APaTS : Enforceability

Journalism 101

admin — Mon, 10 Aug 2009 13:17:00 GMT

Budding members of the fourth estate are schooled in the art of information gathering through the use of the formula known as the "five W's" - who, what, when, where, why and how (go figure on the "how" part . . . it's journalistic license). Although lawyers and the press have been known to clash from time to time, the Federal Circuit has recently adopted this journalistic rubric as the yardstick for evaluating the pleading requirements of inequitable conduct allegations.

In Exergen Corporation v. Wal-Mart Stores, Inc., the Federal Circuit affirmed the district court's denial of a motion for leave to amend to assert a charge of inequitable conduct. Specifically, the court ruled that, in order to plead allegations of inequitable conduct with the requisite particularity, "the pleading must identify the specific who, what, when, where and how" related to the alleged material misrepresentation or admission. Apparently, seasoned patent practitioners can still learn a thing or two from their non-lawyer colleagues.

The case involved Exergen's patents for infrared thermometers. The defendants challenged Exergen's claim on non-infringement, validity and enforceability grounds, and the bulk of the opinion is directed to the first two defenses. However, the defendants also sought review of the district court's denial of their motion to add inequitable conduct as an affirmative defense. The proposed amendment was actually fairly detailed, yet the court found it did not pass muster.

The court began its analysis by embracing Rule 9(b) of the Federal Rules of Civil Procedure which requires that allegations of fraud must be plead with "particularity." The court then noted that application of Rule 9(b) to the patent context was controlled by Federal Circuit, not the regional circuits, due to the unique nature of an inequitable conduct charge. Armed with these investigative tools, the judges proceeded to take apart the proposed pleading. First, as to the "who," the proposed amendment referred generally to "Exergen, its agents, and/or attorneys" and did not name a specific individual associated with the application who both knew of the material information and deliberately withheld or misrepresented it. Second, as to the "what" and "where," the new claim failed to identify which claims and which limitations in those claims the withheld references were relevant to, and where in those references the material information was found. Finally, the proffered pleading stated generally that the withheld references were material, but did not identify why that information was material and how an examiner would have used the information in assessing the patentability of the claims.

The court acknowledged that allegations of deceptive intent can be plead generally, but emphasized that a pleading must set forth sufficient facts from which deceptive intent can reasonably be inferred. Ultimately, the absence of such facts in the pleading, while fatal in and of themselves, also doomed the proposed amendment because there was not enough upon which to base a specific intent to deceive. The court reminded the bar that these specific requirements were necessary to avoid situations where "inequitable conduct devolved into a magic incantation to be asserted against every patentee," leading to wasteful and frivolous litigation.

Our take? Allegations of inequitable conduct - where properly supported - are an important responsive weapon in a defendant's arsenal, but pro forma allegations are a disservice both to a lawyer's role as officer of the court and to the ultimate interest of his or her client. In embracing a Rule 9 approach to such allegations, the Federal Circuit reminds the litigants to use an appropriate check list for determining if they have "just the facts," thus serving both these goals.

Rudyard Kipling - who started off his career as a journalist - penned the following poem regarding his experiences as a newspaper man:

I keep six honest serving-men:
(They taught me all I knew)
Their names are What and Where and When
And How and Why and Who.

Like their journalistic colleagues then, lawyers can now rely upon the five W's to keep them honest with regard to allegations of inequitable conduct.

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

The Cost of Cake

admin — Thu, 26 Apr 2007 11:10:00 GMT

The patent law bar is in a dither over the Supreme Court's decision in MedImmune, Inc. v. Genentech, Inc., 127 S. Ct. 764 (U.S. 2007). MedImmune changes the rules for when a patent licensee may use a declaratory judgment (DJ) action to challenge a licensed patent. Before MedImmune, a licensee usually had to stop paying royalties and breach the license in order to bring a federal court action challenging the validity or enforceability of licensed patents-a requirement, it appeared, dictated by the rules regarding subject matter jurisdiction. Under the old rules, there simply wasn't a case or controversy sufficient to support federal court jurisdiction unless the licensee stepped up to the plate and took enough action to create adversity and a "reasonable apprehension" of suit.

The MedImmune decision changes the ante. Now, a patent licensee may remain in good standing under the license and still bring a DJ action to challenge the validity or enforceability of the licensed patent. Under the MedImmune decision it seems unhappy licensees can have their cake and eat it too.

Certainly, licensors can expect a flurry activity in MedImmune's wake as licensees seek to leverage the decision to their advantage, particularly when the license includes a package of patents. Whether through audit, threats, or actual litigation, some licensees may use a MedImmune club to challenge the validity or enforceability of involved patents in order to negotiate lower royalty rates.

Our take? Not so fast.

Many licenses contain contractual provisions stipulating to the validity and enforceability of the licensed patents. How courts will handle these provisions is still anyone's guess. Should they be deemed enforceable, licensee DJ actions and threats thereof will lose much of their possible bite.

Licensors also can and should evolve their license agreements to obviate the potential problems MedImmune raises. Contract language requiring tripled royalties or attorneys fees as a penalty for unsuccessful challenges will certainly reduce frivolous actions. Licensors may also begin to include termination provisions giving them the right to terminate the license for all patents in a package upon a challenge to the validity or enforceability of a particular one.

Licensors may even use litigation itself as a way to control validity or enforceability challenges. Licensors could file a complaint for infringement, which the licensee would answer with a counterclaim asserting invalidity and a counterclaim asserting unenforceability. Getting the desired license would require the licensee to enter into a binding settlement or consent judgment resolving from the outset patent validity and enforceability.

As these and other MedImmune-influenced provisions roll out, licenses will learn that the decision is not the free-for-all many have made it out to be. In the long run, we believe that licensees will still have to pay, and maybe even pay more, in order to have their cake.