Patent Law Blog (Patently-O)

Steinbeck on Patent Attorneys

From John Steinbeck’s Novel, East of Eden published in 1952:

“Meanwhile Samuel got no richer. He developed a very bad patent habid, a disease many men suffer from. He invented a part of a threshing machine, better, cheaper, and more efficient than any in existence. The patent attorney ate up his little profit for the year. Samuel sent his models to a manufacturer, who promptly rejected the plans and used the method. The next few years were kept lean by the suing, and the drain stopped only when he lost the suit. . . But he had caught the patent fever, and year after year the money made by threshing and by smithing was drained off i npatents. The Hamilton children went barefoot, and their overalls were patched and food was sometimes scarce, to pay or the crisp blueprints with cogs and planes and elevations.”

Book Review: The Book of Air and Shadows

It is not often that an IP lawyer becomes the reluctant hero. Gruber’s Book of Air and Shadows leads Jake Mishkin, a NYC copyright lawyer through a Shakespearean comedy as he attempts to recover a lost Shakespeare play, get the girl, and reconcile with his wife. . .  Mishkin reminds me of Saul Bellow’s hero Eugene Henderson, the Rain King – a large, morose, trustworthy, and lovable fellow. His practice is actually copyright law, but that is probably as close as our profession will get to popular fame.

Note:

• I picked-up the book in the Chicago Airport on Monday and am about half-way through the book. This means that I’m assuming comedy.
• Amazon.Com Link: The Book of Air and Shadows

 

Monsanto v. McFarling: CAFC Affirms "Reasonable Royalty" of 140% of Purchase Price

Monsanto v. McFarling (Fed. Cir. 2007).

Monsanto is one of the few patentees that sues individuals for patent infringement.  In Monsanto’s case, the infringers are farmers who allegedly save & replant Monsanto’s patented genetically modified seeds violation of their “Technology Agreement”. When McFarling was found liable, the Missouri jury assessed damages of $40 per seed-bag and the court issued an injunction.

Monsanto customarily requires a royalty payment of $6.50 per seed-bag in addition to $22 per bag for the soybean seeds themselves.  On appeal the CAFC focused on the proper royalty measure.  McFarling argued that $6.50 was the “established” royalty while Monsanto argued that the actual royalty rate is much greater.

The Court agreed with Monsanto that the nominal designation of $6.50 as a royalty was not the entire sum of the damages:

Picking $6.50 as the upper limit for the reasonable royalty would create a windfall for infringers like McFarling. Such infringers would have a huge advantage over other farmers who took the standard Monsanto license and were required to comply with the provisions of the license, including the purchase-of-seed and non-replanting provisions. The evidence at trial showed that Monsanto would not agree to an unconditional license in exchange for a payment of $6.50, and the explanation—that Monsanto would lose all the benefits it gets from having the cooperation of seed companies in promoting Monsanto’s product and controlling its distribution—is a reasonable commercial strategy.

In fact, the CAFC found that the royalty rate can easily be calculated as something above the total $28 dollars per bag paid.

[I]t would be improper to hold that Monsanto’s reasonable royalty damages are limited to $25.50 to $28.50 per bag.

The damage amount, instead of being based on the amount usually paid by farmers, legitimately includes (a) the harm being felt by Monsanto because of the infrinement as well as (b) the additional benefits garnered by McFarling. In particular, these include: reputational harm due to rogue planters, potential lapses in monsanto’s database of planting techniques; bargaining power; as well as McFarling’s increased yeald of $31 – $61 per acre.

Based on those advantages alone, it was reasonable for the jury to suppose that, in a hypothetical negotiation, a purchaser would pay a royalty of $40 per bag for the Roundup Ready seed.

Under CAFC law, a jury’s damage award will be affirmed unless “grossly excessive or monsrous, clearly not supported by the evidence o rbased only on speculation or guesswork.” Here the court found sufficient reasons for the verdict and affirmed.

Established Royalty: Typically, an “established royalty” is the best measure of reasonable royalty damages when “the patentee has consistently licensed others to engage in conduct comparable to the defendant’s.” The rule of established royalty rate does not apply here, however, because Monsanto apparently never allows for replanting — Thus, there are no “comparable” replanting licenses.

Blacklist: The court also noted that Monsanto may blacklist Mr. McFarling from buying its seeds. 

Notes:

• Mark Lemley of Stanford argued on behalf of the Farmer, McFarling.
• Several other issues are included in the decision.
• Read the case.

 

Forgent v. EchoStar: Jury Instruction on Obviousness

Earlier this week, a Texas jury determined that Forgent’s patent claims against EchoStar were all invalid as anticipated, obvious, and lacking proper written description. Although the one-sided decision probably did not receive a boost from the recent decision of KSR v. Teleflex, it is interesting to note that the jury instructions on obviousness-by-combination closely follow DyStar and other new CAFC obviousness cases.

Jury Instructions:

One way to decide whether one of ordinary skill in the art would combine what is described in various items of prior art, is whether there is some teaching, suggestion, or motivation in the prior art for a skilled person to make the combination covered by the patent claims. Motivation can be implicit. In other words, motivation need not be explicit.

It is common sense that familiar items may have obvious uses beyond their primary purposes, and a person of ordinary skill often will be able to fit the teachings of multiple patents together like pieces of a puzzle. Multiple references in the prior art can be combined to show that a claim is obvious. Any need or problem known in the field and addressed by the patent can provide a reason for combining the elements in the manner claimed. To determine whether there was an apparent reason to combine the known elements in the way a patent claims, you can look to interrelated teachings of multiple patents, to the effects of demands known to the design community or present in the marketplace, and to the background knowledge possessed by a person of ordinary skill in the art. Neither the particular motivation nor the alleged purpose of the patentee controls. One of ordinary skill in the art is not confined only to prior art that attempts to solve the same problem as the patent claim.

 Notes:

• Jury Instructions [PDF]
• Verdict Form [PDF]

DOE Requires Expert Evidence / NDA Still Good After Expiry

Motionless Keyboard v. Microsoft (Fed. Cir. 2007).

Tom Gambaro is two patents related to ergonomic game-controllers.  Like many solo-inventors, Gambaro invented on his own [thin] dime — in particular, he held day jobs as a “graphic artist and dishwasher” and lived “in a friend’s attic.”  After a long process of obtaining seed-money from investors, Gambaro filed for patent protection and assigned the patent to Motionless.  Motionless then sued Microsoft and others for infringement. On summary judgment, however, the district court found the patents invalid for prior public use and not infringed.

