March 2011

False Marking: A Temporary Flash in the Pan

There are several reasons why the onslaught of false marking litigation should be seen as merely a temporary flash in the pan.

  1. Business Practices: For the past several decades, manufacturers and retailers had become lax in policing the false marking of their products. For the most part that laxity no longer exists. It is easy for a company to take steps to avoid false marking charges and the prospect of litigation now provides sufficient incentive.
  2. Legal Rules Requiring Pleading in Particular: In the case In re BP Lucricants, ___ F.3d ___ (Fed. Cir. March 15, 2011) (on mandamus), the Federal Circuit recently held that a false marking plaintiff must plead the their case with particularity under Fed. R. Civ. Pro. R. 9(b). Rule 9(b) states that “In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.” Here, the court held that a complaint must at least “provide some objective indication to reasonably infer” that the defendant had knowledge of the falsity. In the language of Exergen, the false marking plaintiff must provide detail on “the specific who, what, when, where, and how” of the alleged fraud. Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1327 (Fed. Cir. 2009). This heightened pleading requirement seems likely to result in a large number of cases being dismissed – unless the plaintiff has inside knowledge of the manufacturer’s decision making process.
  3. Other Legal Limitations: There continues to be ongoing uncertainty as to what evidence will really be required in order to prove that the manufacturer had intent to deceive the public. In addition, at least one court has held the false marking statute unconstitutional and the Federal Circuit is hearing that issue on appeal.
  4. Likely Low Fine: The courts have not developed any jurisprudence for calculating the fine – other than the obvious notion that the fine must be less than $500 per offense. It is quite likely that the fines eventually assessed will be low. Of course, the problem for defendants is the uncertainty.

False Marking Settlement Updates

Over 1,000 false marking lawsuits have been filed in the past two years. The flash of opportunism was triggered by recent court rulings that the statutory-authorized $500 fine per offence could be calculated on a per-article basis. Thus, the false-marking of one million paper cups could result in a maximum $500 million fine.  The false marking statute –  35 USC 292 –  sets a maximum fine but does not set a minimum.  Thus, it is also possible for a court to set the fine at well under a penny per offense.  

Although most of the lawsuits are still pending, about 180 settlements have been reached. Justin Gray of GrayOnClaims and the Foley firm has been tracking these settlements through the use of FOIA requests and has made the settlement information public. Although patent settlements are not usually publicly available, false marking settlements become public because of the punitive fine received by the US government.

Of the settlements reported thus far, the average value is $53,404 and median is $40,000. This takes the total settlement value to just under $10 million. The lowest settlement has been $500 and the largest $350,000. Of course, it may well be that the largest potential settlements are still pending.

As the chart shows below, settlements have been on the rise over the past few months.

PatentLawImage110

A few plaintiffs dominate the settlements. The top-five settlement plaintiffs are associated with over half of all settlements and settlement value. Patent Group LLC has settled the most cases thus far (37) while Promote Innovation LLC has the most revenue ($899,000). Patent Group LLC self identifies only as a Texas limited liability corporation represented by Ken Good of Tyler Texas. Promote Innovation LLC is also a Texas LLC represented by the Antonelli firm of Houston (former Weil Gotshal attorneys).

I pulled up the docket for Promote Innovation’s case against Roche. The complaint alleges that Roche falsely has continued to mark its ACCU-CHEK diabetes monitoring kits as covered by patents that were held unenforceable due to inequitable conduct back in 2005. See Roche Diagnostics Corp. v. Apex Biotechnology Corp, 374 F. Supp. 2d 673 (S.D.Ind 2005) (holding the patent and is progeny unenforceable).

Guest Post: One EU Patent, 27 Courts

Guest post by Gwilym Roberts of the UK firm Kilburn & Strode

In a flurry of decisions last week the EU confirmed the viability of a unitary EU patent but rejected any tenable form of a unitary court for enforcing it.

The enhanced cooperation process by which a subset of countries agree to a common procedure was agreed in terms of arriving at a language regime although this could still be opposed by Italy and Spain. Hence the path to a unitary patent, granted as an EU designation within the EPO framework, appears permissible. However the European Court of Justice (ECJ) in a separate decision rejected the idea of any unitary patent court system which the ECJ itself was not part of. Most users of the system are extremely nervous about using the ECJ as a possible forum for a unitary court simply because of the lack of experience there and so this seems insurmountable.

As a result in due course it will be possible to get an EU patent but it will still be necessary to enforce it country by country. Given that it is likely to take years to see the paperwork through to obtain a unitary patent in any event, therefore, little or no progress has been made and the benefits of a unitary patent without a unitary court go no further than a potential slight saving in translation costs. As a reasonable framework is being developed for translation savings via the London Agreement, which is already in place, it seems that it may make more sense to pay attention to increasing the number of countries party to the savings available by this alternative route.

In summary, therefore, there has been very little progress despite the excitement over the last few months in relation to an EU patent and the only question is whether, after 40 years of failure, anyone other than the Politicians is really very surprised?

Who is Suing for Patent Infringement?

Kyle Jensen and his group at PriorSMart maintain an incredible database of patent litigation. Last week Kyle provided me with some interesting data on patent filings over the past decade for one of my ongoing projects. I thought that I would present a snapshot based on PriorSMart’s information. The first table below looks at the top-25 filers of patent infringement lawsuits during the past ten years. The second table looks instead at the count of defendants who have been sued for that same time period. (At this point, the defendant-count has some duplication based on individual lawsuits that name both the parent and subsidiary companies as defendants).

 

Rank

Patent Plaintiff

Number of Cases Filed

1

Acacia

190

2

Laughlin Products

162

3

Pfizer

149

4

Monsanto Company

125

5

Ronald A Katz Technology Licensing

107

6

Patent Group (False Marking)

106

7

Novartis

104

8

Abbott Laboratories

103

9

Astrazeneca

80

10

Sanofi-Aventis

78

11

Oakley

77

12

Warner-Lambert Company

74

13

U.S. Philips

74

14

Mag Instrument

70

15

Merck

69

16

3M Innovative Properties Company

67

17

Cygnus Telecommunications Technology

64

18

Schering

64

19

Millennium

63

20

Eli Lilly And Company

61

21

Promote Innovation (False Marking)

60

22

Melvino Technologies

59

23

Teva Pharmaceuticals

58

24

AstraZeneca AB

54

25

Eon-Net

54

 

 

Rank

Patent Plaintiff

Number of Defendants

Non-Practicing Entity

1

Ronald A Katz Technology Licensing

1295

Yes

2

Acacia and Paul Ware

1100

Yes

3

Tillotson and Best Manufacturing Company

468

No

4

Laughlin Products

463

No

5

Geotag

454

Yes

6

U.S. Philips

406

No

7

Pfizer

399

No

8

Massachusetts Institute of Technology

297

Yes

9

Monsanto Company

295

No

10

Parallel Networks

274

Yes

11

Orion IP (Spangenberg)

269

Yes

12

Sanofi-Aventis

260

No

13

Electronics for Imaging (with MIT)

253

Yes

14

Abbott Laboratories

230

No

15

Melvino Technologies and ArrivalStar

226

Yes

16

Leon Stambler

218

Yes

17

Mag Instrument

212

No

18

Astrazeneca

203

No

19

PACid Group

194

Yes

20

Clear With Computers (Spangenberg)

193

Yes

21

Guardian Media Technologies

193

Yes

22

Warner-Lambert Company

187

No

23

Technology Patents

186

Yes

24

Honeywell International

183

No

25

Eli Lilly And Company

182

No

 

About 11% of all defendants sued for patent infringement during this time-period were sued by these 25 plaintiffs.

Post-Disclosure Grace Period – Unique but Good Policy

Guest Post by Canadian Patent Attorney David French of Second Counsel. He also writes the Canada Patent Blog.

The U.S. Senate has now passed its new patent bill, S. 23.  Numerous comments have been made, particularly about the first-to-file revisions of this law. However, no one is commenting on the effect of the following clauses in amended section 102:

102(b) Exceptions-

(1) DISCLOSURES MADE 1 YEAR OR LESS BEFORE THE EFFECTIVE FILING DATE OF THE CLAIMED INVENTION- A disclosure made 1 year or less before the effective filing date of a claimed invention shall not be prior art to the claimed invention under subsection (a) (1) if–

(A) the disclosure was made by the inventor or joint inventor or by another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor; or

(B) the subject matter disclosed had, before such disclosure, been publicly disclosed by the inventor or a joint inventor or another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor.

Subparagraph (B) has the following result:  If you disclose your invention to the public, or more precisely if the subject matter of your later patent application has been previously “publicly disclosed”, then you effectively have established your US filing date.

