Last week I spoke with Yale Professor Thomas Pogge about his proposal for a “Health Impact Fund.” The mission is to provide incentives to develop and distribute drugs that will achieve major global health impacts. Pogge sees the current patent system as valuable, but lacking. The problem is that the most innovative pharmaceutical companies find it very difficult to make money from treatments that are focused on the problems of the developing world. Although helpful, charity donations of drugs are typically insufficient and lead to the problem of parallel imports.
The solution proposed by Pogge is to form a global fund and pay innovator companies based on the global health impact of their new treatment. The more “quality adjusted life years” (QALYs) saved, the more money a company gets. The intent of this reward scheme is to focus the innovators on developing and distributing treatments that will have the greatest worldwide health impact.
The system is intended simply as an additional incentive layer. A drug developer may obtain patents as usual. However, in order to qualify for the program, the patentee would agree to sell its drugs at cost and guarantee access.
Pogge’s models suggest that the fund would have a major impact if funded with $6 billion annually.
I like the idea of aligning economic interests of the innovators with a health impact. If structured correctly, innovators will like this program because it does not take away the option of simply using the traditional patent system. The problems are primarily logistical: who pays the $6b?; how do you measure health impact?; how do you prevent gaming the system (by, for example, only using the program when the patents are likely to be challenged)?; etc.
President Bush’s “Emergency Plan for AIDS Relief” is set to spend about $6 billion on global AIDS treatment this year. [Link]
New Medium (J. Carl Cooper) v. Barco N.V. (N.D. Ill. 2008) (J. Posner)
Sitting by designation, Seventh Circuit Judge Richard Posner recently found New Medium’s asserted patent unenforceable due to inequitable conduct during ex parte reexamination of the patents. This case is important as one of the first decisions to consider inequitable conduct in the wake of Star Scientific.
Barco presented two theories of inequitable conduct: (1) that New Medium had misled the PTO by failing to disclose that its expert declarants had been ‘retained’ and paid; and (2) that inventor/owner Carl Cooper made false statements to the PTO regarding his association with the experts. Judge Posner rejected the first theory, but agreed with the second.
Disclosing Payment to Declarants: All four of New Medium’s experts were retained and paid by the company. However, only two of the experts disclosed their relationship to the PTO. Judge Posner found the lack of disclosure to be “not misleading.” As a default, the PTO should expect that the patent applicant retained and paid its experts.
“[A]ll expert reports in an ex parte proceeding before the Patent Office are procured by the patent owner or applicant, and it is customary to pay the experts for their time, as was done in this case. There is nothing in the reports of the two experts who didn’t say they had been retained to suggest they were charging no fee—no suggestion that they had been moved by altruism or a strong conviction of the rightness of the application to volunteer to submit an expert report gratis.”
This pragmatic default rule makes some sense. If the failure to disclose the payment was not misleading, it could not be material to patentability or lead to a finding of inequitable conduct.
False Statements About Cooperation: In his declaration to the PTO, Mr. Cooper stated that he had “never met or talked with any of these experts” before contacting them to submit reports. Judge Posner found that statement “false.” Cooper had solicited and paid for a bid from one of the experts (Klughart) seven years prior. (Klughart is also a patent attorney). Judge Posner also found that Cooper and Klughart’s testimony about forgetfulness difficult to believe:
“I conclude that Klughart is not neutral and that his forgetfulness may be strategic. . . .
Cooper testified that when he submitted his report in August of 2001 he had forgotten his prior dealings with Klughart. I do not believe that testimony. . . .
I am also disturbed by the statement in Cooper’s brief that ‘Mr. Cooper didn’t think his past contact with Dr. Klughart was ‘material’ and that’s why he didn’t disclose it.’ That is an admission that Cooper lied in his declaration, though I imagine it is unintended.”
Judge Posner had no problem finding intent to deceive the PTO. The second question then is whether the deception was material to patentability. Several prior opinions have held that failure to disclose relationships can be material. See Ferring v. Barr (Fed. Cir. 2006); Nilssen v. Osram (N.D. Ill. 2006). Here, Judge Posner also found materiality:
“Clearly the fabrication was material. It bore centrally on the credibility of one of the expert reports. . . . Suppose Cooper had explained the circumstances to the patent examiner—that Klughart, a practitioner of modest means and prospects, had submitted to Cooper a $250,000 proposal that Klughart may at the time he prepared his expert report have thought he still had a chance of winning; Cooper had not responded to his proposal and Klughart was unaware that the project had been awarded to someone else. Klughart testified that the $250,000 proposal would have netted him about $200,000—a good deal more than a year’s income for him. . . .
Had these circumstances been disclosed to the patent examiner in Cooper’s declaration, Klughart’s report would have been rejected and perhaps the other reports as well, contaminated by the evidence of Cooper’s bad judgment in soliciting a report from Klughart.”
The question of whether deception was material to patentability is an issue of predictive fiction. Here Judge Posner recognized that the reexamination might have had the same result even with full disclosure. However, he implicitly applied the rules of equity to block New Media from such an argument, Quoting Refac, “an inventor cannot submit a misleading affidavit among a plurality of affidavits and later argue that it was the nonmisleading affidavit that resulted in allowance, thus effectively curing the defective affidavit.”
Inequitable conduct: After finding both intent and materiality, the court next determines whether their combined harm is sufficient for a finding of inequitable conduct. Here, Judge Posner found that the intentional submission of false statements tipped the scales.
“The making of a deliberate, material misrepresentation to a patent examiner is extremely serious misconduct because of the ex parte nature of most patent proceedings, including the reexamination proceeding at issue in this case. . . .
Because even material misrepresentations made to the Patent Office will usually not be detected, it is necessary to impose a severe sanction for such misrepresentations when they are detected, at least when as in this case they are deliberate. The appropriate sanction will normally be, and in this case I have decided that it should be, the cancellation of the patents.”
Claim by Claim: The expert reports focused only on a few claims. Cooper argued that the court should only hold those claims unenforceable. Following precedent, Judge Posner rejected that approach.
“The suggestion is that since the expert reports pertained to only a fraction of the claims in the ‘780 patent, I should declare unenforceable just those claims. The Federal Circuit has repeatedly ruled that if inequitable conduct is proved, the entire patent is unenforceable and not just the claims affected by that conduct.”
Holding: Asserted patents are unenforceable.
Notes:
Posner also suggested that the PTO take some action in this case – noting that it “might warrant discipline by the Patent Office (Cooper, as a registered patent agent, is subject to such discipline).”
Hat Tip to David Donoghue for originally noting the case [Link]
The patent laws promote an early filing doctrine. Most directly, by filing patent application documents early, an applicant can avoid problems created by pre-filing disclosures that can negate patentability.[1]Inter alia, early filing also provides a presumptive date of invention and reduction to practice that may have important evidentiary benefits for the applicant.[2]Some doctrines push against early filing. Notably, earlier filed applications may be more likely to have inadequate disclosure.A rushed disclosure could result in the patent application being rejected under the utility, written description, or enablement requirements of the Patent Act.[3] Alternatively, if the application is filed prior to gaining an understanding of the eventual market, an applicant may have insufficient disclosure to support the most valuable claims potential.
Going unrecognized is another benefit of early filing – the ability to keep secret later developed innovations and parameters.That secret information can then be protected and exploited as trade secret information.
At the time of filing, the applicant must provide a complete description including the best mode contemplated by the inventor. However, many if not most patent applications are filed well before the associated product or method is ready for public consumption – before the inventor knows the best commercially viable mode.Post-application developments could take any number of forms, such as particularly operative formulations; ideal antibiotic manufacturing parameters; software code that implements a novel algorithm; a more durable circuit arrangement; etc. Commonly, these tweaks and advances may take the form of a specific species of a disclosed and claimed genus.Of course, this later-stage developments could be incredibly important to anyone wanting to practice the invention or develop some follow-on technology.
Even though product development typically continues after the patent application is filed, the law allows the patent applicant to legitimately keep any later developed information as trade secret.Patent applications are not allowed to add ‘new matter’ to a patent application during prosecution. Likewise, the applicant has no duty to otherwise inform the patent office or the public of ongoing development. Rather, the application is set at filing and ex post developments are generally irrelevant to patentability.[4]
In a later post, I’ll explore whether this potential overlap of patent and trade secret rights is good from a policy perspective.
[1] 35 U.S.C. §102(b).This is especially critical if filing foreign applications.
[2] See, for example, 35 U.S.C. §102(g) and §102(a).
Ex parte Yamaguchi (BPAI 2008)(Precedential Opinion)
In prosecution, the Examiner cited the Narayanan reference against a Texas Instruments patent application filed by Yamaguchi. The rejection identified Narayanan as prior art under 35 U.S.C. § 102(e). The issue on appeal to the BPAI was whether the Narayanan reference can be considered 102(e) prior art as of the filing date of its provisional application.
Section 102(e) allows for submarine prior art – these are typically pending US patent applications that, when published or patented, suddenly become prior art as of their filing date. The statute allows that “[a] person shall be entitled to a patent unless . . .the invention was described in . . .a patent granted on an application for patent by another filed in the United States before the invention by the applicant for patent.. . .” 35 U.S.C. § 102(e).
102(e) Provisional: The issue here is whether Narayanan’s provisional application can be used in 102(e) analysis. The expanded BPAI panel agreed with the examiner that the 102(e) prior art date does reach-back to the date of provisional filing. This result is based on their analysis of 35 U.S.C. § 111(b). Section 111(b) requires that “provisions of this title relating to applications for patent shall apply to provisional applications for patent.”
“Based on this express intent to apply the provisions of Title 35 relating to “applications for patent” to provisional applications (except for four enumerated sections noted in §111(b)(8)), a provisional application can therefore be reasonably considered an “application for patent” within the meaning of §102(e). The plain meaning of these provisions of Title 35 as noted above is outlined in MPEP 2136.03(111) for establishing the critical reference date under §102(e) of a U.S. patent or U.S. application publication that is entitled to the benefit of the filing date of a provisional application under §119(e). Based on the statutory scheme of Title 35, we hold that Appellants have not shown harmful error in the rejections on appeal.”
This holding is in tension with the controlling precedent of In re Wertheim, 646 F.2d 527 (CCPA 1981). In Wertheim, the CCPA held that for a continuation-in-part application, the parent’s filing date may serve as a §102(e) date, but only if the parent contains full §§120 and 112 support for the disclosure.
In this case the Examiner found that the Narayanan provisional application fully supported the eventual publication – and thus that the 102(e) date for narayanan was the filing date of the provisional. The applicant was unable to disprove these findings and the BPAI affirmed the rejection.
On Friday, I will be speaking at the Seton Hall Law Review’s Health Law Symposium. This year’s topic is focused: Preparing for a Pharmaceutical Response to Pandemic Influenza. [LINK] A portion of my talk will focus on how patent law may react during a public health crisis.
The reality is that in a pandemic situation, the patent rights covering important treatments will be ignored. Under TRIPS, during a national emergency would-be patent infringement becomes a legitimate unauthorized use. At some later point, the patent holder should receive payment based on “the economic value of the authorization.” In all likelihood, however, that ex-post payment will be a small fraction of the potential monopoly profits that could have been earned.
There are several legal avenues to allow “unauthorized use” in the US. One avenue is by denying injunctive relief. Even before eBay, no court would order an injunction in the face of a public health crisis that could be mitigated by allowing infringement. The test for injunctive relief specifically looks to the public interest. And here, easy access to treatments would weigh heavily in the public interest. Further, a patentee has no right to injunctive relief if the infringer is the US Government. 28 U.S.C. §1498. Thus, another avenue for unauthorized use is through direct government intervention. In 2001, Congress and the Administration were reported to have seriously considered “breaking” Bayer’s patent on Cipro in order to stockpile the drug against a potential anthrax attack. In the Cipro case, the Government apparently used the threat of breaking the patent to negotiate a long-term contract with Bayer at an unusually low price. This approach might be termed ‘bending’ the patent. Individual states within the US may also apply pressure and threat of unauthorized use while retaining immunity from suit under the 11th Amendment of the Constitution.
What Incentive?: We all understand that governments will not be able to avoid the temptation of breaking (or bending) patents covering important treatments that may be useful in some future crisis. Unfortunately, this prediction of the likely future greatly diminishes today’s incentives to innovate crisis-specific treatments. Many empirical questions remain: Will the ex post compensation be a sufficient incentive to innovate? Will the most valuable treatments have non-crisis uses where patent rights will operate more normally? Are the potential crises so well defined that a grant or prize system could work better?
Notes:
The tables below show patenting and patent application data for patents relating to influenza (search influenz$). For applications filed in 2001, almost 2,500 have been published. Less than 50% of those published applications have issued as patents in the seven year interim. Although we will never be sure, it looks like a little under 20% of the “influenza” applications filed in 2001 kept secret rather than publishing.
The next chart shows the average number of non-patent references cited in the influenza patents as compared to patents in general.
Abbott Laboratories v. Sandoz, Inc., (Fed. Cir. 2008)(Newman, J.)
Preliminary injunctions decisions are blessed with their own four-factor equitable test. I like to think of the test as having two required elements (likelihood of success on the merits and potential irreparable harm) and two optional factors (balance of the equities and public interest). A preliminary injunction (PI) will only issue when (1) the first two elements are demonstrated by the patentee and (2) the combined result of all four elements/factors weighs in favor of a PI.
The district court granted a preliminary injunction to Abbott to stop Sandoz from making or selling a generic version of its extended release clarithromycin antibiotic. In 75 pages of split opinion, the Federal Circuit affirmed with Judge Newman writing the majority opinion; Senior Judge Archer signing-on except for the two juicy parts: I and VI; and Judge Gajarsa in vigorous dissent.
The dispute revolves around the meaning of the required PI element of ‘likelihood of success on the merits.’ To win on this element, the patentee typically needs to provide evidence of infringement of at least one valid claim. Often this element turns on the defendant’s rebuttal proof of invalidity. Here, the defendant provided some evidence of potential invalidity, but not conclusive evidence. Thus, while the defendant did raise a substantial question of the vulnerability of the patent, it did not provide any clear and convincing evidence of invalidity.
Judge Gajarsa argued that Federal Circuit precedent requires a PI be denied when substantial questions of validity are raised. This standard is exemplified in the Federal Circuit’s recent Erico decision – which found the threshold “substantial question” met by evidence which simply “cast[s] doubt on the validity” of the asserted claims.
Judge Gajarsa: “Under our precedent, the likelihood of success factor is properly analyzed by considering whether the alleged infringer raises a substantial question as to validity.”
On the other side, Judge Newman arguesthat a patentee may still be likely to succeed on the merits even when vulnerabilities and substantial invalidity questions are raised by the defense.
Judge Newman: “The question is not whether the patent is vulnerable; the question is who is likely to prevail in the end, considered with equitable factors that relate to whether the status quo should or should not be preserved while the trial is ongoing. The presentation of sufficient evidence to show the likelihood of prevailing on the merits is quite different from the presentation of substantial evidence to show vulnerability. “
Both sides are well supported by conflicting precedent, and this case may well be a good vehicle for an en banc discussion of preliminary injunctive relief.
NMI sued Verisign and others for infringing its credit card processing patent. One of NMI’s claims was found anticipated by a single prior art reference. That reference taught each element in the invalidated claim. However, there was no single example that taught all the elements together.
On appeal, the Federal Circuit reversed – holding that anticipation takes more than simply locating each element within the four corners of a single document.
In its rebuttal, the appellate panel focused on the concept anticipating the invention. To anticipate, the prior art must teach all the claim elements and the claimed arrangement.
Section 102 embodies the concept of novelty—if a device or process has been previously invented (and disclosed to the public), then it is not new, and therefore the claimed invention is “anticipated” by the prior invention. . . . Because the hallmark of anticipation is prior invention, the prior art reference—in order to anticipate under 35 U.S.C. § 102—must not only disclose all elements of the claim within the four corners of the document, but must also disclose those elements “arranged as in the claim.”
Focusing for a moment on arrangement – to anticipate, the reference must teach “all of the limitations arranged or combined in the same way as recited in the claim.”
Applying the rule to this case, the appellate panel found that the prior art reference was not anticipating. The reference disclosed two transaction protocols, but neither protocol contained all of the elements combined in the manner claimed. “Thus, although the iKP reference might anticipate a claim directed to either of the two protocols disclosed, it cannot anticipate the system of claim 23. The district court was wrong to conclude otherwise.”
Means Plus Function: After claim construction, the district court also found NMI’s means-plus-function claims invalid because they lacked any corresponding structure in the specification. On appeal, the Federal Circuit affirmed.
The patent statute allows patentees to draft claims in more generic ‘means plus function’ language. That language allows a patentee claim various elements based on their function. However, means plus function claims are only valid if the specification describes some structure to carry out the proposed function. According to the courts, this structure requirement is separate from any enablement requirement. Thus, some structure must be provided in the specification even if one skilled in the art would not need that disclosure to make the invention.
Here, NMI claimed a “[a bank computer including] means for generating an authorization indicia” but did not provide any corresponding structure in the specification to perform that structure.
On appeal, NMI incredibly argued that the claim was not a means-plus-function claim. The Federal Circuit disagreed – finding that the claim lacks structure.
Searching for structure in the specification, NMI pointed to its recitation of a “bank computer.” Of course that recitation is insufficient.
‘To avoid purely functional claiming in cases involving computer-implemented inventions, we have “consistently required that the structure disclosed in the specification be more than simply a general purpose computer or microprocessor.” Quoting Aristocrat
…
Consequently, a means-plus-function claim element for which the only disclosed structure is a general purpose computer is invalid if the specification fails to disclose an algorithm for performing the claimed function.
Floyd Minks won a jury verdict of $1.3 million based on a judgment of infringement by Polaris. The district court slashed that award by 95% — finding that Minks was adequately compensated by $27,000 in damages and $117,000 in attorney fees and an extra $27,000 for willfulness. On appeal, the Federal Circuit vacated the reduction in damages based on a procedural issue.
As a safety device, many all-terrain vehicles (ATVs) include a reverse-direction governor to prevent operating the vehicle at high speeds while driving backwards. The Minks patent covers a particular type of electronic governor to accomplish this goal.
Through his company, Minks Engineering, Minks designed the electronic governor for Polaris and also patented the design. Later, Polaris found a cheaper vender with a redesigned governor. At that point, Minks sued for infringement.
After the $1.3 million dollar verdict, the district court granted the Polaris motion for a reduction of the damage award “as a matter of law” under Fed. R. Civ. Pro. 50.
In the appeal, the Federal Circuit agreed that some reduction may be proper. However, the appellate panel held the Seventh Amendment of the US Constitution requires that a new trial on damages as a prerequisite to any reduction.
“The issue before us on appeal is whether the Seventh Amendment required the district court to offer Minks the option of a new trial in lieu of accepting the reduced damages award”
The fact-law distinction found throughout patent law is important because of Seventh Amendment’s high regard for factual decisions by a jury. The “reexamination clause” of the Seventh Amendment reads as follows: “no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of common law.” Here, the damage amount is a factual inquiry, and the Seventh Amendment has been interpreted to usually require that a district court offer a new trial on damages as an option when considering setting aside an excessive jury award.
The Eleventh Circuit (where this case arose) allows a judge to reduce a jury verdict without offering a new trial in the limited case where the error was a “legal error” as opposed to an error in adjudging a factual issue. Here, however, the error was in the jury’s determination of the number of infringing sales, royalty base, and royalty rate – all factual issues.
“A comparison of the Georgia-Pacific factors and the standard of a hypothetical negotiation to the evidence of record in this case makes clear that the district court’s reduction of compensatory damages necessarily amounted to an assessment of the sufficiency of the evidence, and as such, the option of a new trial was required.”
This case is in tension with Tronzo v. Biomet (Fed. Cir. 2001). In that opinion, the Federal Circuit agreed that a new trial was not necessary even though the district court had reduced compensatory damages from seven million dollars to only five hundred dollars. The distinction may be that in Tronzo, the reduction was a legal issue because the patentee had presented no credible damages evidence. Here Minks presented at least “limited evidence” of damages.
Nike has sued Wal-Mart for design patent infringement asserting infringement of Pat Nos. D498,914 and D499,248. As with many design patent lawsuits, the patentee here (Nike) also makes a product covered by the design. Design patents have become more important to Nike as the company’s trademark ‘swoosh’ has been less prominent in recent shoe designs. Every year during the past decade, Nike has ranked in the top ten owners of newly issued design patents.
Damages for design patent infringement may be calculated a few different ways. Section 284 calls for compensatory damages with a base of a “reasonable royalty.” Section 289 looks to disgorge profits from the infringer.
In the late 1990’s, Nike won another shoe design patent case against Wal-Mart. In a damages appeal, the Federal Circuit found that Nike had not properly marked its products — holding that to take advantage of the marking statute, a patentee must prove “that substantially all of the products being distributed were marked, and that the marking was substantially consistent and continuous.” Nike Inc. v. Wal-Mart Stores, 138 F.3d 1437 (Fed. Cir. 1998) (Newman).
Notes:
The top image is a portion of the infringement claim chart from the complaint. The second (pink) image is a Nike shoe.
A 2006 paper by Kal Raustiala (UCLA) and Chris Sprigman (UVA) titled the Piracy Paradox discusses intellectual property and the fashion industry. The authors conclude that the legal ability of manufacturers to create knock-off versions of fashion designs actually promotes innovation and investment in that industry. Similar phenomena have been explained in other industries. In music, for instance, some studies have shown that peer-to-peer file sharing of copyrighted work actually increases sales because of the increased popularity of the artist. Since the dawn of radio, record companies have paid stations to broadcast their music – even though the broadcast would be considered infringement.
My question is whether there are patent specific examples of this process going on? Are there times when ‘piracy’ of a technology actually encourages further R&D?
Invention Analysis & Claiming Strategies Seminar. Register for Ron Slusky’s unique program for patent prosecutors and receive a $50 discount as a Patently-O reader. The conference offers 13 hours of accredited CLE. Discount code: PO50. The seminar presents principles that enable patent prosecutors to better identify the broad inventive concept and its fallback features and to develop a suite of claims that will maximize the patent’s value to the patent owner.
October 23-24, 2008: I will be speaking at the Seton Hall Law Review’s upcoming conference titled “Preparing for a Pharmaceutical Response to Pandemic Influenza.” Our panel on intellectual property issues includes Professor Kane (Penn State); Professor Ho (Loyola Chicago); and Professor Opderbeck (Seton Hall). The event (including CLE) is open to the public and free. However, you should pre-register.
In re Ciprofloxacin Hydrochloride Antitrust Litigation (Fed. Cir. 2008)
Bayer’s patent on Cipro was challenged by Barr. However, the parties settled on the eve of trial. In all, Bayer paid $398 million to Barr to ensure that it didn’t receive a judgment of invalidity or unenforceability. Subsequently, Bayer filed for reexam to ensure that there would not be a later inequitable conduct problem. When other companies later challenged the patent, it was repeatedly found valid.
To many, the Barr settlement looked like a way to prop-up the drug price at the expense of consumers, health insurance companies. Various groups filed suit – arguing violations of Sections 1 and 2 of the Sherman Act and violations of state antitrust and consumer protection laws.
On summary judgment, the Federal District Court in New York applied a rule of reason to find no antitrust violations as follows:
The relevant market is CIPRO and Bayer had market power in that market.
However, any “adverse effects on competition” due to the settlement could not create antitrust violations because the settlement was “within the exclusionary zone of the ‘444 patent.”
In its holding, the district court rejected the notion that the “exclusionary zone” would be narrowed or altered by the potential invalidity of the patent. Furthermore, the district court held that unenforceability due to prosecution misconduct cannot be the subject to a Walker-Process antitrust violation – rather, the misconduct must be market-based misconduct. And, the Walker-Process argument failed because Bayer later successful litigation showed that its approach with Barr was not a ‘sham.’
On appeal, the Federal Circuit affirmed the summary judgment in favor of the pharmaceutical companies.
Per Se vs Rule of Reason: Some activities are considered so pernicious that they will be considered per se violations of the Sherman Act. Most actions, however, are judged under the rule of reason to determine if the particular activities had a potentially pro competitive impact. Here, the federal circuit could find no basis for “confidently predict[ing]” that such reverse-payment settlement agreements were unlawful – and consequently should be judged under the rule of reason.
Patents and Antitrust: Patents lead to anticompetitive behavior – that is the nature of the right to exclude. A patentee will not have antitrust liability for activity within the “zone of exclusion” of its patent. On appeal, the Federal Circuit agreed that the reverse payment was within the zone of exclusion.
Reverse Payments: In patents, a reverse payment is a payment by a patentee to an accused infringer to end litigation and perhaps to keep the infringer off the market. Remember, typically, it is the patentee who is looking for damages, not seeking to pay. The plaintiffs argued that such a reverse payment could not be considered within the ordinary scope of patentee behavior. The appellate court disagreed, finding that through the payment, Bayer was protecting its market share in its patented product and thus was well within its rights.
Pursuant to the Agreements, the generic defendants agreed not to market a generic version of Cipro until the ‘444 patent expired and not to challenge the validity of the ‘444 patent, and Bayer agreed to make payments and optionally supply Cipro for resale. Thus, the essence of the Agreements was to exclude the defendants from profiting from the patented invention. This is well within Bayer’s rights as the patentee. . . .
A settlement is not unlawful if it serves to protect that to which the patent holder is legally entitled—a monopoly over the manufacture and distribution of the patented invention.
In addition, the court found that settlements are favored even when anti-competitive.
Furthermore, there is a long-standing policy in the law in favor of settlements, and this policy extends to patent infringement litigation. Settlement of patent claims by agreement between the parties—including exchange of consideration—rather than by litigation is not precluded by the Sherman Act even though it may have some adverse effects on competition.
And, settlements normally include a promise not to challenge validity – something allowed under antitrust laws:
Settlements in patent cases, however, frequently provide that the alleged infringer will not challenge the validity of the patent. Thus, the mere fact that the Agreements insulated Bayer from patent validity challenges by the generic defendants was not in itself an antitrust violation.
Affirmed
Notes
On the panel were Circuit Judges Schall and Prost and Judge Ward from the Eastern District of Texas sitting by designation. The opinion was written by Judge Prost.
Expect petitions for en banc hearing and certiorari. The reverse payment issue has been brewing for some time.
During the post-9/11 anthrax scares, the Federal Government threatened to break the patent and begin manufacturing a generic version if sufficient supplies were not available. [Link]
In Cohesive Technologies, the Federal Circuit issued a reminder that the novelty analysis of 35 U.S.C. §102 is separate and distinct from the nonobviousness analysis of 35 U.S.C. §103(a). The court notes that some prior art evidence – such as inherent elements of a disclosure – used for anticipation argument may not be used in obviousness analyses. That result is in tension with the traditional understanding that § 102 material may be used for §103(a) analysis.
In a recent e-mail, Professor Isaacs (NKU) saw that tension as a reason to for courts to take a fresh look at the text of §103(a). This is especially timely in light of the recent cases such as eBay, KSR, and MedImmune where the Supreme Court had no trouble altering longstanding precedent.
The most glaring problem with the current interpretation of § 103(a) involves post-invention art and secret prior art that are available as §102(b)/§103(a) and §102(e)/ §103(a) references respectively. These two allowances are contrary to the plain language of §103(a) because the statute focuses on what “would have been obvious at the time the invention was made.”
35 U.S.C. 103(a) A patent may not be obtained though the invention is not identically disclosed or described as set forth in §102 of this title, if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains. …
Under a plain reading of §103(a), post-invention references cannot negate patentability because they were not available “at the time the invention was made.” Similarly, secret prior art – almost by definition – could not be known by one of ordinary skill in the art – especially under the Supreme Court’s new “common sense” approach to obviousness.
Of course, these arguments have been tried before – and failed.
In re Foster, 343 F.2d 980 (C.C.P.A. 1965) (cert denied) (creating §102(b)/§103(a) prior art)
Hazeltine Research, Inc. v. Brenner, 382 U.S. 252 (1965) (creating §102(e)/ §103(a) prior art)
Researchers at the IP Research Institute of Australia (IPRIA) have a recent paper on pendency at the various patent offices. Professors Jensen, Palangkaraya and Webster looked at almost 10,000 international patent application families filed in the early 1990’s and studied how they fared in the USPTO, EPO, JPO and APO. When examining the same applications, the USPTO had the shortest pendency. The study also shows that many applicants would take advantage of deferred examination if allowed in the US. [Read the Paper]
Top 25 referrals to Patently-O in the past month (excluding search-engines). Thanks for the links!
IPO File Attachment: ipo.pdf (1306 KB) (Undermining the principles of Knorr-Bremse, the rules force disclsoure of a “patentability opinion” in the form of an ESD)
The ITC found that Qualcomm infringed Broadcom’s ‘983 patents and issued a limited exclusion order against imports by Qualcomm and its customers.
On appeal, the Federal Circuit vacated and remanded — finding that the ITC (1) did not properly find inducement of infringement and (2) lacked authority to issue a limited exclusion order against non-respondents.
Inducement Requires Specific Intent: On their own, Qualcomm’s MSM chipsets do not infringe. However, the ITC found direct infringement in handsets that use the Qualcomm chipset in conjunction with “system determination software.” The ITC found Qualcomm liable for inducing infringement because it provided the chipsets and the system determination software along with training and customer support.
Inducement requires underlying direct infringement and that the accused infringer “knowingly induced infringement and possessed specific intent to encourage another’s infringement.” This includes an “affirmative intent to cause direct infringement.”
On appeal, the Federal Circuit found that the ITC had based its decision on a lower level of “general” intent without requiring evidence of Qualcomm’s “culpable conduct” of “encouraging another’s infringement.”
In particular, the ITC’s statement that “Qualcomm intends to induce infringement because it provides its customers with the system determination code” is insufficient. On remand, the ITC must find specific intent.
ITC Exclusion Orders: The ITC may issue either limited exclusion orders directed toward the actions of specific companies or general exclusion orders directed broadly to an industry. In this case, the ITC issued a limited order that excluded, inter alia, downstream manufacturers who were not named parties in the litigation.
On appeal, the Federal Circuit found that limited exclusion orders may not go beyond the named parties. A general exclusion order may be appropriate. However, additional proof of necessity are required for general orders.
Notes:
This case involves different patents than the District Court Broadcom case [Part I][Part II]
This case is also involves different patents from the earlier Broadcom v. ITC. In that case, the Federal Circuit also vacated an ITC holding this time in Broadcom’s favor — vacating the ITC’s non-infringement finding. [LINK]
The independent inventor J. Carl Cooper invented and patented technology separating a sync signal from a video signal to better ensure vertical and horizontal hold on a video screen. Cooper assigned his rights to TLC which sued Videotek for infringement. Videotek pulled-in its supplier Gennum for indemnification. Gennum now remains as the only defendant.
Priority Date: Cooper’s asserted patent claims priority to an earlier application filed in 1992. The district court found specifically that claim 33 could not claim priority all the way back because the claim included a limitation to an “other circuit” which was only disclosed in the subsequent continuation.
Burdens of Proof and Production: Although a defendant ultimately bears the burden of proving invalidity, the burden of producing evidence may shift back and forth during litigation. For instance, once a defendant provides evidence of anticipation, the patentee then has the “burden of going forward with evidence either that the prior art does not actually anticipate, or … that it is not prior art because the asserted claim is entitled to the benefit of a filing date prior to the alleged prior art.” Proving priority requires evidence of the priority claim and also evidence showing that “the written description in the earlier application supports the claim.” Here, the court required cooper to produce “sufficient evidence and argument to show that [the priority document] contains a written description that supports all the limitations of claim 33, the claim being asserted.” Once the evidence is on the table, the claim will only be invalid if the defendant’s proof remains is clear and convincing.
[B]ecause an issued patent is by statute presumed valid, a challenger has the burden of persuasion to show by clear and convincing evidence that the contrary is true. That ultimate burden never shifts, however much the burden of going forward may jump from one party to another as the issues in the case are raised and developed.
Here, the Federal Circuit agreed that the defendants had clearly proven that the original written description was insufficient – and thus that the patentee could not claim priority all the way back.
Deference To and Waiting For the PTO: The PTO issued Cooper’s patent and then, through a reissue, again allowed the challenged claim to issue even after considering the same prior art (the reissue issued while the appeal was pending). On appeal, the Federal Circuit distinguished Ralston v. Far-Mar-Co (Fed. Cir. 1985). In Ralston, the court deferred to the PTO’s determination of priority date. Here, however, there was no evidence that the PTO specifically considered the priority dates. However, the Federal Circuit refused to “add an additional deference-thumb to the scale, or, even more disruptive, our asking the trial court to reopen the entire invalidity question to reweigh the intangible worth of additional deference.”
This is not to say that the determinations made by the corps of examiners are not important, or should not be worthy of appropriate deference to their expertise in these technical matters, especially when we have the benefit of well-reasoned explications. It is to say that when dealing with the intangible worth to be accorded an administrative agency’s decision making, the judicial process cannot be held hostage to the timing of either the agency or the litigants who have invoked the agency’s further review. In some circumstances a party may be able to obtain a stay from the trial court while awaiting the sought-for agency action; absent that, and absent extenuating circumstances not here present, the case must be decided on the record the litigants present for appeal.
Inequitable Conduct:
There has never been an exception [requiring submission of] anticipatory cumulative references, and we are not inclined to create one now.
Definiteness of Means Plus Function Claim: A MPF claim must be supported by structural disclosure found in the patent specification – this requirement is akin to the written description requirement and focuses on actual disclosure rather than enablement.
The question is not whether one of skill in the art would be capable of implementing a structure to perform the function, but whether that person would understand the written description itself to disclose such a structure.
In electronic circuit cases the actual circuit disclosures are not necessarily required. Rather, generic “core logic” may be sufficient. Here, the defendants were unable to provide clear and convincing evidence of a lack of structure.
Sky Tech v. SAP (Fed. Cir. 2008 ) (nonprecedential order)
Sky sued SAP in the Eastern District of Texas. SAP argued that Sky lacked standing because a prior assignment of patent rights had not been properly obtained. The district court found standing but gave its approval for an interlocutory appeal – noting that the issue was a close question. At the Federal Circuit, the three-judge panel agreed to hear the case and eventually to determine whether Sky has standing. The Sky patents were purchased by XACP in a foreclosure sale of Ozro’s assets – the question will be whether the foreclosure sale was proper even without a written assignment agreement.
Stay pending appeal: SAP had requested a stay pending appeal. The appellate panel refused to rule on that motion – instead noting that “the better course is for the Texas district court to consider that issue in the first instance.”
Last week I spoke with Yale Professor Thomas Pogge about his proposal for a “Health Impact Fund.” The mission is to provide incentives to develop and distribute drugs that will achieve major global health impacts. Pogge sees the current patent system as valuable, but lacking. The problem is that the most innovative pharmaceutical companies find it very difficult to make money from treatments that are focused on the problems of the developing world. Although helpful, charity donations of drugs are typically insufficient and lead to the problem of parallel imports. 
New Medium (J. Carl Cooper) v. Barco N.V. (
The patent laws promote an early filing doctrine. 
On Friday, I will be speaking at the Seton Hall Law Review’s Health Law Symposium. This year’s topic is focused: Preparing for a Pharmaceutical Response to Pandemic Influenza. [
Net MoneyIn v. Verisign (
Minks v. Polaris (
In re Ciprofloxacin Hydrochloride Antitrust Litigation (
Technology Licensing Corp v. Videotek (