Infringement: The Motionless patent claim language requires a “concavity” in the grip housing. Because none of the accused devices included this express limitation, summary judgment of non-infringement was affirmed. Infringement under the Doctrine of Equivalents failed because Motionless did not present “particularized testimony” showing that differences between the claim element and accused device were insubstantial. (I.e., a technical expert is necessary to win on DOE).

Public Use: The CAFC found the Motionless patent not invalid, reversing the lower court’s decision on that issue. Prior to the patent’s critical date, Gambaro disclosed his inventions several persons under a NDA that also expired prior to the critical date.  These disclosures, according to the CAFC were not “public” as required by Section 102(b) because they originally occurred under a NDA. One additional disclosure to a tester was not under a signed NDA.  That disclosure, however, was not considered a public use because the invention was not “connected to be used in the normal course of business to enter data into a system.”  In addition, the tester later signed a NDA.

Terminal Disclaimer: The district court had also found one patent invalid based on a terminal disclaimer filed by Gambaro — holding that the disclaimer was an admission of obviousness. The CAFC quickly reversed that portion of the decision.

A terminal disclaimer simply is not an admission that a later-filed invention is obvious. Thus, the trial court erred on this point and the '322 patent is not invalid due to obviousness.

Reversed-in-part

Notes:

• Like Gambaro, for the next month, I’ll be living in a friend’s attic while teaching Patent Law at Franklin Pierce Law Center in Concord, NH. The friend is patent attorney Steve Finch of Finch & Nguyen.
• In an earlier decision, the CAFC held that Gambaro could not argue on behalf of Motionless “pro se.”

 

No Trademark Protection for ASPIRINA -- Too Close to Generic Aspirin

In re Bayer (Fed. Cir. 2007)

The Trademark Office Appeal Board (TTAB) found the mark ASPIRINA merely descriptive of analgesics. On appeal to the CAFC, Judge Moore filed a majority opinion agreeing that the TTAB had reached the critical 'substantial evidence' threshold and thus affirmed.

The Board concluded that consumers will view ASPIRINA as merely a variation or misspelling of the generic term aspirin and determined that the terms are close in sound, appearance, and meaning. The Board also found that ASPIRINA immediately conveys the impression that Bayer’s analgesics are aspirin-based products. . . .

Under the deferential substantial evidence standard of review, the Board’s decision must be affirmed. Where two different conclusions may be warranted based on the evidence of record, the Board’s decision to favor one conclusion over the other is the type of decision that must be sustained by this court as supported by substantial evidence.

In particular, the CAFC noted that ASPIRINA looks and sounds like aspirin - the same basic product. In addition, a number of online dictionaries show that ASPIRINA is a common spanish-language translation for aspirin.

Judge Newman filed a dissent, arguing that a mark's closeness to a generic word is not determinative of its trademark status. Rather, according to Newman, the Court should examine whether ASPIRINA serves to associate the goods with their source.

• Of note -- the majority gave no weight to the fact that ASPIRINA has been registered in 34 other countries. Judge Newman would have given weight to that international business information.

Patent Reform 2007: Apportionment of Damages

Patent are business tools that can help ensure some monetary reward for innovative effort.  Although few patent are litigated through final decision, the threat of litigation casts an ever-present shadow on licensing negotiations and inter-corporate dealings.  Of course, any underlying threat is closely related to the size of potential damages and strength of a potential injunction.  In the past two-years, damages in particular have become more important as the Supreme Court's decision in EBay v. MercExchange lessens the likelihood of injunctive relief.

There has been little scholarly discussion of how ongoing money damages should be assessed when an injunction is denied.  I take the position that a denial of an injunction should not necessarily result in a compulsory license and that there are many times when continued infringement would be considered willful.

The Patent Reform Acts of 2007 (both House and Senate) propose changes to damage calculations that would require specific economic analysis to ensure that any reasonable royalty damage award captures "only [the] economic value properly attributable to the patent's specific contribution over the prior art."  These calculations would apparently apply to calculations of both past and future damages. CAFC Chief Judge Michel recently testified before Congress -- discussing some practical implementation of the damage modifications:

[T]he provision on apportioning damages would require courts to adjudicate the economic value of the entire prior art, the asserted patent claims, and also all other features of the accused product or process whether or not patented. This is a massive undertaking for which courts are ill-equipped. For one thing, generalist judges tack experience and expertise in making such extensive, complex economic valuations, as do lay jurors. For another, courts would be inundated with massive amounts of data, requiring extra weeks of trial in nearly every case. Resolving the meaning of this novel language could take years, as could the mandating of proper methods. The provision also invites an unseemly battle of "hired-gun" experts opining on the basis of indigestible quantities of economic data. Such an exercise might be successfully executed by an economic institution with massive resources and unlimited time, but hardly seems within the capability of already overburdened district courts. Appellate issue would also proliferate increasing complexity and delays on appeal, not to mention the risk of unsound decisions.

I am unaware of any convincing demonstration of the need for either provision, but even if the Committee ultimately concludes that they would represent an improvement over current patent policies embedded in Title 35 of the United States Code, their practicality seems to me very dubious. That is, the costs in delay and added attorneys fees for the parties and overburden for the courts would seem to outweigh any potential gains. Finally, even if the policy gains were viewed as significant, the courts as presently constituted simply cannot implement the provisions in a careful and timely manner, in my judgment.

More Patently-O TidBits

• Judge Rader's reported take on KSR: No "great change" in obviousness jurisprudence.  Via IAM Magazine.
• Don Zuhn covers the CAFC's denial of en banc review in Pfizer v. Apotex.

What a Mess: Inequitable Conduct Based on Failure to Submit

McKesson Information Solutions v. Bridge Medical (Fed. Cir. 2007)

[UPDATED] McKesson lost at the district court -- the judge found that its patent was unenforceable due to inequitable conduct during prosecution.  The bad-deeds involved McKesson's patent attorney who failed to submit three material pieces of information. On appeal, the CAFC affirmed.

The key facts in this case involved two similar applications pending before the PTO.  The three documents from the first case that were not cited in the second included: a prior-art patent; offices-actions; and the grant of the first case. The court found no clear error in the finding of materiality of these omissions or intent to deceive.

Judge Newman dissented:

It is not clear and convincing evidence of deceptive intent that the applicant did not inform the examiner of the examiner's grant of a related case of common parentage a few months earlier, a case that was examined by the same examiner and whose existence has previously been explicitly pointed out by the same applicant. Nor is it clear and convincing evidence of deceptive intent that the applicant did not cite a reference that the applicant had cited in the same related case, and that had been explicitly discussed with the same examiner in the related case.

...

In Kingsdown, we observed that, "To be guilty of inequitable conduct, one must have intended to act inequitably." 863 F.2d at 872. That standard was not met here. This court returns to the "plague" of encouraging unwarranted charges of inequitable conduct, spawning the opportunistic litigation that here succeeded despite consistently contrary precedent.

This is a major opinion for prosecutors. A further post will follow in June.

Patently-O TidBits on Patent Reform

• John Sullivan, GC of the Commerce Department, has written a letter to support [UPDATED] Patent Reform [but not H.R. 1908].  The Commerce Department suggests reforms that would require applicants to submit higher-quality patent applications.  In reality, this can be translated as adding the submission requirements of accelerated examination to every case.  That approach is likely quite costly for applicants. However, it is undeniable that patent quality is a two-way street.  Low quality patent applications regularly lead to low quality patents.  A head-in-the-sand approach will not work here. The patent community should come-together with a set of best-practices for patent application drafting that can be implemented as rules. These practices should include definitions for claim terms; a more helpful discussion of prior art; a date of invention.  Done correctly, a few simple changes in the patent document could eliminate many of the current validity and claim construction issues that are so alive today. To be practicable for prosecuting attorneys, these reforms should be coupled with reform of the 'rules' of inequitable conduct, which are currently in a state of disarray. [Commerce Dept Letter].
• The Commerce Dep’t letter opposed a number of particulars of currently proposed legislation, including first-to-file.
• The House IP subcommittee has approved the language of H.R. 1908. It now goes to the full judiciary committee for a vote.
• PTO Solicitor John Whealan has been seconded to the US Senate to iron-out the patent reform details. Stephen Walsh, a career PTO official, will reportedly Whealan's shoes as Solicitor. Congratulations to both men!
• A large number of biotech companies have also provided their statement regarding reform. The group opposes "apportionment of monetary damages for patent infringement, expansive PTO rule making authority, an open-ended post grant opposition system, and a narrow grace period." [Coalition letter]

Other TidBits:

• Patently-O has taken-on its first advertising contract -- Patent Supply Co. (See the left toolbar). 
• Etherton Law Group in Phoenix needs you (so long as you are a quick-witted patent attorney with a couple-years experience). [LINK]
• At BIO2007, biotech business executives were asked to rate on a scale of 1-10, the most helpful actions that that the federal gov't could take.
  • Price controls: 71% rated 8-10;
  • International harmonization of patent laws: 59% rated 8-10;
  • Increase funding for biomedical research: 59% rated 8-10;
  • Increase funding for biofeuls: 41% rated 8-10. (Survey by Peter D. Hart Research Associates).

In re Seagate Technology: Willfulness and Waiver, a Summary and a Proposal

In re Seagate questions the scope of privilege and work-product waiver associated with an opinion-of-counsel defense to willfulness. In a new article, Joseph Casino and Michael Kasdan attempt to re-focus the debate by arguing for a "temporal limitation on the scope of waiver which is not hinged on retaining separate [opinion and litigation] counsel."  In addition, the article delves further into the CAFC's Quantum dicta, which encourages bifurcation of trials for liability and willfulness issues.

In In re Seagate Technology, L.L.C., the en banc Federal Circuit has the opportunity (and, it seems, the desire) to squarely address the troubling issues that have arisen in connection with the doctrine of willfulness. The manner in which the Court resolves these issues could have far-reaching impact on accused infringers’ practice of obtaining opinions of counsel and on their practical ability to rely on these opinions to defend against a charge of willful infringement without exposing their ongoing communications with and the work-product of their trial counsel.

The Federal Circuit should adopt a waiver doctrine that encourages the procurement and reliance upon opinions of counsel when one becomes aware of a pre-suit infringement assertion. In such cases, the solution of adopting a temporal cut-off to the waiver of attorney work-product and communications that occur after the litigation has been initiated strikes the proper balance for both patentees and accused infringers. However, it would be a mistake to seek a similar result by creating a bright-line rule that depends on the use of separate trial and opinion counsel to insulate post-litigation communications with counsel from discovery. Further, mandating bifurcation of willfulness issues until after a determination of liability would ease waiver concerns no matter what waiver framework is adopted by the Federal Circuit.

Read the article: [HTML] [PDF]. Preferred Citation: Joseph Casino and Michael Kasdan, In re Seagate Technology: Willfulness and Waiver, a Summary and a Proposal, 2007 Patently-O Patent L.J. 1, http://www.patentlyo.com/lawjournal/2007/05/in_re_seagate_t.html.

Poking a Small Hole in Your Settlement Agreement: Successors

General Mills v. Kraft Foods (Fed. Cir. 2007).

Fruit by the Foot is similar the more popular Fuit Roll Up. The product is essentially three-feet of mashed fruit mixed with corn-syrup. General Mills patented this new food (U.S. Patent No. 5,723,163) and then sued Farley Candy Company for infringement.  The Farley case settled with an agreed lump-sum payment for General Mills and a covenant not to sue Farley or its successors on the patent. The settlement includes a provision that successors only have rights under the agreement if the entire business is transferred.

After the settlement, Kraft purchased Farley's entire business, properly becoming a successor under the agreement.  Kraft then sold-off most of Farley's business to a third party, but attempted to hold-on to its right of continued infringement.  General Mills then sued for infringement.

On appeal of a R.12(b)(6) dismissal, the CAFC gave a literal interpretation to the settlement agreement: First finding that Kraft had properly become a successor based on its purchase of the entire Farely business. Then, because the agreement did not specifically address the issue of divestiture of assets, the court held that Kraft maintained its right to infringe despite selling the Farley assets.

Dismissal affirmed

Notes:

• The case also includes a Civil Procedure gem for those of you thinking about responding to an amended complaint:

Here, the court held that a response to an amended complaint is still due within 10-days regardless filing of a R.12(b)(6) motion to dismiss. R.12(a)(1) and (a)(2) provide the rules regarding timing of responive pleadings; R.12(a)(4) allows a delay in filing a responsive pleading under certain conditions; and R.15 provides a 10-day window for responding to amended complaints in particular. The opinion focused on the the phrase "these periods of time" to limit the delay provision of 12(a)(4) so that it only applies the timing provisions of Rule 12 (and not Rule 15).

"Rule 12(a)(4) then provides that “[u]nless a different time is fixed by court order, the service of a motion permitted under this rule [including a Rule 12(b)(6) motion to dismiss] alters these periods of time” so as to extend the deadline until a motion is ruled upon. Fed. R. Civ. P. 12(a)(4) (emphasis added). However, the time for answering an amended complaint is not one of “these periods of time.” Rather, the deadline for responding to an amended complaint is established separately under Rule 15: “A party shall plead in response to an amended pleading within the time remaining for response to the original pleading or within 10 days after service of the amended pleading, whichever period may be the longer, unless the court otherwise orders.” Fed. R. Civ. P. 15(a)."

This decision confused me because the phrase "these periods of time" is not found in my version of Rule 12(a)(4).  Rather, my version discusses "the periods of time . . . [for] responsive pleading," which might then include a response to an amended complaint under Rule 15.  As you can see below, my version is different than the CAFC's!   In the future, differences will be corrected by the Supreme Court's upcoming amendment: Effective December 1, 2007, Rule 12 will be amended to "these periods."

Various sources have different versions of the rule:

• Cornell Online Version: "the periods of time."
• USCS Fed Rules Civ Proc R 12 (Lexis): "the periods of time."
• Federal Rules (Thompson West 2005 Rev. Ed.): "these periods of time."
• Federal Rules (Westlaw 2007): "these periods of time."
• All cases found in Lexis & Westlaw cite to the rule as "these periods of time."

Interference: Junior Party's "Appreciation" Requirement Limited to Subject Matter of Invention

Henkel v. Procter & Gamble (Fed. Cir. 2007).

Henkel and P&G both make dishwashing detergent tablets, and both parties applied for patents on tablets with two-regions that dissolve at different rates. P&G filed its application one-month before Henkel, and thus became the senior party in the interference proceeding.

The BPAI awarded priority to P&G after finding that Henkel had not proven an earlier conception and reduction to practice. The BPAI opinion turned on the finding that Henkel had not proven an appreciation of its invention that was contemporaneous with conception and reduction to practice.

On appeal, the CAFC reversed, finding that the "appreciation" requirement is not so strict. 

As a matter of law, we do not require that a junior party in an interference demonstrate that it recognized the exact language of the ultimate count—only the subject matter of the invention.

In discussing the appreciation requirement, the court noted that the requirement is to prevent a late filer from obtaining priority after "unwittingly and accidentally created something new." That was not the case here.

Vacated and remanded.

BPAI May Not Substitute its Engineering Expertise for Hard Evidence (In an Interference)

Brand v. Miller (Fed. Cir. 2007).

Both Capital Machine and Miller Veneers claim rights in a new method of cutting veneer from logs using a "tapered filch."  Brand, the inventor on Capital's application now works for Miller, and the two companies had a close-relationship at the time of the applications. Capital filed its patent first, but Miller argued that Capital's invention had been entirely derived from a documents and information provided by Miller.

Derivation: In an interference, impermissible derivation requires a showing of prior conception by the junior party and communication of concepts to the senior party that would enable construction and operation of the invention.  These elements are questions of fact.

In an interference, the BPAI awarded priority to Miller, finding that Miller's communications to Capital were sufficiently enabling. In its appeal to the CAFC, Capital argued that the BPAI had improperly relied upon its own experience instead of evidence in holding that the Miller communication was enabling.

Substantial Evidence of Factual Findings: Appeals from the BPAI interference decision are governed by Section 706 of the Administrative Procedures Act (APA). The CAFC's interpretation of that section requires that "findings of fact by the Board must in all cases be supported by substantial evidence in the [four corners of the closed] record." Thus, it is impermissible for the BPAI to base factual findings on its own experience as opposed to evidence on record.

 Here, the court found that the board had-indeed "substituted its own expertise for record evidence" of how the information communicated by Miller would be arranged to perform the claimed method. "Under such circumstances the Board’s decision was not supported by substantial evidence in the record."

Microsoft: FOSS Infringes Our Patents

Microsoft's Brad Smith (General Counsel) and Horacio Gutierrez (Licensing) were recently interviewed in Fortune. According to the pair, open source software (FOSS) infringes at least 235 Microsoft patents. These include 42 patents infringed by the Linux kernel; 65 patents infringed by Linux GUI; 45 patents infringed by the FOSS Open Office suite; and 15 infringed by FOSS email programs.

Microsoft refuses to state which particular patents are infringed in an attempt to avoid retaliation from FOSS advocates. However, the statements certainly put Linux and its users under a dark cloud -- potentially sufficient for a declaratory judgment action under MedImmune v. Genentech (2006).

Microsoft's patent filing have ramped-up significantly over the past five-years, and the company will likely top the list of new-patent-owners in the coming years.

• Article: Microsoft takes on the free world.

The Nuts and Bolts of Federal Circuit Practice

The Federal Circuit Bar Association is hosting what appears to be an informative webcast on Monday, May 14 from 2-3pm EST on "The Nuts and Bolts of Federal Circuit Practice and Recent Rule Changes." The panel consists of three CAFC clerks, including the Chief Clerk Jan Horbaly. (These are permanent clerks who handle administration and operation of the CAFC, not the recent law-grad LexisNexis clerks). Noted attorney Larry Kass of Milbank is moderating.

According to Larry: This webcast will provide a practical “How To” discussion of the rules and issues that practitioners and companies must face when appealing to the Federal Circuit.  Join the webcast for a behind-the-scenes tour of the Court’s operations from the time the appeal is docketed to the day the mandate issues. 

$75 to register here. [Updated Link -- Password is fcba2007]

Continuations Rules: Not too bad?

Rumors via Hal Wegner:

The continuation rules continue to be the corridor talk of the Boston AIPLA meeting which continues through tomorrow. One respected source has stated to have received information from inside the PTO that the continuation rules package is extremely thick (undoubtedly to respond to the numerous issues raised in testimony) and that the following are essential elements of the rulemaking package:

The "2+1" Limit on Continuations/RCE's: "2+1": First, a patent applicant is limited to one (1) RCE and (2) continuing applications. The rules will be applied retroactively for cases that have not yet received a first action on the merits.

