APaTS : Infringement

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

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.

Diagnosis: P.E.D.

admin — Wed, 11 Jun 2008 14:43:00 GMT

Life's a little less good for patent holder LG Electronics ("LGE") since the Supreme Court determined in Quanta Computer, Inc. v. LG Electronics, Inc. that P.E.D - the patent exhaustion doctrine - terminally infected its patent infringement claims. The doctrine provides that a patent holder can only obtain one recovery for an infringement. Once that recovery has been made-by way of a judgment or a license-further enforcement is exhausted. Exhaustion has particular application in circumstances where the patent holder licenses the supplier of a component, but then later seeks to enforce its patent against that supplier's downstream customers.

In LGE/Quanta, the patents at issue covered technology associated with the way microprocessors and other devices access memory over a data bus. LGE had licensed its portfolio to Intel, authorizing Intel to make, use, or sell its products practicing the LGE patents without limitation. Notwithstanding this broad language, LGE did not intend that the license apply to Intel's customers; other sections of the license agreement stated that LGE did not grant a license to third parties to combine Intel's products with other items or components to build a larger system. Intel also agreed to give written notice to its customers informing them that the license did not extend to combinations of an Intel microprocessor with non-Intel products.

LGE sought to enforce its patents against Quanta Computer, who had obtained Intel microprocessors and combined them with non-Intel components to build a complete computer system that practiced the LGE patents. Quanta asserted the protections of the patent exhaustion doctrine. In essentially adopting Quanta's position, the Supreme Court made three rulings. First, primarily to prevent mischief with regard to innocent purchasers, it determined that patent exhaustion applied to method claims as well as apparatus claims.

Next, it held that the license of a component part that does not fully practice a patent can still lead to patent exhaustion when the licensed component part "substantially embodies" the broader patent. The Court determined that LGE's license of the component created exhaustion because "the only reasonable and intended use" of the microprocessor was to practice the patent and because it "embodied essential features of the patented invention."

Finally, the Court found exhaustion applied even to those situations where the parties attempted to inoculate against the doctrine by indicating within its license agreement the desire not to exhaust the patents. The Court explained that the primary question was a licensee's authority to sell products embodying the patent-and found no meaningful limitation in the actual grant to Intel; the contrary language in other parts of LGE's licensing agreement was directed to the conduct of third parties.

Patent holders are wondering just how contagious LGE/Quanta will be. The decision provides ample ammunition for defendants in situations where their component suppliers have some form of license. No doubt such downstream defenders will be putting their agreements under the microscope to check for any relevant limitations.

Certainly patent holders will want to try to immunize their licenses by carefully crafting the authorization language in the section granting the license. The Court suggests that a different result may have occurred had those conditions and limitations expressly limited the grant of the license. Licensors should dispense with strategies based upon intent and focus upon the need to clearly delineate limitations on the grant of authority. Alternatively, patent holders could shift their enforcement efforts to customers and end users, rather than component suppliers.

We predict that litigation regarding the circumstances under which an unpatented component may fairly be viewed as "substantially embodying" a broader invention will become chronic. Litigants on both sides will have to look for opportunities to build a record which either marginalizes or trumpets the importance of the unpatented component. Note that the Court chastised LGE for not demonstrating that the microprocessors at issue could be used in a non-infringing way, but offered little in the way of bright line tests for determining when an unpatented component substantially embodies a patent.

Finally, litigants will have to be alert for the availability of breach of contract claims. The Court expressly stated that its decision did not limit LGE's contract rights, if any. In its ever increasing efforts to stem patent litigation, the Court may have shifted the same technologic dispute into a different substantive legal arena. We don't see how an epidemic like that will leave anyone-patent holder or potential infringer-feeling that life's good.

Delay of Game

admin — Tue, 29 Apr 2008 15:55:00 GMT

What's the amount of time necessary to separate a patent holder from an infringement verdict? In O2 Micro International, Ltd. v. Beyond Innovation Technology, Co., Ltd., 32 micro seconds was enough - that is, when combined with district court errors regarding claim construction and equivalency. The Federal Circuit's call? The infringement verdict is vacated and the ball goes back to the district court.

