There is an interesting controversy brewing about a blogger (Dunston) who has been sued for defamation and copyright violation by Maine’s tourism advertising firm (Warren Kremer). Dunston reposted (and derided) one of Warren Kremer’s recent ads that mistakenly included the number to a phone-sex hotline. The defamation claim is partially based on Dunston’s accusation that the ad firm is “pissing away” Maine’s tourism dollars.
Blogger Ron Coleman is one of the attorneys representing Dunston.
Pharmaceutical-related patents are allowed in the FDA’s Orange Book only if they’re “composition” or “method of use” patents. Such patents may cover the drug compound, specific formulations of the drug, or methods of treating certain diseases by administering the drug. But “process patents,” which cover methods for making (chemically synthesizing) the drug compound, are not allowed to be listed in the Orange Book. This inconsistency creates several problems for drug companies.
In ordinary circumstances, a patent owner trying to enforce its patent must first get the competitor’s product, look at it and test it, determine that it’s covered by the patent, and then file a lawsuit. In most pharmaceutical patent cases, however, the patent owner need not bother with that. Instead, if an innovator drug company lists its patent in the Orange Book, a generic drug company is required by law to notify the patent owner that it is making (and plans to sell) a drug that arguably infringes the patent. Once notified, the patent owner can file a lawsuit for patent infringement. But notice of possible infringement is required only with respect to patents that are listed in the Orange Book. A patent might not be listed for in the Orange Book because either (a) it’s a process patent; or (b) the patent owner simply forgot to ask the FDA to include it in the Orange Book.
For generic drug companies, the Orange Book provides notice that there are patents out there covering FDA-approved drugs. This relieves the generic drug company’s burden of searching for patents before it invests in research to develop a generic drug product. But patent searching isn’t too difficult nowadays, and generic companies have to do it anyway because not all patents of concern are listed in the Orange Book.
For innovator drug companies, the Orange Book provides more valuable benefits. First, the Orange Book relieves the innovator’s burden of monitoring the marketplace for new generic drugs that infringe its patents. As long as an innovator drug company gets its patent listed in the Orange Book, a generic drug company that desires to make its own version of the drug must, under law, provide notice of possible infringement to the innovator. Upon receiving notice, the innovator is free to file for patent infringement–without having to see the generic product or conduct expensive chemical testing on it. Second (and probably more importantly to the innovator drug companies), the filing of a lawsuit based on a patent listed in the Orange Book automatically invokes a 30-month stay before the generic drug company can sell its drug.
But why can’t any patent relating to an FDA-approved drug be listed in the Orange Book? The answer must be in some sort of bargain struck by lobbyists. After all, the reasons for the Orange Book’s existence apply as well or better when it comes to process patents. For example, to enforce its process patents, an innovator drug company has to monitor the marketplace, obtain a sample of the competitor’s product, test it, and establish a “good faith basis” for filing a patent infringement lawsuit. In other words, the innovator drug company has to gather some evidence (usually the results of chemical testing) that the generic drug company uses the patented process to make the drug. It is difficult and expensive to gather such evidence. In fact, in most cases it would probably be easier to find chemical evidence that a generic drug company infringes a compound or formulation patent, yet because compound and formulation patents may be listed in the Orange book, such monitoring and evidence isn’t required.
Furthermore, owners of process patents must continue to monitor the marketplace even after they win in litigation. Suppose an innovator drug company monitors the market, tests a new generic drug, suspects infringement of its process patent, files a lawsuit, and wins. The generic drug company must then stop selling its drug. However, the generic drug company is free to purchase API made differently, from a different source perhaps, and amend its drug application with the FDA. The innovator drug company that already proved infringement won’t be given notice, and therefore must continue to monitor the market and test all new drugs for infringement of its process patents. Such continuous monitoring isn’t necessary for owners of composition or method of use patents, because a generic company that loses in the first round of litigation will have to provide notice to the innovator company if it later files another drug application. As long as composition or method of use patents are in the Orange Book, the generic drug company must provide notice.
Maybe the inconsistency that only some, but not all, kinds of pharmaceutical patents may be listed in the Orange Book is a minor issue. Maybe the bigger problem is that the Orange Book exists at all. Every other company has to continuously monitor the marketplace for potentially infringing products. And monitoring and testing is expensive for all sorts of high tech industries. What makes the drug companies special? Moreover, because the FDA includes any composition or method of use patent in the Orange Book that an innovator company asks it to list, and does not question whether such listings are proper, many patents that don’t belong in the Orange Book are listed there. This often leads to unnecessary litigation between drug companies. Maybe a way to bring consistency to FDA regulations is to eliminate the Orange Book entirely.
Notes:
Post author: Aaron Barkoff is a patent litigator at the Chicago office of MBHB. He hold a PhD in Biochemistry from Wisconsin and a JD from the University of Chicago.
Here are three new patent papers that I found interesting:
Beth Simone Noveck of New York Law School proposes a peer-to-patent system that would harness the public “collective intelligence” and allow members of the public to suggest references to the Examiner. [Link]
Stuart Minor Benjamin and Arti Rai of Duke Law School provide a useful framework for how the Administrative Procedures Act (APA) should be applied in post-grant reviews. [Link]
Margo Bagley of Emory Law School is worried that the prospect of patent rights forces researches to delay dissemination of their research. Professor Bagley proposes an opt-in filing delay that would allow a two-year grace period coupled with early publication of the patent application [Link] (Published in the Boston College Law Review).
Patent Blog Posts: The world of patent blogs is continuing to grow. Here are
Jim Hawes: What is the most valuable intellectual property?
Patently-O Intellectual Property Schedule: I have started a new Google calendar to keep track of upcoming conferences and events in the patent world. The feed for the calendar is publicly available through these icons: and is apparently best seen through any product that supports the iCal format (like iCal for Mac or Mozilla’s Sunbird). Please send suggested events to patentcalendar@gmail.com.
Kyocera Wireless v. President Electronics and Tony Colida (Fed. Cir. 2006, unpublished).
In a DJ action, Kyocera was awarded summary judgment of noninfringement. On appeal, Colida argued that expert testimony is required for such a summary determination. The CAFC, however, affirmed its prior precedent that expert evidence is “not always necessary to resolve questions of patent infringement.”
While expert evidence may be necessary in cases involving complex technology, this is not such a case, and Mr. Colida does not explain how expert evidence would have been helpful.
Affirmed
Colida has been involved in several other CAFC decisions:
In January 2006, the PTO proposed dramatic changes to patent continuation practice that would essentially allow only one continuation (or CIP or RCE) per application. [Link].
Although the PTO has justified these changes based on a need to reduce examiner workload, the real controversy with extended continuations is what I call “late claiming.”
There are many different ways to “claim” an invention in a patent application. Often, an applicant may pursue one aspect of the invention in the original application, and then file continuations to obtain coverage for other aspects. That practice is fine and legal, but can create business problems when the applicant waits until learning of a competitor product before adding claims that cover that new product.
Late claiming occurs when the applicant adds new claims to cover what has arisen in the marketplace since filing the original patent application.
According to the law, those new claims are generally legitimate so long as they are enabled by the original written description. However, the possibility of late claiming creates another potential down-the-road liability for product developers.
Is late claiming a problem? Will the PTO rule change reduce late claiming?
Small Business Administration concludes that the continuation rule changes “are likely to have a significant economic impact on a substantial number of small entities, including small businesses and small independent inventors.”
Five law firms support the rule change — interestingly, those firms all sent in the same form letter (or at least derivative works). [Matt Buchanan has more]. CORRECTION: The fifth letter — from Quine IP Group — is a recent addition and actually opposes the change.
When can a U.S. patent be used to recover damages for infringement occurring abroad? The answer is actually quite often. Over the past couple of years, plaintiffs have recovered huge damages (or settlements) in U.S. courts for activities that at least partially occurred abroad. In NTP v. RIM, RIM’s BlackBerry system was considered to be used “in the United States” because the e-mail exchange was being controlled by and for the beneficial use of U.S. customers. In Eolas v. Microsoft and AT&T v. Microsoft, the Court of Appeals for the Federal Circuit (CAFC) agreed that the transmittal of computer code could create liability under 271(f) a “component” of a patented invention “supplied” from the U.S. In Shell v. Union Carbide the court further clarified that method claims could have components as well — in this case, the component was a compound used in the patented chemical process. To now, each of these cases have stalled after the CAFC decision when the Supreme Court failed to accept them on petition for certiorari. The lone remaining case is AT&T v. Microsoft. In that case, the Supreme Court has asked the U.S. Solicitor General for the views of the U.S. Government before the Court makes its decision on certiorari. As a historical note, the Supreme Court has not addressed the issue of extraterritorial infringement since the DeepSouth Packing case of 1972, which prompted Congress to pass Section 271(f).
AT&T v. Microsoft (on petition for certiorari).
This issue is huge for Microsoft and for U.S. software developers. Microsoft develops much of its software in the U.S., and ships the code around the world. In the Eolas case, of the half-billion dollar verdict, $330 million was premised on exported code.
In the AT&T case, the CAFC essentially held that Microsoft’s act of shipping its code to a foreign office constitutes patent infringement and any consequential sales or licensing of the shipped code will create patent infringement damages.
The software here involves enhancing the sound quality of synthesized speech while maintaining a high data compression.
In its petition, Microsoft asks two questions:
1) Whether digital software code – an intangible sequence of “1’s” and “0’s” – may be considered a “component[] of a patented invention” within the meaning of Section 271(f)(1); and, if so
2) Whether copies of such a “component[]” made in a foreign country are “supplie[d] . . . from the United States.”
The petition attempts to show that the CAFC has gone astray by interpreting the statute in a manner “appropriate to the technology at issue” rather than according to its “plain meaning and legislative history” as required by Supreme Court precedent.
The petition also impliedly argues that software itself should not be patentable.
The decision below is premised on a commonly held misunderstanding of the nature, and thus the patentability, of software.
Noted attorney Ted Olson and his able team (including Matthew McGill) are handling the appeal.
AT&T’s Opposition
AT&T quickly notes that Microsoft has already appealed this identical issue in the Eolas case, and lost there as well. In addition, AT&T discusses Microsoft’s highly public (but yet unsuccessful) lobbying for patent reform in Congress as evidence that this is an issue that has been considered and rejected by the lawmaking body. Of course, AT&T also argues that the lower court decision does nothing to “expand the extraterritorial reach of U.S. patent laws.
Petitioner’s extraterritoriality argument is a red-herring. Years before . . . the court defined the limits of section 271(f) in order to avoid “the appearance of ‘giving extraterritorial effect to United States patent protection.’”
Waymark (looking only to activity within the U.S. when adjudging infringement).
Amicus in Support of Petitioner by the Software & Information Industry Association (SIIA).
The SIIA is a trade group with over 750 corporate members argued that the CAFC’s new rule upsets settled expectations.
SIIA makes what I see as an important distinction that in Microsoft’s case, the code supplied from the U.S. is not actually incorporated into the infringing products. Rather, the code shipped abroad, copied, and then the copies are installed in the foreign country. They argue that the act was never intended to capture millions of infringing acts based on the supply of only a single component.
Next Steps:
The SG is expected to take several months to provide its input, and this case will not be heard until 4th Quarter 2006. It is currently too-late for parties to file amici briefs. However, the SG will accept input from the public on this important issue.
AT&T v. Microsoft, 414 F.3d 1366 (Fed. Cir. Jul. 13,2005) (271(f) “component” applies to method claims and software being sold abroad);
Eolas v. Microsoft, 399 F.3d 1325 (Fed. Cir. Mar. 2,2005) (271(f) “component” applies to method claims);
Pellegrini v. Analog Devices, 375 F.3d 1113 (Fed. Cir. 2004) (271(f) “component” does not cover export of plans/instructions of patented item to be manufactured abroad);
Bayer v. Housey Pharms, 340 F.3d 1367 (Fed. Cir. 2003) (271(g) “component” does not apply to importation of ‘intangible information’).
Notes:
** 35 U.S.C. 271(f)
(1) Whoever without authority supplies . . . from the United States . . . a substantial portion of the components of a patented invention . . . in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.
(2) Whoever without authority supplies . . . from the United States any component of a patented invention that is especially made . . . for use in the invention and not a staple article . . . suitable for substantial noninfringing use. . . , knowing that such component is so made . . . and intending that such component will be combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.
Parental Guide of Texas v. Thomson (Fed. Cir. 2006).
The most interesting aspect of this case is that the CAFC was willing to decide it. In a post-settlement dispute over damages, Parental Guide originally appealed to the Fifth Circuit. On motion, the Fifth Circuit transferred the case to the CAFC because the settlement agreement “expressly refers to the patent statute, 35 U.S.C. § 284.”
Because it was “at least plausible” that a determination of Section 284 would be necessary to decide the case, the appellate panel felt compelled to hear the appeal.
The majority held that an unpublished patent application that eventually issued as a Canadian patent was a “printed publication” under 35 U.S.C. § 102(b). Judge Linn dissented:
[T]he text of an issued patent does not generally serve to guide researchers to the file history for a more expansive disclosure of the described invention, and it certainly does not lead researchers to the file history for disclosure of subject matter not described in the issued text. . . . The fact that an additional drawing, disclosing additional structure, is present in the application file is a matter of sheer happenstance nowhere indicated in the issued patent. For this reason, it is my view that, as in Cronyn, the anticipatory drawings at issue in this case are “not accessible to the public because they have not been cataloged or indexed in a meaningful way.” . . . In this case, in addition to not being meaningfully indexed, as discussed above, no copies were known to have been made or distributed during the critical period, and the ’119 application was available for viewing only at the Canadian Patent Office in Hull, Quebec.
Bruckelmyer has two patents on methods of thawing frozen ground so that a layer of concrete can be laid on top of the ground. The trial court found Bruckelmyer’s patents obviated by a Canadian patent application and decided the case on summary judgment.
Interestingly, the Canadian patent application included two important figures that were cancelled during prosecution. Those figures were reportedly required for a finding of obviousness.
On appeal, Bruckelmyer argued that the unpublished Canadian patent application was not a “printed publication” under 35 U.S.C. Section 102(b) and thus, was not prior art.
The CAFC found that the original application was “publicly accessible,” and thus a prior art “printed publication” because the Canadian prosecution file was open to the public more than a year before Bruckelmyer filed his application.
A given reference is “publicly accessible”
upon a satisfactory showing that such document has been disseminated . . . to the extent that persons interested and ordinarily skilled in the subject matter . . . exercising reasonable diligence, can locate it and recognize and comprehend therefrom the essentials of the claimed invention without need of further research or experimentation.
In re Wyer, 655 F.2d 221, 226 (CCPA 1981).
Here, the Court found that this particular application could be located because the related patent discussed a solution for the same problem addressed by Bruckelmyer’s patents.
Thus, the application was found to be prior art even though there was no evidence that it was actually disseminated.
Day one of our blog law conference has been a great success. Cathy Kirkman of Wilson Sonsini and I are co-hosts of this LSI conference that has been billed as the first CLE covering the “law of blogs.”
Lava Trading v. Sonic Trading Management (Fed. Cir. 2006, 05–1177)
The majority overturned a lower court claim construction, but Judge Mayer dissented:
The decision today is yet another example of the unfortunate consequences of Markman v. Westview Instruments, Inc., 52 F.3d 967 (Fed. Cir. 1995) (en banc), Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448 (Fed. Cir. 1998) (en banc), and Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc), which cemented this court’s jurisprudence with respect to claim construction as being purely a matter of law subject to de novo review. Because claim construction is treated as a matter of law chimerically devoid of underlying factual determinations, there are no “facts” on the record to prevent parties from presenting claim construction one way in the trial court and in an entirely different way in this court. By not dismissing this case, we issue a decision based on an undeveloped record. We set ourselves up to have to decide claim construction again later, which could well differ from the ruling today. Furthermore, allowance of an appeal of the trial court’s perfunctory, offhand ruling from the bench, for all intents and purposes allows an interlocutory appeal of claim construction, which portends chaos in process.
Lava Trading v. Sonic Trading Management (Fed. Cir. 2006, 05–1177)
In today’s case of Lava Trading, the CAFC again found that knowledge of the accused product is import for providing “a proper context for an accurate claim construction. . . . Without the vital contextual knowledge of the accused products or processes, this appeal takes on the attributes of something akin to an advisory opinion on the [patent] scope. ”
This decision falls in line with the recent Wilson Sporting Goods case that held “while a claim is not to be construed in light of the accused device, in an infringement case, it must inevitably be construed in context of the accused device.”
RealNetworks last week won their patent case against the Boston company Ethos Technologies. [Article] Ethos had asserted that Real infringed two of Ethos’ patents related to downloading technology. According to reports, the jury returned a “unanimous verdict finding that Real did not infringe on any of the 10 claims asserted against in the suit, which was filed in 2002 and sought over $200 million in damages. Moreover, the jury invalidated 7 of the 10 claims.”
In a recent interview, I asked Dave Stewart, Real’s VP and Deputy General Counsel, whether this case altered Real’s position on patent reform:
[Dave Stewart] Our experience in the Ethos litigation confirms our longstanding position on patent reform. We believe the patent system is in need of reform to improve both the quality of the patents issued as well as the time it takes to issue a patent. As a general matter, we have been supportive of most of the Business Software Alliance‘s patent reform efforts. One important step in this regard would be to ensure that all fees paid by inventors be specifically designated for use by the USPTO, which is significantly under funded.
Dave’s response is probably representative of many of the leading technology companies — reform is needed to improve quality and reduce pendency.
In a recent district court decision, Andrew Corp. v. Beverly Mfg. Co., (N.D. Ill. Feb. 16, 2006), already summarized in these pages, the court excluded a non-infringement opinion from evidence when opinion counsel—because of a conflict of interest—ought never to have provided the opinion in the first place. (The opining law firm found itself representing both the patentee and the accused infringer.) The case, then, will be tried under the fiction that the accused infringer, Beverly, knew of the relevant patent but failed to obtain legal advice. Beverly, of course, will be at much greater risk of enhanced damages for willful infringement. The court appreciated that Beverly may be guilty of nothing worse than an unfortunate selection of counsel, and it recognized that choosing a remedy was “unpleasant,” but the court did not take into account the possibility that any resulting award of enhanced damages may well be unconstitutional.
Enhanced damages in an infringement action are a form of punitive damages, and the award of punitive damages is subject to substantive Due Process restrictions. State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 417 (2003). Consistent with Due Process, the Supreme Court requires that “punitive damages should only be awarded if the defendant’s culpability, after having paid compensatory damages, is so reprehensible as to warrant the imposition of further sanctions to achieve punishment or deterrence.” Id. at 419. The “reprehensible” actions that permit an award of punitive damages must themselves be tied to the actions that gave rise to liability in the first place:
A defendant’s dissimilar acts, independent from the acts upon which liability was premised, may not serve as the basis for punitive damages. A defendant should be punished for the conduct that harmed the plaintiff, not for being an unsavory individual or business.
538 U.S. at 422-423. It is by no means clear that the actions of Beverly’s counsel—even if they can be imputed to Beverly—were sufficiently reprehensible to warrant what (in a typical patent case) could amount to millions of dollars in enhanced damages. Even if they were, the connection between Beverly’s purported infringement and its counsel’s ethical lapse is tenuous: it would have done little good to the patentee if Beverly had retained different opinion counsel. (To the contrary, if any counsel were going to advice Beverly to cease infringement, one would think that counsel representing the patentee itself would have done so.)
Through little or no fault of its own, Beverly has been deprived of what is traditionally the most important exculpatory evidence on willfulness. The substantive effect of Due Process on enhanced damages for willful infringement is not entirely clear, but it is questionable whether punitive damages can be based on a fictitious reconstruction of an infringer’s state of mind.
Jeffrey Steck is a partner at MBHB and an experienced litigator. He was also an editor of the California Law Review at the University of California at Berkeley, where he received his JD.
King Pharma v. Teva, 78 USPQ2d 1237 (D.N.J. 2006).
In a pharmaceutical patent dispute, Teva argued that Wyeth’s patent on zaleplon drug products (Sonata) had expired because of a terminal disclaimer. Wyeth (and its exclusive licensee King) argued that patent’s term was ongoing because of a Patent Term Extension due to FDA regulatory review delay.
Under 35 U.S.C. 156(a), the term of a patent “shall be extended” after a series of provisions are satisfied. The district court found the language of the statute unambiguous and gives the court “no discretion.”
Thus, if the enumerated conditions are satisfied, the patentee is entitled to a term extension calculated pursuant to Section 156.
Teva’s motion to dismiss was consequently denied because “a terminally disclaimed patent is eligible for extension under [Section] 156.”
The CAFC has announced a new program of posting digitally formatted oral arguments on its website. According to the www.cafc.uscourts.gov website,
All future argued cases will be available twenty-four hours after argument is completed. Counsel should read this notice containing guidelines for oral arguments.
The files are in MP3 format. A portion of the cases argued since January 2006 are already available. The audio files can be found through the following link:
Andrew Corp v. Beverly Mfg., (N.D.Ill. 2006, 04–6214:146).
Andrew sued Beverly for willful infringement of Andrew’s cable-hanger patents. Beverly then brought forth three opinion letters written by its counsel in an attempt to avoid the willfulness charge.
The opinion letters provide, for instance that Beverly’s new product “does not fall within the claims of [Andrew’s] patent.”
As it turned out, Beverly’s law firm recently merged — and the merged firm represents both Andrew and Beverly.
On motion to disqualify the opinions, the firm responded that “lawyers who represented Andrew have never discussed any Beverly matter with the [lawyers] who represented Beverly and visa versa.”
District Judge Holderman, however, found a clear conflict:
[The firm’s] attorneys took positions directly adverse to its client Andrew in the [two] opinion letters on behalf of its other client Beverly, without obtaining informed consent from both Andrew and Beverly, in violation of Local Rule 83.51.7 and 83.51.10. These opinion letters advised Beverly that its products did not infringe Andrew’s patents, attacked Andrew’s patents, provided potential litigation arguments and provided a factual basis for a potential defense against future claims by Andrew of willful infringement. [The firm] possessed sufficient information to have determined that its work for Beverly was adverse to its existing client Andrew, that it would affect its relationship with Andrew and that the [firm] as a whole was disqualified under the imputed conflict rule.
Remedy: Because of the conflict, the court determined that the opinions could not, as a matter of law, be competent. As such, all opinion letters from the firm were excluded from the case.
In the past, I’ve been given some grief for covering unpublished opinions on the blog. The Federal Circuit has even threatened sanctions against any attorney who cites those opinions in a court filing. Now however, the Supreme Court has voted to require courts to allow citation of unpublished (nonprecedential) appellate opinions.
Chief Justice John Roberts has been quoted as strongly against these hidden opinions— “A lawyer ought to be able to tell a court what it has done.”
According to a Law.com article by Tony Mauro, 9th Circuit Judge Alex Kozenski has been firmly against allowing citation of unpublished opinions:
When the people making the sausage tell you it’s not safe for human consumption, it seems strange indeed to have a committee in Washington tell people to go ahead and eat it anyway.
The rule will not be effective until January 1, 2007.
Professor David Hricik is a leading Intellectual Property Ethicist. He recently posted some questions about your thoughts on patent prosecution conflicts. Do these situations create conflicts of interest:
First example: In prosecuting application for Client A, lawyer receives an office action rejecting claims over a prior art reference that is owned by Client B. Is there a conflict? [your comments].
Second Example: Is it per se unethical for a lawyer to provide a non-infringement or invalidity opinion about another client’s patent? [your comments].
Professor Hricik is also a speaking at our upcoming conference on blog law.
Warren Kremer Paino v. Dunston (D. Maine)
Beth Simone Noveck of New York Law School proposes a peer-to-patent system that would harness the public “collective intelligence” and allow members of the public to suggest references to the Examiner. [
Kyocera Wireless v. President Electronics and Tony Colida (Fed. Cir. 2006, 
Lava Trading v. Sonic Trading Management (Fed. Cir. 2006, 
In a recent district court decision, Andrew Corp. v. Beverly Mfg. Co., (N.D. Ill. Feb. 16, 2006), already summarized in 
King Pharma v. Teva, 78 USPQ2d 1237 (D.N.J. 2006). 
The CAFC has announced a new program of posting digitally formatted oral arguments on its website. According to the www.cafc.uscourts.gov website, 
Andrew Corp v. Beverly Mfg., (N.D.Ill. 2006, 