September 2009

Lucent v. Microsoft: Damages

Damages, Patent, , , , ,

Lucent v. Gateway & Microsoft (Fed. Cir. 2009)

Lucent’s patent-in-suit claims was filed in 1986 and generally focuses on using an on-screen keyboard to enter information into a computer. In 2002, Lucent sued Microsoft and others for infringement. Since then, the patent has expired, but the litigation continues over past damages. Perhaps most notably, this case may serve as a reminder that a twenty year patent term represents a major span in the worlds of business and technology.

The primary infringing portion of Microsoft’s software appears to be the “date picker” function found in Microsoft calendars. In litigation, the jury sided with Lucent and awarded the patent holder with $350 million in damages. Here, I discuss three aspects of the opinion: damages; obviousness; and inducement.

Damages: Most of the action in the Federal Circuit decision revolves around damages. The parties appear to agree that Microsoft sold 110 million accused units with a total sales value of $8 billion. Based on that figure, Lucent requested $561 million in damages based on an 8% royalty rate of Microsoft’s sales revenue. Microsoft argued that the correct licensing rate should result in only $6 million lump sum in damages. On appeal, the Federal Circuit vacated the $350 million dollar award and remanded for a new trial solely on the issue of damages – finding that the original verdict was not supported by substantial evidence.

Reasonable Royalty Calculation: The Patent Act requires that a court award damages at least in the amount of a “reasonable royalty.” The hallmark of that calculation involves a hindsight reconstruction in an attempt to calculate the patentee’s differential “pecuniary condition . . . if the infringement had not occurred.” This is often done through a “hypothetical negotiation” reconstruction based on the Georgia-Pacific factors. See Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970); see also Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1554 n.13 (Fed. Cir. 1995) (en banc).

Entire Market Value: When a patentee proves that the patent related feature serves as the predominant basis for customer demand, courts allow damages to be based upon the “entire market value” of the product (i.e., 8% of the sales revenue of Microsoft Office) rather than focusing on the incremental value of the innovation. Here, the Federal Circuit held that the “only reasonable conclusion” is that the date-picker function is not a substantial driver of Office sales. “There was no evidence that anybody anywhere at any time ever bought Outlook . . . because it had a date picker.”

Patentees typically prefer to invoke the entire market value rule because it seemingly tends to lead to higher total damage payouts. Of course, the market value only sets a base. Interestingly, the Federal Circuit recognized here that the bar on using the entire market value of a product is rather arbitrary.

Although our law states certain mandatory conditions for applying the entire market value rule, courts must nevertheless be cognizant of a fundamental relationship between the entire market value rule and the calculation of a running royalty damages award. Simply put, the base used in a running royalty calculation can always be the value of the entire commercial embodiment, as long as the magnitude of the rate is within an acceptable range (as determined by the evidence). . . . Microsoft surely would have little reason to complain about the supposed application of the entire market value rule had the jury applied a royalty rate of 0.1% (instead of 8%) to the market price of the infringing programs. Such a rate would have likely yielded a damages award of less than Microsoft’s proposed $6.5 million.

The Court goes on to suggest that the entire market value rule has a place in cases where the invention is only a small portion of the product.

Some commentators suggest that the entire market value rule should have little role in reasonable royalty law. See, e.g., Mark A. Lemley, Distinguishing Lost Profits From Reasonable Royalties, 51 Wm. & Mary L. Rev. (forthcoming 2009) … Amy Landers, Let the Games Begin: Incentives to Innovation in the New Economy of Intellectual Property Law, 46 Santa Clara L. Rev. 307, 362 (2006) … But such general propositions ignore the realities of patent licensing and the flexibility needed in transferring intellectual property rights. The evidence of record in the present dispute illustrates the importance the entire market value may have in reasonable royalty cases.

Georgia Pacific Factors: In its opinion, the Federal Circuit emphasized the flexibility of its jurisprudence in deciding damages with an understanding that actual licensing (much less a hypothetical negotiation) is “complicated” and “inexact.” Ultimately, the case is being sent back for a new trial because the jury’s award was not logically tied to the evidence. (“[T] damages evidence of record was neither very powerful, nor presented very well by either party.”) Most notably lacking are comparable licensing agreements.

First, some of the license agreements are radically different from the hypothetical agreement under consideration for the Day patent. Second, with the other agreements, we are simply unable to ascertain from the evidence presented the subject matter of the agreements, and we therefore cannot understand how the jury could have adequately evaluated the probative value of those agreements.