In O2 Micro, the patent at issue involved circuitry for controlling the power made available to the backlights used in laptop computers. The patent holder's technology employed feedback loop signals which served (in part) to prevent circuitry damage by reducing power during unexpected events. Because of difficulties during claim prosecution, the patent holder added limiting language to the claim. The additional language stated that the control provided by the circuits would be enabled "only if said feedback signal is above a predetermined threshold." Defendants used similar circuitry in their products; however, in two modes the circuitry also incorporated both a start-up delay and that 32 micro-second delay. Control continued in both these modes even though the signal fell below the patented threshold.

During pre-trial claim construction, defendants argued that the phrase "only if" should mean "exclusively or solely in the event of" and otherwise allowed for no exception. Agreeing with the patentee, the district court found the "only if" language to be plain English needing no construction. The district court also let the patent holder argue infringement under the doctrine of equivalents, despite the amendment. The verdict form used did not require the jury to specify the basis of the infringement finding it ultimately reached.

On appeal, defendants got a replay on the question of the district court's construction of the "only if" language. Even though defendants did not object to the relevant jury instruction, the Federal Circuit found that they had sufficiently preserved the issue on appeal by raising it during the pre-trial construction hearing. Chiding the district court, the Federal Circuit said that trial court has the responsibility to determine the scope of the language at question when ever a dispute arises regarding a claim term-even if the term has a "plain meaning." The allowance of a claim under the doctrine of equivalents was also erroneous because the district court failed to explain how the patent holder overcame the presumption of prosecution history estoppel.

O2 Micro offers some interesting lessons for the patent litigator's playbook. First, it appears to prevent litigants (and courts) from avoiding tough issues of claim construction, and offers some ammunition to challenge the growing court trend of limiting the number of claims to be construed. While the Federal Circuit "recognized" that the district court can't construe every limitation, it offered no specific rules for this new implementation. Litigants who don't want to see infringement issues collapse into the claim construction process will also want to carefully frame the question by asking "How is the infringing device best characterized as operating?" NOT "What is the scope of the claim?"

Important too, the court's determination that for appeal purposes, defendants need not object to jury instruction if the same issue has been "fully litigated" and decided at the Markman stage of litigation. This more forgiving standard certainly gives greater flexibility to litigants in how they comport themselves during the jury charge phase of a trial. In addition, where a court adopts some intermediate construction (i.e., one which borrows from, but does not completely accept, both sides' constructions) this decision places a premium on understanding one's opponent's reaction/position with regard to the construction.

Do-overs like the one in O2 Micro don't just mean more litigation; they can end up costing the whole game. Whether playing for the offense or the D, patent litigators will want to heed the tactical lesson inherent in the decision or else risk seeing the clock run out on their pending claims.

When Some of the Parts Equal the Whole

admin — Wed, 20 Feb 2008 20:46:00 GMT

You might want to fast forward through more than the commercials on this one-all the best action is in the finale. In TiVo v. Echostar the Federal Circuit engages in page after page of dense claim construction only to deliver the heart of the opinion in a single, concluding paragraph. There, it upheld the jury's entire damage award of $73 million even though it had reversed the jury's determination that patent holder TiVo's hardware claims had been infringed.

How did the Federal Circuit come up with this plot twist?

First, upon review, it upheld the jury's verdict that all of EchoStar's accused devices infringe TiVo's software patent claims. Second, it found that the damages calculation at trial was not predicated on the infringement of particular claims. Enough, the court said, to affirm the entirety of the damages award entered by the district court.

Let's rewind to review the underlying facts. TiVo introduced the world to the time shifting television technologies known as DVR about ten years ago. Since then that technology-which allows television viewers to record, store and playback television broadcasts-has become immensely popular. In 2004, TiVo sued EchoStar for infringement of its hardware and software DVR patent claims. EchoStar operates the DISH Network brand of satellite television and offers competing DVR technologies to DISH Network customers. TiVo has partnered with DIRECTV, DISH Network's biggest competitor.

At trial in the district court, the jury found that EchoStar had infringed both the hardware and software claims of TiVo's patents. The jury then awarded the $73 million in damages and the trial judge ordered a permanent injunction to stop future infringement. The injunction was subsequently stayed pending appeal.

On appeal, the Federal Circuit concluded that EchoStar's competing DVR technology did not infringe TiVo's hardware claims but did infringe the claims of its software patent. The court's unusual construction of the claim term "a" or "an" proved key to TiVo's success. Usually, "a" or "an" are construed to mean one or more. Here the court construed the claim term to "an MPEG stream" as limited to a single MPEG stream because "the context clearly evidences that the usage is limited to the singular."

