Teva v. Eisai: Standing for subsequent Paragraph IV filers

By Jason Rantanen

Teva Pharmaceuticals USA, Inc. v. Eisai Co. (Fed. Cir. 2010)
Panel: Rader, Dyk, and Prost (author)

A company seeking to market a generic version of a previously approved pharmaceutical product must file and receive approval of an Abbreviated New Drug Application (ANDA).  One aspect of the ANDA, called a "Paragraph IV Certification," involves an assertion that each of the patents for that drug listed in the Orange Book is invalid and/or not infringed.  The first manufacturer to file a Paragraph IV Certification is entitled to 180 days of generic marketing exclusivity; until the first-filer's exclusivity period has run, the FDA may not approve ANDA applications by other manufacturers who have filed Paragraph IV certifications for the same patent.   The first-filer's exclusivity period can be triggered by either (1) its commercial marketing of the drug; or (2) entry of a court judgment finding the patent invalid or not infringed.

Eisai holds the New Drug Application for donepezil, and owns five patents listed for this product in the Orange Book.  Of these five patents, one (the '841 patent) was the subject of separate litigation that produced a preliminary injunction barring Teva from marketing a generic version of donepezil until the expiration of the '841 patent in November 2010.  With respect to the remaining four patents, Ranbaxy Laboratories was the first to file a Paragraph IV certification; thus, because Ranbaxy's exclusivity period had not yet run, approval of Teva's ANDA was barred. 

To remedy this issue, Teva brought a declaratory judgment action against Eisai on the remaining four patents, seeking to trigger the exclusivity period.  Ultimately, there was no question as to whether Teva infringed the patents: Eisai had filed a statutory disclaimer for two of them, effectively canceling their claims, and had entered into a covenant not to sue Teva on the remaining two patents.  Nevertheless, all four patents continued to be listed in the Orange Book, precluding approval of Teva's ANDA.

After the Declaratory Judgment action was filed, Eisai moved to dismiss on the ground that Teva had failed to  establish the existence of an Article III case or controversy.  The district court agreed, dismissing the case for lack of jurisdiction.  Teva appealed.

The Federal Circuit reversed the dismissal.  With respect to the jurisdictional issue, the court focused on two cases: Caraco Pharmaceutical Laboratories, Ltd. v. Forest Laboratories, Inc., 527 F.3d 1278 (Fed. Cir. 2008) and Janssen Pharmaceutica, N.V. v. Apotex, Inc., 540 F.3d 1353, 1359 (Fed. Cir. 2008).   Looking to Caraco, the court explained that:

the generic drug company’s injury (i.e., exclusion from the market) is fairly traceable to the defendant’s actions because “but-for” the defendant’s decision to list a patent in the Orange Book, FDA approval of the generic drug company’s ANDA would not have been independently delayed by that patent. 527 F.3d at 1292; see 21 U.S.C. § 355(j)(5)(B)(iv). When an Orange Book listing creates an “independent barrier” to entering the marketplace that cannot be overcome without a court judgment that the listed patent is invalid or not infringed—as for Paragraph IV filers—the company manufacturing the generic drug has been deprived of an economic opportunity to compete. Id. at 1293; see also 21 U.S.C. § 355(j)(5)(B)(4). A declaratory judgment redresses this alleged injury because it eliminates the potential for the corresponding listed patent to exclude the generic drug from the market.

Slip. Op. at 11.  On the other hand, as in Janssen, where a generic manufacturer agrees that an Orange Book patent is valid, enforceable, and infringed, that generic manufacturer lacks standing to pursue a declaratory judgment action against other Orange Book patents for that drug because it cannot market its product even if the exclusivity period runs.  

Applying this framework, the court concluded that Teva had established an actual controversy.  The court distinguished Janssen on the ground that the preliminary injunction associated with the '841 patent was necessarily preliminary, and there was no final determination as to the validity, infringement or enforceability of the '841 patent.  Thus, although Teva could not currently market its product, the preliminary injunciton did not eliminate the existence of a controversy.

With respect to the discretionary component of the Declaratory Judgment Act, the Federal Circuit concluded that the district court had abused its discretion in declining jurisdiction, both because it had relied on its determination that it lacked subject matter jurisdiction as well as being unsupported by the facts. 

The Federal Circuit and Inequitable Conduct: Part III

By Jason Rantanen

Yesterday, I discussed our conclusion that the Federal Circuit applies a stricter standard than the lower tribunals it reviews and that this preference for patentee success manifests through the intent to deceive component of the inequitable conduct analysis.   In this post, I raise some broad ideas about inequitable conduct jurisprudence.  The paper raises others as well, but the ones that follow offer a good perspective into what we believe may be going on. 

The first idea is that the Federal Circuit might be applying a standard for intent to deceive that is higher than that required by its own caselaw.  In other words, the Federal Circuit’s articulated standard – intent greater than gross negligence – might be lower then the court’s normative perspectives on inequitable conduct.  At least some circuit judges might be applying a requirement more akin to knowledge or purpose.  This idea finds some support in the empirical evidence.  Our data indicate that patentee win rates can vary dramatically (from 40% to 100%) depending on the judge authoring the opinion, as the below graph of 14 judges who sat on the bench during the past decade illustrates. 

Fig 11Following closely from this first idea, and also suggested by the Figure, is the notion that when it comes to inequitable conduct the Federal Circuit might be having trouble communicating its standard – particularly with respect to intent – because it is not speaking with one voice.  If the mental state standard applied at the appellate level differs between judges, lower tribunals might have a difficult time “locking on” to the Federal Circuit’s standard.  This problem could be amplified by the fact that, as we have shown, the Federal Circuit does not seem to have balancing jurisprudence, which theoretically would address mental state standards above the threshold.  Thus, rather than having a single standard for intent to deceive that is further refined through the balancing inquiry, Federal Circuit jurisprudence might have at least two distinct (and somewhat bipolar) mental state requirements, one higher than the other.  This state of affairs might produce jurisprudential variation (and perhaps confusion among district courts), and might concentrate (as we have observed) inequitable conduct’s focus on intent to deceive.

Another idea the paper raises is that uncertainty around the standard might reflect jurisprudential design (albeit, probably unintentional jurisprudential design).  For example, perhaps the Federal Circuit believes inequitable conduct doctrine is necessary to protect the integrity of the patent system, but is strongly biased against successful (for the patent challenger) inequitable conduct claims.  Thus, the court might desire to maintain the threat of inequitable conduct so as to encourage patent applicants to take appropriate care in dealing with the public.  Yet allowing too many findings of inequitable conduct might be equally bad, as it could lead the public to question the validity of the patent system altogether, and moreover might invite the “plague” of overasserting inequitable conduct so frequently warned about.  An obfuscated standard for intent to deceive might be just right for balancing these concerns, because it provides a structural context that allows the Federal Circuit to maintain the threat of inequitable conduct – and keep the patent bar in line – but rarely find inequitable conduct.  In effect, this structure encourages patentees to police themselves, and also creates a mechanism by which private parties are responsible for ensuring that patent applicants do not misbehave towards the government, i.e., the law sets up a system that mostly enforces itself. 

The entire paper, which also includes additional observations, ideas, and recommendations, can be downloaded here, and we welcome all comments.  In addition to responding below, comments can be sent to us directly at prm.icpaper@gmail.com.  If the download link does not work for you, and you would like a copy of the paper, please email the above address and I will be happy to send you a PDF.

The Federal Circuit and Inequitable Conduct: Part II

By Jason Rantanen

Part II of this series describes the methodology used in our working paper The Federal Circuit and Inequitable Conduct: An Empirical Analysis, and summarizes some of the key findings.  You can download the entire paper here.  In addition to responding below, comments can be sent either directly to us or to prm.icpaper@gmail.com.

Methodology
The study uses the technique of “content analysis,” which permits researchers to systematically read and empirically analyze the text of judicial opinions.  In broad terms, we first screened all Federal Circuit opinions that contained the term “inequitable conduct” to identify cases that analyzed the issue.  We read all of these cases, coding pertinent information from each independent analysis of inequitable conduct.1  Overall, we coded information from 361 inequitable conduct analyses between the years 1983 and 2010.  The coded information constitutes the empirical data, and the paper reports these data using a variety of statistical presentations and arguments. 

Results
We first examined patent applicants’ success before the Federal Circuit as opposed to lower tribunals.   Our analysis reveals that patentees are quite likely to succeed before the Federal Circuit, winning 76% of the time, a rate of success higher than that observed in the lower tribunal judgments the court is analyzing.  Overall, the Federal Circuit affirms lower tribunal findings of no inequitable conduct 91% of the time, but affirms findings of inequitable conduct only 45% of the time, as illustrated by the below graphs.  This suggests to us that the Federal Circuit is applying a stricter standard than in the lower tribunal opinions it reviews.

Fig 3
Fig 4
 
We next looked at the analytical structure of the inequitable conduct doctrine, which consists of three components: a materiality inquiry, an intent to deceive inquiry, and a discretionary judicial balancing of materiality and intent undertaken with a view toward deciding whether a patent applicant acted inequitably toward the public. 

Examining the data in this light revealed two key findings.  First, when the Federal Circuit gives a single reason for patentee success, that reason is nearly two and a half times more likely to be lack of intent to deceive than it is to be lack of materiality.  Second, balancing is expressly discussed only 8% of the time and forms the basis for a reversal only 2% of the time.  We think this means that the balancing inquiry does not play much of a substantive role in Federal Circuit inequitable conduct jurisprudence.  To be clear, while it looks like lower tribunals need to engage in this step of the analysis, the Federal Circuit does not seem to have any jurisprudence that guides or constrains how lower tribunals actually apply this step.  Instead, balancing at the Federal Circuit looks like a formality, such as checking a box or touching a base, as opposed to a meaningful guide to determining whether a patent applicant engaged in equitable conduct.

* * *

1In other words, if a case involved a claim that four patents were procured by inequitable conduct and the court’s analysis addressed all of the patents in a single textual analysis or rationale, then a single record entry was made in the dataset.  By contrast, if the court used one textual analysis or rationale to find, perhaps, that one of the patents was procured inequitably, and then used a single textual analysis or rationale to find that the other three were not, then two record entries were made in the dataset.

The Federal Circuit and Inequitable Conduct: Part I

By Jason Rantanen

Professor Lee Petherbridge, Ali Mojibi and myself are circulating a draft of our paper Inequitable Conduct and the Federal Circuit: An Empirical Analysis for comment.  The underlying study examines the content of the entire body of Federal Circuit inequitable conduct jurisprudence, and the paper offers several interpretations of the reported data.

Among the most interesting are: that the Federal Circuit seems to apply a stricter standard for inequitable conduct than a substantial number of the tribunals it reviews; that the Federal Circuit’s inequitable conduct standard is applied primarily through the intent to deceive component of the analysis; and that while the apparent lack of clarity in the inequitable conduct standard may be a result of judicial variation on the court, it may also represent a preference by the Federal Circuit to effect a jurisprudential design, the purpose of which is to encourage good faith behavior on the part of patent applicants while only rarely finding inequitable conduct. 

The abstract reads as follows:

Inequitable conduct is unique judicially created doctrine designed to punish patent applicants who behave inequitably toward the public in the course of patent acquisition.  Its name alone strikes fear into the hearts of patent prosecutors, and justly so – for when successfully asserted, inequitable conduct can have devastating consequences that reach far beyond a patentee’s case.  The need for a systematic empirical study of inequitable conduct jurisprudence has become especially pressing now that the Federal Circuit is reviewing inequitable conduct en banc – in terms so broad as to be unprecedented in the history of the doctrine.  This Article reports such a study. 

The study reported here provides evidence, inter alia, that the Federal Circuit applies an inequitable conduct standard stricter than that applied by a substantial number of the tribunals it reviews.  The Federal Circuit’s stricter standard manifests primarily through the intent to deceive component of inequitable conduct doctrine.  For all intents and purposes the Federal Circuit has no substantive jurisprudence around the balancing component, and the materiality component is comparatively less impactful then intent to deceive.  The court appears to have trouble communicating its stricter standard to lower tribunals.  We offer some explanations for why this might be so, and offer some modest suggestions that might advance inequitable conduct doctrine.

The complete Article can be downloaded here.   As this is a work in progress, we are particularly interested in any comments, including alternate explanations for the results we discuss.  In addition to responding below, comments can be sent to us directly or to prm.icpaper@gmail.com.

The Standard for Patent Invalidity Under the Prospect Theory

By Dennis Crouch

In 1888, the US Supreme Court plainly held that patent rights granted by the US government could only be overcome with clear and convincing evidence:

The presumption attending the patent, even when directly assailed, that it was issued upon sufficient evidence that the law had been complied with by the officers of the government . . . can only be overcome by clear and convincing proof.

U.S. v. Iron Silver Min. Co., 128 U.S. 673 (1888). Of course, Iron Silver does not concern invention rights. Rather, the case is about patents for placer mineral rights that were granted to Iron Silver based on the company's claim that it had discovered valuable minerals on the surface of US public land near Leadville, Colorado. Under the law at the time, discovery of surface minerals on public lands allowed a prospector to stake a legal claim that extended to mineral rights under the surface.

Still, the court's holdings on land-patent rights may have some relevance to Microsoft's current challenge to the clear and convincing standard. As Professor Ed Kitch noted in his seminal 1977 article titled The Nature and Function of the Patent System that introduces the "prospect theory of patents," there are many similarities between the mineral claiming patent system and the utility patent system. The prospect theory suggests that patent rights are useful in channeling and coordinating post-invention development activities. The core idea that Kitch recognized is that a business is more likely to pursue post-invention investment and development of a product that falls within its own sphere of patent exclusivity. "The patent system achieves these ends by awarding exclusive and publicly recorded ownership of a prospect shortly after its discovery. The patent system so viewed is closely analogous to the American mineral claim system for public lands. For expositional convenience, this view of the patent system will be called the prospect theory."

Although Kitch does not expressly discuss the legal standards for invalidation, his theory would suggest strong rights tend to better-serve the prospect-role of patents.

Chippendales Cuffs & Collar lack Inherent Distinctiveness as Product Packaging Trade Dress

In re Chippendales USA, Inc. (Fed. Cir. 2010)

PatentlyO080The first Chippendales club opened in Los Angeles in 1978. The following year, on-stage performers began wearing their now well-known Cuffs & Collar costumes. In 2003, the USPTO agreed that the trade-dress had acquired distinctiveness and issued Trademark Registration No. 2,694,613. (Chippendales had argued that the mark was also inherently distinctive, but the examiner had rejected that argument.) In 2008, the original mark became “incontestable.”

PatentlyO083This case arose in 2005 when Chippendales requested a new registratation for the same mark based upon its inherent distinctiveness. (The company wanted to strengthen its mark.) The Tradmark Trial and Appeal Board ruled against Chippendales — finding that the mark was not inherently distinctive.  In particular, the Board noted that strippers often wear revealing would-be professional costumes such as a stethoscope, utility belt, or chaps with a ten-gallon hat.  In this case, the Chippendales Cuffs & Collar costume appears directly derived from a Playboy Bunny costume.  Based on these facts, the Board held that the Chippendales outfit failed the test for inherently distinctive trade dress outlined in Seabrook (CCPA 1977). 

On appeal, the Federal Circuit first looked to determine whether the costume is part of the product design or only product packaging.  That distinction is legally important because of the Supreme Court ruling in Wal-Mart v. Samara Bros (2000) that product design is never inherently distinctive.  Here, the court held that the costume is product packaging — with the product being “adult entertainment services.” 

The Appellate Court then walked through each of the three relevant Seabrook elements: 

  1. Whether the mark is a common shape or design;
  2. Whether the mark is unique or unusual in the particular field;
  3. Whether the mark is a mere refinement of a commonly adopted and well-known form of ornamentation for a particular class of goods or services viewed by the public as a dress or ornamentation for the goods or services; or
  4. Whether the mark is capable of creating a commercial impression distinct from any accompanying words. (This fourth element was held irrelevant in this case.)

Here, the Appellate Court rejected the Board’s implicit holding that no costume on an adult entertainer could be inherently distinctive.  However, the Appellate Court agreed with the Board that the Cuffs & Collar costume was a “mere refinement” of the well-known Playboy Bunny costume.  As a result, the Cuffs & Collar costume failed the third Seabrook element and therefore lacks inherent distinctiveness.

The use of the Playboy mark constitutes substantial evidence supporting the Board’s determination that Chippendales’ Cuffs & Collar mark is not inherently distinctive. The Playboy bunny suit, including cuffs and a collar, was widely used for almost twenty years before Chippendales’ first use of its Cuffs & Collar trade dress. The Cuffs & Collar mark is very similar to the Playboy bunny costume, although the Cuffs & Collar mark in-cludes no bunny ears and includes a bare-chested man instead of a woman in a corset. While the Playboy clubs themselves did not involve exotic dancing, the mark was registered for “operating establishments which feature food, drink and entertainment.” The Cuffs & Collar mark was also worn by waiters and bartenders at Chippendales establishments, which Chippendales argues reinforced the association of the mark with the Chippendales brand. Additionally, the pervasive association between the Playboy brand and adult entertainment at the time of the Board’s decision leads us to conclude that the Board did not err in considering the mark to be within the relevant field of use. Thus, the Playboy registrations constitute substantial evidence supporting the Board’s factual determination that Chippendales’ Cuffs & Collar mark is not inherently distinctive under the Seabrook test.

In its brief, Chippendales argues that Wal-Mart v. Samara is at odds with Seabrook and that the Seabrook should therefore be revisited. The Federal Circuit rejected that suggestion.

Federal Circuit Advisory Council

Chief Judge Randall Rader has announced some changes to the Advisory Council for the Court of Appeals for the Federal Circuit. Ed Reines is taking-over as Chair. [Link] New members of the Council include Tina Chappell (Intel), Chip Lutton (Apple), Dean Whealan (GWU), and Professor Katherine White (Wayne State). Chappell, Lutton, Whealan, and White all clerked for Judge Rader.

Other members of the Council include:

  • Meredith Martin Addy (Brinks Hofer);
  • Jeanne Davidson (DOJ);
  • Professor Lisa Dolak (Syracuse);
  • Robert Huffman (Akin Gump);
  • Michael Jakes (Finnegan);
  • Joe Re (Knobbe);
  • Michael Schaengold (Patton Boggs);
  • Ronald Smith (Finnegan); and
  • Richard Stanley (Howrey).

One role of the Advisor Council is to ensure that the Court is aware of concerns from the bar and litigants. Direct contact information for the council members is available online. [Link]

Council members generally serve three-year terms.

Update: To be clear, I don't see any problem with Judge Rader appointing his former clerks. These are people that the Judge trusts because he has worked closely with them. Trust is important — especially when dealing with potentially sensitive inner-workings of the court system. At the same time, I know from experience that each of these new Council Members are incredibly strong, intelligent, and independent thinkers.

Judge Jimmie V. Reyna

Reyna_Jimmie_01President Obama has announced the nomination of Jimmie V. Reyna to fill the open slot on the Court of Appeals for the Federal Circuit that was created when Judge Mayer moved to Senior Status in June 2010. The Spring 2010 nominations of Kathleen O'Malley and Ed DuMont are still pending Senate confirmation. Federal Circuit Judges Newman, Lourie, Gajarsa, Dyk, and Bryson are all eligible to take senior status.

Reyna has an all-star reputation as head of the International Trade practice of the Williams Mullen firm.  His professional focus fits well within the Federal Circuit's jurisprudence over  international trade decisions by the Court of International Trade (CIT) and the International Trade Commission (ITC). Reyna has also been an active member of Hispanic legal community and the majority of his work appears to involve US-Mexico trade. His third book on international trade will be published later this year.

Challenging the Clear and Convincing Standard of Proof for Invalidating Patents in Court

Microsoft Corp. v. i4i Limited Partnership (on petition for certiorari 2010)

By Dennis Crouch

In 2009, an Eastern District of Texas jury awarded $200 million to i4i after finding that Microsoft willfully infringed the Canadian company’s patent. Judge Davis subsequently added-on $40 million of punitive damages for willful infringement.  The judge also issued an injunction ordering Microsoft to stop selling Word products with the capability of using “custom XML.” That injunction was stayed by the Federal Circuit pending appeal.  On appeal, the Federal Circuit affirmed the lower court’s findings of validity, willful infringement, enhanced damages, and permanent injunctive relief. Despite the injunction, Microsoft continues to sell its software based on a “patch” that apparently prevents the use of custom XML in Word.

Meanwhile, the USPTO conducted a reexamination of the i4i patent and confirmed that the claims at issue were properly patentable.   However, the reexamination did not consider what Microsoft's (now) argues is its key invalidity argument.  That invalidity argument is based on a prior offer-for-sale, and offers-for-sale are excluded from consideration during reexaminations.  The prior offer-for-sale was likewise not considered during the original prosecution of the i4i patent.

This summer, Microsoft petitioned the Supreme Court to take a fresh look at the case —  specifically asking the Court to reject the Federal Circuit's requirement that invalidity be proven with “clear and convincing evidence” when the invalidity argument is one that was not specifically considered by the Patent Office when granting the patent.  Microsoft raised the following  question:

The Patent Act provides that “[a] patent shall be presumed valid” and that “[t]he burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity.” 35 U.S.C. § 282.The Federal Circuit held below that Microsoft was required to prove its defense of invalidity under 35 U.S.C. § 102(b) by “clear and convincing evidence,” even though the prior art on which the invalidity defense rests was not considered by the Patent and Trademark Office prior to the issuance of the asserted patent. The question presented is:

Whether the court of appeals erred in holding that Microsoft’s invalidity defense must be proved by clear and convincing evidence.

This petition is one similar to that raised by Microsoft in z4. That petition was withdrawn when the parties settled

Eleven parties have filed amicus briefs supporting the petition for certiorari.  Microsoft's counsel makes the point that the companies signing in their own name “employ more than three million people and the publicly-traded companies have a combined market capitalization of more than $1.2 trillion.”  Briefs opposing the petition as well as i4i's opposition appear to be due on October 29, 2010.

Chief Judge Roberts has recused himself from the case.

A review of the briefs follow.  Many of the briefs cover similar material and I have attempted to point out some of the differences. Of course, all of these briefs listed argue that the current evidentiary standard is too-high.

* * * * *

Briefs in support of the Petition:

36 Professors led by Mark Lemley:  The professors suggest that the clear and convincing standard does not make sense based on the known bureaucratic difficulties of the USPTO and the result that many issued patents would not survive a serious Section 103(a) analysis. The professors also write that the Supreme Court offered a signal in KSR that the Federal Circuit should reconsider its standard, but that the Federal Circuit has refused to do so.

Brief by Acushnet, SAP, and Others: James Dabney and John Duffy collaborated to examine the history of invalidity defenses. The brief does an especially good job of spelling out different aspects of an invalidity argument that may need a higher standard of proof.  Thus, Acushnet seemingly argues that uncorroborated oral testimony should still be excluded even if the general standard of proof was lowered.  This is one of the more nuanced briefs.

Teva, Cisco, and the Generic Pharma Association: The current standard creates an incentive for patent applicants to conceal material information from the USPTO. An issued patent is valuable — even if it would eventually be found invalid. The cost of invalidating a patent is so high that a patentee can usually obtain significant settlements even for a patent that should have never issued.

Google, Verizon, Dell, HP, Wal-Mart: A preponderance-of-the-evidence is the default burden of proof in civil cases.  The Federal Circuit has no legal justification for its clear-and-convincing standard that unduly burdens accused infringers.  The USPTO normal examination of patents is insufficient to warrant a high level of deference.

Yahoo!: “In requiring clear and convincing proof of facts bearing on patent invalidity, the Federal Circuit’s rule conflicts with this Court’s teaching that a heightened evidentiary standard should not apply where a statute does not prescribe the heightened standard.”

Intel: We have “a thicket of invalid patents that stifles competition and impedes further innovation.”

Securities Industry and Financial Markets Association:  “The Federal Circuit’s stance is contrary to the guidance of this Court as well as to the standards applied by the regional circuits before 1982.”  The flood of bad patents is especially troublesome in the area of business methods and financial software. New transparency laws make it more likely that these patents will be enforced.

Facebook, Netflix, et al.: An important goal of the patent system is to encourage innovation without disrupting other-innovation through mistaken government “grants of monopolies.” To harmonize with the reexamination statute, court's should at least lower the threshold for proving invalidity once a substantial new question of patentability is established.  (I wonder if Facebook's loose use of the “monopoly” term here will come back to haunt them.).

EFF et al.: Giving value to illegitimate patents creates perverse incentives.  These problems are particularly concerning in the software and internet realms for several reasons, including that they impede alternative innovation models such as FOSS.  In addition, the clear and convincing standard is a non-statutory extension of the law.

Apple: Apple argues that the current system makes it too difficult and costly to obtain a judicial decision that a patent is invalid. “”The clear and convincing standard shields a growing number of poor quality patents from the truthseeking function of our adversarial system.”

CTIA –  The Wireless Association: The clear and convincing standard makes a difference in litigation — making it much more likely that a patent will survive validity attacks.  This reality has created practical problems in dealing with holders of low-quality patents who seek large damage awards.

Documents:

Links


 

Patently-O Bits and Bytes

  • USPTO Technical Training for Examiners: The USPTO is looking for folks to provide free scientific & technical training to examiners. The program does not allow guest lecturers to discuss their own pending applications or provide advice on the patentability of any particular claims. [Participate Here]
  • Top-25: IP Reporter Joe Mullin and his crew have created a list of "The 25 Most Influential People in IP." The list includes Professors Lemley & Duffy; PTO Director Kappos; Judges Rader, Michel, & Ward; Justice Kennedy, Senator Leahy; Bob Armitage (Lilly); John Amster (RPX, son of Mort Amster); and Chip Lutton (Apple).
  • London Conference: International Patent Litigation 2010 — IBC Legal is holding a conference on International Patent Litigation 2010 in London on December 6th-7th. Use code KW8093PO to get a 10% discount. http://www.informaglobalevents.com/patlitpo.
  • Reexaminations: In 1998, an anonymous requester filed a request for ex parte reexamination of U.S. Patent No. 5,583,216 owned by Takeda Pharmaceuticals. Earlier this week (and after 12-years in-process) the USPTO issued a reexamination certificate confirming that the original claims are patentable. Hal Wegner handled the reexamination for Takeda, including multiple appeals to Federal Court. The average reexamination certificate in FY10 was issued about 2.5 years after the reexamination request was filed.

Patently-O Bits and Bytes

  • USPTO Technical Training for Examiners: The USPTO is looking for folks to provide free scientific & technical training to examiners. The program does not allow guest lecturers to discuss their own pending applications or provide advice on the patentability of any particular claims. [Participate Here]
  • Top-25: IP Reporter Joe Mullin and his crew have created a list of "The 25 Most Influential People in IP." The list includes Professors Lemley & Duffy; PTO Director Kappos; Judges Rader, Michel, & Ward; Justice Kennedy, Senator Leahy; Bob Armitage (Lilly); John Amster (RPX, son of Mort Amster); and Chip Lutton (Apple).
  • London Conference: International Patent Litigation 2010 — IBC Legal is holding a conference on International Patent Litigation 2010 in London on December 6th-7th. Use code KW8093PO to get a 10% discount. http://www.informaglobalevents.com/patlitpo.
  • Reexaminations: In 1998, an anonymous requester filed a request for ex parte reexamination of U.S. Patent No. 5,583,216 owned by Takeda Pharmaceuticals. Earlier this week (and after 12-years in-process) the USPTO issued a reexamination certificate confirming that the original claims are patentable. Hal Wegner handled the reexamination for Takeda, including multiple appeals to Federal Court. The average reexamination certificate in FY10 was issued about 2.5 years after the reexamination request was filed.

Patent Term Adjustments – Accounting for Rejections Withdrawn after Appeal-Brief Filings

The next Patent-Term-Adjustment (PTA) challenge appears to be simmering.

The ordinary term of a patent is twenty-years from the original patent application filing date. The first several years of that term are generally worthless because they are spent prosecuting the application. The Patent Act provides for a patent term adjustment in cases where the patent prosecution process is unduly slow. With the current USPTO backlog, about 80% of issued patent receive some term adjustment. The average PTA for recently issued patents is just shy of two years. Thus, any discussion of the US twenty-year patent term must consider the real impact of PTA. In Wyeth v. Kappos, 591 F.3d 1364 (Fed. Cir. 2010), the Federal Circuit held that the USPTO had been substantially under-calculating the PTO due to patentees. That change boosted the average calculated PTA by about six-months.

Now, a new PTA challenge appears to be brewing in relation the dramatic increase in the number of appeals to the Board of Patent Appeals & Interferences (BPAI). There is typically a fairly long delay between (1) the point that a patent applicant files a notice of appeal and (2) the point that the appeal is docketed at the BPAI. That delay is due to a lengthy briefing and review period. The patent examiner maintains control over the case during that entire briefing period. It turns out that the majority of appeals never actually reach the BPAI. Rather, the most common occurrence is that at some point during the briefing-period the patent examiner withdraws the appealed rejection and subsequently either issues (1) a notice of allowance or else (2) a new rejection.

The brewing patent term adjustment issue involves how to account for the prosecution delay when a patent applicant appeals a rejection that is later withdrawn prior to a BPAI decision . The delay from notice-to-appeal to withdrawal-of-rejection is often around eight months.

PTA calculations are somewhat complex. 35 U.S.C. 154(b)(1) divides the "patent term guarantee" into three parts: (A) adjustments for delayed USPTO office responses; (B) adjustments for application pendency of more than three years; and (C) adjustments for delays due to appeals, interferences, and secrecy orders. Each Part considers aspects of appeals to the BPAI: Part (A) accounts for any USPTO delay that is more than four-months in responding to "an appeal taken under section 134" or to a decision by the BPAI where allowable claims remain; Part (B) states that the three-year pendency guarantee does not include "any time consumed by appellate review by the Board of Patent Appeals and Interferences or by a Federal court;" while Part (C) accounts for time in appellate review, but only if "the patent was issued under a decision in the review reversing an adverse determination of patentability."

In recent papers, the USPTO petitions office has rejected any PTA for the situation discussed above – where the applicant files a notice of appeal and appeal brief but then the examiner withdraws the rejection, so long as the withdrawal occurs within four-months of the appeal brief filing date. Running through the three-parts, the PTO argues that: Part (A) does not apply because the response to the appeal occurred within four months of the appeal brief. (37 U.S.C. §1.703 specifically interprets "appeal taken" to mean filing of the appeal brief rather than notice of appeal.) Part (B) does not apply because the USPTO interprets every day subsequent to the notice of appeal as being "consumed by appellate review." Finally, Part (C) does not apply because the board did not reach a decision.

Wrong Interpretation: The PTO's interpretation of the statute is not clearly right and is probably wrong because of the inconsistency in how the Office interprets the timing of BPAI review and because the current interpretation frustrates the "guarantees" provided in the statute. In particular, for Part (A) the USPTO states that an appeal is "taken" (and PTA counting-started) only after the applicant files the appeal brief while for Part (B) the USPTO states that time is being consumed by appellate review (and PTA counting-delayed) as soon as a notice of appeal is filed. The better interpretation is that "appellate review by the Board" for Part (B) does not begin until after the examiner answer. Certainly, until that point, the case-file remains under the examiner's control and not under review by the Board.

Trademark Rights for Sound Recordings

Carl Oppedahl lost his case to register the mark “patents.com.”  However, that setback did not dissuade him from continuing to push against trademark law limitations. 

Recently, the USPTO issued a trademark registration certificate for his “sensory mark.” The mark consists of a sixteen-second musical introduction that Oppedahl uses for his recorded lectures on patent law practice. 

During the trademark prosecution, the USPTO examining attorney initially suggested that "due to the length of the proposed mark, consumers may consider the sound to be a mere entertaining prelude to the sound recording, more suitable as a copyrightable work than as a trademarkable source indicator."  Oppedahl responded by pointing-out that the PTO had registered the THX sound recording [THX.MP3] which is apparently 25–seconds in length as registered.  I recently (and unsuccessfully) attempted to use a similar argument when pulled-over for speeding.  Apparently, I have no right to speed just because others speed without getting caught. 

The USPTO has registered a number of sound marks, including the NBC chimes in 1972.  Harley Davidson eventually withdrew its application to register a mark on the sound made by the roar of its V-Twin engine.  

 

Guest Post: An Interesting Preview of Myriad?

By Professor Paul M. Janicke, University of Houston Law Center

The Myriad case from the Southern District of New York, involving patent eligibility of DNA isolates derived from naturally occurring DNA, drew a great deal of attention. The court basically held such isolates ineligible for patent coverage as being too similar to the natural substances, and hence barred by the product-of-nature case law. In the district court Myriad drew twenty-three amici briefs and a great deal of press attention. It is now on appeal at the Federal Circuit, where the first brief is due to be filed October 22. However, in a little-noticed partial dissenting opinion in another case, Circuit Judge Timothy Dyk has given a preview of his likely views on this important question.

The appellate case was Intervet Inc. v. Merial Ltd., decided by a Federal Circuit panel on August 4. The case involved DNA sequences encoding viruses harmful to pigs. According to the patent involved, knowledge of such sequences facilitates detection methods and production of vaccines against the harmful viruses. The patent specification gave full-length DNA sequences for five strains of these types of viruses, and a sequence for a similar but harmless pig virus for comparison purposes. The issues raised below and on appeal were: (i) whether the district court’s constructions of certain claim terms were correct; and (ii) whether a narrowing amendment made in the PTO while a claim was under prior art rejection foreclosed all access to the doctrine of equivalents for the territory between the original language and the amended language or left some of it open. No statutory subject matter issue was raised below or in the appeal.

The Intervet panel majority, consisting of Judges Prost and Bryson, decided those issues largely in favor of the patentee, Merial. Judge Dyk issued an opinion concurring in part and dissenting in part on the appealed questions. However, he also took the occasion to caution that the court’s decision in the case did not mean the court was acquiescing in the patent-eligibility of DNA, even in isolate form: “I write separately primarily to make clear that in construing the claims, we are not deciding that the claims as construed are limited to patentable subject matter.” He proceeded to address the main issue pending in Myriad, namely, whether isolates of DNA similar to DNA found in natural sources like humans or animals are eligible for patenting, or whether they run afoul of the Supreme Court’s pronouncements about products of nature in cases such as Funk Bros., Chakrabarty, and the recent Bilski decision. Judge Dyk indicated he did not think claiming the DNA in its isolated form was sufficient to distinguish it, for eligibility purposes, from the naturally occurring substance. He read the Supreme Court cases to require subject matter that is “qualitatively different” from the naturally occurring substance, and said it was “far from clear” that DNA isolates as claimed here met that test.[8] Perhaps foreshadowing his position in Myriad, he stated:  

The mere fact that such a DNA molecule does not occur in isolated form in nature does not, by itself, answer the question. It would be difficult to argue, for instance, that one could patent the leaves of a plant merely because the leaves do not occur in nature in their isolated form.

The impact of Judge Dyk’s views is difficult to predict. His is certainly an important judicial voice. However, he may not be on the panel drawn to hear the Myriad appeal, and the case may never be heard en banc. Moreover, these might not be Judge Dyk’s final positions on the issues. Only time will tell how this important case plays out. 

* * * * *

[1] Association for Molecular Pathology v. United States Patent & Trademark Office, 2010 U.S. Dist. LEXIS 35418 (S.D.N.Y. April 2, 2010). Myriad Genetics was a co-defendant and co-owner of at least one of the patents in this declaratory action and exclusive licensee under others, hence Myriad has become the popular name of the case.

[2] 2010 WL 3064311 (Fed. Cir. 2010).

[3] See U.S. Patent 6,368,601, col. 1, lines 6-10.

[4] Id. at *9.

[5] Funk Bros. Seed Co. v. Kalo Inoculant Co., 333 U.S. 127, 130 (1948).
[6] Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980). 

[7] Bilski v. Kappos, 130 S.Ct. 3218 (2010).

[8] Intervet, 2010 WL 3064311 at *11.

[9] Id.

Written Description, Claim Scope, and Showing Possession of Hidden Embodiments

PatentLawImage001Laryngeal Mask Co. v. Ambu AS (Fed. Cir. 2010)

The district court rejected LMA’s patent on summary judgment — holding that the claims covering a laryngeal mask device were invalid for lack of written description.

The written description issues here are similar to those presented in Liebel-Flarsheim and Lizard Tech.  The patented invention included both (1) a “cuff” with a “thicker and stiffer” region and (2) a “backplate.”  The described embodiments all showed the thick-stiff region of the cuff connected to the backplate,  but the accused device’s cuff-backplate connection was in a different location. The claims themselves did not expressly limit the connection-site with reference to the thick-stiff region and therefore arguably covered the accused device.  Given that broad construction of the claims (as requested by the patentee), the district court held the patent invalid on written description grounds because the patent document failed to describe or show possession of the invention as embodied by the accused device.

On appeal, the Federal Circuit panel of Chief Judge Rader, Judge Lourie, and Judge Moore rejected the district court’s findings — holding instead that the factual question of written description should be left for the jury in this case. 

Rather than focusing on affirmative evidence of possession, the Federal Circuit highlighted that nothing in the specification suggested that that design of the connection between the cuff and backplate was important or necessary to the invention.

“We agree with LMA that one of ordinary skill in the art could read these disclosures as providing for a cuff reinforcement in the distal region that need not be connected to the backplate. In addition, we agree with LMA that one of ordinary skill in the art could read the Cuff Wall Thickening Passage as disclosing a thickened cuff portion that need not be connected to the backplate.”

Because those factual conclusions raised issues of material fact, the appellate panel reversed the summary judgment holding and remanded.

The Court’s approach implicitly presumes that the asserted patent satisfies the written description requirement and then looks to see whether the evidence is sufficient to overcome that presumption. That method of analysis makes sense based on the procedural setup of the case: Namely, (1) clear and convincing evidence is required to prove that the patent lacks written description; (2) the decision being reviewed was one of summary judgment; and (3) written description is a question of fact.

Notes:

  • The court also reversed a claim construction holding that had led to summary judgment of non-infringement.
  • The asserted claims were all added during prosecution. The original claims required that the backplate be “hermetically bonded to a periphery of the main-cuff” and the new claims have a seemingly broader requirement that the backplate be “attached” to the cuff.  The original claim appears broad enough to cover the link as embodied in the accused device.

 

 

Stays Pending Appeal

August Technology Corp. v. Camtek (Fed. Cir. 2010) (non-precedential order)

A jury ruled that Camtek's semiconductor wafer inspection system infringed August's patent rights. The district court then issued a permanent injunction ordering the adjudged infringer to refrain from making, using, selling or offering-for-sell the infringing device. The court also ordered that Camtek not communicate with third parties located in the US for the purposes of offering to sell the device.

Along with its appeal on the merits, Camtek filed an emergency motion to stay the injunctive relief until the appeal is resolved. 

Under Federal Circuit law, the court will stay injunctive relief if either (1) the moving party shows a substantial likelihood that the injunction will be lifted as part of the merits decision; or (2) the moving party presents a strong case on the merits and the relative harms associated with the stay favor the moving party.  

Writing for the panel, Judge Lourie denied the stay — writing only that Camtek had not “met its burden.” 

Guest Post: Open Season on Copyright Infringement Claims? All Hail, or Hate, the “Troll”?

By Robert W. Zelnick, McDermott Will & Emery LLP

Is it me, or has there been a noticeable uptick in publicity about copyright infringement claims in 2010? There is the prolific new so-called "copyright troll," Righthaven LLC, which has sued more than 120 parties on behalf of its sole newspaper client, the Las Vegas Journal-Review (including against some high-profile defendants, such as politician Sharron Angle). The Fox network has been defending against claims that it violated a plaintiff's copyright when it ran footage of Bernard Madoff, and now the Fox network (in an unrelated claim) is suing politician Robin Carnahan for alleged unauthorized use of Fox clip in a political ad. Some blame the poor economy, some blame the lawyers, some blame a heated election season. Maybe it is all of those reasons, or none of those. But at the end of the day, it doesn't appear that anything has really changed in the substantive copyright law.

Although the nuances of copyright law can be sometimes challenging to understand and interpret, at its heart copyright law stands for a relatively simple proposition – don't copy. The copyright laws are not an act of "judicial activism" to codify a common-sense grammar school lesson. Instead, these laws find their basis in the U.S. Constitution: Article I authorizes Congress to "Promote the progress of science and the useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries." Some of the comments in the blogosphere – including some rather nasty and ad hominem attacks against the "copyright troll of 2010" Righthaven LLC – seem to overlook that the easiest way to avoid copyright infringement claims is to avoid copying.

So, why all the angst related to enforcement of IP laws, now particularly centering on the concept of a copyright troll? In part, there are some of the same criticisms that have long been aimed at so-called "patent trolls": opportunistic lawyers, recoveries that are disproportionate to the "sweat of the brow" of the actual inventor/author, a drag on corporate profitability, etc. However, there are significant differences between a so-called patent troll and a so-called copyright troll.

First, the stakes and business model so far for the copyright cases seem to be quite different from the patent model. Righthaven's model, at least so far, has seemed to be a high-volume of cases that often individually settle in the range of a few thousand dollars.

Second, the policy issues are different. Revenue problems have cause newspapers to disappear at an alarming rate, and copyright revenue gives troubled businesses a new revenue stream from an existing asset. On the other hand, even those bloggers who infringe a copyright are usually creating knowledge, and there may be other counterconsiderations.

Third, some forms of clearinghouse model for copyright licensing/enforcement have existed for decades. For example, ASCAP, BMI, Copyright Clearance Center and others have generated revenue for themselves and for copyright owners by pursuing users of copyrighted works.

Fourth, it seems that courts may have a significant role in influencing policy when it comes to so-called "copyright trolls." For example, the courts have latitude in setting statutory damages in copyright cases within a wide range spanning $200 to $300,000; the exercise of that discretion can directly affect whether a so-called troll's business model will be profitable.

Most of all, though, parties being sued by Righthaven seem to feel a sort of "gotcha" moment. Sure, these defendants saw the copyright notices on the newspapers and websites whose content they allegedly copied, and they knew at some level that copying often has some element of "wrong" to it. But perhaps they figured that there was a safe harbor in doing what everyone else seemed to be doing. Compare the rumored – and often very dangerous – "rules of thumb" about things like the percent of content that can "safely" be copied, the supposed "free pass" that comes from a direct link to the original (copyrighted) article, the breadth of applicability of the fair use defense, and so on.

Perhaps the one aspect of the Righthaven model that many defendants feel most indignant about is that they were sued before receiving a cease-and-desist demand. As another example of the many disconnects between expectations and reality in IP enforcement, a demand letter is not a prerequisite to a complaint. There is no guaranteed "free bite at the apple" when it comes to infringement, and for good reason. Indeed, what would be the value of opinion counsel in the IP arena if the ultimate outcome were that liability only starts to accrue after a party elects to continue infringement after being actually warned of potential claims? Cease-and-desist demands have a place in certain infringement scenarios; however, they are sometimes a waste of time and money, and there is a strong deterrent to infringement when a defendant cannot escape liability for past acts simply by ceasing accused conduct when directly asked by the IP owner. Righthaven has apparently decided that such warning letters do not fit into its business model, which seems to be its prerogative.

The other major factor that contributes to the sense of "gotcha" is undeniably the role of the internet, email and related technologies. In short, acts of infringement can be publicized to the world at the speed of light, via a few keystrokes. Infringement over the internet is also much easier to identify, via increasingly-sophisticated searching and tracking technologies. It comes as no surprise that Righthaven reportedly uses a proprietary technology to identify suspected infringements before offering to buy the underlying copyrights from the copyright owner.

It will be interesting to see whether the Righthaven model, or some other models of so-called "copyright troll," will be sustainable. So far, to my knowledge, none of the 120+ Righthaven defendants has litigated what appear in some cases to be potentially valid "fair use" theories. Indeed, so far, Righthaven reportedly has been willing to settle individual cases for a few thousand dollars, which is far less than it would typically cost a defendant to secure copyright counsel and answer a federal complaint (both without any guarantee of success). I have heard rumblings that some defendants are pursuing discussions to form a defense coalition of sorts, to share costs and to combine expertise and effort. I will be curious to see how Righthaven handles serious defenses to the complaints, and whether pursuing active litigation fits Righthaven's business model.

In the meantime, the publicity surrounding this so-called "copyright troll" and the other high-profile copyright infringement claims of 2010 have served a useful purpose in reminding the public (and even non-copyright lawyers) about best practices regarding copyright law. Said differently, this is a very good time for clients to revisit their copyright practices. Maybe the economy and the election cycle have motivated more parties to enforce their copyrights, and maybe there could be a sustainable entrepreneurial enforcement model for a new kind of "troll," but the copyright law – as always – still prevents copying.

Fujitsu Ltd. v. Netgear

By: Jason Rantanen

Fujitsu Ltd. v. Netgear (Fed. Cir. 2010)
Panel: Lourie, Friedman, and Moore (author)

Indirect infringement claims are particularly relevant in the context of industry-wide interoperablity standards, because frequently companies simply manufacture products capable of particular behavior while the relevant methods are actually carried out by end users.  Patent No. 4,974,952 raises an example of this issue.  The '952 patent claims a method of sending wireless messages involving fragmenting the messages in a particular manner.  Philips, the patent holder, contended that any product that complied with certain sections of the IEEE 802.11 standard infringed the asserted claims, and that by complying with the standard Netgear indirectly infringed the '952 patent (presumably by selling the accused products).

The district court granted summary judgment of noninfringement in favor of Netgear, determining that Phillips had failed to establish either contributory infringement or inducement.  On appeal, the Federal Circuit determined that the district court had erred on some points, but nevertheless affirmed summary judgment of noninfringment with respect to all but four products. 

Use of Standards to establish Direct Infringement: The court's discussion of the use of industry-wide standards to prove infringement may become the most widely-cited portion of this opinion.  After considering the parties' arguments, along with that of amicus Association of Corporate Counsel Intellectual Property Committee, the court held that:

[A] district court may rely on an industry standard in analyzing infringement. If a district court construes the claims and finds that the reach of the claims includes any device that practices a standard, then this can be sufficient for a finding of infringement. We agree that claims should be compared to the accused product to determine infringement. However, if an accused product operates in accordance with a standard, then comparing the claims to that standard is the same as comparing the claims to the accused product….An accused infringer is free to either prove that the claims do not cover all implementations of the standard or to prove that it does not practice the standard.

We acknowledge, however, that in many instances, an industry standard does not provide the level of specificity required to establish that practicing that standard would always result in infringement. Or, as with the ’952 patent, the relevant section of the standard is optional, and standards compliance alone would not establish that the accused infringer chooses to implement the optional section. In these instances, it is not sufficient for the patent owner to establish infringement by arguing that the product admittedly practices the standard, therefore it infringes. In these cases, the patent owner must compare the claims to the accused products or, if appropriate, prove that the accused products implement any relevant optional sections of the standard.

Slip Op. at 8-9. Applying this holding, the panel concluded that because the fragmentation feature in the 802.11 standard was optional, and (although present in the Netgear devices) was turned off by default, Phillips was required to prove that customers actually used the infringing feature. On this point, the Federal Circuit agreed with the district court that there was only evidence of actual infringing use with respect to four products.

Substantial Noninfringing Uses: The Federal Circuit applied the analysis of i4i v. Microsoft, focusing on the specific feature at issue.  Here, because the specific feature was infringing when it was activated, there was no substantial noninfringing use.

Material Part of the Invention: Phillips accused two classes of products: those that only fragmented messages and those that only defragmented messages.  Because the claims of the '952 patent were specifically drawn to the fragmenting steps, not the defragmenting steps, the district court concluded that the accused defragmenting products could not infringe.  Phillips argued that because fragmentation necessarily infringes the asserted claims, than the defragmenting products are useful only for infringement, and Netgear should be liable for them.  The panel rejected this argument: even though the usefulness of the claimed method would be lost without data receivers capable of defragmenting messages, the lack of defragmentation steps in the claims means that products that only defragment messages cannot constitute a "material part" of the invention. 

Mental State Components of Indirect Infringement: In analyzing the respective mental state components for contributory infringement and inducement of infringement, the panel found that Netgear's receipt of letters identifying the '952 patent and alleging infringement by any 802.11 compliant standard were sufficient to survive summary judgment.

Comment: my current research focuses on mental state issues in patent law, including in the context of indirect infringement.  In the near future, I'll discuss this subject in more depth. 

Other issues: In addition to the above indirect infringement issues, the Federal Circuit also concluded that the district court had erred in limiting damages based on the patent marking statute (35 U.S.C. § 287), because the claims covered a method and § 287 does not apply where the patent is directed to a process or method.  The Federal Circuit also analyzed the district's construction of relevant claim terms in Patent Nos. 6,018,642 and 6,469,993, and affirmed its grant of summary judgment of noninfringement of those patents.  The analysis in this section may be particularly relevant to those operating in the wireless technology area.

Follow-up comment: Michael Barclay also noted the importance of the standard-as-evidence holding on his blog, IPDuck.  See http://ipduck.blogspot.com/2010/09/federal-circuit-approves-use-of.html