APaTS : Induced Infringement

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."

High Wire Act

admin — Fri, 07 Mar 2008 00:09:00 GMT

Consider this a heads up to patent holders thinking of taking a fly at preliminary injunctive relief. In Erico International Corp. v. Vutec Corp. & Wiremaid Products, a split panel of the Federal Circuit seemed to lower the standard of proof necessary to demonstrate invalidity at that procedural juncture. The result? Efforts intended as a warm-up act in the litigation may prematurely move the question of patent validity into the center ring. Without the net provided by the evidentiary standards required at trial, patent holders risk losing more than the motion at hand. With both strategic advantage and persuasive momentum at stake, requests for preliminary relief become feats of bravery fraught with real peril.

The patent holder in Erico didn't appear to be flying by the seat of its pants. The defendants admitted copying the patented design and methodology-a system of using open, flanged "J" hooks to ensure proper tension in the hanging of electrical and communication cables-and the patent holder marshaled significant evidence of secondary indicia of nonobviousness. The district court followed the traditional four part test and granted the patent holder's request for a preliminary injunction, rejecting the defendants' defenses of inequitable conduct, on-sale bar and obviousness.

The Federal Circuit agreed with the district court on the first two defenses. However, the court found that the defendants had raised enough questions regarding the patent's validity on grounds of obviousness to defeat the injunction. To reach that conclusion, the majority in Erico seemed to lighten the burden of proof for defendants claiming patent invalidity at the preliminary injunction stage. It held that evidence which "cast doubt" on the patent and/or demonstrated that the patent at issue "was vulnerable" raised "a substantial question" of invalidity sufficient to deny preliminary injunctive relief. It considered the inventor's own testimony regarding an implicit motivation to combine in the relevant industry particularly important in reaching its determination. Without much analysis of the prevailing abuse of discretion standard of review, the court vacated the injunction and remanded the case for trial.

A vigorous dissent argued that recent case law addressing the issue required a showing of "likelihood of success" on the question of obviousness-less than the "clear and convincing" evidence required at trial, but more than the majority's stated standard. The dissent also took issue with the majority for failing to show any clear error by the district court and for ignoring the evidence the district court did review regarding secondary indicia of nonobviousness.

Erico (and its dissent) spotlight the fact that the Federal Circuit has not yet reached a consensus on the standards to be used for review of questions of obviousness -and the burdens of proof born by each party-when preliminary relief is sought. When in doubt, litigants on either side should prepare a record which meets the standard least favorable to them and then be prepared to shine during oral advocacy. Additionally, secondary indicia and motivations to combine remain critical to an obviousness analysis and patent holders put their rights at risk if they ignore what was going on in the industry at the time of the invention.

Most importantly, Erico illustrates the consequences of ill-timed or ill-executed requests for preliminary relief. When a complete record is either not presented (or ignored) patent holders risk having their litigation spiral into a nose dive from which it may never recover. Whether that's a spectacle you'd rather not watch or the greatest show on earth depends on the location of your seat in the patent litigation bigtop.