December 2007

CAFC: Even with Deference, PTO Misinterprets its Own Rules

PatentLawPic123In re Garner, Slip Op. 2007-1221 (Fed. Cir., Dec. 5, 2007)

Garner submitted shoddy evidence to prove an earlier invention date and the Examiner refused to declare an interference.  At the BPAI, Garner added a few additional documents to his Rule 202 priority filing.

37 C.F.R. § 41.202(d)(2) allows a BPAI judge to declare an interference accompanied with an order to prove why the junior party should “prevail on priority.”  Under the rule, “[n]ew evidence in support of priority will not be admitted except on a showing of good cause.”  Here, the BPAI excluded the additional documents as “new evidence” that should have been submitted earlier.

On appeal, the CAFC granted deference to the PTO interpretation of its rules, but still found the PTO’s interpretation erroneous.

PTO Deference: Under Star Fruits and other cases, the CAFC has repeatedly held that the PTO is granted deference in interpreting its own regulations. In Lilly v. UW, the court went on to hold that the PTO’s interpretation of its rules “will be accepted unless it is plainly erroneous or inconsistent with the regulation.”

New Evidence: The “new evidence” submitted by Garner was actually evidence already in the patent file history. Namely, he submitted the provisional application; the specification of the non-provisional; and a previously filed 131 declaration for the appealed case.  The BPAI considered those filings new evidence because they were not part of the original Rule 202 filing.

On appeal, the CAFC took issue with that evidentiary ruling — instead holding that under Rule 202(a)(5), the specifications are automatically part of the evidence to be considered. The CAFC did allow the 131 declaration to be excluded.

Despite winning the evidentiary ruling, Garner was unable to provide sufficient corroborating evidence of prior invention. He had dated photographs, but no evidence proving that his photographed machine actually worked:

“While ‘the law does not impose an impossible standard of ‘independence’ on corroborative evidence by requiring that every point of a reduction to practice be corroborated by evidence having a source totally independent of the inventor . . . [,]’ corroboration of the existence of the device is not sufficient in this case to establish corroboration of reduction to practice. It is also necessary to corroborate that the device worked for its intended purpose.” Quoting Cooper v. Goldfarb, 154 F.3d 1321 (Fed. Cir. 1998).

Thus, the CAFC affirmed the BPAI’s Judgment that Garner failed to “make a prima facie showing of priority.”

 

Finisar v. DirecTV: Compulsory Patent Licensing

Finisar v. DirecTV (Fed. Cir. 2007 — On appeal)

A jury found Finisar’s patent willfully infringed. However, the Eastern District of Texas denied injunctive relief. Instead, the court entered a compulsory licensing scheme that gives DirecTV a right to continue to infringe after paying a fee.[Link] On appeal, Finisar lays out its claim for injunctive relief.

Short Facts: Finisar does not practice its patented invention and is unlikely to ever practice its invention. Likewise, Finisar has not licensed its invention. An injunction blocking DirecTV from selling its infringing satellite television services would potentially create a monopoly for EchoStar. And, DirecTV has money to pay for any damages.

In eBay v. MercExchange, the Supreme Court held that injunctive relief in patent cases requires satisfaction of the traditional four factor test of equitable relief. In eBay, the Supreme Court also made clear that the injunction decision must be made on a case-by-case basis without any bright-line rules or Litmus tests.

About Money: The sufficiency of monetary damages relates to both of the first two eBay factors: (1) whether an injunction would protect against irreparable harm to the patentee and (2) whether damages at law are adequate to compensate the patentee for any continued infringement. Finisar first argues that these two these factors must be wrapped together. The argument is simple – a failure of relief at law results in irreparable harm and vice-versa. Tying the two factors is useful for a patentee because it would then only need to prove one of the two factors primary factors.

Particularly focusing on money damages, Finisar argues that damages are inadequate because the calculation of future royalties is speculative and too uncertain. This type of argument, if factually true, regularly supports injunctive relief.

EBay also declares that the factors must be determined on a case by case basis rather than applying categorical rules. Thus, the fact that a plaintiff is only truly interested in a monetary reward may be a legally insufficient reason to deny relief.

Presumption of Irreparable Harm: Although it avoids using the word ‘presumption,’ Finisar argues that the finding of patent infringement creates a presumption of irreparable harm. This presumption issue was not answered by the eBay decision. In fact, that issue could be seen as the dividing point between the two concurring opinions by Roberts and Kennedy. Following this theme, Finisar argues that the particular harm created by allowing ongoing infringement includes: (1) destroying Finisar’s ability to grant an exclusive license; and (2) hurting Finisar’s ability to license to others because the compulsory license does not deter infringement. A well paid damages expert could calculate the value of those harms and include them in the monetary damage award. I would include the further argument in favor of relief: that long-held precedent would require a presumption of irreparable harm.


Notes:

Patently-O TidBits

  • PPAC Patent Report: Major reform is necessary. [LINK] [About PPAC]
  • New Federal Rules of Civil Procedure: On December 1, the newly revised Federal Rules of Civil Procedure (FRCP) became effective. The rule changes are primarily stylistic rather than substantive. At times, however, it appears that the drafters traded off the goal of preserving the existing meaning in favor of clarity.  Litigators should take time to parse the changes.  [LINK]
  • EPO: Norway & Croatia will become EPO members on January 1, 2008. No retroactive designation is allowed. [LINK] [LINK]
  • Pro Bono: Patent Hawk reports on the recently dismissed case where an inventor sued his pro bono patent attorney for malpractice. [LINK]
  • Patent Reform: Professor Dinh (Georgetown) writes in the American Spectator that we need patent reform: “The reforms proposed by the Patent Reform Act of 2007 are precisely the type of congressional action needed. The Act will remove obstacles to growth and restore balance to the patent system. In particular, the Act will protect inventors’ property rights and encourage innovation by providing a meaningful administrative review process to clarify the scope and validity of patents, and the Act will clarify and modernize the damages rules, thereby eliminating the perverse incentives that foster litigation.” [LINK]
  • Patent Troll Tracker: Patent reform is not a ‘boon to Chinese pirates.” [LINK]