APaTS

Yours, Mine and Ours

admin — Wed, 10 Jun 2009 18:29:00 GMT

Sometimes, the merger of two companies requires a sorting of the Cinderellas from the ugly stepsisters when it comes to pre-existing contractual relationships. The decision in Epistar Corp. v. International Trade Commission involves one such blended family tale. There, after a merger, the alleged infringer found itself with separate licensing agreements that both prohibited and allowed invalidity challenges in future litigation with the same patent holder. The patent holder claimed the agreement that precluded invalidity challenges governed and the International Trade Commission agreed. The Federal Circuit reversed and remanded, finding that the merger, in and of itself, was not enough to prevent the invalidity defense from coming to the dance.

The patent at issue in Epistar covered technology for LEDs. Both alleged infringer Epistar and the company with which it merged (UEC) had entered into settlement agreements with the patent holder in prior infringement actions. Epistar agreed to pay a licensing fee for certain products, but retained the right to challenge the patent if the patent holder sued Epistar in the future. In its license, UEC agreed (prior to the merger) that neither it, nor its successors, could challenge the validity of the patent at issue.

The International Trade Commission ruled that the agreement UEC had with the patent holder precluded Epistar from contesting the validity of the patent at issue with respect to any UEC or Epistar product. However, the Commission failed to acknowledge the separate agreement Epistar had with the patent holder which preserved Epistar's right to challenge patent validity with respect to Epistar's products. The Commission later explained that though it had failed to take into account the Epistar license, Epistar could not challenge the decision because it became final when the Commission declined review.

On appeal, the Federal Circuit overturned the Commission's final determination and found that the agreement Epistar had with the patent holder governed its right to contest the validity of the patent with respect to its products. The patent holder could not use the UEC agreement to gain any further preclusion because that agreement only covered UEC product lines. Because Epistar's separate agreement clearly preserved Epistar's right to contest the validity of the patent in other contexts, the patent holder could only limit Epistar from asserting patent invalidity as to the product lines it acquired from UEC. It could not use the UEC preclusion agreement to reach products that agreement didn't cover. In other words, the patent holder could only preclude Epistar to the extent which UEC was formerly limited.

Epistar's moral? You can't use a merger to cram one license agreement's claim preclusions into a separate agreement in order to encompass a successor's products. Instead, both sides to a license agreement (even one negotiated in the throes of litigation) need to remember that corporate mergers, marriages, dissolutions and divorces are a fact of modern life and to plan accordingly. Then, one hopes, patent holders and the alleged infringers who have become their licensees will have an agreement that fits so that both can live happily ever after.

On Your Mark

admin — Wed, 29 Apr 2009 14:46:00 GMT

Trademark holders, start your engines! - Internet search engine that is. After the Second Circuit's decision in Rescuecom Corp. v. Google Inc., trademark holders may finally be able to go after entities like Google for trademark infringement. Don't race off to the courthouse just yet though. Taking the facts alleged in the complaint as true (as required on the appeal of a 12(b)(6) motion), the Rescuecom court found that Google's sale of Rescuecom's mark to its competitors as an Internet search term constituted a "use in commerce" sufficient to state a claim under the Lanham Act. However, Rescuecom can only succeed on that claim if it can prove that Google's use of its trademark is likely to cause confusion.

Rescuecom's claims arose out of the way Google sells ads. Google identifies important Internet search terms and then sells them to its advertisers as "keywords." An advertiser's purchase of a particular keyword causes the advertiser's ad and link to be displayed (along with other results) on the user's screen after the term is entered into the Google search engine. Google gets paid when the user clicks on the link to connect to the advertiser's Web site. Google uses a Keyword Suggestion Tool to help advertisers identify terms that consumers are likely to use when doing searches related to the advertiser's areas of commerce. Google used its Keyword Suggestion Tool to sell Rescuecom's mark to Rescuecom's competitors.

In its complaint, Rescuecom claimed the Google advertising system infringed its trademark rights. Relying on the decision in 1-800 Contacts, Inc. v. WhenU.com., Inc, the lower court dismissed Rescuecom's complaint for failure to state a claim on the grounds that Rescuecom did not show Google's "use in commerce" of its mark. Reversing, the Second Circuit stated that the 1-800 decision was never intended to stand for the proposition that the use of a trademark in an internal software or computer directory would always be insulated from consideration of "use in commerce" and trademark liability.

Rather, because Google displays and offers Rescuecom's mark to its advertising customers when selling its advertising services and actually recommended and sold Rescuecom's trademark to advertisers, "use in commerce" sufficient to satisfy the requirements of the Lanham Act occurred. The court said nothing about the medium where the mark is in use changes that, and any other reading of the "use in commerce" language violates logic and the intent of the trademark laws. (The court also authored a lengthy "dicta" appendix addressing the confusion surrounding the term "use in commerce" in trademark cases.)

Trademark holders may want to wait out the rush to gain front-runner status after Rescuecom. There's a myriad of uncertainties left to be decided in the remanded Rescuecom litigation. In order to succeed on its trademark infringement, Rescuecom will need to show that consumers are likely to believe, mistakenly, that the ads or Web sites generated from Google's keywords are sponsored by, or affiliated with Rescuecom. How well Rescuecom meets that challenge - along with the individual circumstances of any trademark infringement litigation under contemplation - will determine whether such follow-on litigation unnecessarily "jumps the gun."

The best bet for the long run when it comes to Rescuecom inspired trademark infringement litigation? Whether pursuing or defending a claim, "Get Set" by seeking the advice of experienced intellectual property counsel before giving your battle "Go!"

