Patent Law Blog (Patently-O)

PVPA Not Infringed When Seller Lacked Knowledge

Rewritten Aug 1:

Syngenta Seeds v. Delta Cotton (Fed. Cir. 2006).

In a case involving a variety of soft winter wheat, the CAFC has effectively reversed a jury's finding of infringement and damages under Section 2567 of the Plant Variety Protection Act (PVPA) because the accused seed seller did not have proven knowledge that the seeds were protected. 

Here, Delta was reselling seeds that had been provided by local farmers.  Delta's apparent "don't ask don't tell" policy with regard to the variety of seed enabled it to escape liability under the PVPA. 

Lanham Act: Syngenta also accused Delta of "reverse passing off" because Delta was selling the Syngenta variety of seed under the Delta Cotton name.  Reverse passing off is generally thought of as "misrepresenting someone else's goods or services as [your] own." Dastar.

The CAFC agreed with Syngenta that reverse passing off has no scienter requirement and thus proof of Delta's knowledge would not be required.  However, Syngenta did not show proof that the misidentification of goods caused any harms to Syngenta's business or mark.

Reversed

Settlement Creates Unchallengable Claim Construction

Louisville Bedding Co v. Pillowtex (Fed. Cir. 2006).

Louisville Bedding owns a patent on a mattress pad cover that uses a special skirt material.  In its original suit against Pillowtex, Louisville got a negative claim construction and infringement opinion from the district court and the parties quickly settled. Shortly after settling, Pillowtex dissolved into bankruptcy.

After the earlier decision was used to collaterally estop Louisville in a later suit against another party, the patent holder filed a Rule 60(b)(6) motion to reopen (or vacate) the original decision. -- The motion was denied, first by the district court and then affirmed on appeal.

The CAFC did not discuss whether the application of collateral estoppel of claim construction was correct.  The appellate panel did, however, uphold the longstanding tradition of finality of judgment.

As the Supreme Court has recognized, "[p]ublic policy dictates that there be an end of litigation; that those who have contested an issue shall be bound by the result of the contest, and that matters once tried shall be considered forever settled as between the parties." Baldwin v. Traveling Men’s Ass’n, 283 U.S. 522, 525 (1931). This policy concern is even stronger when a case is ended by the deliberate choice of the parties.

Louisville Bedding argued that the changed circumstances of the Pillowtex bankruptcy opened the door to revisit the case. The CAFC disagreed.

Typically, a district court may grant relief under Rule 60(b)(6) only for "exceptional or extraordinary circumstances.” Louisville has not made such a showing. Because businesses fail every day, the failure of Pillowtex in this case, even though it appeared to be highly commercially successful in 1998, is not an "exceptional or extraordinary circumstance." To say the least, Louisville took a calculated risk that did not turn out the way that it expected. Nor can we say that the equities in this case particularly favor Louisville and its fateful business decision. In the Pillowtex case, Louisville was faced with a summary judgment of noninfringement and an unfavorable claim construction with respect to the ’322 patent. Its position looked bleak at that time. There was no certainty that Louisville could have had that result changed in the district court or on appeal if it did not enter into the settlement agreement. Thus, it was greatly to Louisville’s benefit to settle the case under the terms that it did.

Denial of R.60 motion affirmed.

Supreme Court: Challenging a Patent During the License Term

MedImmune v. Genentech (Supreme Court 2006).

In MedImmune, the Supreme Court will answer the question of whether a licensee in good standing can challenge the validity of the patents it has licensed.  A hidden issue within this case is whether a licensee has the freedom to contract-away its right to challenge the validity of the patents during the license. 

In Lear v. Adkins, The Supreme Court gave the boot to the doctrine of “licensee estoppel” and allowed a licensee to challenge the validity of a licensed patent after termination of the license. Based on Lear, license terms that bar a licensee from later challenging the patent’s validity are (usually) unenforceable. Those decisions, however, are based on cases arising after termination of a license agreement. 

Danger for Cross-License Agreements: The reality is that many license agreements are based on the desire for “patent peace” between the parties.  Often two companies will cross-license their patents and forgo any hopes of a cash payout in favor of the certainty afforded by the agreement.  Those companies are willing and ready to give-up their rights to challenge the patents in district court (during the license term).  If MedImmune has its way, however, those license agreements would actually open the door to litigation rather than achieve the hoped security. 

The potential inability to fully settle lawsuits as they arise also has interesting implications for the sale of patent rights.  Any purchase review (due diligence) will need to look much more closely at ongoing license agreements associated with the patent to determine the extent that the license gives the licensee a right to sue.

Briefing at the Supreme Court will continue this summer to prepare for oral arguments in the October 2006 term.

Links:

• Discussion of the Supreme Court briefs;
• CAFC Decision in MedImmune v. Genentech;
• CAFC Decision in MedImmune v. Centocor;
• MedImmune Petition Granted
• Lear v. Adkins;
• Professor Miller’s comments;
• Supreme Court on the March.

Documents:

• Merits Stage:
  • Party Briefs:
    • MedImmune Brief
  • Amici in Support of Petitioner
    • Solicitor General
    • Law Professors (Dratler Oddi)
    • Generic Pharma Assn
    • Medtronic
    • NRDC
  • Amici in Support of Neither Party
    • Licensing Executives Society
• Petitions Stage
  • Genentech:
    • MedImmune’s Genentech Petition (6509 KB)
    • Genentech's opposition to certiori
    • MedImmune's Genetech Reply
  • Centocor:
    • MedImmune’s Centocor Petition
    • Centocor’s opposition to certiori
    • MedImmune’s Centocor reply

Interference: Late Claim Loses the Game

California v. Iowa (Fed. Cir. 2006).

The first annual bio-bowl was recently played-out before a small crowd and three officials in the heart of Washington, D.C.

Cal and Iowa battled through an interference proceeding over rights to a molecule designed to desensitize a person to an allergen.

Iowa, the junior party, received its patent first.  Within months, Cal amended its pending claims and requested an interference.  Unfortunately for Cal, the PTO had some problems with its new claims and Cal spent many more months fighting over their patentability.  Eventually, Cal canceled its claims and added a new one that properly set-up the interference.

For an interference, new claims must be added within one year of the other patent's issue date. 35 USC 135(b)(1).  Even though its newest claim was filed more than one year after Iowa's patent issued, Cal argued that its earlier amendments and requests for interference should satisfy the rule.  Both the BPAI and CAFC disagreed:

Because California’s proposed interpretation of section 135(b)(1) contravenes this court’s precedent, the plain meaning of the statute, and the policy underlying that section, this court rejects those contentions.

Cal could have relied on the earlier claims if they had not differed in any materially limitation from the new claim -- unfortunately for the brown-furballs, the claim was materially different.

The conclusion: tough luck for you if you write bad claims in anticipation of an interference.

Iowa Wins.

Foreign Soverign Immunity Waived By Patent License Negotiations

Intel and Microsoft v. Commonwealth Scientific (CSIRO) (Fed. Cir. 2006).

Under the Foreign Soverign Immunity Act (FSIA), a foreign state is presumptively immune from the jurisdiction of United States courts. A federal court therefore has no subject-matter jurisdiction over a claim against a foreign state unless the case falls within a specified exception. 28 U.S.C. §§ 1602-1611. 

Intel and Microsoft sued the Australian Commonwealth Scientific and Industrial Research Organisation ("CSIRO") for declaratory judgment of non-infringement. CSIRO is Australia's national science agency and claimed immunity under the FSIA. The district court found jurisdiction, and the appeal was heard on interlocutory review.

Level of Review: Without determining whether to apply CAFC or 9th Circuit law, the appellate panel first determined that the existence of immunity are questions of law that are reviewed de novo.

Commercial Activity: In a question of first impression, CSIRO argued that its extensive patent licensing negotiations should not qualify as a commercial activity exception to the FSIA when those do not result in fully-executed and binding contracts. The CAFC flatly rejected that argument -- finding that commercial activity is broadly defined under the FSIA -- noting in the Congressional record that "[t]he courts would have a great deal of latitude in determining what is a 'commercial activity' for purposes of this bill."

It is possible to extrapolate this case to argue that merely obtaining a U.S. patent is also commercial activity.

CSIRO's acts of (1) obtaining a United States patent and then (2) enforcing its patent so it could reap the profits thereof—whether by threatening litigation or by proffering licenses to putative infringers—certainly fall within the latter category [of commercial activities]. Indeed, we have expressly recognized, in another context, that "a patentee's attempt to conduct license negotiations is a commercial activity."

Affirmed and dismissed.

Read the case: Link

Delay alone cannot constitute intentional concealment

Flex-Rest v. Steelcase (Fed. Cir. 2006).

Flex-Rest holds at least two patents on negative-tilt computer keyboards and sued for infringement.  Steelcase, the defendant, had an earlier conception date, but Flex-Rest argued that 102(g) should not apply because Steelcase had concealed the invention (either intentionally or unreasonably).

Here, there was a seven month delay from Steelcase's reduction to practice and public release of its product (timed with the filing of its own patent application).

Intentional Concealment: As it turns out, a seven month delay alone does not constitute intentional suppression or concealment:

"Intentional suppression, however, requires more than the passage of time. It requires evidence that the inventor intentionally delayed filing in order to prolong the period during which the invention is maintained in secret." quoting Fujikawa.

The record demonstrates that after reduction to practice, Steelcase moved almost immediately towards both filing a patent application and commercially disclosing the KBS device at a trade show, actions which indicate an intent to make a public disclosure.

The CAFC found that keeping the device secret while preparing a patent application and/or preparing for a trade show release "is not, by itself, indicative of intentional suppression or concealment."

Unreasonable Delay: The failure to bring forth an invention, either publicly or in a patent application within a reasonable amount of time will support an inference of suppression or concealment.  "There is no particular length of delay that is per se unreasonable." Here, the CAFC agreed that the seven month delay was not unreasonable:

After reduction to practice, Steelcase resolved design issues and spent $775,000 on tooling for the parts to the KBS device. The lead times for creating the tooling varied from four weeks to approximately six months. Therefore, it does not appear that Steelcase could have brought the KBS device to market much sooner than the trade show unveiling in June 1991.

At the same time, Steelcase’s patent counsel began drafting a patent application for the KBS device, submitting a first draft to Steelcase in March 1991. The draft was reviewed by the four named inventors and filed in May 1991. No evidence indicated that this amount of time was unreasonably long.

In the process, the Court also shot-down the urban myth of a court sanctioned three-month patent prep deadline derived from the old Shindelar case.

Flex-Rest’s argument that Shindelar identifies a reasonable amount of time for drafting when the court stated that “a period of approximately three months could possibly be excused” takes that quote out of context. . . . What constitutes a reasonable time for drafting a patent application will vary with the technology and the particular set of facts involved in each case.

Method Claims Not Exhausted By Sale of Patented Device

LG Electronics (LGE) v. BizCom (Fed. Cir. 2006, 05-1261).

LGE sued a bunch of Intel customers for infringing use of a chipset.  Intel itself was not a defendant because it is licensed to sell the products under an agreement with LGE.  Under the agreement, however, Intel's customers were not permitted to combine the products with non-Intel products.

LGE lost on summary judgment -- the district court found that LGE's rights were "exhausted" as to all but one asserted patent and that LGE was contractually barred from suing over the remaining patent. The appeal addressed, inter alia, implied licenses and exhaustion.

Implied License: A defendant can avoid liability for patent infringement by showing that it had an implied license to practice the patented invention.  To prevail, the defendant must prove that its products (1) have no noninfringing uses and that (2) the circumstances plainly suggest that an implied license should be inferred. Here, Intel expressly informed the parties that they were not licensed to combine the Intel products with other products -- thus those combinations could not be considered licensed in any way.

Exhaustion: The patent exhaustion doctrine is triggered by an unconditional sale of a patented item -- this is commonly termed the "first sale doctrine."

The theory behind this rule is that in such a transaction, the patentee has bargained for, and received, an amount equal to the full value of the goods.

The exhaustion doctrine does not, however, apply to express conditions made upon that original sale.

"In such a transaction, it is more reasonable to infer that the parties negotiated a price that reflects only the value of the ‘use’ rights conferred by the patentee."

Exhaustion - System Claims: Regarding LGE's system claims, the appellate panel found that there was no exhaustion because there were express conditions on the use of Intel's licensed products -- specifically that they could not be combined with non-Intel parts.

Although Intel was free to sell its microprocessors and chipsets, those sales were conditional, and Intel’s customers were expressly prohibited from infringing LGE’s combination patents.

