All posts by Jason Rantanen

About Jason Rantanen

Jason is a Law Professor at the University of Iowa College of Law.

In re Katz (part 2): Indefiniteness of computer processes

Indefinite, Patent, ,

By Jason Rantanen

In re Katz Interactive Call Processing Patent Litigation (Fed. Cir. 2011)
Panel: Newman, Lourie, Bryson (author)

In addition to the discussion of complex patent litigation management procedures, summarized yesterday, In re Katz is also notable for its analysis of the indefiniteness of computer processing-type means plus function elements.

The patents at issue relate to interactive call processing and conferencing systems.  Ten of the selected claims include "means for processing"-type limitations.   For example, claims 96, 98, and 99 of the asserted '863 patent recite a "means for processing at least certain of said answer data signals."  Applying WMS Gaming, Inc. v. International Game Technology, 184 F.3d 1339 (Fed. Cir. 1999) and Aristocrat Technologies Australia Pty Ltd v International Game Technology, 521 F.3d 1328 (Fed. Cir. 2008), the district court found the claims indefinite because the specifications disclosed only general purpose processors without disclosing any of the algorithms used to perform the claimed functions.   

The Federal Circuit agreed with the district court's analysis of three claims.  Under Federal Circuit precedent, "a computer-implemented means-plus-function term is limited to the corresponding structure disclosed in the specification and equivalents thereof, and the corresponding structure is the algorithm."  Slip Op. at 18, citing Harris Corp. v. Ericsson Inc., 417 F.3d 1241, 1253 (Fed. Cir. 2005).  "[B]y claiming a processor programmed to perform a specialized function without disclosing the internal structure of that processor in the form of an algorithm, Katz’s claims exhibit the 'overbreadth inherent in open-ended functional claims,' … in violation of the limits Congress placed on means-plus-function claims in section 112, paragraph 6."  Slip Op. at 19 (internal citation omitted).  Thus, claims 21 and 33 of the '551 patent and claim 13 of the '065 patent, which claim a “processing means . . . for receiving customer number data entered by a caller and for storing the customer number data . . . and based on a condition coupling an incoming call to the operator terminal, the processing means visually displaying the customer number data” but do not disclose an algorithm that corresponds to the “based on a condition coupling an incoming call to the operator terminal” function are invalid for indefiniteness.

The CAFC reached the opposite result on the remaining seven claims – not on the ground that the patent disclosed the requisite algorithms, but on the basis that no algorithm was necessary because the claim elements may simply claim a general process computer:

[i]n the seven claims identified above, Katz has not claimed a specific function performed by a special purpose computer, but has simply recited the claimed functions of “processing,” “receiving,” and “storing.” Absent a possible narrower construction of the terms “processing,” “receiving,” and “storing,” discussed below, those functions can be achieved by any general purpose computer without special programming.  As such, it was not necessary to disclose more structure than the general purpose processor that performs those functions. Those seven claims do not run afoul of the rule against purely functional claiming, because the functions of “processing,” “receiving,” and “storing” are coextensive with the structure disclosed, i.e., a general purpose processor.

Slip Op. at 20-21. 

The CAFC also reviewed the district court's grant of summary judgment on other issues of indefiniteness, as well as written description, obviousness, claim construction, and noninfringement, largely affirming.  Of these issues, patent litigators may want to take note of the court's comment that when dealing with written description issues it is permissible for the court to construe claims whose meaning has not been placed in dispute, "as claim construction is inherent in any written description analysis."  Slip Op. at 27.  Using this seemingly innocuous statement, the CAFC rejected Katz's argument that it was denied the opportunity to demonstrate specification support or proffer expert testimony on the written description issue because it "should have been clear to Katz that the construction of the claims was important to the written description analysis." 

In re Katz: Managing Complex Patent Suits

Patent

By Jason Rantanen

In re Katz Interactive Call Processing Patent Litigation (Fed. Cir. 2011)
Panel: Newman, Lourie, Bryson (author)

Patent litigation is often an astonishingly complex affair.  As proof, one need look no further than In re Katz, an opinion that demonstrates both the heavy burden that patent infringements suits can place on the courts, and the remarkable job that trial and appellate courts do in dealing with those suits.  This post will discuss the CAFC's ruling regarding trial court claim selection procedures in complex patent infringement actions; a subsequent post will focus on the CAFC's review of the summary judgment rulings.

At the core of In re Katz resides the relatively simple concept of a patent holder asserting its patent rights against a group of alleged infringers.  In this instance, however, the patent rights consisted of  "a total of 1,975 claims from 31 patents" asserted against "165 defendants in 50 groups of related corporate entities."  Slip Op. at 6.  Although initially filed in Delaware and Texas, the Judicial Panel on Multidistrict Litigation transferred the actions to the Central District of California for coordinated pretrial proceedings before Judge Klausner.  

In an effort to manage the vast numbers of claims and infringement allegations, Judge Klausner imposed limitations on the number of claims to be addressed in the litigation.  The court "ordered Katz initially to select no more than 40 claims per defendant group, and after discovery to narrow the number of selected claims to 16 per defendant group."  Slip Op. at 7.  Katz was further limited to a total of 64 claims to be asserted against all defendants, although the court included a proviso that Katz could add new claims if they "raise[d] issues of infringement/validity that [were] not duplicative of previously selected claims."  Id. at 7. Katz sought to sever and stay the disposition of all the unasserted claims, contending that the limitations violated its due process rights.  The district court denied Katz's motion, and after granting summary judgment in the defendants' favor on the selected claims, Katz appealed.

On appeal, the Federal Circuit affirmed the district court's ruling on the motion to sever and stay, implicitly approving the court's claim selection procedure.  Focusing primarily on Katz's argument that the claim selection procedure violated its due process rights with respect to the unasserted claims, the CAFC held that the district court appropriately allocated to the patent holder the burden of showing that the issues raised by the new claims were not duplicative.  "When the claimant is in the best position to narrow the dispute, allocating the production burden to the claimant will benefit the decision-making process and therefore will not offend due process unless the burden allocation unfairly prejudices the claimant’s opportunity to present its claim."  Slip Op. at 11.  Here, Katz identified no errors in the district court's initial assessment, which revealed that the patents contained many duplicative claims.  Thus, it was efficient and fair to allocate the burden to Katz.  Furthermore, because Katz made no effort to identify any claims raising non-duplicative issues, the district court acted appropriately in denying Katz's motion.

Typical of several recent Federal Circuit decisions, the opinion includes a cautionary note.  "In approving the district court’s procedure, we do not suggest that a district court’s claim selection decisions in a complex case such as this one are unreviewable."  Rather, the panel comments that its holding is directed at broad assertions that courts may not impose claim selection requirements: 

Katz chose to make the “all or nothing” argument that the entire claim selection process was flawed from the start and that it is impermissible to give the judgments effect as to the unselected claims regardless of Katz’s failure to make any showing as to the uniqueness of any of those claims. That sort of global claim of impropriety is unpersuasive. In complex cases, and particularly in multidistrict litigation cases, the district court “needs to have broad discretion to administer the proceeding.” In re Phenylpropanolamine (PPA) Prods. Liab. Litig., 460 F.3d 1217, 1232 (9th Cir. 2006).

Slip Op. at 14.

Federal Circuit Dispositions, Part II

Patent

By Jason Rantanen

As discussed yesterday, the Federal Circuit disposed of approximately 19% of the patent infringement appeals it adjudicated in FY 2010 via Rule 36 summary orders/affirmances.  Although this datum is interesting, it begs the question whether the CAFC's use of Rule 36 affirmances has changed over time.  To answer that question, I searched WESTLAW for the court's Rule 36 orders and manually reviewed the results.  As the following table shows, aside from a modest rise in 2006 and 2007, the CAFC's use of Rule 36 affirmances has remained relatively constant over the last twelve years – with one important exception.

CAFC Rule 36 Dispositions 1999-2011
That exception is FY 2011, which so far has exhibited a notable uptick in Rule 36 orders.  The blue bar for 2011 reflects only the Rule 36 affirmances issued through the first four and a half months of the fiscal year, which runs from October 1 to September 30.  If the current rate continues, the CAFC will issue over a hundred Rule 36 affirmances in patent infringement cases -  50% more than the next closest year (FY 2007).

The below chart presents the data in a slightly different way, comparing it to total patent infringement appeals and panel dispositions for the years in which I have data.  Data for FY 2011 reflects appeals docketed and terminated through January 28, 2011.  Note that the termination data for FY 2011 is slightly different from previous years (those years reflect panel adjudications, not all terminations).  As a result, the number of actual panel adjudications is likely somewhat lower. 

CAFC Appeals and Dispositions FY 2006-2011

Limitations of this analysis: Because the data was obtained through searches of WESTLAW, it's possible that the number of Rule 36 dispositions is under-inclusive.  I suspect, however, that the variation is not particularly large, as the CAFC's own charts indicate that for patent infringement cases there were 42 summary affirmances in 2010, 55 in 2009, and 36 in 2008, an average variation from my data for those years of about 7. (Data for prior years is not readily available).

Federal Circuit Dispositions, Part I

Patent

By Jason Rantanen

The Federal Circuit's statistics page contains an array of information on both patent and non-patent appeals.  One of the court's most interesting visuals is a pie chart showing dispositions of appeals in patent infringement cases.  Below is the chart for the year ending on September 30, 2010.  (Note that, as one commenter pointed out, this chart shows only appeals in patent infringement cases (i.e.: appeals from district court determinations), an observation that is consistent with the data available here).

Federal Circuit Patent Terminations FY 2010

As the court's graph illustrates, the vast majority of patent appeals result in some form of substantive opinion, in many cases a precedential one.  Although the CAFC uses Rule 36 summary affirmances at about the same frequency when disposing of both patent and non-patent cases, it issues precedential opinions far more often when patents are involved in the appeal as the below chart illustrates:

Fed Cir Merits Terminations Excluding Patents Data sources: "Caseload Analysis" and "Pie chart for merit and non-merit dispositions, in a 12-month period," available at http://www.cafc.uscourts.gov/the-court/statistics.html.

Tomorrow I will dig deeper into the Federal Circuit's use of Rule 36 summary affirmances in connection with patent appeals.

Patent Suit Filings for 2010 Show a Slight Rise

Patent,

By Jason Rantanen

Patstats.org, coordinated by Professor Paul Janicke of the University of Houston Law Center, recently released its analysis of patent suit filings for calendar year 2010.  Patstats reports that although the total number of patent cases filed in 2010 was 3,605 – significantly higher than the 2,744 cases filed in 2009 – much of that increase can explained by the 752 false marking cases filed in 2010.  If the false marking cases are excluded, the increase is closer to 4%.  Professor Janicke was kind enough to provide a set of historical data for context, which I used as the basis for the below graph.

Patent Suit Filings 1990-2010
Note that this chart only shows false marking cases for 2010, and thus assumes that there were not high numbers of false marking cases in previous years (for support of this assumption, see http://www.grayonclaims.com/false-marking-case-information/).  For additional analysis of patent suit filing data, as well as other interesting and useful statistics relating to patent litigation, see www.patstats.org.

Arlington Industries v. Bridgeport Fittings: “The specification is the heart of the patent”

Patent, , ,

By Jason Rantanen

Arlington Indus., Inc. v. Bridgeport Fittings, Inc. (Fed. Cir. 2011)
Panel: Rader (author) Lourie (concurring in part and dissenting in part), Moore

At first glance, Arlington v. Bridgeport presents a seemingly typical claim construction opinion, as the majority opinion reads like any another decision addressing the perpetual question of whether the district court improperly imported a limitation from the specification or instead correctly interpreted the claims in light of the specification and prosecution history.  In an eloquent dissent, however, Judge Lourie reveals his deepest beliefs as to what patents should really be about: permitting the patent holder to claim what is disclosed in the specification – and nothing more.

 
Background
2010-1025The claim construction issue in this appeal involved the term "spring metal adaptor," a key component in the invention: a new fitting for an electrical junction box.  Prior to the invention of Patent No. 5,266,050, held by Arlington, most junction box connectors used a threaded nut that was screwed into the junction box – a tricky operation.  The '050 patent solved this problem by using a fitting with a spring metal adaptor (20) containing two types of outward pointing tangs (22 and 23).  The new fitting could simply be snapped into place rather than needing to be screwed.

During the district court proceedings, the court construed the claim term "spring metal adaptor" to mean a "*split* spring adaptor," commenting that "a necessary feature of the "spring" metal adaptor is that it is 'split.'  Without the split, it would not spring."  Summary judgment of non-infringement was granted in Bridgeport's favor based on this construction.

Majority: The District Court Imported a Limitation from the Specification
Treating the appeal as a standard question of claim construction, Judge Rader, writing for the majority, held that the district court erred by importing a "split" limitation into its constructions of "spring steel adaptor."  The majority first dismissed Bridgeport's argument that "spring" should be construed to mean that the metal adaptor performs a "springing" function, and instead held that it refers to the type of steel used in the adaptor. It then rejected the argument that "spring metal adaptor" should be defined by implication to require a split, considering both the specification and prosecution history, as well as the doctrine of claim differentiation, before concluding that the intrinsic evidence "reveals no intent to lit the term 'spring metal adaptor' by using it in a manner that excludes unsplit adaptors."  Slip Op. at 15.

Judge Lourie's Dissent: "The specification is the heart of the patent"
Bringing to the boil an ideological disagreement that last eruped in Ariad, Judge Lourie's dissent takes issue less with the outcome of this particular appeal than with the CAFC's entire approach to claim construction.  Expanding upon his discussion of claim construction in Phillips v. AWH Corp., 415 F.3d 1303, 1328 (Fed. Cir. 2005) and before, Judge Lourie writes: "the basic mandate is for claims to be interpreted in light of the specification of which they are a part because the specification describes what the inventors invented….The specification is the heart of the patent.  In colloquial terms, you should get what you disclose."  Arlington dissent at 2 (internal citation omitted).  In his view, the problem is that the CAFC has gotten bogged down in its "focus on our muddy, conflicting, and overly formulaic rules…when the real task of claim interpretation is to read the specification and determine what the inventors meant when they used the language they did." Id. (internal citation omitted).

"Obviously the claims define the scope of protection accorded the owners of a patent. Phillips, 415 F.3d at 1312. But in construing the claims we should avail ourselves of the knowledge we glean from the patent specification to see what the inventors disclosed as their invention. The bottom line of claim construction should be that the claims should not mean more than what the specification indicates, in one way or another, the inventors invented."

Id. Thus, Judge Lourie would have ruled differently:

"In this case, the inventors made clear in the specification of the ‘050 patent that the spring metal adapters in their invention have an opening that prevents the adap-tors from forming a complete circle. The result that the panel majority arrives at here, on remand, could be that Bridgeport might be held to be an infringer of a patent that clearly indicates that there is a split in the adaptor, by making or selling an adaptor lacking such a split. That is not a result that the patent law ought to protect."

Id. (emphasis added).

Judge Lourie's articulated ideology of claim construction offers a window into a deeper worldview: that fundamentally, patents should be narrow, limited to only that which the inventor actually contemplated at the time of filing.  If an inventor invents a circular tanged clip with a slot, the inventor should not be able to claim circular tanged clips that lack slots, period.  Following Judge Lourie's reasoning a bit further, if an inventor contemplates a circular tanged clip made out of steel, the inventor should not be able to claim circular tanged clips made out of aluminum.  Perhaps aluminum clips might be held to infringe under the doctrine of equivalents, but they are not within the literal claim scope.

This view has merit.  By placing a heavy onus on the patent applicant to think of all the possible permutations of the invention, applicants would need to think more carefully about their disclosures and patent scope would be limited to only present ideas.  Of course, inventors would necessarily be penalized because it may be impossible to imagine all permutations, especially those that rely on not-yet-envisioned technologies.   But Judge Lourie seems willing to pay this cost because of the greater certainty and narrower scope that he believes flows from limiting the inventor to only what he or she invented.   

Procedural note: There were actually two separate district court proceedings at issue, both arising in the same district.  In the first proceeding, the district court declined to adopt a "split" construction and Bridgeport was found to infringe; that appeal was stayed while the appeal of the second proceeding (in which the court did adopt a "split" construction) was pending.  The second proceeding also involved a related patent, No. 6,521,831, that contained an essentially identical term ("spring steel adapter").  The CAFC reversed the district court's construction of that term as well, a ruling Judge Lourie joined because the district court relied only on its construction of the term in the '050 patent and did not separately construe the term of the '831 in light of that specification.

Additional Commentary: In a recent article on IP Frontline, Hal Wagner offers a perspective on the ongoing discussion between Chief Judge Rader and Judge Lourie about the proper scope of claim construction.  See Wagner, "Arlington Indus. v. Bridgeport Fittings: The 20 Year Claim Construction Debate."

 

Centillion Data v. Qwest Communications: Getting Around Joint Infringement Problems

Patent,

By Jason Rantanen

Centillion Data Systems, LLC v. Qwest Communications International, Inc. (Fed. Cir. 2011)
Panel: Lourie, Linn, Moore (author)

Joint patent infringement remains a hot topic as the Federal Circuit continues to tinker with the doctrine.  Centillion Data v Qwest adds a new twist, allowing joint infringement issues to be avoided altogether when dealing with system claims if a customer "puts the system as a whole into service, i.e., controls the system and obtains benefit from it" – even if the customer does not physically possess or own elements of the system.

Background
Centillion Data Systems sued Qwest for infringement of Patent No. 5,287,270, which relates to a system for collecting, processing, and delivering information from a service provider to a customer.  As described by the CAFC, claim 1 requires:

“a system for presenting information . . . to a user . . . com-
prising:” 1) storage means for storing transaction records, 2) data processing means for generating summary reports as specified by a user from the transaction records, 3) transferring means for transferring the transaction records and summary reports to a user, and 4) personal computer data processing means adapted to perform additional processing on the transaction records.

Slip Op. at 2-3.  Centillion conceded that the claim concludes both components maintained by the service provider (elements 1-3) and an element maintained by an end user (element 4), but contended that Qwest's billing systems (which contain two parts: the "back office" systems and front-end client applications) nevertheless infringe the '270 patent. 

On Qwest's motion, the trial court granted summary judgment of noninfringement, concluding that under BMC Resources Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007) and Cross Medical Products v. Medtronic Sofamor Danek, Inc. 424 F.3d 1293 (Fed. Cir. 2005), Qwest could not be liable for infringement because it did not "use" every element of the claim, nor did it direct or control the fourth element.  The trial court also held that Qwest's customers did not "use" the system, nor did they direct or control elements 1-3.

Meaning of "use"
On appeal, the CAFC focused on the meaning of the word "use" in the context of a system claim, concluding that under NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282 (Fed. Cir. 2005), Qwest's customers "use" the system as required under 271(a).  In reaching its conclusion, the court drew upon its definition of the term in NTP.  Based on that prior definition, the CAFC held that "to '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."  Slip Op. at 8.  While the district court correctly recognized that this was the proper definition to apply, it erred "by holding that in order to 'use' a system under § 271(a), a party must exercise physical or direct control over each individual element of the system. The 'control' contemplated in NTP is the ability to place the system as a whole into service." Id.

Applying this rule, the CAFC concluded that although Qwest itself does not "use" the system, its customers do.  Those customers put the system into operation by initiating a demand for the service that causes the back-end system to generate the requested reports.  "This is 'use' because, but for the customer's actions, the entire system would never have been put into service."  Id. at 11. On the other hand, Qwest does not "use" the system because it never "puts into service the personal computer data processing means.  Supplying the software for the customer to use is not the same as using the system."  Id. at 13.

Comment: Dennis predicted this outcome a year ago.

Whither BMC?
While both the district court and Qwest relied heavily on BMC and Cross Medical, any substantive discussion of those cases, or joint infringement theory more generally, is conspicuously absent from the CAFC's ruling concerning Qwest's customers.  Rather, underlying the court's analysis is the conclusion that BMC and Cross Medical are irrelevant to primary issue before the court: the meaning of the term "use" in 271(a).  This court thus relegates BMC and Cross to the limited context of vicarious liability analyses.  "The customer is a single “user” of the system and because there is a single user, there is no need for the vicarious liability analysis from BMC or Cross Medical."  Slip. Op. at 10.  Of course, the court's ruling is limited to system claims; method claims (the type of claims at issue in BMC) might produce a different result.

Other holdings:
The CAFC addressed two other issues in its opinion, first concluding that Qwest does not "make" the infringing system because it does not provide the "personal computer data processing means" or install the client software, and then ruling that summary judgment of no anticipation was improper due to the existence of disputed issues of fact.

iLOR v. Google: Rejected Claim Construction Does Not Render Case “Objectively Baseless”

Attorney Fees, CAFC, Claim Construction, Fees, Infringement, Injunctions, Patent, ,

By Jason Rantanen

iLOR, LLC v. Google, Inc. (Fed. Cir. 2011)
Panel: Rader, Linn, Dyk (author)

This case involved a district court exceptional case determination based a finding that the suit was objectively baseless and brought in bad faith.  iLOR, the assignee of Patent No. 7,206,839, sued Google for infringement of the '839 patent by Google's Notebook product.  In denying iLOR's request for a preliminary injunction, the district court rejected iLOR's proposed construction of the only claim term in dispute, subsequently granting summary judgment of noninfringement.  The Federal Circuit affirmed the district court's denial of the preliminary injunction, agreeing that the language of the claim, the specification and the prosecution history supported the district court's construction.  See iLOR, LLC v. Google, Inc., 550 F.3d 1067 (Fed. Cir. 2008).  Following the Federal Circuit's disposition of that appeal, the district court granted Google's request to recover its attorneys' fees and costs and expenses, finding the case exceptional on the ground that it was "not close" on the merits (i.e.: ("objectively baseless") and iLOR had acted in subjective bad faith.  iLOR appealed.

In reversing the district court, the CAFC first likened the exceptional case standard for a suit brought by a patent plaintiff (absent misconduct during patent prosecution or litigation) to that of willful infringement.  "The objective baselessness standard for enhanced damages and attorneys’ fees against a non-prevailing plaintiff under Brooks Furniture is identical to the objective recklessness standard for enhanced damages and attorneys’ fees against an accused infringer for § 284 willful infringement actions under In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007) (en banc)."  Slip Op. at 8-9.  Thus, just as willfulness requires an assessment of both objective and "subjective" (i.e.: known or so obvious that it should have been known) prongs, so too does the exceptional case determination. And just as for willfulness, the objective assessment "is to be determined based on the record ultimately made in the infringement proceedings."  Id. at 10.

Comment: At some points, the Federal Circuit's opinion is confusingly imprecise in its usage of "objective baselessness."  Although in some instances it refers to the "objective baselessness" standard as being identical to the overall objective recklessness standard for willfulness (which includes, according to the court, both objective and subjective elements), at other times it treats it as being identical to only the "objective" prong of the analysis.  The only reading that makes sense is that when the court indicates that "objective baselessness" is identical to the willfulness "objective recklessness" standard, what it is really referring to is the overall standard for an exceptional case determination based on a meritless case theory, while when it compares it to the "objective" prong of the willfulness analysis, it really is referring to "objective baselessness."

Applying this framework, the CAFC concluded that iLOR's claim construction was not objectively baseless, and thus it was unnecessary to consider the issue of subjective bad faith.  The CAFC pointed to iLOR's arguments supporting its proposed construction, which – although the court disagreed with them – had some merit.  The CAFC also commented on the difficulty of claim construction, "in which the issues are often complex and the resolutions not always predictable."  Id. at 13.  And the court noted that the fact that it "held oral argument and issued a precedential written opinion in the first appeal suggests that we did not regard the case as frivolous."  Id. at 13-14.  In short, "simply being wrong about claim construction should not subject a party to sanctions where the construction is not objectively baseless."  Id. at 14.

Global-Tech v. SEB: Respondent and Additional Amicus Briefs

Amicus Brief, Inducement, Infringement, Patent, Rantanen

By Jason Rantanen

In Global-Tech v. SEB, the Supreme Court is addressing the state of mind requirement for inducement of infringement.  The petitioner, along with several amicus briefs filed in support, argues that inducement should require that the accused intend to infringe the patent, and that the accused infringer must know of the patent being infringed.  Earlier Patently-O discussions of those briefs are available here and here.

Last week, the respondent (SEB) filed its briefs.  SEB argues that there is no basis for requiring evidence that the accused party possess actual knowledge of the patent; rather, inducement must require a lower state of mind standard than both 35 U.S.C. § 271(c) (contributory infringement) and willful infringement, a standard that is met by Pentalpha's conduct.  In the alternative, SEB argues that Pentalpha's conduct constituted willful blindness, which SEB contends is a form of constructive knowledge and thus is sufficient for inducement.  In addition, SEB argues that the Court should affirm because all the damages were attributable to Pentalpha's direct infringement and because, through it's finding of willful infringement, the jury necessarily found that Pentalpha had actual knowledge of the patent.

Several amicus curiae have also filed briefs in support of the respondent, all arguing that inducement should require only intent to cause the acts as opposed to some form of scienter with respect to whether those acts infringe a patent.  Among these is the brief of a group of law professors led by Professor Ted Sichelman, argues that inducement should require only specific intent to cause the infringing acts – not some form of scienter with respect to whether the acts infringed a patent.  The brief supports this argument by looking to tort and criminal law, pointing out that in those contexts it is not necessary for the accused to know that that the acts violate a legal duty – only that the accused intend to cause the acts themselves. It also argues that prior to the 1952 Patent Act, no court (with one exception as dicta), held that indirect infringement required knowledge of the patent.  Thus, the brief argues, while inducement of infringement should require specific intent to further the acts of direct infringement, it did not traditionally – and should not – require any form of knowledge of whether those acts infringe a patent. 

Oral Argument is set for Wednesday, February 23, 2011.

SEB's Brief:

Amicus Briefs in Support of Respondent:

Note: I understand additional briefs may have been filed, including one on behalf of several companies and PhRMA, that do not appear on the ABA site.  This post will be updated when those briefs are available.

The Use of Online Databases for Legal Scholarship

Academic Studies, Patent, Rantanen, , ,

By Jason Rantanen

Many empirical studies of Federal Circuit jurisprudence rely on searches of one of the leading legal databases such as Westlaw or Lexis.1 Relying on a search of a single database is potentially problematic, however, if the substantive content of the databases is not identical – in other words, if Lexis and Westlaw don't contain the same universe of cases, any claims about the results are necessarily limited by the dataset being used. 

In order to avoid this problem in connection with an empirical study of inequitable conduct that I'm working on, I recently performed a comparison of results obtained by a keyword search on Westlaw versus an identical search on Lexis.  This comparison revealed that although the data obtained from the two sources is largely comparable, small differences do exist that certain types of searchers may want to take into account.

The chart below shows the results, by year, produced by searching for the term "inequitable conduct" in the Federal Circuit databases for Lexis and Westlaw.2,3  In large part, the results suggest that there is relatively little variation between the two databases: in the context of this analysis, only 30 out of 681 (4.4%) Westlaw opinions were not found in Lexis and only 6 out of 657 (0.9%) Lexis opinions were not found in Westlaw.  Furthermore, in no instance did a precedential opinion appear in one database but not another.  Rather, all of the single-database hits were nonprecedential opinions.  In addition, nearly all of the nonprecedential opinions appearing in only a single database issued prior to 1991.   That said, there is a significant difference with respect to nonprecedential opinions for the period prior to 1991: nearly all the nonprecedential opinions from this time period are found in only one database.4  Thus, while it may not be efficient for most practitioners to run keyword searches on multiple databases, scholars conducting empirical research on Federal Circuit decisions, or individuals searching for older party-specific nonprecedential opinions, may want to be sensitive to the differences between the two databases.

Figure 1: Hits Resulting from Search Term "Inequitable Conduct" in Lexis and Westlaw5

 
Search comparison

1 See, e.g., Christopher A. Cotropia, "Determining Uniformity Within the Federal Circuit By Measuring Dissent and En Banc Review," 43 LOY. L.A. L. REV. 801, 811 (2010); Christian E. Mammen, Controlling the "Plague": Reforming the Doctrine of Inequitable Conduct,24 BERKELEY TECH. L.J. 1329, 1348 (2009);  Craig Allen Nard, Toward a Cautious Approach to Obeisance: The Role of Scholarship in Federal Circuit Patent Law Jurisprudence, 39 HOUS. L. REV. 667, 678 fn 40 (2002); Christian A. Chu, Empirical Analysis of The Federal Circuit's Claim Construction Trends, 16 BERK. TECH. L.J. 1075, 1092 (2001); but see R. Polk Wagner and Lee Petherbridge, Is the Federal Circuit Succeeding? An Empirical Assessment of Judicial Performance, 152 U. PA. L. REV. 1105, 1145 (2004) (using results from both Lexis and Westlaw).  In addition, some early empirical studies used the United States Patent Quarterly as their source (see, e.g., John R. Allison & Mark A. Lemley, How Federal Circuit Judges Vote in Patent Validity Cases, 10 FED. CIR. B.J. 435, 436 (2001)), which apparently contains some, but not all, nonprecedential patent decisions.  See e.g., Wirco, Inc. v. Rolock, Inc., 17 U.S.P.Q.2d 1084, 1990 WL 12901 (Fed. Cir. Feb. 14, 1990) as opposed to Mechanical Plastics Corp. v. Unifast Industries, Inc., 1988 WL 25422 (Fed. Cir. March 28, 1988).

2  For purposes of creating this chart, I used the additional limitation "CO(c.a.fed.)" to exclude CCPA and Court of Claims decisions, some of which are included in Westlaw's "ctaf" database.  In addition, I separately compared the results from a keyword search of the entire "ctaf" database to the results from the Lexis search in order to identify any Lexis-only hits that might have been excluded by the Westlaw court limiter.  This process did not reveal any such hits.

3 These results include every search hit that contained the term "inequitable conduct," regardless of the context.  It thus should not be viewed as reflecting any measure of substantive inequitable conduct determinations.  In addition, hits resulting from search terms appearing only in the database-specific casenotes were excluded, as were instances where the database contained duplicate entries of the case opinion or included a copy of a withdrawn opinion.   For more substantive analyses of inequitable conduct jurisprudence, see Lee Petherbridge, Jason Rantanen & Ali Mojibi, The Federal Circuit and Inequitable Conduct: An Empirical Assessment, ssrn id 1686102; Mammen, supra note 1.

4 In addition to double-checking the single-database cases against the search results of the other database, I also spot-checked several decisions against the Lexis/Westlaw case database as a whole by using terms from the parties' names and the Federal Reporter citation, where available.  Although in some instances this resulted in a hit, the contents of those hits were blank.  See, e.g., Air Products & Chemicals, Inc. v. Tanner, 738 F.2d 454 (1984) (nonprecedential) (no opinion in Westlaw; opinion in Lexis).

4 Although the results for 1997 appear equal, each database contained one opinion for that year that is not in the other database.

In re Glatt Air Techniques, Inc.: Single Embodiment Commercial Success

CAFC, Obviousness, Patent, Pharma, Rantanen, Reexamination

By Jason Rantanen

In re Glatt Air Techniques, Inc. (Fed. Cir. 2011)
Panel: Newman, Prost (author), Moore

Glatt Air Techniques involves the reexamination of Patent No. 5,236,503, relating to an improvement to an apparatus known as a Wurster coater used to coat particles such as pharmaceutical ingredients.  The improvement comprises a shield means, such as a physical shield or air wall, positioned adjacent the spray nozzle that prevents particles from prematurely entering the stream of the coating spray before the spray pattern has fully developed, thus causing blockages in the apparatus.  During reexamination, the examiner rejected the claim at issue as obvious in light of the prior art, a determination that was upheld by the Board of Patent Appeals and Interferences.  In reaching its conclusion, the Board also rejected Glatt's commercial success evidence because it related only to a single embodiment – a physical shield – and the claim also covered the use of an air wall.  Thus, the Board concluded, the evidence was not commensurate in scope with the claim.

On appeal, the CAFC first found that the Board had failed to establish a prima facie case of obviousness.  It also disagreed with the Board's rejection of Glatt's evidence of commercial success, expanding on its past holding that "commensurate" does not mean "every" embodiment.   "The fact that Glatt’s commercial products only contain one type of shielding means does not make its commercial success evidence irrelevant. Under the PTO’s logic, there would never be commercial success evidence for a claim that covers more than one embodiment."  Slip Op. at 10.  Citing past precedent, the CAFC went on to state that "we have consistently held that a patent applicant “need not sell every conceivable embodiment of the claims in order to rely upon evidence of commercial success.” Id. (quoting In re DBC, 545 F.3d 1373, 1384 (Fed. Cir. 2008).  Thus, "commercial success evidence should be considered should be considered 'so long as what was sold was within the scope of the claims.'” Id.

Comment: Note that simply being commensurate with the scope of the claim does not necessarily satisfy the nexus requirement, as illustrated by the outcome of In re DBC.

Update: PharmaPatents Blog provides a detailed discussion of the CAFC's reversal of the Board's prima facie case of obviusness, asking whether there was anything else the applicant could have done to avoid a rejection by the examiner and Board.   

Judge Moore Weighs In on Vacatur of Invalidity Opinions

CAFC, Inequitable Conduct, Invalidity, Patent, Patent Cases 2011, Rantanen,

By Jason Rantanen

The Ohio Willow Wood Company v. Thermo-Ply, Inc. (Fed. Cir. Order 2011)
Panel: Rader (author), Newman (additional views), Moore (concurrence)

When a patentee is faced with an judgment of invalidity or inequitable conduct, it is a relatively common tactic to settle with the accused infringer who, as a condition of the settlement agreement, then joins the patentee in a joint motion for vacatur of the adverse decision.  Although vacatur requires exceptional circumstances, it is sometimes granted by the district court.  See e.g., Gracenote, Inc. v. MusicMatch, Inc.; Block Financial v. LendingTree; New Medium v. Barco.

The situation becomes more complex, however, when settlement occurs while the case is on appeal. Willow Wood involves an appeal of an Eastern District of Texas judgment invalidating the asserted claims of Patent No. 7,291,182.  While the appeal was pending, the parties settled and filed a motion for remand to the district court for consideration of a motion for vacatur.  In July 2010, the CAFC issued an order pointing out the high standard for vacatur and ordered the parties to explain what extraordinary circumstances would be presented to the district court that would justify vacatur.  Ohio Willow Wood Co. v. Thermo-Ply, Inc., (Fed. Cir. Order July 29, 2010) (nonprecedential). 

After considering the parties' response, along with an intervention request by a third party also being sued for infringement of the patent, the panel granted the request for "the limited purpose of the district court's consideration of the parties' motion for vacatur."  Ohio Willow Wood Co. v. Thermo-Play, Inc. (Fed. Cir. Order 2011) (Willow Wood II). The CAFC retained jurisdiction, however, "so that any of the parties may seek appellate review by notifying the Clerk of the Court within thirty days of entry of the district court’s decision on remand."  Id. at 3.

Concerned about the remand's potential imprimatur on the joint vacatur motion, Judge Moore, writing in concurrence, expressed the opinion that vacatur of existing invalidity opinions should be a rare and disfavored event, particularly in the patent context.  Citing U.S. Bancorp Mortgate Co. v. Bonner Mall Partnership, 513 U.S. 18, 29 (1994), the judge reiterated the high threshold for justifying vacatur following settlement: "[o]nly in 'exceptional circumstances' should a district court grant vacatur at the request of the litigants."  Willow Wood II concurrence at 2.  This is particularly true with respect to patents:

In this case, for example, the patentee has already sued another party on the patent in question. If the decision that invalidated the patent at issue is not vacated, then the patentee will be collaterally estopped from asserting this patent in this and other suits, thereby saving courts and litigants the time and money it takes to proceed with patent litigation. Patent litigations are among the longest, most time-consuming types of civil actions. As of 2009, 384 patent cases had been pending in the district courts for three years or more. 2009 Admin. Off. U.S. Cts. Ann. Rep., at Table S-11. Moreover, the costs of patent litigation are enormous with an average patent case costing upwards of $3 million for each side. See American Intellectual Property Law Association, Report of the Economic Survey 2009 I-129 (2009). If the district court vacates its invalidity judgment then other defendants and other district courts will be forced to proceed with infringement suits, as there would likely be no collateral estoppel. Even if there were no other suits pending, these concerns should still weigh heavily against vacatur, as the only reason the patentee would want an invalidity judgment vacated is to potentially enforce the patent against others.

Concurrence at 3-4.

Judge Moore's decision to weigh in on the merits of the vacatur issue was criticized by Judge Newman, however, who wrote separately "to point out that the views of our colleague in separate concurrence are not the court’s remand order." Willow Wood II, additional views at 2.  Although favoring the remand on the basis that the district court is in the better position to rule on the issue of vacatur, Judge Newman declined to endorse Judge Moore's proffer of judicial advice, commenting that "[o]ur remand should be unencumbered by even the appearance of prejudgment or of the weight to be given to various considerations. Indeed, the issues on which our colleague in concurrence offers judicial advice are more complex than is here recognized."  Id.

In re Microsoft: Presence Created Solely for Purposes of Litigation Does Not Support Venue

CAFC, Jurisdiction, Patent, Patent Cases 2011, Rantanen,

By Jason Rantanen

In re Microsoft Corporation (Fed. Cir. Order 2011)
Panel: Newman, Friedman, Laurie (per curium)

The Federal Circuit's decision in In re Microsoft, which granted Microsoft's request for a writ of mandamus ordering the Eastern District of Texas to transfer the case to Washington State, originally issued as a nonprecedential order in early November; the CAFC reissued it as precedential today.  The order adds another piece to the now fairly substantial body of law surrounding review of denials of requests to transfer venue.  Allvoice Develop-ments, a company operated from the United Kingdom, sued Microsoft in the Eastern District of Texas for infringing Patent No. 5,799,273.  Microsoft, which is headquartered in the Western District of Washington (where a substantial portion of its employees and operations are located), requested a transfer of venue to Washington State. 

In denying Microsoft's motion to transfer venue, the district court relied on the existence of a local Allvoice office in Tyler, as well as Allvoice's incorporation under the laws of Texas.  The court also weighed the witness factor against transfer because Allvoice had identified potential non-party witnesses in New York, Massachusetts and Florida who, the court found, would find Texas more convenient for trial.  Although the court found that the sources of proof factor weighed in favor of transfer, it did so only slightly because Allvoice said that its documents were maintained in its office in the E.D. Texas. 

On appeal, the Federal Circuit granted Microsoft's request for a writ, likening this case to In re Genentech, Inc., 566 F.3d 1338 (Fed. Cir. 2009), and concluding that the district court abused its discretion by denying transfer.  The CAFC first noted that there was a vast disparity with respect to the convenience of witnesses: all individuals identified by Microsoft as having material information relating to the patents reside within 100 miles of the W.D. Wash.; all but two of the witnesses identified by Allvoice reside outside Texas, and even those two witnesses appear to be relatively peripheral.

Particularly notable, however, was the CAFC's refusal to consider Allvoice's presence in the E.D. Texas.  "Allvoice’s argument … rests on a fallacious assumption: that this court must honor connections to a preferred forum made in anticipation of litigation and for the likely purpose of making that forum appear convenient."  Slip Op. at 5.  Thus, just as transferring thousands of pages of relevant documents to the offices of litigation counsel in Texas in order to assert that the location of those documents favored non-transfer was entitled to no weight in In re Hoffmann-La Roche Inc., 587 F.3d 1333 (Fed. Cir. 2009), so too is the existence of an office created solely for the purpose of manipulating venue a meaningless fact for the venue analysis.  Nor did the CAFC ascribe any weight to extra step of incorporating under the laws of Texas, noting that it was done sixteen days before filing suit.

Uniloc v. Microsoft: The CAFC Rejects the 25 Percent Rule

Damages, Infringement, Invalidity, Patent, Patent Cases 2011, Rantanen, Software, , , ,

By Jason Rantanen

Uniloc USA, Inc. v. Microsoft Corp. (Fed. Cir. 2011)
Panel: Rader, Linn (author), Moore

Uniloc v. Microsoft involves a host of issues, although one stands out as particularly noteworthy.  While  "passively tolerat[ing]" the 25 percent 'rule of thumb' (a method for calculating a reasonable royalty for purposes of infringement damages) in past cases, the CAFC held today that the rule "is a fundamentally flawed tool for determining a baseline royalty rate in a hypothetical negotiation," thus precluding its use for damages calculations.

Uniloc is the owner of Patent No. 5,490,216, an early patent covering a mechanism for combating "casual copying" of software, where users install copies of a software program on multiple computers in violation of applicable software licenses.  In general terms, the patented invention involves the creation of a registration number generated by the software on the user's computer.  The number is sent to the vendor's system, which uses an identical algorithm to create a remote license ID.  If the numbers match when the application boots, the program enters a "use mode;" if they do not, it enters a "demo mode."

In the suit against Microsoft, Uniloc alleged that the Product Activation feature for Microsoft's Word XP, Word 2003, and Windows XP software programs infringed the '216 patent.  A jury agreed, finding that Microsoft not only infringed the patent, but did so willfully.  The jury also rejected Microsoft's invalidity defenses and awarded Uniloc $388 million in damages.  Following the trial, the district court granted Microsoft's motion for JMOL of noninfringement and lack of willfulness (and in the alternative, ordered a new trial on these issues), but denied its request for a JMOL on invalidity.  The court also ordered a new trial on the issue of damages.  On appeal, Uniloc challenged the district court's noninfringement, willfulness, and damages rulings, while Microsoft cross-appealed the denial of its JMOL on invalidity.  The Federal Circuit affirmed the district judge's rulings on willfulness, damages and invalidity, but reversed on the question of infringement, both with respect to JMOL and the grant of a new trial.

Damages
The damages section of the opinion is by far the most significant portion.  At trial, the jury awarded Uniloc $388 million in damages, relying on the testimony of Uniloc's expert, who opined that damages should be $564,946,803 based on a hypothetical negotiation between Uniloc and Microsoft and the Georgia-Pacific factors.  Using an internal Microsoft document relating to the value of product keys, the expert applied the 25 percent "rule of thumb" to the minimum value reported ($10 each), obtaining a value of $2.50 per key.  After applying the Georgia-Pacific factors, which he concluded did not modify the base rate, he multiplied it by the number of new licenses to Office and Windows products, producing the $565 million value.  He confirmed his valuation by "checking" it against the total market value of sales of the Microsoft products (approximately $19 billion, noting that it represented only 2.9% of the gross revenue of the products.   

The 25 Percent Rule: On appeal, the CAFC first rejected the use of the 25 percent rule to calculate patent damages.  "The 25 percent rule of thumb is a tool that has been used to approximate the reasonable royalty rate that the manufacturer of a patented product would be willing to offer to pay to the patentee during a hypothetical negotiation." Slip Op. at 36, citing Robert Goldscheider, John Jarosz and Carla Mulhern, USE OF THE 25 PER CENT RULE IN VALUING IP, 37 les Nouvelles 123, 123 (Dec. 2002).  Under the rule, "licensees pay a royalty rate equivalent to 25 per cent of its expected profits for the product that incorporates the IP at issue." Id., quoting Goldscheider et al. Included in the court's discussion of the rule is an extensive survey of the relevant literature (covering no less than nine articles), as well as an acknowledgement that the "court has passively tolerated its use where its acceptability has not been the focus of the case." Slip Op. at 39.  However, the court recognized that it  never squarely addressed the use of the rule.

Treating the issue as one of first principles, and after considering the relevant Supreme Court caselaw, the CAFC concluded that, as an abstract theory untied to particular factual circumstances of a given case, the 25 percent rule simply cannot be used for damages calculations: 

This court now holds as a matter of Federal Circuit law that the 25 percent rule of thumb is a fundamentally flawed tool for determining a baseline royalty rate in a hypothetical negotiation. Evidence relying on the 25 percent rule of thumb is thus inadmissible under Daubert and the Federal Rules of Evidence, because it fails to tie a reasonable royalty base to the facts of the case at issue.

Slip Op. at 41.  The court based its reasoning on the Daubert standard for expert testimony, concluding that general theories are only permissible if the expert adequately ties the theory to the specific facts of the case.  Under Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999) and General Electric Co. v. Joiner, 522 US 136 (1997), "one major determinant of whether an expert should be excluded under Daubert is whether he has justified the application of a general theory to the facts of the case."  Slip Op. at 43.

Applying this principle, the CAFC criticized the application of the 25 percent rule because there was no link between the rule and the specific case:

The meaning of these cases is clear: there must be a basis in fact to associate the royalty rates used in prior licenses to the particular hypothetical negotiation at issue in the case. The 25 percent rule of thumb as an abstract and largely theoretical construct fails to satisfy this fundamental requirement. The rule does not say anything about a particular hypothetical negotiation or reasonable royalty involving any particular technology, industry, or party.

Slip Op. at 45. In addition, the court pointed to the lack of testimony by Uniloc's expert suggesting that the starting point of a 25 percent royalty had any relation to the facts of the case, and thus the use of the rule was "arbitrary, unreliable, and irrelevant," failing to pass muster under Daubert and tainting the jury's damages calculation.  Id. at 47.

Entire Market Value Rule: The CAFC also rejected the expert's application of the entire market value rule, which he used as a check on the total damages.  "The entire market value rule allows a patentee to assess damages based on the entire market value of the accused product only where the patented feature creates the 'basis for customer demand' or 'substantially create[s] the value of the component parts.'"  Slip Op. at 48.  Here, however, there was no evidence that the patented component created the basis for customer demand, as required by the rule: "This case provides a good example of the danger of admitting consideration of the entire market value of the accused where the patented component does not create the basis for customer demand."  Slip Op. at 51.

Infringement
In opposing Uniloc's challenge on the issue of infringement, Microsoft argued that several grounds supported affirmance of the district court's grant of JMOL of noninfringement.  The CAFC rejected each argument in turn, concluding that substantial evidence supported the jury's finding of infringement. 

Standard of Review: One issue that sophisticated parties often dispute is the relevant standard that applies when reviewing jury verdicts. This appeal was no different – Microsoft contended that the jury verdict should be reviewed de novo, while Uniloc argued that it should be reviewed for substantial evidence.  The CAFC responded by distinguishing situations where "the parties conceded that under one claim construction there was infringement and under the other there was none, and were arguing only over which claim construction was appropriate." Slip Op. at 15.  In these cases, de novo review applies.  On the other hand, where "the claim construction itself is not contested, but the application of that claim construction to the accused device is," the court applies the substantial evidence standard. Id.

Comment: This distinction reinforces a basic principle of Federal Circuit appellate practice: Parties challenging a jury verdict on the issue of infringement will likely want to frame the dispute on appeal as a question of claim construction; parties defending the verdict will likely want to frame it as a question of application of an accepted construction to the accused product or method.  Of course, whether a party will be able to frame the question in a particular way depends largely on how the issue was set up in the district court – which itself is ideally part of counsel's long term strategic thinking.

Applying this standard, the Federal Circuit concluded that the jury's verdict of infringement was supported by substantial evidence, rejecting Microsoft's arguments to the contrary.  The court also rejected Microsoft's argument that a critical "means-plus-function" limitation should be read narrowly.  To the contrary, the court held, it should be read broadly, applying language from IMS Tech., Inc. v. Haas Automation, Inc., 206 F.3d 1422, 1436 (Fed. Cir. 2000) stating that "when in a claimed 'means' limitation the disclosed physical structure is of little or no importance to the claimed invention, there may be a broader range of equivalent structures than if the physical characteristics of the structure are critical in performing the claimed function." 

Expert Testimony, redux: Also of note is the court's ruling with respect to expert testimony as it pertains to infringment.  Although the district court rejected the testimony of Uniloc's expert as "incomplete, oversimplified and frankly inappropriate," the CAFC concluded that this rejection was improper because the district court had already fulfilled its gatekeeping function under Daubert when it explicitly noted that the expert was "qualified."  Thus, it was up to the jury "to evaluate the weight to be given to the testimony of dueling qualified experts."  This application of Daubert seems to be somewhat in tension with the court's treatment of expert testimony in the damages context, which focused on the content of the testimony, not the qualifications of the person giving it.

Joint Infringement: The CAFC also rejected Microsoft's joint infringement argument.  Rather than implicating joint conduct, the court ruled, Uniloc's claim was structured so as to capture infringement by a single party by focusing on one entity.  "That other parties are necessary to complete the environment in which the claimed element functions does not necessarily divide the infringement between the necessary parties. For example, a claim that reads “An algorithm incorporating means for receiving e-mails” may require two parties to function, but could nevertheless be infringed by the single party who uses an algorithm that receives e-mails."  Slip Op. at 29.

Willful Infringement: On the issue of willfulness, the CAFC continued to apply its objective super-threshold for proving willfulness.  "If the accused infringer's position is susceptible to a reasonable conclusion of no infringement, the first prong of Seagate cannot be met." Slip Op. at 32.  Particularly obtuse is the court's triple-negative articulation of the factual holding: "Uniloc has not presented any evidence at trial or on appeal showing why Microsoft, at the time it began infringement, could not have reasonably determined that [Microsoft's algorithms] did not meet the “licensee unique ID generating means,” “licensee unique ID,” or “registration system”/“mode switching means” limitations."

Presumption of Validity: in addressing Microsoft's cross-appeal of the denial of its motion for JMOL and a new trial on invalidity, the court declined to back away from the "clear and convincing" standard for invalidity.  Rejecting Microsoft's argument that its burden was to show invalidity simply by a preponderance of the evidence – as opposed to clear and convincing evidence – because the prior art reference was not before the PTO, the court continued to apply the higher standard.  "Until changed by the Supreme Court or this court sitting en ban, this is still the law."  Slip Op. at 55.  Applying this standard, the court rejected Microsoft's argument that it was simply practicing the prior art, and thus a finding of infringement necessitated a finding of invalidity. 

WiAV Solutions v. Motorola: Clarifying the Meaning of “Exclusive Licensee”

Infringement, License, Patent, Patent Cases 2010, Rantanen

By Jason Rantanen

WiAV Solutions LLC v. Motorola, Inc. (Fed. Cir. 2010)
Panel: Rader, Linn (author), Dyk

WiAV is the purported exclusive licensee of seven patents relating to aspects of signal transmission and data encoding/decoding owned by Mindspeed Technologies, Inc.  In 2009, WiAV sued a set of companies including Motorola, Inc.; Nokia Corporation; Palm, Inc.; and Sony Ericsson Mobile Communications (USA), Inc. for infringement of the Mindspeed patents.  The defendants contended, and the district court agreed, that WiAV lacked constitutional standing to assert the patents because WiAV is not an exclusive licensee of the patents under Textile Productions, Inc. v. Mead. Corp., 134 F.3d 1481 (Fed. Cir. 1998), which they argued holds that a party cannot be an exclusive licensee of a patent when a third party has the right to license the patent. 

In reversing the district court's dismissal, the CAFC rejected this argument, instead holding that "a licensee is an exclusive licensee of a patent if it holds any of the exclusionary rights that accompany a patent."  Slip. Op. at 17 (emphasis added). This decision is in the vein of the court's earlier decision this year in Alfred E. Mann Foundation For Scientific Research v. Cochlear Corp., 604 F.3d 1354, in which it concluded that a licensee is an exclusive licensee of a patent despite retaining the ability to license the patent to settle lawsuits. 

Scope of the Licensing
The licensing rights at issue were held by six third parties, and stemmed from a series of spin-offs and other agreements that occurred as the patents were transferred from company to company. For example, when Rockwell International Corporation, the original owner of the Mindspeed patents, assigned them to Conexant, the second owner, its subsidiary, Rockwell Science Center, received a limited, non-exclusive license to use the patents in connection with its business, along with the right to sublicense to Rockwell International and its "Affiliates," or to transfer the license in connection with the sale of the respective businesses to which the intellectual property rights relate.  The district court found that several of these licensees retained a limited right to license the patents in the field of wireless handsets, and concluded that under Textile Productions, WiAV could thus not be an exclusive licensee of the Mindspeed Patents.

Any Exclusionary Rights
On appeal, the CAFC rejected the argument that, under Textile Productions  "a licensee cannot be an exclusive licensee of a patent if others retain the right to license the patent."  Slip. Op. at 11.  Turning straight to the constitutional analysis, the court held that the standing determination  focuses only on whether a party has any exclusionary right in a patent:

Because the legally protected interests in a patent are the exclusionary rights created by the Patent Act, a party holding one or more of those exclusionary rights—such as an exclusive licensee—suffers a legally cognizable injury when an unauthorized party encroaches upon those rights and therefore has standing to sue. 
…
Thus, the touchstone of constitutional standing in a patent infringement suit is whether a party can establish that it has an exclusionary right in a patent that, if violated by another, would cause the party holding the exclusionary right to suffer legal injury. Contrary to the suggestion of the Defendants, neither this court’s Textile Productions nor Mars decision freed the constitutional standing inquiry from its legal injury mooring.

Slip Op. at 14-15.  Textile Productions, on the other hand, involved only the narrow question of whether a particular type of contract, a requirements contract for a patented product, automatically converts the exclusive supplier into an exclusive licensee.  "Nowhere did the Textile Productions court suggest that a party holding one or more of the exclusionary rights in a patent does not have standing to sue to protect those rights against infringement by an unauthorized third party. Nor is there any indication that the court created a bright-line rule that a party cannot be an exclusive licensee of a patent if others have the right to license the patent."  Slip. Op. at 16.

The CAFC did impose one important limitation on the broad rule for standing: "Because an exclusive licensee derives its standing from the exclusionary rights it holds, it follows that its standing will ordinarily be coterminous with those rights."  Slip Op. at 17. Thus, an exclusive licensee may have standing to sue some parties, but not others; it may also lack standing to sue a party who has the ability to obtain a license from another party with the right to grant it. 

Applying its holding, the court concluded that none of the pre-existing licenses granted the right to license the Defendants to practice the patents in WiAV's field of exclusivity, and thus WiAV possessed constitutional standing for this case. 

Note: WiAV does not disturb the requirement that "[a]n exclusive licenseee generally must join the patent owner to the suit to satisfy prudential standing constraints, i.e., the 'judicially self-imposed limits on the exercise of federal jurisdiction.'" Slip Op. at 14-15, fn. 1.  Here, WiAV had satisfied those concerns by adding Mindspeed to the suit as the "defendant patent owner." 

Judge Kathleen O’Malley Confirmed to the Federal Circuit

CAFC, Patent, Rantanen

By Jason Rantanen

On Wednesday, the Senate confirmed Kathleen McDonald O'Malley to fill the vacancy left by Judge Schall when he took senior status.  Judge O'Malley currently serves as a U.S. District Judge for the Northern District of Ohio, and will be the only sitting Federal Circuit judge to have previously served as a district court judge.   She was nominated for her first judgeship by President Clinton in 1994, prior to which she served in government and private practice.  An earlier Patently-O discussion of Judge O'Malley is available here. 

Two vacancies on the CAFC remain unfilled and although nominees were proposed during the 111th Congress (Jimmie Reyna and Edward DuMont), those nominations were not acted on.  

Prometheus Laboratories v. Mayo: The Broad Scope of Statutory Subject Matter

CAFC, Patent, Patent Cases 2010, Patentable Subject Matter, Pharma, Rantanen

By Jason Rantanen

Prometheus Laboratories, Inc. v. Mayo Collaborative Services (Fed. Cir. 2010)
Panel: Rader, Lourie (author), Bryson

Last Friday, the Federal Circuit released its second noteworthy post-Bilski decision (the first being Research Corp v. Microsoft).  The opinion, Prometheus v. Mayo, issued following a grant-vacate-remand order from the Supreme Court instructing the CAFC to revisit its original decision in light of Bilski.  Despite this procedural posture, however, the new opinion is quite similar to the old, arriving at the same conclusion through essentially the same reasoning.   

Prometheus initially came to the Federal Circuit following a district court grant of summary judgment of invalidity under § 101 (lack of patentable subject matter).  After the CAFC reversed the ruling of invalidity using its "machine-or-transformation" test, Mayo sought review by the Supreme Court.  The Court granted certiorari, vacated the CAFC decision, and remanded for consideration in light of its Bilski opinion.  Earlier Patently-O commentary includes a summary of the original Federal Circuit opinion and a discussion of the remand.

The patents-in-suit claim a method for determining whether a patient has received a therapeutically efficacious amount of drugs such as 6-mercaptopurine ("6-MP") and azthiopurine ("AZA"), which are used to treat inflammatory bowel diseases but can produce toxic side effects.  In the human body, these drugs metabolize into 6-MP metabolites, including 6-methylmercaptopurine ("6-MMP") and 6-thioguanine ("6-TG").  By administering the drug, measuring the subject's levels of 6-MMP and 6-TG and comparing them to pre-determined levels, toxicity can be minimized and efficacy maximized. 

Claim 1 of Patent No. 6,355,623 is representative:

1. A method of optimizing therapeutic efficacy for treatment of an immune-mediated gastrointestinal disorder, comprising:
    (a) administering a drug providing 6-thioguanine to a subject having said im-mune-mediated gastrointestinal disorder; and
    (b) determining the level of 6-thioguanine in said subject having said immune-mediated gastrointestinal disorder,
    wherein the level of 6-thioguanine less than about 230 pmol per 8×108 red blood cells indicates a need to increase the amount of said drug subsequently administered to said subject and
    wherein the level of 6-thioguanine greater than about 400 pmol per 8×108 red blood cells indicates a need to decrease the amount of said drug subsequently administered to said subject.

Although similar in most respects, some claims of the second patent-in-suit, No. 6,680,302, dispense with the "administering" step.

The Patents Do Not Claim a Physical Phenomena
On remand, the CAFC again rejected Mayo's argument that the '623 and '302 patents claim a "natural phenomenon."  In seeking a judgment of invalidity under Section 101, Mayo contended (and the district court agreed) that the "administering" and "determining" steps are merely necessary data-gathering steps for the use of the correlations between 6-TG and 6-MMP and therapeutic efficacy or toxicity in patients.  Because these correlations are simply natural phenomena, Mayo reasoned, they were unpatentable.

As before, the Federal Circuit disagreed, noting that Bilski provides a broad – although not unlimited – scope for patent protection, and “an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection.”  Slip. Op. at 12, quoting Bilski, 130 S.Ct. at 3230.  Furthermore, the court stated, neither the Supreme Court's order to vacate and remand the original Prometheus decision nor Bilski dictates a wholly different analysis or different result.  

The crux of the CAFC's determination that the asserted claims recite a patent-eligible application of naturally occurring correlations between metabolite levels and efficacy or toxicity as opposed to the natural correlation itself rests on the specific treatment steps recited by the claims: the "administering" step and the "determining" step.  "The inventive nature of the claimed methods stems not from preemption of all use of these natural processes, but from the application of a natural phenomenon in a series of steps comprising particular methods of treatment." Slip. Op. at 15-16.

In support of its conclusion, the court reiterated its earlier determination that the treatment methods in Prometheus's patents satisfy the "machine-or-transformation test.  Although this is not the exclusive test, post-Bilski, it nevertheless provides important clues to subject matter patentabilty.  In applying the machine-or-transformation framework, the court specifically rejected Mayo's argument that the disputed claims simply claim natural correlations and the associated data-gathering steps, broadly stating that the asserted claims are "claims to methods of treatment, which are always transformative when one of a defined group of drugs is administered to the body to ameliorate the effects of an undesired condition."  Slip Op. at 17.  Even leaving out the administration step does not make the claims unpatentable, as the CAFC also found the "determining" step to be transformative because it involves "[s]ome form of manipulation, such as the high pressure liquid chromatography method specified in several of the asserted dependent claims or some other modification of the substances to be measured, [which] is necessary to extract the metabolites from a bodily sample and determine their concentration."  Id. at 18.

In reaching this conclusion, however, the court was forced to distinguish its earlier decision In re Grams, 888 F.2d 835 (Fed. Cir. 1989), which similarly claimed a process that involved "(1) performing a clinical test on individuals and (2) based on the data from that test, determining if an abnormality existed and determining possible causes of any abnormality by using an algorithm."  Id. at 20.   Unlike the claims in Grams – which the CAFC found unpatentable "because the tests were just to 'obtain data'" (Slip Op. at 20) – the claims of the Prometheus patents "require the performing of clinical tests on individuals that were transformative." 

Mental Steps
In addition to its overarching analysis of the subject matter issue, the opinion also includes an interesting discussion of the use of mental steps in patent claims.  Although the CAFC agreed that the final "wherein" clauses are mental steps, "A subsequent mental step does not, by itself, negate the transformative nature of prior steps. Thus, when viewed in the proper context, the final step of providing a warning based on the results of the prior steps does not detract from the patentability of Prometheus’s claimed methods as a whole." Slip Op. at 21. Because no claim in the Prometheus patents claims only mental steps, "contrary to Mayo’s assertions, a physician who only evaluates the result of the claimed methods, without carrying out the administering and/or determining steps that are present in all the claims, cannot infringe any claim that requires such steps." Id.

Additional Commentary
In addition to an extensive discussion about the decision in response to Dennis's post on Sunday, other sites commenting on the decision include:

  • Patent Docs
  • patents4life
  • IP Watchdog
  • Chris Holman's IP Blog
  • Hal Weger of Foley has suggested that another grant of certiorari may be down the road, given the opinion's refusal to discuss a three-Justice dissent from the dismissal of certiorari in Lab. Corp., 548 U.S. 124, that was cited with approval by five Justices in two concurrences in Bilski.

Akamai v. Limelight: Joint Infringement Requires an Agency Relationship or a Contractual Obligation

Claim Construction, Infringement, Patent, Patent Cases 2010, Rantanen

By Jason Rantanen and Dennis Crouch

Akamai Technologies, Inc. v. Limelight Networks, Inc. (Fed. Cir. 2010)
Panel: Rader, Linn (author), Prost

Three years ago, in BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007), the Federal Circuit sharply limited the ability of patent holders to assert claims of joint infringement.  The BMC decision was further bolstered by Muniauction, Inc. v. Thomson Corp. and I-Deal (Fed. Cir. 2008). Akamai v. Limelight expands on the "control or direct" rule announced in BMC and Muniauction, explaining that joint infringement requires an agency relationship or a contractual obligation to carry out the relevant steps. 

Akamai's Claim of Joint Infringement
In order to win a patent infringement case, a patentee must prove that a single entity practiced every element (either literally or by equivalents) of at least one valid, enforceable claim. Joint infringement issues can arise when a patent holder asserts method claims over activities whose steps are not carried out by a single party.  For example, if a patent claims a method involving performing steps A, B, and C, the patent holder may need to argue joint infringement (as opposed to straightforward direct infringement) if steps A and B are performed by one party and step C is performed by a second party. 

In Akamai, while the accused party (Limelight) performed the majority of the steps of the asserted claims, at least one of the steps of each claim was performed by its customers.  The patent, No. 6,108,703, is directed to an improved method for storing web page content.  Conventionally, the entirety of a web page, including both the page itself and embedded content (such as graphics) is stored on a single server, or mirrored in its entirety across multiple servers.  The patents-in-suit claim a new approach, which involves storing only the embedded objects on mirrored servers (called a "Content Delivery Network," or "CDN"), while having the webpage itself continue to reside on the content provider's servers.  In order to make this system work, the claims further require that the object URLs be "tagged" to resolve to the CDN. 

Daniel Lewin and his adviser Thomas Leighton devised these methods (or algorithms) while at MIT where Leighton was the head of MIT's Computer Science and Artificial Intelligence Laboratory.  The pair founded Akamai, and their invention continues to serve as a basis for the company's core business.  Lewin was killed aboard American Airlines flight 11 when it crashed into the north tower of the World Trade Center on September 11, 2001.

Limelight, Akamai's direct competitor in the CDN business, performed most of the claimed steps but had its customers (companies such as Netflix) tag the URLs.  Because some of the steps were performed by Limelight and some by its customers, Akamai relied on a theory of joint liability, arguing that Limelight controls or directs the activities of its customers.  At trial, the jury sided with Akamai and awarded over $40 million in lost-profit-damages. The district court rejected the jury verdict and supplemented its own non-infringement judgment – holding that there was "no material difference between Limelight's interaction with his customers and that of Thomson in Muniauction."

On appeal, Akamai contended that substantial evidence supported the infringement finding, arguing that Limelight "(1) creates and assigns a unique hostname for the content provider; (2) provides explicit step-by-step instructions to perform the tagging and serving claim steps; (3) offers technical assistance to help content providers with their performance of the claim step; and (4) contractually requires content providers to perform the tagging and serving claim steps if they utilize the Limelight service."  Slip Op at 11. 

Important holdings
In affirming the district court's judgment of noninfringement, the CAFC expanded on its ruling in BMC that "joint liability may be found when one party 'control[s] or direct[s]' the activities of another party."  Slip Op. at 9.  After noting the foundational nature of this standard, the Akamai panel further held that "what is essential is not merely the exercise of control or the providing of instructions, but whether the relationship between the parties is such that acts of one may be attributed to the other."   Id. at 12.  The court interpreted this as requiring either an agency relationship or a contractual obligation: "as a matter of Federal Circuit law that there can only be joint infringement when there is an agency relationship between the parties who perform the method steps or when one party is contractually obligated to the other to perform the steps."  Slip Op. at 14.

Analyzing the issue as a question of agency law, the CAFC concluded that no substantial evidence supported a finding that Limelight's customers perform any of the steps of the claimed method as agents for Limelight.  (Citing the Restatement (3rd) of Agency §1.01). The court also rejected Akamai's theory that Limelight's customers are contractually required to perform the tagging step.  Rather, the court stated, the contract does not obligate the customers to perform any of the method steps; instead, it "merely explains that the customer will have to perform the steps if it decides to take advantage of Limelight's service."  Slip Op. at 16.

Note: The court repeated the warning it set forth in BMC Resources, 498 F.3d at 1381, that concerns about the difficulty of proving infringement of claims that must be infringed by multiple parties "by proper claim drafting.  A patentee can usually structure a claim to capture infringement by a single party."  Slip. Op. at 17 (quoting BMC Resources).  Failing this, the court suggested (citing Mark Lemley's Divided Infringement article) that patentees may be able to correct a claim by seeking a reissue patent.

Claim Construction
Akamai also challenged the district court's construction of two claim terms in related patents, contending that both constructions imported limitations from the specification into the claims.  In a fact-intensive analysis, the CAFC rejected Akamai's arguments, concluding that the district court correctly interpreted the disputed terms given the treatment of the invention in the specification and the lack of any contrary evidence in the prosecution history. 

The Federal Circuit’s Use of Legal Scholarship

CAFC, Patent, Rantanen

By Jason Rantanen

Professors Lee Petherbridge and David Schwartz have released a draft of their new study on the use of legal scholarship by the Federal Circuit.  In the paper, the authors question the conventional wisdom that the Federal Circuit is less likely than other circuit courts of appeals to use legal scholarship in its decision making, and conclude that this oft-repeated claim is contrary to the empirical evidence. 

Methodology and Dataset:  The authors conducted a search of all the reported opinions for the United States circuit courts of appeals for the years 1990-2008 using a mechanical approach to identify each opinion citing to legal scholarship at least once, followed by a custom-made computer program that identified individual citations to legal scholarship. 

Findings: Contrary to result expected under the conventional wisdom, the authors found that the Federal Circuit's use of legal scholarship is similar to that of the regional circuits.  Although it falls on the lower end of the spectrum of judicial citations, the overall frequency with which the CAFC cites legal scholarship is within the range expressed by the regional circuits, and the median frequency of citations per judge falls around the middle of the regional circuits.

The authors also discovered that, unlike some of the high-frequency-of-citation regional circuits, the Federal Circuit lacks any legal scholarship "super citers," such as Judges Posner, Easterbrook, Calibresi, Becker, and Kozinski, which may explain why its overall citation frequency falls on the lower end of the regional circuits.   

Implications: Based on their empirical analysis, the authors conclude that the "claim that the Federal Circuit does not use legal scholarship as much as it should because it does not use it as often as the regional circuit courts of appeals is essentially eviscerated."  Thus, the authors recommend that future scholarship should focus on the merits of the Federal Circuit's use of scholarship, asking questions about when and how the court uses legal scholarship.

The authors also suggest that adding or encouraging an existing judge to become a "super citer" might be beneficial.  They reason that having a small number of judges who regularly study and use legal scholarship allows that scholarship to make its way into the jurisprudence at a measured rate, where it can be considered by the remaining judges who rely on more traditional tools for developing the law.  This mechanism encourages jurisprudential innovation while preventing sudden dramatic shifts. 

Read the Paper: Download here.

In re Vistaprint Ltd.: Venue Transfer Denied

CAFC, Jurisdiction, Patent, Patent Cases 2010, Rantanen,

By Jason Rantanen

In re Vistaprint Ltd. (Fed. Cir. 2010)
Panel: Gajarsa, Schall (author), and Moore

In a counterpoint to its recent decision in In re Acer, this morning the Federal Circuit denied a request for a writ of mandamus seeking transfer of venue out of the Eastern District of Texas.  The underlying action was bought by ColorQuick, LLC, which holds a patent relating to the preparation of production data for printing, against Vistaprint Limited and OfficeMax Incorporated.  As in Acer, none of the parties resided in Texas: Vistaprint, a foreign corporation, has a wholly-owned subsidiary in Massachusetts; OfficeMax is a Delaware corporation with its principal place of business in Illinois; and ColorQuick is a New Jersey corporation.  Both the panel and author in this appeal were identical to the panel and author that granted the writ in In re Acer.

In denying the request for a writ, the CAFC acknowledged the lack of residency, but ruled that the district court did not abuse its discretion in denying transfer.  The panel first noted that although a trial court has broad discretion in transfer decisions pursuant to 28 U.S.C. § 1404(a), "that is not the same as saying that it may accord weight simply as it pleases."  Slip Op. at 4.  Applying that standard, the panel concluded the district court's weighing of factors in this case did not amount to a "patently erroneous result."  Id. (quoting In re Volkswagen of Am., Inc., 545 F.3d 304, 310 (5th Cir. 2008) (en banc)). Specifically, the CAFC concluded that the district court had not abused its discretion in weighing two factors relating to judicial economy: that the trial court had gained substantial experience in construing the claims of the same patent during a prior litigation and that there was a related case currently pending before the same court.

The CAFC also rejected the petitioners' argument that it is always improper for a district court to deny transfer based on judicial economy when all of the convenience factors clearly favor transfer.  While the court noted the importance of the convenience factors, it also recognized that "§ 1404(a) commits the balancing determination to the sound discretion of the trial court based not on per se rules but rather on an 'individualized, case-by-case consideration of convenience and fairness.'"  Slip Op. at 6-7 (quoting Van Dusen v. Barrack, 376 U.S. 612, 622 (1964)).  In this specific case, the CAFC could not conclude that "the trial court's balancing was so unreasonable as to warrant the extraordinary relief of mandamus."  Id. at 8.

Note: The opinion's final footnote appears to summarize the panel's overarching view on mandamus petitions directed to the venue transfer issue.  It states:

Our holding today does not mean that, once a patent is litigated in a particular venue the patent owner will necessarily have a free pass to maintain all future litigation involving that patent in that venue. However, where, as here, the trial court performed a detailed analysis explaining that it is very familiar with the only asserted patent and the related technology, and where there is a co-pending litigation before the trial court involving the same patent-in-suit, and pertaining to the same underly-ing technology and accusing similar services, we cannot say the trial court clearly abused its discretion in denying transfer.