The jury's damage calculation did not divide out the portion of damages associated with the hardware invention and the portion associated with the software invention. Consequently, the Federal Circuit found infringement of the software claims alone sufficient to sustain the entire judgment. The court also dissolved the stay of the permanent injunction and directed the lower court to assess additional damages based on continued infringement during the appeal.

Kudos to TiVo for understanding that not every starring role requires a speaking part. By not staking to much ground on any particular portion of its damage claim it demonstrated the art of saying best by saying nothing at all and proved that silence truly can be golden.

Interestingly, EchoStar (DISH) issued a press release stating that the injunction was meaningless because its engineers had already developed and deployed "non-infringing" ‘next-generation' DVR software to its customers.

Has EchoStar produced a truly non-infringing technology? Will TiVo trust EchoStar? Is their dispute really over?

Stay tuned here and we'll bring you the answers if, and when they happen.

This Token Good for One Remand

admin — Fri, 11 Jan 2008 22:17:00 GMT

In Hyperphrase Technologies LLC v. Google, Inc., the Federal Circuit gave patent holder Hyperphrase what it needs to take one more trip on the patent litigation merry-go-round - but restrictions do apply. Opponent Google gets off the hook for most of its alleged acts of infringement and the opinion is nonprecedential. Nonetheless, the Federal Circuit's decision-wherein the district court's grant of summary judgment to Google for non-infringement was affirmed in part, vacated in part and then remanded-offers some interesting tactical lessons, particularly to those getting ready for their own appellate ride.

The patents at issue in Hyperphrase covered systems and methods for contextually linking computerized records. Hyperphrase alleged that two Google search-related products-AutoLink and AdSense-infringed its patents. AutoLink serves the general public. It identifies strings of characters called tokens within a web page and automatically turns each of them into a hyperlink to a specific uniform resource locator ("URL"), essentially directing the user's web browser to send the token to Google's servers. Once Google's servers receive the token, it redirects a properly formatted URL to the user's browser to allow access to relevant information from a different source.

The AdSense product is targeted at corporate clients wishing to advertise on the web. It coordinates advertiser content with contextually related web pages. Advertisers supply Google with online advertisements for a fee. When a user accesses a web page, AdSense automatically scans the webpage's content, reading all the words on the page and looking for frequently repeated or recognized combinations of words. From this data, AdSense attempts to discern the general topic of the web page and uses this analysis to select and then display advertisements of likely interest.

The district court determined that summary judgment was appropriate by using restricted constructions of two key patent claim terms. The first term the district court focused upon was "data reference." It construed the term as referencing a link to a single specific record; i.e., one and only one record. Under that definition, the district court found that Google's AutoLink did not infringe because, in many circumstances, the tokens were linked to multiple records and references. Using a similarly restricted definition of the patent claim term "address format," the court determined that AutoLink did not infringe one of the asserted patents which required the use of a common address format by both the processing device and the database.

As for AdSense, the court held that the product's topical and key word analysis did not infringe because it did not directly link any references on the web page to other records, but rather used the analysis of the website as only the initial step in determining whether to link particular advertisements.

On appeal, the Federal Circuit affirmed the district court's decision regarding those patent claims containing the "address format" limitation and further affirmed the district court's decision with regard to the AdSense product. The Federal Circuit reversed and remanded, however, with regard to the issue of infringement of the AutoLink product.

Key to Hyperphrase's (albeit) limited success was its ability to successfully persuade the Federal Circuit that the district court had imposed an unduly narrow claim construction of the term "data reference." First, it focused upon the exact wording of the definition in the patent specification. The specific language used contained no limitations or requirements that a reference be linked to "one and only one" record. Hyperphrase also directed the Federal Circuit to a few examples in the specification whereby a link was made to multiple records. Given these arguments, the Federal Circuit had no trouble determining that the district court had improperly imported limitations from the preferred embodiment onto the claim.

However, the Federal Circuit remanded the ultimate issue of infringement to the district court because there was no record with regard to the presence of any other claim limitation. The Federal Circuit was unwilling to render a determination of infringement without an adequate record. Now, Hyperphrase faces an additional round of briefing and proceedings. Hyperphrase would have been well served to either seek admissions from Google regarding these other elements or to have included within its appellate brief sufficient materials for the court to address the other claim elements. It is unclear whether any of those other claim elements were in dispute, and if so, what steps Hyperphrase took to force the district court to confront those issues as well, under the rationale that claim construction should not be conducted in a piece-meal fashion.

