January 2007

Threats Against Customers Lead to Walker Process Antitrust Claim

Oil_pumpHydril v. Grant Prideco (Fed. Cir. 2007).

Grant and Hydril both own patents relating to oil drilling.  Hydril sued Grant for patent infringement and also asserted a Walker Process antitrust claim against Grant. 

Walker Process claims stem from the 1965 Supreme Court case (of the same name) and allow Section 2 Sherman Act antitrust claims for monopolization or attempted monopolization based on enforcement of a fraudulently procured patent.

Here, Grant’s alleged fraud was that it “obtained its patent by knowingly and deliberately concealing from the Patent Office prior art that it knew would have resulted in a denial of its application.” 

At the district court level, Hydril’s complaint was dismissed for failure to state a claim. In particular, the court noted that Hydril had failed to show sufficient enforcement activity. The CAFC disagreed, holding that threatened enforcement against customers could serve as a basis for a Walker Process claim.

Threats of patent litigation against customers, based on a fraudulently-procured patent, with a reasonable likelihood that such threats will cause the customers to cease dealing with their supplier, is the kind of economic coercion that the antitrust laws are intended to prevent. A supplier may be equally injured if it loses its share of the market because its customers stop dealing with it than if its competitor directs its monopolistic endeavors against the supplier itself. Without customers, a supplier has no business.

 

CAFC: “Circuit means” interpreted as means-plus-function

PatentlyO2006029DESA IP v. EML Tech and Costco (Fed. Cir. 2007 – NONPRECEDENTIAL).

DESA owns a patent directed to motion-activated security lights. The lights have a low-level always-on illumination as well as a bright security illumination that is activated when motion is detected by a passive infrared motion sensor. During infringement litigation, the district court construed the claims and consequently entered a stipulated judgment of noninfringement.

The appeal focused on whether the disputed claim phrases — “sensor means,” “control circuit means,” and “switching means” — should be interpreted as means-plus-function.

The use of the word “means” in the claim language invokes a rebuttable presumption that § 112, ¶ 6 applies; conversely, the failure to use “means” invokes a presumption that § 112, ¶ 6 does not apply. . . . Nonetheless, the presumption that § 112, ¶ 6 applies may be rebutted if the claim recites no function or recites sufficient structure for performing that function.

Distinguishing earlier precedent, the CAFC determined that neither the sensor, control circuit, nor switching pre-means terms recited sufficient structure.

DESA argues that this court has previously stated that “it is clear that the term ‘circuit’ by itself connotes some structure.” In Apex, however, the word “means” was not used, so the reverse presumption—i.e., that § 112, ¶ 6 does not apply—was invoked.

Regarding interpretation of the claims, the CAFC found that the district court had improperly given the terms a narrow construction by focusing on the preferred embodiments and the figures.

CAFC: Construction of Essential Features and Impermissible Recapture

ScreenShot071MBO v. Becton Dickinson (Fed. Cir. 2007).

MBO’s patent is directed to a hypodermic syringe that helps avoid needle sticks. After claim construction, the district court awarded summary judgment of noninfringement to BD.

On appeal, the CAFC recited the rules for claim construction sources:

The most relevant source is the patent’s specification, which is “the single best guide to the meaning of a disputed term.” Next in importance is the prosecution history, which is also part of the “intrinsic evidence” that directly reflects how the patentee has characterized the invention. Extrinsic evidence—testimony, dictionaries, learned treatises, or other material not part of the public record associated with the patent—may be helpful but is “less significant than the intrinsic record in determining the legally operative meaning of claim language.”

Essential Feature: Several of the asserted claims include a preamble precluding needlestick injury “immediately and positively.”  Interpreting the term “immediately,” the CAFC determined that an “essential feature” of the invention is ensure a safe needle immediately “upon removal from the patient.” (rather than immediately after some other event). 

The patentee here has clearly indicated via the specification and the prosecution history that the invention provides, as an essential feature, immediate needle safety upon removal from the patient. It is therefore appropriate to construe the claims so as to ensure that they, too, require that feature.

Interestingly, two of the claims did not include the ‘immediate’ language. For those claims, the court could find no textual hook for inserting the essential feature and thus did not burden those claims with the immediacy requirement.  Between the lines, the court implied that it could have found a textual hook through other claim terms, but stated that it “lack[ed] the power to construe other terms not disputed by the parties.”

Impermissible Recapture: Claim scope which has been surrendered in order to obtain issuance of a patent cannot be later reclaimed through a reissue proceeding.  The district court found that MBO’s patent had improperly expanded the scope of a term and thus construed the terms meaning narrowly.

On appeal, the CAFC held that the recapture rule should not be used to rewrite claim language. Although claim construction should be applied with an eye toward validity, that maxim should only be applied at last resort. Rather, the court should first construe the claims and then later determine if the broadened claims are valid .

Whether those broadened claims are invalidated by the recapture rule is an issue separate from construction.

Affirmed-in-part, reversed-in-part, vacated, and remanded.

Patent Litigation Blocked By Co-Owner’s Refusal to Participate

PatentlyO2006027Israel Bio-Engineering v. Amgen (Fed. Cir. 2007).

In 2002, Israel Bio-Engineering (IBEP) filed suit against Amgen, Immunex and Wyeth (collectively “Amgen”) alleging that their Enbrel drug infringed claim 1 of their patent. (Enbrel is used to treat severe rheumatoid arthritis and psoriasis.).

Yeda intervened — arguing that IBEP did not, in fact, own rights to the patent.  Although Yeda was under contractual obligation to transfer certain patent rights to IBEP, Yeda argued that some of the claims of the patent were invented only after those obligations had ended — and thus that Yeda was under no obligation to transfer rights to IBEP. The district court agreed with Yeda and dismissed IBEP’s suit for lack of standing — finding that IBEP had at most a partial interest in the whole patent.