This is an unusual provision in patent law, indeed unique. But it appears to be good policy. It’s true; anyone relying on this provision would lose their rights in Europe. But if an inadvertent disclosure were to occur as through a public use or a public presentation, then if that disclosure meets the requirements of this section, the applicant would have thereby locked-in their right to obtain a US patent. This would be true, of course, only so long as they do not otherwise violate the one-year deadline to file based their own personal disclosures which have made the invention available to the public. This assumes, as well, that there has been no prior disclosure by a third-party.

This provision repairs a flaw in the present Canadian law. Under the Canadian patent statute, an inventor who puts his invention on the market and relies on the one-year grace period before filing in Canada, can still lose his patent rights if an independent inventor makes the invention “available to the public” before the inventor has filed his patent application. In other words, it’s still a “race to the patent office” as between strangers in Canada.

The exception of Section 102(b)(1)(B) provides relief from that pressure. Effectively, publicly disclosing your invention will shield any application from after-arising prior art. This is equivalent to obtaining a filing date.

Another way to look at the exception is that it provides a presumption that anyone who subsequently publishes an invention is assumed to have acquired knowledge of the invention from the inventor. This would bring such a disclosure within the scope of Section 102(b)(1)(A). This Section 102(b)(1)(A) is the classic Canadian pioneered “one-year inventor originating grace period”.

While this section may be good policy, it may still have a flaw that could be corrected before the House.

What does “publicly disclosed” mean? The main novelty provision of section 102 uses the expression “available to the public” to characterize fatal prior art. This has been interpreted in Europe and Canada as requiring that a prior disclosure must be “enabling” in order to be effective as prior art. If a tractor is driven around town but doesn’t make the invention understandable, then this enablement requirement means that the invention has not been made “available to the public”. Will the same requirement of enablement be imported into the expression “publicly disclosed”?

This uncertainty could be dispelled if, before the House, the bill where amended as follows:

102(b)(1)(B) the subject matter disclosed had, before such disclosure, been publicly disclosed by the inventor or a joint inventor or another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor so as to make the invention available to the public.

On the other hand, the legislators may not wish to commit to such an interpretation. Perhaps they want the Courts to resolve this issue rather than take the responsibility themselves.

To make the amendment proposed would raise the standard required when something is “publicly disclosed” in order for such an event to serve as a shield against after-arising prior art. Perhaps the legislators do not want to be the ones that stipulate for an increase standard.

Under the existing law, once a conception of an invention has occurred and the invention has been reduced to practice, (including reduction to practice under confidential circumstances), the inventor does not have to make a public disclosure that arises to the standard of being “enabling”. He/she can delay filing up to the limit that the invention has not been suppressed or abandoned.  A delay of one year is probably not unreasonable if it fits within the statutory one-year grace period.

 Under this new provision of section 102(b)(1)(B), the sheltering of the invention will live or die according to whether an invention has been “publicly disclosed” to the standard that the law requires.

To clarify or not to clarify, that is the dilemma that the House must face in reviewing its equivalent to S. 23.

Microsoft v. i4i: Shifting Weight of Evidence versus Shifting Burden of Proof

Microsoft Corp. v. i4i Limited Partnership

This case, now pending before the US Supreme Court, questions the standard of proof necessary to invalidate an issued patent based on issues not considered by the USPTO during examination. For Microsoft, lowering the standard appears to be its only chance to escape from a pending judgment of over $100 million in favor of i4i. Microsoft lost at the district court, lost on appeal, lost at the PTO during reexamination, and was summarily denied a second attempt at reexamination. The Supreme Court, however has offered the software giant some light.

The issue is whether the District Court and Federal Circuit erred in holding that Microsoft was required to prove its invalidity defense by clear and convincing evidence “even though the prior art on which the invalidity defense rests was not considered by the Patent and Trademark Office prior to the issuance of the asserted patent.”

It turns out that the parties are not so far apart on the answer. Although i4i argues that the level of proof should remain clear-and-convincing, it also admits that the Federal Circuit has consistently held that the burden can be more easily satisfied with prior art that the PTO never considered.

Throughout its existence, the Federal Circuit has held that the clear-and-convincing standard may be more easily satisfied with references the PTO did not consider. See, e.g., Connell v. Sears, Roebuck & Co., 722 F.2d 1542, 1549 (Fed. Cir. 1983); SSIH Equip. S.A. v. U.S. Int’l Trade Comm’n, 718 F.2d 365, 375 (Fed. Cir. 1983) (five-judge panel); SIBIA Neurosciences, Inc. v. Cadus Pharm. Corp., 225 F.3d 1349, 1355-1356 (Fed. Cir. 2000); Jervis B. Webb Co. v. Southern Sys., Inc., 742 F.2d 1388, 1392 n.4 (Fed. Cir. 1984) (citing cases). . . . As with such other evidence, prior art that the PTO never considered does not change the standard of proof. Instead, the jury can give more or less weight to the evidence because of its particular characteristic.

This argument apparently works for i4i because, although the jury might not have been instructed on the proper appliation of the standard, Microsoft has not preserved that issue for further appeal.

The i4i brief serves as a point-by-point critique of the arguments introduced by Microsoft and others. This technocrat approach is effective, but it also leaves i4i open to the simple cross-doctrinal counter that was so effective in the eBay case. The court will certainly ask – If a preponderance of the evidence is all that is required to invalidate a real property claim, a personal property claim, a registered copyright, a trademark, or a trade secret claim, what is so different about patent law?

Friend-of-the-court briefs in support of i4i’s position are expected this week.

Documents:

Patently-O Bits & Bytes by Lawrence Higgins

Jason Rantanen’s Patently-O post cited by District Court

  • In Arlington Industries, Inc. v. Bridgeport Fittings, Inc., 2011 WL 703612 (M.D.Pa. Feb 18, 2011), the district court cited Jason Rantanen’s Patently-O post discussing the Federal Circuit opinion in that case. [Link]The citation was support for the argument that the Federal Circuit decision is controversial and has some likelihood of being re-heard en banc.  The district court favorably noted the “over 100” comments that had been added to the post.

Mary Wong named Franklin Pierce Center for Intellectual Property Director

  • The Franklin Pierce Center for IP was formed after the Franklin Pierce Law Center and the University of New Hampshire (UNH) decided to unite. Wong has been with UNH since 2005 and is currently a professor and the Chair of the Intellectual Property Graduate Programs. Wong’s research interest focuses mainly on the international intellectual property rights framework. [Link]

AT&T and Sony Ericsson sued over expired patent

  • Romek Figa is suing AT&T and Sony Ericcson over a patent issued to him in 1990 and that expired on May 12, 2008. The patent at issue is patent # 4,924,496, which essentially claims a caller-id device. Figa contends certain Sony Ericcson mobile phones that were sold through AT&T infringed patent 496. In the complaint Figa asserts that prior to the expiration of the patent at issue he notified Sony and AT&T that they were infringing patent 496. Thereafter, Figa and the parties were in negotiations about licensing the patent, but no agreement was ever reached. [Link]

Article One hired to help find prior art that will invalidate the patents in the Interval Licensing lawsuit

  • Article One Partners is a company that makes a profit by using crowdsourcing to try to find prior art to invalidate patents that are at issue in patent infringement lawsuits. Article One will pay researchers money, if they find prior art used to help invalidate a patent. According to Article One Partners CEO Cheryl Milone, multiple stakeholders are sponsoring a project to try to find prior art that would invalidate Interval Licensing’s patents. [Link]

New Patent Blog

  • www.ReexamLink.com is a blog about patent reexamination, reissue, opposition and related patent procedures.  ReexamLink.com will include the interplay between ex parte prosecution, reexamination, litigation, and appeals.  It is intended to provide useful content for litigators, prosecutors, and anyone interested in patent law.  The blog is written by Timothy Bianchi a patent attorney with 17 years experience in patent law.

Patent Jobs:

  • Synaptics is searching for an IP Engineer for their Santa Clara location. [Link]
  • DuPont is looking for an experienced Patent Agent with 3-5 years experience for their Delaware location. [Link]
  • International IP Law Group is looking for a Patent Engineer/Agent with 2-3 years technical experience to work in their Houston Office. [Link]
  • Fiala & Weaver is searching for Patent Attorneys/Agents to work in their D.C Office or to work remotely. [Link]

Upcoming Events:

  • The Wake Forest Journal of Business and Intellectual Property Law will host its Spring Symposium on March 25th. The Symposium will discuss “Creative Capital: Intellectual Property Creation and Venture Capital.” The Keynote Speaker is Bob Young CEO and Founder of Lulu.com; other speakers include Michael Mireles, Therese Maynard, and Daniel Egger. [Link]
  • The Columbus School of Law will host the Dean William Callyhan Robinson Intellectual Property Lecture Series on March 29th. The lecture will be delivered by Jeffrey Lefstin, with an introduction by Judge Alvin Schall. [Link]
  • The University of Dayton, School of Law will host a Symposium Series on Current Issues in Intellectual Property Law on March 31st. The guest speaker will be Scott Kief of The George Washington University Law School. [Link]

Patently-O Bits & Bytes by Lawrence Higgins

Jason Rantanen’s Patently-O post cited by District Court

  • In Arlington Industries, Inc. v. Bridgeport Fittings, Inc., 2011 WL 703612 (M.D.Pa. Feb 18, 2011), the district court cited Jason Rantanen’s Patently-O post discussing the Federal Circuit opinion in that case. [Link]The citation was support for the argument that the Federal Circuit decision is controversial and has some likelihood of being re-heard en banc.  The district court favorably noted the “over 100” comments that had been added to the post.

