In re Seagate Technology:

Patent, Patent Cases 2007

In a rare unanimous en banc opinion, the CAFC has overruled its prior precedent — holding that willful infringement enhanced damages now requires “at least a showing of objective recklessness.”

Accordingly, to establish willful infringement, a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent. 

This eliminates the “affirmative duty of due care” that has historically been created by notice of infringement.

Attorney Client Privilege and Work Product: When asserting an opinion of counsel in defense to a willful infringement claim, any waiver of privilege or work product materials does not (normally) extend to trial counsel.

Read the opinion

Patent Plaintiffs Continue to Push for Expanded notion of Joint Infringement.

Contributory Infringement, Patent, Patent Cases 2007,

AdvanceME v. RapidPay (E.D. Tex. 2007).

Traditionally, direct patent infringement requires a single actor that causes infringement of each element of the asserted patent claim. An agency doctrine allows for multiple actors acting under control of a single entity. However, the common law of patents has long resisted calls for liability for any looser form of “joint infringement.”

In AdvanceME, the Texas court provided additional dicta expanding our notion of circumstances where two separate entities can combine to infringe a patent even when neither entity infringes all claim elements. Here, the court finds that multi-actor infringement requires (1) that all elements of the claim be performed and (2) that there be a “sufficient connection” between the accused actors. “A showing of ‘agency’ or ‘working in concert’ is not required.” The sufficient connection could instead “be shown through a contractual relationship.”

According to the court, joint infringement is easier to prove when a patent claim includes steps performed by two entities. The patent at issue here involves claims that move money from a customer to a merchant then to a merchant processor which is directly infringed by the merchant and merchant processor.

The infringement finding is, however, moot as the patent was also found invalid as anticipated and obvious.

Notes:

  • Read the case

  • The issue of joint infringement is “squarely raised” in another case – BMC v. PaymenTech. [See Divided Infringement]. Oral arguments were held in that case in April, and a decision is expected by October.

  • The expanded joint infringement notion is supported by the CAFC’s recent On Demand decision where the court noted that “[i]t is not necessary for the acts that constitute infringement to be performed by one person or entity.”

  • See Cross Medical (“However, if anyone makes the claimed apparatus, it is the surgeons, who are, as far as we can tell, not agents of Medtronic. Because Medtronic does not itself make an apparatus with the “interface” portion in contact with bone, Medtronic does not directly infringe.”)

  • In PharmaStem, the CAFC did not decide the issue, but noted that the “viability and scope of [the theory of joint infringement] liability is a subject of considerable debate.”

  • Applied Interact, LLC v. Vermont Teddy Bear Co., Inc.  2005 WL 2133416 (S.D.N.Y.,2005), the district court noted that infringement by separate entities requires “some connection” between the entities.

  • Free Standing Stuffer, Inc. v. Holly Dev. Co., 187 U.S.P.Q. 323 (N.D. Ill. 1974), requires a “sufficient connection to, or control over” third party entities performing some of the elements.

  • Cordis Corp. v. Medtronic AVE, Inc., 194 F. Supp. 2d 323 (D. Del. 2002) (requiring close relationship between defendant and the doctors performing part of the patented process).

  • Shields v. Halliburton Co., 493 F.Supp. 1376 (W.D. La. 1980) (finding defendants liable for infringement based on the combined actions of two entities).

  • Sriranga Veeraraghavan, Joint Infringement of Patent Claims: Advice for Patentees, 23 Santa Clara Computer & High Tech L.J. 211 (2006),

CAFC: Patent Attorney Has No Right to Defend Himself Against Charges of Inequitable Conduct

Patent, Patent Cases 2007, Patent Prosecution

Nisus Corp. v. Perma-Chink Sys. v. Michael Teschner (Fed. Cir. 2007).

Nisus Corp’s patent relates to a method of putting Boron in a tree to kill termites and prevent forest fires. After a bench trial, the patent was found unenforceable due to inequitable conduct.  Apparently, Nisus had failed to disclose material documents from a prior lawsuit involving closely related patents.  The court specifically mentioned Nisus’s former patent attorney, Michael Teschner, as one cause of the inequitable conduct.

Teschner sued to intervene in the case and clear his name, but the district court denied him the opportunity. On appeal, the CAFC likewise found Teschner without standing.

Appeal by Nonparty: Usually, a nonparty has no standing to appeal. However, an attorney that is formally reprimanded may appeal to the CAFC.  However, other (informal) “judicial criticisms of lawyers’ actions are not reviewable.”  The court’s comments regarding Teschner here do not rise to a formal reprimand, and thus offer no standing for appeal.

To allow appeals by attorneys, or others concerned about their professional or public reputations, merely because a court criticized them or characterized their conduct in an unfavorable way would invite an appeal by any nonparty who feels aggrieved by some critical statement made by the court in an opinion or from the bench. Treating such critical comments by a court as final decisions in collateral proceedings would not only stretch the concept of collateral proceedings into unrecognizable form, but would potentially result in a multiplicity of appeals from attorneys, witnesses, and others whose conduct may have been relevant to the court’s disposition of the case but who were not parties to the underlying dispute. Nor would it be appropriate to limit such appeals to attorneys, while forbidding others from appealing from critical court comments, as such a limitation would smack of special treatment for members of the bar and would be difficult to justify as a matter of principle.

