October 2010

The Federal Circuit and Inequitable Conduct: Part II

CAFC, Inequitable Conduct, Patent, Rantanen,

By Jason Rantanen

Part II of this series describes the methodology used in our working paper The Federal Circuit and Inequitable Conduct: An Empirical Analysis, and summarizes some of the key findings.  You can download the entire paper here.  In addition to responding below, comments can be sent either directly to us or to prm.icpaper@gmail.com.

Methodology
The study uses the technique of “content analysis,” which permits researchers to systematically read and empirically analyze the text of judicial opinions.  In broad terms, we first screened all Federal Circuit opinions that contained the term “inequitable conduct” to identify cases that analyzed the issue.  We read all of these cases, coding pertinent information from each independent analysis of inequitable conduct.1  Overall, we coded information from 361 inequitable conduct analyses between the years 1983 and 2010.  The coded information constitutes the empirical data, and the paper reports these data using a variety of statistical presentations and arguments. 

Results
We first examined patent applicants’ success before the Federal Circuit as opposed to lower tribunals.   Our analysis reveals that patentees are quite likely to succeed before the Federal Circuit, winning 76% of the time, a rate of success higher than that observed in the lower tribunal judgments the court is analyzing.  Overall, the Federal Circuit affirms lower tribunal findings of no inequitable conduct 91% of the time, but affirms findings of inequitable conduct only 45% of the time, as illustrated by the below graphs.  This suggests to us that the Federal Circuit is applying a stricter standard than in the lower tribunal opinions it reviews.

Fig 3
Fig 4
 
We next looked at the analytical structure of the inequitable conduct doctrine, which consists of three components: a materiality inquiry, an intent to deceive inquiry, and a discretionary judicial balancing of materiality and intent undertaken with a view toward deciding whether a patent applicant acted inequitably toward the public. 

Examining the data in this light revealed two key findings.  First, when the Federal Circuit gives a single reason for patentee success, that reason is nearly two and a half times more likely to be lack of intent to deceive than it is to be lack of materiality.  Second, balancing is expressly discussed only 8% of the time and forms the basis for a reversal only 2% of the time.  We think this means that the balancing inquiry does not play much of a substantive role in Federal Circuit inequitable conduct jurisprudence.  To be clear, while it looks like lower tribunals need to engage in this step of the analysis, the Federal Circuit does not seem to have any jurisprudence that guides or constrains how lower tribunals actually apply this step.  Instead, balancing at the Federal Circuit looks like a formality, such as checking a box or touching a base, as opposed to a meaningful guide to determining whether a patent applicant engaged in equitable conduct.

* * *

1In other words, if a case involved a claim that four patents were procured by inequitable conduct and the court’s analysis addressed all of the patents in a single textual analysis or rationale, then a single record entry was made in the dataset.  By contrast, if the court used one textual analysis or rationale to find, perhaps, that one of the patents was procured inequitably, and then used a single textual analysis or rationale to find that the other three were not, then two record entries were made in the dataset.

The Federal Circuit and Inequitable Conduct: Part I

CAFC, Inequitable Conduct, Patent, Rantanen,

By Jason Rantanen

Professor Lee Petherbridge, Ali Mojibi and myself are circulating a draft of our paper Inequitable Conduct and the Federal Circuit: An Empirical Analysis for comment.  The underlying study examines the content of the entire body of Federal Circuit inequitable conduct jurisprudence, and the paper offers several interpretations of the reported data.

Among the most interesting are: that the Federal Circuit seems to apply a stricter standard for inequitable conduct than a substantial number of the tribunals it reviews; that the Federal Circuit’s inequitable conduct standard is applied primarily through the intent to deceive component of the analysis; and that while the apparent lack of clarity in the inequitable conduct standard may be a result of judicial variation on the court, it may also represent a preference by the Federal Circuit to effect a jurisprudential design, the purpose of which is to encourage good faith behavior on the part of patent applicants while only rarely finding inequitable conduct. 

The abstract reads as follows:

Inequitable conduct is unique judicially created doctrine designed to punish patent applicants who behave inequitably toward the public in the course of patent acquisition.  Its name alone strikes fear into the hearts of patent prosecutors, and justly so – for when successfully asserted, inequitable conduct can have devastating consequences that reach far beyond a patentee’s case.  The need for a systematic empirical study of inequitable conduct jurisprudence has become especially pressing now that the Federal Circuit is reviewing inequitable conduct en banc – in terms so broad as to be unprecedented in the history of the doctrine.  This Article reports such a study. 

