Therasense: Encouraging Intentional Deception?

Patent2011053Powell v. Home Depot (Fed. Cir. 2011).

Michael Powell’s invention is fairly simple –  it covers a guard for a circular saw on an arm.  In 2004, Mr. Powell developed the guard and provided several prototypes to Home Depot for the company to use in its in-store saws for cutting raw lumber to customer specifications.  Rather than having Powell manufacture the guards, Home Depot turned to another company for its 2,000 stores.  Powell obtained a patent then sued Home Depot.  After a three-week trial, a Florida jury awarded Powell $15 million in damages.  The district court also awarded enhanced damages, attorney fees, and pre-judgment interest — bringing the total to $24 million.

On appeal, the Federal Circuit affirmed claim construction, infringement, willfulness, inequitable conduct, and damages. Dissenting-in-part, Judge Dyk argued only that the finding of willful infringement was incorrect because Powell did not prove that Home Depot’s non-infringement defense was objectively unreasonable as is required under the objective prong of the willfulness inquiry.

Inequitable Conduct: One interesting element of the appeal involved inequitable conduct.  During prosecution, Powell had filed a Petition to Make Special on grounds that he was obligated to manufacture and supply devices embodying the claims sought. MPEP 708.02.  That original petition was roughly correct based upon ongoing manufacturing negotiations with Home Depot. Although negotiations with Home Depot fell-through before the PTO granted the petition, Powell never informed the PTO that he no longer qualified for the Special designation under the prospective manufacture prong and actively encouraged the PTO to decide the petition.

In a pre-Therasense decision, the district court held that the failure to inform the  PTO was done with intent to deceive the PTO, but that the intentional omission was not material because (1) the timing was not related to patentability and (2) Powell could have instead filed a petition to make special based upon ongoing infringement of the applied-for claims.  Under Therasense, inequitable conduct will not normally be found based upon an applicant’s improper omission unless the omission is the but-for cause of the patent being issued.

On appeal, the Federal Circuit affirmed — holding that:

Where, as here, the patent applicant fails to update the record to inform the PTO that the circumstances which support a Petition to Make Special no longer exist—that conduct does not constitute inequitable conduct. That is so because Mr. Powell’s conduct obviously fails the but-for materiality standard [of Therasense] and is not the type of unequivocal act, “such as the filing of an unmistakably false affidavit,” that would rise to the level of “affirmative egregious misconduct. Id.

This case creates further difficulty for patent attorneys by giving a free-pass to patent applicants who intentionally deceive the PTO in order to benefit their case.  Although participating in such activity violates the rules of conduct for patent law professionals under 37 C.F.R. 10.22, patent owners apparently will not face consequences.  Adding to the incentive for bad behaviour is the PTO’s lax enforcement through the Office of Enrollment and Discipline; the new statute of limitations on attorney misconduct charges; and the new supplemental examination procedures that allows patentees to whitewash patents obtained through inequitable conduct.  For some this may not be intuitive, but the primary solution is not increased enforcement but instead for the PTO to avoid relying upon attorney statements.

Claim Construction in the Abstract

By Dennis Crouch

Typhoon Touch Tech. v. Dell, Lenovo, Toshiba, Fujitsu, Sand Dune Ventures, Panasonic, Apple, HTC, and Palm (Fed. Cir. 2011)

Touch screen technology has taken-off as an important element of consumer electronics. Typhoon’s US Patent Nos. 5,379,057 and 5,675,362 cover various embodiments of a “portable keyboardless computer system” with a “touch-sensitive screen.”

Typhoon appealed an E.D. Texas ruling that its patents were invalid and not infringed. The appeal focused on the claim construction that served as the basis for both invalidity and non-infringement. The appellate decision is notable for the detached process that the court used to consider claims elements at issue. The opinion never discussed the crux of the invention or its contribution to the art and instead simply looked to the disputed claim terms and the relation of those terms in the specification (as required by Phillips v. AWH).

This week, I participated in a roundtable discussion at Yale Law School sponsored by the Kauffman foundation and by Yale’s Information Society Project (ISP). A substantial amount of the discussion focused on problems stemming from our current claim construction process and our ongoing focus on claim language as opposed to invention or its contribution to the art.

For patent attorneys prosecuting patents, the claims are often seen as equivalent to the invention. The new patent act supports that definition by shifting focus away from the invention and instead onto the “claimed invention.” Thus, the new § 102(a)(1) asks whether “the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.” The new statute’s sole focus on invention as claimed is largely just a codification of fairly well accepted Federal Circuit precedent without much thought of the consequences. Of course, broad subject matter eligibility described in State Street Bank and the TSM test for obviousness were, until quite recently, well accepted Federal Circuit precedents as well. In the past few years, the Supreme Court rolled-back the clock on those issues – returning focus to pre-1982 case law. For “invention” however, the new statute appears to lock-in the claimed-invention as the ongoing focus of patent law.

Judge Kimberly Moore highlighted this issue in her recent dissent from the court’s denial of en banc rehearing of Retractable Technologies, Inc. v. Becton, Dickinson and Company (Fed. Cir. 2011). In that opinion, Judge Moore noted that the approach of the panel decision in Retractable is evident of a major divide amongst Federal Circuit judges as to whether the inventor’s contribution to the art – “what the inventor actually invented” – should be considered in the claim construction process.

This week, my patent law students each argued a mock-Markman hearing – revisiting the facts of Nystrom v. Trex and arguing over whether Ron Nystrom’s claimed decking “board” should be limited to cover only to wood cut from a log. That litigation was interesting because it involved five different court decisions on the proper construction of the term. The final appellate decision narrowed the term’s meaning in a way that allowed Trex’s composite planking to avoid infringement.

Claim construction has become a fundamental aspect of every patent case – even to the extent that Section 101 patentable subject matter decisions turn on the meaning bestowed upon particular claim terms. For patent attorneys, all of this focus on claim meaning puts more pressure on the drafting of the claims and the specification. The sad thing about Nystrom’s patent is that he would have easily won the case if the patent attorney who drafted the application had thrown-in language indicating that a “board” could be made of various materials, not just wood cut from a log. This counterfactual conclusion is sad for Nystrom as the inventor, but it is also sad that such a major weight is placed on non-inventive boilerplate language. In my mind, the importance of claim construction should push the USPTO to do a better job of ensuring that the terms of issued patents are well defined.

###

The Typhoon decision is also notable in the way that the court narrowly interpreted functional claim limitations. As background, Typhoon’s claim was directed to a “computer” that included various elements including a “memory for storing [a] data collection application.” Typhoon argued its claimed invention only required that the memory be capable of storing the data collection application. However, the District Court Judge Davis and Federal Circuit agreed that the proper construction required that memory actually be used for storing the data collection application. In so holding, the courts looked to the specification and found that the described embodiments all had memories that actually included the application rather than just the capability.

###

Finally, the court looked at Typhoon’s “Means for cross-referencing” limitation. The district court held that limitation invalid as indefinite under 35 U.S.C. § 112 because the specification did not include an algorithm adequate to provide sufficient structure for the means-plus-function limitation, citing Aristocrat Technologies Australia PTY Ltd. v. International Game Technology, 521 F.3d 1328, 1334 (Fed Cir. 2008). On appeal, the Federal Circuit rejected that conclusion – finding that the specification did disclose a cross-referencing algorithm in plain language in the text of the specification. The court went on to write that “computer code is not required to be included in the patent specification.” Rather, what is required is disclosure so that one of ordinary skill in the art would recognize the structure as linked to the claimed function.

###

  • Judge Newman wrote the court opinion and was joined by Chief Judge Rader and Judge Prost;
  • The Appellant-Patentee is represented on appeal by Charles Wolfe (Blank Rome);
  • Ed Reines (Weil Gotshal) and Joe Re (Knobbe) were co-lead-counsel for all the appellee-defendants. Briefs were also signed by attorneys at K&L Gates, Baker Botts, Amster Rothstein, Perkins Coie, Covington & Burling, and Malloy & Malloy, as well as Eric Albritton from the Albritton firm.

Federal Circuit Again Declines to Revisit Cybor

By Jason Rantanen

Retractable Technologies, Inc. v. Becton, Dickinson and Company (Fed. Cir. 2011) (CAFC en banc denial) Download 2010-1402 en banc order
Before Rader (dissenting), Newman, Plager, Lourie, Bryson, Linn, Dyk, Prost, Moore (dissenting), O'Malley (dissenting), and Reyna.

As in the past, the Federal Circuit has again expressly declined an invitation to revisit its 1998 en banc holding in Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448 that claim construction is reviewed de novo.  Once again, however, that decision was not without dissent.  Both Judge Moore, joined by Chief Judge Rader, and Judge O'Malley wrote to express their view that Cybor should be revisited. Professor Tun-Jeng Chiang expresses his views on this issue below.

