Federal Circuit affirms permanent injunction in face of prior license agreements

PatentlyO2006102_thumb1_1Acumed LLC v. Stryker Corp. (Fed. Cir. 2008)

In 2004, Acumed sued Stryker for infringing a patent covering an orthopedic nail used in reconstructing humerus fractures.  After a jury verdict of infringement, the district court ordered a permanent injunction. That pre-eBay ruling was subsequently vacated by the Federal Circuit because the lower court did not specifically consider the traditional four-factor test for injunctive relief. On remand, the district court again granted the permanent injunction.  That permanent injunction is affirmed here on appeal.

In eBay, the Supreme Court held that the traditional four factors of equitable relief must be considered before granting injunctive relief in a patent infringement case.  However, if a district court considers the requisite factors, the Federal Circuit will only vacate if they find an “abuse of discretion.” 

Irreparable Harm and Lack of Remedy at Law: The first two factors of (1) irreparable harm caused by continued infringement and (2) inadequate remedies available at law almost entirely overlap. The court easily considered those factors together. 

Acumed had previously licensed the patents to other manufacturers — perhaps indicating that money could be sufficient to compensate for the infringement. However, the district court distinguished the prior licenses based on the identities of the past licensees and Acumed’s more recent “experience in the market.”  The Federal Circuit found no abuse of discretion — noting that “[a] plaintiff’s past willingness to license its patent is not sufficient per se to establish lack of irreparable harm if a new infringer were licensed.” 

The Jury had awarded lost profit damages, and Acumed suggested that fact indicates that future harms would cause irreparable harm (or at least more than what would be compensated by a reasonable royalty).  On appeal, the Federal Circuit did not dispute (or explicitly affirm) this argument. However the court did note that “[t]he essential attribute of a patent grant is that it provides a right to exclude competitors from infringing the patent.”

Balance of Hardships: For the third factor – balancing the hardships – Stryker argued that its customers (who need their arms fixed) would suffer under an injunction. On appeal, the Federal Circuit rejected that argument as a matter of law — holding that the balancing factor “is only between a plaintiff and a defendant, and thus the effect on customers and patients alleged by Stryker is irrelevant.”  Under this construct of the balancing factor, the patentee will usually win — especially when applying the Windsurfing holding that “One who elects to build a business on a product found to infringe cannot be heard to complain if an injunction against continuing infringement destroys the business so elected.”

Public Interest: The patentee must show that the public interest is “not dissereved by an injunction.”  Here, Stryker argued that the Acumed product was lower quality and that the arm bone repair would lead to increased morbidity. The district court did not find that public health argument persuasive and the Federal Circuit agreed that “the court was within its discretion to conclude that the public interest was not disserved by an injunction.”

Permanent Injunction Affirmed

Notes:

  • The Jury found the infringement “willful.” That fact was not discussed in the eBay analysis.
  • This case follows the conventional wisdom that the courts will continue to grant permanent injunctions against competitors who infringe.

Federal Circuit affirms permanent injunction in face of prior license agreements

PatentlyO2006102_thumb1_1Acumed LLC v. Stryker Corp. (Fed. Cir. 2008)

In 2004, Acumed sued Stryker for infringing a patent covering an orthopedic nail used in reconstructing humerus fractures.  After a jury verdict of infringement, the district court ordered a permanent injunction. That pre-eBay ruling was subsequently vacated by the Federal Circuit because the lower court did not specifically consider the traditional four-factor test for injunctive relief. On remand, the district court again granted the permanent injunction.  That permanent injunction is affirmed here on appeal.

In eBay, the Supreme Court held that the traditional four factors of equitable relief must be considered before granting injunctive relief in a patent infringement case.  However, if a district court considers the requisite factors, the Federal Circuit will only vacate if they find an “abuse of discretion.” 

Irreparable Harm and Lack of Remedy at Law: The first two factors of (1) irreparable harm caused by continued infringement and (2) inadequate remedies available at law almost entirely overlap. The court easily considered those factors together. 

Acumed had previously licensed the patents to other manufacturers — perhaps indicating that money could be sufficient to compensate for the infringement. However, the district court distinguished the prior licenses based on the identities of the past licensees and Acumed’s more recent “experience in the market.”  The Federal Circuit found no abuse of discretion — noting that “[a] plaintiff’s past willingness to license its patent is not sufficient per se to establish lack of irreparable harm if a new infringer were licensed.” 

The Jury had awarded lost profit damages, and Acumed suggested that fact indicates that future harms would cause irreparable harm (or at least more than what would be compensated by a reasonable royalty).  On appeal, the Federal Circuit did not dispute (or explicitly affirm) this argument. However the court did note that “[t]he essential attribute of a patent grant is that it provides a right to exclude competitors from infringing the patent.”

