APaTS : KSR

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

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!"

Just Not Cricket

admin — Fri, 08 Feb 2008 20:02:00 GMT

Fair play counts in patent litigation as well as in the game of kings. In Innogenetics N.V. v. Abbott Laboratories, accused infringer Abbott played fast and loose with the trial court's procedural rules. It also took a cavalier approach to the substantive underpinnings of arguments advanced on appeal. The result? Both the district court and Federal Circuit cried foul-and Abbott saw exclusion of key evidence and forfeiture of critical claims as a consequence for its unsportsmanlike conduct.

The underlying case involved technology related to diagnostic tools which both detect and classify Hepatitis C virus (HCV) genotypes in a biologic sample, allowing a more tailored patient treatment. The case is noteworthy for the court's treatment of Abbott's rather loose treatment of the rules, which occurred throughout the course of that litigation. As a result, the district court rejected Abbott's proposed limiting claim construction and entered judgment as a matter of law adverse to Abbott on the issues of infringement, obviousness, anticipation and inequitable conduct.

Originally, Abbott advanced a claim construction predicated on an overly-formulistic definition of the word "as," in order to limit the patent's claims to contemporaneous detection of the key genetic material. The Federal Circuit rejected this argument as "dictionary shopping" and took Abbott to task for not marshalling a record based more upon how one of ordinary skill in the art would understand that term.

Next, Abbott tried to rely upon a non-infringement argument that its method of detection was outside the scope of the patent because it was not known to ordinary artisans at the time of the patent filing. Unfortunately for Abbott, it waited until the eve of trial to raise this argument when it tried to insert a new jury instruction into the proposed set of instructions. The Federal Circuit looked to regional circuit law (the Seventh Circuit) to affirm the district court's decision that Abbott had forfeited that issue by not raising it reasonably in advance of trial. (As an aside, the court also found that the substantive argument lacked merit as well.)

Abbott's pre-trial behavior also affected its affirmative defenses. Abbott ignored the district court's schedule for the filing of supplemental expert reports on the issue of obviousness. Innogenetics persuaded the district court to exclude Abbott's late supplemental offering. Even though Abbott knew the district court's order contained errors regarding the scope of exclusion, it ignored the rules that such challenges should be raised prior to the appeal.

On appeal, the Federal Circuit quickly affirmed the district court's decision that Abbott lacked the necessary evidentiary underpinnings for its obviousness defense. Analyzing the original (allowed) expert report, the court found it both conclusory and vague. The court explained that the Supreme Courts' seminal decision in KSR does not relieve a defendant from demonstrating that particular combinations render a patent obvious, even where a problem was well-known and there was motivation to solve it. With regard to the excluded report, Abbott claimed it could have offered non-expert testimony regarding the requisite motivation. The Federal Circuit again affirmed the district court's decision, relying upon Seventh Circuit precedent regarding the trial court's ability to manage its own docket. The Federal Circuit faulted Abbott for not raising the erroneous order earlier and for offering only speculation as to what lay witnesses could have established.

Litigants on both sides should take note. The Federal Circuit showed little tolerance for Abbott's rather lax attitude toward the rules. It looked to regional circuit law to set the rules of conduct for procedural issues and it used that same law in order to approve consequences for their breach. Thus, despite the universality of patent law, an understanding of differences in the various circuits regarding procedure may very well be outcome determinative.

Determinative too-backing up key claims and defenses with an adequate record. Buzz words won't do. The Federal Circuit repeatedly noted that Abbott simply failed to provide details from the record to support its claims. In particular, the court said that, even in light of KSR, accused infringers cannot rely upon unsupported hindsight to explain how or why references would be combined by those of "ordinary skill in the art."

Clearly, the rules count. Innogenetics reminds us that litigants who repeatedly ignore them may find themselves on a very sticky wicket-losing both the strategic advantage and ultimately, perhaps, the entire game.

Quantity 10; Quality 0

admin — Fri, 07 Dec 2007 19:10:00 GMT

In z4 Technologies Inc. v. Microsoft Corp., Microsoft learned that the rules for mud and appellate arguments aren't always the same-at least not in the Federal Circuit. Apparently, following the old adage that something should stick if enough is flung, Microsoft offered up a bevy of alleged errors, arguments and attacks on appeal in an effort to defeat z4's $115 million patent infringement verdict. The Federal Circuit acknowledged that many of Microsoft's arguments were technically correct. Nonetheless, it affirmed the jury's verdict because it found that all the issues raised by Microsoft were either harmless or not substantial enough to overturn the verdict-holding fast instead, it appears, to that one about the wheat and the chaff.

At issue was z4's patent for technology that prevents software piracy and illicit copying and unauthorized use of computer software. Specifically, z4's invention created a multi-step user authorization scheme requiring users to re-register their software after an initial grace period. Users had the option of re-registering manually or "automatically" using an electronic mode. Both systems enabled the comparison of key information from the initial and secondary registrations in order to verify the registrant as an authorized user.

z4 sued Microsoft, alleging that the "Product Activation" feature in Microsoft's "Office" and "Windows" application software infringed its patent. (Similar claims against Autodesk were settled before trial). Microsoft denied infringement and sought to invalidate the relevant patents on grounds of obviousness and anticipation. After a lengthy trial, the jury returned a verdict of willful infringement and awarded damages in the amount of $115 million, which the trial court enhanced by $25 million, along with an award of attorneys' fees. After bringing, and losing, various post-trial motions, Microsoft appealed on a multiplicity of issues.

The Federal Circuit systematically dismantled each issue Microsoft raised. Microsoft challenged the district court's construction of the term "user" to mean a person or a computer. Agreeing with Microsoft that under the terms of the patent a "user" couldn't be a computer, the court went on to reject as "artificial and inconsequential" the non-infringement argument Microsoft had attached to the construction of the term. The patent specifications described a methodology based on computer specific information and other claim language referenced using computer specific information as a basis for the authorization code. Ample evidence, the Federal Circuit found, for a jury to conclude that Microsoft had infringed the patent.

Next, Microsoft challenged whether there was sufficient evidence for the jury to conclude that its software did not have the requisite "authorization code" because there was not a unique code for each copy of the software; i.e., one authorization code could be used with a number of revisions/versions of the software. The court side-stepped the question of whether the claim required the particular one-for-one relationship by characterizing Microsoft's argument as at best identifying non-infringing modalities, stating: "We are unpersuaded by Microsoft's assertion that it does not infringe because a single copy of the accused software can be installed on an unlimited number of machines using a single product key."

Microsoft's invalidity defenses faired no better. Microsoft founded its anticipation argument on one of its own products -a Licensing Verification Program ("LVP") embedded within a 1998 software product called Brazilian Publisher ("BP 98"). Microsoft alleged that the district court erred when it required that BP 98 "stop piracy" in order to qualify as invalidating art for purposes of anticipation. It claimed that BP 98's intended purpose of "reducing piracy" should have been sufficient. The Federal Circuit agreed--but then went on to find "substantial evidence" from which the jury could find that BP 98 failed even that purpose because the product never actually worked. (Interestingly, the key evidence regarding the problems with BP 98 came from a document which Microsoft was found to have "improperly withheld" until the day before trial started).

The Federal Circuit also rejected any claim of error based on jury instructions, including an instruction regarding obviousness based on the pre-KSR "teaching, suggestions or method" (TSM) standard. Microsoft claimed the holding of KSR required a new trial because of KSR's broader considerations regarding obviousness. Not so, the Federal Circuit held. Even under KSR (and the factors enumerated in Graham v. John Deere), a prima facie case of obviousness requires something more than the conclusory testimony of an expert-evidence, the court found, Microsoft had failed to produce or identify.

Perhaps most painfully, the Federal Circuit refused Microsoft's request for a reconsideration of foreign sales damages in light of the Supreme Court's decision in Microsoft v. AT&T. Significant questions existed whether Microsoft had properly preserved a §271(f) question for appeal in the district court. However, the Federal Circuit chose to address the issue on substantive grounds. The record showed that the jury did not and could not have relied on §271(f)'s provision in determining damages. Both the complaint and jury instruction were based on the provisions of §271(a), which addresses infringing products made, used or sold in the United States and z4 never argued any §271(f) type infringement. Though Microsoft claimed that the same "golden master" distribution system at issue in AT&T was in use here, it never offered evidence segregating foreign sales from domestic sales at trial and it never argued against the appropriateness of including foreign sales damages under §271(a). Without such evidence, there was no properly argued or preserved foreign sales issue.

Admittedly, one would expect a litigant faced with an adverse verdict in the amount of $115 million to marshal an aggressive, all encompassing appeal. Nevertheless, it is clear that in its efforts to scour the record for every conceivable error, Microsoft based its arguments more on formalities and linguistic technicalities than on the substance of the technology at issue. In its effort to be comprehensive, Microsoft appears to have ignored the fact that appellate courts - like juries - respond to themes and can and will focus upon the essentials of the patent over its less relevant technicalities.

Our take away? Only an idiom would lose the forest for the trees.

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.

How Sweet Is It?

admin — Fri, 03 Aug 2007 18:08:00 GMT

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