March 2007

Patent Reform: Damage Apportionment

The influential Intellectual Property Owner’s Association continues to push for patent reform. In particular, the IPO board has voted to support a modification of the rules on damages. The change would explicitly require apportionment of damages. In other words, damages for patent infringement would never be more than the economic value attributable to the innovation.

Proposed amendment:

Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement but in no event less that a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court.

Where an infringer shows that an apportionment of economic value is necessary to assure that damages based upon a reasonable royalty do not exceed the economic value properly attributable to the use made of the invention, such apportionment shall exclude from the reasonable royalty calculation the economic value shown by the infringer to be attributable to the infringer’s incorporation into the infringing product or process of features or improvements, whether or not themselves patented, that contribute economic value to the infringing product or process separately from the economic value properly attributable to the use made of the invention.

Where the claimant shows that the use made of the invention is the basis for market demand for an infringing product or process, the royalty may be based upon the entire market value of the products or processes provided to satisfy that demand.

The court shall identify all factors relevant to the determination of a reasonable royalty under this section and the court or the jury, as the case may be, shall consider such factors in making the determination.

When the damages are not found by a jury, the court shall assess them. In either event the court may increase the damages up to three times the amount found or assessed. Increased damages under this paragraph shall not apply to provisional rights under section 154(d) of this title.

The court may receive expert testimony as an aid to the determination of damages or of what royalty would be reasonable under the circumstances.

IPO also supports changes to the inequitable conduct jurisprudence:

IPO supports legislation to (1) limit or eliminate the unenforceability defense based upon inequitable conduct in patent litigation, (2) eliminate the requirement to disclose the best mode contemplated by the inventor of carrying out the invention, and (3) allow enhanced patent infringement damages to be awarded for “willful” infringement only in limited circumstances, such as those set forth in IPO’s Amicus Brief filed in In Re Seagate Technology LLC.

Teva v. Novartis: Generic Declaratory Judgment Actions

Teva v. Novartis (Fed. Cir. 2007).

Novartis markets Famvir — a treatment for genital herpes. Hoping to get-in on the action, Teva filed an ANDA and later a declaratory judgment suit to invalidate the related Novartis patents.  Teva’s action was dismissed after the generic manufacturer failed to establish “a reasonable apprehension of imminent suit.” (Meanwhile, Novartis had sued Teva on an additional patent covering Famvir).

Since the Supreme Court’s decision in MedImmune, however, the reasonable apprehension test has been eliminated. The new test, written generally in MedImmune, is “whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between the parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.”  Under Article III of the constitution, the controversy must include an ‘injury-in-fact.’

Here, Novartis argued that there was no injury-in-fact because Novartis had not threatened suit on the patents in suit and that another ongoing patent suit against Teva was unrelated. The CAFC disagreed, finding that Novartis had created a controversy. In particular, a combination of the following actions were sufficient to create DJ Jurisdiction:

  • Novartis’ listing of the patents in the Orange Book. (“may not be sufficient” to create Article III jurisdiction)
  • Teva’s submission of an ANDA and certifying that it did not infringe. (“The very act of submitting an ANDA is an act of infringement.”)
  • Novartis’ ongoing lawsuit on a related patent covering the same drug. (“[R]elated litigation involving the same technology and the same parties is relevant in determining whether a justiciable declaratory judgment controversy exists on other related patents…. Novartis’ suit on [only one patent] leaves open the possibility of future litigation.”)

The court attempted to cabin the expanded jurisdiction scope by focusing on the facts:

“The type of legal uncertainty as to the legal status of Teva’s ANDA that Novartis has created by suing on only one of the five paragraph IV certified Famvir® patents listed in the Orange Book is a present injury sufficient for a justiciable controversy.”

Friedman Concurring: Senior Judge Friedman saw a simpler path to finding jurisdiction: Listing of the patents in the Orange Book combined with Teva’s noninfringement certification created an existing controversy.

