Judge Linn Calls for En Banc Restatement of the Law of Inequitable Conduct

En Banc, Inequitable Conduct, Patent, Patent Cases 2009, ,

Larson Mfg. Co. v. Aluminart Products Ltd. (Fed. Cir. 2008)

Larson's patent covers a specially designed outside. The appeal focuses on inequitable conduct and the Federal Circuit vacated a district court judgment that the asserted patent was unenforceable. I will return to the decision in a later post, but wanted to focus attention on the concurring opinion by Judge Linn and his call for an en banc review of inequitable conduct jurisprudence. Linn's concerns could be addressed by the Supreme Court in Aventis Pharma v. Amphastar Pharmaceuticals, which is pending certiorari.

I write separately … to express my view that this precedent has significantly diverged from the Supreme Court's treatment of inequitable conduct and perpetuates what was once referred to as a "plague" that our en banc court sought to cure in Kingsdown Medical Consultants, Ltd. v. Hollister Inc., 863 F.2d 867 (Fed. Cir. 1988) (en banc). …

Symptoms of this plague are apparent from the facts of this case. The patent-in-suit has undergone examination twice in the PTO, and the patentee has been accused of inequitable conduct on each occasion for allegedly withholding material information. During original prosecution, the PTO considered 143 references, 135 of which the submitted two more IDSs in the reexamination, each within approximately one month of the application's Office Actions. The IDSs contained all references relied on in those rejections but did not include the Office Actions themselves. With full knowledge of the co-pending application, the PTO confirmed the patent, which survived reexamination without substantive change to the litigated claims. When the litigation resumed, the accused infringer again charged the patentee with inequitable conduct, this time based on conduct in the reexamination. This second inequitable conduct allegation was the sole issue at trial. Following remand today, the litigation will continue to focus on inequitable conduct, to the exclusion of the patentee's infringement contentions.

The ease with which inequitable conduct can be pled, but not dismissed, is a problem of our own making. The Supreme Court's three inequitable conduct cases involved overt fraud, not equivocal acts of omission. Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 809, 819 (1945) ("patent claims infected with fraud and perjury" where assignee knew that its employee "gave false dates as to the conception, disclosure, drawing, description and reduction to practice" during interference proceeding and then "secured the perjured . . . application and exacted promises from the other parties never to question the validity of any patent that might be issued on that application"); Keystone Driller Co. v. Gen. Excavator Co., 290 U.S. 240, 243 (1933) (false affidavits and deposition testimonies obtained "for valuable considerations" averring that the prior art use "was an abandoned experiment" and "to keep secret the details of the prior use"); Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 240, 243 (1944) (false trade article procured from "an ostensibly disinterested expert" in exchange for $8,000 to gain patent issuance in spite of previously "insurmountable Patent Office opposition"), overruled on other grounds by Standard Oil Co. v. United States, 429 U.S. 17 (1976).

We clarified en banc that the "two elements, materiality and intent, must be proven by clear and convincing evidence," and that "'gross negligence' does not of itself justify an inference of intent to deceive." Kingsdown. But in seeming contradiction with Kingsdown, a standard even lower than "gross negligence" has propagated through our case law. This standard permits an inference of deceptive intent when "(1) highly material information is withheld; (2) 'the applicant knew of the information [and] . . . knew or should have known of the materiality of the information; and (3) the applicant has not provided a credible explanation for the withholding.'" Praxair, Inc. v. ATMI, Inc., 543 F.3d 1306, 1313-14 (Fed. Cir. 2008).

This test is problematic. First, the "high materiality" prong of the intent element simply repeats the materiality element. Conflating materiality and intent in this manner is inconsistent with the principle that "materiality does not presume intent, which is a separate and essential component of inequitable conduct." Manville Sales Corp. The second, "should have known" prong sets forth a simple negligence standard, lower even than the "gross negligence" standard that was expressly rejected in Kingsdown. I also question whether a fact-finder who has deemed information to be "highly material" would not also be compelled to conclude that a reasonable patentee "should have known of the materiality," at least when the patentee "knew of the information," as prong two requires. Third, the "credible explanation" prong effectively shifts the burden to the patentee to prove a negative: that it did not intend to deceive the PTO. But it is the "accused infringer"—not the patentee—who "must prove by clear and convincing evidence that the material information was withheld with the specific intent to deceive the PTO." Star Scientific, Inc. As to this third prong, we have also explained that "[t]he patentee need not offer any good faith explanation unless the accused infringer first carried his burden to prove a threshold level of intent to deceive by clear and convincing evidence." Id. As explained above, however, the first two prongs are not evidence of deceptive intent. The first is evidence of materiality; the second is evidence of negligence. These two prongs are therefore insufficient as a matter of law to establish a clear and convincing "threshold level" of deceptive intent before the third prong can ever properly come into play.

As it now stands, the test generally permits an inference of deceptive intent to be drawn whenever the three prongs are satisfied. This is in tension with the rule in Star Scientific that "the inference must not only be based on sufficient evidence and be reasonable in light of that evidence, but it must also be the single most reasonable inference able to be drawn from the evidence." Id. It cannot be said that deceptive intent is the "single most reasonable inference" when all that prong two shows is that the patentee "should have known" that the information was material. An equally reasonable inference under this test is that the patentee incorrectly believed that the information was not material, or that the patentee was negligent, or even grossly negligent. None of these gives rise to deceptive intent under Kingsdown, nor is deceptive intent the "single most reasonable inference" under Star Scientific.

For the foregoing reasons, I respectfully submit that the test for inferring deceptive intent, as it currently exists, falls short of the standard "need[ed] to strictly enforce the burden of proof and elevated standard of proof in the inequitable conduct context." Star Scientific. The facts of this case suggest that the time has come for the court to review the issue en banc.

Improper Summary Judgment on Doctrine of Equivalents; Marking Products that Perform Method Claims

Damages, Doctrine of Equivalents, Method Claims, Patent, Patent Cases 2009, Summary Judgment, , ,

Crown Packaging v. Rexam Beverage Can (Fed. Cir. 2009)

On summary judgment, the district court held that Rexam did not infringe Crown’s patent beverage can-top patent. The lower court also found that that Crown did not infringe Rexam’s beverage can “necking” patent. On appeal, the Federal Circuit reversed both rulings.

The Doctrine of Equivalents: Over the past two decades, the doctrine of equivalents been pushed out of the usual infringement discussion. Part of the doctrine’s downgrade is due to restricted application due to prosecution history estoppel (Festo) and tighter doctrine (Warner-Jenkinson). Perhaps equally important in the decline of the DOE has been the rise of claim construction as the primary variable of patent litigation. Rather than arguing for infringement as an equivalent, applicants are instead arguing for broad construction of the claim terms. Finally, patent drafters are – on average – better today than they were twenty years ago and spend more energy on considering how to draft claims that capture literal infringement. In a 2007 paper, Professors Lemley and Allison found something similar – that since the late 1990’s (even before Festo), that “equivalents claims usually failed, most often on summary judgment.” Their paper title – “Demise of the Doctrine of Equivalents” – overstates its case. The DOE is sometimes valuable.

Function-Way-Result Test: There are at least two alternate tests for infringement under the doctrine of equivalents. The function-way-result test considers “on a limitation by limitation basis” whether “the accused product performs substantially the same function in substantially the same way with substantially the same result as each claim limitation of the patented product.”

Summary Judgment on DOE: Here, the issue was not so much the law of the DOE, but rather the requirement for summary judgment that there be no remaining material issue of fact. Crown’s patent claims an “annular reinforcing bead,” while Rexam’s product uses a reinforcing fold. The lower court found those different enough to avoid infringement under the DOE. On appeal, however, the Federal Circuit reversed – finding at least one unresolved material issue of fact that precluded summary judgment. DOE requires expert testimony to step through the function-way-result test. And, here, the patentee’s expert stepped through each element and his testimony had not been completely indicted or even refuted.

Because Crown provided evidence in support of its position that the annular reinforcing bead of claim 14 of the ‘826 patent had only one function, and because we must resolve any reasonable factual inferences in favor of the nonmoving party, we conclude that there is a material issue of fact regarding the function of the claimed bead. Accordingly, we reverse and remand the district court’s grant of summary judgment of noninfringement.

This decision by Judge Moore is in line with the court’s 2008 Voda case which was affirmed after parsing expert testimony to ensure that the elements had been properly proven. (In Voda, the court used the alternative “insubstantial difference” test.)

Unmarked Sales by Licensee: In a scenario reminiscent of the recent Quanta v. LG case, Rexam licensed its patents to Belvac to make “neckers” used to stretch out the top of the can bodies. Under the license, Belvac was required “to notify its customers that they would require a separate license from Rexam to perform the smooth die necking method” that is claimed in Rexam’s patents. The license did not require Belvac to mark the machines that it sold. And, in fact, Belvac did not mark them with the Rexam patent number. Crown then used the machine to make over one hundred billion cans.

Marking under 35 U.S.C. § 287(a): The district court found that this past infringement was not actionable because Crown was not on notice of the patent. That decision seemingly follows from 35 U.S.C. § 287(a). Under that provision, a patentee who does not properly mark a patented article “is not entitled to damages for infringement prior to actual notice.” (quoting CAFC decision).

Marking of Method Claims: Rexam’s trick here was to assert only method claims. On its face, Section 287 applies to “any patented article,” and Federal Circuit precedent has clearly stated that the marking requirement does not apply when only method claims are asserted. With palpable regret, Judge Moore writes:

“The law is clear that the notice provisions of § 287 do not apply where the patent is directed to a process or method. Bandag, Inc. v. Gerrard Tire Co., 704 F.2d 1578, 1581 (Fed. Cir. 1983). In Hanson, 718 F.2d 1075 (Fed. Cir. 1983)—we held that 35 U.S.C. § 287(a) did not apply where the patentee only asserted the method claims of a patent which included both method and apparatus claims. Hanson is factually identical to this case, and we are therefore bound by the rule of Hanson.”

Thus the patentee is free to claim damages back six years under Section 286 even without marking or providing actual notice. This decision thus provides an additional reason to include method claims in a patent application. Now, it would be improper to conclude that there is no reason to mark products that perform method claims. In the 1993 American Medical Systems case, the Federal Circuit ruled that marking would be required if “both apparatus and method claims” were asserted and there is a “tangible item to mark.” In this case, the patent claimed both a method and apparatus, but Rexam sued only on the method claims.

The Essential Element Test and ICU Medical

Enablement, Patent, Patent Cases 2009

In discussing the recent ICU Medical case, I noted that Judge Moore’s decision did not rely on the “essential element” test or even cite Gentry Gallery. In Gentry Gallery, the patent covered a sectional recliner. During prosecution, the patentee had amended its claims to drop any reference to the location of the recliner controls. The Federal Circuit held those later-drafted claims invalid because the location of the controls was an “essential element” of the invention that must be included in the claims – otherwise, the claim scope would be unduly broad. Following Gentry Gallery, however, the Federal Circuit stepped-back from the essential element language– instead narrowing the case holding to the well trod notion that claims should be limited to the supporting disclosure. In both Johnson Worldwide, and Cooper Cameron, for instance, the Federal Circuit explicitly denied that Gentry Gallery created any new requirement.

“[W]e did not announce a new ‘essential element’ test mandating an inquiry into what an inventor considers to be essential to his invention and requiring that the claims incorporate those elements.” Cooper Cameron, 291 F.3d 1317 (Fed. Cir. 2002)

In parallel fashion to Gentry Gallery, ICU had included a “spike” in every embodiment and each original claim. During prosecution, and apparently after seeing competing products, ICU amended its claims to drop the “spike” limitation. This was important because the market had moved to a spikeless version of IV valves. This district court in ICU discussed Gentry Gallery and the essential element test, but found no need to base its ruling on that “disfavored” theory. Rather, the court based its analysis on the traditional notion that claims must be described in the specification.

“[T]he Court’s analysis employs the accepted rule that the claims may be no broader than the supporting disclosure, or, conversely, that claims are invalid when the entirety of the specification clearly indicates that the invention is of a much narrower scope. By focusing on the language of the Common Specification in a manner that highlights the function of the “spike” element, and the frequency and ubiquity with which it is referenced, the Court is only attempting to discern the breadth and substance of the invention ICU actually disclosed in the original 1992 Application.”

Although the district court denied its application of any “essential element” test, it went on to hold that any valid claims must include a spike:

“The pervasiveness of the “spike” element in the invention description clearly informs the Court, and would inform any reasonable juror, that what was disclosed and claimed as the invention in the 1992 Application was a needleless medical valve with at a minimum, a “body,” a “seal” and a “spike.””

Likewise, the Federal Circuit’s version denies an omitted element test, but held that any valid claim must include a spike limitation because “a person of skill in the art would not understand the inventor … to have invented a spikeless medical valve.”

Notes:

  • ICU Medical Part I
  • ICU Medical Part II
  • ICU Medical Part III
  • The essential element and omitted element test are largely interchangeable, although some logical distinction could perhaps be made.

Written Description: Federal Circuit Again Invalidates Broadened Claims

Enablement, Patent, Patent Cases 2009, , , ,

ICU Medical v. Alaris Medical System (Fed. Cir. 2009)

This is the second post on the ICU case. Part I discusses the $4.6 million award of attorney fees to the accused infringer based on the patentee’s litigation misconduct.

The district court found several of ICU’s claims invalid for lack of written description under 35 U.S.C. § 112, ¶ 1. On appeal, the Federal Circuit affirmed. (Judges Michel (CJ), Prost, and Moore; Opinion by Moore). Although similar to enablement, the written description requirement pushes an applicant to “convey with reasonable clarity to those skilled in the art that, as of the filing date sought, he or she was in possession of the invention.” Most often, written description arises in cases where new matter is added to the claims during prosecution. That is also the case here – during prosecution ICU amended its claims to include “spikeless” claims — directed to a valve mechanism for adding drugs to an IV without using needles.

To be clear – the original claims included the “spike.” That element was removed during prosecution – seemingly broadening the claims. As the court stated “we refer to these claims as spikeless not because they exclude the preferred embodiment of a valve with a spike but rather because these claims do not include a spike limitation—i.e., they do not require a spike.” It is that failure to include any discussion of a spike in the claim that lead to the claim being held invalid for lack of written description.

The Federal Circuit does not cite Gentry Gallery or the infamous “omitted element” or “essential element” theories. However, the court does rely heavily on LizardTech. In that case, the court did not point to any claim limitation that was not sufficiently described. Rather, the court found the claim invalid because an embodiment arguably covered by the claim was not sufficiently disclosed.

We addressed a similar issue in LizardTech . . . We explained that “the specification provides only one method for creating a seamless DWT, which is to ‘maintain updated sums’ of DWT coefficients. That is the procedure recited by claim 1. Yet claim 21 is broader than claim 1 because it lacks the ‘maintain updated sums’ limitation.” We determined, however, that “[a]fter reading the patent, a person of skill in the art would not understand how to make a seamless DWT generically and would not understand LizardTech to have invented a method for making a seamless DWT, except by ‘maintaining updat[ed] sums of DWT coefficients.'” We therefore concluded that claim 21 was invalid under the written description requirement of § 112, ¶ 1.

In LizardTech, the court explicitly rejected the argument that the written description requirement “requires only that each individual step in a claimed process be described adequately.”

In this case, ICU’s original disclosure focused on spiked embodiments, but the more generic claims are not so limited.

ICU’s asserted spikeless claims are broader than its asserted spike claims because they do not include a spike limitation; these spikeless claims thus refer to medical valves generically—covering those valves that operate with a spike and those that operate without a spike. But the specification describes only medical valves with spikes.

Since all the embodiments included the “spike,” the court concluded that “Based on this disclosure, a person of skill in the art would not understand the inventor … to have invented a spikeless medical valve.”

Invalidity affirmed

Notes:

  • This case also includes an important discussion of claim differentiation that will be dissected in a later post.  
  • Of course, this case suggests the best patent drafting practice of providing multiple embodiments of each claim element, and considering whether each and every limitation in the broadest original claims are necessary.
  • ICU broadened its claim by dropping a limitation — did ICU introduce new matter?
  • In a powerful rhetorical approach, Judge Moore chose to refer to the broad claims as “spikeless claims.” As mentioned, those claims do not include a “spikeless” limitation. Rather, they simply omit a “spike” element. As it turns out more than 99.9% all patent claims issued in 2008 are silent about “spikes,” and under the traditional interpretation of the “comprising” transition – all those claims would literally cover embodiments without spikes. The holding here cannot be that all those claims are invalid. I believe that the holding here is largely a result of the fact that the accused device was in-fact spikeless. Unfortunately, this decision does not provide helpful guidance as to when it will apply. Rather, it appears to simply be an additional vague tool available to defense attorneys.
  • The court did not mention enablement – since it was easy to remove the needle from a syringe and the disclosure includes a preslit seal that could arguably work with a spikeless syringe. That modification would have been enabled based on the original disclosure.

Query on Elements and Limitations

Bits and Bytes, Patent

A Patently-O commenter recently made a distinction between claim elements, claim steps, and claim limitations.

“[B]asically, the distinction can be discerned grammatically. Elements are nouns. Steps are verbs or gerunds. Limitations are almost always adjectives, adverbs or modifying phrases, usually beginning with “wherein”.”

Is this distinction correct? Is there any legal basis for these distinctions?

Federal Circuit Affirms $4.6 million award for litigation misconduct

Attorney Fees, Damages, Patent, Patent Cases 2009

ICU Medical v. Alaris Medical System pic-14.jpg (Fed. Cir. 2009)

ICU’s patents covers technology for using syringes to add drugs to an IV. The district court granted summary judgment of invalidity and also awarded attorney fees and found a violation of Rule 11 of the Federal Rules of Civil Procedure. Alaris was awarded $4.6 million in attorney fees and sanctions. On appeal, the Federal Circuit affirmed.

Section 285 of the Patent Act provides for the award of attorney fees to the winning party in “exceptional cases.” In Brooks Furniture, the Federal Circuit discussed a two-part test for whether attorneys fees may be awarded due to litigation conduct. The test requires that “both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.” A district court fee award will be affirmed absent clear error.

The problem – ICU argued that the claim term “spike” could be a non-pointed structure such as a tube even though the specification “repeatedly and uniformly describes the spike as a pointed instrument.” The claim construction was not ICU’s only problem:

For example, the district court found that ICU made “multiple, repeated misrepresentations . . . to the Court regarding its own patents in an effort to conceal what are now characterized as errors in order to rescue the TRO/PI from denial.” These misrepresentations related to (1) ICU’s assertion of claims in the ’509 patent that were identical to claims in the ’592 patent (i.e., assertion of double-patented claims); (2) ICU’s assertion of more double-patented claims from the ’509 patent even after Alaris and the district court warned ICU of the double-patenting issue; (3) ICU’s misrepresentation of Federal Circuit authority; (4) ICU’s representation that figures 13 and 20–22 of the common specification “clearly” disclosed a spikeless embodiment, only to later acknowledge that these figures do not disclose such an embodiment and state that its representation was an “honest mistake.”

Although the Brooks Furniture rule discusses objectively baseless “litigation,” that rule is not construed to focus on the litigation as a whole. Rather, attorney fees may be assessed if any portion of the litigation is brought in bad faith and in an objectively baseless manner. Here, the Federal Circuit found that the lower court had “appropriately exercised its discretion in awarding attorney fees only for [a] portion of the litigation.”

Notes:

  • Federal Circuit Decision 08-1077.pdf
  • District Court award of Fees: 232495.pdf. Bottom line: “The Court finds that Alaris is due $4,587,622.44 in attorney fees and $164,721.19 in costs for the reasons set forth below. . . . This represents a reasonable lodestar calculation for Alaris’ work . . . , and it constitutes a reasonable pro rata amount of Alaris’ total expenditure of $11,000,000 in attorney fees and $2,000,000 in costs overall in this case.”
  • District Court decision to find a Section 285 exceptional case and Rule 11 sanctions. 232494.pdf. Money Quote: “[The submitted declarations] do not substantively justify or excuse ICU’s litigation tactics or show its good faith. These declarations were prepared by ICU’s litigation counsel for the purpose ofopposing the Rule 11 and Fees Motions, and comprise mostly self-serving assertions of good faith by interested witnesses, such as ICU’s CEO (Dr. George Lopez), trial counsel (Fulwider, Patton, Lee & Utecht; Paul Hastings; or Pooley & Oliver), patent counsel (Knobbe Martens) and its paid experts (Dr. Maureen Reitman and Bob Rogers). These materials lack the indicia of credibility provided by declarations or opinions from outside, independent counsel or experts, particularly outside patent, as opposed to litigation, counsel. Most of the materials appear to have been “memorialized” in retrospect, providing marginal support compared to, for example, an ex ante documented and vetted analysis that preceded the litigation or that, al minimum, preceded the TRO/PI request and the inclusion of the “spike” claims in the amended complaint.”
  • Although the district court decision appears to identify the Fulwider firm as “trial counsel,” that appears to have been a mistake made by the court. A Fulwider attorney has indicated that their firm “was never one of ICU’s trial counsel in that matter, and thus made no representations to the court on ICU’s behalf.” In fact, ICU appears to be somewhat of a toxic client. According to the court documents, Fulwider represented ICU in the 1990’s. At some point ICU dropped the firm as a client and sued for malpractice based on Fulwider’s representation of alleged ICU competitors. Fulwider did not admit wrongdoing, but a 2007 press release by ICU claims that ICU “will be paid $8 million in settlement of its claims against Fulwider.”

Federal Circuit Affirms $4.6 million award for litigation misconduct

Attorney Fees, Damages, Patent, Patent Cases 2009

ICU Medical v. Alaris Medical System pic-14.jpg (Fed. Cir. 2009)

ICU’s patents covers technology for using syringes to add drugs to an IV. The district court granted summary judgment of invalidity and also awarded attorney fees and found a violation of Rule 11 of the Federal Rules of Civil Procedure. Alaris was awarded $4.6 million in attorney fees and sanctions. On appeal, the Federal Circuit affirmed.

Section 285 of the Patent Act provides for the award of attorney fees to the winning party in “exceptional cases.” In Brooks Furniture, the Federal Circuit discussed a two-part test for whether attorneys fees may be awarded due to litigation conduct. The test requires that “both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.” A district court fee award will be affirmed absent clear error.

The problem – ICU argued that the claim term “spike” could be a non-pointed structure such as a tube even though the specification “repeatedly and uniformly describes the spike as a pointed instrument.” The claim construction was not ICU’s only problem:

For example, the district court found that ICU made “multiple, repeated misrepresentations . . . to the Court regarding its own patents in an effort to conceal what are now characterized as errors in order to rescue the TRO/PI from denial.” These misrepresentations related to (1) ICU’s assertion of claims in the ’509 patent that were identical to claims in the ’592 patent (i.e., assertion of double-patented claims); (2) ICU’s assertion of more double-patented claims from the ’509 patent even after Alaris and the district court warned ICU of the double-patenting issue; (3) ICU’s misrepresentation of Federal Circuit authority; (4) ICU’s representation that figures 13 and 20–22 of the common specification “clearly” disclosed a spikeless embodiment, only to later acknowledge that these figures do not disclose such an embodiment and state that its representation was an “honest mistake.”

Although the Brooks Furniture rule discusses objectively baseless “litigation,” that rule is not construed to focus on the litigation as a whole. Rather, attorney fees may be assessed if any portion of the litigation is brought in bad faith and in an objectively baseless manner. Here, the Federal Circuit found that the lower court had “appropriately exercised its discretion in awarding attorney fees only for [a] portion of the litigation.”

Notes:

  • Federal Circuit Decision 08-1077.pdf
  • District Court award of Fees: 232495.pdf. Bottom line: “The Court finds that Alaris is due $4,587,622.44 in attorney fees and $164,721.19 in costs for the reasons set forth below. . . . This represents a reasonable lodestar calculation for Alaris’ work . . . , and it constitutes a reasonable pro rata amount of Alaris’ total expenditure of $11,000,000 in attorney fees and $2,000,000 in costs overall in this case.”
  • District Court decision to find a Section 285 exceptional case and Rule 11 sanctions. 232494.pdf. Money Quote: “[The submitted declarations] do not substantively justify or excuse ICU’s litigation tactics or show its good faith. These declarations were prepared by ICU’s litigation counsel for the purpose ofopposing the Rule 11 and Fees Motions, and comprise mostly self-serving assertions of good faith by interested witnesses, such as ICU’s CEO (Dr. George Lopez), trial counsel (Fulwider, Patton, Lee & Utecht; Paul Hastings; or Pooley & Oliver), patent counsel (Knobbe Martens) and its paid experts (Dr. Maureen Reitman and Bob Rogers). These materials lack the indicia of credibility provided by declarations or opinions from outside, independent counsel or experts, particularly outside patent, as opposed to litigation, counsel. Most of the materials appear to have been “memorialized” in retrospect, providing marginal support compared to, for example, an ex ante documented and vetted analysis that preceded the litigation or that, al minimum, preceded the TRO/PI request and the inclusion of the “spike” claims in the amended complaint.”
  • Although the district court decision appears to identify the Fulwider firm as “trial counsel,” that appears to have been a mistake made by the court. A Fulwider attorney has indicated that their firm “was never one of ICU’s trial counsel in that matter, and thus made no representations to the court on ICU’s behalf.” In fact, ICU appears to be somewhat of a toxic client. According to the court documents, Fulwider represented ICU in the 1990’s. At some point ICU dropped the firm as a client and sued for malpractice based on Fulwider’s representation of alleged ICU competitors. Fulwider did not admit wrongdoing, but a 2007 press release by ICU claims that ICU “will be paid $8 million in settlement of its claims against Fulwider.”

Federal Circuit Affirms $4.6 million award for litigation misconduct

Attorney Fees, Damages, Patent Cases 2009

ICU Medical v. Alaris Medical System pic-14.jpg (Fed. Cir. 2009)

ICU’s patents covers technology for using syringes to add drugs to an IV. The district court granted summary judgment of invalidity and also awarded attorney fees and found a violation of Rule 11 of the Federal Rules of Civil Procedure. Alaris was awarded $4.6 million in attorney fees and sanctions. On appeal, the Federal Circuit affirmed.

Section 285 of the Patent Act provides for the award of attorney fees to the winning party in “exceptional cases.” In Brooks Furniture, the Federal Circuit discussed a two-part test for whether attorneys fees may be awarded due to litigation conduct. The test requires that “both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.” A district court fee award will be affirmed absent clear error.

The problem – ICU argued that the claim term “spike” could be a non-pointed structure such as a tube even though the specification “repeatedly and uniformly describes the spike as a pointed instrument.” The claim construction was not ICU’s only problem:

For example, the district court found that ICU made “multiple, repeated misrepresentations . . . to the Court regarding its own patents in an effort to conceal what are now characterized as errors in order to rescue the TRO/PI from denial.” These misrepresentations related to (1) ICU’s assertion of claims in the ’509 patent that were identical to claims in the ’592 patent (i.e., assertion of double-patented claims); (2) ICU’s assertion of more double-patented claims from the ’509 patent even after Alaris and the district court warned ICU of the double-patenting issue; (3) ICU’s misrepresentation of Federal Circuit authority; (4) ICU’s representation that figures 13 and 20–22 of the common specification “clearly” disclosed a spikeless embodiment, only to later acknowledge that these figures do not disclose such an embodiment and state that its representation was an “honest mistake.”

Although the Brooks Furniture rule discusses objectively baseless “litigation,” that rule is not construed to focus on the litigation as a whole. Rather, attorney fees may be assessed if any portion of the litigation is brought in bad faith and in an objectively baseless manner. Here, the Federal Circuit found that the lower court had “appropriately exercised its discretion in awarding attorney fees only for [a] portion of the litigation.”

Notes:

  • Federal Circuit Decision 08-1077.pdf
  • District Court award of Fees: 232495.pdf. Bottom line: “The Court finds that Alaris is due $4,587,622.44 in attorney fees and $164,721.19 in costs for the reasons set forth below. . . . This represents a reasonable lodestar calculation for Alaris’ work . . . , and it constitutes a reasonable pro rata amount of Alaris’ total expenditure of $11,000,000 in attorney fees and $2,000,000 in costs overall in this case.”
  • District Court decision to find a Section 285 exceptional case and Rule 11 sanctions. 232494.pdf. Money Quote: “[The submitted declarations] do not substantively justify or excuse ICU’s litigation tactics or show its good faith. These declarations were prepared by ICU’s litigation counsel for the purpose ofopposing the Rule 11 and Fees Motions, and comprise mostly self-serving assertions of good faith by interested witnesses, such as ICU’s CEO (Dr. George Lopez), trial counsel (Fulwider, Patton, Lee & Utecht; Paul Hastings; or Pooley & Oliver), patent counsel (Knobbe Martens) and its paid experts (Dr. Maureen Reitman and Bob Rogers). These materials lack the indicia of credibility provided by declarations or opinions from outside, independent counsel or experts, particularly outside patent, as opposed to litigation, counsel. Most of the materials appear to have been “memorialized” in retrospect, providing marginal support compared to, for example, an ex ante documented and vetted analysis that preceded the litigation or that, al minimum, preceded the TRO/PI request and the inclusion of the “spike” claims in the amended complaint.”
  • Although the district court decision appears to identify the Fulwider firm as “trial counsel,” that appears to have been a mistake made by the court. A Fulwider attorney has indicated that their firm “was never one of ICU’s trial counsel in that matter, and thus made no representations to the court on ICU’s behalf.” In fact, ICU appears to be somewhat of a toxic client. According to the court documents, Fulwider represented ICU in the 1990’s. At some point ICU dropped the firm as a client and sued for malpractice based on Fulwider’s representation of alleged ICU competitors. Fulwider did not admit wrongdoing, but a 2007 press release by ICU claims that ICU “will be paid $8 million in settlement of its claims against Fulwider.”

Rooklidge: Patent Reform Damages Provision Violates Seventh Amendment

Academic Studies, Articles and Publications, Damages, Patent, Patent Legislation, , ,

The following post is by Bill Rooklidge. Rooklidge is a patent litigator and former head of the AIPLA. He clerked at the Federal Circuit in the early 1980’s.

Richard Cauley’s March 14, 2009 guest post accurately characterized the damages reform provision of the Patent Reform Act of 2009 as “a judicial nightmare” because of its procedural complications, attendant delay and reversal potential. Two additional problems with that provision merit note: it perpetuates prior art subtraction and introduces into jury trial multiple potential violations of the Seventh Amendment.

Fact-finding and the Seventh Amendment. The Supreme Court coined the term “gatekeeper” in Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993), to describe the trial court’s obligation to “ensure that any and all scientific testimony or evidence admitted is not only relevant, but reliable.” In addition to rulings on Daubert motions, courts also fulfill their gatekeeper role by ruling on motions for summary judgment and judgment as a matter of law, motions in limine, evidentiary objections, and jury instructions. The bills’ damages section would enhance the courts’ gatekeeper role, but in doing so unconstitutionally invade the jury’s province as fact finder.

The bills would add to 35 U.S.C. §284 paragraph (c)(1), which would require the court to select from three methods for calculating a reasonable royalty “based on the facts of the case and after adducing any further evidence the court deems necessary.” A procedural rule requiring the court to weigh evidence to select from alternate theories would be void for depriving the patentee of its right to jury trial. See Fidelity & Deposit Co. of Maryland v. United States, 187 U.S. 315, 320 (1902). A genuine issue of material fact, that is, a dispute over facts that might affect the outcome, requires the issue to go to the jury. See generally Anderson v. Liberty Lobby, 477 U.S. 242 (1986). Similarly, the trial court’s exclusion of the entire market value rule under paragraph (c)(1)(A) for the patentee’s failure to make “a showing to the satisfaction of the court,” would violate the Seventh Amendment in a jury trial in which the patentee presents enough evidence to create a genuine issue of material fact. See Minks v. Polaris Indus., Inc., 546 F.3d 1364, 1372 (Fed. Cir. 2008) (vacating because trial “court necessarily engaged in an independent review of the evidence and substituted its conclusion for that of the jury on the factual issue of compensatory damages”).

The first section of the bills’ section (c)(1)(B) authorizes trial courts to exclude the patentee’s prior licenses for failure to make a “showing to the satisfaction of the court” of three facts regarding the claimant’s other licenses:

“the claimed invention has been the subject of a nonexclusive license for the use made by the invention by the infringer”;

the licenses have been extended “to a number of persons sufficient to indicate a generally marketplace recognition of the reasonableness of the licensing terms”; and

“the license was secured prior to the filing of the case before the court.”

The court also must determine whether the infringer’s use is “of substantially the same scope, volume, and benefit of the rights granted under such license. The second sentence of paragraph (c)(1)(B) requires a similar procedure for noninfringing substitutes for the infringing product or process. And paragraph (c)(1)(C) likewise requires the court to “conduct an analysis to ensure that a reasonable royalty is applied only the portion of the economic value of the infringing product or process properly attributable to the claimed invention’s specific contribution over the prior art.” A court making these findings would invade the province of the jury where the patentee presents substantial evidence on these issues.

Prior Art Subtraction. Section (c)(1)(A)’s requirement for application of the entire market value rule that the “claimed invention’s specific contribution over the prior art” be the “predominant basis for market demand” is just the latest form of “prior art subtraction.” Use of “specific contribution over the prior art” is an attempt to separate the “gist” or “heart” of the invention from the patent claims, and would introduce the extra step of subjectively redefining the scope of a patent. The Federal Circuit long ago rejected using the “gist” or “heart” of the invention to determine obviousness, see Para-Ordnance Mfg. v. SGS Importers Int’l, Inc., 73 F.3d 1085 (Fed. Cir. 1995), and recently rejected using the “point of novelty” in design patent law. Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665, 678 (Fed. Cir. 2008). Stripping the prior art elements out of the claimed invention that has been examined by the USPTO, construed by the federal district court, and relied upon to determine validity and infringement, in no way approximates the “heart” or “gist” of the invention, and that inherently subjective process would be unfair to the patent owner, and would eliminate application of the entire market value to inventions consisting entirely of prior art elements, arguably the vast majority.

Paragraph (c)(1)(C) would limit the reasonable royalty base to the “economic value of the infringing product or process properly attributable to the claimed invention’s specific contribution over the prior art,” replacing apportionment with prior art subtraction. This analysis is no substitute for the sophisticated and nuanced apportionment approach available under existing case law such as Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116, 1133-37 (S.D.N.Y. 1970). Paragraph (c)(1)(C) would address the combination invention problem by stating that for combination inventions “the contribution over the prior art may include the value of the additional function resulting from the combination, as well as the enhanced value, if any, of some or all of the prior art elements as part of the combination, if the patentee demonstrates that value.” This analysis, which finds no precedent in existing case law and lacks any readily definable economic standards, does not even begin to address the problem that subtracting the prior art elements simply does not approximate what the inventor really invented.

Replacement of “contribution over the prior art” with the “essential features” language from the Supreme Court’s recent Quanta Computer, Inc. v. LG Electronics, Inc., 128 S. Ct. 2109 (2008), would just put another label on prior art subtraction. Regardless of label, the bills’ damages provision would drastically reduce patent owners’ ability to obtain reasonable royalty damages, which could not be less fair to those, like independent inventors, research institutions and universities, that have no ability to obtain lost profits damages.

Notes

Spangenberg on Apportionment, Obviousness and Anonymous Comments

Patent,

On Feb 12, 2009, I published “Orion and Taurus: NPE’s at the Federal Circuit” in which I discussed Erich Spangenberg’s cases now pending at the Federal Circuit. In the note, I referred to the $34 million verdict that his company won against Hyundai and noted that the patent may well serve as the “poster child for damages reform.” Erich Spangenberg recently sent me a note regarding his appeals now pending at the Federal Circuit. He makes several important points:

On apportionment: As to being a “patent reformer’s poster child for damage reform,” I take it that this statement by you has two elements: (i) you put some credence in the musings of anonymous comment posters about the state of the art and (ii) the apportionment provisions set forth in the proposed patent reform legislation. In various ways, both of these were put to test at trial. . . . As to the apportionment point, I believe the problem with this point is that a similar non-infringing substitute system [did] not exist at the critical date and on the date of the hypothetical negotiation a similar system would be an enterprise system with a double digit million price tag.

On Obviousness: Every major auto manufacturer produced mountains of prior art (including Mercedes) and not a one of them claimed to have a computerized sales system in operation on the critical date as described by your poster. The art relied on turned on a system known as the IDB 2000—which was developed by Bell+Howell in the late 1980’s at the request of GM. The co-inventor of the IDB 2000 was Dr. Donald Frey. Dr. Frey was the CEO at Bell+Howell during the time the IDB 2000 was initially developed and implemented—a BA, MA and PhD in metallurgic engineering out of Michigan and a long-term employee of GM and Ford, whose credits include being one of the “fathers” of the Mustang while at Ford and a National Medal of Technology recipient. Dr. Frey was not paid for any of the information he provided. In an affidavit he provided that was discussed at trial (Dr. Frey did not testify)—he stated “I have reviewed United States Patent Number 5,283,865 entitled “Computer-Assisted Parts Sales System” (the ‘865 patent) and United States Patent Number 5,367,627 entitled “Computer-Assisted Parts Sales Method (the ‘627 patent) along with the file history for each of these patents.” While there are several points in his affidavit that are important, the most critical is the concluding paragraph in his affidavit that states, “The’627 and the ‘865 patent differ from the IDB2000 in that, among other things, they describe novel parts systems that were not contemplated, designed or implemented as part of the IDB2000.”

I am fascinated by the reverse prognosticators that claim it is “obvious to me” as they sit in their chairs today reflecting on the state of the art in 1989—most of whom posses even less experience at the critical date than the anonymous comment poster who had a summer job in a Mercedes parts bay. In this golden age of modern cynicism is it really so hard to believe that the examiner got it right?

On Anonymous Comments: I am not a fan of—and heavily discount views expressed in—anonymous commentaries. The discipline of providing your verified name gives one pause before you hit the “send” button. One idea you may wish to consider to raise the level of the discourse on your blog is to have an “anonymous” comment section (sometimes this is the only way to get valuable information) and a verified name comment section.

Erich’s points on apportionment are well taken. Apportionment does not make sense when at the time of the infringement there were no suitable substitutes. As has been discussed on the blog, even if you believe that damages should be apportioned according to the incremental value of the claimed innovation, the apportionment method proposed in the Patent Reform Act of 2009 is clearly problematic based upon its proposed procedures.

Patent Reform 2009: More on Damages

Damages, Patent, Patent Legislation, , ,

Guest Post by Richard Cauley. Cauley is the author of the recent Oxford Press book titled Winning the Patent Damages Case: A Litigator’s Guide to Economic Models and Other Damage Strategies. I asked him to provide some thoughts on the damages proposals in the Patent Reform Act of 2009. Cauley.jpg

The damages provisions of the Patent Reform Act of 2009 are not new, nor, in an economic sense, are they particularly controversial. Although their introduction in this legislation may create a political firestorm among those who wish to artificially maximize the economic leverage of patentholders both in court and across the bargaining table, the solutions proposed in the latest attempt at patent reform merely reflect – and attempt to measure – the true economic worth of a patent and the reasonable return to which an inventor is entitled.

What these damages provisions (all of which were contained in the various versions of the failed Patent Reform Act of 2007) attempt to accomplish is to force the court to limit the patentholder’s recovery to the real economic worth of an invention – for example, to a company who might want to license that invention to use in another product or to a consumer who might purchase a product because of that very invention.

Thus, the section limiting the application of the entire market value rule to situations in which the actual invention – the advance over the prior art – forms the basis of consumer demand compensates the inventor only to the extent his invention produces something that people actually want to buy.

This section also ensures that patents on relatively minor components are not given a value in excess of their real economic worth. Where the patent does not cover something critically important to the consumer, the provision limits the patentholder’s recovery to the value of that component to the customer – and precludes a recovery based on the entire product, which may include many other patented components.

Likewise, the section requiring the court to determine whether there is already a “market price” for licensing the patent – in the form of pre-existing licenses for similar patent rights – simply measures how much a prospective licensee would be willing to pay on the open market for the right to use the patent. Of course, this is what the reasonable royalty remedy is supposed to measure.

The purpose of these provisions is obvious. First, they will limit the ability of patentholders, primarily patent trolls, to recover damages in patent litigation far in excess of the actual economic value of those patents. More importantly, however, they will reduce the threat of such inflated damages awards – a threat such plaintiffs use as leverage in licensing campaigns and settlement negotiations to secure recoveries far exceeding the worth these patents really have to the prospective licensees.

The problem with these proposed statutes, then is not their objective – to give patents the value they actually deserve – but the implementation. As written, these provisions are a judicial nightmare. They require the court to conduct a kind of “damages Markman” in which the court must decide, before giving the case to the jury, the economic value of the patent’s “specific contribution over the prior art,” the “basis” for the “market demand” for an infringing process, the “relevant market” for a claimed invention and whether that market has “similar noninfringing substitutes” for the claimed invention. Apparently, the court is also supposed to make the economic decision of which Georgia Pacific factors the jury is allowed to consider.   

The delay which will be caused in an ongoing trial will inevitably be substantial and the opportunities for reversible error in this process will be legion. Although the intent of the drafters of these provisions was certainly praiseworthy– to codify limits on jury’s overvaluing patents in awarding damages – the byzantine rules they set up to implement these objective shows that they certainly have never tried a patent case. Indeed, if the courts would simply follow the judicially- established guidelines already in place, this complex set of regulations would not be necessary.

Hopefully, calmer heads will prevail before these rules are actually imposed on the patent litigation bar and on the courts. There are better and more effective ways of reaching these objectives.

Indeed, it is not surprising that, in another section of the bill – limiting venue for patent cases to districts in which the defendant has a facility – there appears to be no appropriate venue for a patent case against an infringing foreign defendant with no facilities in the United States. Thus, a plaintiff might have jurisdiction over an infringer, but nowhere to sue the company – all dressed up and no place to go.

Links:

In re Nature’s Remedies: Foreign Regulatory Submission Invalidates Patent Under 102(b)

Anticipation, Patent, Patent Cases 2009, ,

In re Natures Remediesssp_temp_capture.jpg (Fed. Cir. 2009) (nonprecedential)

In October of 2005, a third party (Jemo-Pharm) submitted a request for ex parte re-examination of Natures Remedies patented claim covering an herbal composition of guarana, damiana, and yerbe-mate claimed to cause weight loss. More than one year before Remedies’ filing date, an anticipating composition had been submitted to a Danish regulatory organization as part of a request for approval for clinical testing. (The decision is unclear, but implies that the submission was done by Remedies).

A Danish official provided testimony that the submission was a public record and was open for inspection since its date of submission. Remedies’ expert, however, argued that a Danish trade-secrecy law would have prevented such inspection. The BPAI accepted the open-access line of argument and found the submission invalidating prior art under 35 USC 102(b). The patentee appealed – arguing that the official submission was not sufficiently publicly accessible to be considered 102(b) prior art.

On appeal, the Federal Circuit affirmed – finding that the regulatory submission was publicly available more than one year before Remedies filed its application. The court began by recognizing that the official’s testimony created a prima facie case that the submission was publicly accessible – shifting the burden to the patentee. Of course, BPAI factual findings such as this will be affirmed with a finding of “substantial evidence.”

Because [the Danish Official’s] declaration established a prima facie case of public availability, the onus was on Remedies to demonstrate that the [regulatory submission] was not accessible to interested members of the public. Remedies, however, failed to carry its burden.

Under the Danish trade-secrecy law, the regulatory submissions are kept secret when they are of “material importance” to a company’s “economy.” It appears that Remedies could have proven its case but failed to provide evidence to the Board.

Attorney argument, however, cannot take the place of record evidence. See In re Geisler, 116 F.3d 1465, 1470 (Fed. Cir. 1997); Johnston v. IVAC Corp., 885 F.2d 1574, 1581 (Fed. Cir. 1989). Here, the evidence of record does not establish that Remedies intended to keep the formulation of the Medi-Tab capsule confidential until after the study had been completed and a patent application had been filed.

Rejection affirmed

Notes:

  • 102(b) looks at prior art that was “described in a printed publication” more than one year prior to the date of application for the US patent. Implicit within ‘publication’ is a notion that the material is publicly accessible. Notably, however, there is generally no need to prove that the material was actually accessed. Thus, in this case, there is no discussion of whether the regulatory submission was ever seen by anyone.
  • Read the case
  • Reexam No. 90/007,785 (look it up in PAIR).
  • In some ways, this case is simply an extension of the Pivonka v. Axelrod case where the Federal Circuit held that the applicant has waived arguments by failing to present them at the Board of Patent Appeals.

In re Ferguson: Patentable Subject Matter

BPAI, Patent, Patent Cases 2009, Patentable Subject Matter, Software, , ,

In re Ferguson (Fed. Cir. 2009)

Scott Harris has been discussed several times on Patently-O. Harris is a former Fish & Richardson partner. Fish handles the most patent litigation of any firm in the country. In addition to being a patent attorney, Harris is an inventor. He has contracted with the plaintiffs firm Niro Scavone in several actions to enforce patents against Google and other companies. Harris is one of the named inventors of the Ferguson application and he handled the [futile] appeal.

The claimed invention focuses on a “method of marketing a product” and a “paradigm for marketing software.” These claims focus on methods and structures for operating a business.

Methods Under Bilski: Claim 1 reads as follows:

A method of marketing a product, comprising:

developing a shared marketing force, said shared marketing force including at least marketing channels, which enable marketing a number of related products;

using said shared marketing force to market a plurality of different products that are made by a plurality of different autonomous producing company, so that different autonomous companies, having different ownerships, respectively produce said related products;

obtaining a share of total profits from each of said plurality of different autonomous producing companies in return for said using; and

obtaining an exclusive right to market each of said plurality of products in return for said using.

Under Bilski, this case is open and shut. The claim is not even arguably tied to a machine — especially under the Nuijten construction of machine to be a “concrete thing, consisting of parts, or of certain devices and combination of devices [including] every mechanical device or combination of mechanical powers and devices to perform some function and produce a certain effect or result.” (Quoting Burr v. Duryee, 68 U.S. (1 Wall.) 531, 570 (1863)). Thus, the 1863 touchability definition of machine appears to hold weight. On the second Bilski prong, the claim does not require transformation of any article into a different state or thing. The only transformation is that of legal rights and organizational relationships that were explicitly excluded in the Bilski decision: “transformations or manipulations simply of public or private legal obligations or relationships, business risks, or other such abstractions cannot meet the test because they are not physical objects or substances, and they are not representative of physical objects or substances.”

Harris asked the court to consider a different test of patentable subject matter: “Does the claimed subject matter require that the product or process has more than a scintilla of interaction with the real world in a specific way?” The CAFC panel rejected that proposal primarily based on the precedential value of Bilski: “In light of this court’s clear statements that the “sole,” “definitive,” “applicable,” “governing,” and “proper” test for a process claim under § 101 is the Supreme Court’s machine-or-transformation test, see Bilski, passim, we are reluctant to consider Applicants’ proposed test.” The court went on to determine that the “scintilla” test would create too much ambiguity as well.

Non Method Claims: The application also included claims directed to a “paradigm for marketing software” made up of a marketing company that markets software in return for a contingent share of income. Although “instructive,” the Federal Circuit did not directly follow Bilski. Rather, the court looked to determine whether the claimed paradigm fit within one of the four statutory classes listed in Section 101:

Inventions Patentable: “… any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof…”

In a gentle Koan, the Court stated that it “need not resolve the particular class of statutory subject matter into which Applicants’ paradigm claims fall, [however], the claims must satisfy at least one category.” In fact, the court did attempt to resolve the particular class, but was unable to fit the paradigm claim into any of the four.

Applicants’ paradigm claims are not directed to processes, as “no act or series of acts” is required. Nuijten, 500 F.3d at 1355. Applicants do not argue otherwise. Applicants’ marketing company paradigm is also not a manufacture, because although a marketing company may own or produce tangible articles or commodities, it clearly cannot itself be an “‘article[]’ resulting from the process of manufacture.” Nuijten, 500 F.3d at 1356. Again, Applicants do not argue otherwise. And Applicants’ marketing company paradigm is certainly not a composition of matter. Applicants do not argue otherwise.  

Again applying the touchability notion of machine, the Court also rejected the notion that the company paradigm could be a machine:

Applicants do assert, however, that “[a] company is a physical thing, and as such analogous to a machine.” But the paradigm claims do not recite “a concrete thing, consisting of parts, or of certain devices and combination of devices,” Nuijtent, and as Applicants conceded during oral argument, “you cannot touch the company.”

Ending in a flourish, the court found that in fact, the Ferguson paradigm claims are “drawn quite literally to the paradigmatic abstract idea.” (quoting Warmerdam).

Judge Newman offers a poignant concurring opinion.  

Threading Comments on Patently-O

Patent

Typepad (the blog host) has new software for threading comments. I like the idea because it allows for better direct arguments and may make it easier to follow a line of reasoning. At times, the comments turn into a back-and-forth between two or three readers that goes wildly off topic. The threads could allow that comment chain to continue while non-parties could just skip over it. The new software also allows more of an “identity.” You can create a user ID and picture – and then never again be forced to read numbers and letters in fuzzy images. Anonymous comments will still be available. The software also gives the commenter a few minutes to edit comments before they become ‘permanent.’

Test it out here (https://patentlyo.com/test/2008/07/monop1.html) and let me know if we should make the switch.

Guest Post: Hot Topics in US Patent Reexamination

Academic Studies, Articles and Publications, Guest Post, Patent, Reexamination, , ,

By Robert Greene Sterne. Rob Sterne is a founding director of the IP firm Sterne Kessler Goldstein & Fox. I asked him to write about current ‘hot topics’ in patent reexamination.

pic-11.jpg

The marked increase in the use of reexamination has naturally caused more frequent and closer evaluation and scrutiny of its unique procedures by involved parties and the courts. In FY2008, according to official USPTO (PTO) statistics, 168 inter partes reexams and 680 ex parte reexams were instituted. Compare this to FY2005, where 59 inter partes reexams and 524 ex parte reexams were instituted just three years ago. In short, it is becoming one of the faster developing areas of intellectual property law and, in the words of top PTO officials, it is a true “work in progress.”

Developed in conjunction with the Sedona Patent Litigation Conference and a team of my colleagues (and incorporating feedback of dozens of sources including judges, senior officials from the PTO, patent litigators, patent prosecutors, academics, bloggers, and interested members of the public), a comprehensive and neutral white paper overview of this subject matter provides an in-depth review of hot issues currently confronting parties that find themselves in the “parallel universe” of patent reexamination and concurrent litigation in the district courts and USITC. The hot topics addressed include (A) impact of PTO decisions on stock price, (B) reexamination pendency, (C) substantial new questions of patentability, (D) real party in interest, (E) duty of disclosure, (F) protective orders, (G) stay of litigation in view of reexamination, (H) appeals from the Central Reexamination Unit to the Board of Patent Appeals and Interferences, (I) the impact of reexamination on settlement, and (J) page and time limits in reexamination proceedings.

Here is a closer look at three of these topics:

  • Litigation Stays: Reality or Myth – The percentage of reexams that are in the ‘parallel universe’ of district court or USITC patent litigation continues to climb. For example, in FY2008, 62% of current inter partes reexams and 30% of ex parte reexams were in parallel litigation. Judges have wide latitude in granting or denying stays and litigants must carefully evaluate prior stay decisions from their judge and the court they are in to effectively prognosticate how the judge will rule. Especially with respect to inter partes reexams, the grant of a stay can effectively be “game over” for the patent owner.
  • Stock Fluctuation: Impact of PTO and Court Decisions on Stock Price – The practical impact of reexam on patent owners can be enormous. There are recent celebrated examples of stocks dropping 40% in hours after the release of a non-final office action rejecting claims in a suit, even though this development is not controlling on a court case because the reexam is not final. Third party requestors engage in litigation in the press by issuing inflammatory press releases that spin the truth. Patent owners need to be prepared for this media battle to protect their stock price. Moreover, the PTO mails decisions to parties in the reexam, putting the patent owner at a real disadvantage in dealing with the potential reexam media war.
  • Reexamination Pendency: So How Long Does it Take? – The stated goal of the PTO CRU is 24 months from the time the reexam is instituted to a Final CRU office action or action closing prosecution. By statute, the CRU must handle reexams with “special dispatch.” However, there are no definitive statistics on how long it takes for a reexam to be handled to completion by the CRU and then through appeal at the BPAI. Our current best estimate is that it takes approximately two to four years for the CRU to complete a reexam, typically a little faster for ex parte reexams, and two to four years for the BPAI to complete a reexam appeal. Thus, the reexam process could take four to eight years before it arrives at the US Court of Appeals for the Federal Circuit on appeal. This is a significant amount of time and requires additional strategy and tactical decisions by the parties.

For additional insight into patent reexamination, download recent podcasts – “2008 Patent Reexamination Trends” (Episode #1) here and “The Parallel Universe of Patent Reexamination and Litigation” (Episode #2) here.Download the latest version of the Sedona Conference related paper referenced above here, where you can read in-depth about the full list of hot topics identified above.

Patent Law Professors on the Move

Academic Studies, Bits and Bytes, Patent

The lateral market for patent law professors is alive and steaming ahead.

  • Scott Kieff has accepted a position at GW law school in DC and will be moving from Washington University in St. Louis. GW may well have the best patent focused program in the country. At any opportunity, Kieff promotes the notion that strong property rights almost always lead to the best outcome.
  • Tim Holbrook is off a recent stint at Stanford Law school and is taking a position at Emory in Atlanta. Emory's patent space has been vacant since Margo Bagley left for UVA several years ago. Holbrook is leaving his fulltime position at Chicago-Kent.
  • Also leaving Chicago is Katherine Strandburg (from Depaul). Strandburg is taking a position at NYU where she will join Richard Epstein and my undergraduate classmate Troy McKenzie. McKenzie is a chemical engineer, but does not do patent law. Instead he focuses on bankruptcy.
  • In a coup, Mark Janis is headed home to Indiana (Bloomington) – leaving his longtime post at Iowa. Janis largely focuses on the interplay between trademark and patent rights.
  • Dave Schwartz is moving from John Marshall to fill Holbrook's position at Kent. Before moving into academia, Dave was a partner at a firm handling patent litigation and prosecution.

Each of these individuals have been helpful to me at some point during the past few years. Thank you, and good luck in your new positions!

Forward Looking Patent Damages

Articles and Publications, Damages, Injunctions, Patent,

In the wake of eBay, courts and scholars have been working to figure out what to do after denying injunctive relief. A common suggestion is to award an ongoing royalty – often termed a compulsory license. In an impressive body of research stretching back to the year 1660, Lewis & Clark professor Tomás Gómez-Arostegui concludes that “federal courts lack the authority, in either law or equity, to award prospective compensation to plaintiffs for post-judgment copyright or patent infringements.”

Until such time as Congress creates a new form of compulsory licensing, future-damage awards and continuing royalties can only be granted in lieu of a final injunction by consent of the parties.

In non-patent cases, such as accidental death, courts regularly calculate future damages – such as earning capacity. However, in those cases, the award is based on a past tort. In patent cases, prospective damages are based upon future infringing actions.

Looking historically, Gómez-Arostegui could not find a single instance prior to 1789 where the Chancery “awarded a continuing royalty in lieu of a final injunction in infringement cases.” In cases where no injunction was granted, the court did “nothing at all” about ongoing infringement.

How does this cut:

Read the paper here.

Stays Pending Inter Partes Reexamination

Articles and Publications, Patent, Reexamination

In an earlier post I indicated my suprise that courts continue to “grant stays of litigation pending re-examination – especially inter partes reexaminations which tend to be incredibly slow.” In thumbing through Matthew Smith’s new book on Inter Partes Reexaminations, the following statements caught my attention and reaffirmed my conclusion that stays do not make sense here:

“A fully contested proceeding, therefore, could consume six to seven years. . . . [However t]here is as yet no reliable data available to estimate the total time of the proceeding. As of the end of 2008, the only cases with issued reexamination certificates were those in which technical mistakes were made, or in which at least one party chose not to contest the proceedings.”

The first request for inter partes reexamination was made in 2001 and still no contested inter partes reexamination has completed its course. Mr. Smith’s suggestion of “six to seven years” may well be optimistic.

Part of the Patent Reform Act of 2009 would be to take inter partes reexaminations out of the hands of the examination corps and put it under the direction of “an administrative patent judge.” Under the proposal, the PTO is given authority to spell out the actual procedures. Of course, the Board of administrative patent judges has been handling this sort of trial-in-the-first-instance for many years in the form of interference proceedings. The board already has a trial division that is ready to go. Although there are some outliers, interference proceedings are generally terminted within less than two years. For the Oct-Dec 2009 period, 13 interference proceedings were terminated with an average pendency of 9.5 months. 100% of those cases were terminated in less than two years. See 37 C.F.R 41.200(c) (“Patent interferences shall be administered such that pendency before the Board is normally no more than two years.”)

Notes:

Cardiac Pacemaker v. Jude: En Banc Challenge to 271(f) Liability for Components of a Method

Patent

Cardiac Pacemakers v. St. Jude Medical (en banc 2009)

Patent law is ordinarily considered territorial. Infringement of a US patent normally requires practicing an entire patent claim within the US. 35 U.S.C. § 271(f) details an exception to the rule that creates a cause of action for patent infringement for the action of supplying components of a patented invention to be assembled abroad. The Court of Appeals for the Federal Circuit has announced that it will hear a 271(f) case en banc to determine whether “35 U.S.C. § 271(f) appl[ies] to method claims, as well as product claims.”

The case is set for the Court to provide a resounding answer: “No, Section 271(f) does not apply to method claims.”

The statute in question reads as follows:

271(f)(1) Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

In the 2005 Union Carbide decision, the Federal Circuit interpreted 271(f) to encompass method claims. Thus, in that case, Shell was properly held liable for exporting a catalyst to be used abroad to practice the method in a foreign facility Union Carbide is the specific precedent followed by the three member Cardiac Pacemaker panel. Then, in the 2007 Microsoft v. AT&T decision, the Supreme Court found that 271(f) does not extend to cover foreign duplicated software – i.e., that the software in the abstract is not a “component.” Part of the Supreme Court’s justification for its narrow interpretation of 271(f) was based on the traditional presumption against extraterritorial application of US laws.

The court welcomes Amicus briefs on the subject.

Patently-O Bits and Bytes No. 95

Bits and Bytes, Injunctions, USPTO News,
  • Injunctive Relief: I re-read Michelle Lee’s (Google) statement about the need for patent reform. One issue that jumped-out this time: No mention of injunctions. Money is still at stake, but Google appears confident that it won’t face a shut-down even if it loses a patent case. In that sense, Google is lucky that it is being sued by non-practicing entities who as a de facto rule don’t get injunctive relief against infringers who have a major market share.
  • Benefit of Trade Secrets: Avoid Charges of Infringement. In some senses, google is very public. Yet, its actual operation is quite secretive. One benefit of that type of operation is that it helps avoid charges of patent infringement. If patentee’s can’t tell how you operate, it makes it much more difficult to assert charges of infringement.
  • Warranties and Copyright: My colleague Marc Roark has an interesting new paper: Limitation of Sales Warranties as an Alternative to Intellectual Property Rights: An Empirical Analysis of Iphone Warranties’ Deterrent Impact on Consumers.
  • The BPAI Watchdog: http://bpaiwatchdog.blogspot.com/. So far, Leigh Martinson is focusing on the BPAI’s application of Bilski.
  • European Bilski: The Enlarged Board of Appeal of the EPO is looking for third-party input on four issues:
    1. Is it only proper to exclude patents covering computer programs as such when explicitly claimed as a “computer program”?
    2. Does a claim avoid the computer program as such exclusion by mentioning a computer or data storage medium? (If not, what technical effect is needed?)
    3. Can a technical effect be non-physical? Is it sufficient if the physical entity is an unspecified computer?
    4. Does the activity of programming a computer necessarily involve technical considerations?
  • Input on the European questions are due by the end of April. http://www.epo.org/topics/news/2009/20090219.html.
  • Application for the job of PTO Director (by Prof Morris) http://www.stanford.edu/~rjmorris/pto.htm. I maintain that it is possible to find an excellent nominee who is not a patent attorney. However, any nominee who does not have extensive experience with the patent prosecution process will face an uphill credibility battle from day one.