"3+1 Transition Rule": For cases which do have a first action by the time of the new rules, a "bonus" continuation will be allowed, i.e., a total of one (1) RCE and three (3) continuations.

The "25/5" Claim Limits: Twenty-five (25) total claims, including up to five (5) independent claims.

Patent Reform 2007

Patent Reform is in the air. On May 9, 2007, th House IP Subcommittee held a closed-door session to discuss more details of the reform. Mark-up is expected on May 17, 2007.

CAFC Applies KSR: Affirms Obviousness

Leapfrog v. Fisher-Price (Fed. Cir. 2007).

In their first true application of the Supreme Court's obviousness pronouncement in KSR v. Teleflex, the Court of Appeals for the Federal Circuit (CAFC) affirmed a finding of obviousness.

Leapfrog and Fisher-Price compete in the toy market. In this case, leapfrog sued Fisher-Price -- alleging that Fisher-Price's PowerTouch Learning System infringes claim 35 of Leapfrog's patent.

The trial court found the patent not-infringed and invalid as obvious.  On appeal, the CAFC affirmed, noting that the obviousness analysis requires a common sense approach rather than any rigid formula.

An obviousness determination is not the result of a rigid formula disassociated from the consideration of the facts of a case. Indeed, the common sense of those skilled in the art demonstrates why some combinations would have been obvious where others would not. See KSR Int’l Co. v. Teleflex Inc., 550 U.S. __ (2007) (“The combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results.”).

The results may have serious implications for Internet-related patents that have a close non-Internet corollary. The two pieces of prior art were Bevin (electro-mechanical, but not electronic, toy for phonetic learning) and SSR (electronic book-type toy). Together, the two references teach almost all the elements of the asserted claim, and the courts found their combination to be appropriate.

We agree with the district court that one of ordinary skill in the art of children’s learning toys would have found it obvious to combine the Bevan device with the SSR to update it using modern electronic components in order to gain the commonly understood benefits of such adaptation, such as decreased size, increased reliability, simplified operation, and reduced cost. While the SSR only permits generation of a sound corresponding to the first letter of a word, it does so using electronic means. The combination is thus the adaptation of an old idea or invention (Bevan) using newer technology that is commonly available and understood in the art (the SSR). We therefore also find no clear error in the finding of the district court that one of ordinary skill in the art could have utilized the electronics of the SSR device, with the method of operation taught by Bevan, to allow a child to press each individual letter in a word and hear the individual phonemes associated with each letter to sound out the words.

The one remaining limitation -- a "reader" -- was "well-known in the art at the time of the invention" and its combination. That known element could be combined because it provides "an added benefit and simplified use of the toy for the child in order to increase its marketability."

Finally, the court gave the patentee a chance to avoid the combination.

Leapfrog presents no evidence that the inclusion of a reader in this type of device was uniquely challenging or difficult for one of ordinary skill in the art. Nor does Leapfrog present any evidence that the inclusion of a device commonly used in the field of electronics (a reader), and even in the narrower art of electronic children’s toys, represented an unobvious step over the prior art.

Secondary factors not enough to save the day:

The district court explicitly stated in its opinion that Leapfrog had provided substantial evidence of commercial success, praise, and long-felt need, but that, given the strength of the prima facie obviousness showing, the evidence on secondary considerations was inadequate to overcome a final conclusion that claim 25 would have been obvious.

Obviousness affirmed.

Notes:

• Judgment of non-infringement was also affirmed.
• Read the case 

Commerce Secretary Gutierrez Appoints Margaret Peterlin as PTO Deputy Director

Margaret J.A. Peterlin has been appointed as the deputy director of the USPTO -- second-in-command behind director Jon Dudas. Like the Director, Ms. Peterlin is a University of Chicago Law School graduate and spent most of her legal career in the halls of Congress. The job of deputy director opened-up after Steve Pinkos left to return to Texas.  Jon Dudas was the Deputy Director from 2002 to 2004 when his promotion came-through.

From the USPTO Press Release:

“Margaret is a tremendous asset to the USPTO. With an impressive track record of success across several disciplines, she has established herself as a proven leader, strategic legal thinker, and knowledgeable legislative tactician,” said Jon Dudas, Under Secretary of Commerce for Intellectual Property and Director of the USPTO.  “Margaret will apply these skills to USPTO's challenges, which she well understands from her time representing the leadership of the U.S. House of Representatives.  Margaret's leadership will be instrumental in the USPTO's efforts to work with applicants to enhance the quality of their applications, process patents and trademarks in a timely manner, and operate in a way that motivates our employees and inspires our international partners.”

The role of deputy director is appointed by the "Secretary of Commerce, upon nomination by the Director . . . [and] shall be a citizen of the United States who has a professional background and experience in patent or trademark law." 35 U.S.C. 3.

Ms. Peterlin's full title will be: Deputy Under Secretary of Commerce for Intellectual Property and Deputy Director of the Commerce Department’s United States Patent and Trademark Office.

 

 

Links:

• USPTO Press Release
• Peterlin Bio
• 35 USC 3

Thank you MBHB, Hello Missouri!

I have been a part of McDonnell Boehnen Hulbert & Berghoff (MBHB) for the past six years. First as a law clerk, then an associate, and finally in an of counsel role while teaching at Boston University Law School.  Like many of my UChicago classmates, I could have taken a job at almost any major firm in the country. I chose MBHB because I enjoyed and respected the people and fit-well with the firm's entrepreneurial spirit.  And although I hate to admit it, the firm's over-generous payscale was also a draw. I want to thank all of my friends at MBHB for your mentorship, faith in me, and for the freedom-to-operate these past six years.  Your support has been a daily affirmation that my decision was correct.

A year ago, I had no intention of staying in academia -- we were simply enjoying a sojourn in Boston.  But I have loved this year of teaching and writing at BU Law School and the opportunity to think a little-bit deeper about the law.  I recently accepted a position as an associate professor at the University of Missouri Law School in Columbia Missouri.  We chose Mizzou for a few reasons: I really like the faculty -- there are at least four other engineer-law-professors, several others who are also interested in IP law, and even a few bloggers. (Lambert, McGuinness, and newly Sokol).  MU's location is also excellent because many of our family members live nearby. Columbia regularly ranks as one of the best places to live and raise a family -- this is largely driven by the low cost of living and the plentiful spots for hiking & fishing.

