A monkey, an animal-rights organization and a primatologist walk into federal court . . .

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Patent Litigator Andy Dhuey is also representing Photographer David John Slater who has been sued by the monkey Naruto for copyright infringement. In the 9th Circuit Brief, Dhuey writes:

A monkey, an animal-rights organization and a primatologist walk into federal court to sue for infringement of the monkey’s claimed copyright. What seems like the setup for a punchline isreally happening. It should not be happening. Under Cetacean Community v. Bush, 386 F.3d 1169 (9th Cir. 2004), dismissal of this action is required for lack of standing and failure to state a claim upon which relief can be granted. Monkey see, monkey sue is not good law – at least not in the Ninth Circuit. 
More from ATL.

Certificates of Correction

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The chart above shows the number of certificates of correction issued by the USPTO each year with a forecast through the end of 2015. After a patent issues, a patentee can petition for a correction of “clerical or typographical nature, or of minor character” or mistake by the USPTO. There is no fee if the error is a USPTO mistake and currently a $100 fee for correcting applicant-mistakes.

The number of corrections has remained relatively steady over the past 15 years. Since the number of patents issued has risen so dramatically, this steady-state of correction filings means that the average number of corrections per recently issued patent has dropped significantly since 2001.

Support for Mandamus Action to Limit Patent Forum Shopping

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Last week I discussed the TC Heartland mandamus petition here and here. Two amicus briefs have now been filed in support of the petition.

The basic issue is whether the particular limits on patent venue spelled out in 28 U.S.C. 1400(b) should be given effect in the face of broader venue allowances in the more generalized Section 1391(c).

1400(b) reads:

(b) Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.

 

For the past several decades, the court has applied the broader statute 1391(c), and permitted venue so long as the district court has personal jurisdiction over the defendant.  That application has opened the door to venue in E.D. Texas even when the defendant has no place of business there.

John Vandenberg’s team at Klarquist has filed a brief on behalf 24 companies many of which are oft-sued in the E.D. Texas, including Asus, Google, eBay, LinkedIn, NewEgg, SAP, SAS, etc.

The analysis … must start by asking whether this special patent venue statute, standing alone, limits a domestic corporation’s residence to its state of incorporation. The answer is yes: “where the defendant resides” in § 1400(b) “mean[s] the state of incorporation only” for a corporation. (quoting the Supreme Court Fourco decision). . . .

The analysis turns next to the current general venue statute. The question is whether it supersedes this restrictive definition of domestic corporation residence in the special patent venue statute. The answer is that it does not [because the]  current general venue statute expressly subordinates itself to the special venue provisions.

On the policy side, the Amici first highlight the recent John Oliver show ridiculing the E.D. of Texas patent litigation.  The amici then make the argument that forum shopping should not be allowed because it “allows patent owners to choose the forum least likely in our country to allow a speedy or low-cost determination of invalidity or non-infringement. . . . This does not merely disadvantage individual defendants. It undermines the public policy favoring strict scrutiny of issued patents. . . . [H]aving 40% of patent suits in a single district not only burdens individual defendants, it also defeats core public policies of our patent system.”

The Electronic Frontier Foundation (EFF) and Public Knowledge also filed a joint brief in support of mandamus. EFF highlights Judge Moore’s earlier work (then as Professor Moore) where she wrote that extensive forum shopping “conjures negative images of a manipulable legal system in which justice is not imparted fairly or predictably.” Kimberly A. Moore, Forum Shopping in Patent Cases: Does Geographic Choice Affect Innovation?, 79 N.C. L. Rev. 889 (2001).  The brief also highlights a new work by Daniel Klerman & Greg Reilly entitled Forum Selling that argues “judges in the Eastern District have consciously sought to attract patentees and have done so by departing from mainstream doctrine in a variety of procedural areas in a pro-patentee (pro-plaintiff) way.” Neither Moore nor Klerman/Reilly make the 1400(b) argument, but both suggest that forum shopping – when taken too far – is a problem.

Documents:

Kraft’s brief in opposition is due November 9.

Director Michelle Lee: Moving toward Patent Clarity

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The following is a post from Under Secretary of Commerce for Intellectual Property and Director of the USPTO Michelle K. Lee and was published on the PTO Director’s blog. 

Patent quality is central to fulfilling a core mission of the USPTO, which as stated in the Constitution, is to “promote the Progress of Science and useful Arts.” It is critically important that the USPTO issue patents that are both correct and clear. Historically, our primary focus has been on correctness, but the evolving patent landscape has challenged us to increase our focus on clarity.

 Patents of the highest quality can help to stimulate and promote efficient licensing, research and development, and future innovation without resorting to needless high-cost court proceedings. Through correctness and clarity, such patents better enable potential users of patented technologies to make informed decisions on how to avoid infringement, whether to seek a license, and/or when to settle or litigate a patent dispute. Patent owners also benefit from having clear notice on the boundaries of their patent rights. After and after successfully reducing the backlog of unexamined patent applications, our agency is redoubling its focus on quality. 

 We asked for your help on how we can best improve quality—and you responded. Since announcing the Enhanced Patent Quality Initiative earlier this year, we received over 1,200 comments and extensive feedback during our first-ever Patent Quality Summit and roadshows, as well as invaluable direct feedback from our examining corps. This feedback has been tremendously helpful in shaping the direction of our efforts. And with this background, I’m pleased to highlight some of our initial programs under the Enhanced Patent Quality Initiative. 

 First, we are preparing to launch a Clarity of the Record Pilot, under which examiners will include as part of the prosecution record definitions of key terms, important claim constructions, and more detailed reasons for the allowance and rejection of claims. Based on the information we learn from this pilot, we plan to develop best examiner and applicant practices for enhancing the clarity of the record.

 We also will be launching a new wave of Clarity of the Record Training in the coming months emphasizing the benefits and importance of making the record clear and how to achieve greater clarity. Recently, we provided examiners with training on functional claiming and putting statements in the record when the examiner invokes 35 U.S.C. 112(f), which interprets claims under the broadest reasonable interpretation standard and secures a complete and enabled disclosure for a claimed invention. Training for the upcoming year includes an assessment of a fully described invention under 35 U.S.C. 112(a) and best practices for explaining indefiniteness rejections under 35 U.S.C. 112(b).