Patent-'Round-the-Rosy

admin — Wed, 15 Apr 2009 21:08:00 GMT

Is Larson Manufacturing Co. v. Aluminart Products Ltd. the end of what has been, for some, the classic patent game of asserting inequitable conduct? In an effort to stop one of the favorite pastimes of some accused infringers, the Federal Circuit in Larson puts a pox on lower courts' use of loose evidentiary inferences when considering claims of deceptive intent. It's too soon, however, to shout "All fall down." The court's comments on the issue of deceptive intent were dicta, issued as "guidance" to the lower court on remand following a determination that the dismissal of the patent holder's infringement claims on inequitable grounds was not supported by material evidence. Further, the concurrence points out the flaws of the entire test used to decide inequitable conduct cases and calls for an en banc review and recasting of the same-leaving pocketfuls of unresolved questions when it comes to inequitable conduct.

The patents at issue in Larson covered a retractable screen door system. The alleged infringer claimed inequitable conduct during two patent reexaminations and in the infringement action brought by the patent holder. The district court dismissed the patent infringement claims on grounds of inequitable conduct because it found that the patent holder had intentionally withheld material information during one of the reexaminations. The Federal Circuit found that the district court was mistaken as to the materiality of some of the information at issue and that, therefore, its finding of inequitable conduct could not stand. Vacating the lower court's dismissal, the Federal Circuit offered some instructive guidance on how to address the issue of deceptive intent when reviewing the remaining two material nondisclosures on remand.

The court said "materiality does not presume intent and nondisclosure, by itself, cannot satisfy the deceptive intent element." Rather, the party alleging it bears the burden of proving intent with clear and convincing evidence. Courts should also consider any evidence of good faith which points away from deceptive intent. Only then, once a satisfactory threshold level of intent has been established, should courts engage in the final step, balancing materiality and intent, with a higher level of materiality permitting a lower level of intent and vice versa.

Larson makes clear that courts are not going to "spot" litigants' intent. Now, more than ever, proving inequitable conduct will require a fully developed record and litigants must plan on mustering sufficient evidence to make out intent. Relying on inferences alone won't work because the patent holder is sure to counter with evidence of good faith. Moreover, if an inference is to be used, not only must it be based on sufficient evidence and be reasonable in light of that evidence, it also must be the single most reasonable inference able to be drawn from the evidence to meet the clear and convincing standard. This sets the bar pretty high, and means that litigants need to come prepared to marshal all the facts and counter inferences helpful to the other side.

Our spin? Inequitable conduct claims have never been child's play, and with Larson they are now about as welcome as the plague. Unless and until another decision on the topic comes along, Larson may mean that any but the most egregious and material of such claims will quickly find there's little chance of remaining standing once the patent litigation music stops.

Patent Karma

admin — Thu, 05 Mar 2009 19:23:00 GMT

Who needs yoga when there's patent litigation? The Federal Circuit's decision in Revolution Eyewear Inc. v. Aspex Eyewear Inc. shows how holding on too tight can endanger the very thing to which one is attached. In Revolution Eyewear, the patent holder wouldn't release the right to claim patent infringement in the future even though it tried to conclude the litigation by offering a covenant not to sue. Using the wisdom of the ancients (and the decisions in MedImmune and Sandisk) the Federal Circuit found that the defendant still had standing to bring a declaratory judgment for patent invalidity and non-infringement in large part because of the time-limited nature of the proffered covenant. By refusing to let go, the patent holder ended up imperiling the very patent rights it sought to protect.

Heavy.

The Revolution Eyewear patent holder claimed infringement of a magnetized system used to connect a removable sunglass overlay to a pair of eyeglass frames. The years-long litigation history included an early summary judgment and previous trip to the Federal Circuit. Shortly before trial on all claims was scheduled to begin, the patent holder tried to end the lawsuit (including defendant's declaratory judgment action for invalidity and non-infringement) through the offer of the date-limited covenant not sue. Reversing the district court's dismissal of defendant's declaratory judgment action, the Federal Circuit found that defendant had shown the continuing existence of a justiciable controversy.

The court's decision rested in large part upon the fact that the proffered covenant only released infringing conduct through the date of dismissal of the suit. Though the defendant had pulled its allegedly infringing product from the market "out of an abundance of caution," it still had a large quantity on hand. Defendant showed that it could quickly return its product to the marketplace and would do so upon a determination of the patent's invalidity. During oral argument, the patent holder admitted that it would return to court if defendants re-introduced the product after the suit's dismissal and "refused to repudiate suit for future infringement."

The court said that, while the patent holder certainly had such a right, its retention preserved the controversy at a level-under MedImmune and Sandisk-of "sufficient immediacy and reality" to allow the defendant to pursue its declaratory judgment action. The court emphasized no actual infringement or active preparation to infringe was necessary for the justiciable controversy to exist.

Revolution Eyewear demonstrates the new powers held by accused infringer to control the pacing and the initiative in a dispute. By thoroughly considering both the timing of counterclaims and decisions as to how and when to bring products and designs on (and off) the market, accused infringers can gain a distinct strategic advantage.

Remember too that under the "totality of circumstances" test, the history and tenor of the litigation, and the clarity and definiteness of the record with regard to future business plans and litigation intentions takes on great importance. In the end, this record will be the dividing line between prohibited "advisory opinions" and actual controversies.

Patent holders seeking to temper this power are reminded that covenants not to sue are not necessarily fail-proof. Courts will look at the precise coverage intended by covenant and hold the patent holder to it-even if it means finding that the parties still have on ongoing controversy to resolve. One thing is certain: lack of clarity here will almost always lead to an unintended result.

