January 2008

TiVo Wins on Appeal: Permanent Injunction against EchoStar to be Reinstated

Patent,

PatentLawPic184TiVo v. EchoStar (Fed. Cir. 2008)

Around the turn of the century, TiVo’s time shifting DVR television technology took the world by storm and has since become immensely popular.  In 2004, TiVo sued EchoStar and others in the Eastern District of Texas for infringement of its patent claims directed at the DVR hardware and software. EchoStar was found to infringe both the hardware and software claims. The Jury then awarded $73 million in damages and the judge ordered a permanent injunction to stop future infringement.

On appeal, the CAFC used thirty pages of dense claim construction to conclude that the hardware claims were not infringed but that the software claims were infringed.

The jury’s damage calculation did not divide out the portion of damages associated with the hardware invention and the portion associated with the software invention. Consequently, the court found that infringement of the software claims alone is still sufficient to sustain the entire $73 million judgment.

Because the damages calculation at trial was not predicated on the infringement of particular claims, and because we have upheld the jury’s verdict that all of the accused devices infringe the software claims, we affirm the damages award entered by the district court.

As reported, Chief Judge Michel stayed the permanent injunction pending resolution of this appeal. According to the court, that stay “will dissolve when this appeal becomes final.” The lower court will, however, need to add additional damages based on continued infringement during the appeal.

Notes:

  • EchoStar operates the DISH Network brand of satellite television.
  • TiVo has partnered with DIRECTV, DISH Network’s biggest competitor.
  • Part of the claim construction dispute centered on whether the claimed element “an MPEG stream” should be limited to a single MPEG stream.  Here, the CAFC rejected the traditional rule that “a” or “an” mean one or more. Instead, the Court made an unusual ruling here because “the context clearly evidences that the usage is limited to the singular.”
  • EchoStar (DISH) released the following press release, stating that the injunction is meaningless: “We are pleased the Federal Circuit found for us on Tivo’s hardware claims, but are disappointed in the Federal Circuit’s decision on the software claims. The decision, however, will have no effect on our current or future customers because EchoStar’s engineers have developed and deployed ‘next-generation’ DVR software to our customers’ DVRs. This improved software is fully operational, has been automatically downloaded to current customers, and does not infringe the Tivo patent at issue in the Federal Circuit’s ruling. All DISH Network customers can continue to use their DVRs without any interruption or changes to the award-winning DVR features and services provided by DISH Network”
  • Echostar stock (NASDAQ: SATS) fell immediately upon news of the decision, but quickly rose again.

CAFC Allows Lost Profit Damages Based on Defendant’s “Offer to Sell” Infringing Product

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Patent.Law057American Seating v. USSC (Fed. Cir. 2008)

Under 35 U.S.C. Section 271(a), offering to sell a patented invention is a form of patent infringement. This case examines, inter alia, what damages might ensue from such “on sale” activities even when an infringing product is not actually manufactured or sold.

In a separate part of the case, USSC’s VPRo-I wheelchair tiedowns for mass transit were found to infringe a patent held by American Seating.  At some point, USSC stopped selling the VPRo-I and switched to a non-infringing design (presumably to avoid infringement). For pending VPRo-I orders, USSC simply notified customers that the new design would serve as a substitute.

After finding the patent valid and infringed by the offer to sell, the Michigan jury awarded American Seating lost profit damages based on the USSC’s non-infringing sales “because in those cases USSC first made infringing offers to sell the VPRo I, but ultimately delivered the [non-infringing] VPRo II.”

On appeal, the CAFC affirmed that a damage award for the non-infringing sales was appropriate because USSC had essentially pulled a bait-and-switch on its customers. Although courts have “significant latitude” in types of harms that can lead to an award of lost profits. However, plaintiffs must at least prove that the infringement was a “but for” cause of the lost profits.

The Federal Circuit’s 1999 Grain Processing decision also dealt with cases where the an infringing product was not actually sold. In that case, the court held that lost profit damages should only be available when the the product sold is not a substitute for the infringing product. Thus, lost profits would not be available if the replacement was “acceptable to all purchasers of the infringing product.” American Seating provided evidence that some customers had complained about the new model — thus proving that it was not an adequate.

Thus, the CAFC affirmed the lost profit award — finding that “absent USSC’s offer to sell the [infringing] VPRO-I, the sales would have gone to American Seating.”

Notes:

  • Look for a follow-up post on this case in the coming days discussing other lost profit issues, including damages for “collateral sales”  and a discussion of public use under 102(b).

Patently-O Bits and Bytes No. 8

Patent,
  • Upcoming Events:
  • Web Seminar on the implications of Nuijten and Comiskey on Business Method Patenting on Feb 14, 2008 hosted by the World Research Group (WRG) [Link] Patently-O readers receive a 20% discount with code NGD759.  (Regularly $299).
  • Web Seminar on Tafas v. Dudas on Feb 5, 2008 hosted by the Washington Legal Foundation (WLF). (FREE)
  • Cambridge, MA: Feb 14, 2008, PIUG 2008 Boston Biotechnology Meeting hosted by Genzyme. $50 registration fee (must register by Feb 7).
  • Nuijten and Comiskey are mentioned above. These cases are still under consideration at the CAFC for en banc rehearing.  Although rehearings are usually denied, one of these cases (or a consolidation) will likely be re-heard en banc — especially considering the mixed messages that patentees and the public have received regarding patents the extent that patent scope may be divorced from any specific technological innovation. Two other cases, Bilski (Bryson, Clevenger, Moore) and Ferguson, are still pending as well.
  • Speaker Needed: Cyberlaw and Data Privacy Committee needs a speaker for February 19.

    • Claim Interpretation Should Include Disclosed Embodiments

    Claim Construction, Patent,

    Oatey v. IPS (Fed. Cir. 2008)

    PatentLawPic179Oatey’s asserted claim is directed to a washing machine drain with “first and second juxtaposed drain ports.”  The patentee originally lost on summary judgment of noninfringement because the district court construed that element to require “two separate identifiable physical elements” and not simply a single divided drain port. Thus, the lower court agreed that the claim would cover the design showed in Figure 2 of the patent, but excluded the design shown in Figure 3.

    PatentLawPic180On appeal, the CAFC reversed. Writing for a unanimous panel, Judge Newman held that absent disclaimer or estoppel, claims should normally be interpreted to include disclosed embodiments.

    We normally do not interpret claim terms in a way that excludes embodiments disclosed in the specification. . . . At leas[t] where claims can reasonably [be] interpreted to include a specific embodiment, it is incorrect to construe the claims to exclude that embodiment, absent probative evidence on the contrary.

    Because there was no evidence of disclaimer or prosecution history estoppel, Judge Newman found that the claim must be given a broader construction.

    Notes:

    Patent Refom: Unsettling Rights

    Patent, Patent Legislation, ,

    Patent.Law056By Dennis Crouch

    There have been numerous reports calling the US Patent System broken or at least in need of severe repair. From my view, the greatest problems with US patent law arise because of its common lack of clearly drawn property lines.  In academic lingo, we call this a failure of the public notice function.  

    Examples of the fuzzy lines of patent law are well known to Patently-O readers and include the secret rights of unpublished patent applications; shifting rights that may be altered via extended prosecution, future continuing applications, and second look examination; and uncertain rights potentially crumbling under the vagaries of claim construction and obviousness jurisprudence.

    These problems are exacerbated in certain technology areas – such as electronics – by massively overlapping claims and speculators asserting patents in a seemingly more aggressive fashion.  At the same time, there is a strong consensus that these issues do not arise in the same fashion in the pharmaceutical and bio-technological areas. Pharmaceutical patent law is often heralded as an incredible success — especially in the post Hatch-Waxman days of strong generic competition.

    Now comes the Patent Reform Act of 2007. Unfortunately, the proposed patent reforms now being debated by the Senate do virtually noting to address these serious problems and instead potentially cause harm to the current regime.

    CAFC Chief Judge Michel has publicly discussed patent reform and its potential impact on the judicial process. Apart from the Chief’s particular quarrels with damage apportionment and expanded interlocutory appeals, he makes a particular point about the destabilizing effect of major Congressional patent reforms.  In the decades following reforms, each amended word will be litigated and eventually construed. Unfortunately, during the wait for new statutory interpretations, patent holders and accused infringers will be left guessing.  Judge Michel’s ultimate point is that changes in the property regime should only be made when we have a genuine reason to believe that the changes will improve the system as a whole.  For the majority of the proposed patent reforms, that case simply has not yet been made.

     

    Patently-O Bits and Bytes No. 7

    Patent,
    • Patent Reform: The Senate has now placed the Patent Reform Act (S.1145) on the senate Calendar. [Link].  “Minority views” have been filed but are not yet available.
    • BPAI Composition: The CAFC has denied an en banc request in the Translogic case. That case challenged the legality of past BPAI appointment practices. [See Duffy]

    • Harmonization & Work Sharing: The PTO & JPO have announced a new bit of work-sharing cooperation. Under the agreement, a filing in one patent office would be deemed a filing in the partner office as well.  If successful, this proposal could eventually replace the PCT system. [LINK]
    • UK Patenting Computer Programs: A UK Court has now ordered the UK PTO to stop rejecting patents simply because they claim computer programs. [IPKAT]
    • Valuing Patents: Accountants don’t know how to place a value on patents. The solution appears to be an arbitrary standard. [LINK]

     

    Bt-Corn Patent Unenforceable Due to Failure to Submit Internal Employee Notes

    Patent, ,

    PatentLawPic167Monsanto v. Bayer (Fed. Cir. 2008)

    Bayer holds several patents relating to genetically modified Bt corn.  This case arose when Monsanto sued Bayer in Missouri for a declaratory judgment stating that the patents were not infringed; invalid; and unenforceable.  The Eastern District of Missouri Court (Judge Webber) held all the patents unenforceable due to inequitable conduct during prosecution. On appeal, the Federal Circuit affirmed the holding of unenforceability.

    Bt corn contains a gene that codes for Bt toxin — an insect repellent protein found naturally in Bacillus thuringiensis (Bt) bacteria. Bayer’s patents cover the chimeric Bt-plant-promoter gene; plant cells expressing Bt toxin; plants expressing Bt toxin; and the method of modifying plants to express Bt toxin.

    Notes from a Conference: Before Bayer’s patent application, another scientist (Dr. Wayne Barnes) attended a conference and presented a poster on Bt genetic issues.  One Bayer scientist attended the conference and took extensive notes from the poster. Those notes were given to other Bayer Bt scientists including the individual responsible for prosecuting Bayer’s patent applications.

    During prosecution, Bayer submitted Dr. Barnes Abstract, but did not submit the notes. According to the court, those notes were material because they provided evidence of Dr. Barnes disclosure. (A reasonable examiner would have considered them “important in deciding whether to allow the … application”). The inference of intent was easily made since Bayer took a position at the PTO that was directly refuted by information contained in the note.

    Not Prior Art: One important – but unstated – aspect of this case is that the notes are not prior art. Rather, in this case the prior art was the publicly displayed poster.  Thus, the reminder: Rule 56 requires submission of prior art as well as information about the prior art that is either (1) material to patentabilty or (2) a reasonable examiner would consider important in deciding whether to allow the application. 

    Declaratory Judgment Power: Monsanto filed its DJ action against four Bayer patents. In response, Bayer provided a “statement of non-liability” along with a promise not to sue Monsanto on three of the patents. Under CAFC precedent, such a statement normally removes a court’s jurisdiction over those patents — except where, as here, the court retains separate jurisdiction based on a Section 285 request for attorney fees. Thus, because the patents are still before the court, it retains jurisdiction to hold them unenforceable. In addition, the CAFC noted that the recent Nilssen case also allows a court to hold patents unenforceable even after being dropped from the lawsuit.

    Patently-O Bits and Bytes No. 6.

    Patent, Patent Legislation,
    • Patent Reform in February: Hal Wegner notes “widespread predictions” that Senator Leahy now has enough votes to push the Patent Reform Act through the Senate.
    • Patent Reform Writeup: Professor Jay Thomas (Georgetown) is also tasked as the IP guy for the Congressional Research Service (CRS). In that capacity, Thomas has taken to explaining some of the pros and cons of the Patent Reform Acts of 2007. (HR 1908; S 1145).  [CRS REPORT ON PATENT REFORM] According to Thomas: “The provisions of the proposed legislation would arguably work the most sweeping reforms to the U.S. patent system since the nineteenth century.”  Thomas does an excellent job of quickly discussing each proposed reform measure in language as neutral as he can muster.
    • PCT Seminar: April 25–26 Pierce Law will host its 10th annual Comprehensive PCT Seminar in Concord, NH. Cost is under $400 ($100 for students). Two of the leading PCT Experts Carol Bidwell and David Reed will lead the seminar. [LINK]
    • Position: Director of the Office of Technology Management and Industry Relations at the University of Missouri. (Join me in Columbia). “The University of Missouri, Columbia (MU) is seeking an innovative, energetic, and experienced individual to serve as Director of the Office of Technology Management and Industry Relations.” [LINK]

    IEEE Standards: FTC Finds Patent Enforcement “Unfair Competition” Based on Patentee’s Prior Offers to License

    Patent,

    PatentLawPic166Federal Trade Commission v. N-Data (FTC Complaint and Settlement 2008)

    The FTC has announced both a complaint and settlement with the patent enforcement company N-Data. 

    N-Data had purchased Patent Nos. 5,617,418 and 5,687,174 from a distressed company (Vertical Networks) who had received the patents from National Semiconductor.  Both patents related to NWay ethernet technology that has become an IEEE standard. 

    An Encumbrance: National was interested in having its technology adopted as an IEEE standard. Consequently, prior to assigning away its patent rights, National wrote to the IEEE with a promise to “offer to license its NWay technology to any requesting party …. on a nondiscriminatory basis” for a one-time fee of $1,000. The evidence showed that each party in the chain of patent title were aware of those statements at the time of transfer.  Soon after the promise, IEEE adopted the NWay standard.

    Enforcement: Despite the $1,000 license promise by its predecessor, Vertical (and subsequently N-Data) began enforcement proceedings — asking rather for a reasonable royalty totaling approximately $20 million per year.

    FTC Complaint:  In a 3–2 decision, the five-member FTC voted to issue a complaint against N-Data’s activities under Section 5 of the FTC Act.  That section provides the Commission with authority to stop unfair methods of competition and deceptive commercial practices.  The Majority opinion particularly noted the problem of “lock-in”: “Respondent engaged in conduct that was both oppressive and coercive when it engaged in efforts to exploit licensees that were locked into a technology by the adoption of a standard.” 

    This holding is notable because there is no finding that N-Data had monopoly power or any antitrust liability. Consequently, Chairman Majoras (writing in dissent) had difficulty finding any oppression.  Majoras likewise had difficulty characterizing the sophisticated corporate players on the IEEE committee as “victims.” “The novel use of our consumer protection authority to protect large corporate members of a standard-setting organization is insupportable.”

    N-Data chose not to fight and has agreed to the majority findings.

    Patently-O Bits and Bytes No. 5

    Patent, ,
    • PatentLawPic158Majority Leader Harry Reid Plans to Move Quickly on Patent Reform: In the first work period of the Senate, Reid intends to move on patent reform (after handling the defense appropriations bill and economic stimulus). “Once we work these issues out, time permitting, we will also turn to two other priorities in this first work period: patent reform and an energy package.”  Perhaps appropriately, Reid’s concept of invention is tied-up with entrepreneurs: “On patent reform, we must carefully strike the right balance with a bill that promotes rather than blocks innovation from enterprising entrepreneurs.”  In Reid’s view, the bills should have become law in 2007: “If not for the obstruction of just a few Senators, we would have passed these bills last year. I am hopeful that the overwhelming majority of Senators – Democrats and Republicans alike – will have their voices heard this year.” [Zura]
    • ScreenShot024Comments for Japanese Patent Office: The JPO recently established a Policy Committee and have a schedule to recommend JPO policy changes in a report in April/May 2008. The Committee has generated broad goals of (1) a global system; (2) a predictable system; and (3) a system that promotes both creation and utilization. Comments on the goals and potential solutions are requested by Feb 25 (Japan time). [More Info] [Committee Broad Goals and Plan]
    • PatentLawPic157Patent Bar Exam: Patent Agent Alex Nix has created an excellent wiki to help those studying for the Patent Registration Exam: www.PatentBarQuestions.com. Learn and Contribute!

