August 2013

Preliminary Injunctions against Non-Parties

This is an interesting case on several levels. The most important portion appears to be something of an afterthought in the opinion. This seeming afterthought gives district courts authority to issue a preliminary injunction to block non-parties from distributing products believed to be infringing (and sourced from a defendant). And further, the opinion holds that non-party has no right to appeal the preliminary injunction decision even after being named as a defendant.

By Dennis Crouch

Aevoe v. AE Tech (Fed. Cir. 2013)

The usual process of appellate procedure is that interlocutory decisions by a district court judge are not appealable. Rather, the losing party must ordinarily wait until a final judgment ends the lawsuit before filing an appeal. This is an often frustrating rule – especially when the future appeal involves a questionable court decision early in the litigation.

One exception to the appellate final-judgment rule involves interlocutory judgments on motions for injunctive relief. The appellate jurisdictional statute provides for immediate jurisdiction over appeals from the "granting, continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or modify injunctions". 28 U.S.C. § 1292(a)(1).

In this case, Aevoe sued AE Tech in January 2012 and immediately moved for a preliminary injunction to stop AE Tech's sales of allegedly infringing touch-screen protectors. U.S. Patent No. 8,044,942. The court quickly granted the motion for preliminary relief and, although AE Tech had a right to immediately appeal that decision, it failed to file its notice of appeal within the 30 day deadline found in the Federal Rules of Appellate Procedure. Fed. R. App. Proc. 4(a)(1).

In May 2012, AE Tech indicated that it had redesigned its products and had begun to sell them once again. However, on motion, the district court found that the new products represented a failed attempt to design around the patents with only "trivial" and "nonfunctional" design changes and that the new product was not colorably different from the enjoined products and consequently held AE Tech in contempt. At that point, the district court also changed the language of the preliminary injunction order to add language blocking enjoining "colorable imitations" of the patent and to particularly call-out the redesigned product. AE Tech immediately appealed that change in the preliminary injunction as well as the contempt order.

On appeal, the Federal Circuit has dismissed the case – finding that it lacks appellate jurisdiction since (1) the minor change to the preliminary injunction order does not account as a decision "modifying" the order; (2) AE Tech had waived it right to appeal the original order; and (3) contempt decisions regarding preliminary injunctions are not immediately appealable.

The court's basic point here is that the new product line here was already covered by the original injunction language and it is not a "modification" of the injunction to particularly call-out that fact in the language of the injunction grant.

Put simply, whether "colorable imitations" were explicitly mentioned in the injunction language or not, such imitations fell within its scope; the district court was obligated to apply the colorable differences test in the contempt proceeding. Thus, the legal relationship between the parties was in no way altered by the court's changes to the injunction language. Neither the … addition of the "colorable imitation" language nor the explicit description of the actual redesign amount to a modification of the preliminary injunction upon which this court could predicate jurisdiction. . . .

The result here is that the lower court's opinion was one "interpreting an injunction" rather than "modifying an injunction" Since the jurisdictional statute (1292) does not provide for immediate appeals based upon a lower court interpretation or minor clarification.

Because the district court did not substantively modify the January 2012 injunction, AE Tech's appeal derives from a contempt order which is not an appealable interlocutory order. Because the contempt order is not appealable under 28 U.S.C. § 1292(a), this court does not have jurisdiction over AE Tech's appeal.

Enjoining a Non-Party: One issue in the case is that one defendant (S&F) was not joined as a defendant until March of 2012. The appellate court found that it was "beyond debate" that S&F was also "within the express language of the original injunction" since it applied to any party who had notice of the injunction and S&F had been put on notice. A critical feature of the opinion is the conclusion that S&F was in cahoots with AE Tech and thus could be enjoined under FED. R. CIV. P. 65(d)(2)(C) and avoid the ordinary rule that non-parties are not subject to court injunctions. Rule 65(d) allows injunctions against non-parties "who are in active concert or participation" with an enjoined party.

To be clear, the relationship between the original defendant (AE Tech) and prior non-party (S&F) appears to be that S&F was the sole distributer of AE Tech products retail market. The court writes:

AE Tech sold its allegedly infringing products directly to the S&F Defendants for distribution who, in turn, sold the AE Tech products in the marketplace. At the time of those transactions, the S&F Defendants had notice of the injunction, had been apprised of which products were enjoined, and informed Aevoe that they obtained the barred products solely from AE Tech. The S&F Defendants did not obtain the redesigned product from any entity other than AE Tech and AE Tech did not distribute those products through any other entity. Accordingly, by virtue of their distribution agreement, the S&F Defendants were "privies" of AE Tech, did not act independently of AE Tech, and were, thus, subject to the original injunction.

This decision appears to fall roughly in line with the Supreme Court's decision in Golden State Bottling Co., v. NLRB, 414 U.S. 168 (1973) where the court wrote that Rule 65(d) was a codification of common law that allowed injunctions against a non-party "bona fide purchaser, acquiring, with knowledge that the wrong remains unremedied."

Trading Technologies v. Open E Cry: Doctrinal Formalism in Patent Law

By Jason Rantanen

Trading Technologies International, Inc. v. Open E Cry, LLC (Fed. Cir. 2013) Download Trading Tech v Open E Cry
Panel: Lourie (author), Plager, Benson (District Judge)

The traditional – and certainly most widely held – view in patent law is to view its issues as formally distinct doctrines; crystalline pillars supporting the temple.  This view emphasizes the formal distinction between patent law doctrines and rejects attempts to cross between them.  Each doctrine is an independent whole.  Trading Technologies v. Open E Cry exemplifies this view.  (It's worth noting that this opinion notwithstanding, some of the most successful patent litigators that I've met have succeeded by rejecting the formality of doctrines and building their litigation strategy around the intersticial spaces between the doctines.)

Trading Technology ("TT") owns a series of related patents generally pertaining to software for electronic trading on a commodities exchange.  The four patents at issue in this appeal claim priority based on an application that ultimately issued as Patent No. 6,772,132.  In an earlier appeal, Trading Technologies International, Inc. v. eSpeed, Inc., 595 F.3d 1340 (Fed. Cir. 2010), the Federal Circuit considered the correct construction of claims of the '132 patent that required a graphical user interface having a "static" display of market price information.  In eSpeed, the Federal Circuit held that "static," as used in the claims of the ’132 patents, "required a price column that moves only in response to a manual re-centering command."  In reaching this result, eSpeed concluded (among other things) that:

“[t]he inventors’ own specification strongly suggests that the claimed re-centering feature is manual” because the written description “only discusse[d] manual re-centering commands” and referred to “the present invention” as including a manual one-click re-centering feature.

While the earlier litigation was pending, TT filed the applications that matured into the patents involved in this suit. In those applications, TT introduced new claims that lacked the term "static" in any form.  As a result, three of the new patents had identical written descriptions to the '132 patent but claims that differed in one key way: they did not include "static" limitations.  (In the fourth patent TT pursued the strategy of filing a continuation-in-part; the result was that TT was able to add new disclosures). 

TT filed multiple actions based on this second round of patents. The district court consolidated the actions and subsequently grand summary judgment of invalidity of the four  new patents based on lack of adequate written description under 35 U.S.C. § 112(a).  The district court based its ruling on the earlier eSpeed opinion, concluding that eSpeed required holding the claims invalid for lack of written description. The Federal Circuit summarized the district court's action as follows:

According to the district court, eSpeed’s construction of “static” in the ’132 and ’304 patents turned “on the premise that the invention described in the specification was limited to static price axes that move only with manual re-centering.” Id. at 1045. Because the ’411 patent’s claims lacked that term and therefore appeared to cover displays with automatic re-centering, the district court concluded that any decision upholding those broader claims as supported by the same written description “would be at odds with the Federal Circuit’s binding findings in the eSpeed Decision.” Id. In granting the Defendants’ motion for summary judgment, the district court expressly declined to evaluate the parties’ evidence or make its own findings on the merits because the court determined “as a matter of law that the eSpeed Decision controls.”

Slip Op. at 12.  On appeal, the Federal Circuit rejected this reasoning, reversing the grant of summary judgment and remanding for further proceedings.  The court based its conclusion on the formal distinction between the doctrines of claim construction and written description, a distinction that it explained in detail:

Despite their similarities, however, claim construction and the written description requirement are separate issues that serve distinct purposes.

In construing claims, a court seeks to discern the meaning of a particular term used in one or more claims of a patent, based, inter alia, on evidence drawn from the specification, the surrounding claim language, the prosecution history, and relevant extrinsic sources….While guided by the specification, the focus of claim construction remains on defining a discrete claim term to better ascertain the boundaries of a claim. In contrast, the written description analysis considers the bounds of the specification itself. The written description requirement prevents patentees from claiming more than they have actually invented and disclosed to the public, as measured by the written description of the invention provided with their patent applications.

This case illustrates the distinction. In eSpeed, we were called upon to evaluate the proper construction of “static,” a term used in the claims of the ’132 and ’304 patents. Accordingly, we considered the evidence relevant to a proper reading of that term, starting with those patents’ common written description. eSpeed, 595 F.3d at 1353–55. Noting that the patents referred to one-click centering as part of the invention and did not discuss automatic re-centering, we concluded that the specification “strongly suggests” that a “static” price column would require manual re-centering. Id. at 1353–54. And even though the patents described price columns that “do not normally change positions unless a re-centering command is received,” ’132 patent col. 7 ll. 46–48 (emphasis added), we concluded that “the inventors jettisoned the word ‘normally’ during prosecution” by limiting the term “static” in response to an indefiniteness rejection, eSpeed, 595 F.3d at 1354. In sum, we concluded that the disputed claim term should be limited to require a manual re- centering command in the claims of the ’132 and ’304 patents.