Mary Wong named Franklin Pierce Center for Intellectual Property Director

  • The Franklin Pierce Center for IP was formed after the Franklin Pierce Law Center and the University of New Hampshire (UNH) decided to unite. Wong has been with UNH since 2005 and is currently a professor and the Chair of the Intellectual Property Graduate Programs. Wong’s research interest focuses mainly on the international intellectual property rights framework. [Link]

AT&T and Sony Ericsson sued over expired patent

  • Romek Figa is suing AT&T and Sony Ericcson over a patent issued to him in 1990 and that expired on May 12, 2008. The patent at issue is patent # 4,924,496, which essentially claims a caller-id device. Figa contends certain Sony Ericcson mobile phones that were sold through AT&T infringed patent 496. In the complaint Figa asserts that prior to the expiration of the patent at issue he notified Sony and AT&T that they were infringing patent 496. Thereafter, Figa and the parties were in negotiations about licensing the patent, but no agreement was ever reached. [Link]

Article One hired to help find prior art that will invalidate the patents in the Interval Licensing lawsuit

  • Article One Partners is a company that makes a profit by using crowdsourcing to try to find prior art to invalidate patents that are at issue in patent infringement lawsuits. Article One will pay researchers money, if they find prior art used to help invalidate a patent. According to Article One Partners CEO Cheryl Milone, multiple stakeholders are sponsoring a project to try to find prior art that would invalidate Interval Licensing’s patents. [Link]

New Patent Blog

  • www.ReexamLink.com is a blog about patent reexamination, reissue, opposition and related patent procedures.  ReexamLink.com will include the interplay between ex parte prosecution, reexamination, litigation, and appeals.  It is intended to provide useful content for litigators, prosecutors, and anyone interested in patent law.  The blog is written by Timothy Bianchi a patent attorney with 17 years experience in patent law.

Patent Jobs:

  • Synaptics is searching for an IP Engineer for their Santa Clara location. [Link]
  • DuPont is looking for an experienced Patent Agent with 3-5 years experience for their Delaware location. [Link]
  • International IP Law Group is looking for a Patent Engineer/Agent with 2-3 years technical experience to work in their Houston Office. [Link]
  • Fiala & Weaver is searching for Patent Attorneys/Agents to work in their D.C Office or to work remotely. [Link]

Upcoming Events:

  • The Wake Forest Journal of Business and Intellectual Property Law will host its Spring Symposium on March 25th. The Symposium will discuss “Creative Capital: Intellectual Property Creation and Venture Capital.” The Keynote Speaker is Bob Young CEO and Founder of Lulu.com; other speakers include Michael Mireles, Therese Maynard, and Daniel Egger. [Link]
  • The Columbus School of Law will host the Dean William Callyhan Robinson Intellectual Property Lecture Series on March 29th. The lecture will be delivered by Jeffrey Lefstin, with an introduction by Judge Alvin Schall. [Link]
  • The University of Dayton, School of Law will host a Symposium Series on Current Issues in Intellectual Property Law on March 31st. The guest speaker will be Scott Kief of The George Washington University Law School. [Link]

Patently-O Bits & Bytes by Lawrence Higgins

Jason Rantanen’s Patently-O post cited by District Court

  • In Arlington Industries, Inc. v. Bridgeport Fittings, Inc., 2011 WL 703612 (M.D.Pa. Feb 18, 2011), the district court cited Jason Rantanen’s Patently-O post discussing the Federal Circuit opinion in that case. [Link]The citation was support for the argument that the Federal Circuit decision is controversial and has some likelihood of being re-heard en banc.  The district court favorably noted the “over 100” comments that had been added to the post.

Mary Wong named Franklin Pierce Center for Intellectual Property Director

  • The Franklin Pierce Center for IP was formed after the Franklin Pierce Law Center and the University of New Hampshire (UNH) decided to unite. Wong has been with UNH since 2005 and is currently a professor and the Chair of the Intellectual Property Graduate Programs. Wong’s research interest focuses mainly on the international intellectual property rights framework. [Link]

AT&T and Sony Ericsson sued over expired patent

  • Romek Figa is suing AT&T and Sony Ericcson over a patent issued to him in 1990 and that expired on May 12, 2008. The patent at issue is patent # 4,924,496, which essentially claims a caller-id device. Figa contends certain Sony Ericcson mobile phones that were sold through AT&T infringed patent 496. In the complaint Figa asserts that prior to the expiration of the patent at issue he notified Sony and AT&T that they were infringing patent 496. Thereafter, Figa and the parties were in negotiations about licensing the patent, but no agreement was ever reached. [Link]

Article One hired to help find prior art that will invalidate the patents in the Interval Licensing lawsuit

  • Article One Partners is a company that makes a profit by using crowdsourcing to try to find prior art to invalidate patents that are at issue in patent infringement lawsuits. Article One will pay researchers money, if they find prior art used to help invalidate a patent. According to Article One Partners CEO Cheryl Milone, multiple stakeholders are sponsoring a project to try to find prior art that would invalidate Interval Licensing’s patents. [Link]

New Patent Blog

  • www.ReexamLink.com is a blog about patent reexamination, reissue, opposition and related patent procedures.  ReexamLink.com will include the interplay between ex parte prosecution, reexamination, litigation, and appeals.  It is intended to provide useful content for litigators, prosecutors, and anyone interested in patent law.  The blog is written by Timothy Bianchi a patent attorney with 17 years experience in patent law.

Patent Jobs:

  • Synaptics is searching for an IP Engineer for their Santa Clara location. [Link]
  • DuPont is looking for an experienced Patent Agent with 3-5 years experience for their Delaware location. [Link]
  • International IP Law Group is looking for a Patent Engineer/Agent with 2-3 years technical experience to work in their Houston Office. [Link]
  • Fiala & Weaver is searching for Patent Attorneys/Agents to work in their D.C Office or to work remotely. [Link]

Upcoming Events:

  • The Wake Forest Journal of Business and Intellectual Property Law will host its Spring Symposium on March 25th. The Symposium will discuss “Creative Capital: Intellectual Property Creation and Venture Capital.” The Keynote Speaker is Bob Young CEO and Founder of Lulu.com; other speakers include Michael Mireles, Therese Maynard, and Daniel Egger. [Link]
  • The Columbus School of Law will host the Dean William Callyhan Robinson Intellectual Property Lecture Series on March 29th. The lecture will be delivered by Jeffrey Lefstin, with an introduction by Judge Alvin Schall. [Link]
  • The University of Dayton, School of Law will host a Symposium Series on Current Issues in Intellectual Property Law on March 31st. The guest speaker will be Scott Kief of The George Washington University Law School. [Link]

Patent Reform in the House of Representatives:

Earlier today, I testified in Congress before the House of Representatives Judiciary Committee’s Subcommittee on Intellectual Property, Competition, and the Internet. [Link] The IP subcommittee will have jurisdiction over any patent reform measures introduced to the House.  The other two witnesses were Professor Dan Burk (UC Irvine) and Andrew Pincus (Mayer Brown, representing BSA).  The focus of today’s hearing was on the changes that have occurred in patent law since the patent reform process began in 2004.  I.e., what is left for Congress to reform? Our written and recorded testimony is available online here: http://judiciary.house.gov/hearings/hear_03102011_2.html.

Questioning was extensive and included questions from subcommittee Chairman Goodlatte (R-VA), Vice-Chairman Watt (D-NC), and Representatives Conyers (D-Mich), Nadler (D-NY), Chu (D-CA), Reed (R-NY), and Adams (R-FL). Representatives Coble (R-NC) and Quayle were also in attendance.

My written Testimony Follows:

 

Committee on the Judiciary< ?xml:namespace prefix ="" o />

United States House of Representatives

Subcommittee on Intellectual Property, Competition and the Internet

 

Hearing

                                                                   

 “Review of Recent Judicial Decisions on Patent Law”

 

Prepared Statement of

Dennis Crouch

 

March 10, 2011

Washington, DC


 

I.                 Introduction:

 

We are likely nearing a turning point in a decade-long process of patent reform.  Although there is still clearly a strong demand for legislative measures, much has changed since the landmark FTC and NAS point-by-point criticisms of the patent law system were released in 2003 and 2004 respectively.[1] Likewise, much has changed in the six years since the Patent Reform Act of 2005 was introduced in the House of Representatives.[2]  Perhaps in response to these external pressures, the Federal Courts have taken a more active role in shaping patent policy from the bench and have particularly addressed many of the concerns raised by the various patent reform initiatives.

