On summary judgment, the lower court held that Medtronic’s vascular stent patents were not infringed. On appeal, the CAFC made an interesting point about claim construction — holding that a disclaimer in the file history of a patent applied equally to construction of similar terms in all the family member cases. The patentee had consciously chosen to use different claim language in later continuation applications — perhaps to avoid the prior disclaimer. The CAFC paid this no matter.
Medtronic correctly states that its claims do not all use the [disputed] term “end” to describe the connection. . . Instead, certain claims use “turn” or “curved member.” . . . However, because the specification . . . uses “peaks” and “turns” synonymously, and “turn” and “curved member” are used in the []patent claims synonymously with “end,” we find that those claims embody the same “peak” or “end” limitation as the [parent], i.e., the disclaimer from the [parent] patent applies against the [child] patent. Our conclusion is further buttressed by the established rule of claim interpretation that dictates that like terms should be construed consistently across related claims.
According to the Court, Medtronic admitted that the varying claim language should be identically interpreted when it made the statement that the child claims were allowable “for at least the same reasons as the parent application.”
Applied Medical v. U.S. Surgical (Fed. Cir. 2006, 05–1314).
In a dispute over Applied Medical’s patented trocar, the district court granted summary judgment of non-infringement to U.S. Surgical. Specifically, the district court found that the recited means plus function language was not infringed.
A means plus function claim limitation is literally infringed when the relevant structure in the accused device perform the identical function recited in the claim and be identical or equivalent to the corresponding structure in the specification.
Once the relevant structure in the accused device has been identified, a party may prove it is equivalent to the disclosed structure by showing that the two perform the identical function in substantially the same way, with substantially the same result.
This test for infringement is known as the function-way-result test. And, it was in applying the “way” portion of the test that the lower court erred.
Specifically, the district court looked at the “way” the accused structure operated in general and found that it was different from the “way” described in the specification. The CAFC found this general approach to be wrong because it essentially imported additional limitations into the claims.
In this step, the inquiry should be restricted to the way in which the structure performs the properly-defined function and should not be influenced by the manner in which the structure performs other, extraneous functions. . . . [T]he district court improperly imported unclaimed functions when analyzing the way in which the disclosed embodiment performed the claimed function.
In a landmark unanimous decision, the U.S. Supreme Court has reportedly vacated the appellate court’s decision against eBay — putting an end to the “general rule” that a permanent injunction should follow a finding of infringement of a valid patent. Rather, the opinion by Justice Clarence Thomas rules that the decision of “whether an injunction should issue” is within the trial court’s discretion. Concurring opinions by Chief Justice John Roberts and Justice Anthony Kennedy.
Background: At the district court, eBay was found to infringe MercExchange’s valid patent. However, the district court refused to issue an injunction to stop the ongoing infringement because MercExchange’s patent was a disfavored type (business method), because MercExchange was willing to provide a license, and because of the contentious nature of the litigation, any injunction would be difficult to enforce. On appeal, the Federal Circuit (CAFC) reversed, finding that the lower court “did not provide any persuasive reason that this case is sufficiently exceptional to justify the denial of a permanent injunction.” Most controversially, the CAFC concluded with its “general rule that courts will issue permanent injunctions against patent infringement absent exceptional circumstances.”
eBay v. MercExchange ___ U.S. ___, No. 05–131 (2006).
Unanimous Opinion: The decision relies on the traditional “four-factor test” for determining whether to issue a permanent injunction:
A plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. . . . These familiar principles apply with equal force to disputes arising under the Patent Act.
The Court indicated that these factors must be applied on a case by case basis – noting that “traditional equitable principles do not permit such broad classifications.”
The Supreme Court flatly rejected the argument that patentee’s who only license should not qualify for injunctive relief — finding that “[s]uch patent holders may be able to satisfy the traditional four-factor test, and we see no basis for categorically denying them the opportunity to do so. To the extent that the District Court adopted such a categorical rule, then, its analysis cannot be squared with the principles of equity adopted by Congress.”
In its final word, the court emphasized that the “decision whether to grant or deny injunctive relief rests within the equitable discretion of the district courts, and that such discretion must be exercised consistent with traditional principles of equity.”
Roberts, CJ, Scalia, J, and Ginsberg, J, Concurring: Chief Justice Roberts provides a short concurring opinion that appears to caution district court judges in their “discretion.”
[T]here is a difference between exercising equitable discretion pursuant to the established four-factor test and writing on an entirely clean slate. .Discretion is not whim, and limiting discretion according to legal standards helps promote the basic principle of justice that like cases should be decided alike.
The opinion notes that from “at least the early 19th century, courts have granted injunctive relief upon a finding of infringement in the vast majority of patent cases.” According to the Chief Justice, this long tradition of injunctive relief should be awarded great weight.
Kennedy, J, Stevens, J, Souter, J, and Breyer, J, Concurring: These four Justices feel that times have changes, and that the tradition of injunctive relief might no longer be so compelling. The Kennedy opinion is focused primarily on non-manufacturing patent holding companies and business method type patents:
In cases now arising trial courts should bear in mind that in many instances the nature of the patent being enforced and the economic function of the patent holder present considerations quite unlike earlier cases. An industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees. . . . For these firms, an injunction, and the potentially serious sanctions arising from its violation, can be employed as a bargaining tool to charge exorbitant fees to companies that seek to buy licenses to practice the patent. When the patented invention is but a small component of the product the companies seek to produce and the threat of an injunction is employed simply for undue leverage in negotiations, legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest. In addition injunctive relief may have different consequences for the burgeoning number of patents over business methods, which were not of much economic and legal significance in earlier times. The potential vagueness and suspect validity of some of these patents may affect the calculus under the four-factor test.
The equitable discretion over injunctions, granted by the Patent Act, is well suited to allow courts to adapt to the rapid technological and legal developments in the patent system. For these reasons it should be recognized that district courts must determine whether past practice fits the circumstances of the cases before them. With these observations, I join the opinion of the Court.
In the end: The court found problems with both the CAFC decision and the district court decision. For those concerned about the actual parties (MercExchange and eBay), we’ll have to wait to see a new decision from the lower courts.
Crouch’s off the cuff analysis: I had predicted that the Court would apply equitable principles, but would announce that that injunctions should continue to issue in most cases. [Prediction]. As it turns out, that decision is found in the Roberts Concurrence, but not in the majority. (Thus, I lost my $1 bet). I also had not predicted that four Justices (Kennedy, Stevens, Souter, and Breyer) would come out so strongly against injunctions. This decision may indicate a real shift in Patent Law and the strength of an individual patent. My general advice to litigators: The injunction is now a big issue — make sure that you focus on evidence of irreparable harm from the beginning — including your cease & desist letter or initial complaint. My colleague Tom Fairhall correctly points out that this decision adds yet another layer of uncertainty to patent litigation.
Based on this decision, it is now clear that the value of a patent does depend upon the identity of the owner. For instance, an industry competitor will be able to show irreparable injury much more easily than would a university or individual inventor who has no plans to manufacture a product. Because the industry competitor has a higher likelihood of obtaining an injunction, it should be willing to pay more for the patent. Interestingly, this valuation gap may spur more licenses and patent transfers.
Inpro accused T-Mobile and RIM of infringement of its patent relating to electronic devices having user-operable input means such as a thumb wheel. (Pat. No. 6,523,079). After claim construction, the parties stipulated to summary judgment of noninfringement.
Inpro’s PDA design includes a thumbwheel controller with a host interface. The “PDA is designed to run independently by its own [CPU] until it is connected to a host computer. Upon connection to the host computer, the host CPU takes control and can access the memory and other functional units of the PDA.
Inpro appealed the construction of the term “host interface.” Interestingly, the specification only discussed the interface as a parallel bus, and actually disparages serial busses.
The appellate panel agreed the defendants that the term’s definition should be limited to parallel bus interfaces:
The description of a serial connection in the discussion of the expansion bus interface, and the lack of any such description in the discussion of the host interface, reinforce the interpretation of the host interface as requiring a parallel bus interface, for that is the only interface described for that purpose.
The real killer for the plaintiff was that the following line from the patent:
A very important feature of the PDA in an aspect of the present invention is a direct parallel bus interface . . .
Because RIM and T-Mobile use serial ports, they can’t infringe the patent, which is construed to require parallel ports.
Patent Drafting Commentary: This case reinforces the trend of intentional obscurity in patent drafting. Based on this case and others, patent drafters would do well to ensure that nothing in the patent document is “important,” “essential,” “required,” or the like. Those terms do help the patent readers better understand your preferred embodiment, but in court they will only limit your claim scope.
Additional views of Judge Newman: Judge Newman wrote the majority opinion, but added a separate addendum on her own. Judge Newman agreed that the court’s construction of “host interface” was dispositive in this case. However, she argued that the court should have construed all three disputed terms.
I believe we have the obligation to review the construction of the three appealed terms, for the interests of the parties and the public, as well as judicial economy, require final disposition of the issues of claim construction that were decided by the district court, and raised on appeal. This panel’s resolution of this infringement action based solely on the construction of “host interface” does not resolve, or render moot, the interpretation of the other disputed terms. . . .
We should review and decide all three of the disputed claim terms that are presented on this appeal, lest our silence leave a cloud of uncertainty on the patent, its scope, and its validity. Our obligation to the system of patent-based innovation requires no less.
Judge Newman’s view appears to be at odds with Judge Mayer’s recent dissent in Old Town Canoe.
Old Town Canoe v. Confluence Holdings(Fed. Cir. 2006, 05–1123).
Old Town sued Confluence, asserting infringement of its patent covering layered polyethylene canoes. Confluence filed declaratory judgment counterclaims of invalidity and unenforceability.
After a few days of trial, the judge called it quits — first ruling that as a matter of law, the patents were not infringed, and the next day taking further arguments and ruling that the patents were not invalid and not unenforceable.
On appeal, the CAFC majority agreed that the claims were not infringed (based on claim construction) and then bit into the validity analysis.
Enablement: Because the time and temperature settings of the canoe manufacturing process were not disclosed, a jury could find that undue experimentation was required.
Best mode: Best mode requirement only applies to the claimed invention. However, the defendant’s evidence that a preferred mode had not been disclosed to the PTO was enough to overcome the Court’s judgment as a matter of law.
Inequitable Conduct: Without evidence of intent, the patentee’s failure to disclose the best mode is not “material” as a matter of law.
J. Mayer’s Dissent: Dissenting-in-part, Judge Mayer argued that after the district court decided that the defendant did not infringe, the declaratory judgment jurisdiction of the counterclaims vanished. Those counterclaims became moot. Thus, the lower court’s decision on validity and enforceability should be vacated.
Practice Strategy: This case is a prime example of why a defendant should include declaratory judgment counterclaims rather than just defenses. With counterclaims, the plaintiff will need the defendant’s agreement to end the case.
In re EchoStar Communications (Fed. Cir. 2006, order).
In an order on mandamus, the CAFC has vacated a district court’s decision that would require EchoStar’s outside counsel (who provided an infringement opinion) to produce documents that were never communicated to EchoStar.
Before TiVo sued, EchoStar relied on the advice of its in-house counsel in continuing to produce its allegedly infringing product. After the suit was filed, EchoStar hired Merchant & Gould (M&G), but decided not to rely on the IP Boutique’s advice. Since EchoStar was relying on advice in defense of a willfulness charge, TiVo asked for any M&G opinions and associated work product.
The district court ordered production of M&G’s infringement opinions as well as “all work product . . . whether or not communicated to EchoStar.” The non-communicated subject matter, according to the district court, might contain information disclosed to EchoStar — even if the documents themselves were not disclosed.
On appeal, the CAFC (Gajarsa) came to several conclusions:
An in-house attorney providing an opinion to executives can be an “opinion of counsel.” And, relying on that opinion in court will create a waiver of attorney-client privilege. According to the court, “[u]se of in-house counsel may affect the strength of the defense, but it does not affect the legal nature of the advice.”
Attorney-Client privilege is distinct from Work-Product protection. Waiver of one, does not necessarily waive the other.
Here, “[w]ork-product waiver extends only so far as to inform the court of the infringer’s state of mind.”
Importantly, “work product, which is never communicated to the client, is not discoverable” even after waiver of attorney-client privilege.
[I]f a legal opinion or mental impression was never communicated to the client, then it provides little if any assistance to the court in determining whether the accused knew it was infringing, and any relative value is outweighed by the policies supporting the work-product doctrine.
This case goes a long way in clarifying the scope of waiver, which has been in dispute in essentially every patent case where an opinion is asserted. The court also discusses how redaction should take place and gives rather easy guidlines for determining when a document would fall within the waiver.
Kyocera Wireless v. President Electronics and Tony Colida (Fed. Cir. 2006, unpublished).
In a DJ action, Kyocera was awarded summary judgment of noninfringement. On appeal, Colida argued that expert testimony is required for such a summary determination. The CAFC, however, affirmed its prior precedent that expert evidence is “not always necessary to resolve questions of patent infringement.”
While expert evidence may be necessary in cases involving complex technology, this is not such a case, and Mr. Colida does not explain how expert evidence would have been helpful.
Affirmed
Colida has been involved in several other CAFC decisions:
When can a U.S. patent be used to recover damages for infringement occurring abroad? The answer is actually quite often. Over the past couple of years, plaintiffs have recovered huge damages (or settlements) in U.S. courts for activities that at least partially occurred abroad. In NTP v. RIM, RIM’s BlackBerry system was considered to be used “in the United States” because the e-mail exchange was being controlled by and for the beneficial use of U.S. customers. In Eolas v. Microsoft and AT&T v. Microsoft, the Court of Appeals for the Federal Circuit (CAFC) agreed that the transmittal of computer code could create liability under 271(f) a “component” of a patented invention “supplied” from the U.S. In Shell v. Union Carbide the court further clarified that method claims could have components as well — in this case, the component was a compound used in the patented chemical process. To now, each of these cases have stalled after the CAFC decision when the Supreme Court failed to accept them on petition for certiorari. The lone remaining case is AT&T v. Microsoft. In that case, the Supreme Court has asked the U.S. Solicitor General for the views of the U.S. Government before the Court makes its decision on certiorari. As a historical note, the Supreme Court has not addressed the issue of extraterritorial infringement since the DeepSouth Packing case of 1972, which prompted Congress to pass Section 271(f).
AT&T v. Microsoft (on petition for certiorari).
This issue is huge for Microsoft and for U.S. software developers. Microsoft develops much of its software in the U.S., and ships the code around the world. In the Eolas case, of the half-billion dollar verdict, $330 million was premised on exported code.
In the AT&T case, the CAFC essentially held that Microsoft’s act of shipping its code to a foreign office constitutes patent infringement and any consequential sales or licensing of the shipped code will create patent infringement damages.
The software here involves enhancing the sound quality of synthesized speech while maintaining a high data compression.
In its petition, Microsoft asks two questions:
1) Whether digital software code – an intangible sequence of “1’s” and “0’s” – may be considered a “component[] of a patented invention” within the meaning of Section 271(f)(1); and, if so
2) Whether copies of such a “component[]” made in a foreign country are “supplie[d] . . . from the United States.”
The petition attempts to show that the CAFC has gone astray by interpreting the statute in a manner “appropriate to the technology at issue” rather than according to its “plain meaning and legislative history” as required by Supreme Court precedent.
The petition also impliedly argues that software itself should not be patentable.
The decision below is premised on a commonly held misunderstanding of the nature, and thus the patentability, of software.
Noted attorney Ted Olson and his able team (including Matthew McGill) are handling the appeal.
AT&T’s Opposition
AT&T quickly notes that Microsoft has already appealed this identical issue in the Eolas case, and lost there as well. In addition, AT&T discusses Microsoft’s highly public (but yet unsuccessful) lobbying for patent reform in Congress as evidence that this is an issue that has been considered and rejected by the lawmaking body. Of course, AT&T also argues that the lower court decision does nothing to “expand the extraterritorial reach of U.S. patent laws.
Petitioner’s extraterritoriality argument is a red-herring. Years before . . . the court defined the limits of section 271(f) in order to avoid “the appearance of ‘giving extraterritorial effect to United States patent protection.’”
Waymark (looking only to activity within the U.S. when adjudging infringement).
Amicus in Support of Petitioner by the Software & Information Industry Association (SIIA).
The SIIA is a trade group with over 750 corporate members argued that the CAFC’s new rule upsets settled expectations.
SIIA makes what I see as an important distinction that in Microsoft’s case, the code supplied from the U.S. is not actually incorporated into the infringing products. Rather, the code shipped abroad, copied, and then the copies are installed in the foreign country. They argue that the act was never intended to capture millions of infringing acts based on the supply of only a single component.
Next Steps:
The SG is expected to take several months to provide its input, and this case will not be heard until 4th Quarter 2006. It is currently too-late for parties to file amici briefs. However, the SG will accept input from the public on this important issue.
AT&T v. Microsoft, 414 F.3d 1366 (Fed. Cir. Jul. 13,2005) (271(f) “component” applies to method claims and software being sold abroad);
Eolas v. Microsoft, 399 F.3d 1325 (Fed. Cir. Mar. 2,2005) (271(f) “component” applies to method claims);
Pellegrini v. Analog Devices, 375 F.3d 1113 (Fed. Cir. 2004) (271(f) “component” does not cover export of plans/instructions of patented item to be manufactured abroad);
Bayer v. Housey Pharms, 340 F.3d 1367 (Fed. Cir. 2003) (271(g) “component” does not apply to importation of ‘intangible information’).
Notes:
** 35 U.S.C. 271(f)
(1) Whoever without authority supplies . . . from the United States . . . a substantial portion of the components of a patented invention . . . 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.
(2) Whoever without authority supplies . . . from the United States any component of a patented invention that is especially made . . . for use in the invention and not a staple article . . . suitable for substantial noninfringing use. . . , knowing that such component is so made . . . and intending that such component will be combined 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.
Parental Guide of Texas v. Thomson (Fed. Cir. 2006).
The most interesting aspect of this case is that the CAFC was willing to decide it. In a post-settlement dispute over damages, Parental Guide originally appealed to the Fifth Circuit. On motion, the Fifth Circuit transferred the case to the CAFC because the settlement agreement “expressly refers to the patent statute, 35 U.S.C. § 284.”
Because it was “at least plausible” that a determination of Section 284 would be necessary to decide the case, the appellate panel felt compelled to hear the appeal.
The majority held that an unpublished patent application that eventually issued as a Canadian patent was a “printed publication” under 35 U.S.C. § 102(b). Judge Linn dissented:
[T]he text of an issued patent does not generally serve to guide researchers to the file history for a more expansive disclosure of the described invention, and it certainly does not lead researchers to the file history for disclosure of subject matter not described in the issued text. . . . The fact that an additional drawing, disclosing additional structure, is present in the application file is a matter of sheer happenstance nowhere indicated in the issued patent. For this reason, it is my view that, as in Cronyn, the anticipatory drawings at issue in this case are “not accessible to the public because they have not been cataloged or indexed in a meaningful way.” . . . In this case, in addition to not being meaningfully indexed, as discussed above, no copies were known to have been made or distributed during the critical period, and the ’119 application was available for viewing only at the Canadian Patent Office in Hull, Quebec.
Bruckelmyer has two patents on methods of thawing frozen ground so that a layer of concrete can be laid on top of the ground. The trial court found Bruckelmyer’s patents obviated by a Canadian patent application and decided the case on summary judgment.
Interestingly, the Canadian patent application included two important figures that were cancelled during prosecution. Those figures were reportedly required for a finding of obviousness.
On appeal, Bruckelmyer argued that the unpublished Canadian patent application was not a “printed publication” under 35 U.S.C. Section 102(b) and thus, was not prior art.
The CAFC found that the original application was “publicly accessible,” and thus a prior art “printed publication” because the Canadian prosecution file was open to the public more than a year before Bruckelmyer filed his application.
A given reference is “publicly accessible”
upon a satisfactory showing that such document has been disseminated . . . to the extent that persons interested and ordinarily skilled in the subject matter . . . exercising reasonable diligence, can locate it and recognize and comprehend therefrom the essentials of the claimed invention without need of further research or experimentation.
In re Wyer, 655 F.2d 221, 226 (CCPA 1981).
Here, the Court found that this particular application could be located because the related patent discussed a solution for the same problem addressed by Bruckelmyer’s patents.
Thus, the application was found to be prior art even though there was no evidence that it was actually disseminated.
Lava Trading v. Sonic Trading Management (Fed. Cir. 2006, 05–1177)
The majority overturned a lower court claim construction, but Judge Mayer dissented:
The decision today is yet another example of the unfortunate consequences of Markman v. Westview Instruments, Inc., 52 F.3d 967 (Fed. Cir. 1995) (en banc), Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448 (Fed. Cir. 1998) (en banc), and Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc), which cemented this court’s jurisprudence with respect to claim construction as being purely a matter of law subject to de novo review. Because claim construction is treated as a matter of law chimerically devoid of underlying factual determinations, there are no “facts” on the record to prevent parties from presenting claim construction one way in the trial court and in an entirely different way in this court. By not dismissing this case, we issue a decision based on an undeveloped record. We set ourselves up to have to decide claim construction again later, which could well differ from the ruling today. Furthermore, allowance of an appeal of the trial court’s perfunctory, offhand ruling from the bench, for all intents and purposes allows an interlocutory appeal of claim construction, which portends chaos in process.
Lava Trading v. Sonic Trading Management (Fed. Cir. 2006, 05–1177)
In today’s case of Lava Trading, the CAFC again found that knowledge of the accused product is import for providing “a proper context for an accurate claim construction. . . . Without the vital contextual knowledge of the accused products or processes, this appeal takes on the attributes of something akin to an advisory opinion on the [patent] scope. ”
This decision falls in line with the recent Wilson Sporting Goods case that held “while a claim is not to be construed in light of the accused device, in an infringement case, it must inevitably be construed in context of the accused device.”
RealNetworks last week won their patent case against the Boston company Ethos Technologies. [Article] Ethos had asserted that Real infringed two of Ethos’ patents related to downloading technology. According to reports, the jury returned a “unanimous verdict finding that Real did not infringe on any of the 10 claims asserted against in the suit, which was filed in 2002 and sought over $200 million in damages. Moreover, the jury invalidated 7 of the 10 claims.”
In a recent interview, I asked Dave Stewart, Real’s VP and Deputy General Counsel, whether this case altered Real’s position on patent reform:
[Dave Stewart] Our experience in the Ethos litigation confirms our longstanding position on patent reform. We believe the patent system is in need of reform to improve both the quality of the patents issued as well as the time it takes to issue a patent. As a general matter, we have been supportive of most of the Business Software Alliance‘s patent reform efforts. One important step in this regard would be to ensure that all fees paid by inventors be specifically designated for use by the USPTO, which is significantly under funded.
Dave’s response is probably representative of many of the leading technology companies — reform is needed to improve quality and reduce pendency.
In a recent district court decision, Andrew Corp. v. Beverly Mfg. Co., (N.D. Ill. Feb. 16, 2006), already summarized in these pages, the court excluded a non-infringement opinion from evidence when opinion counsel—because of a conflict of interest—ought never to have provided the opinion in the first place. (The opining law firm found itself representing both the patentee and the accused infringer.) The case, then, will be tried under the fiction that the accused infringer, Beverly, knew of the relevant patent but failed to obtain legal advice. Beverly, of course, will be at much greater risk of enhanced damages for willful infringement. The court appreciated that Beverly may be guilty of nothing worse than an unfortunate selection of counsel, and it recognized that choosing a remedy was “unpleasant,” but the court did not take into account the possibility that any resulting award of enhanced damages may well be unconstitutional.
Enhanced damages in an infringement action are a form of punitive damages, and the award of punitive damages is subject to substantive Due Process restrictions. State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 417 (2003). Consistent with Due Process, the Supreme Court requires that “punitive damages should only be awarded if the defendant’s culpability, after having paid compensatory damages, is so reprehensible as to warrant the imposition of further sanctions to achieve punishment or deterrence.” Id. at 419. The “reprehensible” actions that permit an award of punitive damages must themselves be tied to the actions that gave rise to liability in the first place:
A defendant’s dissimilar acts, independent from the acts upon which liability was premised, may not serve as the basis for punitive damages. A defendant should be punished for the conduct that harmed the plaintiff, not for being an unsavory individual or business.
538 U.S. at 422-423. It is by no means clear that the actions of Beverly’s counsel—even if they can be imputed to Beverly—were sufficiently reprehensible to warrant what (in a typical patent case) could amount to millions of dollars in enhanced damages. Even if they were, the connection between Beverly’s purported infringement and its counsel’s ethical lapse is tenuous: it would have done little good to the patentee if Beverly had retained different opinion counsel. (To the contrary, if any counsel were going to advice Beverly to cease infringement, one would think that counsel representing the patentee itself would have done so.)
Through little or no fault of its own, Beverly has been deprived of what is traditionally the most important exculpatory evidence on willfulness. The substantive effect of Due Process on enhanced damages for willful infringement is not entirely clear, but it is questionable whether punitive damages can be based on a fictitious reconstruction of an infringer’s state of mind.
Jeffrey Steck is a partner at MBHB and an experienced litigator. He was also an editor of the California Law Review at the University of California at Berkeley, where he received his JD.
King Pharma v. Teva, 78 USPQ2d 1237 (D.N.J. 2006).
In a pharmaceutical patent dispute, Teva argued that Wyeth’s patent on zaleplon drug products (Sonata) had expired because of a terminal disclaimer. Wyeth (and its exclusive licensee King) argued that patent’s term was ongoing because of a Patent Term Extension due to FDA regulatory review delay.
Under 35 U.S.C. 156(a), the term of a patent “shall be extended” after a series of provisions are satisfied. The district court found the language of the statute unambiguous and gives the court “no discretion.”
Thus, if the enumerated conditions are satisfied, the patentee is entitled to a term extension calculated pursuant to Section 156.
Teva’s motion to dismiss was consequently denied because “a terminally disclaimed patent is eligible for extension under [Section] 156.”
Andrew Corp v. Beverly Mfg., (N.D.Ill. 2006, 04–6214:146).
Andrew sued Beverly for willful infringement of Andrew’s cable-hanger patents. Beverly then brought forth three opinion letters written by its counsel in an attempt to avoid the willfulness charge.
The opinion letters provide, for instance that Beverly’s new product “does not fall within the claims of [Andrew’s] patent.”
As it turned out, Beverly’s law firm recently merged — and the merged firm represents both Andrew and Beverly.
On motion to disqualify the opinions, the firm responded that “lawyers who represented Andrew have never discussed any Beverly matter with the [lawyers] who represented Beverly and visa versa.”
District Judge Holderman, however, found a clear conflict:
[The firm’s] attorneys took positions directly adverse to its client Andrew in the [two] opinion letters on behalf of its other client Beverly, without obtaining informed consent from both Andrew and Beverly, in violation of Local Rule 83.51.7 and 83.51.10. These opinion letters advised Beverly that its products did not infringe Andrew’s patents, attacked Andrew’s patents, provided potential litigation arguments and provided a factual basis for a potential defense against future claims by Andrew of willful infringement. [The firm] possessed sufficient information to have determined that its work for Beverly was adverse to its existing client Andrew, that it would affect its relationship with Andrew and that the [firm] as a whole was disqualified under the imputed conflict rule.
Remedy: Because of the conflict, the court determined that the opinions could not, as a matter of law, be competent. As such, all opinion letters from the firm were excluded from the case.
Glenayre Electronics v. Jackson (Fed. Cir. 2006, 04–1568).
Jackson won a $12 million jury verdict for infringement. However, those damages were remitted by the court who found that “the jury’s $12,000,000 damages award reflects a whopping royalty rate of 30%, a rate five times greater than the very highest rate disclosed in any license agreement offered into evidence.” Instead, the lower court found that the maximum reasonable royalty would be 6% of sales plus a $250,000 lump-sum payment, and proposed a remittitur to $2.65 million as an alternative to a new trial. Jackson accepted the new award, but also pursued claims against Glenayre for indirect infringement based on activity of its customers. The lower court refused to allow those claims to proceed — finding that Jackson had been fully compensated by the initial verdict.
On appeal, the CAFC found that Jackson could not “double dip.”
Jackson’s theory is that he has an absolute, inviolable right to pursue an additional damages award based on Glenayre’s customers’ use of infringing products sold by Glenayre, even though he has already collected compensation for direct infringement by Glenayre because of the same sales. We disagree.
It is possible that a plaintiff could get separate damages for sales and use. However, in this case, Jackson had presented evidence of customer use during the original trial, and the CAFC found that those damages were included within the $2.65 million award calculation.
Judge Newman dissents:
The district court, today affirmed by the panel majority, incorrectly held that there cannot be contributory infringement by a direct infringer. From this ruling and its flawed premises, I respectfully dissent. . .
The panel majority departs in major ways from precedent, in holding that, as a matter of law, there is no liability for a manufacturer’s contributory infringement, or even for direct infringement by users of an infringing device, when damages have been accepted that are limited to the manufacturer’s direct infringement. See Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476 (1964) (Aro II). . .
The [Supreme] Court (in Birdsell) established that while sales by the patentee or an authorized licensee can trigger the first sale doctrine, the collection of damages for infringement does not. Payment of damages by an infringing manufacturer is not an automatic “implied license” to itself or others to continue the infringement.
Breckenridge Pharmaceuticals v. Metabolite Labs. (Fed. Cir. 2006, 05–1121).
Metabolite (patent holder) and PamLab (exclusive licensee) sued Breckenridge in Colorado — asking for a TRO stopping Breckenridge from selling its Folbee product, which is similar to PamLab’s FOLTX. The plaintiffs, however, dismissed their suit after their motion for TRO was denied. Their next step was to send letters to retailers warning them against selling generic equivalents of FOLTX. The letters to the retailers not name Breckenridge or threaten a lawsuit, but did include a PamLab brochure.
Breckenridge then sued Metabolite and PamLab in Florida for declaratory judgment of non-infringement and for various torts based on Florida law.
Metabolite was dismissed from the suit for lack of personal jurisdiction, and summary judgment was granted to PamLab because Metabolite, as patent holder, was an indispensable party.
On appeal, the CAFC agreed with the lower court that Federal Circuit law should be applied to determine whether personal jurisdiction would comport with due process — because even the non-patent issues were “intimately linked to patent law.”
The panel summarized its licensor due process case law:
In sum, our case law has held as follows: where a defendant has sent cease and desist letters into a forum state that primarily involve a legal dispute unrelated to the patent at issue, such as an injunction obtained for misappropriation of trade secrets, the exercise of personal jurisdiction is improper. Silent Drive, 326 F.3d at 1202. Likewise, a defendant may not be subjected to personal jurisdiction if its only additional activities in the forum state involve unsuccessful attempts to license the patent there. Hildebrand, 279 F.3d at 1356. The same is true where the defendant has successfully licensed the patent in the forum state, even to multiple non-exclusive licensees, but does not, for example, exercise control over the licensees’ sales activities and, instead, has no dealings with those licensees beyond the receipt of royalty income. Red Wing Shoe, 148 F.3d at 1357-58.
In contrast, the defendant is subject to personal jurisdiction in the forum state by virtue of its relationship with its exclusive forum state licensee if the license agreement, for example, requires the defendant-licensor, and grants the licensee the right, to litigate infringement claims. Akro, 45 F.3d at 1546. Finally, the defendant will also be subject to personal jurisdiction in the forum state if the exclusive licensee (or licensee equivalent) with which it has established a relationship is not headquartered in the forum state, but nonetheless conducts business there. Genetic Implant, 123 F.3d at 1457-59.
Thus, the crux of the due process inquiry should focus first on whether the defendant has had contact with parties in the forum state beyond the sending of cease and desist letters or mere attempts to license the patent at issue there. Where a defendant-licensor has a relationship with an exclusive licensee headquartered or doing business in the forum state, the inquiry requires close examination of the license agreement. In particular, our case law requires that the license agreement contemplate a relationship beyond royalty or cross-licensing payment, such as granting both parties the right to litigate infringement cases or granting the licensor the right to exercise control over the licensee’s sales or marketing activities.
Here, the CAFC found that the licensing relationship between Metabolite and PamLab, that PamLab’s sales activities in Florida create are sufficient to give the court jurisdiction over Metabolite.
As such, we hold that, through its relationship with PamLab, which sells products in Florida, Metabolite has purposefully availed itself to the privilege of conducting activities within Florida.
Reversed, vacated, and remanded
Notes:
Although apparently a different patent, the patent at suit here is related to Metabolite’s method for diagnosing hyperhomocysteinemia. The validity of that patent is currently being considered by the U.S. Supreme Court in the case of LabCorp v. Metabolite.
This case settled originally, but Semitool revived the litigation after Dynamic began selling a new product. Interestingly, the settlement agreement included a provision for how the patent claims should be construed in any future enforcement proceeding — according to the district court’s claim construction order.
In the revived proceeding, the district court applied its old construction and found the new product noninfringing. On appeal, the CAFC also applied the agreed upon claim construction — rather than questioning it de novo.
Because it resides inside the processing chamber, the condenser in the Tornado cannot supply a drying gas as construed by the Final Claim Construction order issued by the district court. DMS is entitled to judgment as a matter of law that it does not infringe Semitool’s patents
Advanced Cardio and Guidant v. Medtronic (Fed. Cir. 2006, Nonprecedential). 
Applied Medical v. U.S. Surgical (Fed. Cir. 2006, 
In a landmark unanimous decision, the U.S. Supreme Court has reportedly vacated the appellate court’s decision against eBay — putting an end to the “general rule” that a permanent injunction should follow a finding of infringement of a valid patent. Rather, the opinion by Justice Clarence Thomas rules that the decision of “whether an injunction should issue” is within the trial court’s discretion. Concurring opinions by Chief Justice John Roberts and Justice Anthony Kennedy.
Inpro II v. T-Mobile (Fed. Cir. 2006, 
Kyocera Wireless v. President Electronics and Tony Colida (Fed. Cir. 2006, 
Lava Trading v. Sonic Trading Management (Fed. Cir. 2006, 
In a recent district court decision, Andrew Corp. v. Beverly Mfg. Co., (N.D. Ill. Feb. 16, 2006), already summarized in 
King Pharma v. Teva, 78 USPQ2d 1237 (D.N.J. 2006). 
Andrew Corp v. Beverly Mfg., (N.D.Ill. 2006, 
Glenayre Electronics v. Jackson (Fed. Cir. 2006,