May 2006

Patent Validity as a Factor in Determining Injunctive Relief?

KennedyJustice Kennedy’s concurring opinion in eBay included a number of striking comments including the following:

The potential vagueness and suspect validity of some of these patents may affect the calculus under the four-factor test.

If I understand them, the four justices are telling lower courts to reevaluate a patent’s validity and enforceability at the injunction stage — even after those issues have been decided in the patentee’s favor.  If you remember, the question of an injunction only arises after the patent has been found valid, enforceable, and infringed.

Perhaps there are parallels between Kennedy’s position and the sentencing of a convicted criminal.  At the sentencing stage, the sitting judge has a rather free hand to consider the evidence at hand in mitigating the prison time — even if the jury made opposite conclusions.  Here, even if the jury found that the patent was valid and infringed, Kennedy would allow the court to deny an injunction based on the patent’s “suspect validity.”

Of course this approach is wrong, but if you are a cautious patent attorney the solution is simply to not write vague or questionable patent applications.

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Debate on Obviousness Standard Reaches New Level

PatentlyOImage025_smallKSR International v. Teleflex (On Petition for Certiorari)

Like that little blue engine, KSR’s case continues to move forward despite significant obstacles. Now, the Solicitor General has filed its brief on behalf of the U.S. government supporting KSR’s petition for certiorari.

This case takes a direct assault on the Federal Circuit’s longstanding obviousness jurisprudence that requires some explicit reason as to why one of ordinary skill in the art would have known to combine two or more references to solve a particular problem.  The question presented reads as follows:

Whether a claimed invention can be “obvious,” and therefore unpatentable under 35 U.S.C. 103(a), without proof of some “teaching, suggestion, or motivation” to modify or combine the prior art in the manner claimed.

The statute in question, 35 U.S.C. 103(a) is not so specific.  Rather, the statute requires that a patent be denied if

the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art.

35 U.S.C. 103(a).  The Solicitor General’s brief, filed last week, sees the disjunct between the CAFC rule, Section 103(a), and prior Supreme Court decisions such as Graham.  In a blunt rebuke, the SG argues that “the Federal Circuit’s teaching-suggestion-motivation test extends patent protection to non-innovative combinations of familiar elements.”  Rather, the SG argues for a return to the broad factors outlined in Graham for determining the level of one of ordinary skill in the art: “the scope and content of the prior art, the differences between the prior art and the claims at issue, and the level of ordinary skill in the pertinent art.”

The SG’s support for certiorari is rare in patent cases and is often the most cherished of a petitioner’s amici.

Notes: Of course, most inventions involve “a combination of old elements” where each element is found somewhere in the prior art.  (In re Kahn).  After the teaching-suggestion-motivation test is gone, what standard will a patent examiner use to decide whether a new combination is non-obvious? To be sure, the current test is formalistic and has been both under– and over-inclusive.  However, has anyone proposed a better test — one that can be carried out by the PTO even in light of the high-turnover and young workforce in the agency’s examining corps? A patent attorney e-mailed his fear that a less formal test will give examiner’s permission to make the dreaded “because I say so” conclusory argument.

The EPO also has a rather formalistic approach known as the "problem-solution" test. That test also has its detractors, but is seen by many as a superior approach. In the UK, the “Windsurfing” test takes its name from the case of Windsurfing Int’l v. Tabur Marine. In that case, the court looked to whether, when viewed without knowledge of the alleged invention, the differences between what is known to a “skilled but unimaginative technician” and the alleged invention constitute steps that would have been obvious to the technician or whether they require any degree of invention. The hypothetical technician does not consider the commercial consequences which might follow if the step or process in question were found in practice to achieve or assist the objective which he had in view.

Another e-mail that I received focused on the low-tech nature of this case. 

Like sectional couches with remote controls in the arm rest (recall that nightmare?), the technology [here] is so simple that everyone believes they understand it once it is laid out for them.  The technology most [patent attorneys] deal with on a day to day basis is not this simple - drugs, catalysts, biotechnology, automation, software.  The risk of a result-driven declaration of the law on obviousness is keeping me awake at night.