 

II.               The Rapid Developments in Patent Case Law over the Past Several Years:

 

In most areas of law, court-developed doctrines mature quite slowly.  Over the past decade, however, patent law has been a dramatic counter-example.  The courts have substantially altered many longstanding patent doctrines in the course of a few short years.[3]  Several factors combine to explain this phenomenon.  First, unlike most other federal legal questions appealed to regional Circuit Courts of Appeal, virtually all patent law related appeals from across the country are heard by the Court of Appeals for the Federal Circuit (the “Federal Circuit”).  The national reach of the Federal Circuit means that a ruling by the court has an automatic nationwide impact in much the same way that decisions by the United States Supreme Court have a nationwide impact.  However, unlike the Supreme Court, the Federal Circuit hears hundreds of patent cases each year.  Over the past ten years, the funneling of patent appeals to the Federal Circuit has resulted in the court hearing over four thousand patent infringement appeals in addition to its review of patent decisions from the United States Patent and Trademark Office (the “Patent Office”) and the International Trade Commission.[4]  The large number of cases provides the court with the opportunity to rapidly shift the law, even when each case presents only an incremental change. In addition to the means to effect change, it is apparent that both the Federal Circuit and the Supreme Court have taken an interest in shaping patent law policy.[5]  Finally, unlike many Federal statutes, the Patent Act as codified in Title 35 of the United States Code is a relatively sparse statute that leaves tremendous leeway for interpretation.

 

Over the past six years, the Supreme Court granted certiorari and issued a number of important patent decisions that:

 

·       Make it easier to invalidate (or reject) a patent on obviousness grounds, KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007) (eliminating technical hurdles for proving an invention obvious and instead applying a “common sense” analysis for assessing patentability); 

·       Make it more difficult for a patent holding company to obtain injunctive relief to stop ongoing infringement, eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006) (holding that even an adjudged infringer should not be automatically enjoined from continuing to infringe; rather an injunction should only issue after consideration of the traditional four-factor test for equitable injunctive relief); 

·       Make it easier for a manufacturer to obtain a declaratory judgment of non-infringement, MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007) (holding that declaratory judgment (“DJ”) jurisdiction may exist even if the patent holder could not have sued the DJ plaintiff for infringement; apprehension that patentee will sue for infringement is not a necessary element for Article III jurisdiction); 

·       Solidify our understanding of the scope of patentable subject matter available for business method patents, Bilski v. Kappos, 130 S. Ct. 3218 (2010) (invalidating Bilski’s claimed invention – a method of hedging against the occurrence of bad weather – as an unpatentable abstract idea);  

·       Limit the doctrine of export infringement under 35 U.S.C. § 271(f), Microsoft Corp. v. AT&T Corp., 550 U.S. 437 (2007) (holding that Microsoft could not be held liable for exporting software code because the exported source code does not qualify as a “component” under the statute); and  

·       Provide roadmaps for stronger patent licensing agreements, see Quanta Computer, Inc. v. LG Elecs., Inc., 553 U.S. 617 (2008) (patent “exhausted” under first sale doctrine because patentee did not restrict licensee’s sales to third party purchasers) and Ill. Tool Works Inc. v. Indep. Ink, Inc., 547 U.S. 28 (2006) (holding that in antitrust tying cases, courts should not presume that a patent confers market power).

 

During this time, the Federal Circuit has also actively addressed patent reform issues with decisions that:

 

·       Attempt to implement venue reform in a way that limits unreasonable forum shopping, In re TS Tech United States Corp., 551 F.3d 1315 (Fed. Cir. 2009) (on writ of mandamus, ordering case transferred out of venue that had no meaningful ties to the patent infringement case);[6]  

·       Rationalize patent damage awards, Uniloc USA, Inc. v. Microsoft Corp., ___ F.3d ___, 2011 U.S. App. LEXIS 11 (Fed. Cir. 2011) (holding that the 25% Rule for calculating patent damages is “fundamentally flawed” and that total product revenue cannot be considered in the reasonable royalty analysis unless the Entire Market Value Rule applies.) and Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1324 (Fed. Cir. 2009) (requiring a proof that purported “comparable” licenses used for calculating a royalty rate are, in fact, comparable); Wordtech Systems, Inc. v. Integrated Networks Solutions, Inc., 609 F.3d 1308 (Fed. Cir. 2010). 

·       Limit enhanced damages, In re Seagate, 497 F. 3d 1360 (Fed. Cir. 2007) (limiting the potential for treble damages to cases where the adjudged infringer’s actions were at least “objectively reckless”) (see Chart 1); 

·       Expand the false marking doctrine, Forest Group Inc. v. Bon Tool Co., 590 F.3d 1295 (Fed. Cir. 2009);  

·       Limit inequitable conduct pleadings, Exergen Corporation v. Wal-Mart Stores, Inc., 575 F.3d 1312 (Fed. Cir. 2009) (requiring that inequitable conduct pleadings include “specific who, what, when, where, and how of [any] material misrepresentation or omission”); and  

·       Reject Patent Office substantive rulemaking authority, Tafas v. Doll, 559 F.3d 1345 (Fed. Cir. 2009).[7]   

 

PatentLawImage107

 

As we sit here today, the courts also have a number of important cases pending resolution. Among others, these include:

 

·       A challenge to the presumption of validity associated with issued patents, Microsoft Corp. v. I4I Ltd. P’ship, 131 S. Ct. 647 (2010) (certiorari granted on the issue of whether the presumption of validity associated with an issued patent must always be overcome with clear and convincing evidence);  

·       A challenge to the patentability of genetic material, See Ass’n for Molecular Pathology v. United States PTO, 2010 U.S. Dist. LEXIS 35418 (S.D.N.Y. 2010) (holding BRCA gene patents invalid for being directed to a law of nature); 

·       A Constitutional challenge to the False Marking provisions of the Patent Act, Unique Prod. Solutions, Ltd. v. Hy-Grade Valve, Inc., 2011 U.S. Dist. LEXIS 18237 (N.D. Ohio 2011) (holding the False Marking statute unconstitutional) and United States ex rel. FLFMC, LLC v. Wham-O, Inc., Fed. Cir. App. No. 2011-1067 (pending appeal challenging Constitutionality of the statute);[8]  

·       A question regarding the mens rea requirement for inducing infringement under 35 U.S.C. § 271(b), Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 458 (2010) (grant of certiorari);       

·       A major challenge to the implementation of the judge made law of inequitable conduct, TheraSense, Inc. v. Becton, Dickinson & Co., 374 Fed. Appx. 35 (Fed. Cir. April 26, 2010) (en banc order requesting briefing); and 

·       A challenge to patent ownership rights under the Bayh-Dole Act, Bd. of Trs. of the Leland Stanford Junior Univ. v. Roche Molecular Sys., 131 S. Ct. 502 (2010) (grant of certiorari).

                                                            

For better or worse, the courts have substantially shifted the playing field over the past six years. And, the cases currently pending and in the pipeline appear poised to continue this process.  Of course, the courts have limited power and cannot make statutory amendments or offer funding to the Patent Office.  It is safe to say, however, that the courts have addressed (or are addressing) virtually all of the legitimately raised patent reform issues that fall squarely within their purview.  Within this dynamic, an important ongoing role of Congress is at least to ensure that the courts are making the right policy choices.

 

III.              Administrative and Practice Changes that have Arisen Over the Past Several Years:

 

Patent Office Backlog: A key issue of patent law policy that has not been adequately addressed in the past six years is the growing backlog of patent applications pending at the Patent Office.  Although the current Patent Office management team is quite focused on reducing the backlog, their efforts have not been overwhelmingly successful to-date.  As seen in Chart 2 (below), the overall backlog of patent applications pending at the USPTO has increased more than 30% since 2005.  The forced delay is troubling for patent applicants because the exclusive patent right is only enforceable once the patent issues, and typically only against post-issuance infringement.  The multi-year prosecution delay is also troubling for potential competitors and customers because the patent right may eventually spring-forth to re-capture exclusive rights that had been in public use for years.

 

PatentLawImage103

 

Even more dramatic, is the twenty seven fold (~2700%) increase in the backlog of cases awaiting decision at the Board of Patent Appeals and Interferences (BPAI). (Chart 3).  The long and growing backlog of appeals more than doubles the expected duration of the patent prosecution process for the almost 50% of patent applicants that achieve at least a partial victory on appeal.

 

PatentLawImage106

 

These backlogs likely cannot be directly corrected by the courts. Instead, every effort must be made to ensure that the Patent Office is enabled and encouraged to right its own ship.  In the short term, the Patent Office will need to hire more examiners; re-work its failing information technology system; and apply effective negotiation theories to the examination process.  In the longer term, world patent offices must work-share when examining duplicate patent applications that have been filed in multiple countries.[9]  In addition, there are some relatively easy steps that can be taken to help ensure that patent applications are filed in a way that make them easier to examine.  This may include (1) requiring applicants to better delineate their invention and its purposes and (2) more rigorously enforcing the requirement that claims be clearly drafted in a way that relates to the invention as disclosed. 

 

Obviousness and the Backlog: The bulk of time spent in the patent examination process and in appeals to the BPAI revolves around the issue of obviousness.[10]  In other words, the backlogs can be largely attributed to time spent arguing the difficult issue of obviousness. Unfortunately, nothing in the proposed legislation does anything directly to alleviate this burden.  Although the process of examining patents for obviousness may seem to be one best left to the administrative agency, the Patent Office is bound to follow the examination processes laid out by the courts in KSR v. Teleflex[11] and Graham v. John Deere Co.[12]  Because so much time and energy is spent on this issue during the examination process, it may be one where increased substantive rulemaking authority would allow the Patent Office to create a more manageable approach to the statutory question. 

 

Foreign Inventor Influence on the US Patent System: Through a number of reciprocal international agreements such as Paris Convention, the US has promised citizens of other countries access to the US patent system.[13]  Under these agreements, an innovative Japanese company seeking exclusive rights in the US market could obtain US patent protection and enforce those rights in US courts against US competitors.  Despite this offer of rights, the bulk of issued US patent have always been based on US originated inventions.  This practical statistic meant that, historically, US patent reform primarily impacted US companies and US inventors.  Over the past six years, the statistic changed, and for the first time in history, the majority of US patents are now being issued on foreign-originated inventions. (Chart 4).

 

PatentLawImage105

  

For some, this decline in US-centric dominance of the US patent system will serve as a sign that US innovation could use additional encouragement.  In addition, however, the decline may signal a need to change our outlook on the role of patent rights in US policy. Certainly, the offer of patent rights encourages innovation and disclosure of new inventions.  However, this incentive is felt around the world – encouraging companies in Australia or Germany to innovate in their home countries in order to capture an exclusive slice of the US market.[14]  In this framework, patent reform is much more than a domestic policy issue. Rather, it becomes an issue of rooted in international trade and international relations.  This is not a new concept, but one that should be kept in mind as the legislation moves forward.

 

Rise in Patent Reexamination Filings: The US has two primary post-grant opposition processes already in place: (1) inter partes reexamination and (2) third-party requested (or prompted) ex parte reexamination.  Prior to 2005, it appeared that many potential defendants and accused infringers were reluctant to use the post-grant opposition processes.  That reluctance has largely evaporated – in part because of the USPTO’s successful implementation of a Central Reexamination Unit (CRU) composed of elite and highly trained patent examiners in sufficient quantity to have a high response rate.[15]  In addition, patent law professionals have seen that reexamination can be an effective and relatively inexpensive alternative to litigation.  At this point, high-dollar patent infringement lawsuits are usually associated with a parallel reexamination of the patents in-suit – so long as the defendant has a credible obviousness argument based on published materials.  Table 1, shows the rise in popularity of reexaminations over the past few years.

Table 1[16]

FY2000-2004

FY2006-2010

Percent Change in Number of Reexamination Requests

Inter Partes Reexamination Requests

53

903

1704%

Ex Parte Reexamination Requests

1,719

3,272

190%

A notable limitation of the current reexamination system is that reexaminations are only allowed to consider certain invalidity arguments (obviousness and anticipation) and apply a limited set of prior art (patents and printed publications).  Many countries offer broader latitude in their opposition proceedings, although some of those countries completely divide duties between the administrative agency (handling invalidity issues) and the court (handling infringement).[17]  The dramatic shift in usage of available post grant options gives me pause to consider whether the proposed reforms in 2005 offered a permanent solution to what was merely a temporary problem.

 

IV.             Identifying Elements of the Reform Measures that have not been Implemented:

 

A more straightforward approach to issues now before the Committee is to identify elements of prior patent reform measures that have not been addressed by the courts. These include:

 

(1)   Easing the USPTO’s ability to set fees for its services and to retain all fees collected;

(2)   Moving from a “first-to-invent” system to a “first-to-file” system;

(3)   Expanding prior-user rights;

(4)   Requiring that all patent applications be published by the USPTO;  

(5)   Allowing pre-issuance protests (or prior art submissions) by third parties;

(6)   Expanding the scope of post-grant reexamination or adding an additional post-grant opposition proceedings;

(7)   Eliminating the “best mode” requirement; and

(8)   Easing the rules for assignee submission of patent filings without the inventor’s express permission.

 

Each of these reform measures have their own potential benefits and detriments that vary according to the implementation approach chosen.

 

Thank you for this opportunity to present my remarks.

 

Dennis Crouch

March 10, 2011

 

 



[1] Federal Trade Commission, To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy, A Report by the Federal Trade Commission, October 2003; Nat’l Res. Council of the Nat’l Acads., A Patent System for the 21st Century (Stephen A. Merrill et al. eds., National Academies Press).

 

[2] Patent Act of 2005, H.R.2795.

 

[3] See William C. Rooklidge & Alyson G. Barker, Reform of a Fast-Moving Target: The Development of Patent Law Since fee 2004 National Academies Report, 91 J. Pat. & Trademark Off. Soc’y 153 (2009).

[4] Federal Circuit Statistics, Filings of Patent Infringement Appeals from the U.S. District Courts at http://www.cafc.uscourts.gov. 

 

[5] Polk Wagner & Lee Petherbridge, Is the Federal Circuit Succeeding? An Empirical Assessment of Judicial Performance, 152 U. Pa. L. Rev. 1105 (2004) (“since its inception, the [Federal Circuit]—with some assistance from the Supreme Court—has moved aggressively in support of its widely perceived mandate”); Paul R. Michel, Assuring Consistency and Uniformity of Precedent and Legal Doctrine in the Areas of Subject Matter Jurisdiction Entrusted Exclusively to the U.S. Courts of Appeals for the Federal Circuit: A View from the Top, 58 AM. U. L. REV. 699, 702 (2009); Craig Allen Nard & John F. Duffy, Rethinking Patent Law’s Uniformity Principle, 101 Nw. U. L. Rev. 1619 (2007); Dan L. Burk & Mark A. Lemley, The Patent Crisis and How the Courts Can Solve It (2009)

[6] The TS Tech decision appears to have had a major impact on patent venue jurisprudence. In the two years since the case was decided, its analysis has been followed by almost four dozen different courts.  See, for example, Promote Innovation LLC v. Leviton Mfg. Co., 2011 U.S. Dist. LEXIS 16294 (E.D. Tex. Feb. 17, 2011) (granting accused infringer’s motion to transfer venue from the Eastern District of Texas to the Eastern District of New York).

                                             

[7] The Tafas decision was vacated pending rehearing en banc and eventually dropped after the USPTO retracted its planned implementation of rules that would limit both the number of claims that an applicant could file per patent application and the number of continuation applications an applicant could file based on a single invention disclosure. See also, Arti K. Rai, Growing Pains in the Administrative State: The Patent Office’s Troubled Quest for Managerial Control, 157 U. PA. L. REV. 2051 (2009).

[8] Over 1,000 false marking claims were filed in 2009 and 2010.  False Patent Marking at http://www.falsemarking.net/cases.php.

 

[9] See Rai, Growing Pains at note 6.

 

[10] Dennis Crouch, Understanding the Role of the Board of Patent Appeals: Ex Parte Rejection Rates on Appeal, University of Missouri School of Law Legal Studies Research Paper No. 2009-16 (2009) at http://ssrn.com/abstract=1423922. (90% of BPAI appeals involve a question of obviousness).

 

[11] 550 U.S. 398 (2007).

 

[12] 383 U.S. 1 (1966) (setting out the process of the obviousness inquiry as used in both courts and the Patent Office).

 

[13]  Paris Convention for the Protection of Industrial Property, art. 2.

 

[14] See Commonwealth Sci. & Indus. Research Organisation v. Buffalo Tech., 542 F.3d 1363 (Fed. Cir. 2008) (Australian government entity suing on its US software related patent in the Eastern District of Texas).

 

[15] Gregory Novak, Concurrent Reexaminations as a Strategic Patent Litigation Defense Tool, 1020 PLI/Pat 797 (2010) (“since the inception of the Central Reexamination Unit (CRU), reexamination proceedings are producing favorable results [for the third-party] in a more timely manner”).

 

[16] Derived from USPTO Inter Partes and Ex Parte Reexamination Data (December 31, 2010) at http://www.uspto.gov/patents/stats/Reexamination_Information.jsp.

 

[17] To my knowledge, no one has studied the potential impact of increasing the scope of US reexamination practice or adding a broader layer of post grant opposition.

America Invents Act – First to Invent and a Filing Date Focus

Earlier this week, the Senate overwhelmingly passed (95–5) the America Invents Act (S.23 or AIA) which represents a major patent reform initiative.  Many are saying this is the largest patent reform measure since the 1952 Patent Act.  I would argue that two reforms from the 1980’s are at least as important as the AIA: Federal Courts Improvement Act of 1982 (establishing the Court of Appeals for the Federal Circuit) and the 1984 Hatch-Waxman Act (establishing the modern generic drug system). 

Of course, neither of those 1980’s reforms rewrote the core patent law fundamentals of novelty and nonobviousness. In this post, I look at how the AIA re-defines these doctrines.

Filing Date Prior Art: Under the new law, Sections 102 and 103 of the patent act would be largely rewritten.  The new Section 102(a) defines novelty and eliminates invention-date rights (with the exceptions noted below).  The new focus a patent applicant’s “effective filing date” and whether prior art existed before that date. As a general matter, this shift expands the scope of potential prior art and therefore should make it more difficult to obtain patent protection.  In addition to the date change, the statute adds a new catch-all phrase to the scope of prior art. Courts will be asked to consider what it means to be “otherwise available to the public.”  Under the new provision classifies prior art as items “patented, described in a printed publication, or in public use, on sale, or otherwise available to the public.”  Section 102(a)(1).  In addition, a third-party application on file at the PTO will count as prior art as of its effective filing date once that application is published or patented. Section 102(a)(2).  Of course, the effective filing date allows for priority claims

Narrow Grace Period: The new law would substantially narrow the current one-year pre-filing grace period so that that it only applies to negate pre-filing disclosures (1) by the inventor, (2) derived from the inventor, or (3) after the inventor had already publicly disclosed.  A technical problem with the new Section 102(b) provision is that the key term –  “disclosure” – is left undefined. The grace period provision is written as an exception to the filing-date prior art provision discussed above. However, it is unclear whether the exception applies to all types of prior art including “on sale” activities. 

Patent Races and First-to-File: In a patent race with two or more entities seeking protection for the same invention, the patent would be awarded to the first-to-file a patent application rather than the first-to-invent.  This eliminates current Section 102(g), interferences, and questions of conception, diligence, reduction to practice, abandonment, suppression, and concealment.  Except that the new law would allow for a derivation action (court) or proceeding (USPTO) when the first-filer “derived” their claimed invention from another. An oddity of the statute is that the derivation action may only be filed when the patent office issues two patents that claim the same invention. An important aspect of the derivation proceedings before the USPTO is that they allow the parties to settle their case.

One problem with the derivation provision that will be left to the PTO and courts is that the key term – “derived” – is not defined.  If given a broad meaning, the derivation proceedings could offer inventors something akin to the copyright doctrine of derivative works. 

This invention-date focus will likely drive more provisional patent application filings for US entities.  The prior-disclosure grace period limitation may drive a revival in formal invention disclosure publications.  However, because this narrowed grace period is still broader than that available in most countries, a pre-filing disclosure may negate foreign patent rights.

No Prior User Rights: The Senate Bill does not include any provision for prior user rights.  Although current law only has limited prior user rights, a prior user who is sued for infringement may be able to invalidate that patent by claiming prior invention under Section 102(g).  That option is eliminated in a first-to-file system leaving a prior user potentially liable for infringement.  

Nonobvious Subject Matter: The new law would rewrite Section 103 as follows

A patent for a claimed invention may not be obtained, notwithstanding that the claimed invention is not identically disclosed as set forth in section 102, if the differences between the claimed invention and the prior art are such that the claimed invention as a whole would have been obvious before the effective filing date of the claimed invention to a person having ordinary skill in the art to which the claimed invention pertains. Patentability shall not be negated by the manner in which the invention was made.

One shift in the nonobviousness statute merely codifies the current law’s focus on “claims” rather than the “subject matter sought to be patented.”   We’ll hope that courts will not interpret the phrase “the claimed invention as a whole” as requiring the courts to examine the entire claim-set as a whole.

The most important change is that the new provision considers obviousness as of the “effective filing date” of the patent claims being considered rather than “at the time the invention was made.” Of course, the courts already ignore the language of the statute and allow post-invention 102(b) prior art to be used for obviousness analysis.

Jason Rantanen – Associate Professor of Law

I am very happy to announce that my fellow Patently-O author, Jason Rantanen, has accepted a tenure track position as an Associate Professor of Law at the University of Iowa College of Law.  Professor Rantanen and I were classmates at The University of Chicago School of Law.  He holds an MA in History from the University of Chicago and an AB from Brown where he double-majored in Biology and History. For the past year, Professor Rantanen has been a Visiting Researcher at the University of California Hastings School of Law in San Francisco.  Prior to that, he litigated patents at the San Francisco firm of Munger, Tolles & Olson LLP.  Immediately following law school, he clerked for The Honorable William C. Bryson on the United States Court of Appeals for the Federal Circuit.

In addition to his writings on Patently-O, Professor Rantanen has written several law review articles, including a fascinating empirical study of inequitable conduct cases currently being published in the Southern California Law Review (with Lee Petherbridge and Ali Mojibi).

Rantanen will be filling a spot that opened when Mark Janis left for his alma mater, Indiana.  Rantanen's new Iowa colleagues will include one of the most highly respected and renowned IP/Antitrust scholars, Herbert Hovenkamp.

Congratulations to the new Professor!

— Dennis

ABB v Cooper: The Broad Scope of Declaratory Judgment Jurisdiction

By Jason Rantanen

ABB Inc. v. Cooper Industries, LLC (Fed. Cir. 2011) Download 10-1227
Panel: Rader, Lourie, and Dyk (author)

In ABB v. Cooper, the CAFC addressed the previously unanswered question of whether federal subject matter jurisdiction exists over a declaratory judgment patent infringement action where the alleged infringer raises only a state law defense to infringement.

Four years prior to the litigation on appeal the parties had entered into a license agreement to settle a lawsuit in which Cooper asserted that ABB's manufacture of a vegetable oil based dielectric fluid, called BIOTEMP, infringed several of Cooper's patents.  That license permitted ABB to make or "have made" its dielectric fluid; however, it did not include "the right of any third party to make BIOTEMP or any other fluid covered by the Cooper Patents."  ABB also acknowledged in the agreement that each of the Cooper patents are valid and enforceable and that BIOTEMP is covered by one or more of their claims.

ABB subsequently outsourced the manufacture of BIOTEMP to Dow Chemicals, which it agreed to indemnify against claims of infringement by Cooper.  In response, Cooper wrote to ABB and Dow to indicate that it viewed this as a material breach of the license agreement and would "act vigorously to protect its rights in that event."  This led to ABB's filing of a declaratory judgment action in federal court in which it sought a declaration that its activities were authorized under the license agreement and, in an amended complaint, seeking declarations that it does not infringe the Cooper patents. The district judge concluded that ABB's complaint presents no federal question, and thus dismissed the case for lack of subject matter jurisdiction.

Comment: Although not completely clear, the opinion's treatment of the issue suggests that the noninfringement contention is based entirely on ABB's license defense.

No specific threat of infringement litigation required
On appeal, the CAFC first rejected Cooper's argument that no actual controversy existed.  After dismissing the view that there must be a specific threat of infringement litigation by the patentee as being an impermissible attempt to revive the "reasonable apprehension of imminent suit" test rejected by the Supreme Court in MedImmune, the CAFC concluded that the facts of this case were sufficiently similar to those of MedImmune and Micron Tech., v. Mosaid Techs., Inc., 518 F.3d 897 (Fed. Cir. 2008) to warrant the issuance of a declaratory judgment.  Focusing on the warning letters, the court concluded that "under Micron and MedImmune, there was an immediate controversy surrounding infringement.  ABB had an interest in determining whether it would incur liability for induced infringement, and it had an interest in determining whether it would be liable for indemnification, which turned on whether Dow would be liable for infringement."  Slip Op. at 6-7.

Resolution of the state law defense issue left open by Textron
The CAFC also resolved a jurisdictional question left open by the Supreme Court in Textron Lycoming Reciprocating Engine Div., AVCO Corp. v. Auto. Workers, 523 U.S. 653 (1998): "whether federal courts have jurisdiction over a declaratory judgment action where there is a federal cause of action but only a state law defense."  Slip Op. at 9. While a longstanding rule holds that subject matter jurisdiction exists over declaratory judgment actions that are based on a claim of patent infringement, Cooper contended that it did not apply because the only defense raised by ABB in the district court was its state law license defense.  Although discussed in Justice Breyer's concurrence, the Supreme Court explicitly left the issue open in Textron, and it remained unresolved by subsequent courts of appeals.  

Addressing the issue as one of first impression, the CAFC reached the same conclusion as Justice Breyer:

[W]e conclude that federal question jurisdiction exists here. The general rule, articulated repeatedly by the Supreme Court, is that declaratory judgment jurisdiction exists where the defendant’s coercive action arises under federal law. See Franchise Tax Bd., 463 U.S. at 16, 19; Wycoff, 344 U.S. at 248; see also Speedco, 853 F.2d at 912. We see no reason to depart from that general principle where the defense is non-federal in nature.

Slip Op. at 11-12.  In short, the subject matter inquiry for a declaratory judgment action focuses on the defendant's hypothetical well-pleaded Complaint, and thus the defenses raised by the declaratory judgment plaintiff are irrelevant to the inquiry:

According to Franchise Tax Board, then, federal jurisdiction in this type of case depends on the federal character of the hypothetical infringement suit and not the federal character of the invalidity defense. Indeed, “it now seems settled that [a party threatened with an infringement suit] can sue for a declaratory judgment of invalidity or noninfringement [because] the federal nature of the claims appears on the complaint . . . and the precise issue could have been litigated in federal court in a coercive action brought by [the patentee].” 10B Wright, Miller & Kane, Federal Practice and Procedure § 2767, at 650–51 (3d ed. 1998) (emphasis added)).

Slip Op. at 12.

Patent Reform Passed in Senate: House Likely to Introduce Bill this Month

by Dennis Crouch

In strong bipartisan fashion, the Senate today passed the America Invents Act (S. 23). Attention now moves to the Judiciary Committee in the House of Representatives.

The Senate measure includes:

  • The ability for the US Patent & Trademark office to set its own fees and to eliminate the practice of fee-diversion.
  • A transition to a first-to-file system as discussed previously on Patently-O.
  • Broader leeway for third-party submissions with explanations during ex parte patent prosecution.
  • A new “first-window” post-grant patent opposition system with broader jurisdiction (but a shorter timeframe) than reexaminations.
  • A provision that eliminates certain tax strategy patents.
  • Although not entirely clear at this point, it looks like damages limitations were removed from the bill prior to passage.

Republican leadership in the House, including Judiciary Chairman Lamar Smith (Tx) and Majority Leader Eric Cantor (Va) appear ready to move forward with their own version of legislation. Six years ago, Representative Smith introduced the Patent Reform Act of 2005. Under the new Republican leadership, a revived and modified Subcommittee on Intellectual Property, Competition, and the Internet has jurisdiction over patent reform measures. The new Chairman of that Subcommittee is Representative Bob Goodlatte (Va) who co-sponsored prior patent reform measures as did the Vice-Chairman, Representative Howard Coble (NC).

On March 10, 2011, I will testify before the Judiciary Committee as members consider how to draft corresponding legislation. I have specifically been asked to address judicial changes to the patent law landscape since the reform process began in 2005. During that period, the Supreme Court has taken an active role in addressing patent policy concerns in cases such as KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007) (eliminating technical hurdles for proving an invention obvious and instead applying a “common sense” analysis for assessing patentability); MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007) (holding that declaratory judgment jurisdiction may exist even if the patent holder could not have sued for infringement and that the apprehension that patentee will sue for infringement is not a necessary element for Article III jurisdiction); Bilski v. Kappos, 130 S. Ct. 3218 (2010) (holding the claimed invention – a method of hedging – unpatentable as an abstract idea); and Microsoft Corp. v. AT&T Corp., 550 U.S. 437 (2007) (holding that Microsoft could not be held liable for exporting software code because source code does not qualify as a “component” of a patented invention as required under 35 U.S.C. § 271(f)). During this time, the Federal Circuit has decided more than two thousand patent appeals (including a dozen en banc decisions), many of which address the exact concerns raised in the original 2005 patent reform bill. Of course, over this period, the PTO administrative nightmare has grown to a backlog of 1.2 million pending patent applications and the Board of Patent Appeals (BPAI) backlog of pending ex parte cases has grown from 742 in March 2005 to over 20,000 today.

Patent Reform in the Senate

On Monday, the Senate has overwhelmingly voted (87-3) to close debate and vote (cloture) on the America Invents Act (Patent Reform Act of 2011). Senators Leahy (NH) and Coons (DE) have worked to reject partisan amendments that would deter the Bill’s passage. Votes on pending amendments and the final bill are expected Wednesday morning or (perhaps) Late Tuesday night.

Senator Coons released the following statement:

“Patent reform is an important part of making America more competitive in the global market over the long-term, helping turn more inventors into successful entrepreneurs and promoting American innovation. It will create jobs in Delaware and throughout the U.S. The bipartisan support shown in today’s cloture vote demonstrates the importance of the first comprehensive reform to our nation’s patent system in 60 years. I look forward to voting in support of final passage of the America Invents Act.”

Federal Circuit En Banc Patent Decisions

By Jason Rantanen

A few weeks ago a commenter asked about a list of Federal Circuit en banc patent law decisions.  Despite the seeming importance of such a list, I was unable to find one through either online searching or consulting my favorite treatises.  After sorting through several sources, however, I was able to assemble the following list.  While a handful of the opinions are of limited substance, the bulk of the list consists of seminal patent rulings.  Note that this is only a first pass, and any corrections are welcome.

  1. Hyatt v. Kappos, 625 F.3d 1320 (Fed. Cir. 2010 (en banc)
  2. Princo Corp. v. Int'l Trade Comm'n, 616 F.3d 1318 (Fed. Cir. 2010) (en banc)
  3. Ariad Pharmaceuticals, Inc. v. Eli Lilly and Co., 598 F.3d 1336 (Fed. Cir. 2010) (en banc)
  4. Cardiac Pacemakers, Inc. v. St. Jude Med., Inc., 576 F.3d 1348 (Fed. Cir. 2009) (en banc in part)
  5. Abbott Laboratories v. Sandoz, Inc., 566 F.3d 1282 (Fed. Cir. 2009) (en banc in part)
  6. Tafas v. Doll, 559 F.3d 1345 (Fed. Cir. 2009) (en banc)
  7. In re Bilski, 545 F.3d 943 (Fed. Cir. 2008) (en banc)
  8. Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665 (Fed. Cir. 2008) (en banc)
  9. In re Seagate Tech., LLC, 497 F. 3d 1360 ( Fed. Cir. 2007) (en banc)
  10. DSU Med. Corp. v. JMS Co., 471 F.3d 1293 (Fed. Cir. 2006) (en banc in part)
  11. SmithKline Beecham Corp. v. Apotex Corp., 453 F.3d 1346 (Fed. Cir. 2006) (en banc)
  12. Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc);
  13. Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH v. Dana Corp., 383 F.3d 1337 (Fed. Cir. 2004) (en banc)
  14. Honeywell Int'l Inc. v. Hamilton Sundstrand Corp., 370 F.3d 1131 (Fed. Cir. 2004) (en banc)
  15. Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., Ltd., 344 F.3d 1359 (Fed. Cir. 2003) (en banc)
  16. Johnson & Johnston Assocs. Inc. v. R.E. Serv. Co., 285 F.3d 1046 (Fed. Cir. 2002) (en banc)
  17. Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 234 F.3d 558 (Fed. Cir. 2000) (en banc)
  18. Midwest Indus., Inc. v. Karavan Trailers, Inc., 175 F.3d 1356 (Fed. Cir. 1999) (en banc)
  19. Nobelpharma Ab v. Implant Innovations, 141 F.3d 1059 (1998) (en banc in part)
  20. Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448 (Fed. Cir. 1998) (en banc)
  21. In re Zurko, 142 F.3d 1447 (Fed. Cir. 1998) (en banc)
  22. Hilton Davis Chem. Co. v. Warner-Jenkinson Co., 114 F.3d 1161 (Fed. Cir. 1997) (en banc)
  23. Hilton Davis Chem. Co. v. Warner-Jenkinson Co., 62 F.3d 1512 (Fed. Cir. 1995) (en banc)
  24. In re Trovato, 60 F.3d 807 (Fed. Cir. 1995) (en banc)
  25. Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538 (Fed. Cir. 1995) (en banc)
  26. Markman v. Westview Instruments, Inc., 52 F.3d 967 (Fed. Cir. 1995) (en banc)
  27. In re Alappat, 33 F.3d 1526 (Fed. Cir. 1994) (en banc)
  28. In re Donaldson Co., 16 F.3d 1189 (Fed. Cir. 1994) (en banc)
  29. A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020 (Fed. Cir. 1992) (en banc)
  30. In re Dillon, 919 F.2d 688 (Fed. Cir. 1990) (en banc)
  31. Beatrice Foods Co. v. New England Printing & Lithographing Co., 899 F.2d 1171 (Fed. Cir. 1990) (en banc)
  32. Aerojet-Gen. Corp. v. Mach. Tool Works,  Oerlikon-Buehrle Ltd., 895 F.2d 736 (Fed. Cir. 1990) (en banc)
  33. Racing Strollers, Inc. v. TRI Indus., Inc., 878 F.2d 1418 (Fed. Cir. 1989) (en banc)
  34. Gavin v. Star Brite Corp.,865 F.2d 269 (Fed. Cir. 1988) (en banc) (nonprecedential)
  35. Kingsdown Med. Consultants, Ltd. v. Hollister, Inc., 863 F.2d 867 (Fed. Cir. 1988) (en banc)
  36. In re Roberts, 846 F.2d 1360 (Fed. Cir. 1988) (en banc)
  37. Pennwalt Corp. v. Durand-Wayland, Inc., 833 F.2d 931 (Fed. Cir. 1987) (en banc)
  38. Woodard v. Sage Prods., Inc., 818 F.2d 841 (Fed. Cir. 1987) (en banc)
  39. Wyden v. Comm'r of Patents & Trademarks, 807 F.2d 934 (Fed. Cir. 1986) (en banc)
  40. SRI Int'l v. Matsushita Elec. Corp., 775 F.2d 1107 (Fed. Cir. 1985) (en banc)
  41. In re Bennett, 766 F.2d 524 (Fed. Cir. 1985) (en banc)
  42. Paulik v. Rizkalla, 760 F.2d 1270 (Fed. Cir. 1985) (en banc)
  43. In re Etter, 756 F.2d 852 (Fed. Cir. 1985) (en banc)
  44. Atari, Inc. v. JS & A Group, Inc., 747 F.2d 1422 (Fed. Cir. 1984) (en banc)
  45. Gardner v. TEC Systems, Inc., 725 F.2d 1338 (Fed. Cir. 1984) (en banc)
  46. South Corp. v. U.S., 690 F. 2d 1368 (Fed. Cir. 1982) (en banc)

Sources: Chisum on Patents; Lee Petherbridge, "Patent Law Uniformity," 22 Harv. J.L. & Tech. 421 (2009); WESTLAW.  Those interested in further reading on en banc Federal Circuit decisions may want to check out Christopher Cotropia's article "Determining Uniformity Within the Federal Circuit By Measuring Dissent and En Banc Review," 43 Loy. L.A. L. Rev. 801 (2010).

Update: Shortly after publishing this post, I learned that Professor Ryan Vacca at the University of Akron School of Law has drafted an article on the Federal Circuit's en banc practice, which he recently presented at the Missouri Law Review Symposium.  Professor Vacca argues that these practices make the court look much like that of an administrative agency engaging in substantive rulemaking, a role that he suggests is beneficial in shaping patent policy as a whole.  Along with the substantive analysis, the article includes an appendix listing the court's en banc decisions.  A draft of the piece, entitled "Acting Like an Administrative Agency: The Federal Circuit En Banc" is available on ssrn, and I recommend that anyone interested in the CAFC's en banc practices should take a look at it.

Patent Woes Threaten Drug Firms

NYTimes has published a front page article by Duffy Wilson titled “Patent Woes Threaten Drug Firms.” The article begins with a case study of Pfizer whose Lipitor money-stream ($10 billion-per-year) will be severely reduced when its patent expires. Of Course, Pfizer is not alone, the article cites ten blockbuster drugs with patents expiring in 2011 – those ten have a combined annual revenue of over $50 billion. The problem for big-pharma is that their years of record profits have not translated into a replacement line of blockbuster drugs and the drug companies have cut more than 100,000 jobs in the past two years.

Wilson writes “consumers should see a financial benefit as lower-cost generics replace the expensive elite drugs, but may suffer in the long term if companies reduce research and do not produce new drugs that meet the public’s needs.” Already, 75% of prescriptions are to generic drugs, and patented drug prices are under severe pressure from health insurers.

Of course, Pfizer is not an overly sympathetic entity. “In 2009, Pfizer paid the largest criminal fine in the nation’s history as part of a $2.3 billion settlement over marketing drugs for unapproved uses.”

Copyright: Supreme Court to Hear Constitutional Challenge to Copyright Restoration

Golan v. Holder (Supreme Court 2011) (materials from SCOTUS blog)

Symphony Conductor Lawrence Golan along with a group of supporters have successfully petitioned the Supreme Court for a writ of certiorari in their public domain copyright case. The lawsuit arose after Congress enacted the Uruguay Round Agreements Act (URAA) of 1994. Section 514 of URAA restored the copyright term for works created by foreign authors who had lost their rights due to some reason other than expiration of the copyright term. Most frequently, the authors had either failed to renew their copyrights or failed to include a notice of copyright on the works. According to the petitioners, Section 514 restored copyright protection to thousands of works that had previously been in the public domain, including symphonies by Stravinski, books by C.S. Lewis, films by Federico Fellini, and artwork by Pablo Picasso. These works had been previously recognized as public domain in the US and had been used extensively by the petitioners.

The petition for certiorari asks two questions:

  1. Whether the “Progress Clause” of the US Constitution prohibits Congress from removing works from the public domain?
  2. Whether the removal of those works from the public domain violates the First Amendment of the United States Constitution?

The District Court (Colorado) held the law unconstitutional on First Amendment grounds at least “to the extent Section 514 suppresses the right of reliance parties to use works they exploited while the works were in the public domain.” On appeal, a 10th Circuit panel reversed – explicitly rejecting both Constitutionality arguments.

This case is similar to Eldred v. Ashcroft. In that case, the Supreme Court upheld the constitutionality of the 1998 Sonny Bono Copyright Term Extension Act (CTEA) that had extended copyright terms by an additional 20-years. In Eldred, the Supreme Court recognized that Congressional authority to grant copyright was limited by the “limited times” provision of the Progress Clause of the US Constitution. However, the Court concluded that the 20-year extension was sufficiently limited.

Documents:

Federal Circuit Refuses to Hear Appeal of Stay Pending Reexamination

Sorensen v. Lexar Media (Fed. Cir. 2011)

Sorensen’s patent infringement lawsuit against Lexar has been stayed for over two years, awaiting the outcome of the USPTO’s reexamination.  In early 2010, the examiner issued a final rejection which has been appealed to the USPTO’s internal board of appeals –  the BPAI. 

Based on the likely multi-year delay of any final resolution of the reexamination, Sorensen requested that the district court lift the stay and continue with the infringement lawsuit. The district court denied that request and Sorensen appealed to the Federal Circuit asking that the stay be lifted.

Appellate Jurisdiction: Normally, the Federal Circuit does not hear interlocutory appeals of stay decisions unless the lower court order creates “serious, perhaps irreparable, consequences.” 

Here, the court could not identify any particular need to hear this case — especially because both the district court and USPTO decisions will be appealable on the merits by the Federal Circuit. 

Appeal dismissed based on lack of appellate jurisdiction.

Notes:

  • Sorensen may have a stronger argument if ongoing infringement was causing irreparable harm. However, the asserted patent has already expired.

Today’s Study: The BPAI’s Response to its Backlog

By Dennis Crouch

Earlier this week, I directed your attention to the fact that the Board of Patent Appeals (BPAI) now has a backlog of more than 20,000 pending appeals. The appeal backlog continues to rapidly rise.  Each month for at least the past year, the BPAI has disposed of only about half of the number of cases that it received.  USPTO Director David Kappos and his senior staff recognize the appeal backlog as a serious issue. Their initiatives include more judges; a soon-to-be-announced new Chief Judge, and potentially raising the fees associated with filing an appeal (perhaps only if the PTO is given fee-setting authority).

For a number of reasons, the Board of Patent Appeals (BPAI) typically writes an opinion in each and every case decided on the merits.   I wanted to see whether the Board’s opinion writing methods have changed as some sort of response to the growing backlog.

For today’s study, I downloaded all of the BPAI’s published ex parte merits decisions from three specific time periods: February 2009 (407 opinions), January 2010 (455 decisions), and January 2011 (457 opinions).*  I then wrote a script to count the number of words in each decision and graphed the results.

PatentLawImage102

As the chart shows above, in a two-year period the average number of words per BPAI opinion has dropped from over 3,000 words per opinion to just about 2,000 words per opinion.  A few large opinions each year skew the average upward. However, the change in the median word length is even more dramatic. The median opinion from February 2009 includes 60% more words than the median opinion from January 2011.  As a check, I also included the outcome (Affirmed, Affirmed-in-Part, Reversed) and technology center as control variables. Those did nothing to reduce this reported effect. 

Of course, the number of words in an opinion does not necessarily indicate that the decisions are lower quality or even that the opinions are lower quality.  However, the change at least suggests that the BPAI judges are spending less time drafting the opinions.  

Jason Rantanen has written several recent posts on the Federal Circuit’s Rule 36 affirmances. In those cases, the Federal Circuit simply affirms the lower court decision without writing an opinion. “Rule 36” refers to Rule 36 of the Rules of Practice of the Court of Appeals for the Federal Circuit. That rule provides the court with express permission to enter a judgment of affirmance without opinion when the court determines that the lower court should be affirmed and an opinion would have no precedential value.  The BPAI does not have a parallel to Rule 36 in its standard operating procedures. 

Notes

  • * I used February 2009 because in a glitch for January 2009 data.
  • I was just directed to Aaron Feigelson’s recent post on this topic.