Thus, a finding of inequitable conduct does not create any standing for an aggrieved prosecuting attorney to appeal.

Postscript: Mr. Teschner declined my offer for an interview, noting that the matter is still pending at the PTO. His lone statement is that he is “glad that the Federal Circuit found merit in [his] argument.”

Priority to Foreign Application Requires “Inventor’s Knowledge or Consent” at the Time the Foreign Application was Filed

Inventors, Patent, Patent Cases 2007, Priority Rights, Statutory Construction

PatentLawPic009Boston Scientific SciMed v. Medtronic Vascular (Fed. Cir. 2007).

SciMed’s patent application was originally filed by a European company (MinTec) in February 1994 as an European Patent Application. At that time, however, the inventors (Cragg & Dake) had not yet assigned rights to MinTec. Cragg assigned his rights a few months later. Dake did not assign his rights until 1996.

Medtronic has a US priority filing date of June 1994 on the same invention. In the interference, the question is whether a US patent applicant claim priority to a foreign application filed by an entity that was not acting on behalf of the US applicant at the time of filing? CAFC Answer: No priority unless foreign application was filed on behalf of the US applicant.

Under the court’s ruling here, 35 USC 119(a) provides a personal right to the inventor. Consequently, there must be a “nexus…between the inventor and the foreign applicant at the time the foreign application was filed.” That nexus requires at least “knowledge or consent” of the inventor.

“Indeed, as a matter of pure logic, an entity could not have filed a foreign application “on behalf of” an inventor without the inventor’s knowledge or consent; that the foreign application may have been filed in accordance with the laws of the country in which it was filed has no bearing here.”

Holding:

“[A] foreign application may only form the basis for priority under section 119(a) if that application was filed by either the U.S. applicant himself, or by someone acting on his behalf at the time the foreign application was filed.” (emphasis in original)

Notes:

  • This decision [LINK]: Scimed Life Sys., Inc. v. Medtronic Vascular, Inc., — F.3d — (Fed. Cir. 2007).
  • Final BPAI Decision: Patent Interference No. 104,192, Paper No. 187, 2001 WL 1339890 (B.P.A.I. July 21, 2001).
  • Trial Court Decision: Scimed Life Sys., Inc. v. Medtronic Vascular, Inc., 486 F. Supp. 2d 60 (D.D.C. 2006).

 

V-Chip Declaratory Judgment Patent Case Reinstated by CAFC

Declaratory Judgment, Patent, Patent Cases 2007

VchipSony Electronics v. Guardian Media (Fed. Cir. 2007).

Guardian holds several patents for blocking naughty TV shows based on program classification codes. In 1999, Guardian sent a “notice of patent infringement” to Sony asserting that its V-Chip products “infringe the claims,” and later followed-up with a claim chart. Four years later, Guardian sent another letter offering to license its patents. After unsuccessful negotiations, Sony filed a declaratory judgment action in the Southern District of California — alleging non-infringement, invalidity, and unenforceability.

On motion, the district court dismissed the suit for lack of declaratory judgment jurisdiction — finding no actual controversy as required by the Constitution. In particular, the court noted that Guardian had not threatened to sue and the circumstances did not imply a threat of immediate suit. The court then went on to hold that even if jurisdiction existed it would use its discretion to decline hearing the case because (1) the question of jurisdiction is “close” and (2) it appears that the DJ plaintiffs are using the case as a negotiation tool rather than as a means to settle the dispute.

Particular Adverse Positions => DJ Jurisdiction: On appeal, the CAFC determined that an actual controversy certainly existed between Sony and Guardian at the time of the complaint. The parties had taken particular adverse positions regarding infringement and validity (associating particular claims with particular products; requesting a particular amount of money; arguing whether particular prior art references demonstrated particular claim elements). The facts of this dispute make it “manifestly susceptible of judicial determination.” (quoting 300 US 227 (1939)).

In short, because Guardian asserts that it is owed royalties based on specific past and ongoing activities by Sony, and because Sony contends that it has a right to engage in those activities without a license, there is an actual controversy between the parties within the meaning of the Declaratory Judgment Act.

Discretionary Dismissal: The Declaratory Judgment Act allows a court “substantial discretion” not to hear cases even when there exists an actual controversy. However, here, the CAFC found that the lower court’s two reasons for declining to hear the case were arbitrary and thus insufficient. Specifically, the question of jurisdiction is not a close call as the lower court had determined — rather it was only close because of an error of law. Additionally, the CAFC could not discern any “affirmative evidence” of plaintiffs’ nefarious reasons for filing suit.

Vacated and remanded to determine whether there may be other reasons for discretionary dismissal.

Notes:

  • Four other DJ plaintiffs had similar experiences and are discussed in the decision.

Summary Judgment of Non-Infringement: Downward Force <> Upward Force

Patent, Patent Cases 2007, Summary Judgment

SafeTCare v. Tele-Made (Fed. Cir. 2007).

SafeTCare’s patent covers a bariatric hospital bed designed for obese patients. On summary judgment, the district court found that the Tele-Made beds do not infringe. Other defendants and counterclaims are still pending.

Jurisdiction: On appeal, the CAFC sua sponte questioned jurisdiction. Because the judgment was not complete as to all parties and the judge had not issued a Rule 54(b) order of appealability (See Bashman), the CAFC did not have jurisdiction at the time of oral arguments. However, the CAFC allowed the parties time to ask for such an order from the district court before dismissing the appeal. (This pragmatism is perhaps due to Judge Robinson’s place on the panel).

LEVER_SMUpward Force: SafeTCare’s patent requires a plurality of motors exerting a pushing or upward force on the bed.  Tele-Made’s motors are essentially attached to one end of a lever, and by pulling down, cause an upward force on the other end of the lever. However, because SafeTCare’s specification implied a direct link between the motor and the bed, the levered approach was non-infringing. Prosecution history estoppel blocks DOE coverage.

Non-infringement affirmed.

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Reasonable Pertinence may be Sufficient to Combine References in Obviousness Rejection

Obviousness, Patent, Patent Cases 2007

ScreenShot003In re Icon Health and Fitness (Fed. Cir. 2007).

ICON has been a party in more than 50 patent infringement lawsuits and has asserted its treadmill patent (5,676,624) against at least six defendants.  In the midst of litigation, ICON also filed for reexamination, and now appeals the PTO’s final rejection of its patent to the CAFC.

ICON admits that all but one of the claimed elements are disclosed in a Danmark International advertisement.  The remaining element, a gas stabilizing spring, is found in Teague where it is used to assist in opening and closing of a Murphy style bed.

Reasonably Pertinent Art: To be used in an obviousness rejection, prior art must be “reasonably pertinent to the problem addressed” by the patent applicant. Usually this is satisfied by references in the same field of technology or that address the same problem. Here, the CAFC saw enough similarity to find the bed art pertinent:

“Nothing about Icon’s folding mechanism requires any particular focus on treadmills; it generally addresses problems of supporting the weight of such a mechanism and providing a stable resting position. Analogous art to Icon’s application, when considering the folding mechanism and gas spring limitation, may come from any area describing hinges, springs, latches, counterweights, or other similar mechanisms—such as the folding bed in Teague.”

Although the patent applicant lost this argument, this portion of the case is good news for applicants – because of what the opinion did not say. Specifically, the court could have begun with the announcement that “In KSR, the Supreme Court expanded the notion of pertinent obviousness-type prior art when it announced that ‘patent examiners should look [beyond] the problem the patentee was trying to solve.’ . . .”  Instead, the CAFC decided to stick to its narrower jurisprudence.

All elements = Obvious: Under KSR, once the elements are shown in reasonably pertinent art, then an obviousness determination is as simple as connecting the dots. The court says as much:

[W]hile perhaps not dispositive of the issue, the finding that Teague, by addressing a similar problem, provides analogous art to Icon’s application goes a long way towards demonstrating a reason to combine the two references.

Here, the Court explained a connection be tween Teague and the claimed invention by showing that both used the spring in similar ways.

Notes:

  • A report from Steve Sereboff indicates that the PTO has already taken this decision to heart in its new examiner training: “Basically, the examiners can make a prima facie case of obviousness simply by showing that all of the elements in the claim were known.”

Nonpracticing Entity (CSIRO) Gets Injunction

Injunctions, Patent, Patent Cases 2007

ScreenShot061CSIRO v. Buffalo Technology (E.D.Tex. 2007)

CSIRO operates as a technology licensing arm of the Australian Government. CSIRO does not practice its inventions, but has asserted its wireless LAN patent against a number of accused infringers, including Intel, Microsoft, Marvell, and Buffalo. The patent is broad enough to cover all 802.11a/g wireless technology and has a 1992 priority date.

In the case against Buffalo, CSIRO won a slam-dunk summary judgment of validity and infringement. The court then considered whether to award a permanent injunction in favor of the non-practicing entity (NPE).

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Procedure: Expert Testimony Deserves Weight on Summary Judgment

Obviousness, Patent, Patent Cases 2007, Summary Judgment

Omegaflex v. Parker-Hannifin Corp (Fed. Cir. 2007) (nonprecedential)

On summary judgment, the Massachusetts District Court found the Omegaflex pipe-fitting patents novel, nonobvious and infringed. Parker appealed.

Respect the Expert: On several points of contention, the district court gave no probative weight to Parker’s expert’s testimony.  On summary judgment, the evidence should be weighed in the “light most favorable” to the non-movant (Parker). Because the expert testimony creates issues of material fact, the CAFC reversed and remanded.

In dicta, the three-member panel (Judges Michel, Dyk, and Garbis) probed the Supreme Court’s recent KSR decision — noting that it will continue to look for some reason to combine prior art references in an obviousness rejection.

Quoting KSR: “a patent composed of several elements is not proved obvious merely by demonstrating that each of its elements was, independently, known in the prior art.”

Reversed and remanded.

No Appellate Jurisdiction For Appeal of Preliminary Injunction Contempt Order

Patent, Patent Cases 2007

Photokleen Entegris (Mykrolis) v. Pall Corporation (Fed. Cir. 2007).

Mykrolis sued Pall — accusing its competitor of infringing patents related to high-quality liquid filters used in the semiconductor industry. After claim construction, the district court issued a preliminary injunction, but Pall continued to sell a ‘modified’ design.  During a contempt proceeding, the court held Pall in contempt for its continued sales, but also dissolved the preliminary injunction based on new evidence of invalidity. Both sides appealed.

Jurisdiction for appeal of contempt order: The CAFC has interlocutory jurisdiction over preliminary injunction issues such as the issuance, modification, or dissolution of a preliminary injunction. However, the CAFC here held that there is no interlocutory jurisdiction for an appeal of a contempt finding that does not itself modify the injunction. In addition, even though Pall must pay the contempt fine immediately, under Supreme Court precedent, a contempt decision is not considered an appealable final judgment. Finally, interlocutory appeals do not generally provide supplemental jurisdiction unless issues are inextricably intertwined. The contempt appeal was thus dismissed.

Preliminary Injunction: The burden of proving validity is shifted at the preliminary injunction stage where the patentee must show "a likelihood of success on the merits" with respect to both validity and infringement.  A defendant who raises a "substantial question" of invalidity will defeat a preliminary injunction unless it "lacks substantial merit." 

It is often difficult for a plaintiff to win an appeal after dissolution or denial of a preliminary injunction because the lower court’s decision is based on a loose set of factors that are reviewed only for clear error. Here, Mykrolis failed to show clear error in the lower court’s finding of a substantial question of invalidity.

Affirmed.

Notes:

  • Interlocutory jurisdiction: Power to hear an appeal before the lower court issues a final judgment. Interlocutory jurisdiction is generally quite limited and narrowly granted.
  • Hamilton Brooks cooperated with Ropes & Gray in representing the plaintiff Entegris.
  • Leydig Voit represented the defendant Pall Corp.

Monsanto v. McFarling: CAFC Affirms “Reasonable Royalty” of 140% of Purchase Price

Damages, Patent, Patent Cases 2007

Monsanto v. McFarling (Fed. Cir. 2007).

Soybean.USDAMonsanto is one of the few patentees that sues individuals for patent infringement.  In Monsanto’s case, the infringers are farmers who allegedly save & replant Monsanto’s patented genetically modified seeds violation of their “Technology Agreement”. When McFarling was found liable, the Missouri jury assessed damages of $40 per seed-bag and the court issued an injunction.

Monsanto customarily requires a royalty payment of $6.50 per seed-bag in addition to $22 per bag for the soybean seeds themselves.  On appeal the CAFC focused on the proper royalty measure.  McFarling argued that $6.50 was the “established” royalty while Monsanto argued that the actual royalty rate is much greater.

The Court agreed with Monsanto that the nominal designation of $6.50 as a royalty was not the entire sum of the damages:

Picking $6.50 as the upper limit for the reasonable royalty would create a windfall for infringers like McFarling. Such infringers would have a huge advantage over other farmers who took the standard Monsanto license and were required to comply with the provisions of the license, including the purchase-of-seed and non-replanting provisions. The evidence at trial showed that Monsanto would not agree to an unconditional license in exchange for a payment of $6.50, and the explanation—that Monsanto would lose all the benefits it gets from having the cooperation of seed companies in promoting Monsanto’s product and controlling its distribution—is a reasonable commercial strategy.

In fact, the CAFC found that the royalty rate can easily be calculated as something above the total $28 dollars per bag paid.

[I]t would be improper to hold that Monsanto’s reasonable royalty damages are limited to $25.50 to $28.50 per bag.

The damage amount, instead of being based on the amount usually paid by farmers, legitimately includes (a) the harm being felt by Monsanto because of the infrinement as well as (b) the additional benefits garnered by McFarling. In particular, these include: reputational harm due to rogue planters, potential lapses in monsanto’s database of planting techniques; bargaining power; as well as McFarling’s increased yeald of $31 – $61 per acre.

Based on those advantages alone, it was reasonable for the jury to suppose that, in a hypothetical negotiation, a purchaser would pay a royalty of $40 per bag for the Roundup Ready seed.

Under CAFC law, a jury’s damage award will be affirmed unless “grossly excessive or monsrous, clearly not supported by the evidence o rbased only on speculation or guesswork.” Here the court found sufficient reasons for the verdict and affirmed.

