March 2010

False Marking: Starbucks Coffee Cup Insulator

I am at Barnes & Noble in Columbia Missouri drinking a Starbucks Brand latte. My cup is insulated with a removable corrugated cardboard insulator that is marked with U.S. Patent. No. 5,205,473. By my calculation, that patent expires April 27, 2010. (17 years from the April 27, 1993 issue date.) It will be interesting to see how long it takes for the company to remove the patent number once expired (in 2012..).

The ‘473 patent is assigned to LBP Manufacturing of Chicago, but Starbucks could still be liable if it improperly marking its products.

Therasense v. BD: En Banc Support from Law Professors

Guest post by Christian Mammen. Mammen is a Resident Scholar at UC Hastings. He also maintains an IP litigation and strategy practice. (He was also my boss when I was a summer associate at the Heller Ehrman law firm.)

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On March 8, 2010, I submitted an amicus brief (click here for a copy) on behalf of a group of nine law professors (Professors Cotter, Dolak, Gallagher, Ghosh, Hricik, Risch, Sarnoff, Takenaka and myself) in support of en banc review of inequitable conduct in Therasense, Inc. et al. v. Becton, Dickinson & Co. et al. The panel decision in Therasense affirmed the District Court’s finding of inequitable conduct. The inequitable conduct finding related to a failure to disclose to the USPTO statements that had been made to the European Patent Office. The majority decision drew a lengthy dissent from Judge Linn.

The law professors’ amicus brief argues that en banc review is appropriate because of the ongoing inconsistency in Federal Circuit precedents concerning inequitable conduct. In particular, the brief focuses on two specific issues: (1) the legal standard for intent and (2) the proper test of materiality.

Legal Standard for Intent: First, the applicable legal standard for the intent element continues to be uncertain. Although some expected that the 2008 Star Scientific decision (Star Scientific , Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357 (Fed. Cir. 2008)) would prompt a widespread adoption of its single-most-reasonable-inference test for proving intent via circumstantial evidence, that has not been the case. In Therasense, the majority deferred to the District Court’s five findings on the intent issue, without addressing their legal sufficiency. Two of the five findings pertained solely to the materiality of the nondisclosed information; however, Star Scientific holds that “materiality does not presume intent.” One finding of the five was merely that the individuals knew the information and did not disclose it; again, this is not the standard for intent under Star Scientific. And the last two findings were that the individuals’ testimony should be rejected as not credible; these findings failed to address the single-most-reasonable-inference test set forth in Star Scientific.

In addition, the majority decision (and the underlying District Court opinion) implicate the “should have known” test for intent that has often appeared in the Federal Circuit’s precedents. The law professors’ amicus brief argued that there should be an en banc rehearing because there is a conflict between the Kingsdown-Star Scientific line of cases, on the one hand, which disfavor the “gross negligence” test—and by implication the associated “should have known” test—and the Brasseler-Ferring line of cases, on the other hand, which endorse the “should have known” test.

Objective Materiality: Second, since the 2006 Digital Control ruling (Digital Control v. Charles Mach. Works, 437 F.3d 1309 (Fed. Cir. 2006)), it had appeared that the Federal Circuit would steadfastly apply the older “reasonable examiner” test for materiality, rather than the newer and more objective test adopted by the PTO in the 1992 revision to 37 CFR 1.56 (“Rule 56”). However, in Therasense, the majority applied the 1992 version of Rule 56 as the test for materiality. This arguably creates a split in precedent that provides a basis for en banc reconsideration of the proper test for materiality.

Will this be the case in which the Federal Circuit takes inequitable conduct en banc? It is difficult to predict. Over the past five years, the Federal Circuit has declined en banc petitions in a number of prominent and controversial inequitable conduct cases. It can, however, be confidently asserted that, in the twenty-two years since the Federal Circuit convened en banc in Kingsdown Med. Consultants, Ltd. v. Hollister Inc., 863 F.2d 867 (Fed. Cir. 1988), the Federal Circuit has accumulated an impressive tally of inconsistent and contradictory panel decisions that cry out for en banc review.

Patently-O Bits and Bytes No. 326

Two Queries:

  • Intervening: I previously wrote about the case of Block Financial v. LendingTree (W.D. Mo. Feb 23, 2010) where the district court agreed to vacate is summary judgment holding of invalidity in order to facilitate a settlement. How difficult would it be for a third party intervene in the recently dismissed case in order to request a reinstatement of the opinion?
  • Mandamus Jurisdiction: I have been writing some about Federal Circuit Appellate Jurisdiction. Can someone help piece together an explanation of the Federal Circuit’s claim to jurisdiction over interlocutory appeals in the form of a writ of mandamus. I’m especially interested in resolving the court’s appellate jurisdiction over a writ of mandamus asking a question regarding regional circuit law as seen in TS Tech and its progeny.

San Francisco Bay Area/Napa: For over 50 years years, the San Francisco Intellectual Property Law Association has been hosting an annual IP seminar. This year’s event, at the Meritage Resort in Napa Valley April 30 – May 2, is in partnership with LES (incl. a special track of licensing programs) and WIPLA (Women IP Lawyers Association) and includes several law professors, David Kappos and/or Sharon Barner (USPTO – invited), and various other nationally recognized speakers. [Link]

Eighth Circuit: Federal Circuit Does Not Hold Appellate Jurisdiction over a Refusal to Compel Arbitration in a Patent Case

Industrial Wire Products, Inc. (IWP) v. Costco Wholesale Corp., 576 F.3d 516 (8th Cir. 2009).

On appeal, Costco asked the court to determine whether the mandatory arbitration clause of its supply agreement with IWP operates to compel arbitration of IWP’s patent infringement lawsuit. (The Federal Arbitration Act (FAA) creates a right to immediately appeal a district court’s refusal to compel arbitration.)

Before reaching the merits, however, the Eighth Circuit questioned its own appellate jurisdictional over the patent case.

Federal Circuit Appellate Jurisdiction: In creating the Court of Appeals for the Federal Circuit (Federal Circuit), Congress indicated its desire for national uniformity of the patent laws. The Federal Circuit holds exclusive jurisdiction over appeals of district court final judgments in cases that “arise under” the patent laws. 28 USC § 1295(a)(1). The Federal Circuit also holds exclusive jurisdiction over interlocutory appeals of those patent cases if the appeal relates to the grant or denial of an injunction or the creation or destruction of a receivership.

After examining the jurisdictional statutes, the Eighth Circuit determined that the Federal Circuit did not have exclusive jurisdiction because the lower court’s decision (1) was not a final judgment because the lower court had retained jurisdiction after denying the motion to compel arbitration and (2) did not relate to the grant or denial of injunctive relief (or to a receivership). Absent those conditions, the Eighth Circuit held that itself – as the “circuit embracing the district” – had jurisdiction over the appeal. 28 U.S.C. § 1294(1).

Circuit Split: This case highlights an already existing circuit split. In a 2004 decision, the Federal Circuit held that it has exclusive jurisdiction over an appeal of a denial or grant of a motion to compel arbitration. Microchip Tech. Inc. v. U.S. Philips Corp., 367 F.3d 1350 (Fed. Cir. 2004). In Microchip Tech, the Federal held that the act of compelling arbitration is “in effect a mandatory injunction.” Id., following Sinclair Refining Co. v. Atkinson, 370 U.S. 195 (1962) (discussing a “mandatory injunction to carry out an agreement to arbitrate”). The Third Circuit previously held that the Federal Circuit does not have exclusive jurisdiction in this situation. Medtronic AVE, Inc. v. Advanced Cardiovascular Sys., Inc., 247 F.3d 44 (3rd Cir. 2001).

The injunction question could be resolved depending upon whether the district court was (1) asked to simply stay the case or refuse jurisdiction or (2) asked to issue an “antisuit injunction” or order participation in the arbitration process. The FAA specifically discusses the right to “compel arbitration.” Arbitration expert Gary Born has written that an order compelling arbitration “amounts to an injunction requiring a party to arbitrate pursuant to its arbitration agreement.” Gary Born, International Commercial Arbitration 1015 (2009). A Second Circuit decision explains the difference between refusing to hear a case and compelling arbitration:

The first merely arrests further action by the court itself in the suit until something outside the suit has occurred; but the court does not order that it shall be done. The second, through the exercise of discretionary equity powers, affirmatively orders that someone do (or refrain from doing) some act outside the suit. Kulukundis Shipping Co. v. Amtorg Trading Corp., 126 F.2d 978 (2nd Cir 1942)

Compelling Arbitration: On the merits, the Eighth Circuit reversed – holding that the current patent infringement dispute fell within the mandatory arbitration agreement between the parties and therefore that the district court should have entered an order compelling arbitration.

Notes:

Dr. Michelson Supports Patent Reform

Gary Michelson forwarded the following letter which he has also mailed to members of Congress. Dr. Michelson became a billionaire as a result of a settlement of his infringement lawsuit against Medtronic.

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March 17, 2010

I am writing in regard to the patent reform legislation currently before you.

Abraham Lincoln had it right when he said the patent system was the engine of the American economy. Those few words inscribed by our founding fathers in Article I, Section 8 of the Constitution of the United States says it beautifully “to promote the Progress of Science and the useful Arts.”

All politics aside, one would be hard pressed to find support in our history that government can either tax its way out of a recession, or tax its way out of a budget deficit without crushing job formation -the most pressing economic problem of our time. History has shown that it is possible to have vibrant job growth and to simultaneously reverse deficit spending by growing the economy. You cannot increase productivity by simply telling the man with a shovel to dig twice as hard. But one person with a word processor can replace twenty people with typewriters. That is more work done for the same amount of effort, raises productivity and the standard of living, and makes businesses more profitable so they can employ more people. It may well be that in the 1990s, it was the permeation of computers throughout the business world that substantially contributed to the economic growth of those times.

I would submit to you that the next engine to produce that kind of economic growth is currently trapped in the patent office. The United States now competes economically against the rest of the world. We cannot afford to have technology, that if unleashed and nourished would fuel our economy, labor slowly through the patent office while the rest of the world races on.

Companies will not invest in uncertainty. The power of the patent gives small entrepreneurs and large companies alike the certainty that they require to invest their time and money. This creates jobs and frequently a better way of achieving the same result or a better result. Sometimes the better way is the thing itself.

The United States patent system is in desperate need of the reform legislation presently before you.

Some people have grabbed the pulpit and have claimed to speak for the individual inventor. But, grabbing that mantle for themselves and making such proclamations doesn’t make it so.

I have been an independent inventor for the last quarter century. I am the single named inventor on over 900 issued patents or pending applications throughout the world, and just shy of 250 issued patents in the United States alone. Many of the inventions contained in these patents have resulted in highly successful best of kind or entirely new products. One of my licensees estimated that their sales of products incorporating my technologies would exceed five billion dollars ($5,000,000,000.00) and affect the lives of millions of people. Imagine the number of jobs that must be created to design, manufacture, sell and service these previously non existent products.

I mentioned people’s lives effected. Let me be more precise. I am a board certified orthopedic surgeon fellowship trained in and specializing in spinal surgery. Recently the Paralyzed Veterans of America recognized me as the outstanding medical researcher in the field of spinal disorders. My inventions which are in the field of spinal disorders have made such procedures faster, safer, more effective and less expensive. On occasion they have freed people from wheelchairs, lifted them from disability, allowed them to return to being mothers and fathers and husbands and wives, and to go from welfare to work.

Presently we are blessed with a new Director of the United States Patent and Trademark Office (U.S.P.T.O.) who left a job that was the envy of the intellectual property world. He brought with him a unique understanding of ultra large scale information technologies and computers that is so essential to the present and future functioning of the Office, as well as an in depth working knowledge of best practices from the competitive world of free enterprise. This is what will be required to reinvigorate the Patent Office, and to clear up the massive three year backlog of 800,000 pending patent applications. However, the able and dedicated people who staff the patent office cannot effectively execute the people’s business with their hands tied behind them and lacking the resources to do so.

I strongly implore you on behalf of myself, independent inventors like me, and for the good of our country to support the patent reform legislation before you. And if upon reflection you recognize how truly vital the Patent Office is to the future of our country then I would ask you to do more and to consider the issue of “revenue diversion”.

The U.S.P.T.O. is unique in American government in that it costs the taxpayer nothing while providing the best dollar for dollar value in the intellectual property industry. The U.S.P.T.O. should have the authority to set its fees so that they are appropriate to the services provided and “in the aggregate” sufficient to fully optimize the functioning of that office, and to reasonably budget for the capital expenditures that will be required in the future for it to continue to do so.

There is an old saying that the best time to plant a shade tree was fifty years ago. The next best time is right now. Now is the time to act.

Thank you for your consideration of this vital issue. Please do not hesitate to contact me if I may be of service to you in this matter.

Sincerely yours,

Gary K. Michelson, M.D.

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Dale Carlson writes “Scrap the Patent Bill

Settlement + Vacatur: Whitewashing an Invalidated Patent

In Gracenote, Inc. v. MusicMatch, Inc., the District Court (N.D. Cal. Judge Wilken) granted MusicMatch’s motion for partial summary judgment – holding the claims of one of the patents invalid as anticipated. Within months, the parties settled (motivated in part by the anticipation of Yahoo!’s purchase of MusicMatch). As part of the settlement, MusicMatch agreed not to oppose vacatur of the summary judgment decision. On motion, the court did vacate its holding.

In its motion for vacatur, Gracenote indicated that it “intends to seek re-examination of the ‘593 patent.” This result apparently made the vacatur appear more palatable and potentially allow Gracenote to achieve a narrower (but now valid) claimset. Gracenote wrote the following in its motion:

Gracenote hereby requests that the Court vacate its [Summary Judgment Order and] Reconsideration Order. As Gracenote has set forth in its various briefs filed with this Court, Gracenote believes that the Court erred in finding that xmcd and CDDB anticipate or render obvious certain claims of the ‘593 patent. Accordingly, Gracenote intends to seek re-examination of the ‘593 patent, and to submit evidence of xmcd and CDDB to the PTO. Gracenote will likewise submit the relevant orders of this Court to the PTO at that time. Accordingly, Gracenote respectfully requests that the Court vacate the above cited orders and allow the PTO to determine the relevance of xmcd and CDDB to the claims of the ‘593 patent. . . . Gracenote requests the orders be vacated in fairness so that it can pursue re-examination of the ‘593 patent before the PTO.

Although Gracenote seemingly promised to seek reexamination, no reexamination request has been filed in the six years since this case was decided. It is unclear to me whether that failure would rise to the level of contempt of court.

Notes:

  • Gracenote, Inc. v. MusicMatch, Inc., 2004 U.S. Dist. LEXIS 17617 (N.D. Cal. 2004).
  • Block Financial v. LendingTree (W.D. Mo. 2010).
  • File Attachment: GracenoteMotion.pdf (168 KB)
  • See also, Persistence Software, Inc. v. The Object People, Inc., 200 F.R.D. 626,627 (N.D. Cal. 2001) (vacating prior summary judgment motion of invalidity for the express purpose of allowing “future actions against third parties for patent infringement”.); United States Gypsum Co. v. Pac. Award Metals, Inc., 2006 U.S. Dist. LEXIS 47237 (N.D. Cal. 2006) (vacating judgment that patentee was estopped from claiming infringement under the doctrine of equivalents due to prosecution history estoppel).

Vacating an Invalidity Rulings as a Condition of a Negotiated Settlement

Block Financial v. LendingTree (W.D. Mo. 2010)
[File Attachment: Block.v.LendingTree.Invalidity.pdf (25 KB)]
[File Attachment: DismissalReq.pdf (16 KB)]

[Updated March 17, 2010] In 2001, Block Financial sued LendingTree for infringement of its US Patent No. 6,014,645 entitled "REAL-TIME FINANCIAL CARD APPLICATION SYSTEM." Later, Block added assertions of infringement of its US Patent No. 7,310,617 (a continuation application). The case was stayed for several years pending outcome of a reexamination that changed or eliminated about half of the '645 patent's 35 claims.

In a September 2009 order, the district court (W.D. Mo. Judge Smith) issued a partial summary judgment order invalidating many of Block's claims in its '617 patent based on a violation of the "new matter" prohibition of the written description requirement – holding that Block's "February 2002 amendment added new matter to the pending application, which is prohibited by section 132. As those claims are not supported by the original application, they must be declared invalid."

In February 2010, the parties entered into a confidential settlement agreement after the court agreed to vacate its invalidity findings. The parties explained that such an action would serve the public interest:

The court vacating its order would serve the public interest since it facilitates a resolution of the litigation between the parties and the dispute regarding this particular issue. See U.S. Bancorp Mortgage Co. v. Bonner Mall Partnership, 513 U.S. 18, 26 (1994) (holding that vacatur is appropriate when it would serve the public interest). The parties respectfully submit that the vacatur of the court's partial summary judgment order is in the public interest and ask that the court vacate its order in order to allow the parties to settle the current case.

In response to the joint motion vacate, the court issued following order:

The Court is informed that the parties have reached settlement of this case. The settlement contemplates that the Court vacate its Order of September 10, 2009 (Doc # 188). In accordance with the parties' agreement and their joint motion (Doc. # 247), the Court's Order of September 10, 2009 is hereby vacated.

Of course, the US Supreme Court might well contend that the public interest is not being served by this vacatur. In Lear, Inc. v. Adkins, 395 U.S. 653 (1969), the court refused to enforce a contract that barred patent validity challenges – noting a "strong federal policy" in challenging invalid patents and therefore "permitting full and free competition in the use of ideas which are in reality a part of the public domain." A major purpose of this settlement is to remove the black-spot of invalidity from the '617 patent so that it can be asserted against other parties at other times. And, as many have noted, the expense of invalidating a clearly invalid patent is often sufficient to lead to settlement. Of course, once a defendant is relieved of potential liability, it may be quite happy for the patent to remain in effect as a roadblock to other competitors.

See also, Gear Inc. v. L.A. Gear California Inc., 13 USPQ2d 1655 (S.D.N.Y. 1989) (using settlement agreement to vacate judgment of that the term "gear" was generic when used on clothing); Judkins v. HT Window Fashion Corp, 529 F.3d 1334 (Fed. Cir. 2008) (discussing the lower court's decision to vacated ruling of abandonment under 102(g) based on settlement agreement); In re Tamoxifen Citrate Antitrust Litigation, 429 F.3d 370 (2nd Cir. 2005); Aqua Marine Supply v. AIM Machining, Inc., 247 F.3d 1216 (Fed. Cir. 2001).

Patently-O Bits and Bytes

  • PTO General Counsel James Toupin is retiring this week. Raymond Chen is the Deputy GC and Solicitor.
  • Next Week’s Miami-Based IP Law Summit (March 25-27). Speakers include top IP counsel from Home Depot, Alcoa, Altera, Medtronic, Lenovo, Du Pont, Caterpillar, Coach, Tyco, NBA, Ralph Lauren, Burger King, Kodak, Southwire, Xerox, Darden, Bayer, Harley-Davidson, Boeing, and IBM. I am also speaking as are Robert Stoll (Commissioner of Patents) and Lynne Beresford (Commissioner of Trademarks). [Link]
  • Corporate IP Counsel Summit (April 27-28) in New York. Speakers include Patently-O contributors David Boundy (Cantor Fitz), Charles Macedo, Bruce Pokras (Pfizer), Tim Wilson (SAS), and myself. Others speakers are coming from the NFL, NBC, AT&T, Motorola, Kodak, Siemens, Raytheon, Go Daddy, ICANN, Purdue, IBM, Thomson Reuters, New Balance, etc. (Use code FCZ835 when registering for a $500 discount). [Link]
  • GWU is hosting excellent patent law symposium on May 11, 2010 with Chief Judge Michel, PTO Director Kappos and former Director Dickinson, Judges Fogel, Huff & Ericksen, Professors Duffy and Whealan, and top IP counsel from SAP, Motorola, Microsoft, Eli Lilly, Caterpillar, etc. [Link]
  • 2010 Midwest IP Institute on May 7, 2010 in Overland Park, Kansas with former PTO Director Bruce Lehman, Professor David Hricik, Steve Kunin and Ken Germain. Sponsored by the Kansas Bar Ass’n.
  • 110 Year Patent: Last week’s Amazon 1-Click post included a typo suggesting that the patent would expire in the year 2107 (instead of 2017). Several readers wrote-in with corrections including one who questioned: “Is this is a typo or is it Patent Reform?”
  • From its founding, the Franklin Pierce Law Center has focused on teaching patent law and training future patent attorneys. The law school today announced that it is merging with the University of New Hampshire and will become the University of New Hampshire School of Law. The school plans to maintain its well known Franklin Pierce brand-name in the IP market for some time. Franklin Pierce is a headline-advertiser on the Patently-O Job Board.
  • Darby & Darby is dissolving. Of the “big-five” New York IP Firms, only Kenyon is left.
  • Although Not Directly Patent Related, I have really enjoyed reading these working papers by my University of Missouri Law School colleagues:
  • And another non-patent post from my favorite local food writer Scott Rowson: “So the recipe for no-knead bread in last week’s Tribune doesn’t actually say ‘remove dough from towel before cooking,’ so it appears I may be responsible for a few dozen incinerated tea towels around town. Seriously, three people have emailed questions along those lines. So yes, remove the towel from the bread before BAKING IT FOR 45 MINUTES. Failure to do this will cause a fire. Also, shut the oven door after placing the pot inside – I left that out too.” [Link]

Patently-O Bits and Bytes

  • PTO General Counsel James Toupin is retiring this week. Raymond Chen is the Deputy GC and Solicitor.
  • Next Week’s Miami-Based IP Law Summit (March 25-27). Speakers include top IP counsel from Home Depot, Alcoa, Altera, Medtronic, Lenovo, Du Pont, Caterpillar, Coach, Tyco, NBA, Ralph Lauren, Burger King, Kodak, Southwire, Xerox, Darden, Bayer, Harley-Davidson, Boeing, and IBM. I am also speaking as are Robert Stoll (Commissioner of Patents) and Lynne Beresford (Commissioner of Trademarks). [Link]
  • Corporate IP Counsel Summit (April 27-28) in New York. Speakers include Patently-O contributors David Boundy (Cantor Fitz), Charles Macedo, Bruce Pokras (Pfizer), Tim Wilson (SAS), and myself. Others speakers are coming from the NFL, NBC, AT&T, Motorola, Kodak, Siemens, Raytheon, Go Daddy, ICANN, Purdue, IBM, Thomson Reuters, New Balance, etc. (Use code FCZ835 when registering for a $500 discount). [Link]
  • GWU is hosting excellent patent law symposium on May 11, 2010 with Chief Judge Michel, PTO Director Kappos and former Director Dickinson, Judges Fogel, Huff & Ericksen, Professors Duffy and Whealan, and top IP counsel from SAP, Motorola, Microsoft, Eli Lilly, Caterpillar, etc. [Link]
  • 2010 Midwest IP Institute on May 7, 2010 in Overland Park, Kansas with former PTO Director Bruce Lehman, Professor David Hricik, Steve Kunin and Ken Germain. Sponsored by the Kansas Bar Ass’n.
  • 110 Year Patent: Last week’s Amazon 1-Click post included a typo suggesting that the patent would expire in the year 2107 (instead of 2017). Several readers wrote-in with corrections including one who questioned: “Is this is a typo or is it Patent Reform?”
  • From its founding, the Franklin Pierce Law Center has focused on teaching patent law and training future patent attorneys. The law school today announced that it is merging with the University of New Hampshire and will become the University of New Hampshire School of Law. The school plans to maintain its well known Franklin Pierce brand-name in the IP market for some time. Franklin Pierce is a headline-advertiser on the Patently-O Job Board.
  • Darby & Darby is dissolving. Of the “big-five” New York IP Firms, only Kenyon is left.
  • Although Not Directly Patent Related, I have really enjoyed reading these working papers by my University of Missouri Law School colleagues:
  • And another non-patent post from my favorite local food writer Scott Rowson: “So the recipe for no-knead bread in last week’s Tribune doesn’t actually say ‘remove dough from towel before cooking,’ so it appears I may be responsible for a few dozen incinerated tea towels around town. Seriously, three people have emailed questions along those lines. So yes, remove the towel from the bread before BAKING IT FOR 45 MINUTES. Failure to do this will cause a fire. Also, shut the oven door after placing the pot inside – I left that out too.” [Link]

Florist-Inventor Stuck With Admissions Made During Deposition and Loses on Summary Judgment

Delaware Valley Floral Group v. Shaw Rose Nets (Fed. Cir. 2010)

Shaw’s Patent No. 5,765,305 covers a process for producing larger rose heads by placing an elastic netting around the head during growth. The netting reduces the light and heat felt by the petals and therefore conditions them to continue growing for a longer time before opening. The netting has become ubiquitous. On summary judgment, the district court held the patent invalid under the on-sale bar of 35 U.S.C. § 102(b).

Changing Testimony: In a deposition, Shaw stated that he invented and began selling modified roses in 1994. However, Shaw submitted a declaration to the court indicating that he had misspoken at the deposition and the actual invention date was in 1995. This difference was important because the 1994 sales date was more than one-year before the application filing date. The district court, however, refused allow Shaw to modify his prior statement and instead awarded summary judgment of invalidity based on the admission of the 1994 date. On appeal, the Federal Circuit affirmed – holding that the district court had properly refused to allow Shaw to create a disputed material fact. (FRCP 30(e) provides a 30-day window for reviewing the deposition statements, but Shaw did not challenge his own statements until after that deadline had passed.)

Waiver: The perhaps more interesting issue on appeal involves implicit waiver of argument. During the district court proceedings, the parties never directly argued whether the invention was “ready for patenting” by the 1994 date. Shaw admitted that by then he had “ironed out all the wrinkles” but on appeal argued that even then the process was not ready for patenting. Based on the “subtle” and admittedly indirect discussion of the issue, Federal Circuit held that Shaw had waived his right to appeal on the “ready for patenting” issue.

At oral argument on appeal, when questioned about whether Shaw waived this argument, counsel’s response was that the argument was “subtly” raised at oral argument before the district court even though it was not the subject of any heading in its brief, and he did not believe the words “ready for patenting” were used. Oral Argument 6:47-7:24, http://oralarguments.cafc.uscourts.gov/mp3/2009-1357.mp3. We conclude that Shaw failed to contest whether the invention was ready for patenting below and that argument is therefore waived.

Summary Judgment of Invalidity Affirmed

Federal Circuit Jurisdiction over Declaratory Judgment Actions

Laboratory Corp of America (LabCorp) v. Metabolite Labs., Appeal No. 2008-1597 (Fed. Cir. 2010).

In an interesting exposition on Federal Circuit appellate jurisdiction, the court has ruled that LabCorp's appeal should be heard by the Tenth Circuit — concluding that the declaratory judgment action between these parties is merely a state-law contract dispute (patent & know-how license) that does not require determination of a substantial question of patent law. In particular, there were no patent law questions at issue here because those issues were decided in an earlier action, and those results are cemented under res judicata.

Federal Circuit Jurisdiction: 28 USC 1295(a)(1) provides the Federal Circuit with exclusive jurisdiction over the appeal of any final judgment of a district court if the jurisdiction of the district court arose "under any act of Congress relating to patents." In Christianson (1988) and Holmes Group (2002), the Supreme Court outlined the scope of this arising-under jurisdiction to include cases where the "well-pled complaint establishes either that federal patent law creates the cause of action or that the plaintiff's right to relief necessarily depends on the resolution of a substantial question of federal patent law." When the case also includes a state-law claim, there must also be a consideration of the "congressionally approved balance of federal and state judicial responsibilities." Grable (2005).

Federal Circuit Jurisdiction over Declaratory Judgment Actions: For declaratory judgment actions, the Federal Circuit has historically looked at the "hypothetical claim" "that the declaratory defendant would have brought." Speedco (Fed. Cir. 1988). This hypothetical claim analysis does not mesh-well with the Supreme Court's MedImmune (2007) decision. I would argue even more strongly that the Speedco precedent was overruled. MedImmune announced that a court may have declaratory judgment jurisdiction even if the declaratory defendant could not have brought suit at that time. Thus, under MedImmune, the court may still possess arising-under jurisdiction in a patent case even if no hypothetical patent claim could be described for the declaratory defendant. In its decision here, the Federal Circuit did not cite MedImmune, but rather followed its old Speedco reference without questioning that decision's ongoing precedential value.

The Federal Circuit can have jurisdiction over cases only involving breach-of-contract and legal-malpractice claims, but only if the well-pled complaint they raises a substantial question of patent law. Here, LabCorp argued that the prior patent license did not cover certain of its activities. On appeal, the Federal Circuit noted that such a claim could ordinarily raise a substantial question of patent law, but that no patent law question was at issue here because the court had already determined ` the scope of the "licensed patents." Because those issues are res judicata, their presence does not create any questions of patent law to be judged.

[F]or jurisdiction to exist in our court, the substantial question of patent law must be disputed and require resolution on the merits. . . . The issue of infringement . . . has been resolved and is no longer disputed. Accordingly, Metabolite's hypothetical breach of contract claim presents this court with no disputed issue of patent law. . . . Because the issue of patent law is not disputed and substantial, we do not have jurisdiction over this appeal.

Thus, the court "transfer[red] the appeal to the United States Court of Appeals for the Tenth Circuit."

Writing in dissent, Judge Dyk suggested that the Federal Circuit should have jurisdiction over a suit that determines the res judicata effect of a prior judgment that arose under the federal patent laws. Additionally, Judge Dyk disputed the majority's conclusion that the complaint raised no questions of patent law to be decided. "At oral argument, counsel for LabCorp conceded that 'it is possible that the court could have had to decide [the question of whether the outsourced homocysteine assays fell within the claims of the '658 patent] in this case.'"

Cost of the Patent Backlog and the Proposed Solution

The UK Patent Office has released a commissioned study examining the “economic impact of delays in processing patents.” The report (prepared by the consulting company London Economics) suggests that the delays (1) reduce the incentive to innovate; (2) increase the likelihood of filing applications on non-patentable inventions (for the benefit of patent pending status); and (3) the monopoly power held by the owners of non-patentable applications. The estimate of these costs on the world economy is $11.5 billion dollars per year. [Link][Link] The article has a number of major problems, but its bottom line does not seem clearly wrong.

The political motivation behind the study is to push toward greater cooperation between the patent offices in examining co-pending applications. 

The bulk of the calculated “costs” are associated with applicants who need a fast-patent-grant.  That problem could be largely solved better structuring elective accelerated and deferred examination.  In that system, applicants who value a rapid grant would have access to that avenue (for a fee) while others willing to wait could do so.

Patently-O Bits and Bytes: Federal Circuit Judicial Nominees

  • President Obama recently announced KATHLEEN O’MALLEY as his nominee for the open position on the Court of Appeals for the Federal Circuit (CAFC).
  • Next Opening: Chief Judge PAUL R. MICHEL has announced that he is retiring May 31, 2010.
  • Judges PAULINE NEWMAN, ALAN D. LOURIE, ARTHUR J. GAJARSA, TIMOTHY B. DYK, and HALDANE ROBERT MAYER are all currently eligible to take “senior status.” Judge WILLIAM C. BRYSON will be eligible on his 65th birthday (August 19, 2010). Judges RICHARD LINN and RANDALL R. RADER will become eligible in 2012 and 2014 respectively. Of course, a judge can retire at any point. The Senior Status benefit is that the judge continues to receive a full salary but a reduced workload. However, Judges on senior status do not participate in en banc rehearings (unless the senior-judge sat on the original panel) and are never considered the presiding judge of a panel.
  • [Update] Senior Judges do receive a copy of decisions before they issue, but does not have authority to request an en banc poll.

The BPAI’s Standard of Review for Examiner Rejections

Ex Parte Frye (BPAI 2010) (precedential opinion)

In a newly issued precedential opinion, the Board of Patent Appeals and Interferences (BPAI) has ruled that examiner findings are given no deference when challenged on appeal.

“[T]he Board reviews the particular finding(s) contested by an appellant anew in light of all the evidence and argument on that issue.”

However, examiner findings that are not specifically challenged will not normally be disturbed by the BPAI.

“If an appellant fails to present arguments on a particular issue – or, more broadly, on a particular rejection – the Board will not, as a general matter, unilaterally review those uncontested aspects of the rejection. . . .  For example, if an appellant contests an obviousness rejection only on the basis that a cited reference fails to disclose a particular limitation, the Board need not review the other, uncontested findings of fact made by the examiner underlying the rejection, such as the presence of uncontested limitations in the prior art.”

The BPAI opinion is also notable because its signatories include the USPTO Director (Kappos) and Deputy Director (Barner). Although it is unusual for the PTO director to take part in BPAI decisions, the Director is a statutory member of the BPAI under 35 U.S.C. 6(a). Based on the 2008 “Duffy amendments” to Section 6, the Deputy Director apparently now has the same status. I say “apparently” because Westlaw claims that the amendment was technically deficient.

Director Kappos has written a blog post about the opinion.

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Frye’s claim is directed to a shoe having a reverse-incline. On the merits of the appeal, the BPAI reversed the examiner rejection — finding that the examiner had interpreted the prior art in a manner that was “unreasonably broad.”

Federal Circuit Judge Kathleen O’Malley

The White House today announced that Judge Kathleen (Kate) O’Malley (N.D.Ohio) is the nominee to fill the empty judgeship position on the twelve-member Court of Appeals for the Federal Circuit. The position was previously filled by Judge Schall. Chief Judge Michel has announced that he will retire this Spring. The Senate is expected to confirm Judge O’Malley without significant opposition.

Judge O’Malley wrote an interesting dissent while sitting by designation in Ormco Corp. v. Align Technology. In the dissent, Judge O’Malley argued that the majority had unreasonably applied the doctrine of prosecution disclaimer – writing that “prosecution disclaimer requires a patentee to clearly and unmistakably disavow certain interpretations, and I find no such disavowal here.”

The following is the Whitehouse press release:

FROM: The White House, Office of the Press Secretary, For Immediate Release March 10, 2010 President Obama Nominates Raymond Lohier, Jr. for the United States Court of Appeals for the Second Circuit, Judge Kate O’Malley for the United States Court of Appeals for the Federal Circuit

WASHINGTON, DC – Today (March 10, 2010), President Obama nominated … Judge Kate O’Malley to the United States Court of Appeals for the Federal Circuit. … O’Malley currently serves as a U.S. District Judge for the Northern District of Ohio. “Raymond Lohier and Kate O’Malley will both bring an unwavering commitment to fairness and judicial integrity to the federal bench,” President Obama said. “Their impressive legal careers are a testament to the kind of thoughtful and diligent judges they will be on the Second and Federal Circuits. I am honored to nominate them both today.” …

Judge Kate O’Malley: Nominee for the United States Court of Appeals for the Federal Circuit Judge Kathleen McDonald O’Malley has served as a U.S. District Judge for the Northern District of Ohio since 1994. Judge O’Malley also regularly teaches patent litigation at Case Western Reserve University School of Law as Distinguished Visiting Jurist. Prior to her appointment to the District Court, Judge O’Malley was First Assistant Attorney General and Chief of Staff to then-Ohio Attorney General Lee Fisher. In that role, she supervised all litigation for the State of Ohio and counseled senior government officers on legal questions. Until 1991, she was in private practice in Cleveland at Porter, Wright, Morris & Arthur LLP and at Jones Day. After law school, she clerked for the Honorable Nathaniel R. Jones on the U.S. Court of Appeals for the Sixth Circuit. On the District Court, Judge O’Malley has handled numerous intellectual property cases, including while sitting by designation with the U.S. Court of Appeals for the Federal Circuit. The United States Judicial Panel on Multidistrict Litigation has called on Judge O’Malley to preside over several complex nationwide matters. Judge O’Malley graduated from Kenyon College in 1979 (Phi Beta Kappa) and Case Western Reserve University School of Law in 1982 (Order of the Coif).

More Info:


Best Mode Requirement Strikes Down Biotech Patent

Ajinomoto Co., Inc. v. International Trade Commission (Fed. Cir. 2010)

The ITC held that Ajinomoto's patents were invalid for failure to satisfy the best mode requirement of 35 U.S.C. 112. On appeal, the Federal Circuit affirmed.

The two asserted patents relate to methods of producing L-lysine using GM E. coli and include fairly broad claims. L-lysine is used in animal feed and is now a multi-billion-dollar market. The patent discloses one way to create the L-lysine producing E. coli. However, by the time they filed the patent application, the inventors had identified another, better strain. The evidence showed that Ajinomoto intentionally withheld that information.

The best mode doctrine requires that the inventor disclose the preferred embodiment of the invention and any preferences that materially affect properties of the claimed invention, but only to the extent that information is subjectively known by the inventor at the time the application was filed. There are four major caveats to the law of best mode. (There is no duty to supplement the best mode disclosure during prosecution). The scope of the required best mode disclosure is commensurate with the scope of the claims. [updated] This has been termed the "two-way street" of the best mode requirement: "the best mode requirement is a “two-way street,” for which a patentee’s obligations are no broader than the right to exclude." Thus, "the best mode does not extend to unclaimed, non-novel subject matter."

Here, Ajinomoto was tripped-up by the breadth of its claims. Ajinomoto's asserted claim recited the step of "cultivating a bacterium belonging the genus Escherichia . . . having mutation to desensitize feedback inhibition of L-lysine." It was easy then for the the court to hold that Ajinomoto should have recited its preferred host strain.

By defining the invention to include the host strains, we do not read the Commission’s decision as requiring the disclosure of any and all preferences related to the production of lysine, as Ajinomoto claims. The Commission simply defined the scope of the claimed invention to include “cultivating a bacterium” as recited by the asserted claims. Also, the Commission did not, as Ajinomoto asserts, require the disclosure of all subject matter having to do with the claim term “bacterium.” The Commission simply required the disclosure of the preferred and, for the ’698 patent, only bacterial strain that the inventors used to practice the claimed invention.

Ajinomoto unsuccessfully argued that this result was contrary to the precedent of Christianson v. Colt Industries Operating Corp., 822 F.2d 1544 (Fed. Cir. 1987), AllVoice, Zygo, and Bayer.

Patent Reform: The Patent Reform Act of 2010 would eliminate the invalidity defense of failure to satisfy the best mode and therefore would flip the verdict in a case such as this.

Amazon One-Click Patent Slides Through Reexamination

PatentLawPic951 After four-years of reexamination, Amazon's much-maligned 1-click patent is emerging from reexamination largely unscathed. In a recent notice of intent to issue a reexamination certificate, the USPTO confirmed the patentability of original claims 6-10 and amended claims 1-5 and 11-26. The approved-of amendment adds the seeming trivial limitation that the one-click system operates as part of a "shopping cart model." Thus, to infringe the new version of the patent, an eCommerce retailer must use a shopping cart model (presumably non-1-click) alongside of the 1-click version. Because most retail eCommerce sites still use the shopping cart model, the added limitation appears to have no practical impact on the patent scope.

[Updated] The patent application was filed in 1997 and the patent is expected to expire in September, 2017. Amazon still has continuation applications pending that claim priority to the original 1997 filing.

I’m afraid that this case could become the poster-child for post-grant reform.

See:

Patent Reform Act of 2010: Proposed First-to-File Statute

35 USC 100 Definitions

    (g) The terms ‘joint inventor’ and ‘coinventor’ mean any 1 of the individuals who invented or discovered the subject matter of a joint invention. 

    (h) The term ‘joint research agreement’ means a written contract, grant, or cooperative agreement entered into by 2 or more persons or entities for the performance of experimental, developmental, or research work in the field of the claimed invention.

    (i)(1) The term ‘effective filing date’ of a claimed invention in a patent or application for patent means—

            (A) if subparagraph (B) does not apply, the actual filing date of the patent or the application for the patent containing a claim to the invention; or 

            (B) the filing date of the earliest application for which the patent or application is entitled, as to such invention, to a right of priority under section 119, 365(a), or 365(b) or to the benefit of an earlier filing date under section 120, 121, or 365(c). 

        (2) The effective filing date for a claimed invention in an application for reissue or reissued patent shall be determined by deeming the claim to the invention to have been contained in the patent for which reissue was sought. 

    (j) The term ‘claimed invention’ means the subject matter defined by a claim in a patent or an application for a patent.

35 USC 102 Conditions for patentability; novelty

    (a) NOVELTY; PRIOR ART.—A person shall be entitled to a patent unless—

        (1) the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention; or

        (2) the claimed invention was described in a patent issued under section 151, or in an application for patent published or deemed published under section 122(b), in which the patent or application, as the case may be, names another inventor and was effectively filed before the effective filing date of the claimed invention.

    (b) EXCEPTIONS.—

        (1) DISCLOSURES MADE 1 YEAR OR LESS BEFORE THE EFFECTIVE FILING DATE OF THE CLAIMED INVENTION.—A disclosure made 1 year or less before the effective filing date of a claimed invention shall not be prior art to the claimed invention under subsection (a)(1) if—

            (A) the disclosure was made by the inventor or joint inventor or by another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor; or 

            (B) the subject matter disclosed had, before such disclosure, been publicly disclosed by the inventor or a joint inventor or another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor. 

        (2) DISCLOSURES APPEARING IN APPLICATIONS AND PATENTS.—A disclosure shall not be prior art to a claimed invention under subsection (a)(2) if—

            (A) the subject matter disclosed was obtained directly or indirectly from the inventor or a joint inventor;

            (B) the subject matter disclosed had, before such subject matter was effectively filed under subsection (a)(2), been publicly disclosed by the inventor or a joint inventor or another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor; or

            (C) the subject matter disclosed and the claimed invention, not later than the effective filing date of the claimed invention, were owned by the same person or subject to an obligation of assignment to the same person.

    (c) COMMON OWNERSHIP UNDER JOINT RESEARCH AGREEMENTS.—Subject matter disclosed and a claimed invention shall be deemed to have been owned by the same person or subject to an obligation of assignment to the same person in applying the provisions of subsection (b)(2)(C) if—

        (1) the subject matter disclosed was developed and the claimed invention was made by, or on behalf of, 1 or more parties to a joint research agreement that was in effect on or before the effective filing date of the claimed invention; 

        (2) the claimed invention was made as a result of activities undertaken within the scope of the joint

research agreement; and (3) the application for patent for the claimed invention discloses or is amended to disclose the names of the parties to the joint research agreement.

    (d) PATENTS AND PUBLISHED APPLICATIONS EFFECTIVE AS PRIOR ART.—For purposes of determining whether a patent or application for patent is prior art to a claimed invention under subsection (a)(2), such patent or application shall be considered to have been effectively filed, with respect to any subject matter described in the patent or application— 

        (1) if paragraph (2) does not apply, as of the actual filing date of the patent or the application for

patent; or 

        (2) if the patent or application for patent is entitled to claim a right of priority under section 119, 365(a), or 365(b), or to claim the benefit of an earlier filing date under section 120, 121, or 365(c), based upon 1 or more prior filed applications for patent, as of the filing date of the earliest such application that describes the subject matter.

35 USC 103. Conditions for patentability; nonobvious subject matter

A patent for a claimed invention may not be obtained, notwithstanding that the claimed invention is not identically disclosed as set forth in section 102, if the differences between the claimed invention and the prior art are such that the claimed invention as a whole would have been obvious before the effective filing date of the claimed invention to a person having ordinary skill in the art to which the claimed invention pertains. Patentability shall not be negated by the manner in which the invention was made.

35 USC 291. Derived patents

    (a) IN GENERAL.—The owner of a patent may have relief by civil action against the owner of another patent that claims the same invention and has an earlier effective filing date if the invention claimed in such other patent was derived from the inventor of the invention claimed in the patent owned by the person seeking relief under this section

    (b) FILING LIMITATION.—An action under this section may only be filed within 1 year after the first publication of a claim to an invention that is the same or substantially the same as the earlier applicant’s claimed invention.

35 USC 135. Derivation proceedings

    (a) INSTITUTION OF PROCEEDING.—An applicant for patent may file a petition to institute a derivation proceeding. The petition shall set forth with particularity the basis for finding that an earlier applicant derived the claimed invention from the petitioner and, without authorization, filed an application claiming such invention. Any such petition may only be filed within 1 year after the first publication of a claim to an invention that is the same or substantially the same as the earlier applicant’s claimed invention, shall be made under oath, and shall be supported by substantial evidence. Whenever the Director determines that a petition filed under this subsection demonstrates that the standards for instituting a derivation proceeding are met, the Director may institute a derivation proceeding. The determination by the Director whether to institute a derivation proceeding shall be final and nonappealable.

    (b) DETERMINATION BY PATENT TRIAL AND APPEAL BOARD.—In a derivation proceeding instituted under subsection (a), the Patent Trial and Appeal Board shall determine whether the earlier applicant derived the claimed invention from the petitioner and, without authorization, filed an application claiming such invention. The Director shall prescribe regulations setting forth standards for the conduct of derivation proceedings.

    (c) DEFERRAL OF DECISION.—The Patent Trial and Appeal Board may defer action on a petition for a derivation proceeding until 3 months after the date on which the Director issues to the earlier applicant a patent that includes the claimed invention that is the subject of the petition. The Patent Trial and Appeal Board also may defer action on a petition for a derivation proceeding, or stay the proceeding after it has been instituted, until the termination of a proceeding under chapter 30, 31, or 32 involving the patent of the earlier applicant.

    (d) EFFECT OF FINAL DECISION.—The final decision of the Patent Trial and Appeal Board, if adverse to claims in an application for patent, shall constitute the final refusal by the Office on those claims. The final decision of the Patent Trial and Appeal Board, if adverse to claims in a patent, shall, if no appeal or other review of the decision has been or can be taken or had, constitute cancellation of those claims, and notice of such cancellation shall be endorsed on copies of the patent distributed after such cancellation

    (e) SETTLEMENT.—Parties to a proceeding instituted under subsection (a) may terminate the proceeding by filing a written statement reflecting the agreement of the parties as to the correct inventors of the claimed invention in dispute. Unless the Patent Trial and Appeal Board finds the agreement to be inconsistent with the evidence of record, if any, it shall take action consistent with the agreement. Any written settlement or understanding of the parties shall be filed with the Director. At the request of a party to the proceeding, the agreement or understanding shall be treated as business confidential information, shall be kept separate from the file of the involved patents or applications, and shall be made available only to Government agencies on written request, or to any person on a showing of good cause.

    (f) ARBITRATION.—Parties to a proceeding instituted under subsection (a) may, within such time as may be specified by the Director by regulation, determine such contest or any aspect thereof by arbitration. Such arbitration shall be governed by the provisions of title 9, to the extent such title is not inconsistent with this section. The parties shall give notice of any arbitration award to the Director, and such award shall, as between the parties to the arbitration, be dispositive of the issues to which it relates. The arbitration award shall be unenforceable until such notice is given. Nothing in this subsection shall preclude the Director from determining the patentability of the claimed inventions involved in the proceeding.


Patently-O Bits and Bytes

  • Free Podcast: Professer Meurer (BU) discusses his book: Patent Failure and takes “a hard look at the American patent system and why many innovators consider this system and the institutions created to protect patents complete failures.”
  • Fashion Law: Boston globe article on fashion law and profile of Professor Suk (who wants to creat a new law protecting fashion). Suk’s point of view differs from Professors Sprigman and Raustiala who argue that piracy & knock-offs are good for the fashion industry.
  • I’m considering the following query: Is it possible to move from an invention-date-focused regime (FTI) to one that is filing-date-focused (FTF) in a way that is “validity neutral?”

Patently-O Bits and Bytes

  • Free Podcast: Professer Meurer (BU) discusses his book: Patent Failure and takes “a hard look at the American patent system and why many innovators consider this system and the institutions created to protect patents complete failures.”
  • Fashion Law: Boston globe article on fashion law and profile of Professor Suk (who wants to creat a new law protecting fashion). Suk’s point of view differs from Professors Sprigman and Raustiala who argue that piracy & knock-offs are good for the fashion industry.
  • I’m considering the following query: Is it possible to move from an invention-date-focused regime (FTI) to one that is filing-date-focused (FTF) in a way that is “validity neutral?”