Naming the Rule: Anticipating the Patent

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Prior to the America Invents Act of 2011 (AIA), prior art were either (1) prior in time to the invention and thus anticipated the invention (e.g., 102(a), (e), and (g)); or (2) more than one-year prior to the application filing date and thus raised a statutory bar (102(b)). Within this schema, the pre-AIA Section 102 included the title of “Novelty and Loss of Right” where novelty refers to anticipation and loss of right refers to the statutory bar.

The AIA totally rewrote Section 102 and eliminated the notion of anticipating the invention and also altered the notion of the statutory bar. The new rules focus instead on the effective filing date of the invention create what looks a lot like the statutory bar of 102(b) (except for automatic one-year grace period). The rule is not about absolute novelty in terms of invention-date (as that term has always been used in the US) but instead about filing of an application before prior art emerges. Although this seems to fit within what we used to call the statutory bar, Congress included “novelty” within the title of the new Section 102(a) and left-out loss of rights.

Although we understand how the statute is supposed to work, we’re left with the small matter of crystalizing the name for prior art that qualifies under post-AIA 102. It doesn’t necessarily anticipate the invention – and congress appeared intent on moving away from the passive loss-of-rights designation. We could spell-out “qualifies as prior art under Section 102”, but that’s not the kind of identifier that sticks. I propose using the middle ground of “anticipating the patent” or “anticipating the application,” depending upon whether a patent has yet issued. This proposal seems to fit within Congressional intent but also implicitly recognizes that we’re no longer concerned with the invention date but instead the key patent date (i.e., effective filing date). This approach seems to also roughly fits with the language used by European Courts that have long focused on filing dates. Overall, this is not a big deal, but it may end up being important to get the words right.

Federal Circuit: We don’t Decide Claim Construction in the Abstract

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Personalized User Model, LLP v. Google Inc. (Fed. Cir. 2015) (Part II).

In Part I, I discussed the aspect of this decision dealing with the statute-of-limitations for dealing with an inventor who had (allegedly) breached his employment agreement by failing to assign patent rights. In Part II here I focus on the second important portion of the decision – a holding that the appellate court has no jurisdiction to address a claim construction appeal unless the result would impact the outcome of the case at hand.

At the district court, Google won the case based upon a finding of invalidity and non-infringement. The patentee (PUP) did not appeal those holdings, but did ask the court to review the lower court’s claim construction – arguing that the district court misconstrued the term “document” and that mis-construction may well impact future litigation of other claims in the patent family in the form of collateral estoppel (issue preclusion)

On appeal, the Federal Circuit refused to consider the claim construction appeal – finding that the appellate panel would be in violation of the US Constitution if it heard the case. In particular, the Federal Circuit panel held that the dispute over claim construction offered no case or controversy as required by Article III of the US Constitution.

Despite PUM’s concerns that the construction might be given preclusive effect in future litigation involving its related patents, we may not provide an advisory opinion on the meaning of a claim term that does not affect the merits of this appeal and thus is not properly before us.

Although it lost the appeal, asking the question may be good strategy on the part of the patentee here since the appellate court’s refusal to hear the appeal is potentially sufficient to negate the presumption that the patentee had a full and fair opportunity to litigate the issue. Thus, the result may be no issue preclusion.

– Dennis

Working through Old Patent Applications

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The decision in Hyatt v. Lee (Fed. Cir. 2015) included a citation to a June 2013 letter submitted by then Acting Director Terry Rea to the Senate Judiciary Committee. The letter was submitted in a response to a Senate request for information regarding still pending patent applications filed pre-GATT.

Rea reported that 482 applications are still pending that were filed prior to June 8, 1995. That cutoff is important because those applications – if ever issued as patents – will be entitled to 17-year patent terms following the issue date.  Applications filed since that date are given 20-year terms that begin counting at the application filing date.

The letter goes on to list the serial number, inventor, assignee, priority date, and other information for each of the 482 applications.

Leading the pack is Gilbert Hyatt with 399 applications pending. Runner-Up is Personalized Media Communications (John Harvey) company with 38 applications pending.  The remaining ancient-application-owners are all smaller players with only one or two pending (as of 2013). These include UCB Pharma; Boeing; US Dept of HHS; Sanofi-Aventis; and US Smokeless Tobacco Company, as examples.

Although the letter does not so indicate, it is apparent to me that the data does not include applications kept from issuing due to secrecy orders.  On example is recently issued U.S. Patent No. 9,057,604 that was filed as an application in 1989 but did not issue till 2015 because of a secrecy order by the U.S. Government.  Since Rea’s letter, 30 of Harvey’s patents have issued. See link.

 

Federal Circuit Gives PTO “OK” to Treat Hyatt as a Special Case

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Gilbert Hyatt v. Michelle Lee (Fed. Cir. 2015)

Hyatt is a highly successful patentee with more than 75 issued patents and hundreds of millions of dollars in licensing revenue. He also has over 400 patent applications pending before the USPTO that were all filed more than 20-years ago. Hyatt’s applications represent 80% of the applications still-pending that were originally filed prior to the June 1995 patent term transition. Because these old patent applications were filed under the old regime, if they ever issue they will be given a 17-year patent term extending from the issue date (barring a terminal disclaimer or prosecution laches finding). Many of these applications claim priority to much earlier filed applications – some claiming priority back in to the 1970s and most having a complex set of continuation and continuation-in-part applications.

According to the USPTO, these 400 pending applications have – on average – 300 claims each – resulting in about 120,000 pending claims – roughly the equivalent of 6,000 ordinary-sized applications.

I expect that many of Hyatt’s patent claims would cover chip and display technology that is now ubiquitous. If valid and enforceable then we’re talking billions of dollars in licensing fees. If the USPTO has anything to do about it, that result is not coming anytime soon.

Over the years, the USPTO has developed a number of special procedures for Hyatt applications. In 2013, the USPTO began issuing requirements that Hyatt limit each patent family to <600 claims absent a showing of necessity and also identify the earliest priority date for each chosen claim (along with links to the supporting disclosure).

The USPTO also indicated that it would publicize the family linkage of Hyatt’s (otherwise secret) applications. In particular, the disclosure would occur by placing the requirements in the file histories of all of Hyatt’s pending applications, some of which are public. Apparently, this requirements document includes a number of examples of how Hyatt applications overlap claim scope – relying upon specific claim texts of Hyatt’s otherwise secret applications.

In response, Hyatt filed a complaint in the E.D. Virginia asking the district court to enjoin the USPTO from disclosing information in violation of 35 U.S.C. 122(a) (“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”). However, the district court dismissed the case for lack of jurisdiction and – in the alternative – held that the extraordinary nature of Hyatt’s situation created “special circumstances” that allowed for the publication.

Although the statute provides the PTO with seeming authority to determining when to disclose the confidential information (“special circumstances as determined by the director”), the Federal Circuit on appeal here found that the PTO’s power is both “narrow and reviewable.” In particular the appellate panel found that the PTO must “determine that special circumstances exist” and those special circumstances must be sufficient and particular enough to “justify the specific content to be disclosed.” However, because of the seeming discretionary nature of the statute, the Federal Circuit determined that it should review the PTO’s determination of these factors with deference and only overturn the PTO’s decision upon finding of an abuse of discretion.

In determining that the PTO had then acted within these requirements, the panel first held that the requirements were proper – given Hyatt’s unique and special status among patent applicants. The court also found that the disclosure of confidential claim scope proper.

In light of the nature of Mr. Hyatt’s applications, longstanding PTO rules justify the issuance of the Requirements. 37 C.F.R. § 1.75(b) provides that, in a patent application, “[m]ore than one claim may be presented provided they differ substantially from each other and are not unduly multiplied” The PTO issued the Requirements to ensure that Mr. Hyatt’s applications complied with § 1.75(b). Given the extraordinary number and duplicative nature of Mr. Hyatt’s various pending applications, all drawn from the same 12 specifications, it was reasonable for the PTO to be concerned that the claims did not “differ substantially from each other,” and that some claims were “unduly multiplied.” § 1.75(b). In fact, in the Requirements the PTO demonstrates that across these applications, Mr. Hyatt has in numerous cases filed identical or nearly identical claims. This sort of redundant, repetitive claiming is inconsistent with § 1.75(b).

These special circumstances, which justify issuing the Requirements, also justify the disclosure of the confidential information contained in them. . . .

We hold that the Director did not abuse her discretion when she found that the “special circumstances” exception justified the otherwise-prohibited disclosure of the Requirements

It is fairly amazing to look at the effort going-in on both sides in Hyatt’s patent applications. One that is public and available in PAIR Application No. 05/849,812 that claims priority back to 1970 through a series of 20 continuations-in-part.

It’s News to Anthony McCain

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Some of you may have noted that Anthony McCain is now writing Bits and Bytes posts for Patently-O.  Anthony is a 2L at Mizzou where he also earned a degree in Mechanical Engineering.  So far, I have asked Anthony to keep his posts straightforward without much extra commentary because he is new to blogging and is only now enrolled in my Patent Law course.  Once again I’m running Patent Law as a practically oriented class with time spent primarily doing projects, writing claims, amending applications, drafting briefs, and conducting hearings.  McKool Smith has sponsored our Patent Law Moot Court competition that will take place in November — winner gets $1,000.

Back to Anthony:

— Dennis

Rarity: Federal Circuit Reverses Jury Verdict of Non-Obviousness

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ABT Systems and University of Central Florida v. Emerson Electric (Fed. Cir. 2015)

The patent at issue here is owned by UCF and covers a circulating fan system. U.S. Patent No. 5,547,017. Co-Plaintiff (licensee) ABT is the company started by Armin Rudd who is the named inventor on the ‘017 patent.

Prior art systems, such as the one in my house allow for the circulation fan to be left-on even when the air conditioning system is off in order to better distribute conditioned air. The improvement offered by Rudd is to turn on the fan only periodically “after a preselected time period.” That intermittent approach would save “energy and power.”

A jury found that Emmerson’s high-end “Big Blue” thermostats infringe and awarded $300,000 in damages based upon a royalty of $2.25 per unit. The jury also held that Emerson had failed to prove the claims invalid as obvious.

On appeal, the Federal Circuit has reversed – finding that the district court should have granted JMOL on obviousness.

Invalidating a Patent on Obviousness: The question of obviousness asks whether the “differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time of the invention was made to a person having ordinary skill in the art to which said subject matter pertains.” 35 U.S.C. 103(a)(pre-AIA). In KSR v. Teleflex, the Supreme Court held that a “combination of familiar elements according to known methods” that “yield[s] predictable results” is likely invalid as obvious.

Here, elements of the patented system were all known in the art as was the motivation of improving circulation at reduced cost. Likewise, one prior art reference disclosed a “single-shot” fan operation that came on one-time after a heating/cooling cycle and another disclosed period fan-only cycles at times when there was no call for heating. The question then is whether it would have been obvious to create the claimed system of periodically activating and deactivating the fan after a predetermined time following a cooling cycle. Applying KSR, the Federal Circuit found that the law requires an obviousness finding.

Commercial Success: ABT had also argued that the commercial success and long-felt need of the invention should provide enough weight to prove the invention nonobvious. Objective evidence of nonobviousness, such as commercial success, long-felt need, failure of others, copying, and unexpected results can each provide evidence for the analysis. On appeal, however, the Federal Circuit was not persuaded that ABT had proven its case. In particular, ABT did not present evidence particularly linking product commercial success to the claimed periodic fan operation. Likewise, there was no particular evidence presented that Emerson’s infringing product market was being driven in any way by the recycling feature. ABT does have a number of patent licensees that weigh in favor of nonobviousness. However, the Federal Circuit held that those licenses were insufficient to overcome the convincing case of obviousness coming from the prior art.

Holding: Patent Claims Obvious

New Rules on PTAB Trials

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Earlier this year, the USPTO released a set of ‘quick fixes‘ to AIA trial procedures before the Patent Trial and Appeal Board (PTAB) and also promised second package of rule changes. That second package has now been detailed in the USPTO’s Proposed Rule Changes now found in the Federal Register. The proposed rules focus on a number of practical changes to PTAB Trial Procedures:

  • Testimonial Evidence (Such as Expert Declarations) in Patent Owner’s Preliminary Response (to be considered but viewed in the light most favorable to the petitioner when determining whether to institute an inter partes review proceeding)
  • Claim construction standards for patents about to expire (use actual construction for patents that “will expire” before final judgment rather than broadest-reasonable-interpretation)
  • Rule-11 Requirement associated with all papers filed with the PTAB – giving the USPTO “a more robust means with which to police misconduct.”

In her blog-post on the topic, USPTO Director Michelle Lee indicated that the USPTO will also “amend its Office Patent Trial Practice Guide to reflect developments in practice before the Office concerning how the Office handles additional discovery, live testimony, and confidential information.”

As part of the process, Director Lee also offers a “where we stand” set of statistics for the past three years of AIA filings:

  • 3,655 petitions, of which 3,277 are IPRs, 368 are CBMs, and 10 are PGRs.
  • 63% focus on patents from electrical/computer technology centers (TCs) and only 9% in the the bio/pharma TC.
  • Review Institution: Trials have been instituted on 1,389 of 3,277 IPR petitions, 185 of 368 CBM petitions, and 2 of 10 PGR petitions.
  • Trial results: 12% of total claims available to be challenged (4,496 of 38,462), were determined by the PTAB to be unpatentable in a final written decision. Other claims were either not challenged, resolved by settlement, cancelled, or upheld as patentable. Of the first IPRs to reach a conclusion, 25% of claims actually challenged (4,496 of 17,675) were found to be unpatentable.

According to Director Lee, the number of petitions is “around three times more” than what were originally expected by Director Kappos.

These statistics fit with those discussed by Richard Bone in his recent post.

Comments on the proposed rules go to trialrules2015@uspto.gov and discussions will be held at the upcoming roadshows: August 24, 2015 in Santa Clara, August 26, 2015 in Dallas, and August 28, 2015 at USPTO HQ.