Established Royalty: Typically, an “established royalty” is the best measure of reasonable royalty damages when “the patentee has consistently licensed others to engage in conduct comparable to the defendant’s.” The rule of established royalty rate does not apply here, however, because Monsanto apparently never allows for replanting — Thus, there are no “comparable” replanting licenses.

Blacklist: The court also noted that Monsanto may blacklist Mr. McFarling from buying its seeds. 

Notes:

  • Mark Lemley of Stanford argued on behalf of the Farmer, McFarling.
  • Several other issues are included in the decision.
  • Read the case.

 

CAFC Affirms Disqualification of Defendant’s Attorneys

Patent, Patent Cases 2007

In re Hyundai Motor Am., 185 Fed. Appx. 940 (Fed. Cir. 2006)

Orion IP has accused dozens of companies of infringement of its business method patents ("computer-assisted sales").  At one point, Orion worked with the Orrick firm on some matters and Orrick made a pitch to handle Orion’s litigation and patent strategy work. Orion demurred.  Once litigation began, Orrick got back in the game by agreeing to represent several of the accused infringers directly adverse to Orion.

The Texas district court noted a conflict-of-interest and disqualified Orrick.  On writ of mandamus, the CAFC affirmed — finding no error.

The parties apparently presented diverging evidence as to the subject-matter of early meetings between Orrick and Orion and the type of documents exchanged.  The CAFC noted that these were purely factual questions that the lower court "resolved in Orion’s favor" without any clear error.

In order to prevail, Hyundai must clearly and indisputably show clear error in the district court’s findings of fact and application of the facts to the law. Hyundai has not carried its burden. This is essentially a factual dispute, which the district court resolved in Orion’s favor. The district court held a hearing, considered the competing declarations, and reviewed the pertinent documents. We do not find a basis for overturning those findings.

Disqualification affirmed.

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Claim Transitions: "Comprising The Steps Of"

Patent, Patent Cases 2007,

PatentlyO2006047Dippin’ Dots v. Mosey and Dots of Fun (Fed. Cir. 2007). [CORRECTED VERSION]

Everyone should remember their first experience with Dippin’ Dots. I was in Branson at Silver Dollar City. DD owns a patent covering its method of freezing, storing, and serving beads of delicious ice cream. 

Several of DD’s distributors decided to go a cheaper route.  They cancelled their orders with DD and found an alternative source. DD sued for patent infringement. The defendants counterclaimed with Walker Process antitrust claims based on DD’s enforcement of a “fraudulently acquired patent.”  The antitrust claim was based on the inventor’s pre-filing use of the invention that had not been disclosed to the PTO.

The patent was found obvious and DD, the patentee, was held liable for antitrust violations.

Comprising the steps of: The accused products included a diversity of shapes of ice cream pellets — some spherical and others irregular. DD made two infringement arguments based on its claim language of “comprising the steps of . . . beads . . .” DD’s first argument, that all the pellets, regardless of shape, are beads was shot-down by the appellate panel who decided beads must be “spherical” based on limitations explicitly written in the specification. (In this case, the addition of silly wiggle language would have likely saved the day — especially since the drawing being described did not show spherical beads.) 

DD’s second argument, that the “comprising” transition allows for infringement based on the accused spherical beads regardless of the existence of irregular pellets was also shot-down.  

“As to DDI’s second argument, we acknowledge that the term “comprising” raises a presumption that the list of elements is nonexclusive. See Genentech (Fed. Cir. 1997). However, “‘[c]omprising’ is not a weasel word with which to abrogate claim limitations.” Spectrum (Fed. Cir. 1998). “Comprising” appears at the beginning of the claim—”comprising the steps of”—and indicates here that an infringing process could practice other steps in addition to the ones mentioned. Those six enumerated steps must, however, all be practiced as recited in the claim for a process to infringe. The presumption raised by the term “comprising” does not reach into each of the six steps to render every word and phrase therein open-ended—especially where, as here, the patentee has narrowly defined the claim term it now seeks to have broadened.”

Thus, the claimed step of [(3)] freezing said dripping alimentary composition into beads, could not be interepted to as “freezing the alimentary composition into both beads and irregular pellets.”

At first glance, this case seems odd, but the underlying decision rests on a common sense approach to the claim language.  The court essentially found that “freezing said dripping alimentary composition into beads” meant that all of the dripping alimentary composition was frozen into beads. If the step was performed properly there would not be any ‘dripping alimentary compisition’ remaining to form the irregular pellets.

Microsoft v. AT&T: Transnational patent Law

Damages, Patent, Patent Cases 2007, Transnational

Microsoft v. AT&T (Supreme Court 2007).

Section 271(f) of the Patent Act expands the territorial scope of US patent protection by creating liability for exporting one or more “components” of a patented invention so that the whole invention may be practiced abroad. The statute is divided into parts one and two dealing with inducement and contributory activity respectively.