Balance of Hardships: For the third factor – balancing the hardships – Stryker argued that its customers (who need their arms fixed) would suffer under an injunction. On appeal, the Federal Circuit rejected that argument as a matter of law — holding that the balancing factor “is only between a plaintiff and a defendant, and thus the effect on customers and patients alleged by Stryker is irrelevant.”  Under this construct of the balancing factor, the patentee will usually win — especially when applying the Windsurfing holding that “One who elects to build a business on a product found to infringe cannot be heard to complain if an injunction against continuing infringement destroys the business so elected.”

Public Interest: The patentee must show that the public interest is “not dissereved by an injunction.”  Here, Stryker argued that the Acumed product was lower quality and that the arm bone repair would lead to increased morbidity. The district court did not find that public health argument persuasive and the Federal Circuit agreed that “the court was within its discretion to conclude that the public interest was not disserved by an injunction.”

Permanent Injunction Affirmed

Notes:

  • The Jury found the infringement “willful.” That fact was not discussed in the eBay analysis.
  • This case follows the conventional wisdom that the courts will continue to grant permanent injunctions against competitors who infringe.

Federal Circuit Rejects Patent Attorney Expert Testimony; Finds Patent Obvious

Sundance v. Demonte Fabricating (Fed. Cir. 2008)

Sundance sued Demonte for infringing its patent on a retractable truck tarp. A jury found the patent infringed but obvious. In a post-verdict judgment, the Judge vacated the jury’s obviousness determination – finding the patent not invalid.

Patent Attorney Expert Testimony: On appeal, the Federal Circuit found that the Michigan district court erred by allowing a patent attorney – Dan Bliss – to testify as an expert witness on the issues of infringement and validity on behalf of Demonte. At least some of his testimony focused on issues “exclusively determined from the perspective of ordinary skill in the art” even though he was not qualified as an expert in the art of tarp-making.

“Mr. Bliss is not “qualified as an expert by knowledge, skill, experience, training, or education” in the pertinent art; we therefore fail to see how he could “assist the trier of fact to understand the evidence or to determine a fact in issue.” Fed. R. Evid. 702.


….


Admitting testimony from a person such as Mr. Bliss, with no skill in the pertinent art, serves only to cause mischief and confuse the factfinder. Unless a patent lawyer is also a qualified technical expert, his testimony on these kinds of technical issues is improper and thus inadmissible.”

….

We hold that it is an abuse of discretion to permit a witness to testify as an expert on the issues of noninfringement or invalidity unless that witness is qualified as an expert in the pertinent art. Testimony proffered by a witness lacking the relevant technical expertise fails the standard of admissibility under Fed. R. Evid. 702. Indeed, where an issue calls for consideration of evidence from the perspective of one of ordinary skill in the art, it is contradictory to Rule 702 to allow a witness to testify on the issue who is not qualified as a technical expert in that art. We understand that patent lawyers are often qualified to testify as technical experts, but such a qualification must derive from a lawyer’s technical qualifications in the pertinent art.

With Mr. Bliss’s testimony excluded, the Federal Circuit was left with no expert testimony supporting the jury’s obviousness holding. However, following the Supreme Court’s lead in KSR v. Teleflex, the Federal Circuit still felt competent to determine the obviousness on its own. Explaining the appellate court’s competence, the opinion noted that the “technology is simple.”

Holding: Reversed – Claim 1 is invalid as obvious.

Note:

  • Way back when: Peggy Focarino was the primary examiner of the patent at issue. Patent No. 5,026,109.

Federal Circuit Rejects Patent Attorney Expert Testimony; Finds Patent Obvious

Sundance v. Demonte Fabricating (Fed. Cir. 2008)

Sundance sued Demonte for infringing its patent on a retractable truck tarp. A jury found the patent infringed but obvious. In a post-verdict judgment, the Judge vacated the jury’s obviousness determination – finding the patent not invalid.

Patent Attorney Expert Testimony: On appeal, the Federal Circuit found that the Michigan district court erred by allowing a patent attorney – Dan Bliss – to testify as an expert witness on the issues of infringement and validity on behalf of Demonte. At least some of his testimony focused on issues “exclusively determined from the perspective of ordinary skill in the art” even though he was not qualified as an expert in the art of tarp-making.

“Mr. Bliss is not “qualified as an expert by knowledge, skill, experience, training, or education” in the pertinent art; we therefore fail to see how he could “assist the trier of fact to understand the evidence or to determine a fact in issue.” Fed. R. Evid. 702.

….

Admitting testimony from a person such as Mr. Bliss, with no skill in the pertinent art, serves only to cause mischief and confuse the factfinder. Unless a patent lawyer is also a qualified technical expert, his testimony on these kinds of technical issues is improper and thus inadmissible.”

….

We hold that it is an abuse of discretion to permit a witness to testify as an expert on the issues of noninfringement or invalidity unless that witness is qualified as an expert in the pertinent art. Testimony proffered by a witness lacking the relevant technical expertise fails the standard of admissibility under Fed. R. Evid. 702. Indeed, where an issue calls for consideration of evidence from the perspective of one of ordinary skill in the art, it is contradictory to Rule 702 to allow a witness to testify on the issue who is not qualified as a technical expert in that art. We understand that patent lawyers are often qualified to testify as technical experts, but such a qualification must derive from a lawyer’s technical qualifications in the pertinent art.

