April 2011

Jurisdiction in Patent Declaratory Judgment Actions

Patent,

Radio Systems Corp. v. Accession, Inc. (Fed. Cir. 2011) – Part III

The jurisdiction of US Federal Courts is limited in several important ways. One usual doctrinal divide is between subject matter jurisdiction and personal jurisdiction. Because patent enforcement is clearly a matter a Federal Law, the subject matter jurisdiction question normally boils down to whether an “actual case or controversy” exists between the parties as required by Article III of the US Constitution (as interpreted). In MedImmune, the Supreme Court suggested that this actual case or controversy inquiry should be flexible and open.

Personal jurisdiction is a separate question and asks whether a court holds power over the actual parties to the lawsuit. Because plaintiffs are deemed to waive personal jurisdiction objections in the filing of the complaint, the more usual question is whether the court holds power over the defendants to a lawsuit.

Federalism: Personal jurisdiction is one area of the law where the power of the various fifty-states has been deemed to somewhat outweigh the power of the national government. In a seemingly odd system, the question of personal jurisdiction in Federal Courts boils down to whether a State Court in the state where the Federal Court is sited would have power over the defendant. State Court personal jurisdiction tends to then be limited by reference back to US Constitutional principles of due process. Thus, the question asked by the Federal Courts sited in a particular state is whether it would “comport with due process notions of fair play” for a State Court in that state to exercise control over a defendant based on the facts as they are stated in the case.

The usual approach is to look at the extent of the defendant’s contacts with the state and consider whether those meet some minimum threshold level. Normally, each state is seen as a separate entity. Thus, contacts with Mississippi will not give rise to personal jurisdiction across the border in Tennessee. Under the doctrine of Specific Jurisdiction, contacts with the forum state that relate directly to the controversy between the parties tend to be more likely to create personal jurisdiction. However, sufficient unrelated contacts with the forum state can separately lead to a finding of personal jurisdiction under a the doctrine of General Jurisdiction. A final important point is that the jurisdiction tests are separate and distinct from the venue inquiry. Thus, even when a court properly has jurisdiction over a case and the parties, it may still refuse to hear the case based on arguments of improper or inconvenient venue. See TS Tech.

In the case at hand, Radio Systems sued Accession in the Eastern District of Tennessee – asking the court for a declaratory judgment that Accession’s patent was invalid and not infringed. The district court dismissed the case – holding that the Federal Court based in Tennessee lacked personal jurisdiction over Accession. On appeal, the Court of Appeals for the Federal Circuit affirmed.

Accession is a small New Jersey based private corporation. Mr. Sullivan owns the company. He is also the company’s sole employee. During a three year period prior to the declaratory judgment lawsuit, Sullivan contacted Radio Systems on multiple occasions looking to create a business relationship between the parties. The contacts involved letters, e-mails, telephone calls and one trip to Radio Systems’ main office in Tennessee where Sullivan demonstrated his product. (At the face-to-face meeting, Sullivan refused to leave his prototype behind, but did sign a non-disclosure agreement that included Tennessee as the exclusive forum for actions arising from the non-disclosure agreement). There is plenty of evidence that the proposed business relationship would center on the manufacturing and marketing of Mr. Sullivan patented invention – a pet-entrance module for sliding glass patio doors. However, there is no evidence that Sullivan threatened a lawsuit or that Radio Systems challenged the validity of the Sullivan patent during any of the meetings. As a side-show, after it was clear that no deal was going to happen, Sullivan’s patent attorney contacted the USPTO as an informal protest to one of Radio Systems’ pending patent applications. In September 2009, Accession’s counsel also sent letters to Radio Systems “outlining Accession’s infringement allegations and suggesting that the dispute be settled through a licensing agreement.” In November 2009, Radio Systems then filed the declaratory judgment lawsuit in Tennessee.

In its want to lay down clear guidance, the Federal Circuit has previously ruled that “ordinary cease-and-desist notices sent by a patentee to an alleged infringing party in a different state are not sufficient to subject the patentee to specific jurisdiction in that state.” Rather, for a finding of specific personal jurisdiction, the infringement-alleging letter must be accompanied by some other activities related to the allegations that are directed to the forum state. See Autogenomics, Inc. v. Oxford Gene Tech. Ltd., 566 F.3d 1012, 1019 (Fed. Cir. 2009). As a dividing line for specific jurisdiction, the Federal Circuit only “counts” activities related to enforcement of the patent or defenses against infringement. Other activities directed at the forum state that are merely related to the licensing, marketing, manufacturing or development of the invention do not count toward a finding of specific personal jurisdiction. As the court wrote in Autogenomics:

[O]nly enforcement or defense efforts related to the patent rather than the patentee’s own commercialization efforts are to be considered for establishing specific personal jurisdiction in a declaratory judgment action against the patentee.

The court held that interference with Radio Signal’s pending application at the USPTO does not bolster the claim for personal jurisdiction in Tennessee because the USPTO is not located in Tennessee (even though Radio Signal owns its patents in Tennessee).

We made clear in Avocent that enforcement activities taking place outside the forum state do not give rise to personal jurisdiction in the forum, and that decision is controlling here.

Radio Systems did not claim a violation of the non-disclosure agreement, but argued that Sullivans agreement to be subject to personal jurisdiction in Tennessee for actions arising from that agreement should be sufficient fair warning to Sullivan that his company may be subject to action in Tennessee. The Federal Circuit rejected that argument because the agreement did not relate directly to the enforcement or validity of the patent at issue but rather only involved the subject matter of the invention and potential commercialization of the invention.

Finding of no personal jurisdiction affirmed. Federal Courts in Tennessee courts have no jurisdiction over Accession for this patent non-infringement action.

Third Party Attempts to Protest or Otherwise Oppose the Grant of a Published Application

Patent,

Radio Systems Corp. v. Accession, Inc. (Fed. Cir. 2011) – Part II

As the facts are alleged in this case, after learning that Radio Systems had received a notice of allowance on its “SmartDoor” patent application, Accession’s patent counsel telephoned the USPTO Examiner handling the Radio Systems. Because the Examiner did not answer the telephone call, Accession’s attorney left a voice message. Six days later, the Examiner returned the telephone call and spoke directly with Accession’s attorney. During the conversation, the examiner apparently learned about the existence and relevance of the Sullivan prior art patent. (Mr. Sullivan is the founder of Accession). After considering the prior art, the examiner withdrew the patent from issue and filed a new rejection of independent claim 17 based on the Sullivan prior art. Without comment, Radio Systems cancelled claim 17 and the patent issued.

These conversations all occurred in August 2009. For the three years prior to that time, Radio Systems and Accession had been engaging in a slow conversation regarding the Sullivan patent and whether Radio Systems would license the patent rights. During that time, Radio Systems never submitted the reference as prior art to the patent examiner.

To recap, a patent attorney representing a third party (who was interested in ensuring that no patent issued) provided the USPTO Examiner with valuable prior art and likely an explanation of how the prior art related to the patent application under examination. The Examiner had a verbal conversation with the patent attorney and concluded that the prior art rendered the pending claims invalid. The patent applicant had previously been made aware of the prior art but had failed to inform the Examiner of its existence. Without argument, the patent applicant cancelled its claim after it was rejected by the Examiner.