Exhaustion - Method Claims: Here, the CAFC made their statement short and to-the-point: "the sale of a device does not exhaust a patentee’s rights in its method claims."

The Marking Statute of § 287(a) Requires Internet Vendors of Downloadable Patented Software To Mark Their Websites

IMX, Inc. v. LendingTree, LLC, 2005 U.S. Dist. LEXIS 33179 (D. Del. Dec. 14, 2005); motion for reconsideration denied, 2006 U.S. Dist. LEXIS 551 (D. Del. Jan. 10, 2006).

by Eric Lane,

IMX v. LendingTree appears to be the first court decision to hold that compliance with the constructive notice provision of 35 U.S.C. § 287(a) requires a patentee to mark an internet website that facilitates downloads of patented software.

IMX asserted its patent covering a method and system for trading loans against LendingTree. Users download IMX’s web-based software from IMX’s website. LendingTree moved for partial summary judgment to limit damages to those occurring on or after the filing date of the lawsuit because IMX failed to provide constructive notice of the patent. The issue was whether IMX had to mark its website to provide constructive notice.

Although the components of the invention (database and transaction server) can not by viewed by the end user and the website does not embody any claim of the patent, the court found that IMX had a duty to mark its website because the public accesses the commercial embodiment of the patented invention through the IMX website:

Although IMX does not make or sell the computer components through which its patented system is processed, and although the IMX website itself is not the patented invention, nevertheless, consistent with the purpose of § 287(a) as interpreted by the Federal Circuit, the website is intrinsic to the patented system and constitutes a "tangible item to mark by which notice of the asserted method claims can be given" . . . The point of public access to the patented invention of the ‘947 patent since March 2000 has been through IMX's website; therefore, marking the patent on the website is required.

The IMX case is still pending, but if the marking decision is appealed, would it hold up under Federal Circuit scrutiny? The IMX court found that IMX’s website was a "tangible item" under the Federal Circuit’s American Medical Systems decision, but in American Medical Systems, the "tangible item" at issue was an article produced by the method of the patent-in-suit:

In this case, both apparatus and method claims of the ‘765 patent were asserted and there was a physical device produced by the claimed method that was capable of being marked. Therefore, we conclude that AMS was required to mark its product pursuant to section 287(a) in order to recover damages under its method claims prior to actual or constructive notice being given to MEC.

Yet the IMX court explicitly acknowledged that the IMX website is not the patented invention, so the decision is not consistent with AMS.

On the other hand, the IMX decision could be read as finding the website through which the patented product is accessed to be the legal equivalent of product packaging, which would require marking under § 287(a), or that the website is akin to a product insert. There is some case law that supports the proposition that marking patent notice on materials that are included with each individual patented article, though not on the packaging itself, would satisfy the marking requirement under § 287(a). See Calmar, Inc. v. Emson Research, Inc., 850 F. Supp. 861 (C.D. Cal. 1994) (§ 287(a) requires either marking the patented article itself "or, at least, including something with the packages in which the patented articles are shipped which would indicate the article’s patent number"); Stryker Corp. v. Intermedics Orthopedics, Inc., 891 F. Supp. 751 (E.D.N.Y. 1995) (patentee did not comply with section 287(a) because it failed to mark the product packaging "[n]or was there any evidence offered at the trial by the plaintiff that . . . other literature containing the patent marking was placed in the packaging of the [patented surgical implant] that was distributed to vendors and end-users”).

Note: This post is the first in a series of posts by a team of attorneys at Morgan & Finnegan's New York office.  The team is led by former Markey clerk, Mark Abate.

Small Entity Status -- be careful of non-exclusive licenses.

Is a company’s “small entity” status with the PTO put in jeopardy by granting a non-exclusive license to a major corporation — assuming that the non-exclusive license does not convey any right to exclude others from making or using the invention?

According to 37 CFR 1.27, a small entity includes:

an inventor . . . who has not assigned, granted, conveyed, or licensed, and is under no obligation under contract or law to assign, grant, convey, or license, any rights in the invention. . . .

MPEP 509.02 defines “rights in the invention” in this section of the rules as “the right to exclude others from making, using, offering for sale, or selling the invention throughout the United States or importing the invention into the United States.”  This therefore appears to indicate that a non-exclusive license to a large entity that does not convey any right to exclude others would not fall within rule. However, if you read further in the MPEP, you notice a discrepancy involving non-exclusive licenses:

A grant of a non-exclusive license to a “non-small” entity will disqualify applicant from claiming small entity status. See Ulead Systems, Inc. v. Lex Computer & Management Corp., 351 F.3d 1139, 1142 (Fed. Cir. 2003).

In yesterday’s decision in Nilssen v. Osram Sylvania (N.D. Ill. 2006), the district court found Nilssen’s patents unenforceable because, inter alia, Nilssen had failed to pay a large entity fee even though the patents-in-suit were nonexclusively licensed to Philips Electronics.

In addition, the patents were unenforceable due to: (a) a patentability declaration submitted by an undisclosed business partner; (b) Nilssen’s admission that he “opposes government fees, taxes, and the present legal system;” (c) Nilssen’s improper priority claims; (d) failure to disclose ongoing litigation to the PTO; (e) failure to disclose material prior art; and (f) unclean hands due a failure of decorum and courtesy in interactions with the PTO.

Regarding Nilssen’s unclean hands, the Court cited a petition to the Commissioner that reads as follows:

a) [The Examiner] cannot be characterized as being skilled in the arts to which subject applications pertain . . .
b) [The Examiner] is severely deficient in his understanding and use of reason and logic . . .
c) [The Examiner] has an inadequate command of the English language . . .
d) [The Examiner] has repeatedly shown himself to be overtly non-cooperative and non-caring.

Paxil Patent Case: New Mandate

SmithKline Beecham v. Apotex (Fed. Cir. 2006, 04–1522o).

In February 2006, the CAFC affirmed a lower court’s invalidation of Apotex’s Paxil patent — finding that its product-by-process claims were invalid because they attempted to recapture the end-product from the public domain. According to that decision, “once a product is fully disclosed in the art, future claims to that same product are precluded, even if that product is claimed as made by a new process.”

On petition, the CAFC has now refused to rehear the case.  However, the court indicated that a new “mandate of the court will issue on June 29, 2006.”

Judge Newman dissented from the rehearing decision.  She argued that this case should be used to clarify the difference between products that could only be described by the way they are made (Scripps) and products whose production require use of a certain process (Atlantic Thermoplatics). 

This decision holds that a product-by-process claim that, for instance, claims “product X made by performing steps A, B, and C,” will be invalid if product X is known in the art — regardless of whether the known X was made through those steps.  This makes the claimed steps (A, B, and C) meaningless or, in Judge Newman’s words, “expands on the existing confusion by suggesting that the specific language of the claims is not relevant to anticipation.”

Paxil Cases: There are at least two Paxil patent cases that are ongoing. In 2005, the CAFC ruled that the patent covering the drug compound was inherently anticipated. The Supreme Court recently declined to hear that case on appeal.

Supreme Court: Time to Rethink Obviousness

KSR v. Teleflex (Supreme Court 2006).

The Supreme Court has granted KSR’s writ of certiorari and now will address fundamental questions of patentability that have been raised. The doctrine of nonobviousness ensures that patent rights are not granted on inventions that are simply throw-away modifications of prior technology.  Questions of obviousness are at play in virtually every patent case, in both proceedings before the USPTO and during infringement litigation.

Over the past twenty-five years, the Court of Appeals for the Federal Circuit has developed its nonobviousness doctrine using a motivation/suggestion/teaching test. According to the test, when various pieces of prior art each contain elements of an invention, the prior art can be combined together to invalidate a patent on the invention only when there is some motivation, suggestion, or teaching to combine the prior art.

KSR has asked the Supreme Court to rethink that approach and take a fresh look at the obviousness standard for patentability. The petition questions whether obviousness should require any proof of some suggestion or motivation to combine prior art references.

Question Presented: Whether the Federal Circuit erred in holding that a claimed invention cannot be held "obvious," and thus unpatentable under 35 U.S.C. sec. 103(a), in the absence of some proven "'teaching, suggestion or motivation' that would have led a person of ordinary skill in the art to combine the relevant prior art teachings in the manner claimed"?

Interestingly, the Supreme Court has not heard an obviousness since well before the founding of the Federal Circuit. In that case (Sakraida 1976), the High Court held that a combination which only unites old elements with no change in their respective functions is precluded from patentability under 103(a).  Under the Sakraida standard, the Teleflex patent is arguably obvious.

Professor John Duffy has done a masterful job of shepherding this case through the system.  In an article several years ago, Duffy predicted the current rise of Supreme Court interest in patent case.  In fact, at that time he announced that the very issue now being debated in KSR was ripe for adjudication:

One very good candidate for [Supreme Court] review is the law governing whether an invention is not ‘‘obvious’’ at the time of invention. . . . [The Federal Circuit’s suggestion] test, which tends to make even seemingly trivial developments patentable, is entirely the Federal Circuit’s product.  It has no basis in the Supreme Court’s case law and may, in fact, be inconsistent with the Court’s most recent pronouncement on the subject (though that precedent is now more than a quarter century old). . . . None of this is to say that the Court will necessarily reject the doctrine developed by the Federal Circuit; it is only to suggest the Court is likely to end its long absence from this doctrinal area soon.

The Festo Decision and the Return of the Supreme Court to the Bar of Patents, 2002 S.Ct. Rev. 273, 340-41 (2003).  Robert Brauneis another GWU law professor led a group of 24 law professors in support of the petition. Although he did not file a brief (to my knowledge) Richmond Professor Christopher Cotropia argues that (1) recently, the CAFC has removed some rigidity from the obviousness determination and (2) the requirement for proof of a suggestion to combine should be thought of as a rule of evidence. [link].

According to Professor Duffy, the preliminary amici briefing schedule is as follows:

• Amici supporting petitioner or neither side: August 10, 2006 (45 days after cert granted).
• Amici supporting respondent: September 14, 2006 or 35 days after petitioner brief is filed — whichever is less.

Crouch’s Commentary: For those of you concerned about the potential impact of this case — It is very likely that the CAFC’s motivation test will be changed and briefs simply requesting “no change” are unlikely to to be given much weight.  Proposed solutions, including analogies to other areas of law (and foreign law) may be helpful.  In this case, I also believe that would be useful to provide the Court with a number of real-world examples of how the system works or how it should work.

Documents:

• Party Briefs
  • KSR’s Petition for Cert (Including the CAFC and District Court decisions in Appx. A & B);
  • Teleflex’s Brief in Opposition;
  • KSR Reply Brief (314 KB);
  • Teleflex Supplement.
• Amicus Briefs
  • Government in support of petition;
  • 24 Law Professors in support of petition;
  • Progress Freedom Foundation in support of petition;
  • Microsoft, Cisco, Hallmark, et al. in support of petition.

Links:

• Discussion of Government's Brief in Support of Certiorari;
• Discussion of Microsoft’s Amicus Brief;
• Discussion of the CAFC decision;
• Discussion of Law Professors Brief;
• Discussion of In re Kahn;
• Discussion of Petition for Certiorari;
• Prediction Certiorari;
• Prof Miller: KSR Liftoff!
• Prof Miller: Discussion of Gov’t Brief;
• Patent Hawk: Becoming Less Obvious.
• Buchanan: "[O]nce again, patent reform has left the Capitol and walked across First Street to the Supreme Court." [Link]

Jury Trial Not Required For Inequitable Conduct Issues

AGFA v. CREO Products (Fed. Cir. 2006).

In patent litigation involving patented computer-to-plate printing technology, the Massachusetts district court held a bench trial on the issues of inequitable conduct and enforceability before a jury trial on infringement and invalidity. In that bench trial, the patent was found unenforceable.

AGFA appealed — asserting that inequitable conduct and enforceability should have been tried by a jury. The CAFC disagreed — holding that the Seventh Amendment right to a jury trial does not extend to questions of inequitable conduct and enforceability.

Dissent by Newman:

The panel majority holds that the factual questions of both intent to deceive and materiality of deceptively withheld information are not subject to the jury right. This is a departure from the established jury right, for materiality and intent are quintessential questions of fact, and have been tried to a jury throughout the nation's history. There is no basis for removing these factual questions from the jury when the jury is trier of fact. I respectfully dissent from the court's holding that there is no right to a jury, and that the jury demand can be rejected at the trial court's discretion.

More to come later . . .

In its first post-eBay injunction decision, CAFC vacated Abbott's preliminary injunction

Abbott Labs v. Andrx Pharma (Fed. Cir. 2006, 05–1433).

