All posts by Dennis Crouch

About Dennis Crouch

Law Professor at the University of Missouri School of Law.

Monsanto’s Roundup Ready Patents Survive Appeal

Patent, Patent Cases 2006,

Monsanto v. Scruggs (Fed. Cir. 2006).

Back in 2000, Monsanto sued Scruggs for infringement of its patents covering Roundup Ready (R) soybeans and cotton. Scruggs, a Mississippi farmer, had allegedly replanted seeds that he had grown on his farm. Monsanto won the infringement case on summary judgment and an injunction issued.

First Sale Doctrine: On appeal, Scruggs argued that because he purchased the seeds in an unrestricted sale, he was entitled to use those seeds in an unencumbered fashion under the doctrine of patent exhaustion. Scruggs’ first sale argument failed for two reasons. First, although Scruggs never obtained a license to use the seeds, he was supposed to under Monsanto policy — therefore the sale was not “unrestricted.” Second, as the CAFC held in McFarling, rights to second generation seeds are lost by unencombered sale of first generation seeds.

The fact that a patented technology can replicate itself does not give a purchaser the right to use replicated copies of the technology. Applying the first sale doctrine to subsequent generations of self-replicating technology would eviscerate the rights of the patent holder.

Antitrust Counterclaims: As a countermeasure, Scruggs asserted that Monsanto was misusing its patents and violating antitrust laws through its licensing requirements that include “an exclusivity provision, a no replant policy, a no research policy, . . . the payment of a technology fee,” and use of Roundup brand herbicide (with certain limitations). The CAFC made quick-work of these arguments — many of which were previously decided in the 2004 MacFarling case. By rearguing the previously decided in MacFarling, Scruggs appears to be set-up for a petition for certiorari based on those general principles.

In dissent from the antitrust conclusion, Judge Dyk argued Monsanto’s Roundup requirement to be unlawful tying.  More particularly, the requirement to use Roundup branded herbicide should be considered unlawful tying even if not other manufactuer had regulatory approval because that license term would chill activity of competitors in seeking their own regulatory approval.

A potential herbicide competitor thus would be concerned that, even if it secured government approval of its product, use of the approved herbicide would still be barred under the contracts. The elimination of such potential competition is not permissible under the antitrust laws.

Interestingly, neither the majority nor the dissent questioned the “no research” requirement of the license that prohibited research and/or experimentation on the seeds.  In fact, all three judges explicity agreed that restriction is a legitimate “field of use” restriction.  (Perhaps legitimizing a contract-based anti-circumvention requirement à la DMCA.).

The CAFC appears to have also ignored the State of Mississippi’s amicus brief arguing, inter alia,

Permanent Injunction: The lower court had issued a permanent injunction based on the CAFC’s “traditional rule.”  Based on eBay, the CAFC vacated the permanent injunction and remaneded for a full reconsideration of that final issue.

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“Consisting Of” Claim Transition Does Not Exclude Unclaimed Impurities

Patent, Patent Cases 2006,

Conoco v. EEI (Fed. Cir. 2006).

Conoco’s asserted claims were directed to drag reducing agents for gas pipelines.  EEI lost a bench trial and appealed on claim construction.  One claim in particular included the transition “consisting of” rather than the more open-ended “comprising.”

First, the CAFC refused to review the construction de novo because it had not been properly objected to at trial. Reviewing for clear error (substantial evidence) the appellate panel easily found that certain impurities found in the accused product did not allow EEI to escape infringement even though the closed “consisting of” language was used.

[I]mpurities that a person of ordinary skill in the relevant art would ordinarily associate with a component on the “consisting of” list do not exclude the accused product or process from infringement.

Affirmed.

Federal Court Rejects Jurisdiction Over Inventorship Claim

Patent, Patent Cases 2006,

Stevens v. Broad Reach, 79 USPQ2d 1501 (W.D.Mo. 2006).

Feeling he had been slighted by not being listed as the inventor on a patent application directed to a liquid polymer blender, Kirt Stevens sued — seeking a judgment that he is the inventor of the claimed invention and an injunction forcing an amendment to the pending application.

On motion, however, the court dismissed the claims for lack of subject matter jurisdiction. In particular, the court found that amendment of inventorship in a patent application is governed by 35 U.S.C. § 116.  That statute provides that amendment be made before the PTO and, according to the court "does not provide a private right of action in federal court to resolve inventorship disputes in patent applications."

Case dismissed.

Notes: Of course, Stevens cannot take action under Section 116 without the cooperation of the other side.  Suggestions for Stevens? The application, filed in October 2004, has apparently neither been published nor issued as a patent.

Object when jury instructions include disputed claim constructions

Patent, Patent Cases 2006, , ,

Serio-US v. Plastic Recovery Tech (Fed. Cir. 2006).

The jury found that PRT did not infringe Serio’s patents on automatic trash dumpster locks.   

Post-Trial Practice: After the jury’s finding, the plaintiff did not move for JMOL or a new trial — thus forclosing an appeal on the question of infringement except for prejudicial error (which was not found). In addition, the plaintiff did not object to the jury instructions which included the court’s claim interpretations — without an objection these instructions cannot be overtuned unless they are a "miscarriage of justice."  No miscarriage was found.

Exceptional case: The lower court did not find this to be an exceptional case — a finding affirmed on appeal:

Exceptional cases usually feature some material, inappropriate conduct related to the matter in litigation, such as willful infringement, fraud or inequitable conduct in procuring the patent, misconduct during litigation, vexatious or unjustified litigation, conduct that violates Federal Rule of Civil Procedure 11, or like infractions. . . . Absent misconduct in the litigation or in securing the patent, a trial court may only sanction the patentee if both the litigation is brought in subjective bad faith and the litigation is objectively baseless.

Because there was evidence that the case was not brought in bad faith, the refusal to award attorney fees was justified.

Notes:

Noonan’s Corner Office: Amgen v. HMR

Patent, Patent Cases 2006,

By Kevin Noonan.

The peripatetic case of Amgen v. HMR has once again been reviewed by the Federal Circuit.  No. 05-1157, decided August 3, 2006.  Once again the Court has failed to lay the several issues in the case to rest.  While affirming infringement and validity of two of the patents in suit, the court has remanded the matter once again to the district court in view of its de novo claim construction, and perhaps predictably disagreed with the lower court and reversed a determination of infringement under the Doctrine of Equivalents.

The case has two interesting aspects.  First, citing the rubrics of Phillips the court came to its own determination of the meaning of the term “therapeutically effective amount” with regard to a claim for recombinant erythropoietin (EPO).  EPO is a naturally-occurring hormone that stimulates the body to produce red blood cells, and its absence (or insufficiency) causes anemia.  The standard clinical measure of anemia is the hematocrit, or the percent of whole blood comprised of red blood cells. In construing the term “therapeutically-effective amount,” the district court had required that EPO falling within the scope of the claim containing the term increase hematocrit and have any other biological properties of naturally-occurring EPO. 

The Federal Circuit disagreed, and in doing so provided a nice illustration that Phillips has not changed the Court’s capacity for arriving at its own idiosyncratic construction.  The Court determined that the lower court had improperly focused on hematocrit, which is one of EPO’s biological properties recited in the specification, to the exclusion of several others, including increasing stimulation of reticulocyte response, development of ferrokinetic effects, erythrocyte mass changes, and stimulation of hemoglobin.  The Court noted in particular that the specification recited that the therapeutic properties of recombinant EPO “included” all of these, and that the specification further stated that recombinant EPO was therapeutically useful even if it lacked some but not all of these properties. 

Of course, the Court seems to have not considered the fact that all of the recited properties are related to the clinical measurement of hematocrit, since they are all part of the biological developmental pathway leading to an increase in the number of red blood cells in blood.  Thus, by cherry-picking the language of the specification, the Court was able to arrive at a facially-reasonable claim construction that seems to run contra to clinical reality.  This portion of the matter has been remanded, for further consideration in view of the Court’s claim construction, on the issue of invalidity over prior art references to EPO preparations that did not increase hematocrit but may have had one of the other recited biological properties.

The second issue is the doctrine of equivalents.  The “predicted” recombinant EPO protein contains 166 amino acids, but as produced naturally (and using HMR’s recombinant process) EPO has only 165 amino acids.  The issue before the Court was whether Amgen was entitled to assert claims to HMR’s recombinant EPO as an equivalent.  The district court twice found in the affirmative, and the Federal Circuit remanded in its first review so the lower court could consider the issue in view of Festo. Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 535 U.S. 722, 740–41 (2002).  The district court having arrived at the same conclusion, infringement under the doctrine of equivalents, the Federal Circuit reversed, finding estoppel arising during prosecution.  Specifically, the Court held that  preliminary amendments resulting in claim language reciting the 166 amino acid species were not made for reasons tangentially related to the asserted equivalent, as found below, but raised prosecution history estoppel that precluded asserting the claim against HMR’s 165-amino acid species.  The Court’s holding was based in part on Amgen’s cancellation of claim limitations related to “fragments” of the 166-amino acid species, and in part because it found erroneous the district court’s determination that the amendments were made to limit the species to human EPO (the Court noted that if Amgen had intended to so limit the claims the mere addition of the word “human” would have been sufficient).  Finally, the Court rejected the notion that amendments made to avoid a double-patenting rejection were “tangential to patentability.”

For those keeping score, the Court in its two decisions has affirmed the district court’s judgment that two of Amgen’s patents are not invalid and are infringed, also affirmed that another Amgen patent is invalid, reversed a finding of infringement under the doctrine of equivalents (but affirmed that this patent is also not invalid), and for one patent remanded the issue of invalidity to the district court while affirming that if valid this patent is also infringed.  As noted in Judge Michel’s dissent (over the claim construction issue), the district court is now in position to decide whether to grant an injunction, keeping HMR’s competing EPO product off the market until at least the expiration of two of Amgen’s patents.  For the parties, that may be (or have to be) enough.

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States Win Two 11th Amendment Immunity Dismissals

Patent, Patent Cases 2006

Tegic v. U.Texas (Fed. Cir. 2006)

Tegic sued UT in district court in the state of Washington for a declaratory judgment of patent invalidity and unenforceability.  UT had previously sued dozens of Tegic’s cellular phone companies for infringement based on Tegic’s underlying predictive text software. That lawsuit is ongoing.

Despite UT’s participation in similar litigation, the CAFC found that UT was protected from Tegic under 11th Amendment state immunity, and that the similar litigation did not waive such immunity. Particularly of note, the court found that (1) the suit in Texas does not waive immunity to suit in another state; (2) the “customer suit exception” cannot be used to override 11th Amendment immunity; and (3) UT’s issuance of a covenant not to sue Tegic is not a market entry.

The CAFC suggested that Tegic attempt to intervene in the Texas case — of course Tegic’s reason for filing a DJ action in Washington was to get the case out of Texas. . .

Pennington Seed v. Produce Exchange No. 299 and Univ. of Arkansas (Fed. Cir. 2006).

Pennington sued UofA for infringement of patent No. 6,111,170, which claims a new variety of fescue grass. Pennington argued that 11th Amendment immunity here would violate due process because the state of Arkansas provided no other adequate mechanism for pursuing claims against the state.  The CAFC disagreed, citing Florida Prepaid for the proposition that abrogation of state immunity requires a specific abrogation by Congress based on a finding that the available Arkansas procedures are inadequate. Congress has made no such finding.

Pennington also sued university officials in their official capacity.  The CAFC agreed that these persons were immune from a suit for past monetary damages based on actions in their official capacity. In addition, for an injunction to be viable, there must be a direct nexus between the officials and the alleged infringement.  There was none here. Immunity affirmed.

CAFC reopens case for determination on fraudulent expert reports

Patent, Patent Cases 2006

AirBagVenture Industries v. Autoliv (Fed. Cir. 2006).

At trial, damages experts relied on Venture’s financial statements when calculating damages.  It turns out, however, that those statements were at least inaccurate and perhaps fraudulent. Autoliv unsuccessfully moved for relief under FRCP 60(b), then appealed.

60(b)(2): Under Rule 60(b)(2), relief may be granted when new evidence is discovered that clearly would have produced a different result.  This rule rightly presents a high hurdle — requiring prejudice — to reopening a closed case.  After reviewing the potential new numbers, however, the CAFC agreed that despite the original inaccurate information, the final result was not necessarily mistaken.  

60(b)(3): Rule 60(b)(3) relates to fraud, misrepresentation, or other misconduct.

Discovery Misconduct: “Failure to produce material in response to legitimate discovery requests can constitute misconduct under Rule 60(b)(3).”  Even though Venture battled against every discovery request, there was no allegation that it disobeyed the Special Master or district court as would be required.

Reliance on Fraudulent Financial Statements: Unlike its counterpart 60(b)(2), Rule 6(b)(3) does not require prejudice in the result. Rather, when there is fraudulent testimony, relief is appropriate where “a jury might have reached a different conclusion” without the false testimony. (6th Circuit law). Because the lower court had assumed the prejudice standard, it did not address whether the expert testimony relying upon the incorrect financial statements was, in fact, fraudulent.  Thus, the CAFC vacated and remanded for a more complete finding.

Notes:

  • Read the opinion here.
  • This case arose out of a 1995 settlement of a patent dispute that was, according to Autoliv, being breached by Venture.

 

 

Improper claim structure invalidates patent

Patent, Patent Cases 2006

Pfizer v. Ranbaxy (Fed. Cir. 2006).

In an infringement suit arising from Ranbaxy’s ANDA filing, Pfizer’s two patents covering Lipitor (atorvastatin) were upheld as infringed and not-invalid by the district court Judge Farnan. On appeal, the CAFC affirmed on one patent (leaving Lipitor covered), but found the asserted claim of the second patent (the ‘995 patent) invalid under Section 112, paragraph 4 because of an improper dependent claim structure.

Section 112 of the Patent Act requires, inter alia, that a dependent claim incorporates by reference all the limitations of the parent claim and also specifies a further limitation. 

Pfizer’s asserted claim 6 depends from claim 2, which depends from claim 1.  The subject matter of the claims is as follows:

Claim 1: (1) atorvastatin acid; or (2) atorvastatin lactone; or (3) pharmaceutically acceptable salts thereof.

Claim 2: atorvastatin acid but not atorvastatin lactone or a pharmaceutically acceptable salts.

Claim 6: the hemicalcium salt of the compound of claim 2.

Thus, claim 6 fails to "specify a further limitation of the subject matter" of the parent claim (as requred by 112) because the subject matter of claim 6 is completely outside the scope of claim 2.

Consequently, based on violation of the statute, the court found that the claim was invalid.

Although the district court was reluctant to find the fourth paragraph of § 112 to be an invalidating provision, doing so does not exalt form over substance. Rather, it is consistent with the overall statutory scheme that requires applicants to satisfy certain requirements before obtaining a patent, some of which are more procedural or technical than others.

Reversed in part. Pfizer may be able to correct this defect through a reissue application, although there is some question as to whether the defect here falls within an identified category.

Injunction Denied — Compulsory License Granted

Patent, Patent Cases 2006,

Finisar v. DirectTV Group (E.D. Tex. 2006).

A jury found willful infringement by DirectTV.  However, in the post-trial hearing, the court denied Finisar’s motion for injunctive relief and instead granted a compulsory license.

Reasoning from the transcript:

  • Patentee has no irreparable harm because it never made or licensed the invention and DirectTV has money to pay damages. [The court found no presumption of irreparable harm.]
  • Because there are only two major competitors in the "market" (DirectTV and EchoStar), an injunction against DirectTV could create a de facto monopoly in EchoStar’s favor.
  • A compulsory license will adequately compensate Finisar — "especially since Finisar never had the will nor the means to implement the patent itself."
  • Hardship to DirectTV would be enormous. Thousands of employees out of work . . . 15 million lose the ability to watch TV . . . ripple effect . . . "some would say this is a blessing."

Documents:

  • Kathi Lutton and Ruffin Cordell of Fish & Richardson have provided several key documents here.

Appeals Court orders Eolas v. Microsoft Patent Case to be Reassigned

Patent, Patent Cases 2006, ,

Eolas Eolas v. Microsoft (Fed. Cir. 2006).

Eolas has been after Microsoft since 1999 hoping to collect on its five hundred million dollar patent infringement verdict.  After last year’s remand from the CAFC, Microsoft asked the Northern District of Illinois to reassign its case to another judge — a motion that was denied. Microsoft appealed.

In its motion for reassignment, Microsoft did not assert bias or misconduct, but rather argued that under N.D.Ill. rules, cases on remand should be "automatic." (Local Rule 40.5). In denying the motion, the district court explained that the particular rule had become "mostly dormant."

In its decision to reassign the case, the CAFC also relied upon the Seventh Circuit rule that cases must be reassigned on remand. 

Although the 2005 CAFC decision in this case was largely in favor of the patentee Eolas, Microsoft will now have a new opportunity to present its defenses to an entirely new judge.

