CAFC Flips Call Routing Decision

800 Adept v. Murex Securities & Targus (Fed. Cir. 2008)

Adept and Targus both hold patents covering systems and methods for routing 1-800 calls to local franchises. In a multi-patent battle, the Orlando Florida jury found Targus liable for infringing the Adept patents and that the Targus patents were invalid.

Claim Construction: The Adept patents include the step of assigning the telephone number of each potential caller to a particular service location or franchise. The claims require that the assignment take place prior to the call being received, but there was a dispute as to whether the assignment can be stored as an algorithm rather than as a full database record-set. On appeal, the CAFC found that the patents focus on storing the assignment information in a database precludes the awkward twist that would all "assignment" to mean "implementing an algorithm to do the assignment."

As summarized in the abstract, the patents make clear that assignment of service location telephone numbers to potential callers must be completed before a telephone call is ever placed: "Once all such assignments have been made, a database is assembled to be used by a long distance carrier for direct routing of telephone calls."

Prosecution history: The prosecution history also supported this limited definition of assignment. Notably, the appellate panel agreed that the prosecution history was likely not clear enough for "prosecution disclaimer" but that it could still be used "as support for the construction already discerned from the claim language and confirmed by the written description."

Because the Targus operation uses an on-the-fly algorithm to associate callers with franchises, it cannot infringe as a matter of law. Reversed.

All Claims Invalid: The jury found that all claims of the Targus patents were invalid. On appeal, the CAFC limited that holding to only the three claims that were actually included in the pretrial statement.

"Adept's argument that it was unnecessary for its validity expert to put forth a claim-by-claim analysis of the unasserted claims is simply incorrect. Under the patent statute, the validity of each claim must be considered separately. … In this case, it is clear from the parties' pretrial statement and from the trial proceedings that the unasserted claims were neither litigated nor placed in issue during the trial. We therefore reverse the trial court's judgment of invalidity with respect to the unasserted claims."

Expert Mistake = New Trial: Adept's expert, Dr. Brody, made a few mistaken comments about scope of the company's patent disclosure. According to the court, this was the "primary if not the entire evidence" that the jury could have used in its invalidity decision. New trial ordered on the claims affected.

Tortious Interference: Targus sent infringement allegations to Adept clients, and the jury found tortious interference with business relations. On appeal, the CAFC reversed.

"State tort claims against a patent holder, including tortious interference claims, based on enforcing a patent in the marketplace, are "preempted" by federal patent laws, unless the claimant can show that the patent holder acted in "bad faith" in the publication or enforcement of its patent.… As the Supreme Court said long ago, "Patents would be of little value if infringers of them could not be notified of the consequences of infringement, or proceeded against in the courts. Such action, considered by itself, cannot be said to be illegal." Virtue v. Creamery Package (1913)"

In these cases, it is quite difficult to prove 'bad faith' because the claims of patent infringement must be objectively baseless. On appeal, the CAFC found that standard was not met because "Targus [could have had] a reasonable basis for believing that the patent was valid when it asserted the patent against Adept's customers."

Notes:

• Adept has also sued various Targus customers in the E.D.Texas, including Federal Express, Enterprise Rent-A-Car, and Domino's Pizza. Barnes & Thornburg, who represented Targus at trial, is representing the defendants in that case.

Comments

[Steve Sereboff]

Those prematurely invalidated Targus claims are probably dead meat in a reexam.

[curious]

I agree, Steve Sereboff.

[AllSeeingEye]

That raises an interesting question Steve. What exactly is the administrative status of a patent, vis a vis the PTO, whose claims have been "invalidated" by a court and what are the potential remedial actions if any that can be taken by the patentee such as reexam?

[Thomason]

To premise claim construction on a line from the Abstract puts a lot of meaning upon a paragraph thought only to be required for 'cataloguing' purposes.

[MaxDrei]

Haven't read the Decision, Thomason, but doesn't the above Crouch Report reveal that it was the specification that was effective to make the necessary disclosure, which was summarised in the abstract connected to the spec. That's what an abstract is for, I suppose. But it's beyond my understanding, why the court felt it necessary to muddy the waters by referring in its judgement to the abstract. Here in Europe, Art 85 of the EPC has, since 1978, explicitly forbidden use of the abstract for any purpose except for disseminating search information. The EPO routinely re-writes a deficient abstract before it issues the A publication, and Applicant has no basis to complain. The framers of the EPC stood on the shoulders of the US courts. The ROW has since then stood on the shoulders of the EPC framers.

[anonymous]

As I read the decision, the opinion quotes from the abstract because it provides a succinct summary of other parts of the written description.

The analysis starts with the claim language (p. 13), then moves on to the written description (p. 14), where it quotes from the abstract and other parts of the WD to explain its reasoning, then finally concludes with a discussion of the prosecution history evidence (pp. 16-19).

