By Jason Rantanen
In re Katz Interactive Call Processing Patent Litigation (Fed. Cir. 2011)
Panel: Newman, Lourie, Bryson (author)
Patent litigation is often an astonishingly complex affair. As proof, one need look no further than In re Katz, an opinion that demonstrates both the heavy burden that patent infringements suits can place on the courts, and the remarkable job that trial and appellate courts do in dealing with those suits. This post will discuss the CAFC's ruling regarding trial court claim selection procedures in complex patent infringement actions; a subsequent post will focus on the CAFC's review of the summary judgment rulings.
At the core of In re Katz resides the relatively simple concept of a patent holder asserting its patent rights against a group of alleged infringers. In this instance, however, the patent rights consisted of "a total of 1,975 claims from 31 patents" asserted against "165 defendants in 50 groups of related corporate entities." Slip Op. at 6. Although initially filed in Delaware and Texas, the Judicial Panel on Multidistrict Litigation transferred the actions to the Central District of California for coordinated pretrial proceedings before Judge Klausner.
In an effort to manage the vast numbers of claims and infringement allegations, Judge Klausner imposed limitations on the number of claims to be addressed in the litigation. The court "ordered Katz initially to select no more than 40 claims per defendant group, and after discovery to narrow the number of selected claims to 16 per defendant group." Slip Op. at 7. Katz was further limited to a total of 64 claims to be asserted against all defendants, although the court included a proviso that Katz could add new claims if they "raise[d] issues of infringement/validity that [were] not duplicative of previously selected claims." Id. at 7. Katz sought to sever and stay the disposition of all the unasserted claims, contending that the limitations violated its due process rights. The district court denied Katz's motion, and after granting summary judgment in the defendants' favor on the selected claims, Katz appealed.
On appeal, the Federal Circuit affirmed the district court's ruling on the motion to sever and stay, implicitly approving the court's claim selection procedure. Focusing primarily on Katz's argument that the claim selection procedure violated its due process rights with respect to the unasserted claims, the CAFC held that the district court appropriately allocated to the patent holder the burden of showing that the issues raised by the new claims were not duplicative. "When the claimant is in the best position to narrow the dispute, allocating the production burden to the claimant will benefit the decision-making process and therefore will not offend due process unless the burden allocation unfairly prejudices the claimant’s opportunity to present its claim." Slip Op. at 11. Here, Katz identified no errors in the district court's initial assessment, which revealed that the patents contained many duplicative claims. Thus, it was efficient and fair to allocate the burden to Katz. Furthermore, because Katz made no effort to identify any claims raising non-duplicative issues, the district court acted appropriately in denying Katz's motion.
Typical of several recent Federal Circuit decisions, the opinion includes a cautionary note. "In approving the district court’s procedure, we do not suggest that a district court’s claim selection decisions in a complex case such as this one are unreviewable." Rather, the panel comments that its holding is directed at broad assertions that courts may not impose claim selection requirements:
Katz chose to make the “all or nothing” argument that the entire claim selection process was flawed from the start and that it is impermissible to give the judgments effect as to the unselected claims regardless of Katz’s failure to make any showing as to the uniqueness of any of those claims. That sort of global claim of impropriety is unpersuasive. In complex cases, and particularly in multidistrict litigation cases, the district court “needs to have broad discretion to administer the proceeding.” In re Phenylpropanolamine (PPA) Prods. Liab. Litig., 460 F.3d 1217, 1232 (9th Cir. 2006).
Slip Op. at 14.
US Patent Office Director David Kappos has announced his new Deputy Director: longtime intellectual property law professional Teresa Stanek Rea. Ms. Rea is currently a partner at 
Speakers include Professors 
Links: 
The Patent Reform Act of 2011 (S. 23) was introduced on January 25, 2011 by Senator Leahy (D-VT) who was joined by eight co-sponsors (all from the Judiciary Committee) that include Senators Coons (D-DE), Franken (D-MN), Grassley (R-IA), Hatch (R-UT), Klobuchar (D-MN), Kyl (R-AZ), Lieberman (I-CT), and Sessions (R-AL). The bill was referred to the Senate Judiciary Committee which unanimously approved the bill. The House of Representatives will likely move more slowly. Although House Judiciary Committee chair Rep. Smith (R-TX) co-sponsored the similar Patent Reform Act of 2009, Rep. Issa (R-CA) is the “patent expert of Congress” and has only tentatively supported the reform bills in the past. [UPDATE – Most Recent Version of 
First-Inventor-to-File: The reform measure would move the US further toward a first-to-file system. Each patent application would be given an “effective filing date,” and the patentability will be judged on whether any prior art was available prior to the filing date. One-year grace period would remain in effect, but only for the inventor’s own disclosures (and disclosures derived from the inventor). Obviousness will also be judged as of the effective filing date. Inventors will no longer be able to swear behind prior art nor will they be able to establish priority in an interference proceeding. A new creation in the bill is a “derivation proceeding” that would operate only in times where an original inventor alleges that a patent applicant derived the invention from the original inventor’s work. 
Damages: Patent defendants have argued that courts often treat damages issues as afterthoughts with little procedural control. The proposed amendment would add specific procedures and checks on how a judge manages the damages portion of a case. The amended statute would require that a court “identify methodologies and factors that are relevant to the determination of damages” and that “only those methodologies and factors” be considered when determining the damage award. In addition, prior to the introduction of damages evidence, the court would be required to consider either party’s contentions that the others damage case lacks a legally sufficient evidentiary base. In addition, the statute would require a judge to bifurcate the damages portion of a trial if requested “absent good cause to reject the request, such as the absence of issues of significant damages or infringement and validity.” Oddly, the proposed statute seemingly bars a judge from amending the discovery schedule or any “other matters” based upon the trial sequencing. 
Enhanced Damages: Although we often discuss enhanced damages for willful infringement, the current Patent Act is not explicitly limited to situations involving willful infringement. Rather, Section 284 simply states that “the court may increase the damages up to three times the amount found or assessed.” Over the years, Federal Circuit precedent has limited the statute to only situations where the infringer’s actions were at least objectively reckless. The amended statute would codify that holding with the words “Infringement is not willful unless the claimant proves by clear and convincing evidence that the accused infringer’s conduct with respect to the patent was objectively reckless. [I.e., that] the infringer was acting despite an objectively high likelihood that his actions constituted infringement of a valid patent, and this objectively-defined risk was either known or so obvious that it should have been known to the accused infringer.” The statute also makes clear that accusations of willful infringement must be pled with particularity (following FRCP 9(b)); that proof of knowledge of patent is insufficient to establish willful infringement; that a pre-lawsuit notice of infringement cannot itself establish willfulness unless the notification is fact specific in explaining the infringement; that the failure to obtain the advice of counsel (or to present that advice to the jury) “may not be used” to prove willull infringement or inducement of infringement; and that damages subject to trebling are only those accrued after the infringement became willful; and that in a “close case” there will be no willful infringement (here, the statute requires a judge to “explain its decision” and to make a decision prior to the issue being tried by the jury). 
Oath: The bill would make it easier for a corporation to file a substitute inventor’s oath when the inventor is non-cooperative. 
Bilski v. Kappos
Bilski, Kenny Rogers and Supreme Court Rule 46
Anyone working in international intellectual property policy probably knows Al Tramposch. For the past few years, Mr. Tramposch has been serving as a deputy executive director of the AIPLA focusing on international and regulatory issues. Prior to that, he worked for many years as the director of Industrial Property Law (patents, trademarks, and design rights) at WIPO in Geneva and in private practice in DC. He also clerked for Judge Newman at the Federal Circuit. I’ve known Tramposch to be extremely skilled – both because of his deep knowledge of the law and because of his natural management talent. 