    To the Congress of the United States: I am transmitting to the Congress today a legislative proposal entitled, the “National Productivity and Innovation Act of 1983.” The bill would modify the Federal antitrust and intellectual property laws in ways that will enhance this country’s productivity and the competitiveness of U.S. industries in international markets. As you know, one of the most important goals of my Administration has been to revitalize the competitiveness and productivity of American industry. Tax cuts proposed by my Administration and enacted during the 97th Congress have greatly stimulated economic activity. In addition, our efforts to rationalize Federal rules and regulations have significantly enhanced the efficiency of our economy. For the first time in over a decade, there exists the foundation for a period of strong and sustained economic growth. The ability of the United States to improve productivity and industrial competitiveness will also depend largely on our ability to create and develop new technologies. Advances in technology provide our economy with the means to produce new or improved goods and services and to produce at lower cost those goods and services already on the market. It is difficult to overstate the importance of technological development to a strong and healthy United States economy. It has been estimated that advances in scientific and technological knowledge have been responsible for almost half of the increase in this country’s labor productivity over the last 50 years. New technology also creates new jobs and gives us an advantage in world markets. For example, the U.S. computer industry, which was in its infancy just a short time ago, directly provides jobs for about 830,000 Americans and is a leader in world markets. The private and public sectors must spend a great deal of time, money, and effort to discover and develop new technologies. My Administration has moved to bolster research and development (R&D) in the public sector by proposing in our 1984 budget to increase Federal funding of R&D by 17 percent, to $47 billion. However, it is vital that our laws affecting the creation and development of new technologies properly encourage private sector R&D as well. The Economic Recovery Tax Act of 1981 provides a 25 percent tax credit to encourage firms to invest in additional R&D. Our economic program has helped reduce inflation and interest rates and thus has lowered substantially the cost of conducting research. The antitrust and intellectual property laws also have a very significant effect on private investment in R&D. The antitrust laws are designed to protect consumers from anti-competitive conduct. While the economy generally benefits most from vigorous competition among independent businesses, the antitrust laws recognize that in some areas, like the creation and development of technology, cooperation among producers, even competitors, can actually serve to maximize the well-being of consumers. The intellectual property laws, for example, those dealing with patents and copyrights, also serve to promote the interests of consumers. The promise of the financial reward provided by exclusive rights to intellectual property induces individuals to compete to create and develop new and useful technologies. After reviewing the effect of the antitrust and intellectual property laws on the creation and development of new technologies and after consultations with key members of Congress, I have concluded that the antitrust laws can be clarified in some respects and modified in other respects to stimulate significantly private sector R&D. This can be done while maintaining strong safeguards to protect the economy against collusive actions that would improperly restrict competition. The National Productivity and Innovation Act of 1983, which embodies those changes, is a package of four substantive proposals that deals with all phases of the innovation process. Title II of the bill would ensure that the antitrust laws do not unnecessarily inhibit United States firms from pooling their resources to engage jointly in procompetitive R&D projects. Joint ventures often may be necessary to reduce the risk and cost associated with R&D. So long as the venture does not threaten to facilitate price fixing or to reduce innovation, such ventures do not violate the antitrust laws. Nevertheless, the risk remains that some courts may not fully appreciate the beneficial aspects of joint R&D. This risk is unnecessarily magnified by the fact that a successful antitrust claimant is automatically entitled to three times the damages actually suffered. Title II would alleviate the adverse deterrent effect that this risk may have on procompetitive joint R&D ventures. This title provides that the courts may not find that a joint R&D venture violates the antitrust laws without first considering its procompetitive benefits. In addition, Title II provides that a joint R&D venture that has been fully disclosed to the Department of Justice and the Federal Trade Commission may be sued only for the actual damage caused by its conduct plus prejudgment interest. This combination of changes will encourage the formation of procompetitive joint R&D ventures. And unlike some other proposals currently before Congress, it will do so with the minimal amount of bureaucratic interference in the functioning of those ventures. If we are to assure that our laws stimulate investment in new technologies, however, it is not enough merely to correct the adverse deterrent effect the antitrust laws may have on procompetitive joint R&D. Rather, we must also assure that the antitrust and intellectual property laws allow — indeed encourage — those who create new technologies to bring their technology to market in the most efficient manner. Only in this way can those who invest their time, money, and effort in R&D be assured of earning the maximum legitimate reward. Titles III and IV recognize that very frequently the most efficient way to develop new technology is to license that technology to others. Licensing can enable intellectual property owners to employ the superior ability of other enterprises to market technology more quickly at lower cost. This can be particularly important for small businesses that do not have the ability to develop all possible applications of new technologies by themselves. However, the courts have not always been sympathetic to these procompetitive benefits of licensing. Title III would prohibit courts from finding that an intellectual property licensing arrangement violates the antitrust laws without first considering its procompetitive benefits. In addition, the title would eliminate the potential of treble damage liability under the antitrust laws for intellectual property licensing. Although those who suffer antitrust injury as a result of licensing would still be able to sue for their actual damages plus prejudgment interest, Title III would minimize the deterrence that the antitrust laws currently may have on potentially beneficial licensing of technology. Title IV would also encourage the procompetitive licensing of intellectual property. Pursuant to this title, the courts may refuse to enforce a valid patent or copyright on the ground of misuse only after considering meaningful economic analysis. Finally, Title V will close a loophole in the patent laws that has discouraged investment in efficiency-enhancing technologies. Creation of and improvements in the process of making products can be just as important as creating and improving the product itself. Currently, if someone uses a United States process patent outside this country without the owner’s consent and then imports the resulting product into the United States, the importer is not guilty of infringement. Title V of the bill would close this loophole so that owners of process patents can earn their rightful reward by preventing the unauthorized use of their technology. We must not delay making the necessary changes in the law to encourage the creation and development of new technology, to increase this country’s productivity, and to enable our industries to compete more effectively in international markets. We must act now. I therefore urge prompt consideration and passage of this legislative proposal. Ronald Reagan The White House, September 12, 1983. —–