With Mr. Bliss’s testimony excluded, the Federal Circuit was left with no expert testimony supporting the jury’s obviousness holding. However, following the Supreme Court’s lead in KSR v. Teleflex, the Federal Circuit still felt competent to determine the obviousness on its own. Explaining the appellate court’s competence, the opinion noted that the “technology is simple.”

Holding: Reversed – Claim 1 is invalid as obvious.

Note:

  • Way back when: Peggy Focarino was the primary examiner of the patent at issue. Patent No. 5,026,109.

Federal Circuit Transfers Case Out of Texas (Applying New Fifth Circuit Precedent)

In re TS Tech USA Corp. (Fed. Cir. 2008) (precedential order)

Responding to an interlocutory petition for a writ of mandamus, the Federal Circuit has ordered a patent case transferred from Judge Ward’s courtroom in the Eastern District of Texas to the Southern District of Ohio. Both venues were “proper,” but the appellate panel found the Ohio venue “far more convenient.”

In 2007, Michigan based Lear Corp (not Lear Jets) sued TS Tech for infringing its patent covering a pivotable vehicle headrest. The accused TS headrest assemblies were supplied to Honda and used in the Civic and Accura RDX. TS is a Japanese company, but the defendants are TS’s North American subsidiaries headquartered in Ohio and Canada.

In 2008, the Fifth Circuit (TX, LA, MS) decided another venue case on mandamus – finding that cases should be transferred from the Eastern District of Texas when the new venue is “clearly more convenient.” In re VW (5th Cir. 2008) (en banc)(cert petition pending). On mandamus, a lower court’s refusal to transfer will only be reversed if it produces a “patently erroneous result.”

Here, the lower court erred in its application of 5th Circuit law in several ways:

  • Plaintiff’s Choice: The lower court gave too much (“inordinate”) weight to the plaintiff’s choice of venue.
  • Distance from Home: When a defendant is more than 100 miles from home, “inconvenience to witnesses increases in direct relationship to the additional distance to be traveled.” Here, all the witnesses are in Michigan, Ohio, and Canada. All of those witnesses “would need to travel approximately 900 more miles to attend trial in Texas than in Ohio.”
  • Physical Evidence: “Because all of the physical evidence, including the headrests and the documentary evidence, are far more conveniently located near the Ohio venue, the district court erred in not weighing this factor in favor of transfer.”
  • Public Interest: Texas has no interest in handling this patent dispute since the only relevant connection to the venue is that some vehicles containing the accused headrest assembly were sold in the venue. “None of the companies have an office in the Eastern District of Texas; no identified witnesses reside in the Eastern District of Texas; and no evidence is located within the venue.” Thus, the “citizens of the Eastern District of Texas have no more or less of a meaningful connection to this case than any other venue.”

Patently erroneous: Although “patentably erroneous” is difficult to define, the Federal Circuit found the errors sufficient to grant the writ. They reasoned that the 5th Circuit VW case – where mandamus was also granted – was based on essentially identical errors.

Transfer Ordered.

Tags:

Written Description: Single Embodiment Insufficient

This decision is nothing new. Broad claims must either be supported by multiple embodiments or some general principles describing how the single embodiment is applicable to other configurations. Failing that, a broad claim may fail the enablement prong. As seen here, even when enabled, a broad claim without sufficient support will be invalid under the written description requirement.

In re Alonso (Fed. Cir. 2008)

The PTO Board of Appeals (BPAI) rejected claim 92 of Kenneth Alonso’s for failing the written description requirement of Section 112. “To satisfy this requirement, the specification must describe the invention in sufficient detail so that one skilled in the art can clearly conclude that the inventor invented the claimed invention as of the filing date sought.” (quoting case). In an opinion written by Judge Stearns (D.M.A.) sitting by designation, the Federal Circuit affirmed.

Claim 92 of the Alonso patent application claims a “method of treating neurofibrosarcoma in a human by administering an effective amount” of an idiotypic monoclonal antibody (mAb) secreted in a human-human cell hybridoma.

In his application, Alonso only described the preparation of a single mAb, but claimed essentially all Mab’s that bind to neurofibrosarcoma, and the PTO found that a “skilled artisan would reasonably conclude that applicant was clearly not in possession of the claimed genus of compounds. Applicant should direct the claim language toward the only described embodiment (e.g., a mAb produced by hybridoma HB983).”

Standard of Review: The PTO’s factual determinations are reviewed for “substantial evidence.” Thus, the Federal Circuit will affirm when “a reasonable mind might accept [the evidence] as adequate to support a conclusion.” Even if the Federal Circuit might ultimately have seen the facts differently, it will affirm if the PTO’s position is reasonable.

Predictability: The Federal Circuit acknowledged that disclosure of a single embodiment can be sufficient for a broader genus claim. However, more disclosure is necessary when the composition and effectiveness of members of the genus is heterogeneous or unpredictable.