The case at hand involves Microsoft’s infringement of AT&T’s speech coding technology patent. Microsoft has conceded that its software (once installed on a computer) infringes the patent in the US. However, Microsoft has fought against paying patent royalties for sale of the same software abroad.  Microsoft’s argument, spelled out in its brief, is two-fold: (1) Software cannot be a ‘component’ as required by the statute because software code is intangible; and (2) Software copies made abroad cannot be considered ‘supplied’ from the US as required by the statute because no physical particle that Microsoft exported actually became part of the finished product.  I have previously labeled these arguments as the tangibility requirement and the molecular conservation requirement. [Link]

Now, AT&T and its supporters has filed their briefs that explain why 271(f) should encompass foreign copies of software shipped from the US. [Petitioner and Gov’t briefs are discussed here]

AT&T’s Brief on the Merits:

Tangibility: AT&T attacks the tangibility requirement head-on, arguing that there is no such requirement.

[The software] is plainly a component of [the patented] device, just as a unique collection of intangible words is a component of any book bearing the title Moby-Dick, even though those words, too, must be combined with ink and paper before the book can be read.

Of course AT&T is correct — the statute does not spell-out any tangibility requirement, and Microsoft’s statutory argument is, at best implicit. AT&T’s arguments are supported by business practice as well. Software and hardware are developed and sold separately, and each side can easily be though of as providing components of the whole.

Molecular Conservation Requirement: AT&T takes a different view of the statutory requirement that the components be “supplied” from the US. In AT&T’s story, “supplied” means satisfying a need or furnishing.  Using a but-for analysis, AT&T makes clear that without Microsoft’s shipment of the code abroad, it would not have ended-up in the foreign computers.

Here, the Windows object code is present in the foreign made computers only because Microsoft “provided” or “furnished”—in a word, supplied—it from the United States, via golden master disk or electronic transmission.

As it stands, the AT&T brief is well written and convincing on its own — the major problem being that it leads with a petty argument for dismissal.

Philips Corporation also filed a brief in support of AT&T.  Philips makes several arguments, two of which I discuss here:

  1. In today’s market, software and hardware companies do compete head-to-head.  A finding that software export is noninfringing would be at the expense of electronics companies because hardware exports would continue to be considered infringing.  Thus, awarding the win to Microsoft here may free the software industry, but will even further damage the hardware export industry.
  2. In many ways, this case is about the size of damages. Microsoft hopes that copies made abroad will not be seen as infringing because those copies were not literally shipped from the US.  Philips points out under the rules of consequential damage calculations, Microsoft would owe damages for sales of all copies even if 271(f) only covered the initial master disk shipment.

WARF, California, and RCTech filed a joint brief in support of AT&T. These holders of strong bio-related patents see the potential that this case could narrow the scope of their protection. WARF points-out how Microsoft comes to the table with unclean hands:

When it suits its interests, even Microsoft acknowledges that the number of units it supplies is not limited by the number of golden masters it sends abroad. In Microsoft Corp. v. Comm’r of Internal Revenue, Microsoft argued that it was entitled to tax deductions . . . for all foreign sales of software replicated from Microsoft’s golden master abroad, claiming that such copies were “export property” under the statute. The Ninth Circuit . . . agreed with Microsoft that all copies created from the golden master were export property, thereby providing Microsoft with another $31 million in claimed deductions for 1990 and 1991.

BAYHDOLE25.inc is an educational NGO that supports, as you might guess, the Bayh Dole act (at its 25th anniversary).  In a brief supporting AT&T, BD25 argues for the protection of intangible assets — especially assets that are replicable and intended to be replicated.  These include software code, cell lines, patented seeds, DNA, etc. Replicable assets are important and should be protectable.

Documents:

  • On the Merits
  • In Support of Microsoft
  • In Support of AT&T
  • In Support of Neither Party
  • Reply Brief:
  • On Petition for Certiorari

    • Important recent 271(f) cases:

    • NTP v. Research in Motion, (271(f) “component” would rarely if ever apply to method claims).
    • AT&T v. Microsoft, 414 F.3d 1366 (Fed. Cir. 2005) (271(f) “component” applies to method claims and software being sold abroad);
    • Union Carbide v. Shell Oil (Fed. Cir. 2005) (271(f) “component” applies to method claims).
    • Eolas v. Microsoft, 399 F.3d 1325 (Fed. Cir. 2005) (271(f) “component” applies to method claims and software);
    • Pellegrini v. Analog Devices, 375 F.3d 1113 (Fed. Cir. 2004) (271(f) “component” does not cover export of plans/instructions of patented item to be manufactured abroad);
    • Bayer v. Housey Pharms, 340 F.3d 1367 (Fed. Cir. 2003) (271(g) “component” does not apply to importation of ‘intangible information’).

    Earlier Discussion of this case

    Text of 35 USC 271(f)

    (1) Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

    (2) Whoever without authority supplies or causes to be supplied in or from the United States any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use, where such component is uncombined in whole or in part, knowing that such component is so made or adapted and intending that such component will be combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

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    Threats Against Customers Lead to Walker Process Antitrust Claim

    Patent, Patent Cases 2007

    Oil_pumpHydril v. Grant Prideco (Fed. Cir. 2007).

    Grant and Hydril both own patents relating to oil drilling.  Hydril sued Grant for patent infringement and also asserted a Walker Process antitrust claim against Grant. 

    Walker Process claims stem from the 1965 Supreme Court case (of the same name) and allow Section 2 Sherman Act antitrust claims for monopolization or attempted monopolization based on enforcement of a fraudulently procured patent.

    Here, Grant’s alleged fraud was that it “obtained its patent by knowingly and deliberately concealing from the Patent Office prior art that it knew would have resulted in a denial of its application.” 

    At the district court level, Hydril’s complaint was dismissed for failure to state a claim. In particular, the court noted that Hydril had failed to show sufficient enforcement activity. The CAFC disagreed, holding that threatened enforcement against customers could serve as a basis for a Walker Process claim.

    Threats of patent litigation against customers, based on a fraudulently-procured patent, with a reasonable likelihood that such threats will cause the customers to cease dealing with their supplier, is the kind of economic coercion that the antitrust laws are intended to prevent. A supplier may be equally injured if it loses its share of the market because its customers stop dealing with it than if its competitor directs its monopolistic endeavors against the supplier itself. Without customers, a supplier has no business.

     

    CAFC: “Circuit means” interpreted as means-plus-function

    Means Plus Function, Patent, Patent Cases 2007

    PatentlyO2006029DESA IP v. EML Tech and Costco (Fed. Cir. 2007 – NONPRECEDENTIAL).

    DESA owns a patent directed to motion-activated security lights. The lights have a low-level always-on illumination as well as a bright security illumination that is activated when motion is detected by a passive infrared motion sensor. During infringement litigation, the district court construed the claims and consequently entered a stipulated judgment of noninfringement.

    The appeal focused on whether the disputed claim phrases — “sensor means,” “control circuit means,” and “switching means” — should be interpreted as means-plus-function.

    The use of the word “means” in the claim language invokes a rebuttable presumption that § 112, ¶ 6 applies; conversely, the failure to use “means” invokes a presumption that § 112, ¶ 6 does not apply. . . . Nonetheless, the presumption that § 112, ¶ 6 applies may be rebutted if the claim recites no function or recites sufficient structure for performing that function.

    Distinguishing earlier precedent, the CAFC determined that neither the sensor, control circuit, nor switching pre-means terms recited sufficient structure.

    DESA argues that this court has previously stated that “it is clear that the term ‘circuit’ by itself connotes some structure.” In Apex, however, the word “means” was not used, so the reverse presumption—i.e., that § 112, ¶ 6 does not apply—was invoked.

    Regarding interpretation of the claims, the CAFC found that the district court had improperly given the terms a narrow construction by focusing on the preferred embodiments and the figures.

    CAFC: Construction of Essential Features and Impermissible Recapture

    Patent, Patent Cases 2007,

    ScreenShot071MBO v. Becton Dickinson (Fed. Cir. 2007).

    MBO’s patent is directed to a hypodermic syringe that helps avoid needle sticks. After claim construction, the district court awarded summary judgment of noninfringement to BD.

    On appeal, the CAFC recited the rules for claim construction sources:

    The most relevant source is the patent’s specification, which is “the single best guide to the meaning of a disputed term.” Next in importance is the prosecution history, which is also part of the “intrinsic evidence” that directly reflects how the patentee has characterized the invention. Extrinsic evidence—testimony, dictionaries, learned treatises, or other material not part of the public record associated with the patent—may be helpful but is “less significant than the intrinsic record in determining the legally operative meaning of claim language.”

    Essential Feature: Several of the asserted claims include a preamble precluding needlestick injury “immediately and positively.”  Interpreting the term “immediately,” the CAFC determined that an “essential feature” of the invention is ensure a safe needle immediately “upon removal from the patient.” (rather than immediately after some other event). 

    The patentee here has clearly indicated via the specification and the prosecution history that the invention provides, as an essential feature, immediate needle safety upon removal from the patient. It is therefore appropriate to construe the claims so as to ensure that they, too, require that feature.

    Interestingly, two of the claims did not include the ‘immediate’ language. For those claims, the court could find no textual hook for inserting the essential feature and thus did not burden those claims with the immediacy requirement.  Between the lines, the court implied that it could have found a textual hook through other claim terms, but stated that it “lack[ed] the power to construe other terms not disputed by the parties.”

    Impermissible Recapture: Claim scope which has been surrendered in order to obtain issuance of a patent cannot be later reclaimed through a reissue proceeding.  The district court found that MBO’s patent had improperly expanded the scope of a term and thus construed the terms meaning narrowly.

    On appeal, the CAFC held that the recapture rule should not be used to rewrite claim language. Although claim construction should be applied with an eye toward validity, that maxim should only be applied at last resort. Rather, the court should first construe the claims and then later determine if the broadened claims are valid .

    Whether those broadened claims are invalidated by the recapture rule is an issue separate from construction.

    Affirmed-in-part, reversed-in-part, vacated, and remanded.