Abbot was awarded a preliminary injunction (PI) against Teva to stop alleged infringement of its patents relating to extended release clarithromycin. The CAFC reviewed that holding for abuse of discretion or clear error. 

Looking at the prior art, the lower court found no motivation to combine several prior art references that discussed azithromycin rather than clarithromycin.  On appeal, the CAFC found the motivation in the form of an implicit admission made by Abbott in one of its prior patents.  In that prior patent, the specification discussed only clarithromycin, but the claims were directed at both azithromycin and clarithromycin. 

Because the [earlier Abbott] patent explicitly discloses only clarithromycin controlled release compositions, yet claims azithromycin compositions, we conclude that Abbott has represented to the U.S. Patent and Trademark Office ("PTO") that the differences between clarithromycin and azithromycin were such that azithromycin could be substituted into a controlled release clarithromycin composition by a person of ordinary skill in the art without undue experimentation.

Based on the earlier Abbott patent, the CAFC found a substantial argument that a jury could find a motivation to combine the references with a reasonable expectation of success.

Regarding potential irreparable harm, the CAFC held that direct competition “alone does not establish that Abbott’s harm will be irreparable.” 

And, on the question of public interest, the appellate panel “agree[d] with the district court that the public is best served by enforcing patents that are likely valid and infringed.”  But, because of the chance that Abbott’s patents are invalid, the panel concluded “that the public interest is best served by denying the preliminary injunction.”

In dissent, Judge Newman argued that the majority opinion constituted de novo rule and did not give significant deference to the lower court — as is required by law.

My colleagues do not discuss the trial judge's careful explanations, but, upon finding that Teva has raised a "substantial question" about patent validity, they hold that Teva should be permitted to practice the Abbott invention before patent validity is decided. With all respect to my colleagues' concerns, they misapply not only the criteria of the preliminary injunction but also the standard of appellate review.

Newman argues that the criteria used by the majority for determining likelihood of success on the merits were not correct:

Thus my colleagues conclude that claim 4 of the '718 patent is "vulnerable to allegations of invalidity," and find "a substantial argument" as to other claims. These are not the criteria of likelihood of success.

eBay Casualty: E.D. Texas Court Denies Injunctive Relief to Halt Microsoft's Infringing Activities

I’m writing a paper on this very topic, but history is happening faster than I can type . . .

z4 Technologies, Inc. v. Microsoft (E.D.Texas 2006)

z4 Tech appears to be the first post-eBay decision denying a permanent injunction after a patent has been valid and infringed. Here, the jury found that the patents were willfully infringed by Microsoft and that there was insufficient evidence to find the patents invalid. z4 then asked the Court to enjoin Microsoft from making, using, or selling its infringing product (Windows XP).

The Court followed the “traditional four-factor test used by courts of equity.” to determine whether to issue an injunction:

I. Irreparable Injury to Patentee: The patentee argued that infringement of a patent created a rebuttable presumption of irreparable harm to the patentee.  The district court dismissed this “creative” argument as lacking precedential foundation:

z4's arguments for the application of a presumption of irreparable harm are creative, but z4 cannot cite to any Supreme Court or Federal Circuit case that requires the application of a rebuttable presumption of irreparable harm with regard to a permanent injunction.

In fact, the court cited the Supreme Court case of Amoco Production for the proposition that a presumption of irreparable harm in the context of an injunction is “contrary to traditional equitable principles.” 

Because z4 does not create any products, the Court found that z4 the first factor weighed in favor of the willful infringer, Microsoft.

In the absence of a permanent injunction against Microsoft, z4 will not suffer lost profits, the loss of brand name recognition or the loss of market share because of Microsoft’s continued sale of the infringing products. These are the type of injuries that are often incalculable and irreparable. The only entity z4 is possibly prevented from marketing, selling or licensing its technology to absent an injunction is Microsoft. As . . . z4 can be compensated for any harm it suffers in the way of future infringement at the hands of Microsoft by calculating a reasonable royalty for Microsoft’s continued use of the product activation technology. Accordingly, z4 has not demonstrated that it will suffer irreparable harm absent a permanent injunction.

II. Remedies Available at Law (Is Money Sufficient?): Here, the court cited Kennedy’s concurring opinion from eBay:

Justice Kennedy specifically mentioned the situation where a “patented invention is but a small component of the product the companies seek to produce” and states that in such a situation, “legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest.” . . .

Here, product activation is a very small component of the Microsoft Windows and Office software products that the jury found to infringe z4's patents. The infringing product activation component of the software is in no way related to the core functionality for which the software is purchased by consumers. Accordingly, Justice Kennedy’s comments support the conclusion that monetary damages would be sufficient to compensate z4 for any future infringement by Microsoft.

In addition, Microsoft has promised that its new version of Windows (2007) will phase out all the infringing components.  Thus, any ongoing royalty would only last for a couple of years.  “For the reasons stated above, z4 has not demonstrated that monetary damages are insufficient to compensate it for any future infringement by Microsoft.”

III. Balance of Hardships: Microsoft argued that it would be really hard to redesign even a small component of Microsoft office.  From what I have heard about the complicated code noodle, that assertion must be true. Thus, the court found that the balance of the hardships weigh in favor of Microsoft.

IV. Public Interest: Microsoft office is really popular, and “it is likely that any minor disruption to the distribution of the products in question could occur and would have an effect on the public due to the public’s undisputed and enormous reliance on these products. . . . Although these negative effects are somewhat speculative, such potential negative effects on the public weigh, even if only slightly, against granting an injunction.”

Commentary: As I predicted earlier, one way to avoid an injunction is to be a very successful infringer.  I would have suspected that Microsoft’s willfulness would have weighed in z4’s favor, but the court did not even mention willfulness in its analysis of the equitable relief factors. 

In a forthcoming paper code-named Injunction Denied, I address the issue of injunctive and monetary relief in patent cases.  In particular, I focus on the situation where equities favor the defendant, and ask the question what monetary remedy a court should then impose? My answer may surprise you. . .

NTP Continues to Trouble Patent Office

Rumors continue to fly regarding reexamination of NTP’s patents and alleged misdeeds at the PTO.  Calling it “BlackBerryGate,” professor Hal Wegner notes that the allegations reach both PTO administration and into the Department of Commerce.

Although third-party communications in an ex parte reexamination is strictly forbidden, NTP has accused PTO officials of holding covert meetings with RIM officials, including RIM’s CEO and Canadian counsel.  According to the PTO, those meetings had nothing to do with the five ongoing NTP reexaminations.  However, it is clear that RIM was hoping to exert political pressure on the PTO, that the NTP reexamination were undertaken with record speed, and that rejections of NTPs patents were issued just before a critical hearing in the litigation between those two companies.

Of course, NTP has an incentive to fight the messenger — it only has weak direct arguments against the asserted prior arts.  NTP’s position is also weakened by its odd argument that the cited prior art is not good evidence based on a forensic analysis that asserts document tampering.

Crouch’s Comments — NTP’s filings do not present any hard evidence of PTO wrongdoing.  However, we all hope that the Office will come through with clear evidence that there were no improper contacts or pressure.

Documents:

• NTP’s Allegations (8 MB) Check out pp 74+ and also pp 61 – 74.
• BlackBerryGate by Hal Wegner
• Patent Prospector by Patent Hawk
• Time Article by Daren Fonda.
• IP-360 Article (available through e-mail).
• DowJones Article by Stuart Weinberg.

 

CAFC Denies Pro Se Intervenor Rights

Motionless Keyboard Co. v. Microsoft Corp., (Fed. Cir. 2006) (non-precedential ruling)

By Tom Loos,

The CAFC upheld a ruling by the Oregon DC denying an individual inventor to intervene in behalf of a corporation. 

Motionless Keyboard Co.(“MKC”) sued Microsoft for patent infringement.  Microsoft prevailed at summary judgment.  Thomas L. Gambaro, inventor of the patents and MKC’s majority share holder, then attempted to intervene under Fed. R. Civ. P. Rule 24. Gambaro argued he needed to appear as “Pro Se to continue to represent the Plaintiff” since “counsel has withdrawn.” 

The CAFC cited 28 U.S.C. § 1654 and Rowland v. Calif. Men’s Colony, 506 U.S. 194 (1993) to state that “a corporation may appear in federal court only if represented by licensed counsel.”  Applying 9th Circuit law, the CAFC held “to allow Gambaro…to intervene rather than hire replacement counsel ‘would eviscerate section 1654’” (quote from United States v. High Country Broad. Co., 3. F.3d 1244, 1245 (9th Cir. 1993)).

After losing summary judgment, MKC transferred its patent rights to Gambaro.  The CAFC held that “Gambaro may have an interest allowing him to bring an infringement action in his own name [based on the patents], but he may not participate in the case filed by MKC as the plaintiff.”

KSR v. Teleflex -- Certiorari Appears Likely

At the end of May, the Solicitor General filed an invited amicus brief supporting KSR's petition that asks the Supreme Court to take a fresh look at the obviousness standard for patentability.  The petition questions whether obviousness should require proof of some suggestion or motivation to combine prior art references.

Tom Goldstein, attorney for respondents (and SCOTUS Blog proprietor) has filed a response to the SG.  In the response, Teleflex argues that CAFC precedent continues to evolve and extensively discusses the recent Kahn decision that detailed the full scope of CAFC obviousness treatment.

In Kahn, the court affirmed the PTO’s finding of obviousness, explaining at great length that a "teaching, suggestion, or motivation" can be found "implicitly" based on precisely the factors that the Solicitor General says are relevant: "what the combined teachings, knowledge of one of ordinary skill in the art, and the nature of the problem to be solved as a whole would have suggested to those of ordinary skill in the art." 441 F.3d 987. In Cross Medical, the court of appeals applied the "implicit" obviousness standard to reverse a district court ruling that a patent was not obvious, explaining that obviousness could be found on the basis of a "problem [that] was within the general knowledge of those of ordinary skill in the art," 424 F.3d 1322, even if the patent is not directed at "the identical problem addressed in [the] prior art," id. No fair distinction can be drawn between the rule proposed by the Solicitor General and the flexible standard articulated by the Federal Circuit in these more recent decisions and adhered to in this case.

Teleflex's arguments regarding "implicit" motivation is an attempt to show that the CAFC has softened its approach to nonobviousness.  The "implicit" argument is also an attempt to subtly shift the conversation -- The question before the court is whether any "proof" of a motivation should be required. Of course, the proof could take the form of explicit or implicit evidence.

SG Support = Certiorari: A recent (unreleased) study by a patent law professor looked at all invited amici petition briefs filed by the solicitor general for the past five terms. The SG gave an unqualified recommendation for certiorari (as in KSR) in 15 cases. In all 15 cases, the Supreme Court then granted certiorari. 

Court Order Dismissing Patent Suit Does Not Trigger 180-Day Exclusivity Period Under Hatch-Waxman

Apotex v. FDA, No. 06-5105 (D.C. Cir. June 6, 2006)

By Aaron Barkoff of the Orange Book Blog,

The Court of Appeals for the D.C. Circuit today upheld an FDA rule stating that a district court order dismissing a patent suit for lack of subject matter jurisdiction is not a "court decision" under the Hatch-Waxman Act, and is therefore insufficient to trigger the first ANDA filer's 180-day exclusivity period.

Apotex had challenged the FDA rule on the basis that it was inconsistent with the D.C. Circuit's holdings in two prior cases.  In those cases, the court found that FDA's rationale for the rule--that the FDA has insufficient resources to inquire into the legal effects of settlements, such as estoppel, that lead to dismissals--was not adequately justified.

Now, however, the D.C. Circuit has upheld FDA's rule--largely because the FDA offered a better justification this time around.  According to the court, "FDA is indisputably correct that equitable estoppel in the patent law context rarely presents pure issues of law amenable to easy resolution.  . . .  We have little doubt that applying this standard would force FDA, an agency lacking patent law expertise, to resolve borderline questions about the estoppel effects of patent-holder declarations."  The court continued:

As FDA sees it, the uncertainty inherent in an estoppel-based inquiry would lead to two inter-related problems, neither of which relates to the drain-on-resources rationale set forth [previously].  First, FDA believes that the uncertainty would "undermine marketplace certainty and interfere with business planning and investment."  And second, FDA worries that forcing it to parse court decisions will invite fruitless litigation from generic drug manufacturers seeking to trigger, or to avoid triggering, exclusivity periods.

The D.C. Circuit concluded:  "In our view, these perfectly reasonable propositions adequately support FDA's position that an estoppel-based approach to the court decision trigger is ill-advised."

Dennis Crouch’s Comment: I asked Aaron to write this short review of the Apotex case for Patently-O.  He has the primary documents and much more detail at his site, the Orange Book Blog.