Eolas case is now even stronger — with the recent issuance of a reexamination certificate of the Eolas ‘906 patent by the PTO. The reexamination provides a further presumption that the patent is valid over a number of additional pieces of prior art, including that submitted by W3C Director Tim Berners-Lee.

Documents:

The 271(f) export issue is likely to be taken-up by the Supreme Court in the parallel AT&T v. Microsoft case.

PVPA Not Infringed When Seller Lacked Knowledge

Patent, Patent Cases 2006,

Rewritten Aug 1:Softred

Syngenta Seeds v. Delta Cotton (Fed. Cir. 2006).

In a case involving a variety of soft winter wheat, the CAFC has effectively reversed a jury’s finding of infringement and damages under Section 2567 of the Plant Variety Protection Act (PVPA) because the accused seed seller did not have proven knowledge that the seeds were protected. 

Here, Delta was reselling seeds that had been provided by local farmers.  Delta’s apparent "don’t ask don’t tell" policy with regard to the variety of seed enabled it to escape liability under the PVPA. 

Lanham Act: Syngenta also accused Delta of "reverse passing off" because Delta was selling the Syngenta variety of seed under the Delta Cotton name.  Reverse passing off is generally thought of as "misrepresenting someone else’s goods or services as [your] own." Dastar.

The CAFC agreed with Syngenta that reverse passing off has no scienter requirement and thus proof of Delta’s knowledge would not be required.  However, Syngenta did not show proof that the misidentification of goods caused any harms to Syngenta’s business or mark.

Reversed

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Patent Reform: Issa’s Litigation Pilot Gains Support (HR 5418)

Patent, Patent Legislation

Substantive patent reform legislation is dead for the year.  The one Bill that has some traction is Representative Darrell Issa’s patent litigation pilot program.  The Bill (HR5418) would cost only $5m per year and would change the random case assignments in district courts so that judges who opt in would be more likely to hear patent cases. The money pays for a law clerk with technical expertise.

On July 26, 2006, the House IP subcommittee markup, members approved the Bill, although more amendments are expected to address concerns that the focus on particular "patent" judges could increase the opportunity for forum shopping.

Rep Issa is the named inventor on dozens of patents and has personally been involved in patent litigation in his hometown of San Diego.

There is no companion Bill in the Senate yet, although Senator Hatch is said to be "working on it."

One motivation for the legislation is to try to reduce the CAFC reversal rate. Can someone do a study to see if Judges that handle more patent cases are less like to be overturned at the CAFC? You probably have a year to complete the study, because, even with support of the subcommittee, passage this year is still a long-shot.

Documents:

Settlement Creates Unchallengable Claim Construction

Patent, Patent Cases 2006,

LouisvilleBeddingPatentLouisville Bedding Co v. Pillowtex (Fed. Cir. 2006).

Louisville Bedding owns a patent on a mattress pad cover that uses a special skirt material.  In its original suit against Pillowtex, Louisville got a negative claim construction and infringement opinion from the district court and the parties quickly settled. Shortly after settling, Pillowtex dissolved into bankruptcy.

After the earlier decision was used to collaterally estop Louisville in a later suit against another party, the patent holder filed a Rule 60(b)(6) motion to reopen (or vacate) the original decision. — The motion was denied, first by the district court and then affirmed on appeal.

The CAFC did not discuss whether the application of collateral estoppel of claim construction was correct.  The appellate panel did, however, uphold the longstanding tradition of finality of judgment.

As the Supreme Court has recognized, "[p]ublic policy dictates that there be an end of litigation; that those who have contested an issue shall be bound by the result of the contest, and that matters once tried shall be considered forever settled as between the parties." Baldwin v. Traveling Men’s Ass’n, 283 U.S. 522, 525 (1931). This policy concern is even stronger when a case is ended by the deliberate choice of the parties.

Louisville Bedding argued that the changed circumstances of the Pillowtex bankruptcy opened the door to revisit the case. The CAFC disagreed.

Typically, a district court may grant relief under Rule 60(b)(6) only for "exceptional or extraordinary circumstances.” Louisville has not made such a showing. Because businesses fail every day, the failure of Pillowtex in this case, even though it appeared to be highly commercially successful in 1998, is not an "exceptional or extraordinary circumstance." To say the least, Louisville took a calculated risk that did not turn out the way that it expected. Nor can we say that the equities in this case particularly favor Louisville and its fateful business decision. In the Pillowtex case, Louisville was faced with a summary judgment of noninfringement and an unfavorable claim construction with respect to the ’322 patent. Its position looked bleak at that time. There was no certainty that Louisville could have had that result changed in the district court or on appeal if it did not enter into the settlement agreement. Thus, it was greatly to Louisville’s benefit to settle the case under the terms that it did.

Denial of R.60 motion affirmed.

Book Review: Anonymous Lawyer

Book Review, Patent

AnonymouslawyerAnonymous Lawyer
By Jeremy Blachman
Released July 25, 2006.

$15.75 from Amazon (37% off).

I e-mailed back-and-forth with the author Jeremy Blachman back in early 2004 — before I started Patently-O.  He was at Harvard Law School and gave me lots of great tips and helped me get my feet wet in the blog world.  I finally met Jeremy in person in 2005, several months after the New York Times revealed that the prototypical BigLaw partner embodied by the Anonymous Lawyer Blog is, in fact, Mr. Blachman. Rather than joining Reed Smith as a new associate after graduation, Jeremy got a book deal to transform his blog persona into a full length novel.  He has done an excellent job!

The book is a breeze to read (advance copy) and it is always fun to trash corporate attorneys.  It’s cheap too — $15. Hopefully most of you will chuckle to yourself as you read the book — happy that your firm is not this bad. . .

On-line Resources:

Book Review: Innovation and its Discontents

Book Review, Patent,

Review by Professor Thomas G. Field, Jr.

Jaffelerner Innovation and its Discontents: How Our Broken Patent System is Endangering Innovation and Progress, and What to Do About It (2004).
by Adam Jaffe and Josh Lerner

The 2004 book, Innovation and Its Discontents, has received too much attention to ignore. There, and more recently in the Wall Street Journal and elsewhere, Professors Jaffee and Lerner maintain that the patent system is broken, endangering innovation and progress. To their credit, they acknowledge that the alarm has been sounded for centuries. But such ground was well covered in Fritz Machlup’s agnostic study, An Economic Review of the Patent System, published by the U.S. Senate in 1958. Also, to their credit, they criticize, at 158, Nobel Laureates for exceeding the scope of their expertise. Yet, their often-rambling book suffers from the same fault.

Ironically, an introductory section beginning at 18 is entitled "patent medicine." As noted by Wikipedia, for example, "One memorable group of patent medicines — liniments that allegedly contained snake oil, supposedly a universal panacea — made snake oil salesman a lasting synonym for a charlatan." The authors aren’t charlatans, but it is difficult for anyone who knows much about patents to take Discontents seriously.

Jaffee and Lerner put a fresh face on prophesies of doom by linking them to two recent process changes in the patent system — a shift from tax to user-fee funding for the PTO and the creation of the U.S. Court of Appeals for the Federal Circuit. Although they argue that patent policy is too important to leave to patent lawyers, both problems and proposed solutions seem more related to process than policy.

The authors could be taken more seriously if they didn’t persist in flagging a few patents as evidence that, according to their subtitle, "our patent system is broken, endangering innovation and progress." Three mentioned in their book and elsewhere are for sideways swinging, exercising cats with laser pointers, and wristwatches for dogs. They might not resort to such examples, however, if they appreciated that the first is unenforceable, the second could not be enforced except possibly under § 271(b), and the third if enforced would seem unlikely to endanger much of anything.

By citing such patents, Jaffee and Lerner are hardly alone in subjecting the PTO to ridicule, but I fail to see how altered funding of the PTO could have increased the frequency of such patents. Nor do I see how their proposals would reduce it. Although they advocate, for example, earlier publication and expanded opposition, who other than the humorless would oppose? And how much time or money might such humorless individuals be willing to spend?

The relationship between the shift in PTO funding, on the one hand, and the issuance of patents for silly or trivial inventions, on the other, is remote. Indeed, I can think of nothing more likely to deter applications to protect inventions of little or no economic value than the substantial fee increases that followed the shift.

It is unlikely that those who got the swinging and cat-exercising patents harbored delusions about their economic value. Jaffee and Lerner, with most other patent system critics, however, seem not to appreciate why applicants often find such assessments difficult. As I’ve argued repeatedly, applicants unaware of the market value of inventions have far less incentive to scour the literature for potentially fatal art than infringers who subsequently become aware of the stakes. Anyone who understands that should not be surprised that patents are sometimes invalidated. Nor should they protest overmuch that infringers intending to do so must meet a heightened burden of proof. Moreover, they should not be sanguine about the prospects for early opposition.

Turning to Jaffee and Lerner’s claim that the Federal Circuit was a bad idea, I’m even more skeptical. Prior to 1982, only two courts had appellate jurisdiction to review PTO decisions directly — the D.C. Circuit and the CCPA. The 1966 report of an expert commission established by President Johnson faulted the latter as too quick to favor applicants. Fearing erosion of a strong presumption of validity, the Johnson Commission recommended that the CCPA be more deferential. It also recommended that the Office be allowed to appeal from the CCPA to the D.C. Circuit. Because that circuit was unlikely to see infringement appeals, I regard the post-1982 situation as an improvement over what was proposed.

If the Federal Circuit, reviewing directly, adopts rules unduly favoring applicants, the consequences must be faced in collateral review. The substantial price paid for that possibility, apparently unappreciated at the time — and perhaps even now, was the dearth of precedents bearing on the many issues that arise only in the latter context.

Beyond that, some things for which Jaffee and Lerner fault the Federal Circuit, e.g., the strength of the validity presumption, preceded its creation. Others, e.g., the role of juries in patent litigation, are best addressed by Congress or by Supreme Court justices who have made a hash of fact-law distinctions in patent law.

If Jaffee and Lerner, with many others, fear that the fox has been set to watch the hen house, they need to re-evaluate their assumptions about the Federal Circuit and the patent bar. Even if the court were inclined to be the handmaiden of that bar, how would it deal with the many internal conflicts manifested by the diversity of amici in the eBay case? How would it deal with the fact that, for many attorneys, patents are both sword and shield?

On balance I am anything but contented with Innovation and its Discontents. Those who share my belief that two relative newcomers have little grasp of key problems, much less meaningful solutions, should not stand silent.

Note: This review was originally published in PatentCafe’s IPFrontLine. Republished with permission.

Continuation Change Timeline / Upcoming Conference

Patent

DSC002151The gossip tree says that the PTO received over 500 comments to its proposed changes to continuation practice.  Most of these comments are publicly available here.  The now independently confirmed rumor is that the final rules will be modified and published in late November or early December of this year with an implementation date of January 2007.  It is likely that a number of risk-averse companies will be filing continuations like-mad this fall on the recommendation of their CYA attorneys.

As many of you know, the proposed rules include controversial restrictions on continuation practice that would allow only one continuation or RCE as a right.  Other second or subsequent continuations could be filed with a showing of cause. Read more about the proposed continuation changes here.

Cecil Quillen, who first addressed this issue back in 2001, provided his interesting comments to the proposal:

Rather than attempting to limit the number of continuing application filings by creating an additional procedure. . . the PTO should instead seek legislation abolishing all forms of continuing applications (continuations, CIPs, RCEs, etc.), except for divisional applications filed pursuant to a Section 121 Requirement for Restriction.

For those of you in Chicago, John Doll (the Commissioner of Patents), Douglas Lichtman (UChicago), and others will be discussing this issue as well as other Internet related issues at an upcoming seminar titled “IP Law and the Internet” at Northwestern Law School on July 27, 2006. Link. Contact Evan Brown or Kevin Thompson for more information on the conference.

How to Manage Outside Counsel (A patent).

Patent

First there was the patented mock jury, now we have a patented method and apparatus for managing outside counsel.  U.S. Patent No. 7,076,439, titled “Method and Apparatus for Managing Multiple Projects,” is assigned to LSI Logic. Claim 8 reads as follows:

8. An apparatus comprising:

a memory configured to store (i) a membership information database, (ii) a global events database, (iii) a calendar database and (iv) an events engine database; and

a database management system configured to:

