Tag Archives: Claim Construction

Deference to ITC Claim Construction Decisions?

Claim Construction, ITC, Patent, Patent Cases 2009

Erbe Elektromedizin v. ITC and Canady Techpic-33.jpg (Fed. Cir. 2009) 08-1358.pdf

Erbe’s patent appears to cover aspects of a surgical flesh-welding technique known as argon plasma coagulation (APC). After narrowly construing the claimed plurality of endoscopic “working channel,” the ITC found no evidence of direct infringement. On appeal, the Federal Circuit affirmed.

I’ll avoid the claim construction particulars, but focus here on whether the Federal Circuit can properly review ITC Claim Construction decisions de novo.

Claim construction is a matter of law, and under the Administrative Procedures Act, the Federal Circuit reviews ITC decisions of law for “correctness.” However, in the usual course, agency decisions interpreting a matter of law are ordinarily given at least Skidmore level deference. See Christensen v. Harris County.

En Banc Federal Circuit: Infringement of Product-by-Process Claim Requires Practicing the Process

En Banc, Method Claims, Patent, Patent Cases 2009,

Abbott Labs v. Sandoz (Fed. Cir. 2009) (en banc) 07-1400.pdf

The Federal Circuit had developed two opposing lines of cases for interpreting the scope of a product-by-process claim. Acting en banc sua sponte sub secretum, the appellate body sided with the Atlantic Thermoplatics line in holding that infringement of a product-by-process claim requires practicing the claimed process steps. This decision makes Judge Newman’s 1991 Scripps decision no longer good law. (Note, the en banc portion is only Section III.A.2).

[T]his court now restates that “process terms in product-by-process claims serve as limitations in determining infringement.”

The holding here explicitly focuses on claim construction for the purposes of infringement. Based on my first-pass, it appears that the court has left undecided whether this rule applies for validity purposes. I.e., can a product-by-process claim now cover a well known product made through a new process?

Notes

  • This is a very interesting decision and more analysis will be forthcoming.
  • Perhaps the most interesting portion of the decision is Judge Newman’s 39 page dissent.
  • Based on this Decision, generic Omnicef will continue to be available.

BPAI Precedential Opinion on Rejecting Software Means Claims

BPAI, Indefinite, Patent, Patent Cases 2009,

Ex parte Catlinpic-32.jpg (BPAI 2009)(precedential) fd073072.pdf.

The first-time around, the BPAI found some of Catlin’s claims patentable. On rehearing (requested by the SPE), the BPAI reversed course – finding the means-plus-function claims indefinite under 35 USC § 112.

Catlin’s claim one reads as follows:

1. A method for implementing an on-line incentive system, said method comprising the steps of:
providing, at a merchant’s web site, means for a consumer to participate in an earning activity to earn value from a merchant; and
transferring value from said merchant to said consumer for participation in said earning activity, if said consumer qualifies, without re-directing said consumer away from said merchant’s web site, whereby said consumer’s focus of activity remains at said merchant’s web site.

The Patent Act allows a patentee to claim inventive elements using “means plus function” language. A means plus function term is construed to cover the corresponding structures as described in the specification as well as any equivalents. This rule of construction means that seemingly broadly written means limitations are often quite limited in practice — especially when the specification is not thoroughly drafted.

If no corresponding structure can be identified in the disclosure, then the claim will be found “invalid as indefinite.”

Here, the claim recites a “means for a consumer to participate in an earning activity to earn value from a merchant.” On rehearing, the BPAI could not find any corresponding structure in the specification. In particular, the Board was looking for an algorithm for performing the claimed function.

[W]e have thoroughly reviewed the Appellants’ Specification and have not been able to locate an adequate disclosure of structure, material, or acts corresponding to the functions of allowing a consumer to participate in an earning activity and earn value from an earning activity. In particular, the Specification does not disclose any specific algorithm that could be implemented on a general purpose computer to allow a consumer to participate in an earning activity and earn value from an earning activity.

Holding: Claims indefinite.

Claim Construction Disclaimer & Judicial Estoppel

Patent,

Fitness Quest (FQ) v. Jonathan Monti (Fed. Cir. 2009) (non-precedential)

In 2002, Monit – an individual inventor – approached FQ with his idea for personal exercise equipment. FQ agreed to a confidentiality & nondisclosure agreement, but FQ eventually walked away from the deal.

In 2003, FQ began making the now-popular “Ab Lounge” and Monti sent a letter accusing the company of infringement and breach of the confidentiality agreement. FQ quickly filed for declaratory relief.

The district court ruled for FQ on summary judgment – finding that FQ had not violated the confidentiality agreement and that its new product did not infringe Monti’s patent. On appeal, the Federal Circuit vacated-in-part – holding that summary judgment of non-infringement was improper as to claim 28 of Monti’s patent.

Disclaimed Needed Scope: Claim construction focused first on the term “back extension” in the apparatus claims. Monti argued that “back extension” could include pushing back in the Ab Lounger. The court rejected that argument because Monti’s application specifically disclaimed coverage of back extensions that require pushing.

From the patent: “Many Nautilus TM type machines have been constructed in the prior art to mimic this movement and add resistance to it, biomechanically, the core movement of this type of machine was a pushing movement. This is a distinct disadvantage of the prior art methods of back extension. Also, this does not fall within the scope of Kinesiologically Correct TM [i.e., this invention].”

One of the asserted claims (claim 28) does not, however, include the back extension limitation. Apparently, the disclaimer only applies to the coverage of the “back extension” term. Consequently, the Federal Circuit held that that claim may still be infringed (pending reconsideration by the lower court.)

Judicial Estoppel: During litigation, Monti explained the claim term “selectively applying a force” as applying a different force based on the weight of the user, but then later wanted to expand the definition after learning that the relevant portion of the Ab Lounger does not apply a force based on the weight of the user. Following the equitable doctrine of judicial estoppel, the district court refused to allow Monti to change his argument.

Monti clearly advocated that the system must determine that amount of force to apply with reference to the weight of the individual using the device. This position is directly contrary to his current position, which is that the force producing assembly applies a force irrespective of the user’s weight. The Court adopted Monti’s previous construction and finds that FQ would suffer an unfair detriment if Monti was not estopped because Monti could defeat summary judgment by assuming a contrary position now that the facts show his prior position is unhelpful to him.

In New Hampshire v. Maine, 532 U.S. 742, 750-51 (2001), the Supreme Court outlined the guidelines for finding judicial estoppel in federal courts:

First, a party’s later position must be “clearly inconsistent” with its earlier position. Second, courts regularly inquire whether the party has succeeded in persuading a court to accept that party’s earlier position, so that judicial acceptance of an inconsistent position in a later proceeding would create the perception that either the first or the second court was misled. Absent success in a prior proceeding, a party’s later inconsistent position introduces no risk of inconsistent court determinations, and thus poses little threat to judicial integrity. A third consideration is whether the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped.

Here, the Federal Circuit vacated the finding of judicial estoppel – finding that Monti’s new claim construction argument was not “clearly inconsistent” with his prior winning position. Rather, the Federal Circuit saw Monti’s explanation as an attempt to distinguish “selectively applying” in the asserted claim from a “selectively adjusting” limitation in another claim. “This was not “clearly inconsistent” with his arguments on summary judgment, making the application of judicial estoppel inappropriate.”

Breach of Contract (Confidentiality): The breach of contract ruling is also interesting. During discussions Monti sent the following message to FQ: “After using the machine I noticed that it would be better for me to take the back extension out and lower the pivot point.” According to Monti, FQ then disclosed the beneficial aspects of lowering the pivot point (but not removing the back extension). On appeal, the Federal Circuit did could not find any breach of confidentiality because Monti had not disclosed that “lowering the pivot point alone has any benefit.”

 

Holman: A Contrarian Law Professor’s Two Cents on the Arkansas Carpenter’s (Ciprofloxacin) Petition for Certiorari

Academic Studies, Articles and Publications, Patent,

By Christopher M. Holman, Ph.D., J.D., Associate Professor at UMKC Law School

Professor Mark Lemley recently filed an amici curiae brief on behalf of himself and a cohort of prominent professors of law, economics, and business in support of a petition for certiorari in Arkansas Carpenter's Health and Welfare Fund v. Bayer (the "Professors’ Brief").[1] Joining the professors as amici on the brief are the American Antitrust Institute, the Public Patent Foundation, and AARP. These professors and organizations are asking the Supreme Court to review and reverse the Federal Circuit's decision in In re Ciprofloxacin Hydrochloride Antitrust Litigation.[2] Arkansas Carpenter's is the latest in a string of certiorari petitions that have been filed in cases involving an unsuccessful antitrust challenge to a so-called “reverse payments settlement” between a drug patent owner and a potential generic competitor. So far the Supreme Court has denied all of the petitions.

The defining characteristic of a reverse payments settlement is the transfer of some form of consideration, often but not always cash, from the patent owner to the alleged infringer. In most settlements of patent infringement suits any payment typically flows from the alleged infringer to the patent owner, i.e., in the "forward" direction. Reverse payment settlements of challenges brought against prescription drug patents under the Hatch-Waxman Act have been controversial for years. The FTC and others charge that these agreements are anti-competitive and result in substantially higher prescription drug prices for consumers (and ultimately third-party payers such as the government). The atypical direction of the payment is considered suspect by many who view it as evidence that the merits of the patent case must be weak, and argue that the branded drug company is in effect paying the generic company to stay off the market and using the patent as a mere pretense to skirt antitrust liability. Clearly, absent the patent a naked agreement by a generic drug company to stay off the market in exchange for cash would constitute an antitrust violation.