“[B]y listing those five patents in the Orange Book, “Novartis represent[ed] that a ‘claim of patent infringement could reasonably be asserted if a person not licensed by the owner engaged in the manufacture, use or sale’ of generic famciclovir covered by the claims of its listed Famvir® patents.” Maj. Op. at 15. In its Abbreviated New Drug Application filed with the Food and Drug Administration, Teva certified … that “its drug did not infringe” any of the five Novartis Famvir® Orange Book patents or that the patents were invalid. There thus is an existing controversy between the parties over whether Teva’s generic version of Famvir® would infringe the four other Famvir® patents listed in the Orange Book, and whether these patents are valid.”

Terminal Disclaimer Does Not Negate Hatch-Waxman Term Extension

Merck v. HI-TECH (Fed. Cir. 2007).

During prosecution of its patent application covering TRUSOPT, Merck filed a terminal disclaimer to voluntarily cut-short the duration of its patent’s validity.  The terminal disclaimer helped Merck overcome some of its own prior-art that might have obviated the invention.  Later, because of delays in FDA regulatory approval, Merck was able to tack-on an additional 3+ years — moving the expiry date from Dec ’04 to Apr ’08.

HI-TECH filed a Paragraph IV certification requesting approval for a generic version of the glaucoma treatment and asserting that Merck’s patent was expired and invalid. The district court dismissed the case — holding that the Hatch-Waxman term-extension was not canceled by the terminal disclaimer.

Law: 35 USC 156 provides that the term of a patent “shall be extended … from the original expiration date of the patent” if the proper conditions are met. Section 156 makes no mention of terminal disclaimers.

Holding: On appeal, the CAFC found that it is permissible — and in-fact mandatory — to tack-on Section 156 extensions to the term of a terminally disclaimed patent. 

Analysis: The statute says the term “shall be extended.” That wording implies a duty to extend once the requisite conditions are met. According to the CAFC, since a terminal disclaimer is not an explicit exception to the rule, it cannot be read-in. This reading of the statute is buttressed by the fact that terminally disclaimed patents are explicitly excluded from 154(b) term adjustments.  (expressio unius).

USPTO Public Pair: Static URLs Please

For the past several years, the US Patent Office has been encouraging practitioners to use its electronic file wrapper system.  The system, known as PAIR, contains all sorts of information on pending and issued patents including: filing data, foreign priority, patent family data, and a full prosecution history.

Until this weekend PAIR operated through a static URL system.  That meant that you could bookmark the PAIR page for your pending applications or e-mail the link to your clients, the inventors, or even potential licensees. I also used this feature to obtain information for my statistical studies and have written several bits of code to automatically download and preformat information regarding selected patents.

Now, without public notice or comment, the PTO has removed the static URL system and replaced it with a session-cookie based system that monitors a particular computer’s activities and does not allow for bookmarking or other delayed or preformatted access. 

Advice: What would really be useful would be to have a system that allows for automatic updates of PAIR data, such as an RSS feed. Unfortunately, the PTO has taken a technological step backward. 

CAFC Expands Scope of Declaratory Judgment Jurisdiction

SanDisk v. STMicroelectronics (Fed. Cir. 2007).

SanDisk and ST were undergoing explicitly “friendly discussions” regarding cross-licensing of flash-memory technology rights. At a “settlement” meeting, ST showed a powerpoint presentation that mapped its claims to SanDisk technology and openly discussed SanDisk’s [alleged] infringement.

Apprehension: To avoid a declaratory judgment suit, ST’s attorney told SanDisk that “ST has absolutely no plan whatsoever to sue SanDisk.”  SanDisk agreed that it would at least wait until the following Tuesday to sue.   License proposals were exchanged, but SanDisk eventually didn’t like the deal.  About one month after the initial meetings, SanDisk sued for declaratory judgment of noninfringement and invalidity.

Case Dismissed: The district court dismissed the case — finding no actual controversy under the Declaratory Judgment Act “because SanDisk did not have an objectively reasonable apprehension of suit.”  Under Article III of the constitution, courts only have jurisdiction over actual “cases and controversies.” In regards to patent related declaratory judgment actions, the Federal Circuit has held that such a case or controversy only exists when a party has an objectively reasonable apprehension of being sued for patent infringement.

Deleting The Reasonable Apprehension Test: In the meantime, the Supreme Court decided MedImmune v. Genentech – tearing a large hole through the CAFC’s DJ reasonable apprehension test. 

“The Supreme Court’s opinion in MedImmune represents a rejection of our reasonable apprehension of suit test.”

