Patent Law Blog (Patently-O)

Court Blocks PTO Rules on Eve of Effective Date; All Four Equitable Relief Factors Suggest Injunction

Tafas v. Dudas (E.D. Va. October 31, 2007)

After a two-year long notice, comment, and review process, the US Patent & Trademark Office (PTO) published a set of final rules in August 2007 to effectively limit the number of claims filed in each patent application and to limit the number of continuation applications stemming from an original patent application.  (Current rules allow unlimited claims and unlimited continuations).  Tafas, an individual inventor, immediately filed suit — asking the Virginia based Federal Court to block the rules. Later, Glaxo Smithkline (GSK) filed a preliminary injunction to stop the rules before their November 1, 2007 effective date. Other parties, including the AIPLA, Élan, Hexas, the Roskamp Institute,and Tikvah Therapeutics, IBM, SanDisk, & Senator Schumer, then filed briefs or declarations supporting preliminary relief.

In granting the requested preliminary injunction, the district court walked through the four relevant factors: (1) likelihood that the plaintiff will succeed on the merits of the case; (2) irreparable harm without an injunction; (3) a balance of hardships weighing in favor of an injunction; and (4) the public interest supporting an injunction.  Although the four factors are considered as a whole, the first to factors are clearly the most important and must always be proven.

Likelihood of Success: In its brief analysis of the issues, the court found a “genuine possibility” that the PTO will lose. In particular, the Court noted two particular GSK arguments as likely winners: (1) the facial illegality of limiting the number of continuation applications under 35 USC 120; and (2) problems created by the retroactive effect on settled rights. A third argument – vagueness of the ESD requirements – also has some value according to the Court.

Continuation Applications: 35 USC 120 can be read various ways, but the Court found that Federal Circuit law “suggests that a decision by the PTO to limit the number of continuing applications would run contrary to the mandate of Section 120.”  See Symbol. This conclusion is made easier because the PTO would deserve no rulemaking deference for any rules that extends into substantive grounds. GSK’s position on the illegality of claim limitations is not as strong because there is no statutory provision to the contrary. Thus, the court found that “neither party can claim a strong likelihood of success on this issue.”

Retroactive Effect: The doctrine of retroactive effect is interesting here. Unless expressly granted by Congress, an agency’s rulemaking cannot be retroactive. The court found vested rights in the ability to file continuations and claims under the old rules. Those rights vested at the time when the patentee chose to file for patent protection and give up trade secret protection.

While “an individual [that] discloses his trade secret to others who are under no obligation to protect the confidentiality of the information, or otherwise publicly discloses the secret,” loses that property right, Rucklehaus, 467 U.S. 1002, the Final Rules retroactively alter the bargain on which inventors like GSK rely in making their decision to surrender their rights. The Final Rules thus impair GSK’s right to this bargain.

ESD Requirements: The after publishing the final rules, the PTO published a series of clarification papers and guidelines for how to properly prepare an examination support document (ESD) under the new rules. The Court turned that guidance on its head — suggesting an admission of vagueness and noting that the additional guidance cannot be used to help vague rules overcome due process violations.

An alternative way to block the rules is to show that they are “arbitrary and capricious.” The Court found the PTO’s reasoning coherent enough to give the agency a pass.

Thus, the PTO’s rationale appears to be sufficient to satisfy arbitrary and capricious review, and the Court will find that GSK has not shown a real likelihood of success on this issue.

Irreparable Harm: The Court agreed that the “uncertainty” created by the new regulations was sufficient to cause irreparable harm because they would change investment and patent filing incentives. Without an injunction, GSK would be unable to recover from its lost protection if the rules are ultimately determined to be invalid.

Balance of Hardships: For the preliminary injunction, the balance of hardships weigh in GSK’s favor because GSK’s woes are instant once the new rules are effective. On the other hand, the PTO will simply experience a gradual continued increase in pendency.

Public Interest: The public interest is in a stable patent system. Thus, a preliminary injunction to preserve the status quo is appropriate.

Notes:

• PI Order (describing the scope of injunction);
• Discussion of Hearing
• Documents filed for the PI Hearing
• Emergency Motions at the CAFC

PTO Continuation and Claim Rules Temporarily Blocked by District Court

On October 31, 2007, Judge Cacheris of the Eastern District of Virginia held court in the case of Tafas v. Dudas. In that case, several plaintiffs have joined together in an attempt to block implementation of a set of new patent prosecution rules proposed by the USPTO. The jist of those rules would be to effectively limit the number of claims filed in each patent application and to limit the number of ‘continuation’ applications that may stem from any original patent application.

At the conclusion of the hearing, the Court issued an oral decision temporarily enjoining the PTO from implementing the new rules that were set to become effective on November 1, 2007. John White, who attended the hearing, noted that the crowd clearly supported the plaintiffs and were quite relieved by the decision. Jill Browning of the Ashe firm also attended today’s hearing and provides the following analysis of Judge Cacheris’ hearing on the PTO’s Continuation and Claim Limitations:

With respect to the arguments presented, the Court was clearly well prepared on all the issues.  The attending members of the patent bar (of which there were many) were grateful to the Court for making its decision granting the injunction before the critical November 1 deadline and before the rules had a chance to become effective.   

The Court, at the outset, asked why GSK had delayed in filing its motion.  GSK indicated that the rules issued in August, 2007, were so different from the rules the public commented on in January, that, given the complexity of the rules, GSK’s filing of the motion was timely.  On this point, the USPTO later argued that the Final Rules were merely a “logical outgrowth” of the public comments provided and, thus, acceptable under the law.  GSK took issue with this point, but indicated that this topic would be more germane to the summary judgment briefing and did not need to be decided now. 

GSK began its argument by focusing on the public interest.  GSK argued that the public’s interest would best be served by not implementing the rules and, as support for this, pointed out that every amicus and declaration (and a letter from a Senator) filed by a third party had supported GSK’s position, as opposed to the USPTO’s. [Link] GSK pointed out that the public interest would best be served by maintaining the status quo, as opposed to implementing rules that would require applicants (and specifically GSK) to make substantive choices and decisions regarding their patent portfolios that could never be “undone.”  One particularly persuasive point GSK made during argument wsa that the “contract” between the applicant and the government (i.e., the applicant discloses its trade secret in return for patent protection) was broken by the USPTO’s enactment of the rules.  GSK pointed out that the “quid” of submitting the applications was already accomplished, and now the USPTO wanted to change the “quo.” 

In response, the USPTO argued that the USPTO was not deaf to the public outcry – but that the outcry of “change is bad” is not enough to outweigh an agency’s need to conduct its business in a way that alleviates an over burdened system.  In fact, at one point the USPTO, in a somewhat contradictory argument, noted that it was not enacting a “mechanical” rule eliminating additional continuations. Rather, the rules were simply directed at a way to relieve an overburdened system.  The USPTO stated that the New Rules would increase efficiency and decrease backlog.

GSK rebutted the USPTO’s argument that a delay would cause irreparable harm (i.e., loss of money in changing to the new implementation) by pointing out that the money was already spent, and delaying the implementation of the rules would not cause the USPTO to lose additional money.  On rebuttal, the USPTO indicated that the government would have to expend additional money re-training the examiners, as they could not be expected to maintain their understanding of such complicated and detailed rules for any extended period of time.

With respect to the merits of the case, the Court specifically asked each party whether the USPTO was acting in an arbitrary and capricious manner.  While GSK indicated that they did not need to address this question until summary judgment briefing, it believed that the USPTO was so acting, as evidenced by the Final Rules contradicting over 100 years of court precedent.  The USPTO, in response to the Court’s question, clung to the argument that the rules were merely procedural, and, thus, are well within the USPTO’s authority.  The USPTO also indicated that the 10,000 page record, which included a public comment period, supported the USPTO’s careful and extensive consideration of the issues and stands in stark contradiction to any allegation that the USPTO acted in an arbitrary and capricious manner.

The Court also asked each party what makes the New Rules “substantive” vs. “procedural.”  GSK argued that the rules were substantive primarily because the rules represent a break with over 100 years of substantive patent practice (focusing primarily on the ability to file unlimited continuations, excepting very narrow prosecution laches situations that should be applied on a very limited case-by-case basis).  The USPTO responded by arguing that the Final Rules were procedural because they do not affect the substantive rights of applicants to file, and do not even limit the number of continuations that an applicant can file – the applicant, to file additional applications (i.e., more than the 2 + 1) need only file a petition, which will be decided on a case-by-case basis.

GSK argued that the effect of the Final Rules was, in fact retroactive because it impaired the rights of a party, relying on Supreme Court precedent.  The USPTO indicated that Final Rules were not retroactive, merely because they “upset expectations” and that there is no property right in a patent application or in any particular procedure adopted by the USPTO.   

While, as the USPTO pointed out, an injunction is an extraordinary measure, GSK argued out that agencies are enjoined “all the time” when they promulgate rules that are challenged as being beyond the agencies’ authority.  Apparently, the Court agreed with GSK.  The reasoning for Judge Cacheris’ decision will be found in an opinion that he will issue before close of business today.

1.  When we can expect a final decision on the merits:  The summary judgment briefing schedule that the USPTO had agreed upon with Tafas appears to no longer be in effect for several reasons.  First, the USPTO claims that the expedited briefing schedule was agreed to based on Tafas’ agreement not to seek an injunction.  The USPTO indicated that Tafas reneged on the agreement and joined the motion for a preliminary injunction or TRO and, thus, this alone was grounds to vacate the government’s agreement.  Second, even if the court determined that Mr. Tafas’ actions did not repudiate the agreement, given the additional amicus briefs, and joining GSK as a party, the USPTO requires additional time to adequately address the briefs.  Further, the USPTO pointed out that, because the injunction was granted, plaintiff’s arguments for a speedy hearing on the summary judgment motion are less pertinent.  The Court instructed the parties to attempt to agree on a briefing schedule.  Hopefully, the briefing schedule will be presented as an order so that we will be able to determine when it will be heard, as this will determine when ultimate resolution of the case.

