April 2019

Infringing by Using a System vs Making/Selling the System

Patent

by Dennis Crouch

Omega Patents LLC v. CalAmp Corp. (Fed. Cir. 2019)

Omega’s patents cover remote control and monitoring systems for vehicles.  The defendant, CalAmp, helps companies and governments monitor their vehicles (location and status, such as battery health and vehicle speed).  In the infringement trial, a Florida jury sided with the patentee – finding the patents willfully infringed and not invalid.  The district court then trebled the damages and awarded attorney fees — for a tidy sum of $15 million (with an ongoing royalty of $13 per unit).

On appeal, the Federal Circuit has made several interesting rulings. In a later post, I’ll return to the validity issue.

This post will focus on infringement: Some of Omega’s claims require both “a transmitter and a receiver for receiving signals from said transmitter.” (33 and 31 in the figure above).  CalAmp’s accused device has the transmitter, but the accompanied receiver is a cell-phone tower.  Since CalAmp does not supply cell towers, the appellate panel found CalAmp cannot be a direct infringer under the All Elements Rule.

Making and Selling vs Using: Note here that we’re talking about system claims, and the patentee particularly accused CalAmp of “making and selling” the invention.  As explained below, infringement allegations for “using” an invention can be treated more expansively under the beneficial control doctrine.

The patentee had also alleged CalAmp’s indirect infringement — that CalAmp should be liable for its customers’ infringing use of the system. On appeal, the court agreed that there was sufficient evidence to find that the customers had “used” the claimed system:

“[T]o use a system for purposes of infringement, a party must put the invention into service, i.e., control the system as a whole and obtain benefit from it.” Centillion Data Sys., LLC v. Qwest Commc’ns  Int’l, 631 F.3d 1279 (Fed. Cir. 2011). “[A] person must control (even if indirectly) and benefit from each claimed component.” Intellectual Ventures I v. Motorola Mobility, 870 F.3d 1320 (Fed. Cir. 2017). Here, there was evidence from which the jury could infer that customers controlled and used the system and received the required benefits.

In other words, the cell-phone tower was being “used” by the customers as part of the system, and therefore it didn’t matter that they were owned by and more generally controlled by a separate entity.

Despite finding potential liability here, the court substantially vacated the infringement verdict on other grounds (informing the jury of the proper claim construction / proof of knowledge for inducement / etc).

At the end of the appeal, only one claim was left as valid/infringed.  The Federal Circuit determined that the patentee had not provided sufficient evidence at trial to support the full damage award based upon that lone claim. Thus, the new trial will also be needed on damages.

Patently-O Bits and Bytes by Juvan Bonni

Bits and Bytes, Patent

Recent Headlines in the IP World:

Commentary and Journal Articles:

New Job Postings on Patently-O:

Combating the Trafficking in Counterfeit and Pirated Goods

Patent

On April 3, 2019, President Trump released a “memorandum on combating trafficking in counterfeit and pirated goods” which calls for a report on the state of the issue to be completed by November 1, 2019.  Homeland security is in charge, with consultations from Commerce, Justice, OMB, USTR, and others, including intellectual property rights holders.

The memorandum mentions a couple of prior studies on counterfeiting and piracy, but the current data continues to be lacking — as the GAO wrote in 2010: “U.S. government estimates of economic losses resulting from counterfeiting cannot be substantiated due to the absence of underlying studies.”

A few elements of the memorandum are important to consider:

  1. The Administration is treating counterfeit goods and copyright piracy as homeland security and law enforcement issues — directing those groups to to step-up their efforts.
  2. The Administration is focusing as much on trafficking as it is production.  Think about vendors such as Amazon, Physical carriers such as FedEx, digital pipeline operators; payment providers, and customs brokers.  For legitimate intermediaries, however, the focus is on acting as “beneficial partners in combating trafficking.”

Although counterfeit goods may be costing the makers of branded products, the companies trafficking in the goods are making money.  It will be interesting to see the extent that those companies operating on an international scale will be willing to cooperate with US law enforcement.

Eligibility Train Wreck Continues its Skid: Skidmore Deference for the PTO on Eligibility

Patent

by Dennis Crouch

A key point of argument and policy over the past decades has been the level of authority given to the USPTO as the government’s expert patent law agency.  When the USPTO makes a decision — is that decision respected by other tribunals?  At times the agency is given substantial deference (factual conclusions made by the PTAB), but other agency decisions are also regularly reviewed de novo without deference.  With regard to interpretation of substantive patent law, PTO determinations are often simply ignored.

Cleveland Clinic Found. v. True Health Diagnostics LLC (Fed. Cir 2019) (nonprecedential) offers a case-in-point with the following key statement from the Federal Circuit:

While we greatly respect the PTO’s expertise on all matters relating to patentability, including patent eligibility, we are not bound by its guidance. And, especially regarding the issue of patent eligibility and the efforts of the courts to determine the distinction between claims directed to natural laws and those directed to patent-eligible applications of those laws, we are mindful of the need for consistent application of our case law.