Illegitimate Means to a Legitimate End?: From all appearances, the result of this sequence of events is that third-party contact helped the USPTO avoid issuing a patent with invalid claims. The problem is that the examiner and attorneys had to violate USPTO rules to achieve that beneficial result. When rules in-place frustrate beneficial ends, the proper solution may well be to change the rules.

Legitimizing the Means: What is needed here is a simple straightforward mechanism for third parties to provide information to patent examiners regarding reasons why a particular pending application should be rejected. The submission should be written and preferably in the English language, but there is no reason why it must follow any other formality requirements. At that point, the patent examiner should have independent authority to consider the submission on its merits. Written correspondence (such as e-mail correspondence) between the third party and the examiners could also be allowed to give the examiner a better opportunity to understand the submission. The written record is helpful to avoid the appearance of any secret or improper dealings between the examiner and a third party.

Background on Third Party Attempts to Protest or Otherwise Oppose the Grant of a Published Application

US patent applications were not published prior to 2001. As Congress considered implementing the publication system, some patent applicants complained that competitors and others would raise the cost of patenting by filing needless oppositions. Thus, the law was written to limit third party oppositions. The relevant statute, 35 U.S.C. § 122(c), states that:

The Director shall establish appropriate procedures to ensure that no protest or other form of pre-issuance opposition to the grant of a patent on an application may be initiated after publication of the application without the express written consent of the applicant.

The USPTO has given a somewhat narrow interpretation to the restrictions blocking any post-publication “protest or other form of pre-issuance opposition to the grant.” In its rulemaking for 37 C.F.R. § 1.99, the USPTO decided to allow third parties to submit prior art during a limited two-month period after publication but prohibited any explanation of the patents or publications or the submission of any other information. 1239 Off. Gaz. Pat. Office 71. Thus, according to the rulemaking, the mere third-party submissions of prior art is not considered a “protest” or “pre-issuance opposition.”

In 2003, Steve Kunin was the Deputy Commissioner for Patent Examination Policy at the USPTO. In March of that year, Kunin published a notice in the USPTO Official Gazette explaining further limitations on the examination corps in dealing with non-party contact with examiners during ex parte prosecution. Kunin writes:

[T]he USPTO is instructing the Patent Examining Corps to: (1) not reply to any third-party inquiry or other submission in a published application that is still pending before the USPTO; (2) not act upon any third-party inquiry or other submission in a published application, except for written submissions that are provided for in 37 CFR 1.99 and written submissions in applications in which the applicant has provided an express written consent to protest or pre-issuance opposition; and (3) decline to accept oral or telephoned comments or submissions about published applications from third parties. When refusing third-party telephone or oral discussions, examiners may call the party’s attention to the statutory prohibition on initiating protests, to this Notice, or to 37 CFR 1.2 (all Office business should be transacted in writing), if appropriate. The USPTO may also refer third-party inquiries or submissions not provided for in 37 CFR 1.99 by registered practitioners in published applications in which the applicant has not provided an express written consent to protest or pre-issuance opposition to the Office of Enrollment and Discipline for appropriate action.

The USPTO’s interpretation of the law is that examiners should refuse to consider any submissions by non-parties. However, Kunin’s notice further indicated that the USPTO retains the right to use the material submitted if it is relevant to patentability:

[T]he provisions of 35 U.S.C. § 122(c) and 37 CFR 1.99, 1.291, and 1.292 limit a third party’s ability to protest, oppose the grant of, or have information entered and considered in an application pending before the USPTO. However, these provisions (and this notice) do not limit the USPTO’s authority to independently re-open the prosecution of a pending application on the USPTO’s own initiative and consider information deemed relevant to the patentability of any claim in the application.

This approach follows a recent examiner comment on Patently-O that “what has been seen cannot then be unseen.”

Changing the Rule without Changing the Law: The law forbids non-party “protests” and other forms of “pre-issuance opposition to the grant of a patent” subsequent to publication of the application. The law also requires the USPTO Director to establish appropriate procedures to ensure that those activities do not take place. However, USPTO has already decided that the law does not forbid submission of prior art documents during a limited time period post-publication so long as the examiner retains independent authority to analyze for patentability and craft rejections. The USPTO would likely be well within its powers to expand the document submission program in a way that (1) allows for submission of explanations; (2) extends the timing of submissions; and (3) reduces or eliminates the fee associated with the submission.

Ex Parte Contact with USPTO Examiners

Patent,

Radio Systems Corp. v. Accession, Inc. (Fed. Cir. 2011)

Accession is a small private New Jersey corporation. Its owner, Thomas Sullivan, is also the sole employee and named inventor of the company’s patent. Accession makes and sells a pet door (the “Wedget”) that installs within a sliding glass patio door. Accession’s Patent No. 7,207,141 issued in April 2007 and claims this “portable pet portal insert for use with a sliding patio door.” Radio Systems is headquartered in Tennessee and makes pet-related products, including a patented electronic pet access door (the “SmartDoor”).

The personal jurisdiction holding in this case will be discussed in a different post, but here I wanted to bring up the interesting facts regarding Accession’s ex parte contact with the USPTO regarding Radio System’s pending patent application. Judge Bryson explains the facts as follows:

On August 20, 2009, Accession’s counsel left a voice message with the PTO examiner for the [Radio Corp] SmartDoor application, alerting the examiner to the existence of Accession’s ‘141 patent. On the same day, Accession’s counsel telephoned Radio Systems’ counsel and stated his position that the SmartDoor infringed the ‘141 patent and that interference proceedings would be warranted between the ‘141 patent and the SmartDoor application. Later that day, Accession’s counsel left a voice message with Radio Systems’ counsel indicating that Mr. Sullivan should be named as a co-inventor on the SmartDoor application. On August 25, 2009, Accession’s counsel sent an e-mail to Radio Systems’ counsel asking whether Radio Systems had brought the ‘141 patent to the attention of the PTO. The next day, the PTO examiner returned the phone call of Accession’s counsel. As a result of that conversation, the PTO withdrew the notice of allowance previously issued for the SmartDoor application. On August 28, 2009, Accession’s counsel sent an e-mail to Radio Systems’ counsel informing him of the communication with the examiner.

Of course, third-party contact with an examiner is expressly prohibited under the Manual of Patent Examining Procedure unless expressly authorized by the applicant. Further violating procedure, the USPTO Examiner then returned the telephone call and based upon the information learned issued a “Notice of Withdrawal from Issue.”

Once an examiner learns of important prior art it, that examiner should use the prior art. Here, the examiner cited the Sullivan patent as prior art against claim 17 of the SmartDoor application and indicated that the “pertinent prior art document” had been disclosed in a telephone conversation with Accession’s patent attorney on August 26, 2009. In response, Radio Corp cancelled claim 17.

In its brief, Accession attempted to rebut the argument that its attorney had done anything wrong – writing that:

Nothing in the record could establish that the Patent Office considered Accession’s contacts to be “wrongful.” Indeed, after the first contact, a voicemail left by Accession’s counsel with the patent examiner, the Patent Office reached out to Accession’s counsel and subsequently took action it believed appropriate. That action did not include sanctions against Accession. There is nothing in this record (or elsewhere) suggesting that the Patent Office found Accession’s counsel’s actions to have violated any rule, policy, or law. Further, the record demonstrates that the sole purpose of the contacts was to alert the Patent Office to the fact that the Radio Systems pending application was deficient.

What should happen here?

Claim Construction Deference

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Lexicon Medical v. Northgate Technologies and Smith & Nephews (Fed. Cir. 2011)

Judge Rader begins his claim construction decision with an interesting conclusion:

Because the record amply supports the trial court’s interpretation of this claim term … this court affirms.

Of course the Federal Circuit’s en banc decision in Cybor requires that claims be reviewed de novo and without deference to the lower court decision. Thus ,the proper question on appeal is not whether the evidence supports the lower court’s decision but instead whether the lower court made the correct determination. In its actual analysis of the claim construction, the appellate panel here appears to have actually performed a complete de novo review and concluded that, indeed, the trial court’s conclusions were correct. The seeming slip in the opening statement of the opinion is understandable – district court opinions on claim construction should be given some deference.

Part of the trouble with claim construction is that the analysis is rarely a binary decision for the court. Rather, there are often a large number of potential interpretations for any particular claim phrase and, courts typically construe (or refuse to construe) multiple claim phrases. Thus, the idea that a random claim construction should be correct 50% of the time is completely wrong. We also know that well informed, reasonable decision makers often disagree on the particular “best” construction of a particular claim phrase. In a recent article, Peter Menell wrote “If nothing else, the past two decades revealed the inherent difficulties of using language to define the boundaries of abstract and intangible rights.” Menell, Powers, & Carlson, Patent Claim Construction: A Modern Synthesis and Structured Framework, 25 Berkeley Tech. Law Journal 711 (2011).

District courts do make mistakes in construing claims, and those should be corrected on appeal. However, apart from clear district court errors, there is no evidence that the Federal Circuit judges do a better job of construing claims than do district court judges. Offering some deference to district court decisions would give a modicum of finality to those decisions and would give some credence to the reality that claim construction involves substantial factual analysis. In his article, Menell writes that “the Federal Circuit is likely to formally rule that there is a role for district court fact-finding in the claim construction process.” We will be waiting to see if Menell’s prediction comes true.

Kappos and his $100 Million (10%) Budget Cut

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Last week, I reported that the new appropriations for the remaining five-months of FY2011 would force the USPTO to cut approximately $100,000,000.00 from its budget. That figure represents more than a 10% cut in what the office was expecting to spend during this period. Today, USPTO Director David Kappos confirmed my statements in a message to USPTO Employees. He writes:

In view of the funding cuts reflected in the final budget and affecting the U.S. government as a whole, we will be unable to expend the additional $85-100 million in fees that we will be collecting during this fiscal year—funds that we had anticipated being able to use to fund operations this year.

… Further, I am mindful of the fact that we may very well be operating at the FY 2011 level for the foreseeable future. As a result, we have had to make some difficult decisions in order to ensure the responsible stewardship of the agency.

Based on the budget cuts, Director Kappos has announced the following changes for the patent examination corps:

  • No overtime;
  • Hiring freeze;
  • Training limited to “mandatory training”;
  • PCT search funding is cut severely;
  • Detroit satellite office is indefinitely postponed;
  • IT infrastructure investments eliminated except for “mission-critical” issues;
  • Track One expedited patent examination program indefinitely postponed; and
  • Mandatory reductions in expenses including travel, conferences, and other contracts.

The $85-100 million in fees that the USPTO will collect but not be allowed to spend will be passed to the general federal government coffers to be spent on other non-patent projects. These cuts will obviously have a negative impact on patent quality, patent pendency, and examiner morale.

Ed DuMont’s “Controversial” Federal Circuit Nomination Continues to Languish after One Year

Patent

In a recent blog post, Bill Vobach noted that Edward C. DuMont’s original nomination as a judge for the Court of Appeals for the Federal Circuit has now been awaiting Senatorial action for more than one year.

This hold-up is a shame. DuMont is eminently well qualified. He has spent years as a top litigator at WilmerHale, Sullivan & Cromwell, and the Solicitor General’s Office within the Department of Justice. He graduated from Yale, Phi Beta Kappa and Summa Cum Laude with the highest standing of any humanities student. At Stanford Law School, DuMont graduated with distinction and was honored with membership to the Order of the Coif. After law school, he clerked for conservative thought leader Richard Posner on the Court of Appeals for the Seventh Circuit. DuMont’s litigation experience has focused primarily on appellate practice and he has argued 18 Supreme Court cases. He has also done trial work and handled at least one patent lawsuit through trial. Even though he has not focused on any particular areas of law, DuMont has worked on a number of intellectual property focused lawsuits, including the Lemelson case, Mattel v. MCA (trademark), Eldred (copyright term extension), Gen-Probe v. Vysis (precursor to MedImmune), Merck v. Teva, Princo v. Philips, AFT v. Cardinal, and Tivo v. Echostar. The ABA has rated DuMont as “unanimously well qualified” and he has also been awarded numerous “leading lawyer” awards throughout his 25-year legal career.

While DuMont has been awaiting Senate confirmation, both Jimmie Reyna and Kathleen O’Malley have been given approval and are now Federal Circuit Judges.

Why the Delay: The hold-up for DuMont’s nomination is the fact that he is openly gay. If approved by the Senate, DuMont would be the only openly gay federal appellate judge and one of only three openly gay federal judges. To-date, no federal judicial appointment for an openly gay man has been approved by the Senate. The delay has been entirely behind the scenes and no Senator has been bold enough to publicly announce the ridiculous position that homosexual men should not be allowed to judge patent appeals.

To be fair, the issue of homosexuality does arise occasionally in the federal employment cases heard by the court. Earlier this year, for instance, in Todd M. Jack v. Department of Commerce, the Federal Circuit was asked to consider whether Jack had been properly suspended for 120 days after he accused his USPTO co-workers of being homosexuals, claimed that his co-workers had “hired Chinese homosexuals to stalk and harass him”; and “lunged” at a superior. The Federal Circuit affirmed the Merit Systems Protection Board’s decision that the suspension was not a violation of Jack’s rights. It is hard to see how this case could have been decided any differently even if the judge himself were gay. The cases involving homosexual issues are much less common than those involving other forms of harassment – such as (hetero)sexual and racial harassment.

The bottom line in DuMont’s situation: The subject matter jurisdiction of the Court of Appeals for the Federal Circuit is severely limited in scope, and DuMont’s sexual orientation is highly unlikely to impact his judicial performance in any way. At this point, Senators Leahy (D-Vt) and Grassley (R-Iowa) and the other members of the Judiciary Committee are the ones responsible for holding back. The Federal Circuit Bar Association, AIPLA, and IPO have all given lip service to supporting DuMont’s nomination, but it is time that they begin to push a bit harder.

Federal Circuit orders En Banc rehearing of Akamai Joint Infringement Claim

Patent

Akamai Technologies, Inc. v. Limelight Networks, Inc., (Fed. Cir. 2011) (en banc order)

The Federal Circuit has ordered an en banc rehearing of Akamai's appeal focusing on the following question:

If separate entities each perform separate steps of a method claim, under what circumstances would that claim be directly infringed and to what extent would each of the parties be liable?

Briefs of amici curiae may be filed without consent from the parties or leave of the court. This decision follows on the heels of Judge Bryson's recent public plea in McKesson for rehearing en banc on the issue of joint infringement.  The leading article on the topic is Mark A. Lemley et al., Divided Infringement Claims, 33 AIPLA Q.J. 255, 283 (2005). In that article, Lemley argues that virtually all divided infringement problems could have been prevented by better claim drafting.  To date, I have not seen a careful or complete retort to the Lemley's article.

Document:

Tivo v. Echostar: New Rules for Post Injunction Contempt Proceedings against Modified Products

Patent,

Tivo Inc. v. Echostar Corp. (Fed. Cir. 2011) (en banc)

At trial, Echostar was held liable as an infringer and was permanently enjoined from making or selling the infringing products as well as “all other products that are only colorably different therefrom.” Echostar then modified and continued to market its product. Rather than filing a new lawsuit, Tivo filed a contempt action arguing that Echostar’s activities violated the permanent injunction already in place. The district court held Echostar in contempt after ruling that the modified product was not colorably different from the infringing product and therefore that its sale violated the permanent injunction.

Normally, a contempt proceeding is the appropriate vehicle for judging violations of a permanent injunction. However, when a company’s new product is sufficiently different from its prior infringing product, courts instead require the patentee to pursue an entirely new case on the merits of the new product. In a rare en banc decision penned by Judge Lourie, the Court of Appeals for the Federal Circuit has provided new guidance as how courts should structure a contempt proceeding when an adjudged infringer releases a new or modified product.

The new rules of contempt proceedings for modified products following an injunction:

  1. Good Faith Design Around: A good faith effort to modify a product in order to avoid infringement will not avoid a contempt proceeding. However, the good faith of someone held in contempt may be used in lessening the penalty for contempt.
  2. Overrule Two-Step Process: The two-step test defined in KSM Fastening Sys., Inc. v. H.A. Jones Co., 776 F.2d 1522, 1530–32 (Fed. Cir. 1985), is overruled as unworkable. That test required courts to first determine whether a contempt proceeding is appropriate based upon the colorable difference test and then determine whether contempt actually occurred. Under the new approach, courts will have broad discretion in judging whether to hold a contempt proceeding so long as the injured party offers “a detailed accusation … setting forth the alleged facts constituting the contempt.”
  3. Appealing Decision to Hold a Contempt Proceeding: A confused aspect of the decision is whether the lower court’s decision to hold a contempt proceeding will be appealable. In one portion of the opinion, the court states that the question of whether the contempt proceeding was proper will not be directly appealable. “As with appeals from findings of civil contempt in other areas of law, we will only review whether the injunction at issue is both enforceable and violated, and whether the sanctions imposed were proper.” In the next paragraph, however, the court notes “that there may be circumstances in which the initiation of contempt proceedings would constitute an abuse of discretion by the district court.” The court then went on to hold that the decision in this particular case was not an abuse of discretion.
  4. Colorably Different: In order win a contempt proceeding, the patentee must show that “the newly accused product is [not] so different from the product previously found to infringe that it raises ‘a fair ground of doubt as to the wrongfulness of the defendant’s conduct.'” In conducting this analysis, the court should focus on the portions of the accused product that were a basis for the prior finding of infringement and consider whether those portions have been significantly modified or removed. “If those differences between the old and new elements are significant, the newly accused product as a whole shall be deemed more than colorably different from the adjudged infringing one” and a contempt finding would be inappropriate. At that point, the patentee could still pursue a full infringement action.
  5. Infringement and Claim Construction: Even when the new product is not colorably different from the prior infringing products, the court must also determine that the new product actually infringes the asserted patent claims. In this process, the court will be bound by its prior claim construction ruling.

In this case, the district court failed to explicitly consider whether Echostar’s modified product met each limitation of the asserted claim. On remand, the district court must make that factual determination.

The court was unanimous as to this new approach to contempt proceedings.

Dissent: The dissent filed by Judge Dyk primarily challenges whether a particular portion of the injunction can be challenged as vague and overbroad in a contempt proceeding. Judge Dyk’s dissent was joined by Chief Judge Rader and Judges Gajarsa, Linn, and Prost. Looking at the tallies, for this portion of the opinion, there were seven judges in the majority and five in dissent. [updated to fix counting error] The majority included Judges O’Malley and Reyna who were not on the bench until well after briefing and oral arguments had been complete.

Nortel, Google, and the Ongoing Rights of Licensees in Bankruptcy [Updated]

Patent,

We have previously discussed Google's $900 million Stalking Horse bid to purchase Nortel's portfolio of more than 6,000 patents.  Nortel was a Canadian-based telecommunications equipment manufacturer. The company is now bankrupt and the company's assets have largely been sold to pay its debts. The patent portfolio represents one of the last remaining company assets.

Over the years, Nortel has licensed its technology and its patent rights to various other companies, including Research-in-Motion, Microsoft, Plantronics, Foundry Networks, and others.

An interesting aspect of the proposed transfer would involve "vesting all of Nortel's right, title and interest in and to such patent assets absolutely in the purchaser free and clear of and from all encumbrances."  Ongoing licenses would also be rejected and terminated as permissible by law.

Bankruptcy has a tendency to disturb well-settled contracts.  In particular, a bankruptcy trustee has the right to either assume or reject executory agreements.  Executory agreements are typically seen as any ongoing contract where both parties have ongoing material obligations.  When the bankruptcy trustee rejects an executor agreement, the wronged-party has a right to collect for breach of contract, but only as an unsecured creditor. (Unsecured creditors typically receive very little money from the liquidating party.)

Both US and Canadian law provide an important exception for executory licenses of patents and copyrights.  See Section 365(n) of the Bankruptcy Code.  A patent licensee can continue to enforce its rights under the license if it continues to pay any royalty due.  Courts do typically allow the trustee to prevent assignment of non-exclusive licenses. In this case, Nortel's trustee has "affirmatively and reasonably refused to give consent … to any renewal, extension, assignment, amendment, waiver or modification of any license [or] any Cross-License Agreement…. [No licensee] shall have the right or power to transfer any of its obligations, right, title or interest in the licenses."  The trustee's proposal also indicates that licensees who do not come forward to explicitly claim their right as licensees will lose their rights: The licenses will be terminated at "closing and shall forever be barred, released and extinguished."

Moving forward, the scope of rights granted to licensees and the potential licensing revenue stream will likely have a major impact on whether competitors bid against Google.  Microsoft has publicly claimed its belief that its rights as a licensee will continue to bind subsequent purchasers of the Nortel patents.

Documents

In re Yasuhito Tanaka – Addition of Narrower Claims is Appropriate Basis for Reissue

Patent

By Jason Rantanen

In Re Yasuhito Tanaka (Fed. Cir. 2011) Download 10-1262
Panel: Bryson, Linn (author), Dyk (dissent)

Patent No. 6,093,991 issued to Yasuhito Tanaka in 2000.  Two years later, Tanaka filed a reissue application seeking to broaden the scope of independent claim 1.  During the reissue proceeding, Tanaka gave up the broadening attempt, instead presenting unamended claims 1-7 and new claim 16 depending from claim 1. 

The examiner rejected claims 1-7 and 16 on the ground that, because Tanaka's declaration did not specify an error that broadens or narrows the scope of the claims of the issued patent, there was no error correctable by reissue.  A seven judge panel of the Board of Patent Appeals and Interferences affirmed the examiner's decision in a precedential opinion, concluding that 35 U.S.C. § 251 "disallow[s] reissue applications that simply add narrow claims to the reissue patent when no assertion of inoperativeness or invalidity for the reasons set forth in § 251 can be made by the patentee" and finding that Tanaka was impermissibly seeking an additional claim on reissue 'in order to hedge against the possible invalidity of one or more of the original claims.'"  Slip Op. at 4 (quoting Board decision).  

Majority: Addition of Narrower Claims is Permitted
On appeal, Judges Linn and Bryson disagreed with the Board's holding.  Drawing upon a rule articulated in dicta by Judge Rich in In re Handel, 312 F.2d 943, 946 n.2 (CCPA 1963), an implication of the rule in In re Muller, 417 F.2d 1387 (CCPA 1969), and an assumption of the rule in Hewlett-Packard Co. v. Bausch & Lomb, Inc., 822 F.2d 1556 (Fed. Cir. 1989), the majority held that longstanding precedent and the principles of stare decisis permit patent applicants to file a reissue application solely to add additional claims:

Even though the rule that adding a dependent claim as a hedge against possible invalidity is a proper reason to seek reissue has seemingly never been formally embodied in a holding of this court or its predecessor, articulation of the rule in Handel was not simply a passing observation—it was a considered explanation of the scope of the reissue authority of the PTO in the context of a detailed explanation of the reissue statute. Based on this court’s adoption of that rule and its adherence to the rule in both Muller and Hewlett-Packard, this court rejects the Board’s contrary ruling.

Judge Dyk's Dissent
Rejecting the majority's shaky reliance on Handel, Muller, and Hewlett-Packard, Judge Dyk instead pointed to even older precedent – a nineteenth century Supreme Court decision – that, in his view, rendered reissue unavailable when nothing in the original patent was being corrected.

It is plausibly suggested that ‘the claim could be made perfect in form, and consistent with the description of all that portion of the apparatus which relates to the invention, by simply striking out the letter of designation for the upper chest, J, and the letter of designation for the conveyor shaft of that chest, K.’ But that the inventor did not and does not intend so to amend his claim is conclusively shown by his having repeated the same claim, including these very letters of designation, in the [retained] claim of the reissued patent. His attempt is, while he retains and asserts the original claim in all particulars, to add to it an-other claim which he did not make, or suggest the possibility of, in the original patent . . . .

To uphold such a claim . . . would be to disregard the principles governing reissued patents, stated upon great consideration by this court at the last term in the case of Miller v. [Bridgeport] Brass Co., 104 U.S. 350, and since affirmed in many other cases.

Dissent, quoting Gage v. Herring, 107 U.S. 640, 645 (1883) (emphasis added by Judge Dyk).  In Judge Dyk's view, Gage thus foreclosed the ability of applicants to retain the original claims without alteration or amendment, or at a minimum created enough conflict with the cases cited by the majority that the court was free to address the issue on the merits.  

Comment: As both the majority and dissent seem to implicitly recognize, neither is on particularly solid ground in terms of prior decisions.  The majority relies on a rule that it itself admits is dicta, but nevertheless characterizes as the product of longstanding precedent.  The dissent foundation's is even less stable, being built on vague language from an opinion that involved an earlier version of § 251.  It is not at all clear from Gage that the Court was concerned with the mere addition of a new claim or instead with the addition of a broadening claim, although after reading Gage I think the majority has the more correct interpretation.  In the end, though, the majority supports its opinion not just with citation to Handel, but also with reasoning sufficient enough to provide an independent basis for the ruling.

Summary of Microsoft v. i4i Oral Argument

Patent,

Guest Post by Megan M. La Belle, Catholic University Columbus School of Law

Professor La Belle attended the oral argument in Microsoft v. i4i Limited Partnership this morning and was kind enough to prepare this summary for Patently-O.

Today, the United States Supreme Court heard oral argument in Microsoft Corporation v. i4i Limited Partnership, in which Microsoft has challenged the Federal Circuit’s clear and convincing evidence standard for overcoming the presumption of patent validity set forth in 35 U.S.C. § 282.  The argument was held before a full courtroom, with former Deputy Solicitor General Thomas G. Hungar representing Microsoft, former Solicitor General Seth P. Waxman representing i4i, and Deputy Solicitor General Malcolm Stuart arguing as amicus curiae on behalf of the United States in support of i4i.

Mr. Hungar began his argument by referring to the Court’s statement in KSR Int’l Co. v. Teleflex, Inc. that the presumption of validity “seems much diminished” where, as here, the prior art was not considered by the U.S. Patent & Trademark Office.  Justice Scalia quickly responded, asking whether Microsoft was arguing that a preponderance of the evidence standard should apply across the board, or only when the prior art was not considered by the USPTO.  Mr. Hungar explained that Microsoft’s position is that the more relaxed standard should apply in all cases where patent validity is challenged.

The Justices then asked a series of questions about the state of the law and congressional intent in 1952 when § 282 was enacted, since the statute itself is silent as to the evidentiary standard.  The Court focused on Radio Corporation of America (RCA) v. Radio Eng’g Labs., Inc., 293 U.S. 1 (1934), in which Justice Cardozo made some broad statements about the presumption of patent validity, including that the challenger “bears a heavy burden of persuasion” and that the presumption cannot be overcome “except by clear and cogent evidence.”  Relying on RCA, i4i argued that Congress intended to codify the existing presumption of patent validity when it enacted § 282, and therefore clear and convincing evidence is the correct standard.  Microsoft countered that the law regarding the presumption of validity was “all over the map” in 1952, and that some courts did not recognize any presumption of validity, much less a presumption that could only be overcome by clear and convincing evidence.  Microsoft further argued that the quoted language from RCA was mere dicta, and that the case was distinguishable because RCA involved a question of priority of invention, not validity. 

In addition to arguing that Congress intended to codify the clear and convincing standard, counsel for both i4i and the United States emphasized Congress’s acquiescence in that standard over the years.  They contended that Congress is well aware of the Federal Circuit’s clear and convincing standard, and that Congress has been very active in the patent arena both in the past and in the present.  Yet, despite its many other proposals to reform the patent system, Congress has made no attempt to change the long-standing evidentiary standard for overcoming a presumption of validity.