My plan is to focus primarily on teaching and writing for the first few years, although I hope to keep my hands a bit dirty as well. Thanks MBHB, and Hello Missouri!

Links:

• University of Missouri-Columbia Law School
• MBHB: www.mbhb.com
• Two Other Blogs Run by MBHB Attorneys:
  • Orange Book Blog, by Aaron Barkoff  ("Covering the intersection of Patent Law and FDA Law").
    • PatentDocs, by Chris Singer, Ph.D., Don Zuhn, Ph.D., Jason Derry, Ph.D., Kevin Noonan, Ph.D., and Sherri Oslick, Ph.D. ("Biotech & Pharma Patent Law & News Blog").

CAFC Affirms Disqualification of Defendant's Attorneys

In re Hyundai Motor Am., 185 Fed. Appx. 940 (Fed. Cir. 2006)

Orion IP has accused dozens of companies of infringement of its business method patents ("computer-assisted sales").  At one point, Orion worked with the Orrick firm on some matters and Orrick made a pitch to handle Orion's litigation and patent strategy work. Orion demurred.  Once litigation began, Orrick got back in the game by agreeing to represent several of the accused infringers directly adverse to Orion.

The Texas district court noted a conflict-of-interest and disqualified Orrick.  On writ of mandamus, the CAFC affirmed -- finding no error.

The parties apparently presented diverging evidence as to the subject-matter of early meetings between Orrick and Orion and the type of documents exchanged.  The CAFC noted that these were purely factual questions that the lower court "resolved in Orion's favor" without any clear error.

In order to prevail, Hyundai must clearly and indisputably show clear error in the district court's findings of fact and application of the facts to the law. Hyundai has not carried its burden. This is essentially a factual dispute, which the district court resolved in Orion's favor. The district court held a hearing, considered the competing declarations, and reviewed the pertinent documents. We do not find a basis for overturning those findings.

Disqualification affirmed.

Watch-Out!: Bleed-through Claim Construction and Argument Estoppel

Pods v. Porta Stor (Fed. Cir. 2007)

Pods and Porta Star are competing storage and moving companies. Pods sued Porta Stor for patent infringement based on its patent directed to a method and apparatus for moving a storage container in and out of a truck.  A jury found infringement and the judge held the patent not invalid.

On appeal, Porta Star focused-in on the claim term "carrier frame." That term was used in both claim 1 and claim 29.  The lower court applied diverging meanings to the two instances, but no-one could explain why the claim construction should vary from the traditional "presumption that the same terms appearing in different portions of the claims should be given the same meaning unless it is clear from the specification and prosecution history that the terms have different meanings at different portions of the claims."

The parties agree that the structure described as a “carrier frame” in claim 1 is “a four-sided or rectangular-shaped carrier frame” that surrounds the container on all sides. . . . PODS has pointed to no evidence in the specification or the prosecution history that the term “carrier frame” in claim 29 has any meaning other than the uncontested meaning in claim 1.

The agreed definition of claim 1 construed "carrier frame" as four-sided frame, and because "the only embodiments disclosed in the specification are four-sided," the CAFC held that the claim 1 definition should prevail throughout the claimset. Based on this claim construction, the court found non-infringement.

Notes: The problem with this decision is that claim 1 explicitly limits a carrier frame with four sides while claim 29 only includes the limitation "carrier frame:"

Claim 1: . . . carrier frame including right and left longitudinal elements [and] having front and rear transverse elements . . .

Claim 29: . . . a carrier frame . . .

Despite this clear textual difference, the CAFC determined that the carrier frame of claim 29 must be defined as having four sides because (a) the parties agreed that claim 1 requires a four-sided carrier frame and (b) the only embodiments included four-sided carrier frame.

The court also denied coverage under the doctrine of equivalents because of prosecution estoppel -- in particular, the patentee had argued against a rejection of claim 1 by stating that claim 1 required a rectangular frame.

Why the patentee lost: It used the word "invention" when arguing against the rejection of claim 1: "the present invention which allows the carrier frame to be elevated and positioned as a rectangular-shaped frame with respect to the container, the vehicle and the ground.”

Patently-O TidBits

• MBHB has released Volume 5 of its snippets newsletter. snippets was originally started by a group of associates at MBHB (who are now partners). And, in many ways, Patently-O is a snippets spin-off. Contents of the most recent edition:
  • MedImmune's Impact for Licensees by Josh Rich
  • Crafting the Cease and Desist Letter in Light of MedImmune by Dave Frischkorn and Rory Shea
  • E-Discovery FAQ by Richard Carden and Jennifer Kurcz
  • Trademark Infringement and Web Page Metadata by Eric Moran and Jim Suggs.
  • There is also a Special Alert discussing the impact of KSR v. Teleflex by Kevin Noonan, Jeremy Noe, Dan Williams, and Paul Kafadar.
  • Download snippets V.I;
  • Download KSR Special Alert;
• Verizon v. Vonage: Many casual commentators have indicated their belief that Verizon's VOIP patents are "junk." A jury held that they were nonobvious and the judge concurred.  On Friday, the CAFC rejected Vonage's plea for an immediate retrial based on the outcome of KSR v. Teleflex. The appeal continues.
• There has been some discussion on Patently-O regarding European and Japanese patent blogs.  My money is on IPEG (de Wit) and IP Kat (Phillips) as the best amongst several good in Europe and the UK. I don't read Japanese, but I have not heard of anything comparable discussing Japanese patent law. The Japanese IP High Court does have a nice english website. Link.
• Can someone fix this Wikipedia entry: http://en.wikipedia.org/wiki/Patent_Reform_Act_of_2007
• ... I'm off to Bio2007 ...

KSR and the Line Between Fact and Law

By Professor Chris Cotropia

Well, we have gotten early indications from the major patent players as to how the substantive part of KSR will play out.  TSM still has a place in the post-KSR world, at least according to Chief Judge Michel of the Federal Circuit and Deputy Commissioner Focarino of the USPTO.  These are preliminary statements.  We will not know what the Federal Circuit or USPTO really think until the first precedential opinion or interim guidelines issue.  But these early comments make one wonder if KSR changes anything, particularly those like myself who witnessed the Federal Circuit's acceptance of, and reliance on, implicit TSM well before In re Kahn, DyStar, and Alza.

While the substantive impact may turn out to be minimal, KSR could have a significant procedural effect.  The Court appears to have shifted the line between factual and legal parts of the nonobviousness analysis, moving what was (is?) the TSM test from being a question of fact to a question of law. 

The Supreme Court in Graham established that nonobviousness was ultimately a question of law, but there were recognized underlying factual issues—content of the prior art, scope of the claims, and the level of the PHOSITA.  When the CCPA, and then the Federal Circuit, started employing the TSM test, the test became another underlying factual component of the inquiry.  As a result, there was not much left at the question of law level, and the Federal Circuit affirmed most appeals from rejections by the USPTO and or trials before district courts on the nonobviousness issue.

Book Review: Fundamentals of Claim Drafting

Paul Cole is a European patent attorney as well as a regular Patently-O reader. I have been planning to write a short review for some-time of his book -- Fundamentals of Patent Drafting. I was prompted today when another reader recommended the book.

Given Paul's background, Fundamentals has a focus on European (and UK) patent drafting.  However, the author is also quite familiar with US patent laws and blends-in US topics as well -- making the book a good resource for US attorneys who are managing foreign prosecution or who are drafting patents that will eventually be filed in Europe.  There is also an interesting discussion of windsurfing technology.

Book price: £25.00 (plus postage for outside the UK: £5.60 to Europe or £13.50 to outside Europe) from CIPA

USPTO Issues Preliminary Obviousness Examination Instructions

In the wake of KSR v. Teleflec, Deputy Commissioner Peggy Focarino has submitted a memorandum to the technology center directors with preliminary examination guidance.  The memo includes marching orders requiring that examiners continue to provide "reasons" for combining prior art in an obviousness rejection.

[I]n formulating a rejection under 35 U.S.C. 103(a) based upon a combination of prior art elements, it remains necessary to identify the reason why a person of ordinary skill in the art would have combined the prior art elements in the manner claimed.

In submitting the memo, Deputy Commissioner Focarino noted that the Supreme Court's opinion requires explicit discussion:

To facilitate review, [the apparent reasons for combining prior art] should be made explicit.

In addition, the memo reminds us of the basics of Graham v. John Deere:

1. determining the scope and contents of the prior art;
2. ascertaining the differences between the prior art and the claims in issue;
3. resolving the level of ordinary skill in the pertinent art; and
4. evaluating evidence of secondary consideration.

• Download Focarino.pdf (Thanks to Hal Wegner and others for the memo).

Impact of KSR v. Teleflex on Pharmaceutical Industry

For the past 30 years, Cal has been a litigation analyst serving the investment community. He is member of the New York Bar and a graduate of Northwestern law School. www.litigationnotes.com.

=====================

By Cal Crary:

We do not believe that too much guessing is needed to see what the new patent environment will be like, since we already have the benefit of Chief Judge Michel’s March 23, 2007 decision in the Norvasc case, in which he identified the likely changes in the court’s obviousness jurisprudence. . . . A few of the principles reflected in Judge Michel’s opinion are as follows:

1. routine testing to optimize a single parameter, rather than numerous parameters, is obvious;
2. an approach that is obvious to try is also obvious where normal trial and error procedures will lead to the result;
3. unexpected results cannot overcome an obviousness challenge unless the patentee proves what results would have been expected;
4. a reasonable expectation of success does not have to be a predictable certainty but rather it can be an expectation that can be satisfied by routine experimentation; and
5. motivation can be found in common knowledge, the prior art as a whole or the nature of the problem itself.

....

[T]here are certain types of patents in the pharmaceutical industry that will have to be looked at, or looked at again, in light of the Supreme Court’s opinion. We happen to believe that enantiomer patents are especially vulnerable, at least in cases in which the technology to separate them was available in the public domain at the time the separation was made. However, we do not believe that the courts will permit a massive extermination of drug industry patents or that a meat-axe approach to them will be used. Rather, we think the Supreme Court’s only demand is that common sense be injected into the determination of what a person of ordinary creative skill in the art would do. The primary examples of enantiomer patents that we regard as vulnerable include Forest Labs’ Lexapro, Bristol-Myers’ Plavix, AstraZeneca’s Nexium and Johnson & Johnson’s Levaquin. We think that all four of these drugs are especially vulnerable now, in light of the new, broader scope of obviousness. In the case of Levaquin, Mylan Labs lost at the district court level in a case that it should have won, even under the law as it existed at the time, and then it was affirmed by Judge Pauline Newman, a pro-industry Federal Circuit judge, in a non-precedential decision without opinion. In a new case, if obviousness is in the mix and if Judge Newman is avoided on appeal, then Levaquin will be a generic drug.

KSR and the F-Words

By Professor Shubha Ghosh

Now that the Supreme Court has issued its opinion in KSR v. Teleflex, the first reaction is what took it so long?   During the past six months since oral arguments in late November, I was expecting that the Court was taking its time crafting a historical opinion that delved into the genesis and evolution of the nonobviousness doctrine since the Hotchkiss decision in 1851.  The Court does mention the Hotchkiss decision and a few others, but the six month gestation has yielded a compact, thirty page decision that can be summarized with three simple F-words: formalism, functionality, and flexibility. 

The Legacy of KSR v. Teleflex

Part of the legacy of KSR will depend upon how the case is treated by the Federal Circuit (CAFC). Graham v. John Deere is the seminal patent case on obviousness, and is cited by most patent decisions involving the question of obviousness.  Cases like Sakraida and Anderson's Black-Rock are much less likely to be relied-on. Sakraida, for instance, is fifty-times (50x) less likely to be cited by the CAFC than Graham -- even though Sakraida represented (until 2007) the Supreme Court's most recent pronouncement on obviousness.  Sakraida's low-level influence has waned in recent times.  For instance, the cow-dung case has only been cited once by the CAFC in the past decade. (in DyStar).

The table above shows the number of Shepard's citations found for the Supreme Court's set of obviousness decisions. Total citations include all known citations while "total court" citations include only instances where the case was cited in a court opinion. The No. 2 case (in CAFC citations) is US v. Adams. That case is notorious as the only nonobviousness case -- i.e., were the Supreme Court found the claims nonobvious.

The KSR Opinion has much more meat than Sakraida, but the case will never challenge the canonical status of Graham v. John Deere.  Of course, the question of KSR's legacy is now in the hands of the CAFC.