The study reported here provides evidence, inter alia, that the Federal Circuit applies an inequitable conduct standard stricter than that applied by a substantial number of the tribunals it reviews.  The Federal Circuit’s stricter standard manifests primarily through the intent to deceive component of inequitable conduct doctrine.  For all intents and purposes the Federal Circuit has no substantive jurisprudence around the balancing component, and the materiality component is comparatively less impactful then intent to deceive.  The court appears to have trouble communicating its stricter standard to lower tribunals.  We offer some explanations for why this might be so, and offer some modest suggestions that might advance inequitable conduct doctrine.

The complete Article can be downloaded here.   As this is a work in progress, we are particularly interested in any comments, including alternate explanations for the results we discuss.  In addition to responding below, comments can be sent to us directly or to prm.icpaper@gmail.com.

The Standard for Patent Invalidity Under the Prospect Theory

Invalidity, Patent

By Dennis Crouch

In 1888, the US Supreme Court plainly held that patent rights granted by the US government could only be overcome with clear and convincing evidence:

The presumption attending the patent, even when directly assailed, that it was issued upon sufficient evidence that the law had been complied with by the officers of the government . . . can only be overcome by clear and convincing proof.

U.S. v. Iron Silver Min. Co., 128 U.S. 673 (1888). Of course, Iron Silver does not concern invention rights. Rather, the case is about patents for placer mineral rights that were granted to Iron Silver based on the company's claim that it had discovered valuable minerals on the surface of US public land near Leadville, Colorado. Under the law at the time, discovery of surface minerals on public lands allowed a prospector to stake a legal claim that extended to mineral rights under the surface.

Still, the court's holdings on land-patent rights may have some relevance to Microsoft's current challenge to the clear and convincing standard. As Professor Ed Kitch noted in his seminal 1977 article titled The Nature and Function of the Patent System that introduces the "prospect theory of patents," there are many similarities between the mineral claiming patent system and the utility patent system. The prospect theory suggests that patent rights are useful in channeling and coordinating post-invention development activities. The core idea that Kitch recognized is that a business is more likely to pursue post-invention investment and development of a product that falls within its own sphere of patent exclusivity. "The patent system achieves these ends by awarding exclusive and publicly recorded ownership of a prospect shortly after its discovery. The patent system so viewed is closely analogous to the American mineral claim system for public lands. For expositional convenience, this view of the patent system will be called the prospect theory."

Although Kitch does not expressly discuss the legal standards for invalidation, his theory would suggest strong rights tend to better-serve the prospect-role of patents.

Chippendales Cuffs & Collar lack Inherent Distinctiveness as Product Packaging Trade Dress

Blogroll, Patent, Trademark

In re Chippendales USA, Inc. (Fed. Cir. 2010)

PatentlyO080The first Chippendales club opened in Los Angeles in 1978. The following year, on-stage performers began wearing their now well-known Cuffs & Collar costumes. In 2003, the USPTO agreed that the trade-dress had acquired distinctiveness and issued Trademark Registration No. 2,694,613. (Chippendales had argued that the mark was also inherently distinctive, but the examiner had rejected that argument.) In 2008, the original mark became “incontestable.”

PatentlyO083This case arose in 2005 when Chippendales requested a new registratation for the same mark based upon its inherent distinctiveness. (The company wanted to strengthen its mark.) The Tradmark Trial and Appeal Board ruled against Chippendales — finding that the mark was not inherently distinctive.  In particular, the Board noted that strippers often wear revealing would-be professional costumes such as a stethoscope, utility belt, or chaps with a ten-gallon hat.  In this case, the Chippendales Cuffs & Collar costume appears directly derived from a Playboy Bunny costume.  Based on these facts, the Board held that the Chippendales outfit failed the test for inherently distinctive trade dress outlined in Seabrook (CCPA 1977). 

On appeal, the Federal Circuit first looked to determine whether the costume is part of the product design or only product packaging.  That distinction is legally important because of the Supreme Court ruling in Wal-Mart v. Samara Bros (2000) that product design is never inherently distinctive.  Here, the court held that the costume is product packaging — with the product being “adult entertainment services.” 

The Appellate Court then walked through each of the three relevant Seabrook elements: 

  1. Whether the mark is a common shape or design;
  2. Whether the mark is unique or unusual in the particular field;
  3. Whether the mark is a mere refinement of a commonly adopted and well-known form of ornamentation for a particular class of goods or services viewed by the public as a dress or ornamentation for the goods or services; or
  4. Whether the mark is capable of creating a commercial impression distinct from any accompanying words. (This fourth element was held irrelevant in this case.)

Here, the Appellate Court rejected the Board’s implicit holding that no costume on an adult entertainer could be inherently distinctive.  However, the Appellate Court agreed with the Board that the Cuffs & Collar costume was a “mere refinement” of the well-known Playboy Bunny costume.  As a result, the Cuffs & Collar costume failed the third Seabrook element and therefore lacks inherent distinctiveness.

The use of the Playboy mark constitutes substantial evidence supporting the Board’s determination that Chippendales’ Cuffs & Collar mark is not inherently distinctive. The Playboy bunny suit, including cuffs and a collar, was widely used for almost twenty years before Chippendales’ first use of its Cuffs & Collar trade dress. The Cuffs & Collar mark is very similar to the Playboy bunny costume, although the Cuffs & Collar mark in-cludes no bunny ears and includes a bare-chested man instead of a woman in a corset. While the Playboy clubs themselves did not involve exotic dancing, the mark was registered for “operating establishments which feature food, drink and entertainment.” The Cuffs & Collar mark was also worn by waiters and bartenders at Chippendales establishments, which Chippendales argues reinforced the association of the mark with the Chippendales brand. Additionally, the pervasive association between the Playboy brand and adult entertainment at the time of the Board’s decision leads us to conclude that the Board did not err in considering the mark to be within the relevant field of use. Thus, the Playboy registrations constitute substantial evidence supporting the Board’s factual determination that Chippendales’ Cuffs & Collar mark is not inherently distinctive under the Seabrook test.

In its brief, Chippendales argues that Wal-Mart v. Samara is at odds with Seabrook and that the Seabrook should therefore be revisited. The Federal Circuit rejected that suggestion.

Federal Circuit Advisory Council

Current Affairs, Patent

Chief Judge Randall Rader has announced some changes to the Advisory Council for the Court of Appeals for the Federal Circuit. Ed Reines is taking-over as Chair. [Link] New members of the Council include Tina Chappell (Intel), Chip Lutton (Apple), Dean Whealan (GWU), and Professor Katherine White (Wayne State). Chappell, Lutton, Whealan, and White all clerked for Judge Rader.

Other members of the Council include:

  • Meredith Martin Addy (Brinks Hofer);
  • Jeanne Davidson (DOJ);
  • Professor Lisa Dolak (Syracuse);
  • Robert Huffman (Akin Gump);
  • Michael Jakes (Finnegan);
  • Joe Re (Knobbe);
  • Michael Schaengold (Patton Boggs);
  • Ronald Smith (Finnegan); and
  • Richard Stanley (Howrey).

One role of the Advisor Council is to ensure that the Court is aware of concerns from the bar and litigants. Direct contact information for the council members is available online. [Link]

Council members generally serve three-year terms.

Update: To be clear, I don't see any problem with Judge Rader appointing his former clerks. These are people that the Judge trusts because he has worked closely with them. Trust is important — especially when dealing with potentially sensitive inner-workings of the court system. At the same time, I know from experience that each of these new Council Members are incredibly strong, intelligent, and independent thinkers.

Judge Jimmie V. Reyna

CAFC, Patent

Reyna_Jimmie_01President Obama has announced the nomination of Jimmie V. Reyna to fill the open slot on the Court of Appeals for the Federal Circuit that was created when Judge Mayer moved to Senior Status in June 2010. The Spring 2010 nominations of Kathleen O'Malley and Ed DuMont are still pending Senate confirmation. Federal Circuit Judges Newman, Lourie, Gajarsa, Dyk, and Bryson are all eligible to take senior status.

Reyna has an all-star reputation as head of the International Trade practice of the Williams Mullen firm.  His professional focus fits well within the Federal Circuit's jurisprudence over  international trade decisions by the Court of International Trade (CIT) and the International Trade Commission (ITC). Reyna has also been an active member of Hispanic legal community and the majority of his work appears to involve US-Mexico trade. His third book on international trade will be published later this year.