Under the CAFC’s new rule, a patentee can create a situation amenable to declaratory judgment jurisdiction by making statements far short of threatening legal action. In particular, DJ jurisdiction can exist when the patentee’s position vis-a-vis a DJ plaintiff either (1) indicate that the DJ plaintiff is taking illegal actions or (2) pushes the DJ plaintiff toward abandoning legitimate activities.

“Article III jurisdiction may be met where the patentee takes a position that puts the declaratory judgment plaintiff in the position of either pursuing arguably illegal behavior or abandoning that which he claims a right to do.”

In particular, the following should be closely considered when writing cease and desist letters:

“We hold only that where a patentee asserts rights under a patent based on certain identified ongoing or planned activity of another party, and where that party contends that it has the right to engage in the accused activity without license, an Article III case or controversy will arise and the party need not risk a suit for infringement by engaging in the identified activity before seeking a declaration of its legal rights.”

Here, the CAFC found that ST’s activities were sufficient to create DJ jurisdiction.  In particular, the claim charts mapping out infringement along with ST’s discussion of SanDisk’s “infringement” were sufficient to create jurisdiction. There was no need to cut-off license negotiations prior to filing suit. Furthermore, ST’s self-serving statement that it did not intend to sue did “not moot the actual controversy created by its acts.” 

Vacated and remanded.

Notes:

  • The rule still requires some activity by the patentee: “In the context of conduct prior to the existence of a license, declaratory judgment jurisdiction generally will not arise merely on the basis that a party learns of the existence of a patent owned by another or even perceives such a patent to pose a risk of infringement, without some affirmative act by the patentee.”
  • Concurrence: In a concurring opinion, Judge Bryson spells the fear of many patent holders: ”it would appear that under the court’s standard virtually any invitation to take a paid license relating to the prospective licensee’s activities would give rise to an Article III case or controversy if the prospective licensee elects to assert that its conduct does not fall within the scope of the patent.”

Patently-O TidBits

  • Amgen v. Hoechst: Amgen has filed its petition for certiorari asking for a review of de novo appellate claim construction. The money quote:

“Construction of patent claims depends on technological mastery and is therefore, like the inquiry into the reliability of scientific testimony under Daubert, 509 U.S. 579 (1993), something for which trial courts are uniquely suited and owed special deference. The Federal Circuit’s simplistic syllogism – if an issue is for the court, it must be subject to complete de novo review on appeal – flies in the face of Rule 52(a) and is belied by well-established practice in patent and other areas of the law in which the factual determinations undergirding a court’s legal pronouncement are reviewed for clear error.”

Amgen follows the Supreme Court’s lead in verbally trashing CAFC jurisprudence.  It is one thing for Justice Scalia to shout gobbledygook — quite another coming from counsel asking for a hearing.

  • Professor Isaacs: Patents are not property, they are federal entitlements not covered by the Takings Clause of the Fifth Amendment. [LINK]
  • Personal: Rent my apartment in Brookline MA…[LINK]

Routine Experimentation -> Obvious

Pfizer v. Apotex (Fed. Cir. 2007).

Norvasc® is Pfizer’s patented blockbuster drugs for treating hypertension and angina.  The Court of Appeals for the Federal Circuit (CAFC) has invalidated Pfizer’s patent — finding it obvious. Generics are already on the market.  

Background: Apotex, a generic manufacturer, filed a notice with the FDA — certifying its belief that Pfizer’s patent covering Norvasc was invalid and unenforceable. The trial court upheld Pfizer’s patent and issued an injunction stopping Apotex from making a generic version.

Courts and the PTO: In its appellate opinion, the CAFC began with a strong repudiation of any reliance on Examiner’s findings during prosecution of a patent: “Our case law consistently provides that a court is never bound by an examiner’s finding in an ex parte patent application proceeding.”  Applying this boundary, the panel found that “it can never be the case that an examiner’s interim finding of prima facie obviousness renders the claims of an issued patent prima facie obvious.” 

Unpredictably Obvious: Norvasc is amlodipine besylate.  At the time of the invention, amlodipine was known as was the use of besylate anions.  Pfizer argued that the results of combining these would have been unpredictable and therefore non-obvious.  The CAFC disagreed, finding that unpredictability does not result in nonobviousness.