Guest Post on Conflicting Claims: The Raw Statistics of PTAB Trials

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Guest Post by Richard Bone. Mr. Bone is a partner at the VLP Law Group.

The popular view of the PTO’s new AIA reviews, or “patent trials”, is that they have been disproportionately unfavorable to patentees in their outcomes, provoking characterizations such as “patent death squad” for the Patent Trial and Appeal Board (PTAB), the body that administers the trials.

Yet the PTAB’s own statistics paint a different picture: that, in fact, as few as 25% of patent claims challenged are actually held “invalid” by the PTAB, and that figure actually represents only 11% of all of the claims in all of the patents which received at least one AIA challenge. That being the case, patent owners ought to be less fearful than most commentators suggest.

To understand the discrepancy between published statistics and public perception, it’s necessary to dissect the data. Fortunately the PTAB has made various layers of data available on its website. The data is cumulative over all petitions filed from the inception of AIA trials, in September 2012. For all data, the PTAB counts proceedings that have received a final adjudication, whether that be as a result of a settlement, or a request for adverse judgment by the patent owner, or because the PTAB issued a final written decision. Between September 2014 and April 2015, the data was presented on three occasions, as a sequence of bar-graphs condensed into a single graphic. From April 2015, the PTAB has presented the data monthly in a more informative manner, with multiple graphic representations and an accompanying narrative. From both formats, it’s possible to see what is going on, though the numbers mask a number of subtleties.

Just as patents are asserted on a claim by claim basis, so invalidity is adjudicated claim by claim. The overwhelming majority of patent trials to date have been Inter Partes Reviews (IPRs), with almost all of the remainder being “Covered Business Method Reviews” (CBMs). Although the PTAB’s data through January 2015 was presented in aggregate form for the two types of proceeding, the more recent data shows that, statistically, the outcomes of the two types of proceeding are very similar. In both an IPR and a CBM, the petitioner (party challenging the patent) must identify the claims challenged, and advance a ground of invalidity of each. The fee structure for filing an IPR or a CBM includes a challenge to up to 20 claims of a patent, but exacts an additional fee of $200 per claim challenged in excess of 20. Subsequently, if the petition is accepted and trial proceeds, the PTAB levies a further fee of $400 per claim in excess of 15 on which trial is instituted. With this type of fee structure, and accepting that – beyond the filing fees – there is an effort and therefore a cost to prepare a separate argument for each claim challenged, and that there is also an overall page limit for the petition, many petitioners may have been choosy over which claims to challenge. In some cases that choice will have been based on the patent claims asserted in litigation, which need not have been all of the claims in the patent. In others, it will have been based on an assessment that, after demolishing certain well-chosen claims, what remains of the patent is essentially toothless.

So, according to the PTO, through July 2015, in patents for which AIA petitions were filed, 47% of the claims were challenged. This number is little changed from the 45% figure from September 2014. However, the July 2015 numbers, when broken down into the different types of proceedings, show that across all CBMs 58% of patent claims were challenged. This could be because of the longer page limits for CBM petitions (80 pages vs. 60 pages for IPRs) but could equally be because Section 101 challenges are permissible in CBM’s: when arguing invalidity of an independent claim under section 101, it is not significant additional effort to argue invalidity of claims depending from it.

It has to be assumed from the way that the data is characterized that trials recently instituted that have not yet received a final adjudication are not included in the data. Because of the fact that a patent trial typically takes 18 months from filing a petition to issuance of a final written decision, any large scale trend that has happened recently will take some time to be reflected in the PTAB’s cumulative averages.

In any case, just based on claims challenged to date, patent owners could see – on average – patents surviving with more than half of their claims intact, not adjudicated as patentable per se but simply not challenged. Furthermore, the PTAB’s latest charts suggest that the numbers do not include the petitions that were wholly denied, and thus did not result in a trial. Thus, the reported data is based on petitions that resulted in a trial on at least one challenged claim. The statutes governing inter partes review state that trial should only be instituted if “there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition”, and this takes into account any preliminary response filed by the patent owner. If the petition was judged not to have met that standard for any claim challenged then trial does not proceed (the petition is “denied”): those claims are not included in the PTAB’s data and hence the overall numbers of surviving claims are actually slightly more favorable to patent owners because trial is not always instituted. It is difficult to calculate this effect precisely because in many instances multiple petitions are filed against a single patent and those several petitions are consolidated into a single proceeding for trial. It is not clear from the PTAB’s data how such petitions that formally do not proceed to trial on their own because they are subsumed into another proceeding are differentiated from those petitions that fall short on all challenged claims and thus lead to no trial on the challenged patent. Nevertheless, comparing fiscal years 2013, 2014, and the first 10 months of 2015, we are seeing a growing number of petitions denied: rising from 14% in 2013 to 32% in 2015, a trend that can only be welcome to patent owners.

The statistics for those claims on which trial is instituted become more complicated, however. As of September last year, the PTO reported that trial was instituted on 66% of challenged claims. By July of this year, that number had dropped slightly to 63% of all challenged claims in all types of petitions: however, CBM’s had an institution rate that was slightly above the average, at 65%.

At this point, looking at the situation from the point of view most favorable to patent owners, trial is only being instituted on 31% of the claims in the patents that have been challenged in an AIA review (and this may be a smaller proportion overall, if it is accepted that a growing number of petitions are being denied outright). It is also fair to say that any claim whose validity was challenged in an IPR or CBM petition and on which trial was not instituted has emerged from that process as a stronger claim, unless the claim escaped that evaluation because the parties entered a settlement even before the PTAB had issued a decision on whether to institute a trial.

Once trial has been instituted, however, patent owners appreciate that the claims proceeding to trial are in considerable jeopardy. For the claims that proceed to trial, the PTAB identifies 4 distinct categories of outcome: held unpatentable (in a final written decision); held patentable (in a final written decision); cancelled (e.g., by patent owner’s amendment), or disclaimed (by patent owner); and “remaining patentable”.

The last of these categories is perhaps the most controversial in the way that the numbers are presented, and one that has been least well understood. It arises from a settlement that precludes the need for a final written decision by the Board. According to the PTAB, by July 2015, 45% of all IPR’s in which trial was instituted were terminated by settlement. One has to assume that a common form of settlement permits the patent owner to retain their patent without an adjudication of invalidity of any of the challenged claims in return for dropping a contemporaneous infringement suit against the petitioner. Claims subject to a settlement in this way have been undoubtedly weakened by the fact of there being a determination of probable invalidity (an institution of a patent trial) in the public record, but they have nevertheless “survived” a formal written judgment from the PTAB.

Claims cancelled by the patent owner are a casualty of the proceeding and arise – most likely – from a desire by the patent owner to minimize the ongoing costs of defending the patent before the PTAB. In any view of the proceedings, an instituted IPR or a CBM is, to any patent owner, an expensive way to lose a patent.