In the case at hand, the Federal Circuit refused to follow or give any deference to PTO guidelines and instead affirmed a lower court determination that the claims at issue were ineligible as effectively claiming a law of nature.

Over the years, the PTO has shifted policy.  In the old eligibility cases like Diehr and Chakrabarty, the agency was refusing to issue patents that it saw as crossing-the-eligibility-line.  However, the new statements by Dir. Iancu go the other-way, with the USPTO creating a policy of issuing patents that the courts would find invalid (if given the opportunity).

The statement from the court here is important although buried in a non-precedential opinion.  One reason for its importance is its clear tension with the Federal Circuit’s recent decision in Natural Alternatives that called for Skidmore deference to be given to the PTO statement on eligibility.

The U.S. Patent and Trademark Office has adopted guidance on how examiners [and the agency as a whole] should determine whether a claim is eligible under § 101 and provided examples of eligible and ineligible claims. Under these guidelines, a claim to a practical application of a natural product to treat a particular disease is patent eligible. The parties dispute the persuasiveness of this document and the weight we should afford it under Skidmore v. Swift & Co., 323 U.S. 134, 65 S.Ct. 161, 89 L.Ed. 124 (1944).

Nat. Alternatives Intl., Inc. v. Creative Compounds, LLC, 2018-1295, 2019 WL 1216226, at *5 n.2 (Fed. Cir. Mar. 15, 2019).  Although Natural Alternatives was precedential, its statement regarding Skidmore deference was admittedly dicta by Judge Moore.  Judge Moore was also on the Cleveland Clinic panel, and I suspect that she would not have signed the opinion if it had been issued as precedential. Of course, that begs the question of why sign it as a non-precedential opinion?

 

The IP Section — Stream the First Four Episodes

Patent

by Dennis Crouch

I first worked with Wes Austin back in 2006 as he developed his Dunes CLE program and later followed with some interest his Utah-based patent firm Austin-Rapp.  As the image shows below, Austin has expanded from patent law into comedy as well.  His new sitcom – THE IP SECTION – merges the two (as well as Mormonism) and stars a patent lawyer who wants to be a stand-up comedian.

Watch the series here:

  1. The first four episodes are available for streaming on YouTube: https://www.youtube.com/channel/UC6bg3TGN_3hn628xD_1h0ww
  2. Austin also made a video of the back-story: https://www.facebook.com/theipsection/videos/251584812287074/

Do any of your experiences as a patent attorney or inventor fit easily into a comedy routine?

The Role of Profit Disgorgement in IP Law

Patent

by Dennis Crouch

In its new petition to the Supreme Court, Romag asks “whether willful infringement is a prerequisite for an award of an infringer’s profits.”  In utility patent law, courts have held that disgorgement of the infringer’s profits is never available as a remedy.  That option was eliminated from the Patent Act in 1946.  In design patents, however, disgorgement is the ordinary remedy.

Romag’s case falls under a different law (Trademark Law) and statutory scheme (The Lanham Act).  Section 35 of the Lanham Act (15 U.S.C. § 1117(a)) expressly provides for disgorgement of an infringer’s profits:

When a violation of any right of the registrant of a mark registered in the [USPTO], a violation under section 1125(a) or (d) of this title, or a willful violation under section 1125(c) of this title, shall have been established in any civil action arising under this chapter, the plaintiff shall be entitled, subject to the provisions of sections 1111 and 1114 of this title, and subject to the principles of equity, to recover (1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action.

The setup here appears pretty clear — defendant’s profits are available as a remedy to trademark infringement action – so long as they comport with “the principles of equity.”

This is a major circuit split: Six of the appellate circuits follow the statute by allowing a plaintiff to recover infringer’s profits without any additional showing (such as willfulness); Five other circuits require a prerequisite showing of willfulness prior to allowing disgorgement; and one circuit (the First Circuit) has hybrid requirement where willfulness must be shown when the parties are not direct competitors.   The Federal Circuit does not have its own law on this issue, but follows the law of the appropriate regional circuit court when hearing a TM case.

The plaintiff here – Romag – is a leading supplier of magnetic fasteners for bags and wallets. In 2002 Fossil started using Romag fasteners. Around 2008, however, Fossil’s products began appearing with counterfeit Romag branded fasteners.

A jury found for Romag — both for trademark infringement and patent infringement.  However, the jury also found that the infringement was not willful. The basic idea is that the mental-state culpability was on Fossil’s Chinese supplier, not Fossil itself.  The jury did go ahead and award a portion of Fossil’s profits — finding that 1% of Fossil’s profits were attributable to the TM infringement ($6.7 million).

