Patent Law Blog (Patently-O)

Federal Circuit affirms permanent injunction in face of prior license agreements

Acumed LLC v. Stryker Corp. (Fed. Cir. 2008)

In 2004, Acumed sued Stryker for infringing a patent covering an orthopedic nail used in reconstructing humerus fractures.  After a jury verdict of infringement, the district court ordered a permanent injunction. That pre-eBay ruling was subsequently vacated by the Federal Circuit because the lower court did not specifically consider the traditional four-factor test for injunctive relief. On remand, the district court again granted the permanent injunction.  That permanent injunction is affirmed here on appeal.

In eBay, the Supreme Court held that the traditional four factors of equitable relief must be considered before granting injunctive relief in a patent infringement case.  However, if a district court considers the requisite factors, the Federal Circuit will only vacate if they find an “abuse of discretion.” 

Irreparable Harm and Lack of Remedy at Law: The first two factors of (1) irreparable harm caused by continued infringement and (2) inadequate remedies available at law almost entirely overlap. The court easily considered those factors together. 

Acumed had previously licensed the patents to other manufacturers — perhaps indicating that money could be sufficient to compensate for the infringement. However, the district court distinguished the prior licenses based on the identities of the past licensees and Acumed’s more recent “experience in the market.”  The Federal Circuit found no abuse of discretion — noting that “[a] plaintiff’s past willingness to license its patent is not sufficient per se to establish lack of irreparable harm if a new infringer were licensed.” 

The Jury had awarded lost profit damages, and Acumed suggested that fact indicates that future harms would cause irreparable harm (or at least more than what would be compensated by a reasonable royalty).  On appeal, the Federal Circuit did not dispute (or explicitly affirm) this argument. However the court did note that “[t]he essential attribute of a patent grant is that it provides a right to exclude competitors from infringing the patent.”

Balance of Hardships: For the third factor – balancing the hardships – Stryker argued that its customers (who need their arms fixed) would suffer under an injunction. On appeal, the Federal Circuit rejected that argument as a matter of law — holding that the balancing factor “is only between a plaintiff and a defendant, and thus the effect on customers and patients alleged by Stryker is irrelevant.”  Under this construct of the balancing factor, the patentee will usually win — especially when applying the Windsurfing holding that “One who elects to build a business on a product found to infringe cannot be heard to complain if an injunction against continuing infringement destroys the business so elected.”

Public Interest: The patentee must show that the public interest is “not dissereved by an injunction.”  Here, Stryker argued that the Acumed product was lower quality and that the arm bone repair would lead to increased morbidity. The district court did not find that public health argument persuasive and the Federal Circuit agreed that “the court was within its discretion to conclude that the public interest was not disserved by an injunction.”

Permanent Injunction Affirmed

Notes:

• The Jury found the infringement “willful.” That fact was not discussed in the eBay analysis.
• This case follows the conventional wisdom that the courts will continue to grant permanent injunctions against competitors who infringe.

Federal Circuit Rejects Patent Attorney Expert Testimony; Finds Patent Obvious

Sundance v. Demonte Fabricating (Fed. Cir. 2008)

Sundance sued Demonte for infringing its patent on a retractable truck tarp. A jury found the patent infringed but obvious. In a post-verdict judgment, the Judge vacated the jury's obviousness determination – finding the patent not invalid.

Patent Attorney Expert Testimony: On appeal, the Federal Circuit found that the Michigan district court erred by allowing a patent attorney - Dan Bliss – to testify as an expert witness on the issues of infringement and validity on behalf of Demonte. At least some of his testimony focused on issues "exclusively determined from the perspective of ordinary skill in the art" even though he was not qualified as an expert in the art of tarp-making.

"Mr. Bliss is not "qualified as an expert by knowledge, skill, experience, training, or education" in the pertinent art; we therefore fail to see how he could "assist the trier of fact to understand the evidence or to determine a fact in issue." Fed. R. Evid. 702. …. Admitting testimony from a person such as Mr. Bliss, with no skill in the pertinent art, serves only to cause mischief and confuse the factfinder. Unless a patent lawyer is also a qualified technical expert, his testimony on these kinds of technical issues is improper and thus inadmissible." …. We hold that it is an abuse of discretion to permit a witness to testify as an expert on the issues of noninfringement or invalidity unless that witness is qualified as an expert in the pertinent art. Testimony proffered by a witness lacking the relevant technical expertise fails the standard of admissibility under Fed. R. Evid. 702. Indeed, where an issue calls for consideration of evidence from the perspective of one of ordinary skill in the art, it is contradictory to Rule 702 to allow a witness to testify on the issue who is not qualified as a technical expert in that art. We understand that patent lawyers are often qualified to testify as technical experts, but such a qualification must derive from a lawyer's technical qualifications in the pertinent art.

With Mr. Bliss's testimony excluded, the Federal Circuit was left with no expert testimony supporting the jury's obviousness holding. However, following the Supreme Court's lead in KSR v. Teleflex, the Federal Circuit still felt competent to determine the obviousness on its own. Explaining the appellate court's competence, the opinion noted that the "technology is simple."

Holding: Reversed – Claim 1 is invalid as obvious.

Note:

• Way back when: Peggy Focarino was the primary examiner of the patent at issue. Patent No. 5,026,109.

Federal Circuit Transfers Case Out of Texas (Applying New Fifth Circuit Precedent)

In re TS Tech USA Corp. (Fed. Cir. 2008) (precedential order)

Responding to an interlocutory petition for a writ of mandamus, the Federal Circuit has ordered a patent case transferred from Judge Ward's courtroom in the Eastern District of Texas to the Southern District of Ohio. Both venues were "proper," but the appellate panel found the Ohio venue "far more convenient."

In 2007, Michigan based Lear Corp (not Lear Jets) sued TS Tech for infringing its patent covering a pivotable vehicle headrest. The accused TS headrest assemblies were supplied to Honda and used in the Civic and Accura RDX. TS is a Japanese company, but the defendants are TS's North American subsidiaries headquartered in Ohio and Canada.

In 2008, the Fifth Circuit (TX, LA, MS) decided another venue case on mandamus – finding that cases should be transferred from the Eastern District of Texas when the new venue is "clearly more convenient." In re VW (5^th Cir. 2008) (en banc)(cert petition pending). On mandamus, a lower court's refusal to transfer will only be reversed if it produces a "patently erroneous result."

Here, the lower court erred in its application of 5^th Circuit law in several ways:

• Plaintiff's Choice: The lower court gave too much ("inordinate") weight to the plaintiff's choice of venue.
• Distance from Home: When a defendant is more than 100 miles from home, "inconvenience to witnesses increases in direct relationship to the additional distance to be traveled." Here, all the witnesses are in Michigan, Ohio, and Canada. All of those witnesses "would need to travel approximately 900 more miles to attend trial in Texas than in Ohio."
• Physical Evidence: "Because all of the physical evidence, including the headrests and the documentary evidence, are far more conveniently located near the Ohio venue, the district court erred in not weighing this factor in favor of transfer."
• Public Interest: Texas has no interest in handling this patent dispute since the only relevant connection to the venue is that some vehicles containing the accused headrest assembly were sold in the venue. "None of the companies have an office in the Eastern District of Texas; no identified witnesses reside in the Eastern District of Texas; and no evidence is located within the venue." Thus, the "citizens of the Eastern District of Texas have no more or less of a meaningful connection to this case than any other venue."

Patently erroneous: Although "patentably erroneous" is difficult to define, the Federal Circuit found the errors sufficient to grant the writ. They reasoned that the 5^th Circuit VW case – where mandamus was also granted – was based on essentially identical errors.

Transfer Ordered.

Tags: Venue

Written Description: Single Embodiment Insufficient

This decision is nothing new. Broad claims must either be supported by multiple embodiments or some general principles describing how the single embodiment is applicable to other configurations. Failing that, a broad claim may fail the enablement prong. As seen here, even when enabled, a broad claim without sufficient support will be invalid under the written description requirement.

In re Alonso (Fed. Cir. 2008)

The PTO Board of Appeals (BPAI) rejected claim 92 of Kenneth Alonso's for failing the written description requirement of Section 112. "To satisfy this requirement, the specification must describe the invention in sufficient detail so that one skilled in the art can clearly conclude that the inventor invented the claimed invention as of the filing date sought." (quoting case). In an opinion written by Judge Stearns (D.M.A.) sitting by designation, the Federal Circuit affirmed.

Claim 92 of the Alonso patent application claims a "method of treating neurofibrosarcoma in a human by administering an effective amount" of an idiotypic monoclonal antibody (mAb) secreted in a human-human cell hybridoma.

In his application, Alonso only described the preparation of a single mAb, but claimed essentially all Mab's that bind to neurofibrosarcoma, and the PTO found that a "skilled artisan would reasonably conclude that applicant was clearly not in possession of the claimed genus of compounds. Applicant should direct the claim language toward the only described embodiment (e.g., a mAb produced by hybridoma HB983)."

Standard of Review: The PTO's factual determinations are reviewed for "substantial evidence." Thus, the Federal Circuit will affirm when "a reasonable mind might accept [the evidence] as adequate to support a conclusion." Even if the Federal Circuit might ultimately have seen the facts differently, it will affirm if the PTO's position is reasonable.

Predictability: The Federal Circuit acknowledged that disclosure of a single embodiment can be sufficient for a broader genus claim. However, more disclosure is necessary when the composition and effectiveness of members of the genus is heterogeneous or unpredictable.

We have previously held in a similar context that "a patentee of a biotechnological invention cannot necessarily claim a genus after only describing a limited number of species because there may be unpredictability in the results obtained from species other than those specifically enumerated." Noelle v. Lederman, 355 F.3d 1343, 1350 (Fed. Cir. 2004).

Alonso argued that his single embodiment should be given more weight because he had actually reduced it to practice (unlike the Rochester COX-2 case). The Federal Circuit rejected that argument because Alonso had not provided the necessary predictive information – "nothing about the structure, epitope characterization, binding affinity, specificity, or pharmacological properties common to the large family of antibodies implicated by the method."

Notes:

• The court gives the following justification for the written description requirement: "The requirement 'serves a teaching function, as a quid pro quo in which the public is given meaningful disclosure in exchange for being excluded from practicing the invention for a limited period of time.'" quoting Univ. of Rochester, 358 F.3d 916 (Fed. Cir. 2004) (in turn quoting Enzo Biochem, 323 F.3d 956 (Fed. Cir. 2002)).
• In his 2005 book on Electronic and Software Patents, Steve Lundberg, et al. include the understatement: "The purpose of the written description requirement has been in flux recently."

Professor Collins: In re Bilski: Tangibility Gone “Meta”

By Professor Kevin Emerson Collins (Indiana University Law School – Bloomington) [PDF Version]

In its recently issued en banc majority opinion in In re Bilski, the Federal Circuit articulates a "machine-or-transformation" test for patent-eligible subject matter under § 101 of the Patent Act. Although they are both legitimate questions, this short comment addresses neither whether there is a legitimate statutory basis for this test nor whether Supreme Court precedent should be interpreted so as to mandate (or even support) this test. Rather, it focuses solely on the criteria that the court offers to draw the line between patentable and unpatentable transformations. The Federal Circuit has added a new twist to the tangibility test that has for many years played a role in determining patent-eligibility: the tangibility test has gone "meta." The tangibility of the formal data that is actually transformed by a method of processing information is not relevant to patent-eligibility, but the tangibility of the things that the data is about—the tangibility of the informational content of the data or the things to which the data refers—now appears to be dispositive.

Bilski sets out a disjunctive two-prong "machine-or-transformation" test for patent-eligible subject matter: "A claimed process is surely patent-eligible subject matter under § 101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing." Slip op. at 10. The opinion declines to elaborate on the implications of the particular-machine prong of the test because the applicants conceded that their claim did not satisfy this prong. Id. at 24. It addresses only the transformation prong. It puts forward a conjunctive, two-prong test that must be satisfied for a method to "transform[] a particular article into a different state or thing" and thus to qualify as patent-eligible subject matter. First, the transformation implicated "must be central to the purpose of the claimed process." Id. In other words, it must also "impose meaningful limits on the claim's scope" and not "be insignificant extra-solution activity." Id. Second, the transformation only qualifies as patent-eligible if it transforms a certain type of "article." "[T]he main aspect of the transformation test that requires clarification here is what sorts of things constitute 'articles' such that their transformation is sufficient to impart patent-eligibility under § 101." Id. at 24–25. This is the distinction—the distinction between the "articles" that, if transformed, constitute patent-eligible subject matter and the other "articles" that, if transformed, do not constitute patent-eligible subject matter—on which the opinion elaborates at length, id. at 25–32, and on which this comment focuses.

Most importantly for the point addressed here, the Federal Circuit implies in Bilski that there are two different categories of "electronically-manipulated data," id. at 25, and that the data in each category is a different type of "article" insofar as patent-eligibility is concerned. The data in the first category is an "article" that, if transformed by a method claim, constitutes patent-eligible subject matter, but a method that transforms the data in the second category is not a patent-eligible method.

The first category is comprised of data that represents a "physical object or substance." Id. at 28. For example, citing In re Abele, 684 F.2d 902 (C.C.P.A. 1982), the Federal Circuit stated that a method that transforms data that "clearly represent[s] the physical and tangible objects, namely the structure of bones, organs, and other body tissues" is a patent-eligible method. Slip. op. at 26.

The second category of data seems to have two distinct subsets. The first subset is data that, as claimed, does not represent anything (or, alternatively, that can represent anything). This data is semantically empty; it is a variable without any specified informational content. Bilski again uses Abele—but this time the claims that the court rejected under § 101—as an example. Id. The fact that methods reciting the transformation of this meaningless (or infinitely meaningful) data are not patent-eligible should come as no surprise to those familiar with the history of patent-eligibility in the last several decades: methods that recite the manipulation of variables without semantic meaning are nothing more than methods that recite mathematical algorithms in the abstract.

The second subset of the second category, however, is likely to raise some eyebrows: it contains data that represents something specific or something in particular, but that something represented is itself intangible. Here, the informational content of the data—the thing in the world to which the data refers—is intangible. The Federal Circuit holds that the method at issue in Bilski is not patent-eligible because it "transform[s]" or "manipulat[es]" data representing "public or private legal obligations or relationships, business risks, or other such abstractions," which critically is not data "representative of physical objects or substances." Id. at 28.

The idea that the meaning that the user attributes to the data transformed or manipulated by an information processing method is relevant to patent-eligibility is not a novel feature of the "machine-or-transformation" test announced in Bilski. For example, the "concrete, useful and tangible result" test of State Street Bank required the courts to examine the meaning of the data, variables or "numbers" in the course of determining patent-eligibility. State St. Bank & Trust Co. v. Signature Fin. Group, 149 F.3d 1368, 1373–75 (Fed. Cir. 1998). However, what is new in Bilski is the importance now placed on the physicality of the thing to which the data refers. Thus, the tangibility test has gone "meta": it is no longer the tangibility of jostling electrons that is of concern (as it was in the early days of patents on computer-executed information processing methods), but the tangibility of the stuff represented by those electrons-as-symbols. In the language of semiotics, the tangibility analysis has shifted from a concern about the tangibility of the signifier—the physical configuration of matter that forms a symbol—to a concern about the tangibility of the signified—the informational content of or the thing represented by the symbol.

There is in my opinion much that needs to be said about this move in Bilski that takes the long-standing concern about tangibility in the patent-eligibility analysis "meta," transforming it from a concern about a signifier to a concern about a signified. Here, however, I limit myself to raising two initial, narrow questions.

First, the move raises a normative question: Why should we treat information about tangible things in a manner that is categorically different from the manner in which we treat information about intangible things? Having taken its cue from the Supreme Court, the Federal Circuit clearly wants to prevent patent-eligible method claims from pre-empting mathematical "fundamental principles." Slip op. at 26. However, the most appropriate means to achieve this end would seem to be a focus on the specificity, not the intangibility, of what is meant. Why should the manipulation of data that represents my height (a presumptively physical property of my body) be patentable, yet the manipulation of data that represents my expected longevity (a property that is difficult to classify as a physical one) be unpatentable?