Damages award vacated

Power Behind the Black Box of Obviousness: In a string of recent cases, the Federal Circuit has reinvigorated the notion that jury verdicts on the question of obviousness will likely be upheld on appeal. Here, Microsoft argued for a particular interpretation of the prior art that it presented. While being sympathetic to Microsoft’s argument, the court held that the defendant’s arguments did not meet the necessary burden.

When the underlying facts are taken in the light most favorable to Lucent, the non-moving party, the evidence reasonably permitted the jury to have decided that Microsoft did not prove by clear and convincing evidence that claim 19 would have been obvious.

Nonobviousness affirmed.

Inducement: Lucent’s case was built on the notion of contributory infringement. Microsoft’s software does not – just by itself – directly infringe Lucent’s asserted method claims. Rather, by selling the software, Microsoft leads its customers to directly infringe. Contributory infringement and inducement both require proof of underlying direct infringement. At trial, Lucent was unable to point to any actual instance where a Microsoft customer used Microsoft products to perform the claimed method. On appeal, the Federal Circuit affirmed the infringement finding by holding that circumstantial evidence was sufficient to support a conclusion that at least one person (other than the experts in the case) used the products in an infringing manner.

As in Moleculon, the jury in the present case could have reasonably concluded that, sometime during the relevant period from 2003 to 2006, more likely than not one person somewhere in the United States had performed the claimed method using the Microsoft products.

Infringement affirmed.

Federal Circuit Debates Stays Pending Reexamination; Injunctions when Claims are of “Suspect Validity”

Patent

Fresenius USA, Inc. v. Baxter International, Inc. (Fed. Cir. 2009)

Three judges, three opinions with a unanimous majority opinion written by Judge Gajarsa and two competing concurring opinions by Judges Dyk and Newman. The majority opinion (see below) renders most of Baxter’s asserted dialysis claims obvious. The two concurring opinions focus on the fact that the remaining still-valid claims are currently under reexamination at the USPTO and question whether a stay is appropriate.

Judge Dyk suggests that a final determination of the case may need to be stayed “pending the outcome of the reexamination.” Notably, Judge Dyk argues that the currently-valid claims are “of dubious validity in light of our holding.”

I join the majority opinion on the understanding that it does not foreclose the district court in its discretion from staying further proceedings pending the outcome of the reexamination before the U.S. Patent and Trademark Office. While Fresenius did not establish the invalidity of claims 26–31 of the ‘434 patent in the district court proceeding, those claims on their face are of dubious validity in light of our holding that claims 1–3 and 13–16 of the ‘131 patent and claim 11 of the ‘027 patent are invalid. It is entirely possible that the U.S. Patent and Trademark Office will finally conclude that claims 26–31 of the ‘434 patent are also invalid.

Judge Newman writes in response to Judge Dyk and argues that a stay would be

[inappropriate] at this stage in this protracted litigation, after full trial and decision in the district court, after full appeal and ruling of the appellate court and with only a modified remedy remaining on remand. . . . A stay of finality, after the issues of validity and infringement have been litigated and decided by the district court and appealed to the Federal Circuit, is a distortion of the role of reexamination.

I remain a strong supporter of the principle of reexamination. It can be a useful and powerful tool for the benefit of both patentees and those interested in restricting or eliminating adversely held patents. However, if routinely available to delay the judicial resolution of disputes, the procedure is subject to inequity, if not manipulation and abuse, through the delays that are inherent in PTO activity.

Majority Opinion:

The jury held that Baxter’s patents covering a hemodialysis machine with a touch-screen interface were invalid as obvious. In a post-jury JMOL decision, district court Judge Armstrong (N.D.Cal.) held that the jury verdict was not supported by substantial evidence – and thus that the claims remained valid. On appeal, the Federal Circuit largely reversed – finding that the jury had sufficient evidence to decide either way.

The jury yes/no decision here shows signs of the ‘black box’ effect that renders such decisions largely unassailable. Rather than attacking the jury’s reasoning, the appeal can only question whether the defendant had provided sufficient evidence of obviousness (regardless of whether the jury actually relied upon that evidence).

Where, as here, the jury made no explicit factual findings regarding obviousness, we must determine whether the implicit findings necessary to support the verdict are supported by substantial evidence.

Permanent Injunction: The court had ordered a permanent injunction to stop ongoing infringement. On appeal, the Federal Circuit vacated that decision after finding some of the claims invalid. On remand, the district court is instructed to “revise or reconsider the injunction in light of the fact that only claims 26–31 of the ‘434 patent remain valid and infringed.”