In affirming the district court's decision of non-infringement regarding those patent claims which contained the "address format" limitation, the Federal Circuit did not rely upon any particular construction of the term. Rather, the court focused at great length upon how the AutoLink product operated similarly to the prior art that was discussed in the specification of the patent. In particular, the Court noted that the patent specification had criticized prior art systems which required an intermediate processing step involving address translation, rather than using a common address. The Court thus adopted a very common sense approach to the infringement issue. Litigants often focus upon a fine parsing of claim language to assess infringement, often ignoring the fact that a patent's discussion of how the claimed subject matter is an improvement over the prior art can serve as an effective tool for framing claim construction and infringement arguments.

Finally, the Federal Circuit noted that the district court's conclusion that the AdSense product did not infringe was not based upon any particular construction of the term "data reference," but simply on the fact that neither AdSense's topics nor key words referred to any of the advertisements ultimately linked to them. The Federal Circuit's decision to affirm this conclusion is striking in that it is not tied to any particular claim language, but rather to general characterizations about how the patented system operates. Using an Elvis Presley example, the Federal Circuit noted that a web page dedicated to Elvis Presley's movies could generate an ad for Apple's online music store because both the page and the ad relate in some way to the subject of "rock music artists." The accused product generated this contextual relationship even though neither that phrase nor any words in the actual ad ever appears anywhere on the original web page.

Without going into great detail, the Federal Circuit concluded that the general linking of related topics somehow fell outside the teachings of the patent, or a fair understanding of the word "reference," even under the doctrine of equivalents (e.g., "Both AdSense topics and key words are so far a field of the meaning of data reference as used in the asserted claims that no reasonable fact finder could conclude that AdSense performs substantially the same function in substantially the same way"). The decision does not reflect what type of record, if any, Hyperphrase marshaled with regard to the doctrine of equivalents. However, the cursory treatment by the Federal Circuit suggests that more can or should have been done with regard to this issue. While the AdSense product may not have used the web page content as the sole basis for a linked reference, it clearly had some impact on which advertisement would be ultimately linked to the page. The issue should have been whether the additional steps performed by the AdSense product somehow changed the essential character of the initial step of the analysis. Clearly, how the inquiry was framed had a significant impact on the Court's conclusion.

Hyperphrase's insights into patent litigation practice offers up some interesting strategic guidance for all patent litigation practitioners, making it, we believe, more than worthy of the token of our attention.

Side-Swiped

admin — Mon, 19 Nov 2007 21:01:00 GMT

We know who T-Boned the In re Translogic Technology, Inc. patent holder and their $86.5 million patent infringement verdict. Patent holders everywhere should be on the lookout for one of those new "KSR" cars bearing license plates with the letters "P.T.O." . . .

In re Translogic Technology, Inc. involved a patent covering a multiplexer-a type of complex electrical circuit. Patent holder Translogic initiated infringement litigation against alleged infringer Hitachi Limited in 1999. In 2003, a jury upheld the validity of Translogic's patent. In May 2005, following a finding of induced infringement, Translogic received an $86.5 million jury award for patent infringement damages. After the jury's verdict the district court entered a permanent injunction.

Shortly after the original filing of the district court litigation, Hitachi initiated the first of five third party requests for re-examination of the relevant patent in the PTO. The PTO merged the various requests into a single, separate proceeding which wound its way through the PTO during the pendency of the district court action. In 2004, the PTO rejected a critical portion of the Translogic patent on the grounds that the claims would have been obvious at the time of invention. In July of 2005, following Translogic's attempt at claim amendment, the PTO affirmed its rejection of the Translogic patent.

Various appeals ensued. The federal circuit consolidated them (staying the injunction) and-ouch-went with the PTO's determination. Cleaving to the dictates of the Supreme Court's decision in KSR International Co. v. Teleflex Inc. (while first making short work of a disputed claim limitation), the Translogic court served up a crash course on obviousness.

Patent holders navigating an obviousness-based validity challenge face a rocky road. After KSR, the relevant inquiry is whether differences between the patented subject matter and the prior art would have been obvious at the time of invention to a person of ordinary skill in the art. The old "teaching suggestion and motivation" ("TSM") test for obviousness continues its death spiral. Instead, KSR dictates that "common sense" and "flexibility" take precedence in determining whether an invention is obvious in light of prior art. All prior art is considered part of the public domain and it doesn't matter whether the art that suggests the new invention is in a different field or solves a different problem. As we predicted when KSR first issued, alleged infringers have freer reign to string together disparate inferences from different fields of endeavor to show that all elements of an invention existed in prior art references.

Despite five years of litigation, a jury's verdict and the issuance of a permanent injunction by the district court, patent holder Translogic could not overcome KSR's heavy toll. Translogic attempted to demonstrate that the prior art reference offered by Hitachi taught away from its invention because it involved a logic solution rather than multiplexers. The court disagreed, saying that one with "ordinary skill" in the art (circuitry) would look to logic for likely solutions. Translogic's other attempts to distinguish the prior art met a similar fate-easy dismissal under KSR's requirements that the invention exceed the capabilities of someone with ordinary imagination skilled in the art.

We wonder whether anyone took a wrong turn. The opinion does not discuss whether Translogic told their invention story in an effort to demonstrate the requisite amount of novelty. Nor does it discuss whether Translogic offered evidence of market-based motivations like long-felt need and the failure of others to offer a satisfactory competing product. Still, allowing an alternative proceeding to obviate five years of litigation and the work of the district court should give litigants and their trial counsel pause. Certainly, this decision creates an incentive for alleged infringers to utilize the PTO as an alternative forum for dispute resolution-"tire kicking" that, at best, may further complicate patent litigation and at worst, may have the undesired effect of wasting judicial resources.

Patent holders need to buckle up. Patent litigation has become a much riskier undertaking. Now, more than ever, the foresight of experienced counsel may prove to be the difference between patent holders who walk away from patent litigation and those who crash and burn.

By Any Other Name

admin — Tue, 06 Nov 2007 18:46:00 GMT

Take a whiff of the Federal Circuit's opinion in Paice LLC v. Toyota Motor Corporation. The court-imposed "ongoing royalty" (following a jury decision of patent infringement under the doctrine of equivalents) smells a lot like a compulsory license agreement to us. While the court made sure to distinguish its arrangement from traditional "compulsory licenses"-- where anyone who meets certain criteria has congressional authority to use that which is licensed-the impact is the same. In certain instances, parties in an infringement action who can't or won't agree now face the possibility of a forced, ongoing relationship, the terms of which neither party ever approved.

We've long suspected the potential availability of such a remedy. The facts of Paice reveal the particular circumstances where such court imposed "unions" may arise. In Paice, the patent holder claimed that Toyota's hybrid vehicles infringed its patents for hybrid drive shaft technology. While the jury found no literal infringement, it determined that relevant features of Toyota's hybrid cars (the Prius II, the hybrid Highlander and the Lexus RX 400h) infringed Paice's patents under the doctrine of equivalents. The jury assessed damages at an amount equal to approximately $25 per accused infringing vehicle.

After the verdict Paice sought to permanently enjoin Toyota from further manufacture or sale of the infringing vehicles. The district court applied the traditional four-part test for injunctive relief. It concluded that the situation at hand did not meet the requirements necessary for a permanent injunction-particularly, because Paice could not show irreparable injury as it does not actually manufacture any competing goods. However, rather than leaving the parties to sort out how they would deal with future acts of infringement, the court imposed an "ongoing royalty" for the life of Paice's patent. Under the district court's order, Toyota was required to pay Paice $25 for each of the infringing hybrid vehicles it sold.

Paice appealed, alleging both that the court's order exceeded the authority of the patent statute and that it was entitled to a jury trial to determine the appropriate rate of any ongoing royalty. The federal circuit had almost no trouble addressing either argument.

First, the Paice court reviewed 35 U.S.C §283, which authorizes the imposition of an injunction in order to prevent the violation of patent rights. The query for the court in the instant case was whether "an order permitting use of a patented invention in exchange for a royalty is properly characterized as preventing the violation of rights secured by the patent." (Emphasis in original)

The answer? Yes-but, the court cautioned, not always. Rather, when infringement is present and an injunction is not warranted, district courts should first encourage the parties to negotiate a license agreement themselves. (The concurrence argues that this step should be mandatory-and that district court in the case in chief improperly skipped it). District courts are only to step in and assess a "reasonable royalty" themselves if the parties fail to come to an agreement on their own.

To survive review, the record must reflect sufficient information to determine whether the royalty set by the court meets standards of reasonableness. District courts may take additional evidence to help set the rate. Here, the record did not contain enough information to determine whether or not the district court had abused its discretion. The federal circuit remanded for the sole purpose of establishing the appropriate royalty rate.

The Paice court made clear that district courts have the power to set the rate of this type of "ongoing royalty" without running afoul of the Seventh Amendment's requirement of a jury trial. Because the royalty arises out of the court's equitable powers it is "monetary relief not properly characterized as damages."

Paice future implications remain unclear. Infringers may be less willing to come to the bargaining table-if they can duck an injunction and just face royalties anyway, why bother? Customers may claim implied licenses or may seek to re-negotiate if the court imposed rate is more advantageous. Patent holders may have to spend more time and effort making sure all is well vis-à-vis patent rights and infringement.

Our advice? Keep your nose clean-since Paice seems to add "your licensee friends" to the list of things you just might not be able to pick.

Elbow Room

admin — Wed, 03 Oct 2007 13:38:00 GMT

Divided patent infringement occurs when multiple parties act jointly in order to infringe a single patent claim. Thanks to the Federal Circuit's decision in BMC Resources, Inc. v. Paymentech, Ltd., a party accused of such infringement now knows exactly how far they need to go in order to escape liability - and the answer's easily within reach. According to BMC, as long as the parties act at "arm's length" - and no one entity performs or controls each and every step or element of a claimed invention - no joint infringement occurs.

BMC involved a method patent for a multi-step process allowing the use of debit cards in automated bill payment systems without the need for a PIN - a Personal Identification Number. Patent holder BMC's payment method combined steps from several different participants, including the payee's agent, a remote payment network (for example, an ATM network), and a card issuing financial institution. The relevant patent combined all necessary steps in a single claim.

Alleged infringer Paymentech, which processes financial transactions for clients of third parties, initiated a similar PIN-less debit card payment service. Like BMC, Paymentech's system utilized multiple participants. The parties agreed that Paymentech did not perform every step of the method at issue.

Still, BMC argued that Paymentech's conduct constituted infringement under the decision in On Demand Machine Corp. v. Ingram Industries. BMC claimed that On Demand created a new standard for infringement by multiple parties whereby a showing of participation and combined action sufficed to prove joint liability. BMC staked its position on language within On Demand which seemed to offer protection for patents issued to new and useful invention that cannot be performed by one person.

Both the trial court and the Federal Circuit rejected this reading of On Demand - and with it any suggestion of the existence of a conspiracy to infringe cause of action. Instead, the Federal Circuit firmly restated the well-established rules for joint liability in patent law: Without evidence that a single party controlled or directed each step of the patented process there's no viable divided infringement action.

Direct infringement claims continue to require a showing that the party accused of infringement has violated each and every element of the claimed method or product in order to be held liable for infringement. Similarly, indirect infringement - which occurs when a defendant participates in or encourages infringement but does not directly infringe the patent - requires a finding that some party among the accused actors has committed the entire act of direct infringement.

An alleged infringer cannot escape liability for direct infringement by having someone else carry out one or more of the claimed steps on its behalf. Such vicarious liability will only attach, however, upon a showing that the party charged with infringement had direct control of the conduct of the acting party.

The rule holds true when the alleged divided infringement involves multiple parties. In Cross Medical Products v. Medtronic Sofamor Danek (a case in which we represented Medtronic Sofamor Danek), we successfully argued that the acts of surgeons implanting the accused apparatus shouldn't be attributed to the medical device manufacturer simply because the medical device manufacturer's representative appeared in the operating room. Without the requisite level of direct control of the multiple parties, no direct infringement occurs just because of the involvement of multiple parties.

The BMC court recognized that the established rules may allow parties acting in concert to enter into arm's length transactions to avoid infringement, but felt that such concerns could be offset by proper claims drafting. Certainly, proper upfront evaluation of claims will help determine the scope of patents and a party's potential liability.

But we believe that analysis of divided infringement claims will now hinge on the relationship between the parties - particularly in business method patents. Advice from experienced patent litigation counsel is essential. BMC clarifies that no joint direct infringement occurs simply because the party's combined actions serve to meet every element or step of a method claim. Accordingly, a detailed assessment of the nature of the relationship between those taking the joint action becomes the key determinative - whether deciding to sue or in the defending against allegations of divided infringement.

Now that's something we like - a standard you can, almost, reach out and touch.

Beeeep Beeeep Beeeep

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