Second, the move raises concerns about administrability. Is data about my expected longevity about something physical, namely my body? If it is, then why isn't the data at issue in Bilski also about something tangible? The data is after all about a property of lumps of coal, namely their expected future rate of consumption or the legal rights that individuals have with respect to them. Or, to formulate the administrability problem in a recursive manner, what about data that is about the structural qualities of electronic signals? To determine whether a method that manipulates such data is patent-eligible, it would seem again to be necessary to confront the tangibility of an electronic signal—the very question that patent doctrine has been trying to render irrelevant for several decades—but this time with the signal as a signified rather than as a signifier.

CLE: How to Draft Software Claims under Bilski

In Bilski, the Federal Circuit laid down the law of subject matter eligibility under Section 101 of the Patent Act. To be patent eligible, a claimed process must either: (1) be tied to a particular machine or apparatus, or (2) transform a particular article into a different state or thing. In all likelihood, claim limitations focused at general machines such as a "computer" will not be considered tying to "particular machine." Bilski did not, however, decide that question – Bilski's claims were admittedly divorced from any particular machine. On the transformation side, the court provided the example from Abele where graphically displaying "X-ray attenuation data produced in a two dimensional field by a computed tomography scanner" was sufficient transformation. Bilski's claims were essentially knocked-out on the new mental steps doctrine – a process where all the claimed steps "may be performed entirely in the human mind is obviously not tied to any machine and does not transform any article into a different state or thing."

Two additional points: Although the Federal Circuits points to the machine-or-transformation test as the sole test for Section 101 patentability, the court approved two ‘corollaries.’  First, field-of-use limitations continue to be “generally insufficient to render an otherwise ineligible process claim patent-eligible.” Second, "insignificant postsolution activity will not transform an unpatentable principle into a patentable process." (quoting Diehr).  Thus, merely reciting a specific machine or particular transformation will not bring a claim into the realm of patentable subject matter unless the recitation is more than mere insignificant postolution or extra-solution activity.

Going forward, I do not believe that these limitations will have a significant impact on a skilled practitioner's ability to patent software innovations. However, I would like community input on how you might properly claim computer software in a way that avoids § 101 rejections?

Patenting Tax Strategies Under Bilski

Except for the few patent holders and Accenture, the tax strategy business community has been largely anti-patent – going so far as to lobby congress to introduce legislation to create a specific exception that would block enforcement of those patents.

In Bilski, the Federal Circuit refused to categorically exclude any particular fields of business or technology from the scope of patent protection. The court specifically mentioned software and business methods as still patentable. Presumably, tax strategies are still patentable as well. The closest the court came to creating an exclusion is for purely 'mental' processes – where each step of the process could be performed in the human mind.

Rather than an approach focusing on specific exclusions, the court applied the machine-or-transformation rule: A process is patent eligible under §101 if "(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state of things." Bilski's claim was not patentable as a mental process. Additionally the Bilski claim failed the machine-or-transformation test because it was (1) not tied to any machine and (2) the alleged transformations in Bilski were not sufficient because they did not transform "physical objects or substances" nor did the transform articles "representative of physical objects or substances." Notably, transformation of "legal obligations or relationships, business risks, or other such abstractions" do not qualify as 'transformations' under the new test. The Federal Circuit left the State Street patent hanging – we know the test used in State Street was wrong, but we don't know whether the claimed invention would be patentable under the new test.

Going forward, tax strategies (and business methods generally) that necessarily need computer assistance will be able to obtain protection by including sufficient recitation of ties to "particular machines." Practically, the links should be tied to particular portions of the computer to ensure that the tied machine is "particular" enough. On the transformation side, it is unclear whether the transformation of money will be considered sufficiently "representative of physical objects or substances."

Links:

• Tax Law Prof
• Linda M. Beale

In re Bilski: Patentable Process Must Either (1) be Tied to a particular machine or (2) Transform a Particular Article

In re Bilski, __ F.3d __ (Fed. Cir. 2008)(en banc)

The Federal Circuit has affirmed the PTO's Board of Patent Appeals (BPAI) finding that Bilski's claimed invention (a method of hedging risks in commodities trading) does not satisfy the patentable subject matter requirements of 35 U.S.C. § 101. In doing so, the nine-member majority opinion (penned by Chief Judge Michel) spelled out the "machine-or-transformation" test as the sole test of subject matter eligibility for a claimed process.

The Supreme Court … has enunciated a definitive test to determine whether a process claim is tailored narrowly enough to encompass only a particular application of a fundamental principle rather than to pre-empt the principle itself. A claimed process is surely patent-eligible under § 101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing. …. Because the applicable test to determine whether a claim is drawn to a patent-eligible process under § 101 is the machine-or-transformation test set forth by the Supreme Court and clarified herein, and Applicants' claim here plainly fails that test, the decision of the Board is AFFIRMED.

State Street Test Is Out: In State Street, the Federal Circuit used the "useful, concrete, and tangible result" of a process as a touchstone for patentability. In Bilski, the en banc panel found the State Street formulation "insufficient to determine whether a claim is patent-eligible under § 101."

[W]e also conclude that the "useful, concrete and tangible result" inquiry is inadequate and reaffirm that the machine-or-transformation test outlined by the Supreme Court is the proper test to apply.

Some Business Methods and Software Are Still In: Still, the court made clear that business methods and Software will still be patentable – if they meet the machine-or-transformation test.

We rejected [a categorical] exclusion in State Street, noting that the so-called "business method exception" was unlawful and that business method claims (and indeed all process claims) are "subject to the same legal requirements for patentability as applied to any other process or method." We reaffirm this conclusion. … [A]lthough invited to do so by several amici, we [also] decline to adopt a broad exclusion over software or any other such category of subject matter beyond the exclusion of claims drawn to fundamental principles set forth by the Supreme Court

To be clear, the machine-or-transformation test is not a physicality test – i.e., a claim can still be patentable even if it does not recite sufficient "physical steps." On the flip-side, "a claim that recites 'physical steps' but neither recites a particular machine or apparatus, nor transforms any article into a different state or thing, is not drawn to patent-eligible subject matter." Here, the court spelled out the specific issue in mind: a claimed process where every step may be performed entirely in the human mind. In that situation, the machine-or-transformation test would lead to unpatentability. "Of course, a claimed process wherein all of the process steps may be performed entirely in the human mind is obviously not tied to any machine and does not transform any article into a different state or thing. As a result, it would not be patent-eligible under § 101."

Along this line, the court also dispelled two rising concerns, noting that that (1) neither novelty nor obviousness have any relevance to the section 101 inquiry, and (2) the fact that an individual claim element is – standing alone – patent ineligible does not render the claim unpatentable because patent eligibility is considered while examining the claim as a whole.

What is a Transformation?: The courts have already developed an understanding of transformation as it relates to the Section 101 inquiry. Here, the Federal Circuit referred to the distinction made in the 1982 Abele case. There, the court distinguished between two of Abele's claims – finding only one patentable. The unpatentable claim recited "a process of graphically displaying variances of data from average values" without specifying "any particular type or nature of data … or from where the data was obtained or what the data represented." The patentable dependent claim identified the "data [as] X-ray attenuation data produced in a two dimensional field by a computed tomography scanner." In retrospect, the Federal Circuit sees the difference between these two claims to be that of transformation. The second claim included sufficiently specific transformation because it changed "raw data into a particular visual depiction of a physical object on a display." Notably, the transformation did not require any underlying physical object. As the court noted later in the opinion, the transformed articles must be "physical objects or substances [or] representative of physical objects or substances."

The Bilski claims themselves were not seen as transforming an article:

Purported transformations or manipulations simply of public or private legal obligations or relationships, business risks, or other such abstractions cannot meet the test because they are not physical objects or substances, and they are not representative of physical objects or substances. Applicants' process at most incorporates only such ineligible transformations. . . . As discussed earlier, the process as claimed encompasses the exchange of only options, which are simply legal rights to purchase some commodity at a given price in a given time period. The claim only refers to "transactions" involving the exchange of these legal rights at a "fixed rate corresponding to a risk position." Thus, claim 1 does not involve the transformation of any physical object or substance, or an electronic signal representative of any physical object or substance.

The principle behind the test is to prevent a patentee from obtaining claims that preempt the use of fundamental principles. That principle reaches back more than 150 years to the Morse case where the inventor was precluded from claiming all uses of electromagnetism to print characters at a distance.

We believe this is faithful to the concern the Supreme Court articulated as the basis for the machine-or-transformation test, namely the prevention of pre-emption of fundamental principles. So long as the claimed process is limited to a practical application of a fundamental principle to transform specific data, and the claim is limited to a visual depiction that represents specific physical objects or substances, there is no danger that the scope of the claim would wholly pre-empt all uses of the principle.

What is a "Particular Machine"?: For software and business methods, the question will remain as to whether a general purpose computer is sufficiently particular to qualify as a "particular machine." "We leave to future cases the elaboration of the precise contours of machine implementation, as well as the answers to particular questions, such as whether or when recitation of a computer suffices to tie a process claim to a particular machine." As Professor Duffy noted in an earlier Patently-O article, the PTO Board of Patent Appeals (BPAI) has already answered this question: "A general purpose computer is not a particular machine, and thus innovative software processes are unpatentable if they are tied only to a general purpose computer." See Ex parte Langemyr (May 28, 2008) and Ex parte Wasynczuk (June 2, 2008). More commonly, the claim may tie the software to computer memory or a processor – is that sufficiently particular? I suspect this fact pattern will arise shortly.

Unpatentability Affirmed

Notes:

• Although three dissenting opinions were filed, Judge Newman is the only judge who found patentable subject matter in Bilski's claim.
• In Dissent, Judge Mayer thought the decision did not go far enough: "Affording patent protection to business methods lacks constitutional and statutory support, serves to hinder rather than promote innovation and usurps that which rightfully belongs in the public domain." Citing work by Professors Dreyfuss and Pollack, Mayer argues that business method patents have the overall effect of stifling innovation by restricting competition.
• In his Dissent, Judge Rader asks the insightful question of why a new test is necessary when settled law already answers the question. Rader would have decided the opinion with one line: "Because Bilski claims merely an abstract idea, this court affirms the Board's rejection." I believe Rader's position is quite defensible. In particular, the majority justifies its need for the test as a way to ensure that we avoid the "preemption of fundamental principles." In the majority construct, the machine-or-transformation test serves as a fairly accurate proxy for preventing preemption. The court does not, however, answer why any proxy is necessary – if the purpose is to exclude overbroad abstract ideas why not simply rely on the current rule preventing patenting of abstract ideas (as well as the law requiring full enablement)?

Concurring opinion by Judge DYK (joined by Judge LINN) attempt to reconcile the history of the patent system with the new rule of patentability.

Reasonable Billing Rates

Matlink v. Home Depot & Lowes (S.D. Cal. 2008)

Matlink sued the big box retailers for infringement of its patent covering a supply re-ordering system. After some discovery "stonewalling," the district court awarded attorney-fees to the defendants for their time wasted on a motion to compel. Here, the attorney fees were calculated based on the rates charged by the defendant's three Southern California Winston & Strawn attorneys:

Partner with 15 years experience	$630 per hour
Associate with 6 years experience	$455 per hour
Associate with 1 year experience	$280 per hour

In awarding fees, the court found these rates "not … excessive in this context."

A similar situation recently arose in Quantronix v. Data Trak (D. Minn 2008). There, the district court looked at the hourly billing rates for several Salt Lake City patent litigators from the Trask Britt firm:

Partner with 15 years experience	$350 per hour
Associate with 3 years experience	$195 per hour
Associate with 2 year experience	$175 per hour

The Quantronix court found these rates reasonable as well. "Considering the experience levels of the individuals on the Quantronix billing statements and the Court's own experience with and knowledge of prevailing rates in this market, the Court finds that the hourly billing rates submitted by Quantronix are reasonable and commensurate with the rates of other attorneys in this area with similar knowledge and practice experience."

When Richmond based attorneys from Troutman Sanders requested attorney fees earlier this year, they used the following rate chart:

Partner with 20 years experience	$350 per hour
Partner with 14 years experience	$350 per hour

Thomas & Betts Power Solutions v. Power Distrib., Inc., (E.D. Va. 2008).

The Florida IP firm of Allen Dyer requested similar rates in AC Direct, Inc. v. Kemp (M.D. Fla. 2008)

Founding partner with 40 years experience	$325 per hour
Attorney with 6 years experience	$190 per hour

The AC Direct court found those rates reasonable. "In the Court's experience, the rates charged by the attorneys and paralegals assigned to this case are within the range of reasonable legal fees for the Orlando, Florida marketplace. Further, the fees are appropriate given the level of skill displayed in this case."

Notes:

• I saw the original report of Matlink in the Docket Navigator; The other cases were found in Westlaw.

Co-Inventors Contribution Must Be “More Than The Exercise of Ordinary Skill”

Oren Tavory v. NTP (Fed. Cir. 2008)(nonprecedential)

In March 2006, RIM settled its patent dispute with NTP for $600 million+. In the wake of that settlement, Tavory filed an inventorship claim against NTP arguing that he was a co-inventor of at least one of the NTP patents. The district court dismissed the case – finding that Tavory did not provide "sufficient independent evidence to corroborate his inventorship allegations." On appeal, the Federal Circuit affirmed in NTP's favor.

Back in the late 1980's and early 1990's Tavory worked with Tom Campana as a computer programmer for Telefind. While there, Tavory developed a computer program to facilitate an e-mail-to-pager system. He was also part of a team that created the pager-to-laptop e-mail system. Telefind ran out of money in 1991 and Tavory left for greener pastures. When Don Stout later filed Campana's patent applications, he appended a copy of the code that Tavory had co-authored. During the RIM trial, Tavory testified for NTP. At that time, he did not claim inventorship.

Correcting Inventorship: An issued patent is presumed to name the correct inventors. Thus, an inventorship challenge must bring "clear and convincing evidence" that the newly surfaced inventor "contributed to the conception of the claimed invention." "Simply reducing to practice that which has been conceived by others is insufficient for co-inventorship." Under the clear and convincing standard, the inventorship challenge "must be corroborated by independent evidence."

Contribution Must Be "More Than The Exercise of Ordinary Skill": Tavory suggested that his contribution was the claimed "interface switch." However, the Federal Circuit rejected that claim because (1) Tavory did not prove that the "interface switch itself was not in the prior art"; and (2) Tavory likewise did not prove that "his alleged contribution to the claimed invention—the interface switch—was the result of anything more than the exercise of ordinary skill in the art." Consequently, "he has failed to establish co-inventorship."

Judge Newman concurred with this result, but would have decided the case on laches (based on the long delay in making the claim) and estoppel (based on Tavory's silence during the NTP trial).

 

Judge Posner on Inequitable Conduct

New Medium (J. Carl Cooper) v. Barco N.V. (N.D. Ill. 2008) (J. Posner)

Sitting by designation, Seventh Circuit Judge Richard Posner recently found New Medium's asserted patent unenforceable due to inequitable conduct during ex parte reexamination of the patents. This case is important as one of the first decisions to consider inequitable conduct in the wake of Star Scientific.

Barco presented two theories of inequitable conduct: (1) that New Medium had misled the PTO by failing to disclose that its expert declarants had been 'retained' and paid; and (2) that inventor/owner Carl Cooper made false statements to the PTO regarding his association with the experts. Judge Posner rejected the first theory, but agreed with the second.

Disclosing Payment to Declarants: All four of New Medium's experts were retained and paid by the company. However, only two of the experts disclosed their relationship to the PTO. Judge Posner found the lack of disclosure to be "not misleading." As a default, the PTO should expect that the patent applicant retained and paid its experts.

"[A]ll expert reports in an ex parte proceeding before the Patent Office are procured by the patent owner or applicant, and it is customary to pay the experts for their time, as was done in this case. There is nothing in the reports of the two experts who didn't say they had been retained to suggest they were charging no fee—no suggestion that they had been moved by altruism or a strong conviction of the rightness of the application to volunteer to submit an expert report gratis."