Based on Judge Dyk’s argument regarding dubious validity, this case appears to now create a situation suggested by Justice Kennedy in his eBay concurrence. In that opinion, Kennedy argued that the “suspect validity” of patent claims “may affect the calculus under the four-factor test.” Thus, even though the claims have been held valid, their marginal validity could weaken the patentee’s case for permanent injunctive relief.

Notes:

  • This is an interesting and nuanced opinion that includes much more than what is discussed here.

 

Mystery Graph of the Day

Patent,

I created the following graph after reading the Federal Circuit’s 3-2 claim construction reversal in Martek. Can you guess what the graph represents?

Mystery Solved by Joe Helmsen from Pepper Hamilton. Joe writes

“I think that the graphs represent the percent chance of having a majority decision in a particular direction given that each of x judges has a y% chance of deciding in that way.  For example, the top line represents 1 judge at 90%, 2 judges have to go 2-0 (.9*.9=81%), 3 judges have to go 3-0 or 2-1 (.9^^3 + 3*.9*.9*.1 =97.2%, etc.).” 

Right. One point of the graph is to illustrate the interesting phenomenon that the odds of convincing a “majority” are much higher when the panel has an odd number of judges. This is easy to understand when comparing a two-judge panel with a three-judge panel. A two-judge panel offers no room for error because requires that you convince both judges. On the other hand, a three-judge panel will side with you if you convince two of the three judges.

The graph also illustrates a second point – that in theory multiple judges tend to make marginal cases more predictable. Thus, an argument that will convince a judge 70% of the time would be predicted to carry the day in almost 90% of 12–member en banc panels.

Of course, this discussion relies on several false premises.  Most notably, the analysis assumes that each panel member decision is independent of the decision made by other panel members. That is is clearly not true.  Rather, the judges and clerks communicate and influence one another.  In addition to independence, the analysis presented here presumes that each judge has the same likelihood of deciding the case in a particular direction. 

Patently-O Bits and Bytes No. 129

Bits and Bytes, Patent
  • Law Student Scholarship: The Richard Linn American Inn of Court is sponsoring a newly established scholarship in honor of Mark T. Banner who died in 2008. Mark was a major force in the patent community and was very helpful to me early in my career. Although the Linn AIC is located in Chicago, the organization is taking applications nationally, now through October 10, 2009. The award is open to any student interested in pursuing a career in intellectual property. However, some preference may be given to students who are involved in a local Inn of Court. Intellectual property focused Inns are located in Chicago, DC, San Francisco Bay Area, Philadelphia, New Jersey, NYC, LA, and Boston. [Download The Richard Linn Inn Mark T. Banner Scholarship Materials][About American Inns of Court].
  • Job Board Sponsor: I'm happy to announce that Franklin Pierce Law Center has become a sponsor of the Patently-O job board. The law school continues its focus on patent law with a particular emphasis on practical training. I was teaching there in the summer of 2007 and very much enjoyed my stay in southern New Hampshire.  

Patently-O Bits and Bytes No. 129

Bits and Bytes, Patent
  • Law Student Scholarship: The Richard Linn American Inn of Court is sponsoring a newly established scholarship in honor of Mark T. Banner who died in 2008. Mark was a major force in the patent community and was very helpful to me early in my career. Although the Linn AIC is located in Chicago, the organization is taking applications nationally, now through October 10, 2009. The award is open to any student interested in pursuing a career in intellectual property. However, some preference may be given to students who are involved in a local Inn of Court. Intellectual property focused Inns are located in Chicago, DC, San Francisco Bay Area, Philadelphia, New Jersey, NYC, LA, and Boston. [Download The Richard Linn Inn Mark T. Banner Scholarship Materials][About American Inns of Court].
  • Job Board Sponsor: I'm happy to announce that Franklin Pierce Law Center has become a sponsor of the Patently-O job board. The law school continues its focus on patent law with a particular emphasis on practical training. I was teaching there in the summer of 2007 and very much enjoyed my stay in southern New Hampshire.  