[A] rule of law equating unpredictability to patentability, applied in this case, would mean that any new salt … would be separately patentable, simply because the formation and properties of each salt must be verified through testing. This cannot be the proper standard since the expectation of success need only be reasonable, not absolute.

Here, the court found plenty of evidence to believe that a PHOSITA would have had a reasonable expectation of success.

Obvious to try: A combination can be “obvious to try” but still be nonobvious.  This is may be true, for instance, in cases where there are many potential parameters or where the art merely suggests a “general approach that seemed to be a promising field of experimentation.” The court distinguished those situations from the present case — finding that a PHOSITA would have been able to narrow the group of potential salt-formers to fewer than 53 anions, which would be an acceptable number to form “a reasonable expectation of success.”

Routine Experimentation: Start telling your story!!  It is axiomatically true that patentability is not negated by the manner in which the invention was made.  The exception, found here, is that “routine testing” can be considered a reason to invalidate the patent.

[T]he prior art provided not only the means of creating acid addition salts but also predicted the results, which Pfizer merely had to verify through routine testing.

Secondary Factors: On appeal, the CAFC also held that it was an error to consider Pfizer’s switch from a different form of amlodipine to amlodipine besylate as a secondary factor of obviousness.  Furthermore, comparison of unexpected results must compare the invention to the closest prior art — not to the closest commercial product.

Orange Book Issues: Mylan was first to challenge the patent and lost.  Under the Orange Book rules, Mylan still qualifies for six-months as the exclusive generic seller.  Apotex, which won this case, claims that it also has rights to begin selling a generic version as soon as the FDA gives its approval. Apotex, however, has not presented its legal claim.

Expiration: When $2.4 billion per year are at stake, every day counts.  The patent was set to expire on Sunday, although Pfizer claimed six additional months of exclusivity based on its testing of childhood eficacy.

Notes:

  • The patent had previously been upheld by three separate district courts.

The New Law of Enablement

Liebel-Flarsheim v. Medrad (Fed. Cir. 2007).

This case raises an interesting enablement issue. The issue involves how we should interpret patent claims that extend coverege over material that is not enabled.  This is an important question because most patent claims are written to literally cover embodiments that are not fully enabled. 

Facts: Liebel-Flarsheim’s patent describes a preferred embodiment of a needle holder that includes an associated pressure jacket but do not enable a jacket-free embodiment.  The patent claims did not claim (or even mention) the pressure jacket and thus, based on comprising language, were construed to cover injectors regardless of whether they have an associated pressure jacket.  Medrad’s accused products do not have the pressure jacket.

Lower Court: The lower court found the patent invalid as not enabled — holding that it would have taken undue experimentation to practice the claimed invention without the pressure jacket.

Argument on Appeal: Liebel argues that "the asserted claims do not recite or require the absence of a pressure jacket and the court improperly focused on such an embodiment."  In particular, the question of creating an embodiment without a pressure jacket is not one of "experimentation" but rather additional follow-on innovation.

Appellate Decision: On appeal, CAFC panel found the patent invalid as not enabled.

We have previously construed the claims … such that they are not limited to an injector with a pressure jacket, and therefore the full scope of the claimed inventions includes injectors with and without a pressure jacket. That full scope must be enabled, and the district court was correct that it was not enabled.

There must be “reasonable enablement of the scope of the range” which, in this case, includes both injector systems with and without a pressure jacket.

The irony of this situation is that Liebel successfully pressed to have its claims include a jacketless system, but, having won that battle, it then had to show that such a claim was fully enabled, a challenge it could not meet. The motto, “beware of what one asks for,” might be applicable here.

Invalidity affirmed.

Notes:

  • "During the prosecution of the front-loading patents, Liebel removed all references in the claims to a pressure jacket."

Patently-O via BlackBerry

Several Patently-O readers have BlackBerry devices. These hand-held devices are great because they allow you to continue to work even when strolling on the beach, playing with your children, or participating in a departmental meeting.

I have formatted a daily e-mail feed so that it is more accessible to BlackBerry users.  The new e-mail format will include the entire text for each post from the previous day.  The e-mail is through a company called “FeedBurner.” To sign up, follow this link: http://www.feedburner.com/fb/a/emailverifySubmit?feedId=775893

Feedback is welcome.

