Patent Law Blog (Patently-O)

Threats Against Customers Lead to Walker Process Antitrust Claim

Hydril v. Grant Prideco (Fed. Cir. 2007).

Grant and Hydril both own patents relating to oil drilling.  Hydril sued Grant for patent infringement and also asserted a Walker Process antitrust claim against Grant. 

Walker Process claims stem from the 1965 Supreme Court case (of the same name) and allow Section 2 Sherman Act antitrust claims for monopolization or attempted monopolization based on enforcement of a fraudulently procured patent.

Here, Grant’s alleged fraud was that it “obtained its patent by knowingly and deliberately concealing from the Patent Office prior art that it knew would have resulted in a denial of its application.” 

At the district court level, Hydril’s complaint was dismissed for failure to state a claim. In particular, the court noted that Hydril had failed to show sufficient enforcement activity. The CAFC disagreed, holding that threatened enforcement against customers could serve as a basis for a Walker Process claim.

Threats of patent litigation against customers, based on a fraudulently-procured patent, with a reasonable likelihood that such threats will cause the customers to cease dealing with their supplier, is the kind of economic coercion that the antitrust laws are intended to prevent. A supplier may be equally injured if it loses its share of the market because its customers stop dealing with it than if its competitor directs its monopolistic endeavors against the supplier itself. Without customers, a supplier has no business.

 

CAFC: "Circuit means" interpreted as means-plus-function

DESA IP v. EML Tech and Costco (Fed. Cir. 2007 – NONPRECEDENTIAL).

DESA owns a patent directed to motion-activated security lights. The lights have a low-level always-on illumination as well as a bright security illumination that is activated when motion is detected by a passive infrared motion sensor. During infringement litigation, the district court construed the claims and consequently entered a stipulated judgment of noninfringement.

The appeal focused on whether the disputed claim phrases — "sensor means," "control circuit means," and "switching means" — should be interpreted as means-plus-function.

The use of the word "means" in the claim language invokes a rebuttable presumption that § 112, ¶ 6 applies; conversely, the failure to use "means" invokes a presumption that § 112, ¶ 6 does not apply. . . . Nonetheless, the presumption that § 112, ¶ 6 applies may be rebutted if the claim recites no function or recites sufficient structure for performing that function.

Distinguishing earlier precedent, the CAFC determined that neither the sensor, control circuit, nor switching pre-means terms recited sufficient structure.

DESA argues that this court has previously stated that "it is clear that the term 'circuit' by itself connotes some structure." In Apex, however, the word "means" was not used, so the reverse presumption—i.e., that § 112, ¶ 6 does not apply—was invoked.

Regarding interpretation of the claims, the CAFC found that the district court had improperly given the terms a narrow construction by focusing on the preferred embodiments and the figures.

CAFC: Construction of Essential Features and Impermissible Recapture

MBO v. Becton Dickinson (Fed. Cir. 2007).

MBO’s patent is directed to a hypodermic syringe that helps avoid needle sticks. After claim construction, the district court awarded summary judgment of noninfringement to BD.

On appeal, the CAFC recited the rules for claim construction sources:

The most relevant source is the patent’s specification, which is "the single best guide to the meaning of a disputed term." Next in importance is the prosecution history, which is also part of the "intrinsic evidence" that directly reflects how the patentee has characterized the invention. Extrinsic evidence—testimony, dictionaries, learned treatises, or other material not part of the public record associated with the patent—may be helpful but is "less significant than the intrinsic record in determining the legally operative meaning of claim language."

Essential Feature: Several of the asserted claims include a preamble precluding needlestick injury “immediately and positively.”  Interpreting the term “immediately,” the CAFC determined that an “essential feature” of the invention is ensure a safe needle immediately “upon removal from the patient.” (rather than immediately after some other event). 

The patentee here has clearly indicated via the specification and the prosecution history that the invention provides, as an essential feature, immediate needle safety upon removal from the patient. It is therefore appropriate to construe the claims so as to ensure that they, too, require that feature.

Interestingly, two of the claims did not include the ‘immediate’ language. For those claims, the court could find no textual hook for inserting the essential feature and thus did not burden those claims with the immediacy requirement.  Between the lines, the court implied that it could have found a textual hook through other claim terms, but stated that it “lack[ed] the power to construe other terms not disputed by the parties.”

Impermissible Recapture: Claim scope which has been surrendered in order to obtain issuance of a patent cannot be later reclaimed through a reissue proceeding.  The district court found that MBO’s patent had improperly expanded the scope of a term and thus construed the terms meaning narrowly.

On appeal, the CAFC held that the recapture rule should not be used to rewrite claim language. Although claim construction should be applied with an eye toward validity, that maxim should only be applied at last resort. Rather, the court should first construe the claims and then later determine if the broadened claims are valid .

Whether those broadened claims are invalidated by the recapture rule is an issue separate from construction.

Affirmed-in-part, reversed-in-part, vacated, and remanded.

Patent Litigation Blocked By Co-Owner's Refusal to Participate

Israel Bio-Engineering v. Amgen (Fed. Cir. 2007).

In 2002, Israel Bio-Engineering (IBEP) filed suit against Amgen, Immunex and Wyeth (collectively “Amgen”) alleging that their Enbrel drug infringed claim 1 of their patent. (Enbrel is used to treat severe rheumatoid arthritis and psoriasis.).

Yeda intervened — arguing that IBEP did not, in fact, own rights to the patent.  Although Yeda was under contractual obligation to transfer certain patent rights to IBEP, Yeda argued that some of the claims of the patent were invented only after those obligations had ended — and thus that Yeda was under no obligation to transfer rights to IBEP. The district court agreed with Yeda and dismissed IBEP’s suit for lack of standing — finding that IBEP had at most a partial interest in the whole patent.

Generally, one co-owner can block other co-owners from enforcing a patent simply by refusing to join voluntarily in the patent infringement suit.

Absent the voluntary joinder of all co-owners of a patent, a co-owner acting alone will lack standing.

Although it allowed IBEP to make a new argument on appeal, the CAFC applied Israeli contract law to hold that IBEP, at most, was a co-owner.

Notes:

• One fact that makes this case even more interesting is that IBEP was asserting claim 1, a claim that very likely fell under the terms of the assignment.  If the patent had only included claim 1, then it would have been owned by IBEP.  However, Yeda had rights in claims 2 and 3. Although those claims were likely unenforceable, their existence gave Yeda a partial interest in the entire patent.
• 2005 Appeal of The Case: Israel Bio-Engineering Project v. Amgen et al. (Fed. Cir. 2005).
• Baristas talk about another Yeda case.
• Beware that there are a few exceptions to the rule stated above.

Wegner: Escaping the Depths of the Patent Shadows

A response to Merges,
By Hal Wegner

Professor Robert P. Merges makes much sense in his op-ed piece, Back to the Shadows, or Onward and Upward? Current Trends in Patent Law. We and thoughtful supporters of the patent system share much common ground.  Professor Merges touches on numerous points where there is hardly any significant difference with this writer, including the domestic results of the eBay decision from last year.  In his analysis of the Supreme Court, Professor Merges is correct that the Court is generally “pro business”, but it is another matter whether in some industries being “pro business” means being “pro-patent”.

“Pro Business” as Anti-Patent, a new Direction at the Court:  Professor Merges is absolutely correct that the Supreme Court today is “pro-business”.  Whether the majority is pro-patent is possible but not yet conclusively determined: It is too soon to tell. It is undeniable that there is a solid, anti-patent Supreme Court core consisting of Justices Breyer and Stevens.  Justice Stevens’ anti-patent record reaches back to the mid-1970’s and is too well documented to question.  Yet, Justice Breyer is apparently now the more enthusiastic anti-patent of the two; they are the only members of the Court in this century to have taken the view that the open door to § 101 patent-eligibility for “living” inventions in the Chakrabarty case should be narrowed, arguing in a dissent in J.E.M. that the utility patent law “does not apply to plants”.(1) Just last year, an anti-patent drumbeat manifested in the Breyer dissent from the Metabolite “DIG” (joined by Stevens) plus their joint participation in the Justice Kennedy concurrence in eBay further validates their anti-patent bias.  Justice Souter joined both the Metabolite DIG dissent and the Kennedy eBay concurrence, but whether he is truly a solid part of an anti-patent core requires more data points; they may be forthcoming in shortly in KSR and in early Spring in Microsoft.  Whether other members of the Court join this core remains to be seen.

Feeding this nascent anti-patent core are two dominant themes:  First, while the Supreme Court is pro-business, a major segment of the business community is largely anti-patent, turning the patent system upside down:  Under this twisted view of patents, being “anti-patent” may be “pro business”.  Second, the patent jurisprudence of the Federal Circuit has created and continues to create problems that necessarily fuel further growth of an anti-patent sentiment. 

En Banc Panel to Determine Scope of Opinion Waiver

In Re Seagate Technology (Fed. Cir. 2007).

The Federal Circuit has decided sua sponte to an en banc hearing addressing the following questions:

1. Should a party's assertion of the advice of counsel defense to willful infringement extend waiver of the attorney-client privilege to communications with that party's trial counsel? See In re EchoStar Commc'n Corp., 448 F.3d 1294 (Fed. Cir. 2006).
2. What is the effect of any such waiver on work-product immunity? 
3. Given the impact of the statutory duty of care standard announced in Underwater Devices, Inc. v. Morrison-Knudsen Co., 717 F.2d 1380 (Fed. Cir. 1983), on the issue of waiver of attorney-client privilege, should this court reconsider the decision in Underwater Devices and the duty of care standard itself?

DOCS

• En Banc Order
• Petition
• Opposition
• Reply

NOTE:

• As I suggested earlier this week, the CAFC has begun to test publication of merits briefs on its www.cafc.uscourts.gov website.
• The Order indicates that Amici will be entertained “in accordance with [FRAP] 29 and Federal Circuit Rule 29.” This likely means that the court will grant leave to all amici briefs, although that meaning is unclear.

Only Appeal After Counterclaims are Dismissed

International Electronic Tech. v. Hughes Aircraft & DirecTV (Fed. Cir. 2007).

Sua Sponte, the Federal Circuit dismissed plaintiff’s appeal on subject matter jurisdiction because the case had not been finally resolved. In particular, the defendant had not yet dismissed its counterclaims.

The court takes umbrage at parties who have not carefully screened their cases to ascertain whether or not a judgment is final. It is incumbent on all parties to do so. The court should not be required or obligated to scrub every case to determine finality. At this time, the court shall not issue an order to show cause as to whether both parties should be cited or sanctioned for failing to determine finality before filing; however, the parties and other members of the bar are hereby placed on notice that the court shall in the future begin to cite counsel for failure to determine whether or not the appealed judgment is final.

Upcoming Events:

• January 26, 2007 at the San Jose Museum of Art: We’ll be discussing transnational scope of U.S. patent laws. $225 for practitioners; $0 for academics and government types. [LINK]. West-coast heavy hitters include Lemley (Stanford), Keiff (Hoover Institution), Ochoa (SCU). Also starring Dan Burk (MN).  Three big bloggers, Eric Goldman, Michael Geist, & Dennis Crouch.
• February 16, 2007 at UC Boalt Hall (Berkeley): Perspectives on Patent Law and Innovation. Judges Linn, Prost, Rader, Whyte, & Patel, etc.[LINK]
• February 23, 2007 at Duke Law School: IP Hot Topics Symposium (with CLE credit). Blockbuster panels on patents and file-sharing. Judge Dyk has the keynote lunch address. [LINK]
• February 23, 2007 at Ohio State: The Future of Patent Reform [LINK]
• March 15–16, 2007 at DePaul (Chicago): [LINK]
• March 29, 2007 at Catholic Univ (DC): Ethical Issues in Patent Law [LINK]

CAFC: Prior suit against manufacturer precluded later suit against end users

Transclean v. Jiffy Lube (Fed. Cir. 2007).

I spent one summer of my youth in the lube & oil business.  It ends up being a pretty fun occupation, although the pay is quite low.

Transclean is the exclusive licensee to a patent covering a machine for changing automatic transmission fluid.  Bridgewood sold infringing machines, and lost an earlier patent battle with Transclean. (Although Bridgewood has apparently not paid-up yet).

Transclean — wanting its money — filed suit against end-users, including Jiffy Lube, who had purchased the Bridgewood products.

The courts, however, found Transcleans claims precluded. Under 8th Circuit claim preclusion law, an earlier suit bars a later asserted claim if:

1. the first suit resulted in a final judgment on the merits;
2. the prior judgment was rendered by a court of competent jurisdiction;
3. both suits involve the same cause of action; and
4. both suits involve the same parties or their privies.

Here, the only questionable factor was whether Jiffy was in privity with Bridgewood. In the 8th Circuit, privity is found when parties are closely related with nearly identical interests so that “it is fair to treat them as the same parties for the purpose of determining the preclusive effect of the first judgment.”

Generally, for this standard, a buyer-seller relationship does not create privity for claim preculsion and Jiffy would lose the appeal — except for Transclean’s litigation strategy . . . Earlier in the litigation, transclean had argued that Jiffy was in privity with the prior defendant Bridgewood. Using that ‘admission’ and the doctrine of judicial estoppel, the CAFC refused to hear Transclean’s new arguments about the lack of privity (even though it is clear that there was no privity in fact).

In this case, we find it appropriate to invoke judicial estoppel to hold Transclean to its concession that Bridgewood and its customers were in privity for claim preclusion purposes. The determination Transclean asks us to make—that Bridgewood and the defendants were not in privity for claim preclusion purposes—is clearly inconsistent with the position it advocated before the trial court and in its opening brief on appeal. . . . As part of its litigation strategy, Transclean made the choice to concede privity between Bridgewood and its customers after choosing not to join the customers in the first litigation. Under the circumstances presented by this case, we believe Transclean should be held to the consequences of its choices.

 

CAFC: Electronic Filing of Briefs

The Federal Circuit has proposed amendments to its local rules that will require electronic filing of briefs and appendices:

These rule changes would require the filing of a digital version of every brief and appendix filed by a party represented by counsel, unless counsel certifies that submission of a brief or appendix in digital format is not practical or would constitute hardship. The requirements for the filing of paper copies of the briefs and appendices would continue unchanged. Comments must be received by the close of business on February 16, 2007.

Links:

• CAFC Proposed Rule Change
• Howard Bashman on Electronic Filing

11th Amendment Immunity Waived by Requesting an Interference Proceeding

Vas-Cath v. University of Missouri (Fed. Cir. 2006).

Interference proceedings arise when two patent applicants both hope to obtain a patent on the same invention. 35 USC §135. The PTO holds a mini-trial and (usually) grants a patent to the party with priority. This case arose over claims to a dual-lumen catheter used in prolonged hemodialysis.

The University of Missouri filed its patent application first, but Vas-Cath pushed its through the PTO more quickly — resulting in an issued patent. On Missouri’s request, the PTO initiated an interference — a process that lasted six years and eventually resulted in all nineteen claims being awarded to the University.

Vas-Cath appealed and the case was heard in the Western District of Missouri. Unfortunately for Vas-Cath, the district court quickly dismissed the case based on Missouri’s Eleventh Amendment immunity from suit in federal court. (District Court Decision).  Vas-Cath then appealed to the Court of Appeals for the Federal Circuit (CAFC).

11th Amendment Sovereign Immunity: The 11th Amendment, ratified in 1798 provides that:

The Judicial powers of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.

This has been interpreted to provide a state (or a state university) with absolute immunity from an action in federal court unless the immunity is waived or the State’s actions violate someone’s 14th Amendment due process guarantee. In general, a state’s participation in the patenting process does not imply any waiver of immunity.

Here, Vas-Cath argued that the University’s request for and participation in the interference constituted waiver, and the CAFC agreed:

[T]he University did not simply procure a patent through the routine of ex parte examination, but requested the PTO to conduct litigation-type activity, obtaining a favorable agency ruling for which the statute authorizes judicial review.

The CAFC found that the University had indeed waived its immunity by voluntarily entering into the litigation-type interference — thus negating its “assertion of immunity to bar appeal of that adjudication.”

Notes:

• As State Universities play increasingly greater roles in the patent game, state immunity questions will likely continue to rise. Recently, we have several immunity decisions, namely: Tegic v. U.Texas, Pennington Seed v. Produce Exchange No. 299 and Univ. of Arkansas, Intel and Microsoft v. Commonwealth Scientific (foreign immunity).

Follow-on to Professor Merges: High-Tech Calls For Reform

As a follow-on to yesterday’s op-ed by Professor Robert Merges, I think that Sun Microsystems General Counsel Mike Dillon’s statement last September on the patent tax go to the point of what reforms many high-tech execs would prefer:

[W]e were happy to recently host a visit to Sun by Congressman Lamar Smith. Along with Senators Hatch and Leahy, he has been a leader in the push for patent reform. In the course of our meeting, we shared our views on the need for significant changes to the current patent system, including the repeal of Sec. 271(f), limits on injunctive relief and the need to restrict damage awards to the value of the invention described in the contested patent. (Under the current system a plaintiff claiming a patent on a small, inexpensive component like a heat sink can claim damages based on the total profit for the entire product - even if it is something that contains thousands of other components.)

Although I suspect that Dillon is also upset about “bad” patents, patent quality was not even in his list of complaints. Rather, all these reforms would change the value of patents across the board. 

It is my perception that many high-tech execs are quite anti-patent after being burned a time or two.  Perhaps they should read Professor Merges recent empirical work on “Patents, Entry and Growth in the Software Industry.” In that paper, Merges finds that his data “suggests a simple overall conclusion: patents are not killing the software industry, and successful firms are paying attention to patent quality, at least according to some measures.”

Note:

• Merges’ paper is focused on new entrants into the market. Thus, even after reading the paper, bastions of the old-software-market still might not be happy with the current state of patent law.

CAFC: Meaning of "About"

Ortho-McNeil Pharm. v. Caraco Pharm. (Fed. Cir. 2006).

Ortho’s patent covers a pain-relief combo of tramadol and acetaminophen with a ratio of “about 1:5.” Caraco’s drug has a ratio of 1:8.67.  The lower court construed the claims and found no infringement.

Claim Construction: On appeal, the Federal Circuit construed the term “about 1:5” by first looking at the intrinsic evidence.  In the patent and claims, Ortho had used the term “about” repeatedly: disclosed ratios included about 1:1, about 1:5, about 1:19 to about 1:5, and about 1:1600. 

The court reasoned that the term must have a narrow meaning in this patent because a broad meaning would leave other claimed ratios meaningless. The court also noted that the literal meaning of the term should be narrowly construed because Ortho “could have easily claimed a [broader] range of ratios”

An expert testified that the statistical range should be 1:3.6 to 1:7.1 based on a confidence interval constructed from the data in the patent, and the Federal Circuit agreed. (The patent discussed the importance of 95% CI).

Literal Infringement: The Federal Circuit found that there could be no literal infringement because the upper claimed bound for the ratio was 1:7.1 while Caraco’s ratio was 1:8.67.

Doctrine of Equivalents: No DOE because Ortho cancelled claims with broader range during reissue. Interestingly, the Court made this ruling based on vitiation rather than prosecution history estoppel:

[I]t cancelled the broader "comprising" claims, except for claim 6. In sum, having so distinctly claimed the "about 1:5" ratio, Ortho cannot now argue that the parameter is broad enough to encompass, through the doctrine of equivalents, ratios outside of the confidence intervals expressly identified in the patent. We agree with the district court that to do so would eviscerate the limitation.

Summary judgment of noninfringement affirmed

Merges: Back to the Shadows, or Onward and Upward? Current Trends in Patent Law

By Professor Robert Merges

When no less an authority than Hal Wegner of Foley and Lardner starts worrying about the current direction of the Supreme Court on patent issues, it’s time to sit up and take notice. I have heard some of these concerns in the past few years, especially in the wake of the eBay injunction case. But when Hal sent around his widely-read “top 10 cases” email recently, I could see that his outlook had taken a serious turn for the worse. Here are some quotes from the recent Wegnerian missive:

“eBay philosophically piggybacks off an anti-exclusionary right climate in the electronics/software/manufacturing industries that has had a constant, anti-patent drumbeat in the academic and business communities and in the mainstream press. The Court has listened. . . .

[A] decidedly anti-patent core nucleus from the Douglas era is reforming at the Court that - save for Justice Stevens - had disappeared in the wake of the 1980 Chakrabarty and 1981 Diehr decisions . . . .

I believe this is a fairly mainstream view, at least among some chem/biotech/pharma practitioners. And despite how much Hal knows about all things patent (things he has generously shared with me and other academics over the years), I have to disagree with his assessment. Even more, though, I am worried about the larger implications of these views. The wedge between the pharma/biotech/manufacturing and the software/electronics views of the patent world is on one level just a normal development in a vibrant and growing field. But beyond a certain point, it is not a good sign. This is especially true when it is combined with the view that the current Supreme Court is anti-patent. Taken together, this attitude reminds me of the bad old days, the days whose shadow we in this field have only recently emerged from: the days when patent lawyers huddled together, defensively, while a hostile world seemingly bent on the destruction of this area of law (and these incentives for inventors) lobbed random attacks their way.

Jeff Steck: Saving the Supreme Court from Folk Science

Based on the briefs filed in the Microsoft v. AT&T case, the Supreme Court faces a substantial risk of establishing logically indefensible precedent relating to computer software. The status of software in patent law is a fair subject of debate, but such policy decisions should not be based on folk science.

In the briefs now before the Court, software-and information generally-is characterized as an ethereal construct, barely capable of being controlled or understood. In its amicus brief, Autodesk calls information "meta-physical." The Software & Information Industry Association describes information as "purely intangible." According to Microsoft, information is "abstract," and is "floating in the ether." Information has been so denigrated that AT&T, who holds the patent on the software method relevant to the case, claims that "software is not 'information.'" 

Colloquially speaking, information is hardly a new concept. Perhaps this is why the briefs assume it is reasonable to use a dichotomy pulled from Aristotelian philosophy: optical disk as "substance" versus computer program as "accident." But like physics, chemistry, and other topics of interest to the ancients, information has become a science, and it should be discussed as a science.

Patent Searching

Queries for Patently-O readers:

• Do you always conduct a prior art search before filing a new patent application? (why?)
• Are there certain technology areas that still need to be searched from the PTO search room?
• Are there certain technology areas where searches are more cost effective — either because the search is cheaper or because the search is more likely to discover the majority of close prior art?
• What are the best tools available to a searcher who is not on-site at the PTO?
• How much do you typically pay (or charge) for a professional search?
• How in-depth do you tend to read the resulting references?

Notes:

• In our book, Patent Application Practice, Jim Hawes and I recommend a pre-filing search as a matter of course. However, we make clear that a cost effective search will certainly overlook unknown references. [Link]
• On his blog, IPO President Marc Adler strongly recommends pre-filing searches. [Link]
• Professional Searcher, Gary Odom gives four reasons for pre-filing searches:
• Draft around the art: “If you don’t know the prior art, you cannot possibly draft novel claims, know the appropriate claim scope, or reasonably hope that the drafted claims are valid.”
• Pro-actively explain the art: Using the discovered art either in the patent application or during a pre-action conference increases the odds that the examiner will grant the claims sooner.
• Clearance: Although not complete, a “quick prior art search” may reveal clearance issues or provide some assurance.
• Enforcement: Having the best prior art cited on the patent will strengthen the patent and lessen the potential for later re-examination.

Please leave your comment below:

Collateral Estoppel Does Not Extend to Preliminary Injunction Findings

Abbott Labs v. ANDRX (Fed. Cir. 2007).

The district court granted a preliminary injunction to stop Andrx from selling extended release clarithomycin as a generic version of Biaxin XL. Andrx appealed.

Four factors for preliminary relief: (1) Likelihood of success on the merits; (2) irreparable harm from failing to issue a PI; (3) balance hardships of the parties; and (4) public interest.

Collateral Estoppel: Oddly, the same district court granted Abbott’s PI motion against two other defendants because the patents looked invalid. On appeal Andrx argued that, as in Blonder-Tongue, “Abbott cannot assert patents against one party which have been found to be invalid or unenforceable against another party.”

The CAFC found that collateral estoppel does not apply here because the earlier discussion of validity and enforceability had not been fully and finally litigated in the other cases. (Applying Seventh Circuit law).

Vitiation: Andrx also argued that the PI should not issue because its generic does not infringe — either literally or under the doctrine of equivalents. Under DOE analysis, the Andrx product included a pharmaceutically acceptable glyceryl monostearate rather than the claimed “pharmaceutically acceptable polymer." Andrx argued that a GST equivalent would vitiate the polymer requirement. The CAFC, however, found that the two could be equivalent — falling in-line with the common notion that adjectives are subject to vitiation more often than nouns.

Notes: One thing that is unclear is why the court did not discuss the merits of the invalidity factor of the PI decision rather than focusing solely on the collateral estoppel issue.

Patently-O Tidbits

Eye on the Web

• The creatives at RTIP have created www.FedCirc.us a new patent case-law portal. The site gives in-depth analysis of the most recent FedCir cases.
• India Patent Data: Professor Sampat (Columbia) has created the first complete searchable version of Indian patent applications and issued patents. The site is free here: http://India.bigpatents.org/.  (The site is in beta form — send comments and suggestions here: info@India.bigpatents.org.)
• See also, www.PatentBlurb.com by Leonard Heyman.

Upcoming Events:

• January 26, 2007 at the San Jose Museum of Art: We’ll be discussing translational scope of U.S. patent laws. $175 for practitioners; $0 for academics and government types. [LINK].
• January 24–27 in New Orleans: AIPLA Midwinter Institute — always a great event. $795 practitioner; $70 for academics. [LINK].

ITC: Standing to Appeal

Fuji Photo v. ITC (Fed. Cir. 2007).

In its fifth appellate decision of this 1998 case . . .

Fuji owns the patent on certain disposable cameras. Jazz and others take the discarded cameras, repair them, then sell them. Earlier, the court decided that cameras first sold by Fuji in the US were no longer protectable under the first-sale doctrine. However, the court held that those that the first-sale doctrine did not apply to products originally sold abroad.

Here, Fuji appealed the ITC's calculation of the percentage of already imported cameras that were infringing.  The problem was the difficulty of determining which cameras were originally sold in the US.

Standing: On appeal, the CAFC first determined that Fuji had no right to appeal.  Unlike in normal infringement cases, ITC actions give the patentee no right to collect damages -- rather, any past damages go to the coffers of the US Government.

Private plaintiffs, unlike the Federal Government, may not sue to assess [civil] penalties for wholly past violations. (quoting 528 U.S. 167 (2000).

It is clear here that any violations are wholly in the past because Jazz Photo no longer conducts business and is in the liquidation process.   

Injunction against Officer: Jack Benun, former owner of Jazz, also appealed -- arguing that the ITC had no power to issue an injunction against him personally simply because of Jazz's infringement.

The CAFC agreed with the ITC order -- finding that "the Commission could legitimately issue a cease and desist order against him."  In their decision, the CAFC followed the Supreme Court's 1937 Standard Education case which held that an administrative agency could bind officers of a corporation after issuing an order against the corporation itself.

CAFC Outlines Difference Between Vacating and Reversing

E-Pass v. 3Com (Fed. Cir. 2007)

E-Pass filed its original complaint in 2000 and has been through one round of appeal. The earlier appeal focused on claim construction.  In this appeal, E-Pass argued that the lower court didn't properly follow the CAFC's directions.

Once a case has been decided on appeal, the rule adopted is to be applied, right or wrong, absent exceptional circumstances.

The CAFC had vacated the lower court's summary judgment and remanded for further proceedings.  On remand, the lower court considered the new claim construction handed down, but once again concluded that summary judgment against E-Pass was proper.

On appeal, the CAFC agreed with the lower court -- finding that its earlier decision was not a reversal.  Rather, by vacating the decision the court implied that summary judgment may be proper after further consideration of the facts.

By vacating, we signaled that, although the district court’s prior decision rested upon erroneous grounds, a proper claim construction might support a judgment (summary or otherwise) in favor of either party.

Affirmed.

Why Microsoft Wants Patent Reform

Parker v. Microsoft (Fed. Cir. 2006).

Opinion in full [citations removed]:

Charles W. Parker (“Parker”) appeals a final judgment of the [DC District Court] dismissing his patent infringement action against Microsoft as frivolous. We review a district court’s frivolousness determination for an abuse of discretion. Parker’s allegations that he has patented the “elemental atom” and that Microsoft has infringed his rights by using and improperly claiming inventorship of such an invention are “fanciful,” “fantastic,” and “delusional” contentions supporting the district court’s determination. On appeal, Parker provides us with no persuasive basis to conclude that the district court abused its discretion in dismissing the action. We affirm.

Supreme Court: Licensee in Good Standing May File Declaratory Judgment

MedImmune v. Genentech (Supreme Court 2007).

Declaratory judgment (DJ) actions are often used by potential defendants to obtain a declaration that a patent is invalid, unenforceable, or not infringed.  Under Federal Circuit law, a licensee cannot challenge a patent without first breaching the license.  The CAFC's reasoning was that a licensee in good standing feels no apprehension of suit since the license is essentially a settlement between the parties. Without an apprehension of suit, the DJ action would not rise to an actual controversy as required by the Constitution.

In a broadly worded opinion, the Supreme Court has scrapped the Federal Circuit's "reasonable-apprehension" test on declaratory judgment standing in favor of a rule that allows licensee's in good-standing to file DJ actions.

We hold that petitioner was not required, insofar as Article III is concerned, to break or terminate its 1997 license agreement before seeking a declaratory judgment in federal court that the underlying patent is invalid, unenforceable, or not infringed.

There are several things to note immediately:

Not Limited to Patents: This case at least extends to all licensing issues and likely to most contracts -- whether or not they involve patents or intellectual property.

Suggested Contractual Work-Around: Reading between the lines, the opinion may indicate that a contractual "prohibition against challenging the validity of the patents." may serve to block challenges by licensee's in good standing. Without the clause, however, the Court found no such prohibition:

To begin with, it is not clear where the prohibition against challenging the validity of the patents is to be found. It can hardly be implied from the mere promise to pay royalties on patents

Regarding apprehension of suit, the Opinion's footnote 11 is a complete divergence from common practice -- finding that a licensee who pays royalties either in fear of an injunctions or for fear of treble damages is being coerced in a way that creates an Article III case or controversy.

Links:

• Download MedImmune.pdf
• Briefs filed in MedImmune v. Genentech;
• CAFC Decision in MedImmune v. Genentech;
• CAFC Decision in MedImmune v. Centocor;
• MedImmune Petition Granted;
• Lear v. Adkins;
• Professor Miller’s comments;
• Supreme Court on the March;
• Supreme Court docket sheet.

"Right-to-Sue" Clause Does Not Give Licensee a Right to Sue

Propat v. RPost (Fed. Cir. 2006).

Standing: Only a "patentee" has standing to sue for patent infringement.  In order to qualify as a "patentee" the plaintiff must possess "all substantial rights in the patent."

Propat sued RPost for patent infringement.  The district court, however, dismissed the case for lack of standing -- finding that Propat was merely a licensee and not in possession of sufficient patent. Propat appealed.

By its plain terms, the Propat's license gives the company rights to initiate and enforce license agreements and to sue infringers.  Prior to any lawsuits, however, Propat must "consult and obtain prior approval" from the superior interest-holder.  The license can also be terminated for breach or other reasons. In addition, the license forbids transfer of Propat's rights.

Based on the license agreement, the appellate panel agreed that Propat did not have sufficient rights to bring suit. The court pointed to several elements of the license in its decision:

• An express provision retaining ownership in the superior interest-holder;
• Superior party was required to pay any maintenance fees;
• Superior party continued to enjoy some control over the use of the patent; and
• Superior party held a right to terminate the license under certain circumstances.

In addition, the court reaffirmed that a "right to sue" clause in a license does not actually entitle the licensee to sue.

Zyprexa Patent Upheld on Appeal

Eli Lilly v. Zenith Goldline (Fed. Cir. 2006)

Lilly’s patent covers olanzapine (Zyprexa®) and its use for the treatment of schizophrenia. Three generic manufacturers (Zenith (IVAX), Dr. Reddy’s, and Teva) filed an ANDA and Lilly responded with a complaint in the Southern District of Indiana.  After a bench trial, the district court agreed with Lilly that the patent was valid, infringed, and enforceable.  The defendants appealed to the Court of Appeals of the Federal Circuit.

Anticipation: To anticipate the invention, a prior art reference “must disclose each and every feature of the claimed invention, either explicitly or inherently.”  However, in both Petering and Schaumann, prior art references that disclosed the family of the claimed compound were found to anticipate the claimed compound — even though the claimed compounds were not specifically discussed.

Here, the CAFC found that those cases were not applicable because the closest reference to olanzapine did not spell out “a definite and limited class of compounds that enabled a person of ordinary skill in the art to at once envisage each member in this limited class.”

Obviousness: The CAFC agreed that the prior art references did not suggest a the compound. In addition, Lilly provided strong evidence of secondary considerations, including: “(1) a long-felt and unmet need; (2) failure of others; (3) industry acclaim; and (4) unexpected results.”

The record shows a long-felt need for a safer, less toxic, and more effective clozapine-like drug; a decade (or more) of failure to find a replacement for clozapine; a reasonable amount of commercial success for olanzapine; and a number of awards for olanzapine as indicators of industry acclaim.

Public Use: Prior to filing the patent application, Lilly conducted Phase I clinical safety trials. The court found, however, that the trials were well within the experimental use exception:

In this case, Lilly tailored its tests to their experimental drug safety and efficacy purpose, adequately monitored for results, and maintained confidentiality throughout the duration of the study. The trial court did not err in finding no public use.