But our decision in eSpeed did not thereby determine whether the same written description would also support different claims drawn to a non-“static” display. In particular, we did not make “findings regarding the specification . . . that are dispositive” as to the present written description challenge. See Summary Judgment Order, 852 F. Supp. 2d at 1044. On the contrary, we merely determined the best construction for a single disputed claim term, a term that is absent from the claims of the ’411, ’768, and ’374 patents now before us. That analysis did not require us to pass on the outer limits of the pa- tents’ written description, nor did we endeavor to do so. In fact, our prior examination of that written description did not even settle the limited claim construction issue then facing the court, see eSpeed, 595 F.3d at 1353–54 (concluding that the specification “strongly suggests” that the claimed re-centering feature is manual), much less conclusively find that the same written description could never support any claim to a display with a non-“static” price axis.

Slip Op. at 17-18.

Prosecution History Estoppel: The court also reversed grant of summary judgment of prosecution history estoppel, concluding that statements made in connection with the earlier '132 patent did not extend through to the subsequent patents in the same lineage in this case.  "Prosecution history estoppel can extend from a parent application to subsequent patents in the same lineage, Elkay, 192 F.3d at 981, as can a prosecution disclaimer, Omega Eng’g, 334 F.3d at 1333–34. But “arguments made in a related application do not automatically apply to different claims in a separate application.” Biogen, Inc. v. Berlex Labs., Inc., 318 F.3d 1132, 1139 (Fed. Cir. 2003)….In this case, the intrinsic record specific to the ’055 patent distinguishes eSpeed and compels a different result." Slip Op. at 24.

Disclosure: Several years ago, Dennis represented Trading Technologies in a previous case at the District Court level. That said, we haven't talked about the substance of these cases.

Hiring New Law Professors

By Dennis Crouch

I posted earlier that we’re looking to hire a new intellectual property law professor here at the University of Missouri School of Law. At least two other schools are looking for new IP-focused law faculty: University of New Hampshire (formerly Franklin Pierce Law Center) and Syracuse University. UNH is filing its “Chair in Patent Law” and looking for “an accomplished patent law scholar and teacher” ready to move to beautiful Concord, New Hampshire. Contact John Greabe, Chair, Appointments Committee, at faculty.appointments@law.unh.edu. Syracuse is seeking “applicants with teaching and scholarly interests in law and technology, commercialization of technology, and intellectual property. The College of Law is particularly interested in applicants who will bring diversity to the faculty.” Contact Professor Margaret Harding, Chair, Appointments Committee, at mharding@law.syr.edu.

More jobs available here: http://www.patentlyo.com/jobs/

Without More, Product Supplier has no DJ Jurisdiction for Protecting its Customers against Infringement Litigation for Using Product

By Dennis Crouch

Cisco Systems, Inc. v. Alberta Telecom (d/b/a TR Tech) (Fed. Cir. 2013)

In a non-precedential opinion, the Federal Circuit has extended the Supreme Court’s recent holding in Nike v. Already with reference to patent cases. The result here is that Cisco customers continue to face patent infringement liability for using Cisco products, but that Cisco cannot file a declaratory judgment lawsuit to clear its distribution chain from litigation threats. Although ostensibly following MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007), the appellate court here retreats at least from more liberal interpretations of that decision. The case is interesting because it appears that the holding here is substantially based upon an offered covenant-not-to-sue seemingly made by TR Tech’s counsel during oral arguments on appeal. This parallels the court’s recent decision in Organic Growers v. Monsanto where the court also relied upon statements made during oral arguments in order to make its decision. It is unclear whether this strategy is the proper way for the court to handle appeals especially because the law is not well settled with regard to the binding effect of unprepared oral statements made during appellate oral arguments. In the Monsanto case, the court wrote:

If we rely on Monsanto’s representations to defeat the appellants’ declaratory judgment claims (as we do), those representations are binding as a matter of judicial estoppel. It is well-established that a party who successfully argues one position is estopped from later adopting a contrary position in a case involving the same patent.

In reality, I don’t believe that the notion of judicial estoppel is quite a clear-cut as the judges appear to believe here.

The basic setup in this case is that Cisco’s routers form an integral part of most computer networks. And, TR Tech’s patents cover a particular network configuration facilitated by Cisco routers. TR sued various Cisco customers for infringement and alleged that the infringement was based upon those defendants’ use of Cisco routers. In response, Cisco filed a declaratory judgment lawsuit against TR – seeking judgments of patent invalidity and noninfringement. The district court dismissed the case – finding it “difficult to tell from the record [of the customer lawsuits] whether a justiciable controversy yet existed between Cisco and TR Labs.” In the appellate oral arguments, TR Tech stated that the company had “”no basis for suing [Cisco] either for direct or indirect infringement;” that Cisco’s routers have substantial non-infringing uses; and that TR Labs would be “happy” to give Cisco a covenant-not-to-sue Cisco for infringement of any of the asserted patents. (To be clear, it does not appear that any covenant-not-to-sue has been effectuated). The court writes:

It is understandable that Cisco may have an interest in saving its customers from infringement contentions premised, even in part, on their use of Cisco products. In the circumstances presented here, that interest is simply insufficient to give rise to a current, justiciable case or controversy upon which federal declaratory judgment jurisdiction may be predicated.

In writing the opinion, Judge O’Malley is somewhat careful to distinguish two recent Federal Circuit opinions: Arkema Inc. v. Honeywell International, Inc., 706 F.3d 1351 (Fed. Cir. 2013) and Arris Group, Inc. v. British Telecommunications PLC, 639 F.3d 1368 (Fed. Cir. 2011). In Arkema, the Federal Circuit allowed the DJ-plaintiff to add newly-issued patents to the DJ action and in Arris Group, the court found DJ-jurisdiction based upon patent lawsuits against customers that included indemnification claims against the DJ-plaintiff as well as pre-litigation allegations of infringement by the patentee against the DJ-plaintiff. None of those factors existed here.

Judge Rader’s Obviousness Tutorial: Including the Conclusion that Older Prior Art is Less Credible and a Restatement that Objective Indicia of Nonobviousness Play a Critical Role

By Dennis Crouch

Leo Pharmaceutical Products, Ltd. v. Rea, 2013 WL 4054937 (Fed. Cir. 2013)

In a pre-AIA filing, Galderma challenged Leo’s U.S. Patent No. 6,753,013 in an inter partes reexamination before the USPTO’s now renamed Board of Patent Appeals. The patent claims a “storage stable and non-aqueous” pharmaceutical composition used to treat skin conditions such as psoriasis. Prior to the invention, it was well known that a combination of Vitamin-D along with a corticosteroid could form the basis of an effective treatment. However, no one had been able to manufacture a storage stable form of the combination. This was especially challenging because the stable forms of the active ingredients prefer different pH levels. To achieve the storage stable results, Leo added a solvent to the mixture. The claim identifies the solvent in a markush group that likely includes thousands of potential compounds. During the reexamination, Leo also added the particular limitation that “said pharmaceutical composition is storage stable and non-aqueous.”

In reviewing the case, the Board first construed these new terms “storage stable” and “non-aqueous” and then found the patent invalid as obvious over the prior art. On appeal, the Federal Circuit has reversed.

Claim Construction: The Federal Circuit continues, for the time being, to give no deference to PTO claim construction decisions. Here, the term “storage stable” was difficult to construe because it was never used during prosecution of the original patent application and only added during reexamination. However, the patent does discuss the composition’s “ability to resist degradation” according to test results presented in the specification and the PTO accepted that definition as proper. Noting that one of ordinary skill “would have reasonably looked to the described stability test as defining what was meant by ‘storage stable.’” On appeal, the Federal Circuit rejected that definition as impermissibly narrow and that instead allowed a broader definition. Although not elucidated by the opinion, the patentee is walking a fine line with this amendment between (1) having a sufficiently broad patent and (2) improperly adding new matter to the claims in violation of the written description requirement.

Obviousness: This decision may become a somewhat important obviousness case for patentees. The Board found the patent claims obvious in light of a combination of three prior art references. The Board basically found that it would have been obvious for someone of skill in the art to take the prior art combination of Vitamin-D and corticosteroids and add in the claimed solvent in order to achieve storage stability.

On appeal, the Federal Circuit faulted the Board for failing to give credence to the patentee’s identification of the problem (that a stable form should be designed). The prior art did not particularly recognize the problem but rather “either discouraged combining vitamin D analogs and corticosteroids … or attempted the combination without recognizing or solving the storage stability problems.” Leo also presented evidence that, at the time of the invention, researchers were being “warned that vitamin D should not be combined with other drugs requiring a low pH ( e.g., corticosteroids).”

[T]he record shows no reason for one of ordinary skill in the art to attempt to improve upon either Dikstein or Serup using Turi. The ordinary artisan would first have needed to recognize the problem, i.e., that the formulations disclosed in Dikstein and Serup were not storage stable. To discover this problem, the ordinary artisan would have needed to spend several months running storage stability tests Only after recognizing the existence of the problem would an artisan then turn to the prior art and attempt to develop a new formulation for storage stability. If these discoveries and advances were routine and relatively easy, the record would undoubtedly have shown that some ordinary artisan would have achieved this invention within months of Dikstein or Serup. Instead this invention does not appear for more than a decade.

Now, the Federal Circuit’s language here obviously includes some amount of doublespeak or could perhaps be described as slicing the bologna awfully thin since according to the court, researchers (1) recognized that vitamin D could not be stably combined with low pH drugs such as corticosteroids but (2) did not recognize that vitamin-D could not be stably combined with corticosteroids.

Old Prior Art: In the discussion, Judge Rader uses an interesting between-the-lines or perhaps behind-the-scenes analysis of the prior art:

First, the Board found motivation to combine Dikstein or Serup with Turi because one of ordinary skill would have used vitamin D to solve the well-known side effects of steroid treatment. However, combining Turi and vitamin D to address the side effects of a steroid treatment is only straightforward in hindsight. Turi was publicly available in the prior art for twenty-two years before the ′013 patent was filed, yet there is no evidence that anyone sought to improve Turi with vitamin D. According to the record, even when Serup published the well-known side effects of steroid-induced atrophy in 1994, no one—including Serup—sought to improve Turi by adding vitamin D to Turi’s corticosteroid composition. Serup even targeted the precise side effects that the Board believed would have motivated the addition of a vitamin D analog to Turi’s corticosteroid composition, yet Serup did not seek to improve Turi by adding vitamin D. . . .

The elapsed time between the prior art and the ′013 patent’s filing date evinces that the ′013 patent’s claimed invention was not obvious to try. Indeed this considerable time lapse suggests instead that the Board only traverses the obstacles to this inventive enterprise with a resort to hindsight. It took over a decade—after Dikstein’s disclosure of the benefits of combining vitamin D and corticosteroid treatments into one formulation—for Dikstein’s formulations to be tested for storage stability. And, until the advancement made by the inventors of the ′013 patent, no one had proposed a new formulation that would be storage stable. The problem was not known, the possible approaches to solving the problem were not known or finite, and the solution was not predictable. Therefore, the claimed invention would not have been obvious to try to one of ordinary skill in the art. Indeed ordinary artisans would not have thought to try at all because they would not have recognized the problem.

Under Judge Rader’s point of view here, older prior art should be seen as less credible in the obviousness analysis. The logic obvious improvements would have happened quickly and the long time span between improvements suggest that the improvement was not an obvious one. This logic is bolstered in cases such as this where research is ongoing in the area and a market has already developed.

Although the patentee claimed a wide variety of solvents, the Federal Circuit also found that there were many more potential solvents available to try and the PTO did not offer specific reasons why the ones selected would have been particularly obvious to try.

In addition, the Board found that a person of ordinary skill in the art would have been capable of selecting the correct formulation from available alternatives. Specifically, the Board found more than eight different classes of additives ( e.g., diluents, buffers, thickeners, lubricants). The Board also found more than ten different categories of composition forms ( e.g., liniments, lotions, applicants, oil-in-water or water-in-oil emulsions such as creams, ointments, pastes, or gels). “Based on these broad and general disclosures,” the Board reasoned that an artisan would have been able to “mak[e] choices about what ingredients to include, and which to exclude” in formulating a composition with a vitamin D analog and steroid. To the contrary, the breadth of these choices and the numerous combinations indicate that these disclosures would not have rendered the claimed invention obvious to try. See Rolls–Royce PLC v. United Techs. Corp., 603 F.3d 1325, 1339 (Fed.Cir.2010) (claimed invention was not obvious to try because the prior art disclosed a “broad selection of choices for further investigation”). . . . .

This court and obviousness law in general recognizes an important distinction between combining known options into “a finite number of identified, predictable solutions,” KSR, and ” ‘merely throwing metaphorical darts at a board’ in hopes of arriving at a successful result,” Cyclobenzaprine, quoting Kubin. While the record shows that, as early as 1995, the prior art indicated that both vitamin D analogs and corticosteroids were effective treatments for psoriasis, that same prior art gave no direction as to which of the many possible combination choices were likely to be successful. Instead, the prior art consistently taught away from combining vitamin D analogs and corticosteroids.

One important feature of PTO decision making is that Board conclusions of fact only require substantial evidence to be affirmed on appeal. Here, the Federal Circuit avoided that issue by indicating that all of its decisions were based upon the Board failure to properly apply the law to those facts. “In this case, however, with no material factual disputes, this court cannot share the Board’s analysis and application of the law to those facts.”

Objective Indicia of Non-Obviousness: Judge Rader writes:

The court now turns to the Board’s analysis of the objective indicia of nonobviousness. The Board reasoned that “the strong case of obviousness outweighs the experimental evidence and testimony about the advantages of the claimed composition.” Contrary to the Board’s conclusion, this court finds the objective indicia, in concert with the entire obviousness analysis, present a compelling case of nonobviousness. In fact, the objective indicia of nonobviousness highlight that the Board’s analysis regarding the combination of Serup or Dikstein with Turi was colored by hindsight.

Whether before the Board or a court, this court has emphasized that consideration of the objective indicia is part of the whole obviousness analysis, not just an afterthought. … When an applicant appeals an examiner’s objection to the patentability of an application’s claims for obviousness, the PTO necessarily has the burden to establish a prima facie case of obviousness which the applicant then rebuts. However, during inter partes reexamination, the Board is reviewing evidence of obviousness—including objective indicia—submitted by two adversarial parties for the claims of an issued patent. Thus, the Board should give the objective indicia its proper weight and place in the obviousness analysis, and not treat objective indicia of nonobviousness as an afterthought.

Objective indicia of nonobviousness play a critical role in the obviousness analysis. They are “not just a cumulative or confirmatory part of the obviousness calculus but constitute[ ] independent evidence of nonobviousness.” Ortho–McNeil Pharm., Inc. v. Mylan Labs., Inc., 520 F.3d 1358, 1365 (Fed.Cir.2008). This case illustrates a good reason for considering objective indicia as a critical piece of the obviousness analysis: Objective indicia “can be the most probative evidence of nonobviousness in the record, and enables the court to avert the trap of hindsight.” Crocs, Inc. v. Int’l Trade Comm’n, 598 F.3d 1294, 1310 (Fed.Cir.2010) (internal quotation marks omitted). Here, the objective indicia of nonobviousness are crucial in avoiding the trap of hindsight when reviewing, what otherwise seems like, a combination of known elements.

Unexpected results are useful to show the “improved properties provided by the claimed compositions are much greater than would have been predicted.” See In re Soni, 54 F.3d 746, 751 (Fed.Cir.1995) (internal quotation marks omitted). This record shows “extensive experimental evidence” of unexpected results that contradict the Board’s obviousness finding. J.A. 14. The Board concluded that the “unexpected results” claimed by Leo Pharmaceuticals were not surprising or unexpected. J.A. 19. However, substantial evidence does not support the Board’s conclusion.

During reexamination, the inventors of the ′013 patent submitted test results that analyzed the Dikstein and Serup formulations. The inventors found that the formulations disclosed by Dikstein and Serup result in significant degradation of the vitamin D analog and corticosteroid. See J.A. 1041–46 (testing formulations in Serup); J.A. 1625–27, 2152–2154 (testing formulations in Dikstein). The inventors also tested an improvement of Serup using Turi, by replacing Serup’s solvent with POP–15–SE, and still found significant degradation of the corticosteroid component. See J.A. 1045–46. These test results are a strong indication that the ′013 patent’s combination of known elements yields more than just predictable results.

In addition to evidence of unexpected results, Leo Pharmaceuticals provided other objective indicia of non-obviousness. For example, the commercial success of Leo Pharmaceutical’s Taclonex® ointment is a testament to the improved properties of the ′013 patent’s claimed invention. Taclonex® is the first FDA-approved drug to combine vitamin D and corticosteroids into a single formulation for topical application. While FDA approval is not determinative of nonobviousness, it can be relevant in evaluating the objective indicia of nonobviousness. See Knoll Pharm. Co., Inc. v. Teva. Pharm. USA, Inc., 367 F.3d 1381, 1385 (Fed.Cir.2004). Here, FDA approval highlights that Leo Pharmaceutical’s formulation is truly storage stable, something that the prior art formulations did not achieve.

The record also shows evidence of long felt but unsolved need, i.e., the need for a single formulation to treat psoriasis. The length of the intervening time between the publication dates of the prior art and the claimed invention can also qualify as an objective indicator of nonobviousness. See Ecolochem, Inc. v. S. Cal. Edison Co., 227 F.3d 1361, 1376–77 (Fed.Cir.2000). Here, the researchers were aware of the benefits of using both vitamin D and corticosteroids in the treatment of psoriasis as early as 1986. See, e.g., Dikstein col. 1, ll. 9–16. And Turi, upon which the Board relied to make its case, issued in 1978. Yet, it was not until the ′013 patent’s filing in 2000— twenty-two years after Turi and fourteen years after Dikstein-that the solution to the long felt but unsolved need for a combined treatment of vitamin D and corticosteroid was created. The intervening time between the prior art’s teaching of the components and the eventual preparation of a successful composition speaks volumes to the nonobviousness of the ′013 patent.

Here, the objective indicia—taken in sum—are the most “probative evidence of nonobviousness … enabl[ing] the court to avert the trap of hindsight.” Crocs, Inc., 598 F.3d at 1310. Viewed through the lens of the objective indicia, as opposed to the hindsight lens used by the Board, the ′013 patent would not have been not obvious over Turi in combination with Dikstein or Serup. Therefore, this court reverses the Board’s obviousness determination.

October 4 Symposium and CLE on Resolving Patent Disputes

Dear readers –

I want to invite you to join us here at the University of Missouri School of Law on October 4, 2013 for a Symposium focusing on “Resolving IP Disputes: Calling for an Alternative Paradigm.” The symposium is sponsored by the MU School of Law’s Center for the Study of Dispute Resolution as well as the Journal of Dispute Resolution (JDR). Professor Jim Levin and I are organizing the event. If you are planning to attend from out of town, please let me know and we can help with logistics. I expect for this to be a fairly small event with about 100 intellectual property and dispute resolution professionals in attendance in addition to a number of academics, students, and business folks. There is no fee to attend or to receive CLE, but it would help us if you register using the following link:

https://docs.google.com/forms/d/1hWoGc0DvHBDcc-wsO-06fphE8oRjWEbTESDLdLKqnPI/viewform

– Dennis (dcrouch@patentlyo.com)

= = = = =

Abstract of the Symposium

Patents now pervade the American business culture and marketplace. The number of issued patents continues to increase as does the intensity of enforcement. Most new products and services are covered by one or more patents – only some of which are owned by the manufacturer or service provider.

Patents have the potential of serving as tools for business transactions – a legal mechanism for capturing and transferring the value of innovation while allowing the resulting information to be spread widely. However, patent enforcement through litigation is incredibly expensive and time consuming. Litigation costs regularly exceed $10,000,000 in contested cases and lasts for years.

This year’s Journal of Dispute Resolution symposium explores alternative mechanisms for resolving patent disputes and for proactively transforming would-be disputes into cooperative business arrangements. At the same time, patents may be different from other private-law concerns. The power of patents to block use the use of useful articles creates a strong public interest in results that both encourage innovation without unjustly limiting access to information or ideas.

This symposium is sponsored by the University of Missouri School of Law and the Journal of Dispute Resolution, the flagship journal of the University of Missouri’s Center for the Study of Dispute Resolution.

= = = = =

Brief Agenda for the Symposium

Friday, October 4th

8:00 AM to 8:30 AM – Continental Breakfast and Coffee Reception Sponsored by Turner Boyd LLP

8:30 AM to 8:45 AM – Introductory Remarks

8:45 AM to 9:40 AM – 1st Panel– Disputes with an industry focus, including biotechnology and smartphone disputes: Dean Gary Myers (MU), Kevin Noonan (MBHB), Jorge Contreras (American University)

9:45 AM to 10:40 AM – 2nd Panel– Practical issues of resolving disputes before the USPTO: Anne Craig (Harvard), Matthew Smith (now with Turner Boyd), Jaron Brunner (DWT)

10:55 AM to 11:55 AM – Keynote: —Greg Gorder (Co-Founder of Intellectual Ventures)

1:20 PM to 2:15 PM – 3rd Panel—Transparency in in patent disputes and patent information: Yvette Liebesman (SLU), Dennis Crouch (MU), Bernard Chao (U Denver)

2:15 – Conclusion

2:20 – Reception Sponsored by the Biotech and Pharma Patent Blog Patent Docs

= = = = =

I look forward to seeing you there.

SkinMedica v. Histogen

By Jason Rantanen

SkinMedica Inc. v. Histogen Inc. (Fed. Cir. 2013) Download SkinMedica v Histogen
Panel: Rader (dissenting), Clevenger, Prost (author)

SkinMedica owns Patents No. 6,372,494 and 7,118,746, which relate to methods for producing pharmaceutical compositions containing "novel conditioned cell culture medium compositions,…[and] uses for the[m]."  A conditioned cell culture medium is an artificial environment that supplies the components necessary to meet the nutritional needs of the growing cells.  The conditioned medium at issue here also included extracellular proteins that, according to the patentees, may be useful for treating skin conditions such as wrinkles, frown lines, etc. 

The written descriptions of the '494 and '746 patents explain that a novel and important aspect of their invention is the difference between growing cells in two-dimensions and growing cells in three-dimensions. 

Claim 1 of the '494 patent:

1. A method of making a composition comprising:

(a) culturing fibroblast cells in three-dimensions in a cell culture medium sufficient to meet the nutritional needs required to grow the cells in vitro until the cell culture medium contains a desired level of extracellular products so that a conditioned medium is formed;

(b) removing the conditioned medium from the cultured cells; and

(c) combining the conditioned medium with a pharmaceutically acceptable carrier to form the composition.

(emphasis added by court).  At issue was the phrase "culturing…cells in three-dimensions."  The district court construed this phrase to mean "growing…cells in three dimensions (excluding growing in monolayers or on microcarrier beads."  Following claim construction, the district courted summary judgment of noninfringement for Histogen as it was undisputed that Histogen grew its cells on microcarrier beads. 

Limits on Ordinary Meaning: On appeal, the Federal Circuit affirmed the district court's claim construction. The court first agreed with SkinMedica that "the ordinary meaning of “culturing . . . cells in three-dimensions” would reach the use of beads."  However,

If the specification reveals “a special definition given to a claim term by the patentee that differs from the meaning it would otherwise possess[,] . . . the inventor’s lexicography governs.”…. And if the specification reveals “an intentional disclaimer, or disavowal, of claim scope by the inventor,” the scope of the claim, “as expressed in the specification, is regarded as dispositive.”
Slip Op. at 13 (citations omitted).  An  high hurdle applies when dealing with implied rather than express redefinition, as an "implied redefinition must be so clear that it equates to an explicit one."  Id. at 29, quoting Thorner v. Sony Computer, 669 F.3d 1362, 1368 (Fed. Cir. 2012).  Here, according to the majority, the inventors did precisely that for "culturing…cells in three dimenations":

In the written description, the patentees plainly and repeatedly distinguished culturing with beads from culturing in three-dimensions. They expressly defined the use of beads as culturing in two-dimensions. And they avoided anticipatory prior art during prosecution by asserting that the conditioned medium produced by two-dimensional cultures was inferior and chemically distinct from the conditioned medium produced by three-dimensional cultures. Because none of the evidence called to our attention by SkinMedica would reasonably lead to a different reading of the intrinsic evidence, we find that the inventors clearly redefined the scope of “culturing . . . cells in three dimensions” by disclaiming the use of beads—which would otherwise be included in the ordi- nary meaning of that phrase.

Id. at 15.  In support of this conclusion, the majority opinion walks through a lengthy discussion of the text of the specification and prosecution history, addressing language such as "beads, as opposed to cells grown in three dimensions and the use of "i.e."  The result was a disavowal of beads from the scope of the claim term at issue:

"In sum, although the inventors never explicitly redefined three-dimensional cultures to exclude the use of beads, their implicit disclaimer of culturing with beads here was even “so clear that it equates to an explicit one. Without fail, each time the inventors referenced culturing with beads in the specification, they unambiguously distinguished that culture method from culturing in three-dimensions."

Id. at 27. 

Incorporation by Reference: One of SkinMedica's counter arguments was that the written description incorporated a voluminous technical treatise, Cell & Tissue Culture: Laboratory Procedures ("Doyle") in its entirety and that Doyle describes three-dimensional culturing with beads.  Among the majority's bases for rejecting SkinMedica's argument was the lack of any specific reference to Doyle:

Third, even if we assume that the passage from Doyle discusses what one of ordinary skill in the art might understand to be three-dimensional culturing with beads, the inventors’ general citation of Doyle does not indicate any reliance on that particular passage to define “culturing in three-dimensions” and to abandon the otherwise clear disclaimer of beads in the specification. When discussing cell culture methods, the patentees make the following reference to Doyle:

The cells may be cultured in any manner known in the art including in monolayer, beads or in three-dimensions and by any means . . . . Methods of cell and tissue culturing are well known in the art, and are described, for example, in [Doyle], supra; Freshney (1987), Culture of Animal Cells: A Manual of Basic Techniques, infra.

’494 patent col. 10 ll. 2–6.

It is clear from that passage that the inventors did not refer to Doyle in order to define what they meant by “three-dimensional culturing” in their patent. They did not indicate their reference to Doyle was for that purpose; nor did they even refer with any detailed particularity to the passages in Doyle that, according to SkinMedica, may have discussed three-dimensional culturing with beads. When the inventors wanted to use Doyle to explain the potential scope of terms they used, they did so specifically….We see no reason for such a non-specific reference to trump the clear disclaimer in the specification of culturing with beads.

Slip Op. at 35-36. 

Judge Rader's Dissent: Writing in dissent, Judge Rader disagreed that the patentee had met the "heavy presumption" in favor of the ordinary meaning of claim language.  Central to Judge Rader's opinion was the distinction between growing cells "on beads" and growing cells in three-dimensions using beads.  

Deference battle? Judge Rader's dissent also relied on testimony by SkinMedica's technical expert, Dr. Salomon.  The majority agreed with district court's decision to give Dr. Salomon's testimony "no weight"; in Judge Rader's eyes, "Dr. Salomon's testimony, when viewed as a whole, deserves great weight and respect."  Slip Op. at 47. 

Federal Circuit: Secret Patent Trials are OK

By Dennis Crouch

By their nature, patents have the power to control the ways that we can use our property. Gun laws can prohibit gun owners from shooting in certain areas. In the same way, a patent covering a particular gun will prohibit an individual (without license) from building or using a gun with that design. This is true even if the individual owns all the raw materials necessary to build the gun. Following this train reasoning, Courts have historically recognized that the public has a right to access patent information. Traditionally, US courts have operated in a manner that is open and public. However, in recent years more and more judges have allowed the courts to become a largely secret adjudication forum. [Note here that this issue will be a topic of one of our panels at the October 4 Conference here at Mizzou]. This parallels the rise in the ongoing secret adjudication both for grand juries and national security issues.

In Apple Inc. v. Samsung Electronics Co. (Fed. Cir. 2013), the Federal Circuit largely rejects any general public interest in patent and litigation information and instead holds that the public interest must be definite and particularized in order to have merit. The court writes:

We recognize the importance of protecting the public’s interest in judicial proceedings and of facilitating its understanding of those proceedings. That interest, however, does not extend to mere curiosity about the parties’ confidential information where that information is not central to a decision on the merits. While protecting the public’s interest in access to the courts, we must remain mindful of the parties’ right to access those same courts upon terms which will not unduly harm their competitive interest. For the reasons set forth above, we hold that the district court abused its discretion in refusing to seal the particular documents that Apple and Samsung challenge in these appeals.

Ordinarily, this type of appeal does not reach a court of appeals because most district court judges are extremely willing to allow parties to keep file documents, briefs, and testimony under seal in a way that is generally kept secret from the public. As with most disputes, the judge does not intervene when all parties agree to keep information secret. Here, Judge Koh refused to keep documents under seal even though both parties (Apple and Samsung) had stipulated that they could be so filed.

Writing for the court, Judge Prost highlights what the “extraordinary” notion that a patent trial should be open to the public.

Consistent with the extraordinary level of interest in the case, the press was given extraordinary access to the judicial proceedings. Unlike many patent trials, which often contain mountains of sealed exhibits and occasionally have closed courtroom proceedings, the district court explained to the parties before the trial that “the whole trial is going to be open.” Consequently, the district court agreed to seal only a small number of trial exhibits. And shortly after the close of business each day, the parties, by order of the court, provided the press with electronic copies of every exhibit used at trial that day. Similarly, most exhibits attached to pre-trial and post-trial motions were ordered unsealed.

In its decision, the Federal Circuit purported to follow Ninth Circuit law requiring that “That is, the party [wanting to seal records] must articulate compelling reasons supported by specific factual findings that outweigh the general history of access and the public policies favoring disclosure, such as the public interest in understanding the judicial process.” Here, the inclusion of trade secret information is often sufficient to warrant sealing of records.

In rejecting the district court’s decision, the Federal Circuit held that Judge Koh had applied a too stringent standard. In particular, Judge Koh asked for “compelling reasons” for sealing the documents while the law only requires “good cause.”

USPTO: Software Composition Inventions are Unpatentable under §101 unless they Clearly Disavow that the Storage Mechanism is a Transitory Wave or Signal

By Dennis Crouch

Ex parte Mewherter (PTAB 2013)

The USPTO has recently designated Ex parte Mewherter as a precedential decision with regards to its treatment of rejections under 35 U.S.C. § 101. The opinion basically holds that standard Beauregard claims (computer readable storage media) are not patent eligible because they could encompass transitory signals that are unpatentable under the Federal Circuit’s Nuijten decision.

IBM’s Patent Application Serial No. 10/685,192 is directed to a “system for converting slide show presentations” that converts each slide into “raster imagery” and then extracts contextual data (such as titles) and places those “in proximity to the raster imagery.” The claim at issue here is claim 16, that is written as follows:

16. A machine readable storage medium having stored thereon a computer program for converting a slide show presentation for use with a non-presentation application, the computer program comprising a routine of set instructions for causing the machine to perform the steps of:

Extracting a slide title for a first slide in a slide show presentation produced by a slide show presentation application executing in memory of a computer;

Converting said first slide with said slide title into a raster image;

Disposing both said slide title and said raster image of said slide in a markup language document; and

Repeating said extracting, converting and disposing steps for a selected group of other slides in the slide show presentation.

The examiner rejected the claim under 35 U.S.C. § 101 as claiming non-statutory subject matter. In particular, the examiner indicated that the instructions could be imbedded in a signal or wave and are therefore unpatentable under In re Nuijten (Fed. Cir. 2007). In its appeal to the PTAB, IBM argued that its claimed “machine readable storage medium” is sufficiently fixed to avoid the transitory concerns expressed by the Federal Circuit in Nuijten. In the appeal, however, the PTAB affirmed the examiner’s rejection – finding that under the “broadest reasonable interpretation” a “machine readable storage medium” continues to encompass unpatentable transitory signals. Here, the specification does not particularly define the claim term and IBM did not offer any promise that the claim is limited to non-transitory signals.

In its 2012 examination training, the USPTO offered parallel guidance:

When the specification is silent (no special definition of a CRM provided in original disclosure):

– It is acceptable to amend the claims to exclude the signal embodiment by adding “non-transitory” to modify the computer readable media.

– See “Subject Matter Eligibility of Computer Readable Media” (Jan. ’10)

“Non-transitory” is not a requirement, but simply one option.

– Applicant can choose other ways to amend the claim in accordance with the original disclosure.

– Not acceptable to just add “physical” or “tangible”

– Nuijten’s ineligible signals were physical and tangible.

– Not acceptable to add “storage” absent support in original disclosure because the broadest reasonable interpretation of computer readable storage media based on common usage covers signals/carrier waves.

The bottom line here is that patent applicants must now specifically disclaim transitory waves or signals as their compositional carrier of any software claims.

Revisiting the Indispensable Party

By Dennis Crouch

In Yesterday’s case of University of Utah v. Max-Planck-Gesellschaft, the Federal Circuit held that the patent owner (here, University of Massachusetts) was not an indispensable party to an inventorship dispute. Judge Moore dissented. And, I think Judge Moore has the better argument here based upon the statutory language. Here’s why. The statutory hook for bringing the case is found in 35 U.S.C. 256 that allows a “court before which such matter is called in question” to “order correction of the patent.” However, the statute requires that any correction of inventorship be made “on notice and hearing of all parties concerned.” In my mind, that statute largely ends the debate.

Federal Circuit Rejects Supreme Court Original and Exclusive Jurisdiction over State-vs-State Inventorship Disputes

By Dennis Crouch

A highlight of this opinion is Footnote 1 of Judge Moore’s dissenting opinion that states “The majority baldly asserts that issues of patent ownership and inventorship are not sufficiently grand for the Supreme Court to resolve in the first instance. That is not our decision to make. It is for the Supreme Court to itself decide.”

= = = = =

University of Utah v. Max-Planck-Gesellschaft (Fed. Cir. 2013)

In 2011, University of Utah (UUtah) filed a federal lawsuit under 35 U.S.C. § 256 to correct the inventorship of U.S. Patent No 7,078,196. That patent is directed to Small Interfering RNAs (siRNAs) and methods of creating those molecules that are the current study of intensive genetic therapy research.

According to USPTO records, the patent is owned collectively by the Max-Planck Institute as well as MIT, the Whitehead Institute and the University of Massachusetts. Dr. Brenda Bass – a UUtah professor – alleges that Dr. Thomas Tuschl – a UMass Professor – incorporated her ideas into his patent but then did not name her as an inventor. All of these assignees were named as defendants in the complaint filed in Federal District Court.

The appeal raises interesting issues of civil procedure, federalism, and sovereign immunity. The 11th Amendment to the U.S. Constitution generally provides sovereign immunity to state governments from any cause of action in Federal Court brought by citizens of another state or country. However, the 11th Amendment does not provide for immunity in state-vs-state actions. Rather, the U.S. Constitution provides that “In all [Federal] Cases . . . in which a State shall be Party, the supreme Court shall have original Jurisdiction.” Art III, §2, cl. 2. Following the constitutional guidance, the jurisdictional statutory code provides that the “Supreme Court shall have original and exclusive jurisdiction of all controversies between two or more States.”

Rather than fighting the battle in District Court, UMass (a state institution) argued that the case brought by UUtah (another state institution) should be seen as a state-vs-state conflict that should go directly to the Supreme Court in the matter of first instance.

In order to avoid that result (but still reach the same result), UUtah dropped UMass as a defendant and instead list the leaders of UMass (including its president Robert Caret) as the defendants. Based upon that change, District Court Judge Saris held that the case should no longer be seen as a state-vs-state case and that, as a consequence, the Supreme Court did not have exclusive original jurisdiction. Judge Saris also found that correction of inventorship was not a “core sovereign interest sufficient to make this a dispute between States,” but that the case could proceed against the named officials under the Ex parte Young doctrine. Particular to this case is that the remedy demanded was an order directing the USPTO to correct inventorship rather than calling for any monetary or injunctive relief against the state.

Although the district court case is not final, the Federal Circuit took an immediate appeal under the Collateral Order Doctrine.

On appeal, the Federal Circuit has affirmed – finding that “UMass is not a real party in interest under the Supreme Court’s caselaw.” Although both the Constitution and Statute appear clear, the US Supreme Court has been reluctant to take cases such as this and has thus added requirements that the case be “serious,” “dignified,” and raising “important” federalism concerns. In addition, the Supreme Court has considered whether there are other avenues for relief. And, both of the competing states must be indispensable parties to the lawsuit.

On this notion, UMass argues that UUtah is seeking the property of UMass (i.e., its patent) and that is sufficient to make UMass a real party that cannot be “plead around.”

Agreeing with UMass, the Federal Circuit instead held that the case is about “inventorship” and the identity of the individual inventor of a patent is not a “core sovereign interest” that need be raised directly to the Supreme Court. In addition, the Federal Circuit agreed that the formal shift from suing the University to suing the University President in his Official Capacity was sufficient to evade the state-vs-state setup. Finally, the appellate panel found that UMass (a patent owner) is not an indispensable party to the case since its interests are being adequately protected by the other co-owners and its named officials.

In reality, UUtah UMass [Updated] likely does not want the Supreme Court to directly hear the case. Rather, the strategy here is that the University is largely betting on the likelihood that the Supreme Court would decline to exercise jurisdiction – effectively ending the case.

= = = = =

Writing in Dissent, Judge Moore vigorously disagreed with the majority’s holding.

The majority erroneously holds that a patent-ownership dispute between two state universities is not a “controversy between two or more States.” It then compounds this error and holds that a patent owner is not an indispensable party to an action that seeks to reassign title to the patents-in-suit. I respectfully dissent.

I. Subject Matter Jurisdiction

The district court lacks jurisdiction over UUtah’s claims against the UMass Officials because those claims raise a dispute between two States, Utah and Massachusetts. Article III of the U.S. Constitution vests the Supreme Court with original jurisdiction over cases in which a State is a party. As § 1251(a) expressly states: “The Supreme Court shall have original and exclusive jurisdiction of all controversies between two or more States.” There is no dispute that UUtah and UMass are instruments of Utah and Massachusetts, respectively, and that a suit between those institutions could only be brought in the Supreme Court. The majority, however, concludes that § 1251(a) does not apply here because UUtah elected to sue the UMass Officials rather than UMass. That conclusion is incorrect.

To determine if a suit implicates the Supreme Court’s exclusive original jurisdiction, we look “behind and beyond the legal form” of the claim and determine “whether the State is indeed the real party in interest.” Arkansas v. Texas, 346 U.S. at 371. The majority agrees with this general proposition but holds that the UMass Officials, not UMass, are the real parties in interest. I disagree.

This case involves a dispute between UMass and UUtah over who owns the rights to the Tuschl II patents. UMass is the assignee of the Tuschl II patents and UUtah “wants to own the patents.” UUtah is pursuing that interest through a correction of inventorship claim under 35 U.S.C. § 256 and a corresponding request for an order that UUtah owns the patents. … UUtah also alleges in its complaint that it “should be the sole owner or an owner” of the Tuschl II patents. It specifically requests that the court “order assignment of all right title and interest” in the patents to UUtah. Indeed, the majority recognizes (1) that UUtah specifically requested that the court assign it all rights to the Tuschl II patents and (2) that UUtah will obtain the rights to the patents if it prevails on its correction of inventorship claims. This is a dispute about ownership, plain and simple.

UUtah cannot recast the nature of this dispute by suing the UMass Officials as stand-ins for UMass. Indeed, the majority never holds that the UMass Officials have any interest in this proceeding. Nowhere does the majority suggest that the UMass Officials are “parties concerned” that may be subject to a correction of inventorship action under § 256(b). . . .

Section 1251(a) contains “uncompromising language”: the Supreme Court has original and exclusive jurisdiction over “all controversies between two or more States.” Mississippi v. Louisiana, 506 U.S. 73, 77, 113 S.Ct. 549, 121 L.Ed.2d 466 (1992). The majority errs when it concludes that § 1251(a) does not apply to this dispute because the “State has no core sovereign interest” in inventorship or patent ownership. Maj. Op. at 13–15. The majority’s “core sovereign interests” test is at odds with the plain language of the statute, which contemplates “all controversies” between states fall within 1251, not just those involving core sovereign interests. There is simply no basis to limit the statute in such a way.

Moreover, requiring a core sovereign interest to implicate the Supreme Court’s exclusive jurisdiction erodes the Court’s discretion to decide which controversies it will hear. The existence of the Supreme Court’s exclusive jurisdiction and its discretion to exercise that jurisdiction are separate concepts. The Court’s exclusive original jurisdiction extends to “all controversies between two or more States.” 28 U.S.C. § 1251(a). The Court, however, is not required to exercise its jurisdiction over every controversy. The Court tends to exercise its jurisdiction sparingly, depending upon the nature of the interest of the complaining State, the seriousness and dignity of the claim, and the availability of another original forum to resolve the dispute. Mississippi v. Louisiana, 506 U.S. at 76–77. The concept of a “core sovereign interest” has roots in opinions that address whether the Supreme Court will decide to exercise its jurisdiction over a dispute, not whether the Court’s exclusive original jurisdiction over the controversy exists. See id. at 77; Texas v. New Mexico, 462 U.S. 554, 570, 571 n. 18, 103 S.Ct. 2558, 77 L.Ed.2d 1 (1983); Connecticut ex rel. Blumenthal v. Cahill, 217 F.3d 93, 109 (2d Cir.2000) (collecting cases). The majority’s conflation of those two concepts strips the Supreme Court of its discretion to decide if a case is sufficiently serious to exercise jurisdiction over it. It reallocates that power to the lower courts—who will decide which subset of cases—those implicating core sovereign interest—will be presented to the Supreme Court. FN1

The majority finds support for its decision in the Second Circuit’s split decision in Cahill. With all due respect, even if we adopt the flawed logic of the majority in Cahill, this case would still fall within the Supreme Court’s exclusive jurisdiction in § 1251. The majority correctly recognizes that, generally, a State is the real party in interest if ” the effect of the judgment would be to restrain the Government from acting, or compel it to act.” Maj. Op. at 14 (quoting Cahill, 217 F.3d at 106). But the majority nevertheless concludes that UMass is not the real party in interest because a judgment to correct inventorship “will not require or restrain UMass from acting.” Id. at 13. This is not correct.

A judgment in UUtah’s favor will restrain UMass’s ability to act. If successful, UUtah will be declared sole owner of the Tuschl II patents and UMass will have no interest in them. UMass will not be able to license or assign the patents. And UUtah will be able to exclude UMass from practicing the inventions claimed in the patents. Patent rights are the quintessential right to restrain. The effect of this judgment will be to prevent UMass from exploiting the Tuschl II patents or the technologies they cover. This certainly “restrain[s] the Government from acting.”

UUtah alternatively requests that Dr. Bass be found to be a co-inventor. A finding that Dr. Bass is a co-inventor of the Tuschl II patents will result in UUtah co-owning those patents. The effect of the judgment would be that UUtah could practice or license the patents without UMass’s consent and without having to account to UMass. See 35 U.S.C. § 262. The judgment would thus restrain UMass from asserting its rights in the Tuschl II patents against UUtah or any of UUtah’s licensees. Again, this restrains UMass from acting.

The majority ignores these effects on UMass. Without explanation, the majority asserts that UMass will only be “more or less affected by the decision” and that transfer of the Tuschl II patents to UUtah will “not deplete the state treasury.” Maj. Op. at 15. This is incorrect. A correction of inventorship by the PTO will give UUtah an ownership interest in the Tuschl II patents by operation of law and dilute or revoke UMass’s property interest. Indeed, as the majority also recognizes, UUtah expressly asks the court to order the reassignment of the patents to UUtah. The central effect of a judgment in UUtah’s favor will be to deplete the assets of the current owners of the Tuschl II patents, one of whom is UMass. UMass is thus the real party in interest in this case.

This is a dispute between two state universities over who owns a valuable patent portfolio—a dispute over property ownership. As undesirable as it may be, we are bound to follow the plain language of § 1251(a): “The Supreme Court shall have original and exclusive jurisdiction of all controversies between two or more States.” It is up to the Supreme Court to decide if it wants to exercise its exclusive jurisdiction over this controversy. We should not contort the statute to avoid a perceived injustice FN2 that would result if the Court declined to exercise jurisdiction over UUtah’s claims.

UUtah initiated an action that seeks to obtain UMass’s interest in the Tuschl II patents. That is a controversy between two States and can only be brought in the Supreme Court. Accordingly, we should reverse the district court’s decision that it had jurisdiction over UUtah’s claims against the UMass Officials.

II. Indispensable Party

The majority’s holding that UMass is not an indispensable party to this action is incorrect. We have held that when a plaintiff brings a declaratory judgment action seeking to invalidate a patent or hold it not infringed, the patentee is both a necessary and indispensable defendant in that action. A123 Sys., Inc. v. Hydro–Quebec, 626 F.3d 1213, 1217–19, 1220–22 (Fed.Cir.2010); Enzo APA & Son, Inc. v. Geapag A.G., 134 F.3d 1090, 1094 (Fed.Cir.1998). It would be nonsensical to suggest that all patent owners must be joined in a suit seeking to invalidate the patent, but they need not be joined in a suit over patent ownership. Indeed, § 256(b) requires a court, before it orders a correction of inventorship, to provide “notice and hearing of all parties concerned,” i.e., those with an “economic stake” in the patent. Chou, 254 F.3d at 1359–60. We should apply our general rule that all co-owners must be joined in an action that affects their patent. See Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456, 1467 (Fed.Cir.1998).

The majority instead holds that UMass is not an indispensable party because UUtah joined “all of the Tuschl Patent owners except UMass,” each of whom are “jointly represented by legal counsel.” Maj. Op. at 21. It is not enough that UMass and the named defendants “share the same overarching goal” of defeating UUtah’s inventorship and ownership claims. A123 Sys., 626 F.3d at 1221 (holding that absent patentee was an indispensable party when the named party had “overlapping” but not “identical” interests).

The majority deviates from our longstanding requirement that all patent owners be joined, citing an exception created in Dainippon Screen Manufacturing Co. v. CFMT, Inc., 142 F.3d 1266 (Fed.Cir.1998). It is true that, like Dainippon Screen, the named defendants here are represented by common counsel. But the majority omits the “highly relevant” facts from Dainippon Screen—the absent party was a wholly-owned subsidiary of the named party and was created by the named party to enforce the patents-in-suit. 142 F.3d at 1267–68, 1272–73. We allowed the suit to go forward because “the parties’ interests in the asserted patents were not just common, but identical.” A123 Sys., 626 F.3d at 1221 (discussing Dainippoin Screen ).

There is no party in this suit which represents UMass’s interest in the Tuschl II patents. Other defendants also have an interest in the patents, but they do not represent UMass’s interest. Indeed, their interests may well diverge. For example, the non-UMass defendants may choose to settle with UUtah in a way that diminishes UMass’s rights, such as stipulating that Dr. Bass is the sole inventor of the Tuschl II patents in exchange for ownership interests in the patents. That risks extinguishing UMass’s rights to the patents without UMass participating in the lawsuit.

The majority further claims that defendant Alnylam can represent UMass’s interest because UMass “handed sole and exclusive control of this suit over to Alnylam.” Maj. Op. at 21. That right, however, is conditional. If there is a conflict of interest, Alnylam loses its right to control UMass’s defense. Id. The agreement thus contemplates that Alnylam and UMass may not have identical interests. Because UMass does not have identical interests with any of the named defendants, it is an indispensable party in this case. I dissent from the majority’s contrary holding.

Hiring an IP Law Professor at the University of Missouri

I wanted to post this hiring announcement for – We are looking to hire a tenure-track or (tenured) professor to teach and research in the field of intellectual property. My Dean Gary Myers and the faculty are looking to expand our intellectual property focus at the law school in several different ways, including through hiring additional faculty.

Job Posting

= = = = =

Job Description

The University of Missouri School of Law seeks entry-level or lateral candidates for a full-time tenure track position in the area of Intellectual Property. The School of Law is looking for individuals with a strong commitment to scholarship, teaching, and public service. Candidates must have an excellent academic record and either legal practice experience or advanced academic training.

The University of Missouri-Columbia is the flagship campus of the University of Missouri system and is one of only 34 public universities in the country belonging to the American Association of Universities, a group of elite research universities. As both a research and land grant university, we have opportunities for interdisciplinary interaction that are unmatched at all but a handful of other universities. In addition, Columbia is regularly ranked as one of the most livable cities in the country.

Application Procedure

Review of applications will begin immediately and will continue until all available positions are filled. The School of Law will review the Faculty Appointments Registration applications as they are distributed by the AALS. (If you are participating in the Faculty Appointments Register you do not need to mail or email your materials.) Applicants who are not participating in the Faculty Appointments Register must apply by submitting a cover letter and resume at http://hrs.missouri.edu/find-a-job/academic/.