If something about the decision seems odd based on the blog post, you should probably skim the decision itself. The claim construction analysis is fairly unremarkable here.

The interesting part of the opinion is the preemption analysis. The CAFC's cases on that have been reasonably clear, but this case will be helpful to patentees because it's the clearest instance of a CAFC panel overturning a jury verdict for insufficient evidence of bad faith. It's also, as far as I can tell, the first CAFC case grounding the patentee's right of publicity/enforcement in 35 U.S.C. s. 261. Prior cases have cited the marking statute and the First Amendment (which is probably what the panel refers to in its citation to Globetrotter at the top of p. 28).

I'm also curious as to why Judge Dyk didn't join in the panel's reasoning.

[Patents]

Do any of you guys have links to the Adept and Targus held patents?

[Fiber Pneuman]

"it raises an interesting question Steve. What exactly is the administrative status of a patent, vis a vis the PTO, whose claims have been "invalidated" by a court and what are the potential remedial actions if any that can be taken by the patentee such as reexam?"

DOES ANYONE KNOW THE ANSWER TO THIS?

[Leopold Bloom]

"DOES ANYONE KNOW THE ANSWER TO THIS?"

If you'd stop shouting...

See Ethicon v. Quigg (Fed. Cir. 2008): if a court finds a patent invalid, and that decision is either upheld on appeal or not appealed, the PTO may discontinue its reexamination. This is consistent with Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d 788 (1971), which "held that where a patent has been declared invalid in a proceeding in which the 'patentee has had a full and fair chance to litigate the validity of his patent' (402 U.S. at 333, 91 S.Ct. at 1445....), the patentee is collaterally estopped from relitigating the validity of the patent." Mississippi Chemical Corp. v. Swift Agricultural Chemicals Corp., 717 F.2d 1374, 1376, 219 USPQ 577, 579 (Fed.Cir.1983), quoted in Allen Archery, 819 F.2d at 1091, 2 USPQ2d at 1492. Of course, in the end it is up to a court, not the PTO, to decide if the patentee had a "full and fair chance" to litigate the validity of the patent. But it is admissible for the PTO to act on the standing judgment of invalidity unless and until a court has said it does not have res judicata effect.

See also MPEP 2286. The gist - if the court ruling is final, then you can't raise a substantial new question of patentability with respect to invalidated claims. If all claims are invalidated then you are out of luck.

[anonymous]

Leopold, what about reissue? 35 U.S.C. 251 allows a patentee to cure defects in the spec or the claims provided that the defects render at least one claim inoperative or invalid and that he defect wasn't the result of deceptive intent by the patentee.

If a district court discovers an invalidating "defect" in a patent, the language of the statute doesn't clearly prevent a patent from curing that defect at the PTO. Section 1400 of the MPEP doesn't say anything about that question, either.

Ethicon v. Quigg, 849 F.2d 1422 (Fed. Cir. 1988)and MPEP 2286 seem to say that if a patent is invalidated in court, the patentee can't then argue to the PTO that the patent is actually valid. What they don't say is that a patentee can't ask the PTO to fix the invalidity problem through reissuance of the patent.

Obviously

[Leopold Bloom]

"what about reissue?"

I don't know for certain, but it seems that a reissue is possible. Of course, if filed after two years from the original grant (which is pretty likely if the patent's claims are subject to a final judgment of invalidity), then the reissue claims can't be broader than the original claims. That's going to pin you down pretty well.

[anonymous]

True, but most grounds for invalidity involve patent claims that are too broad, not too narrow. If a patentee finds out through litigation that his claims are too narrow to ensnare anything that's out there, then he's probably out of luck.

If, however, the problem is prior art or insufficient written description or something like that, then the 2-year limit doesn't apply and the patentee can make the claims narrower.

I'm sure I've missed something, but I don't know what it is...

[anonymous]

also, the "Obviously" in my prior comment was the vestige of a sentence I thought I'd deleted completely... it wasn't snark.

[AllSeeingEye]

It seems that the res judicata effect of the invalidation ruling in a subsequent suit for enforcement has been addressed, but I think we can all imagine that result. The more interesting question IMO is what happens to the administrative status of the patent vis a vis the PTO? Same question for a ruling of unenforceability due to IC. Is the patent administratively recorded as "unenforceable" or are the particular claims at issue marked somehow as "invalid?" Is the judgment recorded in the PTO against the patent? Can the patent be rexamined or reissued notwithstanding?

[Just Visiting]

"But it's beyond my understanding, why the court felt it necessary to muddy the waters by referring in its judgement to the abstract"

The water is already muddy. There CAFC has already held that the abstract can be considered in interpreting the claims leaving no real reason to avoid pointing to the abstract in an opinion.