 Second, we are Transforming Our Review Data Capture Process to ensure that reviews of an examiner’s work product by someone in the USPTO will follow the same process and access the same facets of examination. Historically, we have had many different types of quality reviews including supervisory patent examiner reviews of junior examiners and quality assurance team reviews of randomly selected examiner work product. Sometimes the factors reviewed by each differed, and the degree to which the review results were recorded. With only a portion of these review results recorded and different criteria captured in those recordings, the data gathered was not as complete, useful, or voluminous as it could have been. As a result, the USPTO has been able to identify statistically significant trends only on a corps-wide basis, but not at the technology center, art unit, or examiner levels. We are working to unify the review process for all reviewers and systematically record the same and all review results through an online form, called the “master review form,” which we intend to share with the public. 

 What are the implications of this new process and new form? This new process will give us the ability to collect and analyze a much greater volume of data from reviews that we were already doing, but that were not previously captured in a centralized, unified way. As we roll out this new review process the amount of data we collect will significantly increase anywhere from three to five times. This will allow us to use big data analytic techniques to identify more detailed trends across the agency based upon statistically significant data including at the technology center, art unit, and even examiner levels. Also, this new process will give us better insight into not just whether the law was applied correctly, but whether the reasons for an examiner’s actions were spelled out in the record clearly and whether there is an omission of a certain type of rejection. For example, for an obvious rejection we are considering not only whether a proper obvious rejection was made, but whether the elements identified in the prior art were mapped onto the claims, whether there are statements in the record explaining the rejection, and whether those statements are clear.

 The end result will be the (1) ability to provide more targeted and relevant training to our examiners with much greater precision, (2) increased consistency in work product across the entire examination corps, and (3) greater transparency in how the USPTO evaluates examiners’ work product. You can read more about these and our many other initiatives, such as our Automated Pre-examination Search pilot and Post Grant Outcomes, which incorporates insight from our Patent Trial and Appeal Board and other proceedings back into the examination process on our new Enhanced Patent Quality Initiative page on our website.

 Finally, let me close by emphasizing that our Enhanced Patent Quality Initiative is not a “one-and-done” effort. Coming from the private sector, I know that any company that produces a truly top quality product has focused on quality for years, if not decades. The USPTO is committed to no less. The programs presented here are just a start. My goal in establishing a brand new department within the USPTO was to focus exclusively on patent quality and the newly created executive level position of Deputy Commissioner for Patent Quality will ensure enhanced quality now, and into the future. With your input we intend to identify additional ways we can enhance patent quality as defined by our patent quality pillars of excellence in work products, excellence in measuring patent quality, and excellence in customer service.

 To that end, we will continue our stakeholder outreach and feedback collection efforts in various ways, such as our monthly Patent Quality Chat webinars. The next Patent Quality Chat webinar on November 10 will focus on the programs presented in this blog and our other quality initiatives. I encourage you to join in regularly to our Patent Quality Chats and visit the Enhanced Patent Quality Initiative page on our website for more information.  The website provides recordings of previous Quality Chats as well as upcoming topics for discussion. We are eager to hear from you about our Enhanced Patent Quality Initiative, so please continue to provide your feedback to WorldClassPatentQuality@uspto.gov(link sends e-mail).  Thank you for collaborating with us on this exciting and important initiative!

 

IPR Appeal: Federal Circuit Tells PTAB to Reject More Claims

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Belden v. Berk-Tek (Fed. Cir. 2015) on appeal from IPR2013-00057 (Patent Trial & Appeal Board) .

In an inter partes review appeal, the Federal Circuit has sided with the patent challenger – finding that the PTAB had erred by upholding the patentability of two of Belden’s claims.  This case is important largely for its result. The case is also one to be studied for some attempt to tease out the Federal Circuit’s purported legal analysis.

In the IPR of U.S. Patent No. 6,074,503, the PTAB cancelled claims 1-4 as obvious over a combination of prior art references but upheld claims 5-6.  In this process, the Federal Circuit must give substantial deference to PTAB factual findings (such as the factual underpinnings of the obviousness analysis) but reviews questions of law (such as the ultimate determination of obviousness) de novo on appeal.  Thus, all other things being equal, it is a much less daunting process to base your appeal on an issue of law rather than upon a factual dispute.

In reversing the PTAB’s decision upholding claims 5-6, the Federal Circuit wrote that the Board’s “contrary finding rests on legal errors.”  However, the analysis in the analysis that followed, the court appeared to point out a series of incorrect factual conclusions and perhaps suggests that ‘motivation to combine’ should truly be considered a question of law rather than of fact.

There is no meaningful dispute here, and the Board did not deny, that the two pieces of prior art in combination teach or suggest the methods of claims 5 and 6. The dispute concerns motivation to combine. The Petition and the Institution Decision reveal the two related ways in which that issue was presented and considered: whether a skilled artisan would substitute the twisted pairs of CA ’046 into the method of JP ’910; alternatively, whether a skilled artisan making the cable of CA ’046 would look to the JP ’910 method to make it. The brief discussion in the Petition suggests both views of the matter. …

As the Board found, it is “undisputed that CA ’046 discloses ‘a helically twisted cable.’” There is no dispute that the twisted pairs in CA ’046 need to fit into the notches of (i.e., be aligned with) the separator, as shown in the two figures from CA ’046 reproduced above, for the resulting cable to be made. And the Board correctly recognized in its discussion of claims 1 and 2 that JP ’910 clearly teaches the importance of aligning conductors with a separator (core), and suggests doing so with a die to prevent twisting of the separator, before they are all bunched together for twisting in a stranding device. That evidence points clearly toward a motivation of a skilled artisan to arrive at the methods of claims 5 and 6 based on JP ’910 and CA ’046, as the Board reasoned in its preliminary determination in the Institution Decision.