Inventor's Post-filing Publication Disparaging Invention Leaves Patent Unenforceable

Research Corporation Technologies v. Microsoft (D. Az. 2006).

After a bench trial, Arizona District Court Judge Manual Real of found that RCT’s patents were unenforceable based on inequitable conduct that occurred during prosecution of the patents in suit. And, because it was an “exceptional case,” the judge granted Microsoft’s request for $8 million in attorney fees.

Back in 2001, RCT sued Microsoft for its patents directed to a “blue noise mask” used in halftoning digital images.  The new procedure was touted in the patent application as being “visually pleasing” and lacking “low frequency graininess at every level of gray.”  At the same time the inventors published a paper that reported resulted of “visually annoying clumps” with graininess.  In the paper, the inventors reportedly rejected the claimed algorithm in favor of another technique that was inconsistent with the patent.  That paper was never submitted to the PTO. 

The court found this seemingly contradictory information material because a “reasonable Patent Examiner clearly would have considered [the contradictory information] important to at least the written description and enablement requirement for patentability.”  For intent, the judge found that:

It is not credible that they did not know that a reasonable Examiner would consider it important to know that patent applicants’ reported efforts to practice the applications’ disclosed No K technique had led to “visually annoying clumps,” not the “visually pleasing” images promised by the patent applications and their patent claims.” 

In addition, the inventors were awful on the stand — one was “not credible” and the other “evasive.” Thus, further supporting the finding of intent to mislead the PTO.

According to a release by Microsoft’s attorney John Vandenberg*, the patents previously had been asserted against Hewlett-Packard Company, Seiko Epson Corporation, and Lexmark International, each of whom had settled out of court and taken a license. In awarding Microsoft attorney fees, the Court found it to be an “exceptional case” and that RCT knew or should have known of the inequitable conduct before the Patent Office. 

• RCT Finding of Fact;
• RCT Judgment.

A couple of readers wrote-in to identify Judge Manny Real as a legendary old-school federal judge, and former chief judge in the central district of California. It appears that Judge Real is sitting by designation for this patent case. 

NonInfringement Opinion Discounted By Lack of Disclosure Evidence

Liquid Dynamics v. Vaughan (Fed. Cir. 2006)

In a detailed decision involving technology for pumping sewage, the CAFC affirmed a finding of infringement and willfulness.

An interesting aspect of the case involved the evidence of willful infringement. 

• The CAFC agreed that Vaughan's use of a former LD employee was persuasive evidence in proving copying.
• Vaughan's noninfringement opinion was properly discounted because the attorney was not given all the important evidence.

The case also gave a further analysis of Daubert principles in patent cases.

Biotech: Written Description Does Not Require Recitation Of A Known Structure

Falker-Gunter Falkner v. Inglis (Fed. Cir. 2006, 05–1324)

by Donald Zuhn, PhD

In an appeal from a decision of the PTO Board, the Federal Circuit affirmed judgment for Appellees (Inglis et al.) in an interference involving vaccines comprising modified viral vectors. In particular, the subject matter of the interference concerned vaccines comprising a poxvirus vector having a deleted or inactivated essential gene, wherein the modified poxvirus is capable of producing infectious viral particles when grown in a host cell modified to produce the absent essential viral gene product. In contrast with the vaccines of the invention, traditional vaccines had been prepared by deleting or inactivating inessential genes in the viral vector, since the deletion or inactivation of essential genes made it difficult to produce vaccines in commercial quantities.

On appeal, Appellants (Falkner et al.) reiterated several arguments made before the Board, each concerning the common issue of whether Appellees had adequately described and enabled a poxvirus-based vaccine. Specifically, Appellants argued that because Appellees did not identify any essential poxvirus genes or the inactivation of any such genes, Appellees had not sufficiently described and enabled vaccines comprising a poxvirus vector having a deleted or inactivated essential gene.

With respect to the Board's determination that Appellees had sufficiently described vaccines comprising poxvirus vectors having modified essential genes, the Court noted that there was undisputed testimony before the Board that at the time of filing of Appellees' earliest application, the DNA sequence of the poxvirus genome and the locations of essential poxvirus genes had been disclosed in the scientific literature. Adhering to the well-established rule that "[a] patent need not teach . . . what is well known in the art," the Court held that "there is no per se rule that an adequate written description of an invention that involves a biological macromolecule must contain a recitation of known structure." In affirming the Board's determination that Appellees adequately described the invention, the Court concluded that because "accessible literature sources clearly provided, as of the relevant date, [poxvirus] genes and their nucleotide sequences (here "essential genes"), satisfaction of the written description requirement does not require either the recitation or incorporation by reference (where permitted) of such genes and sequences."

NOTE: This post was written by Donald Zuhn, PhD. Don is a true expert in cutting edge biotech patent law and practices both prosecution and litigation at MBHB LLP in Chicago. (zuhn@mbhb.com).

CAFC "Clarifies" Design Patent Jurisprudence but Denies Rehearing En Banc

Lawman Armor v. Winner Int’l (Fed. Cir. 2006, en banc).

In February 2006, the Federal Circuit decided Lawman Armor in a way that utterly devalued design patents.  The decision appeared to read a design patent would never be enforceable if the patent was simply a novel combination of known elements.  Essentially, the decision held that, for the point of novelty test, multiple prior art references could be combined without any prior suggestion or motivation for doing so.  As noted in the AIPLA’s amicus brief requesting rehearing, if this result were true, there would be very few enforceable design patents because most (if not all) designs are combinations of old forms.

On motion for rehearing and rehearing en banc, the original CAFC panel issued a new opinion intended to “clarify” the original:

In our [original] decision, we did not intend to cast any doubt upon our prior decisions indicating that in appropriate circumstances a combination of design elements itself may constitute a ‘point of novelty.’ Such a combination is a different concept than the overall appearance of a design which, as indicated, our cases have recognized cannot be a point of novelty.

Thus, the result:

• A unique combination of known elements may be a “point of novelty” for design patent infringement analysis; but
• The “overall appearance” of a design cannot serve as such a “point of novelty.”

As one of the attorneys of record pointed out to me in a post-decision conversation, this distinction does not make sense for this case because the Appellant never argued that the point of novelty was simply the “overall appearance.” Rather, the Applicant set forth eight constituent elements and also argued that the combination of those elements was a ninth point of novelty.

Judge Newman, joined by Judges Rader and Gajarsa would have heard the case in an en banc panel. In a dissenting opinion, those judges argue that the overall appearance of a design should be sufficient to constitute patentable novelty:

The patentability of a design is determined on statutory criteria, as for all patents. The protocol called "point of novelty" has often aided the analysis of the application of these criteria to designs, but it is not a different concept from patentability based on the invention -- the design -- as a whole, and has not replaced the statutory provisions. Contrary to the panel's view, the overall appearance of a design can indeed be novel, and can indeed constitute the patentable novelty.

Documents:

• CAFC Original Opinion
• CAFC Clarifying Opinion
• CAFC Order On Rehearing with Newman Dissent
• Lawman Petition For Rehearing
• Nike's Amicus Brief
• ISDA's Amicus Brief

Links:

• Design Patent: Patently-O discussing the petition for rehearing
• Design Patent: Patently-O discussing the CAFC original panel decision
• Welch: Discussing the CAFC original panel decision I
• Welch: Discussing the CAFC original panel decision II
• Welch: Discussing the rehearing decision
• Welch: Discussing the Nike Brief
• Welch: Discussing the IDSA brief

Debate on Obviousness Standard Reaches New Level

KSR International v. Teleflex (On Petition for Certiorari)

Like that little blue engine, KSR’s case continues to move forward despite significant obstacles. Now, the Solicitor General has filed its brief on behalf of the U.S. government supporting KSR’s petition for certiorari.

This case takes a direct assault on the Federal Circuit’s longstanding obviousness jurisprudence that requires some explicit reason as to why one of ordinary skill in the art would have known to combine two or more references to solve a particular problem.  The question presented reads as follows:

Whether a claimed invention can be “obvious,” and therefore unpatentable under 35 U.S.C. 103(a), without proof of some “teaching, suggestion, or motivation” to modify or combine the prior art in the manner claimed.

The statute in question, 35 U.S.C. 103(a) is not so specific.  Rather, the statute requires that a patent be denied if

the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art.

35 U.S.C. 103(a).  The Solicitor General’s brief, filed last week, sees the disjunct between the CAFC rule, Section 103(a), and prior Supreme Court decisions such as Graham.  In a blunt rebuke, the SG argues that “the Federal Circuit’s teaching-suggestion-motivation test extends patent protection to non-innovative combinations of familiar elements.”  Rather, the SG argues for a return to the broad factors outlined in Graham for determining the level of one of ordinary skill in the art: “the scope and content of the prior art, the differences between the prior art and the claims at issue, and the level of ordinary skill in the pertinent art.”

The SG’s support for certiorari is rare in patent cases and is often the most cherished of a petitioner’s amici.

Notes: Of course, most inventions involve “a combination of old elements” where each element is found somewhere in the prior art.  (In re Kahn).  After the teaching-suggestion-motivation test is gone, what standard will a patent examiner use to decide whether a new combination is non-obvious? To be sure, the current test is formalistic and has been both under– and over-inclusive.  However, has anyone proposed a better test — one that can be carried out by the PTO even in light of the high-turnover and young workforce in the agency’s examining corps? A patent attorney e-mailed his fear that a less formal test will give examiner’s permission to make the dreaded “because I say so” conclusory argument.

The EPO also has a rather formalistic approach known as the "problem-solution" test. That test also has its detractors, but is seen by many as a superior approach. In the UK, the “Windsurfing” test takes its name from the case of Windsurfing Int’l v. Tabur Marine. In that case, the court looked to whether, when viewed without knowledge of the alleged invention, the differences between what is known to a “skilled but unimaginative technician” and the alleged invention constitute steps that would have been obvious to the technician or whether they require any degree of invention. The hypothetical technician does not consider the commercial consequences which might follow if the step or process in question were found in practice to achieve or assist the objective which he had in view.

Another e-mail that I received focused on the low-tech nature of this case. 

Like sectional couches with remote controls in the arm rest (recall that nightmare?), the technology [here] is so simple that everyone believes they understand it once it is laid out for them.  The technology most [patent attorneys] deal with on a day to day basis is not this simple - drugs, catalysts, biotechnology, automation, software.  The risk of a result-driven declaration of the law on obviousness is keeping me awake at night.

These comments at least have anecdotal weight — in the recent eBay oral argument, Chief Justice Roberts was heard to quip that even he could have invented invention in question (or at least created the software flow-charts).

Documents:

• Party Briefs
  • KSR’s Petition for Cert (Including the CAFC and District Court decisions in Appx. A & B);
  • Teleflex’s Brief in Opposition
  • KSR Reply Brief (314 KB)
• Amicus Briefs
  • Government in support of petition;
  • 24 Law Professors in support of petition;
  • Progress Freedom Foundation in support of petition;
  • Microsoft, Cisco, Hallmark, et al. in support of petition.

Links:

• Patently-O Discussion of Microsoft’s Amicus Brief
• Patently-O Discussion of the CAFC decision;
• Patently-O Discussion of Law Professors Brief;
• Patently-O Discussion of In re Kahn;

Claim Construction: Similar Terms in Continuation Given Identical Meaning

Advanced Cardio and Guidant v. Medtronic (Fed. Cir. 2006, Nonprecedential).

On summary judgment, the lower court held that Medtronic’s vascular stent patents were not infringed.  On appeal, the CAFC made an interesting point about claim construction — holding that a disclaimer in the file history of a patent applied equally to construction of similar terms in all the family member cases.  The patentee had consciously chosen to use different claim language in later continuation applications —  perhaps to avoid the prior disclaimer.  The CAFC paid this no matter.

Medtronic correctly states that its claims do not all use the [disputed] term "end" to describe the connection. . . Instead, certain claims use "turn" or "curved member." . . .  However, because the specification . . . uses "peaks" and "turns" synonymously, and "turn" and "curved member" are used in the []patent claims synonymously with "end," we find that those claims embody the same "peak" or "end" limitation as the [parent], i.e., the disclaimer from the [parent] patent applies against the [child] patent. Our conclusion is further buttressed by the established rule of claim interpretation that dictates that like terms should be construed consistently across related claims.

According to the Court, Medtronic admitted that the varying claim language should be identically interpreted when it made the statement that the child claims were allowable "for at least the same reasons as the parent application."

Internet Radio: eBay v. MercExchange

The Supreme Court recently turned the injunction pendulum — giving district courts a looser hand to determine whether to issue an injunction.  Intel’s GC Bruce Sewell says this:

There will now be a greater willingness to take cases to trial . . . [since] if you lose a case there is a potential you can compensate the plaintiff in dollars rather than having your whole company shut down

I was recently part of an online radio program discussing the eBay case.  The “Coast-to-Coast” discussion included Rachel Krevans from MoFo and the Legal Talk Network show was hosted by attorneys J. Craig Williams and Robert Ambrogi.

• Coast-to-Coast Show link.
• MP3 download.
• Windows Media stream.
• Craig Williams’ Blog: May it Please the Court.
• Robert Ambrogi’s Blog: LawSites.

Inherent Anticipation at the Supreme Court

SmithKline Beecham v. Apotex (on petition for writ of certiorari)

The Supreme Court is contemplating hearing this case that questions the standards for inherent anticipation of a patent. The drug in question is Paxil, and the case history has more twists than a Hazzard County road. But, the question now before the Court is simple:

Whether a compound that is inevitably produced by the prior art is inherently anticipated by the prior art, and thus not novel under 35 U.S.C. 102.

Another way to focus on the particular question is whether any human recognition of the inherency is required.

Here, Paxil (a PHC hemihydrate) is inevitably produced by a PHC anhydrate, and PHC anhydrate (A.K.A. Ferrosan) was well known before the Paxil patent.

Judge Posner (sitting by designation) determined that Paxil was not inherently anticipated because its inevitable production from Ferrosan was not a “scientific []certainty.” On appeal, the CAFC reversed that particular decision — finding that the patent was inherently anticipated because PHC hemihydrate “inevitably results from production of” PHC anhydrate.

Now, the Solicitor General has provided the government’s views on the case, and supported the CAFC decision:

The court of appeals correctly held that the patent claim is invalid because PHC hemihydrate was inherently anticipated by the prior art that inevitably produced it. . . . a characteristic of a pre-existing product is not patentable even if no one had previously recognized that characteristic.

Because the Gov’t fully supports the CAFC decision, it also recommended against hearing the case.

• Discussion of the original panel opinion: Part I, Part II, Part III, and part IV.
• Discussion of the en banc order and new appellate opinion: Part V, Part VI.
• My premature conclusion: Part VII.
• Solicitor General’s Brief
• Aaron Barkoff’s Orange Book Blog

MedImmune v. Genentech -- Licensee's Right To Challenge Patent Validity (Briefs on the Merits)

MedImmune v. Genentech (Supreme Court 2006).

Earlier this year, the Supreme Court granted MedImmune’s petition for certiorari to determine when a patent licensee can challenge the validity of a patent.  The CAFC has held on a number of occasions that a licensee in good standing has no standing to sue for declaratory judgment because it is not under threat of being sued for patent infringement.  However, this conclusion pushes against the Supreme Court’s 1969 decision in Lear v. Adkins which held that a public policy interest in invalidating bad patents was strong enough to warrant a limitations on a licensee’s ability to give up its right to challenge a patent’s validity. 

The specific question presented is as follows:

Does Article III’s grant of jurisdiction of "all Cases . . . arising under . . . the Laws of the United States," implemented in the "actual controversy" requirement of the Declaratory Judgment Act, 28 U.S.C. § 2201(a), require a patent licensee to refuse to pay royalties and commit material breach of the license agreement before suing to declare the patent invalid, unenforceable or not infringed?

MedImmune’s brief and the first batch of amicus briefs have been filed and are reviewed below.

MedImmune’s Argument is quite simple — neither the Declaratory Judgment Act nor the Constitution exclude patent licensees from the scope of DJ jurisdiction, and such a per se rule is wrong because there are situations where an actual case or controversy exists between the licensee and licensor.  The linchpin of MedImmune’s case is their argument that “apprehension of suit is not a necessary condition [of establishing a concrete legal controversy], and this Court has never suggested such a thing.”

U.S. Government filed its brief and presents a number of interesting arguments. Specifically, the SG argues that the CAFC “has erected an unwarranted obstacle to declaratory relief in patent cases” that “cannot be justified by considerations of patent policy.”

[The CAFC’s] limitation on the availability of declaratory relief cannot be squared with this Court’s cases or with the congressional purposes underlying the Act. As demonstrated by decisions of this Court involving pre-enforcement challenges to statutes, it is sufficient for a declaratory judgment plaintiff to demonstrate a genuine risk of enforcement and a reasonable likelihood that he would engage in the proscribed conduct if the threat were removed. A declaratory judgment plaintiff need not run the risks entailed in actually violating the law in order to make out an “actual controversy.” See, e.g., Steffel v. Thompson, 415 U.S. 452, 459, 475 (1974). Indeed, this Court has already rejected the proposition that a licensee’s ongoing payment of patent royalties negates any justiciable dispute over the validity of the patent. Altvater v. Freeman, 319 U.S. 359 (1943). Yet the Federal Circuit’s insistence on compliance with its two-part test requires a patent licensee to commit a material breach of its license agreement in order to create an “actual controversy.” That result is contrary to the congressional purposes behind the Act, which was adopted to free parties of the requirement that they act at their peril on their own interpretation of their rights before being able to obtain a judicial construction of those rights.

When the Petitioner and Government briefs are examined together, you will see that they have presented a strong attack on the CAFC’s decision, and might just change the face of the licensor-licensee relationship.

Professor Brief (Dratler & Oddi) argue that DJ jurisdiction should extend “up to the constitutional limits. Indeed, it would begin and end with those limits.”  Licensee’s should fall within this standard.

The Generic Pharmaceutical Association discusses the CAFC’s requirement of an “actual controversy” and argues that “Article III controversies arise even when the patentee is not about to commence an action.  This argument is even more focused in the recent briefs in the Apotex v. Pfizer case.

Medtronic discusses the importance of DJ actions in patent cases. The case is especially compelling in areas where dozens of patents are licensed in a single agreement that sweeps together both the good and the bad.

National Resources Defense Counsel is not interested in patent issues, but believes that this case could have some effect on its ability to bring certain environmental litigation.  NRDC presents three requisites of an Article III case or controversy: injury in fact, causation, and redressability.  Here, MedImmune satisfies those requisites because it is paying a license fee under protest, the causation is the allegedly invalid patent, and the redress is to declare the patent invalid.

The Licensing Executive Society (LES) directly addresses Lear v. Adkins, arguing that case “held that licensees could not be precluded from challenging the validity of a licensed patent under the doctrine of licensee estoppel.” However, because of inconsistent application of the Lear doctrine, licensees today have difficulty in known when or even if they can challenge the validity of their licensed patent. “The Court is now in a position to resolve uncertainty in this area by issuing a ruling that clarifies and explains the continuing validity and scope of the Lear doctrine. LES urges the Court to provide such clarity.”

Documents:

• Merits:
• Party Briefs:
• MedImmune Brief
• Amici in Support of Petitioner
• Solicitor General
• Law Professors (Dratler Oddi)
• Generic Pharma Assn
• Medtronic
• NRDC
• Amici in Support of Neither Party
• Licensing Executives Society
• Petitions Stage
• Genentech:
• MedImmune’s Genentech Petition (6509 KB)
• Genentech's opposition to certiori
• MedImmune's Genentec Reply
• Centocor:
• MedImmune’s Centocor Petition
• Centocor’s opposition to certiori
• MedImmune’s Centocor reply

Links:

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

FTC v. Schering Plough -- DOJ Rebuffs FTC in Reverse-Payment Antitrust Litigation

The Federal Trade Commission and Department of Justice have long fought over who should control and enforce antitrust laws within the U.S.  That debate continues . . .

FTC v. Schering-Plough (on petition for certiorari).

In a March 2005 decision, the 11th Circuit Court of Appeals set aside an FTC order that barred Schering-Plough from settling an infringement suit with generic makers regarding the patented blood pressure drug K-Dur.  In the settlement, Schering-Plough made a “reverse payment” to the potential infringers to settle the lawsuit. The FTC had concluded that the settlement was an "unreasonable restraint of trade."  The 11th Circuit, however, disagreed, finding that payment from a patent holder to a generic competitor cannot be the sole basis of a violation of antitrust law (and thus spurring deals totaling billions of dollars). 

In its petition for certiorari, the FTC presents the question:

Whether an agreement between a pharmaceutical patent holder and a would-be generic competitor, in which the patent holder makes a substantial payment to the challenger for the purpose of delaying the challenger’s entry into the market, is an unreasonable restraint of trade.

Before considering the petition, the Court requested the Solicitor General’s views on the case — i.e., the Court asked the DOJ to comment on whether FTC’s case should be heard.  In a response made public today, the Government’s view is that the issues are important, but the FTC has not brought a good case. 

[Reverse payment] settlements may pose a risk of restricting competition in ways that are not justified by a lawful patent, to the detriment of consumers. This case, however, does not present an appropriate opportunity for this Court to determine the proper standards for distinguishing legitimate patent settlements, which further the important goals of encouraging innovation and minimizing unnecessary litigation, from illegitimate settlements that impermissibly restrain trade in violation of the antitrust laws.

The DOJ’s arguments are essentially that: (1) the particular issues were not squarely addressed by the appellate court and (2) there is no circuit split.

As Foley’s Hal Wegner has noted, the Solicitor General’s view is not controlling.  For instance, in the upcoming LabCorp v. Metabolite case, the SG unsuccessfully argued against certiorari.

Solicitor General's brief

FTC Petition for Cert (182 KB)

FTC petition for Rehearing at the 11th Circuit

Schering 11th Circuit Decision.pdf

Patent at issue, No. 4,863,743

PubPat Amicus Brief to the 11th Circuit [pdf]

Patently-O Article I

Patently-O Article II

Patently-O Article III

Patently-O Article IV

I’m sure that we’ll find more information at the Orange Book Blog.

Orange Book Declaratory Judgment Question Goes to Supreme Court

Apotex v. Pfizer (On petition for certiorari).

In 2005, the CAFC decided Teva v. Pfizer and declared that the court does not have declaratory judgment jurisdiction over a case between an ANDA filer and the patent holder unless the patent holder at least threatens suit.  Orange Book listing - on its own– does not create a reasonable apprehension of suit.

Apotex is facing the same situation in the present case.  They filed their ANDA request, Pfizer did not file suit or threaten litigation.  However, Apotex is afraid that as soon as it begins to manufacture the new drug that Pfizer will sue and potential force Apotex to pay “massive patent liability.”

Thus, Apotex has asked the Supreme Court to determine whether declaratory judgment jurisdiction can exist based on this “prospect of massive patent liability that deters generic manufacturers from entering the marketplace.”

The Supreme Court has asked the Solicitor General to present the government’s view on whether declaratory judgment jurisdiction can exist in this situation.  This request by the High Court is seen as a potential stepping stone to grant of Petitioner's request for certiorari.  The FTC made its position clear on this issue in a recent brief in the Tamoxifen Citrate Antitrust Litigation (“Under the panel ruling, pharmaceutical companies are now free to pursue this anticompetitive ploy without fear of antitrust liability.”).

Notes:

• Orange Book Blog has the briefs;
• Joseph Miller’s Notes.

LabCorp v. Metabolite Decision Coming Soon

The eBay case is a major decision, but Justice Kennedy’s concurrence that derides business method patents appears to foreshadow the outcome of the pending appeal of Laboratory Corp. of America (LabCorp) v. Metabolite Laboratories (Supreme Court 2006).

In eBay, the concurrence almost begged lower courts to force compulsory licenses when the asserted patent is a “business method.”

In addition injunctive relief may have different consequences for the burgeoning number of patents over business methods, which were not of much economic and legal significance in earlier times. The potential vagueness and suspect validity of some of these patents may affect the calculus under the four-factor test.

In LabCorp, the High Court will review the question of whether a patent can claim rights to a basic scientific relationship used in medical treatment if the claim is limited to “correlating” test results.  Although the claim in question is a “medical method” it is not far afield from the much maligned “business methods.”

It appears highly likely that Justice Kennedy’s group of four (Justices Kennedy, Stevens, Souter, and Breyer) will stick together in an attempt to invalidate this patent (and potentially many others).  And, they only need one more Justice to have a majority.  On the other hand, as Professor Joseph Miller points out, the loose language of Kennedy’s concurrence might be a sign that they could not get a majority for the LabCorp decision.

I wondered though, as I read eBay, whether it was a sign the Court is not striking down the claim in LabCorp … on the theory that the Kennedy Four in eBay, knowing they had failed to muster a majority in LabCorp, were all the more determined to speak plainly, and a bit sharply, about the problems with the contemporary patent system that make automatic injunctions especially imprudent (assuming, for a moment, the merits of that critique).

Chief Justice Roberts, who led the more conservative concurrence will likely not take part in the decision because of a potential conflict of interest.

 

CAFC Refines Function-Way-Result Test of Infringement

Applied Medical v. U.S. Surgical (Fed. Cir. 2006, 05–1314).

In a dispute over Applied Medical’s patented trocar, the district court granted summary judgment of non-infringement to U.S. Surgical. Specifically, the district court found that the recited means plus function language was not infringed.

A means plus function claim limitation is literally infringed when the relevant structure in the accused device perform the identical function recited in the claim and be identical or equivalent to the corresponding structure in the specification.

Once the relevant structure in the accused device has been identified, a party may prove it is equivalent to the disclosed structure by showing that the two perform the identical function in substantially the same way, with substantially the same result.

This test for infringement is known as the function-way-result test.  And, it was in applying the “way” portion of the test that the lower court erred.

Specifically, the district court looked at the “way” the accused structure operated in general and found that it was different from the “way” described in the specification.  The CAFC found this general approach to be wrong because it essentially imported additional limitations into the claims.

In this step, the inquiry should be restricted to the way in which the structure performs the properly-defined function and should not be influenced by the manner in which the structure performs other, extraneous functions. . . . [T]he district court improperly imported unclaimed functions when analyzing the way in which the disclosed embodiment performed the claimed function.

Summary judgment vacated.

Supreme Court Vacates eBay Injunction

In a landmark unanimous decision, the U.S. Supreme Court has reportedly vacated the appellate court’s decision against eBay — putting an end to the “general rule” that a permanent injunction should follow a finding of infringement of a valid patent.  Rather, the opinion by Justice Clarence Thomas rules that the decision of “whether an injunction should issue” is within the trial court’s discretion. Concurring opinions by Chief Justice John Roberts and Justice Anthony Kennedy.

Background: At the district court, eBay was found to infringe MercExchange’s valid patent. However, the district court refused to issue an injunction to stop the ongoing infringement because MercExchange’s patent was a disfavored type (business method), because MercExchange was willing to provide a license, and because of the contentious nature of the litigation, any injunction would be difficult to enforce.  On appeal, the Federal Circuit (CAFC) reversed, finding that the lower court "did not provide any persuasive reason that this case is sufficiently exceptional to justify the denial of a permanent injunction."  Most controversially, the CAFC concluded with its “general rule that courts will issue permanent injunctions against patent infringement absent exceptional circumstances.”

eBay v. MercExchange ___ U.S. ___, No. 05–131 (2006).

Unanimous Opinion: The decision relies on the traditional “four-factor test” for determining whether to issue a permanent injunction:

A plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. . . . These familiar principles apply with equal force to disputes arising under the Patent Act.

The Court indicated that these factors must be applied on a case by case basis – noting that “traditional equitable principles do not permit such broad classifications.”

The Supreme Court flatly rejected the argument that patentee’s who only license should not qualify for injunctive relief — finding that “[s]uch patent holders may be able to satisfy the traditional four-factor test, and we see no basis for categorically denying them the opportunity to do so. To the extent that the District Court adopted such a categorical rule, then, its analysis cannot be squared with the principles of equity adopted by Congress.”

In its final word, the court emphasized that the “decision whether to grant or deny injunctive relief rests within the equitable discretion of the district courts, and that such discretion must be exercised consistent with traditional principles of equity.”

Roberts, CJ, Scalia, J, and Ginsberg, J, Concurring: Chief Justice Roberts provides a short concurring opinion that appears to caution district court judges in their “discretion.”

[T]here is a difference between exercising equitable discretion pursuant to the established four-factor test and writing on an entirely clean slate. .Discretion is not whim, and limiting discretion according to legal standards helps promote the basic principle of justice that like cases should be decided alike.

 The opinion notes that from “at least the early 19th century, courts have granted injunctive relief upon a finding of infringement in the vast majority of patent cases.”  According to the Chief Justice, this long tradition of injunctive relief should be awarded great weight.

Kennedy, J, Stevens, J, Souter, J, and Breyer, J, Concurring: These four Justices feel that times have changes, and that the tradition of injunctive relief might no longer be so compelling.  The Kennedy opinion is focused primarily on non-manufacturing patent holding companies and business method type patents:

In cases now arising trial courts should bear in mind that in many instances the nature of the patent being enforced and the economic function of the patent holder present considerations quite unlike earlier cases. An industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees. . . . For these firms, an injunction, and the potentially serious sanctions arising from its violation, can be employed as a bargaining tool to charge exorbitant fees to companies that seek to buy licenses to practice the patent. When the patented invention is but a small component of the product the companies seek to produce and the threat of an injunction is employed simply for undue leverage in negotiations, legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest. In addition injunctive relief may have different consequences for the burgeoning number of patents over business methods, which were not of much economic and legal significance in earlier times. The potential vagueness and suspect validity of some of these patents may affect the calculus under the four-factor test.

The equitable discretion over injunctions, granted by the Patent Act, is well suited to allow courts to adapt to the rapid technological and legal developments in the patent system. For these reasons it should be recognized that district courts must determine whether past practice fits the circumstances of the cases before them. With these observations, I join the opinion of the Court.

In the end: The court found problems with both the CAFC decision and the district court decision.  For those concerned about the actual parties (MercExchange and eBay), we’ll have to wait to see a new decision from the lower courts.

Crouch’s off the cuff analysis: I had predicted that the Court would apply equitable principles, but would announce that that injunctions should continue to issue in most cases.  [Prediction].  As it turns out, that decision is found in the Roberts Concurrence, but not in the majority. (Thus, I lost my $1 bet).  I also had not predicted that four Justices (Kennedy, Stevens, Souter, and Breyer) would come out so strongly against injunctions.  This decision may indicate a real shift in Patent Law and the strength of an individual patent.  My general advice to litigators: The injunction is now a big issue — make sure that you focus on evidence of irreparable harm from the beginning — including your cease & desist letter or initial complaint.  My colleague Tom Fairhall correctly points out that this decision adds yet another layer of uncertainty to patent litigation.

Based on this decision, it is now clear that the value of a patent does depend upon the identity of the owner. For instance, an industry competitor will be able to show irreparable injury much more easily than would a university or individual inventor who has no plans to manufacture a product.  Because the industry competitor has a higher likelihood of obtaining an injunction, it should be willing to pay more for the patent.  Interestingly, this valuation gap may spur more licenses and patent transfers.

Notes:

• File Attachment: Opinion.pdf (74 KB)
• File Attachment: Summary.pdf (59 KB)
• File Attachment: Roberts Concur.pdf (61 KB)
• File Attachment: Kennedy Concur.pdf (56 KB)
• Discussion of the Case
• Lee Gesmer’s take
• Always thoughtful Matt Buchanan

Philips v. AWH Takes a Casualty: "interface" construed as "parallel bus interface."

Inpro II v. T-Mobile (Fed. Cir. 2006, 05–1233).

Inpro accused T-Mobile and RIM of infringement of its patent relating to electronic devices having user-operable input means such as a thumb wheel. (Pat. No. 6,523,079). After claim construction, the parties stipulated to summary judgment of noninfringement. 

Inpro’s PDA design includes a thumbwheel controller with a host interface.  The “PDA is designed to run independently by its own [CPU] until it is connected to a host computer.  Upon connection to the host computer, the host CPU takes control and can access the memory and other functional units of the PDA. 

Inpro appealed the construction of the term “host interface.” Interestingly, the specification only discussed the interface as a parallel bus, and actually disparages serial busses. 

The appellate panel agreed the defendants that the term’s definition should be limited to parallel bus interfaces:

The description of a serial connection in the discussion of the expansion bus interface, and the lack of any such description in the discussion of the host interface, reinforce the interpretation of the host interface as requiring a parallel bus interface, for that is the only interface described for that purpose.

The real killer for the plaintiff was that the following line from the patent:

A very important feature of the PDA in an aspect of the present invention is a direct parallel bus interface . . .

Because RIM and T-Mobile use serial ports, they can’t infringe the patent, which is construed to require parallel ports.

Patent Drafting Commentary: This case reinforces the trend of intentional obscurity in patent drafting.  Based on this case and others, patent drafters would do well to ensure that nothing in the patent document is “important,” “essential,” “required,” or the like.  Those terms do help the patent readers better understand your preferred embodiment, but in court they will only limit your claim scope.

Additional views of Judge Newman: Judge Newman wrote the majority opinion, but added a separate addendum on her own. Judge Newman agreed that the court’s construction of “host interface” was dispositive in this case.  However, she argued that the court should have construed all three disputed terms.

I believe we have the obligation to review the construction of the three appealed terms, for the interests of the parties and the public, as well as judicial economy, require final disposition of the issues of claim construction that were decided by the district court, and raised on appeal. This panel's resolution of this infringement action based solely on the construction of "host interface" does not resolve, or render moot, the interpretation of the other disputed terms. . . .

We should review and decide all three of the disputed claim terms that are presented on this appeal, lest our silence leave a cloud of uncertainty on the patent, its scope, and its validity. Our obligation to the system of patent-based innovation requires no less.

 Judge Newman’s view appears to be at odds with Judge Mayer’s recent dissent in Old Town Canoe.

DJ Counterclaims Allow Adjudication of Invalidity Counterclaims Even After Noninfringement Decision

Old Town Canoe v. Confluence Holdings (Fed. Cir. 2006, 05–1123).

Old Town sued Confluence, asserting infringement of its patent covering layered polyethylene canoes. Confluence filed declaratory judgment counterclaims of invalidity and unenforceability.

After a few days of trial, the judge called it quits — first ruling that as a matter of law, the patents were not infringed, and the next day taking further arguments and ruling that the patents were not invalid and not unenforceable.

On appeal, the CAFC majority agreed that the claims were not infringed (based on claim construction) and then bit into the validity analysis.

Enablement: Because the time and temperature settings of the canoe manufacturing process were not disclosed, a jury could find that undue experimentation was required.

Best mode: Best mode requirement only applies to the claimed invention. However, the defendant’s evidence that a preferred mode had not been disclosed to the PTO was enough to overcome the Court’s judgment as a matter of law.

Inequitable Conduct: Without evidence of intent, the patentee’s failure to disclose the best mode is not “material” as a matter of law.

J. Mayer’s Dissent: Dissenting-in-part, Judge Mayer argued that after the district court decided that the defendant did not infringe, the declaratory judgment jurisdiction of the counterclaims vanished.  Those counterclaims became moot.  Thus, the lower court’s decision on validity and enforceability should be vacated.

Practice Strategy: This case is a prime example of why a defendant should include declaratory judgment counterclaims rather than just defenses.  With counterclaims, the plaintiff will need the defendant’s agreement to end the case.

In re EchoStar: Opinion Waiver Does Not Extend To Work Product Never Communicated To The Client

In re EchoStar Communications (Fed. Cir. 2006, order).

In an order on mandamus, the CAFC has vacated a district court’s decision that would require EchoStar’s outside counsel (who provided an infringement opinion) to produce documents that were never communicated to EchoStar.

Before TiVo sued, EchoStar relied on the advice of its in-house counsel in continuing to produce its allegedly infringing product.  After the suit was filed, EchoStar hired Merchant & Gould (M&G), but decided not to rely on the IP Boutique’s advice.  Since EchoStar was relying on advice in defense of a willfulness charge, TiVo asked for any M&G opinions and associated work product.

The district court ordered production of M&G’s infringement opinions as well as “all work product . . . whether or not communicated to EchoStar.”  The non-communicated subject matter, according to the district court, might contain information disclosed to EchoStar — even if the documents themselves were not disclosed.

On appeal, the CAFC (Gajarsa) came to several conclusions:

1. An in-house attorney providing an opinion to executives can be an “opinion of counsel.”  And, relying on that opinion in court will create a waiver of attorney-client privilege. According to the court, “[u]se of in-house counsel may affect the strength of the defense, but it does not affect the legal nature of the advice.”
2. Attorney-Client privilege is distinct from Work-Product protection.  Waiver of one, does not necessarily waive the other.
3. Here, “[w]ork-product waiver extends only so far as to inform the court of the infringer’s state of mind.”
4. Importantly, “work product, which is never communicated to the client, is not discoverable” even after waiver of attorney-client privilege.

[I]f a legal opinion or mental impression was never communicated to the client, then it provides little if any assistance to the court in determining whether the accused knew it was infringing, and any relative value is outweighed by the policies supporting the work-product doctrine.

This case goes a long way in clarifying the scope of waiver, which has been in dispute in essentially every patent case where an opinion is asserted. The court also discusses how redaction should take place and gives rather easy guidlines for determining when a document would fall within the waiver.

Notes:

• Joe Miller’s Comments
• Knorr-Bremse
• Golden Blount

 

Expert Testimony Not Required for Infringement Finding

Kyocera Wireless v. President Electronics and Tony Colida (Fed. Cir. 2006, unpublished).

In a DJ action, Kyocera was awarded summary judgment of noninfringement. On appeal, Colida argued that expert testimony is required for such a summary determination. The CAFC, however, affirmed its prior precedent that expert evidence is “not always necessary to resolve questions of patent infringement.”

While expert evidence may be necessary in cases involving complex technology, this is not such a case, and Mr. Colida does not explain how expert evidence would have been helpful.

Affirmed

Colida has been involved in several other CAFC decisions:

• Mobile Phone Manufacturers Win Design Patent Suits
• District Court's Review of Figures in Design Patent Sufficient for Summary Judgment
• Design Patents: Appeals Court Finds Cell-Phone Infringement Suit to be Frivolous 
  
  

 

Supreme Court Moves Toward Hearing AT&T v. Microsoft Software Export Case

When can a U.S. patent be used to recover damages for infringement occurring abroad? The answer is actually quite often.  Over the past couple of years, plaintiffs have recovered huge damages (or settlements) in U.S. courts for activities that at least partially occurred abroad.  In NTP v. RIM, RIM’s BlackBerry system was considered to be used “in the United States” because the e-mail exchange was being controlled by and for the beneficial use of U.S. customers.  In Eolas v. Microsoft and AT&T v. Microsoft, the Court of Appeals for the Federal Circuit (CAFC) agreed that the transmittal of computer code could create liability under 271(f) a “component” of a patented invention “supplied” from the U.S. In Shell v. Union Carbide the court further clarified that method claims could have components as well — in this case, the component was a compound used in the patented chemical process.  To now, each of these cases have stalled after the CAFC decision when the Supreme Court failed to accept them on petition for certiorari.  The lone remaining case is AT&T v. Microsoft.  In that case, the Supreme Court has asked the U.S. Solicitor General for the views of the U.S. Government before the Court makes its decision on certiorari.  As a historical note, the Supreme Court has not addressed the issue of extraterritorial infringement since the DeepSouth Packing case of 1972, which prompted Congress to pass Section 271(f).

AT&T v. Microsoft (on petition for certiorari).

This issue is huge for Microsoft and for U.S. software developers. Microsoft develops much of its software in the U.S., and ships the code around the world.  In the Eolas case, of the half-billion dollar verdict, $330 million was premised on exported code.

In the AT&T case, the CAFC essentially held that Microsoft’s act of shipping its code to a foreign office constitutes patent infringement and any consequential sales or licensing of the shipped code will create patent infringement damages.

The software here involves enhancing the sound quality of synthesized speech while maintaining a high data compression.

In its petition, Microsoft asks two questions:

1) Whether digital software code – an intangible sequence of “1’s” and “0’s” – may be considered a “component[] of a patented invention” within the meaning of Section 271(f)(1); and, if so

2) Whether copies of such a “component[]” made in a foreign country are “supplie[d] . . . from the United States.”

The petition attempts to show that the CAFC has gone astray by interpreting the statute in a manner “appropriate to the technology at issue” rather than according to its “plain meaning and legislative history” as required by Supreme Court precedent.

The petition also impliedly argues that software itself should not be patentable.  

The decision below is premised on a commonly held misunderstanding of the nature, and thus the patentability, of software.

Noted attorney Ted Olson and his able team (including Matthew McGill) are handling the appeal.

AT&T’s Opposition

AT&T quickly notes that Microsoft has already appealed this identical issue in the Eolas case, and lost there as well. In addition, AT&T discusses Microsoft’s highly public (but yet unsuccessful) lobbying for patent reform in Congress as evidence that this is an issue that has been considered and rejected by the lawmaking body. Of course, AT&T also argues that the lower court decision does nothing to “expand the extraterritorial reach of U.S. patent laws.

Petitioner’s extraterritoriality argument is a red-herring.  Years before . . . the court defined the limits of section 271(f) in order to avoid “the appearance of ‘giving extraterritorial effect to United States patent protection.’”

Waymark (looking only to activity within the U.S. when adjudging infringement).

Amicus in Support of Petitioner by the Software & Information Industry Association (SIIA).

The SIIA is a trade group with over 750 corporate members argued that the CAFC’s new rule upsets settled expectations.

SIIA makes what I see as an important distinction that in Microsoft’s case, the code supplied from the U.S. is not actually incorporated into the infringing products.  Rather, the code shipped abroad, copied, and then the copies are installed in the foreign country.  They argue that the act was never intended to capture millions of infringing acts based on the supply of only a single component.

Next Steps:

The SG is expected to take several months to provide its input, and this case will not be heard until 4th Quarter 2006. It is currently too-late for parties to file amici briefs.  However, the SG will accept input from the public on this important issue.

Documents:

• Microsoft Petition
• AT&T Opposition
• SIIA Amicus Brief
• Microsoft Reply
• AT&T Supplemental Opposition
• Microsoft Supplemental Reply
• Microsoft Appendix
• CAFC Decision
• District Court Decision (Pauley S.D.N.Y.) [Thanks to Arun Chandra at Hogan Hartson for the heads-up].

Links:

• NTP v. Research in Motion, (271(f) “component” does not apply to method claims).
• AT&T v. Microsoft, 414 F.3d 1366 (Fed. Cir. Jul. 13,2005) (271(f) “component” applies to method claims and software being sold abroad);
• Eolas v. Microsoft, 399 F.3d 1325 (Fed. Cir. Mar. 2,2005) (271(f) “component” applies to method claims);
• Pellegrini v. Analog Devices, 375 F.3d 1113 (Fed. Cir. 2004) (271(f) “component” does not cover export of plans/instructions of patented item to be manufactured abroad);
• Bayer v. Housey Pharms, 340 F.3d 1367 (Fed. Cir. 2003) (271(g) “component” does not apply to importation of ‘intangible information’).

Notes:

** 35 U.S.C. 271(f)

(1) Whoever without authority supplies . . . from the United States . . . a substantial portion of the components of a patented invention . . . in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

(2) Whoever without authority supplies . . . from the United States any component of a patented invention that is especially made . . . for use in the invention and not a staple article . . . suitable for substantial noninfringing use. . . , knowing that such component is so made . . . and intending that such component will be combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

CAFC's Jurisdiction Extends to Settlement Disputes Where Settlement References the Patent Act

Parental Guide of Texas v. Thomson (Fed. Cir. 2006).

The most interesting aspect of this case is that the CAFC was willing to decide it.  In a post-settlement dispute over damages, Parental Guide originally appealed to the Fifth Circuit.  On motion, the Fifth Circuit transferred the case to the CAFC because the settlement agreement “expressly refers to the patent statute, 35 U.S.C. § 284.”

Because it was “at least plausible” that a determination of Section 284 would be necessary to decide the case, the appellate panel felt compelled to hear the appeal.

 

Judge Linn Dissent: File Wrapper Should Not Serve as Prior Art

Bruckelmyer v. Ground Heaters (Fed. Cir. 2006).

The majority held that an unpublished patent application that eventually issued as a Canadian patent was a “printed publication” under 35 U.S.C. § 102(b).  Judge Linn dissented:

[T]he text of an issued patent does not generally serve to guide researchers to the file history for a more expansive disclosure of the described invention, and it certainly does not lead researchers to the file history for disclosure of subject matter not described in the issued text. . . . The fact that an additional drawing, disclosing additional structure, is present in the application file is a matter of sheer happenstance nowhere indicated in the issued patent. For this reason, it is my view that, as in Cronyn, the anticipatory drawings at issue in this case are "not accessible to the public because they have not been cataloged or indexed in a meaningful way." . . . In this case, in addition to not being meaningfully indexed, as discussed above, no copies were known to have been made or distributed during the critical period, and the ’119 application was available for viewing only at the Canadian Patent Office in Hull, Quebec.

 

Unpublished Foreign Patent Application Invalidates Later Filed Patent

Bruckelmyer v. Ground Heaters (Fed. Cir. 2006).

Bruckelmyer has two patents on methods of thawing frozen ground so that a layer of concrete can be laid on top of the ground. The trial court found Bruckelmyer's patents obviated by a Canadian patent application and decided the case on summary judgment.

Interestingly, the Canadian patent application included two important figures that were cancelled during prosecution.  Those figures were reportedly required for a finding of obviousness.

On appeal, Bruckelmyer argued that the unpublished Canadian patent application was not a “printed publication” under 35 U.S.C. Section 102(b) and thus, was not prior art.

The CAFC found that the original application was “publicly accessible,” and thus a prior art “printed publication” because the Canadian prosecution file was open to the public more than a year before Bruckelmyer filed his application.

A given reference is "publicly accessible" 

upon a satisfactory showing that such document has been disseminated . . . to the extent that persons interested and ordinarily skilled in the subject matter . . . exercising reasonable diligence, can locate it and recognize and comprehend therefrom the essentials of the claimed invention without need of further research or experimentation.

In re Wyer, 655 F.2d 221, 226 (CCPA 1981).

Here, the Court found that this particular application could be located because the related patent discussed a solution for the same problem addressed by Bruckelmyer's patents.

Thus, the application was found to be prior art even though there was no evidence that it was actually disseminated.

In Lava Trading Dissent, Judge Mayer Laments de Novo Review

Lava Trading v. Sonic Trading Management (Fed. Cir. 2006, 05–1177)

The majority overturned a lower court claim construction, but Judge Mayer dissented:

The decision today is yet another example of the unfortunate consequences of Markman v. Westview Instruments, Inc., 52 F.3d 967 (Fed. Cir. 1995) (en banc), Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448 (Fed. Cir. 1998) (en banc), and Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc), which cemented this court’s jurisprudence with respect to claim construction as being purely a matter of law subject to de novo review. Because claim construction is treated as a matter of law chimerically devoid of underlying factual determinations, there are no "facts" on the record to prevent parties from presenting claim construction one way in the trial court and in an entirely different way in this court. By not dismissing this case, we issue a decision based on an undeveloped record. We set ourselves up to have to decide claim construction again later, which could well differ from the ruling today. Furthermore, allowance of an appeal of the trial court’s perfunctory, offhand ruling from the bench, for all intents and purposes allows an interlocutory appeal of claim construction, which portends chaos in process.

Claims Should be Construed within the Context of the Accused Device

Lava Trading v. Sonic Trading Management (Fed. Cir. 2006, 05–1177)

In today's case of Lava Trading, the CAFC again found that knowledge of the accused product is import for providing "a proper context for an accurate claim construction. . . . Without the vital contextual knowledge of the accused products or processes, this appeal takes on the attributes of something akin to an advisory opinion on the [patent] scope. " 

This decision falls in line with the recent Wilson Sporting Goods case that held “while a claim is not to be construed in light of the accused device, in an infringement case, it must inevitably be construed in context of the accused device.”

After Winning Jury Verdict, RealNetwork Speaks-Out for Patent Reform

RealNetworks last week won their patent case against the Boston company Ethos Technologies. [Article] Ethos had asserted that Real infringed two of Ethos’ patents related to downloading technology.  According to reports, the jury returned a “unanimous verdict finding that Real did not infringe on any of the 10 claims asserted against in the suit, which was filed in 2002 and sought over $200 million in damages. Moreover, the jury invalidated 7 of the 10 claims.”

In a recent interview, I asked Dave Stewart, Real’s VP and Deputy General Counsel, whether this case altered Real’s position on patent reform:  

[Dave Stewart]  Our experience in the Ethos litigation confirms our longstanding position on patent reform.  We believe the patent system is in need of reform to improve both the quality of the patents issued as well as the time it takes to issue a patent.  As a general matter, we have been supportive of most of the Business Software Alliance's patent reform efforts.  One important step in this regard would be to ensure that all fees paid by inventors be specifically designated for use by the USPTO, which is significantly under funded.

Dave’s response is probably representative of many of the leading technology companies — reform is needed to improve quality and reduce pendency.

Constitutionality of Andrew Corp. v. Beverly Mfg.

By Jeff Steck

In a recent district court decision, Andrew Corp. v. Beverly Mfg. Co., (N.D. Ill. Feb. 16, 2006), already summarized in these pages, the court excluded a non-infringement opinion from evidence when opinion counsel—because of a conflict of interest—ought never to have provided the opinion in the first place. (The opining law firm found itself representing both the patentee and the accused infringer.) The case, then, will be tried under the fiction that the accused infringer, Beverly, knew of the relevant patent but failed to obtain legal advice. Beverly, of course, will be at much greater risk of enhanced damages for willful infringement. The court appreciated that Beverly may be guilty of nothing worse than an unfortunate selection of counsel, and it recognized that choosing a remedy was “unpleasant,” but the court did not take into account the possibility that any resulting award of enhanced damages may well be unconstitutional.

Enhanced damages in an infringement action are a form of punitive damages, and the award of punitive damages is subject to substantive Due Process restrictions. State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 417 (2003). Consistent with Due Process, the Supreme Court requires that “punitive damages should only be awarded if the defendant’s culpability, after having paid compensatory damages, is so reprehensible as to warrant the imposition of further sanctions to achieve punishment or deterrence.” Id. at 419. The “reprehensible” actions that permit an award of punitive damages must themselves be tied to the actions that gave rise to liability in the first place:

A defendant’s dissimilar acts, independent from the acts upon which liability was premised, may not serve as the basis for punitive damages. A defendant should be punished for the conduct that harmed the plaintiff, not for being an unsavory individual or business.

538 U.S. at 422-423. It is by no means clear that the actions of Beverly’s counsel—even if they can be imputed to Beverly—were sufficiently reprehensible to warrant what (in a typical patent case) could amount to millions of dollars in enhanced damages. Even if they were, the connection between Beverly’s purported infringement and its counsel’s ethical lapse is tenuous: it would have done little good to the patentee if Beverly had retained different opinion counsel. (To the contrary, if any counsel were going to advice Beverly to cease infringement, one would think that counsel representing the patentee itself would have done so.)

Through little or no fault of its own, Beverly has been deprived of what is traditionally the most important exculpatory evidence on willfulness. The substantive effect of Due Process on enhanced damages for willful infringement is not entirely clear, but it is questionable whether punitive damages can be based on a fictitious reconstruction of an infringer’s state of mind.

Jeffrey Steck is a partner at MBHB and an experienced litigator. He was also an editor of the California Law Review at the University of California at Berkeley, where he received his JD.

Links:

• Patently-O Summary of Andrew Corp. v. Beverly Mfg.
• District Court Decision in Andrew Corp. v. Beverly Mfg.
• David Hricik’s Discussion of the Issues
• Conflicts of Interest in Patent Prosecution

Terminal Disclaimer Does Not Negate Patent Term Extension

King Pharma v. Teva, 78 USPQ2d 1237 (D.N.J. 2006).

In a pharmaceutical patent dispute, Teva argued that Wyeth’s patent on zaleplon drug products (Sonata) had expired because of a terminal disclaimer. Wyeth (and its exclusive licensee King) argued that patent’s term was ongoing because of a Patent Term Extension due to FDA regulatory review delay.

Under 35 U.S.C. 156(a), the term of a patent “shall be extended” after a series of provisions are satisfied.  The district court found the language of the statute unambiguous and gives the court “no discretion.”

Thus, if the enumerated conditions are satisfied, the patentee is entitled to a term extension calculated pursuant to Section 156.

Teva’s motion to dismiss was consequently denied because “a terminally disclaimed patent is eligible for extension under [Section] 156.”

 

Noninfringement Opinions Excluded Based on Attorney Conflict of Interest

Andrew Corp v. Beverly Mfg., (N.D.Ill. 2006, 04–6214:146).

Andrew sued Beverly for willful infringement of Andrew’s cable-hanger patents. Beverly then brought forth three opinion letters written by its counsel in an attempt to avoid the willfulness charge.

The opinion letters provide, for instance that Beverly’s new product “does not fall within the claims of [Andrew’s] patent.”

As it turned out, Beverly’s law firm recently merged — and the merged firm represents both Andrew and Beverly.

On motion to disqualify the opinions, the firm responded that “lawyers who represented Andrew have never discussed any Beverly matter with the [lawyers] who represented Beverly and visa versa.”

District Judge Holderman, however, found a clear conflict:

[The firm’s] attorneys took positions directly adverse to its client Andrew in the [two] opinion letters on behalf of its other client Beverly, without obtaining informed consent from both Andrew and Beverly, in violation of Local Rule 83.51.7 and 83.51.10. These opinion letters advised Beverly that its products did not infringe Andrew’s patents, attacked Andrew’s patents, provided potential litigation arguments and provided a factual basis for a potential defense against future claims by Andrew of willful infringement. [The firm] possessed sufficient information to have determined that its work for Beverly was adverse to its existing client Andrew, that it would affect its relationship with Andrew and that the [firm] as a whole was disqualified under the imputed conflict rule.

Remedy: Because of the conflict, the court determined that the opinions could not, as a matter of law, be competent.  As such, all opinion letters from the firm were excluded from the case.  

Links:

• David Hricik’s Discussion of the Issues

CAFC: Damage Recovery for Infringing Sales Precluded Later Recovery for Infringing Use

Glenayre Electronics v. Jackson (Fed. Cir. 2006, 04–1568).

Jackson won a $12 million jury verdict for infringement.  However, those damages were remitted by the court who found that "the jury’s $12,000,000 damages award reflects a whopping royalty rate of 30%, a rate five times greater than the very highest rate disclosed in any license agreement offered into evidence." Instead, the lower court found that the maximum reasonable royalty would be 6% of sales plus a $250,000 lump-sum payment, and proposed a remittitur to $2.65 million as an alternative to a new trial. Jackson accepted the new award, but also pursued claims against Glenayre for indirect infringement based on activity of its customers. The lower court refused to allow those claims to proceed — finding that Jackson had been fully compensated by the initial verdict.

On appeal, the CAFC found that Jackson could not “double dip.”

Jackson’s theory is that he has an absolute, inviolable right to pursue an additional damages award based on Glenayre’s customers’ use of infringing products sold by Glenayre, even though he has already collected compensation for direct infringement by Glenayre because of the same sales. We disagree.

It is possible that a plaintiff could get separate damages for sales and use.  However, in this case, Jackson had presented evidence of customer use during the original trial, and the CAFC found that those damages were included within the $2.65 million award calculation.

Judge Newman dissents:

The district court, today affirmed by the panel majority, incorrectly held that there cannot be contributory infringement by a direct infringer. From this ruling and its flawed premises, I respectfully dissent. . .

The panel majority departs in major ways from precedent, in holding that, as a matter of law, there is no liability for a manufacturer's contributory infringement, or even for direct infringement by users of an infringing device, when damages have been accepted that are limited to the manufacturer's direct infringement. See Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476 (1964) (Aro II). . .  

The [Supreme] Court (in Birdsell) established that while sales by the patentee or an authorized licensee can trigger the first sale doctrine, the collection of damages for infringement does not. Payment of damages by an infringing manufacturer is not an automatic "implied license" to itself or others to continue the infringement.

 

Personal Jurisdiction over Patent Holder Arises Based on Licensee's Activities

Breckenridge Pharmaceuticals v. Metabolite Labs. (Fed. Cir. 2006, 05–1121).

Metabolite (patent holder) and PamLab (exclusive licensee) sued Breckenridge in Colorado — asking for a TRO stopping Breckenridge from selling its Folbee product, which is similar to PamLab’s FOLTX.  The plaintiffs, however, dismissed their suit after their motion for TRO was denied.  Their next step was to send letters to retailers warning them against selling generic equivalents of FOLTX.  The letters to the retailers not name Breckenridge or threaten a lawsuit, but did include a PamLab brochure.

Breckenridge then sued Metabolite and PamLab in Florida for declaratory judgment of non-infringement and for various torts based on Florida law. 

Metabolite was dismissed from the suit for lack of personal jurisdiction, and summary judgment was granted to PamLab because Metabolite, as patent holder, was an indispensable party.

On appeal, the CAFC agreed with the lower court that Federal Circuit law should be applied to determine whether personal jurisdiction would comport with due process — because even the non-patent issues were “intimately linked to patent law.” 

The panel summarized its licensor due process case law:

In sum, our case law has held as follows: where a defendant has sent cease and desist letters into a forum state that primarily involve a legal dispute unrelated to the patent at issue, such as an injunction obtained for misappropriation of trade secrets, the exercise of personal jurisdiction is improper. Silent Drive, 326 F.3d at 1202. Likewise, a defendant may not be subjected to personal jurisdiction if its only additional activities in the forum state involve unsuccessful attempts to license the patent there. Hildebrand, 279 F.3d at 1356. The same is true where the defendant has successfully licensed the patent in the forum state, even to multiple non-exclusive licensees, but does not, for example, exercise control over the licensees’ sales activities and, instead, has no dealings with those licensees beyond the receipt of royalty income. Red Wing Shoe, 148 F.3d at 1357-58.

In contrast, the defendant is subject to personal jurisdiction in the forum state by virtue of its relationship with its exclusive forum state licensee if the license agreement, for example, requires the defendant-licensor, and grants the licensee the right, to litigate infringement claims. Akro, 45 F.3d at 1546. Finally, the defendant will also be subject to personal jurisdiction in the forum state if the exclusive licensee (or licensee equivalent) with which it has established a relationship is not headquartered in the forum state, but nonetheless conducts business there. Genetic Implant, 123 F.3d at 1457-59.

Thus, the crux of the due process inquiry should focus first on whether the defendant has had contact with parties in the forum state beyond the sending of cease and desist letters or mere attempts to license the patent at issue there. Where a defendant-licensor has a relationship with an exclusive licensee headquartered or doing business in the forum state, the inquiry requires close examination of the license agreement. In particular, our case law requires that the license agreement contemplate a relationship beyond royalty or cross-licensing payment, such as granting both parties the right to litigate infringement cases or granting the licensor the right to exercise control over the licensee’s sales or marketing activities.

Here, the CAFC found that the licensing relationship between Metabolite and PamLab, that PamLab’s sales activities in Florida create are sufficient to give the court jurisdiction over Metabolite.

As such, we hold that, through its relationship with PamLab, which sells products in Florida, Metabolite has purposefully availed itself to the privilege of conducting activities within Florida.

Reversed, vacated, and remanded

Notes:

• Although apparently a different patent, the patent at suit here is related to Metabolite’s method for diagnosing hyperhomocysteinemia.  The validity of that patent is currently being considered by the U.S. Supreme Court in the case of LabCorp v. Metabolite.

Agreed-upon Claim Construction from Settlement Agreement Goes Unchallenged by CAFC

Semitool v. Dynamic Micro (Fed. Cir. 2006).

This case settled originally, but Semitool revived the litigation after Dynamic began selling a new product.  Interestingly, the settlement agreement included a provision for how the patent claims should be construed in any future enforcement proceeding — according to the district court’s claim construction order.

In the revived proceeding, the district court applied its old construction and found the new product noninfringing.  On appeal, the CAFC also applied the agreed upon claim construction — rather than questioning it de novo.

Because it resides inside the processing chamber, the condenser in the Tornado cannot supply a drying gas as construed by the Final Claim Construction order issued by the district court. DMS is entitled to judgment as a matter of law that it does not infringe Semitool’s patents

 

Joint Patent Infringement Occurs When Infringement Results From Participation and Combined Action Of Multiple Parties

On Demand Machine v. Ingram and Amazon.com (Fed. Cir. 2006, 05–1074).

One aspect of this case involves the concept of “joint infringement.”  The district court instructed the jury as follows:

It is not necessary for the acts that constitute infringement to be performed by one person or entity. When infringement results from the participation and combined action(s) of more than one person or entity, they are all joint infringers and jointly liable for patent infringement. Infringement of a patented process or method cannot be avoided by having another perform one step of the process or method. Where the infringement is the result of the participation and combined action(s) of one or more persons or entities, they are joint infringers and are jointly liable for the infringement.

On appeal, the appellate panel found “no flaw in this instruction as a statement of law.”  This raises a number of interesting questions.  Many of these questions will be answered in the Freedom Wireless appeal that is currently being briefed. In that case, the lower court gave the following jury instructions:

if separate companies work together to perform all the steps of a claim of a patent, the companies are jointly responsible, that is, responsible as a group for the infringement of the patent.  Even if no single company performs all the steps of the claim, the companies are jointly responsible.

Based on these instructions, the jury found infringement.  In an unpublished order (Dec 05), the CAFC granted a stay of the injunction because of the questionable theory of joint infringement — noting that the CAFC has not directly addressed addressed the theory of joint infringement and there is relatively no precedent on that issue.

Notes:

• CAFC's Stay of the Freedom Wireless Injunction [PDF]
• Patently-O discussion of this opinion’s preamble interpretation.