We have previously held in a similar context that “a patentee of a biotechnological invention cannot necessarily claim a genus after only describing a limited number of species because there may be unpredictability in the results obtained from species other than those specifically enumerated.” Noelle v. Lederman, 355 F.3d 1343, 1350 (Fed. Cir. 2004).

Alonso argued that his single embodiment should be given more weight because he had actually reduced it to practice (unlike the Rochester COX-2 case). The Federal Circuit rejected that argument because Alonso had not provided the necessary predictive information – “nothing about the structure, epitope characterization, binding affinity, specificity, or pharmacological properties common to the large family of antibodies implicated by the method.”

Notes:

  • The court gives the following justification for the written description requirement: “The requirement ‘serves a teaching function, as a quid pro quo in which the public is given meaningful disclosure in exchange for being excluded from practicing the invention for a limited period of time.'” quoting Univ. of Rochester, 358 F.3d 916 (Fed. Cir. 2004) (in turn quoting Enzo Biochem, 323 F.3d 956 (Fed. Cir. 2002)).
  • In his 2005 book on Electronic and Software Patents, Steve Lundberg, et al. include the understatement: “The purpose of the written description requirement has been in flux recently.”

Professor Collins: In re Bilski: Tangibility Gone “Meta”

By Professor Kevin Emerson Collins (Indiana University Law School – Bloomington) [PDF Version]

In its recently issued en banc majority opinion in In re Bilski, the Federal Circuit articulates a “machine-or-transformation” test for patent-eligible subject matter under § 101 of the Patent Act. Although they are both legitimate questions, this short comment addresses neither whether there is a legitimate statutory basis for this test nor whether Supreme Court precedent should be interpreted so as to mandate (or even support) this test. Rather, it focuses solely on the criteria that the court offers to draw the line between patentable and unpatentable transformations. The Federal Circuit has added a new twist to the tangibility test that has for many years played a role in determining patent-eligibility: the tangibility test has gone “meta.” The tangibility of the formal data that is actually transformed by a method of processing information is not relevant to patent-eligibility, but the tangibility of the things that the data is about—the tangibility of the informational content of the data or the things to which the data refers—now appears to be dispositive.

Bilski sets out a disjunctive two-prong “machine-or-transformation” test for patent-eligible subject matter: “A claimed process is surely patent-eligible subject matter under § 101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.” Slip op. at 10. The opinion declines to elaborate on the implications of the particular-machine prong of the test because the applicants conceded that their claim did not satisfy this prong. Id. at 24. It addresses only the transformation prong. It puts forward a conjunctive, two-prong test that must be satisfied for a method to “transform[] a particular article into a different state or thing” and thus to qualify as patent-eligible subject matter. First, the transformation implicated “must be central to the purpose of the claimed process.” Id. In other words, it must also “impose meaningful limits on the claim’s scope” and not “be insignificant extra-solution activity.” Id. Second, the transformation only qualifies as patent-eligible if it transforms a certain type of “article.” “[T]he main aspect of the transformation test that requires clarification here is what sorts of things constitute ‘articles’ such that their transformation is sufficient to impart patent-eligibility under § 101.” Id. at 24–25. This is the distinction—the distinction between the “articles” that, if transformed, constitute patent-eligible subject matter and the other “articles” that, if transformed, do not constitute patent-eligible subject matter—on which the opinion elaborates at length, id. at 25–32, and on which this comment focuses.

Most importantly for the point addressed here, the Federal Circuit implies in Bilski that there are two different categories of “electronically-manipulated data,” id. at 25, and that the data in each category is a different type of “article” insofar as patent-eligibility is concerned. The data in the first category is an “article” that, if transformed by a method claim, constitutes patent-eligible subject matter, but a method that transforms the data in the second category is not a patent-eligible method.

The first category is comprised of data that represents a “physical object or substance.” Id. at 28. For example, citing In re Abele, 684 F.2d 902 (C.C.P.A. 1982), the Federal Circuit stated that a method that transforms data that “clearly represent[s] the physical and tangible objects, namely the structure of bones, organs, and other body tissues” is a patent-eligible method. Slip. op. at 26.

The second category of data seems to have two distinct subsets. The first subset is data that, as claimed, does not represent anything (or, alternatively, that can represent anything). This data is semantically empty; it is a variable without any specified informational content. Bilski again uses Abele—but this time the claims that the court rejected under § 101—as an example. Id. The fact that methods reciting the transformation of this meaningless (or infinitely meaningful) data are not patent-eligible should come as no surprise to those familiar with the history of patent-eligibility in the last several decades: methods that recite the manipulation of variables without semantic meaning are nothing more than methods that recite mathematical algorithms in the abstract.

The second subset of the second category, however, is likely to raise some eyebrows: it contains data that represents something specific or something in particular, but that something represented is itself intangible. Here, the informational content of the data—the thing in the world to which the data refers—is intangible. The Federal Circuit holds that the method at issue in Bilski is not patent-eligible because it “transform[s]” or “manipulat[es]” data representing “public or private legal obligations or relationships, business risks, or other such abstractions,” which critically is not data “representative of physical objects or substances.” Id. at 28.