Pull My Finger Fred

JCW Investments v. Novelty, 05-2498 (7th Cir., Mar. 20, 2007)

Meet Pull My Finger® Fred. He is a white, middle-aged, overweight man with black hair and a receding hairline, sitting in an armchair wearing a white tank top and blue pants. Fred is a plush doll and when one squeezes Fred’s extended finger on his right hand, he farts. He also makes somewhat crude, somewhat funny statements about the bodily noises he emits, such as “Did somebody step on a duck?” or “Silent but deadly.”

Fartman could be Fred’s twin. Fartman, also a plush doll, is a white, middle-aged, overweight man with black hair and a receding hairline, sitting in an armchair wearing a white tank top and blue pants. Fartman (as his name suggests) also farts when one squeezes his extended finger; he too cracks jokes about the bodily function. Two of Fartman’s seven jokes are the same as two of the 10
spoken by Fred. Needless to say, Tekky Toys, which manufactures Fred, was not happy when Novelty, Inc., began producing Fartman, nor about Novelty’s production of a farting Santa doll sold under the name Pull-My-Finger Santa.

Somewhat to our surprise, it turns out that there is a niche market for farting dolls, and it is quite lucrative…

In the appeal, the 7th Circuit agreed that a single seller of farting dolls was enough and upheld the copyright on Fred.

 (via Bob Loblaw)

False Declarations: The Chosen Instrument of an Intentional Scheme to Deceive the PTO

eSpeed v. BrokerTec (Fed. Cir. 2007).

ESpeed is the software-wing of the Wall-Street brokerage Cantor Fitzgerald. Its patents relate to software for replacing the “open outcry” feel of the market floor.

Judge Jordan of Delaware found eSpeed’s patents unenforceable, and on appeal, the CAFC affirmed.

Inequitable Conduct: A patent will be unenforceable if the patent was procured through inequitable conduct. Inequitable conduct does not require a showing of fraud, but it does require actions that materially affect the patentability of the invention coupled with an intent to deceive the PTO. “Once a district court has found a threshold level of both materiality and intent to deceive, the district court must balance the evidence to determine if equity should render the patent unenforceable.”

Level of Review: Because of base in equity, inequitable conduct findings are reviewed for clear error.

Materiality: Initially, eSpeed initially failed to disclose its own prior “Super System.”  When eSpeed’s counsel eventually learned of the system, they went overboard — filing multiple declarations on behalf of the inventors regarding the prior art system as well as thousands of pages of documents. One declaration included a statement that certain features in the claimed invention were not found in its own prior system. Unfortunately for eSpeed, the court found that statement to be knowingly false and material.

Intent: Intent to deceive may be inferred, especially from direct statements by the patentee:

The applicants submitted the declarations at issue in an apparent attempt to purge possible inequitable conduct … Instead of being candid, [one] declaration disingenuously states that the Super System did not include [the claimed element]. The district court was free to draw an inference that these declarations were “the chosen instrument of an intentional scheme to deceive the PTO” because “[t]he affirmative act of submitting an affidavit must be construed as being intended to be relied upon” Refac.

Unenforceability affirmed.

Notes:

  • The language: “chosen instrument of an intentional scheme to deceive the PTO” comes from the 1983 CAFC decision Rohm & Haas Co. v. Crystal Chem. That case includes other choice language, including: “In contrast to cases where allegations of fraud are based on the withholding of prior art, there is no room to argue that submission of false affidavits is not material.”

Doctrine of Equivalents: Festo Exceptions Narrow

Cross Medical v. Medtronic (Fed. Cir. 2007).

Medtronic brought its lawyers and engineers together to redesign their bone screws — the point was to avoid infringing the Cross patents while still having a product that was essentially the same.  Once-upon-a-time, the doctrine of equivalents would have complicated the issue, but applying Festo, Medtronic modified its design by changing the thread-depth — a limitation that had been subject to a narrowing amendment by Cross during prosecution of its patent.

In particular, the claim had been amended to include a screw depth “below the [rod] diameter” and Medtronic’s design-around used a screw depth that was above the rod diameter.