The most important two categories, those claims that are found invalid, or whose patentability is upheld, by the PTAB in a final written decision are those that grab the headlines. Respectively, 42% and 9% of claims proceeding to trial are found invalid and valid. In the grand scheme of things, these are a small fraction of the total number of claims challenged (26% and 6%), and a still smaller fraction of the total number of claims in patents receiving challenges under the AIA. However, what is clear is that patent owners who have decided to fight to the very end are on the whole being severely bruised in the process. The PTO reinforces this point with a break out of 447 IPR trials to date that have “reached final written decisions”: in 2/3rds of them (295 trials), all claims on which trial had been instituted were found unpatentable; by contrast, only in 16% of final written decisions were all claims adjudicated to be patentable. In CBM’s these numbers are even further skewed in favor of petitioners: 79% of final written decisions in CBM’s involved wholesale invalidation of the claims taken to trial, whereas in only 4% were all of the claims upheld. When considered claim by claim, in CBM’s the validity of just 2% of claims are upheld in a final written decision of the Board.

There are a number of questions that the data do not answer: for instance, how many patents sustained a challenge to all of their claims and were ultimately found invalid in their entireties.

But it is clear how the gap between perception and the actual numbers can be bridged: final written decisions are on balance unfavorable to patentees, more so in CBM’s than in IPR’s. It is likely to be the most valuable claims that are contested in this way. Even though such claims represent a tiny proportion of all patent claims that came under jeopardy in an AIA review, it may be little consolation to patent owners that the claims they are left with – if any – are those they would have least interest in enforcing.

Patentlyo Bits and Bytes by Anthony McCain

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 Get a Job doing Patent Law

Micro Entities Rising Popularity

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The patent statute now provides for three categories of patent applicants: Large entities, Small Entities, and Micro Entities. As their names suggest, the groupings are largely defined by entity size with the exception that University-owned patents can qualify for micro-entity status despite billion dollar endowments. Entity status determines patent office fees. With a few exceptions, large entities pay full-freight, small entities receive a 50% reduction in fees, and micro entities receive a 75% reduction. I should mention also that the micro entity status became available only in 2013 as part of the America Invents Act (AIA) implementation.

The chart above groups provisional patent application filings into the various entity-sizes and includes two date-groupings: Applications filed in FY2011-2012 and those filed in FY2014-2015 (through August 4, 2015). As is apparent, a substantial percentage of provisional applications are now being filed under the micro-entity status. The pre-AIA information suggests that the rise in micro-entity status should largely be associated with a drop in small-entity status.

About 45% of provisional applications are abandoned without any further non-provisional or PCT application claiming priority.

Employment Agreement Breach: Failure to Assign Can’t be Fixed Because of Statute of Limitations

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Personalized User Model and Konig v. Google (Fed. Cir. 2015)

This case involves a fascinating set of back-door dealings. While Konig was employed at the non-profit research institute SRI, he started a side project with a friend creating a personalized information service – the subject of the patent that he filed (apparently without offocially notifying SRI). It is Konig’s patent that is being allegedly infringed by Google. See U.S. Patents No. 6,981,040.

After Konig’s patent holding company sued Google for infringement, Google management then called-up SRI and obtained a quitclaim deed over “any rights” in the patent held by SRI. With those rights in-hand, Google argued in court that Konig had breached his employment agreement by failing to assign rights to the patents to SRI and that Google was now the rightful owner (of at least a right to have the patents assigned). The district court, however, found the breach-of-contract claim time-barred by its state-law statute of limitations.

Because Konig’s alleged breach-of-contract with SRI was in the 1990’s, it seems likely that the three-year statute of limitations term had passed. However, Delaware (the site of the lawsuit) has a “discovery rule” that tolls any statute of limitations for the period in which an injury is ‘inherently unknowable” and “the claimant is blamelessly ignorant of the wrongful act and the injury.” Of course, a simple search years ago of the patent database would have turned up Konig’s patent rights, but the Search Giant argued that search would have been “practically impossible.” In the appeal, the Federal Circuit agreed with the district court that Google’s arguments were not sufficient proof of the inherent unknowability of Konig’s alleged breach or proof of SRI’s blameless ignorance. In particular, SRI knew that:

Konig was leaving [SRI] to immediately work at a start-up technology company. Considering the competitiveness of companies and institutes in the technical world and, as Google has argued, that the technology was related to Konig’s work at SRI, his departure and new venture could well have been a “red flag” that should have generated an inquiry whether Konig had conceived an invention during his employment with SRI that he might intend to develop and commercialize with his new company.

More importantly, Google failed to show that SRI was blamelessly ignorant of Konig’s alleged breach of contract. Google’s attempts to dispense with its burden of proof for the blamelessly ignorant element of the discovery rule by arguing the futility of any inquiry do not compensate for its failure of proof. Despite the opportunities for SRI to have inquired about Konig’s departure and his new venture—the obvious one being an exit interview, at which an inquiry might have been made regarding whether Konig had made any inventions at SRI that had not been reported to SRI—the record is critically deficient on the minimum quantum of evidence necessary to show that SRI did anything to protect its interests. . . .

Employers do not need to track a former employee’s every movement for an indefinite period of time to look for potential claims, but there should be some basic level of diligence in looking after one’s interests.

Delaware also has a statutory tolling of causes of action when the would-be defendant is out of the state of Delaware. 10 Del. C. § 8117. Although not express in the statute, the district court held that the tolling did not apply when the cause of action had “no connection to Delaware.” On appeal, the Federal Circuit affirmed: “Although the statute on its face does not require any connection to Delaware, we agree with the district court’s disinclination to interpret the statute so broadly as to apply to any claim, claimant, or defendant.”

Recordation Prevents Straight Ownership Claim: Although the court does not go into it here, ownership of patent rights would not generally require proof of breach-of-contract. If SRI owns the patent rights then its sale of rights to Google should shift ownership, regardless of whether Konig was in breach of contract or not. One problem with that theory, however, is that the employment agreement does not appear an effective transfer of rights but only a promise to transfer. Thus, even under the employment agreement Konig remained owner until such time as he transferred ownership to the employer. A second problem with the theory involves the recordation statute – 35 U.S.C. 261, which suggests the recordation of the assignment to Konig’s company may be sufficient to extinguish Google’s purchased rights.

Federal Circuit Stops Downstream Enforcement of Standard-Essential DVD Patents

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by Dennis Crouch

The case here is interesting and important – especially as it relates to patent pools and FRAND license offers.  I have posted the relevant holding, while I think more about its potential impact. 

In 2012, JVC Kenwood sued Nero, Inc. for infringing its patents relating to methods of playing and burning optical discs (DVD and Blueray).  See, for example, U.S. Patent No. 6,141,491.  These patents are considered standard-essential parts of the patent pools formed around these technology standards and all of the (legit) disc and hardware manufacturers pay the license fee.  That license is obviously designed to cover end-users as well who are the ultimate consumers of the DVD technology.

Nero sells software that helps folks play and burn discs from their computers.  As such, Nero does not directly infringe the patents under section 271(a). JVC alleges instead that Nero should be held liable for contributory and induced infringement under 271(b) and (c).

JVC’s case a number of major theoretical problems: Most important to the District Court and Federal Circuit was that the consumers are already licensed to use the discs and, as such, the alleged underlying direct infringement is actually a licensed use.

The court held, on summary judgment, that JVC is “barred from asserting claims of direct infringement against end users for use of Nero software with DVD and Blu-ray optical discs made or sold by a party whose products have been expressly released from claims of infringement by JVC with regard to the Patents.” The court held that, absent direct infringement, Nero cannot be liable for indirect infringement. . . . We affirm on that ground.

Fed Cir. Decision.

The district court also (alternatively) held that the licensed manufacture and sale of the discs exhausted the patent rights as to those discs.  On appeal, the Federal Circuit vacated that ruling – finding that the evidence was “sketchy.”  It appears to me that the court did not want to further confuse the exhaustion doctrine with this case and perhaps Judges Newman, Dyk, and Reyna could not agree on the correct formulation.

 

New Developments in ClearCorrect v. USITC

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Guest Post by Sapna Kumar.  Prof. Kumar is an Associate Professor at the University of Houston Law Center, where she teaches patents and administrative law. Her most recent article, Regulating Digital Trade, discusses the ClearCorrect decision at length and is available on SSRN.

Some interesting developments have arisen this past week regarding ClearCorrect Operating, LLC v. USITC. In this case, the Federal Circuit will decide whether the ITC has jurisdiction over digital information (see Patently-O Archives for my previous post about this case).

The Suprema En Banc Opinion

The first development is the Federal Circuit’s en banc decision in Suprema v. USITC. Both parties in ClearCorrect will file supplemental briefs to discuss what impact Suprema has on their case.

Back in 2011, I argued in a law review article that the ITC should be entitled to Chevron deference when it determines whether an article infringes a valid and enforceable patent.  Prior to Suprema, the Federal Circuit had never granted deference to the ITC for a patent-related decision outside of dicta. In Suprema, the Federal Circuit belatedly steps on the Chevron bandwagon, granting the ITC deference for its interpretation of “articles that infringe.”

Although the Suprema decision affirmed the ITC, it nevertheless supports a reversal in ClearCorrect. The Suprema majority treats the terms “articles” and “goods” as interchangeable throughout the opinion. Black’s Law Dictionary, both at the time the Tariff Act was passed and at present, shows that “goods” generally refers to tangible property.

The four-judge dissent in Suprema was even more explicit, maintaining that “articles” refers to physical objects. This is notable, given that dissenting judges Prost and O’Malley are both on the ClearCorrect panel. Nothing from the majority’s decision will prevent the ClearCorrect panel from holding that “articles” are limited to tangible property.

Another notable feature of the Suprema decision is how the court chose to apply the Chevron test. Chevron has two steps. First, the reviewing court asks whether Congress has directly spoken to the precise question at issue. If Congress hasn’t, the court moves to Step Two, where it asks whether the agency’s answer is based on a permissible interpretation of the statute.

In most circuits, Step Two is relatively toothless, with just about any answer being treated as reasonable. The only notable exception is in the D.C. Circuit, where Step Two is a searching standard that is analogous to hard-look review. In Suprema, the court adopted an approach that is close to the D.C. Circuit, conducting a detailed review of the statutory text, policy, and legislative history of § 337. If this robust Step Two is applied in ClearCorrect, the ITC’s decision will be struck down due to liberties that the agency takes with the legislative history.

ClearCorrect Oral Argument

Also this week, a three-judge panel (Prost, O’Malley, and Newman) heard oral arguments for ClearCorrect.  The panel expressed concern about where to draw the line for electronic transmissions. The ITC’s attorney conceded that not all imports of information are under its jurisdiction, but was unable to tell the panel where the ITC believes the line should be drawn. The panel observed that the digital models in this case were not bought and sold in commerce, but were instead used to create molds that were then used to create plastic aligners.

Prost and O’Malley also scrutinized the ITC’s statutory interpretation. They noted that dictionary definitions from the 1920s seemed to support a much narrower interpretation than what the ITC was seeking.

My article Regulating Digital Trade was also discussed by the panel. Prost raised my argument that the Commission Opinion misquoted a key 1922 Senate Report. The Senate Report states:

The provision relating to unfair methods of competition in the importation of goods is broad enough to prevent every type and form of unfair practice.

The Commission Opinion quoted this language without the limiting phrase “in the importation of goods,” and failed to use an ellipses. Both Prost and O’Malley questioned whether the ITC’s position was still valid given the narrower language.

To date, the Supreme Court has never granted certiorari on a § 337 case. Given that the Federal Circuit is now grappling with important issues of jurisdiction, it may be time for the Supreme Court to get involved.

Patent Grant Rate by Technology Area

Patent

TechAreas

The chart above shows the USPTO patent grant rate across a variety of major technology areas. I apologize for the tightness of the lines, but there are several overall trends that are easy to discern.  In particular, the general trend reported last week – a drop in grant rate followed by a rise once Director Kappos took charge – is present in each of the major technology areas. In general, you will also see less variance between the technology areas in later years. It is unclear at this point if that coming-together is due more to USPTO practices or to applicant practices or some other unknown factor.

The major outlier in the group is electronic commerce patent applications.  Those applications continue to be granted at a rate of < 10%

Regarding the sources: The data primarily comes from the USPTO Chief Economist Alan Marco and his team [LINK].  For each year in the chart, I calculated the percentage of patent applications that were issued as patents (relative to the number disposed-of as either abandoned or issued).  Thus, a figure of 70% grant rate would indicate that, of the respective patents that were fully disposed-of during the given time period, 70% issued as patents and 30% were abandoned.  If an application is still pending at the end of the time period then it is not counted.  Likewise, the applicant’s filing of a continuation application before abandonment/issuance has no impact on the grant rate for the given year.  The technology categories here are linked to the NBER technology areas except for eCommerce that I coded (Class 705 and 701/467, corresponding to Art Units in the 3620’s, 3680’s, and 3690’s).  Of importance, the data here goes only through disposals made in September 2014.

 

 

Guest Post by Gary Griswold on Design Patent Damages

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Yesterday, the Federal Circuit summarily denied Samsung’s petition for rehearing and rehearing en banc of the high profile Apple v. Samsung decision.  (The denial was per curiam and didn’t appear on the Federal Circuit’s website, so unless you follow this case very closely you may have missed it.)  In light of that development, Samsung will almost certainly file a petition for certiorari.  Below, Gary L. Griswold, former President and Chief Intellectual Property Counsel for 3M Innovative Properties Company, offers his thoughts on design patent damages following Apple v. Samsung. 

35 USC 289 – After Apple v. Samsung, Time for a Better-Crafted Judicial Standard for Awarding “Total Profits”?

Gary L Griswold[i]

In April, I published an article, 35 USC 289 – An Important Feature of U. S. Design Patent Law: An Approach to Its Application,[ii] in the IPO Law journal. A month later, the Federal Circuit handed down its decision in Apple v Samsung. An analysis of the opinion and its ramifications by Professor Rantanen subsequently appeared on Patently-O.[iii]

Rantanen concluded, “The bottom line is that high damage claims for design patent infringement are going to be much more credible in the wake of Apple v Samsung. Under the court’s ruling, it would seem entirely possible, as a hypothetical example, for an automobile manufacture to be liable for its entire profits from a particular car model if that model contained, say, an infringing tail light. Given the publicity surrounding Apple v. Samsung, my expectation is that there will be an explosion of design patent assertions and lawsuits.”[iv]

There are troubling signs that increased assertion activity has already begun. Design patents are nearly ideal assertion vehicles given that they are inexpensive to obtain with no cost to maintain, are not published prior to grant, and have a full term of protection beginning with grant rather than filing—not to mention the § 289 damages opportunity that can include total profits of the infringer.[v]

Given the good in design patents—they operate as effective and important means for protecting innovatively designed products in the marketplace—how can this good be preserved without incurring the bad— as one example, design patents becoming the next business model for patent assertion entities (PAEs)?

In my April article, I offered a proposal for judicial implementation of § 289 that would involve the court determining “if the patented design is substantially the basis for customer demand for the entire article.” If it was, § 289 total profits damages would apply to the article; if not, total profits would not be available.

The determination would involve a binary decision, not an apportionment, in keeping with the apparent Congressional intent when § 289 and its predecessors were enacted. I noted in the April paper that the “customer demand” proposal assumes that there is a presently existing basis in § 289 for the courts to evolve a practical and useful methodology to apply a “total profits” recovery that avoids clearly unreasonable results, but at the same time captures circumstances where it is sound policy to afford a total profits option for recovery.”

The court in Apple v. Samsung,[vi] in applying § 289, apparently believed its options were limited. It stated “In reciting that an ‘infringer shall be liable to the owner to the extent of [the infringer’s] total profit’, Section 289 explicitly authorizes the award of the total profit from the article of manufacture bearing the patented design…..The clear statutory language prevents us from adopting a ‘causation’ rule as Samsung urges.” The court dismissed an early 2nd Circuit decision which limited a design patent damage award to the profits realized from the sale of a piano shell or case where the shell was sold separately from the inner workings of the piano, stating that Samsung’s smartphones were not sold separately from their shells. Id. at 27-28.

If a court were to look to adopt a workable and practical application of § 289 that would work for all types of articles of manufacture, then perhaps the customer demand proposal is a pathway to a more rationally applied § 289. It is not apportionment, so does not run afoul of the Congressional intent surrounding § 289 and its predecessors. It also avoids some clearly ludicrous results. The example of a patented tire design triggering lost profit recovery on a large agricultural combine as set out my April paper would be avoided given the irrelevancy to any likely customer of the tire design as a basis for purchase of the combine.

In this example, the same outcome, of course, could be achieved by using the separate product exception. Either way, the common sense result is preferable to what otherwise would be an overly literal application of the statute.

The separate product exception, however, has serious limitations. For example, it fails to account for a situation where an inconsequential, but patented, graphical user interface design that is not sold separately is included in an electronic device. Most thoughtful commentators would agree that § 289 profits should not normally apply to these types of relatively complex electronic devices where software features of this type are typically incidental and specifically designed for the device and, thus, are integral to it.

The same issue arises for hardware components that are designed for and integrated into a consumer end product. As an example, semiconductor manufacturers are obtaining design patents on a portion of a semiconductor. Will total profits be disgorged on the entire semiconductor? Yet more troublesome, will the electronic device into which the semiconductor is incorporated be the subject of total profits recovery under § 289? Does the outcome change if the semiconductor is an internally supplied component for the electronic device, not sold separately, versus a non-custom semiconductor that is sourced from an outside vendor? By way of comparison, if there was a utility patent on the semiconductor, would it be likely that the entire device would be subject to damages under the entire market value rule?[vii]

Another example of an exception to the literal application of 35 USC § 289 is suggested by Apple in its responsive brief to “Defendant-Appellants’ Petition for Rehearing en banc.” It states: “As the panel correctly recognized, this distinctive design was not severable from the inner workings of Samsung’s smartphones, see Op. 27-28, in the way that a cupholder is analytically distinct from the overall look-and-feel of a car.”[viii] This exception could be generalized to the situation where the design-patented element is analytically distinct from the overall look-and-feel of the device for which total profits are claimed.

These are just a few of the examples which have and will surface that argue against a literal application of 35 USC § 289. What can be done?

The court in Apple v. Samsung said “policy arguments that should be directed to Congress. We are bound by what the statute says, irrespective of policy arguments that may be made against it.”[ix] Ct. Opinion at 27, fn. 1. But courts have acted or provided guidance in other instances where easily foreseeable outcomes of literal application of a statute would be unreasonable. The entire market value rule is a prime example where a literal approach could have been surfaced as a reason to deny damages for activity beyond the patent scope but within the patented invention’s influence.

Unfortunately, without a course correction we are likely headed for the explosion Professor Rantanen predicts. As noted, for example, we can expect PAE business models to adapt to new opportunities presented by the courts. The result could take design patents way beyond their intended purpose of stimulating invention. In the end, this will likely bring forward efforts to repeal § 289. This would deny a fair and reasonable remedy for those who invent new designs that are substantially the basis of customer demand. Hopefully, a judicial framework will be developed that strikes the right balance and further secures § 289 as a distinguishing feature of U.S. design patent law.

[i] Mr. Griswold is a Consultant residing in Hudson, WI and was formerly President and Chief Intellectual Property Counsel for 3M Innovative Properties Company. The paper reflects the views of the author. He wishes to thank Bob Armitage and Mike Kirk for their excellent contributions to the paper.

[ii] Gary L. Griswold, 35 USC § 289 – An Important Feature of U.S. Design Patent Law: An Approach to Its Application. IPO Law Journal, (April 6, 2015). http://www.ipo.org/wp-content/uploads/2015/04/griswold_an-approach.pdf

[iii] Rantanen, Jason, “Apple v. Samsung: Design Patents Win.” Patently-O. (May 18, 2015) https://patentlyo.com/patent/2015/05/samsung-design-patents.html

[iv] Id.

[v] Marcus, David and Shawn Leppo, “Welcome Fallout from the Smartphone Wars: Federal Circuit embraces strong protection of design patents.” Metropolitan Corporate Counsel. (July 17, 2015). http://www.metrocorpcounsel.com/articles/32603/welcome-fallout-smartphone-wars-federal-circuit-embraces-strong-protection-design-pat?utm_source=mccreview+Upload+20150106&utm_campaign=58fe4b6614-MCC_Review_07_22_20157_21_2015&utm_medium=email&utm_term=0_4624ea9f3a-58fe4b6614-236350701

[vi] Apple v. Samsung, Case No. 2014-1335; 2015-1029 (Fed. Cir. May 18, 2015). http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/14-1335.Opinion.5-14-2015.1.PDF

[vii] The impact on suppliers, manufacturers and retailers will be significant. Who will take the risk of this exposure, the supplier through an indemnity agreement who did not receive the profit on the article, the manufacturer who will need to assess the exposure for each component, or the retailer (for its profit) who sells the final product?

