En Banc Arguments This Week

Patent, , , ,

by Dennis Crouch

On February 8, 2013 (this Friday), the Federal Circuit will sit en banc and hear arguments on two important patent cases. In CLS Bank v. Alice Corp the court will focus on the patenting of inventions implemented through software. The two particular questions highlighted in the en banc order are:

a. What test should the court adopt to determine whether a computer-implemented invention is a patent ineligible “abstract idea”; and when, if ever, does the presence of a computer in a claim lend patent eligibility to an otherwise patent-ineligible idea?; and

b. In assessing patent eligibility under 35 U.S.C. § 101 of a computer-implemented invention, should it matter whether the invention is claimed as a method, system, or storage medium; and should such claims at times be considered equivalent for § 101 purposes?

In addition to the parties, the Federal Circuit has also granted leave for the USPTO to participate at oral arguments. The USPTO’s brief focused on practical mechanisms for the process of determining § 101 eligibility. The agency wrote “the essential question under § 101 is whether the claim, properly construed, incorporates enough meaningful limitations to ensure that it amounts to more than a claim for the abstract idea itself . . . This Court should identify a non-exhaustive list of factors for district courts and examiners to consider in resolving that essential question on a case-by-case basis.”

The second patent case (argued first on the 8th) is that of Robert Bosch v. Pylon Mfg. In Bosch, the court is focusing on the “final judgment rule” that limits a losing party’s right to appeal until the district court judgment is finalized. Particularly, 28 U.S.C. § 1292(c)(2)  indicates that the Federal Circuit has jurisdiction over patent appeals once the case is “final except for an accounting.  The basic question on appeal is: Define “an accounting.”  The en banc order asks two particular questions:

a) Does 28 U.S.C. § 1292(c)(2) confer jurisdiction on this Court to entertain appeals from patent infringement liability determinations when a trial on damages has not yet occurred?

b) Does 28 U.S.C. § 1292(c)(2) confer jurisdiction on this Court to entertain appeals from patent infringement liability determinations when willfulness issues are outstanding and remain undecided?

In its brief of the case, the U.S. Government argued that “accounting” encompasses the damage award. As such, the Government argues that appeal is appropriate once liability is determined. 

At the Supreme Court, oral argument in Bowman v. Monsanto (patent exhaustion doctrine) is scheduled for February 19; and FTC v. Watson (reverse payment settlements) is scheduled for March 25. Arguments for Association for Molecular Pathology v. Myriad Genetics, Inc.
have not yet been scheduled.

Presume that Claims Cover the Preferred Embodiment

Patent

by Dennis Crouch

Accent Packaging v. Leggett & Platt (Fed. Cir. 2013)

In yet another case, the Federal Circuit has altered a district court claim construction in a way that entirely flips the outcome.

In a 2010 action, Accent asserted that L&P infringed its US Patent Nos. 7,373,877 (claims 1–5) and 7,412,992 (claims 1, 3, 4, 7, and 10–14).  The patents are directed to a device for baling recyclables or solid waste for easier handling. 

The asserted claim required a set of “elongated operator bodies, with each of the operator bodies being operably coupled with a respective one of said gripper, knotter, cutting element and cover so as to supply driving power from the single drive assembly thereto.”  Leggett's accused device links together the gripping/knotting/cutting/covering tasks and only requires two operator bodies to accomplish all four tasks.  In construing the claims, the district court held that the “each . . . respective one of” language required that each operator body perform only one of the listed tasks. As such, Leggett could not infringe.

On appeal, the Federal Circuit reversed –  finding that its interpretation of the claim does not require that “each elongated operator body be coupled to one and only one of these operator elements.”  Rather the court found that the language only required coupling with at least one operator element.  In its decision, the court relied heavily on the fact that the identified preferred embodiment of the invention showed an operator body operably coupled to both a knotter and a cover.

[I]n the preferred embodiment of the invention, two elongated operator bodies are operably coupled to both the knotter and the cover. Put differently, the preferred embodiment features an elongated operator body that is operably coupled to one or more operator elements. We have held that “a claim interpretation that excludes a preferred embodiment from the scope of the claim is rarely, if ever, correct.” On-Line Techs., Inc. v. Bodenseewerk Perkin-Elmer GmbH, 386 F.3d 1133, 1138 (Fed. Cir. 2004).

One question that I have regarding this particular preferred embodiment canon of construction has to do with amendments made during prosecution. In my view, a narrowing claim language made during the course of prosecution should not carry the same presumption of covering the preferred embodiment.  In this case, the claims were completely rewritten during prosecution in order to place the application in condition for allowance.  And, the limitations in question were added during prosecution. 