The idea that the meaning that the user attributes to the data transformed or manipulated by an information processing method is relevant to patent-eligibility is not a novel feature of the “machine-or-transformation” test announced in Bilski. For example, the “concrete, useful and tangible result” test of State Street Bank required the courts to examine the meaning of the data, variables or “numbers” in the course of determining patent-eligibility. State St. Bank & Trust Co. v. Signature Fin. Group, 149 F.3d 1368, 1373–75 (Fed. Cir. 1998). However, what is new in Bilski is the importance now placed on the physicality of the thing to which the data refers. Thus, the tangibility test has gone “meta”: it is no longer the tangibility of jostling electrons that is of concern (as it was in the early days of patents on computer-executed information processing methods), but the tangibility of the stuff represented by those electrons-as-symbols. In the language of semiotics, the tangibility analysis has shifted from a concern about the tangibility of the signifier—the physical configuration of matter that forms a symbol—to a concern about the tangibility of the signified—the informational content of or the thing represented by the symbol.

There is in my opinion much that needs to be said about this move in Bilski that takes the long-standing concern about tangibility in the patent-eligibility analysis “meta,” transforming it from a concern about a signifier to a concern about a signified. Here, however, I limit myself to raising two initial, narrow questions.

First, the move raises a normative question: Why should we treat information about tangible things in a manner that is categorically different from the manner in which we treat information about intangible things? Having taken its cue from the Supreme Court, the Federal Circuit clearly wants to prevent patent-eligible method claims from pre-empting mathematical “fundamental principles.” Slip op. at 26. However, the most appropriate means to achieve this end would seem to be a focus on the specificity, not the intangibility, of what is meant. Why should the manipulation of data that represents my height (a presumptively physical property of my body) be patentable, yet the manipulation of data that represents my expected longevity (a property that is difficult to classify as a physical one) be unpatentable?

Second, the move raises concerns about administrability. Is data about my expected longevity about something physical, namely my body? If it is, then why isn’t the data at issue in Bilski also about something tangible? The data is after all about a property of lumps of coal, namely their expected future rate of consumption or the legal rights that individuals have with respect to them. Or, to formulate the administrability problem in a recursive manner, what about data that is about the structural qualities of electronic signals? To determine whether a method that manipulates such data is patent-eligible, it would seem again to be necessary to confront the tangibility of an electronic signal—the very question that patent doctrine has been trying to render irrelevant for several decades—but this time with the signal as a signified rather than as a signifier.

CLE: How to Draft Software Claims under Bilski

In Bilski, the Federal Circuit laid down the law of subject matter eligibility under Section 101 of the Patent Act. To be patent eligible, a claimed process must either: (1) be tied to a particular machine or apparatus, or (2) transform a particular article into a different state or thing. In all likelihood, claim limitations focused at general machines such as a “computer” will not be considered tying to “particular machine.” Bilski did not, however, decide that question – Bilski’s claims were admittedly divorced from any particular machine. On the transformation side, the court provided the example from Abele where graphically displaying “X-ray attenuation data produced in a two dimensional field by a computed tomography scanner” was sufficient transformation. Bilski’s claims were essentially knocked-out on the new mental steps doctrine – a process where all the claimed steps “may be performed entirely in the human mind is obviously not tied to any machine and does not transform any article into a different state or thing.”

Two additional points: Although the Federal Circuits points to the machine-or-transformation test as the sole test for Section 101 patentability, the court approved two ‘corollaries.’  First, field-of-use limitations continue to be “generally insufficient to render an otherwise ineligible process claim patent-eligible.” Second, “insignificant postsolution activity will not transform an unpatentable principle into a patentable process.” (quoting Diehr).  Thus, merely reciting a specific machine or particular transformation will not bring a claim into the realm of patentable subject matter unless the recitation is more than mere insignificant postolution or extra-solution activity.

Going forward, I do not believe that these limitations will have a significant impact on a skilled practitioner’s ability to patent software innovations. However, I would like community input on how you might properly claim computer software in a way that avoids § 101 rejections?

Patenting Tax Strategies Under Bilski

Except for the few patent holders and Accenture, the tax strategy business community has been largely anti-patent – going so far as to lobby congress to introduce legislation to create a specific exception that would block enforcement of those patents.

In Bilski, the Federal Circuit refused to categorically exclude any particular fields of business or technology from the scope of patent protection. The court specifically mentioned software and business methods as still patentable. Presumably, tax strategies are still patentable as well. The closest the court came to creating an exclusion is for purely ‘mental’ processes – where each step of the process could be performed in the human mind.