Patently-O Bits and Bytes No. 129

Bits and Bytes
  • Law Student Scholarship: The Richard Linn American Inn of Court is sponsoring a newly established scholarship in honor of Mark T. Banner who died in 2008. Mark was a major force in the patent community and was very helpful to me early in my career. Although the Linn AIC is located in Chicago, the organization is taking applications nationally, now through October 10, 2009. The award is open to any student interested in pursuing a career in intellectual property. However, some preference may be given to students who are involved in a local Inn of Court. Intellectual property focused Inns are located in Chicago, DC, San Francisco Bay Area, Philadelphia, New Jersey, NYC, LA, and Boston. [Download The Richard Linn Inn Mark T. Banner Scholarship Materials][About American Inns of Court].
  • Job Board Sponsor: I'm happy to announce that Franklin Pierce Law Center has become a sponsor of the Patently-O job board. The law school continues its focus on patent law with a particular emphasis on practical training. I was teaching there in the summer of 2007 and very much enjoyed my stay in southern New Hampshire.  

Professor Arti Rai to join the PTO?

Patent,

Tech Law Reporter Andrew Noyes today reports on rumors that Duke University Law Professor and occasional Patently-O contributor Arti Rai will be joining the USPTO executive suite as head of external affairs. That position typically leads both intra– and inter-governmental relations. 

Professor Rai’s primary research focus over the past decade has been on the administrative powers of the USPTO and regulatory methods of promoting regulation especially in the areas of health care and biotechnology. In a 2009 article, Professor Rai suggests that the PTO should continue to use the courts to secure additional control over its own rulemaking and procedural authority.

Given the difficulties of securing congressional action—particularly when Congress may be unwilling or unable to separate relatively simple administrative reform from highly contentious issues like damage awards in litigation—the judiciary is probably the more promising venue for conferring such control.

Additionally, Rai argues that the PTO should move forward with inequitable conduct reform.

The progress that could be achieved through inequitable-conduct reform is difficult to overstate. With such reform, interactions with applicants could be regulated in a much more rational manner. In addition to accelerated examination, inequitable-conduct reform could also create opportunities (where appropriate) for more intensive, on-the-record engagement between the examiner and the applicant. For example, in appropriate cases, on-the-record pre-first-office-action interviews that obviate the need for multiple subsequent rounds of negotiation between examiner and applicant might be possible.

Professor Rai has long ties with President Obama. They were law school classmates at Harvard Law School and she worked tirelessly on the campaign. Prior to becoming a law professor, Rai clerked for Judge Patel (N.D. Cal.) and was an associate at Jenner & Block.

Her patent law expertise and close ties to President Obama also place her on a short list of Federal Circuit nominees should a vacancy arise.

Claim Preclusion and Vitiation

Patent

Nystrom v. Trex and Home Depot (Fed. Cir. 2009)

Ron Nystrom’s patent covers a type of decking board that is shaped in a way to shed water. In a prior case, the Federal Circuit, limited the claim term “board” to cover only boards made of “wood cut from a log.” Nystrom’s case was one of the first examples of how Phillips v. AWH could be used to limit claim scope based on statements in the specification and prosecution history – even when those statements do not rise to either a disavowal of scope or definition of a term. Because the Trex’s product is a wood-composite, it did not literally infringe the asserted claims. The district court also held that Nystrom had waived its right to argue infringement under the doctrine of equivalents.

A few days after losing the first case, Nystrom filed a second lawsuit against Trex and its distributors (Home Depot, et al.). Asserting infringement under the doctrine of equivalents against a second generation of Trex products.

On appeal, the Federal Circuit has held that the second lawsuit is barred by the claim preclusion doctrine of res judicata. Following a final judgment on the merits, claim preclusion binds parties from re-litigating the merits presented and also from raising “any other admissible matter which might have been offered” on the merits. In patent law, claim preclusion only arises when the accused product in the second suit is “essentially the same” as the accused product in the first suit.

For claim preclusion in a patent case, an accused infringer must show that the accused product or process in the second suit is “essentially the same” as the accused product or process in the first suit. Foster, 947 F.2d at 480. “Colorable changes in an infringing device or changes unrelated to the limitations in the claim of the patent would not present a new cause of action.” Id. Where an accused infringer has prevailed in an infringement suit, “the accused devices have the status of noninfringements, and the defendant acquires the status of a noninfringer to that extent.” Young Eng’rs, Inc. v. U.S. Int’l. Trade Comm’n, 721 F.2d 1305, 1316 (Fed. Cir. 1983).

Notably, claim preclusion applies applies even against issues that are waived – as here – rather than contested in open court.

In the present case, Trex admits that its new products are different, but argues that they avoid infringement in the same way – namely that its boards are not “cut from a log.” The Federal Circuit recognized this as a novel question of whether the “essentially the same” requirement should focus only on the claim terms at issue in the original case:

This court has previously emphasized that the focus for claim preclusion should be on “material differences” between the two accused devices, but has not addressed directly whether the focus of the “material differences” test is on the claim limitations at issue in each particular case.