Some Justices inquired about solutions other than altering the evidentiary standard.  Justices Breyer and Sotomayor wondered if perhaps the issues raised by this case could be addressed with careful jury instructions.  Justice Sotomayor suggested, for example, that a jury could be instructed that the burden of proof to overcome the presumption of validity is clear and convincing evidence, but that the challenger’s burden is more easily satisfied with respect to evidence of prior art that was not considered by the USPTO.  Microsoft responded that such a jury instruction could be confusing for the jury, as the Federal Circuit held in an earlier case between Microsoft and z4 Technologies.

Finally, the Court returned to the question as to why the presumption of validity should apply when the prior art was not considered by the USPTO.  In response to Justice Ginsburg’s request to justify such a rule, Mr. Waxman offered four reasons.  First, a validity challenge is a “collateral attack” on a governmental decision to issue a patent.  Second, if a patent is erroneously invalidated, the harm to the patent owner is significant because of the preclusive effect such a determination has under Blonder Tongue v. University of Illinois, 402 U.S. 313 (1971).  Third, i4i argued that such a presumption is warranted because patent owners, investors, and licensees rely on patents once they are issued.  Finally, i4i claimed that it is “far from black and white what the PTO does or doesn’t consider,” and that rejecting the long-standing clear and convincing standard would marginalize the agency.  In response, Justice Breyer stated that i4i’s reasons “are all along the lines of how important patents are and what a disaster [it is when] patents are invalidated.”  Justice Breyer then commented that, in today’s world, perhaps a “worse disaster for the country is to have protection given to things that don’t deserve it….”

The Court is expected to issue its decision before the end of June 2011.  Chief Justice Roberts recused himself, so the case will be decided by the remaining eight justices.

Megan M. La Belle is an assistant professor at the Catholic University of America, Columbus School of Law, where she teaches and researches in the area of intellectual property law and procedure.  Her article "Patent Litigation, Personal Jurisdiction, and the Public Good" recently appeared in the George Mason Law Review.

Update: A copy of the rough transcript can now be downloaded here: Download Microsofti4iOralArgument

Concentration of Patent Cases in the Eastern District of Texas

Patent

Patent litigator James Pistorino has emerged from the collapse of Howry as a partner at Perkins Coie. In a recent BNA article, Pistorino provided a brief analysis of patent complaints filed in 2010 with a focus on the Eastern District of Texas. In 2010, E.D. Texas held a slight lead in the absolute number of patent cases filed. Excluding false marking cases, 299 cases were filed in E.D. Texas compared with 255 in Delaware, 225 in the Central District of California, 180 in the Northern District of California, and 179 in the Northern District of Illinois. Pistorino argues that E.D. Texas’s slight lead in the number of cases filed masks the jurisdiction’s continued overwhelming popularity. In particular, he considered the number of defendants sued for infringement and found that in 2010 more defendants were sued in E.D. Texas than in Delaware, California, New Jersey, and Illinois combined. Figure 2 from the article highlights this conclusion. Based upon the data reported, Pistorino goes on to question “whether the forum shopping issue in patent cases (particularly in the Eastern District of Texas) has been solved and whether increased scrutiny of improper joinder of defendants is warranted.”

See James Pistorino, Concentration of Patent Cases in Eastern District of Texas Increases in 2010, 81 BNA Patent, Copyright & Trademark Journal 803 (2011) (Subscriber access only).

Microsoft v. i4i Oral Argument – Monday, April 18

Patent

by Jason Rantanen

Tomorrow, Monday April 18th, the Supreme Court will hear oral arguments in Microsoft v. i4i, which presents the question whether proving invalidity requires clear and convincing evidence when the prior art on which the invaldity defense rests was not considered by the PTO.  The full Question Presented can be found here and prior Patently-O posts on the subject are linked below.

The Federal Trade Commission’s (FTC) Recommendations to the International Trade Commission (ITC): Unsound, Unmeasured, and Unauthoritative

Patent

In March 2011, the FTC issued a Report entitled “The Evolving IP Marketplace: Aligning Patent Notice and Remedies with Competition.”  In that report, the FTC recommended that the ITC adopt the view that “only those licensing activities that promote technology transfer ‘exploit’ patented technology within the meaning of Section 337, and therefore satisfy the domestic industry requirement.” Also, the FTC recommended that the ITC “incorporate concerns about patent hold-up, especially of standards, into the decision of whether to grant an exclusion order in accordance with the public interest elements of Section 337.”

In a new Patently-O Patent Law Journal essay, Benjamin Levi and Rodney Sweetland review the FTC’s recommendations for FTC action and argue that “the recommendations appear to be outcome-driven, as they overlook legal and policy-based factors that counsel against implementation of the recommendations.”

Cite as Benjamin Levi and Rodney R. Sweetland, The Federal Trade Commission’s (FTC) Recommendations to the International Trade Commission (ITC): Unsound, Unmeasured, and Unauthoritative, 2011 Patently-O Patent L.J. 1, at /media/docs/2011/10/levi.ftcunsound.pdf.

Levi & Sweetland are principals in the Washington, DC offices of McKool Smith, P.C.

Patently-O Bits & Bytes by Lawrence Higgins

Patent,

Jay Walker sues more than 100 of companies for patent infringement

  • Jay Walker is a successful inventor and entrepreneur. He is the founder of Priceline, a website that offers discounts on hotels, cruises, and other travel related items. Walker has now sued more than 100 companies for patent infringement. He contends that these companies violated various patents that he owns. Walker’s suit against Apple, Google, Samsung, Microsoft and others claim their mapping technology infringes his patents. [Complaint] Walker’s suit against companies like Groupon and Livingsocial claim that they infringe four of his patents. One such patent (6,249,772) called “Systems and Methods Wherein A Buyer Purchases A Product At A First Price And Acquires The Product From A Merchant That Offers The Product For Sale At A Second Price.” [Complaint]

Number of patent applications in Europe hits all-time high

  • The EPO received 235,000 European patent filings in 2010, the highest number ever in the office’s 34-year history. Over 33% of the filings came from European states, 26% from the US and 18% from Japan. EPO’s president Battistelli states that, “after a 2-year slump, the EU and US are nearly back to their levels of patenting before the crisis.” Is this a sign that the economy is improving? [Link]

Patent issued for bubbles!

  • On March 22 the USPTO issued patent #7,910,531 titled “Composition and method for producing colored bubbles” to C2C Technologies. However, on that same day Crayola filed a re-exam 95/001,582 which asserts anticipation and obviousness. Crayola filed the re-exam because they already have colored bubbles on sale in stores and would likely be liable for patent infringement if they do not find a way to get the patent invalidated. [Link]

Patent Jobs:

  • Shumaker & Sieffert is seeking to hire patent attorneys with 1-5 years experience for their Twin Cities office. The firm will consider remote working relationships for experienced attorneys. [Link]
  • Holland & Hart is searching go trademark attorney with 4+ years experience for their Boulder office. [Link]
  • Wenderoth, Lind & Ponack is seeking an entry-level patent attorney with a chemical background for their Washington D.C. office. [Link]
  • Chernoff Vilhauer is looking for their patent attorney with 4+ years of experience for their Portland office. [Link]

Upcoming Events:

  • William Mitchell College of Law will hold the 2nd annual Patterson Thuente IP Lecture on April 21st. Judge Randall Radar will discuss the most pressing issues in patent law. [Link]
  • Fordham Intellectual Property Law Institute will host the 19th Annual Intellectual Property Law and Policy Conference April 28th -29th. David Kappos, Victoria Espinel, Judge Newman, Judge Radar, and many others in the IP field will be in attendance. [Link]
  • Licensing Executives Society (LES) will hold its Spring Meeting in New York May 4th -6th. The Keynote speaker will be David Kappos. Patently-O readers will receive a $200 discount by using promo code PO11. [Link]
  • The 3rd Annual Corporate IP Counsel Forum will be held May 24-25 in New York. The Corporate IP Counsel Summit is the premier forum to hear about solutions to maximize IP assets, avoid costly litigation, create and maintain efficient infrastructure, fully integrate IP strategies into business plans, prepare for anticipated patent law changes, and much more. Guest speakers include Michael Bishop, Mony Ghose, Mark Costello, Michael Springs, Charles Kwalwasser, and Timothy Wilson. Patently-O readers will receive a $100 discount by using promo code FZA884. [Link]

Contact Lawrence.Higgins@patentlyo.com with leads for future Bits and Bytes.

Patently-O Bits & Bytes by Lawrence Higgins

Patent,

Jay Walker sues more than 100 of companies for patent infringement

  • Jay Walker is a successful inventor and entrepreneur. He is the founder of Priceline, a website that offers discounts on hotels, cruises, and other travel related items. Walker has now sued more than 100 companies for patent infringement. He contends that these companies violated various patents that he owns. Walker’s suit against Apple, Google, Samsung, Microsoft and others claim their mapping technology infringes his patents. [Complaint] Walker’s suit against companies like Groupon and Livingsocial claim that they infringe four of his patents. One such patent (6,249,772) called “Systems and Methods Wherein A Buyer Purchases A Product At A First Price And Acquires The Product From A Merchant That Offers The Product For Sale At A Second Price.” [Complaint]

Number of patent applications in Europe hits all-time high

  • The EPO received 235,000 European patent filings in 2010, the highest number ever in the office’s 34-year history. Over 33% of the filings came from European states, 26% from the US and 18% from Japan. EPO’s president Battistelli states that, “after a 2-year slump, the EU and US are nearly back to their levels of patenting before the crisis.” Is this a sign that the economy is improving? [Link]

Patent issued for bubbles!

  • On March 22 the USPTO issued patent #7,910,531 titled “Composition and method for producing colored bubbles” to C2C Technologies. However, on that same day Crayola filed a re-exam 95/001,582 which asserts anticipation and obviousness. Crayola filed the re-exam because they already have colored bubbles on sale in stores and would likely be liable for patent infringement if they do not find a way to get the patent invalidated. [Link]

Patent Jobs:

  • Shumaker & Sieffert is seeking to hire patent attorneys with 1-5 years experience for their Twin Cities office. The firm will consider remote working relationships for experienced attorneys. [Link]
  • Holland & Hart is searching go trademark attorney with 4+ years experience for their Boulder office. [Link]
  • Wenderoth, Lind & Ponack is seeking an entry-level patent attorney with a chemical background for their Washington D.C. office. [Link]
  • Chernoff Vilhauer is looking for their patent attorney with 4+ years of experience for their Portland office. [Link]

Upcoming Events:

  • William Mitchell College of Law will hold the 2nd annual Patterson Thuente IP Lecture on April 21st. Judge Randall Radar will discuss the most pressing issues in patent law. [Link]
  • Fordham Intellectual Property Law Institute will host the 19th Annual Intellectual Property Law and Policy Conference April 28th -29th. David Kappos, Victoria Espinel, Judge Newman, Judge Radar, and many others in the IP field will be in attendance. [Link]
  • Licensing Executives Society (LES) will hold its Spring Meeting in New York May 4th -6th. The Keynote speaker will be David Kappos. Patently-O readers will receive a $200 discount by using promo code PO11. [Link]
  • The 3rd Annual Corporate IP Counsel Forum will be held May 24-25 in New York. The Corporate IP Counsel Summit is the premier forum to hear about solutions to maximize IP assets, avoid costly litigation, create and maintain efficient infrastructure, fully integrate IP strategies into business plans, prepare for anticipated patent law changes, and much more. Guest speakers include Michael Bishop, Mony Ghose, Mark Costello, Michael Springs, Charles Kwalwasser, and Timothy Wilson. Patently-O readers will receive a $100 discount by using promo code FZA884. [Link]

Contact Lawrence.Higgins@patentlyo.com with leads for future Bits and Bytes.

Patently-O Bits & Bytes by Lawrence Higgins

Patent,

Jay Walker sues more than 100 of companies for patent infringement

  • Jay Walker is a successful inventor and entrepreneur. He is the founder of Priceline, a website that offers discounts on hotels, cruises, and other travel related items. Walker has now sued more than 100 companies for patent infringement. He contends that these companies violated various patents that he owns. Walker’s suit against Apple, Google, Samsung, Microsoft and others claim their mapping technology infringes his patents. [Complaint] Walker’s suit against companies like Groupon and Livingsocial claim that they infringe four of his patents. One such patent (6,249,772) called “Systems and Methods Wherein A Buyer Purchases A Product At A First Price And Acquires The Product From A Merchant That Offers The Product For Sale At A Second Price.” [Complaint]

Number of patent applications in Europe hits all-time high

  • The EPO received 235,000 European patent filings in 2010, the highest number ever in the office’s 34-year history. Over 33% of the filings came from European states, 26% from the US and 18% from Japan. EPO’s president Battistelli states that, “after a 2-year slump, the EU and US are nearly back to their levels of patenting before the crisis.” Is this a sign that the economy is improving? [Link]

Patent issued for bubbles!

  • On March 22 the USPTO issued patent #7,910,531 titled “Composition and method for producing colored bubbles” to C2C Technologies. However, on that same day Crayola filed a re-exam 95/001,582 which asserts anticipation and obviousness. Crayola filed the re-exam because they already have colored bubbles on sale in stores and would likely be liable for patent infringement if they do not find a way to get the patent invalidated. [Link]

Patent Jobs:

  • Shumaker & Sieffert is seeking to hire patent attorneys with 1-5 years experience for their Twin Cities office. The firm will consider remote working relationships for experienced attorneys. [Link]
  • Holland & Hart is searching go trademark attorney with 4+ years experience for their Boulder office. [Link]
  • Wenderoth, Lind & Ponack is seeking an entry-level patent attorney with a chemical background for their Washington D.C. office. [Link]
  • Chernoff Vilhauer is looking for their patent attorney with 4+ years of experience for their Portland office. [Link]

Upcoming Events:

  • William Mitchell College of Law will hold the 2nd annual Patterson Thuente IP Lecture on April 21st. Judge Randall Radar will discuss the most pressing issues in patent law. [Link]
  • Fordham Intellectual Property Law Institute will host the 19th Annual Intellectual Property Law and Policy Conference April 28th -29th. David Kappos, Victoria Espinel, Judge Newman, Judge Radar, and many others in the IP field will be in attendance. [Link]
  • Licensing Executives Society (LES) will hold its Spring Meeting in New York May 4th -6th. The Keynote speaker will be David Kappos. Patently-O readers will receive a $200 discount by using promo code PO11. [Link]
  • The 3rd Annual Corporate IP Counsel Forum will be held May 24-25 in New York. The Corporate IP Counsel Summit is the premier forum to hear about solutions to maximize IP assets, avoid costly litigation, create and maintain efficient infrastructure, fully integrate IP strategies into business plans, prepare for anticipated patent law changes, and much more. Guest speakers include Michael Bishop, Mony Ghose, Mark Costello, Michael Springs, Charles Kwalwasser, and Timothy Wilson. Patently-O readers will receive a $100 discount by using promo code FZA884. [Link]

Contact Lawrence.Higgins@patentlyo.com with leads for future Bits and Bytes.