None of the Board’s reasons for concluding otherwise in its Final Written Decision withstands scrutiny through the lens of governing law. The Board’s first reason was that JP ’910 shows only conductors that are not individually insulated, so that “one of ordinary skill…would not have been motivated … simply to substitute twisted pairs of insulated conductors for the bare metal conductors.” But JP ’910 plainly discloses the need to align the conducting wires with the core and how to do so, as the Board recognized in its analysis of claims 1 and 4. The alignment problem and solution do not depend on whether the wires are insulated. The Board’s disregard of the insulation-independent alignment teaching of JP ’910 violates the principle that “[a] reference must be considered for everything it teaches by way of technology and is not limited to the particular invention it is describing and attempting to protect.” EWP Corp. v. Reliance Universal Inc., 755 F.2d 898, 907 (Fed. Cir. 1985) (emphases in original); see In re Applied Materials, Inc., 692 F.3d 1289, 1298 (Fed. Cir. 2012). . . .

The Board, returning to its focus on insulation of individual conductors, further reasoned: “Berk-Tek also has not explained why a person of ordinary skill in the art would have had sufficient reason to use the final jacketing/extrusion step of JP ’910, which serves to insulate electrically the bare-metal conductors of JP ’910, to manufacture a cable comprising twisted pairs of individually insulated conductors that do not require additional electrical insulation.” The Board found no answer to Belden’s statement that the final jacketing step, if the conductors themselves were insulated, would be “‘redundant.’ ” But that logic misconstrues the claim language and overlooks on-point evidence. . . .

In short, the record is one-sided on the proper question of whether JP ’910 taught a solution to the problem of aligning cable components that a skilled artisan would have been motivated to use in making CA ’046’s cables. The Board erred in determining that Berk-Tek had not proven the obviousness of the methods of claims 5 and 6 of the ’503 patent by a preponderance of the evidence.

Read the decision here: http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/14-1575.Opinion.11-3-2015.1.PDF.

 

New Federal Rules of Civil Procedure

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After a long rule-change process, a new set of amended Federal Rules of Civil Procedure (FRCP) will become effective on December 1, 2015.

Directly impacting patent cases is the elimination of the form patent complaint that allowed patentees to file a complaint without particularly spelling out any theories of of infringement.  New complaints will be required to satisfy the Twiqbal standard of alleging facts that make the claim for relief plausible.  In the patent situation, courts may begin requiring at least a particular statement of which patent claims are being infringed and perhaps at least one claim chart.

The amendments also include changes a set of case management and discovery rules to better streamline that process and focus on proportionality.

 

McCarthy on the Federal Circuit as a trademark court

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by Dennis Crouch

Thomas McCarthy and Dina Roumiantseva have published a new article titled: Divert All Trademark Appeals to the Federal Circuit? We Think Not.  They write:

With some regularity over the years, a proposal is made to change the Lanham Act so that appeals in all Lanham Act trademark and false advertising cases from district courts across the United States will be diverted from the regional circuit courts of appeal to the Court of Appeals for the Federal Circuit. We think it is time to discuss this proposal head on and hopefully to convince the reader that this diversion is not a good idea and should never be implemented. Advocates of this proposal claim that trademark law would benefit from the consistency that a single appeals court could provide and that the Federal Circuit has exceptional expertise in trademark law. We believe, however, that trademark law does not suffer from the kind of circuit conflict that led to the channeling of all patent appeals to the Federal Circuit in 1982. Moreover, our review of case law suggests that some regional circuits have a comparable or greater experience with trademark law. We argue that no change in the present system of trademark appeals is needed.

I see merit to the McCarthy-Roumiantseva argument.  However, I also see a major problem with the current intellectual property system is its disjointed implementation nature.  Copyright is adminstered by a branch of the Library of Congress. Patent and Trademark registration is handled by a single agency, except for state-law and FDA exclusivity issues. And, the appellate courts that hear most copyright and trademark infringement actions almost never hear any patent infringement actions – and vice versa. Trade secret is almost (but not quite) entirely state law derived. These major divides in administration and adjudication have led to a system that lacks substantial coherence across doctrinal silos and has opened the door for special interests to tweak individual portions of the law toward their favor.

Federal Circuit: Denies En Banc Rehearing on Lost Profit Sales for Component Export

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In a split opinion, the Federal Circuit has denied WesternGeco’s en banc petition on the issue of whether a patentee can collect lost profit damages stemming from foreign sales that constitute infringement under 35 U.S.C. § 271(f).   The question presented:

When there has been a finding of infringement under 35 U.S.C. § 271(f) for supplying components of a patented system to be combined outside the United States, is a patentee, in effect, categorically barred from recovering proven lost profits that occurred outside the United States, which were the direct and foreseeable result of the infringement under § 271(f)?

In its original panel decision, the Federal Circuit indicated that its tradition of avoiding extraterritorial application of U.S. patent law led it to apply Section 271(f) in a restrictive rather than expansive way.

 

WesternGeco cannot recover lost profits resulting from its failure to win foreign service contracts, the failure of which allegedly resulted from ION’s supplying infringing products to WesternGeco’s competitors. . . . Section 271(f) does not eliminate the presumption against extraterritoriality. Instead, it creates a limited exception. . . . It is the act of exporting the components from the United States which creates the liability. . . . Just as the United States seller or exporter of a final product cannot be liable for use abroad, so too the United States exporter of the component parts cannot be liable for use of the infringing article abroad.

Of course, the fact that WesternGeco is not entitled under United States patent law to lost profits from the foreign uses of its patented invention does not mean that it is entitled to no compensation. Patentees are still entitled to a reasonable royalty, and WesternGeco received such a royalty here. . . .

As he did in the original panel decision, Judge Wallach also dissented here – joined by Judges Newman and Reyna.  In the original opinion, Judge Wallach wrote:

[T]he limited geographic reach of United States patent law does not mean activities occurring outside the United States are categorically disregarded when determining issues of patent infringement. . . . [In 271(f)] Congress imposed liability on those supplying from the United States components of a patented invention “in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States.” . . .