Under Festo, equivalence usually cannot be asserted for an element that had been subject to a narrowing amendment during prosecution. If, however, the amendment was only “tangentially related” to the accused equivalent then Festo estoppel does not apply.

The district court found that, in fact, the amendment made during prosecution was only tangentially related to the accused equivalent — thus finding that Medtronic infringed under the Doctrine of Equivalents (DOE).

Tangential exception is narrow: In its decision, the CAFC first noted that the tangential relation exception is “very narrow.”  Here, the tangential exception cannot apply. As in Rhodia, the equivalent is within the range surrendered by the amendment. According to CAFC law, such a surrender is not tangential.

Reversed and Remanded.

Tangential Concurrence: In a concurrence designed for a casebook, Judge Rader explains why there should be only a narrow possibility of rebutting Festo estoppel based on the tangential relationship between the amendment and the accused equivalent.  In almost explicit terms, the concurrence indicates that the tangentiality excuse should probably not even exist (Except for the Supreme Court precedent).

Declaratory Judgment: MedImmune Opens Doors

Cellco v. Broadcom (Fed. Cir. 2007).

The Verizon (Cellco) DJ action was dismissed by the district court based on a currently pending ITC action against Qualcomm. (Qualcomm makes the Cellco chips). On appeal, the CAFC affirmed dismissal.

Citing the recent Supreme Court case of MedImmune, the CAFC first found an error:

[W]e conclude that the district court erred as a matter of law in holding that no actual controversy existed between the parties, as required by the Declaratory Judgment Act, 28 U.S.C. § 2201(a) and Article III of the Constitution.

MedImmune, which was decided earlier this year, eliminated the CAFC’s “reasonable apprehension” test and seemingly allows the courts much broader declaratory power.

The CAFC was able to uphold the lower court’s dismissal based on the “unique and substantial discretion” discretion given courts to decide whether to hear DJ actions even when Article III jurisdiction exists. Here, the CAFC suggested that Cellco intervene in the Broadcom/Qualcomm suit involving the same patented technology.

DDC Note:

  • This apparent declaratory judgment action is oddly captioned with Broadcom, the patentee, listed as plaintiff.
  • The other factual quirk of this case is that Brodcom and Qualcomm have already settled several

MedImmune is opening doors in other cases as well:

  • Highway Equip v. Cives Corp (D.Iowa March 7, 2007) (Article III controversy exists based on letter indicating patent infringement and absence of promise not to sue).
  • Rite-Hite v. Delta-T (E.D.Wis. March 7, 2007) (Court refused to dismiss DJ action or follow the ‘reasonable apprehension of suit’ test.)
  • BNSF Ry. Co. v. Box (C.D.Ill. January 18, 2007) (“a plaintiff need not expose himself or herself to liability or engage in conduct violative of the statute in question before the plaintiff could seek a declaratory judgment regarding the validity of the statute.”).

Supreme Court: Pharmaceutical Reverse Payments May be Considered by Supreme Court

In an order today, the Supreme Court asked the US Solicitor General for the Gov’ts views on Joblove v. Barr Labs.  This case, also known as Tamoxifen Citrate Antitrust Litigation, questions the antitrust viability of reverse-payment settlements

Pharmaceutical patent owners and generic makers have been accused of cooperating in a scheme to prop-up drug prices.  In a number of cases, generic manufacturers have received payments from patent owners as incentive to drop patent challenges. So far the courts have OK’d the agreements, but the Government is pushing its case for enforcement of the Antitrust laws.

Over the past few years, the FTC & DOJ have been at-odds on whether this business practice represents a problem.

In 2006, FTC v. Schering-Plough, a similar case was presented to the Supreme Court. There, the DOJ filed a brief indicating its disagreement with the FTC and arguing that the high court should not hear the case. In its brief, the DOJ indicated that the Tamoxifen litigation (this case) would be a better avenue for the Supreme Court’s focus.  After hearring the DOJ’s argument, the Supreme Court denied cert in Schering-Plough.

Patent Prosecution: Accelerated Examination

According to a press release, the PTO issued the first patent reviewed under its ‘accelerated examination’ program that began last fall. The patent, issued to Brother Kogyo Kabushiki Kaisha of Nagoya, Japan was filed on September 29, 2006 and issued less than six-months later as US Patent No. 7,188,939 (Ink Cartridges). The prosecution history includes an examiner interview via telephone followed by a clarifying amendment and a notice of allowance.

Accelerated examination procedures have been labeled onerous. Yet, in this case the Japanese ink-powerhouse appears to have used the procedure for its advantage.

Divided Infringement

Direct patent infringement generally requires a single actor to practice every element of a patent claim. Indirect infringement, such as contributory infringement and inducement, also require a showing of underlying direct infringement by a single actor. The single actor requirement is commonly expanded under a loose agency concept — one cannot avoid liability simply by having someone else perform one or more steps of the method. 

However, two separate entities that each only performs a portion of a patented invention cannot be said to jointly infringe the patent if there is no knowledge of the patent and the relationship between the two entities is merely an arms-length contractual relationship.

Between the two extremes, lies an unexplored middle-ground. There is a concern that the bright-line single actor rules tends to promote tacit agreements by corporations to “jointly infringe” in a fashion that looks much like an arms-length transaction.

In a concept-piece written last fall, I proposed a new cause of action for conspiratorial infringement.  Conspiratorial infringement would eliminate the single-actor requirement but would include a strong mens rea element.

In the wake of the CAFC’s 2006 On Demand decision, several cases have raised the issue of conspiracy to infringe as well as the broader concept of divided infringement. In On Demand, the CAFC approved of a divided infringement jury instruction:

On Demand Jury Instruction: It is not necessary for the acts that constitute infringement to be performed by one person or entity. When infringement results from the participation and combined action(s) of more than one person or entity, they are all joint infringers and jointly liable for patent infringement. Infringement of a patented process or method cannot be avoided by having another perform one step of the process or method.

The On Demand statements are arguably dicta and, in any event, the opinion did not squarely address the issue. However, in Freedom Wireless v. Boston Communications, a Massachusetts district court gave the following jury instructions:

if separate companies work together to perform all the steps of a claim of a patent, the companies are jointly responsible, that is, responsible as a group for the infringement of the patent.  Even if no single company performs all the steps of the claim, the companies are jointly responsible.

After losing a huge jury verdict, Boston Communications appealed on the jury instructions and asked for an emergency stay of the imposed injunction. The CAFC quickly issued an order staying the injunction — finding that the imposed vicarious liability appears to raise important unaddressed questions:

[W]e conclude that BCGI has demonstrated the existence of a substantial question whether the theory of liability applied by the district court departs from this court’s precedents regarding vicarious liability for infringement in such a manner as to bring the verdict into question. This court has not addressed the theory of joint infringement and there is relatively little precedent on that issue. (unpublished order)

Unfortunately, the case was settled for $87 million before the CAFC could make its final decision on the case.

Going the other way, the Delaware magistrate in Digene v. Ventana recently held that the patent statute preempts any separate state-law claim of ‘conspiracy to infringe a patent.’

ScreenShot012The next big kahuna is BMC v. PaymenTech. BMC is on appeal at the CAFC after the lower court dismissed BMC’s joint-infringement claims.  The PaymenTech case squarely presents the concept of divided infringement. BMC, the patentee, argues that joint infringement "may be shown by participation and combined action" and that neither direction nor control by one party is required.  PaymenTech, on the other hand, argues that divided infringement is entirely bogus, that On Demand is pure dicta, and that the current statutory scheme does not allow for BMC’s proposed strict-liability joint infringement.

Notes:

  • Professor Mark Lemley’s article on divided infringement is instructive on this topic. (LINK).  As part of the Keker Van Nest firm, Lemley has filed an amicus brief (on behalf of Comcast) arguing that the court should not extend its reach to cover divided infringement.
  • Oral arguments are scheduled for April 5, 2007.

Documents:

In re Seagate: Scope of Opinion Waiver

A tremendous amount of litigious time and energy is spent fighting over opinions of counsel and associated waivers.  Formal non-infringement or invalidity opinions are usually designed for litigation — their sole purpose to reduce that a defendant will be held liable for treble damages.  The formal opinions are — as you might expect — stiff and formal. The good ones are exceedingly thorough and cover all the legal bases.  Yet, formal opinions often fall far short of honestly answering the important question: "What are my chances of winning if I’m sued on this patent?"  That question is much more nuanced.

Opinions of counsel are protected as attorney work product and usually attorney-client privilege as well.  When the opinion is presented to court, those protections are waived.  Many courts extend the scope of the waiver to include any related opinions (whether formal or informal) provided to the client. This waiver has, on occasion, been extended to litigation counsel even when an outside firm provided the formal opinion. 

The logic behind the broad waiver may help avoid nefarious behavior: A potential defendant would like to obtain several separate opinions, then only produce the ‘best’ one.  Such a scenario would hardly comport with the ‘reasonable reliance’ standard.  In addition, a broad wavier helps the patentee’s counsel ensure that any opinion is based on a solid background rather than potentially faulty information. (sword vs. shield)

One reason why waiver issues are fought so fiercely is that court outcomes are all-over-the-map. Some courts grant broad waivers while others are quite narrow.

In Seagate, the lower court granted a broad waiver to include otherwise privileged communication between the defendant and its trial counsel "even if it is communicated in the context of trial preparation."  The waiver was also extended to include in-house counsel’s internal discussions with business executives.  The Court of Appeals for the Federal Circuit, acting sua sponte, has requested an en banc hearing to determine the scope of opinion waivers.

In its opening brief, Seagate takes the position that "opinion and trial counsel have entirely different roles," and those roles require that the waiver be limited to opinion counsel.  Seagate also focuses on the result — that litigation attorneys will stop talking with their clients, resulting in worse legal representation. Clear rules will also "foster predictability."

I agree that this case is very important for patent litigants, but the interesting aspect involves the interplay between general practice and boutique firms. (More to come on this).

Documents:

Notes:

Patently-O TidBits

  • Four Patentable Subject Matter Cases (via Hal Wegner):
    • Microsoft v. AT&T (Supreme Court): Although not squarely raised, if the court discusses patentable subject matter, it will rule that software per se is not patentable.  Depending upon that ruling, it may eliminate business method patents as well.  An opinion is expected this spring.
    • In re Nuijten (Fed. Cir.): The Federal Circuit has heard oral arguments on this case, which focuses on patentability of a signal that is not tied to any particular physical form.  
    • Ex parte Bilski: This case is on appeal from the BPAI involving patenting of methods that could be “entirely performed within the human mind.” (The PTO has rejected the application).
    • In re Comiskey: Comiskey was recently argued at the CAFC, and supplemental briefs filed on Section 101 issues that were raised sua sponte by the CAFC (Chief Judge Michel, Judges Dyk & Prost). This case involves a method that could be performed by humans without any machine as an aide.
  • Thomas Ichim on YouTube discussing stem cell patents
  • Aaron Barkoff on Bloomberg TV discussing reverse payment settlements. 

Copyright Query

Hypothetical: Arthur the author writes a new book and transfers the copyright of the final-work to Penny the publisher — including rights to any derivative works.

Later, Arthur decides that the story should have a different ending. He goes back to a rough-draft and rewrites various portions. (In his rewrite, Arthur does not look at the final version.)  Who owns the new version? What about a sequal based on the new version?

Franklin Pierce IP Summer Institute

For most of the month of June, I will be teaching the basic US Patent Law course at Franklin Pierce’s 21st annual Intellectual Property Summer Institute (IPSI). Other (more specialized) courses available include, inter alia, IP Management (Dellenbaugh); International Patent Law (Becker); Patent Data Mining (Cavicchi); Practice before the Federal Circuit (Whealan); Licensing (Weikers, Jorda); Trademark Law (LaFrance); and IP Valuation (Smith). I’m hoping to sit-in on a couple of these for my own edification.

For those of you who don’t know, Concord, New Hampshire is absolutely beautiful in the summer. Since Pierce is the only law school in the state and is located in the capital city, there is also a good chance that you’ll get to meet your favorite presidential candidate.

International: Pierce Law also offers an international summer perspective. Professor Bill Hennessey (probably the leading US scholar on Chinese patent law) is leading the IPSI program at Tsinghua University in Beijing. (June 25 – July 27). This is one of the very-top programs on Asian-IP issues, and Tsinghua is one of the highest rated universities in all of mainland China.  For a more European approach, Pierce Law also has an eLaw program in Cork, Ireland.

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