The University of Missouri is an equal opportunity/ADA institution and is particularly interested in applications from women and minorities. Additional information about the School of Law is available at www.law.missouri.edu. To request ADA accommodations, please contact Associate Dean Rigel Oliveri at 573-882-5068.    

Benefit Eligibility

This position is eligible for University benefits. The University offers a comprehensive benefits package, including medical, dental and vision plans, retirement, and educational fee discounts. For additional information on University benefits, please visit the Faculty & Staff Benefits website at http://www.umsystem.edu/totalrewards/benefits

Equal Employment Opportunity

The University of Missouri is an equal access, equal opportunity, affirmative action employer that is fully committed to achieving a diverse faculty and staff. For more information, call the Associate Vice Chancellor of Human Resource Services/Affirmative Action officer at 573-882-4256.

To request ADA accommodations, please call Human Resource Services at 573-882-7976. TTY users, please call through Relay Missouri, 1-800-RELAY (735-2966) or en Español at 1-800-520-7309.

Patent Ethics by Hricik

Professor David Hricik writes Patently-O’s Ethics Blog: Patent Ethics by Hricik available online at patentlyo.com/hricik. For the past year, Professor Hricik took a hiatus while clerking for Randall Rader – Chief Judge of the Court of Appeals for the Federal Circuit. He is now back online and has four recent posts:

Welcome back David Hricik!

Patently-O Bits & Bytes by Lawrence Higgins

Upcoming Events:

  • American Conference Institute is hosting the FDA Boot Camp in Boston, MA on September 17-18, 2013. ACI’s FDA Boot Camp has been designed to give products or patent litigators, as well as patent prosecutors, industry in-house counsel, and life sciences investment and securities experts, a strong working knowledge of core FDA competencies. Register with discount code “PTO200”.  [Link]
  • The Licensing Executives Society (LES) will hold their annual meeting September 22-25, in Philadelphia. The annual meeting is themed "IP Matters in Every Deal" the meeting is a must-attend IP, licensing and business development event.  [Link] 
  • American Conference Institute is hosting the Paragraph IV Disputes Master Symposium in Chicago, IL on October 3-4, 2013.  At this symposium, there will be in-depth discussions and practical take aways that will prepare you for this new era of extreme Hatch-Waxman litigation. Critical sessions will address all facets of Paragraph IV litigation from pre-litigation concerns to the commencement of suit through final adjudication. Register with discount code “PTO200”.  [Link]
  • The USPTO’s 18th Annual Independent Inventor Conference will be held October 11-12. For two days, independent inventors and small business owners will have an unparalleled opportunity to learn, network, and jumpstart their creative endeavors. Experts and senior officials from the USPTO will present valuable information on patents, trademarks, and other intellectual property (IP) matters while successful business owners and inventors will relate their inspiring personal experiences in bringing their dreams to market.  [Link]
  • The EPO will hold their Patent Information Conference on October 22-24, in Bologna, Italy.  The EPO Patent Information Conference 2013 will be organized in co-operation with the Directorate General for the Fight against Counterfeiting – Italian Patent and Trademark Office.  [Link]
  • AIPLA annual meeting will take place October 24-26, in Washington, DC. The Annual Meeting offers  opportunities to connect with others in the IP industry from around the world to learn during sessions such as: Navigating Through the PTAB and Federal Courts After the AIA; Trademark Fair Use; What You Need to Know About the Hague Agreement; Evolving IP Rights in China, and IP Issues Facing Government R&D Contractors.  [Link]
  • American Conference Institute is hosting the FDA Boot Camp Devices Edition in Chicago, IL on November 5-6, 2013.  Many products liability lawyers, patent counsel, business and investment experts, medical and regulatory affairs professionals, and those involved in pricing and reimbursement — despite their tenure in working with FDA-regulated devices — are not well-versed in the essentials of the approval process and the regulatory hurdles of the post-approval period. ACI’s Third Annual FDA Boot Camp – Devices Edition has been designed to give you a strong working knowledge of core FDA competencies. Register with discount code “PTO200”.  [Link]

 

Contact Lawrence.Higgins@patentlyo.com with leads for future Bits and Bytes.

Patently-O Bits & Bytes by Lawrence Higgins

Upcoming Events:

  • American
    Conference Institute is hosting the FDA Boot Camp in Boston, MA on September 17-18, 2013. ACI’s FDA Boot Camp has been designed to give
    products or patent litigators, as well as patent prosecutors, industry
    in-house counsel, and life sciences investment and securities experts, a
    strong working knowledge of core FDA competencies. Register with discount
    code “PTO200”.  [Link]
  • The
    Licensing Executives Society (LES) will hold their annual meeting
    September 22-25, in Philadelphia. The annual meeting is themed "IP
    Matters in Every Deal" the meeting is a must-attend IP, licensing and
    business development event.  [Link] 
  • American
    Conference Institute is hosting the Paragraph IV Disputes Master Symposium
    in Chicago, IL on October
    3-4, 2013.  At this
    symposium, there will be in-depth discussions and practical take aways
    that will prepare you for this new era of extreme Hatch-Waxman litigation.
    Critical sessions will address all facets of Paragraph IV litigation from
    pre-litigation concerns to the commencement of suit through final
    adjudication. Register with discount code “PTO200”.  [Link]
  • The USPTO’s
    18th Annual Independent Inventor Conference will be held October 11-12. For
    two days, independent inventors and small business owners will have an
    unparalleled opportunity to learn, network, and jumpstart their creative
    endeavors. Experts and senior officials from the USPTO will present
    valuable information on patents, trademarks, and other intellectual
    property (IP) matters while successful business owners and inventors will
    relate their inspiring personal experiences in bringing their dreams to
    market.  [Link]
  • The EPO
    will hold their Patent Information Conference on October 22-24, in
    Bologna, Italy.  The EPO Patent Information Conference
    2013 will be organized in co-operation with the Directorate General
    for the Fight against Counterfeiting – Italian Patent and Trademark Office.  [Link]
  • AIPLA
    annual meeting will take place October 24-26, in Washington, DC. The
    Annual Meeting offers  opportunities
    to connect with others in the IP industry from around the world to learn
    during sessions such as: Navigating Through the PTAB and Federal Courts
    After the AIA; Trademark Fair Use; What You Need to Know About the Hague
    Agreement; Evolving IP Rights in China, and IP Issues Facing Government
    R&D Contractors.  [Link]
  • American
    Conference Institute is hosting the FDA Boot Camp Devices Edition in
    Chicago, IL on November 5-6, 2013.  Many
    products liability lawyers, patent counsel, business and investment
    experts, medical and regulatory affairs professionals, and those involved
    in pricing and reimbursement — despite their tenure in working with
    FDA-regulated devices — are not well-versed in the essentials of the
    approval process and the regulatory hurdles of the post-approval period. ACI’s Third Annual FDA Boot Camp –
    Devices Edition has been designed to give you a strong working
    knowledge of core FDA competencies. Register with discount code “PTO200”.  [Link]

 

Contact Lawrence.Higgins@patentlyo.com
with leads for future Bits and Bytes.

Patently-O Bits & Bytes by Lawrence Higgins

Upcoming Events:

  • American Conference Institute is hosting the FDA Boot Camp in Boston, MA on September 17-18, 2013. ACI’s FDA Boot Camp has been designed to give products or patent litigators, as well as patent prosecutors, industry in-house counsel, and life sciences investment and securities experts, a strong working knowledge of core FDA competencies. Register with discount code “PTO200”.  [Link]
  • The Licensing Executives Society (LES) will hold their annual meeting September 22-25, in Philadelphia. The annual meeting is themed "IP Matters in Every Deal" the meeting is a must-attend IP, licensing and business development event.  [Link] 
  • American Conference Institute is hosting the Paragraph IV Disputes Master Symposium in Chicago, IL on October 3-4, 2013.  At this symposium, there will be in-depth discussions and practical take aways that will prepare you for this new era of extreme Hatch-Waxman litigation. Critical sessions will address all facets of Paragraph IV litigation from pre-litigation concerns to the commencement of suit through final adjudication. Register with discount code “PTO200”.  [Link]
  • The USPTO’s 18th Annual Independent Inventor Conference will be held October 11-12. For two days, independent inventors and small business owners will have an unparalleled opportunity to learn, network, and jumpstart their creative endeavors. Experts and senior officials from the USPTO will present valuable information on patents, trademarks, and other intellectual property (IP) matters while successful business owners and inventors will relate their inspiring personal experiences in bringing their dreams to market.  [Link]
  • The EPO will hold their Patent Information Conference on October 22-24, in Bologna, Italy.  The EPO Patent Information Conference 2013 will be organized in co-operation with the Directorate General for the Fight against Counterfeiting – Italian Patent and Trademark Office.  [Link]
  • AIPLA annual meeting will take place October 24-26, in Washington, DC. The Annual Meeting offers  opportunities to connect with others in the IP industry from around the world to learn during sessions such as: Navigating Through the PTAB and Federal Courts After the AIA; Trademark Fair Use; What You Need to Know About the Hague Agreement; Evolving IP Rights in China, and IP Issues Facing Government R&D Contractors.  [Link]
  • American Conference Institute is hosting the FDA Boot Camp Devices Edition in Chicago, IL on November 5-6, 2013.  Many products liability lawyers, patent counsel, business and investment experts, medical and regulatory affairs professionals, and those involved in pricing and reimbursement — despite their tenure in working with FDA-regulated devices — are not well-versed in the essentials of the approval process and the regulatory hurdles of the post-approval period. ACI’s Third Annual FDA Boot Camp – Devices Edition has been designed to give you a strong working knowledge of core FDA competencies. Register with discount code “PTO200”.  [Link]

 

Contact Lawrence.Higgins@patentlyo.com with leads for future Bits and Bytes.

Resolving Patent Disputes – October 4, 2013

I’ll put out a more formal post in a couple of weeks, but I wanted to highlight an upcoming one-day conference here in Columbia Missouri on October 4, 2013 that is being jointly sponsored by the University of Missouri School of Law and also the Journal of Dispute Resolution. The general topic is “Resolving Patent Disputes” and we have a number of interesting speakers. I am co-organizing the conference along with Professor Jim Levin. Professor Levin is a longtime mediator and professor of mediation. Our keynote speaker is Greg Gorder who is one of the co-founders of Intellectual Ventures.

Conference is free with 5 hours of CLE credit. Let me know if you are planning on coming from out-of-town or if you need more details.

Use THIS LINK to register.

Dennis, dcrouch@patentlyo.com

  

Supplier’s Offer to Make Product Invalidates Patent under the On-Sale Bar

Hamilton Beach Brands, Inc. v. Sunbeam Products, Inc. (Fed. Cir. 2013)

In a split decision, the Federal Circuit has affirmed a lower court ruling that Hamilton Beach’s asserted patent claims are invalid under the on-sale bar of (pre-AIA) 35 U.S.C. 102. The patent at issue is U.S. Patent No. 7,947,928 and relates to a slow-cooker or crockpot. (I use it generically, but “Crock-Pot” is a brand whose trademark is held by Sunbeam.) The original specification focused on a pot with an integrated spoon in the lid. In the second-continuation, Hamilton Beach responded to Sunbeam’s new product by refocusing the claims on a pot with a latched top.

The priority application was filed in March 2006. More than one year prior (In February 2005), Hamilton Beach issued a purchase order for 2,000 slow cookers from a foreign supplier but to be delivered to its US warehouse. That order was confirmed by the supplier that same month and manufacturing would begin once Hamilton Beach provided its “release.” Hamilton beach did not provide the release until after the one-year critical date and no products were manufactured or sold until after that critical date.

The On-Sale Bar of (Pre-AIA) 102(b) will invalidate a patent when the invention was sold or offered-for-sale more than one year before the filing date. The trick here to finding an offer-for-sale is to think in reverse – the supplier is selling the products to the patentee. Thus, the commercial offer-for-sale occurs when the supplier says “we’ll make it once you give your release.” In patent law, an offer for sale is one where the other party only needs to accept in order to create a binding contract for sale. Here, the supplier’s confirmation satisfies that definition. As Judge O’Malley writes:

Hamilton Beach’s supplier responded prior to the critical date that it was ready to fulfill the order. In other words, the supplier made an offer to sell the slow cookers to Hamilton Beach. At that point, the commercial offer for sale was made and, under the governing corporate purchase agreement, Hamilton Beach could accept the offer when it so pleased. And, Hamilton Beach concedes, as it must, that, had it provided a “release” any time after it received that email, a binding contract would have been formed.

The statute requires that an offer for sale of the invention invalidates the patent and here, this offer satisfied that statutory requirement.

Writing in Dissent, Judge Reyna argued that the transactions should not be seen as a commercial offer for sale, but rather an experimental use.

The decision here is one that calls to mind the large literature on company structure. The patentee lost here because it chose to outsource manufacture in a particular way (through a purchase contract). Hitting on that point, Judge Reyna writes: “My greatest concerns involve the implications this case will have for future innovators, most notably small enterprises and individual inventors who lack in-house prototyping and fabricating capabilities.” Of course, it turns out that most US product companies (not just small enterprises) outsource some amount of manufacture.

Full Attorney Fees ($9m) Awarded for Pattern of Vexatious Litigation Strategy, Affirmed on Appeal

Monolithic Power Systems (MPS) v. O2 Micro (Fed. Cir. 2013).

The court decision here ends with the following statement:

More than a decade ago, the Beckman Instruments court foretold, "we can certainly imagine a case in which litigation misconduct would justify an award of attorney fees for the entire litigation." Beckman Instruments, Inc. v. LBK Produkter AB, 892 F.2d 1547 (Fed. Cir. 1989). We are quite confident that this was the kind of case it had in mind.

Background: In October 2008, MPS filed a declaratory judgment (DJ) action against O2 Micro – asking the district court to issue declarations of noninfringement and invalidity with respect to four O2 Micro patents. U.S. Patent Nos. 6,856,519, 6,809,938, 6,900,993, and 7,120,035. O2 Micro's attorneys had been monitoring case-filing information and, when the company learned that it had been sued, it quickly filed its own complaint regarding the same patents in the USITC (even before MPS was able to serve notice on O2 Micro). O2 Micro then filed a motion to stay the district court. 28 U.S.C. § 1659 provides statutory guidance for staying district court patent litigation while awaiting the outcome of USITC actions. The statute states that when there are parallel proceedings, "the district court shall stay, until the determination of the Commission becomes final, proceedings in the civil action with respect to any claim that involves the same issues [being adjudged at the USITC]. The stay provision has two additional requirements. First, the stay must be requested by one of the parties. Second, as a deadline, the request to stay must be made within either "(1) 30 days after the party is named as a respondent in the proceeding before the Commission, or (2) 30 days after the district court action is filed, whichever is later." 28 U.S.C. § 1659. However O2 Micro apparently waited a bit beyond the 30-day deadline which gave the district court discretion to deny the stay motion.

Losing Case and Covenants Not To Sue: As the litigation progressed, O2 initially provided evidence of a February 1998 invention date based upon the inventor's testimony and an electronic date-stamp on the documents. However, MPS provided evidence that the date-stamp had been back-dated. The district court sided with MPS in ruling that the earliest invention date was July 1999. And, subsequently, the court-appointed technical expert (Prof. Perreault) drafted a memo that the patents were invalid based upon intervening prior art. Before the court could issue its final judgment (likely placing official approval on the expert report) O2 issued a unilateral covenant-not-to-sue that forced dismissal of the lawsuit. O2 had previously issued covenants not to sue in a handful of other cases once the cases began going south.

Full Attorney Fees Awarded: Although the court was unable to make its final invalidity ruling, it did take a major step by awarding MPS its entire attorney fees and costs of $9,000,000+. The patent statute provides for fee-shifting in "exceptional cases." 35 U.S.C. § 285 ("The court in exceptional cases may award reasonable attorney fees to the prevailing party.") The award here was based upon O2's "vexatious litigation strategy, litigation misconduct and unprofessional behavior." To be clear, the problem, according to the Judge, was not just this case, but instead the pattern of bad behavior seen in prior cases as well.

On appeal, the Federal Circuit has affirmed and repeated its earlier statements that "litigation misconduct" alone can be sufficient to make a case exceptional under § 285 – even when the lawsuit itself is not objectively baseless or brought in bad faith. "In other words, litigation misconduct alone may suffice to make a case exceptional."

Pattern from Prior Cases: The Federal Circuit also affirmed that the exceptional case award can be based on a pattern of "vexatious litigation strategy" that extends beyond the particular case or controversy at issue.

[T]he district court's findings of an overall vexatious litigation strategy and numerous instances of litigation misconduct are sufficient to support an exceptional case determination. The record provides ample grounds for the district court to find that O2 Micro had undertaken a vexatious litigation strategy. Having presided over a decade of litigation between O2 Micro and MPS, the district court witnessed several instances in which O2 Micro sued MPS customers in order to prompt MPS to file declaratory judgment actions with the court. In each previous case, O2 Micro withdrew its claims and granted covenants not to sue after substantial litigation had taken place. In the underlying case, O2 Micro employed its modus operandi, this time moving to dismiss only after MPS and ASUSTeK had completed their filings for the final pretrial conference, wasting the parties' and the court's resources. The district court, with its unparalleled familiarity with and insight into O2 Micro's motivations and repeated resort to these tactics, assessed that this pattern amounted to a vexatious litigation strategy that would support a finding of exceptional case. We decline to disturb that assessment.

Now, to be clear, while the prior pattern is relevant to the exceptional case award, the court did not here indicate that the costs of the prior cases could be tacked-on.

Fees from other cases: If you remember, this case involved parallel proceedings before the USITC. And, because the USITC cases generally move faster, the bulk of the costs (discovery) directly stemmed from that case. In calculating the costs, the district court allowed MPS to collect for USITC discovery costs that were then reasonably used in the district court case. On appeal, the Federal Circuit confirmed that result:

Based on the examples of unprofessional behavior provided by the district court and the many more instances of it we were able to glean from the record, we agree with the district court that O2 Micro's rampant misconduct so severely affected every stage of the litigation that a full award of attorney fees was proper here. Under the unique circumstances, the district court's award of ITC-related expenses is also not an abuse of discretion, especially in view of the discovery's application in the district court and the parties' agreement to its dual use.

$9,000,000 pre-trial. It is somewhat amazing that the attorney fees and costs awarded here were $9 million even though no trial occurred. That amount represents a 10% reduction on some fees and a 25% reduction on other fees. $300,000 of that amount went toward calculating the fees! ("Fees generated in preparing attorneys' fees application, $ 343,035). In order to appeal, a losing party who owes some monetary judgment will normally be required to post an appeal bond. FRCP 62(d). Here, O2 has already put-up $9.5 million in order to cover the amount due plus interest.

Patent Attorneys Love Apple

Fordham has a new study on smartphone patents and their assertion. Here is the money quote:

The most frequent plaintiff in the dataset [is] Apple. Apple has a uniquely aggressive litigation history when compared to the rest of the market leaders and Apple's stance may have effected a more general increase in litigation within the market. First, Apple has filed more lawsuits than other market share leaders. Second, Apple began asserting its design patents related to its smartphone in 2011 and prior to these lawsuits, design patent suits were vary rare in the market. Finally, patent infringement litigation saw a substantial increase after Apple's broad patent litigation was filed in 2011. Apple's aggressive litigation posture may be spurring litigation throughout the market and may be motivating competitors to acquire additional patents in order help them strengthen their defensive position.

See THE IMPACT OF THE ACQUISITION AND USE OF PATENTS ON THE SMARTPHONE INDUSTRY (WIPO under a Special Services Agreement) at /media/docs/2013/08/clip_study.pdf.