March 2005

The Expanding Reach of U.S. Patent Laws

Patent, Patent Cases 2005

Eolas and RIM Decisions Change the Potential for U.S. Damages Based on Foreign Infringing Activities

As I mentioned earlier, from a legal standpoint, the most important aspect of the Eolas v. Microsoft decision [pdf] is its treatment of extraterritorial infringement. Under traditional notions, U.S. patent law did not extend beyond the territorial bounds of the country. Although this principle was affirmed in the CAFC 2004 case of Pellegrini v. Analog Devices (cert. denied 2004), it appears now that Pellegrini has been narrowly interpreted.

With the one-two punch of Eolas and RIM v. NTP [pdf decision], the CAFC has laid-out a clear path for patent holders to collect damages for certain infringing activity occurring abroad. These cases are based on software-type technology, however, I see clear applications to other technologies, including biotechnology.

In Eolas, the patentee claimed an “executable application” used for a specific purpose. The CAFC upheld Microsoft’s liability for infringement due to its foreign sales under Section 271(f) of the patent statute. Section 271(f) creates a cause of action for infringement due to foreign sales when a component of a patented invention is supplied from the U.S., knowing that the component will be combined in an infringing manner outside the U.S. 

As in the figure above, Microsoft had shipped a master copy of computer code for Internet Explorer (IE) to its foreign suppliers who then copied the disk and sold the copies on foreign soil.  This activity was seen as infringing, even though the patented invention was not practiced until at least the 3rd step above.

Thus, two principles of emerge from Eolas: (i) there is no "physicality" requirement for a component of a patented invention to fall within the statute; and (ii) the shipped component itself need not be part of the infringing use, rather a foreign produced copy of the shipped component can create infringement liability when the copy is to be used in an infringing manner.

Of course, one of the closest parallels to computer code is genetic code.  Quite easily, the CAFC Eolas decision could be expanded to include shipment of DNA or other genetic material abroad for replication and incorporation into a patented invention.

The RIM (RIMM) v. NTP opinion concerning the hand-held BlackBerry held that plain language of section 271(a) does not preclude infringement where a system is used within the United States even though a component of that system is physically located outside the United States.  According to the Court, the test is not whether the infringement took place within the United States, but whether "control and beneficial use" of the infringing system was within the United States.  It appears that "control and beneficial use" will be liberally construed — for instance, in RIM’s case, control of the system and RIM headquarters were in Canada.  End users, however, were located in the U.S.  At a minimum, control and beneficial use of the BlackBerry system was located in both the U.S. and Canada.

The RIM case has potential to have a major impact on outsourcing of manufacturing and services.  Essentially, a call center located in India may now be found to be infringing a U.S. patent if a court finds that the control and beneficial use of the system can be seated in the U.S.

PTO Director Jon Dudas Commits to Patent Reform Measures — saving applicants $30M+ annually

Conference or CLE, Patent,

Jon Dudas, PTO Director, gave a great luncheon talk at the well attended Town Hall Meeting on Patent Reform held in Chicago.  In his speech, he gave a commitment to work toward patent reform measures in Congress.  Dudas has worked on Capitol Hill for many years and has strong relationships with key Republican members of Congress.  His active support will be critical for any patent legislation. 

The big news, however, were his clear statements on non-legislative steps the PTO is undertaking to solve a number of well known problems at the Office.  Specifically, Undersecretary Dudas spoke on (i) transparency; (ii) reexaminations; and (iii) appeals.  The best aspect of the ideas that Dudas presented is that the solutions can be implemented by the PTO without Congressional action.

(i) Transparency: Dudas is a big believer in the motto: “You cannot improve what you cannot measure.”  With that in mind, he is implementing a number of new systems for measuring how well the PTO is doing in terms of both pendency and quality.  These include more in-process reviews as well as a reformation of the pendency statistic.

Historically, pendency has been calculated by looking at newly issued patents to determine how long they took to issue.  This calculation is obviously backward looking.  Now, the PTO is implementing forward looking measures to determine the ‘firepower’ of various technology areas.  Specifically, the PTO’s firepower number is an estimate of, given the current backlog and workforce, how long would it take for a patent filed today to issue or be abandoned.  This number will be more difficult to calculate, but is necessary if the pendency number is to serve as any basis for improvement at the PTO.

(ii) Reexamination: At the conference, there is quite a bit of discussion on legislative efforts to enact a post-grant reform system through legislation.  However, Dudas believes that the reexamination procedures currently available provide a valuable means for improving patent quality of the most important patents (those being litigated).  The problem is that the PTO is much too slow in evaluating reexams.  Almost half of reexams take over two years and many over four years to complete.  In his talk, Dudas gave a commitment to cut pendency of all reexams to two years or less.  To ensure quality, Dudas plans to implement a supervisory review process of for all reexams.

(iii) Pre-Brief Appeal Conference: Finally, in an announcement that may save at least $30M in annual attorney fees, Undersecretary Dudas indicated his plans to introduced an opportunity for a pre-brief appeal conference to give the applicant an opportunity to discuss perceived errors by the Examiner in conference with the Examiner and at least one supervisor or SPE.  The thought is that this conference may eliminate a good portion of easy cases that are normally decided only after the applicant files a (costly) brief. 

I was able to talk with a number of great attorneys at the meeting, including Undersecretary Dudas, Greg Mayer, Matt Buchanan, Bill Rooklidge, and Herb Wamsley.

USPTO: Do Not Send Mail To PTO’s DC Address

Patent

Although the USPTO moved to Virginia almost two years ago, it has still been accepting mail at its DC address.  That practice is changing: 

Effective April 4, 2004, all mail sent to the USPTO’s Washington DC 20231 address will be returned to sender.  Such returned mail will not be considered proof of filing.  Unless otherwise indicated, patent-related mailings should be sent to: Commissioner for Patents P.O. Box 1450 Alexandria, VA 22313-1450. 

Link:

Appeals Court Orders New Trial in $500 Million Microsoft-Eolas Web Browser Case

Patent, , ,

Eolas v. Microsoft

Eolas v. Microsoft (Fed. Cir. March 2, 2005).

Eolas and the University of California sued Microsoft for infringement of its patent that involves a method of using a web browser to open third-party applications using plug-ins.  The District Court for the Northern District of Illinois granted final judgment to Eolas after a jury found that Microsoft infringed the patent and actively induced United States users of Internet Explorer to infringe. The district court also invoked 35 U.S.C. § 271(f) to include foreign sales of Internet Explorer in the royalty awarded to Eolas.  The jury awarded Eolas a royalty of $1.47 per unit of infringing product, which amounted to a total award of $520,562,280.

On appeal, the Court of Appeals for the Federal Circuit (CAFC) found that district court improperly granted judgment as a matter of law (JMOL) in Eolas’ favor on Microsoft’s anticipation and obviousness defenses and improperly rejected Microsoft’s inequitable conduct defense — and thus vacated the district court’s decision and remanded for a new trial on these issues. The CAFC also affirmed the district court’s claim construction and related jury instruction. 

Finally, the biggest news from a patent law perspective is that the Court affirmed the district court’s holding that "components," according to section 271(f)(1), include software code on golden master disks.

(more…)

February 2005 Report on New Academic Research

Articles and Publications, Patent

We are a day late on the February report of New Academic Research. 

  1. Santa Clara’s Computer and High Tech Law Journal has an excellent new article on by Christopher Holman proposing the use of the Protein Similarity Score for determining genuses of related protein sequences. Holman argues that the similarity score represents a more rational and scientifically based approach to claiming a genus of related proteins compared to the current practice based on percent identity.  21 Santa Clara Computer & High Tech. L.J. 55 (Download Article.pdf). Thanks to Trevor Dutcher, the Journal’s Editor for providing a copy of the article.
  2. Professor Katherine Strandburg has written an important article regarding the experimental use exception to patent infringement.  Her article, What Does The Public Get? Experimental Use And The Patent Bargain, is published at 2004 Wisconsin Law Review 82, and also available at SSRN.  Her article, that builds from principles of patent law, is cited in at least one of the briefs in the Merck v. Integra case, and may help shape the Supreme Court’s decision.
  3. Professor Eileen Kane’s article on the patentability of Genes and DNA will become more important if the Supreme Court decides to take up the case of LabCorp v. Metabolite — a case that may redefine concepts of patentable subject matter.  Kane argues that the genetic code "can be characterized as a law of nature."  If so, the legitimacy of genes as patentable subject matter is severely questioned. Available at SSRN, 71 Tennessee Law Review 707.
  4. David Almeling is now a clerk at the 11th Circuit.  His recent article in the Stanford Technology Law Review discusses utility requirement issues of nanotechnology inventions.  Specifically, Almeling argues that nanotech should be measured under the same utility requirements as all other inventions. The article, Patenting Nanotechnology: Problems with the Utility Requirement is available here: http://stlr.stanford.edu/STLR/Articles/04_STLR_N1/contents_f.htm.

Each month I post a note discussing the academic side of patent law.  My on-line sources for material are the SSRN electronic library, a few hard copy journals, and several more that are freely available on-line.  Most of my material, however, comes from articles directly e-mailed to me from professors and law review editors.  Please feel free to e-mail articles for the March edition. (Include information on where the article is being published). — DDC

CAFC: On-Sale Bar Requires Conception of Invention

Patent, Patent Cases 2005

Patentlyo032

Sparton Corp. v. United States (Fed. Cir. 2005).

Sparton, a military contractor, sued the U.S. government to recover money under 28 U.S.C. Section 1498(a) for unlicensed use of its patented inventions by the U.S. government.  The U.S. Claims Court has jurisdiction over this type of claim and held that Sparton’s two patents were invalid because they were offered for sale more than one year before the patents were filed.  Specifically, the Claims Court found that an engineering proposal submitted by Sparton to the Navy created the bar.

On apppeal, the Federal Circuit panel (Archer) explained that, although "the Supreme Court has not explained what is necessary for a "commercial offer for sale," we have held that two elements are necessary. Namely, a court must find that (1) there was a "commercial offer"; and (2) that offer was for the patented invention."

Sparton argued that the proposal that they submitted was not an offer for the patented invention, and thus, could not present an on-sale bar.  Both sides agreed that the proposal did not describe the complete patented invention.  However, the lower court had construed the proposal using standard contract law to determine that the proposal/offer would also include the patented invention.

The Federal Circuit agreed with the patentee, finding that the claim’s court’s "result is illogical. . . . With no conception of an invention, there cannot be an offer for sale or a sale of that invention."

REVERSED AND REMANDED

Links:

High Court asks for government’s view on patentability of tests to determine vitamin deficiency.

Patent, Patent Cases 2005, ,

LABORATORY CORP. OF AMERICA (LabCorp) V. METABOLITE LABORATORIES, ET AL. (on petition for cert at the Supreme Court 2005).

The Supreme Court moved a step closer to granting cert in the case by inviting the Acting Solicitor General to file a brief expressing the views of the United States on the following question:  

Respondent’s patent claims a method for detecting a form of vitamin B deficiency, which focuses upon a correlation in the human body between elevated levels of certain amino acids and deficient levels of vitamin B. The method consists of the following:

First, measure the level of the relevant amino acids using any device, whether the device is, or is not, patented;

second, notice whether the amino acid level is elevated and, if so, conclude that a vitamin B deficiency exists.

Is the patent invalid because one cannot patent laws of nature, natural phenomena, and abstract ideas? Diamond v. Diehr, 450 U.S. 175, 185 (1981).

In the opinion below, the CAFC (Rader, J.) affirmed the jury verdict of indirect infringement and breach of contract, and affirmed the district court’s award of over $8 million in damages to Metabolite (including damages for willfulness).  The dissent (Schall, J.) argued that claim interpretation had been mishandled. Metabolite Laboratories, Inc. v. Laboratory Corp. of America Holdings, dba as LabCorp., 370 F.3d 1354 (Fed. Cir. 2004) (read my summary)

The question that the High Court is now considering does not appear to have even been addressed by the CAFC decision.  The Court’s docket shows that the case has already been distributed for conference five times since January 1, 2005.  

In its petition for a writ of certiorari, LabCorp presented three questions to the Court:

1. Whether liability can be imposed for willfully inducing patent infringement under 35 U.S.C. § 271(b) based solely on evidence that a party has disseminated a basic scientific fact to others.

2. Whether an express limitation in a patent claim can be ignored so as to allow the patent to cover the exact opposite of what was claimed.

3. Whether a method patent setting forth an indefinite, undescribed, and non-enabling step directing a party simply to “correlat[e]” test results can validly claim a monopoly over a basic scientific relationship used in medical treatment such that any doctor necessarily infringes the patent merely by thinking about the relationship after looking at a test result.

The Court, however, appears to be interested only the extent that a basic scientific relationship used in medical treatment is patentable.  LabCorp’s introduction provides a compelling story and sets the stage for the debate:

The holding of the Federal Circuit in this case is truly extraordinary. The court construed a patent to confer on respondents a legally-protected monopoly to bar any doctor in the Nation from even about a well-known scientific correlation. It then went even further, holding—in conflict with other Federal Circuit decisions—that petitioner LabCorp indirectly “induced” such infringement merely by publishing truthful information informing doctors of this basic scientific fact. And further compounding its errors, the Federal Circuit violated well-established tenets of patent law by expanding the patent beyond its express terms, and by upholding its validity.

Documents:

Thanks to Jonathan Franklin at Hogan & Hartson and Glenn Beaton at Gibson Dunn for copies of the briefs and to appellate attorney Howard Bashman at How Appealing for the heads-up on the case.