Rather than an approach focusing on specific exclusions, the court applied the machine-or-transformation rule: A process is patent eligible under §101 if “(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state of things.” Bilski’s claim was not patentable as a mental process. Additionally the Bilski claim failed the machine-or-transformation test because it was (1) not tied to any machine and (2) the alleged transformations in Bilski were not sufficient because they did not transform “physical objects or substances” nor did the transform articles “representative of physical objects or substances.” Notably, transformation of “legal obligations or relationships, business risks, or other such abstractions” do not qualify as ‘transformations’ under the new test. The Federal Circuit left the State Street patent hanging – we know the test used in State Street was wrong, but we don’t know whether the claimed invention would be patentable under the new test.

Going forward, tax strategies (and business methods generally) that necessarily need computer assistance will be able to obtain protection by including sufficient recitation of ties to “particular machines.” Practically, the links should be tied to particular portions of the computer to ensure that the tied machine is “particular” enough. On the transformation side, it is unclear whether the transformation of money will be considered sufficiently “representative of physical objects or substances.”

Links:

In re Bilski: Patentable Process Must Either (1) be Tied to a particular machine or (2) Transform a Particular Article

In re Bilski, __ F.3d __ (Fed. Cir. 2008)(en banc)

The Federal Circuit has affirmed the PTO’s Board of Patent Appeals (BPAI) finding that Bilski’s claimed invention (a method of hedging risks in commodities trading) does not satisfy the patentable subject matter requirements of 35 U.S.C. § 101. In doing so, the nine-member majority opinion (penned by Chief Judge Michel) spelled out the “machine-or-transformation” test as the sole test of subject matter eligibility for a claimed process.

The Supreme Court … has enunciated a definitive test to determine whether a process claim is tailored narrowly enough to encompass only a particular application of a fundamental principle rather than to pre-empt the principle itself. A claimed process is surely patent-eligible under § 101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.

….

Because the applicable test to determine whether a claim is drawn to a patent-eligible process under § 101 is the machine-or-transformation test set forth by the Supreme Court and clarified herein, and Applicants’ claim here plainly fails that test, the decision of the Board is AFFIRMED.

State Street Test Is Out: In State Street, the Federal Circuit used the “useful, concrete, and tangible result” of a process as a touchstone for patentability. In Bilski, the en banc panel found the State Street formulation “insufficient to determine whether a claim is patent-eligible under § 101.”

[W]e also conclude that the “useful, concrete and tangible result” inquiry is inadequate and reaffirm that the machine-or-transformation test outlined by the Supreme Court is the proper test to apply.

Some Business Methods and Software Are Still In: Still, the court made clear that business methods and Software will still be patentable – if they meet the machine-or-transformation test.

We rejected [a categorical] exclusion in State Street, noting that the so-called “business method exception” was unlawful and that business method claims (and indeed all process claims) are “subject to the same legal requirements for patentability as applied to any other process or method.” We reaffirm this conclusion.

[A]lthough invited to do so by several amici, we [also] decline to adopt a broad exclusion over software or any other such category of subject matter beyond the exclusion of claims drawn to fundamental principles set forth by the Supreme Court

To be clear, the machine-or-transformation test is not a physicality test – i.e., a claim can still be patentable even if it does not recite sufficient “physical steps.” On the flip-side, “a claim that recites ‘physical steps’ but neither recites a particular machine or apparatus, nor transforms any article into a different state or thing, is not drawn to patent-eligible subject matter.” Here, the court spelled out the specific issue in mind: a claimed process where every step may be performed entirely in the human mind. In that situation, the machine-or-transformation test would lead to unpatentability. “Of course, a claimed process wherein all of the process steps may be performed entirely in the human mind is obviously not tied to any machine and does not transform any article into a different state or thing. As a result, it would not be patent-eligible under § 101.”

Along this line, the court also dispelled two rising concerns, noting that that (1) neither novelty nor obviousness have any relevance to the section 101 inquiry, and (2) the fact that an individual claim element is – standing alone – patent ineligible does not render the claim unpatentable because patent eligibility is considered while examining the claim as a whole.

What is a Transformation?: The courts have already developed an understanding of transformation as it relates to the Section 101 inquiry. Here, the Federal Circuit referred to the distinction made in the 1982 Abele case. There, the court distinguished between two of Abele’s claims – finding only one patentable. The unpatentable claim recited “a process of graphically displaying variances of data from average values” without specifying “any particular type or nature of data … or from where the data was obtained or what the data represented.” The patentable dependent claim identified the “data [as] X-ray attenuation data produced in a two dimensional field by a computed tomography scanner.” In retrospect, the Federal Circuit sees the difference between these two claims to be that of transformation. The second claim included sufficiently specific transformation because it changed “raw data into a particular visual depiction of a physical object on a display.” Notably, the transformation did not require any underlying physical object. As the court noted later in the opinion, the transformed articles must be “physical objects or substances [or] representative of physical objects or substances.”

The Bilski claims themselves were not seen as transforming an article:

Purported transformations or manipulations simply of public or private legal obligations or relationships, business risks, or other such abstractions cannot meet the test because they are not physical objects or substances, and they are not representative of physical objects or substances. Applicants’ process at most incorporates only such ineligible transformations. . . . As discussed earlier, the process as claimed encompasses the exchange of only options, which are simply legal rights to purchase some commodity at a given price in a given time period. The claim only refers to “transactions” involving the exchange of these legal rights at a “fixed rate corresponding to a risk position.” Thus, claim 1 does not involve the transformation of any physical object or substance, or an electronic signal representative of any physical object or substance.

The principle behind the test is to prevent a patentee from obtaining claims that preempt the use of fundamental principles. That principle reaches back more than 150 years to the Morse case where the inventor was precluded from claiming all uses of electromagnetism to print characters at a distance.

We believe this is faithful to the concern the Supreme Court articulated as the basis for the machine-or-transformation test, namely the prevention of pre-emption of fundamental principles. So long as the claimed process is limited to a practical application of a fundamental principle to transform specific data, and the claim is limited to a visual depiction that represents specific physical objects or substances, there is no danger that the scope of the claim would wholly pre-empt all uses of the principle.

What is a “Particular Machine”?: For software and business methods, the question will remain as to whether a general purpose computer is sufficiently particular to qualify as a “particular machine.” “We leave to future cases the elaboration of the precise contours of machine implementation, as well as the answers to particular questions, such as whether or when recitation of a computer suffices to tie a process claim to a particular machine.” As Professor Duffy noted in an earlier Patently-O article, the PTO Board of Patent Appeals (BPAI) has already answered this question: “A general purpose computer is not a particular machine, and thus innovative software processes are unpatentable if they are tied only to a general purpose computer.” See Ex parte Langemyr (May 28, 2008) and Ex parte Wasynczuk (June 2, 2008). More commonly, the claim may tie the software to computer memory or a processor – is that sufficiently particular? I suspect this fact pattern will arise shortly.

Unpatentability Affirmed

Notes:

  • Although three dissenting opinions were filed, Judge Newman is the only judge who found patentable subject matter in Bilski’s claim.
  • In Dissent, Judge Mayer thought the decision did not go far enough: “Affording patent protection to business methods lacks constitutional and statutory support, serves to hinder rather than promote innovation and usurps that which rightfully belongs in the public domain.” Citing work by Professors Dreyfuss and Pollack, Mayer argues that business method patents have the overall effect of stifling innovation by restricting competition.
  • In his Dissent, Judge Rader asks the insightful question of why a new test is necessary when settled law already answers the question. Rader would have decided the opinion with one line: “Because Bilski claims merely an abstract idea, this court affirms the Board’s rejection.” I believe Rader’s position is quite defensible. In particular, the majority justifies its need for the test as a way to ensure that we avoid the “preemption of fundamental principles.” In the majority construct, the machine-or-transformation test serves as a fairly accurate proxy for preventing preemption. The court does not, however, answer why any proxy is necessary – if the purpose is to exclude overbroad abstract ideas why not simply rely on the current rule preventing patenting of abstract ideas (as well as the law requiring full enablement)?

Concurring opinion by Judge DYK (joined by Judge LINN) attempt to reconcile the history of the patent system with the new rule of patentability.

Reasonable Billing Rates

Matlink v. Home Depot & Lowes (S.D. Cal. 2008)

Matlink sued the big box retailers for infringement of its patent covering a supply re-ordering system. After some discovery “stonewalling,” the district court awarded attorney-fees to the defendants for their time wasted on a motion to compel. Here, the attorney fees were calculated based on the rates charged by the defendant’s three Southern California Winston & Strawn attorneys:

Partner with 15 years experience

$630 per hour

Associate with 6 years experience

$455 per hour

Associate with 1 year experience

$280 per hour

In awarding fees, the court found these rates “not … excessive in this context.”

A similar situation recently arose in Quantronix v. Data Trak (D. Minn 2008). There, the district court looked at the hourly billing rates for several Salt Lake City patent litigators from the Trask Britt firm:

Partner with 15 years experience

$350 per hour

Associate with 3 years experience

$195 per hour

Associate with 2 year experience

$175 per hour

The Quantronix court found these rates reasonable as well. “Considering the experience levels of the individuals on the Quantronix billing statements and the Court’s own experience with and knowledge of prevailing rates in this market, the Court finds that the hourly billing rates submitted by Quantronix are reasonable and commensurate with the rates of other attorneys in this area with similar knowledge and practice experience.”

When Richmond based attorneys from Troutman Sanders requested attorney fees earlier this year, they used the following rate chart:

Partner with 20 years experience

$350 per hour

Partner with 14 years experience

$350 per hour

Thomas & Betts Power Solutions v. Power Distrib., Inc., (E.D. Va. 2008).

The Florida IP firm of Allen Dyer requested similar rates in AC Direct, Inc. v. Kemp (M.D. Fla. 2008)

Founding partner with 40 years experience

$325 per hour

Attorney with 6 years experience

$190 per hour

The AC Direct court found those rates reasonable. “In the Court’s experience, the rates charged by the attorneys and paralegals assigned to this case are within the range of reasonable legal fees for the Orlando, Florida marketplace. Further, the fees are appropriate given the level of skill displayed in this case.”