PatentlyO2006028Generally, one co-owner can block other co-owners from enforcing a patent simply by refusing to join voluntarily in the patent infringement suit.

Absent the voluntary joinder of all co-owners of a patent, a co-owner acting alone will lack standing.

Although it allowed IBEP to make a new argument on appeal, the CAFC applied Israeli contract law to hold that IBEP, at most, was a co-owner.

Notes:

  • One fact that makes this case even more interesting is that IBEP was asserting claim 1, a claim that very likely fell under the terms of the assignment.  If the patent had only included claim 1, then it would have been owned by IBEP.  However, Yeda had rights in claims 2 and 3. Although those claims were likely unenforceable, their existence gave Yeda a partial interest in the entire patent.
  • Beware that there are a few exceptions to the rule stated above.

Wegner: Escaping the Depths of the Patent Shadows

WegnerA response to Merges,
By Hal Wegner

Professor Robert P. Merges makes much sense in his op-ed piece, Back to the Shadows, or Onward and Upward? Current Trends in Patent Law. We and thoughtful supporters of the patent system share much common ground.  Professor Merges touches on numerous points where there is hardly any significant difference with this writer, including the domestic results of the eBay decision from last year.  In his analysis of the Supreme Court, Professor Merges is correct that the Court is generally “pro business”, but it is another matter whether in some industries being “pro business” means being “pro-patent”.

PatentlyO2006026“Pro Business” as Anti-Patent, a new Direction at the Court:  Professor Merges is absolutely correct that the Supreme Court today is “pro-business”.  Whether the majority is pro-patent is possible but not yet conclusively determined: It is too soon to tell. It is undeniable that there is a solid, anti-patent Supreme Court core consisting of Justices Breyer and Stevens.  Justice Stevens’ anti-patent record reaches back to the mid-1970’s and is too well documented to question.  Yet, Justice Breyer is apparently now the more enthusiastic anti-patent of the two; they are the only members of the Court in this century to have taken the view that the open door to § 101 patent-eligibility for “living” inventions in the Chakrabarty case should be narrowed, arguing in a dissent in J.E.M. that the utility patent law “does not apply to plants”.(1) Just last year, an anti-patent drumbeat manifested in the Breyer dissent from the Metabolite “DIG” (joined by Stevens) plus their joint participation in the Justice Kennedy concurrence in eBay further validates their anti-patent bias.  Justice Souter joined both the Metabolite DIG dissent and the Kennedy eBay concurrence, but whether he is truly a solid part of an anti-patent core requires more data points; they may be forthcoming in shortly in KSR and in early Spring in Microsoft.  Whether other members of the Court join this core remains to be seen.

Feeding this nascent anti-patent core are two dominant themes:  First, while the Supreme Court is pro-business, a major segment of the business community is largely anti-patent, turning the patent system upside down:  Under this twisted view of patents, being “anti-patent” may be “pro business”.  Second, the patent jurisprudence of the Federal Circuit has created and continues to create problems that necessarily fuel further growth of an anti-patent sentiment. 

(more…)

En Banc Panel to Determine Scope of Opinion Waiver

In Re Seagate Technology (Fed. Cir. 2007).

The Federal Circuit has decided sua sponte to an en banc hearing addressing the following questions:

  1. Should a party’s assertion of the advice of counsel defense to willful infringement extend waiver of the attorney-client privilege to communications with that party’s trial counsel? See In re EchoStar Commc’n Corp., 448 F.3d 1294 (Fed. Cir. 2006).
  2. What is the effect of any such waiver on work-product immunity? 
  3. Given the impact of the statutory duty of care standard announced in Underwater Devices, Inc. v. Morrison-Knudsen Co., 717 F.2d 1380 (Fed. Cir. 1983), on the issue of waiver of attorney-client privilege, should this court reconsider the decision in Underwater Devices and the duty of care standard itself?

DOCS

NOTE:

  • As I suggested earlier this week, the CAFC has begun to test publication of merits briefs on its www.cafc.uscourts.gov website.
  • The Order indicates that Amici will be entertained “in accordance with [FRAP] 29 and Federal Circuit Rule 29.” This likely means that the court will grant leave to all amici briefs, although that meaning is unclear.

Only Appeal After Counterclaims are Dismissed

International Electronic Tech. v. Hughes Aircraft & DirecTV (Fed. Cir. 2007).

Sua Sponte, the Federal Circuit dismissed plaintiff’s appeal on subject matter jurisdiction because the case had not been finally resolved. In particular, the defendant had not yet dismissed its counterclaims.

The court takes umbrage at parties who have not carefully screened their cases to ascertain whether or not a judgment is final. It is incumbent on all parties to do so. The court should not be required or obligated to scrub every case to determine finality. At this time, the court shall not issue an order to show cause as to whether both parties should be cited or sanctioned for failing to determine finality before filing; however, the parties and other members of the bar are hereby placed on notice that the court shall in the future begin to cite counsel for failure to determine whether or not the appealed judgment is final.

Upcoming Events:

  • January 26, 2007 at the San Jose Museum of Art: We’ll be discussing transnational scope of U.S. patent laws. $225 for practitioners; $0 for academics and government types. [LINK]. West-coast heavy hitters include Lemley (Stanford), Keiff (Hoover Institution), Ochoa (SCU). Also starring Dan Burk (MN).  Three big bloggers, Eric Goldman, Michael Geist, & Dennis Crouch.
  • February 16, 2007 at UC Boalt Hall (Berkeley): Perspectives on Patent Law and Innovation. Judges Linn, Prost, Rader, Whyte, & Patel, etc.[LINK]
  • February 23, 2007 at Duke Law School: IP Hot Topics Symposium (with CLE credit). Blockbuster panels on patents and file-sharing. Judge Dyk has the keynote lunch address. [LINK]
  • February 23, 2007 at Ohio State: The Future of Patent Reform [LINK]
  • March 15–16, 2007 at DePaul (Chicago): [LINK]
  • March 29, 2007 at Catholic Univ (DC): Ethical Issues in Patent Law [LINK]

CAFC: Prior suit against manufacturer precluded later suit against end users

Transclean v. Jiffy Lube (Fed. Cir. 2007).

I spent one summer of my youth in the lube & oil business.  It ends up being a pretty fun occupation, although the pay is quite low.

Transclean is the exclusive licensee to a patent covering a machine for changing automatic transmission fluid.  Bridgewood sold infringing machines, and lost an earlier patent battle with Transclean. (Although Bridgewood has apparently not paid-up yet).

Transclean — wanting its money — filed suit against end-users, including Jiffy Lube, who had purchased the Bridgewood products.

The courts, however, found Transcleans claims precluded. Under 8th Circuit claim preclusion law, an earlier suit bars a later asserted claim if:

  1. the first suit resulted in a final judgment on the merits;
  2. the prior judgment was rendered by a court of competent jurisdiction;
  3. both suits involve the same cause of action; and
  4. both suits involve the same parties or their privies.

Here, the only questionable factor was whether Jiffy was in privity with Bridgewood. In the 8th Circuit, privity is found when parties are closely related with nearly identical interests so that “it is fair to treat them as the same parties for the purpose of determining the preclusive effect of the first judgment.”

Generally, for this standard, a buyer-seller relationship does not create privity for claim preculsion and Jiffy would lose the appeal — except for Transclean’s litigation strategy . . . Earlier in the litigation, transclean had argued that Jiffy was in privity with the prior defendant Bridgewood. Using that ‘admission’ and the doctrine of judicial estoppel, the CAFC refused to hear Transclean’s new arguments about the lack of privity (even though it is clear that there was no privity in fact).

In this case, we find it appropriate to invoke judicial estoppel to hold Transclean to its concession that Bridgewood and its customers were in privity for claim preclusion purposes. The determination Transclean asks us to make—that Bridgewood and the defendants were not in privity for claim preclusion purposes—is clearly inconsistent with the position it advocated before the trial court and in its opening brief on appeal. . . . As part of its litigation strategy, Transclean made the choice to concede privity between Bridgewood and its customers after choosing not to join the customers in the first litigation. Under the circumstances presented by this case, we believe Transclean should be held to the consequences of its choices.

 

CAFC: Electronic Filing of Briefs

The Federal Circuit has proposed amendments to its local rules that will require electronic filing of briefs and appendices:

These rule changes would require the filing of a digital version of every brief and appendix filed by a party represented by counsel, unless counsel certifies that submission of a brief or appendix in digital format is not practical or would constitute hardship. The requirements for the filing of paper copies of the briefs and appendices would continue unchanged. Comments must be received by the close of business on February 16, 2007.

Links:

11th Amendment Immunity Waived by Requesting an Interference Proceeding

ScreenShot070Vas-Cath v. University of Missouri (Fed. Cir. 2006).

Interference proceedings arise when two patent applicants both hope to obtain a patent on the same invention. 35 USC §135. The PTO holds a mini-trial and (usually) grants a patent to the party with priority. This case arose over claims to a dual-lumen catheter used in prolonged hemodialysis.

The University of Missouri filed its patent application first, but Vas-Cath pushed its through the PTO more quickly — resulting in an issued patent. On Missouri’s request, the PTO initiated an interference — a process that lasted six years and eventually resulted in all nineteen claims being awarded to the University.

Vas-Cath appealed and the case was heard in the Western District of Missouri. Unfortunately for Vas-Cath, the district court quickly dismissed the case based on Missouri’s Eleventh Amendment immunity from suit in federal court. (District Court Decision).  Vas-Cath then appealed to the Court of Appeals for the Federal Circuit (CAFC).

11th Amendment Sovereign Immunity: The 11th Amendment, ratified in 1798 provides that:

The Judicial powers of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.

This has been interpreted to provide a state (or a state university) with absolute immunity from an action in federal court unless the immunity is waived or the State’s actions violate someone’s 14th Amendment due process guarantee. In general, a state’s participation in the patenting process does not imply any waiver of immunity.

Here, Vas-Cath argued that the University’s request for and participation in the interference constituted waiver, and the CAFC agreed:

[T]he University did not simply procure a patent through the routine of ex parte examination, but requested the PTO to conduct litigation-type activity, obtaining a favorable agency ruling for which the statute authorizes judicial review.

The CAFC found that the University had indeed waived its immunity by voluntarily entering into the litigation-type interference — thus negating its “assertion of immunity to bar appeal of that adjudication.”

Notes:

Follow-on to Professor Merges: High-Tech Calls For Reform

As a follow-on to yesterday’s op-ed by Professor Robert Merges, I think that Sun Microsystems General Counsel Mike Dillon’s statement last September on the patent tax go to the point of what reforms many high-tech execs would prefer:

ScreenShot069[W]e were happy to recently host a visit to Sun by Congressman Lamar Smith. Along with Senators Hatch and Leahy, he has been a leader in the push for patent reform. In the course of our meeting, we shared our views on the need for significant changes to the current patent system, including the repeal of Sec. 271(f), limits on injunctive relief and the need to restrict damage awards to the value of the invention described in the contested patent. (Under the current system a plaintiff claiming a patent on a small, inexpensive component like a heat sink can claim damages based on the total profit for the entire product – even if it is something that contains thousands of other components.)

Although I suspect that Dillon is also upset about “bad” patents, patent quality was not even in his list of complaints. Rather, all these reforms would change the value of patents across the board. 

It is my perception that many high-tech execs are quite anti-patent after being burned a time or two.  Perhaps they should read Professor Merges recent empirical work on “Patents, Entry and Growth in the Software Industry.” In that paper, Merges finds that his data “suggests a simple overall conclusion: patents are not killing the software industry, and successful firms are paying attention to patent quality, at least according to some measures.”

Note:

  • Merges’ paper is focused on new entrants into the market. Thus, even after reading the paper, bastions of the old-software-market still might not be happy with the current state of patent law.

CAFC: Meaning of “About”

UltracetOrtho-McNeil Pharm. v. Caraco Pharm. (Fed. Cir. 2006).

Ortho’s patent covers a pain-relief combo of tramadol and acetaminophen with a ratio of “about 1:5.” Caraco’s drug has a ratio of 1:8.67.  The lower court construed the claims and found no infringement.

Claim Construction: On appeal, the Federal Circuit construed the term “about 1:5” by first looking at the intrinsic evidence.  In the patent and claims, Ortho had used the term “about” repeatedly: disclosed ratios included about 1:1, about 1:5, about 1:19 to about 1:5, and about 1:1600. 

The court reasoned that the term must have a narrow meaning in this patent because a broad meaning would leave other claimed ratios meaningless. The court also noted that the literal meaning of the term should be narrowly construed because Ortho “could have easily claimed a [broader] range of ratios”

An expert testified that the statistical range should be 1:3.6 to 1:7.1 based on a confidence interval constructed from the data in the patent, and the Federal Circuit agreed. (The patent discussed the importance of 95% CI).

Literal Infringement: The Federal Circuit found that there could be no literal infringement because the upper claimed bound for the ratio was 1:7.1 while Caraco’s ratio was 1:8.67.

Doctrine of Equivalents: No DOE because Ortho cancelled claims with broader range during reissue. Interestingly, the Court made this ruling based on vitiation rather than prosecution history estoppel:

[I]t cancelled the broader “comprising” claims, except for claim 6. In sum, having so distinctly claimed the “about 1:5″ ratio, Ortho cannot now argue that the parameter is broad enough to encompass, through the doctrine of equivalents, ratios outside of the confidence intervals expressly identified in the patent. We agree with the district court that to do so would eviscerate the limitation.

Summary judgment of noninfringement affirmed

Merges: Back to the Shadows, or Onward and Upward? Current Trends in Patent Law

MergesBy Professor Robert Merges

When no less an authority than Hal Wegner of Foley and Lardner starts worrying about the current direction of the Supreme Court on patent issues, it’s time to sit up and take notice. I have heard some of these concerns in the past few years, especially in the wake of the eBay injunction case. But when Hal sent around his widely-read “top 10 cases” email recently, I could see that his outlook had taken a serious turn for the worse. Here are some quotes from the recent Wegnerian missive:

Wegner“eBay philosophically piggybacks off an anti-exclusionary right climate in the electronics/software/manufacturing industries that has had a constant, anti-patent drumbeat in the academic and business communities and in the mainstream press. The Court has listened. . . .

[A] decidedly anti-patent core nucleus from the Douglas era is reforming at the Court that - save for Justice Stevens - had disappeared in the wake of the 1980 Chakrabarty and 1981 Diehr decisions . . . .

I believe this is a fairly mainstream view, at least among some chem/biotech/pharma practitioners. And despite how much Hal knows about all things patent (things he has generously shared with me and other academics over the years), I have to disagree with his assessment. Even more, though, I am worried about the larger implications of these views. The wedge between the pharma/biotech/manufacturing and the software/electronics views of the patent world is on one level just a normal development in a vibrant and growing field. But beyond a certain point, it is not a good sign. This is especially true when it is combined with the view that the current Supreme Court is anti-patent. Taken together, this attitude reminds me of the bad old days, the days whose shadow we in this field have only recently emerged from: the days when patent lawyers huddled together, defensively, while a hostile world seemingly bent on the destruction of this area of law (and these incentives for inventors) lobbed random attacks their way.

I think this period, which the field survived (some would say, just barely), casts a long shadow over today’s developments. But in my view at least, there is much more sunlight today than in the bad old days of the Douglas-Black anti-patent jihad. We have not seen, in any of the Court’s recent opinions, discussion of patents as “monopolies,” along the lines of Justice Douglas’ concurrence in Great Atlantic & Pacific Tea Co. v. Supermarket Equipment Corporation: “Every patent is the grant of a privilege of exacting tolls from the public. The Framers plainly did not want those monopolies freely granted.” Compare this with a statement from the unanimous opinion in one of the “new wave” of Supreme Court patent cases, the Festo case from 2002:

Each time the Court has considered the doctrine [of equivalents], it has acknowledged this uncertainty [over effective claim scope] as the price of ensuring the appropriate incentives for innovation, and it has affirmed the doctrine over dissents that urged a more certain rule.

In my view, it makes no sense to equate Douglas’ fifty year old dictum in a concurrence with this recent statement from a unanimous Court opinion. To reiterate: the recent statement of binding law talks of preserving “incentives for innovation,” and not hunting down spurious monopolies.

If there is an “Exhibit A” in Hal’s alarmist argument, it is the recent eBay opinion. Indeed, eBay seems to be the driving force behind most of the anxiety over the current direction of the Supreme Court. On one level, this is perplexing; after all, an opinion extolling “traditional principles of equity – the heart of the Court’s holding in eBay – hardly seems like a radical, “anti-property” legal ruling. But I think that the concerns Hal expresses have a deeper cause: the divergence in interests, and growing split, between pharma/biotech and electronics/software industries. I will return to this theme momentarily. But first, a few words about the post eBay environment are in order.