Of course, the preliminary injunction is not a decision on the merits of the rules — it is only preliminary relief. A full decision will likely be delayed until at least early January.  The PTO may still choose to appeal.

In other prosecution news… New IDS rules are expected to be published soon.

Preliminary Injunction Order

Text of the Preliminary Injunction order from Judge Cacheris:

4) Defendants [USPTO & Director Jon Dudas] are preliminarily enjoined from implementing the Final Rules titled “Changes to Practice for Continued Examination Failings, Patent Applications Containing Patentably Indistinct Claims, and Examination of Claims in Patent Applications”;

5) Defendants are preliminary enjoined from issuing new regulations restricting the number of continuing applications, the number of requests for continued examination, and the number of claims that may be filed with the PTO;

6) This Order shall expire upon the entry of a final judgment in this matter, unless otherwise ordered by the Court.

• File Attachment: GSK PI Order.pdf (30 KB)

Patent Prosecution Notes

1. The MPEP was recently updated to include examination guidelines in light of KSR v. Teleflex: MPEP; Bluepages. The update to MPEP 706.02(j) reads as follows:  

35 U.S.C. 103 authorizes a rejection where, to meet the claim, it is necessary to modify a single reference or to combine it with one or more other references. After indicating that the rejection is under 35 U.S.C. 103, the examiner should set forth in the Office action:

1. the relevant teachings of the prior art relied upon, preferably with reference to the relevant column or page number(s) and line number(s) where appropriate,
2. the difference or differences in the claim over the applied reference(s),
3. the proposed modification of the applied reference(s) necessary to arrive at the claimed subject matter, and
4. an explanation >as to< why >the claimed invention would have been obvious to< one of ordinary
   skill in the art at the time the invention was made.

. . . It is important for an examiner to properly communicate the basis for a rejection so that the issues can be identified early and the applicant can be given fair opportunity to reply. Furthermore, if an initially rejected application issues as a patent, the rationale behind an earlier rejection may be important in interpreting the scope of the patent claims. Since issued patents are presumed valid (35 U.S.C. 282) and constitute a property right (35 U.S.C. 261), the written record must be clear as to the basis for the grant. Since patent examiners cannot normally be compelled to testify in legal proceedings regarding their mental processes (see MPEP § 1701.01), it is important that the written record clearly explain the rationale for decisions made during prosecution of the application.

See MPEP § 2141 - § 2144.09 generally for guidance on patentability determinations under 35 U.S.C. 103. . .

Happy Halloween -- A Working Holiday for US Patent Attorneys

(U.S. Patent No. 6,769,793).

Materials from Tafas/GSK v. Dudas: Challenging the PTO's new Rules

Documents:

• Supporting Preliminary Injunction and Restraining Order against PTO:
• File Attachment: GSK Amended Complaint.pdf (132 KB)
• File Attachment: GSK Brief Supporting a Preliminary Injunction and TRO.pdf (106 KB)
• File Attachment: GSK Reply Supporting PI.pdf (76 KB)
• File Attachment: Tafas Support For PI.pdf (34 KB) 
• File Attachment: AIPLA Supporting PI.pdf (157 KB)
• File Attachment: Elan Supporting PI.pdf (74 KB) 
• File Attachment: Hexas Supporting PI.pdf
• File Attachment: PhRMA Supporting PI.pdf
• File Attachment: BIO Supporting PI.pdf
• File Attachment: Sen. Schumer Asking PTO to Back Down (1376 KB)

• Opposing Preliminary Injunction and Restraining Order:
• File Attachment: USPTO Opposition to GSK Motion for TRO-Injunction.pdf (228 KB)
• File Attachment: PTO Oppose AIPLA.pdf (75 KB)
• Declarations:
• File Attachment: Helfgott Declaration.pdf (461 KB)
• File Attachment: Hetz Declaration.pdf (340 KB)
• File Attachment: Magen Declaration.pdf (376 KB)
• File Attachment: Kappos Declaration.pdf (77 KB)
• File Attachment: Manbeck Declaration.pdf (776 KB)
• File Attachment: pto.motiontostrike.manbeck.dec.pdf (71 KB)
• File Attachment: gsk.motion.oppose.strike.manbeck.pdf (50 KB)
• File Attachment: pto.rebuttal.brief.manbeck.declaration.pdf (82 KB)
• Other:
• Analysis proving that the rules have no significant economic impact
• Zura
• Quinn
• PatentDocs

Translogic Challenges (1) the Constitutionality of BPAI Decisions and (2) CAFC's Retroactive Application of a PTO Proceeding to a Jury Verdict

In re Translogic (Fed. Cir. 2007)
Translogic v. Hitachi ( Fed. Cir. 2007)

In parallel proceedings, Translogic won its patent infringement case in a jury trial against Hitachi (jury agreed that the claims were valid) and lost its BPAI reexamination appeal (BPAI found claims invalid). Both appeals reached the CAFC at roughly the same time and were decided the same day with the following holding: 

•  In re Translogic: BPAI affirmed; claims are obvious.
• Translogic v. Hitachi: Based wholly on the above decision, the jury verdict vacated because claims are obvious.

Translogic has now requested an en banc rehearing of this unusual pair of cases decisions: 

Unlawful BPAI Composition: In a recent article, Professor John Duffy challenged the current process of appointing BPAI judges as unconstitutional. John F. Duffy, Are Administrative Patent Judges Unconstitutional? , 2007 Patently-O L.J. 21.  The crux of the Duffy article is that these administrative judges must be appointed by either the head of the Commerce Department or the President. I.e., appointment of these officers by lower level offices, such as the under-secretary, is unconstitutional. Art. II, § 2, cl. 2.  In Translogic's favor, the Supreme Court has created "broad standing rules" that that do not require specific 'injury' due to botched appointment. Likewise, Translogic argues that court precedent provides standing despite a failure to raise this issue at the BPAI or in the original CAFC case. Professor Duffy's article also found its way to Congress – HR 1908 would amend Section 6 of the Patent Act to require the Secretary of Commerce to appoint the BPAI members. Of course, this issue calls into question most recent BPAI decisions.

Antiretroactivity Doctrine: Of course, if the BPAI's decision is vacated, the CAFC must then take a second look at its summary decision in the infringement case.  Translogic also argues that the vacatur violates the Supreme Court’s “antiretroactivity doctrine.”  Under that doctrine, later cancellation of an issued patent should not be used to overturn a prior jury verdict. Although in dicta, the Supreme Court spoke on this very issue — noting that “title to these moneys [damage awards] does not depend upon the patent, but upon . . . judgment of the court.” Moffitt v. Garr, 66 US 273 (1861).  In any event, the patent is not invalid until the PTO issues a certificate of cancellation under 35 USC 307. Thus, the holding is at least severely premature.

Jury Trial and Reexamination: The 7^th Amendment right to a jury trial also includes a right not to have a jury verdict reexamined by a Court except according to the rules of Common Law. Translogic’s argument here is that the CAFC decision violates this right because it nullifies the jury verdict “without applying any appellate standard of review, based solely on its affirmance of a Board decision that explicitly reexamined facts tried to the jury.”

Notes:

• Thanks to Hal Wegner for noting this case in an email to the author.

Emergency Motions at the CAFC

There is a good possibility that late on Halloween night, the CAFC will receive an emergency motion for a preliminary injunction or temporary restraining order. How does this work:

• Jurisdiction: The CAFC has jurisdiction to immediately hear an appeal to a district court’s denial of injunctive relief under 28 USC 1292 (granting jurisdiction over grants & denials of injunctions) The CAFC has jurisdiction over all cases arising under hte patent laws . 28 USC 1295 This case clearly arises under the patent laws because the complaint asserts that the patent laws preclude the PTO from taking these actions.
• Timing: Normally, a respondent is given at least eight days to respond to a motion in appellate court. FRAP 27.  However, the appellate court can shorten that time by giving ‘reasonable notice.’ A temporary order to ‘preserve the status quo’ would not need any notice.
• Emergency Motions:The CAFC has no specific procedure to deal with emergency motions.
• Lone Judge: At the CAFC, most emergency motions involving preliminary injunctive relief are decided by a full three-member panel. However, a single judge will, on occasion, make the determination. In, Tivo v. EchoStar, for instance, Chief Judge Michel issued a temporary stay pending consideration by the full panel. The Federal Rules of Appellate Procedure provide room for a single circuit judge to “act alone on any motion.”

Documents:

• If someone would e-mail briefs in the GSK/Tafas case, I will post them. (dcrouch@patentlyo.com)
• File Attachment: Tafas Support For PI.pdf (34 KB) 
• File Attachment: GSK's_Reply_TRO_and_PI_Brief.pdf (86 KB)

Patent Reform in the Senate

• The Senate continues an internal struggle over patent reform. Although a majority of Senators support the proposed reform measures, the majority does not yet have the 60 votes necessary to close debate. 
• Although the Democrats have been more strongly supporting patent reform, the Senate Bill (S.1145) is clearly bi-partisan. Co-Sponsors include the following Republicans: Orrin Hatch; John Cornyn; Larry Craig; Michael Crapo; Gordon Smith; Roberts; Bennett. Co-Sponsors include the following Democrats: Pat Leahy; Ken Salazar; Chuck Schumer; Sheldon Whitehouse.
• The reform measures (already passed in the house) would make numerous changes to the patent laws, including:
• Force a large number of patent infringement suits to be filed in the defendant’s home court;
• Reduce damage awards for infringement and require specific proof of market value of invention as compared to the closest prior art;
• Limit enhanced damages to a specifically enumerated subset of willfully infringing actions;
• Create a new, expanded post-grant opposition procedure (specific rules to be created by the PTO);
• Create expanded right to submit third-party prior art;
• Change to a first-to-file system (creating a whole new set of prior art);
• Provide enhanced regulatory authority to the PTO (So that it can enact the continuation changes). . .
• Patent reform is an area quite friendly to horse trading and votes are much more easily changed than areas with a greater potential voter response. Few Senators will gain or lose votes based on their patent reform vote.

Patent Prosecutors: Don't Wait for the Witching Hour

The head of a corporate IP department recently forwarded the following message to his troops:

To take advantage of the "one more continuation," we will be filing around XYZ applications between now and 1-Nov.

Some of you have experienced the USPTO electronic filing system locking up as its workload increases just before the cutoff at midnight Eastern time. It is fair to say that the witching hour this Halloween will be particularly intense. 

Thus either file a day or so early, or switch to a paper filing. I'd rather pay the extra $75 in fees for a paper filing than miss that date.

If you decide to paper file between 2 and 4 PM on Halloween, then you have time to take the application to a normal post office before they close. If you are making late changes, you might want to simply plan on using the open-till-midnight post office at the airport. . . However at the witching hour, will its small parking lot fill up with patent practitioners spooked they cannot find a parking place?"

As we’ve always done in Chicago — file early and often.

Sources of Prior Art

Stu Soffer of IPRIORI has conducted an interesting study on 109 recent patent cases. He looked at the types of prior art cited by courts in making decisions on invalidity.  The following is excerpted from Mr. Soffer’s recent report:

“Some time ago I started tracking in my ePriori database the type of art (and the reference itself) of prior art applied against specific patent claims found in dispositive orders -- Summary Judgment Orders and Appeals – materials that presumably rise above the heap presenting the best arguments.  I don’t track the art in file histories unless it is specifically part of the final litigation.  What follows is a very small sampling and may not hold with larger samplings, but seems plausible. This mini-study covers 342 items of art applied to 147 patents in 109 patent cases. 

This small sample tells an interesting story, including the breadth of materials to consider.  Most frequently used are other patents.  I would have expected ‘articles’ to be the next, but instead citations to ‘products’ is the second most applied. This is possibly a reflection of the knowledge of the parties of the history of their markets.  Another indication is that the materials most often searched online – the easily accessible -- only account for 64% of materials.  The ‘other’ category includes: theses, source code, software, websites, textbooks, compounds, print, grant proposals, advertisements, press releases, technical standards, and patent applications.  The ‘ephemera’ category captures real oddities.  For example, a dental mould of teeth.”

This evidence comes from litigation — however, it could have some impact on prosecution issues. Notably — to what extent are known products submitted as prior art to the PTO? Are brochure disclosures sufficient?

35 USC 120

Is the legality of the PTO’s new rules to limit the number of claims foreclosed by Section 120 of the Patent Act?

Section 120 declares that a newly filed patent application “shall have the same effect” as a parent application so long as it is “filed before the patenting or abandonment …[of] the first application.”  The statute includes two specific limitations: First, the newly claimed invention must have been properly disclosed in the original application by overlapping inventors. Second, the new application must specifically reference the parent.

Courts have primarily used Section 120 in determining whether to grant an early ‘priority date’ to a later filed application. The following quote from a recent CAFC case is typical:

“A patent application for an invention disclosed in a previously-filed application in a manner that satisfies all the requirements of 35 U.S.C. § 112 is entitled to the benefit of the earlier filing date.”

Go Med, 471 F.3d 1264 (Fed. Cir. 2006). The practice of filing continuations is old — and was sanctioned by the US Supreme Court in the 1863 case of Godfrey v. Eames.

• File Attachment: PTO Opposition to PI.pdf (234 KB)  

Bayh-Dole Act is Not a "Patent Law" Sufficient to Create CAFC Jurisdiction

WARF v. Xenon Pharmaceuticals (Fed. Cir. 2007) (nonprecedential opinion).

In 2006, WARF won a $1 million verdict in a breach of contract case against Xenon. Although contracts are normally issues of state law, WARF’s original complaint also raised technology transfer issues under the Bayh-Dole Act. (35 U.S.C. §§ 200, et seq.).

On appeal, the CAFC found that it lacked subject matter jurisdiction over the appeal because it did not arise under the patent laws. In this vein, the court first concludes that Bayh-Dole’s inclusion in Title 35 does not necessarily indicate that it is a “patent law.” Rather, the general rule is that contract or licensing disputes do not implicate patent laws unless they require some determination of patent issues such as validity or infringement.

“[M]ere inclusion in Title 35 of the United States Code does not make a statute a patent law under which a claim may arise. At its heart, the Bayh-Dole Act concerns government funding agreements – contracts in the language of 35 U.S.C. § 201 – an area that is outside our section 1295(a) jurisdiction.”

Of course, if Title 35 contains non-patent laws, it makes sense that there may also be patent laws not found in Title 35.

Even if Bayh-Dole was a “patent law,” the appellate panel found that it would still not have jurisdiction over the case because the provisions of Bayh-Dole (1) did not create WARF’s cause of action and (2) are not necessary to determine any other rights of relief.

Case transferred to the Seventh Circuit Court of Appeals.

Enablement: Claimed "surfactant" not enabled by three working examples

Par Pharmaceuticals v. Roxane Labs (Fed. Cir. 2007) (Nonprecedential)

Par’s megestrol acetate suspension is prescribed to people who lose their appetites — often during treatment for cancer or AIDS. Interestingly, the company created this popular drug while attempting to design around a megestrol patent owned by BMS.

After obtaining patent protection, Par sued Roxane for infringement. The district court, however, granted summary judgment of invalidity under 35 USC 112 ¶ 1 — finding that “Par is not entitled to the broad claims it asserts.”

Enablement analysis begins with the presumptions that an issued claim is enabled and that a challenge to enablement requires clear and convincing evidence.  Unlike its close analog written description, enablement is reviewed by the CAFC on a de novo basis.

A claim is enabled when a PHOSITA can make and use the claim without undue experimentation. Broader claims, of course, require broader disclosure to ensure that their “full scope” is enabled. The unpredictable nature of an area of technology often serves patentees well as they argue non-obviousness. (It cannot be obvious if the results could not have been predicted). However, the enablement requirement demands more disclosure for unpredictable arts.

Broad Claims: Here, Par’s claim includes the following elements: “(a) megestrol acetate; … and (c) a surfactant.”  The CAFC finds this claim very broad because it would “allow the choice of any surfactant in any concentration.” (emphasis in original). In its disclosure, Par described three working examples and only one new surfactant. As a matter of law, the CAFC found that “these three working examples do not provide an enabling disclosure commensurate with the entire scope of the claims.”

Notes:

• This opinion, drafted by Judge Moore may begin to provide some indication of her style.
• Does this make sense: Because the applicant broadly claimed “a surfactant,” the specification must enable various types of surfactants. If, the claim had been written even more broadly — by eliminating that limitation — there would have been no need to include a description of various types of surfactants.

USPTO Continuation and Claim Rules: AIPLA Request Injunction to Halt New Rules

Feeling some pressure from its members, the AIPLA has now filed an amici brief in support of GSK’s motion for a preliminary injunction to stop enforcement of the PTO’s new rules on continuations and claim count.

A preliminary injunction requires the moving party to satisfy a four factor test of equitable relief:

• Likelihood of success on the merits of the case;
• Irreparable harm that will persist without relief;
• Balance of hardships weights in favor of relief; and
• The public interest supports relief.

In its brief, the AIPLA focused on how the new rules work to destroy established interests. The brief focuses on a tradeoff between patents and trade-secrets — indicating that the inventions embodied by many currently pending applications would have been kept as trade-secrets but for the longstanding “guarantee of a full and fair opportunity to seek a spectrum of patent protection.”  According to the AIPLA, the limitations on claims and and continuations severely inhibit that guarantee and thus create an irreparable harm to current applicants.

David Kappos, Chief of IP at IBM, filed a declaration in support of the AIPLA brief. Kappos noted the incredible cost that it will incur to review its 25,000+ pending patent applications to ensure compliance. Writing on behalf of SanDisk, two attorneys noted that the technology company will lose at least $200,000 in filing fees due to required consolidation. Writing as a paid expert for SKB, former PTO Director Harry Manbeck has filed a declaration explaining why, in his view, the new rules are illegal.

Files:

• File Attachment: AIPLA.PI.Motion.pdf (158 KB)
• File Attachment: Kappos.pdf (76 KB)
• File Attachment: Sandisk.pdf (376 KB)

Links:

• PatentDocs
• Quinn

CAFC Continues to Support Strong State Immunity from Patent Infringement

BPMC v. California Department of Health (Fed. Cir. 2007).

There is a reason why states generally support strong patent rights: States are increasingly major patent holders – based on inventions developed through federal grants. At the same time, states are generally immune from being sued for infringement. In this case, the CAFC allows the State of California to assert immunity based essentially on a case-numbering technicality.

The facts are simple: Kaiser filed a declaratory judgment action against the patent holder BPMC back in 1997. The California DOH intervened in that case — an action generally considered a waiver of immunity. That case was dismissed for improper venue. In 2006, BPMC filed an identical (mirror image) infringement action against the DOH asserting the identical patent and issues and in the same venue as the 1997 action. The issue here is whether the waiver in the original case of California’s 11th Amendment immunity applies also to the new case. 

Here, the CAFC narrowly construed the state’s waiver of immunity to be strictly limited to the same action. The court noted precedent that the waiver would apply if BPMC had been able to file its case as a revival of the original action an “numbered as that cause of action.”

The appellate panel also rejected BPMC’s argument that the DOH should be judicially estopped from changing its position in this litigation. According to the court, the about-face was excusable because of an intervening change in the law of immunity. (Florida Prepaid). 

Expect that this case will receive a petition for certiorari.

Notes:

• Regular Blog Commenter Andrew Dhuey is counsel for BPMC
• Vas-Cath v. University of Missouri (Fed. Cir. 2006).
• Tegic v. U.Texas (Fed. Cir. 2006)
• Pennington Seed v. Produce Exchange No. 299 and Univ. of Arkansas (Fed. Cir. 2006).

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• Jobs Site: Ryan Swarts is now the listing manager of the Patently-O Patent Law Jobs site. Contact him at: jobs@patentlyo.com.
• Ocean Tomo Auction:  At the Ocean Tomo pre-auction conference, I’ll be speaking on the “three branches of patent reform” at the Palmer House Hilton in Chicago.
• Michigan Law Review: Five Essays on Patent Reform:
• Eisenberg: The Supreme Court’s New Patent Law Experience [HTML] [PDF]
• Wegner: Making Sense of KSR (and the CAFC) [HTML] [PDF]
• Kunin: KSR’s Effect on Patent Law [HTML] [PDF]
• Armitage: Why is Congress Still Pushing Patent Reform? [HTML] [PDF]
• Duffy: Predicting Patent Reform [HTML] [PDF]

Personal Jurisdiction: Patent Plaintiff must Link Accused Product with Accused Defendant

F&G Research v. Paten Wireless (Fed. Cir. 2007)(Nonprecedential)

Part of the Congressional patent reform package focuses on venue reform. Defendants are tired of being sued in the Eastern District of Texas.

In this case, F&G sued Paten in the Southern District of Florida — alleging that Paten’s infringing computer mouse components were being distributed in the state.

On appeal, the CAFC affirmed the lower court’s dismissal of the case — finding that F&G failed to show that Florida courts have personal jurisdiction over the defendant. The Florida long-arm statute allows for specific jurisdiction over parties who commit tortious acts within Florida. The plaintiff has the burden of providing evidence of those acts.

Here, F&G showed that Paten sold components to several companies doing business in Florida (e.g., Logitech, Belkin, and Creative Technology) and also showed that accused products were being sold in Florida. However, the plaintiff did not provide evidence that the accused products sold in Florida were Paten’s products. Thus, no personal jurisdiction.

New Evidence on Appeal: At the appeal stage, F&G presented some evidence that Paten’s products were being sold in Florida. However, the CAFC refused to hear that new evidence. Although personal jurisdiction may be raised sua sponte by the appellate court, the court will not conduct de novo fact finding regarding jurisdiction.

What now?: Although now armed with more evidence of personal jurisdiction, F&G would likely be blocked from filing in Florida because the issue has already been decided between the parties. There are, of course, several hundred other venues available within the US.

Prepare for the new IDS rules.

For the past two years, the PTO has been discussing its trio of rules — Continuation Rules; Claim Rules; and Disclosure Rules. The first two sets are in final form and are set to be implemented November 1, 2007. The third set — disclosure rules — are in “secret final form” and are waiting for White House (OMB) approval before being implemented.

Under patent office rules, everyone involved with the prosecution of a patent application has a duty to disclose any information to the PTO that may be material to patentability. This information is typically prior art known to the inventor or attorney and or evidence of prior use or sale. Failure to comply with the duty of disclosure can result in the patent being held unenforceable (after a showing of intent & materiality).

In some cases, extensive pre-filing prior art searches reveal dozens (if not hundreds) of prior art references that are all then submitted to the PTO for review. Understandably, patent examiners do not have time to review all those references in any detail — and my own empirical evidence suggests that examiners do not examine more than twenty references. [LINK]

The PTO’s disclosure proposal would set a breaking point of twenty references that may be submitted to the Office ‘without explanation.’ Applicants who submit more than twenty references (or “very long” documents) will be required to personally review the submissions and provide information regarding their materiality as well as an explanation as to why the particular application is not preempted by the prior art reference.

Although the Final Version of the rules is not yet available (it is being kept secret by the PTO), their one-paragraph statement is as follows:

The U.S. Patent and Trademark Office (Office) amends its regulations on information disclosure statement (IDS) requirements and other related matters to improve the quality and efficiency of the examination process. These changes would enable the examiner to focus in on the relevant portions of submitted prior art at the very beginning of the examination process, give higher quality first actions, and minimize wasted steps. This action would make the following changes relating to submissions of IDSs by applicants: Impose a requirement for the personal review of, and to provide information about, certain citations; eliminate the fees for, but permit only timely, IDS submissions; and only permit the filing of an IDS after the mailing of a notice of allowance if a claim is admitted to be unpatentable and a narrowing amendment is also submitted. The Office would also: permit third parties to submit prior art up until the mailing of a notice of allowance after application publication; no longer permit an IDS to meet the submission requirement for a request for continued examination (RCE); permit, after payment of the issue fee, certain amendments and petitions so applicants will not have to file a continuation application or an RCE for such items; and revise the protest rule to better set forth options that applicants have for dealing with unsolicited information received from third parties. 

These rules are likely to become effective in early 2008. In the meantime, applicants may be advised to submit their prior art ASAP.

• OMB Link

CAFC Approves Compulsory License (but calls it an "ongoing royalty")

Paice v. Toyota (Fed. Cir. 2007)

A jury found that Toyota infringed Paice’s hybrid engine patent only under the doctrine of equivalents. In a post-verdict decision, the Texas district court denied injunctive relief — finding that a $25 per engine compulsory license rate was sufficient. On appeal, the CAFC affirmed the infringement decision — holding that the jury had sufficient evidence to both (1) find infringement under the doctrine of equivalents and (2) deny literal infringement.

The major question at issue in this appeal, however, is the ongoing royalty. (The CAFC majority refused to call the ongoing royalty a compulsory license — Judge Rader, concurring, noted that the two are identical).

No Relief and No License: Denial of injunctive relief does not equate with issuance of a compulsory license.  Here, the CAFC recognizes that after denying injunctive relief, a district court may choose simply to wait for the parties to either negotiate a license or stop infringing.  In fact, the court noted that an ongoing royalty should not be determined simply as a matter of course. Rather, such an extreme form of relief should be used only as “necessary.”

[A]warding an ongoing royalty where “necessary” to effectuate a remedy … does not justify the provision of such relief as a matter of course whenever a permanent injunction is not imposed. In most cases, where the district court determines that a permanent injunction is not warranted, the district court may wish to allow the parties to negotiate a license amongst themselves regarding future use of a patented invention before imposing an ongoing royalty. Should the parties fail to come to an agreement, the district court could step in to assess a reasonable royalty in light of the ongoing infringement.

Calculating the Reasonable Ongoing Royalty: In this case, the district court held that the ongoing royalty should be the same royalty rate as determined by the jury for past damages. On appeal, the CAFC found that much more should go into the determination of an ongoing royalty. And, of course, future royalties would likely be different than past royalties if only because of a shift in timing of the hypothetical negotiation.

Power to Order Compulsory License: Although settlement is preferred, the CAFC made clear that a district court judge has the power to declare an ‘ongoing royalty’ rate.  Further, because ongoing royalties are a form of equitable relief, there is no Seventh Amendment right to a jury decision.

Remanded for a recalculation of the ongoing royalty.

USPTO Begins Examining Applications Once Again

On October 11, 2007, the PTO issued a MEMO instructing examiners to stop examination on pending applications that exceed the new 5/25 claim rule.  Eight days later, on October 19, 2007, the PTO issued a new memo ordering examiners to begin examining those applications once again. 

 

 

 

Supreme Court Study: Conservatives Support IP Rights; Liberals Do Not ?

The politics of patent law is somewhat confusing. Those with the most at stake — innovator pharmaceutical companies — lean heavily toward a Republican party affiliation. Along that line, it is Democrats — with the support of California technology companies — who are pushing through Congressional patent reform measures that would weaken the strength of patent rights.  On the other hand, the current US Patent Office Republican administration has taken major steps to tighten the patent prosecution rules of practice.  These rule changes are most vehemently opposed by the innovator pharmaceutical companies and supported by many west coast technology companies.

The judiciary has also been thought to be a mixed bag — without any identifiable liberal-conservative ideologic divide.  In a new paper, DePaul Professor Matthew Sag and his colleagues from Northwestern (Jacobi & Sytch) prove that presumption wrong — at least for Supreme Court decisions. They find that throughout the past several decades, liberal Supreme Court justices tend to rule Against the IP Owner (XIPO) significantly more often than their conservative counterparts.  In other words — conservatives tend to support IP rights while liberals tend to deny those rights. The figure below, excerpted with permission from the paper, shows the trend based on Martin-Quinn scores of judicial ideology. Interestingly, the effect holds across all the various areas of IP law.

Notes:

• Read the Sag Paper: The Effect of Judicial Ideology in Intellectual Property Cases
• Matthew Sag & Mark Shultz’s new blog: Fairly Useful
• In a 2001 paper, Kimberly Moore (now Judge Moore) studied district court claim construction decisions and found no discernible difference between Republican and Democratic appointees. 15 HARV. J.L. & TECH. 1 (2001).

Patent Licensee holding Exclusive Rights to a Field of Use Does Not Have Standing

International Gamco v. Multimedia Games (Fed. Cir. 2007).

A single patent can have multiple ‘exclusive licensees’ where each licensee has exclusive rights to a portion of the patent rights. Rights are often divided temporally, physically, by field of use, and by type of use.  Here, Gamco received an exclusive license grant from gaming giant IGT to sell state authorized NY lottery games covered by the ‘035 patent.

On appeal, the CAFC found that Gamco does not have standing to file suit without the cooperation of the patentee, IGT.

An exclusive licensee possesses standing to sue in its own name if it holds “all substantial rights” to the asserted patent. Historic cases have held that an exclusive territorial licensee has standing without joining the assignee. Here, the court drew a line at exclusive field of use licenses — holding that an exclusive license to a portion of the patented subject matter does not include sufficient rights to create licensee standing.  Relying on the Supreme Court’s 1892 Pope v. Jeffery opinion, the appellate panel found that field of use divisions create a real potential that a defendant could face suits from multiple licensees.

“In Pope, as in this case, the license only conveyed rights to a subset of the patented subject matter. For that reason, as in this case, the conveyance posed a threat of multiple suits based on the same allegations of infringement. This court therefore holds that Gamco lacks standing to sue in its own name without joining IGT.”

Senior Judge Friedman gave a different reading to Pope and filed a dubitante opinion — doubting the correctness of the decision.

Patent Office Has Stopped Examining Patents with 25+ Claims

Those of you following your docket through the PTO’s PAIR system may note that the Office has begun its ‘identification process’ of unexamined patents with either (1) more than 25 claims issued or (2) more than 5 independent claims. The docket report shows:

• Entry: Flagged for 5/25
• Status: “Request for SIR -- Recorded” or “Preexam Flag for 1.75(b) Issues”

According to a telephone conversation with the Office of the Commissioner for Patents, these cases have been pulled from Examiner dockets because they exceed the 5/25 limit and are thus-far unexamined.  We will be able to do a retrospective in Mid-November to estimate the number of cases impacted by this pre-rule activity.  Of course, this appears to be a de facto implementation of the new rules prior to the stated November 1 effective date.

• For an example, look at the PAIR data for App. No. 20060294241.
• Thanks to James McEwen and Randall Svihla alerting me to this issue. 
• This alert will help many practitioners ensure that they have found all their cases that exceed the new limits. Many attorneys keep no specific records of the number of claims filed. For published cases, Derwent keeps track of the number of claims.
• UPDATE 10/17/07 — App. No. 20060294241 referenced above is no longer ‘flagged.’

Patent Malpractice a Federal Issue

Air Measurement Corp v. Akin Gump (Fed. Cir. 2007).
Immunocept v. Fulbright & Jaworksi (Fed. Cir. 2007).

Through a pair of malpractice cases, the CAFC has expanded its reach over state law malpractice claims.  These cases conclude that federal courts hold exclusive jurisdiction over cases involving state law malpractice claims that require resolution of a “substantial question of federal patent law” such as infringement, validity, enforceability, or patent claim scope. This general concept is not new, rather, these case incrementally expand the type of patent malpractice claims that require federal court decisionmaking. The issue is whether the particular form of malpractice asserted requires a determination of a substantial question of federal patent law.

In Air Measurement (AMT), the patent holder sued its attorney for malpractice based on a series of alleged mistakes, including filing after an on sale bar date, failing to submit two prior art references; and failing to properly inform AMT of the mistakes. AMT was still able to collect $10m in royalties on the patent family, but asserted that it would have collected more but for the alleged attorney error.  Because adjudication of the malpractice claim requires a determination of (potential) patent infringement, the dispute properly ‘arises under’ the US Patent Law. 28 USC 1338.

In Immunocept, the patent holder attempted to license its patents to J&J back in 2002. J&J’s attorneys found that the patent was narrowly drafted and refused to take a license. (‘Consisting of’ claim language). In 2005, the Immunocept sued its patent attorneys for malpractice. On appeal, the CAFC agreed that federal courts holds exclusive jurisdiction over this case because it requires a determination of patent claim scope – a substantial patent law question.

“Because patent claim scope defines the scope of patent protection, we surely consider claim scope to be a substantial question of patent law.”

After finding jurisdiction, the appellate panel affirmed the lower court’s finding that the claim was barred by a two-year statute of limitations. (Clock begins running after reasonable notice of the facts underlying a malpractice claim).

Patent Law Jobs

Recently posted jobs from the Patently-O patent law jobs site:

Patent Attorney - Wagner Blecher Law Firm - Northern California

Patent Agent for International Law Firm in DC

Senior Patent Attorney - DIRECTV - El Segundo, CA

Patent Agents and Patent Agent Trainee - Sim McBurney - Toronto, Canada

Patent Agent or Attorney - Womble Carlyle - Tysons Corner VA

Experienced Patent Attorneys -- Lee & Hayes -- Pacific Northwest

Companies pay a $200 fee to post patent law related jobs. Job seekers can search the site for free.

Ethical Duties to Comply with the New Rules

Harry Moatz is the Director of the PTO’s office of Enrollment and Discipline. At the most recent IPO meeting in New York, Mr. Moatz reviewed several principles regarding compliance with the new PTO rules:

• Failure to comply with the new rules will subject attorneys and agents to OED discipline. See 35 USC 32.
• Attorneys and agents have a duty of inquiry to ensure that all assertions made to the office must be “legally warranted” and not made for an “improper purpose.”  37 CFR 10.18(b).
• Practitioners must read each and every paper submitted to the office in its entirety.
• Of course, the duty to disclose material information continues until prosecution concludes. This duty applies to anyone involved in prosecution – including the inventors.

Links:

• Moatz.PPT
• IPJur
• Moatz Bio

‘Comprised of’ is an open-ended transition

CIAS v. Alliance Gaming Corp. (Fed. Cir. 2007)

CIAS asserted its counterfeit protection patent against both Alliance Gaming and Bally’s but lost on summary judgment of non-infringement. On appeal, the CAFC reversed the claim construction, but affirmed the judgment.

‘Comprised of’ is an open-ended transition: Rather than the traditional “comprising” transition, CIAS wrote that its invention was “comprised of” several elements. The district court construed “comprised of” as a “closed-end term that excludes the presence of all [non-presented] elements.” On appeal, the CAFC reversed holding simply that “comprised of” is the same as “comprising” and should be interpreted as open ending.

The appellate panel did, however, give a narrow definition to the claimed “unique authorization information” — holding that it had been narrowed by prosecution arguments.  

Notes:

• PTO records show 134,000 patents including “comprised of” language.

 

KSR' s Phosita Creativity Applies to Indefiniteness

Allvoice Computing v. Nuance Comm. (Fed. Cir. 2007)

Allvoice appealed after the Texas court found its means-plus-function claim elements indefinite under 35 U.S.C. § 112. The patent relates to voice recognition software.

PHOSITA Creativity: A means plus function element is considered indefinite if a PHOSITA “would be unable to recognize the structure in the specification and associate it with the corresponding function in the claim.”

On appeal, the CAFC took a cue from KSR v. Teleflex — finding that a PHOSITA is creative and “not an automation.” For software cases, this means that the specification “need only disclose adequate defining structure to render the bounds of the claim understandable to one of ordinary skill in the art.  Here, the CAFC found that the algorithm flowchart (see figure) was sufficient structure.

Best Mode: The appellate panel also included the reminder that the best mode requirement only extends to the claimed invention.

Notes:

• Part of an increasing trend, Professor Paul Janicke performed the claim construction.

GlaxoSmithKline vs. Dudas: An Attempt to Stop Implemention of PTO Prosecution Rules

The U.S. Patent Office does not have substantive rulemaking authority.  Thus, the office cannot change the meaning of “novelty” or “obviousness” even through a formal process of notice and comment rulemaking. The Office does, however, have the power to make rules that govern procedures within the office that are “not inconsistent with [the] law.” 35 USC 2.

GlaxoSmithKline has now sued the Patent Office to stop implementation of two new sets of PTO rules — arguing that the scope and effect of the new rules extend well beyond the PTO’s limited rulemaking authority. The main thrust of the rules is to limit the number of follow-on applications that can be filed that somehow relate to an original patent application and to limit the number of claims filed in each patent application.

Glaxo can easily show that these rule changes will harm its business — especially because the rules retroactively impact the UK company’s already pending patent applications.

The rules hit innovator pharmaceutical companies especially hard. Pharmaceutical companies typically file large original patent applications early in the drug development process. Those original applications typically disclose many variations of a class of drug along with various methods of manufacturing and using the drug. As development continues, follow on continuation applications are used to specify and claim particular subgroups. The continuations also typically include further information to prove utility and nonobviousness of the particular subgroups.  These rule changes will severely limit GSK’s ability to file these continuations and, as a consequence, will hurt its position.

GSK notes that the PTO’s exceptions to the rule is primarily mythical because it requires a strict “could not have” limitation.

• Read the Complaint
• The complaint was filed by my old firm of Kirkland & Ellis. This is perhaps odd since Kirkland does no patent prosecution.

Patent Politics

• The Chinese: In the October 12th Republican Debate, Mitt Romney broke into his speech on patent rights and foreign trade: “I understand that if we don't get real careful and protect patents and designs and technology, that what we tend to sell the most of, those kinds of things -- intellectual property -- is going to get stolen by the Chinese or by others; that we have to recognize agreements have to be in our benefit, not just in their benefit…We need to make sure that the Chinese begin to float their currency and they protect our designs and our patents and our technology.”
• Tax Strategies: For his part, Barak Obama has proposed special legislation to block patenting of tax strategies. (Obama Tax Patent) The Bush Whitehouse has (at least implicitly) embraced these tax strategy patents.  Ed Lazear, the Whitehouse chief economic advisor, is the first named inventor on a pending patent application directed to a method of “multi-state tax analysis” filed by the Schwegman firm in Minneapolis. (Link).
• Patent Reform 2007: S.1145 is still hanging around the senate waiting for a couple of hours on the floor where it can be passed without debate…The Bill is in the Judiciary Committee, but it will move quickly if proponents can find 60 votes. (Informal reports are that they are only a handful shy.)

Appellate Standing Does Not Require Patentee

Schwarz Pharma and Warner Lambert v. Paddock Labs (Fed. Cir. 2007)

Schwarz sued after Paddock filed an ANDA for FDA approval to sell generic forms of Schwarz’s Univasc ACE inhibitor. Under 35 USC 271(e), the act of filing an ANDA is a form of patent infringement.  Paddock won on summary judgment of non-infringement.

Standing: Schwarz is the exclusive licensee. Warner-Lambert actually owns the patent. On numerous occasions, the CAFC has held that the patent owner must be a named plaintiff in any patent infringement action. (An exclusive-licensee does not have sufficient standing on its own). The question on appeal is whether the patent owner must be part of an appeal as well.

Without any statutory or precedential guidance, the CAFC was forced to create its own rule — holding that – unlike district court standing – appeals to the CAFC do not necessarily need to include the patent holder.

The district court standing requirement is explained as a method of avoiding the potential of a defendant facing separate actions from a patent holder and its exclusive licensee. Because there is ‘no such danger’ for appeals, the CAFC found that the ‘prudential’ standing requirement is not necessary.

Prosecution History Estoppel: As a reminder not to rely on the doctrine of equivalents (DOE), the appellate panel held that DOE coverage was excluded based on the patentee’s narrowing amendment during prosecution.  In its attempted end-run, Schwarz argued the amendment should not exclude DOE coverage for the accused product containing MgO because MgO was not covered by the originally filed claim.  The CAFC rejected that argument — Somehow the court could not wrap its head around Schwarz’s argument that MgO was not an “alkali or alkaline earth metal salt” as originally claimed.

Notes: Interestingly, the court appears to have only applied a shorthand analysis for construing the original scope of the claims.

Contempt Proceedings Against Apotex for Filing Second Depakote ANDA

Abbott v. Torpharm & Apotex (Fed. Cir. 2007)

Depakote is one of the most popular anti-seizure medications on the market. In an ANDA dispute, Apotex was ordered from commercially manufacturing, using, selling, or importing generic versions of the drug that would violate Abbott’s patents.

Apotex was found in contempt of court after the generic manufacturer guided another company (Nu-Pharm) through the process of filing an ANDA on an allegedly non-infringing form of the drug. Sitting by designation, Judge Richard Posner issued the contempt order after finding no difference between the new product and the old product.

Remember here — Apotex is not being held in contempt for actually making or selling the drug. Rather, the contempt stems from filing the Nu-Pharm ANDA — which is a form of infringement under 35 USC 271.

On appeal, Apotex argued that district courts have no jurisdiction to hold contempt proceedings when the accused action is filing an ANDA.

In its opinion, the CAFC agreed with the patent holder that ANDA filings are infringement. As a form of infringement, the district court has the power to issue injunctions to stop the infringement and to issue contempt orders for violations of any injunction.

In this case, however, the appellate panel found that Judge Posner’s contempt proceedings made an error in law — because the original injunction did not include an express order not to “infringe” or not to “file an ANDA”, Apotex could not be held in contempt for those actions. Furthermore, Apotex cannot be held in contempt for foreign manufacturing or sales.

Judge Dyk in dissent argues that the contempt proceeding was improper. Rather, Nu-Pharm should receive a full hearing in court to determine whether the new product is infringing.

DDC Notes on EBay: Although not discussed by the CAFC panel, I cannot see how an injunction against filing an ANDA would qualify for injunctive relief under eBay v. MercExchange.  This is an important issue because it is unclear at this point whether eBay applies to ANDA injunctions issued under 271(e)(4)(B). Additionally, the CAFC failed to provide any analysis on whether an injunction against ANDA filings is permissible under that statute. (I would argue that it is not permissible).

Patently-O Tidbits

A few updates while I wait for my airplane:

• Director John Love at the PTO has released a new set of “relaxed” guidlines for implementing the rules. These address some of the fears of major corporate patent holders. This is important to read prior to November 1. [Patent Docs explain]
• The PTO has published its new obviousness examination guidelines. The guidance on obviousness focuses solely on the Supreme Court precedent in KSR, John Deere, and other Supreme Court cases. Perhaps going beyond the requirements of the law, the PTO will require examiners to provide a full written record. A major focus is on finding the “problem” before determining whether the solution is obvious.  Predictability is the another key. [Link]
• I’ll be in Dallas this weekend. (near Alliance Airport) Shoot me a note if you’d like to meet-up on Friday . dcrouch@patentlyo.com.
• GlaxoSmithKline has now joined the fray — reportedly suing the PTO to stop the new rules from becoming effective.  Mike Strickland of GSK was one of the leaders of the lobbying campaign againt the new rules. [Complaint][Quinn]

Important Unenforceability Case - CAFC Affirms Multiple Counts of Misconduct

Nilssen v. Osram Sylvania (Fed. Cir. 2007)

In a unanimous panel opinion, the CAFC has affirmed a district court finding that Ole Nilssen’s patents are unenforceable due to inequitable conduct. Although Nilssen prosecuted his own patents pro se, the CAFC cut him no slack since he was smart enough to “cite the [MPEP], patent statutes and regulations, and case law during prosecution.”

Unenforceability of Non-Asserted Patents: In a related family of patents, misconduct during prosecution of one of the patents can lead to the whole family being found unenforceable. Reversing that theory, the CAFC agreed that the lower court properly found several of Nilssen’s non-asserted patents to be unenforceable. (Although the court did not create any strict limit on the potential bleed-through, it should be noted that Nilssen originally asserted infringement of those patents, but later dropped those claims.)

Expert Testimony: Following Ferring, the CAFC agreed that Nilssen’s failure to disclose a close relationship with his 132 declarant constituted inequitable conduct.

Small Entity Fees: Although not during prosecution, pretending to be a small entity when paying maintenance fees can also lead to unenforceability. Here, the court found that payment of the small entity fee after licensing to Philips demonstrated an “obvious intent to mislead.”

Priority Claims: Misleading priority claims can also constitute inequitable conduct.

Notes:

• Patently-O Discussion of the District Court Case

The difficulty of obtaining a patent -- circa 1850

In the wake of changes in prosecution rules at the PTO. Some may find Charles Dickens’ 1850 essay on the struggle of an independent inventor somewhat encouraging. (In this story, John didn’t even get to the struggle of enforcement).

CAFC: No Sua Sponte Summary Judgment; No Baseless Suit Without Claim Construction

EON-Net v. Flagstar Bancorp (Fed. Cir. 07-1132) (non-precedential)

In 2006, the Washington State district court granted summary judgment of non-infringement in Flagstar’s favor. The court also applied sanctions against the patentee’s attorneys – a NYC class action boutique — for filing the “baseless” litigation. [link]

Sua Sponte Summary Judgment: A summary judgment motion for non-infringement must at least point to “specific ways in which the accused system [does] not meet the claim limitations.” (Exigent Technology). Without at least that threshold level of information, the court must reject such a motion. 

Here, the court issued its summary judgment decision on sua sponte grounds (i.e., using grounds that had not been particularly raised in the SJ motion). Because EON did not have an opportunity to respond, the CAFC vacated and remanded.

“The district court should have given Eon-Net an opportunity to fully present its arguments on these issues, even if the district court ultimately would have reached the same conclusion. We have previously held that where a district court construes a patent without following the necessary steps, we should remand the matter for further proceedings so that the district court can follow the appropriate steps.”

Sanctions: Normally, an attorney is required to perform a “reasonable pre-filing inquiry” that includes an infringement analysis prior to filing a patent infringement complaint. Here, the district court sanctioned Eon’s counsel for not performing such an inquiry.

In a major exception to the inquiry requirement, however, “an attorney may not be sanctioned solely for failing to conduct a reasonable inquiry as long as the complaint is well-founded.” Of course, in patent cases, a patent claim can rarely be deemed unfounded prior to claim construction.

“[W]ithout a full claim construction analysis it is impossible to assess whether Eon-Net’s claim construction was unrealistic.”

Furthermore, the “mere fact” that EON sent identical complaints to dozens of other companies is insufficient to establish that the complaint was filed for a sanctionable “improper purpose.”

A Tangled Web of Patent Rights

Patent Attorney and Inventor Scott Harris is at the center of an interesting web of events. Harris is the inventor of dozens of patents and has successfully licensed those patents with the help of the plaintiff’s firm Niro Scavone. Until last month, Harris was also a principal at Fish & Richardson. Illinois Computer Research (ICR), a recent assignee of a Harris patent, is suing both Google (for patent infringement) and Fish & Richardson (for tortious interference, etc.). 

For its part, Fish & Richardson allegedly claims title to the Harris patent – which was apparently invented while Harris was working at Fish.

In the lawsuit, ICR has asserted that Google infringes its US Patent No. 7,111,252. The patent at issue here apparently covers features for improving the look and feel of the internet — Google’s Book Search is the accused product. According to Information Week, this is at least the fifth patent lawsuit filed against Google in 2007. (Meanwhile Google stock …).

Two other Harris patents have also recently been asserted: See BarTex v. FedEx and Memory Control v. Honda, LG, Motorola, et al. Harris patents have also been asserted against Dell, GM, Panasonic, Kodak, cars.com, and move.com.  Joe Mullin of the Daily Journal reports that Harris denies any involvement in the ownership or management of any of these companies. The owner instead is James Beauregard Parker — a member of the Florida Bar since 2005.

• Read the Amended Complaint
• Troll Tracker on Scott Harris I
• Troll Tracker on Scott Harris II

Short Article Request: In the wake if this case, I would like to post a short (600 word) article on determining an employee’s inventorship rights. This article might think about the default rule absent an employee agreement; may an agreement to assign implied; how does patent law differ from copyright work for hire.

Peer-to-Patent Calls for Independent Inventor Participation

Peer to Patent Press Release:

FACT:  [You’ll wait]an average of 44 months before you … receive a First Office Action on the Merits of your patent application in Technology Center 2100 (Computer Architecture, Software, and Information Security).

FACT: If you participate in Peer-To-Patent you could have a First Office Action on the Merits for that same application in only 23 months, and as little as 7 months if you opt for early publication. … at no additional cost…

This pilot program runs only through June 2008 and is limited to 250 applications with special priority being given to inventors with fewer than 25 patents.

Join already-participating companies such as GE, HP, IBM, Microsoft and other small inventors in this historic initiative to open up the patent examination process for public submission of prior art and commentary.

Applicants interested in participating in the Peer-to-Patent pilot must first file a patent application with the USPTO.  The patent application must be within Technology Center 2100 subject matter (covering computer architecture, software, and information security) in order to be eligible for the Peer-to-Patent pilot.  Applicants must then submit a signed "Applicant's Consent to Third-Party Comments in Published Applications and Consent to Pilot Participation" form available on the USPTO website at: http://www.uspto.gov/web/patents/peerpriorartpilot/consent.pdf.  And email a scanned and signed copy of the completed consent form to: PeerReviewPilot2007@USPTO.GOV .

Rule Changes Triage: Dealing with already pending claims prior to November 1

Patent prosecution attorneys are dealing with dozens of fires started by the new PTO rules.  This post deals only with the quickly approaching deadline of November 1, 2007 when the new rules become effective. The following tips come from practicing patent attorneys dealing who suggest potential actions to be taken prior to November 1, 2007 for currently pending applications.

• Applications under final Office Action having already filed an RCE
• James McEwen: If there is already a request for continued examination (RCE) filed in a family of applications, and the application is currently under a final Office Action, it would be advisable to file an RCE prior to November 1 since it will be the applicant's last chance to file such an RCE without a Petition under 37 CFR 1.114(g). 
• Multiple Applications of a Family under separate final Office Actions
• James McEwen: Regardless of whether an RCE has already been filed in a family, if multiple members of the family are currently under final Office Actions, file an RCE in each case prior to November 1.  Otherwise, the applicant will be limited to only one RCE in the family without the required Petition.  
• Pending Continuations-In-Part
• Brad D. Pedersen: Disclaim priority to parent cases. If the claims cover subject matter that was added in the CIP case, then the claim of priority to the parent cases is not necessary and actually can limit the number of other continuing applications that may be filed off that parent case. By disclaiming priority, a child CIP case will not count against the continuation limits applied to a parent case under Rule 78(d)(1)(i)B. Ideally, the parent case can be removed as obviousness-type prior art by using the common assignee invention exemption under 35 USC 103(c).
• Brad D. Pedersen: File a table showing priority date for each claim. If some of the claims are fully supported by a parent case and need that claim of priority for prior art purposes, then a table showing the priority date for each claim should be filed by November 1, 2007 pursuant to Rule 78(d)(3). Late filing of the table may require the filing of a petition to correct the claim of priority for the application.
• Emily Berger & Sarah Gates: Examine CIPs. Identify your pending continuation-in-part (CIP) applications and determine whether they were properly labeled as CIPs in the first place. If an application is in fact a CIP, identify those claims supported by applications in the priority chain. Under the new rules, if a rejection is traversed by stating that a claim is entitled to the filing date of an earlier application in the priority chain and that, therefore, the applied reference is not prior art to that claim, the Examiner may make the next office action final – even if new art is presented. By properly identifying the priority date for each claim, you may avoid “wasting” the Request for Continued Examination (RCE) or one of the limited number of permitted continuation applications, in order to respond to a final action.
• Cancel Claims Subject to Restriction Requirement
• James McEwen: It is permissible to maintain non-elected claims in an application after a restriction or election requirement.  However, when non-elected claims depend from an elected claim and the elected claim becomes allowable, the non-elected claims are rejoined and examined.  Under the new rules, the rejoinder of the non-elected claims can result in the application violating the 5/25 rule.  As an examination support document (ESD) cannot be filed after a first Office Action, it is likely that the applicant would be forced to cancel the non-elected claims due to 37 CFR 1.75(b)(1).  Moreover, as the rejoinder is technically a withdrawal of the original restriction requirement, applicant would not be able to file a divisional application containing the claims needing to be cancelled, and would instead need to use any remaining continuation applications allowed under 37 CFR 1.78.  Thus, when an application is subject to a restriction requirement, non-elected claims should be immediately cancelled so that a divisional application containing the non-elected claims can be filed and to ensure that the applicants do not accidentally violate the 5/25 rule upon rejoinder.
• Move claims in pending applications to applications under active examination
• James McEwen: As 37 CFR 1.75(b)(1) and 37 CFR 1.75(b)(4) do not apply to applications having received a first Office Action by November 1, 2007, such applications are prime to receive new claims without exceeding the 5/25 rule.  An example of such a circumstance may be when a provisional obviousness-type double patenting rejection is received.  Thus, patentably indistinct claims in multiple copending applications can be cancelled from applications that are merely pending, and be reintroduced in applications which are under active examination to avoid violating the 5/25 rule for multiple copending applications set forth in 37 CFR 1.75(b)(4).  A possible further benefit is that such an addition could provoke a restriction of the new claims under 37 CFR 1.145, thereby obtaining an additional two continuations and an RCE for the claims while avoiding the issues under 37 CFR 1.75(b)(4) and 37 CFR 1.78(f)(2) or 1.78(f)(3).  As such, unless filing a terminal disclaimer would result in allowance before November 1, 2007, move patentably indistinct copending claims to the application being currently examined and cancel the claims from the copending application.  

Notes:

• Patent Docs on the case
• Patently-O Comments Provide Some Suggestions
• File Attachment: McEwen - Rule Change.doc (215 KB)
• File Attachment: Pederson - Rule Changes.DOC (34 KB)
• File Attachment: Macedo - Rule Change.DOC (72 KB)
• http://www.nipra.org/ownrules.htm
• http://www.nipra.org/rce114.html
• Register for a Webinar by Charles Macedo: link.
• IPO Survey

CAFC: Director Cannot Issue Interim Term Extensions Pending Appeal of Extension Denial

Somerset Pharmaceuticals v. Dudas (Fed. Cir. 2007)

Somerset filed a Patent Term Extension Application with the PTO about one year before its pharmaceutical patent was set to expire.  The PTO eventually denied the application with one month left on the patent term. (The PTO only acted in July 2007 – after Somerset filed an emergency motion with the CAFC).

On appeal, Somerset asked the appellate court for a preliminary injunction that would order the PTO director to issue an interim term extension pending the patent holder’s appeal of the extension denial.

In the Federal Circuit, preliminary relief is only granted where the moving party establishes at least a threshold “reasonable likelihood of success on the merits.”  The appellate panel found no likelihood of success — thus denying the appeal.

Somerset had appealed the PTO’s failure to issue an interim extension.  However, once the PTO denied the extension application, the director no longer had power to issue an interim extension. 35 U.S.C. § 156(e)(2). Consequently, the PTO’s denial of Somerset’s extension application means that the company’s case for an an interim order loses its merit.

Notes:

• This opinion was originally published on July 31, 2007, but was reissued as precedential on October 4, 2007.
• Perhaps without noticing, this case appears to raise the “threshold” level of potential success required for a preliminary injunction from “a likelihood” to “a reasonable likelihood.” See Nat’l Steel Car, Ltd. v. Canadian Pac. Ry., Ltd., 357 F.3d 1319, 1325 (Fed. Cir. 2004) (“[A] movant is not entitled to a preliminary injunction if he fails to demonstrate a likelihood of success on the merits.”).
• It appears that the formal positioning of the case – created by the PTO’s delay in issuing a decision – helped the PTO win the appeal.  If Somerset has some likelihood of winning an appeal on the merits of the PTO’s extension denial then it might have asked the court to issue an interim extension (rather than ask the court order the PTO director to do so).
• This decision continues the formal reading of the PTE statute. See, Merck & Co. v. Hi-Tech Pharmacal Co., 482 F.3d 1317 (Fed. Cir. 2007).
• Orange Book Blog on the decision

Patently-O Tidbits

• Patent Sharks: The recording industry has focused its message — individuals who download share songs without paying will be sued. [$200k verdict against single mother]  In the 19^th century, ‘patent sharks’ went after individuals in the same way — leading to major patent reforms. [Link] [Kirkman Blog]
• PTO Morass: GAO Report on the PTO: “Hiring Efforts Are Not Sufficient to Reduce the Patent Application Backlog”. In response, the PTO will conduct its own study to “review assumptions the agency uses to establish production goals for patent examiners.” [Link] The Department of Commerce also notes that the new rule changes should help fix the employment mess. (p.36 of the report).
• Obviousness: Milton & Anderson suggest a new obviousness acronym — the common sense selection (CSS) test. “[M]ere selection of elements from various prior art references and combining them together with no change in their respective functions is a matter of common sense to one skilled in the art, and, therefore, obvious and not patentable. On the other hand, a combination that includes something new or produces a new function or an unpredictable result remains potentially patentable.” [LINK]
• Patent Reform:
• Political Economist & Harvard Professor Mike Scherer has an excellent new paper on the Political Economy of Patent Reform in the US. [TIIP]
• One report I’ve seen announces that the Senate has 41 anti-reform votes — enough to block consideration of the reform measures. A reformed reform bill may still have a chance.
• Kathi Lutton (Fish & Richardson’s Chief Litigator) & Kelly Hunsaker continue to develop their Patent Reform Updates.

Claimed 'plant cell' must enable monocots and dicots; CAFC affirms noninfringement and invalidity of Monsanto GM corn patents

Monsanto Co. v. Syngenta Seeds, Inc. (Fed. Cir. 2007)

Monsanto and its Dekalb subsidiary hold three patents covering Roundup-Ready Corn.

• 4,940,835 covers a GM gene that confers glyphosate resistance to plants.
• 5,538,880 covers the process of producing herbicide and insect resistant corn.
• 6,013,863 covers the process of producing glyphosate resistant corn having a marker gene.

Syngenta grew Dekalb GM seeds that had been produced according to the patented methods and then grew genetically identical progeny exhibiting the same GM traits. 

In the ensuing infringement litigation, the district court held that the ‘835 patent invalid for under 35 USC 112 for lack of enablement and held that Syngenta did not infringe the two process patents because the accused infringer did not perform the initial step of the claims. (That initial step of “bombarding … cells with DNA-coated microprojectiles” was performed by Bayer prior to issuance of the patents).

Enablement: The ‘835 patent is not limited to corn. Rather, it claims to be applicable to ‘plant cells.’ During claim construction, the district court found that the patent scope extended to all plant cells – including both monocots and dicots. However, the ‘835 patent was filed before genetic transformation of monocot cells was possible.

“The claim requires transformation of the plant cell. Without the ability to transform a monocot cell, one skilled in the art could not determine whether the plant gene could carry out the claimed functions and thus fall within the scope of the claim.”

Thus, the ‘835 patent is invalid for lack of enablement.

Infringement of Dependent Process Claims: Generally, a dependent claim includes all the limitations of its parent.  Here, however, Monsanto argues that its process claim structure necessitates an alternative viewpoint.  In particular, Monsanto argued in the alternative that its Claim 4 is (1) not a dependent and (2) even if a dependent does not require all the limitations of Claim 1. The process claims line-up as follows:

• Claim 1: A process for producing a fertile transgenic Zea mays plant comprising the steps of …
• Claim 4: A process comprising obtaining progeny from a fertile transgenic plant obtained by the process of claim 1 which comprise said DNA.

Thus, Claim 4 is directed to a process of growing seeds from a plant that was produced according to the manner of claim 1.  This could be considered a claim directed to a process of using a product of a process.

The CAFC quickly shot-down Monsanto’s argument — holding that claim 4 is a dependent and the all element rule applies.

“Although in a somewhat unusual format, claim 4 is dependent from claim 1 because it only stands if all three steps recited in claim 1 have been performed. In other words, the additional fourth step of obtaining progeny depends on the performance of the process comprising the three steps recited in claim 1 for obtaining a fertile transgenic plant. Claim 4 contains each element of a dependent claim.”

The court also repeated its rule that one “cannot infringe” a dependent claim without also infringing the parent claim.

271(g) Infringement: Under 271(g), a product made by a patented process also creates infringement liability.  Here, however, Syngenta could not be held liable because several steps of the process were performed prior to issuance of the patent.

“Infringement is not possible under § 271(g) when the three first steps of the claimed process are performed before the issuance of the patent.”

Summary judgment of noninfringement and invalidity affirmed.

 

 

Short Article Request: Short-term Reaction to PTO Rule Changes

On November 1, 2007, the PTO’s new rules will become effective. Those claims will limit the number of continuation applications that may be filed as well as the number of claims included in each application.

Article request: I would like to publish two separate short articles (<1000 words) written by Patently-O readers. Topics: (1) What action, if any, should a patent applicant take between now and November 1 to preserve rights in an of an already pending valuable patent application?; (2) Are there any actions that should be taken prior to November 1 to preserve rights in a valuable invention that is not yet associated with a patent application?

Please send your questions and short articles to: dcrouch@patentlyo.com.

====

Of interest is the following statement from the PTO’s Rule Change FAQ: “[A]pplicant may file as many continuation or CIP applications as applicant wants between August 21, 2007 and October 31, 2007, without a petition and showing, regardless of the number of previously filed continuing applications.”

Ever since Bodog lost a default patent infringement judgment to 1^st Technology, the offshore gaming company has been on a rampage against patent trolls.

• SaveBodog
• www.newbodog.com
• www.bodog.com
• Calvin’s Blog

 

New Patent Fees

The PTO has enacted a modest fee increase of roughly 3%. The largest bump is in appeal fees. An appeal with oral arguments now costs $2050 in fees. (I would query whether this appeal fee increase is meant to cover costs or as a disincentive)

Due on filing:

• Utility Filing Fee: $310
• Utility Search Fee: $510
• Utility Examination Fee: $210
• Total: $1030 (was $1000)

Due later:

• Notice of Appeal: $510 (was $340 in 2005)
• Appeal Brief: $510 (was $340 in 2005)
• Oral Hearing: $1030 (was $340 in 2005)
• Utility Issue Fee: $1440
• 3.5 Year Maintenance Fee: $930
• 7.5 Year Maintenance Fee: $2,360
• 11.5 Year Maintenance Fee: $3,910

Fee Schedule

 

Emergency Injunction Denied

The CAFC occasionally grants emergency motions to stay injunctive relief pending the outcome of an appeal. That occurred earlier in 2007 in the Verizon v. Vonage litigation.

Going the other way, Novartis recently filed an emergency motion to enjoin Teva from selling a generic version of Famciclovir pending outcome of the patent litigation. In early September 2007, the CAFC granted a temporary injunction to block Teva’s introduction into the market. Now, however, after considering the merits of the case, the Court has denied the Novartis suggestion to continue the injunction throughout the litigation.

• See http://www.orangebookblog.com/2007/09/teva-wins-in-di.html
• See http://www.orangebookblog.com/2007/10/pharma-news-bri.html

Consideration of Delayed Injunctive Relief Demanded by CAFC

The recent Verizon v. Vonage majority opens the door to an expanded use of what I would call delayed injunctive relief.  In particular, the two-member majority (JJ Dyk & Gajarsa) explains in Footnote 12 that the district court “should have” considered whether to allow the adjudged infringer Vonage more time to implement a workaround before enforcing an injunction.

“One factor that is relevant to the balance of the hardships required by the Supreme Court’s decision in eBay was not considered by the district court, namely whether the district court should have allowed time for Vonage to implement a workaround that would avoid continued infringement of the ’574 and ’711 patents before issuing its injunction.”

The appellate panel also notes that Verizon’s interest in putting Vonage “out of business” is not a legitimate interest — rather, the court’s obligation is to protect Verizon’s patent interests without disrupting other business activity.

“Verizon had a cognizable interest in obtaining an injunction to put an end to infringement of its patents; it did not have a cognizable interest in putting Vonage out of business.”

Historically, a finding of patent infringement resulted in a relatively quick form of complete injunctive relief requiring that any adjudged infringement cease immediately.  The Supreme Court’s EBay v. MercExchange opinion considered injunctive relief a yes/no decision — either an injunction is granted or denied based on the traditional four-factor analysis.  Here, the CAFC appears to be reformulating debate to focus on a timing question —  i.e., if not now, at what point will the four-factors favor the patent holder?

In this case, the Court’s words are relegated to a footnote because Vonage never requested a workaround period.  And, in addition, sufficient time has already passed since the verdict.

“Vonage made no request for a workaround period to the district court, and Vonage has already had several months since the district court’s judgment to implement a workaround.”

Patent Assignment: "obligation to assign" treated differently than concurrent assignment

IpVenture v. ProStar (Fed. Cir. 2007)

IpVenture sued ProStar for infringement of its patent directed to a thermal and power management system for computers.

One of the inventors — Douglass Thomas — had been a patent attorney at HP at the time of the invention. The district court found that Thomas had an obligation under his employment contract with HP to assign rights to that company. Consequently, the district court dismissed the case for lack of standing. On appeal, the CAFC reversed.

All entities with independent substantial patent rights must be included in a patent infringement lawsuit — they are “indispensable or necessary parties” to the infringement suit.  The policy behind this judicial rule is to ensure that an accused infringer is only sued once.

Here HP has no rights for two reasons:

1. Under contract law, HP did not have immediate ownership in the patent rights because the inventor’s employment agreement only created an “obligation to assign” the rights.  (The employment contract could have alternatively included terms such as “the inventor hereby grants all rights present and future…”).
2. In 2005, HP agreed (via contract with IpVenture) that it did not own any rights to the asserted patent.

After disavowing any rights to the patent, HP ensured that it would not be able to sue ProStar for infringement — as a consequence, IpVenture had standing to sue without joining HP.

Dismissal vacated.

Notes:

• Beware: Patent assignments are contracted interpreted under state law
• There is some California state law supporting the idea that the assignment had 'vested' even though it was only an agreement to assign.

Stay Pending Appeal: Strong Likelihood of Success on Appeal Wins Stay

Muniauction v. Thompson Corp (Fed. Cir. 2007)

Thompson appealed a permanent injunction barring it from participating in municipal bond auctions over electronic networks in violation of Muniauction’s patent. The jury had found the Muniauction patent valid and willfully infringed based on a theory of joint infringement — the theory recently rejected in Paymentech.

Prior to the substance of the appeal, Thompson moved for a stay of the permanent injunction, which the court granted.

Stays Pending Appeal: Stays of injunctive relief follow the same jurisprudence regardless of whether the relief is permanent or preliminary.  The same four-factor test is also used when granting preliminary relief. The factors asses the chances of success on the merits (of the appeal) and weigh ‘hardships’ to the parties and to the public.

Four factor tests are tricky to apply — some factors may be required while others merely ‘balanced’ with various thresholds in between.  For stays, a moving party’s “strong likelihood of success on the merits” generally receives a stay of relief without regard to hardship of the parties. To win, the movant must present at least a threshold “substantial case on the merits.” In that instance, a stay would issue if coupled with proof of hardships associated with the injunction.

Here, the district court based its infringement decision on the faulty law of joint infringement — creating a high likelihood that the defendant will succeed on appeal. When the first factor is so strongly proven, a stay will always be granted.