In general, a patentee is entitled to full compensatory damages where infringement is found. . . . . The[] general principles of full compensation, of course, do not directly address the question of whether foreign activities may be considered when calculating such compensation. The Supreme Court, however, has answered this question in the affirmative, looking to noninfringing foreign sales to calculate lost profits where the patented product is manufactured in the United States. For example, [see] Goulds’ Manufacturing Co. v. Cowing.

There is a strong chance that WesternGeco will petition for a writ of certiorari and this type of international patent law case has some background before the court. See, Microsoft Corp. v. AT&T Corp., 550 U.S. 437 (2007) and Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518, 531 (1972).

= = = = =

As a comment, I should mention here that the question petitioned is somewhat disingenuous in that the lost-profits would be available associated with foreign component sales, just not those tied to sale of the would-be-infringing-product. The problem for the patentee is that the real profits are in the final product not the underlying components.

Trademark Cases

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Trademark cases are almost interesting. Here are the last 10 filed according to my docket report:

  1. Kentucky Mist Moonshine Inc. v. University of Kentucky (E.D.Ky.) (declaratory judgment lawsuit that UK can’t control the term Kentucky).
  2. Star of Texas Fair & Rodeo v. El Rodeo, Inc. (W.D.Tex.) (arguing that “El Rodeo” is confusingly similar to “Rodeo Austin”.)
  3. Yeti Coolers, LLC v. Evans (W.D.Tex.) (Defendant accused of making knock-off cooler’s using Yeti mark.)
  4. Haru Holding Corp. v. Sapporo Ichiban Inc. (E.D.N.Y.) (Allegations that “Sapporo Haru” restaurant is confusingly similar to the Haru Sushi marks.)
  5. El Holdings Lake City v. Lake City RV Resort (N.D.Fla.) (Allegations that defendant’s “Lake City RV Resort” is confusingly similar to “Lake City Campground and RV Resort”. Both are located within 1-mile of Lake City, Florida.)
  6. Garçon v. FanDuel Inc. (D.Md.) (Class action with Pierre Garçon (NFL Player) as lead plaintiff against fantasy football site.)
  7. Smart Energy Today, Inc. v. DOES (C.D.Cal.) (Alleging that anonymous competitors wrote bad reviews on Yelp.)
  8. Luxottica Group S.p.A. v. The Partnerships and Unincorporated Associations Identified on Schedule “A” (N.D.Ill.) (counterfeit Ray-Bans.)
  9. Direct Niche, LLC v. Via Varejo S/A (D.Minn.) (cybersquatting ACPA action asking US court to overturn WIPO UDRP decision on  casasbahia.com).
  10. Rosenstreich et al v. L’Oreal S.A. (S.D.N.Y.) (Allegation is that L’Oreal’s “TXT IT” cosmetics campaign is too close to the mark “T3XT !T C0$M3T!C$”.)

PTO Rules: File Sharing and Correcting Foreign Priority Claims

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By Dennis Crouch

NOTE: See final paragraph for Nov. 5 pending rule change for correcting foreign priority claims.

The USPTO has published a new Final Rule notice titled: Changes To Facilitate Applicant’s Authorization of Access to Unpublished U.S. Patent Applications by Foreign Intellectual Property Offices. This is a follow-up to the proposed rules from 2014. As its name suggests, the proposal would allow the USPTO to share otherwise secret information regarding pending-unpublished US applications with foreign patent offices, such as the EPO. A major caveat here though is that the sharing of information requires applicant authorization. The change is part of the general major shift toward worksharing and international procedural harmonization. The following comes from the notice:

[The USPTO] is revising its rules of practice to include a specific provision by which an applicant can authorize the Office … all or part of the file contents of an unpublished U.S. patent application in order to satisfy a requirement for information imposed on a counterpart application filed with the foreign IP office. … The final rule changes consolidate the specific provisions of the regulations by which applicants give the Office authority to provide a foreign IP office with access to an application in order to satisfy a requirement for information of the foreign IP office. The Office is also revising the rules of practice to indicate there is no fee for providing a foreign IP office with an electronic copy of an application-as-filed or an electronic copy of file contents pursuant to a bilateral or multilateral agreement. Additionally, along with changes to the application data sheet (ADS) form [to facilitate authorization], the final rule changes simplify the process for how applicants provide the Office with the required authorization, thereby reducing the resources applicants must expend to comply with these foreign IP office requirements, and enhance the quality of patent examination.

The change has a November 30, 2015 effective date.

In this process, the PTO is setting up a major roadblock to more complete worksharing by only sharing documents when authorized by applicants. One comment to the proposed rules focused on this issue:

Comment 4: One comment asserted that the proposed rule change is based upon the assumption that a specific authority is required from an applicant in order to send out pre-publication information to a foreign IP office where applicant has filed an application and that the Office should reconsider this assumption. The comment further asserted that once an applicant files an application in a foreign IP office, applicant inherently agrees to the rules and requirements of that foreign IP office. Accordingly, the comment suggests that the Office does not need a separate authorization to either send a priority document or pre-publication information to that foreign IP office. Therefore, the comment requested that the Office reconsider the need for any authorization for access in this circumstance. The comment stated that if the Office adopts this position, then the entire authorization section from the ADS can be removed and a filing of an application in a foreign IP office by an applicant can serve as authorization for access to send priority documents and/or pre-publication information to that foreign IP office(s).

Response: After due consideration of the comment, the Office has decided to not adopt the position expressed in the comment. The written authority requirement is in accord with 35 U.S.C. 122(a), and consistent with current Office policy, practice, and procedure regarding access. Therefore, the Office is retaining the requirement for written authority from an applicant for access to the file contents of an unpublished application.

Here, the statute properly quoted by the Patent office does require that these non-published “applications for patents shall be kept in confidence by the Patent and Trademark Office and no information concerning the same given without authority of the applicant or owner unless necessary to carry out the provisions of an Act of Congress or in such special circumstances as may be determined by the Director.”