    CAFC: Meaning of “About”

    Claim Construction, Doctrine of Equivalents, Patent, Patent Cases 2007, Vitiation

    UltracetOrtho-McNeil Pharm. v. Caraco Pharm. (Fed. Cir. 2006).

    Ortho’s patent covers a pain-relief combo of tramadol and acetaminophen with a ratio of “about 1:5.” Caraco’s drug has a ratio of 1:8.67.  The lower court construed the claims and found no infringement.

    Claim Construction: On appeal, the Federal Circuit construed the term “about 1:5” by first looking at the intrinsic evidence.  In the patent and claims, Ortho had used the term “about” repeatedly: disclosed ratios included about 1:1, about 1:5, about 1:19 to about 1:5, and about 1:1600. 

    The court reasoned that the term must have a narrow meaning in this patent because a broad meaning would leave other claimed ratios meaningless. The court also noted that the literal meaning of the term should be narrowly construed because Ortho “could have easily claimed a [broader] range of ratios”

    An expert testified that the statistical range should be 1:3.6 to 1:7.1 based on a confidence interval constructed from the data in the patent, and the Federal Circuit agreed. (The patent discussed the importance of 95% CI).

    Literal Infringement: The Federal Circuit found that there could be no literal infringement because the upper claimed bound for the ratio was 1:7.1 while Caraco’s ratio was 1:8.67.

    Doctrine of Equivalents: No DOE because Ortho cancelled claims with broader range during reissue. Interestingly, the Court made this ruling based on vitiation rather than prosecution history estoppel:

    [I]t cancelled the broader “comprising” claims, except for claim 6. In sum, having so distinctly claimed the “about 1:5” ratio, Ortho cannot now argue that the parameter is broad enough to encompass, through the doctrine of equivalents, ratios outside of the confidence intervals expressly identified in the patent. We agree with the district court that to do so would eviscerate the limitation.

    Summary judgment of noninfringement affirmed

    Collateral Estoppel Does Not Extend to Preliminary Injunction Findings

    Patent, Patent Cases 2007

    Abbott Labs v. ANDRX (Fed. Cir. 2007).

    The district court granted a preliminary injunction to stop Andrx from selling extended release clarithomycin as a generic version of Biaxin XL. Andrx appealed.

    Four factors for preliminary relief: (1) Likelihood of success on the merits; (2) irreparable harm from failing to issue a PI; (3) balance hardships of the parties; and (4) public interest.

    Collateral Estoppel: Oddly, the same district court granted Abbott’s PI motion against two other defendants because the patents looked invalid. On appeal Andrx argued that, as in Blonder-Tongue, “Abbott cannot assert patents against one party which have been found to be invalid or unenforceable against another party.”

    The CAFC found that collateral estoppel does not apply here because the earlier discussion of validity and enforceability had not been fully and finally litigated in the other cases. (Applying Seventh Circuit law).

    Vitiation: Andrx also argued that the PI should not issue because its generic does not infringe — either literally or under the doctrine of equivalents. Under DOE analysis, the Andrx product included a pharmaceutically acceptable glyceryl monostearate rather than the claimed “pharmaceutically acceptable polymer.” Andrx argued that a GST equivalent would vitiate the polymer requirement. The CAFC, however, found that the two could be equivalent — falling in-line with the common notion that adjectives are subject to vitiation more often than nouns.

    Notes: One thing that is unclear is why the court did not discuss the merits of the invalidity factor of the PI decision rather than focusing solely on the collateral estoppel issue.

    ITC: Standing to Appeal

    Patent, Patent Cases 2007

    Fuji Photo v. ITC (Fed. Cir. 2007).

    In its fifth appellate decision of this 1998 case . . .

    Fuji owns the patent on certain disposable cameras. Jazz and others take the discarded cameras, repair them, then sell them. Earlier, the court decided that cameras first sold by Fuji in the US were no longer protectable under the first-sale doctrine. However, the court held that those that the first-sale doctrine did not apply to products originally sold abroad.

    Here, Fuji appealed the ITC’s calculation of the percentage of already imported cameras that were infringing.  The problem was the difficulty of determining which cameras were originally sold in the US.

    Standing: On appeal, the CAFC first determined that Fuji had no right to appeal.  Unlike in normal infringement cases, ITC actions give the patentee no right to collect damages — rather, any past damages go to the coffers of the US Government.

    Private plaintiffs, unlike the Federal Government, may not sue to assess [civil] penalties for wholly past violations. (quoting 528 U.S. 167 (2000).

    It is clear here that any violations are wholly in the past because Jazz Photo no longer conducts business and is in the liquidation process.   

    Injunction against Officer: Jack Benun, former owner of Jazz, also appealed — arguing that the ITC had no power to issue an injunction against him personally simply because of Jazz’s infringement.

    The CAFC agreed with the ITC order — finding that "the Commission could legitimately issue a cease and desist order against him."  In their decision, the CAFC followed the Supreme Court’s 1937 Standard Education case which held that an administrative agency could bind officers of a corporation after issuing an order against the corporation itself.