These comments at least have anecdotal weight — in the recent eBay oral argument, Chief Justice Roberts was heard to quip that even he could have invented invention in question (or at least created the software flow-charts).

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Claim Construction: Similar Terms in Continuation Given Identical Meaning

AIPLATalk215Advanced Cardio and Guidant v. Medtronic (Fed. Cir. 2006, Nonprecedential).

On summary judgment, the lower court held that Medtronic’s vascular stent patents were not infringed.  On appeal, the CAFC made an interesting point about claim construction — holding that a disclaimer in the file history of a patent applied equally to construction of similar terms in all the family member cases.  The patentee had consciously chosen to use different claim language in later continuation applications —  perhaps to avoid the prior disclaimer.  The CAFC paid this no matter.

Medtronic correctly states that its claims do not all use the [disputed] term “end” to describe the connection. . . Instead, certain claims use “turn” or “curved member.” . . .  However, because the specification . . . uses “peaks” and “turns” synonymously, and “turn” and “curved member” are used in the []patent claims synonymously with “end,” we find that those claims embody the same “peak” or “end” limitation as the [parent], i.e., the disclaimer from the [parent] patent applies against the [child] patent. Our conclusion is further buttressed by the established rule of claim interpretation that dictates that like terms should be construed consistently across related claims.

According to the Court, Medtronic admitted that the varying claim language should be identically interpreted when it made the statement that the child claims were allowable “for at least the same reasons as the parent application.”

Internet Radio: eBay v. MercExchange

The Supreme Court recently turned the injunction pendulum — giving district courts a looser hand to determine whether to issue an injunction.  Intel’s GC Bruce Sewell says this:
There will now be a greater willingness to take cases to trial . . . [since] if you lose a case there is a potential you can compensate the plaintiff in dollars rather than having your whole company shut down

I was recently part of an online radio program discussing the eBay case.  The “Coast-to-Coast” discussion included Rachel Krevans from MoFo and the Legal Talk Network show was hosted by attorneys J. Craig Williams and Robert Ambrogi.

Inherent Anticipation at the Supreme Court

AIPLATalk209SmithKline Beecham v. Apotex (on petition for writ of certiorari)

The Supreme Court is contemplating hearing this case that questions the standards for inherent anticipation ScreenShot030of a patent. The drug in question is Paxil, and the case history has more twists than a Hazzard County road. But, the question now before the Court is simple:

Whether a compound that is inevitably produced by the prior art is inherently anticipated by the prior art, and thus not novel under 35 U.S.C. 102.

Another way to focus on the particular question is whether any human recognition of the inherency is required.

Here, Paxil (a PHC hemihydrate) is inevitably produced by a PHC anhydrate, and PHC anhydrate (A.K.A. Ferrosan) was well known before the Paxil patent.

Judge Posner (sitting by designation) determined that Paxil was not inherently anticipated because its inevitable production from Ferrosan was not a “scientific []certainty.” On appeal, the CAFC reversed that particular decision — finding that the patent was inherently anticipated because PHC hemihydrate “inevitably results from production of” PHC anhydrate.

Now, the Solicitor General has provided the government’s views on the case, and supported the CAFC decision:

The court of appeals correctly held that the patent claim is invalid because PHC hemihydrate was inherently anticipated by the prior art that inevitably produced it. . . . a characteristic of a pre-existing product is not patentable even if no one had previously recognized that characteristic.

Because the Gov’t fully supports the CAFC decision, it also recommended against hearing the case.

Scholarship: Patent Thickets See a New Light

Patent law professor Douglas Lichtman (and my good friend) has an interesting new short article (8 pages of text) about problems of “patent thickets.” 

Theorists have discussed patent thickets as an example of problematic over-ownership — A.K.A. the tragic “anti-commons.”  When a particular area of technology is blanketed by multiple patents owned by multiple parties, everyone blocks everyone else, and nothing gets done.

After all, the conventional literature on the tragedy of the anti-commons asserts that resources will be inefficiently under-used in the face of too many overlapping patent rights.

Lichtman turns this theory on its head and asserts that in actuality, a very thick thicket might result in less litigation.  His idea is in a case of multiple overlapping patents, each patent represents only a small piece of the pie.  And few patentees would be willing to go through litigation simply to recover such a small slice.

More patents means less money per patent holder. Less money, in turn, means less of an incentive for a firm to strategically delay in the hopes of being a patent holdout, and less of an incentive for an accidental patent holdout to actually bring suit.

A couple of weeks ago, I would have rejected Lichtman’s argument out of hand.  Under the old rule, every patent holder had a right to force large settlements based on its hold-up threat through injunction.  Now, post eBay, his ideas begin to make more sense. . .

MedImmune v. Genentech — Licensee’s Right To Challenge Patent Validity (Briefs on the Merits)

ChimericImmunoglobulinMedImmune v. Genentech (Supreme Court 2006).

Earlier this year, the Supreme Court granted MedImmune’s petition for certiorari to determine when a patent licensee can challenge the validity of a patent.  The CAFC has held on a number of occasions that a licensee in good standing has no standing to sue for declaratory judgment because it is not under threat of being sued for patent infringement.  However, this conclusion pushes against the Supreme Court’s 1969 decision in Lear v. Adkins which held that a public policy interest in invalidating bad patents was strong enough to warrant a limitations on a licensee’s ability to give up its right to challenge a patent’s validity. 

The specific question presented is as follows:

Does Article III’s grant of jurisdiction of "all Cases . . . arising under . . . the Laws of the United States," implemented in the "actual controversy" requirement of the Declaratory Judgment Act, 28 U.S.C. § 2201(a), require a patent licensee to refuse to pay royalties and commit material breach of the license agreement before suing to declare the patent invalid, unenforceable or not infringed?

MedImmune’s brief and the first batch of amicus briefs have been filed and are reviewed below.

MedImmune’s Argument is quite simple — neither the Declaratory Judgment Act nor the Constitution exclude patent licensees from the scope of DJ jurisdiction, and such a per se rule is wrong because there are situations where an actual case or controversy exists between the licensee and licensor.  The linchpin of MedImmune’s case is their argument that “apprehension of suit is not a necessary condition [of establishing a concrete legal controversy], and this Court has never suggested such a thing.”

U.S. Government filed its brief and presents a number of interesting arguments. Specifically, the SG argues that the CAFC “has erected an unwarranted obstacle to declaratory relief in patent cases” that “cannot be justified by considerations of patent policy.”

[The CAFC’s] limitation on the availability of declaratory relief cannot be squared with this Court’s cases or with the congressional purposes underlying the Act. As demonstrated by decisions of this Court involving pre-enforcement challenges to statutes, it is sufficient for a declaratory judgment plaintiff to demonstrate a genuine risk of enforcement and a reasonable likelihood that he would engage in the proscribed conduct if the threat were removed. A declaratory judgment plaintiff need not run the risks entailed in actually violating the law in order to make out an “actual controversy.” See, e.g., Steffel v. Thompson, 415 U.S. 452, 459, 475 (1974). Indeed, this Court has already rejected the proposition that a licensee’s ongoing payment of patent royalties negates any justiciable dispute over the validity of the patent. Altvater v. Freeman, 319 U.S. 359 (1943). Yet the Federal Circuit’s insistence on compliance with its two-part test requires a patent licensee to commit a material breach of its license agreement in order to create an “actual controversy.” That result is contrary to the congressional purposes behind the Act, which was adopted to free parties of the requirement that they act at their peril on their own interpretation of their rights before being able to obtain a judicial construction of those rights.

When the Petitioner and Government briefs are examined together, you will see that they have presented a strong attack on the CAFC’s decision, and might just change the face of the licensor-licensee relationship.

Professor Brief (Dratler & Oddi) argue that DJ jurisdiction should extend “up to the constitutional limits. Indeed, it would begin and end with those limits.”  Licensee’s should fall within this standard.

The Generic Pharmaceutical Association discusses the CAFC’s requirement of an “actual controversy” and argues that “Article III controversies arise even when the patentee is not about to commence an action.  This argument is even more focused in the recent briefs in the Apotex v. Pfizer case.

Medtronic discusses the importance of DJ actions in patent cases. The case is especially compelling in areas where dozens of patents are licensed in a single agreement that sweeps together both the good and the bad.

National Resources Defense Counsel is not interested in patent issues, but believes that this case could have some effect on its ability to bring certain environmental litigation.  NRDC presents three requisites of an Article III case or controversy: injury in fact, causation, and redressability.  Here, MedImmune satisfies those requisites because it is paying a license fee under protest, the causation is the allegedly invalid patent, and the redress is to declare the patent invalid.

The Licensing Executive Society (LES) directly addresses Lear v. Adkins, arguing that case “held that licensees could not be precluded from challenging the validity of a licensed patent under the doctrine of licensee estoppel.” However, because of inconsistent application of the Lear doctrine, licensees today have difficulty in known when or even if they can challenge the validity of their licensed patent. “The Court is now in a position to resolve uncertainty in this area by issuing a ruling that clarifies and explains the continuing validity and scope of the Lear doctrine. LES urges the Court to provide such clarity.”

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Professor Kimberly Moore Receives Nomination to Federal Circuit Court of Appeals

KimpictureAs predicted, the White House has sent Professor Kimberly Moore’s name to the Senate as a nominee to be a United States Circuit Judge for the Federal Circuit — filling the spot of Judge Raymond C. Clevenger, III, who has retired.

This should make the CAFC Judicial Conference that starts on May 19 a bit more exciting.

Professor Moore has long been considered one of the handful of leading patent law professors, and is especially noted for her empirical research methods. In addition, Moore is co-author of a book on patent litigation along with CAFC Chief Judge Michel and she is the Editor-in-Chief of the Federal Circuit Bar Journal. 

Although not a registered patent attorney, Moore holds a BS and MS from MIT in electrical engineering.  Her masters thesis focused on chaos theory applied to electrical systems.  She received her JD from Georgetown.  Moore has been teaching law — and more specifically patent law — since completing her clerkship with Judge Archer at the CAFC.  She also has trial experience from her associate days at Kirkland & Ellis.

My two-cents — Professor Moore is an excellent nominee.  She is extremely intelligent, and has a complete understanding of the legal issues faced by the CAFC.  You will find that her decisions will be fair and quick, and, I believe that her vast knowledge of the CAFC and its history will help her to craft opinions that reconcile some of the internal cracks that have surfaced the past few years. I hope that the Patent Bar and will stand with me in putting its weight fully behind this nomination.

Congratulations to Professor Moore!

FTC v. Schering Plough — DOJ Rebuffs FTC in Reverse-Payment Antitrust Litigation

The Federal Trade Commission and Department of Justice have long fought over who should control and enforce antitrust laws within the U.S.  That debate continues . . .

FTC v. Schering-Plough (on petition for certiorari).

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.  In the settlement, Schering-Plough made a “reverse payment” to the potential infringers to settle the lawsuit. 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 (and thus spurring deals totaling billions of dollars). 

In its petition for certiorari, the FTC presents the question:

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.

Before considering the petition, the Court requested the Solicitor General’s views on the case — i.e., the Court asked the DOJ to comment on whether FTC’s case should be heard.  In a response made public today, the Government’s view is that the issues are important, but the FTC has not brought a good case. 

[Reverse payment] settlements may pose a risk of restricting competition in ways that are not justified by a lawful patent, to the detriment of consumers. This case, however, does not present an appropriate opportunity for this Court to determine the proper standards for distinguishing legitimate patent settlements, which further the important goals of encouraging innovation and minimizing unnecessary litigation, from illegitimate settlements that impermissibly restrain trade in violation of the antitrust laws.

The DOJ’s arguments are essentially that: (1) the particular issues were not squarely addressed by the appellate court and (2) there is no circuit split.

As Foley’s Hal Wegner has noted, the Solicitor General’s view is not controlling.  For instance, in the upcoming LabCorp v. Metabolite case, the SG unsuccessfully argued against certiorari.

  • Solicitor General's brief
  • FTC Petition for Cert (182 KB)
  • FTC petition for Rehearing at the 11th Circuit
  • Schering 11th Circuit Decision.pdf
  • Patent at issue, No. 4,863,743
  • PubPat Amicus Brief to the 11th Circuit [pdf]
  • Patently-O Article I
  • Patently-O Article II
  • Patently-O Article III
  • Patently-O Article IV
  • I’m sure that we’ll find more information at the Orange Book Blog.

    Patently-O Tidbits

    Blog Notes:

    • www.OrangeBookBlog.com: Chicago Attorney Aaron Barkoff has started the Orange Book Blog: At the Intersection of Patent Law and FDA Law.  I know from experience that Aaron is a great writer (his office is next-door to mine) and I believe that you will learn from his posts.
    • I have also been very impressed lately with Gary Odom’s blog Patent Prospector.  Gary is not a lawyer, but he does lots of patent searching and analysis.  Like another patent searcher many of us know, Gary is not afraid to speak his mind or give an opinion.

    Vote for Patently-O:

    • Patently-O is up for an @Award as the “Favorite Legal Blog” from TechnoLawyer. There is a two-step voting process:

    Orange Book Declaratory Judgment Question Goes to Supreme Court

    Apotex v. Pfizer (On petition for certiorari).

    In 2005, the CAFC decided Teva v. Pfizer and declared that the court does not have declaratory judgment jurisdiction over a case between an ANDA filer and the patent holder unless the patent holder at least threatens suit.  Orange Book listing - on its own– does not create a reasonable apprehension of suit.

    Apotex is facing the same situation in the present case.  They filed their ANDA request, Pfizer did not file suit or threaten litigation.  However, Apotex is afraid that as soon as it begins to manufacture the new drug that Pfizer will sue and potential force Apotex to pay “massive patent liability.”

    Thus, Apotex has asked the Supreme Court to determine whether declaratory judgment jurisdiction can exist based on this “prospect of massive patent liability that deters generic manufacturers from entering the marketplace.”

    The Supreme Court has asked the Solicitor General to present the government’s view on whether declaratory judgment jurisdiction can exist in this situation.  This request by the High Court is seen as a potential stepping stone to grant of Petitioner's request for certiorari.  The FTC made its position clear on this issue in a recent brief in the Tamoxifen Citrate Antitrust Litigation (“Under the panel ruling, pharmaceutical companies are now free to pursue this anticompetitive ploy without fear of antitrust liability.”).

    Notes:

    LabCorp v. Metabolite Decision Coming Soon

    The eBay case is a major decision, but Justice Kennedy’s concurrence that derides business method patents appears to foreshadow the outcome of the pending appeal of Laboratory Corp. of America (LabCorp) v. Metabolite Laboratories (Supreme Court 2006).

    In eBay, the concurrence almost begged lower courts to force compulsory licenses when the asserted patent is a “business method.”

    In addition injunctive relief may have different consequences for the burgeoning number of patents over business methods, which were not of much economic and legal significance in earlier times. The potential vagueness and suspect validity of some of these patents may affect the calculus under the four-factor test.

    In LabCorp, the High Court will review the question of whether a patent can claim rights to a basic scientific relationship used in medical treatment if the claim is limited to “correlating” test results.  Although the claim in question is a “medical method” it is not far afield from the much maligned “business methods.”

    It appears highly likely that Justice Kennedy’s group of four (Justices Kennedy, Stevens, Souter, and Breyer) will stick together in an attempt to invalidate this patent (and potentially many others).  And, they only need one more Justice to have a majority.  On the other hand, as Professor Joseph Miller points out, the loose language of Kennedy’s concurrence might be a sign that they could not get a majority for the LabCorp decision.

    I wondered though, as I read eBay, whether it was a sign the Court is not striking down the claim in LabCorp … on the theory that the Kennedy Four in eBay, knowing they had failed to muster a majority in LabCorp, were all the more determined to speak plainly, and a bit sharply, about the problems with the contemporary patent system that make automatic injunctions especially imprudent (assuming, for a moment, the merits of that critique).

    Chief Justice Roberts, who led the more conservative concurrence will likely not take part in the decision because of a potential conflict of interest.

     

    CAFC Refines Function-Way-Result Test of Infringement

    AIPLATalk208Applied Medical v. U.S. Surgical (Fed. Cir. 2006, 05–1314).

    In a dispute over Applied Medical’s patented trocar, the district court granted summary judgment of non-infringement to U.S. Surgical. Specifically, the district court found that the recited means plus function language was not infringed.

    A means plus function claim limitation is literally infringed when the relevant structure in the accused device perform the identical function recited in the claim and be identical or equivalent to the corresponding structure in the specification.

    Once the relevant structure in the accused device has been identified, a party may prove it is equivalent to the disclosed structure by showing that the two perform the identical function in substantially the same way, with substantially the same result.

    This test for infringement is known as the function-way-result test.  And, it was in applying the “way” portion of the test that the lower court erred.

    Specifically, the district court looked at the “way” the accused structure operated in general and found that it was different from the “way” described in the specification.  The CAFC found this general approach to be wrong because it essentially imported additional limitations into the claims.

    In this step, the inquiry should be restricted to the way in which the structure performs the properly-defined function and should not be influenced by the manner in which the structure performs other, extraneous functions. . . . [T]he district court improperly imported unclaimed functions when analyzing the way in which the disclosed embodiment performed the claimed function.

    Summary judgment vacated.

    Supreme Court Vacates eBay Injunction

    EBayITIn a landmark unanimous decision, the U.S. Supreme Court has reportedly vacated the appellate court’s decision against eBay — putting an end to the “general rule” that a permanent injunction should follow a finding of infringement of a valid patent.  Rather, the opinion by Justice Clarence Thomas rules that the decision of “whether an injunction should issue” is within the trial court’s discretion. Concurring opinions by Chief Justice John Roberts and Justice Anthony Kennedy.

    Background: At the district court, eBay was found to infringe MercExchange’s valid patent. However, the district court refused to issue an injunction to stop the ongoing infringement because MercExchange’s patent was a disfavored type (business method), because MercExchange was willing to provide a license, and because of the contentious nature of the litigation, any injunction would be difficult to enforce.  On appeal, the Federal Circuit (CAFC) reversed, finding that the lower court “did not provide any persuasive reason that this case is sufficiently exceptional to justify the denial of a permanent injunction.”  Most controversially, the CAFC concluded with its “general rule that courts will issue permanent injunctions against patent infringement absent exceptional circumstances.”

    eBay v. MercExchange ___ U.S. ___, No. 05–131 (2006).

    Unanimous Opinion: The decision relies on the traditional “four-factor test” for determining whether to issue a permanent injunction:

    A plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. . . . These familiar principles apply with equal force to disputes arising under the Patent Act.

    The Court indicated that these factors must be applied on a case by case basis – noting that “traditional equitable principles do not permit such broad classifications.”

    The Supreme Court flatly rejected the argument that patentee’s who only license should not qualify for injunctive relief — finding that “[s]uch patent holders may be able to satisfy the traditional four-factor test, and we see no basis for categorically denying them the opportunity to do so. To the extent that the District Court adopted such a categorical rule, then, its analysis cannot be squared with the principles of equity adopted by Congress.”

    In its final word, the court emphasized that the “decision whether to grant or deny injunctive relief rests within the equitable discretion of the district courts, and that such discretion must be exercised consistent with traditional principles of equity.”

    Roberts, CJ, Scalia, J, and Ginsberg, J, Concurring: Chief Justice Roberts provides a short concurring opinion that appears to caution district court judges in their “discretion.”

    [T]here is a difference between exercising equitable discretion pursuant to the established four-factor test and writing on an entirely clean slate. .Discretion is not whim, and limiting discretion according to legal standards helps promote the basic principle of justice that like cases should be decided alike.

     The opinion notes that from “at least the early 19th century, courts have granted injunctive relief upon a finding of infringement in the vast majority of patent cases.”  According to the Chief Justice, this long tradition of injunctive relief should be awarded great weight.

    Kennedy, J, Stevens, J, Souter, J, and Breyer, J, Concurring: These four Justices feel that times have changes, and that the tradition of injunctive relief might no longer be so compelling.  The Kennedy opinion is focused primarily on non-manufacturing patent holding companies and business method type patents:

    In cases now arising trial courts should bear in mind that in many instances the nature of the patent being enforced and the economic function of the patent holder present considerations quite unlike earlier cases. An industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees. . . . For these firms, an injunction, and the potentially serious sanctions arising from its violation, can be employed as a bargaining tool to charge exorbitant fees to companies that seek to buy licenses to practice the patent. When the patented invention is but a small component of the product the companies seek to produce and the threat of an injunction is employed simply for undue leverage in negotiations, legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest. In addition injunctive relief may have different consequences for the burgeoning number of patents over business methods, which were not of much economic and legal significance in earlier times. The potential vagueness and suspect validity of some of these patents may affect the calculus under the four-factor test.

    The equitable discretion over injunctions, granted by the Patent Act, is well suited to allow courts to adapt to the rapid technological and legal developments in the patent system. For these reasons it should be recognized that district courts must determine whether past practice fits the circumstances of the cases before them. With these observations, I join the opinion of the Court.

    In the end: The court found problems with both the CAFC decision and the district court decision.  For those concerned about the actual parties (MercExchange and eBay), we’ll have to wait to see a new decision from the lower courts.

    Crouch’s off the cuff analysis: I had predicted that the Court would apply equitable principles, but would announce that that injunctions should continue to issue in most cases.  [Prediction].  As it turns out, that decision is found in the Roberts Concurrence, but not in the majority. (Thus, I lost my $1 bet).  I also had not predicted that four Justices (Kennedy, Stevens, Souter, and Breyer) would come out so strongly against injunctions.  This decision may indicate a real shift in Patent Law and the strength of an individual patent.  My general advice to litigators: The injunction is now a big issue — make sure that you focus on evidence of irreparable harm from the beginning — including your cease & desist letter or initial complaint.  My colleague Tom Fairhall correctly points out that this decision adds yet another layer of uncertainty to patent litigation.

    Based on this decision, it is now clear that the value of a patent does depend upon the identity of the owner. For instance, an industry competitor will be able to show irreparable injury much more easily than would a university or individual inventor who has no plans to manufacture a product.  Because the industry competitor has a higher likelihood of obtaining an injunction, it should be willing to pay more for the patent.  Interestingly, this valuation gap may spur more licenses and patent transfers.

    Notes:

    BPAI Decisions

    ScreenShot029The USPTO has a new search engine for finding decisions of the Board of Patent Appeals and Interferences. (Link).  As far as I know, none of the 308 decisions filed in 2006 are precedential.  Rather, it seems the last precedential decision was Ex parte Lundgren from 2005. (Decision).

    Traditionally, the vast majority of BPAI decisions involved underlying applications that remained secret.  With the advent of publication of applications, the BPAI has become a more public body and continues to move toward the goal of providing sound decisions that both adjudicate the particular issues in question and provide further guidance to other applicants and examiners.

    For someone thinking of starting a new blog, I would suggest a BPAI blog in the mold of John Welch’s excellent TTABlog.

    What is a patent troll?

    Here’s my working definition of the confusing term: Patent Troll.

    Definition: The patent troll does not research or develop the technology or any products related to its patent. Rather, the patent troll waits for others to independently develop the patented technology into useful products and to create a market for those products. Once the newcomers are locked-into the new technology, the patent troll seeks rents either through licensing or litigation.

    Question: Is this type of activity bad?

    Links:

    Philips v. AWH Takes a Casualty: “interface” construed as “parallel bus interface.”

    AIPLATalk207Inpro II v. T-Mobile (Fed. Cir. 2006, 05–1233).

    Inpro accused T-Mobile and RIM of infringement of its patent relating to electronic devices having user-operable input means such as a thumb wheel. (Pat. No. 6,523,079). After claim construction, the parties stipulated to summary judgment of noninfringement. 

    Inpro’s PDA design includes a thumbwheel controller with a host interface.  The “PDA is designed to run independently by its own [CPU] until it is connected to a host computer.  Upon connection to the host computer, the host CPU takes control and can access the memory and other functional units of the PDA. 

    Inpro appealed the construction of the term “host interface.” Interestingly, the specification only discussed the interface as a parallel bus, and actually disparages serial busses. 