Agreeing with the accused infringer Trex, the Federal Circuit ruled that claim preclusion applies – since the second suit would involve Nystrom “attempting to prove infringement of the same claim limitations as to the same features of the accused devices.”

Vitiation: Judge Rader authored the majority opinion, which was joined by Chief Judge Michel and Judge Prost. In addition, Judge Rader filed three pages of “additional views” focusing on the doctrine of equivalents (DOE) and its sub-doctrine of claim vitiation. DOE allows a patentee to prove infringement even when an accused device is missing certain claim limitations – so long as the difference from the claimed limitation is only insubstantial. One limitation of the DOE is that does not apply where its application would “vitiate a claim limitation.”

Judge Rader argues that the two potentially inconsistent doctrines can be reconciled into a single doctrine that both focus on the “substantiality of a missing claim limitation.” In other words, Judge Rader argues that vitiation is not a separate sub-doctrine, but rather is wholly “subsumed within the test for equivalents itself.”

[C]laim vitiation, by definition, simply rewinds and replays the doctrine of equivalents test for substantiality of a missing claim limitation. Thus, a finding of insubstantial difference to show equivalency obviates any further vitiation analysis—the wholly insignificant equivalent, by definition, would not vitiate the claim. On the other hand, a finding of substantial difference renders vitiation unnecessary. Thus, the vitiation doctrine is really subsumed within the test for equivalents itself. In other words, the all elements rule is simply a circular application of the doctrine of equivalents.

The problem with this approach is the hodge-podge of law vs. fact differentiation created by the Federal Circuit. Notably, DOE is a question of fact (decided by juries) while vitiation is a question of law (decided by judges).

This case can serve to illustrate this situation. Trex argued to the district court that a finding of equivalents on a product comprised of forty to fifty percent wood would necessarily vitiate the claim language requiring the board to be “made [entirely] from wood.” The district court agreed and barred Nystrom from pursuing an infringement theory based on equivalents. Would the result be different, however, if the accused device was comprised of fifty-five or sixty percent wood? Seventy percent? Should this question be resolved by a jury, by a judge, or by both?

The Rising Importance of Method Claims

Patent

The chart above shows the percentage of issued patents that have at least one method claim grouped according to the year of issuance of the patent. Here, I defined a method claim as one which includes either the term “method” or the term “process.”

As is apparent, the use of method claims has risen steadily over the past thirty five years.

Most Common Preambles

Patent

The following is a list of the most commonly used preambles based on an analysis of the first listed claim of the 2.1 million patent applications that have been published by the USPTO. Although the most common preambles are quite generic, the listed top-26 preambles represent fewer than 5% of the published applications.

When is it better to use the generic “a method” preamble verses a more detailed preamble such as a “method for content selection of digital media stored in a memory coupled to a digital media processor and playable on a digital audio-visual playback device”?

About 25% of the first-listed claims were directed toward some type of method or process.

Most Common Preambles

  1. A method
  2. An apparatus
  3. A semiconductor device
  4. A system
  5. A composition
  6. An image forming apparatus
  7. A device
  8. A display device
  9. A semiconductor memory device
  10. A liquid crystal display device
  11. A pharmaceutical composition
  12. An integrated circuit
  13. An image processing apparatus
  14. An electronic device
  15. A computer-implemented method
  16. An isolated nucleic acid molecule
  17. A computer system
  18. A method of manufacturing a semiconductor device
  19. An information processing apparatus
  20. An isolated polynucleotide
  21. A liquid crystal display
  22. A memory device
  23. Apparatus
  24. An article
  25. A circuit
  26. An isolated polypeptide

Federal Circuit: Is a Human An Animal? Written Description; Enablement; and Inventorship

Patent, ,

Martek Biosciences v. Nutrinova and Lonza (Fed. Cir. 2009)

[Read part I of the discussion of Martek]

Sitting in as an expanded five-member panel, the Court of Appeals for the Federal Circuit has largely affirmed a jury verdict finding Martek’s patents valid and infringed. The case involves issues of written description, enablement, sufficiency of infringement evidence, corroboration of prior inventorship arguments, and claim construction of the word “animal.” The five members agreed as to all issues except for claim construction. On that claim construction issue, the majority opinion of Judges Newman, Gajarsa, and Moore held that a human is an animal. Judges Lourie and Rader argued in dissent that the patentee’s use of animal suggested that it did not include humans.

Is a human an animal: The four patents in suit cover various aspects of making and using the omega-3 fatty acids. Nutrinova sells allegedly infringing products for human consumption. One of the patents claims a method for achieving high concentrations of the omega-3 acids in an “animal,” and the parties contested whether an a human is an animal. The majority based its decision on the maxim that the patentee is free to be its own lexicographer. “When a patentee explicitly defines a claim term in the patent specification, the patentee’s definition controls.” In its specification, Martek appears to plainly define the term animal in the following sentence: “The term ‘animal’ means any organism belonging to the kingdom Animalia.” It is undisputed that humans are classified within the kingdom Animalia – and thus, humans fit within the claims animal limitation. Q.E.D.

According to the court, once a patentee defines a term, extrinsic evidence of that term’s meaning “is simply irrelevant.” On remand, the district court will need to consider whether the patent is infringed under the broader definition.

The dissent does not disagree with the traditional maxim, but argues that the patent is not so clear in its definition:

This case illustrates the unusual situation in which a purported definition of a claim term in the written description is totally negated by the remainder of the text of the patent. Martek’s attempt at lexicography does not conform to the way in which it otherwise describes its invention.

In particular, the dissent points to the fact that the claim in question is “a method of raising an animal” in a way that increases the “content of omega-3 highly unsaturated fatty acids in said animal” and that the field of the invention looks toward “food products derived from such animals.” The specification and claims spell out a variety of animals that could be so-raised: poultry, swine, cattle, shrimp, shellfish, milk producers, and goats. However, the specification only refers to humans when it discusses the benefits of ingesting the milk and meat of those animals.

Written Description: The accused infringers argued that the patentee had added new matter to the claims of one of the patents during prosecution and that the claims are consequently invalid under the traditional written description requirement of 35 U.S.C. § 112. The Federal Circuit disagreed – finding that the jury had sufficient evidence to reject the written description argument. In particular, the ‘594 patent generally claims “a food product.” Although that claim term had been added during prosecution, the Federal Circuit found that it was sufficiently supported by the original disclosure – noting again that “the earlier application need not describe the claimed subject matter in precisely the same terms as found in the claim.” Tech Licensing (Fed. Cir. 2008). Rather, the test is “whether the disclosure of the application relied upon reasonably conveys to the artisan that the inventor had possession at that time of the later claimed subject matter.”

Evidence of Infringement: The claims of the ‘281 patent recite a limitation that the claimed microorganisms designed to create the omega-3 fatty acids caused less vessel damage than another other cultural medium (which used more sodium chloride). Martek did not provide results of any physical analysis of the accused infringing product to ensure that it met this limitation. Rather, Martek’s experts discussed the “literature” on the topic and a conceptual analysis of the known effects of a high chlorine concentration. On appeal, the Federal Circuit affirmed that the expert testimony was sufficient for a jury to find infringement – holding that there is no “general rule requiring one who alleges infringement of a claim containing functional limitations to perform actual tests or experiments on the accused product or method. Rather, a “patentee may prove infringement by any method of analysis that is probative of the fact of infringement.” Forest Labs. 239 F.3d 1305 (Fed. Cir. 2001).

Evidence of Prior Inventorship: It is improper to say that ‘prior inventorship’ is a defense to patent infringement. However, an accused infringer can invalidate a patent under 35 U.S.C. § 102(g)(2) by showing clear and convincing evidence that it (1) conceived of the invention before the patentee and (2) either reduced the invention to practice or was diligent in reducing the invention to practice from a time beginning before the patentee’s conception date; and (3) did not abandon, suppress, or conceal the invention. In this case, the defendants had filed a patent application on a similar invention prior to the patentee. However, that application had gone abandoned. The application properly serves as evidence of conception, but – because it was abandoned – does not serve as constructive reduction to practice. Here, the accused infringer’s defense failed because it could not provide other corroborating evidence of reduction to practice or diligence.

Enablement: The claims of the ‘567 patent were found invalid on JMOL due to lack of enablement due to a genus-species issue. Claim 1 broadly discusses growing “euryhaline microorganisms” while the specification only discloses two examples of thraustochytrium and schizochytrium organisms. The defendants’ experts testified that there were at least 10,000 different qualifying species and the district court agreed that two species were insufficient. On appeal, it appears that the patentee gave-up on its claim 1, but the Federal Circuit agreed that the other claims had been improperly invalidated because they included limitations to the specific examples proffered in the specification. Evidence presented indicated that the species of those dependent claims together encompassed “only 22 known species.”

Appellate Court Stays Injunction Against Microsoft Word

Patent

Microsoft v. i4i (Fed. Cir. 2009)

Without substantive opinion the Federal Circuit has stayed enforcement of an injunction against Microsoft that could have forced the software giant to stop selling its flagship product Word. Absent further rulings, the stay will be in force until Microsoft’s appeal is decided on the merits — likely extending into 2010. In August 2009, the lower court found Microsoft liable as a willful infringer of i4i’s patent relating to xml document processing – a function of Word ’03 and ’07. That court ordered Microsoft to stop infringing by October 10, 2009.

The Stay order indicates that:

“Without prejudicing the ultimate determination of this case by the merits panel, the court determines based upon the motion papers submitted that Microsoft has met its burden to obtain a stay of the injunction.”

Interestingly, the stay order indicates that it is a per curiam decision, but the order was signed by the Federal Circuit Clerk Jan Horbaly “for the court.” I see this as an indication that the judges assigned to the merits panel do not yet want to reveal their identities.

The unfortunate part of this decision is that it does not define what it takes to meet the “burden to obtain a stay of the injunction” – especially in the wake of eBay. How does the court go about deciding whether to stay relief? How important is the fact that briefing of the merits are being expedited? What role did the amicus briefs by HP and Dell play in the decision?

Google’s Patent on its GOOGLE.COM Home Page

Design Patent, Patent, ,

Earlier this week, the USPTO issued a design patent to Google that covers the “ornamental design for a graphical user interface [GUI] … as shown and described.” Pat. No. D. 599,372. Design patent coverage is essentially defined by the images include in the issued patent. Here, the image looks roughly the same as the company’s ubiquitous Google.com homepage. (See image below.)

To be clear, many patent professionals would argue that it is misleading to ever simply call this “a patent.” Rather, it is a design patent. Design patents have limited scope in that they only cover ornamental designs rather than technological advances. The USPTO has been granting design patent protection for screen shots and icons for many years. However, to my (limited) knowledge, none of those design patents have ever been enforced in court. As with most design patents, it appears that during prosecution, the PTO never issued a substantive rejection based on novelty or obviousness. [UPDATE – I updated this paragraph based on messages from two of the leading design patent experts Saidman and Carani who rightly indicated that in the past several years, few design patents have been found invalid]

Dashed or “ghost” lines in the drawing indicate features that are not claimed. Thus, patent would be infringed by someone using an identical layout even if they replaced the “Google” mark with their own mark. You can note at the bottom that the design patent drawing is marked with a circle-c ©. That indicates that Google is also claiming copyright protection for this layout. In addition, in the design patent, Google indicates that it is also claiming trademark protection for portions of the layout and – perhaps – for the layout as a whole.

Although there is some conflict in the precedent, modern courts have generally allowed companies to overlap design patent, copyright, and trademark protection in the same way that a prosecutor may charge someone with multiple crimes that all stem from the same bad act. This only becomes a problem when applicants also attempt to include utility patent protection in the mix. The problem arises because inventions protected by utility patents are required to be “functional” while design patent, copyright, and trademark laws only protect “non-functional” elements. [The non-functionality doctrine varies considerably between the regimes.]

I like to think of the three regimes (design patent, copyright, and trademark) as essentially creating different rules of evidence to prove the same thing. All of the regimes have some sort of distinctiveness doctrine. For design patents, the design must be a novel and nonobvious advance; for trademark, the mark must help distinguish goods or services in the minds of consumers; for copyright, the work must be original. Likewise the elements of infringement are similar, but different enough to provide added value to someone concerned with protecting an underlying valuable asset.

Allowing overlapping protection has problems. Most notably, the ‘piling on’ effect may make it too expensive to challenge Google’s rights even if their claim to rights appears overreaching. In the criminal justice system, this has the same effect of pushing folks to plea bargain.

Google operates in part on its reliance on the fair use doctrines of copyright and trademark laws and has been a strong advocate of open access of copyrighted works (think Google books and Google’s indexing) and limited trademark rights (so that others can bid for Google ads on a competitors trade name). By relying on design patents, Google positions itself in a way that it can protect its rights based on patent doctrines while still arguing for weaker rights in those other areas.

Design patents remain in force for 14-years from the date of issue. Thus, Google’s design patent is set to expire on Sept 1, 2023.

I have taken a screen shot of the Google.com website from Sept 3, 2009. It pretty clearly would not infringe because of the differences between layout in the patent and the layout on the site.

Notes:

  • Read the computer programmer response on Slashdot.
  • File Attachment: patd599372.pdf (72 KB). Also, see Google’s patent on Google Patents.
  • It is pretty amazing that the patent lists ten inventors for that simple thing. Did each of those individuals contribute inventive material?
  • Inequitable Conduct?: According to the face of the patent, Google did not submit any prior art. The examiner found 13 largely irrelevant pieces of prior art. Google should have at least submitted a copy of its home-page from 1 year before its March 2004 application date. The screen-shot below is the Google page from one-year before its patent priority date. (via Internet Archive). The Screen Shot serves as 102(b) prior art and also serves as a non-infringing alternative for competitors.

PatentLawPic778

  • Gawker’s ValleyWag has more background in a post titled “Google Patents World’s Simplest Home Page.”
  • Continuations: This patent is part of a family of at least seven design patents. Six of them are still pending, but one issued as a patent in 2006 (D533,561) covering the layout of search results. The recently issued ‘372 patent was filed in 2006, but claims priority to the 2004 filing date of the ‘561 patent.

Federal Circuit Expanded Panel

Patent, ,

Martek Biosciences Corp. v. Nutrinova, Inc. (Fed. Cir. 2009) (expanded panel)

Sitting in as an expanded five-member panel, the Court of Appeals for the Federal Circuit has largely affirmed a jury verdict finding Martek’s patents valid and infringed. The case involves issues of written description, enablement, sufficiency of infringement evidence, corroboration of prior inventorship arguments, and claim construction of the word “animal.”  The five members agreed as to all issues except for claim construction. On that issue, the majority opinion of Judges Newman, Gajarsa, and Moore held that a human is an animal.  Judges Lourie and Rader argued in dissent that the patentee’s use of animal suggested that it did not include humans.

I’ll write more about the case in a separate post, but here I want to focus on the procedure of an expanded panel.

Expanded Panel: It appears that the expanded panel was prompted in-part as a show dignitaries who were visiting the court.  The court claimed authority under 28 U.S.C. 46(b) which indicates that the “Federal Circuit . . . may determine by rule the number of judges, not less than three who constitue a panel.”  There is a problem with this authority. The statute calls for the court to create a “rule” for determining the number of judges. Rather than following a rule, however, the expanded panel here appears to be an ad-hoc creation. 

Notes:

  • Parallel Reexamination: As with most litigation, the patents are also under reexamination at the PTO.  As usual – and perhaps as required by the law – the Federal Circuit entirely ignored that proceeding.

Patent Attorney Work Week

Patent

I built a dataset of all original patent applications that have been published January – August 2009. Using that dataset, I created the chart below showing the patent applications grouped by the day of the week that the application was filed (based on filing date listed in publication). As is apparent, Friday filings are the most prevalent while only 2% of applications were filed on the weekends. As shown in the second and third charts, the Friday filed applications on average (1) include more claims and (2) include more words in the detailed description as compared to applications filed on other days of the week. Applications filed on the weekend are significantly shorter – a phenomenon likely explained by the larger proportion of independent inventor filings on the weekend.

Rethinking the USPTO Examiner Count System

Patent

The USPTO uses a count system as one way to measure patent examiner productivity. Examiners receive one count for sending out an initial office action and a second count when the case is “disposed.” As you might guess, a case is disposed of when it either issues as a patent or is abandoned by the applicant. However, many folks are surprised that the applicant’s filing of a request for continued examination (RCE) also counts as a disposal. As the chart shows below, this count incentive may well be driving a flood of RCE filings. The system also provides some incentive for aggressive restriction practice that forces the applicant to divide a single application into multiple applications. Notably, (1) the examiner does not receive any extra credit for examining a larger or more complex application and (2) the eventual divisional application is ordinarily routed to the original examiner who can do the search more quickly and still get the same counts.

One of the initial missions of new PTO director David Kappos is to rethink the count system and to figure out a way to ensure that examiners have “the time they need to do their job properly” and which also “incentivizes compact prosecution.” Giving a hint at the final solution, Director Kappos also suggests that the count system should encourage “the use of interviews.” The eight member task force includes four examiner union (POPA) representatives and four PTO managers – perhaps ensuring that the solution will not be a dramatic shift. [Quotes come from an internal PTO communication.]

Add your proposal below: