May 2009

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Bits and Bytes No. 113: PTO Director

  • Nothing to report on the quest for a new PTO director. Although the Obama administration’s “fast start” has been reported by the media, he is now slower than President Clinton who nominated Bruce Lehman in April of his first year in office. President Bush nominated Jim Rogan in May of his first year in office. President Obama has two more days to match that benchmark. (My prediction of a May 8 nomination has come and gone…)
  • Albritton v. Cisco: The Patent Troll Tracker case continues. Trial in the defamation case is set for September 14 in Tyler Texas. Defendants include Cisco, Richard Frenkel (the Patent Troll Tracker) Mallun Yen, and John Noh.
  • Ward v. Cisco: Johnny Ward Jr. (son of Judge Ward) has a parallel case running against Cisco in Texarkana (Arkansas). Ward voluntarily dismissed Frenkel from the lawsuit after Cisco “admitted agency.” Discovery is ongoing and the parties have asked for trial to begin December 30, 2009.
  • Speaking of EDTX: Last week, the Canadian company i4i won a $200 million verdict for willful patent infringement against Microsoft. Apparently i4i’s xml editing software was completely undercut when Microsoft included xml editing software in MSWord. The patent is here. Joe Mullin has more.
  • Voting continues for the “best patent blog.” (I don’t like this survey, but it is still nice to make a good showing.)
  • Singulair Patent Reexamination: Earlier this year, ArticleOne asked for prior art on Merck’s Singlair patent and two of its “community members” offered seemingly important references. ArticleOne then filed for reexamination of the patent, which was granted on May 20. Today ArticleOne issued press releases related to the reexamination. Peter Ludwig (Darby & Darby) is representing ArticleOne before the PTO. Singulair garnered $4 billion+ in sales last year.
  • Information Query: The Singulair patent’s reexamination number is 90/009,432. If you were an investor, how would you go about closely following the prosecution history in that case?
  • Patent Jobs:

Bits and Bytes No. 113: PTO Director

  • Nothing to report on the quest for a new PTO director. Although the Obama administration's "fast start" has been reported by the media, he is now slower than President Clinton who nominated Bruce Lehman in April of his first year in office. President Bush nominated Jim Rogan in May of his first year in office. President Obama has two more days to match that benchmark. (My prediction of a May 8 nomination has come and gone...)
  • Albritton v. Cisco: The Patent Troll Tracker case continues. Trial in the defamation case is set for September 14 in Tyler Texas. Defendants include Cisco, Richard Frenkel (the Patent Troll Tracker) Mallun Yen, and John Noh.
  • Ward v. Cisco: Johnny Ward Jr. (son of Judge Ward) has a parallel case running against Cisco in Texarkana (Arkansas). Ward voluntarily dismissed Frenkel from the lawsuit after Cisco "admitted agency." Discovery is ongoing and the parties have asked for trial to begin December 30, 2009.
  • Speaking of EDTX: Last week, the Canadian company i4i won a $200 million verdict for willful patent infringement against Microsoft. Apparently i4i's xml editing software was completely undercut when Microsoft included xml editing software in MSWord. The patent is here. Joe Mullin has more.
  • Voting continues for the "best patent blog." (I don't like this survey, but it is still nice to make a good showing.)
  • Singulair Patent Reexamination: Earlier this year, ArticleOne asked for prior art on Merck's Singlair patent and two of its "community members" offered seemingly important references. ArticleOne then filed for reexamination of the patent, which was granted on May 20. Today ArticleOne issued press releases related to the reexamination. Peter Ludwig (Darby & Darby) is representing ArticleOne before the PTO. Singulair garnered $4 billion+ in sales last year.
  • Information Query: The Singulair patent's reexamination number is 90/009,432. If you were an investor, how would you go about closely following the prosecution history in that case?
  • Patent Jobs:

Bits and Bytes No. 113: PTO Director

  • Nothing to report on the quest for a new PTO director. Although the Obama administration's "fast start" has been reported by the media, he is now slower than President Clinton who nominated Bruce Lehman in April of his first year in office. President Bush nominated Jim Rogan in May of his first year in office. President Obama has two more days to match that benchmark. (My prediction of a May 8 nomination has come and gone...)
  • Albritton v. Cisco: The Patent Troll Tracker case continues. Trial in the defamation case is set for September 14 in Tyler Texas. Defendants include Cisco, Richard Frenkel (the Patent Troll Tracker) Mallun Yen, and John Noh.
  • Ward v. Cisco: Johnny Ward Jr. (son of Judge Ward) has a parallel case running against Cisco in Texarkana (Arkansas). Ward voluntarily dismissed Frenkel from the lawsuit after Cisco "admitted agency." Discovery is ongoing and the parties have asked for trial to begin December 30, 2009.
  • Speaking of EDTX: Last week, the Canadian company i4i won a $200 million verdict for willful patent infringement against Microsoft. Apparently i4i's xml editing software was completely undercut when Microsoft included xml editing software in MSWord. The patent is here. Joe Mullin has more.
  • Voting continues for the "best patent blog." (I don't like this survey, but it is still nice to make a good showing.)
  • Singulair Patent Reexamination: Earlier this year, ArticleOne asked for prior art on Merck's Singlair patent and two of its "community members" offered seemingly important references. ArticleOne then filed for reexamination of the patent, which was granted on May 20. Today ArticleOne issued press releases related to the reexamination. Peter Ludwig (Darby & Darby) is representing ArticleOne before the PTO. Singulair garnered $4 billion+ in sales last year.
  • Information Query: The Singulair patent's reexamination number is 90/009,432. If you were an investor, how would you go about closely following the prosecution history in that case?
  • Patent Jobs:

Discovery Misconduct

Boss v. Yamaha (Fed. Cir. 2009)

Boss sued Yamaha for infringement of its patents covering a snowmobile seat. After an unfavorable claim construction, Boss admitted that it could not prove infringement. On appeal, the Federal Circuit affirmed the construction and the verdict of noninfringement.

The interesting portion of the opinion focused on the alleged discovery abuses by Yamaha’s counsel. Although a moot point (because Boss did not appeal its motion for sanctions that had been denied), the Federal Circuit felt compelled to at least verbally admonish the attorneys “unacceptable” conduct.

[I]t appears from the record presented to us that Yamaha’s discovery practices were less than commendable. For example, on several occasions Yamaha date-stamped documents to be filed with the district court using the court’s time stamp, but did not actually place the document in the court’s drop-box at that time. Rather, Yamaha actually filed the documents, by placing them in the drop-box, several days after the “filed” stamp was placed on the documents. After the district court realized that this was not an isolated incident, but happened several times, it admonished Yamaha, stating that “[t]his deceitful conduct will not be tolerated” and that this inappropriate practice “is particularly egregious when . . . the court is liberal in granting extensions of time.” The court further noted that “counsel in this case have been admonished before about the gamesmanship that has been taking place in this lawsuit.” In addition, regarding Yamaha’s interpretation of communications with the district court, the court further characterized Yamaha’s actions as “unreasonabl[e]” and “disingenuous.” This type of conduct during litigation is unacceptable and reflects a lack of respect for both the opposing party and the court.

Despite the ruling on misconduct, Yamaha walks away without any sanctions.

Paragon v. Timex: Claims with Contextual Limitations

Paragon Solutions v. Timex (Fed. Cir. 2009) pic-37.jpg

Paragon’s patent covers a GPS/physiologic exercise monitoring system that displays realtime calculated values such as heartrate, altitude, velocity. The components of the invention are divided between a data acquisition unit and a display unit. After an unfavorable claim construction, Paragon stipulated to a non-infringement judgment. On appeal, the Federal Circuit vacated judgment – finding that the district court had improperly construed the terms.

Disavowal of Claim Scope : The district court concluded that the claimed “data acquisition unit” must be a single structure encompassing both GPS and physiologic sensors. That ruling was critical because the accused device (Timex Biolink) physically separates the GPS and physiologic monitors. Although the claim language did not limit the acquisition unit to a single physical device, the district court found that Paragon had disavowed that scope

pic-38.jpg

when it amended the claims to require that the acquisition unit be separate from the display unit.

On appeal, the Federal Circuit agreed that the patentee had clearly disavowed a single structure. However the court could not find a reason that the amendment would limit the acquisition unit to a single device.

We conclude that, read in light of the specification, the claim term “data

acquisition unit” is not limited to a single structure but may comprise multiple physically separate str

uctures, and that the applicants did not make a clear and unmistakable disavowal of multiple physically separate structures during prosecution.

Parallel Construction: In construing claims, courts presume that a term in one claim will hold its meaning throughout the claims. That presumption is overcome when “it is clear from the specification and prosecution history that the terms have different meanings at different portions of the claims.” Here, because the claimed “acquisition unit” can be multiple structures, the Federal Circuit found that the claimed “display unit” may also include multiple structures.

Real Time Data: The district court interpreted the claimed “real time” display of data as contextual. For some activities – such as mountain climbing – a thirty second delay may well be “real time.” However, for ot

her activities, a thirty second delay would not be considered real time.

On appeal, the Federal Circuit held that this context-dependent definition is not proper in an apparatus claim. “[A]pparatus claims cover what a device is, not what a device does.” Hewlett-Packard v. Bausch & Lomb, 909 F.2d 1464, 1468 (Fed. Cir. 1990).

Absent an express limitation to the contrary, any use of a device that meets all of the limitations of an apparatus claim written in structural terms infringes that apparatus claim. … Construing a non-functional term in an apparatus claim in a way that makes direct infringement turn on the use to which an accused apparatus is later put confuses rather than clarifies, frustrates the ability of both the patentee and potential infringers to ascertain the propriety of particular activities, and is inconsistent with the notice function central to the patent system.

Consequently, the Federal Circuit modified the construction of “displaying real-time data,” to be “displaying data without intentional delay, given the processing limitations of the system and the time required to accurately measure the data.”

Based on these modifications to the claim construction, the Federal Circuit vacated the finding of non-infringement and remanded for further proceedings. I wonder — if the specification had clearly indicated that the definition of “real-time” could shift depending on the type of use, would the claim then be held invalid as indefinite under 35 USC 112.

Notes:

  • This case could potentially have an impact on pharmaceutical composition claims that include limitations such as “a physiologically sufficient amount.” Of course, whether a drug is “physiological sufficient” will often depend upon the individual patient and that patient’s particular situation at that time.
  • There are two major difference between the Paragon situation and my hypothetical compound claim. First, the real-time display capability in Paragon was seen as a structural limitation while the “physiologically sufficient” amount could be seen as a functional limitation. This difference is important because the Federal Circuit expressly limited its holding to the construction of “non-functional term[s].” However, that distinction is slight because it is unclear what the court meant by “non-functional.” (I.e., “a non-functional term” could be a purely aesthetic limitation; it could be a means-plus-function term; it could be a term that defines the purpose of a particular structure; etc.) A second distinction is that Paragon’s claim is an apparatus claim not a compound claim. Neither of these distinctions appear compelling.

Declaratory Judgment: Personal Jurisdiction over Foreign Patent Holder

Autogenomics v. Oxford Gene Tech (Fed. Cir. 2009) 08-1217.pdf

The opposing viewpoints of Judges Newman and Moore continues to be seen in Federal Circuit decisions. This appeal arrived at the Federal Circuit after the Central District of California district court dismissed the case for lack of personal jurisdiction over the declaratory judgment defendant (and patent holder) Oxford Gene Technology.Writing for the majority, Judge Moore (joined by N.D. Ill. Judge Gettleman sitting by designation) affirmed the judgment. Judge Newman wrote in dissent.

Even in patent cases, a federal court’s personal jurisdiction over parties is based on state boundaries. Here, the case was filed in a federal court sitting in California. When a defendant challenges personal jurisdiction, the court must consider two general factors: (1) whether the forum state’s long-arm statute permits service of process and (2) whether assertion of personal jurisdiction would violate due process.” Most states have extended their long-arm statutes to the bounds of due process. Thus, the question collapses to a consideration of the US Constitutional as applied at the geographic state boundaries.

The Constitutional limits of due process can be met by either showing general personal jurisdiction (based on continuous and systematic contacts with the state) or specific personal jurisdiction (based on a defendant’s activities in the state that relate to the cause of action.)

Focusing on specific personal jurisdiction, this case is in some ways a repeat of the court’s 2008 Avocent holding that a patentee’s efforts at commercialization are irrelevant to the specific jurisdiction question. Rather, the minimum contacts for specific jurisdiction must relate to “only enforcement or defense efforts related to the patent.” Thus, although Oxford has licensed its patents to several California companies, those licenses do not work toward a finding of specific personal jurisdiction over the foreign company.

DJ Jurisdiction over a Non-US Company: Both the majority and dissent expressed concern that foreign patent holders may often fly under the radar in such a way that no US court would have personal jurisdiction. Of course, the patent statute deals with that potential eventuality. For a non-US patent holder, the District of Columbia Federal Court has jurisdiction “to take any action respecting the patent or rights thereunder” to the same extent “that it would have if the patentee were personally within the jurisdiction of the court.” 35 USC 293.

Section 293 makes an exception for non-US patent holders who designate a US person to receive process. The statute does not indicate that such designation serves as consent to personal jurisdiction in the person’s home location. However, cases have held that designating a US process agent under Section 293 operates as consent to personal jurisdiction. See In re Papst Licensing, 590 F. Supp. 2d 94 (D.D.C. 2008).

Section 293 reads as follows.

Every patentee not residing in the United States may file in the Patent and Trademark Office a written designation stating the name and address of a person residing within the United States on whom may be served process or notice of proceedings affecting the patent or rights thereunder. If the person designated cannot be found at the address given in the last designation, or if no person has been designated, the United States District Court for the District of Columbia shall have jurisdiction and summons shall be served by publication or otherwise as the court directs. The court shall have the same jurisdiction to take any action respecting the patent or rights thereunder that it would have if the patentee were personally within the jurisdiction of the court.

In the past year, about 11 patent infringement cases were filed in DC District Court.

Appellate Practice: Working Models for the Court

Farrago v. Rawlings Sporting Goodspic-36.jpg (Fed. Cir. 2009)

Farrago’s patent covers a pad for relieving knee stress. The argument focused on whether Rawlings’ product has four surfaces (as claimed) or only three surfaces (as Rawlings argues). On appeal, the Federal Circuit quickly affirmed summary judgment of noninfringement without opinion. (A narrowing amendment during prosecution precluded application of the doctrine of equivalents.)

I’ll only focus here briefly on the appellate practice. Farrago submitted a sample of the accused product to the appellate court so that the judges and clerks could examine the product prior to oral arguments. During oral arguments, the court thanked Farrago’s attorney – noting that the sample “was very helpful.” Of course, the court needed only 24 hours to release its opinion against Farrago.

Genentech & Volkswagen: Federal Circuit Splits on Venue Transfer Cases

In re Genentech (Fed. Cir. 2009)(granting mandamus and ordering transfer) 09-M901.pdf
In re Volkswagen of America (Fed. Cir. 2009)(denying mandamus) 09-M897.pdf

Since deciding TS Tech, the Federal Circuit has received a gaggle of Mandamus petitions – most of them asking the appellate court to order cases transferred out of the Eastern District of Texas to more convenient locations. In a pair of opinions – both authored by Judge Linn and released on the same day – the appellate court has provided additional guidance on deciding these transfer issues.

Genentech – Transfer Granted:

  • Key Witnesses: Genentech identified several witnesses in Northern California and argued it would be more convenient for them to attend trial in that locale. The district court, however gave little weight to Genentech list because the did not identify location of “key” witnesses. On appeal, the Federal Circuit held that at such an early stage of trial, it is unreasonable to require a defendant to show that potential witnesses are “more than relevant” or face denial of transfer.
  • European Witnesses: Several identified witnesses would come from Europe. The Texas court held that it would be more convenient for the European witnesses to travel to Texas than to California because California is further from Europe than is Texas. Here, the district court directly followed the Fifth Circuit’s proportionality test that “[w]hen the distance between an existing venue for trial of a matter and a proposed venue under § 1404(a) is more than 100 miles, the factor of inconvenience to witnesses increases in direct relationship to the additional distance to be traveled.” On appeal, the Federal Circuit noted that the difference in distance should be given less weight when the witnesses are already traveling a great distance.
  • Centralized Location: Although Texas is certainly a more central location, the Federal Circuit held that the factor could not favor a Texas venue because none of the identified witnesses reside in Texas. Rather, the court found that California is more centralized because a number of material witnesses reside within California.
  • Convenience to the Parties: Genentech is in Northern California, Biogen (another defendant) is in San Diego, Sanofi (the plaintiff) is in Germany.
  • Availability of Compulsory Process: If trial is in Texas, there may be several third-party witnesses that could not be compelled to attend because they are in California – outside the long-arm of Texas jurisdiction.
  • Evidence: “In patent cases, the bulk of the relevant evidence comes from the accused infringer.” Here, all of Genentech & Biogen’s relevant evidence is in California.
  • Prior Suit: Genentech has been a plaintiff in the Eastern District of Texas and the district court. On appeal, the Federal Circuit ruled that it would be legal error to consider a prior case that would not otherwise provide for judicial economy.
  • California’s Jurisdiction over Sanofi: There is some question of whether the California court has jurisdiction over Sanofi. The Federal Circuit held that the potential lack of personal jurisdiction in the transferred venue does not weigh heavily against transfer. “There is no requirement under § 1404(a) that a transferee court have jurisdiction over the plaintiff or that there be sufficient minimum contacts with the plaintiff.”
  • Court Congestion: This is a speculative factor and given little weight.

In re Volkswagen – Mandamus Denied:

  • The plaintiff – MHL – is a small company headquartered in Michigan, but registered in Texas.
  • In two lawsuits separate lawsuits (both in the Eastern District of Texas), MHL has sued over thirty US & Foreign automobile companies for patent infrignement.
  • VW has asked that the case be transferred from the Eastern District of Texas to the Eastern District of Michigan.
  • Multiple Lawsuits: The Federal Circuit identified the “existence of multiple lawsuits” involving the same patents and overlapping issues to be “a paramount consideration when determining whether a transfer is in the interest of justice. … Although these cases may not involve precisely the same issues, there will be significant overlap and a familiarity with the patents could preserve time and resources. Because the district court’s decision is based on the rational argument that judicial economy is served by having the same district court try the cases involving the same patents, mandamus is inappropriate under our precedents.”

Comment: In patent cases, these venue games tend to approach the absurd, and I am surprised that the Federal Circuit has taken these cases so seriously. Defendants want to move out of the Eastern District of Texas because they fear trial and the potential major damage award. The “convenient venue” argument is concocted because the Eastern District of Texas is clearly a “proper forum” with personal jurisdiction over the defendants.

MHL is a patent holding company that registered as a Texas business in June of 2007. That registration appears to have served its purpose – to win the Texas venue argument even though the principles of the business are all located in Michigan. On the other side – it looks like the Federal Circuit refused to consider the two most important facts of convenience in the Genentech case. First, in 2006, Genentech sued MedImmune for patent infringement in the Eastern District of Texas. At that time, Genentech calculated that Texas was perfectly suitable even though neither party was located in the state. Yet, the Federal Circuit held that it was legal error for the district court to consider Genentech’s prior activities in the present motion for Venue. The second issues is jurisdiction – it just does not make sense to transfer a case to a new forum without some assurances that the court has personal jurisdiction over the parties.

Disclaimer: I just noticed that my former firm MBHB (who is now a sponsor of Patently-O) is involved in the Genentech case. I do not represent any clients these days. One reason why I have enjoyed having MBHB as a sponsor is that the firm has never tried to exert editorial control over the blog or its content beyond the layout of the firm’s ad.

Impact of Merger/Buyout on Prior Agreement to Not Challenge Patent Validity

Epistar v. ITC (and Philips Lumileds Lighting) (Fed. Cir. 2009) 07-1457.pdf

Merger: Lumileds owns a patent covering a light-emitting diode (LED) with an electrically conductive window layer that is both brighter and more efficient than other LEDs. The conductive layer helps spread the flow of electrical current avoid “current crowding.”

At issue in this case is the impact of a corporate merger/buyout on a settlement agreement that included a promise to not challenge a patent’s validity.

Lumileds and Epistar have signed at least two prior settlement agreements involving the patent at issue here. In those agreements, Epistar agreed to pay a licensing fee for certain products, but reserved its right to challenge the patent if Lumileds asserted the patent against other patents. A third company, UEC, agreed that neither it nor its successors would later challenge the validity of the Lumileds patents.

Subsequently, Epistar purchased UEC, and the patentee argued that UEC’s agreement should also bind Epistar. On appeal, the Federal Circuit partially rejected that argument – holding that the UEC settlement continues to bind the parties, but only “as understood and intended by them, according to its ordinary terms.” Thus, even though Epistar took on all the legal obligations of UEC, Epistar can still challenge the Lumileds patent if the case does not involve UEC related products.

UEC’s settlement agreement has preclusive effect upon Epistar only “to the same extent as upon [UEC it]self.” Restatement (Second) of Judgments § 43 (1982). The preclusive effect of that agreement, if any, is limited to UEC’s pre–Epistar product lines. To paraphrase this court in International Nutrition v. Horphag Research, Epistar’s acquisition of UEC does not have the effect of limiting Epistar’s rights that are unrelated to the product lines it acquired from UEC. Accordingly, this court overturns the Commission’s final determination that Epistar is estopped from challenging validity of the ’718 patent when asserted against its own products, separate from the UEC–Lumileds settlement agreement.

Here, the court could have done well to cite the Supreme Court’s decision of Lear v. Adkins and its statements favoring the ability to challenge patent validity based on on “the strong federal policy favoring the full and free use of ideas in the public domain.”

BPAI Statistics: How Many Opinions do BPAI Judges Write?

As a follow-up to an earlier post on BPAI decisions; appeal efficiency and potentially over-worked Administrative Patent Judges, I took a look at BPAI decisions from January and February 2009. According to BPAI's statistics, the BPAI disposed of 993 ex parte appeals during that two month period. Based on the PTO's FY2009 numbers, about 9% of those disposals were either remands or dismissals without a decision on the merits. The examiner's rejection was affirmed in 55% of the cases; Affirmed-in-part in 14% of the cases; and reversed in 23% of the cases.

776 of the Jan-Feb 2009 ex parte decisions show-up in the Westlaw database. Those 776 decisions were authored by 78 different Administrative Patent Judges. During the two month period, four judges penned more than 25 opinions, although the average is closer to 10 opinions. (If we assume that Westlaw includes 80% of the opinions, then the average jumps to 12 opinions in the two months – or six opinions per month). On an annualized basis this extrapolates to authoring an average of 72 opinions per year. Of course, this average includes opinions by BPAI administration who regularly write only a small handful of decisions. Excluding those individuals pushes the extrapolated average to about 75 opinions per year for each BPAI Judge handling ex parte cases.

These numbers are comparable to the Court of Appeals for the Federal Circuit. Each of the twelve Federal Circuit judges (not counting Senior Judges) wrote about 28 majority opinions in 2008. In addition, each Federal Circuit judge participated in over 400 cases (most of which were decided without opinion). Thus, while the BPAI judges write more opinions, the Federal CIrcuit judges actually decide more cases.

Notes:

  • The lower number of cases found in Westlaw is due – in part – to the fact that many of the cases being appealed are unpublished. In those cases, the BPAI decisions are kept secret. In addition, for some reason, Westlaw is not picking up all of the released BPAI decisions. Still, the Westlaw format is easier to use than the BPAI PDF.

Patent Licenses Include Inherent Rights Allowing Third-Party Manufacture

Corebrace, LLC. v. Star Seismic LLC pic-35.jpg (Fed. Cir. 2009) 08-1502.pdf

Corebrace’s patent covers an earthquake-resistant brace for steel framed buildings. The original rights-holder (the inventor, Benne Murthy Sridhara from Bangalore) first licensed patent rights to Star. Later, the patent rights were assigned to Corebrace.

Star’s nonexclusive license from the inventor grants a right to “make, use, and sell” licensed products. The license also includes a restriction that Star may not “assign, sublicense, or otherwise transfer” its rights – except to an affiliated company. The inventor did already have a relationship with CoreBrace and reserved for that company “all rights not expressly granted” including any improvements created “by a third party whose services have been contracted.”

The question on appeal is whether the license grants Star the right to use third-party contractors to manufacture licensed products for its own use. The Federal Circuit answered in the affirmative – holding that absent a clear disclaimer, a patent license includes a right to use a third party manufacturer.

The right to “make, use, and sell” a product inherently includes the right to have it made by a third party, absent a clear indication of intent to the contrary. (Following Utah law)

Patent licensing is complicated because the contracts are interpreted under state law. Here, the contract indicates that Utah law should be followed. There is not Utah decision on point. However, the Federal Circuit noted its own precedent as well as California Supreme Court cases that “have both persuasively held that a ‘have made’ right is implicit in a right to make, use, and sell, absent an express contrary intent. We consider that the Utah Supreme Court would therefore likely arrive at the same conclusion were it to consider the issue.”

Often, exclusive licensees are implicitly granted greater rights than their non-exclusive counterparts. In the non-exclusive setting – allowing the licensee to subcontract undercuts the patent-holder’s rights; while in an exclusive licensee scenario, the patentee is presumed to have fully exploited its patent rights in that one contract. In this case, however, the Federal Circuit ruled that the implicit right to sub-contract manufacturing does not depend on any exclusive license status.

Zuhn: A Model Patent Office for the Future

Dr. Zuhn has been covering patent happenings at the BIO Conference. His article discussing a panel on suggestions for fixing the USPTO is a great read. The theme presented by Sherry Knowles (from GSK) is one that many Patently-O readers understand – stakeholders cannot count on someone else to address problems at at the PTO.

John Duffy, who participated followed-up with a note about GSK’s role in the case of Tafas v. Dudas.

GSK has been very well served by its attorneys, which includes an excellent team of lawyers from Kirkland & Ellis headed by John M. Desmarais. They’ve been successful in winning 99% of what GSK wanted. The rules still aren’t in effect, and they are unlikely ever to go into effect without substantial revision. Moreover, as for the last 1% percent that GSK attorneys weren’t able to win, I don’t think any attorneys could have won. The administrative law issues in the case were always very difficult for GSK’s position. I don’t think any set of attorneys could have produced a better result, and I don’t doub t that GSK’s lawyers recognize that Supreme Court review would have its risks.

Duffy also discussed the potential risks of a Supreme Court decision in Tafas v. Dudas.

Judge Prost did a masterful job on the administrative law issues in the Tafas case. If the case were appealed to the Supreme Court, I think the Court would largely affirm her opinion. The most difficult issue in the case has always been whether, giving the agency’s rules an appropriate amount of Chevron deference, a court should nonetheless hold Final Rule 78 inconsistent with the clear meaning of section 120 of the Patent Act. Judge Prost ruled against the agency on that issue, and her result seems to me to be one reasonable resolution of a difficult issue. But the issue is a close one, as even Judge Bryson’s concurrence suggests. If Tafas were to be heard by the Supreme Court, it is entirely possible that the Justices (a majority of whom either have taught ad law or have served on the ad law-heavy D.C. Circuit) might give the agency a bit more deference than the Federal Circuit panel did. Thus, if the case went to the Supreme Co urt, I think likely outcomes would be either a complete affirmance or a reversal limited to the one issue that GSK won at the Federal Circuit.

Other News:

  • The White House has again recognized Peer-to-Patent as an example of “approachable government.” http://www.whitehouse.gov/newmedia/. (“Improves the quality of issued patents”).

BPAI Shuts Down Dissent in Favor of Efficiency

The Board of Patent Appeals (BPAI or Board) is very much a quasi-judicial body. The emphasis for today is on quasi. 35 USC §6 calls for each appeal to be heard by at least a three judge panel. Yet, the Board appears to be taking steps to limit the effectiveness of those panels. These changes are apparently motivated by a need for efficiency in the face of budget shortfalls and increased appeals.

Like examiners, BPAI judges have a count system. BPAI Judges are expected to sit on about 300 panels per year and draft about 100 opinions. In the past, judges would receive credit for drafting full dissents and concurring opinions. That has changed. In an internal email, BPAI Vice-Chief Jay Moore has indicated that these extraneous opinions will no longer ordinarily garner any credit. According to Vice-Chief Judge Moore, "[c]oncurrences, dissents, and remands are not normally efficient mechanisms for securing the 'just, speedy, and inexpensive' resolution of an appeal before the Board." The e-mail is reproduced below:

====

From: Moore, James T
Sent: Thursday, May 07, 2009 9:57 AM

To: All BPAI Judges
Cc: MacDonald, Allen; Fleming, Michael R.; Santiago, Amalia

Subject: Policy Clarification on Dissents, Concurrences and Remands

Importance: High

Colleagues:

Please note that, effective immediately, if you would like a dissent, concurrence, or remand to be considered towards your productivity totals, you must submit a request. The form is attached, and may be used retroactively for cases prior to this date. For cases after this date, it must be submitted to your Vice Chief Judge within one week of mailing of the dissent, concurrence, or remand in order to be considered.

Concurrences, dissents, and remands are not normally efficient mechanisms for securing the “just, speedy, and inexpensive” resolution of an appeal before the Board. (Bd. R. 1). As indicated in the PAPs, a productivity credit is not automatically earned for a concurring opinion, dissenting opinion, or remand. Accordingly, justification is required to explain the need to undertake the extra work and occasion the extra delay in order to ensure efficient and proper utilization of our resources. Further, any credit given for a concurring opinion, dissenting opinion, or remand will be commensurate in scope with the justification provided and the scope of the extra work.

Please see Al or Jay if you have any questions.

Thanks,

Jay Moore
Allen MacDonald

====

The push for efficiency at the BPAI is also seen in the non-judge "patent attorney" program. Many of the BPAI opinions are now ghost written by newly minted patent attorneys and then signed by the BPAI judges. The real problem with this program is that when the patent attorneys are used, the BPAI judge is given a much higher throughput quota.

According to an anonymous observer - "the time constraints [under the Patent Attorney program] are so serious that for many cases, not a single one of the judges signing off on a decision will have read the underlying papers detailing the facts of the case." This observer asked to remain anonymous based on "the intolerance of dissent at the Board."

This need for efficiency is also the driver behind the still-pending BPAI appeal rule changes.

Dickson Industries: Inequitable Conduct Holding Vacated

Dickson Industries, Inc. v. Patent Enforcement Team, L.L.Cpic-34.jpg . (Fed. Cir. 2009) (nonprecedential) 08-1372.pdf

Application of inequitable conduct jurisprudence continues to divide the Federal Circuit. Judge Rader has perhaps been the most outspoken critic of the current over-use of inequitable conduct allegations. In this case, Judge Rader was joined by Judges Mayer and Posner (by designation) in vacating a lower court finding of inequitable conduct.

The PET patent covers an apparatus for making drainage grooves at the edge of a roadway. Prior to litigation, PET had argued that the machines for making rumble strips at the side of the road also violate the patent rights. Subsequently, Dickson sued for declaratory relief.

The jury found the patent invalid and found the patent holder liable for $1.5 million for tortiously interfering with with Dickson’s business relationships. The court then also (1) found the patent unenforceable due to inequitable conduct during reexamination for failure to disclose material information and (2) awarded attorney fees to Dickson.

On appeal, the Federal Circuit affirmed the anticipation decision, but vacated the decision on inequitable conduct.

The case largely centered around one prior art reference – “Spangler” – which discloses an apparatus to make rumble strips. PET knew about Spangler during reexamination of its patent, but did not disclose that reference to the PTO.

Agreeing with the Jury, the Federal Circuit found substantial evidence indicating that Spangler discloses all the elements of PET’s patent – rendering the patent invalid.

Ordinarily, after finding the patent invalid, the court would not need to decide issues of inequitable conduct. Here, however, the appellate panel addressed inequitable conduct because that conduct served as the basis for the lower court’s award of exceptional case attorney fees.

Amending Pleadings to Add Inequitable Conduct Charges: Allegations of inequitable conduct are parallel to charges of fraud and ordinarily must be pled with specificity. Thus, in most cases the accused infringer does not have sufficient evidence to allege inequitable conduct in the initial filing of defenses. Here, the court initially denied Dickson’s motion to amend its complaint to add IC charges. However, at trial the court changed its mind and allowed the issue to be presented.

On appeal, the Federal Circuit found that PET was “prejudiced” by the inconsistent orders and was thus denied “the opportunity to adequately defend against the allegation of inequitable conduct at trial. For instance, PET was denied the opportunity to introduce evidence of good faith, which militates against a finding of deceptive intent.”

The district court’s contradicting positions undermine the legitimacy of its ruling on inequitable conduct. This court cannot say with confidence that the record regarding inequitable conduct is not incomplete. Thus, this court vacates the district’s decision on the issue of inequitable conduct and remands to provide an opportunity to fully develop the record regarding inequitable conduct. Further, this Court vacates the award of attorney fees premised on inequitable conduct as premature.

In a warning to the lower court, Judge Rader again raised the notion that inequitable conduct litigation “has become an absolute plague.”

Given the severe consequences of unenforceability when it is imposed on a patent, it is paramount that the district court exercise necessary caution to ensure that the patent owner met its burden of proof with respect to both the materiality and deceptive intent.

Vacated-in-part.

Notes:

  • Judges Mayer and Posner (sitting by designation) participated in the panel.
  • Update: I have fixed an important typographical error. Judge Rader indicated that inequitable conduct litigation is the problem (not inequitable conduct itself).

Deference to ITC Claim Construction Decisions?

Erbe Elektromedizin v. ITC and Canady Techpic-33.jpg (Fed. Cir. 2009) 08-1358.pdf

Erbe’s patent appears to cover aspects of a surgical flesh-welding technique known as argon plasma coagulation (APC). After narrowly construing the claimed plurality of endoscopic “working channel,” the ITC found no evidence of direct infringement. On appeal, the Federal Circuit affirmed.

I’ll avoid the claim construction particulars, but focus here on whether the Federal Circuit can properly review ITC Claim Construction decisions de novo.

Claim construction is a matter of law, and under the Administrative Procedures Act, the Federal Circuit reviews ITC decisions of law for “correctness.” However, in the usual course, agency decisions interpreting a matter of law are ordinarily given at least Skidmore level deference. See Christensen v. Harris County.

En Banc Federal Circuit: Infringement of Product-by-Process Claim Requires Practicing the Process

Abbott Labs v. Sandoz (Fed. Cir. 2009) (en banc) 07-1400.pdf

The Federal Circuit had developed two opposing lines of cases for interpreting the scope of a product-by-process claim. Acting en banc sua sponte sub secretum, the appellate body sided with the Atlantic Thermoplatics line in holding that infringement of a product-by-process claim requires practicing the claimed process steps. This decision makes Judge Newman’s 1991 Scripps decision no longer good law. (Note, the en banc portion is only Section III.A.2).

[T]his court now restates that “process terms in product-by-process claims serve as limitations in determining infringement.”

The holding here explicitly focuses on claim construction for the purposes of infringement. Based on my first-pass, it appears that the court has left undecided whether this rule applies for validity purposes. I.e., can a product-by-process claim now cover a well known product made through a new process?

Notes

  • This is a very interesting decision and more analysis will be forthcoming.
  • Perhaps the most interesting portion of the decision is Judge Newman’s 39 page dissent.
  • Based on this Decision, generic Omnicef will continue to be available.

Patently-O Bits and Bytes No. 111

Courtoon via David Mills.

Although patent activity may be down 10%, it is still much more active than it was a decade ago. Folks are hiring: