Michael Kasdan and Joseph Casino discuss recent shifts in reasonable royalty jurisprudence with a particular focus on the recent cases of Cornell, Lucent, and Lansa. Together, these decisions "indicate an emerging trend to more carefully scrutinize the evidentiary and economic basis of reasonable royalty-based patent damages awards in the setting of the appropriate royalty base, the application of the entire market value rule, and the calculation of the appropriate royalty rate." [Download Kasdan.Casino.Damages]
Edward Reines and Nathan Greenblatt have returned with an extension of their 2009 article on the proposed right of interlocutory appeals of claim construction. This new article considers the impact of the recent Supreme Court decision of Mohawk Industries, Inc. v. Carpenter as well as proposed modifications to the Patent Reform Act of 2009. Cite as Edward Reines and Nathan Greenblatt, Interlocutory Appeals of Claim Construction in the Patent Reform Act of 2009, Part II, 2010 Patently-O Patent L.J. 7 (2010). [Download Part II Reines.2010][Download Part I, Reines,2009]
Edward Reines and Nathan Greenblatt have returned with an extension of their 2009 article on the proposed right of interlocutory appeals of claim construction. This new article considers the impact of the recent Supreme Court decision of Mohawk Industries, Inc. v. Carpenter as well as proposed modifications to the Patent Reform Act of 2009. Cite as Edward Reines and Nathan Greenblatt, Interlocutory Appeals of Claim Construction in the Patent Reform Act of 2009, Part II, 2010 Patently-O Patent L.J. 7 (2010). [Download Part II Reines.2010][Download Part I, Reines,2009]
Edward Reines and Nathan Greenblatt have returned with an extension of their 2009 article on the proposed right of interlocutory appeals of claim construction. This new article considers the impact of the recent Supreme Court decision of Mohawk Industries, Inc. v. Carpenter as well as proposed modifications to the Patent Reform Act of 2009. [Download Reines.2010]
The French company SEB sued Montgomery Ward, Pentalpha and others for infringement of its patent covering deep-fat-fryer. Patent No. 4,995,312. SEB won a jury verdict verdict of willful infringement and was awarded $4.6 million in damages, but the district court reduced the damage award to $2 million and refused to award enhanced damages for willfulness citing Seagate.
f.o.b. sales: Pentalphia shipped its products f.o.b. China and argued that it therefore could not be liable for sales in the US. The Federal Circuit rejected that argument — holding instead that the US shipment destination and the intended US retail location were sufficient for a jury to find that the sales were within the US for the purposes of 35 U.S.C. 271. This decision follows the precedent of the 2008 Litecubesdecision. In Litecubes, the court held that a foreign company’s “sale” may properly be considered within the US if the seller deals directly with US customers and then ships to the US — regardless of whether title to the goods was legally transferred in another country.
Patent Attorney Expert: Noted patent attorney Charles Van Horn testified at the trial as expert witness explaining the infringement. Although he is not an expert on deep-fat-fryers, the Federal Circuit held that the lower court did not err in allowing his testimony:
District courts enjoy “wide latitude” to determine admissibility and “the mode and order” of evidentiary presentations. In this case, the district court was in the best place to judge that Mr. Van Horn had the “knowledge, skill, experience, training, [and] education” of a “specialized” nature that was likely to “assist the trier of fact to understand the evidence or to determine” infringement. Fed. R. Evid. 702.
In its decision, the appellate panel looked specifically at Van Horn’s 31 years at the patent office examining material-science related patents as well as his undergraduate chemistry degree.
The decision also discusses claim construction; infringement; prosecution history estoppel; and willfulness.
Wisconsin Alumni Research Foundation (WARF) v. Xenon Pharma, Appeal No. 08-1351 (7th Cir. 2010).
WARF and Xenon jointly filed for patent protection for a cholesterol lowering enzyme known as Stearoyl CoA Desaturase (SCD). Warf also granted Xenon rights as an exclusive licensee and Xenon agreed to pay royalties for sales or sublicense fees. Xenon then sublicensed its rights to Novartis but did not pay royalties to WARF. Xenon's argument is based on the law of concurrent patent ownership. Generally, a patent co-owner is not required to share licensing revenue with other co-owners. The district court rejected that argument here — finding that the contract between WARF and Xenon is controlling over the patent law default rule. At trial, a jury awarded WARF one-million-dollars in royalties. That award was reduced then by the judge to $300,000.
The Seventh Circuit has now affirmed the lower court ruling that Xenon breached its license agreement by granting a sublicense without paying WARF its share.
35 U.S.C. 262 makes clear that each Joint owner of a patent right may make use of the rights "without the consent of and without accounting to the other owners." However, §262 has a major caveat in that it only applies "in the absence of any agreement to the contrary." Picking up on that caveat, the Seventh Circuit made clear that the "statutory default rule therefore controls unless there is an agreement to the contrary." The appellate panel went on to confirm that the WARF/Xenon agreement is certainly an "agreement to the contrary" despite the fact that it does not include a specific and explicit revocation of § 262 rights.
The bargained-for exchange between the parties provided that the Foundation would forego its right to separately license the patent in exchange for receiving a share of the profits from Xenon's commercialization of the technology—either directly or via a sublicense to a third party. Xenon received a significant benefit from the agreement—the exclusive right to exploit the technology protected by the joint patent application. Xenon cannot avoid paying royalties or sublicense fees to the Foundation simply by labeling the Novartis transaction a "license" rather than a "sublicense."
Quiet Title: Xenon also filed for its own patents on PPA compounds used to suppress SCD levels. WARF claimed ownership rights in the PPA because one of its scientists had contributed to the project and sued here to quiet title and also sued for conversion. On appeal, the court sided with WARF — finding that the WARF scientist's assignment of rights to Xenon was void because the scientist has already assigned all interest in future inventions to WARF.
Seventh Circuit: WARF originally appealed its case to the Federal Circuit. However, the Federal Circuit transferred the case to the Seventh Circuit based on a lack of subject matter jurisdiction. In a non-precedential opinion, the court held that the dispute did not "arise under the patent laws." [Link] An interesting aspect of that decision was that the court's statement that the Bayh-Dole Act (35 U.S.C. §§ 200-212) is not "patent law" when considering the question of appellate jurisdiction. The Federal Circuit refused to take the jurisdiction issue en banc. Judge Rader penned the following dissent from the en banc denial:
In an extremely short per curiam opinion with far too little explanation, the panel left the impression that it was giving away this court's jurisdiction over a broad swath of claims potentially arising from the Bayh-Dole Act, 35 U.S.C. §§ 200-212. While non-precedential, the panel's opinion nonetheless unnecessarily suggests that this court's jurisdiction to review these cases is limited. I respectfully dissent from this court's denial of rehearing en banc.
The panel concluded, albeit without much analysis, that WARF's complaint did not allege that the Bayh-Dole Act creates a cause of action. Thus it was entirely unnecessary for the panel to opine as to whether the Bayh-Dole Act is a "patent law" or not. And indeed, the Bayh-Dole Act, in my view, is most certainly a patent law. While the panel dismissed the notion that the Bayh-Dole Act's "mere inclusion" in Title 35 does not make it a "patent law," it seems to me that this is actually a pretty good indicator. After all, Title 35 is itself entitled "Patents," and Chapter 18, which encompasses only §§ 200-212, is called "Patent Rights in Inventions Made with Federal Assistance." Also, the language within some of the sections of the Bayh-Dole Act suggests its provenance as a patent law. For example, 35 U.S.C. § 201(d) defines "invention" as "any invention or discovery which is or may be patentable…." Section 201(e) explains that a "subject invention" is an invention conceived of or first reduced to practice by a contractor. "Conception" and "reduction to practice" are familiar patent law terms of art. Also, § 200 states that the Act intends "to use the patent system to promote the utilization of inventions arising from federally supported research or development…." The Bayh-Dole Act is, "at its heart," a patent law, albeit a patent law that employs some government contract rules to facilitate its patent-related policy objectives.
Although this court's panel opinion did not mention it, the reason that the "improvements" clause in this case does not require an infringement analysis is that the WARF/Xenon agreement features no issued patents, just patent applications. Thus, no court need perform a true infringement analysis. See GAF Building Materials Corp. v. Elk Corp., 90 F.3d 479, 483 (Fed.Cir.1996) (no declaratory judgment jurisdiction for infringement/invalidity of a design patent that had not issued when suit was filed; without an issued patent, there can be no infringement and thus no Article III controversy). Unlike GAF, however, this case features an undeniable controversy between the parties. To resolve this dispute, some court will have to compare the claims of the pending patent applications of the WARF/Xenon agreement with the alleged "improvements," and the contract's use of patent infringement parlance to define this term will necessitate some sort of patent analysis, starting with construction of the pending claims. Thus, this is a patent dispute for still another reason.
The Forest Group, Inc. v. Bon Tool Co. (Fed. Cir. 2009).
The false marking statute provides for a fine of “not more than $500 for every … offense.” 35 U.S.C. 292. Past cases have severely limited the false-marking damage award by holding that the sale of thousands of falsely marked items constituted a single “offense” under the statute. The Federal Circuit has rejected those cases – holding here that a qui tam plaintiff may collect up to $500 for each falsely-marked product distributed. This decision is important because it opens the door to potentially large monetary judgments in false-marking cases. Anyone who marks their products as patented or patent pending should take this opportunity to review those markings to ensure that the product being marked falls within the scope of the listed patent and that the patent continues to be valid and enforceable.
At one time Bon Tool bought & sold construction stilts that were manufactured by Forest. However, Bon Tool eventually dropped Forest as a supplier and began importing a duplicate knock-off version from China even though Forest’s stilts were marked with its Patent No. 5,645,515. Forest sued for infringement. During litigation, the district court construed the claims in a way that made clear that neither the original Forest stilts nor the knockoff stilts infringed the patent. At that point (in 2007), Forest’s claims were dismissed on summary judgment. For the next two years, however, the parties argued Bon Tool’s counter claims – including false-marking. In 2009, the district court held that Forest was liable for false-marking because it continued to mark its products as patented even after the 2007 summary judgment decision. However, the court awarded only $500 in damages.
Parties have a reason to mark their products as patented because such marking serves as constructive notice to potential infringers—allowing a patentee to collect damages for past infringement. Under Section 287 of the Patent Act, “[i]n the event of failure so to mark, no damages shall be recovered by the patentee in any action for infringement, except on proof that the infringer was notified of the infringement and continued to infringe thereafter, in which event damages may be recovered only for infringement occurring after such notice.” In theory, marking a product as patented will deter others from attempting to compete by creating a similar version of the product. In addition, manufacturers may garner some reputational benefit by indicated that their product is patented or that a patent is pending.
The false-marking statute is intended to promote competition as a counterbalance against scams and potentially overreaching claims. A successful false-marking claimant must prove two elements: first, that an unpatented article has been marked as patented; and second that the marking was done with intent to deceive the public. See Clontech Labs. Inc. v. Invitrogen Corp., 406 F.3d 1347, 1352 (Fed. Cir. 2005). Here, the Federal Circuit reviewed the district court bench-trial finding of false-marking for clear error. It found no clear error. The appellate panel did, however, hold that the district court had improperly limited the damage award to $500.
Under Section 292 of the Patent Act anyone who marks an “unpatented article with the word ‘patent’ … for the purpose of deceiving the public … shall be fined not more than $500 for every such offense.” Although the false-marking statute has been part of the patent law for more than 150 years, it was amended in 1952. That amendment changed the damage calculation from “not less than one hundred dollars” to “not more than $500.” The leading case interpreting the pre-1952 statute is the one hundred year old decision of London v. Everett H. Dunbar Corp., 179 F. 506 (1st Cir. 1910). In London, the court interpreted the statute to impose “a single fine for continuous false marking”—reasoning that a minimum penalty of $100 per falsely marked article would be out of proportion and inequitable.
[I]f we construe the statute to make each distinct article the unit for imposing the penalty, the result may follow that the false marking of small or cheap articles in great quantities will result in the accumulation of an enormous sum of penalties, entirely out of proportion to the value of the articles. . .
Despite the statutory change, recent courts have followed the London precedent – including the Bon Tool district court. On appeal, the Federal Circuit rejected that precedent – holding instead that the statute requires that each falsely marked article can serve as the basis of a separate offense. The appellate court made clear that the reasoning of London no longer applies because the statute now sets a maximum per-offense award rather than a minimum.
This does not mean that a court must fine those guilty of false marking $500 per article marked. The statute provides a fine of “not more than $500 for every such offense.” By allowing a range of penalties, the statute provides district courts the discretion to strike a balance between encouraging enforcement of an important public policy and imposing disproportionately large penalties for small, inexpensive items produced in large quantities. In the case of inexpensive mass-produced articles, a court has the discretion to determine that a fraction of a penny per article is a proper penalty.
Vacated. On remand, the district court must “determine the number of articles falsely marked by Forest after November 15, 2007 [and] the amount of penalty to be assessed per article.”
Intellectual Science and Technology v. Sony Electronics (Fed. Cir. 2009).
This decision follows a long line of cases warning against the use of means-plus-function claim language. The decision should also be seen as guidance to technical experts (to be more technical).
Intellectual Science’s Patent No. 5,748,575 covers a computer configured to simultaneously access multiple optical discs (such as CD-ROMS). According to the description, an “intelligent time-division multiplexer” is used to combine the multiple information sets into a single data stream for the host computer to process. Following the advice of an appointed special master, the district court on summary judgment held the patent not-infringed. On appeal, the Federal Circuit affirmed.
The appeal focused on the claimed “data transmitting means.” The parties agreed that the limitation should be interpreted under 35 U.S.C. 112p6 as a means-plus-function term. The dispute turned on whether the claimed means covers the accused device.
For a means-plus-function claim term, the term literally covers an accused device if the relevant structure in the accused device performs the identical function recited in the claim and that structure is identical or equivalent to the corresponding structure in the specification.
The patentee’s problem was that its technical expert’s report failed to tie the accused device to the claimed means and its corresponding structures found in the patent specification.
[T]he problem . . . is the absence of any showing that the identified structure accomplishes the same function in the same way as the claimed structure. . . . [T]he record must specifically identify the infringing features of those components and the reason that one of skill in the art would recognize them as infringing. Without that further identification and explanation, a reasonable juror would not be able to determine that those allegedly infringing components are actually present.
A court can properly find summary judgment of non-infringement if the patentee’s expert fails to provide “foundation for his infringement opinion in sufficient detail for the court to be certain that features of the accused product would support a finding of infringement under the claim construction adopted by the court, with all reasonable inferences drawn in favor of the non-movant.” Here, the Federal Circuit held that the patentee’s expert had failed that test.
Judgment of NonInfringement Affirmed.
Notes: There is nothing “wrong” with writing means-plus-function claim language — especially to accompany a well drafted specification. However, an applicant should not expect that its broadest claim is the MPF.
Claim 1 of the patent reads as follows:
1. An information processing apparatus with multitasking function, the information processing apparatus comprising:
(a) a plurality of turntables, each comprising a disc-setting table for mounting an optical disc;
(b) a plurality of optical units, each comprising a driving means and an optical read head, wherein said driving means is provided for moving said optical read head in a radial direction of said optical disc to a predetermined disc position on a surface of said optical disc;
(c) means for simultaneously controlling a plurality of said driving means to move a plurality of said optical read heads to a plurality of predetermined disc positions on at least two optical discs for retrieving information stored thereon;
(d) a plurality of signal-process systems for converting a plurality of information sets retrieved by said plurality of optical read heads from a compact disc format to the original state of the information; and
(e) data transmitting means for transmitting a plurality of the information sets converted by said plurality of signal-process systems to a host computer.
Perfect Web’s asserted patent covers a method of managing bulk e-mail distribution. Claim 1 of the application (filed in 2000) reads as follows:
1. A method for managing bulk e-mail distribution comprising the steps:
(A) matching a target recipient profile with a group of target recipients;
(B) transmitting a set of bulk e-mails to said target recipients in said matched group;
(C) calculating a quantity of e-mails in said set of bulk e-mails which have been successfully received by said target recipients; and,
(D) if said calculated quantity does not exceed a prescribed minimum quantity of successfully received e-mails, repeating steps (A)-(C) until said calculated quantity exceeds said prescribed minimum quantity. (Pat. No. 6,431,400).
The district court held the claims invalid as anticipated and obvious as well as for failing to claim statutory subject matter under Section 101. On appeal, the Federal Circuit upheld the obviousness finding and left the alternative reasons undecided.
Of course, in 2000, targeted bulk e-mail was already around, and the defendants provided prior art evidence of steps (A)-(C). That is, marketers were already identifying target recipients, sending out e-mails, and calculating the percent received. Missing from the prior art was step (D) – iteratively repeating steps (A)-(C) until the number of recipients reaches the a prescribed quantity.
Evidence of Common Sense: The district court held on summary judgment thatKSRstyle “common sense” would lead one of ordinary skill in the art to perform the iterative step (D). On appeal, the Federal Circuit affirmed that finding – holding particularly that the finding of common sense does not require “explication in any reference or expert opinion.”
Although a court need not have documentary support of its common sense analysis, a court (or patent examiner) must at least clearly explain its reasoning.
We reiterate that, on summary judgment, to invoke “common sense” or any other basis for extrapolating from prior art to a conclusion of obviousness, a district court must articulate its reasoning with sufficient clarity for review.
In this case, the appellate panel agreed that the idea of repeating already known steps until a threshold is met was simply a common sense extension:
Thus, this last step, and the claim as a whole, simply recites repetition of a known procedure until success is achieved. Recognizing this, the district court explained: “If 100 e-mail deliveries were ordered, and the first transmission delivered only 95, common sense dictates that one should try again. One could do little else.”
The court added an interesting caveat regarding expert testimony and the level of one of skill in the art — noting that expert testimony may well be necessary for “complex” technology.
If the relevant technology were complex, the court might require expert opinions. Here, however, the parties agreed that ordinary skill in the relevant art required only a high school education and limited marketing and computer experience. No expert opinion is required to appreciate the potential value to persons of such skill in this art of repeating steps (A)-(C).
Obvious to Try: As a corollary to its common sense holding, the appellate court also held that the additional step (D) would have been “obvious to try” under KSR. “[S]imple logic suggests that sending messages to new addresses is more likely to produce successful deliveries than re-sending messages to addresses that have already failed. . . . [I]ndeed, the predictable and actual result of performing step (D) is that more e-mail messages reach more recipients.”
Long-felt Need: The patentee argued that a nonobviousness conclusion was supported by evidence of the secondary consideration of long-felt need. Particularly, the method helps solve the recognized competing problems of reaching customers without “burning up” the mailing list by oversending.
The Federal Circuit rejected these arguments because the patentee had failed to provide any evidence of improved efficiency beyond “bare assertion.” In addition, the court suggested that any proof of long-felt need would be insufficient to “overcome [the] strong prima facie showing of obviousness.” (quoting Asyst Techs (2008))
Claim Construction: Interestingly, the court issued its summary judgment order prior to claim construction. The Federal Circuit found no error because construction of the disputed claim terms would not have changed the obviousness outcome.
Notes: The patent was originally titled “Statement regarding federally sponsored research or development.” That is apparently a typographical error fixed in a subsequent certificate of correction.
Texas Juries: Michael Smith reviews E.D. Texas patent trial verdicts for 2009 (thus far). Depending upon how you count, the score ranges “from 8-3-1 to 6-6-1 (depend[ing] on whether you count a post-jury selection grant of summary judgment or not).” [Link]
Judge Michel: A transcript of Chief Judge Paul Michel’s recent speech to the FCBA is now available through that organization’s website. [Link] In addition to announcing his retirement, Judge Michel argued strongly against a statutory right to appeal claim construction decisions. His discussion also touched on the fact that eight of the twelve Federal Circuit judging slots could open within the next 12-months. He suggests that the replacements should include (a) a district court judge and (b) a patent litigator who has extensive experience trying commercial cases in front of juries. Judge Michel suggested room for diversity on the court since all members are white and only 25% are women.
Appointing Judges: Regarding Federal Circuit appointments. The Obama administration is already focused on ensuring that minorities and women receive their share of appointments. In the words of Judge Michel, it is the Bar’s job to help “assure that the appointees to the Court are selected based on merit, on experience, on quality, on intellect, on intelligence, on energy, and not because they’re, you know, somebody’s cousin or whatever the other considerations might be.”
Concentration of Ownership: Hal Wegner and Justin Gray review the top 150 patent holders and reports on growing ownership concentration. [Link][See also Patent Prospector]
Written Description: Amicus Briefs in Ariad v. Lilly: Patent Docs Review the Briefs. [Link]
Presumption of Validity:Lucent v. Gateway: The Federal Circuit has denied Microsoft’s petition for rehearing. Microsoft is expected to file a petition to the Supreme Court focusing on the interpretation of Section 282’s “presumption of validity.” Microsoft questions whether that statute is properly construed to always require clear and convincing evidence of invalidity.
Presumption of Validity Redux: In a recent article, Scott Kieff and Henry Smith argue for a reduction in the presumption of validity. [Link]
Reexaminations: Reexamination Statistics: Of the 734 inter partes reexaminations that have been requested in the past decade, 498 (68%) are “known to be in litigation.” [Link]
Texas Juries: Michael Smith reviews E.D. Texas patent trial verdicts for 2009 (thus far). Depending upon how you count, the score ranges “from 8-3-1 to 6-6-1 (depend[ing] on whether you count a post-jury selection grant of summary judgment or not).” [Link]
Judge Michel: A transcript of Chief Judge Paul Michel’s recent speech to the FCBA is now available through that organization’s website. [Link] In addition to announcing his retirement, Judge Michel argued strongly against a statutory right to appeal claim construction decisions. His discussion also touched on the fact that eight of the twelve Federal Circuit judging slots could open within the next 12-months. He suggests that the replacements should include (a) a district court judge and (b) a patent litigator who has extensive experience trying commercial cases in front of juries. Judge Michel suggested room for diversity on the court since all members are white and only 25% are women.
Appointing Judges: Regarding Federal Circuit appointments. The Obama administration is already focused on ensuring that minorities and women receive their share of appointments. In the words of Judge Michel, it is the Bar’s job to help “assure that the appointees to the Court are selected based on merit, on experience, on quality, on intellect, on intelligence, on energy, and not because they’re, you know, somebody’s cousin or whatever the other considerations might be.”
Concentration of Ownership: Hal Wegner and Justin Gray review the top 150 patent holders and reports on growing ownership concentration. [Link][See also Patent Prospector]
Written Description: Amicus Briefs in Ariad v. Lilly: Patent Docs Review the Briefs. [Link]
Presumption of Validity:Lucent v. Gateway: The Federal Circuit has denied Microsoft’s petition for rehearing. Microsoft is expected to file a petition to the Supreme Court focusing on the interpretation of Section 282’s “presumption of validity.” Microsoft questions whether that statute is properly construed to always require clear and convincing evidence of invalidity.
Presumption of Validity Redux: In a recent article, Scott Kieff and Henry Smith argue for a reduction in the presumption of validity. [Link]
Reexaminations: Reexamination Statistics: Of the 734 inter partes reexaminations that have been requested in the past decade, 498 (68%) are “known to be in litigation.” [Link]
Texas Juries: Michael Smith reviews E.D. Texas patent trial verdicts for 2009 (thus far). Depending upon how you count, the score ranges “from 8-3-1 to 6-6-1 (depend[ing] on whether you count a post-jury selection grant of summary judgment or not).” [Link]
Judge Michel: A transcript of Chief Judge Paul Michel’s recent speech to the FCBA is now available through that organization’s website. [Link] In addition to announcing his retirement, Judge Michel argued strongly against a statutory right to appeal claim construction decisions. His discussion also touched on the fact that eight of the twelve Federal Circuit judging slots could open within the next 12-months. He suggests that the replacements should include (a) a district court judge and (b) a patent litigator who has extensive experience trying commercial cases in front of juries. Judge Michel suggested room for diversity on the court since all members are white and only 25% are women.
Appointing Judges: Regarding Federal Circuit appointments. The Obama administration is already focused on ensuring that minorities and women receive their share of appointments. In the words of Judge Michel, it is the Bar’s job to help “assure that the appointees to the Court are selected based on merit, on experience, on quality, on intellect, on intelligence, on energy, and not because they’re, you know, somebody’s cousin or whatever the other considerations might be.”
Concentration of Ownership: Hal Wegner and Justin Gray review the top 150 patent holders and reports on growing ownership concentration. [Link][See also Patent Prospector]
Written Description: Amicus Briefs in Ariad v. Lilly: Patent Docs Review the Briefs. [Link]
Presumption of Validity:Lucent v. Gateway: The Federal Circuit has denied Microsoft’s petition for rehearing. Microsoft is expected to file a petition to the Supreme Court focusing on the interpretation of Section 282’s “presumption of validity.” Microsoft questions whether that statute is properly construed to always require clear and convincing evidence of invalidity.
Presumption of Validity Redux: In a recent article, Scott Kieff and Henry Smith argue for a reduction in the presumption of validity. [Link]
Reexaminations: Reexamination Statistics: Of the 734 inter partes reexaminations that have been requested in the past decade, 498 (68%) are “known to be in litigation.” [Link]
Guest post by Professor Peter S. Menell (UC-Berkeley School of Law); Matthew D. Powers (Weil, Gotshal & Manges LLP); and Steven C. Carlson (Fish & Richardson PC)
The construction of patent claims plays a critical role in nearly every patent case. It is central to evaluation of infringement and validity, and can affect or determine the outcome of other significant issues such as unenforceability, enablement, and remedies. Yet jurists and scholars have long lamented the challenges of construing patent claim terms. The Federal Circuit’s en banc decision in Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005), stands as the most authoritative decision on claim construction doctrine. But while putting to rest various controversies, many core tensions in claim construction persist. Moreover, the decision itself does not provide a step-by-step approach to construing claims. This commentary provides a structured road map.
Most patents currently being reexamined at the PTO are also being litigated in parallel proceedings in district court. This rise in importance of parallel reexaminations leads directly to both Constitutional controversies and practical problems. Although the Federal Circuit has nimbly attempted to avoid the problem, the truth is that both the PTO (an Article II executive agency) and the Article III Courts focus on the same question of validity of patent claims. These races to conclusion raise questions of both separation of powers and res judicata.
A practical issue is raised by Microsoft in the i4i case relates to the relevance of non-dispositive reexamination events to the question of willful infringement. In Microsoft’s case, the ex parte reexamination request was initially granted, and that grant was followed by a non-final office action rejection. On appeal, Microsoft argued that the PTO’s rejections of i4i’s claims on obviousness grounds should result in a per se finding that its its infringement defenses were not objectively reckless. Rather, according to Microsoft, the PTO’s grant of reexamination and non-final rejection at least serve to prove that its defenses were credible. i4i argues on the other side that the non-dispositive reexamination events are irrelevant because of the different standard for review, different claim construction approach, and lack of finality.
At the Santa Clara Law School conference that I attended yesterday, one panelist made a seeming reasonable suggestion – that courts should begin to reexamination results once an applicant agrees to amend or cancel claims being asserted during litigation. At that point, it is a foregone conclusion that the resulting reexamination certificate will not confirm the patentability of those pre-amended claims.
The four Edwards patents all relate to internal blood-vessel grafts for treating aneurisms. The grafts are designed to be inserted endovascularly without the need for open surgery. After construing the claims, N.D. Cal. District Court Judge Jeffrey White granted summary judgment of non-infringement to the two defendants, Cook and Gore. On appeal, the Federal Circuit affirmed.
Lumpy Claim Construction: Patent claim construction serves as a prime example of how litigators can take a simple issue and make it quite complicated. For their part, judges are keen to limit the issues. A common approach in claim construction is to group similar claim terms together and give them identical meaning. In this case, the patent used the terms “graft,” “graft body,” graft structure”, “bifurcated base structure,” and “bifurcated base graft structure.” Examining these terms, the appellate panel agreed that these terms could properly be analyzed together because the applicant had used them “interchangeably in the specification,” at least with respect to the disputed differences.
This risk of synonymous meaning is not necessarily bad. Using various terms to describe the same idea helps to flesh out the detail and scope of the idea. However, in most cases, applicants would probably be better off emphasizing distinctions between similar terms. The distinctions may well be useful for ensuring varied claim coverage.
The point from this case is that the distinctions between similar terms must be explicitly emphasized if the applicant wants to have confidence that it can later rely on the differences.
Broadening Claims:During prosecution, Edwards seemingly broadened some of its claims by amending the “intraluminar graft” elements to simply “graft” elements. Despite that change, the court found that the specification’s written description still required that all grafts be intraluminal.
By Kevin Emerson Collins, Associate Professor of Law, Indiana University Maurer School of Law—Bloomington [BIO][Articles][PDF Version of this Post]
Background: The Machine-or-Transformation Test of Bilski
Last fall, the Federal Circuit articulated the “machine-or-transformation” test for patent eligibility in its landmark case In re Bilski, 545 F.3d 943 (Fed. Cir. 2008) (en banc). It held that a method is eligible for patent protection only if it is either (a) limited to a “particular machine” or (b) responsible for transforming a “particular article” into a different state or thing. Id. at 954. Additionally, in a classic example of language that adds judicial wiggle room, the machine or transformation that satisfies either of these prongs “must impose meaningful limits on the claim’s scope,” it “must be central to the purpose of the claimed process,” and it must not be part of “insignificant extra-solution activity” or a “mere data-gathering step.” Id. at 961–62 (emphases added).
The Supreme Court has accepted certiorari in Bilski, but the impending Supreme Court opinion has not stopped the Federal Circuit from issuing what is perhaps its most important case to date applying the machine-or-transformation test: Prometheus Laboratories, Inc. v. Mayo Collaborative Services. There have been two distinct types of claims that have taken center stage in recent debates over the section 101 doctrine of patent eligibility: “business methods” and what I will call “determine-and-infer methods.” The claim at issue in Bilski describes a classic business method. In contrast, Prometheus involves a determine-and-infer method. The Federal Circuit’s opinion in Prometheus opens a new window into the import of the machine-or-transformation test. Regardless of one’s views of the soundness of Federal Circuit’s reasoning in Prometheus, herein lies one of the opinion’s greatest virtues. By issuing Prometheus before the Court’s oral arguments in Bilski, the Federal Circuit has helped to clarify the stakes of the Court’s decision to sanction, reformulate, or reject the machine-or-transformation test.
Lucent’s patent-in-suit claims was filed in 1986 and generally focuses on using an on-screen keyboard to enter information into a computer. In 2002, Lucent sued Microsoft and others for infringement. Since then, the patent has expired, but the litigation continues over past damages. Perhaps most notably, this case may serve as a reminder that a twenty year patent term represents a major span in the worlds of business and technology.
The primary infringing portion of Microsoft’s software appears to be the “date picker” function found in Microsoft calendars. In litigation, the jury sided with Lucent and awarded the patent holder with $350 million in damages. Here, I discuss three aspects of the opinion: damages; obviousness; and inducement.
Damages: Most of the action in the Federal Circuit decision revolves around damages. The parties appear to agree that Microsoft sold 110 million accused units with a total sales value of $8 billion. Based on that figure, Lucent requested $561 million in damages based on an 8% royalty rate of Microsoft’s sales revenue. Microsoft argued that the correct licensing rate should result in only $6 million lump sum in damages. On appeal, the Federal Circuit vacated the $350 million dollar award and remanded for a new trial solely on the issue of damages – finding that the original verdict was not supported by substantial evidence.
Reasonable Royalty Calculation: The Patent Act requires that a court award damages at least in the amount of a “reasonable royalty.” The hallmark of that calculation involves a hindsight reconstruction in an attempt to calculate the patentee’s differential “pecuniary condition . . . if the infringement had not occurred.” This is often done through a “hypothetical negotiation” reconstruction based on the Georgia-Pacific factors. See Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970); see also Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1554 n.13 (Fed. Cir. 1995) (en banc).
Entire Market Value: When a patentee proves that the patent related feature serves as the predominant basis for customer demand, courts allow damages to be based upon the “entire market value” of the product (i.e., 8% of the sales revenue of Microsoft Office) rather than focusing on the incremental value of the innovation. Here, the Federal Circuit held that the “only reasonable conclusion” is that the date-picker function is not a substantial driver of Office sales. “There was no evidence that anybody anywhere at any time ever bought Outlook . . . because it had a date picker.”
Patentees typically prefer to invoke the entire market value rule because it seemingly tends to lead to higher total damage payouts. Of course, the market value only sets a base. Interestingly, the Federal Circuit recognized here that the bar on using the entire market value of a product is rather arbitrary.
Although our law states certain mandatory conditions for applying the entire market value rule, courts must nevertheless be cognizant of a fundamental relationship between the entire market value rule and the calculation of a running royalty damages award. Simply put, the base used in a running royalty calculation can always be the value of the entire commercial embodiment, as long as the magnitude of the rate is within an acceptable range (as determined by the evidence). . . . Microsoft surely would have little reason to complain about the supposed application of the entire market value rule had the jury applied a royalty rate of 0.1% (instead of 8%) to the market price of the infringing programs. Such a rate would have likely yielded a damages award of less than Microsoft’s proposed $6.5 million.
The Court goes on to suggest that the entire market value rule has a place in cases where the invention is only a small portion of the product.
Some commentators suggest that the entire market value rule should have little role in reasonable royalty law. See, e.g., Mark A. Lemley, Distinguishing Lost Profits From Reasonable Royalties, 51 Wm. & Mary L. Rev. (forthcoming 2009) … Amy Landers, Let the Games Begin: Incentives to Innovation in the New Economy of Intellectual Property Law, 46 Santa Clara L. Rev. 307, 362 (2006) … But such general propositions ignore the realities of patent licensing and the flexibility needed in transferring intellectual property rights. The evidence of record in the present dispute illustrates the importance the entire market value may have in reasonable royalty cases.
Georgia Pacific Factors: In its opinion, the Federal Circuit emphasized the flexibility of its jurisprudence in deciding damages with an understanding that actual licensing (much less a hypothetical negotiation) is “complicated” and “inexact.” Ultimately, the case is being sent back for a new trial because the jury’s award was not logically tied to the evidence. (“[T] damages evidence of record was neither very powerful, nor presented very well by either party.”) Most notably lacking are comparable licensing agreements.
First, some of the license agreements are radically different from the hypothetical agreement under consideration for the Day patent. Second, with the other agreements, we are simply unable to ascertain from the evidence presented the subject matter of the agreements, and we therefore cannot understand how the jury could have adequately evaluated the probative value of those agreements.
Damages award vacated
Power Behind the Black Box of Obviousness: In a string of recent cases, the Federal Circuit has reinvigorated the notion that jury verdicts on the question of obviousness will likely be upheld on appeal. Here, Microsoft argued for a particular interpretation of the prior art that it presented. While being sympathetic to Microsoft’s argument, the court held that the defendant’s arguments did not meet the necessary burden.
When the underlying facts are taken in the light most favorable to Lucent, the non-moving party, the evidence reasonably permitted the jury to have decided that Microsoft did not prove by clear and convincing evidence that claim 19 would have been obvious.
Nonobviousness affirmed.
Inducement: Lucent’s case was built on the notion of contributory infringement. Microsoft’s software does not – just by itself – directly infringe Lucent’s asserted method claims. Rather, by selling the software, Microsoft leads its customers to directly infringe. Contributory infringement and inducement both require proof of underlying direct infringement. At trial, Lucent was unable to point to any actual instance where a Microsoft customer used Microsoft products to perform the claimed method. On appeal, the Federal Circuit affirmed the infringement finding by holding that circumstantial evidence was sufficient to support a conclusion that at least one person (other than the experts in the case) used the products in an infringing manner.
As in Moleculon, the jury in the present case could have reasonably concluded that, sometime during the relevant period from 2003 to 2006, more likely than not one person somewhere in the United States had performed the claimed method using the Microsoft products.
I created the following graph after reading the Federal Circuit’s 3-2 claim construction reversal in Martek. Can you guess what the graph represents?
Mystery Solved by Joe Helmsen from Pepper Hamilton. Joe writes
“I think that the graphs represent the percent chance of having a majority decision in a particular direction given that each of x judges has a y% chance of deciding in that way. For example, the top line represents 1 judge at 90%, 2 judges have to go 2-0 (.9*.9=81%), 3 judges have to go 3-0 or 2-1 (.9^^3 + 3*.9*.9*.1 =97.2%, etc.).”
Right. One point of the graph is to illustrate the interesting phenomenon that the odds of convincing a “majority” are much higher when the panel has an odd number of judges. This is easy to understand when comparing a two-judge panel with a three-judge panel. A two-judge panel offers no room for error because requires that you convince both judges. On the other hand, a three-judge panel will side with you if you convince two of the three judges.
The graph also illustrates a second point – that in theory multiple judges tend to make marginal cases more predictable. Thus, an argument that will convince a judge 70% of the time would be predicted to carry the day in almost 90% of 12–member en banc panels.
Of course, this discussion relies on several false premises. Most notably, the analysis assumes that each panel member decision is independent of the decision made by other panel members. That is is clearly not true. Rather, the judges and clerks communicate and influence one another. In addition to independence, the analysis presented here presumes that each judge has the same likelihood of deciding the case in a particular direction.
Sitting in as an expanded five-member panel, the Court of Appeals for the Federal Circuit has largely affirmed a jury verdict finding Martek’s patents valid and infringed. The case involves issues of written description, enablement, sufficiency of infringement evidence, corroboration of prior inventorship arguments, and claim construction of the word “animal.” The five members agreed as to all issues except for claim construction. On that claim construction issue, the majority opinion of Judges Newman, Gajarsa, and Moore held that a human is an animal. Judges Lourie and Rader argued in dissent that the patentee’s use of animal suggested that it did not include humans.
Is a human an animal: The four patents in suit cover various aspects of making and using the omega-3 fatty acids. Nutrinova sells allegedly infringing products for human consumption. One of the patents claims a method for achieving high concentrations of the omega-3 acids in an “animal,” and the parties contested whether an a human is an animal. The majority based its decision on the maxim that the patentee is free to be its own lexicographer. “When a patentee explicitly defines a claim term in the patent specification, the patentee’s definition controls.” In its specification, Martek appears to plainly define the term animal in the following sentence: “The term ‘animal’ means any organism belonging to the kingdom Animalia.” It is undisputed that humans are classified within the kingdom Animalia – and thus, humans fit within the claims animal limitation. Q.E.D.
According to the court, once a patentee defines a term, extrinsic evidence of that term’s meaning “is simply irrelevant.” On remand, the district court will need to consider whether the patent is infringed under the broader definition.
The dissent does not disagree with the traditional maxim, but argues that the patent is not so clear in its definition:
This case illustrates the unusual situation in which a purported definition of a claim term in the written description is totally negated by the remainder of the text of the patent. Martek’s attempt at lexicography does not conform to the way in which it otherwise describes its invention.
In particular, the dissent points to the fact that the claim in question is “a method of raising an animal” in a way that increases the “content of omega-3 highly unsaturated fatty acids in said animal” and that the field of the invention looks toward “food products derived from such animals.” The specification and claims spell out a variety of animals that could be so-raised: poultry, swine, cattle, shrimp, shellfish, milk producers, and goats. However, the specification only refers to humans when it discusses the benefits of ingesting the milk and meat of those animals.
Written Description: The accused infringers argued that the patentee had added new matter to the claims of one of the patents during prosecution and that the claims are consequently invalid under the traditional written description requirement of 35 U.S.C. § 112. The Federal Circuit disagreed – finding that the jury had sufficient evidence to reject the written description argument. In particular, the ‘594 patent generally claims “a food product.” Although that claim term had been added during prosecution, the Federal Circuit found that it was sufficiently supported by the original disclosure – noting again that “the earlier application need not describe the claimed subject matter in precisely the same terms as found in the claim.” Tech Licensing (Fed. Cir. 2008). Rather, the test is “whether the disclosure of the application relied upon reasonably conveys to the artisan that the inventor had possession at that time of the later claimed subject matter.”
Evidence of Infringement: The claims of the ‘281 patent recite a limitation that the claimed microorganisms designed to create the omega-3 fatty acids caused less vessel damage than another other cultural medium (which used more sodium chloride). Martek did not provide results of any physical analysis of the accused infringing product to ensure that it met this limitation. Rather, Martek’s experts discussed the “literature” on the topic and a conceptual analysis of the known effects of a high chlorine concentration. On appeal, the Federal Circuit affirmed that the expert testimony was sufficient for a jury to find infringement – holding that there is no “general rule requiring one who alleges infringement of a claim containing functional limitations to perform actual tests or experiments on the accused product or method. Rather, a “patentee may prove infringement by any method of analysis that is probative of the fact of infringement.” Forest Labs. 239 F.3d 1305 (Fed. Cir. 2001).
Evidence of Prior Inventorship: It is improper to say that ‘prior inventorship’ is a defense to patent infringement. However, an accused infringer can invalidate a patent under 35 U.S.C. § 102(g)(2) by showing clear and convincing evidence that it (1) conceived of the invention before the patentee and (2) either reduced the invention to practice or was diligent in reducing the invention to practice from a time beginning before the patentee’s conception date; and (3) did not abandon, suppress, or conceal the invention. In this case, the defendants had filed a patent application on a similar invention prior to the patentee. However, that application had gone abandoned. The application properly serves as evidence of conception, but – because it was abandoned – does not serve as constructive reduction to practice. Here, the accused infringer’s defense failed because it could not provide other corroborating evidence of reduction to practice or diligence.
Enablement: The claims of the ‘567 patent were found invalid on JMOL due to lack of enablement due to a genus-species issue. Claim 1 broadly discusses growing “euryhaline microorganisms” while the specification only discloses two examples of thraustochytrium and schizochytrium organisms. The defendants’ experts testified that there were at least 10,000 different qualifying species and the district court agreed that two species were insufficient. On appeal, it appears that the patentee gave-up on its claim 1, but the Federal Circuit agreed that the other claims had been improperly invalidated because they included limitations to the specific examples proffered in the specification. Evidence presented indicated that the species of those dependent claims together encompassed “only 22 known species.”
Martek Biosciences Corp. v. Nutrinova, Inc. (Fed. Cir. 2009) (expanded panel)
Sitting in as an expanded five-member panel, the Court of Appeals for the Federal Circuit has largely affirmed a jury verdict finding Martek’s patents valid and infringed. The case involves issues of written description, enablement, sufficiency of infringement evidence, corroboration of prior inventorship arguments, and claim construction of the word “animal.” The five members agreed as to all issues except for claim construction. On that issue, the majority opinion of Judges Newman, Gajarsa, and Moore held that a human is an animal. Judges Lourie and Rader argued in dissent that the patentee’s use of animal suggested that it did not include humans.
I’ll write more about the case in a separate post, but here I want to focus on the procedure of an expanded panel.
Expanded Panel: It appears that the expanded panel was prompted in-part as a show dignitaries who were visiting the court. The court claimed authority under 28 U.S.C. 46(b) which indicates that the “Federal Circuit . . . may determine by rule the number of judges, not less than three who constitue a panel.” There is a problem with this authority. The statute calls for the court to create a “rule” for determining the number of judges. Rather than following a rule, however, the expanded panel here appears to be an ad-hoc creation.
Notes:
Parallel Reexamination: As with most litigation, the patents are also under reexamination at the PTO. As usual – and perhaps as required by the law – the Federal Circuit entirely ignored that proceeding.
Wisconsin Alumni Research Foundation (WARF) v. Xenon Pharma, Appeal No. 08-1351 (
Lucent v. Gateway & Microsoft (Fed. Cir. 2009)
Martek Biosciences v. Nutrinova and Lonza (
Is a human an animal: The four patents in suit cover various aspects of making and using the omega-3 fatty acids. Nutrinova sells allegedly infringing products for human consumption. One of the patents claims a method for achieving high concentrations of the omega-3 acids in an “animal,” and the parties contested whether an a human is an animal. The majority based its decision on the maxim that the patentee is free to be its own lexicographer. “When a patentee explicitly defines a claim term in the patent specification, the patentee’s definition controls.” In its specification, Martek appears to plainly define the term animal in the following sentence: “The term ‘animal’ means any organism belonging to the kingdom Animalia.” It is undisputed that humans are classified within the kingdom Animalia – and thus, humans fit within the claims animal limitation. Q.E.D. 
According to the court, once a patentee defines a term, extrinsic evidence of that term’s meaning “is simply irrelevant.” On remand, the district court will need to consider whether the patent is infringed under the broader definition.