August 2005

Supreme Court: FTC confronts decision that liberally allows brand-generic patent settlements

Patent,

PatSeminar026FTC v. Schering-Plough (on Petition for Cert).

After losing at the 11th Circuit, the FTC has filed a petition for certiorari asking the Supreme Court to hear its appeal.  In a March 2005 decision, the 11th Circuit Court of Appeals set aside an FTC order that barred Schering-Plough from settling an infringement suit with generic makers regarding the patented blood pressure drug K-Dur.  The FTC had concluded that the settlement was an “unreasonable restraint of trade.”  The 11th Circuit, however, disagreed, finding that payment from a patent holder to a generic competitor cannot be the sole basis of a violation of antitrust law. Accordingly, the court SET ASIDE the decision of the Federal Trade Commission and VACATED its cease and desist order.

In its petition for certiorari, the FTC presents two questions to the Court:

1. Whether an agreement between a pharmaceutical patent holder and a would-be generic competitor, in which the patent holder makes a substantial payment to the challenger for the purpose of delaying the challenger’s entry into the market, is an unreasonable restraint of trade.

2. Whether the court of appeals grossly misapplied the pertinent “substantial evidence” standard of review, by summarily rejecting the extensive factual findings of an expert federal agency regarding matters within its purview.

In its supporting brief, the FTC argues that agreements between competitors should not be per se lawful simply because they are within the “potential” reach of a patent claim. The Public Patent Foundation (PubPat) supported the FTC at the Eleventh Circuit and will likely file an Amici Brief in support of the FTC’s petition.

Links:

Million Dollar Patent

Patent

In patent prosecution, the Patent Office fees are usually quite low when compared to the cost of hiring a patent attorney.  I’m predicting that the usual equation is not quite true for Angiotech International who was recently asked to pay $1.25 Million in application filing fees for a patent application having about 10,000 claims.  (File Attachment: Fee Due.pdf). 

As would be expected, the patentee quickly submitted an amended specification that cut the disclosure to three independent claims and 96 dependent ones — thus reducing its PTO bill to only two grand.

As Greg Aharonian noted, it is lucky that the applicant was a small entity — otherwise the fee would have been over $2,000,000. (Published Application)

Links:

BPAI: No Motivation to Combine Because Neither Cited Reference Recognized Advantages Discussed in Application

Patent

Ex parte Gottling (B.P.A.I. 2005) (unpublished).

Gottling successfully appealed an Examiner’s rejection based on his argument that there was no motivation for combining the cited prior art references within the references themselves.

Obviousness cannot be established by combining prior art to produce the claimed invention absent some teaching or suggestion supporting the combination.  The mere fact that the prior art may be modified in the manner suggested by an examiner does not make the modification obvious unless the prior art suggested the desirability of the modification.

In this case, the Board found that the Examiner had not explained “why a person of ordinary skill in the art would have found it obvious” to combine the references in the manner proposed by the Examiner.” In particular, the Board noted that neither reference specifically recognized the advantages discussed in Gottling’s application.

KSR v. Teleflex, now before the Supreme Court asks the court to review the “teaching-suggestion-motivation test” that was the basis of the Gottling decision.  

StopFakes Small Business Initiative.

Patent

With its new leadership corps, the USPTO is moving forward with a number of initiatives to address the concerns of patent holders, businesses, and the public.

A major project launched last fall is the anti-counterfeit program StopFakes! (www.stopfakes.gov).  Now, the PTO has created a small business focused initiative to “help small business owners protect their intellectual property from overseas piracy and counterfeiting.  Information on the new small business initiative is available online here: www.uspto.gov/smallbusiness.

Patently-O Tidbits

Patent
  • PATPROS: Link. Scott Kamholz at Foley Hoag has created a nice reference page for patent prosecution. Foley Hoag is also home of TTABlog author John Welch.
  • USPTO RSS FEEDS: Link. The attorney-bloggers at Rethink(IP)  have developed a great set of RSS feeds that provide USPTO news updates straight from the PTO website.  
  • GUESTMAP: I have installed a new Patently-O GUESTMAP  Feel free to leave your mark.
  • SUMMER ASSOCIATES: Friday is the last day for my firm’s summer associate program.  I was able to get several of the summers involved with the blog.  Thanks Paul Kafadar, Cory Hojka, Nicole Lammers (TBA), Rebecca Brown, and Jessica Lunney! Our firm is always looking for talented technocrats who can communicate well and have an interest in patent law.
  • PAPER TOPICS: Link. Pittsburgh Professor Michael J. Madison has posted a list of interesting topics for IP papers.
  • FILE HISTORIES: A Patently-O Reader is looking for the filewrappers for Patent Nos. 5,894,554 and 6,415,335.  These are reportedly being asserted by a company called EpicRealm (Story).  Let me know if you have them.
  • EXPERIMENTAL USE: In a newly published paper in the Federal Circuit Bar Journal, Professor Hal Wegner argues that the U.S. should have a clear experimental use defense that would allow experimentation on a patented invention.

Thanks for reading! (crouch@mbhb.com)

 

 

Interference only declared once examination is complete

Patent, Patent Cases 2005

Elevator033Westbrook v. Gray, 75 U.S.P.Q.2d 1607 (BPAI) (UNPUBLISHED).

In a short decision, the Patent Board confirmed that “examination must be complete in an application before an interference involving that application is initiated.”

Applicant Gray filed a petition with the Board asking for guidance as to whether it should file a motion suggesting the declaration of an interference. Finding that examination of the application had not been completed, the Board held that an interference would be premature.

Under MPEP 2301.01, before a claim should be “considered as the basis for the count of an interference, the claim should be allowable and in good form.”

Federal Circuit Broadly Interprets Copyright Safe Harbor for Computer Repair

Patent, Patent Cases 2005

Storagetek v. Custom Hardware Engineering (Fed. Cir. 2005)

Normally, the unauthorized duplication of computer software violates the exclusive right of the copyright holder.  Section 117(c) of the Copyright Act, however, authorizes the copying of a computer program for purposes of maintaining or repairing a machine if the “copy is made solely by the virtue of activation of [that] machine”. 

In a case of first impression, the Federal Circuit addresses the extent of this protection offered by 17 U.S.C. § 117(c). The Court of Appeals, relying on definitions in 17 U.S.C. § 117(d), held that § 117(c) protects maintenance and repair as two different activities. “Repair,” according to the Federal Circuit, is restoring a broken machine to its original specifications. “Maintenance,” on the other hand, has “a much broader temporal connotation” that “encompass[es] monitoring systems for problems [and] not simply fixing a single, isolated malfunction.” Thus, the Federal Circuit found erroneous the district court’s conclusion that only repair activities are protected under Sec. 117(c).

Furthermore, the Court of Appeals also found DMCA provisions likely not applicable. Circumvention of a technological measure providing access to a copyrighted work is not a violation of DMCA, according to the Federal Circuit, unless it “infringes or facilitates infringing a right protected by the Copyright Act.” Finally, the Court of Appeals did not agree, based on material factors, that the copyrighted work in question should receive trade secret protection.

The Federal Circuit thus vacated the district court’s grant of a preliminary injunction to Storage Technology and remanded for further proceedings. Judge Rader, in dissent, decried the majority’s decision as “destroy[ing] copyright protection for software that continually monitors computing machine behavior.”

NOTE: This post was written by Cory Hojka. Mr. Hojka is a law clerk at MBHB and a student at the University of Chicago Law School.

Silicon Wafer Technology: Reasonable Jury Could Find Inducement

Patent

Elevator032MEMC Electronic Materials v. Mitsubishi Materials (Fed. Cir. 2005).

MEMC sued Mitsubishi for infringement of its patent directed to the preparation of high quality single crystal silicon for the semiconductor industry. The district court dismissed the claims on summary judgment — finding no evidence of infringement or inducement.

On appeal, the CAFC affirmed the rejection of the direct infringement claim, but reversed on inducement.  The panel found that the defendant (i) knew of the alleged direct infringer’s activities; (ii) provided technical support to the alleged direct infringer via e-mail; (iii) sent a shipment to the alleged direct infringer to address technical problems; (iv) visited the alleged direct infringer’s site to provide further technical support; and (v) knowledge of the patent itself. This record swayed the CAFC to reverse the district court’s holding that “a reasonable jury could not find intent to induce infringement.”

Specifically, the CAFC noted the series of e-mails provide “sufficient circumstantial evidence . . . that SUMCO intended to encourage those [potentially infringing] activities.”

File Attachment: MEMC Decision (104 KB)

As Cathy Kirkman notes in her excellent Silicon Valley Media Law Blog, the CAFC drew a parallel with the the recent Supreme Court Grokster copyright inducement opinion.  Quoting Grokster, the appellate court held that evidence such as “advertising an infringing use or instructing how to engage in an infringing use, show an affirmative intent that the product be used to infringe.”

Prosecution History Gets Little Weight In Claim Construction

Patent, Patent Cases 2005

ScreenShot024

AquaTex v. Techniche (Fed. Cir. 2005).

AquaTex appealed a summary judgment of noninfringement arguing that the district court had improperly applied prosecution history estoppel to limit use of the doctrine of equivalents.

On appeal, the CAFC “decline[d] to give the prosecution history much weight.”  In its decision the Court quoted Phillips for the conclusion that the prosecution history is an ongoing negotiation that “often lacks the clarity of the specification and thus is less useful for claim construction.”  Although the CAFC disagreed with the lower court’s basis of decision, ultimately, the panel affirmed the claim construction.

Regarding the doctrine of equivalents, the CAFC could not find the requisite “clear and unmistakable surrender of subject matter required to invoke argument-based prosecution history estoppel.”

Affirmed-in-part, Reversed-in-part. 

CAFC Refuses To Find Estoppel Based On Arguments Before The EPO

Patent, Patent Cases 2005

Elevator031Tap Pharmaceutical v. OWL Pharmaceuticals (Fed. Cir. 2005).

In an action for infringement of several pharmaceutical patents, the Federal Circuit upheld the district court’s findings that the generic drug-maker (OWL) had infringed two of the plaintiffs’ (Tap et al) patents.

Broad Scope Derived from Specification: Claims which described the patented compound as “comprising a copolymer … of lactic acid and … of glycolic acid” were interpreted by the appellate panel to also encompass copolymers “produced by any method.”  Although the specification only provided examples of copolymers made from lactic and glycolic acid, it did note that the polymer “may be produced by any method.” 

Disclaimer Based On Foreign Prosecution: Regarding foreign prosecution history, the CAFC gave little weight to statements made by the patentee to an Examiner in the European Patent Office that the invention did not include compounds made from lactide or glycolide.  The European Examiner had rejected the claims after this argument was made, finding that the compounds which the patentee had attempted to disclaim were not different from those made from lactic and glycolic acid.  Therefore, because the European claims were later allowed on other grounds, and because the patentee had not made this argument before the USPTO, the patentee must have “receded from that characterization of the claims,” and thus these statements should be given little weight in the process of claim construction.

Even Common Words Construed According To Specification: A second claim directed to “particles containing a water-soluble drug” was interpreted to encompass only particles which included both 1) the drug substance, and 2) a drug-retaining substance, because the drug-retaining substance was included in all the examples in the specification and was listed as a benefit of the invention.  The court held that the term “containing,” while not a technical term, helped to describe the patented technology and therefore “cannot be defined by some ordinary meaning isolated from the proper context.”  Thus, the district court was correct to look to both intrinsic and extrinsic evidence to properly interpret the claim.

The Federal Circuit thus affirmed the district court’s claim construction as to both patents.

NOTE: This post was written by Rebecca Brown.  Ms. Brown is a law clerk at MBHB and a student at Northwestern University School of Law.

  • As Attorney Jason Rantanen pointed out in a recent e-mail, there is a clear distinction between the prosecution history disclaimer and prosecution history estoppel.  The disclaimer doctrine is related to “claim construction for the purposes of literal infringement” while the estoppel doctrine bars the assertion of DOE under Festo.

CAFC: Continuation Application Need Not Claim Priority to PCT Application

Patent, Patent Cases 2005

Elevator030Broadcast Innovation v. Charter Communications (Fed. Cir. 2005).

The district court found Broadcast’s patent to be anticipated because its priority date was more than one year after the publication of an Australia PCT application on the same subject matter filed by the same parties.  The asserted patent failed to claim a specific reference to the PCT application, but did claim priority to a U.S. application that, in turn, claimed priority to an earlier PCT filing.

On appeal, the CAFC determined that the district court had applied the wrong priority date to the asserted patent — finding that the chain of priority was sufficient to fall within the requirements of 35 U.S.C. 120.

[T]he applicant filed the [US priority application] on July 18, 1995, as the U.S. national stage application of the original PCT application. However, July 18, 1995 is not the “U.S. filing date” of the [US priority application]. Specifically, under 35 U.S.C. § 363, the international filing date of a PCT application is also the U.S. filing date for the corresponding national stage application.

Thus, the court clarified that Section 120’s reference to a later filed application having “the same effect . . . as though filed on the date of the prior application” means that the later application will be treated as having the effective filing date of the prior application.

NonProfit Sues Drug Maker for False Marking

Patent,

Patients Not Patents v. Medimpex United (Dist. D.C. 2005).

Under Section 292 of the Patent Act, “[a]ny person may sue” a party that falsely marks a product as “patented” or “patent pending.”  In such cases, the fine is limited to $500 per offense.

In a court filing on Tuesday, August 16, 2005, a D.C. nonprofit known as “Patients not Patents, Inc.” filed a Section 292 complaint against Medimpex United, maker of Xalex Weight Management Gel.

The complaint, signed by PNP’s director Jeffrey Light, alleges that Medimpex’s products have been falsely marked as “patented” and sold through various marketing channels, including a list of internet retailers.

There is little precedent on Section 292, however, in the recent Clontech case, the Federal Circuit determined that the statute requires patentees have a good faith believe that the marked article falls within the subject matter of the patent.  According to the CAFC, marking must be reliable in order to permit free and fair competition and commerce. In an e-mail, Light commented that this statute provides a way of “linking patent issues to consumer protections.”

Links:

Patent Reform Act of 2005

Patent, Patent Legislation

The Patent Reform Act of 2005 is changing as it moves through congress.  In the latest amendment, Representative Smith has eliminated some of the most controversial aspects of the bill, including the injunction provision and the provision that would limit the scope of claims in continuing applications.

The reform measures still include a move to first-to-file; changes to the duty of candor; limitations on infringement and willfulness damages; post grant opposition procedures; and a revised venue statue.

Links:

 

CAFC takes a new look at “rear end” definition

Patent, Patent Cases 2005

Elevator029Research Plastics v. Federal Packaging (Fed. Cir. 2005).

In a dispute over caulking tubes, Research appealed a district court judgment of non-infringement — arguing that the lower court had erred in its claim construction.

Claim construction centered on the claim term “rear end.” Referencing only intrinsic evidence, the CAFC determined that the lower court had erred slightly in its definition of the term — finding that the prosecution history provided substantial support for defining the rear end as the “point defined by the rear edge of the tube.”  On remand, the district court must reconsider literal infringement in light of the new construction.

Regarding the Doctrine of Equivalents, the Court found that Research had disclaimed equivalents to a ribbed nozzle by amending the claims to overcome a cited reference. Thus, under Festo, that scope cannot be recaptured as an equivalent to the claimed invention.

File Attachment: Decision.pdf (78 KB)

PTO Fee Diversion is Constitutional

Patent

Barber of SevilleFigueroa v. < ?xml:namespace prefix ="" st1 />United States (Ct. Fed. Clms. 2005).

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In Figueroa, the plaintiff challenged Congress’ diversion of USPTO fee revenue to non IP government programs as an illegal exaction and unconstitutional.  Specifically, the plaintiff argued that because the diversion interfered with the USPTO’s performance and burdened inventors with costs unrelated to securing patent rights, it was “not rationally related to promoting the progress of the useful arts, as required by the Constitution.”

 

The Court disagreed, and held that the diversion was not unconstitutional.  It applied a rational basis test, which required the plaintiff to prove that the diversion of fees was not “rationally related to legitimate governmental objectives.” 

 

Relying on Eldred v. Ashcroft, the Court noted that IP policy judgments “are vested in Congress, and courts must be deferential to Congress’ exercise of its power in that sphere.”  It pointed out that under current USPTO appropriations legislation, the USPTO has continued to grow and its appropriations have increased.  Therefore, it concluded that “Congress’ determination of federal spending priorities and how the patent system fits into national economic development goals is an eminently rational exercise of that power.”

NOTE: This post was written by Paul Kafadar.  Paul is a law clerk at MBHB and a law student at Northwestern University in Chicago.

Links:

TiVo Wins Patent Case On Appeal

Patent, Patent Cases 2005

Elevator026TiVo v. Pause (Fed. Cir. 2005).

In a patent infringement action, the district court had granted summary judgment to the defendant TiVo — finding that certain TiVo products did not infringe Pause’s reissued patent.  On appeal, Pause challenged the district court’s claim construction rulings as erroneously defining the limitations “circular storage buffer” and “time interval of predetermined duration”.  In support of its position, Pause argued, inter alia, that (i) the lower court’s interpretation of a “circular storage buffer” limitation should not depend on other language appearing later in the claim and (ii) the language employed by the district court in construing the limitations was not present within the claim and, thereby, led to impermissible narrowing of the claim’s scope.

The Federal Circuit, relying in part on Phillips v. AWH, rejected the first argument as “[p]roper claim construction . . . demands interpretation of the entire claim in context, not a single element in isolation.” Additionally, the Federal Circuit further found that Pause’s second argument was inconsistent with the prosecution history and the language present elsewhere in the claim and in the specification. 

The Federal Circuit affirmed — finding no error in either claim construction or infringement analysis.

NOTE: This post was written by Cory Hojka. Mr. Hojka is a law clerk at MBHB and a student at the University of Chicago Law School.

< ?xml:namespace prefix ="" o />File Attachment: CAFC Decision.pdf (77 KB)

On Remand, Federal Circuit to Rehear Integra Appeal

Patent, Patent Cases 2005

Integra Lifesciences v. Merck KGaA (Fed. Cir. 2005) (Order).

On remand from the Supreme Court, the CAFC has reinstated the Integra’s appeal and ordered the parties to re-brief the case based on the Supreme Court’s recent decision.

In a nutshell, the Supreme Court found that Section 271(e)(1) of the Patent Act provides a safe harbor that protects would-be infringers from liability for “all uses of patented inventions that are reasonably related to the development and submission of any information under the FDCA.”

Links:

 

Claim Construction: Specification is Always Highly Relevant

Patent, Patent Cases 2005,

Elevator023Terlep v. Brinkman Corp (Fed. Cir. 2005).

Stephen Terlep sued Brinkman, Wal-Mart, and Home Depot for infringement of his patent directed to an omni-directional LED.  After construing the claims, the Arkansas federal court granted summary judgment of noninfringement based on the accused products failure to have a “clear plastic tubular holder” as claimed.

On appeal, the Federal Circuit affirmed, finding that the court’s claim construction methods were appropriate under Phillips v. AWH.

In Phillips, the CAFC determined that the specification of a patent is “always highly relevant to the claim construction analysis. Usually, it is dispositive.”  

To apply Phillips, the court analyzed each use of the term “clear” in the claims, specification, and prosecution and came to the conclusion that the district court had appropriately excluded “translucent” from the term’s definition.

Dictionaries: The CAFC went on to find that the district court’s use of dictionary definitions to support its finding from the written description was an appropriate use of the extrinsic evidence.

File Attachment: 04-1337.pdf (57 KB)

Illinois Tool Works: Patents and Unlawful Tying

Patent, Patent Cases 2005

IllinoisToolIllinois Tool Works v. Independent Ink (Supreme Court 2005). 

On appeal to the Supreme Court is the question of whether market power must be proven in a Section 1 Sherman Act case that alleges the tying of a non-patented product to the sale of a patented product.  In its opinion in the case, Court of Appeals for the Federal Circuit determined that a rebuttable presumption of market power sufficient to restrain trade under antitrust law arises from the patentee’s possession of a patent used in an explicit tying agreement.  Oral arguments are scheduled for Tuesday, November 29, 2005.

Briefing is ongoing, but a number of parties have filed as amici. 

  • In Support of Petitioner
  • In Support of Respondent
    • (Not yet due).

    REVIEWS:

    Amicus Brief of the U.S Government:

    The government makes the powerful argument that there is “no economic basis” for inferring market power from the “mere fact” that the defendant holds a patent.  The relevant market would rarely have the same boundaries as the legal scope of the patent — as such, the per se approach is not warranted.  Both the DOJ and FTC have a policy against applying a presumption of market power based on the existence of a patent. Download the U.S. Government Brief.

    Brief of the IPO:

    The Intellectual Property Owners Association agreed with the Government Brief that there was a lack of economic rational for a per se presumption of market power.  In addition, the IPO argued that the presumption makes it too easy for defendants in patent infringement suits to file baseless antitrust counterclaims.  Notably, the IPO questions the basic premise that tying is competitive by citing a number of academic articles (Bakos) that provide evidence of the pro-consumer effects of tying agreements. File Attachment: IPOTyingBrief.pdf (1099 KB).

    Amicus Brief of the MPAA

    The Motion Picture Association of America and several other organizations filed a joint brief in support of the petitioner.  The MPAA makes the argument that Loew’s does not set a rule of “presuming antitrust market power from intellectual property ownership.”  The MPAA is a heavy copyright holder, but certainly realizes that the Supreme Court often generalizes across traditional IP categories with its analysis. File Attachment: Illinois Tool MPAA Amicus Brief.pdf (345 KB).

    Brief of the NYIPLA:

    In its support of the petitioner, the NY IP Law Association (David Ryan, et al.) took the novel position that Section 271(d)(5) of the Patent Act exempts tying. Section 271–(d)(5) provides that:

    No patent owner . . . shall be denied relief or deemed guilty of misuse or illegal extension of the patent right by reason of his having . . . (5) conditioned the license of any rights to the patent or the sale of the patented product on the acquisition of a license to rights in another patent or purchase of a separate product, unless, in view of the circumstances, the patent owner has market power in the relevant market for the patent or patented product on which the license or sale is conditioned.

    The NYIPLA thus argues that the plain language of the statute encompasses tying and requires a specific showing of market power — thus eliminating the per se approach.  File Attachment: NYIPLABrf.pdf (318 KB).

    Amicus Brief of the IPLAC:

    The Intellectual Property Law Association of Chicago analyzed the parallels between this case and Jefferson Parish — making the argument that the only notable difference between the two cases being the fact that a portion of the tying product is patented. File Attachment: IPLACbrf.pdf (132 KB).

    Patent Board Erred By Creating New Grounds For Rejection

    Patent

    ScreenShot022In re Kumar (Fed. Cir. 2005)

    Kumar et al. appealed the PTO Board of Patent Appeals and Interferences decision rejecting Kumar’s patent application claims on aluminum oxide particles as obvious under 35 U.S.C. Sec. 103.

    The Board held the claims unpatentable based on calculations derived from U.S. Patent No. 5,389,194 (the Rostoker patent). These calculations were not performed by the examiner nor were they presented during the argument of the appeal to the Board. The Federal Circuit therefore concluded that these calculations represented new grounds for rejection by the Board. Since the Board had provided Kumar no opportunity to respond to these new grounds for rejection, the Federal Circuit also reversed and remanded the Board’s holding.

    NOTE: This post was written by Cory Hojka.  Mr. Hojka is a law clerk at McDonnell Boehnen Hulbert & Berghoff LLP and a law student at the University of Chicago Law School in Hyde Park.