The result in this case is major — instead of winning on summary judgment, the Federal Circuit here holds that Leggett & Platt loses on summary judgment and is liable for infringement.

AccentPackagingBaler

 

 

Big Firms and Contingency Fee Struggles: Parallel Networks v. Jenner & Block

Patent

by Dennis Crouch

Joff Wild at IAM has posted some interesting reading in the ongoing dispute between the patent assertion entity, Parallel Networks and its former litigation counsel at Jenner & Block. [Link]

According to the pleadings filed by Parallel Networks in Texas state court[link below], Jenner withdrew from its contingency-fee representation of Parallel Networks against Oracle after losing on summary judgment and determining that it was unlikely to win a large award. Parallel Networks then found new counsel and eventually settled the case for about $20 million. Once that case ended, Jenner returned asking for more than $10 million in attorney fees based upon its hourly rates through summary judgment.

Under the representation agreement, both parties had agreed to arbitrate any dispute over fees and an arbitrator awarded Jenner with a $3 million fee. Parallel Networks has now asked the court to set aside the arbitration award – arguing that under Texas law, a contingent fee attorney cannot drop its client simply for economic reasons and then expect to receive any further compensation. The suit also alleges a host of other problems with Jenner & Block representation in both the Oracle litigation and the parallel case against QuinStreet. The bulk of those allegation stem from various internal communications at Jenner involving the risk and potential of the cases that were never communicated to Parallel Networks.

The lawsuit will be interesting to follow because it offers a rare public glimpse inside big-firm contingency fee structures and the associated political struggle raised by many risk-averse firm leaders. Here, that attempted risk aversion may well cost the firm several million dollars in fees.

I should note that Professor David Hricik testified on behalf of Parallel Networks in the Arbitration.  Hricik is on leave from his Patently-O writing as he clerks at the Federal Circuit. I have not spoken with him about this case. –  Dennis

Docs:

USPTO: Kappos -> Rea

Patent

by Dennis Crouch

David Kappos is now the former Director of the United States Patent Office — joining a select group that claims Thomas Jefferson as its inaugural member and more recently includes Todd Dickinson, Jon Dudas, Jim Rogan, and Bruce Lehman.  The Kappos era has been interesting and eventful. In the next few weeks we will be jointly publishing a set of Kappos Stories both here and in the Yale Journal of Law & Technology.

Without fanfare, Teresa Stanek Rea has moved into the leadership role as Acting Director after joining the USPTO in 2011 as Deputy Director.  Congratulations Director Rea.  Rea is expected to continue to push many of the same levers as Kappos –  namely reducing the patent backlog, “right sized patents” through cooperative applicant-examiner negotiation of patent scope, and full implementation of the post-grant trial system. 

I expect that President Barack Obama will not name a new director until after March.  The USPTO Director is also an Undersecretary of Commerce, reporting directly to the US Secretary of Commerce.  That position has been held by Acting Secretary Rebecca Blank since June of 2012.

Challenging Cybor: Lighting Ballast Control v. Philips Electronics

Patent,

By Dennis Crouch

Lighting Ballast Control v. Philips Electronics (Fed. Cir. 2013) on petition for en banc rehearing

The patentee in this case has now filed its brief requesting that the court sit en banc and overturn its 15-years-old decision, Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448 (Fed. Cir. 1998) (en banc). In Cybor, the Federal Circuit held that district court claim construction should be given no deference on appeal, facts-be-damned.

The major claim construction issue in the case turns on whether a particular claim phrase should be interpreted under 35 U.S.C. 112¶6. The asserted claim requires a "voltage source means providing a constant or variable magnitude DC voltage between the DC input terminals." U.S. Patent No. 5,436,529. In preparing for a claim construction decision, the district court was presented with evidence on the technology in question and the level of ordinary skill in the art and then made a number of seemingly factual conclusions — The most pertinent conclusion being that a person of skill in the art would interpret the disputed term as covering a class of structures that include "a rectifier, or structure to rectify the AC power line into a DC voltage." Once that factual conclusion was reached, it was easy for the district court to make its claim construction decision that the term was not limited by 112¶6. The district court particularly held that interpreting the term as a means-plus-function limitation would have "exalted form over substance and disregarded the knowledge of a person of ordinary skill in the art." Based upon district court's construction, a jury sided with the patentee in finding infringement.

On appeal, the Federal Circuit reversed that decision – following Cybor and its progeny in holding that the entire claim construction process is reviewed de novo. On de novo review, the appellate panel found that the better interpretation of the claims limited their scope to that available under 112¶6. Further, because the asserted patent did not spell-out how to build a voltage source, the Federal Circuit ruled that the claim was invalid as indefinite.

In its decision, the Federal Circuit held that the lower court decision "concerned only questions of law." Everyone understands that conclusion is wrong but that it a required constructive conclusion based upon Federal Circuit precedent. Of course, the Supreme Court has written on the topic too and found claim construction a "mongrel practice" involving a mixture of fact and law. Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996) (holding for policy reasons that judges, not juries, should decide claim construction).

Why is this important for Lighting Ballast? If the Federal Circuit is able to recognize that the court made some factual conclusions then it will likely give some deference to those conclusions on appeal. And, in this case, that deference may be sufficient to flip the decision back in favor of the patentee.

Read the petition. Download CyborPetition

Briefs in support are apparently due by February 15, 2013. Andrew Dhuey is representing the patentee on appeal.

The Federal Circuit’s New Obviousness Jurisprudence: An Empirical Study

Obviousness, Patent,

By Jason Rantanen

[Download the draft article]

Obviousness remains one of the primary issues raised in patent cases.  A few weeks ago, Dennis noted that "the vast majority of BPAI/PTAB decisions focus on the question of obviousness,"  and 5 of the 11 opinions involving utility patents issued by the Federal Circuit this past month addressed obviousness.  Many of these cases revolve around application of the Supreme Court's decision in KSR v. Teleflex, and reflect disagreements over the interpretation of the Court's opinion.   

This article presents the results of an empirical examination of the Federal Circuit's obviousness jurisprudence over a period of fifteen years, asking whether the Federal Circuit really changed its behavior as a result of KSR.  In systematically examining the court's opinions, I found the following:

  • Following KSR the Federal Circuit has become substantially less favorable to patentees on the issue of obviousness. 
  • The Federal Circuit’s ubiquitous pre-KSR requirement that patent challengers identify a “teaching, suggestion, or motivation” (“TSM”) to combine or modify the prior art has largely disappeared, at least in formal terms.
  • Although the concept underlying TSM has endured, in the form of a “reason to combine” requirement, the post-KSR form of that requirement differs substantially from its pre-KSR incarnation.
  • The Federal Circuit now routinely relies on language from KSR that “[a] court must ask whether the improvement is more than the predictable use of prior art elements according to their established functions”  and the use of “common sense” to find combinations and modifications of the prior art to be obvious.
Although there may be some disagreement within the court, taken as a whole this study provides strong evidence that the Federal Circuit has both changed what it says and does when reviewing appeals involving the issue of obviousness. The magnitude of some of my findings was particularly surprising: for example, in the five years after KSR the Federal Circuit affirmed the PTO on the issue of obviousness 91% of the time (94 out of 103 times).
 
Over the next few weeks I'll be posting some of my findings that didn't make it into the article. 

Patent Term Calculations: District Courts Split on PTA Calculations; Revive Focus on Deference to PTO Determinations

Patent

By Dennis Crouch

Exelixis v. Kappos (Exelixis II) (E.D. Va. 2013)

We now have a district court split on post-RCE patent term adjustment. This decision – siding with the PTO – arises from a second Exelixis case and will be called Exelixis II (Brinkema, J.) In Exelixis I, Judge T.S. Ellis sided with the patentee in finding that the PTO was improperly under-calculating the patent term owed to patentees who had filed a request-for-continued examination during the course of prosecution. Exelixis v. Kappos, — F. Supp. 2d —, 2012 WL 5398876 (E.D. Va. Nov. 1, 2012), as amended Nov. 6, 2012. In the parallel caes of Novartis AG v. Kappos, — F. Supp. 2d –, 2012 WL 5564736 (D.D.C. Nov. 15, 2012), Judge Huvelle adopted the reasoning of Judge Ellis in siding with the patentee. Those decisions basically held that "once the three year clock has run, PTA is to be awarded on a day for day basis regardless of subsequent events." The PTO has argued that an RCE stops the running of the PTA clock.

In her newly released opinion, Judge Brinkema has sided with the PTO in holding that "'any time consumed by continued examination of the application requested by the applicant under section 132(b)' (via the filing of an RCE) does not count toward that three-year period." Quoting 35 U.S.C. §154(b)(1)(B). Exelixis I is already on appeal to the Federal Circuit and part II may be there soon as well.

The PTA statute is poorly written and thus both sides offer reasonable interpretations. In that type of scenario the most important factor is often whether deference is given to the agency's statutory interpretation. Here, Judge Brinkema determined that the PTO's interpretation of its statute should be accorded Skidmore deference because the PTO's interpretation is a "reasonable conclusion as to the proper construction of the statute." Quoting Cathedral Candle Co. v. U.S. Int'l Trade Comm'n, 400 F.3d 1352 (Fed. Cir. 2005). In that case, Judge Bryson wrote "we believe the Supreme Court intends for us to defer to an agency interpretation of the statute that it administers if the agency has conducted a careful analysis of the statutory issue, if the agency's position has been consistent and reflects agency-wide policy, and if the agency's position constitutes a reasonable conclusion as to the proper construction of the statute, even if we might not have adopted that construction without the benefit of the agency's analysis." Of course, that case was not a patent case. And the Federal Circuit has appeared much less willing to offer deference to USPTO decisions.

Read the new opinion here: /media/docs/2013/01/gov.uscourts.vaed.280154.31.0.pdf.

Smartphone Wars: Micron’s Slide-to-Unlock Patent

Patent

by Dennis Crouch

Adding a bit of drama to the slide-to-unlock debate, Micron has just received its own patent covering a "system and method for controlling user access to an electronic device." U.S. Patent No 8,352,745 issued in January 2013 but claims priority to an original application filed in February 2000 and lists Jim McKeeth as inventor.

Claims:

1. A system comprising:

a touch screen upon which a user is to enter, by drawing, a geometric pattern in a specified direction to gain access to the system; and

a processing circuit coupled to the touch screen to compare the user entered geometric pattern to a predefined geometric pattern stored in a memory.

6. The system of claim 1 wherein the user entered geometric pattern is a line.

Apple's slide-to-unlock patents claim priority only to the 2004-2005 timeframe and, although they may be separately patentable, Apple's patents will not serve to invalidate Micron's new patent.

Samsung has a 10-year cross-license deal with Micron. I have not seen reports of any similar deals with Apple, Google\Motorola, or RIM. It will be interesting to see whether Micron holds onto the patent or shifts it to an enforcement company as it did in 2010 in sending 4,000+ patents to John Desmarais for enforcement. Micron is a major manufacturer of computer memory with a market valuation of about $8 billion, perhaps they should just ask for Apple to endorse-over its recent billion dollar patent infringement judgment. One complicating factor is that I suspect Micron is a supplier for all of the potential defendants.

NO DISCLAIMERS OR DISAVOWALS

Patent

What do you think of the following boiler-plate language that some applicants are including in their office-action responses:

NO DISCLAIMERS OR DISAVOWALS

Although the present communication may include alterations to the application or claims, or characterizations of claim scope or referenced art, the Applicants are not conceding in this application that previously pending claims are not patentable over the cited references. Rather, any alterations or characterizations are being made to facilitate expeditious prosecution of this application.

Applicant reserves the right to pursue at a later date any previously pending or other broader or narrower claims that capture any subject matter supported by the present disclosure, including subject matter found to be specifically disclaimed herein or by any prior prosecution.

Accordingly, reviewers of this or any parent, child or related prosecution history shall not reasonably infer that the Applicants have made any disclaimers or disavowals of any subject matter supported by the present application.

Piercing the Corporate Veil: Corporate Officers Are Liable for Their Own Torts

Patent

by Dennis Crouch

Hall v. Bed, Bath & Beyond, Inc. and Nachemin, __ F.3d __ (Fed. Cir. 2013)

This design patent decision is interesting and important on several levels and so I have divided the post into two sections. This section focuses on the Federal Circuit’s dismissal of the charges filed personally against a Bed Bath & Beyond employee who allegedly caused the infringement. In my view, the court arrived at the wrong conclusion in holding that the corporate veil protected the employee from patent infringement liability. In a separate post, I wrote about the court’s decision to maintain a low notice pleading requirement for design patent infringement litigation.

Set Up From the Complaint: Mr. R.J. Hall designed a new product known as a “Towel Tote” that is basically an absorbent scarf with pockets on the ends.  [See one here]. After filing his design patent application, Hall e-mailed with Mr. Farley Nachemin at Bed Bath & Beyond (BB&B) to see whether the company would retail his product.  Nachemin is a VP at BB&B and is employed as the General Merchandise Manager. Nachemin showed interest and two later met face-to-face. In the meetings and e-mails Hall made clear that the patent was pending. However, instead of moving forward with Hall, BB&B (with direct participation from Nachemin) mailed Hall’s product to Pakistan and had it copied and manufactured for retail distribution back in the US.

When Hall later sued BB&B, he also sued Nachemin for infringement and inducing infringement (as well as other federal and state business torts).

Corporate Veil Protecting Officers and Directors: In a recent opinion, the Federal Circuit agreed with the district court that the Corporate Veil shields Nachemin from liability under New York law (the law applicable to this case). The basic contention is that – as a Vice-President of the Company, Nachemin is an officer of the company and therefore cannot ordinarily be held liable for debts of the company unless the corporate veil is pierced. Under New York law, “the party seeking to pierce a corporate veil [must] make a two-part showing: (i) that the owner [or officer] exercised complete domination over the corporation with respect to the transaction at issue; and (ii) that such domination was used to commit a fraud or wrong that injured the party seeking to pierce the veil.” Quoting Am. Fuel Corp. v. Utah Energy Dev. Co., 122 F.3d 130, 134 (2d Cir. 1997). The appellate panel arrived at the reasonable conclusion that the complaint did not sufficiently allege domination by Nachemin.

Error: However, the error in the Federal Circuit’s decision is its seeming assumption that the corporate veil applies to protect an officer who personally committed the tort of patent infringement. It does not. The court wrote:

[Defendants] primarily argue that under New York law, “the party seeking to pierce a corporate veil [must] make a two-part showing: (i) that the owner exercised complete domination over the corporation with respect to the transaction at issue; and (ii) that such domination was used to commit a fraud or wrong that injured the party seeking to pierce the veil.” Am. Fuel Corp. v. Utah Energy Dev. Co., 122 F.3d 130, 134 (2d Cir. 1997); see also Wm. Passalacqua Builders, Inc. v. Resnick Developers South, Inc., 933 F.2d 131, 138 (2d Cir. 1991) (“[T]o pierce the corporate veil, the parent corporation must at the time of the transaction complained of . . . have exercised such control that the subsidiary ‘has become a mere instrumentality’ of the parent, which is the real actor.”). Applying the principles of New York law, we do not discern reversible error in the district court’s dismissal of the action against Mr. Nachemin.

The problem with the court’s conclusion is that the corporate veil does not liberate an individual from personally committed torts.

The Corporate Veil: Corporate law is, for the most part, a creature of state law. Each state has its own rules regarding the various corporate forms and their resulting limitations of liability that protect corporate owners as well as officers and directors of the corporation. However, all states follow the general principle that certain qualified parties will not be held liable for debts of a corporation unless the facts conform to a veil-piercing exception to the rule as suggested above.

Agents Personally Liable for Their Own Torts: One enormous caveat to the corporate veil protection is the general rule that corporate officers and agents are personally liable for their own tortious conduct. Thus, a bouncer who commits battery will be personally liable for the damage caused even if the improper action was at the behest of his nightclub employer. See Aguirre v. Paul, 862 N.Y.S.2d 580 (2008) (“A corporate officer is not held liable for the negligence of the corporation merely because of his official relationship to it; it must be shown that the officer was a participant in the wrongful conduct.”); Munder v. Circle One Condominium, Inc., 596 So2d 144 (Fla 4th DCA 1992); Messenger v. Frye, 176 Wash 291 (1934).

Agent Personally Liable for Their Own Torts Even if Act is On Behalf of Company: It is generally not an excuse that the tortious conduct was done on behalf of the corporate entity. Thus, a person is liable for his own tortious conduct even when acting for the benefit of another.

Personal Liability for Patent Infringement: A plain reading of the patent laws make clear that individuals can be held liable for patent infringement. 35 U.S.C. 271(a) (“whoever without authority makes … any patented invention, within the United States … infringes the patent”). That reading is supported by a long history of holding individuals personally liable for patent infringement. There have been a few Federal Circuit cases on point. In Orthokinetics, lnc. v. Safety Travel Chairs, Inc., 806 F.2d 1565 (Fed. Cir. 1986), the court wrote:

[I]t is well settled that corporate officers who actively aid and abet their corporation’s infringement may be personally liable for inducing infringement under § 271(b) regardless of whether the corporation is the alter ego of the corporate officer.

Id. See also Wordtech Systems, Inc v. Integrated Networks Solutions, Inc., 609 F.3d 1308 (Fed. Cir. 2010) (corporate structure does not shield officers from liability for personally participating in contributory patent infringement); Power Lift, Inc. v. Lang Tools, Inc.,774 F.2d 478 (Fed. Cir. 1985) and Manville Sales Corp. v. Paramount Systems, Inc., 917 F.2d 544 (Fed. Cir. 1990).

In a 2003 article, Professor Lynda Oswald foreshadowed the wrong-turn made by the court here. Oswald writes:

[Courts] tend to mis-apply the general principles of agency and tort law described above when evaluating the liability of an officer for the infringing acts of his or her corporation. Although courts purport to look for personal participation by the officer in the patent infringement of the corporation, courts typically gauge such personal participation by examining whether the corporate veil can be pierced to hold the officer personally liable for violating § 271(a)’s prohibition against ” making, using, or selling” the patented invention. In doing so, however, courts fail to recognize that piercing analysis is irrelevant to issues of officer liability.

See Lynda J. Oswald, The Personal Liability of Corporate Officers for Patent Infringement, 44 IDEA 115, 130 (2003).

Nachemin might not be liable in this case, but it is clear that the corporate veil does not serve as his shield.

Notes

  • The individual liability of Mr. Nachemin was something of an appendage to the decision as a whole. I suspect that the confused language that I note is most likely due to the light treatment given to the issue.

Rexnord v. Kappos

Patent, , ,

By Jason Rantanen

Rexnord Industries, LLC v. Kappos and Habasit Belting, Inc. (Fed. Cir. 2013) Download 2011-1434.Opinion.1-18-2013.1
Panel: Newman (author), Lourie, Prost

In Rexnord v. Kappos, the Federal Circuit reversed the Board of Patent Appeals and Interferences' conclusion of nonobviousness, concluding that claims 1-14 of Patent No. 6,523,680 are obvious as a matter of law.  The significant aspect of this opinion is the court's rejection of the PTO's arguments that "the Board need not consider other grounds that had been presented during the reexamination, for they had not been raised on the appeal to the Board" and that "the Board does not consider aspects
beyond those relied on by the examiner."  Slip Op. at 12.  The CAFC's ruling on the latter point, however, creates some significant tensions and does not cleanly resolve the issue. 

The '680 patent relates to a mechanical convey belt formed of rows of belt modules interlinked by transverse rods.  Rexnord filed a petition for inter partes review, arguing that claims 1-4 of the '680 patent were invalid as anticipated and obvious.  The issue on appeal focused on a limitation in representative claim 1 that required a web with a diameter of less than 10 mm. In its petition for inter partes reexamination, Rexnord included the argument that the 10mm limitation was merely a "design choice."  Slip Op. at 13.  In holding that this element was obvious in light of the prior art, however, the Examiner did not reference the "design choice" argument.  Instead, the Examiner stated that:

Thompson ’048 discloses the broad teaching of providing a corrugated intermediate portion with
an adjacent web portion to prevent objects from being pinched between adjacent modules where a
space bounded by the web, an outer end of the first link end and the sidewalls of the second link
ends is completely closed. It would have been obvious to one of ordinary skill in the art to [include
in] the modules of Horton ’248 . . . a web adjacent the corrugated portion to prevent objects from being pinched between adjacent modules as taught by Thompson ’048

Slip Op. at 9 (emphasis added).

Habasit, the patent owner, appealed the examiner's rejection to the BPAI.  In its appeal, Habasit argued that the examiner erred because none of the references disclosed a space with a diameter less than 10 mm, as required by the claims. Although only the second argument is discussed in the CAFC opinion, Rexnord raised two arguments in response: (1) both Palmaer and Thompson disclosed a completely closed space (i.e.: a space with a diameter of 0 mm) and (2)

Thompson, Jr. et al. goes beyond merely disclosing a closed space in a preferred embodiment, and teaches the exact subject matter that Habasit asserts is novel in the '680 Patent. Despite the efforts by Habasit to distort the teachings of Thompson, Jr. et al., the reference clearly teaches solving the identical problem, see col. 1, lines 26-34 of Thompson, Jr. et al. (“objects being conveyed are subject to being caught in the gaps between the links”), solved by Habasit using an identical solution, see col. 14, lines 38-41 of Thompson, Jr. et al. (“the plates 51 on the links 25 cover the gaps 37 to prevent catching articles therein, while providing movement between adjacent links so as to allow traversing of a radiused section”). Accordingly, Thompson, Jr. et al. clearly teaches one skilled in the art to prevent objects from being pinched between modules by modifying Horton to at least partially, or completely, cover a gap in which the object can be pinched.

2008 WL 8119276.

The Board ruled in favor of Habasit, holding that "the Examiner has not identified where the prior art discloses that this space has a diameter of less than 10 mm as required by the claims,"  Slip Op. at 10, quoting Board opinion at 11, and rejecting the space of 0 mm argument.  In reaching this conclusion, the Board did not discuss Rexnord's second argument above.  Slip Op. at 9. 

In its request for rehearing from the Board decision, Rexnord subsequently raised two arguments relating to the 10mm limitation: that the 10 mm spacing was inherent in the prior art and that it was merely a design choice in light of the prior art. The Board denied rehearing, stating that “Rexnord’s reasons as to why it would have been obvious to construct a space as recited in the claims (Request, 3–5) were not the rationale of the Examiner’s rejection.” Slip Op. at 11, quoting Dec. on Rehearing at 3.

On appeal, the CAFC rejected Rexnord's inherency argument but agreed with its obviousness argument.  The main aspect of the appeal, however, was the Federal Circuit's rejection of the PTO's argument that Rexnord couldn't argue grounds for affirming the rejection that were not articulated by the Examiner:

When Habasit appealed the examiner’s decision, Rexnord was not barred from presenting this argument in defense of the examiner. The PTO states in its brief on
this appeal:

Just as this Court does not entertain arguments made outside of appellant’s opening brief, see, e.g., In re Watts, 354 F.3d 1362, 1367 (Fed. Cir. 2004); In re Schreiber, 128 F.3d 1473, 1479 (Fed. Cir. 1997), the Board has a rule that similarly bars the presentation of new arguments outside appellant’s opening brief (absent circumstances not alleged here), see 37 C.F.R. § 41.79(b).

PTO Br. 24. We observe that Rexnord was not the appellant before the Board, and that the premise is an incorrect statement of the appellate process. On judicial review, the correctness of the decision appealed from can be defended by the appellee on any ground that is supported by the record, whether or not the appellant raised the argument.

While this general point seems to be solid, the opinion uses it to support two rules that are in tension: (1) that the appellee can include in its response brief arguments that it raised before the examiner but were not discussed in the examiner's decision ("When Habasit appealed the examiner's decision, Rexnord was not barred from presenting this argument in defense of the examiner," Slip Op. at 13), and (2) that the appellee before the Board does not need to raise those arguments until its request for reexamination ("The issue was fully raised before the examiner, and these references were not again a patentability issue until after the Board reversed the examiner," Slip Op. at 13; "Rexnord asked the Board on rehearing to consider the other grounds before the examiner, in support of the examiner's decision," Slip Op. at 14). 

In other words, the CAFC seems to be saying that the appellee to the board can raise these arguments in its response brief or it can wait until it files its request for rehearing (or maybe that it can only raise these arguments in its request for rehearing; I'm not sure given the court's ambiguity).  Both seem somewhat inconsistent with the way appellate practice usually works: if an appellee doesn't argue an issue in its responsive brief, it generally can't argue that issue in its request for rehearing regardless of whether it made the argument before the lower tribunal. 

Note that this opinion invovled an appeal from the BPAI, which is now the Patent Trial and Appeal Board.  If it carries over into PTAB practice, however, it could have significant consquences for how appeals are structured. 

Antigua to Reject Intellectual Property Rights of US Companies as WTO Authorized Trade Sanction for Killing Offshore Online Gambling

Patent

By Dennis Crouch

The Caribbean nation of Antigua and Barbuda has won its case against the United States at the World Trade Organization (WTO) and is now authorized and moving forward with the granted sanction – suspension of all American-owned intellectual property rights within the Antigua borders. This trade sanction comes as a response to the US campaign against off-shore on-line gambling. That campaign has decimated an Antiguan industry and was found to violate the US WTO trade obligations. Antigua has been negotiating with the US for the past decade on some mechanism to resolve the dispute.

In a press release, Hon. Carl Roberts High Commission from Antigua to the UK indicated the following: “For nearly a decade, Antigua has sought to resolve the dispute with the United States Government over the US failure to abide by American treaty obligations with regard to remote gaming.” Colin Murdoch, Trade Ambassador for Antigua goes on: “This decision [to suspend US IP rights] did not come easily. After countless proposals from our government have been more or less ignored by the Office of the USTR – numerous decisions by the WTO declaring the United States Government’s position illegal – and failure of the United States Government to provide meaningful proposals to end the dispute, the WTO provides this remedy not to encourage illicit behavior by nations; but rather to provide them with a way to secure their legal rights as sovereign nations.”

At this point, the Antiguan government has not indicated the exact date when suspension will begin or whether the suspension will apply to both IP procurement and enforcement. About 10 patent applications were filed in Antigua in both 2010 and 2011.

The Land of 365 Beaches may soon become the hot site for unlicensed but legal copyright streaming. Companies may want to proactively register their .AG domain as well.

Get a New Patent Law Job: Recent Patent Law Job Postings

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Here are a set of recently-posted patent law jobs posted to our Patently-O Job Board:

More jobs are being posted almost every day. We have two current sponsors on the Job Board site, including Eric Gould and Elysium Digital. Thanks for your support! – Dennis

Design Patent Litigation: Notice Pleading Requirements Remain Low

Patent, , ,

Totetowelby Dennis Crouch

Hall v. Bed, Bath & Beyond, Inc. and Nachemin, __ F.3d __ (Fed. Cir. 2013)

This design patent decision is interesting and important on several levels and so I have divided the post into two sections. This section focuses on the district court's clear error in dismissing the infringement lawsuit on the pleadings.  The second section will focus on the Federal Circuit's dismissal of the charges filed personally against the employees who caused the allegedly infringement.

The set-up here is interesting.  Mr. R.J. Hall designed a new product known as a “Towel Tote” that is basically an absorbent scarf with pockets on the ends.  [Buy one here.] After filing his design patent application, Hall sat down with Mr. Farley Nachemin at Bed Bath & Beyond (BB&B) to see whether the company would retail his product.  Instead of moving forward with Hall, BB&B mailed Hall's product to Pakistan and had it copied and manufactured for retail distribution back in the US.

When his patent issued, Hall sued BB&B as well as Nachemin and other executives for design patent infringement and a number of state-law business claims such as, false advertising, misappropriation, and unfair competition.  U.S. Design Patent No. D596,439.  The district court then dismissed the case on the pleadings –  finding that the complaint did not particularly identify the “new, original, and ornamental” features of the design patent. On appeal, the Federal Circuit rejects that decision and instead holds that, even under Iqbal and Twombly, a pleading does not require this level of information. Rather, following the law of utility patents, the court holds here that a proper design patent infringement complaint only requires the following five elements:

  1. An allegation of ownership of the patent;
  2. The name of the defendant;
  3. The patent number;
  4. A statement of the means by which the defendant allegedly infringes; and
  5. Relevant sections of the patent laws.

Citing Phonometrics, Inc. v. Hospitality Franchise Systems, Inc., 203 F.3d 790 (Fed. Cir. 2000).  In this case, the district court's ruling was well off-base because the design patentee need not prove the design's points of novelty even at trial since validity is presumed and infringement no longer relies on the points-of-novelty test.

In the litigation, BB&B had filed a counterclaim alleging that that Mr. Hall himself had violated the Lanham Act by telling the company his product was “protected by patent” even before the patent issued.  BB&B also alleged that the Hall committed false marking by continuing to mark his product “patent pending” even several months after the patent had issued.  On appeal, the Federal Circuit holds that these statements “cannot be viewed as even plausibly misleading.”  With regard to the the false marking claim, the court also adds that the defendant had failed to plead competitive harm, which is now a core element of false marking under the Leahy-Smith America Invents Act of 2011.

+ + + + +

Judge Newman wrote the majority opinion that was joined by Judge Linn.

Judge Lourie wrote in dissent – basically arguing that more deference should have been given to the district court's role of ensuring that the pleadings are clear enough.  Judge Lourie acknowledged legal mistakes of the district court, but also directed attention to a separate aspect of the district court decision. The district court wrote: “Rather than plead in a coherent fashion, making clear how the facts support a particular theory of infringement as to a given Defendant, Plaintiff has conflated all his facts, pleading without making any distinctions of any kind. This ambiguity in pleading is unacceptable.”   

Notes

  • As with most design patents, this one issued without substantive examination on the merits.  The application was filed in November 2008 and the first correspondence from the USPTO was a notice of allowance mailed in May 2009. The patent issued shortly thereafter.
  • Professor Tushnet has more on her site with more focus on the Lanham Act claims: http://tushnet.blogspot.com/2013/01/do-you-know-where-your-towel-is-and.html. 

Obvious as a Matter of Law

Patent, ,

By Dennis Crouch  [UPDATED]

Soverain Softwarwe v. Newegg (Fed. Cir. 2013)

This Federal Circuit decision is fairly big news as far as its legal results. District Court Judge Davis rejected Newegg's obviousness argument on summary judgment – finding each of the asserted patent claims not invalid. On appeal, the Federal Circuit has completely reversed that holding and instead finds here that all of the asserted claims are invalid as obvious. The case also raises a novel argument for secondary indicia of nonobviousness.

The unanimous opinion is written by Judge Newman and joined by Judges Prost and Reyna.

The Federal Circuit panel's approach here follows the lead of KSR International Co., v. Teleflex, Inc., 550 U.S. 398 (2007). In that case, the Supreme Court was able to make the legal conclusion that the asserted claims were obvious because the factual underpinnings of obviousness were not in material dispute.

Where, as here, the content of the prior art, the scope of the patent claim, and the level of ordinary skill in the art are not in material dispute, and the obviousness of the claim is apparent in light of these factors, summary judgment is appropriate.

In his usual quotable way, Greg Aharonian writes that "A bit of commonsense leaks into the CAFC."

The asserted patents in this case are all eCommerce patents purchased out of bankruptcy. United States Patent Nos. 5,715,314, 5,909,492, and 7,272,639. The court walked through the obviousness of each different claim finding that (1) each element was found in the prior art and (2) the combination of elements would have been well within the skill of an ordinary database designer and GUI developer.

Licensing as Secondary Indicia of Nonobviousness: The court does have an interesting discussion of secondary indicia of nonobviousness. The patentee argued that the extensive licensing of its patent provided evidence of the patent's nonobviousness – asking the rhetorical question "why would someone pay to license an invalid patent?" The court did not entirely foreclose that argument in the future, but appears to have sided with Newegg's contention that the licenses were taken "to avoid the costs of litigation" and not to take advantage of the invention.