Patent Reform 2011

Patent

The U.S. Patent System moved one step closer to a major overhaul. On Thursday, April 14, the Judiciary Committee of the House of Representatives voted 32-3 in favor of the America Invents Act (Patent Reform Act of 2011).

As mentioned in Professor Sichelman’s post, A managers amendment would have changed the definition of prior art to include only (1) patent applications and (2) public disclosures. Under that proposal, non-informing uses, sales, and offers-to-sell would not qualify as prior art. However, that portion of the manager’s amendment failed (the rest of the managers amendment passed and is now included within the bill).

The amended act includes a several additional tweaks, including:

  • A sunset provision for USPTO fee setting funding authority;
  • A limitation that the new post-grant supplemental examination procedure (designed to allow an applicant to wash away the threat of inequitable conduct charges) cannot be used if the USPTO finds that the applicant committed fraud on the patent office during the original prosecution;
  • The establishment of a pro bono program for assisting “financially under-resourced” inventors; and
  • A few odd statements about the move from “first inventor to use” to “first inventor to file.”

 

  

Joint Infringement: When Multiple Actors Work in Concert

Patent

McKesson Technologies Inc. v. Epic Systems Corp. (Fed. Cir. 2011)

The Court of Appeals for the Federal Circuit has again ruled that infringement of a patented method requires that a single entity performs all steps of the method. Other recent cases on point include BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007) and Muniauction, Inc. v. Thomson Corp., 552 F.3d 1318 (Fed. Cir. 2008). According to these cases, actions by third parties only count toward infringement if those parties are acting as agents of or under the control and direction of the single direct infringer.

In McKesson, the patented communications method requires action from a health care provider as well as multiple users. There was no infringement here because the users were not acting under the “control and direction” of the health care provider.

Inducement <> Control: Although the users were encouraged by the health care provider to take the would-be infringing step, encouragement alone is doctrinally insufficient to consider the users as agents of the health care provider. In his opinion for the court, Judge Linn noted that the users were not under a contractual duty to use the system and that the “voluntary actions of patients” were did not create an agency relationship.

An interesting aspect of the decision is that each judge filed an opinion.

Judge Linn, writing the “opinion for the court” indicated that the court was bound by prior precedent, but also argued that patentee’s facing a joint infringement situation simply should have done a better job in claim drafting.

[I]n patent law, unlike in other areas of tort law, the patentee specifically defines the boundaries of his or her exclusive rights and provides notice to the public to permit avoidance of infringement. This stands in sharp contrast to the circumstances surrounding a joint tort where the victim has no ability to define the injurious conduct upfront and where, absent joint liability, the victim would stand uncompensated as a consequence.

This approach is supported by an interesting article by Mark Lemley, et al., that argues most divided infringement situations could be solved by better claim drafting.

Judge Bryson concurred in the judgment based upon binding precedent, but called for an en banc re-hearing.

I agree that the decision in this case is correct in light of this court’s decisions in BMC Resources, Muniauction, and Akamai Technologies. Whether those decisions are correct is another question, one that is close enough and important enough that it may warrant review by the en banc court in an appropriate case.

Judge Newman dissented – arguing that the approach conflicts with prior precedent:

Earlier cases applied the law of infringement as a straightforward matter of tortious responsibility. For example, in Fromson v. Advance Offset Plate, Inc., 720 F.2d 1565 (Fed. Cir. 1985), the court held that contributory infringement was possible when a step of a method claim was practiced by the customer, and explained that “because [the manufacturer’s] customers, not [the manufacturer], applied the diazo coating, [the manufacturer] cannot be liable for direct infringement with respect to those plates but could be liable for contributory infringement.” Id. at 1568. This has been the law. It has never had en banc reversal.

Interestingly, the Fromson case has been repeatedly cited for the notion that customer actions cannot be used to support a direct infringement charge against a manufacturer. The case has only rarely been cited this additional teaching that inducing infringement does not require a single direct infringer. The first Federal Circuit decision holding that inducement requires proof of direct infringement appears to be Met-Coil Systems Corp. v. Korners Unlimited, Inc., 803 F.2d 684, 687 (Fed. Cir. 1986). In several post-1952 cases, the Supreme Court has stated that an invention must actually be infringed – i.e., practiced – before someone can be liable for indirect infringement. However, in those cases, the Supreme Court did not state that the actual infringement must be performed by a single entity, and a fair reading of those cases would allow for infringement-by-conspiracy.

New Members of the PPAC: Google’s Michelle Lee

Patent

The USPTO’s Patent Public Advisory Committee (PPAC) is an advisory board that advises the USPTO Director on management of the patent operations of the office, including policies, goals, budget, fees, and other office operations. PPAC members are appointed by the Secretary of Commerce – typically on nomination from the PTO Director. Although the PPAC has no direct power, the USPTO Director is bound by statute to at least consider its input.

Most recently, the Secretary of Commerce is in the process of naming Michelle Lee to the PPAC. Ms. Lee is Google’s Head of Patents and Patent Strategy. She was previously a clerk for former Federal Circuit Chief Judge Paul Michel and partner at Fenwick & West. She is a graduate of Stanford Law School (where she was a law review editor) and MIT (where she graduated at the top of her class with an electrical engineering degree). Google is becoming more and more involved in the patent law system. Probably most importantly for the company, Google has been sued hundreds of times for patent infringement. It has been those lawsuits that have pushed the company to call for patent reform that limits the “temptations and opportunities for abuse.” Google has also become a major patent holder – with over 1,000 issued patents and over 1,000 pending patent applications. Google has been active in the market for patents and a large number of its patents and patent applications were purchased from other companies. Last week, Google significantly upped its market profile by offering to $900 million to purchase bankrupty Nortel’s portfolio of 6,000 patents. In addition, Google has taken a lead in providing free access to patent data. Ms. Lee is filling the spot left by former PTO Deputy Director Steve Pinkos.

Earlier this year, the Secretary of Commerce appointed Esther Kepplinger and Wayne Sobon to the PPAC. Ms. Kepplenger was a longtime USPTO employee – spending five years as the Deputy Commissioner of Patents and is now a Wilson Sonsini’s “Chief Patent Counselor.” Mr. Sobon was Director of Intellectual Property for Accenture for many years, but recently took on the role of Chief IP Counsel for Rambus. At that time, Louis Foreman, Founder of Enventys, was also re-appointed to the board.

Other board members include: