Eon-Net v. Flagstar Bancorp: Exceptional Case after Remand

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By Jason Rantanen

Eon-Net LP v. Flagstar Bancorp (Fed. Cir. 2011) Download 09-1308
Panel: Lourie (author), Mayer and O'Malley

This decision is an important opinion in the area of litigation sanctions entered against a patentee, and should be read in conjunction with two cases issued earlier this year, iLor v. Google, 631 F.3d 1372 (Fed. Cir. 2011), and Old Reliable v. Cornell, 635 F.3d 539 (Fed. Cir. 2011).  Patently-O commentary on those cases can be found here and here.

Background
Eon-Net is a patent holding company formed to enforce the three patents in suit, which it did with vigor.  While most of its lawsuits resulted in early settlements or dismissals, Eon-Net's suit against Flagstar took a different turn.  The district court initially entered summary judgment of non-infringement on the sua sponte ground "that the written description limited the claims to processing information originating from a hard copy document and Eon-Net's position that the claims covered the processing of information entered on a website was baseless," and awarded Rule 11 sanctions.  Slip Op. at 7.  However, that decision was vacated by the Federal Circuit because Eon-Net had not been given an opportunity to respond, and thus "it was impossible to determine if Eon-Net's claim construction and infringement positions were without merit."  Id. at 8.

On remand, the case was reassigned to a new judge and the parties engaged in the claim construction process, after which the court again limited the disputed elements to information originating from a hard copy document.  Eon-Net stipulated to non-infringement.  Upon motion by Flagstar, the district court found the case exceptional under 35 U.S.C. 285 and in violation of Rule 11 of the Federal Rules of Civil Procedure. On appeal, the CAFC first affirmed the district court's claim construction before turning to the exceptional case finding.

Many Varieties of Misconduct Can Support an Exceptional Case Finding
Before engaging in analysis of the specific bases for the district court's exceptional case finding, the CAFC first noted that many varieties of misconduct can support an exceptional case finding under 35 U.S.C. § 285: lodging frivolous filings, engaging in vexatious or unjustified litigation, and litigation misconduct and unprofessional behavior.  The court reiterated, however, that absent litigation misconduct or misconduct in securing the patent, "sanctions under § 285 may be imposed against the patentee only if both (1) the patentee brought the litigation in bad faith; and (2) the litigation is objectively baseless."  Slip Op. at 17.

Eon-Net Filed Objectively Baseless Litigation in Bad Faith
Affirming the district court's exceptional case finding, the Federal Circuit agreed that this lawsuit was objectively baseless, filed in bad faith and for an improper purpose.  After distinguishing iLor v. Google, in which the CAFC also addressed the issue of whether a claim construction was objectively baseless, the court turned to the question of whether Eon-Net had filed the lawsuit in bad faith and for an improper purpose, concluding that it had:

In particular, the district court found that Eon-Net’s case against Flagstar had “indicia of extortion” because it was part of Eon-Net’s history of filing nearly identical patent infringement complaints against a plethora of diverse defendants, where Eon-Net followed each filing with a demand for a quick settlement at a price far lower than the cost to defend the litigation.

Slip Op. at 22.  This strategy of exploiting the high cost to defend complex patent litigation in order to extract nuisance value settlements constituted bad faith.  The court pointed to Eon-Net's pattern of filing complaints, then demanding quick settlements at a price far lower than the cost of litigation.  Parties must either expend significant resources to defend against the suit – as Flagstar did in this case – or give in to the nuissance settlement demand.  FIling such a meritless lawsuit also is also a waste of judicial resources, as it "unnecessarily require[s] the district court to engage in excessive claim construction analysis before it is able to see the lack of merit of the patentee's infringement allegations."  Slip Op. at 23. 

Of course, patentees should be able to enforce their patent rights or offer licensing terms.  Nevertheless, "the appetite for licensing revenue cannot overpower a litigant’s and its counsel’s obligation to file cases reasonably based in law and fact and to litigate those cases in good faith."  Slip Op. at 24.

Comment: although the CAFC affirmed the district court's finding that Eon-Net had acted with an improper purpose, it did not suggest that that requirement should be grafted onto the "bad faith" element.

The CAFC also affirmed the district court's finding that Eon-Net and Zimmerman had engaged in litigation misconduct and its imposition of Rule 11 sanctions.

Patentable Subject Matter and the Supreme Court Myriad Preview

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Myriad's patent claims are directed, inter alia, to several isolated human DNA molecules that represent the BRCA1 and BRCA2 genes. These gene mutations are associated with an increased risk of developing breast and/or ovarian cancer. Because women with these gene mutations are much less likely to survive into old-age, many choose to undergo extensive preventive surgery in an attempt to avoid the risk. In other words, the genetic information and testing technology is important. 

Fundamentals of Patentability: Most patentability decisions focus on either an invention's obviousness or a patent's failure to properly disclose the invention. The Myriad case looks at something more fundamental – whether isolated human DNA is, in general, the type of thing that should be patentable.

Product of Nature: In this case, all the parties agree that the claimed DNA molecules are "compositions of matter" that nominally fall within the statutory guidelines of patentable subject matter found in 35 U.S.C. § 101. The disagreement comes from the common law gloss that the Supreme Court has added to the statute. Namely, the Supreme Court has repeated stated that, regardless of the novelty of the invention, neither products of nature nor natural phenomena qualify for patenting. The big issue in this case boils down to whether the claimed molecules fall within this product of nature exception.

Human-Made Inventions: According to the Court, "human-made inventions" sit at the opposite end of the spectrum from products of nature. To be distinguishable from products of nature, a human made invention must be "markedly different" or express "distinctive" characteristics from what is found in nature.

Patenting Isolated cDNA: Myriad's patent also claim cDNA molecules that are synthesized in the lab using the naturally occurring enzymes reverse transcriptase and DNA polymerase.  cDNA differs from native DNA in that the cDNA typically (and in this case) represents only the information for a single gene and with unnecessary (intron) information removed. Native DNA is typically part of a large single molecule (a chromosome) that includes lots of genes and lots of introns intermixed between and within gene coding. The human body has a natural process for accessing and using the particular gene when it is needed. To do this, enzymes are able to create an RNA strand that mirrors the DNA information and that removes the introns. In the human, that RNA is then used to create a protein used by the body. For Myriad, the RNA is instead transcribed back into DNA (now called cDNA because it is [c]omplementary to the RNA).

To be clear, Myriad did not claim to invent any of this process or to invent cDNA in general. Rather, Myriad invention is that it created a cDNA molecule that holds the exact same information as the naturally occurring BRCA1/BRCA2 RNA.  Certainly, cDNA is chemically different from RNA — it is preferred in the lab because it is double-stranded and typically more stable.   An additional difference here is that the claimed cDNA is isolated from the cell and the living organism so that it it can be tested and used in different ways.  

Holding: cDNA is Markedly Different from That Found in Nature: The Federal Circuit considered these arguments, but decided to take a different perspective — focusing on differences instead of similarities. In holding the claims patentable, the court reasoned that: 

  1. The claimed cDNA is a molecule that is not found in nature.
  2. The claimed cDNA is quite different from a native chromosomal DNA.
  3. Human intervention of cleaving and/or synthesizing is necessary to make the cDNA.
  4. Because the molecule is changed, it cannot be said to be merely "purified."
  5. Judge Moore goes on to explain that the cDNA sequence is "completely different than the corresponding RNA."

Insignificant Extra-Solution Modification: In a number of cases, the Supreme Court has worked to conflate the issues of patentable subject matter with issues of obviousness and novelty.  Thus, for instance, courts have repeatedly noted that insignificant extra-solution modifications of an invention cannot whitewash an otherwise unpatentable invention.   Here, potential conflation has a strong foothold because the real breakthrough at the time was discovery of the genetic sequence itself.  It took tremendous effort and ingenuity to discover that transcription map and that map was the key to their discovery as outlined in the inventors 1994 Science article.  However, in 1994 (the time of the invention) once a sequence was known, almost any trained molecular biology lab technician could manufacture the isolated cDNA with effort but without much necessary ingenuity. If the discovered map itself was unpatentable as merely information and the process to create the isolated DNA was already known, then where is the invention? This type of analysis is outside of mainstream Federal Circuit decisions, but if the Supreme Court takes the case, the interplay between what was invented and what was already known may well be an important element in to the court's discussion of patentable subject matter.  

   

   

   

Patent Reform 2011: House Bill Coming to the Senate in September

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[Update 8/3/2011] In the immediate wake of the debt crisis “solution.” President Obama talked about the next steps for Congress.  High on his agenda: Patent Reform:

Through patent reform, we can cut the red tape that stops too many inventors and entrepreneurs from quickly turning new ideas into thriving businesses — which holds our whole economy back.

Senate Majority Leader Harry Reid then announced that the patent reform bill will be the first item taken up for consideration when the Senate returns from recess. 

Parallel patent reform Bills have already passed the House and the Senate.  The Bills have a number of differences. 

Senate democrates have filed a cloture motion to end debate on patent reform and take an immediate vote on H.R. 1249 in toto once the Senate returns from vacation in early September.  Under this scenario, the legislation would not need to return to the House for any further consideration.

Joint Appendix Practice

Patent

By Jason Rantanen

ClearValue, Inc. v. Pearl River Polymers, Inc. (Fed. Cir. 2011) (nonprecedential order) Download 2011-1078.8-1-11.1

The preparation of joint appendices in connection with Federal Circuit appeals is an instance where rules and practices often collide.  Technically, parties may only include the specific record pages actually referenced in the parties' briefs.  See Federal Circuit Rule 30(a)(2)(B).  With few exceptions, no additional context pages are permitted by the rules.  For example, the joint appendix rules technically preclude the addition of the cover page of motions that contain pages being cited.  Prior art references may not be included in their entirety – only the specific pages that are referenced – unless they are a patent.  And it would be a violation of the rules to include the page before or after a cited page of a textbook or technical manual.  The main exception relates to "transcript pages," for which the rules encourage parties submit sufficient surrounding pages to provide context for a referenced excerpt.  In addition, the court's rules prohibit "indiscrininate referencing in briefs to blocks of record pages," so parties may not include large quantities of the record via broad citation.  FCR 30(a)(2)(C).

In reality, appellants and appelles sometimes disregard these strict rules, and instead make some attempt to provide enough context so that cited materials are meaningful to the court.  Parties risk incurring the court's wrath should they go too far, however, as illustrated by Judge Prost's order in ClearValue.  ClearValue did not simply attempt to provide a few context pages; rather it apparently indiscriminately cited to an entire 195-page training manual, an entire 344-page motion for summary judgment, and an entire 797-page transcript.

This practice violated Federal Circuit Rule 30, and the court ordered ClearValue to reimburse the appellant for its copying costs, to correct its briefs to cite only those pages of the documents that are relevant to the issues it raises, and to prepare a new joint appendix containing only those items cited by the parties in their briefs, along with a few pages before and after the relevant testimony paassages for context. 

While I agree with the court's response in this particular circumstance, given the quantity of likely unnecessary material that ClearValue required be included in the appendix, the court's opinion highlights the jumbled nature of the joint appendix rule.  For some materials (patents and testimony), context is allowable; for everything else, it is not.  Unless there is a good reason to draw this line, perhaps the rule should be revised to apply equally to all materials included in the appendix. 

Thanks to Hal Wegner for pointing out this nonprecedential order in his email newsletter.

The BPAI’s Precedent: Most Cited Cases by the Board

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The following list provides the most-often cited cases in BPAI decisions thus-far in 2011.

The vast majority of BPAI decisions involve a patent applicant appealing an examiner's final rejection and the most common patentability issue on appeal is obviousness. Thus, it is not surprising that many of the cited cases involve obviousness and claim construction issues. These cases have influenced the court in the past and are likely to continue to do so.

  1. KSR v. Teleflex, 550 U.S. 398 (2007) (Standard for obviousness);
  2. In re KAHN, 441 F.3d 977 (Fed. Cir. 2006) (Reasons for obviousness determination must be articulated);
  3. In re AMERICAN ACADEMY OF SCIENCE TECH CENTER., 367 F.3d 1359 (Fed. Cir. 2004) (Claims should be given their broadest reasonable interpretation);
  4. In re OETIKER, 977 F.2d 1443 (Fed. Cir. 1992) (The examiner has the burden of presenting a prima facie case for rejection);
  5. Graham v. John Deere, 383 U.S. 1 (1966) (Methodology for determining obviousness);
  6. In re Keller, 642 F.2d 413 (C.C.P.A. 1981) (A rejection premised upon a combination of references cannot be overcome by attacking the references individually);
  7. In re Morris, 127 F.3d 1048 (Fed. Cir. 1997) (Claims should be given their broadest reasonable interpretation consistent with the specification);
  8. Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (ordinary meaning of claim);
  9. In re Merck, 800 F.2d 1091 (Fed. Cir. 1986) (Non-obviousness cannot be established by attacking references individually where the rejection is based upon the teachings of a combination of references);
  10. In re Best, 562 F.2d 1252 (C.C.P.A. 1977) (When the PTO identifies prior art that is the same or substantially the same as claimed subject matter, the burden shifts to the applicant to come forward with evidence and argument showing that the prior art products do not necessarily or inherently possess the characteristics of the claimed product);
  11. In re Zletz, 893 F.2d 319 (Fed. Cir. 1989) (Claims must be interpreted as broadly as their terms reasonably allow but limitations should not be read into claims);
  12. In re Schreiber, 128 F.3d 1473 (Fed. Cir. 1997) (claim structure form primary claim limitations; elements of anticipation);
  13. In re Spada, 911 F.2d 705 (Fed. Cir. 1990) (process of proving anticipation);
  14. In re Gurley, 27 F.3d 551 (Fed. Cir. 1994) (Teaching away; A known or obvious composition does not become patentable simply because it has been described as somewhat inferior to some other product for the same use); and
  15. In re Warner, 379 F.2d 1011 (C.C.P.A. 1967) (The PTO must produce factual basis for its decisions).

To create the table, I first parsed all of the BPAI decisions that have been released thus far in 2011 in order to create a table of authority for each case. I then ranked the cited cases to find those that were most-often cited.

As an interesting tidbit, I also looked for correlation between the citation of a particular case and the outcome of the BPAI decision. As you might expect, some cases are better for patent applicants. Two examples of this are In re Warner and In re Gurley. In cases citing Warner, the examiner's rejections are affirmed less than 10% of time. On the flip side – cases citing Gurley affirm the examiner rejection in more than 80% of cases.

Patently-O Daily E-Mail (Free)

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Patently-O Bits & Bytes by Lawrence Higgins

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Patent Jobs:

  • Roberts Mlotkowski Safran & Cole is seeking a patent attorney with 2-4 years of experience and a degree in electrical engineering. [Link]
  • Skiermont Puckett is searching for one or more associate attorneys with 3 or more years of patent litigation experience. [Link]
  • Roberts Mlotkowski Safran & Cole is looking for a patent attorney with 2-4 years of experience and a chemical background. [Link]
  • Wolf Greenfield is seeking a patent agent or technology specialist who has experience working as a patent examiner in the Biotechnology field. [Link]
  • Greenberg Traurig is searching for a patent agent with 1-3 years of experience. [Link]
  • Wilen Group is looking for an in-house patent attorney with an engineering background. [Link]
  • Cantor Colburn is seeking an associate patent attorney with 2-5 years of experience. [Link]
  • Lee & Hayes is searching for patent attorneys with at least 3 years of experience. [Link]
  • Maginot, Moore & Beck is looking for a patent attorney with 1-5 years of experience and a background in electrical engineering. [Link]
  • The Webb Law Firm is seeking associates with a background in metallurgical engineering. [Link]
  • Thompson Hine is searching for a patent attorney with 2-3 years of experience. [Link]
  • King & Spalding is looking for a patent agent with 2-4 years of experience and a background in engineering. [Link]
  • Aspen Aerogels is seeking a patent agent/IP analyst with 5+ years of experience. [Link]
  • Myriad Genetics is seeking a patent attorney with 2-5 years of experience and a background in molecular biology. [Link]

Patently-O Bits & Bytes by Lawrence Higgins

Patent

Patent Jobs:

  • Roberts Mlotkowski Safran & Cole is seeking a patent attorney with 2-4 years of experience and a degree in electrical engineering. [Link]
  • Skiermont Puckett is searching for one or more associate attorneys with 3 or more years of patent litigation experience. [Link]
  • Roberts Mlotkowski Safran & Cole is looking for a patent attorney with 2-4 years of experience and a chemical background. [Link]
  • Wolf Greenfield is seeking a patent agent or technology specialist who has experience working as a patent examiner in the Biotechnology field. [Link]
  • Greenberg Traurig is searching for a patent agent with 1-3 years of experience. [Link]
  • Wilen Group is looking for an in-house patent attorney with an engineering background. [Link]
  • Cantor Colburn is seeking an associate patent attorney with 2-5 years of experience. [Link]
  • Lee & Hayes is searching for patent attorneys with at least 3 years of experience. [Link]
  • Maginot, Moore & Beck is looking for a patent attorney with 1-5 years of experience and a background in electrical engineering. [Link]
  • The Webb Law Firm is seeking associates with a background in metallurgical engineering. [Link]
  • Thompson Hine is searching for a patent attorney with 2-3 years of experience. [Link]
  • King & Spalding is looking for a patent agent with 2-4 years of experience and a background in engineering. [Link]
  • Aspen Aerogels is seeking a patent agent/IP analyst with 5+ years of experience. [Link]
  • Myriad Genetics is seeking a patent attorney with 2-5 years of experience and a background in molecular biology. [Link]

Patently-O Bits & Bytes by Lawrence Higgins

Patent

Patent Jobs:

  • Roberts Mlotkowski Safran & Cole is seeking a patent attorney with 2-4 years of experience and a degree in electrical engineering. [Link]
  • Skiermont Puckett is searching for one or more associate attorneys with 3 or more years of patent litigation experience. [Link]
  • Roberts Mlotkowski Safran & Cole is looking for a patent attorney with 2-4 years of experience and a chemical background. [Link]
  • Wolf Greenfield is seeking a patent agent or technology specialist who has experience working as a patent examiner in the Biotechnology field. [Link]
  • Greenberg Traurig is searching for a patent agent with 1-3 years of experience. [Link]
  • Wilen Group is looking for an in-house patent attorney with an engineering background. [Link]
  • Cantor Colburn is seeking an associate patent attorney with 2-5 years of experience. [Link]
  • Lee & Hayes is searching for patent attorneys with at least 3 years of experience. [Link]
  • Maginot, Moore & Beck is looking for a patent attorney with 1-5 years of experience and a background in electrical engineering. [Link]
  • The Webb Law Firm is seeking associates with a background in metallurgical engineering. [Link]
  • Thompson Hine is searching for a patent attorney with 2-3 years of experience. [Link]
  • King & Spalding is looking for a patent agent with 2-4 years of experience and a background in engineering. [Link]
  • Aspen Aerogels is seeking a patent agent/IP analyst with 5+ years of experience. [Link]
  • Myriad Genetics is seeking a patent attorney with 2-5 years of experience and a background in molecular biology. [Link]

Recent Patent Deals:

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  • Microsoft/Apple/RIM have joined together to purchase 6,000 Nortel patents for $4.5 billion. Although the sale reportedly completed this week, the US Department of Justice is investigating to consider whether the collaborative purchase was done with the intent (or potential result) of limiting competition. [Background]
  • In May 2011, Google acquired over 1,000 patents from IBM.  Acting strategically, Google did not record the assignment until after the Nortel deal.   The IBM patents appear to be focused on a Google core function of data storage. See, e.g., U.S. Patent No. 7,266,596.
  • LSI transferred 115 patents to NetApp after an asset purchase. LSI also transferred 26 patents to INVENSAS which is a subsidiary of licensing-focused TESSERA.
  • Patent enforcer Wi-LAN purchased 60 patents from Glenacre Electronics for a reported $8 million. The patents all appear to relate to wireless communications.
  • NXP sold its sound solutions business to Knowles Electronics, along with a few dozen patents. The obscure "Nytell Software" obtained another few dozen NPX patents.
  • Patent protector RPX purchased 28 patents from Fairchild Semiconductor and 15 patents from Celltrace.
  • Small private company OnSpec transferred its 26 patents to the patent enforcer TPLGroup.
  • The New Jersey company OMAHA ACQUISITION obtained a dozen or so patents related to patient beds from SANDEL MEDICAL INDUSTRIES, LLC.
  • In its settlement with Walker Digital, Apple purchased the patents it had been accused of infringing.

…

Reverse Bifurcation in Practice

Patent

By Jason Rantanen

Patent litigation can be particularly frustrating and inefficient when litigation costs far exceed the potential damages resulting from an infringement.  This issue is particularly problematic when the patent holder's expected litigation costs are significantly lower than those of the accused infringer, such as in the instance of the prototypical "patent troll," because under such circumstances the settlement value is largely driven by the expected cost of litigation to the accused infringer as opposed to the actual damages from the infringement, resulting in a windfall for the patent holder.

One strategy for addressing this issue – and for streamlining patent litigation generally – is to decide cheaper and easier issues early in the litigation process, a concept discussed by Dennis Crouch and Robert P. Merges in their article Operating Efficiently Post-Bilski by Ordering Patent Doctrine Decision-Making, 25 Berkeley Tech. L.J. 1673 (2010).  An example of the strategy is "reverse bifurcation," in which the damages phase is moved to the front of the litigation sequence with the goal of figuring out how much is really at stake.  This procedural move may be particularly appropriate in the case of patent holders who sue a large number of parties, including parties with relatively small potential damages pools, in the hopes of extracting the aforementioned undeserved rents. 

This approach was recently employed by Otter Products LLC in its suit with Gellyfish Technology of Texas.  Earlier this year, Gellyfish sued Otter and 36 other defendants for infringement of Patent No. 6,847,310.  After being served with the Complaint, Otter attempted to identify the products accused of infringing the patent, finding that only two of the products named in the Complaint were ever sold by Otter, and those products (which have since been discontinued) had trival sales with potential damages estimated in the $800-$1200 range. 

When Otter's settlement offer was rejected, it filed a motion seeking to sever itself from the existing case and requesting a "reverse bifurcation" procedure in the new matter so that damages discovery and trial would precede liability discovery and trial.  A copy of that motion is available here:  Download Gellyfish v Alltel Motion.  The motion appears to have had some effect: shortly after it was filed, Otter withdrew the motion citing additional discussions between the parties that suggested an amicable resolution.

While no order issued in response to Otter's motion, Otter's approach makes considerable sense.  From a judicial and party efficiency standpoint, forcing patent holders to identify the accused products early on during litigation may greatly simplify discovery and perhaps eliminate the need for a merits determination, which itself can be extremely complex.  It may also help to discourage patent holders from bringing suits in instances where the potential damages are minimal compared to litigation costs.  And forcing patent holders to think about a realistic universe of damages (as opposed to pipe-dreams of every product sold by the accused infringer) may encourage earlier settlement – as perhaps occurred here.

Note: Thanks to Robert Merges for pointing me to the Otter case and the EDTexweblog.com for background on the case. 

Federal Circuit: Isolated Human DNA Molecules are Patentable

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ASSOCIATION FOR MOLECULAR PATHOLOGY V. MYRIAD GENETICS (Fed. Cir. 2011)

In a much anticipated decision, the Court of Appeals for the Federal Circuit has rejected the Southern District of New York’s court’s holding that could have rendered invalid all patents claiming isolated forms of naturally occurring DNA molecules. However, the decision is somewhat nuanced and will be appealed.

Judge Lourie drafted the opinion of the court that was joined in-part by the entire panel. Judge Moore drafted a concurring opinion that agrees with the conclusion that the isolated DNA is patentable but disagrees with Judge Lourie’s methodology for determining when an isolated compound is sufficiently “man made” to no longer be considered a natural phenomenon or product of nature. Judge Bryson concurred in part, but dissented on the issue of whether an isolated human DNA molecule should not be patentable. Judge Bryson writes:

We are therefore required to decide whether the process of isolating genetic material from a human DNA molecule makes the isolated genetic material a patentable invention. The court concludes that it does; I conclude that it does not.

Focusing here briefly on the majority opinion, the court made four specific holdings:

  • Affirmed: The District Court properly had jurisdiction over the case;
  • Reversed: The district court erred in holding that Myriad’s claims directed to isolated DNA were invalid;
  • Affirmed: The district court properly held that Myriad’s claims directed to comparing or analyzing gene sequences were invalid; and
  • Reversed: The district court erred in holding that Myriad’s claims directed to screening potential cancer therapeutics via changes in cell growth rates were invalid.

The result here is that Myriad’s BRCA Gene patents are somewhat damaged, but remain strong. The plaintiffs are likely to either request an en banc rehearing or immediately file a petition for a writ of certiorari with the Supreme Court. Myriad is likely to request a rehearing on the issue of subject matter jurisdiction.

[More to Come]

Documents: Read the 105 page decision here.

Essay: Not So Confidential: A Call for Restraint in Sealing Court Records

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In a new Patently-O Patent Law Journal essay, Professor Bernard Chao argues that courts should do more to ensure public access to patent litigation documents. The Court of Appeals for the Federal Circuit already requires the parallel submission of non-confidential versions of any briefs filed under seal. Professor Chao argues that same approach could work in the district courts and would go a long way in solving the current problem of overly-sealed records. Read it while its hot:

Bernard Chao, Not So Confidential: A Call for Restraint in Sealing Court Records, 2011 Patently-O Patent L.J. 6.

Patent Licenses are Presumed to Cover Continuation Applications (Absent Clear Indication to the Contrary)

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General Protecht Gp. (Zh. Dongzheng) v. Leviton Mfg. (Fed. Cir. 2011)

By Dennis Crouch

Note: This is an important case that clarifies a Federal Circuit rule of contract interpretation. The court holds here that a patent license will be presumed to cover continuation patents claiming priority to the licensed patent. Contracting parties can overcome this presumption by including within the contract “clear indication of mutual intent to the contrary.” This case should be read in conjunction with TransCore v. Electronic Transaction Consultants Corp., 563 F.3d 1271 (Fed. Cir. 2009). In TransCore, a seeming clear statement that the license did not “apply to any other patents [already issued] or to be issued in the future” was insufficient to overcome the presumption that future continuation applications were included within the license. In both TransCore and GPG, the presumption is derived both (1) from a reading of the terms of the written contract and (2) from equitable estoppel principles.

The case is also notable for its approval of the use of a preliminary injunction against the parties to stop proceedings occurring in a separate judicial forum.

* * * *

Background: In a prior lawsuit, Leviton sued GPG for infringing two of its circuit interrupter patents. Prior to trial, the parties settled and Leviton issued a covenant not to sue GPG or its customers on the patents-in-suit. The settlement also included a venue clause – indicating that any dispute would be “prosecuted exclusively in the U.S. District Court for the District of New Mexico.”

After the settlement, Leviton continued to prosecute continuation applications stemming from the original patents and, in 2010, filed complaints in both the International Trade Commission (ITC) and the Northern District of California against GPG for infringing two of the continuation patents.

In response, GPC filed a declaratory action in the New Mexico court and persuaded the judge there to issue a preliminary injunction barring Leviton from pursuing its claims in either the ITC or California. GPC argued that the prior settlement implicitly provides the company with a license to the newly issued patents and that, according to the prior settlement, any dispute regarding the license must be decided by the New Mexico court.

On appeal, the Federal Circuit affirmed lower court’s preliminary injunction.

This case presents a non-frivolous dispute regarding the scope of a patent license. The outcome of that dispute will determine whether the patentee can sustain its suit for infringement. Thus, there is no question in this case that the dispute “relates to or arises out of” the Settlement Agreement. The forum selection clause therefore applies, and the district court did not abuse its discretion in granting the preliminary injunction on that basis.

GPC’s implied license argument is non-frivolous based upon the Federal Circuit’s decision in TransCore v. Electronic Transaction Consultants Corp., 563 F.3d 1271 (Fed. Cir. 2009). In that caes, TransCore had previously settled a lawsuit that gave ETC (through MARK IV) a license to practice the patents in suit. The settlement specifically stated that the covenant not to sue “shall not apply to any other patents issued as of the effective date of this Agreement or to be issued in the future.” However, when TransCore’s continuation patent later issued, the Federal Circuit held that the new patent was also covered by an implied license and through legal estoppels. Here, the court found that the same principles apply.

From our holding in TransCore it reasonably follows that where, as here, continuations issue from parent patents that previously have been licensed as to certain products, it may be presumed that, absent a clear indication of mutual intent to the contrary, those products are impliedly licensed under the continuations as well. If the parties intend otherwise, it is their burden to make such intent clear in the license. It is well settled that parties are free to contract around an interpretive presumption that does not reflect their intentions.

Affirmed.

Note: The preliminary injunction issue (esp. irreparable harm) is to be discussed in a separate post.

Federal Circuit Judicial Watch

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The Court of Appeals for the Federal Circuit is a twelve member court, but that membership has been undergoing major changes over the past few years.

Most recently, Judge Arthur J. Gajarsa has announced his plan to step away from active service and assume senior status at the end of this week. Judge Gajarsa's absence creates a second open seat on the court. Although Edward DuMont has been nominated to fill the other open seat (vacated by Chief Judge Paul Michel, it appears likely that DuMont's nomination will not move forward at this point. Earlier this year, Judge Jimmie V. Reyna was confirmed by the Senate. The court has typically been seen as only lightly-partisan according to traditional Republican-Democratic lines, however it is interesting to note that Judge Reyna's confirmation marks the first time in history that the majority of active judges on the court were nominated by a Democratic President. Judge Kathleen O'Malley also joined the court on December 27, 2010.

With the recent passing of Judges Archer and Friedman, the court only includes four senior status judges: Judges Mayer, Plager, Clevenger, and Schall. As mentioned, Judge Gajarsa will soon join the senior status ranks. In 2011, senior judges have participated in over 20% of Federal Circuit panel decisions. Judges Newman, Lourie, Bryson, and Dyk are all eligible for Senior Status and Judge Linn will be eligible on his next birthday. Although none of those five have publicly announced any intent to step down, many expect at least two more lines to open-up during the next year.

The current Chief Judge of the Federal Circuit is Randall Rader. The position of Chief Judge of the Federal Circuit is given to the most senior active member of the court who is less than 65 years old and who has not previously been Chief Judge. The term is seven years. If Judge Rader serves-out his entire seven year term, then the next Chief Judge will be Judge Kimberly Moore. If, however, he resigns at least a year early, then Judge Sharon Prost would take on the post at age 64.

Thanks also to Hal Wegner of Foley & Lardner who has been keeping tabs on the Court.

Federal Circuit Judicial Watch

Patent

The Court of Appeals for the Federal Circuit is a twelve member court, but that membership has been undergoing major changes over the past few years.

Most recently, Judge Arthur J. Gajarsa has announced his plan to step away from active service and assume senior status at the end of this week. Judge Gajarsa's absence creates a second open seat on the court. Although Edward DuMont has been nominated to fill the other open seat (vacated by Chief Judge Paul Michel, it appears likely that DuMont's nomination will not move forward at this point. Earlier this year, Judge Jimmie V. Reyna was confirmed by the Senate. The court has typically been seen as only lightly-partisan according to traditional Republican-Democratic lines, however it is interesting to note that Judge Reyna's confirmation marks the first time in history that the majority of active judges on the court were nominated by a Democratic President. Judge Kathleen O'Malley also joined the court on December 27, 2010.

With the recent passing of Judges Archer and Friedman, the court only includes four senior status judges: Judges Mayer, Plager, Clevenger, and Schall. As mentioned, Judge Gajarsa will soon join the senior status ranks. In 2011, senior judges have participated in over 20% of Federal Circuit panel decisions. Judges Newman, Lourie, Bryson, and Dyk are all eligible for Senior Status and Judge Linn will be eligible on his next birthday. Although none of those five have publicly announced any intent to step down, many expect at least two more lines to open-up during the next year.

The current Chief Judge of the Federal Circuit is Randall Rader. The position of Chief Judge of the Federal Circuit is given to the most senior active member of the court who is less than 65 years old and who has not previously been Chief Judge. The term is seven years. If Judge Rader serves-out his entire seven year term, then the next Chief Judge will be Judge Kimberly Moore. If, however, he resigns at least a year early, then Judge Sharon Prost would take on the post at age 64.

Thanks also to Hal Wegner of Foley & Lardner who has been keeping tabs on the Court.

Federal Circuit Judicial Watch

Patent

The Court of Appeals for the Federal Circuit is a twelve member court, but that membership has been undergoing major changes over the past few years.

Most recently, Judge Arthur J. Gajarsa has announced his plan to step away from active service and assume senior status at the end of this week. Judge Gajarsa's absence creates a second open seat on the court. Although Edward DuMont has been nominated to fill the other open seat (vacated by Chief Judge Paul Michel, it appears likely that DuMont's nomination will not move forward at this point. Earlier this year, Judge Jimmie V. Reyna was confirmed by the Senate. The court has typically been seen as only lightly-partisan according to traditional Republican-Democratic lines, however it is interesting to note that Judge Reyna's confirmation marks the first time in history that the majority of active judges on the court were nominated by a Democratic President. Judge Kathleen O'Malley also joined the court on December 27, 2010.

With the recent passing of Judges Archer and Friedman, the court only includes four senior status judges: Judges Mayer, Plager, Clevenger, and Schall. As mentioned, Judge Gajarsa will soon join the senior status ranks. In 2011, senior judges have participated in over 20% of Federal Circuit panel decisions. Judges Newman, Lourie, Bryson, and Dyk are all eligible for Senior Status and Judge Linn will be eligible on his next birthday. Although none of those five have publicly announced any intent to step down, many expect at least two more lines to open-up during the next year.

The current Chief Judge of the Federal Circuit is Randall Rader. The position of Chief Judge of the Federal Circuit is given to the most senior active member of the court who is less than 65 years old and who has not previously been Chief Judge. The term is seven years. If Judge Rader serves-out his entire seven year term, then the next Chief Judge will be Judge Kimberly Moore. If, however, he resigns at least a year early, then Judge Sharon Prost would take on the post at age 64.

Thanks also to Hal Wegner of Foley & Lardner who has been keeping tabs on the Court.

In Memory: Judge Glenn Archer

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James Brookshire of the Federal Circuit Bar Association (FCBA) sent me a note today that Judge Glenn Archer has died. Judge Archer first joined the Court of Appeals for the Federal Circuit in 1985 after a career as a JAG lawyer, a private practitioner, and an Assistant Attorney General of the Department of Justice Tax Division. Judge Archer was born in my home state of Kansas and left to attend Yale in the late 1940’s. After Yale, he attended law school at George Washington in DC.

Judge Archer was Chief Judge of the Federal Circuit from 1994-1997 when he took senior status at the age of 68. His line on the court was not filled until 2000 when Judge Dyk was confirmed by the Senate. Judge Archer’s last opinion for the court was in January 2011 in a case captioned Wiley v. Merit Systems Protection Bd. Chief Judge Rader and Judge Gajarsa joined Judge Archer’s opinion holding that the MSPB had failed to properly follow the procedural requirements concerning a retired federal employee’s survivor annuity. As a senior judge in 1998, Judge Archer was tasked with drafting the majority opinion in the en banc case of Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448 (Fed. Cir. 1998). His opinion, written in the wake of the Supreme Court’s Markman decision, held that claim construction was a “purely legal issue” subject to “de novo review on appeal.” That still-controversial decision has now been cited more than 8,000 times.

A 2008 IP Law & Business article discussed the close connection between Judge Archer’s former clerks. These clerks include Judge Kimberly Moore, Professor Tim Holbrook, Frank Angileri, and Teresa Lavenue.

The Court Released a Brief Statement

Patent Term Adjustment (PTA) Statistics

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The chart above shows the perecent of patents that are awarded some patent term adjustment (PTA) at issue.  I have highlighted a recent apparent downward trend that began around October 2010.  Still, around 80% of recently issed patents have lengthened patent terms due to patent office delays that go beyond the statutory bounds outlined in 35 U.S.C. 154.

The chart below shows the average PTA award, again grouped by issue date. The break-point in early 2010 shows the impact of the Federal Circuit's Wyeth decision holding that the PTO had been under-calculating patent term. The average PTA award is now hovering around 600 days (20 months). 

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