The USPTO has also announced “Change in Practice Regarding Correction of Foreign Priority Claims.” The changes – becoming effective on November 5, 2015, will make it more difficult to correct errors in foreign priority claims. Starting this week, a correction of a foreign priority claim made outside of the one-year deadline will require a petition to accept an unintentionally delayed benefit claim.

The Leahy-Smith America Invents Act (AIA) … provides that the filing date of an earlier foreign patent application may now be the effective prior art date for subject matter disclosed in a U.S. patent or a U.S. patent application publication. Therefore, U.S. patent application publications should reflect accurate foreign priority information to minimize the burden on examiners and members of the public in assessing the effective prior art date for subject matter disclosed in such U.S. patent application publications. The USPTO will thus now require that any correction of the identification of the foreign application (by application number, country (or intellectual property authority), and filing date) in a foreign priority claim after the time period for filing a priority or benefit claim be via a petition to accept an unintentionally delayed priority claim, and once the petition is granted in a pending application, will now publish a corrected patent application publication reflecting the accurate foreign priority claim information.

So, if you have a correction to make regarding foreign priority, it is probably best to get it done in the next two days. In general, the “unintentional” standard is fairly easy to overcome, but does require sworn statements that may later open-the-door to charges of inequitable conduct if it turns out that the error was known for some time. I’ll also note here that the parallel correction of US priority already requires the petition.

Federal Circuit: Attorney Reputational Harm Does Not Raise Case-or-Controversy Following Settlement.

Patent

Tesco Corp (Plaintiff) v. National Oilwell Varco (Defendant-Appellee) v. Glen Ballard & John Luman (Interested Party – Appellant) (Fed. Cir. 2015)

Interesting case here – Jury verdict for the patentee, but in post-verdict motions S.D. Texas Judge Ellison dismissed the case with prejudice as a sanction against the patentee plaintiff for litigation misconduct. The Judge found that Ballard and Luman had directly lied to the court about the origin of a critical element of prior art. The Judge wrote:

Not every lawyer who lies to a court will be caught, so when such deliberate and advantage-seeking untruthful conduct is uncovered, the penalty must be severe enough to act as a deterrent.

While an appeal of the dismissal was pending, the parties settled “all outstanding issues.” That settlement agreement was signed both by representatives of the parties and the attorneys. However, Ballard and Luman decided to pursue the appeal further – arguing that the reputational harm from the district court opinion justified continued jurisdiction. The Federal Circuit disagreed – finding “no remaining case or controversy.”

Although Ballard and Luman have not been able to defend themselves in court, they will likely get their chance to do so before the Texas Bar. Apparently, they cannot do so publicly because the records are privileged and their former client Tesco will not allow their disclosure.

The majority opinion here was written by Judge O’Malley and joined by Judge Chen.

Writing in dissent, Judge Newman argued that the lawyers should be able to defend their reputation since it is their “most valuable asset.” The basic argument from Ballard and Luman is that the “sole evidentiary basis” for their bad faith is post-trial testimony from the creator of the asserted prior art and, according to the Attorney’s, that post-trial testimony was different from what he had said years earlier. The district court had disagreed with that characterization.

===

Brief on Point: TescoAttorneyArg

Patentlyo Bits and Bytes by Anthony McCain

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Get a Job doing Patent Law

Filing a Civil Action and Paying Fees

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A few months ago I wrote about the Fourth Circuit decision in Shammas v. USPTO under the headline “USPTO Can Demand Attorney Fee Awards, Even When it Loses the Case.” The Shammas case surrounds the question of when, and to what extent, the PTO may request reimbursement of its costs associated with a civil action filed by a petitioner trying to force the USPTO to grant the applied-for rights.  The particular case here is focused on a trademark civil action, but the statute is virtually parallel for patent cases. In particular, both provisions include cost-shifting would seemingly force the applicant to pay the PTO’s expenses of the proceedings, win-or-lose.

Patent Cases: “All the expenses of the proceedings shall be paid by the applicant.”

Trademark Cases: “unless the court finds the expenses to be unreasonable, all the expenses of the proceeding shall be paid by the party bringing the case, whether the final decision is in favor of such party or not.”

Here, the district court sided with the USPTO – agreeing that the term “PROBIOTIC” was generic for its proposed use and therefore not registrable.

The district court then awarded attorney fees to the USPTO, which the 4th Circuit affirmed — holding that the “all the expenses” provision of the statute includes attorney fees.

The losing mark-seeker has now filed a petition for writ of cert asking:

Whether the Fourth Circuit’s holding – that “the expenses of the proceeding” that “shall be paid” by a trademark applicant bringing an action under Section 21(b) include the salaries of attorneys and paralegals employed by the United States Patent and Trademark Office – violates the American Rule.

Although the PTO seems to have the upper hand with regard to the statutory language, the right to fee shifting is hard for petitioners to accept — especially considering the rarity of strict fee-shifting mechanisms within our court systems (especially where one-side always pays).

A surprising aspect of the case is that the statute has been around for a while (170 years) and during that time, the USPTO has apparently never before sought (or been awarded) attorney fees under the statute. Without a grant of certiorari, that trend will have come full-stop and about-course.

[Shammas v Focarino certiorari pet and pet app]

 

 

Federal Circuit Looks for Briefing on Automatic Assignment En Banc Challenge

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Following up on the Shukh v. Seagate petition for en banc rehearing, the Federal Circuit has now taken an important first step of asking Seagate for its response to the petition, due by November 13, 2015.

The issue here is the construction of an employment agreement where the patentee “hereby assigns” all future inventions (created within the scope of the employment).  The Federal Circuit rule is that the agreement serves as an effective property right transfer such that, at the moment* of invention, rights to the invention automatically transfer to the employer.

One reason why the issues in the case are interesting to me is because the current Federal Circuit rule is contrary to the traditional property law notion expounded in the UCC that  “a purported present sale of future goods or of any interest therein operates as a contract to sell.”  Although relatively new, these same limits on property transfer stretch back hundreds of years in our common law history. In the background of the case is the notion that the Federal Circuit has created a federal law of assignment agreements that seemingly operates worldwide — again going against the norm that in the patents are to be treated as personal property in the exchange context, and personal property exchanges are normally governed by local state or foreign law.

In the patent context the question the Federal Circuit’s rule serves as an important and additional thumb on the side of employers rather than their employee inventors. In addition questions of legal tradition noted above, the the case raises important innovation policy questions and questions of inventor/employee rights.  The issues here can be thought of as in parallel to other areas where the law places limits on how far employment contracts can go to strip an employee of her rights. Consider, for example, covenants-not-to-compete, inventions outside of the scope of employment, and post-employment secrecy requirements limiting what someone can do with learned skills and knowledge.  In those contexts, the courts (and legislatures) have found that it doesn’t make sense to enforce overreaching employment contracts except when very particularly bargained for.

Employers obviously prefer the current rule because it so strongly favors them.  Thus, I expect that any IPO/AIPLA (and probably PTO) commentary on this front will support the current automatic-assignment rule.

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* I included the asterisk next to “moment” of invention because of the reality that invention is typically a process distributed over time.  As the courts have repeatedly written, invention begins with a full and complete conception of the invention remains inchoate until the invention is reduced to practice (either actually or constructively). Updated for spelling.

 

Treatise on the Law of Patents Section 170

Patent

The following section from the Curtis Treatise on the Law of Patents is interesting in my estimation.

Section 170 The statutes however which authorize the assignment of an invention before the patent has been obtained appear to embrace only the cases of perfected or completed inventions. There can properly speaking be no assignment of an inchoate or incomplete invention although a contract to convey a future invention may be valid and may be enforced by a bill for a specific performance. But the legal title to an invention can pass to another only by a conveyance which operates upon the thing invented after it has become capable of being made the subject of an application for a patent This is apparent from the provisions of the statute which require the specification and the application to be made in the name of the inventor. A contract to convey a future invention or an improvement to be made upon a past invention cannot alone authorize a patent to be taken by the party in whose favor such contract was intended to operate.

George T. Curtis, A Treatise on the Law of Patents for Useful Inventions (1873).

Does the Law Permit a Seller to Assign Title Before Acquiring Title?

Patent

Alexander Shukh v. Seagate Tech. (Fed. Cir. 2015) (en banc petition)

In an en banc petition, Shukh has challenged the Federal Circuit’s “automatic assignment” rule announced in its 1991 FilmTec decision.  The basic rule from the Federal Circuit is that a pre-invention contract that states “I hereby assign” potential future inventions is deemed an effective transfer of title even though the future inventions have not yet been conceived.   The more standard interpretation of a purported transfer of a not-yet-owned property is, at most, as a conveyance of equitable rights but not legal title. See Stanford v Roche (2011) (Breyer, J., dissenting) (citing G. Curtis, A Treatise on the Law of Patents for Useful Inventions §170 (1867)).  Legal title then requires a new affirmative act by the seller once title is acquired. See Pomeroy on Equity Jurisprudence §1287 (1918); Joseph Story, Equity Jurisprudence, §1040 (1853); Murray, Corbin on Contracts §50.2 (2007); UCC Section 2-105(2) (“A purported present sale of future goods or of any interest therein operates as a contract to sell.).

This is an issue that has been boiling under the surface for some time and the court should grant en banc rehearing.

The petition raises a second issue involving attorney-client privilege that could have an important impact on patent prosecution.

Whether, in a Section 256 Correction of Inventor action, does the common interest doctrine of attorney-client privilege entitle an inventor to access and use his own invention records and communications?

A potential outcome of this decision could be further clarification as to the relationship of the attorney to inventors who are the employees of the client at a time when the inventors continue to have title to the invention at name-listing rights.

Read the petition: AMS En Banc Petition

Impact of an Inter Partes Review Petition Denial on Willfulness

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WARF v. Apple (W.D. Wisconsin 2015)

Following a jury verdict on infringement and validity (October 10) and another verdict on damages awarding $230 million in reasonable royalty (October 19), Judge Conley (W.D.Wisc.) has now quickly disposed of the case by entering judgment in favor of the patentee (WARF) the amount awarded and denying Apple’s motion for judgment as a matter of law.  The case is now set for appeal to the Federal Circuit.

During trial the Judge rejected WARF’s willfulness claim – finding that Apple had a pretty good – thought ultimately losing – obviousness argument:

Apple demonstrated at trial that the elements of the asserted claims of the ‘752 patent were all known in the prior art, and many were well-known for those skilled in the art. Indeed, WARF did not meaningfully dispute this. As a result, the only factual dispute as to Apple’s obviousness defense was whether a person of ordinary skill in the art would have combined those elements and had a reasonable chance of doing so successfully.

Under the current requirement of both objectively and subjectively willful behavior, the court found that WARF could not prove with clear and convincing evidence that Apple acted “despite an objectively high likelihood that its actions constituted infringement of a valid patent.”

It turns out that Apple had also presented its obviousness argument to the PTAB in an inter partes review challenge. In that case, the Board refused to grant the IPR petition – finding that Apple “has not shown, under 35 U.S.C. § 314(a), that there is a reasonable likelihood that it will prevail with respect to at least one of the challenged claims.” Back in the lawsuit, Judge Conley rejected WARF’s argument that the PTAB’s denial is relevant.  Unfortunately, it appears that the Judge’s ruling is based upon a misunderstanding of PTAB procedure and burdens. In particular, the judge rested his decision upon the incorrect notions that IPR cancellation requires “clear and convincing evidence” and that granting an IPR petition requires proof that the challenger is “likely to prevail” on the merits. The Judge writes:

All PTAB found was that Apple was not likely to prevail on its defense by proving obviousness by clear and convincing evidence. PTAB did not consider whether this defense was objectively reasonable or raised a substantial question. As such, the PTAB finding — like the jury’s finding rejecting the invalidity challenge — does not settle the issue of whether Apple’s defense was objectively reckless.

Of course, the PTAB cancellation is based upon a substantially lower standard – a preponderance of the evidence – not clear and convincing evidence. In addition, the PTAB decision at the petition stage looks only for a “reasonable likelihood” of prevailing rather than simply being “likely” to prevail. (In most cases, the ‘reasonable’ modifier makes it easier to prove a conjecture: compare “certainty” with “reasonable certainty.”)

Although the PTAB decision is not identically written to the willfulness test, it is not clear to me which standard is higher. And, I think that the statistics would play out here to easily show that it is a rare case where a well-pled obviousness argument was rejected by the PTAB at the petition stage and then relied upon by a jury to invalidate a patent.

The comparison:

  • In the Inter Partes Review, the Patent Office determined that Apple’s obviousness argument lacked a reasonable likelihood of winning on validity, keeping in mind that the patent is not presumed valid and that obviousness must be proven by only a preponderance of the evidence.
  • For willfulness, the patentee must show that an objective observer would perceive a high likelihood that the patent would be found valid (really, not invalid). Since validity is presumed in court challenges, what happens here is that the willfulness burden shifts to the defense to present a obviousness argument strong enough to convince an objective observer that the patentee had less than a high likelihood of winning on validity, keeping in mind the presumption of validity and requirement of clear-and-convincing evidence of obviousness.

I will pause here to apologize for the complexity of the comparison. You can thank the Federal Circuit for creating these tricky rules to replace what has traditionally (and by statute) been a much more open doctrine. The Supreme Court is addressing these issues in Halo and Stryker.

The point here for me is that Apple was unable to pass the petition stage of an IPR – i.e., they did not have a reasonable chance of winning on the lowered standard for invalidity. At least we can say that they had even less of a shot of winning with the same challenge presented in court with the higher burden. In context, this seems to me that the PTAB decision is quite relevant to the question presented here.

[WARFAppleWillfulness]

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I’ll note here that the district court briefing on the issue was all filed under seal and not available.  In addition, the district court has just agreed to seal a large set of trial evidence and demonstrative exhibits.  It appears that WARF offered no objection – why would they?  Here, at the least the court should order a redaction rather than complete sealing to support the strong public interest in patent cases and in an open court system.  See also, Secret Patent Trials are OK; Access to Courts; A Call for Restraint in Sealing Court Records.

Guest Post: Restoring “Causal Nexus”

Patent,

Guest post by Bernard Chao

On September 17, 2015, the Federal Circuit issued another decision in the Apple v. Samsung smartphone war (summarized previously here). In the fourth court decision dealing with injunctions, Apple IV gave new guidance on the level of proof necessary to satisfy the “causal nexus” requirement. Although this requirement demands that patentees prove that the specific infringing feature cause irreparable harm, the majority opinion (by Judge Moore) observed that proving causation was “nearly impossible” in cases involving products with thousands of components. So the court watered down the causal nexus requirement by saying that it was enough for Apple to show the infringing features to be “important to product sales and that customers sought these features in the phones they purchase.” On October 19, 2015, Samsung filed a Petition for Rehearing en banc on this issue. Although I don’t agree with everything Samsung has to say about Apple’s injunction request, I do believe that the full Federal Circuit should revisit the decision and reinvigorate the “causal nexus” requirement.

As I argue in greater depth in my upcoming essay, Causation and Harm in a Multicomponent World
(forthcoming University of Pennsylvania Law Review Online), Apple IV is troubling on both doctrinal and theoretical grounds. On the doctrinal level, the decision fails to appreciate that most multicomponent technology products are made up of countless small advances, not a few far-reaching ones that change consumer preferences. Presumably, Apple chose its most valuable patents to assert against Samsung; but a review of the three Apple patents at issue show how minor the infringing features are — a conclusion that Chief Judge Prost’s dissent also made. If a powerhouse like Apple doesn’t have a pioneering patent to assert, there probably aren’t very many such patents out there. My point is that a single feature rarely, if ever, drives consumers from one technology-based product to another. Holding that causation is present for every important feature is therefore inconsistent with how consumers actually decide to buy multicomponent devices.

On a theoretical level, Apple IV reveals a deeper debate within patent law. Some view patents as a kind of traditional property that allows owners to do with it what they will. Others understand patent law to be focused on the public good. Reviewing Judge Moore’s majority opinion and Judge Reyna’s concurrence reveals that their willingness to accept less evidence of harm has been clouded by their view of patents as a form of traditional property. But this view of patents is wrong. The fundamental purpose underlying patent law is to promote innovation. To the extent that inventors receive financial rewards, it is simply a byproduct of encouraging innovation. This concept is rooted in the Constitution, which authorizes laws “to promote the Progress of Science and the useful Arts . . .” Moreover, the Supreme Court has repeatedly sought to maximize innovation on behalf of the public when shaping various different patent doctrines. Most importantly, that is the view the Court took in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006) when it held that patent owners no longer possess the automatic right to exclude others from infringing their patents. They must first satisfy eBay’s equitable four factor test. Of course, the first factor involves showing that the infringing feature actually caused irreparable harm.

In sum, there are both doctrinal and theoretical reasons for the full Federal Circuit to reconsider Apple IV and restore the “causal nexus” requirement so that patentees have to show real causation and harm. The failure to do so will allow patentees to use a permanent injunction (or the threat of one) to force an infringer to take a license at a rate that reflects the value of the injunction, which is often greater than the value of the patented feature. This is the kind of patent holdup that a prudent application of eBay helps avoid.

Choosing a District for Patent Infringement Filing and Giving Meaning to Section 1400(b)

Patent,

by Dennis Crouch

Back in 2008, I remember speaking with Judge Rader about the court’s recent jurisprudence.  My thought was that In re TS Tech (Fed. Cir. 2008) was the most important of the year thus far. In that case, the Federal Circuit started the trend of mandamus actions for venue change that had an important (although not conclusive) impact on venue in patent cases.  Following TS Tech, patent plaintiffs learned ways to shape their behavior to better ensure venue by, for example, incorporating in Texas and creating a headquarters in Marshall.  At that time, we also saw a rise in patent infringement filings in Delaware – the corporate home for many companies, plaintiffs and defendants alike.

The new pending mandamus petition of  In re TC Heartland (Fed. Cir. 2015) has the potential of even more dramatically shaking-up patent litigation filing strategy and limiting the extensive forum shopping available under current Federal Circuit doctrine.   In particular, the E.D. Texas filings might be brought-back into the norm.

The Federal Circuit has taken its first step toward hearing the mandamus action by ordering Kraft to provide a response to Heartland’s petition.  The per curiam order requires Kraft to respond within seven days. 10-26-15Order.

In the case, Heartland proposes a reinterpretation of the more powerful doctrine of jurisdiction rather than the venue requirements of TS Tech.

Under Heartland’s proposed statutory interpretation, a patent case could only be filed in districts (1) where the defendant resides or (2) where the defendant has both committed acts of infringement and has a regular and established place of business. This stems directly from the language of 28 U.S.C. 1400(b).

Further, in cases where a court’s personal jurisdiction over the defendant is based on acts of infringement in the forum (specific jurisdiction rather than general jurisdiction), Heartland argues that the courts don’t have jurisdiction to adjudge the alleged out-of-state infringement.

Susan Decker provides more perspective in Bloomberg.

 

 

Where does a Defendant “Reside” for Jurisdictional Purposes in Patent Infringement Cases?

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By Dennis Crouch

In re TC Heartland LLC (on mandamus to the Fed Cir. 2015) (read-it: Heartland Mand)

An interesting mandamus action was recently filed by the Prof John Duffy and Jim Dabney (both now with Hughes Hubbard) raising the following: Whether 28 U.S.C. § 1400(b) precludes the district court from hearing this action.

Section 1400(b) is the jurisdiction statute for patent cases indicates two mechanisms for jurisdiction: (1) the district where the defendant resides or (2) the district where the defendant infringed and has a regular place of business.

Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.

28 U.S.C. § 1400(b). Section 1391(c) further provides for a broad definition of residency, broadly including both (1) the district of domicile and (2) any district where the defendant is subject to the court’s personal jurisdiction on the issue of the case.

The question ultimately raised by the case is whether the broad residency definition of §1391(c) applies to modify and expand the “resides” language of 1400(b).

The history goes back-and-forth: In Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957), the Supreme Court ruled that “28 U.S.C. § 1400(b) is the sole and exclusive provision controlling venue in patent infringement actions, and that it is not to be supplemented by the provisions of 28 U.S.C. § 1391(c).” Then in 1988, §1391(c) was amended to expand the definition of residency and also to include a statement that its residency definition was “for purposes of venue under this chapter.” Subsequently, the Federal Circuit in VE Holdings held that the 1988 amendment overruled Fourco and that the expanded residency definition §1391(c) now applies in patent cases since §1400 (the patent jurisdiction provision) is in the same chapter as §1391. In 2011, Congress again changed its statute – this time repealing the “for purposes of venue under this chapter” and instead added in that the statute applies in all civil cases “except as otherwise provided by law.”

The petition argues that VM Holdings was wrongly decided in the first place and basically led to the reality known as the Eastern District of Texas. In the alternative, the petition also argues that the 2011 amendment overruled VM Holdings.

VE Holding has produced enormous venue shopping opportunities in patent infringement actions to the point where, in the most recent year, one district (E.D. Tex.) has 50% more patent filings than the next most popular district (D. Del.) and more than four times as many filings as the district with the third most patent case filings. . . . “The abuses engendered by this extensive venue,” Stonite Products Co. v. Melvin Lloyd Co., 315 US 561 (1942), are precisely the sort of abuses that were prevented by the Supreme Court’s decisions on § 1400(b) and that would be prevented once again with a return to those controlling precedents.

What isn’t clear to me is whether a mandamus panel has authority to overrule the prior precedent. Of course, an en banc panel will have that authority and in their petition Duffy & Dabney particularly request en banc consideration.

Personal Jurisdiction: The petitioner here also argues an additional personal jurisdiction question that begins with the standard notion that each act of infringement is a separate act of infringement. Their argument then is that the court only has specific personal jurisdiction with reference to allegedly infringing Delaware sales and not the sales in other jurisdictions. The usual practice in patent cases is that once the court has specific personal jurisdiction based upon one alleged act of infringement directed to the state that the court can then adjudge infringement allegations arising nationwide. Of course, that result contravenes the usual rule that “specific personal jurisdiction is limited to claims that arise from “an ‘activity or an occurrence that takes place in the forum state.'” Walden (2014). In its brief, the petitioner does a fine job of distinguishing Keeton v. Hustler (1984) that allowed for nationwide damages for defamation. The difference from patent law is that the substantive single publication rule for defamation means that the nationwide damages all stemmed from the same tortious act that led to the specific personal jurisdiction in NH; in the patent context sales in one state that might create personal jurisdiction in that state are separate acts of infringement than sales in another state. Thus, the petitioner explains: “The district court here plainly lacks personal jurisdiction to adjudicate the merits of claims arising from non-Delaware transactions or events.”

At first glance, you might think that petitioner’s rule would lead to a patentee having to sue a defendant separately in each state across the nation. That would only be true if there was no location with general jurisdiction over the defendant – nationwide claims would still be available in any state with general jurisdiction over a defendant. In addition, the availability of multi-district litigation would streamline cases where multiple parallel lawsuits are filed.

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about_energy_black_cherry_bottle[1]The case below is Kraft Foods v. TC Heartland (D.Del.) and alleges infringement of three patents covering the packaging and contents of a flavored liquid beverage concentrate such as Kraft’s MiO water enhancer. U.S. Patent Nos. 8,293,299; 8,511,472; and 8,603,557.  TC Heartland makes its competing “Splash” water enhancers from its Carmel, Indiana HQ.

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