    The appellate panel agreed the defendants that the term’s definition should be limited to parallel bus interfaces:

    The description of a serial connection in the discussion of the expansion bus interface, and the lack of any such description in the discussion of the host interface, reinforce the interpretation of the host interface as requiring a parallel bus interface, for that is the only interface described for that purpose.

    The real killer for the plaintiff was that the following line from the patent:

    A very important feature of the PDA in an aspect of the present invention is a direct parallel bus interface . . .

    Because RIM and T-Mobile use serial ports, they can’t infringe the patent, which is construed to require parallel ports.

    Patent Drafting Commentary: This case reinforces the trend of intentional obscurity in patent drafting.  Based on this case and others, patent drafters would do well to ensure that nothing in the patent document is “important,” “essential,” “required,” or the like.  Those terms do help the patent readers better understand your preferred embodiment, but in court they will only limit your claim scope.

    Additional views of Judge Newman: Judge Newman wrote the majority opinion, but added a separate addendum on her own. Judge Newman agreed that the court’s construction of “host interface” was dispositive in this case.  However, she argued that the court should have construed all three disputed terms.

    I believe we have the obligation to review the construction of the three appealed terms, for the interests of the parties and the public, as well as judicial economy, require final disposition of the issues of claim construction that were decided by the district court, and raised on appeal. This panel’s resolution of this infringement action based solely on the construction of “host interface” does not resolve, or render moot, the interpretation of the other disputed terms. . . .

    We should review and decide all three of the disputed claim terms that are presented on this appeal, lest our silence leave a cloud of uncertainty on the patent, its scope, and its validity. Our obligation to the system of patent-based innovation requires no less.

     Judge Newman’s view appears to be at odds with Judge Mayer’s recent dissent in Old Town Canoe.

    Patents are Still “Very Important”

    In Inpro v. T-Mobile, an applicant’s use of the phrase “very important feature” in the specification allowed the court to legitimately import the “important” limitation into the claims.  That result prompted a resourceful, but anonymous Patently-O reader to do some quick analysis to figure out: who still uses phrases like “very important?” The answer: Lots of people.

     

    The following table shows the percentage of patents using the terms “important” or “very important” by month over the past twenty years.  As you can see, “important” features are alive and discussed in a significant number of applications.

     


    Application Month

    “important” %

    “very important” %

    Jan 1985

    23.5

    1.65

    Jan 1990

    24.0

    1.80

    Jan 1995

    28.3

    1.82

    Jan 2000

    29.6

    2.08

    Jan 2001

    27.5

    1.80

    Jan 2002

    27.0

    1.78

    Jan 2003

    24.4

    1.95

    Jan 2003*

    32.3

    2.31

    Jan 2004*

    31.4

    2.21

    *Data taken from published patent applications, which may or may not also have issued as patents.

     

    Of course, there are times when it is useful to talk about a “very important” feature of the invention — such as if you are attempting to avoid known prior art.  However, I would be cautious even on that point.

     

    A few caveats to this data — some of these hits might be in the background saying “this problem is very important.”  Some of them might also be saying it is “not very important.”

    Patently-O TidBits

    • Highway 101: Oracle and GWU are hosting a timely symposium on patentable subject matter in light of Lundgren and Metabolite.  For law school faculty, Oracle will sponsor your paper and travel expenses to the November conference in Washington DC. Conference Details PDF.
    • Fire of Genius: After regularly contributing to several blogs, Professor Joseph Miller at Lewis & Clark has started his own blog
    • TinyTechIP: Blaise Mouttet is also a long-time blog comment-writer.  His new blog focuses on nanotechnology patent developments.
    • PunchcardTechnoLawyer: I regularly receive the TechnoLawyer intellectual property newsletter, known as “IPMemes.” Last year, TechnoLawyer members picked Patently-O as the “Best Practice Area Blog” on the net.  This year, Patently-O is up for Favorite Legal Blog — Your vote would be appreciated.
      • How to vote (3 minute process):
      • Note — the one issue with TechnoLawyer is that they send quite a few e-mails — I would recommend using your yahoo or gmail account. (I setup a rule in outlook)