More than ever, patent holders should meditate upon the consequences of rattling the litigation saber. A well-executed declaratory judgment may end up transforming unmindful patent litigation into the very thing that causes a next incarnation of patent invalidity-a rebirth no patent holder is interested in.

Sometimes It's Not What You Say...

admin — Tue, 03 Feb 2009 15:56:00 GMT

. . . It's who says it -- at least when it comes to patent attorneys offering expert testimony in an infringement case. In Sundance, Inc. v. Demonte Fabricating Ltd., the district court allowed a patent attorney to testify on issues of infringement and validity even though the attorney had no expertise in the technology covered by the patent. Reversing, the Federal Circuit said the evidentiary requirements regarding expert testimony apply to all experts, even patent attorneys. The court said that unless a patent lawyer also happens to have separate technical qualifications, any testimony from that attorney on technical issues is improper and thus inadmissible. Interestingly, the panel then looked to KSR and determined that it could decide the issue of obviousness itself -- because the technology the patent covered was "simple."

Who says it, indeed.

The patents in Sundance covered a retractable, segmented cover system for trucks, swimming pools and other structures. After trial of patent holder Sundance's infringement claims, the jury found the patent infringed, but also found it invalid for obviousness. The trial judge vacated the jury's determination and held that the patent was not obvious as a matter of law. Defendant Demonte appealed.

Before reaching the question of obviousness, the Federal Circuit took the opportunity the case presented to review the role of experts in patent cases. The court emphasized that the Supreme Court's decision in Daubert applies equally to patent cases, just as it does in other kinds of litigation. Nothing within patent law excuses courts from the "gate keeping" role they have under Federal Rule of Evidence 702 to ensure that expert testimony in such cases is both reliable and relevant. And patent lawyers, as a class of experts, do not get a pass; they may, in fact, draw greater scrutiny.

Here, the court said, the trial court violated that standard and abused its discretion by allowing the patent attorney to discuss issues regarding "ordinary skill in the art" when the patent attorney had no expertise in tarps or covers. The Sundance court said that letting persons with no skill in the pertinent art testify as experts "serves only to cause mischief and confuse the factfinder." Except for those rare instances where a patent lawyer is also a qualified expert in the pertinent art, patent lawyers are only qualified to testify on general patent office practice and procedure. Even though patent attorneys may have gained technical expertise practicing patent law, that, in and of itself, is insufficient to qualify them as technical experts under Rule 702.

Once the Federal Circuit excluded the testimony of defendant's expert, the jury's obviousness holding lacked any supporting expert testimony. Nonetheless, following KSR, the Federal Circuit still was competent to determine obviousness on its own, particularly given the relative simplicity of the "technology" involved.

Looks like your mom is right (again). When it comes to expert testimony in a patent case, how you say it might just prove to be the difference in whether or not what your expert has to say gets heard. Cross that fellow member of the patent bar off your witness list and find someone with the requisite level of experience in the relevant technical field to testify instead. Otherwise, as in Sundance, you might just find that the expert testimony you thought would be so compelling has, instead, fallen on deaf ears

Holistic Medicine - For Patents

admin — Mon, 26 Jan 2009 20:08:00 GMT

We all like certainty - especially in the patent law. But Ricoh Co. Ltd. v. Quanta Computer Inc. offers anything but bright lines in discussing § 271(b) inducement and § 271(c) contributory infringement claims. In a divided decision, the Court instructs us that the totality and context of relevant circumstances is the touchstone with respect to indirect infringement.

In Ricoh, the district court concluded that no contributory infringement had occurred because the optical disk drives sold by Quanta could be used to read discs in a non-infringing manner, even though the process for writing to the disc was infringing. But the Federal Circuit disagreed because contributory infringement applies not only to the sale of an individual infringing component but also to the sale of infringing components that are part of a larger downstream device. To hold otherwise would allow infringers to unfairly escape liability by using an infringing component in a larger product containing some additional, separable - but non-infringing - feature or capability.

On induced infringement, the Court was again pragmatic, if not holistic. The district court had rejected any claim of induced infringement by relying in large part on the fact that there was no evidence of any communication between the defendant and the direct alleged infringer. But the Federal Circuit said that intent to induce infringement can be inferred from circumstantial evidence - including defendant's knowledge of the patent and its control over the design or manufacturing of the product used for direct infringement to infer the requisite specific intent. Here, Ricoh showed that Quanta knew of the relevant patents, designed a similar separate write-only drive system and then made presentations to customers that touted the advantages of those drives.

Our prognosis? It's about risks - not bright lines. Litigants need to deal with the concept that the more the product seems to have a distinct component whose sole use is in practicing some portion of the patent, the more likely there will be contributory infringement. And the more substantial the record that development of an accused product occurred outside a clean room, the more likely there will be legitimate inferences of intent to induce infringement. Our prescription? Read Ricoh and call us in the morning.

Night of the Living Dead Letter

admin — Thu, 08 Jan 2009 19:13:00 GMT

Beware the Curse of the Zombie Opinion-of-Counsel Letter! In re Seagate -- and the changes it made to the standard for willful infringement - seemed to kill off such creatures. Now, the Federal Circuit's decision in Broadcom Corp. v. Qualcomm, Inc., brings them back to life. Swirling out of the mists of the law of induced infringement, the Opinion-of-Counsel Letter has risen from its crypt, bringing new terrors to alleged infringers everywhere . . . .

In Broadcom, the jury returned a verdict that Qualcomm had willfully infringed and induced the infringement of Broadcom's patents for 3G mobile phone technologies. Qualcomm had elected to maintain its attorney-client privilege rather than introduce the opinion-of-counsel letter prepared by its attorneys in response to Broadcom's willful infringement claim. After the trial court set aside the jury's willfulness determination in the wake of Seagate, Qualcomm chose to accept the jury's verdict on liability and damages rather than have a new trial on all issues, including the willfulness question. After the court's entry of an injunction, Qualcomm appealed.

On appeal, Qualcomm argued that Seagate required a change in the rules for determining infringement claims based on inducement. Before Seagate infringers had an "affirmative duty of due care" to avoid willful infringement, and opinion-of-counsel letters often served as evidence of the exercise of that duty. When Seagate eliminated that duty, it looked like the need for opinion-of-counsel evidence had also been killed off. Qualcomm claimed the trial court had erred in its instructions regarding conclusions the jury could draw from Qualcomm's failure to offer its opinion-of-counsel letter. Qualcomm argued that it could not be liable for inducement if it was not liable for willfulness since the specific intent standard for inducement is greater than the recklessness associated with willful infringement.

The Federal Circuit rejected these arguments. The Court found the inducement standards unchanged since its opinion in DSU Medical. Under DSU, proof of induced infringement, under 35 U.S.C. § 271(b), requires evidence that the accused infringer "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 Broadcom panel held that inducement may be found even when willfulness is absent.

And what specter rose out of its Seagate grave to satisfy those evidentiary requirements? The Opinion-of-Counsel Letter - or, more specifically, the failure to obtain (or offer) such evidence when faced with an induced infringement claim. The court said it "would be manifestly unfair to allow opinion-of-counsel evidence to serve an exculpatory function . . . and yet not permit patentees to identify failures to procure such advice as circumstantial evidence of intent to infringe." In the end, the Federal Circuit invalidated one of the patents, but left the district court's judgment and injunction standing.

From the perspective of an alleged infringer, Broadcom offers plenty to keep the accused infringer up at night. Spooky: A close reading of Broadcom might lead to the conclusion that the "specific intent" requirement of inducement is not so specific. Spookier: An alleged infringer in an induced infringement action who can't conjure an Opinion-of-Counsel Letter may not stand a ghost of a chance. Spookiest: No one can say what previously discounted claim or defense might next rise up to join the Opinion-of-Counsel Letter among the ranks of the "undead."

The Pompatus of Silence

admin — Fri, 12 Dec 2008 17:00:00 GMT

After the most recent decision in Qualcomm Inc. v. Broadcom Corp., patent law may need a new word^[1] to describe the specific consequences of silence in the face of a duty to disclose patents while participating in a standards-setting organization ("SSO"). Such silence by the patent holder in Qualcomm-along with some genuinely shocking litigation shenanigans-resulted in the Federal Circuit finding an implied waiver of patent enforceability against those practicing the standard set by the SSO. The Qualcomm court also looked to evidence of Qualcomm's pre-suit business misconduct to affirm an award of §285 "exceptional case" attorneys fees. Though the Federal Circuit had previously disallowed consideration of pre-suit conduct, here it said the evidence served as a predicate for understanding and evaluating other litigation and trial misconduct.

Ooo eee baby, that don't sound like a good time.

The patents at issue in Qualcomm covered video compression technology. Patent holder Qualcomm brought a suit against Broadcom alleging patent infringement. Broadcom's affirmative defense claimed the Qualcomm's participation in the Joint Video Team (JVT) SSO-whose purpose was to develop "a simple royalty free baseline profile" for industry members-made the patents unenforceable.

Throughout the litigation and trial, Qualcomm claimed it had not participated in setting the relevant standard (known as H.264) and that it had no responsive relevant evidence. However, on the last day of trial, the testimony of a Qualcomm witness led to the discovery of more than 200,000 pages of additional e-mail and other documentary evidence. This previously undisclosed information showed that Qualcomm had fully participated in setting the H.264 standard and that it had intentionally shielded its patents from the SSO so that it could later obtain royalties from products that complied with the standard. (Qualcomm's efforts regarding concealment of the evidence also resulted in multiple sanctions for its trial team and generated other oft-cited opinions).

Because Qualcomm allowed the standard to be developed using technologies covered by its patents, the Federal Circuit found that equity required that the patents be rendered unenforceable against those using the standard "until the misuse is purged"-a lessening of the consequence ordered by the district court which had held the patents unenforceable "against the world." The Qualcomm court used implied waiver as the specific doctrine for its order because it found that Qualcomm had breached a duty (both explicit and as understood by the participants of the SSO under Rambus) to disclose its relevant technology.

Note that the Federal Circuit had no time for Qualcomm's argument that consideration of Broadcom's affirmative defense regarding enforceability was improper because the jury had returned a verdict of non-infringement. Given the right circumstances, savvy defendants can use Qualcomm's teachings to gain considerable leverage in a case, including posturing for settlement. By persisting in an unenforceability defense (even when there's a finding of non-infringement) a defendant can convey to the patent owners that it faces exposure beyond a finding of non-infringement.

Qualcomm's consideration of pre-suit conduct in its award of attorney's fees to Broadcom also offers a framework for getting courts to look at events that occur before the litigation as evidence. By linking such pre-litigation bad conduct to misconduct that occurs during the trial, litigants may be able to create a compelling picture that what happened at trial is the culmination of a coordinated practice of bad conduct by a bad actor. With Qualcomm, both the patent and the patent holder then become the joker and both must face the music.

[1] For a full discussion of the etymology of the word "pompatus"(sometimes spelled "pompitious") please see; http://www.straightdope.com/columns/read/972/in-steve-millers-the-joker-what-is-the-pompatus-of-love

There is a Madness to the Method

admin — Mon, 03 Nov 2008 19:58:00 GMT

The Federal Circuit issued an en banc decision in In re Bernard L. Bilski late last week, making clear that for every action, there is an equal and opposite reaction. While theoretically leaving alive the prospect of valid business method patents, the Court made clear that unless a process claim is "tied to a particular machine or apparatus" or "transforms a particular article into a different state or thing," the reaction is scientifically certain - no patentable subject matter.

Bilski applied for a patent that claimed, among other things, a method for hedging risk in the field of commodities trading, although the application extended the claim to other non-commodity transactions. The Examiner rejected the claim as an abstract idea. While the Board of Patent Appeals concluded that the Examiner's test (requiring technological arts and a specific apparatus) was erroneous, it also determined that the application was nonetheless nonpatentable because it merely claimed an intangible idea (in this case "transformation of risks") and thus was not patentable subject matter under the "process" component of Section 101.

The Federal Circuit brought its own method to the process.

Machine-or-Transformation Test

The Federal Circuit identified the critical inquiry as whether the claim recites a fundamental principle and, if so, whether it would pre-empt substantially all uses of the fundamental principle. More simply, the query is whether the claim is narrow enough to encompass only particular applications of a fundamental principle rather than preempting the principle itself. Claims directed to a particular machine or apparatus, or that transform a particular article into a different state or thing, are "surely patent-eligible" because they would not preempt all other uses.

While previously the Supreme Court precedent may have been equivocal as to the machine-or-transformation test, the Federal Circuit put all such equivocation to rest by adopting the machine-or-transformation test as the sole test for governing patentability under Section 101, repudiating the "useful, concrete, and tangible" test from its State Street decision -- at least for the time being, while leaving room for future refinement to its newly announced method:

"Nevertheless, we agree that future developments in technology and sciences may present difficult challenges to the machine-or-transformation test, just as the widespread use of computers and the advent of the Internet has begun to challenge it in the past decade. Thus, we recognize that the Supreme Court may ultimately decide to alter or perhaps even set aside this test to accommodate emerging technologies."

As scientific discoveries continue, apparently so might the method of analysis announced in Bilski.

Bilski Method Applied

The Bilski application for a method to hedge commodities risk did not transform any article into a different state or thing. Because it failed to meet the machine prong as well, it is not patent-eligible subject matter. The claim constituted a purely mental process that would preempt the use of mathematical calculations to facilitate hedging.

A limitation in the claim limiting it to the field of consumable commodities was not a sufficient limit to salvage the claim's patentability. The Federal Circuit addressed the generally-insufficient addition of a field of use limitation designed to curtail the scope of an otherwise-preempting fundamental principle. In drawing a distinction between the use of a fundamental principle in a particular field of art rather than for a particular use, the Court noted that only the latter scope is patentable, while the former is not.

Bilski Practical Tips:

Where an algorithm or formula is central to the innovative idea, ensure that that the claims are directed to a particular apparatus -- perhaps using dependent claims (e.g., separate claims in which the fundamental process is related to a machine, such as a computer, a calculator, a slide rule, an abacus, and so on).
Even without a particular apparatus or machine, draft claims to highlight the transformative nature of the process.
In litigation, Bilski will place a premium on construing limitations in method claims that are arguably directed to particular tangible applications or uses.
Litigants unsatisfied with the likely results of a machine/transformation test will have to start early to develop case themes and a discovery record to demonstrate why the test is insufficient and so take advantage of the Court's willingness to consider "future developments in technology."
Given the Court's warning that Sections 102 and 103 considerations are not relevant to Section 101, litigants will have to exercise care and vigilance in developing discrete records for each statute, especially given a likely overlap among the facts that bear on all three issues (e.g., "surprise results" may have bearing on both the "transformation" prong and a Section 103 obviousness analysis).

Perhaps there is a method to the madness. E = mc² is an important scientific discovery. It's just not patentable.

Tilt

admin — Wed, 15 Oct 2008 01:00:00 GMT

In Aristocrat Technologies, Inc. v. International Game Technology, the accused infringer thought they'd hit the jackpot by convincing the district court to hold a patent invalid due to "Improper Revival" during patent prosecution. The district court paid out on the defense and granted summary judgment on the defendant's behalf. On appeal, the Federal Circuit invoked house rules and held that procedural irregularities in the prosecution of a patent just isn't in the hopper of defenses available under § 282 of the patent code--and took the win away.

The patents at issue in Aristocrat covered electronic slot machines technologies. During prosecution, the patent holder missed a payment by one day and the PTO mailed a notice of abandonment. The patent holder filed a petition to revive the application, claiming that the delay was "unintentional." The PTO granted the petition, the first patent issued, and then a related second patent subsequently issued.

The patent holder sued for infringement of both patents. The accused infringer argued that the patent holder had failed to show an "unavoidable delay" (required by the regulations) when it revived its patent. It claimed this failure meant the patent application had been improperly revived and that the application should be deemed abandoned, thereby invalidating the first patent and anticipating the second one. The district court agreed and entered its summary judgment ruling.

Reversing, the Federal Circuit held that an "Improper Revival" defense wasn't in the cards. The Aristocrat court said that prosecution defects aren't available as an invalidity defense because such defenses are expressly limited to novelty, utility and non-obviousness, the "conditions of patentability." Nor could the defendants avail themselves of § 282's catch-all provision. The court ruled that the provision--which covers "any other fact or act made a defense by this title"--applied only to an action made a defense by the title, and nothing in the code expressly recognized Improper Revival of an abandoned application as a defense.

The court emphasized that its ruling was not intended to excuse conduct rising to the level of prosecution laches or inequitable conduct, particularly when the conduct alleged includes any affirmative misrepresentation of material fact coupled with an intent to deceive. Interestingly, the Federal Circuit expressly avoided the question of whether an "unintentional" delay amounts to an "unavoidable" delay under the code.

For the Aristocrat court, the defendant's argument turned out to be no better than a wooden nickel. The decision shows that to have a winning combination, creative requests to extend the law need to be grounded on a proper consideration of the entire statutory framework and the canons of statutory construction. Aristocrat also shows the importance of not gaming the PTO system. Here, there was ample evidence that the patent holder's failure to make the timely payment was an honest mistake--not an effort to get around procedural rules the Federal Circuit respects. Other facts may have edged the court into a consideration of the equities involved--even in light of the court's recent decision in Star Scientific Inc. v. R.J. Reynolds Tobacco Co.

And all patent gamers should take note of what Aristocrat didn't decide. Did the patentee's conduct truly satisfy the code? Is something "unintentional" sufficiently "unavoidable" to satisfy the Patent's Office regulatory requirements? These questions remain unanswered and a defense of "Improper Revival" may be available before the PTO, even if it isn't in district court. This may give new impetus to reexamination proceedings as accused infringers may be willing to wager that "Improper Revival" will become patent law's latest one-armed bandit - at least in the right casino.

Up in Smoke

admin — Mon, 29 Sep 2008 16:22:00 GMT

Death of lower court victories can be a side effect of appeals, so perhaps the accused patent infringer in Star Scientific Inc. v. R.J. Reynolds Tobacco Co. shouldn't have inhaled their district court win. RJR, the accused infringer, obtained an order for summary judgment in the district court based on the inequitable conduct of patent holder Star Scientific. On appeal, the Federal Circuit made RJR cough up that win. It found that RJR had failed to meet the requisite burden of proof on intent to deceive and sent the case back to the district court for further consistent proceedings-a reversal and remand that surely had to burn.

In Star Scientific, the patents at issue covered a process for curing (drying) tobacco in a way that significantly reduced dangerous chemical by-products. At the center of the dispute was a letter from a Star scientist conveying information that certain foreign tobacco already existed with lower levels of nitrites-the chemical by-product the patent claimed to eliminate. RJR alleged that Star switched law firms in the middle of the patent prosecution in order to avoid disclosing the letter. Star representatives testified that the change was motivated both by the death of a partner at its first firm and its observation of a poor performance by another attorney from that firm in an unrelated prosecution.

Rejecting the testimony as unbelievable, the district found that Star changed law firms in order to "quarantine" the letter from disclosure to the PTO-conduct, it believed, sufficient to demonstrate the requisite deceptive intent necessary to invalidate the patents on equitable grounds. On appeal, the Federal Circuit strongly disagreed and snuffed out the entirety of the lower court's analysis, despite its nod to the district court's ability to make credibility determinations.

Instead, the Star Scientific court reasoned that since inequitable conduct can only be established by clear and convincing evidence and that the accused infringer bears the burden of proof, a patent holder's failure to offer a credible alternative explanation of fact is not enough to shift that burden. Review of the record here showed that RJR had "failed to elicit any testimony or submit any other evidence" regarding a deceptive intent around the disputed letter-despite being specifically asked by the court to do so in supplemental briefing. The record revealed that one key Star witness had never even seen the disputed letter until it was presented to him at his deposition and another was never asked any questions about it. The Federal Circuit said that without any evidence supporting the requisite threshold level of intent, the district court simply did not have the discretion to exercise any equitable inquiry into the patent's enforceability.

And-at least according to Star Scientific -if intent can only be established by indirect or circumstantial evidence (as is often the case), the proffered explanation regarding deception must be the single most reasonable inference able to be drawn from that evidence or the requirements of the clear and convincing standard are not met. Further, patent holders only need to offer rebuttal evidence regarding their good faith once the accused infringer has met its evidentiary burden. Even then, the patent holder may have the right to argue for a "balancing of the equities" to determine whether the conduct alleged was egregious enough to warrant holding the entire patent unenforceable.

With Star Scientific -whose holding takes one of the most conservative recent approaches regarding deceptive intent-patent holders may have an easier time blowing away allegations that their conduct should be construed as intentionally deceptive. We also wonder whether a deposition strategy that might have sought to avoid developing good facts for the other side may have proved fatal in this case. Perhaps the inequitable conduct pack needs a new warning-one that informs accused infringers that their deceptive intent claims could very possibly end up in smoke.

The Long Way Around

admin — Tue, 09 Sep 2008 16:29:00 GMT

Savvy travelers in the land of patent litigation occasionally use the stipulated judgment short-cut to speedy appellate review of the district court's claim construction. In order to have a final, appealable judgment, litigants on this usually expedited route agree that the accused products would or would not infringe (as the case may be) in light of the district court's claim construction. This allows the case to proceed up to the Federal Circuit for review of the claim construction, without wasting a lot of time at the district court litigating under the disputed construction.

However, the decision in Jang v. Boston Scientific makes clear that such stipulated judgments don't always end up in the fast lane. In Jang, the stipulation between the parties failed to explain clearly the impact the disputed construction had on infringement. As a result, the Federal Circuit found it lacked the proper context for a meaningful claim construction. The Court sent the parties to the back of the line, remanding the matter to the district court for further clarification-something parties in a hurry never want to see happen.

The patent holder in Jang may have been the one in a rush. The patents at issue involved cardiac stents and Dr. Jang, the inventor and patent holder, claimed Boston Scientific owed him $100 million under a patent licensing agreement between the parties. Boston Scientific asserted it only owed a smaller $10 million non-commercialization fee. The proper payment owed depended upon whether certain subsequent Boston Scientific products were "covered" under the parties' licensing agreement. Answering that question depended upon the district court's construction of certain claims within Jang's patent.

After the district court issued its claim construction order, the parties entered into a stipulation conceding that infringement could not be shown if the district court's claim constructions were upheld on appeal. Unfortunately, the stipulation did not explain how an appellate reversal of the district court's particular claim construction would affect the infringement dispute. Additionally, the stipulation lacked a factual context for the issues presented by the parties and nothing in the stipulation explained how the disputed claim construction impacted the allegedly infringing products.

The Federal Circuit said these ambiguities required the remand it ordered. Stipulated judgments must meet the same jurisdictional requirements as other judgments. If the court cannot ascertain the basis for the stipulated judgment, it cannot review it, particularly if the ambiguities involved impact the court's jurisdiction. Here, the court could not tell why the accused products did not infringe under the district court's construction or why they would infringe under the alternative construction Jang offered. Without further clarification the court found that appellate review was simply not possible.

Jang makes clear what we've always known: the Federal Circuit won't skip over necessary analysis just because the parties have agreed to the circumstances giving rise to the appeal. Stipulated judgment or not, clear drafting that serves to educate the court regarding the disputed claims and the accused products are always necessary elements for success. Our advice? When it comes to stipulated judgments, patent litigators should follow Jang's road signs that the fast lane is reserved for properly-constructed vehicles.

Dockless

admin — Thu, 21 Aug 2008 18:08:00 GMT

In Proveris Scientific Corporation v. InnovaSystems, Inc., the defendant sought to invoke the so called "Safe Harbor" provisions of 35 U.S.C §271(e) in order to avoid liability for patent infringement. The patent at issue covered a system and apparatus that allowed those seeking FDA approval to provide necessary data demonstrating the efficiency and effectiveness of drug delivery for drugs delivered in an aerosol spray via a nasal pump or inhaler. Defendant manufactured and sold a testing/calibration device that provided essentially the same information by using technology similar to that enunciated in the patent. Defendant claimed that §271(e), which exempts the use of a patented invention solely for uses reasonably related to the development and submission of information to the FDA, sheltered its actions.

The defendant never found a port in the storm for its position. The district court granted JMOL in the patent holder's favor and the Federal Circuit affirmed on appeal.

What sunk the defendant? The fact that neither its device nor the patent holder's was subject to FDA approval-both merely facilitated the process for others. The Federal Circuit noted the almost "perfect" symmetry between the two distortions to patent term that §271(e) was enacted to eliminate. The first occurs when a patent holder's term is unfairly shortened because of the need to obtain FDA approval prior to commercialization. The second happens when the term is unfairly extended at its end by a patent holder preventing competitors from beginning the approval process until after the expiration of the patent.

The Federal Circuit found that research, testing or manufacturing equipment or products ancillary to the FDA's approval process are simply not subject to the distortion of patent terms contemplated by §271(e). Because it did not need FDA approval for its equipment, the patent holder here faced no limitations to use at the start of the patent term. Similarly, no FDA action will hinder the defendant from moving forward when the patent holder's term expires. This similar symmetry meant the defendant could not claim the succor of the Safe Harbor provision.

All litigants in these industries on deck! Even if activity is "reasonably related" to the submission of data to the FDA, a party still faces exposure if a meaningful distinction can be drawn between the "thing" that is being submitted for approval and the materials, systems or equipment used to assist in that process. Participants in these industries would be well served by reviewing the standards and language under the Federal Food Drug and Cosmetic Act to determine whether their inventions -- depending on how claimed -- would be subject to FDA approval.

Note also that its handling of expert testimony is ultimately what capsized defendant's case. Defendant never submitted a formal Rule 26 report for one of its proffered witnesses because it claimed the patent was so simple enough that it did not require expert testimony. Its other proposed expert lacked experience in the relevant area and the district court excluded the testimony of both. Without any contradictory expert testimony regarding the patents validity, the Federal Circuit had no choice but to affirm the JMOL granted to the patent holder.

Clearly, the defendant did not give serious consideration to the role of expert testimony in a patent case, to its ultimate detriment. While litigants are always trying to "simplify" matters for jurors, this case serves as a reminder that properly prepared and qualified experts remain a key part of any patent trial.

The lesson? Chart a course which fails to heed to the current direction of expert winds and risk watching your patent litigation action run aground just like the defendant in Proveris.

On the Block

admin — Wed, 06 Aug 2008 18:44:00 GMT

Chopping block, that is, since the patent holder in Muniauction, Inc. v. Thomson Corp. had its verdict for willful patent infringement overturned and its $77 million damage award eliminated. Changes in controlling case law in the time between verdict and appeal contributed to the reversal; but bad expert testimony and a skimpy record on appeal also helped turn the district court's verdict into nothing more than an inflated appraisal.

Patent holder Muniauction held an electronic methods patent that utilized a conventional web browser to allow municipalities to auction bonds to underwriters over the Internet. Because of the web browser, bidders could monitor the auction and the status of the current best bid. Alleged infringer Thomson held the patent on the prior art which operated in much the same manner but required the use of proprietary software in order for bidders to participate in the bond auctions.

Following the verdict in Muniauction's favor, Thomson appealed. While the appeal was still pending, the Supreme Court issued the KSR decision regarding the test for obviousness under § 103. The Federal Circuit also issued opinions which changed the standards for willful infringement (Seagate) and for evaluation of infringement in multi-party method patents (BMC Resources).

The district court's verdict simply couldn't survive review under these new standards. Because obviousness is a question of law, the Federal Circuit gave no deference to the jury verdict or the district court's conclusion. Muniauctions's expert had admitted that key patent claims were essentially identical to the prior art except for the use of the web browser. Relying on KSR, the court held as a matter of law that the web browser improvement was nothing "more than the predictable use of prior art elements according to their established function." Worse, additional damaging testimony from patent holder's own expert negated important conflicting evidence from the PTO regarding validity. Attempts to show secondary indicia of non-obviousness were also dismissed because the court found no sufficient connection to the claims under review.

Further, though the Federal Circuit acknowledged that certain asserted claims were not obvious even under KSR, it found those claims not to be infringed. BMC Resources demands the presence of a single controlling "master mind" in order for there to be infringement in process patents requiring in-put from multiple parties. Reviewing the record, the Federal Circuit determined that alleged infringer Thomson did not exert that kind of control in the process under review and could not, therefore, be found liable for direct infringement.

The case serves as a stark reminder that the law does matter and litigants need to build their case around the key legal principles at issue. This includes recognizing unsettled areas of the law and anticipating potential changes in the law adverse to the litigant's position. With regard to obviousness, the requirement of a nexus between the invention and the secondary indicia of non-obviousness is nothing new, yet its importance in the obviousness calculus has been heightened in the wake of KSR. Nevertheless, the plaintiff apparently relied upon a fairly sparse record regarding these factors, focusing upon features and functionality of the commercial embodiment that were not directly implicated by the claims. Equally important, the patent holder did not help its case by conceding how close the prior art was to the claimed invention; by not precisely tying further expert testimony regarding the scope of prior art to the actual claim language, the plaintiff and its expert gave the defendant an opening that the Federal Circuit ultimately seized upon.

Our advice? Heed the teachings of Muniauction or risk Federal Circuit review ending with the pronouncement that a prior district court victory is now "going, going GONE!"

Cat in the Vat

admin — Mon, 21 Jul 2008 18:14:00 GMT

Look at that! Look at that! Prong Two just stepped in on the mat-or, perhaps more precisely, it showed up in the Federal Circuit's decision in Cat Tech LLC v. TubeMaster, Inc. Specifically, in Cat Tech, the Federal Circuit reviewed whether the changes the Supreme Court decision in MedImmune v. Genentech made to the first prong of the test for declaratory judgment jurisdiction in actions brought by potential infringers impacted the second prong of the same jurisdictional test. The test prior to MedImmune required that the declaratory judgment plaintiff (1) have a reasonable apprehension that the patentee will file suit and (2) conduct "meaningful preparation" to conduct potentially infringing activity. In MedImmune, the Supreme Court rejected the test's first prong in favor of a more lenient "totality of the circumstances" review. Until Cat Tech, however, no decision addressed MedImmune's impact on the second prong. Would it, too, have to go?

The answer- "No! No! It does not have to go!"

Instead, Cat Tech found that the second prong of "meaningful preparation" is still intact - at least as a factor working to determine whether a dispute is immediate and real, even under MedImmune's more lenient standards. Meaningful preparation toward potential infringing activity is important (but perhaps not a required element) in this fundamental inquiry because actual steps taken toward infringement are indicators of both "immediacy and reality."

Here, potential infringer TubeMaster had designed four different configurations of a system for loading catalyst into multi-tube chemical reactors similar to that used by patent holder Cat Tech. The patented system used unique spacing to prevent broken catalyst and dust from falling into the catalyst tubes-thereby preventing uneven or incompletely loaded reactor tubes. TubeMaster's designs also used spacing to prevent uneven loading but the spaces were of a different size.

In addition to generating AutoCAD drawings for each of its four configurations, TubeMaster had successfully manufactured one of its configurations and was ready to deliver products under any configuration "within a normal delivery schedule" after receiving an order. Further, the company did not expect to make substantial modifications to its loading device designs after the beginning of production. The court found these actions to be significant, concrete steps sufficient to satisfy the test's second prong. The fact that TubeMaster had not created any sales literature or begun advertising its alternate configurations was a factor to be considered, but did not negate the immediacy and reality of the controversy.

In Cat Tech the Federal Circuit makes clear that declaratory judgment jurisdiction isn't automatic even when immediacy and reality prerequisites are met. Rather, a district court has discretion in deciding whether to entertain its jurisdiction. Here, the court found most persuasive the fact that, without the exercise of the district court's jurisdiction, TubeMaster would have to "bet the farm"- choose between abandoning its catalyst loaders or risk an award of treble damages in an infringement suit from Cat Tech. TubeMaster convinced the Federal Circuit that its situation was precisely the type of dilemma the Declaratory Judgment statute was intended to ameliorate.

Cat Tech certainly adds a new dimension to the post-MedImmune declaratory judgment landscape. Practitioners on both sides of the patent law aisle will want to take its lessons under serious advisement because:

Whether it's a prong or circumstance of the totality,
Expect a DJ when the controversy becomes reality.