(A) assign from a membership information database (i) an in-house council and (ii) an outside council to a project based on a first input from an individual;
(B) receive a document having an initial date;
(C) store in a global event database (i) said document and (ii) said initial date based on a second input from said individual;
(D) calculate a due date based on both (i) a type of said document and (ii) said initial date;
(E) store in a calendar database said due date;
(F) select said outside council to perform a first task for said project;
(G) receive from an events engine database as selected by said in-house council an authorization response for said outside council to perform said first task;
(H) send automatically to said outside council both (i) a work authorization defined by said authorization response and (ii) said document when an authorization event occurs;
(I) receive from said events engine database as selected by said in-house council a first conditional response for said first task, wherein said first conditional response is (i) set when said authorization event occurs and (ii) performed if set when a first reminder event occurs;
(J) calculate a first reminder date for said first reminder event;
(K) store in said calendar database said first reminder date; and
(L) send automatically on said first reminder date to said outside council a first reminder email to complete said first task if said first conditional response is set, wherein a supervisor does not receive said first reminder email;
(M) receive from said events engine database as selected by said in-house council a second conditional response for said first task, wherein said second conditional response is (i) set when said first reminder event occurs and (ii) performed if set when a second reminder event occurs;
(N) calculate a second reminder date for said second reminder event; and
(O) send automatically on said second reminder date to both (i) said outside council and (ii) said supervisor, a second reminder email to complete said first task if said second conditional response is set.

The prosecution history includes an appeal brief filed by applicant that resulted in a new rejection based on a new search . . .

Interference: Late Claim Loses the Game

Patent, Patent Cases 2006,

Images_1California v. Iowa (Fed. Cir. 2006).

The first annual bio-bowl was recently played-out before a small crowd and three officials in the heart of Washington, D.C.

Cal and Iowa battled through an interference proceeding over rights to a molecule designed to desensitize a person to an allergen.

Iowa, the junior party, received its patent first.  Within months, Cal amended its pending claims and requested an interference.  Unfortunately for Cal, the PTO had some problems with its new claims and Cal spent many more months fighting over their patentability.  Eventually, Cal canceled its claims and added a new one that properly set-up the interference.

For an interference, new claims must be added within one year of the other patent’s issue date. 35 USC 135(b)(1).  Even though its newest claim was filed more than one year after Iowa’s patent issued, Cal argued that its earlier amendments and requests for interference should satisfy the rule.  Both the BPAI and CAFC disagreed:

Because California’s proposed interpretation of section 135(b)(1) contravenes this court’s precedent, the plain meaning of the statute, and the policy underlying that section, this court rejects those contentions.

Cal could have relied on the earlier claims if they had not differed in any materially limitation from the new claim — unfortunately for the brown-furballs, the claim was materially different.

The conclusion: tough luck for you if you write bad claims in anticipation of an interference.

Iowa Wins.

Foreign Soverign Immunity Waived By Patent License Negotiations

Patent, Patent Cases 2006, ,

CsiroIntel and Microsoft v. Commonwealth Scientific (CSIRO) (Fed. Cir. 2006).

Under the Foreign Soverign Immunity Act (FSIA), a foreign state is presumptively immune from the jurisdiction of United States courts. A federal court therefore has no subject-matter jurisdiction over a claim against a foreign state unless the case falls within a specified exception. 28 U.S.C. §§ 1602-1611. 

Intel and Microsoft sued the Australian Commonwealth Scientific and Industrial Research Organisation ("CSIRO") for declaratory judgment of non-infringement. CSIRO is Australia’s national science agency and claimed immunity under the FSIA. The district court found jurisdiction, and the appeal was heard on interlocutory review.

Level of Review: Without determining whether to apply CAFC or 9th Circuit law, the appellate panel first determined that the existence of immunity are questions of law that are reviewed de novo.

Commercial Activity: In a question of first impression, CSIRO argued that its extensive patent licensing negotiations should not qualify as a commercial activity exception to the FSIA when those do not result in fully-executed and binding contracts. The CAFC flatly rejected that argument — finding that commercial activity is broadly defined under the FSIA — noting in the Congressional record that "[t]he courts would have a great deal of latitude in determining what is a ‘commercial activity’ for purposes of this bill."

It is possible to extrapolate this case to argue that merely obtaining a U.S. patent is also commercial activity.

CSIRO’s acts of (1) obtaining a United States patent and then (2) enforcing its patent so it could reap the profits thereof—whether by threatening litigation or by proffering licenses to putative infringers—certainly fall within the latter category [of commercial activities]. Indeed, we have expressly recognized, in another context, that "a patentee’s attempt to conduct license negotiations is a commercial activity."

Affirmed and dismissed.

Read the case: Link