Notes:

  • I saw the original report of Matlink in the Docket Navigator; The other cases were found in Westlaw.

Co-Inventors Contribution Must Be “More Than The Exercise of Ordinary Skill”

Oren Tavory v. NTP (Fed. Cir. 2008)(nonprecedential)

In March 2006, RIM settled its patent dispute with NTP for $600 million+. In the wake of that settlement, Tavory filed an inventorship claim against NTP arguing that he was a co-inventor of at least one of the NTP patents. The district court dismissed the case – finding that Tavory did not provide “sufficient independent evidence to corroborate his inventorship allegations.” On appeal, the Federal Circuit affirmed in NTP’s favor.

Back in the late 1980’s and early 1990’s Tavory worked with Tom Campana as a computer programmer for Telefind. While there, Tavory developed a computer program to facilitate an e-mail-to-pager system. He was also part of a team that created the pager-to-laptop e-mail system. Telefind ran out of money in 1991 and Tavory left for greener pastures. When Don Stout later filed Campana’s patent applications, he appended a copy of the code that Tavory had co-authored. During the RIM trial, Tavory testified for NTP. At that time, he did not claim inventorship.

Correcting Inventorship: An issued patent is presumed to name the correct inventors. Thus, an inventorship challenge must bring “clear and convincing evidence” that the newly surfaced inventor “contributed to the conception of the claimed invention.” “Simply reducing to practice that which has been conceived by others is insufficient for co-inventorship.” Under the clear and convincing standard, the inventorship challenge “must be corroborated by independent evidence.”

Contribution Must Be “More Than The Exercise of Ordinary Skill”: Tavory suggested that his contribution was the claimed “interface switch.” However, the Federal Circuit rejected that claim because (1) Tavory did not prove that the “interface switch itself was not in the prior art”; and (2) Tavory likewise did not prove that “his alleged contribution to the claimed invention—the interface switch—was the result of anything more than the exercise of ordinary skill in the art.” Consequently, “he has failed to establish co-inventorship.”

Judge Newman concurred with this result, but would have decided the case on laches (based on the long delay in making the claim) and estoppel (based on Tavory’s silence during the NTP trial).

 

Judge Posner on Inequitable Conduct

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]

BPAI: Under §102(e), Provisional Application Considered Prior Art as of its Filing Date.

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.

Rethinking the four ‘factors’ of preliminary injunctive relief

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 argues that 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.

Anticipation Requires More Than Disclosing All the Elements

Net MoneyIn v. Verisign (Fed. Cir. 2008)

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.

Holding of MPF claim invalidity affirmed.

Judge Improperly Cut Patentee’s Million Dollar Jury Verdict Without Offering a New Trial

Minks v. Polaris (Fed. Cir. 2008)

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.

Vacated and remanded for a new trial on damages.

Rethinking the Scope of Prior Art in Obviousness Cases

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)

Perhaps the time is right for a challenge.

Federal Circuit Agrees to Hear Interlocutory Appeal on Standing

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.”

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CAFC allows Venue Transfer to Texas

In re Volkswagen (Fed. Cir. 2008) (nonprecedential denial of mandamus)

In July 2007, MHL filed a patent infringement suit against VW in the Eastern District of Texas. Hoping to avoid that venue, the automobile company countersued in the Eastern District of Michigan. Although primarily a declaratory judgment action, VW included Michigan state law claims of unfair competition, defamation, trade disparagement, and abuse of process. In a preliminary hearing, the Michigan court declined its powers of supplemental jurisdiction over the state law claims and ordered the case be transferred to Texas. Because the transfer was not a final action, VW had no right to an appeal. Instead, it filed a writ of mandamus.

The Federal Circuit considered the writ, but ultimately declined to exercise authority over the case – finding that VW had not shown the importance of immediately deciding the issue. “A party seeking a writ bears the burden of proving that it has no other means of attaining the relief desired.”

In Texas, the 5th Circuit Court of Appeals just released its en banc opinion in another In re VW case. In that case, the 5th Circuit held that the E.D. Texas (Marshall) court had unreasonably refused to transfer VW’s case to a Northern District court in Dallas. The AIPLA filed a brief in that case, noting that the Eastern District of Texas rarely allows an out-transfer. From the AIPLA brief: “The routine filing of patent infringement complaints in the Eastern District of Texas that have essentially no connection to that district has been encouraged by the seeming reluctance of courts in that district to transfer cases under § 1404(a).” [Link]

In another venue case, Judge Patel of the Northern District of California noted that venue games are “perfectly legitimate”

“It is clear that both parties are attempting to achieve tactical advantage in the choice of a forum (which is a perfectly legitimate goal in an adversarial system of justice).” 

In Sorensen v. Phillips, Judge Patel transferred the case to the Southern District of California where a parallel proceeding was already underway (and stayed pending reexamination).

Notes:

 

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