APaTS : Obviousness

Who's ̶O̶n̶ Owns First?

admin — Mon, 26 Oct 2009 16:01:00 GMT

The decision in Stanford University v. Roche Molecular Systems demonstrates the importance of sorting out the players when it comes to patent ownership and when multiple assignments of patent rights occur. Patent holder Stanford University brought an action for patent infringement against alleged infringer Roche. Stanford based its claim for patent ownership (in part) upon a written promise by one of the inventors to assign his inventions. Roche countered that it had an actual assignment from that inventor which trumped Stanford's. Though the statute of limitation had already run on Roche's ability to bring an action on ownership, Roche argued the assignment meant Stanford lacked standing. The trial court rejected Roche's claims but found the patent invalid for obviousness. Vacating that decision, the Federal Circuit remanded the case and ordered the district court to dismiss the action finding that what's on second was lack of standing.

The patents at issue covered a novel way to measure the effectiveness of antiretroviral medications in the blood of individuals with HIV. Stanford developed the test in partnership with a company that was later acquired by Roche. Stanford initially offered to license the technology rights to Roche. When negotiations failed, Stanford sued Roche for patent infringement.

Roche pled the ownership issue as an affirmative defense and as a counterclaim. The district court said the claims were time barred because the relevant statute of limitations had already run. The Federal Circuit held otherwise, noting the well-settled rule that questions of standing can be raised at any time and are not foreclosed by, or subject to, statutes of limitations. The panel found that statutory limitations on Roche's affirmative right to claim ownership (which had clearly passed) did not apply when its ownership was raised as a challenge to Stanford's standing to sue.

Roche's ownership interest could not be refuted. Though the agreement it acquired from its predecessor had been executed after the one the inventor signed with Stanford, it contained an actual assignment versus the promise to assign contained in the Stanford agreement. Promises to assign (like the one held by Stanford) require an additional assignment contract in order to transfer rights. Because of its agreement, Roche could claim equitable title immediately at the moment of invention, and the inventor actually had nothing left to assign to Stanford despite his contractual obligation. Roche also automatically held legal title in the patent application at the moment it was filed, negating the inventor's subsequent assignment to Stanford during patent prosecution.

Nor could Stanford obtain the benefit of the USPTO's recordation rules which generally grant ownership to the first assignee to record when, as here, two entities claim ownership. In order to take advantage of the provision, the assignee filing must be a bona fide purchaser who takes without notice and pays valuable consideration. Here, the Federal Circuit found that Stanford was at least on inquiry notice of the relationship between the inventor and Roche's predecessor and the potential for a rights-transfer. As a result, Stanford's was not entitled to the priority otherwise accorded a bona fide first-filed assignment.

Because Stanford could not establish full patent ownership, it lacked standing to assert its claims of infringement against Roche. Thus, the district court lacked jurisdiction over Stanford's infringement claim and also should not have addressed the validity of the patents, resulting in the Federal Circuit's order for vacation and dismissal.

Stanford underscores the importance of carefully scrutinizing ownership and standing issues before filing suit. Our advice? When it comes to answering the question "Who owns the patent in this litigation?" don't let the guy on third^[1] be the only one with an answer.

[1] Costello: I don't know.
Abbott: He's on third.
Please see http://www.baseball-almanac.com/humor4.shtml for a full transcript.

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!"

...Eliminates Pesky Patents Too!

admin — Mon, 14 Apr 2008 20:00:00 GMT

Shocking? The Federal Circuit's opinion in Agrizap, Inc. v. Woodstream Corp. doesn't necessarily reach that amplitude. Yet the decision does contain some high-wattage lessons for patent holders, as well as for those seeking to short-circuit the letter (or spirit) of existing confidentiality agreements.

Let's just say this one's a live-wire.

Agrizap held patent rights to certain rodent control technology. The patent at issue included a methodology-known as a resistive switch-that uses the animal's body to complete an electrical circuit. Once complete, the circuit triggers a generator that then dispatches the varmint through electrocution. Agrizap marketed its invention under the brand name "Rat Zapper."

Alleged infringer Woodstream is a nationwide distributor of more traditional pest control products. It entered into a confidentiality agreement with Agrizap which ultimately culminated in the Rat Zapper being marketed under a Woodstream label. Pursuant to the parties' agreement, Agrizap agreed not to compete in those venues where the Woodstream branded Rat Zapper was sold.

At the same time, Woodstream was trying to figure out how to make a similar product itself. Nonetheless, it assured Agrizap that actions taken in furtherance of that goal-like sending the Rat Zapper to China-were for purposes permitted under the parties' agreement. Within three years of entering into its agreement with Agrizap, Woodstream began selling its own resistance-switch based Electronic Mouse Trap (EMT) and Electronic Rat Trap (ERT) in direct competition with the Rat Zapper.

Agrizap brought suit for both patent infringement and fraudulent misrepresentation. After trial, the jury returned damage awards for both claims. Various post-trial motions ensued and the district ultimately entered a final judgment which affirmed the $1.2 million fraudulent misrepresentation award, but overturned as a matter of law, the $1.4 million infringement damages. Both parties appealed.

The Federal Circuit first reviewed the fraudulent misrepresentation claim. It affirmed the jury's award, even though Agrizap never propounded a specific dollar amount for its fraud damages. The court said, as wrong-doer, Woodstream had to bear the risk of uncertainty because Agrizap did introduce general evidence regarding the losses caused by Woodstream's conduct.

The Federal Circuit found that the district had erred in its determination that the patent covering the Rat Zapper was not obvious. Instead, the Federal Circuit said that the Rat Zapper did nothing more than combine familiar elements to yield a predictable result-the very definition of obviousness employed in KSR. Agrizap's evidence regarding commercial success, long-felt need and Woodstream's copying could not overcome the fact the Rat Zapper was basically a combination of previous patents. The Court referenced other patents that made use of animal-based resistive switches, as well as Agrizap's own patent for the Gopher Zapper, which employed a mechanical switch to complete the circuit.

Agrizap illustrates the risks patent holders face under the new rules for obviousness. Those considering infringement litigation will want to do their best to make sure that their own action doesn't become the conduit for their patent's invalidation. Additionally, Agrizap demonstrates the impact extra-patent agreements can have on litigation. Here, good contractual housekeeping kept a significant portion of the damages viable despite an invalid patent. The lesson? To fully assess risk, patent holders who think they smell a rat (or licensees contemplating becoming one) need to look beyond the patents in order to determine which party's most likely to get zapped.

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.

How Sweet Is It?

admin — Fri, 03 Aug 2007 18:08:00 GMT

Takeda Chemical Ind., Ltd. v Alphapharm Pty., Ltd....(read more)

Patent Law's New Math: Medimmune + KSR ≥ Your License Agreement

admin — Fri, 18 May 2007 13:16:00 GMT

MedImmune, Inc. v. Genentech, Inc. and KSR International Co. v. Teleflex Inc....(read more)

Fully Throttled: Obviousness, Super-Sized

admin — Thu, 10 May 2007 19:41:00 GMT

KSR International Co. v. Teleflex Inc....(read more)