The FTC and DOJ have jointly issued a monumental report on the relationship between patent rights and antitrust policy. Gems from the report:
Refusal to license patents to competitors – without more – will not raise antitrust concerns.
Conditional refusals, on the other hand, are subject to antitrust scrutiny.
Standard setting negotiations, cross-licensing, & patent pools are not per se violations, but are reviewed under the rule of reason framework.
The starting point for evaluating practices that extend beyond a patent’s expiration is an analysis of whether the patent in question confers market power. If so, these practices will be evaluated under the agencies’ traditional rule of reason framework, unless the agencies find a particular practice to be a sham cover for naked price fixing or market allocation.
Collecting royalties beyond a patent’s statutory term can be efficient.
Notably absent from the report are issues involving pharmaceutical reverse-payments where the two departments have recently knocked-heads.
Ocean Tomo continues to make news in its quest to reduce intellectual property transaction costs and, in the process, transform IP rights into liquid assets and financial instruments.
On Thursday, April 19 (10:00am – 12:00pm), Ocean Tomo will be holding a town-hall meeting at Chicago’s Swissotel discussing the company’s newest venture — its IP Enterprise Zone (IPEZ) and IP Exchange (IPX).
IPX Chicago is expected to provide a number of tradable products, including equity listings, IP Indexes, IP Backed Bonds and Securities, standardized IP related futures and options, and “patent rich company IPO’s.” There is also real potential that the exchange will include securities based on the outcome of patent litigation as well as patent prosecution.
Ocean Tomo talks about the revolution in IP Backed Securities as a parallel to the rise in mortgage-backed securities that has continued to drive low lending rates for the past decade.
For those of you out of the loop, Ocean Tomo’s IP auction is also being held in Chicago this week.
Quanta v. LG Electronics (on Petition for Certiorari, 2007).
Chipmaker Intel licensed a set of patents owned by the Korean chaebol LG. By its terms, the license expressly does not extend to Intel’s customers and similarly does not cover any customer product made by combining an Intel product with a non-Intel product.
When LG sued a host of Intel-chip-based computer manufacturers for infringement, they complained of attempted double-dipping. According to the defendants, their use of licensed Intel-chips implicated the first sale doctrine of patent exhaustion.
First Sale Doctrine: Under the first sale doctrine, an authorized and unrestricted sale of a patented product exhausts the patent’s power over that particular product. Thus, a patentee cannot later sue a customer who uses the product in an infringing manner.
Proceedings: The lower court quickly found that the Intel “unrestricted” license and Intel’s sale of its chips under the license exhausted LG’s rights to any additional patent recovery. On appeal, the Court of Appeals for the Federal Circuit (CAFC) reversed, finding that when restrictions are placed on a license, “it is more reasonable to infer that the parties negotiated a price that reflects only the value of the ‘use’ rights conferred by the patentee.” The appellate panel found that there was no exhaustion because of express conditions on the use of Intel’s licensed products — specifically that the products could not be combined with non-Intel parts.
Now, the defendants have asked the Supreme Court to decide whether the CAFC erred by holding that LG’s “patent rights were not exhausted by its license agreement with Intel Corporation, and Intel’s subsequent sale of product under the license.” On April 16, the Supreme Court requested the views of the Solicitor General — a major step toward granting certiorari.
Quanta’s petition to the Supreme Court begins with hyperbole:
[LG Electronics] purchased a portfolio of patents … and now contends that those patents are infringed by every computer in the world.
Quanta’s argument is quite simple:
Intel sold chipsets to the petitioners;
Those sales were fully authorized under the LG license and were made without restriction;
Therefore, LG’s patent rights are exhausted.
Quanta goes on to say that under Supreme Court jurisprudence, a sale cannot be conditional. (No improper restraints on alienation). And, without citing Arizona Cartridge, the petition lists a set of upcoming problems if conditions for sale are allowed for patented items:
[T]he Federal Circuit’s new jurisprudence threatens to kick off a new era of “notices” attached to sold goods. Obvious candidates include “single use only,” “no use outside of Massachusetts,” “no repair,” “no resale,” or “no resale for less than the price of purchase.”
On the other side, LG points-out that Intel made a business decision not to cover its customers. Because of that decision, Intel received a cheaper license, but now the customers must make-up the difference.
[When there are no patent misuse or notice concerns,] parceling out of the exclusivity rights is simply a matter for negotiation in the marketplace, not for a legal override of commercially fashioned terms.
An amicus on behalf of Dell, HP and others identifies the origin of the current CAFC precedent: Mallinckrodt.
Mallinckrodt held that a restriction on the post-sale use and enjoyment of a patented article is enforceable under the patent laws as long as it does not “venture[] beyond the patent grant and into behavior having an anticompetitive effect not justifiable under the rule of reason.”
According to the Amicus (and Quanta), the Mallinckrodt decision and its progeny do not follow Supreme Court precedent as stated in Univis Lens.
Univis Lens … held that the authorized sale of an article manufactured “under the patent” exhausts all patent claims in the article regardless of any purported limitation on the subsequent use and enjoyment of the article. . . Univis Lens held that a condition on the post-sale use and enjoyment of a patented device violated the antitrust laws because it was not enforce-able under the patent laws, and thus was not protected against antitrust scrutiny. See 316 U.S. at 252 (“[t]he price fixing features of appellees’ licensing system, which are not within the protection of the patent law, violate the Sherman Act”).United States v. Univis Lens Co., 316 U.S. 241 (1942)
Notes
It turns out that the patents were originally issued to Wang Labs and are indeed quite broad. U.S. Patent Nos. 4,918,645; 5,077,733; 4,939,641; 5,379,379; and 5,892,509
Mallinckrodt, Inc. v. Medipart, Inc., 976 F.2d 700 (Fed. Cir. 1992)
Jazz Photo v. ITC, 264 F.3d 1094 (Fed. Cir. 2001), cert. denied, 536 U.S. 950 (2002)(“United States patent rights are not exhausted by products of foreign provenance. To invoke the protection of the first sale doctrine, the authorized first sale must have occurred under the United States patent.”).
Acumed and Stryker both manufacture equipment for orthopedic surgery. Based on its patented nail technology for reconstructing humerus fractures, Acumed sued Stryker for patent infringement. A jury found the claims valid and that Stryker was a literal and willful infringer. Based on the verdict, the Oregon judge assessed enhanced damages and entered a permanent injunction against the adjudged infringer. Stryker appealed infringement and willfulness.
Claim Construction: The most-disputed aspect of the case involved the court’s interpretation of the claim term “transverse holes.” Every figure showed the holes, showed them extending “perpendicularly through the shaft.” Similarly, the description noted that the holes were “perpendicular.” Based on this intrinsic evidence and the precedential value of Phillips, Stryker argued that the claim term should be given a narrow meaning.
On appeal, the CAFC refused to limit “transverse holes” to holes that were arranged perpendicularly. In doing so, the court reestablished that the paramount rule of construction is that claims are given their plain meaning.
The plain meaning … covers more than the particular embodiment shown…. While the disclosed embodiment possesses “perpendicular” holes, the claim language covers all “transverse” holes—a word that does not necessarily imply right angles. Moreover, the patentees’ description of their preferred embodiment itself implies a difference between the words “perpendicular” and “transverse.”
In its analysis, the Court implied reasoning similar to that of claim differentiation. Here, however, the analysis compared the use of “perpendicular” in the specification with the word “transverse” as used in the claims.
The written description states that Figure 2 “illustrates a plurality of transverse holes, each of which is . . . perpendicular to the portion of the nail axis at the butt portion 14 of the nail.” ’444 patent col.2 ll.56-59. This implies that a “transverse” hole need not be “perpendicular”—if it were, the patentee would not have needed to clarify that these holes, in addition to being transverse, were perpendicular to the nail axis.
This case follows the same pattern as the en banc decision of Phillips v. AWH:
Just as in Phillips, where the asserted claim mentioned “steel baffles” and hence “strongly implie[d] that the term ‘baffles’ does not inherently mean objects made of steel,” this usage of language is strong evidence that the patentee considered “transverse” and “perpendicular” to have distinctly different meanings.
Narrowing Intrinsic Evidence: The court refused to give credence to the interpretation of the term “transverse” found in prior art that was cited on the face of the patent because the reference was not “created by the patentee in attempting to explain and obtain the patent.”
Judge Kimberly Moore dissented from this claim interpretation. Judge Moore would have held that the intrinsic evidence “fully supports” defining “transverse” as “made at right angles to the anterior-posterior axis of the body”.
The majority suggests that the use of both words “implies a difference between the words ‘perpendicular’ and ‘transverse.’” The majority contends that if transverse was meant to be construed as perpendicular, “the patentee would not have needed to clarify that these holes, in addition to being transverse, were perpendicular to the nail axis.” I disagree… [T]he patentee used the two words to clearly specify which of the definitions of transverse applied to his invention; the purpose of using the word “perpendicular” was to further describe what the inventor meant by the term “transverse,” not to distinguish it as the majority suggests.
Willfulness Affirmed:
[T]wo patent attorneys … at first strongly discouraged Stryker from marketing the infringing nail in the United States. Despite that advice, Stryker continued to push towards a United States market entry, filing its FDA application months before it received … revised [non-infringement] legal advice….The judgment of willfulness is therefore affirmed.
Permanent Injunction: Because the case was decided before eBay, the CAFC remanded for a finding on the equities.
Vonage is the darling of network neutrality advocates. Using Vonage, millions of people have canceled their telephone service in favor of an IP-phone that connects through the Internet.
Last month, a jury determined that Vonage infringed three Verizon patents. (6,282,574, 6,104,711, 6,359,880). These patents all relate to various aspects of Internet telephony.
This is not a “troll” case — By definition, patent trolls are only looking for a payment in exchange for a patent license. Here, it is fairly clear that Verizon hopes that its patents will cause Vonage to close its doors. Thus, Verizon requested and was granted a permanent injunction.
Stays Pending Appeal: The general rule as stated in the Federal Rules of Civil Procedure [R. 62(a)] is that a permanent injunction “shall not be stayed during the period after its entry and until an appeal is taken or during the pendency of an appeal.” At its discretion, a district court can stay an injunction. In cases such as this, where the patents strike to the core of the defendant’s business, denial of a stay often ends the case because an appeal 3-months-later is too late. Under the Federal Rules of Appellate Procedure [R. 8(a)], a defendant may make a motion to the appellate panel for temporary relief after first showing that a lower court motion would have been “impractical.”
In Standard Havens, the Federal Circuit announced a four-factor test for considering whether to issue a stay pending appeal.
Likelihood of success on the merits of the appeal;
Irreparable harmed absent a stay;
Irreparable harm due to a stay (continued infringement); and
Public interest.
Vonage Partial Stay: The U.S. District Judge Claude Hilton (E.D.Va) issued the permanent injunction and but granted a partial stay. The judge’s decision allowed Vonage to continue in operation, but barred the upstart from signing-up any new customers.
Emergency Appeal: As it did in TiVo v. EchoStar, the Court of Appeals for the Federal Circuit (CAFC) immediately stayed the injunction (at the request of Vonage) and will hear an appeal regarding injunctive relief on April 24, 2007.
The following synopsis comes from noted patent attorney Charles Van Horn:
USPTO Commissioner for Patents John Doll announced today at a DC Bar meeting that the final rules on continuation and designated claims practices are at OMB (Office of Management and Budget) for approval. The final rules were logged in on April 10 and OMB is expected to complete its review in 90 days, but frequently grants itself an extension of time. The final IDS rules were said to be on the desk of Director Dudas for approval, and will follow the other two packages to OMB in due course. So at this point in time, July-August would be an approximation for publication of the final rules, with 30 days (based on previous PTO statements) to implementation. No details of the final rules were disclosed.
Context: The PTO has proposed dramatically limiting the number of allowed continuation applications (including continuations, continuations-in-part, and requests for continued examination) and the number of claims pursued in each patent. These proposals have drawn ire from the patent bar.
When I think of PATENTS.COM, I immediately think of Carl Oppedahl’s old law firm. Of course, this secondary meaning was not enough to overcome the Federal Circuit’s determination that the domain name’s trademark usage was merely descriptive. [Link]
PATENTS.COM is now up for sale! As of today, the high-bid is $10,000. I expect the bidding to go much higher for this trendsetting and well established domain.
As part of requests for either reexamination or accelerated examination, the submitter must include particular references to the relevant portions of cited prior art. The Peer-to-Patent project also plans to include a pin-cite approach to give the Examiner a genuine clue as to why particular references were cited. [A pin-cite is a law-school term for a citation to the location of the information within a document. In patent-lingo, this might be: Column 5, lines 12-55]
This leads to a question of whether pin-cite references are helpful to examiners, and whether they would lead to greater patent accuracy. Theoretically, a pin-cite should help ensure that the Examiner browses the most relevant portion of the cited art. In addition, the pin-cites may reduce the amount of time that the Examiner uses to pinpoint relevant portions — freeing up time for a more in-depth analysis or for a broader search strategy.
If these projects are successful, you can expect that the pin-cites will be required IDS practice within a few years.
Query:
Do (will) pin cites help the examiners and lead to a higher quality examination of patent applications?
Do any Examiners regularly request such information from the applicant? Under Star Fruits, an Examiner would certainly be within the law to require further information regarding the cited art. E.g., “For each pending claim, please identify relevant portions of each reference cited by the applicant.”
As an applicant, how would you respond to such a request?
Bass Pro owns a patent covering a vest with an attached seat. In April 2003, Bass Pro sued its arch-rival Cabela’s for patent infringement and the parties quickly settled with Cabela’s agreeing to stop infringing under a consent decree signed by the judge. A year later, Cabela’s introduced a new product — a backpack with an attached seat. Bass Pro brought a contempt proceeding.
Modified Product Contempt Rule: When an enjoined party produces a modified device, a contempt order can issue only after a showing that the modified device infringes the patent.
It appears that Cabela’s accused backpack exhibits every element in the body of Bass Pro’s claim 1. The only difference is the preamble — Bass Pro’s preamble is directed to a vest and seat combo — not a backpack.
The district court, seeing the evidence, decided that the vest preamble should not be limiting — thus finding that the ‘vest’ claim covers the backpack product.
Amended Preamble: Ordinarily, a preamble does not create a cause for limiting the claim scope. In this case, however, the prosecution history led-us out of the ordinary. During prosecution, Bass Pro had amended the preamble to add the vest term (replacing the original ‘garment’). In addition, throughout prosecution Bass Pro had discussed its “vest” in contrast to prior art backpack-chair combos.
It is clear that this patentee procured the patent based on the “unique combination of vest and pivotable seat member” stressed in the prosecution history, where the applicant placed these limitations in the claims. The district court erred in holding that the “vest” of claim 1 was not a material limitation to the claim.
On the correct claim construction the vest is a material element, and the claim cannot reasonably be found to be literally infringed.
Notes:
I’m a big Bass Pro fan. We make an annual late-December journey to the store in search of fabulous Christmas presents. Let me suggest one in particular: This stove-top popcorn popper works amazingly well.
Today is the three-year anniversary of the Patently-O Blog. It all started on April 6, 2004. We now have 1400+ posts covering every precedential patent appeal and Supreme Court decision during this time.
I’m amazed at the popularity of the site — especially considering that the site is primarily directed to the relatively small group of attorneys practicing patent law and patent litigation (about 30,000 persons). In all, there have been over 3 million visits. These visits come from virtually every technology-related Fortune 1000 company, every law firm with at least five patent attorneys on staff, and many many other sources. Recently a larger number of Patent Examiners have begun to read the site as well. The graph below falls-short because it does not include the 8,000+ attorneys and agents who have signed-up to receive Patently-O through an e-mail or an RSS-reader.
The CAFC has announced that next Tuesday the Court will hold a discussion regarding “Briefing and Oral Argument in Cases Involving the Government.”
The discussion will be held in Courtroom 201 at 2 p.m. on Tuesday, April 10 at the Howard T. Markey National Courts Building. After presentations by one or more judges, there will be an opportunity for those attending to ask questions. The session is expected to last no more than 90 minutes. No advanced registration is required and of course no cost is involved.
While a significant number of patent cases involve the government as a party, I expect that the focus of the briefing will involve cases rising from the US Merit Systems Protection Board (MSPB), Court of Federal Claims (CFC), Board of Contract Appeals (BCA), and the Department of Veteran Affairs (DVA). These cases are occasionally worth a substantial amount of money (especially CFC & BCA cases). However, the majority are small-potatoes as compared to most patent appeals. Consequently, attorneys involved prepare less. I suspect that the Court will primarily focus on that issue.
A couple of side-notes: one involving pro-bono and another involving the national stature of the Court of Appeals for the Federal Circuit.
Pro Bono: Some of these low-dollar cases create a perfect opportunity for a patent attorney interested in pro-bono activities. In handling a Veteran’s appeal, you will likely provide a valuable service and, at the same time, build your experience at the CAFC.
A National Court: Unlike the regional circuit courts of appeal, the CAFC is a national court that handles cases from all-around the country. To the extent possible, meetings such as this should provide an opportunity for all interested attorneys to participate or at-least access the information provided by the Court. A simple suggestion would be to provide telephonic access or an MP3 recording of the event. Of course, this is a minor suggestion — in fact, it is wonderful that the Court is interested in prompting a dialogue with the Bar.
Claim differentiation is based on a “common sense” presumption that different words used in the various claims indicate that the claims differ in focus and scope. Andersen holds a number of patents related to fiber materials and sued Fiber Composites for infringement. Fiber Composites used the material for deck railing. Several of the claims included terms such as pellets, linear extrudates, or composites.
Overcoming the Presumption of Claim Differentiation: Based on the concept of claim differentiation, Andersen argued that the composite limitation must not be limited to pellets and linear extrudates. In its decision, the CAFC agreed that – in the abstract – Andersen’s argument was sound. However, the appellate body found “powerful evidence” in both the specification and prosecution history that overcome the presumption of claim differentiation. In particular, the applicant lumped the three elements together when making arguments and discussed the pellet form as an ‘essential’ part of the invention.
Differentiation of Elements vs. Claims: It is also important to remember that the doctrine is that of claim differentiation rather than element differentiation. Claim differentiation is not necessary unless the claims as a whole are redundant.
“A further reason for not applying the doctrine of claim differentiation in this case is that the … claims are not otherwise identical but for the references to pellets, linear extrudates, and composite compositions, and thus the district court’s construction does not make the composite composition claims redundant. Instead, there are numerous other differences varying the scope of the claimed subject matter….
Even though the “composite composition” claims, as construed by the district court, cover substantially the same subject matter that is covered by the “pellet” and “linear extrudate” claims, overlapping patent claims are not unusual, and the overlap does not require us to construe the “composite composition” claims to cover subject matter that differs from the subject matter covered by the other two sets of claims. Under these circumstances, the doctrine of claim differentiation does not require rejection of the district court’s construction of the claims.
Consequently, the CAFC ruled that the composite elements were no broader than the claimed pellets or extrudates.
Notes:
This is a case from January 2007. I missed it because the Seagateen banc order was released the same day.
Korsinsky v. Dudas (Fed. Cir. 2007) (NONPRECEDENTIAL [but citable] OPINION).
Korsinsky, an individual inventor, allowed his patent to expire for failure to pay the maintenance fee. After the PTO refused to reinstate the patent, he brought this federal action.
The patent in question (4,736,447) is related to automatic data processing of a video feed reaches back to a 1983 filing date. The patent itself issued in 1988, but the patentee did not make the first maintenance fee payment at 3.5 years. Thus, the patent expired in 1992. Twelve years later (in 2004), Korsinsky filed a petition for reinstatement based on the patentee’s statement that “the notice of maintenance fee was not received.” After being denied reinstatement by the PTO, Kirsinsky first requested a refund and then attempted again to get reinstatement.
Cause of action:
Mr. Korsinsky’s main argument on appeal is that the PTO has designed a system with tricks and traps that duped him into disclosing his invention and paying substantial sums only to have his invention later confiscated. He argues that this system violates Article I, Section 8, clause 8 of the United States Constitution, which grants Congress the power “[t]o promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”
On appeal, the CAFC sided with the USPTO and district court — determining that the maintenance fee system is constitutional and has not been arbitrarily or capriciously enforced.
Notes:
John Whealan (pictured at right) handled the PTO’s brief. Mr. Whealan has been the USPTO Solicitor since 2001.
In an earlier post, I noted that there are some benefits of providing an initial claim with concrete structure and limitations so that someone reading the claim can instantly understand the invention and its benefits. This helps frame the invention in the minds of the reader and may be especially important when the USPTO Examiner flips to Claim 1 before reading anything else in the patent application.
There are, however, limitations to this approach. In particular, 37 C.F.R. 1.75(g) provides that “[t]he least restrictive claim should be presented as claim number 1.” That rule of practice was added in 1996 along with other changes for implementing the 18-month publication rules. The purpose of the change was “to facilitate the selection of a representative claim” to be published in the Gazette.
Although the rule is in place, it appears to be rarely — if ever — enforced. The Manual of Patent Examination Practice (MPEP) interprets the rule as a should rule rather than a must rule.
Claims should preferably be arranged in order of scope so that the first claim presented is the least restrictive. MPEP 608.01(m)
Further, a search of CAFC, District Court, and BPAI opinions along with law review articles reveals only two passing mentions of the rule. (Interestingly, the law review article appears to incorrectly interpret the rule).
Of course, the fact that the rule has not been enforced does not lead to the conclusion that the rule will not be enforced against your client. (I.e., down the line it might come up once again).
The right aproach: Of the usual three independent claims, it is often difficult to determine which is the least restrictive because each may approach the invention from a different perspective. If one is clearly the least restrictive then it should be listed as claim 1. If some ambiguity remains, choose the claim that is the most concrete, fleshed-out, and understandable and list it as claim 1.
Central Admixture Pharmacy v. Advanced Cardiac Solutions (Fed. Cir 2007).
Central Admixture (CAPS) owns a patent covering a glucose-protein solution used to help overcome ischemia during heart surgery. During prosecution, CAPS made a Freshman-Chem error — claiming the fluid concentration range in units of osmolarity (solute per liter of total solution) instead of osmolality (solute per kilogram of solvent). In this case, for instance, the unit change moves the claimed range by only a few percent. However, the defendant’s concentration was on the border-line — making the issue critical.
CAPS applied for and received a certificate of correction. The certificate, however, was not issued until after the litigation had already begun.
Certificate of Correction: A certificate of correction can be used to correct a minor mistake such as a “clerical or typographical” error or other minor error. In Superior Fireplace, the court held that a certificate of correction that broadens the claim is only permissible when it is clear from the specification and prosecution history how to correct the error.
Broadening: Here, the CAFC found that the correction broadened the claims because they now cover “less-concentrated solutions which would not be covered under the original claims.” [DDC: Of course, a range should not be considered broadened if you are merely shifting the range].
Clear Error Correction: CAPS error is not plain to a reader since solutions have both an osmolality and and osmolarity. The error can be seen when examining the units used in the specification (mOsmol/L, rather than mOsmol/kg), but the CAFC saw the difference between these units as “very slight.” (noting that the difference between miles and meters is much different).
Since the error corrected here was not clearly evident to one of skill in the art and the result of its correction was to broaden the claims, ACS should be granted summary judgment that the certificate of correction is not valid.
The relief for an improper certificate of correction is simply to cancel the certificate. Thus, in this case the patent “continues to read as it did prior to the issuance of the certificate.”
Voidable Title: The research that led to the patent was funded by an NIH grant. The NIH indicated that it would waive its rights to obtain patent protection, but the inventor (Dr. Buckberg of UCLA) failed to properly perfect the waiver. In Campbell Plastics, the CAFC held that a similar error would allow the Government to obtain title to the patent. However, in this case, the inventor retains title until the day that the NIH goes after it.
Notes:
The certificate of correction was issued in 2001. The CAFC did not mention that a reexamination certificate was issued in 2005 that made no-change to the corrected patent.
Factually, is an osmolarity of 400-500 mOsmol broader than an osmolality of 400-500 mOsmol?
Footnote 5: ‘The result might be different if the patentee’s choice of unit resulted in a clearly incorrect claim—“fifty miles” instead of “fifty meters,” for instance. Here, though, the difference between an osmolarity of 400 mOsmol/L and an osmolality of 400 mOsmol/kg is very slight.’
28 USC 1400(b) is the primary patent venue statute. Under the statute, a patent infringement lawsuit may be filed in a jurisdiction (a) where the defendant resides; or (b) where the infringement occurred — so long as the defendant has a “regular and established place of business” in that jurisdiction.
Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business. 28 USC 1400
1400(b) has been around for a long time and has (historically) been given narrow interpretation. Corporate residence was often limited to the location of the principal place of business or corporate headquarters and an established place of business did not include stores owned by others or sales-persons covering the locale. Numerous patent cases were dismissed or transferred because the defendant did not meet the requirements of the law. For instance, in the 1964 case of Sheldon v. Norbute, a Pennsylvania district court transferred the patentee’s case to New York even though the infringement occurred in Pennsylvania. According to the court, the defendant did not fit under the statute because it did not “maintain, control, or pay for an establishment in the district.”
In 1990, Congress took to the pen and broadened the definition of a defendant’s “residence” to include any jurisdiction where the court has personal jurisdiction.
For purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced. 28 USC 1391
In VE Holdings (1990), the Federal Circuit interpreted the amended statute — determining that the statute’s “language is clear and its meaning is unambiguous.” The appellate panel held that the new statute eviscerats the limitations of Section 1400(b) and allows for patent infringement suits in any jurisdiction where the defendant has sufficient contacts under the constitution.
This leads us to last week — where Orion IP filed suit against 63 defendants in the sparsely populated Eastern District of Texas. It appears that only a handful of these large corporate defendants have any connection to the jurisdiction beyond a mere ‘stream of commerce’ analysis. Is it time to return some teeth to Section 1400?
The Senate’s Patent Reform Bill of 2006 (S.3818) would have amended §1400 to, for the most part, eliminate the 1990 expansion. Under that proposal, the revised venue statute would read as follows:
(b) Any civil action arising under any Act of Congress relating to patents, other than an action for declaratory judgment … may be brought only — (1) in the judicial district where either party resides; or (2) in the judicial district where the defendant has committed acts of infringement and has a regular and established place of business.
(c) Notwithstanding section 1391(c) of this title, for purposes of venue under subsection (b), a corporation shall be deemed to reside in the judicial district in which the corporation has its principal place of business or in the State in which the corporation is incorporated.
The proposal still goes beyond the original scope of §1400 by allowing suits in jurisdictions based on the residence of either the plaintiff or defendant.
Full Disclosure: Several of MBHB’s are defendants in the Orion case. These comments are my own and not those of MBHB or its clients.
The PTO has been quietly expanding its patent quality review program using both pre and post-allowance approaches. The general perception is that the quality review is both over-inclusive and under-inclusive. It must certainly be true that the review is catching some patents. However, the following quote — reportedly from a Patent Examiner — suggests that the review program — at least the top-secret post-allowance review — may be somewhat misdirected in its approach.
“[I]f your claims are long and all the t’s and i’s are crossed and dotted, those cases will get a pass. If the claims are short and the subject matter is easily comprehensible, they will get reviewed. (A note to attorney out there — make those claims long, heh). Short claims will get many rejections no matter how novel or unobvious they are. They will make the applicant to put anything in for an allowance. First action allowance will get pulled (at least in my group).” (via G. Ahronian)
Many patent attorneys draft their initial claim in short-abstract form. I have heard of the two finger approach for the first claim which requires the text of claim one to fit under your index and middle fingers. My approach has long been to provide an initial claim that is long and detailed so that the examiner can understand the invention in concrete form. With later independent claims, I begin to draw-out the scope to cover a larger ranger of enabled scope. I wonder how this approach fares under the new quality review process. Of course, this approach must be used within the applicable rules — notably 37 CFR 1.75(g), which requires that the “least restrictive claim should be presented as claim number 1, and all dependent claims should be grouped together with the claim or claims to which they refer to the extent practicable.”
Notes:
Secrets at the PTO: The PTO has been stingy and secretive with all information regarding its Office of Patent Quality Assurance (OPQA). What we do know is that OPQA rejections (or their underlying reasoning) are not provided to patent applicants or placed into any publicly available record. Any further information regarding operation of the OPQA would be appreciated (either via email or comment). dcrouch@gmail.com.
Litigation Notes: Anyone litigating a recently issued patent may want to submit a FOIA request to the PTO to obtain OPQA information regarding the patent in question. A routing sheet may be available. Examiners — Is an internal record maintained regarding OPQA rejections?
The influential Intellectual Property Owner’s Association continues to push for patent reform. In particular, the IPO board has voted to support a modification of the rules on damages. The change would explicitly require apportionment of damages. In other words, damages for patent infringement would never be more than the economic value attributable to the innovation.
Proposed amendment:
Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement but in no event less that a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court.
Where an infringer shows that an apportionment of economic value is necessary to assure that damages based upon a reasonable royalty do not exceed the economic value properly attributable to the use made of the invention, such apportionment shall exclude from the reasonable royalty calculation the economic value shown by the infringer to be attributable to the infringer’s incorporation into the infringing product or process of features or improvements, whether or not themselves patented, that contribute economic value to the infringing product or process separately from the economic value properly attributable to the use made of the invention.
Where the claimant shows that the use made of the invention is the basis for market demand for an infringing product or process, the royalty may be based upon the entire market value of the products or processes provided to satisfy that demand.
The court shall identify all factors relevant to the determination of a reasonable royalty under this section and the court or the jury, as the case may be, shall consider such factors in making the determination.
When the damages are not found by a jury, the court shall assess them. In either event the court may increase the damages up to three times the amount found or assessed. Increased damages under this paragraph shall not apply to provisional rights under section 154(d) of this title.
The court may receive expert testimony as an aid to the determination of damages or of what royalty would be reasonable under the circumstances.
IPO also supports changes to the inequitable conduct jurisprudence:
IPO supports legislation to (1) limit or eliminate the unenforceability defense based upon inequitable conduct in patent litigation, (2) eliminate the requirement to disclose the best mode contemplated by the inventor of carrying out the invention, and (3) allow enhanced patent infringement damages to be awarded for “willful” infringement only in limited circumstances, such as those set forth in IPO’s Amicus Brief filed in In Re Seagate Technology LLC.
Novartis markets Famvir — a treatment for genital herpes. Hoping to get-in on the action, Teva filed an ANDA and later a declaratory judgment suit to invalidate the related Novartis patents. Teva’s action was dismissed after the generic manufacturer failed to establish “a reasonable apprehension of imminent suit.” (Meanwhile, Novartis had sued Teva on an additional patent covering Famvir).
Since the Supreme Court’s decision in MedImmune, however, the reasonable apprehension test has been eliminated. The new test, written generally in MedImmune, is “whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between the parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” Under Article III of the constitution, the controversy must include an ‘injury-in-fact.’
Here, Novartis argued that there was no injury-in-fact because Novartis had not threatened suit on the patents in suit and that another ongoing patent suit against Teva was unrelated. The CAFC disagreed, finding that Novartis had created a controversy. In particular, a combination of the following actions were sufficient to create DJ Jurisdiction:
Novartis’ listing of the patents in the Orange Book. (“may not be sufficient” to create Article III jurisdiction)
Teva’s submission of an ANDA and certifying that it did not infringe. (“The very act of submitting an ANDA is an act of infringement.”)
Novartis’ ongoing lawsuit on a related patent covering the same drug. (“[R]elated litigation involving the same technology and the same parties is relevant in determining whether a justiciable declaratory judgment controversy exists on other related patents…. Novartis’ suit on [only one patent] leaves open the possibility of future litigation.”)
The court attempted to cabin the expanded jurisdiction scope by focusing on the facts:
“The type of legal uncertainty as to the legal status of Teva’s ANDA that Novartis has created by suing on only one of the five paragraph IV certified Famvir® patents listed in the Orange Book is a present injury sufficient for a justiciable controversy.”
Friedman Concurring: Senior Judge Friedman saw a simpler path to finding jurisdiction: Listing of the patents in the Orange Book combined with Teva’s noninfringement certification created an existing controversy.
“[B]y listing those five patents in the Orange Book, “Novartis represent[ed] that a ‘claim of patent infringement could reasonably be asserted if a person not licensed by the owner engaged in the manufacture, use or sale’ of generic famciclovir covered by the claims of its listed Famvir® patents.” Maj. Op. at 15. In its Abbreviated New Drug Application filed with the Food and Drug Administration, Teva certified … that “its drug did not infringe” any of the five Novartis Famvir® Orange Book patents or that the patents were invalid. There thus is an existing controversy between the parties over whether Teva’s generic version of Famvir® would infringe the four other Famvir® patents listed in the Orange Book, and whether these patents are valid.”
Korsinsky v. Dudas (Fed. Cir. 2007) (NONPRECEDENTIAL [but citable] OPINION). 