    Patently-O Bits and Bytes No. 4

    Patent
    • Patent Reform: The influential Intellectual Property Owners association (IPO) recently reported its belief that the Senator Leahy will “attempt to pass a revised version of S. 1145 in the Senate in February.”  The Bill has already successfully passed through the Senate judiciary committee. [www.ipo.org]
    • RelatIP: An “online community tailored exclusively to the unique requirements of intellectual property (IP) attorneys.” [www.relatIP.com]. 
    • Facebook: To meet Patently-O readers, join the Patently-O Facebook Group.
    • Patent Troll Tracker Concedes: The Patent Troll Tracker is tired of the “kerfuffle” and plans to limit use of the occasionally offensive term troll.  PTT’s specialty is sifting through the chain of shell corporations used by patent enforcers.  Feeling the fire, Ray Niro’s $10,000 reward is reportedly dangerously close achieving success — unmasking the identity of the troll tracker.  See McIntyre v. Ohio Elections Commission (“Protections for anonymous speech are vital to democratic discourse. Allowing dissenters to shield their identities frees them to express critical, minority views . . . Anonymity is a shield from the tyranny of the majority. . . . It thus exemplifies the purpose behind the Bill of Rights, and of the First Amendment in particular: to protect unpopular individuals from retaliation . . . at the hand of an intolerant society.”). (Image of Hamilton as the anonymous Publius).

    Innogenetics: Forward Looking Damages Approved

    Patent, ,

    ScreenShot002The injunction decision in Innogenetics deserves a second look. In that case, the Federal Circuit closely examined the Wisconsin District Court’s award of both injunctive relief and $1.2 million in forward looking damages.

    The $7 million total damage award was divided into two parts by the jury: a $5.8 million “market entry fee” and a $1.2 million “ongoing royalty payment.”*  This award “exactly tracked” the damage award proposed by the patentee’s expert and also fit within the jury instructions, which called for “both an up-front payment and an ongoing royalty payment.” 

    In addition to receiving a lump-sum to cover ongoing royalties, the District Court also awarded an injunction to stop ongoing infringement.  On appeal, the CAFC rejected this double-dipping. In her opinion, however, Judge Moore, was careful to cast the reversal in the language of eBay v. MercExchange.  Thus, the appellate panel held that a patentee who asked for and received future licensing royalties has no standing to complain of irreparable harm.

    The reasonable royalties awarded to Innogenetics include an up-front entry fee that contemplates or is based upon future sales by Abbott in a long term market. When a patentee requests and receives such compensation, it cannot be heard to complain that it will be irreparably harmed by future sales.

    Although the court did not use the words, the rule here appears to be akin to that of equitable estoppel.  This is a simple case for the appellate panel because the patentee asked for the forward looking damages.  However, the panel also implicitly accepts forward looking damages as an adequate substitute for injunctive relief.  The collection of damages negates irreparable harm — the most important eBay factor.**

    On remand, the CAFC also appears to have vacated the lump-sum future sale damages. Without discussion, the appellate panel ordered that the district court instead implement a compulsory license with a running royalty payment. The only clue to the court’s reasoning lies in Footnote 9, which notes that the shift to a running royalty would allow the district court to retain jurisdiction to “ensure the terms of the compulsory license are complied with.” 

    Notes:

    Design Patents: Claim Construction Rules Lead to Summary Judgment of Non-Infringement

    Patent, ,

    ScreenShot001

    One question to be answered in the upcoming Egyptian Goddess en banc rehearing is whether Markman style claim construction should apply to design patent cases.  George Raynal, an associate at the Saidman firm, took a look at the practical impact of such claim construction: summary judgment.

    by George Raynal

    The effect of applying Markman to design patent claim construction prior to determining infringement has resulted in an overwhelming likelihood that an accused infringer will bring a successful motion for summary judgment of non-infringement.  < ?xml:namespace prefix ="" o />

    In a survey, 63 design patent infringement cases have been identified since Markman was first applied to a design patent claim in Elmer v. ICC Fabricating, Inc., 67 F.3d 1571 (Fed. Cir. 1995).  Of these, the accused infringer moved for summary judgment of non-infringement in 43 cases.  The movant was successful in 31 (72%)[1] of those 43 cases, whereas the motion for summary judgment of non-infringement was denied only 12[2] times.  Of the successful 31, ten[3] were appealed and only one[4] of those ten was reversed because the court could not agree that no reasonable jury could find infringement based on the record. 

    Additionally, summary judgment of infringement has been granted in only four design patent infringement cases since Elmer.[5]  A motion for summary judgment of infringement has been denied once.[6] (more…)

    Appealing the Kitchen Sink

    Patent, , , , ,

    Innogenetics v. Abbott Labs (Fed. Cir. 2008).

    Innogenetics holds a patent covering a method of detecting Hepatitis C Virus (HCV) using hybridizing probes complementary to the 5’ untranslated region of HCV. The patent was found infringed and not invalid.

    On appeal, Abbott follows the currently favored “kitchen sink” approach:

    On appeal, Abbott challenges a myriad of issues, including the district court’s claim construction [of the word “as”], summary judgment of literal infringement, evidentiary exclusions as to Abbott’s obviousness and anticipation defenses, judgment as a matter of law that the Resnick patent did not anticipate claim 1 of the ’704 patent, summary judgment of no inequitable conduct, award of attorney’s fees to Innogenetics for Abbott’s counterclaim of inequitable conduct due to its exceptionality, and grant of a permanent injunction.

    The appellate panel patiently discussed each issue. Here, we only discuss a few:

    Infringement by Later-Invented Technology: Abbott proposed that it could not infringe because its particular “Realtime PCR” method of detecting HCV had not yet been invented at the time of the patent application.  Although the CAFC held that Abbott had procedurally forfeited that argument, the appellate body also noted that the argument is “lacks merit.”

    Essentially, Abbott argues that a patent can never be literally infringed by embodiments that did not exist at the time of filing. Our case law allows for after-arising technology to be captured within the literal scope of valid claims that are drafted broadly enough. See SuperGuide Corp. v. DirecTV Enters., Inc., 358 F.3d 870, 878-80 (Fed. Cir. 2004).

    Late Disclosure: Abbott disclosed a prior art reference (the Cha patent) the day before discover closed (and after all depositions had been completed). Then, on the day before trial, Abbott requested that the jury instructions be amended to include the Cha patent as an anticipatory reference.  The district court denied Abbott’s motion as unduly late and prejudicial to Innogenetics. On appeal, the CAFC affirmed — taking Abbott to task for its hard litigation tactics.

    This case aptly demonstrates the pitfalls of playing fast and loose with rules of discovery. Conclusory expert reports, eleventh hour disclosures, and attempts to proffer expert testimony without compliance with Rule 26 violate both the rules and principles of discovery, and the obligations lawyers have to the court. Exclusion and forfeiture are appropriate consequences to avoid repeated occurrences of such manipulation of the litigation process.

    Anticipation: The kitchen sink tactic worked — The CAFC did agree with Abbott that its expert’s testimony on anticipation had been improperly disregarded. The district court had disregard the testimony – finding that the expert had based his conclusions on an incorrect understand of the claim term ‘genotyping.’  On appeal, the CAFC used its own knowledge of biotech law to find that the district court’s findings on this issue were ‘clearly erroneous.’ Consequently, Abbott gets a new trial on the issue of anticipation.

    Injunctive Relief: The plaintiff agreed to jury instructions that would allow the jury to award both past and future damages. The award of $7 million appeared to include both past and future damages. In addition, the court issued an injunction to halt future infringement. On appeal, the CAFC held that the plaintiff was improperly double-dipping — a patentee may not collect a lump-sum for future damages and, at the same time, be awarded injunctive relief to stop future infringement.

    The reasonable royalties awarded to Innogenetics include an upfront entry fee that contemplates or is based upon future sales by Abbott in a long term market. When a patentee requests and receives such compensation, it cannot be heard to complain that it will be irreparably harmed by future sales. . . . As a result, the district court’s grant of an injunction prohibiting future sales of Abbott’s genotyping assay kits was an abuse of discretion and must be vacated.

    Patent Reform and the Ethos of the American Inventor

    Inventors, Patent, Patent Legislation

    PatentLawPic138Although I understand the reality that most patent prosecution is handled on behalf of corporate assignees, I still hold a special place in my heart for the maverick American inventor.  Some might understand the slight pangs I felt when reading the inventorship section of the Senate report on patent reform.  The report suggests eliminating from the law “the antiquated notion that it is the inventor who files the application, not the company-assignee.” Perhaps it is time my thoughts of the American inventor to go the way of the Wild West and horse drawn carriages.

    The Bill (S.1145) is intended to fix an understandable problem — that of inventors who fail to fulfill their contractual obligation to assign patent rights to the Corporate owner.  This is a serious problem as shown by the current issue of IPToday which includes a full-length article describing the complex set of hoops currently required to overcome these so called “problem inventors.” [LINK]

    Beyond the sound-bites, the specific reform provisions are not so bad. The revised statute would allow an “obligated assignee” to file the patent application on its own behalf. An inventor’s oath is still required unless the “obligated inventor” is either unable or unwilling to sign. Under the provision, a patent cannot be challenged as invalid or unenforceable based on a corporations mistaken claim that the inventor had an obligation to assign.  The savings clause appears to also include protection against mistakes in correctly naming inventors in the application.

    Quanta v. LG: Will the Supreme Court Clarify the Exhaustion Doctrine?

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    Editorial and News by Charles R. Macedo, Joseph Casino, Michael Kasdan, and Howard Wizenfeld.

    Today, for the first time in half a century, the Supreme Court heard oral argument on the extent to which a patentee can license its patents to different members of the same sales chain for the same product. [Transcript] In Quanta v. LG Electronics, the High Court heard arguments on whether a patentee can grant patent rights and at the same time contract around the exhaustion doctrine.  Further, the issue of whether patent exhaustion applies to method claims was also before the Court.  Charley Macedo attended the oral arguments to get a first hand impression of how the Supreme Court might deal with the issues related to patent exhaustion.

    An interesting aspect of oral argument at the Supreme Court was the focus of the Justices on whether patent exhaustion is an issue of patent law, contract law, or antitrust law.  Justice Breyer’s questions appeared to suggest that, under contract law theories, a patentee should not be able to put a post customer restriction in a license because it would impose improper “equitable servitudes on chattel”.  He also suggested that placing such a restriction could violate antitrust law doctrines.  By contrast, Justice Roberts focused on whether exhaustion is a patent law or contract law doctrine.

    In fact, the theory of patent exhaustion probably implicates both patent law and contract law.  It implicates patent law because, once an authorized sale is made, the patentee should have no further right to limit the sale of that item in commerce.  It implicates contract and antitrust law to the extent the patentee tries to impose an improper restriction in its license agreement.  Either way, the Supreme Court should preclude a patentee from contracting around the exhaustion doctrine.

    The Justices were also interested in knowing why the exhaustion doctrine was codified in the Copyright Act but not in the 1952 Patent Act.  In this regard the Amici were unable to cite to any useful discussion.

    During argument LGE also argued that the notices Intel sent to its customers were valid techniques of avoiding a defense of implied license.  LGE objected to the use of the exhaustion doctrine as an end-around to the defense of implied license.

    The role of patent protection in the U.S. economy continues to remain important and should not be undermined.  However, once a patentee has authorized goods or services to be sold under its patent, it should not be entitled to obtain a second payment for the same patent.   The Supreme Court has a chance to reestablish this fundamental principle of U.S. Patent Law.  We will have to wait and see if the Court takes advantage of this opportunity.

    Patently-O Bits and Bytes No. 3

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    • Patent Prosecution Highway Pilot Program extends to include Canada, Korea, Japan, and Hong Kong. Under the program, allowed US claims can receive “accelerated examination” in the other patent offices. Likewise, cases seeking claims first allowed in the other countries will be “made special” in the US. (MPEP 708.02(a) procedures for a petition to make special do not apply here). [LINK]. [via “C’est é-p@tent!”]
    • Outside the Box v. Travel Caddy: In an non-precedential opinion, CAFC judges disagreed on the meaning of the claim term “between.” The majority (Archer & Bryson) held that the term “between” limited the location of a panel only to an area within two end points.  In dissent, Judge Dyk argued that the open claim transition “comprising” should be interpreted to allow infringement even if the panel extends beyind the end points. [LINK]
    • Quanta: Today, the Supreme Court is hearing Oral Arguments in the Quanta case. Three Supreme Court / IP veterans are handling the oral arguments: Maureen Mahoney (Quanta); Thomas Hungar (DOJ); Carter Phillips (LGE, patentee).
    • ACPC Conference: In-house patent counsel may enjoy the upcoming ACPC meeting in Santa Barbara, Jan 27–30. [Link]

    Revisiting Foreign Infringing Activity

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    Patent.Law053CNET v. ETILIZE, 2007 U.S. Dist. LEXIS 87205 (N.D. Cal. 2007).

    CNET sued Etilize for infringement of its patented method and system for creating an electronic website catalog.  

    International Infringement: The accused infringer Etilize employs Pakistanis (in Pakistan) to manually comb the Internet and update its database of websites.

    Method and System Claims: Because Etlilize performs some steps of the patented method outside of the US, it cannot be found to infringe the method claims under 35 U.S.C. 271(a).

    On the other hand, CNET argued that the system claim would be infringed because the control and beneficial use of the system stems from the US. (NTP v. RIMM). On summary judgment, Judge Patel distinguished the RIMM decision and sided with the accused infringer. In particular, the court found that the claimed “system for creating” was not controlled or used by American end-users of the compiled data.

    That a copy of the catalog is located on a server in the United States … does not change the fact that overall control of the data collection and catalog creation is exercised from Pakistan.

    Import under 271(g): 35 U.S.C. 271(g) provides an additional avenue for capturing foreign infringement. That statute specifically charges importation of a product made by a patented process. Under Bayer v. Housey and NTP, this statute has been limited to physical products that have been manufactured.

    Here, Judge Patel found that the electronic catalog (when stored on computer readable media) is a physical product and qualifies under 271(g).  In Microsoft v. AT&T, the Supreme Court followed the same analysis in holding that “a copy of Windows, not Windows in the abstract qualifies as a ‘component’ under 271(f).”