In addition to recommending that the court reconsider the issue of deference, Judge Moore's dissent emphasizes the problematic nature of claim construction review by the Federal Circuit itself: on the one hand, "[c]laim construction is the single most important event in the course of a patent litigation"; on the other, "our rules are still ill-defined and inconsistently applied, even by us."  Moore dissent at 1.  This problem is especially acute in Retractable Technologies: "Retractable simply cannot be reconciled with our en banc decision in Phillips."  Id. at 4.  Here, Judge Moore asserts, the majority applied its own approach to claim construction, not that of Phillips, "[c]hanging the plain meaning of a claim term to tailor its scope to what the panel believes was the actual invention."  Id. at 6.  This is not an isolated instance, Judge Moore points out, but is a common practice that points to a fundamental split on the court about the nature of claim construction: a disagreement over whether claim scope should be limited to "what the inventor actually invented" or instead construed according to the plain meaning to one of skill in the art, a meaning that may be informed – but is not dictated – by the specification.

Note: In  support of her view that the Federal Circuit's own claim construction is ill-defined and inconsistently applied, Judge Moore cited the views of several commentators who "have observed that claim construction appeals often lead to frustrating and unpredictable results for both the litigants and trial courts," including Dennis's post on the panel decision and Hal Wegner's post on Arlington Industries v. Bridgeport Fittings on IP Frontline

Appealing BPAI Rejections: Part I

My keen research assistant Patrick Barnacle pulled up records on 56 ex parte patent appeals that have been decided by the Court of Appeals for the Federal Circuit since March 2005. All of these cases arise from rejections sustained by the USPTO’s internal Board of Patent Appeals and Interferences (BPAI). We are working to create a more complete database. In the meantime, I wanted to report some preliminary results on timing.

The median ex parte appeal took just over fifteen months to complete as measured from the date of the BPAI decision until the date of the Federal Circuit decision. As measured from the filing of the CAFC Notice of Appeal, the median appeal took exactly one year (365 days). Some appeals took longer: Comiskey, Ferguson, and Bilski each took more than two years from the NOA, but they were all tied to en banc decisions. About 25% of the appeals took less than ten months from the NOA.

Once oral arguments (if any) are complete, the Federal Circuit is rather quick at issuing an opinion. The median decision was issued 47 days after the oral arguments. (Again, a skewed average of 86 days is driven by the handful of en banc decisions) 30% of the decisions came within one week of oral arguments – most of those took one to two days.

We have not yet analyzed the correlation between delay and results, but it appears that especially quick decisions tend to favor the PTO over the applicant. As you might expect, delays in judgment correlate with longer opinions; opinions marked precedential; dissenting opinions; and opinions with Judge Newman on the panel.

Irreparable Harm of Generic Competition: Federal Circuit Affirms Finding that Generic Entry Does not Cause Irreparable Harm

Altana Pharma & Wyeth v. Teva (Fed. Cir. 2009)200905141300.jpg

Altana’s Patent No. 4,758,579 claims the proton pump inhibitor pantoprazole – the active ingredient the anti-ulcer drug Protonix®. Of course, PPI’s were known before Altana’s patent and even one of Altana’s own prior patents discusses a “compound 12″ that is structurally similar to those claimed in the ’579 patent.

Teva and Sun filed for permission to begin making generic versions of the drug, and Altana subsequently filed this infringement action. (Altana filed separate actions that were consolidated.)

This appeal stems from the New Jersey district court’s denial of Altana’s motion for a preliminary injunction. The lower court found that the patentee had failed to prove two critical prerequisites of equitable preliminary relief: (1) a likelihood of success on the merits and (2) irreparable harm.

The equitable test for preliminary injunctive relief requires that the requesting party prove:

  1. a reasonable likelihood of success on the merits;
  2. irreparable harm if an injunction is not granted;
  3. a balance of hardships tipping in its favor; and
  4. the injunction’s favorable impact on the public interest.

Although the ultimate grant or denial of preliminary relief is within the “sound discretion of the district court,” failure to abide by these four factors would be reversible error. Orders to grant or deny a preliminary injunction are immediately appealable.

Likelihood of Success: The Federal Circuit has held that preliminary relief should be denied if the accused infringer raises a “substantial question” of invalidity of the asserted claims. At the PI stage, the court need not consider the ultimate “clear and convincing” standard. Rather, the focus is on “vulnerability.”