Recent cases show that for the most part the fears of the patent bar in the immediate aftermath of eBay are not being realized. (Joe Scott Miller's running web page tally of post-eBay cases shows this. As Professor Miller’s data show, district courts have granted plenty of preliminary and permanent injunctions following eBay. Injunctions have been denied in cases weak on the merits, which of course is nothing new; and in a few cases where patents provide disproportionate leverage or are asserted by entities that do not contribute in any appreciable way to innovation: exactly the result intended in the eBay opinion, in my view. And note to Hal: since pharma/biotech firms are real innovators, they have nothing to fear from eBay.) For the most part, people in the patent world recognize this: how can one rationally complain about the continued increase in patent applications while arguing that eBay has significantly undermined the value of all patents? If that latter argument were true, application volume would be dropping, not rising. The opinions in Warner-Jenkinson and Festo, other opinions, and even the remarks about the need not to upset the apple-cart in the oral argument in KSR show a concern with balance that belies a wild-eyed anti-patent bias.

My reading of the evidence – including eBay and its aftermath – is that this is a pro-business Court. I think the Supreme Court has created, overall, a very moderate body of patent law in recent years. (Examples: taking claim construction from juries; preserving the doctrine of equivalents, first from a frontal attack, and then by preventing prosecution history estoppel from swallowing it; trying to draw a reasonable line in the on-sale bar area; etc.) It has absolutely not shown itself to be systematically “anti-patent.” What it has done is to try to keep order and balance in a fast-paced field, weighing the interests of various branches of industry and various users of the patent system. This is, by all assessments, a pro-business Court. It would be shocking if the Court had deviated from this baseline commitment in one important branch of business cases, those involving patents. In my view, it has not.

The Supreme Court’s Real Concern: The Federal Circuit

Later in his letter, Hal has this to say:

[T]he passage of a generation and an open and some would say deserved hostility of the academic community toward the Federal Circuit has transformed this Court of Appeals into just that, an intermediate appellate court where the Supreme Court now pays perhaps closer attention to its jurisprudence than any regional circuit, except possibly the Ninth Circuit.

Here Hal is onto something significant. The real target of the Supreme Court’s caselaw seems to be, not the patent system generally, but the jurisprudence of the Federal Circuit. It is crucial to keep this in mind: whatever one thinks of the Federal Circuit, or of how much its caselaw needs “correcting,” targeting that Circuit is not the same as targeting patents or patent law generally. This is a vital distinction between the “bad old days” of the Douglas/Black era and today.

The Federal Circuit may well be the “new Ninth Circuit.” Despite the Federal Circuit’s overall success in stabilizing patent law, and setting it on a more coherent course, in my opinion the legal rulings of that Circuit often cause unnecessary confusion. Vacillation and variation are well-recognized in a number of important areas: claim construction, the “written description” requirement, means-plus-function claims, inherency, and product-by-process claims, just to name a few. There may be good reasons for some of this variation. They may be structural, having to do with the difficulty of the subject matter, or the absence of competing ideas and different perspectives caused by being the only appellate court in the area. (For some original analysis of these issues, and a sure-to-be-provocative proposal, see Craig Alan Nard and John Duffy’s recent working paper calling for patent issues to be spread among two or more appellate circuits: “Rethinking Patent Law's Uniformity Principle.”) Perhaps the Federal Circuit’s problems are more idiosyncratic, having to do with the composition or workings of this particular group of judges. Whatever the cause, the Supreme Court, in stepping up the scrutiny on that Circuit, is just doing its job of supervising and tending the overall functioning of the federal court system.

So in my view it makes no sense to criticize the Supreme Court, which is trying to steer the Federal Circuit in the right direction. It is especially perplexing to hear some of the same voices complain about the Supreme Court as also complain about the variations in Federal Circuit cases. These dual complaints (“the Federal Circuit needs a lot of work” and “The Supreme Court is anti-patent”) make the patent community sound incredibly negative. It reminds me of the old WoodyAllenWoody Allen joke about the food at summer camp: “The food was awful. And the portions were small too.” The Supreme Court is the only force actively working to steer the Federal Circuit onto a reasonable course. For those of us who believe patent law is an important and worthy field of law, we ought to be grateful for the attention.

To summarize: I believe the Court looks at patent cases from a centrist, inclusive, business-oriented perspective, which is a far cry from saying they are anti-patent. Criticism of individual patents, as in the KSR oral argument, or the dissent from the dismissal of certiorari in Metabolite does not in my mind reveal an underlying anti-patent bias. It does reveal a concern with the quality of some individual patents – which is a different concern.

But of course, in this the Court is not alone. Although it is tempting to say that those who are “anti-bad patents” are really in some sense “anti-patent,” I would disagree. As this is the core of the contentious divergence between pharma and electronics mentioned earlier, I turn to that issue now.

Looking at the Bigger Picture: When Molecules and Electrons Collide

It is no secret that the pharmaceutical and biotechnology industries have very different interests than those of electronics and software. Pharma products are typically covered by one or at most a handful of patents; the “billion dollar molecule” means that in pharma, there is such a thing as “the billion dollar patent.” Not so in electronics and software. Hundreds or thousands of patents may read on individual features of a complex microprocessor, consumer electronics device, or software product.

Because the Supreme Court’s cases have in recent years tried to strike a balance between various aspects of the patent system, they have of necessity waded into this area of contention. In many ways, concerns about the Supreme Court are really only part of a larger set of concerns on the part of pharma/biotech. The people who make their livelihood from these industries appear to me to be worried that the newfound efforts at “balance” are coming directly at their expense – that whatever balance the system as a whole may be gaining is coming at the cost of certainty and stability in their core areas of concern.

I want to make two points about that. First, I do not think that this is a “zero sum game.” I think the patent system can be tweaked and adjusted so as to address the concerns of the electronic/software industries, without undermining the economic position of pharma/biotech to any appreciable extent. Second, I believe that this “us against them” mentality could have some serious negative consequences. (This mentality is on prominent display in a recent brief filed by Eli Lilly in the Microsoft v. AT&T case in the Supreme Court – a frontal assault on the patentability of software, by a large pharmaceutical firm. Fortunately, it is unlikely the Court will take much notice, since the case centers on a discrete section of the Patent Act relating to infringing exports, and has nothing whatsoever to do with Section 101 issues.) Whatever the strains of bringing disparate industries under “one big patent tent,” based on what we know now they are worth it, compared to the alternative.

On the first point: despite real friction in recent years, I believe both sets of industries can be accommodated in a reasonable patent system. The key point is for the pharma/biotech industries to recognize that the software and electronics industries are not anti-patent, they are anti-bad patent. There is a world of difference between these two. (If you don’t believe that, look in on the debates between rabid open source and “free software” advocates and those trying to defend the value of patents in the software and other industries. It is maddening for software industry people that they are attacked as club-wielding monopolists by those who attack patents from within the software industry, and then accused by pharma of being latter-day acolytes of the Douglas/Black anti-patent school!)

On the other side, those in the electronics/software industries need to put themselves in the shoes of pharma/biotech. As carefully as “patent trolls” strategize to acquire patents that aim directly at the Achilles heels of an electronic or software product, so do generic drug companies take aim at the patents of pharma/biotech. Any tool designed to “weed out” weak patents from the hands of trolls can and will be turned around and used against pharma/biotech patents, by generic drug firms only too happy to swoop in after all the hard (and expensive!) work is done and cash in on a pharmaceutical product or therapy. And unlike in the electronics/software industries, this cut-throat competitive game goes on in pharma/biotech in an industry that comes under intense public scrutiny concerning drug pricing, marketing and safety. Sometimes it seems as if the press and other observers are doing their best to turn Big Pharma into the next tobacco or asbestos industry – ironic when you realize that pharma/biotech is at heart all about saving and extending lives, not endangering them. Against this backdrop, it is easy to see why the pharma/biotech industries are concerned. Patent law is one of the last bastions against a fairly hostile onslaught. Of course they are worried about any weakening along this front.

One “solution” that might seem commonsensical is to split the patent system. Although it is tempting to do so, to “send the combatants to opposite corners of the ring,” in my mind we don’t yet know enough about how this would work to advocate it seriously. There are too many open questions: would the patent office issue two separate types of patents? How would the borderline between them be policed? Would they be enforced differently? What standards of validity and infringement would apply to each? And on and on. These issues will have to be studied very carefully before one can confidently advocate a truly split patent system. Maybe something along these lines will make sense someday. In the meantime, piecemeal, careful reform of individual patent doctrines and procedures seems a far more sensible course.

Because of this uncertainty, it seems to me divisive and dangerous for pharma/biotech to alienate potential allies. The electronics and software industries are after all huge players in the economy, and they have earned a substantial place at the bargaining table over patent issues. This new reality is being felt in the patent world, and will continue to be felt. The old days of the large east coast law firms and a few dominant (mostly east coast) companies setting patent policy are over. This is a sign of success: our economy is growing and changing, and patents continue to be important in many sectors. Public policy will and should change accordingly. That’s the way the system is supposed to work.

The downside of divisiveness is also worth considering. Do the pharma/biotech industries want to drive electronics/software companies into a political alliance with generic companies? Do pharma/biotech firms want to embrace the “patent trolls,” and risk associating themselves with entities seen as interested only in exploiting weaknesses in the system to make money than in actually pushing ahead with useful new technologies? (The lessons of the tort reform movement are relevant here: it may take too much time, but eventually those who use the legal system only to extort money from productive sectors of society will be shut down. Why would you want to ally yourself with players operating under a surefire expiration date?) These kinds of political bedfellows pose serious risks all around, in my view. Better to compromise over the details of patent reform than risk open warfare of this sort. That could be bad for everyone who believes the patent system is a fundamentally worthwhile institution.

Going Forward

To summarize: What worries me about Hal’s views is that they overemphasize the shadows currently cast over the patent system, and invite comparisons with an era that I think was very different. And to the extent Hal’s views exacerbate a split between powerful industry groups with interests in the patent system, they point us in a dangerous direction n.

I may not agree with my old friend Hal in this matter. But the point is that we do (I think) both share an important fundamental belief in the viability and continuing potential of the patent system. (That’s one of the many things he passed along to me in my early days in this field.) In my view, the Supreme Court shares this view too. We need to continue to work with the Court, and with each other, in the good faith belief that we are all engaged in a worthy common enterprise. What do you say, Hal?

Note: Robert Merges is the Wilson Sonsini Goodrich & Rosati Professor of Law and Technology and Director or the Berkeley Center for Law & Technology.

Jeff Steck: Saving the Supreme Court from Folk Science

PatentlyO2006020Based on the briefs filed in the Microsoft v. AT&T case, the Supreme Court faces a substantial risk of establishing logically indefensible precedent relating to computer software. The status of software in patent law is a fair subject of debate, but such policy decisions should not be based on folk science.

In the briefs now before the Court, software-and information generally-is characterized as an ethereal construct, barely capable of being controlled or understood. In its amicus brief, Autodesk calls information "meta-physical." The Software & Information Industry Association describes information as "purely intangible." According to Microsoft, information is "abstract," and is "floating in the ether." Information has been so denigrated that AT&T, who holds the patent on the software method relevant to the case, claims that "software is not 'information.'" 

Colloquially speaking, information is hardly a new concept. Perhaps this is why the briefs assume it is reasonable to use a dichotomy pulled from Aristotelian philosophy: optical disk as "substance" versus computer program as "accident." But like physics, chemistry, and other topics of interest to the ancients, information has become a science, and it should be discussed as a science.

One prerequisite of science is the ability to isolate an object of study from the complicating influence of the environment. The first quantitative understanding of physics came only after natural philosophers turned their attention to the unimpeded motions of planets and pendulums, and the modern era of chemistry, it is argued, began when a French lawyer isolated the process of combustion. In biology, evolution was discovered only after the study of an isolated island ecosystem. Just as physics, chemistry, and biology were once "proto-sciences," so too was it difficult until recent decades to speak of a science of information. Information had always been bound up with books and thoughts, where its quantitative study would have been unimaginable. Digital computers, though, have given us both the ability and the motivation to study information in a nearly isolated form.

AT&T's denial that software is information is strange, and even disappointing, because it was at AT&T's own Bell Labs that the scientific study of information originated. See Wiki. In the intervening half-century, the physical properties of information have been studied thoroughly. Lawyers and the courts cannot be expected to understand this young science in detail, but they should not assume that there is nothing to understand.

One of the most profound results of the scientific study of information is that information, like other physical phenomena, is governed by the laws of thermodynamics. In particular, information has the properties of the thermodynamic quantity known as "entropy." See Wiki. These physical laws impose real limitations on the storage and manipulation of information, without regard to whether the information is embodied in magnetic dots, microscopic pits, punched cards, or even radio waves. Many of these laws and limitations are summarized in Michael P. Frank, "The Physical Limits of Computation," Computing in Science & Engineering (May/June 2002) at 16-26, available here.

The science of information need not be studied in depth to appreciate how uninformed many of the arguments to the Supreme Court have been. A comparison between computer software and "design information" (such as CAD/CAM codes, blueprints, instructions, or recipes) is repeated among the briefs. The desired inference, spelled out by amicus Amazon, is that there is "no scientific basis" for distinguishing between them. This inference, though, is incorrect. In the study of information, as in thermodynamics, there is a fundamental distinction between actions that are "reversible" and actions that are "irreversible." An irreversible process is one in which information is lost. For example, overwriting data in memory, as is done continually in a computer system, is not reversible. Copying a computer program from a master disk onto a blank portion of a hard drive, though, is reversible: even if the master disk is lost, its information can be restored using the information from the hard drive, and the hard drive can be restored to its original blank state.  

Contrary to Amazon's arguments, then, computer software can be scientifically distinguished from design information, because using design information to produce a product is irreversible. A manufactured product cannot be changed back into CAD/CAM codes and raw materials. A computer with Windows installed, though, can be changed back into a computer with a blank disk and an uninstalled copy of Windows. 

The amicus law professors have argued that compressed or encrypted information is "useless gibberish." Again, the science of information provides a helpful insight: compressing and encrypting data are both reversible processes. No relevant information is lost, since the data can be decompressed and decrypted to its original form.

Microsoft provides a nearly Biblical description of its Windows software as "abstract information" that "lacks physical existence" but to which Microsoft has "given a physical manifestation" as a "golden master." See John 1:14 ("And the Word was made flesh... and we beheld his glory."). How the first manifestation of Windows was pulled from the ether, though, is irrelevant. The issue before the Court relates only to what happened after Windows was originally compiled, and it is clear that any copies made thereafter were the mundane result of a reversible copying process.  

Thus, the distinction in Federal Circuit case law between software, which can be a "component," and design information, which cannot, is a valid distinction. It can be seen as a question of whether supplying the alleged component is reversible: information is a component if and only if it can be added and removed in a substantially reversible way. This parallels our understanding of mechanical components: most parts can be both added to and removed from a mechanical device. Of course, gray areas would remain (compiling source code into object code, for example, is not entirely reversible), but they remain in other technologies as well.

Information has other properties that allow it to be easily understood as a "component." Like mechanical components, information can be traced to its source (to determine who is liable), and it can be counted (to measure damages). Indeed, information can be far easier to trace to its source than anything made of molecules. A U.S. manufacturer could deny that it exported any physical part of an accused product: a connector made overseas may look exactly like one made domestically. Microsoft, though, could hardly deny that it was the original source of the Windows program: the probability that someone would arrange so many megabytes of information the same way as Microsoft, without copying, are astronomically small.

Normally, a single copy of a program is provided on each disk or on each computer. This makes it easy to count the instances and the location of a software "component" to determine damages: the number that are made in the United States, the number that are exported, and the number that are made abroad. Even in other, more complicated scenarios, information theory provides ways of characterizing the number of copies that exist (using, for example, measures of "redundancy" or of "mutual information").

Without proper guidance, the Supreme Court is likely to perpetuate proto-scientific characterizations of software. Information, such as the information used to store and transmit software, has well-understood physical properties. Because of those properties, software can be logically and consistently treated as a "component" under the patent laws. Whether those properties imply that software merits patent protection is open to debate, but neither side in that debate should disregard the scientific understanding of information in the hope of a victory based on ignorance.

Note: Jeff Steck is a patent litigator at McDonnell Boehnen Hulbert & Berghoff in Chicago.  He studied physics at the University of Chicago.

Patent Searching

PatentlyO2006019Queries for Patently-O readers:

  • Do you always conduct a prior art search before filing a new patent application? (why?)
  • Are there certain technology areas that still need to be searched from the PTO search room?
  • Are there certain technology areas where searches are more cost effective — either because the search is cheaper or because the search is more likely to discover the majority of close prior art?
  • What are the best tools available to a searcher who is not on-site at the PTO?
  • How much do you typically pay (or charge) for a professional search?
  • How in-depth do you tend to read the resulting references?

HolmesNotes:

  • In our book, Patent Application Practice, Jim Hawes and I recommend a pre-filing search as a matter of course. However, we make clear that a cost effective search will certainly overlook unknown references. [Link]
  • On his blog, IPO President Marc Adler strongly recommends pre-filing searches. [Link]
  • Professional Searcher, Gary Odom gives four reasons for pre-filing searches:
    • Draft around the art: “If you don’t know the prior art, you cannot possibly draft novel claims, know the appropriate claim scope, or reasonably hope that the drafted claims are valid.”
    • Pro-actively explain the art: Using the discovered art either in the patent application or during a pre-action conference increases the odds that the examiner will grant the claims sooner.
    • Clearance: Although not complete, a “quick prior art search” may reveal clearance issues or provide some assurance.
    • Enforcement: Having the best prior art cited on the patent will strengthen the patent and lessen the potential for later re-examination.

Please leave your comment below:

Collateral Estoppel Does Not Extend to Preliminary Injunction Findings

Abbott Labs v. ANDRX (Fed. Cir. 2007).

The district court granted a preliminary injunction to stop Andrx from selling extended release clarithomycin as a generic version of Biaxin XL. Andrx appealed.

Four factors for preliminary relief: (1) Likelihood of success on the merits; (2) irreparable harm from failing to issue a PI; (3) balance hardships of the parties; and (4) public interest.

Collateral Estoppel: Oddly, the same district court granted Abbott’s PI motion against two other defendants because the patents looked invalid. On appeal Andrx argued that, as in Blonder-Tongue, “Abbott cannot assert patents against one party which have been found to be invalid or unenforceable against another party.”

The CAFC found that collateral estoppel does not apply here because the earlier discussion of validity and enforceability had not been fully and finally litigated in the other cases. (Applying Seventh Circuit law).

Vitiation: Andrx also argued that the PI should not issue because its generic does not infringe — either literally or under the doctrine of equivalents. Under DOE analysis, the Andrx product included a pharmaceutically acceptable glyceryl monostearate rather than the claimed “pharmaceutically acceptable polymer.” Andrx argued that a GST equivalent would vitiate the polymer requirement. The CAFC, however, found that the two could be equivalent — falling in-line with the common notion that adjectives are subject to vitiation more often than nouns.

Notes: One thing that is unclear is why the court did not discuss the merits of the invalidity factor of the PI decision rather than focusing solely on the collateral estoppel issue.

Patently-O Tidbits

Eye on the Web

Upcoming Events:

  • January 26, 2007 at the San Jose Museum of Art: We’ll be discussing translational scope of U.S. patent laws. $175 for practitioners; $0 for academics and government types. [LINK].
  • January 24–27 in New Orleans: AIPLA Midwinter Institute — always a great event. $795 practitioner; $70 for academics. [LINK].

ITC: Standing to Appeal

Fuji Photo v. ITC (Fed. Cir. 2007).

In its fifth appellate decision of this 1998 case . . .

Fuji owns the patent on certain disposable cameras. Jazz and others take the discarded cameras, repair them, then sell them. Earlier, the court decided that cameras first sold by Fuji in the US were no longer protectable under the first-sale doctrine. However, the court held that those that the first-sale doctrine did not apply to products originally sold abroad.

Here, Fuji appealed the ITC’s calculation of the percentage of already imported cameras that were infringing.  The problem was the difficulty of determining which cameras were originally sold in the US.

Standing: On appeal, the CAFC first determined that Fuji had no right to appeal.  Unlike in normal infringement cases, ITC actions give the patentee no right to collect damages — rather, any past damages go to the coffers of the US Government.

Private plaintiffs, unlike the Federal Government, may not sue to assess [civil] penalties for wholly past violations. (quoting 528 U.S. 167 (2000).

It is clear here that any violations are wholly in the past because Jazz Photo no longer conducts business and is in the liquidation process.   

Injunction against Officer: Jack Benun, former owner of Jazz, also appealed — arguing that the ITC had no power to issue an injunction against him personally simply because of Jazz’s infringement.

The CAFC agreed with the ITC order — finding that "the Commission could legitimately issue a cease and desist order against him."  In their decision, the CAFC followed the Supreme Court’s 1937 Standard Education case which held that an administrative agency could bind officers of a corporation after issuing an order against the corporation itself.

CAFC Outlines Difference Between Vacating and Reversing

E-Pass v. 3Com (Fed. Cir. 2007)

E-Pass filed its original complaint in 2000 and has been through one round of appeal. The earlier appeal focused on claim construction.  In this appeal, E-Pass argued that the lower court didn’t properly follow the CAFC’s directions.

Once a case has been decided on appeal, the rule adopted is to be applied, right or wrong, absent exceptional circumstances.

The CAFC had vacated the lower court’s summary judgment and remanded for further proceedings.  On remand, the lower court considered the new claim construction handed down, but once again concluded that summary judgment against E-Pass was proper.

On appeal, the CAFC agreed with the lower court — finding that its earlier decision was not a reversal.  Rather, by vacating the decision the court implied that summary judgment may be proper after further consideration of the facts.

By vacating, we signaled that, although the district court’s prior decision rested upon erroneous grounds, a proper claim construction might support a judgment (summary or otherwise) in favor of either party.

Affirmed.