[viii] See Brief in Opp’n to Rhg, Apple v. Samsung, Case No. 2014-1335; 2015-1029 at 27-28 (Fed. Cir. July 20, 2015)

[ix] Apple v. Samsung, Ct. Opinion at 27, fn. 1.

Tight Rules on Pre-Discovery Infringement Contentions offer Forecast for Patent Reform Provisions

Patent

by Dennis Crouch

In the civil procedure focused Keranos v. Silicon Storage (Fed. Cir. 2015), the Federal Circuit has ruled that a trial court must consider good cause when determining whether to allow parties to amend their infringement contentions.  The is a likely precursor to future disputes if Congress enacts patent reform measures that require traditional infringement contention elements be asserted in the original complaint. 

 

Here, Keranos sued several dozen defendants in E.D. Texas for infringing its transistor programming patents. See U.S. Patent Nos. 4,795,719, 4,868,629,  and 5,042,009.

In its original infringement contentions (filed prior to discovery as required by local rules), Keranos identified a number of allegedly infringing products and product families.  After uncovering further information regarding infringing products, the patentee filed a motion to amend its infringement contentions to particularly identify the offending product numbers. However, the district court denied that motion – noting that the local rules required identification of products by number, not family, and that the patentee had not acted diligently in using the public domain to identify the product numbers. As a result, the trial court limited the case only to the accused products particularly identified in the original infringement contentions.

On appeal, the Federal Circuit has vacated the district court ruling and remanded with instructions to consider on a defendant-by-defendant basis whether product number information was publicly available when the infringement contentions were filed.  For those that were not publicly available based upon a diligent search, the court should allow amended infringement contentions.  However, those product numbers that could have been identified (and identified as infringing) will seemingly remain off the list.

= = = = =

The Keranos decision also includes an interesting discussion of standing. Keranos (a Nicholas Gross company) obtained the patents from the United Module Corporation (UMC) just before filing suit in what was termed an “Exclusive Patent License and Royalty Agreement.”  UMC, however, was not joined as a plaintiff in the cases.

The rule for patent cases is that all parties holding substantial ownership rights of a patent must be joined as plaintiffs in any action  asserting that patent. However, title-holder may create an exclusive licenses that is so extensive as to be considered an assignment of all substantial patent rights.  In that case, the licensee is “‘deemed the effective ‘patentee’ under 35 U.S.C. § 281’ with effective title to the patent, and alone has ‘standing to maintain an infringement suit in its own name.’  Quoting Prima Tek II v. A-Roo Co., 222 F.3d 1372 (Fed. Cir. 2000).

Here, the patents had expired and UMC transferred the “exclusive past, present, and future rights to sue and recover for infringement, to make, use, import, and sell products covered by the patents, and to negotiate and grant sublicenses” and did not retain any right to sue infringers.  Since the patent was expired, the question of whether UMC retained a right to use the invention was moot.  As such, the Federal Circuit affimed that the licensee had proper standing.

 

 

Akamai v. Limelight: Federal Circuit Expands the Contours of Direct Infringement

Patent

By Jason Rantanen

Akamai Technologies, Inc. v. Limelight Networks, Inc. (Fed. Cir. 2015) (en banc)  Download Opinion

Today, a unanimous Federal Circuit (minus judges Taranto, Chen and Stoll, who did not participate) issued its opinion on remand from the Supreme Court in Limelight Networks v. Akamai Techs.  (PatentlyO discussion here.)  To the extent there is any question: when considering situations in which the acts are not actually being performed by the alleged direct infringer, the question is “whether all method steps can be attributed to a single entity.”  Slip Op. at 6 (emphasis added).  The court expanded this class to encompass two new forms of divided activity.

In its Limelight opinion, the Supreme Court held that induced infringement under § 271(b) requires a single direct infringer.  Consequently, Limelight could not be liable for indirect infringement absent the existence of that direct infringer.  Inducement was not a viable legal theory for situations where the accused party performed some of the steps and the remaining steps were performed by another party.

In its opinion on remand, the Federal Circuit expands the scope of direct infringement under § 271(a) in situations where all the steps of a claimed method are not actually being performed by the accused party.  Under the Federal Circuit’s pre-Akamai precedent, a party could be liable for direct infringement if (1) it performs all the steps itself; (2) it acts through an agent (applying traditional agency principles); or (3) it contracts with another to perform one or more steps of a claimed method.  The latter two forms of direct infringement are generally described as inquiring into whether “a single entity directs or controls the acts of another,” considering general principles of vicarious liability.

In the new Akamai opinion, the Federal Circuit adds an additional category that falls within the scope of “control or direction.”  The key language:

We conclude, on the facts of this case, that liability under § 271(a) can also be found when an alleged infringer conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method and establishes the manner or timing of that performance. Cf. Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 930 (2005) (stating that an actor “infringes vicariously by profiting from direct infringement” if that actor has the right and ability to stop or limit the infringement). In those instances, the third party’s actions are attributed to the alleged infringer such that the alleged infringer becomes the single actor chargeable with direct infringement. Whether a single actor directed or controlled the acts of one or more third parties is a question of fact, reviewable on appeal for substantial evidence, when tried to a jury.

 Slip Op. at 5.  In addition, the Federal Circuit held participatnts in a joint enterprise can be charged with the acts of the other for purposes of direct infringement.

Alternatively, where two or more actors form a joint enterprise, all can be charged with the acts of the other, rendering each liable for the steps performed by the other as if each is a single actor. See Restatement (Second) of Torts § 491 cmt. b (“The law . . . considers that each is the agent or servant of the others, and that the act of any one within the scope of the enterprise is to be charged vicariously against the rest.”). A joint enterprise requires proof of four elements:

(1) an agreement, express or implied, among the members of the group;

(2) a common purpose to be carried out by the group;

(3) a community of pecuniary interest in that purpose, among the members; and

(4) an equal right to a voice in the direction of the enterprise, which gives an equal right of control.

Id. § 491 cmt. c. As with direction or control, whether actors entered into a joint enterprise is a question of fact, reviewable on appeal for substantial evidence. Id.
(“Whether these elements exist is frequently a question for the jury, under proper direction from the court.”).

Slip Op. at 5-6.  The Federal Circuit thus vacated all earlier precedent that limited 271(a) to principal-agent relationships, contractual arrangements, and joint enterprise.  “Rather, to determine direct infringement, we consider whether all method steps can be attributed to a single entity.”  Id. at 6.  Applying this standard to the facts of the case, the court held that there was sufficient evidence to support the jury’s verdict of infringement.

Interestingly, the consequence now seems to be that inducement can apply to situations where one party performs some of the steps and the remaining steps are performed by another.  First, under Promega v. Life Tech, a party can be liable for inducing itself.  Since Limelight is a direct infringer under the new Akamai opinion, it could be liable for inducement as well (not that this would seem to come up much in situations where the steps are being performed domestically).  Second, a party could be liable for inducement where it induced another party who itself performed some of the steps and the remaining steps were attributable to the induced party (even if performed by another).

Peter Menell’s Patent Litigation Guide

Patent, ,

Professor Peter Menell is very much a practical consensus builder and his collaborative Patent Case Management Judicial Guide has gone a long way in seting a gold standard in how a Judge should manage patent cases (and thus how parties should litigate patent cases).

The 1,300 page third edition has just been released and is available for free on SSRN with the following abstract:

This treatise updates and expands upon the second edition of the Patent Case Management Judicial Guide (2012). Since that time, patent litigation has continued to increase in complexity. This edition encompasses implementation of the America Invents Act (“AIA”), the emergence of review proceedings at the Patent Trial and Appeal Board (“PTAB”), the Supreme Court’s many recent patent decisions (patent eligibility, claim construction, claim indefiniteness, infringement analysis (rejecting “joint infringement”), the intent requirement for induced infringement liability (rejecting a defense of good faith belief of a patent’s invalidity), and attorney fees), and the Federal Circuit’s damages jurisprudence (including damage awards for standard essential patents (SEP) licensed pursuant to fair, reasonable, and nondiscriminatory (FRAND) terms. It also includes case management checklists, model case management orders, and other materials developed by district judges and advisory bodies for streamlining patent case management. Finally, this volume adds a chapter on patent litigation at the Court of Federal Claims.

http://ssrn.com/abstract=2637605. Menell’s team of co-authors includes Lynn Pasahow (Fenwick); Jim Pooley (Pooley); Matthew Powers (Tensegrity); Steven Carlson (Kasowitz Benson); Jeffrey Homrig (Latham); George Pappas (Covington); Carolyn Chang (Fenwick); Colette Mayer (Morrison Foerster); and Marc Peters (Morrison Foerster).

Guest Post by Prof. Burstein: Ethicon v. Covidien — Some key design patent issues

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In this post, Sarah Burstein, Associate Professor of Law at the University of Oklahoma College of Law, examines the design patent components of the Federal Circuit’s recent Ethicon decision.  Dennis’s discussion of the utility patent’s indefiniteness issue is here.

Ethicon Endo-Surgery, Inc. v. Covidien, Inc. (Fed. Cir. Aug. 7, 2015) Download opinion
Panel:  Chen (author), Lourie, Bryson

Ethicon alleged that Covidien’s Sonicision cordless ultrasonic dissection device infringed various utility and design patents. Each of the asserted design patents claimed a portion (or portions) of a design for a surgical device. A representative image from each patent is shown below:

patents_in_suit

All of the asserted design patents claimed at least some portion of the design of the u-shaped trigger. Three of them also claimed the design of the torque knob and/or activation button.

The district court granted summary judgment that the design patents were invalid for lack of ornamentality and not infringed. Ethicon appealed.

Validity

The Federal Circuit reversed the grant of summary judgment of invalidity. A patentable design must be, among other things, “ornamental.” The Federal Circuit has interpreted this as, essentially, a type of non-functionality requirement.

In deciding that the designs were invalid as functional, the district court relied on a number of factors from Berry Sterling Corp. v. Pescor Plastics, Inc. In Berry Sterling, the Federal Circuit stated that, in addition to the existence of alternative designs:

Other appropriate considerations might include: whether the protected design represents the best design; whether alternative designs would adversely affect the utility of the specified article; whether there are any concomitant utility patents; whether the advertising touts particular features of the design as having specific utility; and whether there are any elements in the design or an overall appearance clearly not dictated by function.

In their appellate briefs, the parties disputed the relevance and relative weight of these factors. Ethicon noted the significant tension between Berry Sterling and other controlling precedents, arguing that “[b]efore and after Berry Sterling, this Court has treated the presence or absence of alternative designs that work as well as the claimed design as a dispositive factor in analyzing functionality.” Covidien, on the other hand, argued that the availability of alternative designs was not a dispositive factor.

In its decision, the panel attempted to harmonize the conflicting precedents by stating that the Federal Circuit had not, in fact, previously “mandated applying any particular test for determining whether a claimed design is dictated by its function and therefore impermissibly functional.”

The panel noted, however, that the Federal Circuit had “often focused . . . on the availability of alternative designs as an important—if not dispositive—factor in evaluating the legal functionality of a claimed design.” The panel then recast the Berry Sterling factors as only being applicable “where the existence of alternative designs is not dispositive of the invalidity inquiry.” The panel did not explain how or when the existence of alternatives would—or would not be—dispositive as to validity. However, it did make it clear that “an inquiry into whether a claimed design is primarily functional should begin with an inquiry into the existence of alternative designs.”

Although Ethicon had submitted evidence of alternative designs, Covidien argued they were not “true alternatives because, as the district court found, they did not work ‘equally well’ as the claimed designs.” The Federal Circuit disagreed with Covidien for two main reasons:

First, the district court’s determination that the designs did not work “equally well” apparently describes the preferences of surgeons for certain basic design concepts, not differences in functionality of the differently designed ultrasonic shears. . . . Second, to be considered an alternative, the alternative design must simply provide “the same or similar functional capabilities.”

The Federal Circuit also decided that, in finding the claimed designs to be functional, the district court “used too high a level of abstraction,” focusing on general design concepts—for example, on the concept of an open trigger—instead of “the particular appearance and shape” of the claimed design elements. The Federal Circuit therefore reversed the district court’s summary judgment of invalidity.

Infringement

This decision also provided some useful clarification about how to apply the design patent infringement test, as formulated by the en banc Federal Circuit in Egyptian Goddess, Inc. v. Swisa, Inc. In the wake of Egyptian Goddess, some lawyers have argued that: (1) a court must (almost) always consider the prior art when analyzing design patent infringement; and (2) in certain circumstances, the prior art can be used to broaden the scope of a patented design.

In Ethicon, the panel helpfully—and accurately—clarifies the rule of Egyptian Goddess, noting that:

Where the claimed and accused designs are “sufficiently distinct” and “plainly dissimilar,” the patentee fails to meet its burden of proving infringement as a matter of law. If the claimed and accused designs are not plainly dissimilar, the inquiry may benefit from comparing the claimed and accused designs with prior art to identify differences that are not noticeable in the abstract but would be significant to the hypothetical ordinary observer familiar with the prior art. (Citations omitted.)

In this case, the district court engaged in a “side by side comparison between the claimed designs and the design of Covidien’s accused shears” and determined that they were plainly dissimilar and, therefore, the design patents were not infringed. The Federal Circuit provided these images as a representative example:

infringementEthicon argued that they were not plainly dissimilar and that the district court erred in not considering the prior art, “which Ethicon characterizes as predominantly featuring thumb-ring and loop-shaped triggers.” Essentially, Ethicon sought to broaden the scope of its patent by showing some significant visual “distance” from the prior art.

The Federal Circuit disagreed with Ethicon, finding no genuine dispute of fact on the issue of infringement. According to the court, the designs were only similar “[o]n a general conceptual level.” And because the designs were plainly dissimilar, the court “did not need to compare the claimed and accused designs with the prior art.” The court therefore affirmed the grant of summary judgment of non-infringement.

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