Obviousness of Chemical Compound: When considering the obviousness of a chemical compound, courts ordinarily first look for a “lead compound” known in the prior art and then consider whether a chemist would have had some reason to modify the known compound in the particular manner to achieve the new compound. Courts are not rigidly bound by this ordinary approach – thus, for instance, a court may look to multiple lead compounds:

Moreover, to the extent Altana suggests that the prior art must point to only a single lead compound for further development efforts, that restrictive view of the lead compound test would present a rigid test similar to the teaching-suggestion-motivation test that the Supreme Court explicitly rejected in KSR.

Here, the appellate panel found “ample evidence” that a chemist would have chosen “compound 12″ as a natural choice for further PPI research. The particular modification of compound 12 was then suggested in articles by Sachs and Bryson who were researching properties of effective PPIs.

Considering this evidence as a whole, the Federal Circuit found it sufficient to raise a substantial question of obviousness.

Irreparable Harm: The district court could not find any irreparable harm of allowing infringement during the course of the litigation. Often, money damages are seen as insufficient when the defendant does not have cash-on-hand. Here, however, Teva and Sun both have plenty. The court also found that Altana almost certainly has a business plan to deal with the launch of generics. During the litigation, Nycomed purchased Altana — seemingly in the lower court’s view, that purchase also indicates that money damages are adequate (since a price can be placed on the company & its patent rights).

Perhaps most harmful to Altana was that the lower court found the patentee’s statements of harms “exaggerated” and lacking “credibility.” A court sitting in equity righty places a dim light on activities suggestive of unclean hands.

On appeal, the Federal Circuit affirmed without significantly commenting on the merits. Rather, the court made this case about equitable discretion: “the law cited by the district court highlights this court’s deference to a district court’s determination whether a movant has sufficiently shown irreparable harm.”

Denial of Preliminary Injunction Affirmed

Judge Newman wrote a short concurring opinion.

Although the evidence presented to the district court does not, in my view, establish invalidity of the patent on the pharmaceutical product pantoprazole, see, Gonzales v. O Centro Espirita Beneficente Uniao do Vegetal, 546 U.S. 418, 429 (2006) (“the burdens at the preliminary injunction stage track the burdens at trial.”) at this preliminary stage deference is warranted to the district court’s weighing of the conflicting expert opinions interpreting the evidence. On this basis, I concur in sustaining this discretionary action.

CAFC Affirms Exceptional Case Attorney Fees Based on Multiplicity of Minor Acts of Misconduct

PatentLawPic365Nilssen v. Osram Sylvania (Fed. Cir. 2008)

In 2007, a unanimous CAFC panel affirmed a district court’s finding that Ole Nilssen’s light bulb patents were unenforceable due to inequitable conduct.  The improper prosecution conduct included failing to disclose a close relationship with a 132 declarant; misleading priority claims; and improper payment of a small entity fee.

Now on appeal is whether Nilssen owes attorney fees under 35 U.S.C. § 285.  As with most civil cases in the US, the general rule in patent cases is that each party pays their own attorney fees.  Section 285 of the patent act provides a limited exception — providing that a district court “in exceptional cases may award reasonable attorney fees to the prevailing party.”  Here, the district court found the case exceptional based on the aforementioned inequitable conduct as well as “litigation misconduct” and the filing of a “frivolous lawsuit.” 

Benign Inequitable Conduct: Nilssen argued that his alleged inequitable conduct had very little real impact — i.e., that it was benign.  The CAFC rejected that argument — finding that inequitable conduct is never benign. “In fact, it is a contradiction to call inequitable conduct benign.”

Building a Mountain from Pebbles: Nilssen makes a good argument that none his individual acts of misconduct appear bad enough to call the case ‘exceptional.’ 

These acts of misconduct include late production of documents, disavowal of a prior interrogatory response (and never filing a formal correction), attempting to exclude interrogatories that were never signed; informally withdrawing patents from suit, but waiting until only a few months before trial to formally withdraw the patents; and waiving attorney client privilege without providing formal notice to Osram.

Each of these actions can rather easily be explained as “either harmless oversight or permissibly rough litigation tactics.”  This is perhaps especially true when you consider that the K&E firm – well known for its relentless bull dog litigation style — represented Osram.

To the CAFC panel, however, the “multiplicity” of these individual elements were sufficient to warrant the exceptional case finding — even without an individual smoking gun.

In dissent, Judge Newman did not see an exceptional case:

The statutory authority to award attorney fees was intended to “prevent gross injustice,” not to shift the economic balance against the unsuccessful plaintiff.

Notes:

  • The first line of the case reads: “Nilssen is the owner and principal inventor of over 200 patents…”  What does the court mean by “principal inventor” and is there any legal significance associated with that designation?