This pragmatic default rule makes some sense. If the failure to disclose the payment was not misleading, it could not be material to patentability or lead to a finding of inequitable conduct.

False Statements About Cooperation: In his declaration to the PTO, Mr. Cooper stated that he had "never met or talked with any of these experts" before contacting them to submit reports. Judge Posner found that statement "false." Cooper had solicited and paid for a bid from one of the experts (Klughart) seven years prior. (Klughart is also a patent attorney). Judge Posner also found that Cooper and Klughart's testimony about forgetfulness difficult to believe:

"I conclude that Klughart is not neutral and that his forgetfulness may be strategic. . . . Cooper testified that when he submitted his report in August of 2001 he had forgotten his prior dealings with Klughart. I do not believe that testimony. . . . I am also disturbed by the statement in Cooper's brief that 'Mr. Cooper didn't think his past contact with Dr. Klughart was 'material' and that's why he didn't disclose it.' That is an admission that Cooper lied in his declaration, though I imagine it is unintended."

Judge Posner had no problem finding intent to deceive the PTO. The second question then is whether the deception was material to patentability. Several prior opinions have held that failure to disclose relationships can be material. See Ferring v. Barr (Fed. Cir. 2006); Nilssen v. Osram (N.D. Ill. 2006). Here, Judge Posner also found materiality:

"Clearly the fabrication was material. It bore centrally on the credibility of one of the expert reports. . . . Suppose Cooper had explained the circumstances to the patent examiner—that Klughart, a practitioner of modest means and prospects, had submitted to Cooper a $250,000 proposal that Klughart may at the time he prepared his expert report have thought he still had a chance of winning; Cooper had not responded to his proposal and Klughart was unaware that the project had been awarded to someone else. Klughart testified that the $250,000 proposal would have netted him about $200,000—a good deal more than a year's income for him. . . . Had these circumstances been disclosed to the patent examiner in Cooper's declaration, Klughart's report would have been rejected and perhaps the other reports as well, contaminated by the evidence of Cooper's bad judgment in soliciting a report from Klughart."

The question of whether deception was material to patentability is an issue of predictive fiction. Here Judge Posner recognized that the reexamination might have had the same result even with full disclosure. However, he implicitly applied the rules of equity to block New Media from such an argument, Quoting Refac, "an inventor cannot submit a misleading affidavit among a plurality of affidavits and later argue that it was the nonmisleading affidavit that resulted in allowance, thus effectively curing the defective affidavit."

Inequitable conduct: After finding both intent and materiality, the court next determines whether their combined harm is sufficient for a finding of inequitable conduct. Here, Judge Posner found that the intentional submission of false statements tipped the scales.

"The making of a deliberate, material misrepresentation to a patent examiner is extremely serious misconduct because of the ex parte nature of most patent proceedings, including the reexamination proceeding at issue in this case. . . . Because even material misrepresentations made to the Patent Office will usually not be detected, it is necessary to impose a severe sanction for such misrepresentations when they are detected, at least when as in this case they are deliberate. The appropriate sanction will normally be, and in this case I have decided that it should be, the cancellation of the patents."

Claim by Claim: The expert reports focused only on a few claims. Cooper argued that the court should only hold those claims unenforceable. Following precedent, Judge Posner rejected that approach.

"The suggestion is that since the expert reports pertained to only a fraction of the claims in the '780 patent, I should declare unenforceable just those claims. The Federal Circuit has repeatedly ruled that if inequitable conduct is proved, the entire patent is unenforceable and not just the claims affected by that conduct."

Holding: Asserted patents are unenforceable.

Notes:

• Posner also suggested that the PTO take some action in this case – noting that it "might warrant discipline by the Patent Office (Cooper, as a registered patent agent, is subject to such discipline)."
• Hat Tip to David Donoghue for originally noting the case [Link]

BPAI: Under §102(e), Provisional Application Considered Prior Art as of its Filing Date.

Ex parte Yamaguchi (BPAI 2008)(Precedential Opinion)

In prosecution, the Examiner cited the Narayanan reference against a Texas Instruments patent application filed by Yamaguchi. The rejection identified Narayanan as prior art under 35 U.S.C. § 102(e). The issue on appeal to the BPAI was whether the Narayanan reference can be considered 102(e) prior art as of the filing date of its provisional application.

Section 102(e) allows for submarine prior art – these are typically pending US patent applications that, when published or patented, suddenly become prior art as of their filing date. The statute allows that "[a] person shall be entitled to a patent unless . . .the invention was described in . . .a patent granted on an application for patent by another filed in the United States before the invention by the applicant for patent.. . ." 35 U.S.C. § 102(e).

102(e) Provisional: The issue here is whether Narayanan's provisional application can be used in 102(e) analysis. The expanded BPAI panel agreed with the examiner that the 102(e) prior art date does reach-back to the date of provisional filing. This result is based on their analysis of 35 U.S.C. § 111(b). Section 111(b) requires that "provisions of this title relating to applications for patent shall apply to provisional applications for patent."

"Based on this express intent to apply the provisions of Title 35 relating to "applications for patent" to provisional applications (except for four enumerated sections noted in §111(b)(8)), a provisional application can therefore be reasonably considered an "application for patent" within the meaning of §102(e). The plain meaning of these provisions of Title 35 as noted above is outlined in MPEP 2136.03(111) for establishing the critical reference date under §102(e) of a U.S. patent or U.S. application publication that is entitled to the benefit of the filing date of a provisional application under §119(e). Based on the statutory scheme of Title 35, we hold that Appellants have not shown harmful error in the rejections on appeal."

This holding is in tension with the controlling precedent of In re Wertheim, 646 F.2d 527 (CCPA 1981). In Wertheim, the CCPA held that for a continuation-in-part application, the parent's filing date may serve as a §102(e) date, but only if the parent contains full §§120 and 112 support for the disclosure.

In this case the Examiner found that the Narayanan provisional application fully supported the eventual publication – and thus that the 102(e) date for narayanan was the filing date of the provisional. The applicant was unable to disprove these findings and the BPAI affirmed the rejection.

Rethinking the four ‘factors’ of preliminary injunctive relief

Abbott Laboratories v. Sandoz, Inc., (Fed. Cir. 2008)(Newman, J.)

Preliminary injunctions decisions are blessed with their own four-factor equitable test. I like to think of the test as having two required elements (likelihood of success on the merits and potential irreparable harm) and two optional factors (balance of the equities and public interest). A preliminary injunction (PI) will only issue when (1) the first two elements are demonstrated by the patentee and (2) the combined result of all four elements/factors weighs in favor of a PI.

The district court granted a preliminary injunction to Abbott to stop Sandoz from making or selling a generic version of its extended release clarithromycin antibiotic. In 75 pages of split opinion, the Federal Circuit affirmed with Judge Newman writing the majority opinion; Senior Judge Archer signing-on except for the two juicy parts: I and VI; and Judge Gajarsa in vigorous dissent.

The dispute revolves around the meaning of the required PI element of 'likelihood of success on the merits.' To win on this element, the patentee typically needs to provide evidence of infringement of at least one valid claim. Often this element turns on the defendant's rebuttal proof of invalidity. Here, the defendant provided some evidence of potential invalidity, but not conclusive evidence. Thus, while the defendant did raise a substantial question of the vulnerability of the patent, it did not provide any clear and convincing evidence of invalidity.

Judge Gajarsa argued that Federal Circuit precedent requires a PI be denied when substantial questions of validity are raised. This standard is exemplified in the Federal Circuit's recent Erico decision – which found the threshold "substantial question" met by evidence which simply "cast[s] doubt on the validity" of the asserted claims.

Judge Gajarsa: "Under our precedent, the likelihood of success factor is properly analyzed by considering whether the alleged infringer raises a substantial question as to validity."

 

On the other side, Judge Newman argues that a patentee may still be likely to succeed on the merits even when vulnerabilities and substantial invalidity questions are raised by the defense.

Judge Newman: "The question is not whether the patent is vulnerable; the question is who is likely to prevail in the end, considered with equitable factors that relate to whether the status quo should or should not be preserved while the trial is ongoing. The presentation of sufficient evidence to show the likelihood of prevailing on the merits is quite different from the presentation of substantial evidence to show vulnerability. "

Both sides are well supported by conflicting precedent, and this case may well be a good vehicle for an en banc discussion of preliminary injunctive relief.

Anticipation Requires More Than Disclosing All the Elements

Net MoneyIn v. Verisign (Fed. Cir. 2008)

NMI sued Verisign and others for infringing its credit card processing patent. One of NMI's claims was found anticipated by a single prior art reference. That reference taught each element in the invalidated claim. However, there was no single example that taught all the elements together.

On appeal, the Federal Circuit reversed – holding that anticipation takes more than simply locating each element within the four corners of a single document.

In its rebuttal, the appellate panel focused on the concept anticipating the invention. To anticipate, the prior art must teach all the claim elements and the claimed arrangement.

Section 102 embodies the concept of novelty—if a device or process has been previously invented (and disclosed to the public), then it is not new, and therefore the claimed invention is "anticipated" by the prior invention. . . . Because the hallmark of anticipation is prior invention, the prior art reference—in order to anticipate under 35 U.S.C. § 102—must not only disclose all elements of the claim within the four corners of the document, but must also disclose those elements "arranged as in the claim."

Focusing for a moment on arrangement – to anticipate, the reference must teach "all of the limitations arranged or combined in the same way as recited in the claim."

Applying the rule to this case, the appellate panel found that the prior art reference was not anticipating. The reference disclosed two transaction protocols, but neither protocol contained all of the elements combined in the manner claimed. "Thus, although the iKP reference might anticipate a claim directed to either of the two protocols disclosed, it cannot anticipate the system of claim 23. The district court was wrong to conclude otherwise."

Means Plus Function: After claim construction, the district court also found NMI's means-plus-function claims invalid because they lacked any corresponding structure in the specification. On appeal, the Federal Circuit affirmed.

The patent statute allows patentees to draft claims in more generic 'means plus function' language. That language allows a patentee claim various elements based on their function. However, means plus function claims are only valid if the specification describes some structure to carry out the proposed function. According to the courts, this structure requirement is separate from any enablement requirement. Thus, some structure must be provided in the specification even if one skilled in the art would not need that disclosure to make the invention.

Here, NMI claimed a "[a bank computer including] means for generating an authorization indicia" but did not provide any corresponding structure in the specification to perform that structure.

On appeal, NMI incredibly argued that the claim was not a means-plus-function claim. The Federal Circuit disagreed – finding that the claim lacks structure.

Searching for structure in the specification, NMI pointed to its recitation of a "bank computer." Of course that recitation is insufficient.

'To avoid purely functional claiming in cases involving computer-implemented inventions, we have "consistently required that the structure disclosed in the specification be more than simply a general purpose computer or microprocessor." Quoting Aristocrat … Consequently, a means-plus-function claim element for which the only disclosed structure is a general purpose computer is invalid if the specification fails to disclose an algorithm for performing the claimed function.

Holding of MPF claim invalidity affirmed.

Patent Term Adjustments Just Got Longer

Wyeth v. Dudas (D.D.C., Sept. 30, 2008).

35 U.S.C. § 154(a) establishes the patent term at twenty years from the filing date. Section 154(b) introduces various term adjustments due to PTO delay. One of the adjustment provisions broadly works toward a "guarantee of no more than 3-year application pendency." The other primary adjustment provision more narrowly focuses on the timeliness of individual PTO actions – such as providing an office action within 14-months. (These are §154(b)(2) and (b)(1) respectively).

Because some delays may qualify under multiple provisions, the statute also includes a clause to prevent double counting. This double counting statute – §154(b)(2)(A) – is written to ensure that "the period of any adjustment granted under this subsection shall not exceed the actual number of days the issuance of the patent was delayed."

In calculating the adjustment, the PTO calculates the adjustment under the broad rule and separately calculates the adjustment under the narrow rule. Then, to avoid double counting, uses only the adjustment that is greater. Thus, the applicant only gets credit for either the broad rule adjustment or the narrow rule adjustment, whichever is larger.

In this case, Wyeth has successfully challenged the PTO's interpretation. As the court holds, the double-counting problem does not arise when the specific PTO (b)(1) delay occurs before the application has been pending for 3-years.

This case, if it holds on appeal, will potentially add 22-months to the eventual term of the patents awaiting examination in the PTO bottleneck.

Already issued patents: 37 C.F.R. § 1.705(d) provides a two month deadline for reconsidering the PTO's calculations.

Notes:

• MBHB Patent Docs have written a more thorough interpretation of the case. [Patent Docs][Patent Hawk]
• File Attachment: pta.pdf (46 KB)

 

Tags: Patent+Term+Adjustment

Judge Improperly Cut Patentee’s Million Dollar Jury Verdict Without Offering a New Trial

Minks v. Polaris (Fed. Cir. 2008)

Floyd Minks won a jury verdict of $1.3 million based on a judgment of infringement by Polaris. The district court slashed that award by 95% -- finding that Minks was adequately compensated by $27,000 in damages and $117,000 in attorney fees and an extra $27,000 for willfulness. On appeal, the Federal Circuit vacated the reduction in damages based on a procedural issue.

As a safety device, many all-terrain vehicles (ATVs) include a reverse-direction governor to prevent operating the vehicle at high speeds while driving backwards. The Minks patent covers a particular type of electronic governor to accomplish this goal.

Through his company, Minks Engineering, Minks designed the electronic governor for Polaris and also patented the design. Later, Polaris found a cheaper vender with a redesigned governor. At that point, Minks sued for infringement.

After the $1.3 million dollar verdict, the district court granted the Polaris motion for a reduction of the damage award "as a matter of law" under Fed. R. Civ. Pro. 50.

In the appeal, the Federal Circuit agreed that some reduction may be proper. However, the appellate panel held the Seventh Amendment of the US Constitution requires that a new trial on damages as a prerequisite to any reduction.

"The issue before us on appeal is whether the Seventh Amendment required the district court to offer Minks the option of a new trial in lieu of accepting the reduced damages award"

The fact-law distinction found throughout patent law is important because of Seventh Amendment's high regard for factual decisions by a jury. The "reexamination clause" of the Seventh Amendment reads as follows: "no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of common law." Here, the damage amount is a factual inquiry, and the Seventh Amendment has been interpreted to usually require that a district court offer a new trial on damages as an option when considering setting aside an excessive jury award.

The Eleventh Circuit (where this case arose) allows a judge to reduce a jury verdict without offering a new trial in the limited case where the error was a "legal error" as opposed to an error in adjudging a factual issue. Here, however, the error was in the jury's determination of the number of infringing sales, royalty base, and royalty rate – all factual issues.

"A comparison of the Georgia-Pacific factors and the standard of a hypothetical negotiation to the evidence of record in this case makes clear that the district court's reduction of compensatory damages necessarily amounted to an assessment of the sufficiency of the evidence, and as such, the option of a new trial was required."

This case is in tension with Tronzo v. Biomet (Fed. Cir. 2001). In that opinion, the Federal Circuit agreed that a new trial was not necessary even though the district court had reduced compensatory damages from seven million dollars to only five hundred dollars. The distinction may be that in Tronzo, the reduction was a legal issue because the patentee had presented no credible damages evidence. Here Minks presented at least "limited evidence" of damages.

Vacated and remanded for a new trial on damages.

Rethinking the Scope of Prior Art in Obviousness Cases

In Cohesive Technologies, the Federal Circuit issued a reminder that the novelty analysis of 35 U.S.C. §102 is separate and distinct from the nonobviousness analysis of 35 U.S.C. §103(a). The court notes that some prior art evidence – such as inherent elements of a disclosure – used for anticipation argument may not be used in obviousness analyses. That result is in tension with the traditional understanding that § 102 material may be used for §103(a) analysis.

In a recent e-mail, Professor Isaacs (NKU) saw that tension as a reason to for courts to take a fresh look at the text of §103(a). This is especially timely in light of the recent cases such as eBay, KSR, and MedImmune where the Supreme Court had no trouble altering longstanding precedent.

The most glaring problem with the current interpretation of § 103(a) involves post-invention art and secret prior art that are available as §102(b)/§103(a) and §102(e)/ §103(a) references respectively. These two allowances are contrary to the plain language of §103(a) because the statute focuses on what "would have been obvious at the time the invention was made."

35 U.S.C. 103(a) A patent may not be obtained though the invention is not identically disclosed or described as set forth in §102 of this title, 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 to which said subject matter pertains. …

Under a plain reading of §103(a), post-invention references cannot negate patentability because they were not available "at the time the invention was made." Similarly, secret prior art – almost by definition – could not be known by one of ordinary skill in the art – especially under the Supreme Court's new "common sense" approach to obviousness.

Of course, these arguments have been tried before – and failed.

• In re Foster, 343 F.2d 980 (C.C.P.A. 1965) (cert denied) (creating §102(b)/§103(a) prior art)
• Hazeltine Research, Inc. v. Brenner, 382 U.S. 252 (1965) (creating §102(e)/ §103(a) prior art)

Perhaps the time is right for a challenge.

Federal Circuit Agrees to Hear Interlocutory Appeal on Standing

Sky Tech v. SAP (Fed. Cir. 2008 ) (nonprecedential order)

Sky sued SAP in the Eastern District of Texas. SAP argued that Sky lacked standing because a prior assignment of patent rights had not been properly obtained. The district court found standing but gave its approval for an interlocutory appeal – noting that the issue was a close question. At the Federal Circuit, the three-judge panel agreed to hear the case and eventually to determine whether Sky has standing. The Sky patents were purchased by XACP in a foreclosure sale of Ozro's assets – the question will be whether the foreclosure sale was proper even without a written assignment agreement.

Stay pending appeal: SAP had requested a stay pending appeal. The appellate panel refused to rule on that motion – instead noting that "the better course is for the Texas district court to consider that issue in the first instance."

Tags: Standing

CAFC allows Venue Transfer to Texas

In re Volkswagen (Fed. Cir. 2008) (nonprecedential denial of mandamus)

In July 2007, MHL filed a patent infringement suit against VW in the Eastern District of Texas. Hoping to avoid that venue, the automobile company countersued in the Eastern District of Michigan. Although primarily a declaratory judgment action, VW included Michigan state law claims of unfair competition, defamation, trade disparagement, and abuse of process. In a preliminary hearing, the Michigan court declined its powers of supplemental jurisdiction over the state law claims and ordered the case be transferred to Texas. Because the transfer was not a final action, VW had no right to an appeal. Instead, it filed a writ of mandamus.

The Federal Circuit considered the writ, but ultimately declined to exercise authority over the case – finding that VW had not shown the importance of immediately deciding the issue. "A party seeking a writ bears the burden of proving that it has no other means of attaining the relief desired."

In Texas, the 5^th Circuit Court of Appeals just released its en banc opinion in another In re VW case. In that case, the 5^th Circuit held that the E.D. Texas (Marshall) court had unreasonably refused to transfer VW's case to a Northern District court in Dallas. The AIPLA filed a brief in that case, noting that the Eastern District of Texas rarely allows an out-transfer. From the AIPLA brief: "The routine filing of patent infringement complaints in the Eastern District of Texas that have essentially no connection to that district has been encouraged by the seeming reluctance of courts in that district to transfer cases under § 1404(a)." [Link]

In another venue case, Judge Patel of the Northern District of California noted that venue games are "perfectly legitimate"

"It is clear that both parties are attempting to achieve tactical advantage in the choice of a forum (which is a perfectly legitimate goal in an adversarial system of justice)."

In Sorensen v. Phillips, Judge Patel transferred the case to the Southern District of California where a parallel proceeding was already underway (and stayed pending reexamination).

Notes:

• Discussion of 5^th Circuit appeal

 

Tags: Venue, Patent

Anticipated yet Nonobvious

Cohesive Tech v. Water Corp (Fed. Cir. 2008)

Perhaps the most important portion of this case relates to the notion that novelty and nonobviousness are separate and distinct inquiries. And, that a patent may be found anticipated yet nonobvious.

On summary judgment, the district court Cohesive’s HPLC patent might be obvious, but certainly was not anticipated.  Water appealed — arguing that the judgment was logically incorrect if anticipation truly is the “epitome of obviousness.”  On appeal, however, the Federal Circuit confirmed that novelty and obviousness are separate and distinct — one does not necessarily follow the other.

“While it is commonly understood that prior art references that anticipate a claim will usually render that claim obvious, it is not necessarily true that a verdict of nonobviousness forecloses anticipation. The tests for anticipation and obviousness are different.

The court suggested two circumstances where an anticipated claim might still be nonobvious.  First, secondary considerations of nonobviousness may exist that are not relevant in an anticipation claim. Second, although inherent elements apply in an anticipation, inherency is generally not applicable to nonobviousness. 

“[O]bviousness requires analysis of secondary considerations of nonobviousness, while secondary considerations are not an element of a claim of anticipation. And although anticipation can be proven inherently, proof of inherent anticipation is not the same as proof of obviousness.”

The court also gives an example —

“Consider, for example, a claim directed toward a particular alloy of metal. The claimed metal alloy may have all the hallmarks of a nonobvious invention—there was a long felt but resolved need for an alloy with the properties of the claimed alloy, others may have tried and failed to produce such an alloy, and, once disclosed, the claimed alloy may have received high praise and seen commercial success. Nevertheless, there may be a centuries-old alchemy textbook that, while not describing any metal alloys, describes a method that, if practiced precisely, actually produces the claimed alloy. While the prior art alchemy textbook inherently anticipates the claim under § 102, the claim may not be said to be obvious under § 103.”

Judge Mayer dissented — arguing that anticipation is a subset of nonobviousness. “Although a claimed invention can be obvious but not anticipated, it ‘cannot have been anticipated and not have been obvious.’ In re Fracalossi, 681 F.2d 792, 794 (CCPA 1982).”

“The majority’s assertion that a claim can be anticipated but not obvious, flies in the face of a long line of precedent to the contrary. Not surprisingly, it is unable to cite a case remanding to the district court for consideration of anticipation, while at the same time sustaining a determination that claims at issue are not obvious.”

The practical impact of this case:

1. Anticipation still gets to a jury even when the defense has a credible obviousness argument.
2. The Majority’s example might be seen to narrow the scope of documents available for obviousness arguments along a temporal axis. (References from a long time ago shouldn’t be combined with more recent references.)
3. In some ways, the ‘common sense’ approach of KSR encourages this decision. While anticipation may still be a formal construct, obviousness should focus on what really would have been obvious at the time of the invention.
4. Professor Ochoa (Santa Clara) reminded me about the European rule that does not allow “secret” prior art to be used in obviousness (inventive step) analysis.  If the US so modified its rules, perhaps the distinction between obviousness and anticipation would begin to ring true.

Federal Circuit Affirms $46m Default Judgment Against Bodog

1^st Technology v. Rational Ent. and Bodog (Fed. Cir. 2008)

1^st Technology won a default patent infringement judgment against the online gambling company Bodog and the Nevada district court awarded $46 million in damages plus interest. The patentee has been enforcing the judgment by attaching Bodog's US assets – including its domain names and trademark registrations. Without opinion, the Federal Circuit has affirmed that judgment.

On appeal, Bodog argued that it was not properly served notice of the litigation and that the Nevada court lacked personal jurisdiction over the company. 1^st argues that the service (to a Bodog's Costa Rica office) was proper and that by not arriving in court Bodog had waived its personal jurisdiction argument. In addition, plaintiffs cite to a 2005 Forbes article noting how "in 2005, the Bodog entities handled $7.3 billion in online wagers, 95% of which came from the United States, with sales increasing every year. [Bodog's founder] Mr. Ayre pays no United States income tax, and prides himself on the fact that he and the Bodog entities routinely evade United States law."

Links:

• Patently-O: Internet Gamer Loses Millions in Default Patent Judgment.
• Evan Brown: Court enjoins transfer of trademarks associated with domain name booty.
• Cartoon: Calvin Ayre has his own superhero cartoon: Ayre Force.

Prior Art Must Enable a Skilled Artisan to Make the Invention without Undue Experimentation

Impax Labs v. Aventis Pharmaceuticals (Fed. Cir. 2008)

This appeal focuses on the question of when a prior art disclosure is sufficiently enabled.

An Aventis patent covers the use of RILUTEK (riluzole) to treat ALS. Impax filed an ANDA with the FDA (seeking to market a generic version of the drug). In subsequent litigation, Impax also alleged, inter alia, that the listed patent should be held invalid. In particular, Impax argued that an earlier Aventis patent (the '940 patent) anticipates the asserted Aventis patent (the '814 patent) by suggesting a class of compounds may be used to treat ALS. The district court, however found that the '940 patent "does not enable a person of ordinary skill in the art to treat ALS with riluzole and therefore does not anticipate claims 1-5 of the '814 patent."

Burden particularly heavy: A defendant who hopes to use previously considered art to invalidate a patent has a "particularly heavy" burden.

Thus, a party challenging patent validity has the burden to prove its case with clear and convincing evidence. When the examiner considered the asserted prior art and basis for the validity challenge during patent prosecution, that burden becomes particularly heavy. See Hewlett-Packard Co. v. Bausch & Lomb Inc., 909 F.2d 1464, 1467 (Fed. Cir. 1990).

In this case, the '940 patent had been considered by the examiner during prosecution of the asserted patent.

Enabled Prior Art: To anticipate, the prior art must be enabling – i.e., it must "enable one of ordinary skill in the art to make the invention without undue experimentation."  This enablement standard is different from the applicant's 112 enablement requirement which requires enablement of both making and using the invention.  That distinction becomes lost in cases like this, however, where the patent covers a method of treatment.  Here, the Federal Circuit appears to require anticipatory prior art to enable practicing the claimed method.

Enablement of prior art is a question of law, but is based on underlying factual findings. In close cases, the important factual finding is the amount of experimentation that would have been necessary. Applying Wands factors, the Federal Circuit agreed that the prior reference was not enabling.

As shown by the trial court, the [prior art] '940 patent's dosage guidelines are broad and general without sufficient direction or guidance to prescribe a treatment regimen. The alleged prior art also contains no working examples. Finally, nothing in the '940 patent would have led one of skill in the art to identify riluzole as a treatment for ALS. In sum, each component of the claimed invention—identifying riluzole as a treatment for ALS and devising dosage parameters—would require undue experimentation based on the teachings of the '940 patent.

Burden of Proving Enabled Prior Art: In judging anticipation, courts generally presume that prior art is enabled. That presumption may be overcome by a patentee by providing "persuasive evidence" of nonenablement. At that point, the ultimate burden of proof (with clear and convincing evidence) lies with the accused infringer. In this case, the district court did not explicitly follow this burden shifting framework. On appeal, the Federal Circuit held that articulation of the rule was not necessary. The burden was properly shifted because Aventis presented "sufficient evidence to overcome the presumption of enablement."

Holding: Affirmed. Validity challenge defeated because prior art was not enabled.

Notes:

• The opinion did not focus on timing: As technology develops more and more prior art references become enabled. Thus, it is important to consider at what point in time the reference must be enabling.

Disclosure: My former colleagues at MBHB represent Aventis in this case. The district court case was ongoing while I was there.

No Personal Jurisdiction for Patent Case Against Sprint Nextel

Datascape v. Sprint Nextel (N.D. GA, 2008)

Datascape sued Sprint Nextel for infringement of its patents covering a system for linking non-standard devices to an open network.

In an interesting holding, the Federal district court in Georgia held it lacks personal jurisdiction over Sprint Nextel. It turns out that – despite indications from its website – Sprint Nextel is simply a holding company that holds stock in operating companies.

Based on the evidence presented in this case, the Court is unable to find that Sprint Nextel has contacts with the State of Georgia sufficient to confer either general or specific jurisdiction over Sprint Nextel. Moreover, as to the analysis for specific jurisdiction, in particular, the Court is unable to find, as required by Supreme Court and Federal Circuit law, that Sprint Nextel purposefully directed its activities at the State of Georgia or that the assertion of personal jurisdiction would be reasonable and fair. operating activity of Sprint Nextel, according to Mr. Andreasen, is a telephone refurbishing business in Kansas. Sprint Nextel denies manufacturing, using, selling, importing, and/or offering for sale products or services related to wireless products

Shaping Nuanced Patent Injunctions: Broadcom v. Qualcomm

Broadcom v. Qualcomm (Fed. Cir. 2008) [Part II]

On appeal, the Federal Circuit affirmed the permanent injunction against Qualcomm – finding that the district court acted within its equitable discretion and properly followed the injunctive relief guidelines set forth by the Supreme Court in eBay v. MercExchange (2006).

Although recognizing the importance of its eventual decision, the Federal Circuit again refrained from determining whether a finding that a patent has been infringed should serve as presumptive evidence of irreparable harm.

"It remains an open question 'whether there remains a rebuttable presumption of irreparable harm following eBay.'" Quoting Amado (Fed. Cir. 2008)

Irreparable Harm: The patentee Broadcom is a non-practicing entity in the sense that it does not make or sell the invention claimed in the asserted patents. The patentee does, however, compete indirectly with Qualcomm by making an alternative chipset. Here, the Federal Circuit agreed that eBay does not allow a general rule that would prevent a non-practicing from obtaining injunctive relief and that in this Broadcom had been able to show the potential for irreparable harm.

"Broadcom provided evidence of irreparable harm, despite the fact that it does not currently practice the claimed inventions. This result is consistent with eBay, in which the Supreme Court cautioned that 'traditional equitable principles do not permit such broad classifications' as presuming that a patentee cannot establish irreparable harm based on a patentee's 'willingness to license its patents' or 'its commercial activity in practicing the patents.'"

Adequate Remedy at Law: Broadcom had licensed its patents Verizon. A license can theoretically show that monetary damages are adequate. However, the particular market situation is important for that determination. In this case the Verizon license is a vertical license while a license to Qualcomm would be a horizontal license. Thus, the court agreed that "the Verizon license has little bearing on the effect of a compulsory license to a direct competitor."

Hardships and Public Interest: The district court created the injunction order with a "sunset provision." Under the plan, Qualcomm may continue infringing for twenty-months while paying a compulsory license rate. At the end of those twenty months, the company will be enjoined from further infringement. The delayed nature of the injunction consequently removed any notion that the a balance of hardships or the public interest would favor the adjudged infringer because it gives plenty of time to redesign and redeploy to customers without any interruption of service.

This decision is insightful in how it moves the proper focus from whether an injunction should issue to the more nuanced issues of how to shape the injunction in a way that best serves the public interest while still protecting property rights. One problem with complex injunctions and ongoing compulsory licenses is that the district court must continue to monitor and make judgments on the situation. In this case the district court recently found Qualcomm in contempt for failing to pay its ongoing royalties of more than $93 million. As a sanction, the court ordered Qualcomm to pay gross profits – noting that "[w]hile an award of gross profit may overcompensate … it will do so in an amount which bears a direct relationship to the degree of infringement. The more that were sold, the greater the award."

Notes:

Read more about the case here.

“Indefiniteness is a Matter of Claim Construction”

Praxair v. ATMI (Fed. Cir. 2008)

Praxair's patents cover pressurized storage containers for potentially hazardous gasses. The patents teach safety mechanisms to help prevent accidental rapid discharge. Of the three patents asserted against ATMI, the Delaware district court found two unenforceable due to inequitable conduct during prosecution. The asserted claims of the third patent were held invalid as indefinite under 35 U.S.C. §112¶2. On appeal, the Federal Circuit reversed-in-part.

Inequitable Conduct: Each patent applicant has a duty to act with "candor, good faith, and honesty" when prosecuting patent applications. Material breach of this duty can result in any resulting patents being held unenforceable due to inequitable conduct. Proof of inequitable conduct has been divided into two parts – requiring "clear and convincing evidence that the applicant (1) made an affirmative misrepresentation of material fact, failed to disclose material information, or submitted false material information, and (2) intended to deceive the [PTO]." Quoting Cargill v. Canbra Foods, Ltd., 476 F.3d 1359 (Fed. Cir. 2007).

Direct evidence is rarely available to prove intent to deceive the PTO when the patent applicant is accused of withholding material information. Rather, the intent element is typically inferred by the proof that the material withheld was highly material; that the applicant knew (or should have known) of the materiality; and that the applicant has no credible excuse for withholding information.

Highly Material Based on Statements in Prosecution: Looking at Praxair's '115 patent, the court did not see the withheld prior art as highly material on its own. However, the reference became highly material based on Praxair's statements during prosecution. Specifically, the reference became highly material when Praxair told the PTO that the prior art does not teach the elements found in the withheld art. Testimony of the inventors proved that they knew that those elements were, in fact, in the prior art.

Because those same prosecution statements were not submitted during prosecution of Praxair's '609 patent, the Federal Circuit held that the withheld references could not be considered highly materiality.

"At the time the four statements discussed were made during the prosecution of the '115 patent, there had already been a notice of allowability indicating that all claims of the '609 patent would be issued. ATMI has not established, or even asserted, that the statements in the prosecution of the '115 patent somehow infected the prosecution of the '609 patent. Absent the four statements, the district court did not make any finding of intent with respect to the withholding of RFO art during the prosecution of the '609 patent."

Thus, the Federal Circuit affirmed the unenforceability holding as to the '115 patent, but reversed as to the '609 patent. On remand, the lower court will reconsider infringement of the '609 patent based on a claim construction error.

Indefinite Claims:

"Indefiniteness is a matter of claim construction, and the same principles that generally govern claim construction are applicable to determining whether allegedly indefinite claim language is subject to construction. Datamize, LLC v. Plumtree Software, Inc., 417 F.3d 1342, 1348 (Fed. Cir. 2005). Indefiniteness, like claim construction, is a question of law, and we review a district court's entry of summary judgment on the issue of indefiniteness de novo."

Claims are generally only found indefinite if they are "insolubly ambiguous, and no narrowing construction can properly be adopted." Here, the district court found the claim term "port body" of the third patent to be indefinite because it was "not described, labeled, or coherently discussed in the patent." On appeal, however, the Federal Circuit reversed that finding – holding instead that the patent's specification was adequate although not eloquent.

"Although the discussion of the port body in the '895 patent's specification may not be a model of clarity, the specification adequately explains that the port body is a housing that sealingly engages the outlet of the cylinder and defines the fluid discharge path."

Extrinsic evidence: As with claim construction, the use of extrinsic evidence in determining definiteness is only secondary if applicable at all. In this case, the patentee's expert was unable to point to any specific portion of the structure that could be considered the "port body." On appeal, the Federal Circuit rejected that factual element as lacking impact on the legal question of indefiniteness.

"Even if we were to agree that Dr. Fronczak was unable to reach a single consistent construction of the port body, such extrinsic evidence would not prove the '895 patent invalid, since indefiniteness is a legal rather than a factual question."

Indefiniteness holding reversed.

Dissenting in part, Judge Lourie saw no inequitable conduct with either patent. In particular, Judge Lourie noted that the evidence of intent to deceive the PTO was quite weak.

"While a smoking gun may not be needed to show an intent to deceive, more is needed than materiality of a reference. The district court did not find anything further here. In addition, the court did not engage in any balancing of materiality and intent as is required by our precedent."

Tafas v. Dudas: Appellate Briefs

Tafas v. Dudas (pending before the Federal Circuit)

GSK and Tafas have filed their appellee briefs in the landmark battle over whether the US Patent Office has the power to implement limitations on continuation applications or the number of claims requested in each application.

"The Final Rules [spurn the limits set by Congress] by, among other things, limiting the number of continuing applications, requests for continued examination ("RCEs"), and claims that an applicant may file. In issuing these rules, the PTO makes an unprecedented and unlawful grab for power that threatens both incentives to innovate as well as the authority of this Court, the Supreme Court, and Congress. Indeed, by enacting the Final Rules, the PTO attempts to grant itself the authority to do exactly what this Court and its predecessor court have repeatedly told the PTO it lacks the power to do."

Document:

• File Attachment: GSK.FedCir.pdf (482 KB)
• File Attachment: tafasbrf.pdf (6191 KB)

Combining References in Novelty; Slack in New Matter; No Decision on Injunction for NPE

CSIRO v. Buffalo Technology (Fed. Cir. 2008)

CSIRO is a nonpractising patent holder. It is also an arm of the Australian government. After winning an infringement suit against Buffalo Tech, CSIRO was awarded permanent injunctive relief to protect its spread spectrum WLAN technology.

On appeal, more than a half-dozen amici filed briefs arguing for and against injunctive relief in this situation. On appeal, however, the Federal Circuit vacated the infringement holding – leaving the discussion of injunctive relief for another day. The vacatur came from the district court’s pre-KSR strict requirement for a motivation to combine references.

Combining References For Novelty: On novelty, Buffalo asked the court to combine two references in its analysis because one of the reference cites the other in a footnote. The Federal Circuit rejected that argument — finding that the footnote discussion was insufficient to concatenate the two references. “In particular, the reference to Bingham does not ‘identify with detailed particularity what specific material it incorporates and clearly indicate where that material is found in the various documents.’ Advanced Display Systems, (Fed. Cir. 2000).”

New Matter: 35 USC 132 bars an applicant from presenting new matter once a patent application has been filed.  In litigation, the written description requirement of Section 112 serves as the basis for invalidating patents with added new matter.  The new matter limitation is not strict. Rather, when the claims are amended, the patent will only be invalidated if the original specification is not “sufficient to allow persons of ordinary skill in the art to recognize that the inventor invented the subject matter that is claimed in the asserted claims.”  Further, the PTO’s decision to allow an amendment provides a patent with “an especially weighty presumption of correctness.”

Here, CSIRO changed its claim limitation from “frequencies in excess of 10 GHz” to simply “radio frequencies.”  On appeal, the Federal Circuit affirmed the lower court’s factual finding that the amendment did not impermissibly add new matter. (No clear error). In particular, neither party suggested a technical distinction between handling lower frequencies. Further, the court found that the original specification was not limited to frequencies in excess of 10 GHz.

On remand, the lower court will reevaluate obviousness.

Federal Circuit Affirms that Lucent’s $1.5B Patent Victory is Gone

Lucent v. Gateway, Dell, & Microsoft (Fed. Cir. 2008)

Lucent's two patents cover a compression method for MP3 digital audio files. The case originally resulted in a $1.5 billion jury award for Lucent. The district court, however set aside the jury verdict. That decision is affirmed here on appeal. Lucent's problems stem from (1) joint ownership of its '080 patent and (2) failure to provide even one specific instance when the Microsoft's encoder actually infringed the '457 patent.

"Lucent has failed to provide sufficient evidence to establish that the High Quality encoder actually runs on Windows Media Player and thus it would be too speculative to conclude that Windows Media Player necessarily infringes the '457 patent."

This case provides important lessons for both inventorship and proving infringement. More to come.

Federal Circuit: Failure to Obtain Non-Infringement Opinion May Serve As Evidence of Intent to Induce Infringement

Broadcom v. Qualcomm (Fed. Cir. 2008)

A California jury found Qualcomm liable for infringing or inducing infringement of three Broadcom patents covering 3G mobile phone technology. (US Pat. Nos. 6,847,686, 5,657,317, and 6,389,010). On appeal, the Federal Circuit has invalidated one of the patents, but left the judgment and injunction standing.

Seagate and Inducement: Like willfulness, inducing infringement requires proof of culpability. In Seagate, the Federal Circuit altered the standard for willful infringement – making it more difficult for a patentee to obtain treble damages. Consequently, in the willfulness context, there is no longer an "affirmative duty of due care" to avoid infringement. Here, Qualcomm argued (unsuccessfully) that the evidence available to prove inducement should be changed as well.

More generally, the defendant argued that it could not be liable for inducement if it was not liable for willfulness because the specific intent standard for inducement is greater than the recklessness associated with willful infringement. On appeal, the Federal Circuit rejected these arguments – finding the inducement standards unchanged and finding that inducement may be found even when willfulness is absent. The crux of the holding may be that the "specific intent" requirement of inducement is not so specific. Under the leading inducement case DSU v. JMS, proof of inducing infringement requires evidence that the accused "intended to cause the acts that constitute the direct infringement," and that the accused "kn[ew] or should have known [that] its action would cause the direct infringement."

The evidentiary argument was whether – for its inducement decision – the jury could consider Qualcomm's decision to seek advice of counsel as circumstantial evidence of intent. The appellate panel saw such evidence as fair game.

"Because opinion-of-counsel evidence, along with other factors, may reflect whether the accused infringer "knew or should have known" that its actions would cause another to directly infringe, we hold that such evidence remains relevant to the second prong of the intent analysis. Moreover, we disagree with Qualcomm's argument and further hold that the failure to procure such an opinion may be probative of intent in this context. It would be manifestly unfair to allow opinion-of-counsel evidence to serve an exculpatory function, as was the case in DSU itself, see 471 F.3d at 1307, and yet not permit patentees to identify failures to procure such advice as circumstantial evidence of intent to infringe. Accordingly, we find no legal error in the district court's jury instructions as they relate to inducement."

Too Broad: Prosecutors are typically careful to ensure that claims will be given a broad interpretation during litigation. If the claim is too broad, however, it will likely be found invalid. Here, Broadcom's '686 patent digital video signal processor. The district court found that a 'global controller' was required for operation of the processor, but the Federal Circuit could not find that limitation in the claims or any justification from the specification. Without that limitation, the claim was invalid as anticipated.

Broadcom's argument for a narrow interpretation was based on its discussion of prior art admissions in the specification – arguing that its admitted prior art would invalidate a broad claim. The Federal Circuit did not reject that contention per se. Rather, the court rejected Broadcom's version because the company had failed to show that its admitted prior art would actually anticipate the broad claim. "Because Broadcom has not demonstrated that "every limitation" of claim 1 is found in this reference, its self-invalidating argument must fail."

Late Claim Construction: Claim construction can happen at any stage of a case. Here, however, Qualcomm did not request a construction of the "network" term found in the '317 patent until after the jury had returned its verdict. On appeal, the Federal Circuit agreed with the lower court that Qualcomm had waived its right to demand construction of that term. "We agree that Qualcomm cannot be allowed to create a new claim construction dispute following the close of the jury trial."

'Qualcomm's eleventh-hour attempt to litigate a newly minted claim construction controversy falls squarely within our holding in Eli Lilly & Company v. Aradigm Corporation, where a party "never requested that the district court construe any terms in [the relevant claim] and never offered a construction of [that claim]," but rather "[o]nly after the presentation of all of the evidence to the jury . . . even suggest[ed] that claim construction might be helpful to determine the proper scope of the claimed invention." 376 F.3d 1352, 1360 (Fed. Cir. 2004).'

Injunctions: District courts issue injunctions while sitting 'in equity.' This typically gives the court discretionary power to shape and craft relief in a way that best achieves the right result. Here, the district court pushed enforcement of the injunction back to January 31, 2009. In the meantime, Qualcomm pays mandatory damages and Broadcom has now power to stop continued infringement in this period.

In the appeal, Broadcom argued that, under eBay, no permanent injunction should be awarded. In particular, Qualcomm had licensed its patents to Verizon for money – indicating that monetary relief is adequate and because the injunction will disrupt (non-Verizon) CDMA carriers (hardship) and will also be tough on the public. On appeal, the appellate panel rejected those arguments and instead found that the district court acted within its proper discretion by issuing the injunction order. (more to come on injunction order)

Notes:

• In the parallel Broadcom v. ITC, last week the Federal Circuit vacated the ITC's non-infringement finding of another Broadcom patent. The ITC will reconsider that issue.

A third parallel case, Kyocera v. ITC, is pending appeal at the Federal Circuit. In that case, the cell phone companies are appealing the ITC's exclusion order regarding yet another Broadcom patent.

En Banc Federal Circuit Revives Design Patent Law

Egyptian Goddess v. Swisa (Fed. Cir 2008, en banc)

In a rare unanimous en banc opinion, the Court of Appeals for the Federal Circuit has revived the value of design patent protection by loosening the standard for infringement. The opinion – penned by Judge Bryson – rejects the "point of novelty" test as a requirement to prove infringement of a design patent. Instead, the judges agree that the 1871 Gorham "ordinary observer" test is the "sole test for determining whether a design patent has been infringed."

The focus of the Gorham test is to look for substantial similarity between the patented design and the accused design. It is called the ordinary observer test because the similarity is considered from the perspective of an ordinary observer who is familiar with the art. Although Gorham only requires a comparison between the patented and accused designs, prior art designs will generally be useful for highlighting differences. A second pro-patentee rule that emerges from this case is that the burden of production of prior art designs will fall on the accused infringer. On claim construction, the Federal Circuit agreed that a 'verbal description' of the diagrams is not required, but will not – by itself – be reversible error.

Ordinary Observer With a Tight Focus: Although the patentee was able to change the law, it actually lost the day. In the appeal, the CAFC concluded that even under the ordinary observer test, "no reasonable fact finder could find that EGI met its burden of showing, by a preponderance of the evidence, that an ordinary observer, taking into account the prior art, would believe the accused design to be the same as the patented design."

The courts application of the law shows that proving infringement under the ordinary observer test will not be a walk in the park for design patent holders. Many cases will likely still turn on technical points of similarity rather than simply a broader totality of similarity. Yet, despite the potential difficulties, the situation is vastly improved from the hardships imposed by the point of novelty test.

More to come…

Erroneous Revival by PTO is not a Cognizable Defense in an Infringement Action

Aristocrat Technologies Australia v. International Game Technologies (IGT) (Fed. Cir. 2008)

'The district court concluded that the U.S. Patent and Trademark Office "improperly revived" U.S. Patent No. 7,056,215 after it was abandoned during prosecution, and therefore held it (and the continuation patent that followed it) invalid on summary judgment. We conclude that "improper revival" is not a cognizable defense in an action involving the validity or infringement of a patent. Thus, we reverse the district court's grant of summary judgment and remand for proceedings consistent with this opinion.'

ATA missed its US national stage filing by one day. The PTO granted ATA's petition to revive the application based on the applicant's seemingly legitimate claim that the "entire delay" in filing the appropriate papers "was unintentional." The district court, however, found the patent invalid based on the PTO's "improper revival" of the application. In particular, the district court found that the PTO lacked authority to revive unintentionally late national stage applications.  Rather, according to the court, the PTO can only revive such applications when the cause of delay meets the much higher standard of being unavoidable. The Court found its statutory support from 35 USC 371, which requires the PTO to hold late national stage applications as abandoned unless "such failure to comply was unavoidable."

On appeal, the Federal Circuit panel (Judges Newman, Bryson, and Linn) reversed – finding that "improper revival" is not a proper invalidity defense in a patent infringement action.

The court's surprising conclusion is based on its interpretation of 35 U.S.C. §282. That statute lists the defenses available to charges of patent infringement. Those include:

(1) Noninfringement …,

(2) Invalidity of the patent or any claim in suit on any ground specified in part II of this title as a condition for patentability,

(3) Invalidity of the patent or any claim in suit for failure to comply with any requirement of sections 112 or 251 of this title.

(4) Any other fact or act made a defense by this title.

Conditions for Patentability: In the appeal, the Federal Circuit saw the term "condition for patentability" of ¶2 above as a term of art and gave it a narrow interpretation: "While there are most certainly other factors that bear on the validity or the enforceability of a patent, utility and eligibility, novelty, and nonobviousness are the only so-called conditions for patentability." Thus, complying with the timing requirements is not a condition of patentability.

Made a Defense: Taking a similarly hard stand, the appellate panel found that ¶4 above would only apply when another act had explicitly been 'made a defense' by the words of the patent act.

"Congress made it clear in various provisions of the statute when it intended to create a defense of invalidity or noninfringement, but indicated no such intention in the statutes pertaining to revival of abandoned applications. For example, 35 U.S.C. § 273 is entitled "Defense to infringement based on earliest inventor" and expressly provides that the provision "shall be a defense to an action for infringement."… Because the proper revival of an abandoned application is neither a fact or act made a defense by title 35 nor a ground specified in part II of title 35 as a condition for patentability, we hold that improper revival may not be asserted as a defense in an action involving the validity or infringement of a patent."

On several occasions, the court has allowed an invalidity finding when the cause of invalidity did not reach one of the Section 282 categories. In the 1995 Quantum case, for instance, the court invalidated a patent based on improperly expanding its scope during prosecution. Here, the court pushed Quantum aside finding it irrelevant or "inapposite." On the policy side, the court noted that this case is a one-off and is unlikely to encourage bad applicant behavior.

What result: The result of this case is that an accused infringer has no recourse to invalidate a patent that was issued as a result of procedural lapses during prosecution. Absent proof of inequitable conduct, there may be no recourse at all. In this respect, the Federal Circuit quoted its own 1997 Magnivision decision:

"Procedural lapses during examination, should they occur, do not provide grounds of invalidity. Absent proof of inequitable conduct, the examiner's or the applicant's absolute compliance with the internal rules of patent examination becomes irrelevant after the patent has issued."

Notes:

• If you have not chosen a case note yet, this is the one…
• CAFC to Decide Important Revival Case: Aristocrat v. IGT

Federal Circuit Finds Personal Jurisdiction Over Declaratory Judgment Defendant

Campbell Pet Co. v. Theresa Miale & Ty-Lift Ent. (Fed. Cir. 2008)

Ms. Miale holds two patents relating to stretchers for carrying injured animals her company (a partnership with her mother) sells products based on the patents.

The issue in the case is one of personal jurisdiction – whether the Federal Court sitting in Washington State has sufficient power over the patentee and her company to adjudge Campbell’s declaratory judgment action.

The facts are that Ty-Lift sold several thousand dollars worth of equipment to Washington residents, opened its internet website to Washington residents, and Ms. Miale even demonstrated the product at a Convention in the state.  While there, Miale and her mother “confronted several Campbell employees” and accused them of infringing Miale’s patents.  They also allegedly asked the convention director to remove the Campbell products and told customers of the infringement.

The district court originally dismissed the case – finding that Miale’s contacts were not sufficient for either general jurisdiction or specific jurisdiction.  

“[T]he [district] court found that the defendants had purposely engaged in transactions in Washington during the three-day convention in June 2007, and the court found that the cause of action for a declaratory judgment of patent noninfringement and invalidity arose from or was connected with those transactions. However, relying on our decision in Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355 (Fed. Cir. 2003), the court found that due process considerations barred the court from exercising personal jurisdiction over the defendants based on the activities at the June 2007 convention in Seattle.

The district court noted that the notion of “fair play and substantial justice” should “afford a patentee sufficient latitude to inform others of its patent rights without subjecting itself to jurisdiction in a foreign forum.”

On appeal, the Court of Appeals for the Federal Circuit reversed – finding that constitutional due process considerations of International Shoe do not bar the suit.  For the Federal Circuit, “sending letters to another state” is not sufficient to satisfy the requirements of due process and thus personal jurisdiction – even if those letters threaten litigation.  Here, the facts asserted show more than simply “attempts to inform.”

“Of critical importance to the issue of personal jurisdiction, Ms. Miale’s attempts at “extra-judicial patent enforcement” were targeted at Campbell’s business activities in Washington and can fairly be characterized as attempts to limit competition from Campbell at the Seattle convention.”

Reversed: The district court does have the power to hear this case.

 

 

In re Swanson: CAFC Allows Reexamination Based on Reference Previously Considered by PTO and Courts

In re Swanson (Fed. Cir. 2008)

Back in 1984, the patent examiner rejected Swanson's claim based on U.S. Patent No. 4,094,647 ("Deutsch"). The claims were then amended and the patent allowed. Later, in an infringement action involving the patent, the Federal Circuit affirmed a judgment that "Deutsch did not anticipate the asserted claims." Abbott v. Syntron, 334 F.3d 1343 (Fed. Cir. 2003). Surmodics is the patent owner, and the patent is licensed to Abbott.

After losing at the CAFC, Syntron filed for ex parte reexamination of the patent – asserting again that the claims were anticipated by Deutsch. As per usual, the PTO agreed to reexamine the patent – based on a "substantial new question of patentability." 35 USC §303. On appeal, Swanson argues that the Deutsch reference was considered in both the initial examination and the litigation – and thus cannot serve as the "new" basis for reexamination.

Third-party filed reexaminations provide a check on PTO power, but the SNQ requirement is designed to protect patentees from harassment.

This 'substantial new question' requirement would protect patentees from having to respond to, or participate in unjustified reexaminations. Further, it would act to bar reconsideration of any argument already decided by the Office, whether during the original examination or an earlier reexamination. House Report 96-1307, 96th Cong., 2d Sess. (1980).

In its 1997 Portola Packaging case, the CAFC gave teeth to the SNQ requirement – finding that a new question could not be presented by "prior art previously considered by the PTO in relation to the same or broader claims." Reacting to that decision, in 2002 Congress amended Section 303 and to ensure that a new question may be raised by prior art that was previously considered by the examiner:

35 USC §303 "The existence of a substantial new question of patentability is not precluded by the fact that a patent or printed publication was previously cited by or to the Office or considered by the Office."

Pointedly, the House Report accompanying the 2002 legislation found that "the Federal Circuit incorrectly interpreted Congress' original intent." According to the House Report, "the appropriate test to determine whether a 'substantial new question of patentability' exists should not merely look at the number of references or whether they were previously considered or cited but their combination in the appropriate context of a new light as it bears on the question of the validity of the patent."

SNQ = Reference Never Considered by the PTO for the Particular Purpose: Based on the statutory change, the appellate panel found that a substantial new question is simply one that has never been considered by the PTO. Here, the record shows that the original examiner relied upon Deutsch only as a secondary reference in an obviousness rejection of a broader claim.

"In light of the extremely limited purpose for which the examiner considered Deutsch in the initial examination, the Board is correct that the issue of whether Deutsch anticipates the method disclosed in claims 22, 23, and 25 was a substantial new question of patentability, never before addressed by the PTO"

SNQ Relation to Court Proceedings: In court, the parties had battled out the exact anticipation argument presented in the reexamination. On appeal, the CAFC panel found that "the determination of a substantial new question is unaffected by these court decisions." According to the court this makes sense because "the two forums [Courts and the PTO] take different approaches in determining validity and on the same evidence could quite correctly come to different conclusions" based on the burden of proof. Quoting Ethicon (Fed. Cir. 1988).

Affirmed

Notes:

• Judges Gajarsa (Author), Lourie, & Bryson.
• This opinion gives further strength to ex parte reexamination requests.
• The CAFC has consistently required that a patent's presumption of validity be negated by "clear and convincing evidence." Here, the court made a minor slip by calling the standard 'statutory.'

"In civil litigation, a challenger who attacks the validity of patent claims must overcome the presumption of validity with clear and convincing evidence that the patent is invalid. 35 U.S.C. § 282. If this statutory burden is not met, "[c]ourts do not find patents 'valid,' only that the patent challenger did not carry the 'burden of establishing invalidity in the particular case before the court.'" Ethicon, 849 F.2d at n.3 (internal citations omitted) (emphasis in original)."

Thanks to Paul Morgan for noting this issue.

Potential of Extending Exclusive Generic Period by Delaying Generic Launch Does Not Create Actionable Harm

Janssen Pharmaceutica v. Apotex, Inc (Fed. Cir. 2008)

Like most of today's pioneer-generic drug patent battles, this case involves multiple parties all looking for some advantage in the end-game battle over exclusivity.

Three JANSSEN patents are listed in the FDA orange book as covering its blockbuster anti-psychotic drug sold under the name Risperdal. ($2.5 billion in 2007 sales). TEVA was the first to challenge the patents and receives the Hatch-Waxman 180 days of generic market exclusivity. APOTEX came later and hoped to shorten TEVA's clock by invalidating the patents. The Federal Circuit, however, rejected APOTEX case – finding no declaratory judgment jurisdiction. In particular, the court saw no case or controversy between APOTEX and JANSSEN. (APOTEX wanted to shorten TEVA's rights).

TEVA had challenged only two of the three JANSSEN patents. On June 29, 2008, the unchallenged patent expired and the next day the FDA approved TEVA's generic application. To date, however, the generic company has apparently not yet launched. TEVA's 180 day clock will not be triggered until either (1) it launches its generic alternative or (2) the other two patents are found invalid by a court. If the court invalidates the JANSSEN patents, then TEVA's 180 days will end sooner – allowing APOTEX to enter the market at an earlier date. (TEVA's 180 days would have been triggered even earlier if APOTEX had successfully challenged the third patent (the '663 patent). It instead agreed that the '663 patent was valid.). To get out of the case, JANSSEN promised not to sue APOTEX on the other two patents.

On appeal, the three judge panel (CJ Michel, J Moore, and J Rader) recognized the harm APOTEX was feeling – but decided that the harm was not sufficient for declaratory judgment jurisdiction.

"[W]e conclude that the harm that has continuously existed in the present case—Apotex's inability to launch its generic product immediately upon the expiration of the '663 patent—is not sufficient to give rise to declaratory judgment jurisdiction."

What are they talking about?: This decision involves a multi-billion dollar drug and APOTEX – a leading generic provider – would be in a position to obtain at least millions in generic sales by launching sooner. Furthermore, the harm to APOTEX is not just waiting more than the 180 days, but also in giving TEVA more time to solidify its generic market position down the road. YET, the court concludes that the harm is "not sufficient to give rise to declaratory judgment jurisdiction."

Head in the Sand: It turns out that the court based its ruling on facts developed before we knew that TEVA would delay its launch:

"We heard oral arguments in this case on July 7, 2008, approximately a week after Teva could have launched its generic product. However, we are not deciding whether the facts alleged on July 7, 2008—the date we heard oral arguments—give rise to a justiciable Article III case or controversy. We hold that at the time when the district court entered final judgment in this case, Apotex's alleged harm of indefinite delay of approval was too speculative to create an actual controversy to warrant the issuance of a declaratory judgment"

The CAFC is probably correct that when the lower court made its decision months ago, the harm – TEVA's potential delayed marketing after expiration – was too speculative to support DJ jurisdiction.

Now that TEVA's delay is no longer speculative, APOTEX may well be able bring suit to invalidate the JANSSEN patents. However, that result is merely my own speculation.

CAFC: Deadlines Stick

Hildebrand v. Steck Mfg. (Fed. Cir. 2008) (nonprecedential)

Hildebrand's invention looks pretty cool – a device for removing bolts when the head is inaccessible or damaged. (U.S. Patent No. 5,737,981).

Hildebrand won at trial and was awarded $74,863 in lost profits from Steck. Hildebrand failed to request costs & fees within the 10-day time period (under Colorado local rules) and appealed for relief to the CAFC. On appeal, the court affirmed – finding that "the district court properly concluded that his application was untimely."

This case gives further creedence to the CAFC’s general operating procedure of giving no benefit to a party simply because the party is appealing pro se or with inadequate counsel.

Venue: East Coast Wins

Third Dimension v. Fairchild (E.D. Tex. 2008)

• Third Dimension sued Infineon in the E.D. Texas for infringement of U.S. Patent No. 5,216,275, et al.
• One month later, Fairchild filed a declaratory judgment action against Third Dimension in D. Maine on the same patents.
• Later that same day, Third Dimension sued Fairchild for infringement in the E.D. Texas on the same patents.

Holding: The first case stays in Texas. The second two cases are consolidated in Maine. "Third Dimension argues that the Maine case should be denied first-filed status because it filed an earlier case against Infineon involving the same patent as this case. . . . While this case and the Infineon case involve the same patent, that is the extent of the similarity."

Time Zone Problem: An interesting aspect of this case is the inherent time-zone problem. Fairchild filed its action in Maine at 12:01 a.m. EST on May 17. Third Dimension at 12:00 a.m. CST on the same day. Fairchild wins because it filed on the East Coast. Can that be right? (This conflict usually arises when a right is cemented on a particular day — such as a patent issuing.)

CAFC Applies Lilly to Invalidate Carnegie Mellon’s Plasmid Claims

Carnegie Mellon University v. Hoffman-La Roche (Fed. Cir. 2008)

Carnegie Mellon's patents cover recombinant plasmids used to enhance expression of an DNA polymerase. On appeal, the CAFC affirmed the lower court holding that the patent claims fail to meet the written description requirement under Lilly.

35 U.S.C. §112 requires that the patent document "contain a written description of the invention and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention.

The written description requirement is used to make sure that the patentee only claims what has been invented. The public gets a "meaningful disclosure in exchange for being excluded from practicing the invention for a limited period of time." Quoting Enzo Biochem (Fed. Cir. 2002).

A common written description argument is that the claims have not been disclosed to their full scope. In the Lilly case, for instance, the CAFC found that a generic claim directed to "any vertebrate and mammalian cDNA" were not supported by a specification that only discussed one species – rat cDNA.

To be clear, written description is not about enablement. Patent claims may well be enabled based on PHOSITA's knowledge of the art, but still fail the written description requirement because the patentee did not disclose the entire scope of its invention.

A representative claim from Carnegie's patents reads as follows:

1. A recombinant plasmid containing a cloned complete structural gene coding region isolated from a bacterial source for the expression of DNA polymerase I, under operable control of a conditionally controllable foreign promoter functionally linked to said structural gene coding region, said foreign promoter being functional to express said DNA polymerase I in a suitable bacterial or yeast host system.

In reviewing the claim, the CAFC noted that the DNA coding sequence is "broadly defined … only by its function of encoding DNA polymerase I" and that the claims are not limited to any particular bacterial or yeast species.

The specification only discloses one operative gene – the E. coli polA gene. And at the time of the patent, only three polA genes had been cloned (out of thousands of bacteria strains). "[W]ith regard to the promoter, the patents fail to disclose the nucleotide sequence or other descriptive features for a polA gene (including the promoter sequence) from any bacterial source other than E. coli."

"To satisfy the written description requirement in the case of a chemical or biotechnological genus, more than a statement of the genus is normally required. One must show that one has possession, as described in the application, of sufficient species to show that he or she invented and disclosed the totality of the genus. . . . [W]e conclude that that requirement was not met here.

Gentry Gallery: The district court also applied Gentry Gallery to invalidate other claims. In Gentry, the CAFC found a patent claim invalid because the claim failed to recite an "essential element" of the invention. Here, Roche argued that the patents were directed to avoiding the problem of lethality to host cells, but that the claims did not include that limitation. As it has done repeatedly, the CAFC rejected the idea that Gentry Gallery created an essential element test. (The claims remain invalid under the Lilly analysis.).

The Clarified Law of Inequitable Conduct

Although not new writing law, in Star Scientific, Chief Judge Michel does a nice job of clearly breaking down inequitable conduct analysis into simple two steps. The case clarifies that threshold levels of materiality and intent must each be proven by clear and convincing evidence.

Inequitable Conduct Two Step Analysis:

1. Whether the accused infringer proven threshold levels of (a) intent to deceive the PTO and (b) materiality, both with clear and convincing evidence. Although the intent element may be proven by circumstantial evidence. The clear and convincing standard requires that the evidence must be strong enough to point to "intent to deceive" as the "single most reasonable inference able to be drawn from the evidence."
2. If both elements are proven by clear and convincing evidence, the court should "look to the equities" to determine whether the evidence warrants a finding of inequitable conduct and thus unenforceability. It is only at this second stage when the court may balance the relative weight of proof. In particular, "[t]he more material the omission or the misrepresentation, the lower the level of intent required to establish inequitable conduct, and vice versa." (Quoting Critikon, 120 F.3d 1253 (Fed. Cir. 1997)(J. Rich)).

Still unclear is the meaning of "threshold." Presumably proving a "threshold level of intent" should be easier than simply proving "intent."

Documents:

• Read Star Scientific
• Read the Patently-O review of Star Scientific [Part I]

Important Inequitable Conduct Decision: Defendant Must Prove its Case

Star Scientific v. R.J. Reynolds Tobacco (Fed. Cir. 2008)

After a bench trial, the district court held that Star's tobacco curing patents were unenforceable due to inequitable conduct during prosecution and invalid as indefinite. This post will discuss the inequitable conduct issues.

The Star patents are directed at a method of making healthier tobacco (same nicotine, but fewer nitrites and other chemicals). Higher end organic or green tobacco is perhaps the only growth market in the lagging US market. The inequitable conduct issues in this case revolve primarily around a letter received by the prosecuting attorneys from a Star scientist indicating that Chinese tobacco already had lower levels of nitrites due to "their use of old [radiant heat] flue-curing techniques." Neither the letter nor a set of similar data were ever disclosed to the PTO.

An accused infringer can defang a patent by showing the patentee guilty of inequitable conduct during prosecution. To successfully prove inequitable conduct, the accused infringer must present "evidence that the applicant (1) made an affirmative misrepresentation of material fact, failed to disclose material information, or submitted false material information, and (2) intended to deceive the [PTO]." An issued patent is presumed valid and enforceable – thus, the "burden of proving inequitable conduct lies with the accused infringer. The patentee need not offer any good faith explanation unless the accused infringer first carried his burden to prove a threshold level of intent to deceive [and materiality] by clear and convincing evidence." Further, "[e]ven if a threshold level of both materiality and intent to deceive are proven by clear and convincing evidence, the court may still decline to render the patent unenforceable."

"The need to strictly enforce the burden of proof and elevated standard of proof in the inequitable conduct context is paramount because the penalty for inequitable conduct is so severe, the loss of the entire patent even where every claim clearly meets every requirement of patentability. . . . [C]ourts must ensure that an accused infringer asserting inequitable conduct has met his burden on materiality and deceptive intent with clear and convincing evidence before exercising its discretion on whether to render a patent unenforceable. . . . If a threshold level of intent to deceive or materiality is not established by clear and convincing evidence, the district court does not have any discretion to exercise and cannot hold the patent unenforceable regardless of the relative equities or how it might balance them.

Specific Intent: As the CAFC held the 1995 Molins case, the intent requirement is "specific intent to . . . mislead[] or deceiv[e] the PTO."

"Rather, to prevail on the defense, the accused infringer must prove by clear and convincing evidence that the material information was withheld with the specific intent to deceive the PTO."

When circumstantial evidence is used to prove intent, that evidence "must still be clear and convincing" and intent to deceive the PTO must be "the single most reasonable inference able to be drawn from the evidence." As a flat rule, information is not material if it is cumulative to that already disclosed.

In this case, prosecution was begun at the Sughrue Mion firm and then moved to the Banner Witcoff firm. RJR's theory of intent was that the firm switch was necessary to avoid disclosing the letter. Star's witness stated that the "reasons behind the replacement of the Sughrue firm were that a key partner passed away and that [the witness] observed a Sughrue attorney perform unsatisfactorily in an unrelated prosecution." The district court, however, rejected that testimony as unbelievable. On appeal, however, the CAFC reversed:

"[E]ven if Star's explanations are not to be believed, it remained RJR's burden to prove its allegation regarding the reason for the Sughrue firm's dismissal. RJR cannot carry its burden simply because Star failed to prove a credible alternative explanation."

Here, the court found that RJR had simply not proven its case:

"RJR failed to elicit any testimony or submit any other evidence indicating that Star knew what the Burton letter said prior to replacing the Sughrue firm, or that the letter was a reason for changing firms. RJR admitted at oral argument that it failed to even ask [Star's] executives about these critical facts, and RJR failed to identify any testimony or other evidence when specifically asked by us to do so in supplemental briefing. Further, a review of the record shows that Williams actually testified, in response to a different question, that he had never seen the Burton letter prior to his deposition in the present litigation. This statement was never impeached, questioned, or explored by RJR's counsel. RJR identified Perito, Star's chairman, as the officer who made the decision to terminate the Sughrue firm, but Perito was never asked whether he had knowledge of the Burton letter or whether it played any role in his decision to change firms.

In the end, the court concluded, that RJR had simply failed to provide sufficient facts to support an inference of intent to deceive. Reversed and Remanded.

Notes:

• The decision gave Star's stock (STSI) a nice bump:

Of course, there is no "legal" impact, but I query the importance of the fact that both prosecution firms (Sughrue Mion and Banner Witcoff) are well known and well respected in the legal communities.

Cooper Techs: PTO’s Interpretation of “Original Application” Given Chevron Deference

Cooper Techs. v. Dudas (Fed. Cir. 2008)

Inter partes reexamination is relatively new. The 1999 AIPA provides that it is available for "any patent that issues from an original application filed in the United States on or after" November 29, 1999. Cooper's original patent application was filed prior to the 1999 deadline, but a continuation application was filed after the deadline. The debate here was whether the continuing application should be considered an "original application" under the statute. The PTO argued that the continuation should be considered an original application and that its interpretation should be given a high level of deference.

On appeal, the CAFC affirmed. In doing so, the court first found that PTO's interpretation of "original application" is was a procedural determination leading the court to grant Chevron-level deference to the PTO's interpretation.

We have also previously held that 35 U.S.C. § 2(b)(2) does not authorize the Patent Office to issue "substantive" rules. See Merck & Co. v. Kessler, 80 F.3d 1543 (Fed. Cir. 1996). "A rule is 'substantive' when it 'effects a change in existing law or policy' which 'affect[s] individual rights and obligations.'" … In this case, the Patent Office's interpretation of "original application" does not effect any change in existing law or policy; rather, it is a prospective clarification of ambiguous statutory language regarding a matter of procedure. It is therefore "interpretive"--rather than "substantive"--under the definitions put forward in Animal Legal Defense Fund. We conclude that the Patent Office had the authority under 35 U.S.C. § 2 to interpret section 4608, because that interpretation both governs the conduct of proceedings in the Patent Office, not matters of substantive patent law, and is a prospective clarification of ambiguous statutory language.

….

Because the Patent Office is specifically charged with administering statutory provisions relating to "the conduct of proceedings in the Office," 35 U.S.C. § 2(a)(2)(A), we give Chevron deference to its interpretations of those provisions. See Lacavera ("Because the PTO is specifically charged with administering this statute, we analyze a challenge to the statutory authority of its regulations under the Chevron framework."); see also Bender v. Dudas, 490 F.3d 1361 (Fed. Cir. 2007) (applying Chevron framework to Patent Office regulations for the conduct of proceedings in the Patent Office); Ethicon, Inc. v. Quigg, 849 F.2d 1422 (Fed. Cir. 1988) (same).

Under the familiar two-step Chevron analysis, "[w]e always first determine 'whether Congress has directly spoken to the precise question at issue.'" Hawkins v. United States, 469 F.3d 993, 1000 (Fed. Cir. 2006) (quoting Chevron, 467 U.S. at 842). "We do so by employing the traditional tools of statutory construction; we examine the statute's text, structure, and legislative history, and apply the relevant canons of interpretation." Delverde, SrL v. United States, 202 F.3d 1360, 1363 (Fed. Cir. 2000). "If we find 'that Congress had an intention on the precise question at issue, that intention is the law and must be given effect . . . .'" Hawkins, 469 F.3d at 1000 (quoting Chevron, 467 U.S. at 843 n.9.) If we conclude that "Congress either had no intent on the matter, or that Congress's purpose and intent is unclear," Delverde, 202 F.3d at 1363, then we proceed to step two, in which we ask "whether the agency's interpretation is based on a permissible construction of the statutory language at issue," Hawkins, 469 F.3d at 1000.

….

We conclude that the Patent Office's interpretation of section 4608 is permissible and therefore entitled to deference.

This is a relatively minor case, and the true issue is whether it provides any indication of how the court will proceed in Tafas v. Dudas.

CAFC Finally Affirms a Finding of Infringement by Equivalents

Dr. Voda v. Cordis Corp. (Fed. Cir. 2008)

Dr. Voda’s case is an exciting tale of an individual inventor litigating against a major corporation in the red sandy soil of western Oklahoma. 

A jury found that Cordis catheters infringed Voda’s patents and adjudged a reasonable royalty to be 7.5% of gross sales. The jury also found the infringement willful and the patents not invalid.  The district court then affirmed the jury verdict but denied Voda’s request for injunctive relief.

Claim Construction: Voda’s claim included the requirement that the catheter be engaged “along a line” of the aorta. The district court, however, found that the claim is not limited to linear portions of the aorta. On appeal, the CAFC confirmed the construction — reminding us that “the context in which a term is used in the asserted claim can be highly instructive.” Phillips. When engaged, it is clear that the catheter may curve along the aorta.

The specification does indicate that the “present invention [includes a] straight portion.” However, the CAFC refused to see that statement as a “clear disavowal of claim scope” because the specification discusses other instances where the same portion could be curved.

Doctrine of Equivalents: Cordis had redesigned some of its products to avoid literal infringement. However, these were found to infringe under the Doctrine of Equivalents. In particular, a “second straight portion” claim element was not literally found in the Cordis products, but the jury found that the products did include an equivalent element.

At the court’s option, either of two tests of equivalent may be used:

Under the insubstantial differences test, “[a]n element in the accused device is equivalent to a claim limitation if the only differences between the two are insubstantial.” Honeywell Int’l Inc. v. Hamilton Sundstrand Corp., 370 F.3d 1131, 1139 (Fed. Cir 2004). Alternatively, under the function-way-result test, an element in the accused device is equivalent to a claim limitation if it “performs substantially the same function in substantially the same way to obtain substantially the same result.” Schoell v. Regal Marine Indus., Inc., 247 F.3d 1202, 1209-10 (Fed. Cir. 2001).

The CAFC looked to Voda’s experts to find evidence of insubstantial difference. In particular, Voda’s expert testified that the Cordis “curve portion” was essentially straight and that “cardiologists would have difficulty distinguishing the two during use.”  In addition, Voda introduced evidence that the Cordis curve portion “performed the same function as a straight portion, in the same way, to achieve the same result. . . . Accordingly, we affirm the jury’s findings of infringement with respect to these claims.”

Notes:

• EBay: Voda argued for an injunction based on the irreparable harm to its exclusive licensee. The CAFC rejected that justification — finding that the irreparably harmed must be the party seeking the injunction.
• Seagate: The CAFC vacated the willfulness finding that was based on pre-Seagate law.
• Festo: The CAFC did find that some of Voda’s claims were not infringed under the DOA. Those claims had been narrowed during prosecution and were subject to prosecution history estoppel.
• Prior Appeal: In the 2007 appeal in this case, the CAFC held that Voda could not assert its foreign patents covering the same product in US courts. [LINK]
• See Lemley & Allison: THE (UNNOTICED) DEMISE OF THE DOCTRINE OF EQUIVALENTS

 

No Inequitable Conduct if Examiner Finds Withheld Reference while Searching

Teva Pharm. Indus. v. Apotex, 2008 U.S. Dist. LEXIS 60418 (D.N.J. 2008)

In 2007, Teva sued Apotex infringing its carvedilol patents. Apotex counterclaimed with charges of inequitable conduct – alleging that Teva had failed to disclose "any of the English language counterparts" of a submitted prior art reference.

The examiner actually found the withheld references in his search, and Teva argued no harm, no foul, no materiality. Apotex disagreed and argued that the examiner's serendipity "does not, as a matter of law, absolve an applicant from a charge of inequitable conduct."

New Jersey District Court Judge Brown agreed with the patentee Teva – holding that a reference cannot be considered "withheld from the examiner" if it is actually before the examiner.

"In Scripps Clinic & Res. Found. v. Genentech, Inc., 927 F.2d 1565, 1582 (Fed. Cir. 1991), the Federal Circuit stated that "[w]hen a reference was before the examiner, whether through the examiner's search or the applicant's disclosure, it can not be deemed to have been withheld from the examiner."

. . .

The duty to disclose all information known to be material to patentability is deemed to be satisfied if, all information known to be material to patentability of any claim issued in a patent was cited by the Office or submitted to the Office in the manner prescribed by §§ 1.97(b) -(d) and 1.98.

. . .

It is undisputed that the document allegedly withheld by Teva was found by the examiner. Therefore, in light of the fact that the alleged failure to disclose the English language counterparts of EP 0 127 099 is the only basis for Apotex's inequitable conduct counterclaim, the Court concludes that Apotex's inequitable conduct counterclaim should be dismissed with prejudice."

Research Tools: No 271(e)(1) Safe Harbor for Non-Regulated Equipment

Proveris Scientific Corp v. InnovaSystems, Inc. (Fed. Cir. 2008)

Innova's optical spray analyzer is used in connection with FDA regulatory submissions. In particular, the device can be used to measure the quality of aerosol sprays used for drug delivery. In a pre-trial order, much experienced Judge Young of Massachusetts ruled that the safe harbor of 35 USC 271(e)(1) does not immunize Innova's activities.

Section 271(e)(1) is designed to facilitate FDA regulatory approval process by immunizing submission related activity from charges of patent infringement. In particular, the safe harbor immunizes activities associated with a patented invention "solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs or veterinary biological products."

On appeal, the CAFC affirmed Judge Young's decision – holding that "the Section 271(e)(1) safe harbor does not immunize the OSA from infringement."

"In short, Innova is not a party seeking FDA approval for a product in order to enter the market to compete with patentees. Because the OSA device is not subject to FDA premarket approval, and therefore faces no regulatory barriers to market entry upon patent expiration, Innova is not a party who, prior to enactment of the Hatch-Waxman Act, could be said to have been adversely affected by the second distortion. For this reason, we do not think Congress could have intended that the safe harbor of section 271(e)(1) apply to it. Put another way, insofar as its OSA device is concerned, Innova is not within the category of entities for whom the safe harbor provision was designed to provide relief. We thus agree with the district court that Innova is not entitled to the benefit of the section 271(e)(1) safe harbor."

Note:

1. Jeff Light of "Patients not Patents" filed an amicus brief in this case.

USPTO Rejects SYMBICORT Patent Extension

In re Patent Term Extension for Patent No. 5,674,860 (Commissioner for Patents 2008)

Summary: The USPTO has rejected AstraZeneca’s request for an extension of its patent term on Symbicort. In its decision, the office gave two reasons: (1) new combinations of old drugs do not receive extensions; and (2) AstraZeneca missed the filing deadline by a day.

Intro: AstraZeneca’s drug Symbicort has two active ingredients: formoterol fumarate dihydrate and budesonide. Global Symbicort sales were $1.6 billion in 2007.  The original patent application covering the combo invention was filed in 1991 by two of Astra’s Swedish scientists. The US version issued in 1997.

“Human drug products” require pre-market FDA approval – a long and expensive process. The FDA approved Symbicort in July 2006 – some 15 years after the original patent application was filed.  This long delay is common, and the Hatch-Waxman provision of 35 USC 156 provides for an extension of the patent term based on these delays.

In this case, however, the USPTO has rejected Astra’s extension petition — finding the patent ineligible.

Combo Drugs: Under the statute, extensions are only granted if the patented “product … is the first permitted [and FDA approved] commercial marketing use of the product.”  35 USC 156(a)(5)(A). It turns out that each active ingredient in the Symbicort has been previously marketed – although the combination was new to the market.  Applying the rule to the facts, the PTO found that the “product” had been previously marketed:

“Because both active ingredients in SYMBICORT have been previously approved for commercial marketing or use before the approval of SYMBICORT, Applicant's approval of SYMBICORT does not qualify as the first permitted commercial marketing or use of either active ingredient, as required by section 156(a)(5).”

Synergy is Irrelevant: Importantly, the PTO rejected the argument that the relevant “product” must include both active ingredients because they have synergistic value when combined.

“The term "product" as used in 35 U.S.C. 156 includes any new drug or antibiotic drug, "as a single entity or in combination with another active ingredient." 35 U.S.C. 156 (f)(2). Section 156(f)(2) says nothing about whether a combination is synergistic.”

This decision follows the CAFC precedent found in Arnold Partnership v. Dudas, 362 F.3d 1338 (Fed. Cir. 2004). In that case, the court rejected a PTE extension for Vicoprofen (hydrocodone/ibuprofen) announcing that the statute requires a component-by-component analysis for PTE extension:

“This statutory language requires this court to examine a drug product patent’s eligibility for extension on a component-by-component, or an ingredient-by-ingredient basis.  The final phrase in subsection (f) –“including any salt or ester of the active ingredient, as a single entity or in combination with another active ingredient” – emphasizes this point.  This final phrase of subsection (f) shows that the statute refers to a drug product on a component-by-component basis, not as a whole.” Arnold Partnership.

MPEP 2751 includes the interesting statement that “an approved product having two active ingredients, which are not shown to have a synergistic effect or have pharmacological interaction, will not be considered to have a single active ingredient made of the two active ingredients.”  The PTO in its decision rejected the negative implication of this statement.

One Day Late: As an alternative reason for its decision, the Commissioner found that the PTE Petition had been filed one day late. It is always a trick to figure out whether the first day of a time period “counts.” 

Section 156 announces that the due date is: "within the sixty-day period beginning on the date the product received [FDA] permission.” PTO rules spell this out more particularly – requiring the application be submitted “within the sixty day period beginning on the date the product first received permission.” 37 C.F.R. 1.720(f). Based on a “plain language” reading of the statute and rule, the PTO decided that the day that permission was granted counts as day one rather than day zero.

Because the FDA granted permission on July 21, 2006, PTO found that the sixty-day period ended on September 18, 2006. Astra filed its petition on September 19.

Astra can appeal “within TWO MONTHS of the mailing date of this letter.”  The PTO’s letter was sent on June 13 – query whether the reply is due on the 12th, 13th, or 14^th?

BPAI Factual Findings Affirmed Based on Substantial Evidence

In re Stauffer (Fed. Cir. 2008) (nonprecedential)

This is a nice idea: A device for automatically printing out caller ID records. What I prefer (and have used in the past) is to receive an e-mail receipt for all incoming calls and with messages attached in an mp3.

SEI (the party in interest) has a simple enough claim:

1. A caller ID printing device, comprising:

a controller configured to detect caller ID information from an incoming call; and
a printer configured to automatically print the caller ID information; and
a message template onto a call record immediately after the first receipt of a first ring signal and without user intervention.

The BPAI rejected the claim as obvious. On appeal, the CAFC reminded the applicant that the BPAI’s underlying factual determinations need only be supported by “substantial evidence.”

‘Substantial evidence is evidence that “a reasonable mind might accept as adequate to support a conclusion.” In re Gartside, 203 F.3d 1305 (Fed. Cir. 2000). “[W]here two different inconsistent conclusions may reasonably be drawn from evidence in the record, an agency’s decision to favor one conclusion over the other is the epitome of a decision that must be sustained upon review for substantial evidence.” In re Jolley, 308 F.3d 1317 (Fed. Cir. 2002). This court will not determine that a decision made by the Board is unsupported “simply because the Board chose one conclusion over another plausible alternative.” Id.’

In this case, the panel easily found that two references combined teach each element of the invention and render it obvious.

Obviousness of Chemical Compounds; Split over Inequitable Conduct

EISAI v. DR. REDDY’S LABORATORY and TEVA PHARMACEUTICALS (Fed. Cir. 2008)

Eisai’s blockbuster ulcer drug AcipHex boasts over $1 billion in annual worldwide sales.  The company holds a patent covering the active ingredient – rabeprazole – and its salts. Dr. Reddy’s and Teva each filed ANDAs and Eisai filed suit to block generic entry.

Eisai won a summary judgment decision that the patent is infringed and enforceable. The appeal focuses on obviousness and inequitable conduct.

Obviousness of Chemical Compounds: Structural similarity is the touchstone of the obviousness inquiry for patents claiming a novel chemical compound. A looming question for pharmaceutical companies, however, is how the Supreme Court’s decision in KSR v. Teleflex will impact chemical patents.

In KSR, the Supreme Court eased a defendant’s pathway for invalidating a patent as obviousness. KSR’s focus, however was on inventions created by combining known elements.  Here, the individual components of Eisai’s claimed compound were all known. However, the Eisai decision cabins-in KSR’s importance by showing that the assumptions found in KSR often do not apply to chemical compound cases.

“The Supreme Court’s analysis in KSR thus relies on several assumptions about the prior art landscape. First, KSR assumes a starting reference point or points in the art, prior to the time of invention, from which a skilled artisan might identify a problem and pursue potential solutions. Second, KSR presupposes that the record up to the time of invention would give some reasons, available within the knowledge of one of skill in the art, to make particular modifications to achieve the claimed compound. Third, the Supreme Court’s analysis in KSR presumes that the record before the time of invention would supply some reasons for narrowing the prior art universe to a "finite number of identified, predictable solutions." In Ortho-McNeil Pharmaceutical, Inc. v. Mylan Laboratories, Inc., 520 F.3d 1358, 1364 (Fed. Cir. 2008), this court further explained that this "easily traversed, small and finite number of alternatives . . . might support an inference of obviousness." To the extent an art is unpredictable, as the chemical arts often are, KSR’s focus on these "identified, predictable solutions" may present a difficult hurdle because potential solutions are less likely to be genuinely predictable.”

Thus, in chemical compound cases, “a prima facie case for obviousness for a chemical compound still, in general, begins with the reasoned identification of a [prior art] lead compound.”  Obviousness can then based on structural similarity along with some “motivation that would have led one of ordinary skill in the art to select and then modify a known compound (i.e. a lead compound) in a particular way to achieve the claimed compound.”  Although the motivation to modify the prior art can come from many different fields, some motivation is needed. In chemical cases, this motivation may be proved by showing a ‘sufficiently close relationship’ between the prior art and claimed compound that would ‘create an expectation . . . that the new compound will have similar properties to the old.’ (internal quotation marks removed). In other words, an obvious substitution would be ‘predictable.’

In this case, the lead compound – Lansoprazole – is quite similar to the claimed compound Rabeprazole. The difference is only found in a trifluroethoxy substituent at the 4–position (see figure) versus a methoxypropoxy substituent.  Although structurally similar, the CAFC could not find any motivation to substitute the active groups. In particular, the court noted that it would not make sense to drop trifluroethoxy from the prior art — since it is that substituent that activated Lansoprazole.

“The record, however, shows no discernible reason for a skilled artisan to begin with lansoprazole only to drop the very feature, the fluorinated substituent, that gave this advantageous property.”

Nonobviousness affirmed.

A High Bar for Inequitable Conduct: As usual, Judge Rader took a hard stance against inequitable conduct. He writes:

“Inequitable conduct in prosecuting a patent application before the United States Patent & Trademark Office may take the form of an affirmative misrepresentation of material fact, a failure to disclose material information, or the submission of false material information, but in every case this false or misleading material communication or failure to communicate must be coupled with an intent to deceive.  Innogenetics, N.V. v. Abbott Labs., 512 F.3d 1363, 1378 (Fed. Cir. 2008).  Materiality, defined as "what a reasonable examiner would have considered important in deciding whether to allow a patent application," and intent are both questions of fact, and require proof by clear and convincing evidence.  Id.  To satisfy the "intent" prong for unenforceability, "the involved conduct, viewed in light of all the evidence, including evidence indicative of good faith, must indicate sufficient culpability to require a finding of intent to deceive."  Kingsdown Med. Consultants, Ltd. v. Hollister Inc., 863 F.2d 867, 876 (Fed. Cir. 1988) (en banc) (citing Norton v. Curtiss, 433 F.2d 779 (CCPA 1970)).  Gross negligence is not sufficient.  Id.  This is a high bar.”

This opinion along with Judge Rader’s recent dissent in the Aventis case may show a growing split within the court on the issue of inequitable conduct.

Notes:

• I updated this report to add a squishy word: “often.” The modified sentence now reads: “However, the Eisai decision cabins-in KSR’s importance by showing that the assumptions found in KSR often do not apply to chemical compound cases.”

Can a Patent Plaintiff Reserve Claims to be Filed in a Later Lawsuit?

Hemphill v. Kimberly-Clark (Fed. Cir. 2008 — appeal pending)

Over the past few years, the CAFC has been developing its jurisprudence on both claim preclusion and issue preclusion. A new appeal will likely add to the mix.

Hemphill initially sued Kimberly-Clark back in 2002 for infringement of claim 1 of her patent covering a tampon design. (U.S. Patent No. 4,557,720). Kimberly-Clark won that case on summary judgment of non-infringement.

Now, Hemphill has filed a new suit — alleging that the same Kimberly-Clark products infringe claim 2 of the same patent. The new case was dismissed under the theory of claim preclusion or res judicata.  Claim preclusion prevents re-litigation of the same case between the same parties. “[A] party who once has had a chance to litigate a claim before an appropriate tribunal usually aught not to have another chance to do so.”

Here, the new litigation involves the same parties, same product, and same patent. Based on the seemingly identical circumstances, the lower court held res judicata applies — and that Hemphill should have brought the charges under claim 2 in the initial proceeding.

In 2005, the CAFC held that res judicata does not apply when the second litigation involved a new patent — holding that “each patent asserted raises an independent and distinct cause of action.”  [Abbey v. Mercedes]  Likewise, the CAFC held in 2008 that res judicata does not apply when the second litigation involves an accused product that is not “essentially the same” as the originally accused product. [Acumed v. Stryker]

In all likelihood the CAFC will affirm here — holding that when a patentee holds-back certain claims within a patent that those claims will be lost.  A factor weighing heavily against Hemphill is that she is appealing pro se.

Links:

• PATRACER

 

Inequitable Conduct Based on Petition to Make Special

Scanner Technologies Corp. v. ICOS Vision Systems (Fed. Cir. 2008)

There are many companies that value quick prosecution and issuance. Yet, few have taken the PTO's offer of accelerated examination (AE). Potential applicants avoid the accelerated examination program for several reasons – most of which are associated with the AE requirements to (i) search for prior art; (ii) identify all claimed elements found in each relevant reference; and additionally (iii) prepare an explanation of why the claims are patentable over the references. These AE requirements are costly and potentially open the applicant to charges of inequitable conduct (as well as narrow claim scope).

In this case, Scanner saw ICOS products at a trade show and subsequently filed a petition to make special in the hopes that its patent would issue more quickly. The petition argued that the petition should be granted based on ICOS products. The petition was granted and the patent issued within the year.

After Scanner sued for infringement, the district court found the patent unenforceable due to inequitable conduct in filing the petition to make special. On appeal, the CAFC reversed – but in the process revived aspects of the inequitable conduct inquiry. The particular conduct at issue included statements in the petition that infringement was clear even though the accused product had not been fully inspected.

Broad Concept of Materiality: Although inequitable conduct issues often focus on whether the misconduct was "material to patentability." The CAFC began by quoting its own 1994 GE v. Samick opinions holding that a false statement in a petition to make special should be considered "material" if "it succeeds in prompting expedited consideration of the application." This broad consideration of materiality follows the Nilssen decision holding that misrepresenting an applicant's status as a small entity (in the payment of post issuance maintenance fees) may also be considered material.

"[W]e must reject Scanner's view that inequitable conduct cannot be shown absent a misrepresentation that bears on the patentability of the claims in the application. When the setting involves a petition to make special, as is the case here, we reaffirm that a false statement that succeeds in expediting the application is, as a matter of law, material for purposes of assessing the issue of inequitable conduct."

Reasonable Inferences Favor Patentee: Although the CAFC agreed that the type of conduct here could be inequitable conduct, this case did not present sufficient evidence. Because materiality and intent must both be proven with clear and convincing evidence, the appellate panel requires that all reasonable inferences be given weight:

"Whenever evidence proffered to show either materiality or intent is susceptible of multiple reasonable inferences, a district court clearly errs in overlooking one inference in favor of another equally reasonable inference."

Because the CAFC found potential reasonable explanations for the claims of infringement, it held that those statements could not be considered false or misleading, and thus not material.

By clearing the inequitable conduct charges, Scanner avoids paying ICOS attorney fees. However, the CAFC affirmed that all claims of the patents were invalid and not infringed.

Notes:

• Interesting statement: "We also affirm the district court's judgment invalidating all claims of the patents in suit given the stipulation between the parties that the case would be tried on a representative claim."

Tags: Accelerated+Examination, Petition+to+make+special

CAFC Vacates Validity Holding Based on Agreement by the Parties [UPDATED 2:00pm]

Baychar v. Salomon North America (Fed. Cir. 2008)

As part of a settlement process, parties regularly agree to 'consent decrees' that include admissions that the patent is valid and/or infringed. When signed by a court, those judgments serve important purposes in later direct challenges via res judicata or collateral estoppel. A consent decree may also serve as evidence or a deterrent against other challengers.  It is rare, however, for the Federal Circuit to sign a consent decree on appeal.

Baychar sued Solomon for infringement of its snowboard boot liner patent that apparently teaches a better way for wicking moisture. The district court found the patent (1) not infringed based on an implied license and (2) invalid.  By the time of oral arguments on appeal, the parties had apparently come to an agreement that Baychar would waive its infringement argument if the court would vacate the invalidity finding.  In a short non-precedential opinion, the appellate panel (Judges Mayer, Plager, and Dyk) did just that: affirming that the patent was infringed based on an implied license while vacating the judgment of invalidity.

The business issue here is that Baychar has asserted its patent against multiple defendants, and the invalidity finding would have ruined its chances of success across the board. It was willing to admit defeat in this case as a way to save the patent for another fight.

Notes:

• In its opinion, the CAFC noted that the issue of infringement will be resolved by the appellate court rather soon in Baychar v. Burton.

In a prior opinion in the Salomon case, the CAFC dismissed Baychar's appeal on a procedural issue — its notice of appeal was filed five days late. Federal Circuit rules require a notice of appeal of a patent case be filed within 30 days from the final judgment. [Link] Apparently, the district court issued a second final judgment giving Baychar the opportunity to appeal again.

Prison: The last stand for land line phones.

TIP Systems v. Phillips & Brooks (PBG) (Fed. Cir. 2008)

"This is a patent infringement case pertaining to wall-mounted telephones designed for use by prison inmates."  Both the accused device and the patents focus on a telephone system that operates without the dangers of a phone cord. However, the TIP patents require a "handset" mounted in the wall of the phone box with a mouthpiece that "extends through" the wall.  These claims are exemplified in the figures.

The accused devices do not use a traditional handset, but rather use a separate ear-piece and mouthpiece. In addition, the accused device wall is flush – and the mouthpiece does not break through the wall.

Questionable claims of infringement are naturally resolved by a Markman hearing and subsequent summary judgment of noninfringement. Here, the district court found (i) that the claimed handset must include a handle with both an ear-piece and mouthpiece and (ii) that the mouthpiece must pass through an aperture in the front wall of the phone box.  It was clear that the accused device did not exhibit either of these features and thus could not infringe.

The definition of the handset was made easy because the claims stated that: "a telephone handset being a handle with an ear-piece at one end and a mouthpiece at an opposite end." The exact definition is support from the figures is also provided in the specification.

The CAFC affirmed on claim construction then went on to consider whether the elements may still be covered under the doctrine of equivalents (DOE). 

If an element is not literally covered by a claim, the device may still be considered infringing if the accused element is equivalent to the claimed element. Thus, to infringe a patent, each claim element or its equivalent must be found in an accused device.

Whether equivalency exists may be determined based on the "insubstantial differences" test or based on the "triple identity" test, namely, whether the element of the accused device "performs substantially the same function in substantially the same way to obtain the same result." 

The game in the doctrine of equivalents is defining an 'element.'  The patentee wants a broad definition (the telephones as a whole are very similar) while the defendant argues for a narrow definition. Here, the defendants won when the courts found that a "handle" is an element of the claim.  Since the accused devices have no structure that is similar to a handle, they cannot infringe even as an equivalent.