Patently Funny

Cartoons via Stu Rees at www.stus.com. (Used with permission).

KSR v. Teleflex: A Tale Full of Sound and Fury, Signifying Little?

By Professor Gregory Mandel

Though the Supreme Court’s unanimous reversal in KSR v. Teleflex, No. 04-1350, 550 U.S. ___ (2007), contains some harsh words for the Federal Circuit’s teaching, suggestion, or motivation (TSM) test, the decision itself appears to leave the TSM requirement roughly intact.  Justice Kennedy’s opinion emphatically rejects an 'explicit' TSM test—one that would require explicit prior art teachings in order to combine given references in the obviousness analysis.  At the same time, the decision appears to essentially recreate the 'implicit' or 'flexible' TSM test—one that would allow implicit suggestions, such as the nature of the problem, to provide the requisite motivation to combine.  It is this implicit TSM requirement that represented current Federal Circuit doctrine, pursuant to several decisions published after certiorari was granted in KSR (e.g., In re Kahn, DyStar, & Alza).  In fact, the Supreme Court even indicates that the Federal Circuit may have gotten it right in these post-cert cases.  The KSR opinion is more a critique of the Circuit's application of the obviousness (and TSM) standard to the specific facts in KSR than a critique of the need to rigorously (and expansively) evaluate what would lead a PHOSITA to combine certain references in the obviousness analysis.

Under KSR, in order to evaluate whether a given combination was obvious, the factfinder must "determine whether there was an apparent reason to combine the known elements in the fashion claimed by the patent at issue."   The Supreme Court’s "reason to combine" sounds significantly like "suggestion, teaching, or motivation to combine."  It is interesting that the Court used a term as loose as “reason,” given concerns raised during oral argument about the indefiniteness of the term “motivation.”  In addition, the Court requires that, "[t]o facilitate review, the analysis should be made explicit," a proposition for which the Court cites Kahn, warning that conclusory statements are not sufficient. The Court goes on to criticize rigid application of TSM, particularly relying solely on published articles and explicit content of issued patents.  But, the Court notes, "In the years since the Court of Customs and Patent Appeals set forth the essence of the TSM test, the Court of Appeals no doubt has applied the test in accord with these principles in many cases. There is no necessary inconsistency between the idea underlying the TSM test and the Graham analysis."  And, the Court explicitly notes that the post-cert Circuit cases were not before it: "The extent to which [DyStar and Alza] may describe an analysis more consistent with our earlier precedents and our decision here is a matter for the Court of Appeals to consider in its future cases."  The opinion also clearly (appropriately in my opinion) invites greater analysis of the PHOSITA and the circumstances surrounding the PHOSITA and the pertinent technology than the Circuit has engaged in in some of its decisions.

Senate Considers Reforms to Importation Rules

Kinik v. ITC: In 2004, the Federal Circuit determined that the language of 271(g) does not apply to Section 337 actions at the ITC. [Opinion]  In that decision, court noted that the 271(g) product by process statute explicitly limits itself “for the purposes of this title.”

Thus, when a defendant is accused of improper imports under Section 337, he cannot raise the defenses that the product included material change by subsequent processes or that the imported product is a trivial component of a larger product.

On May 1, 2007, the Senate held testimony regarding a legislative amendment that would apply 271(g) to ITC issues as well. Professor Chris Cotropia presented three specific problems raised by the current differential: 

• inconsistent judgments;
• noncompliance with TRIPs; and
• hindrance of the policies behind the exceptions.

AIPLA opposes amendment arguing that it "would only benefit foreign manufacturers accused of unfair trade practices."

Links:

• http://judiciary.senate.gov/hearing.cfm?id=2735
• http://www.patentlyo.com/patent/2005/10/amendment_to_27.html

Microsoft v. AT&T: Extraterritorial Enforcement of US Patents

Microsoft Corp. v. AT&T Corp., 550 U. S. ____ (2007).

In a 7-1 decision, the Supreme Court held that Section 271(f) of the Patent Act does not extend to cover foreign duplication of software.

There is no such thing as a world-wide patent. Rather, patent law is territorial. A US patent covers infringing acts that occur in the US but generally disregards extraterritorial activity. The lone statutory exception is Section 271(f) of the Patent Act, which calls for infringement liability for the unauthorized supply of "components" of a patented invention for "combination" abroad.

Todays business reality has considerably dulled the teeth of 271(f) in the area of manufacturing -- few physical components are shipped abroad from the US.  Through Microsoft and others, the US continues to be a leader in software development and the export of software.  Of course, Microsoft does not export its software by loading millions of CDs on a cargo ship. Rather, it sends only a few copies to foreign OEM distributors who load copies of the software onto PCs for sale.

AT&T is the assignee of a patent covering a computer for encoding and compressing recorded speech. In the US, a computer with Microsoft WIndows installed infringes the patent. The question in this case, is whether the foreign installed software can be considered a "component" supplied from the US under 271(f). 

The question before us: Does Microsoft's liability extend to computers made in another country when loaded with Windows software copied abroad from a master disk or electronic transmission dispatched by Microsoft from the United States? Our answer is "No."

As can be seen from the various amici briefs, reasonable minds can differ regarding two statutory elements: (1) whether software -- without being tied to a physical medium -- can be classified as a "component;" and (2) whether the foreign-made copy was "supplie[d]" from the US. Abiding by its principle against extraterritorial application of laws -- especially patent laws -- the Supreme Court answered both of these questions in a restrictive fashion:

• Abstract Software: Until it is expressed as a computer-readable "copy," e.g., on a CD-ROM, Windows software indeed any software
  detached from an activating medium remains uncombinable. . . . Abstract software code is an idea without physical embodiment, and as such, it does not match §271(f)'s categorization: "components" amenable to "combination." [DDC: Software is never without a physical embodiment?]
• Supply of Copies: [T]he very components supplied from the United States, and not copies thereof, trigger §271(f) liability when combined abroad to form the patented invention at issue. Here, as we have repeatedly noted,  the copies of Windows actually
  installed on the foreign computers were not themselves supplied from the United States. [Therefore no liability for foreign-made copies]

Dissent by Justice Stevens: In my view, Justice Stevens - in a solo dissent - has the more sensible view of component.

[I]f a disk with software inscribed on it is a "component," I find it difficult to understand why the most important ingredient of that component is not also a component.