Following trial, the Connecticut district court threw-out the profit disgorgement verdict — holding that the 2nd Circuit required willful infringement before disgorging profits.  The appeal went to the Federal Circuit (because of the patent issue) who affirmed — applying 1st Circuit law.  After a bit more civil procedure, the petition is now before the U.S. Supreme Court:

Whether, under section 35 of the Lanham Act, 15 U.S.C. § 1117(a), willful infringement is a prerequisite for an award of an infringer’s profits for a violation of section 43(a), id. § 1125(a).

This is a case with a very good shot of being heard by the U.S. Supreme Court.

Romag Fasteners, Inc., v. Fossil, Inc., et al., 2018-1233 (RomagCertPetition])

Power of Negative Limitations

Patent

IBM v. Iancu (Fed. Cir. 2019) (non-precedential)

In two separate IPR proceedings, the PTAB found several of IBM’s claims unpatentable as anticipated obvious. U.S. Patent No. 7,631,346 claims 1, 3, 12, 13, 15, and 18.  On appeal, the Federal Circuit has vacated / reversed those opinions.  [error fixed above]

The patent here claims a  user-authentication method for a “single-sign-on . . . within a federated computing environment.”  The basic setup here is that user known to a “first system” wants access to resources on a “second system” that doesn’t know about the user.  The invention works by the first system providing an “identifier” associated with the user and the second system creating a user account using that identifier — not too complex here.  A “single-sign-on” is basically a setup for user convenience so that the user only logs-in on one system but can access the whole federation.

Both systems are part of a “federated” environment – which seems potentially complex except for the definition found in the patent:

A federation is a loosely coupled affiliation of enterprises which adhere to certain standards of interoperability; the federation provides a mechanism of trust among those enterprises with respect to certain computational operations for the users within the federation.

In the appeal here, the patentee argues that the Board too-broadly defined the terms “federated computing environment.”  Of some interest here, both IBM and the IPR petitioners (Priceline, OpenTable, etc.) agreed upon the term’s definition and that it was limiting even though it appeared only in the claim preamble.  The PTAB disagreed with the parties — and in particular held that the term “federation . . . is not limited to enterprises” but could instead more generally includes a group of “entities.”  Under the Board’s interpretation, any two computer systems could be seen as “entities” even if both are within a single “enterprise.”  That broader scope is important because the closest prior art authentication system involved two computers within a single enterprise.

On appeal, the Federal Circuit found the PTAB’s construction unreasonable – given the plain definition in the specification.  On remand, the PTAB will consider whether the prior art still anticipates the invention based upon this narrower construction.

= = = =

I considerably simplified the facts above.  It turns out that the patent specification was not as consistent in stating that a “federation” required computers from at least two different “enterprises.” In particular, the specification states that:

In the context of the present invention, a federation is a set of distinct entities, such as enterprises, organizations, institutions, etc., that cooperate to provide a single-sign-on, ease-of-use experience to a user. . . . The terms ‘entity’ or ‘party’ generally refers to an organization, an individual, or a system that operates on behalf of an organization, an individual, or another system.

Notice that this definition of federation is not limited to enterprises, but instead is tied to the broader category of “entities,” and entities include “systems” — i.e., computers.  Thus, the Board found that a federation can be created by two computer systems even if operating within the same business enterprise.

In the appeal, the Federal Circuit rejected this approach holding here that the “such as” language limits was intended as an exclusive listing of what counts as federation elements.

The column 10 passage refers to entities “such as” the ones listed and includes “etc.”—both of which, in this context, indicate that only things of a type similar to the itemized ones are covered, namely, other establishments or ventures or firms or the like. We have recognized that “such as” and “etc.” sometimes have just that meaning. (“rule of ejusdem generis). That understanding is the only reasonable one for the passage, given the plain meaning of the definitional and other language we have already discussed.

It is hard for me to say what the take-away is for patent drafters on this claim construction except – who knows what the court will decide?

I’ll note here that the IPR petitioners settled the case with IBM but the USPTO stepped in to defend the PTAB sua sponte claim construction decision.

= = = = =

Does Silence Disclose a Negative Limitation: The panel also addressed the single-sign-on element of the claims — the single-sign-on requirement is interesting because it may sound like a positive limitation but is really being interpreted as a negative limitation. Basically, once the user gives credentials for the first system, the user doesn’t need more authentication (i.e. passwords) to access the second system.  In the appeal, the Federal Circuit found that the silence on a topic was not sufficient to disclose the absence of a feature:

Even if the Board were correct that Mellmer is “silent” …  that characterization would not alone support a finding that there was no user authentication action….  Silence in that sense would not by itself suffice for the Petitioner to meet its burden to prove, by a preponderance of the evidence, that there was no user authentication action in this scenario.

In other words – a negative limitation can be powerful.  On appeal, the Federal Circuit has reversed the holdings based upon single-sign-on being found in this reference.