Nonetheless, courts who have considered the legality of reverse payment settlements have repeatedly concluded that, in view of the incentives and dynamics created by the unique structure of a patent infringement suits brought under the Hatch-Waxman Act, it is neither surprising nor particularly suspicious to find payments flowing from the patent owner to the alleged infringer in the settlement of these suits. In fact, even the FTC has acknowledged that at least some reverse payment settlements are legitimate and even pro-competitive. In most patent infringement litigations, the alleged infringer faces the prospect of potentially large money damages based on its past infringement, so there is often an incentive to pay the patent owner to settle the lawsuit and avoid this risk. In contrast, Hatch-Waxman litigation generally occurs before the potentially infringing generic drug goes on the market. The generic drug company typically faces no risk of money damages for past infringement. At the same time, the drug patent owner faces huge potential financial losses if even one court finds its patent invalid or not infringed, and given the uncertainty patent litigation, particularly at the district court level, it is not surprising that some patent owners would be willing to pay to settle the lawsuit and resolve the uncertainty.

The Professor's Brief is essentially an updated version of a brief Professor Lemley filed in 2006 in support of a petition for certiorari in In re Tamoxifen, a reverse payment settlement antitrust challenge arising out of the Second Circuit. In 2006, I seriously considered signing on to his Tamoxifen amici brief; without having delved into the issue, the notion of reverse payments settlements as characterized by Professor Lemley and others struck me as suspicious and anti-competitive . After all, why would a patent owner pay an alleged infringer to settle a lawsuit unless the merits of the patent case were weak? Under these circumstances, is it not logical to infer that the parties are using the patent lawsuit as a mere pretense to provide cover for what is in actuality an agreement between potential competitors not to compete? However, before I signed on to the brief I decided to read the Second Circuit'sTamoxifen decision, as well as the reverse payments settlement decisions that had already been issued by the Sixth and Eleventh circuits. In his brief, Professor Lemley argued that the decisions from these other circuits were in conflict with the Second Circuit's decision in Tamoxifen. After reading the cases, I found that I disagreed with Professor Lemley's interpretation of the decisions, and concluded that in fact there is no split between the circuits. In fact, the decisions by the Second, Sixth and Eleventh circuits (and now the Federal Circuit) are all quite consistent, taking into account that each case involves its own unique settlement agreements and other surrounding facts, and that the decisions necessarily reflect the facts of the individual case being decided.

Reading these decisions sparked my curiosity, particularly since my interpretation of the case law diverged substantially from that of Lemley and many other academic commentators. I decided to research the topic, and in 2007 I published an article entitled “Do Reverse Payments Settlements Violate the Antitrust Laws?”[3] In the article, I survey the diverse array of patent settlements that have been lumped together under the imprecise label "reverse payment settlement,” and explain the factors that motivate the structure of these settlements. After reviewing the facts surrounding specific settlement agreements, and considering the well reasoned explanations of various judges who have rejected the notion that the mere presence of a reverse payment can render an otherwise legitimate patent settlement illegal, I came to disagree with the position propagated by the FTC and academics such as Professor Lemley, i.e., that the mere inclusion of a reverse payment in an otherwise legal patent litigation settlement renders the agreement per se or presumptively in violation of the antitrust laws. Moreover, my view is aligned with that of the vast majority of courts that have addressed the issue. After a close reading of the decisions, it is clear to me that the purported split between the circuits has so far failed to materialize, although the situation could change if and when other circuits weigh in on the issue.

In this short article penned for Patently-O, I will challenge some of the specific assertions made in the Professors’ Brief. For simplicity, many of the citations in this article are to my law review article. Those interested in a more expansive treatment of the subject are encouraged to consult the law review article, which includes primary cites to the cases and other authorities.

(more…)

Federal Circuit Applies Phillips to Limit Gift Card Claim Construction

Claim Construction, Patent, Patent Cases 2009,

Every Penny Counts, Inc. v. American Express, Visa, Green Dot, MasterCard, First Data, etc. (Federal Circuit 2009)

Dr. Burke is a psychoanalyst who never liked change. I’m not talking Obama style change. No, Burke patented a method for donating leftover change (“excess cash”) to charities (or to store it in a separate savings account.)

Burke’s company (EPC) sued a host of defendants. who sell gift cards — alleging that the retail sale of gift cards along with merchandise infringe upon his patents because the gift card sales “loading value onto accounts at a point-of-sale terminal.” EPC’s argument was that the purchaser was using “excess cash” to buy the gift card.

On appeal, the Federal Circuit rejected the patentee’s argument for a broad claim construction – instead holding that the claimed “excess cash” was an “amount selected by the payor beyond the total amount due at the point of sale.”

Looking at the specification as “the primary basis for construing the claims,” the appellate panel noted that the specification repeatedly described the method’s purpose as allowing someone to conveniently donate to charities or to painlessly save money. From the specification:

In current shopping situations a clerk inputs the price of all items in a cash register and the latter totals the price. The consumer offers either the exact amount of cash or a sum exceeding the price, and the clerk enters that amount. The cash register then subtracts the price from the cash.

The excess cash offers the customers an opportunity to save small amounts of money painlessly. It also affords the consumer to donate [sic] small amounts of money to charity.

Interpreting this, the Federal Circuit determined that the claimed “excess cash” must be only what is left over after all items (including gift cards) are paid for. “Where the consumer does not offer a sum in excess of the total displayed on the cash register, then there is no excess cash.”

Non-infringement affirmed.

Notes:

  • Read the Opinion: 08-1434.pdf.
  • The Federal Circuit remarked that EPC wasted its appellate time arguing process – that it didn’t get a fair chance to argue claim-construction below. Claim construction is reviewed de novo, and the appellant needs to focus on why it should win on the merits, not on whether the district court was listening. “EPC has surprisingly little to say about what it alleges is substantively wrong with the district court’s construction, or why its proposed construction would be better on the merits. Instead, it attempts to assign error to the district court’s construction on a number of procedural grounds. Principally, it argues that the court erred by (1) spending a portion of the claim construction hearing considering the meaning of the phrase “sales price,” which was not a disputed claim term; and (2) using the accused products to tailor a construction of the patent claims that would make it impossible for EPC to prove infringement. Neither of these arguments has merit.”
  • As a rule, the Federal Circuit is respectful to both parties as well as their arguments and positions. Here, Senior Judge Cudahy went about as far as the Court ever does by describing Burke’s invention only within quotation marks (Burke’s “invention”) and once referring to the “‘invention’, such as it is.” The court more explicitly showed its disdain by awarding costs to the defendants.
  • Some of you may have heard of Bank of America’s “Keep the Change” program. According to the company brochure: “Each time you buy something with your Bank of America Check Card, we’ll round your purchase to the nearest dollar amount and transfer the difference from your checking account to your savings account. You get to keep the change and grow your savings. What could be easier?” EPC’s litigation against BOA continues.

Federal Circuit Remands Patent Pool Misuse Case: Issue of Improperly Sequestering Alternative Technology

ITC, Patent, Patent Cases 2009,

Princo v. ITC200904211316.jpg (Fed. Cir. 2009) Read the Decision

The ITC found that the CD-R and CD-RW disks imported by Princo violate a handful of Philips patents that cover industry standard compact disk technology. On appeal, the adjudged infringer argued that the patents should be unenforceable under the equitable doctrine of patent misuse. Giving some credence to the argument, the Federal Circuit vacated-in-part and remanded for further proceedings to determine whether Philip’s misused its patents by allegedly agreeing with a competitor not to license-out would-be competing technology.

Misuse is an antitrust theory that attempts to restrain a patentee from over-extending the anticompetitive strength of the patent rights in ways “contrary to public policy.” In some situations the antitrust authorities allow multi-company patent pooling as a way to promote foundational development and convergence. See Herbert Hovenkamp, Mark. D. Janis & Mark A. Lemley, IP and Antitrust § 34.4, at 34-20.1 (2009) (“Typical procompetitive benefits [of patent pools] include the clearing of blocking positions, the advantages flowing from integration of complementary technologies, and the cost savings from avoiding litigation.”). These agreements may be reviewed under the rule of reason for pro-competitive benefits.

In the early 1990’s Philips, Sony, and others formed a patent pool to cover CD-R and CD-RW technology and – in the process – defined the industry standard. Philips licenses the pools (but not individual patents) — charging a per disk royalty and requiring that the licenses be used only to make CD’s that comply with the defined “Orange Book compliant” standards. When Princo refused to pay the royalty, Philips sued for infringement in the ITC.

This appeal focuses on one particular patent in the pool – Sony’s U.S. Patent No. 4,942,565 (“Lagadec”). Lagadec claims a digital process for identifying the laser position. The patent pool also includes a patent covering a similar analog process for identifying the laser position developed by Philips. And, in fact, the defined standard requires that the analog process (not the digital process) be used.

Tying Non-Essential or Non-Used Patent: Princo argued that Lagadec is a non-essential patent and that Philips “improperly used its market power to force manufacturers seeking patents essential to the production of Orange Book compliant discs to also take a license to Lagadec, an allegedly-nonessential and Non-used Sony patent.” The Supreme Court saw this type of tying as problematic in Zenith v. Hazeltine, 395 US 100 (1968). In Zenith, the court held that “conditioning the grant of a patent license upon payment of royalties on products which do not use the teaching of the patent [is] misuse.”

Reasonable Claim Construction: Although the final claim scope was not clear, Philips argued under a reasonable broad claim construction, the standard analog process would infringe one of the claims in the Lagadec patent — thus making that patent “essential” to the pool and immunizing the pool from the tying challenge. Without determining the specific claim construction, the Federal Circuit agreed that misuse may be avoided if at the time of the licensing “it would have been reasonable for a manufacturer to believe a license … was necessary.”

We thus think that perfect certainty is not required to avoid a charge of misuse through unlawful tying. Rather, in this context a blocking patent is one that at the time of the license an objective manufacturer would believe reasonably might be necessary to practice the technology at issue.

The Federal Circuit’s “reasonable” approach meshes with the Hovenkamp Antitrust-IP treatise which states:

Indeed, even if the patents are only arguably conflicting, there are strong reasons to permit the settlement of patent disputes by means of a cross-licensing agreement. Not only will judicial economy be served and litigation costs reduced by settling such disputes, but the delay and uncertainty associated with blocking patent disputes may prevent either party from going forward with a commercial product for years while litigation is pending. Where two or more patents are arguably blocking, therefore, settling the dispute by means of cross-licensing is likely to be procompetitive.   

Here, for instance, by licensing Lagadec, a manufacturer has more certainty that licensing the pool will avoid later allegations of infringement — a major goal of the standard setting operation.

Cutting-off Alternatives: By including Sony’s Lagadec patent in the pool but then preventing manufacturers from using the digital process, Princo argued that Philips improperly colluded to sequester the work-around technology from competitive development. In Princo’s words “Philips bribed Sony not to use . . . Lagadec to compete against the [Philips dominated standard].” On appeal, the Federal Circuit agreed with Princo that such collusion could be misuse even if the patent included “essential” claims.

It is one thing to offer a pooled license to competing technologies; it is quite another to refuse to license the competing technologies on any other basis. In contrast to tying arrangements, there are no [pro competitive] benefits to be obtained from an agreement between patent holders to forego separate licensing of competing technologies, as counsel for Philips conceded at oral argument. . . . Agreements between competitors not to compete are classic antitrust violations. . . . Agreements preventing patent licensing of competing technologies also can constitute such violations.

On remand, the ITC must determine whether Princo has provided sufficient evidence to show that Sony and Philips agreed not to separately license Lagadec as competing technology and that the digital technology could have been a viable alternative.

Dissent in Part: Dissenting in part, Judge Bryson would have fully affirmed the ITC’s findings.

Prior Discussion of the Case:

Written Description: Pioneering Claims Require More Expansive Written Description

Patent, , , ,

Ariad v. Eli Lilly (08-1248.pdf, Fed. Cir. 2009) (Judge Moore; Concurring opinion by Judge Linn)

Ariad sued Lilly for infringing its patent that claims a method of reducing NF-κB (“en eff kappa be”) activity. The listed inventors of the patent include, inter alia, two Nobel Laureates, and the original assignees include Harvard, MIT, and the Whitehead Institute. A jury found that both Evista and Xigris infringe, and the judge denied Lilly’s JMOL motion on invalidity. The resulting judgment was for $65 million in past damages and an ongoing royalty of 2.3% of sales.

On appeal, the Federal Circuit reversed the lower court’s decision – finding the asserted claims invalid for lack of written description. The written description requirement is intended to ensure that the inventors “disclose the technologic knowledge upon which the patent is based [and] demonstrate that the patentee was in possession of the invention that is claimed.” (Quoting Capon). Consequently, the disclosure in the patent document “must clearly allow persons of ordinary skill in the art to recognize that he or she invented what is claimed” and was in “possession” of the invention at the time of filing including “all elements and limitations.” In other words, Ariad “must describe some way of performing the claimed methods.”  The actual level of disclosure depends upon several factors such as the extent of prior art, maturity of the science, and the “predictability of the aspects at issue.”

Here, it was clear that the invention was “extraordinarily creative” in a highly unpredictable field with little prior art available. Ariad’s expert even testified that the invention necessitated the development of a new vocabulary. All these factors indicate that the written description bar will be set high.

Here, Ariad’s description was scant on real examples

The ’516 patent discloses no working or even prophetic examples of methods that reduce NF-κB activity, and no completed syntheses of any of the molecules prophesized to be capable of reducing NF-κB activity.

Without specific examples, Ariad attempted to show that its description was sufficient by bolstering the skill of a PHOSITA. Unfortunately for the Patentee, the Jury found an early effective filing date and much of Ariad’s evidence showed skill in the art after that 1989 date.

Because written description is determined as of the filing date—April 21, 1989 in this case—evidence of what one of ordinary skill in the art knew in 1990 or 1991 cannot provide substantial evidence to the jury that the asserted claims were supported by adequate written description.  

Although important, these small date issues probably made no difference because the description was so lacking and the prior art so sparse.

The state of the art at the time of filing was primitive and uncertain, leaving Ariad with an insufficient supply of prior art knowledge with which to fill the gaping holes in its disclosure.

“We therefore conclude that the jury lacked substantial evidence for its verdict that the asserted claims were supported by adequate written description, and thus hold the asserted claims invalid.”

Caveat Vindicor: In its conclusion, the court noted that this result likely turned on clam construction. If Ariad had agreed to a narrower construction in litigation or narrower claim language during prosecution, then the written description requirement might have been satisfied. Of course, if it had pursued that strategy, infringement would have likely been lost.

Although Judge Linn concurred in the opinion, he wrote separately to remind readers of his belief that the written description requirement should be eliminated and enablement be allowed to do its job.

Notes:

  • Pioneering inventions are less likely to be found obvious or anticipated. However, one problematic result highlighted by this decision is that those pioneer patents are more likely to be trapped by the formalities of the patent system.

Bits and Bytes No. 101: Patent Bill & the Patent Lobby

Patent, , , ,
  • Reform: Today, the Senate Judiciary Committee met shortly and announced that an agreement is “close” on all of the controversial issues and that the compromise will result in a major overhaul of S. 515. Gene Quinn has instant-comments. Potential changes include: (1) codifying the existing law of damages rather than changing it – except that a judicial check on jury-awarded damages would be added; (2) eliminate “best mode” as a ground for invalidating a patent; (3) lowering the standard for post grant review to an “interesting question” rather than a “substantial new question of patentability.” We should see some language this week.
  • Reform: A reader sent me the following points on the potential agreed-to compromise Bill in the Senate:
    • Damages. The amendment will strike the contentious calculation of reasonable royalty damages provision and will replace it with the gatekeeper language developed by Senators Feinstein and Specter, which will provide more of a role for the judge to identify the appropriate legal standards and relevant factual contentions for the jury.
    • Inter partes reexamination. The amendment will strike the controversial “in public use or on sale” additions on inter partes reexamination.
    • Best mode. The amendment will retain the requirement that a specification contain the best mode of carrying out the invention as part of the patent application, but not allow best mode to be used as means to invalidate a patent.
    • Interlocutory appeals. The amendment will tighten the interlocutory appeals provision. The bill as introduced would have given the district court complete discretion whether to approve an application for interlocutory appeal of a claims construction hearing. This amendment will provide district court with specific standards that it must certify have been met.
    • Willfulness. The amendment tightens the willfulness provision to ensure is in line with the Federal Circuit’s decision in Seagate.
    • Venue. The amendment will strike the current subsection on venue, and replace it with a codification of the Federal Circuit’s recent decision in TS Tech.
  • Lobby Lobby: The IPO reports that “by early afternoon yesterday, 16 paid ‘line sitters’ were already in line in the corridor outside the [committee] room, holding places for lobbyists to be admitted to the room this morning.”
  • Patent Jobs: The Patently-O Job board has picked-up some steam over the past week. Here are some recent job postings.

Improper Summary Judgment on Doctrine of Equivalents; Marking Products that Perform Method Claims

Damages, Doctrine of Equivalents, Method Claims, Patent, Patent Cases 2009, Summary Judgment, , ,

Crown Packaging v. Rexam Beverage Can (Fed. Cir. 2009)

On summary judgment, the district court held that Rexam did not infringe Crown’s patent beverage can-top patent. The lower court also found that that Crown did not infringe Rexam’s beverage can “necking” patent. On appeal, the Federal Circuit reversed both rulings.

The Doctrine of Equivalents: Over the past two decades, the doctrine of equivalents been pushed out of the usual infringement discussion. Part of the doctrine’s downgrade is due to restricted application due to prosecution history estoppel (Festo) and tighter doctrine (Warner-Jenkinson). Perhaps equally important in the decline of the DOE has been the rise of claim construction as the primary variable of patent litigation. Rather than arguing for infringement as an equivalent, applicants are instead arguing for broad construction of the claim terms. Finally, patent drafters are – on average – better today than they were twenty years ago and spend more energy on considering how to draft claims that capture literal infringement. In a 2007 paper, Professors Lemley and Allison found something similar – that since the late 1990’s (even before Festo), that “equivalents claims usually failed, most often on summary judgment.” Their paper title – “Demise of the Doctrine of Equivalents” – overstates its case. The DOE is sometimes valuable.

Function-Way-Result Test: There are at least two alternate tests for infringement under the doctrine of equivalents. The function-way-result test considers “on a limitation by limitation basis” whether “the accused product performs substantially the same function in substantially the same way with substantially the same result as each claim limitation of the patented product.”

Summary Judgment on DOE: Here, the issue was not so much the law of the DOE, but rather the requirement for summary judgment that there be no remaining material issue of fact. Crown’s patent claims an “annular reinforcing bead,” while Rexam’s product uses a reinforcing fold. The lower court found those different enough to avoid infringement under the DOE. On appeal, however, the Federal Circuit reversed – finding at least one unresolved material issue of fact that precluded summary judgment. DOE requires expert testimony to step through the function-way-result test. And, here, the patentee’s expert stepped through each element and his testimony had not been completely indicted or even refuted.

Because Crown provided evidence in support of its position that the annular reinforcing bead of claim 14 of the ‘826 patent had only one function, and because we must resolve any reasonable factual inferences in favor of the nonmoving party, we conclude that there is a material issue of fact regarding the function of the claimed bead. Accordingly, we reverse and remand the district court’s grant of summary judgment of noninfringement.

This decision by Judge Moore is in line with the court’s 2008 Voda case which was affirmed after parsing expert testimony to ensure that the elements had been properly proven. (In Voda, the court used the alternative “insubstantial difference” test.)

Unmarked Sales by Licensee: In a scenario reminiscent of the recent Quanta v. LG case, Rexam licensed its patents to Belvac to make “neckers” used to stretch out the top of the can bodies. Under the license, Belvac was required “to notify its customers that they would require a separate license from Rexam to perform the smooth die necking method” that is claimed in Rexam’s patents. The license did not require Belvac to mark the machines that it sold. And, in fact, Belvac did not mark them with the Rexam patent number. Crown then used the machine to make over one hundred billion cans.

Marking under 35 U.S.C. § 287(a): The district court found that this past infringement was not actionable because Crown was not on notice of the patent. That decision seemingly follows from 35 U.S.C. § 287(a). Under that provision, a patentee who does not properly mark a patented article “is not entitled to damages for infringement prior to actual notice.” (quoting CAFC decision).

Marking of Method Claims: Rexam’s trick here was to assert only method claims. On its face, Section 287 applies to “any patented article,” and Federal Circuit precedent has clearly stated that the marking requirement does not apply when only method claims are asserted. With palpable regret, Judge Moore writes:

“The law is clear that the notice provisions of § 287 do not apply where the patent is directed to a process or method. Bandag, Inc. v. Gerrard Tire Co., 704 F.2d 1578, 1581 (Fed. Cir. 1983). In Hanson, 718 F.2d 1075 (Fed. Cir. 1983)—we held that 35 U.S.C. § 287(a) did not apply where the patentee only asserted the method claims of a patent which included both method and apparatus claims. Hanson is factually identical to this case, and we are therefore bound by the rule of Hanson.”

Thus the patentee is free to claim damages back six years under Section 286 even without marking or providing actual notice. This decision thus provides an additional reason to include method claims in a patent application. Now, it would be improper to conclude that there is no reason to mark products that perform method claims. In the 1993 American Medical Systems case, the Federal Circuit ruled that marking would be required if “both apparatus and method claims” were asserted and there is a “tangible item to mark.” In this case, the patent claimed both a method and apparatus, but Rexam sued only on the method claims.

Written Description: Federal Circuit Again Invalidates Broadened Claims

Enablement, Patent, Patent Cases 2009, , , ,

ICU Medical v. Alaris Medical System (Fed. Cir. 2009)

This is the second post on the ICU case. Part I discusses the $4.6 million award of attorney fees to the accused infringer based on the patentee’s litigation misconduct.

The district court found several of ICU’s claims invalid for lack of written description under 35 U.S.C. § 112, ¶ 1. On appeal, the Federal Circuit affirmed. (Judges Michel (CJ), Prost, and Moore; Opinion by Moore). Although similar to enablement, the written description requirement pushes an applicant to “convey with reasonable clarity to those skilled in the art that, as of the filing date sought, he or she was in possession of the invention.” Most often, written description arises in cases where new matter is added to the claims during prosecution. That is also the case here – during prosecution ICU amended its claims to include “spikeless” claims — directed to a valve mechanism for adding drugs to an IV without using needles.

To be clear – the original claims included the “spike.” That element was removed during prosecution – seemingly broadening the claims. As the court stated “we refer to these claims as spikeless not because they exclude the preferred embodiment of a valve with a spike but rather because these claims do not include a spike limitation—i.e., they do not require a spike.” It is that failure to include any discussion of a spike in the claim that lead to the claim being held invalid for lack of written description.

The Federal Circuit does not cite Gentry Gallery or the infamous “omitted element” or “essential element” theories. However, the court does rely heavily on LizardTech. In that case, the court did not point to any claim limitation that was not sufficiently described. Rather, the court found the claim invalid because an embodiment arguably covered by the claim was not sufficiently disclosed.

We addressed a similar issue in LizardTech . . . We explained that “the specification provides only one method for creating a seamless DWT, which is to ‘maintain updated sums’ of DWT coefficients. That is the procedure recited by claim 1. Yet claim 21 is broader than claim 1 because it lacks the ‘maintain updated sums’ limitation.” We determined, however, that “[a]fter reading the patent, a person of skill in the art would not understand how to make a seamless DWT generically and would not understand LizardTech to have invented a method for making a seamless DWT, except by ‘maintaining updat[ed] sums of DWT coefficients.'” We therefore concluded that claim 21 was invalid under the written description requirement of § 112, ¶ 1.

In LizardTech, the court explicitly rejected the argument that the written description requirement “requires only that each individual step in a claimed process be described adequately.”

In this case, ICU’s original disclosure focused on spiked embodiments, but the more generic claims are not so limited.

ICU’s asserted spikeless claims are broader than its asserted spike claims because they do not include a spike limitation; these spikeless claims thus refer to medical valves generically—covering those valves that operate with a spike and those that operate without a spike. But the specification describes only medical valves with spikes.

Since all the embodiments included the “spike,” the court concluded that “Based on this disclosure, a person of skill in the art would not understand the inventor … to have invented a spikeless medical valve.”

Invalidity affirmed

Notes:

  • This case also includes an important discussion of claim differentiation that will be dissected in a later post.  
  • Of course, this case suggests the best patent drafting practice of providing multiple embodiments of each claim element, and considering whether each and every limitation in the broadest original claims are necessary.
  • ICU broadened its claim by dropping a limitation — did ICU introduce new matter?
  • In a powerful rhetorical approach, Judge Moore chose to refer to the broad claims as “spikeless claims.” As mentioned, those claims do not include a “spikeless” limitation. Rather, they simply omit a “spike” element. As it turns out more than 99.9% all patent claims issued in 2008 are silent about “spikes,” and under the traditional interpretation of the “comprising” transition – all those claims would literally cover embodiments without spikes. The holding here cannot be that all those claims are invalid. I believe that the holding here is largely a result of the fact that the accused device was in-fact spikeless. Unfortunately, this decision does not provide helpful guidance as to when it will apply. Rather, it appears to simply be an additional vague tool available to defense attorneys.
  • The court did not mention enablement – since it was easy to remove the needle from a syringe and the disclosure includes a preslit seal that could arguably work with a spikeless syringe. That modification would have been enabled based on the original disclosure.

Federal Circuit Affirms $4.6 million award for litigation misconduct

Attorney Fees, Damages, Patent, Patent Cases 2009

ICU Medical v. Alaris Medical System pic-14.jpg (Fed. Cir. 2009)

ICU’s patents covers technology for using syringes to add drugs to an IV. The district court granted summary judgment of invalidity and also awarded attorney fees and found a violation of Rule 11 of the Federal Rules of Civil Procedure. Alaris was awarded $4.6 million in attorney fees and sanctions. On appeal, the Federal Circuit affirmed.

Section 285 of the Patent Act provides for the award of attorney fees to the winning party in “exceptional cases.” In Brooks Furniture, the Federal Circuit discussed a two-part test for whether attorneys fees may be awarded due to litigation conduct. The test requires that “both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.” A district court fee award will be affirmed absent clear error.

The problem – ICU argued that the claim term “spike” could be a non-pointed structure such as a tube even though the specification “repeatedly and uniformly describes the spike as a pointed instrument.” The claim construction was not ICU’s only problem:

For example, the district court found that ICU made “multiple, repeated misrepresentations . . . to the Court regarding its own patents in an effort to conceal what are now characterized as errors in order to rescue the TRO/PI from denial.” These misrepresentations related to (1) ICU’s assertion of claims in the ’509 patent that were identical to claims in the ’592 patent (i.e., assertion of double-patented claims); (2) ICU’s assertion of more double-patented claims from the ’509 patent even after Alaris and the district court warned ICU of the double-patenting issue; (3) ICU’s misrepresentation of Federal Circuit authority; (4) ICU’s representation that figures 13 and 20–22 of the common specification “clearly” disclosed a spikeless embodiment, only to later acknowledge that these figures do not disclose such an embodiment and state that its representation was an “honest mistake.”

Although the Brooks Furniture rule discusses objectively baseless “litigation,” that rule is not construed to focus on the litigation as a whole. Rather, attorney fees may be assessed if any portion of the litigation is brought in bad faith and in an objectively baseless manner. Here, the Federal Circuit found that the lower court had “appropriately exercised its discretion in awarding attorney fees only for [a] portion of the litigation.”

Notes:

  • Federal Circuit Decision 08-1077.pdf
  • District Court award of Fees: 232495.pdf. Bottom line: “The Court finds that Alaris is due $4,587,622.44 in attorney fees and $164,721.19 in costs for the reasons set forth below. . . . This represents a reasonable lodestar calculation for Alaris’ work . . . , and it constitutes a reasonable pro rata amount of Alaris’ total expenditure of $11,000,000 in attorney fees and $2,000,000 in costs overall in this case.”
  • District Court decision to find a Section 285 exceptional case and Rule 11 sanctions. 232494.pdf. Money Quote: “[The submitted declarations] do not substantively justify or excuse ICU’s litigation tactics or show its good faith. These declarations were prepared by ICU’s litigation counsel for the purpose ofopposing the Rule 11 and Fees Motions, and comprise mostly self-serving assertions of good faith by interested witnesses, such as ICU’s CEO (Dr. George Lopez), trial counsel (Fulwider, Patton, Lee & Utecht; Paul Hastings; or Pooley & Oliver), patent counsel (Knobbe Martens) and its paid experts (Dr. Maureen Reitman and Bob Rogers). These materials lack the indicia of credibility provided by declarations or opinions from outside, independent counsel or experts, particularly outside patent, as opposed to litigation, counsel. Most of the materials appear to have been “memorialized” in retrospect, providing marginal support compared to, for example, an ex ante documented and vetted analysis that preceded the litigation or that, al minimum, preceded the TRO/PI request and the inclusion of the “spike” claims in the amended complaint.”
  • Although the district court decision appears to identify the Fulwider firm as “trial counsel,” that appears to have been a mistake made by the court. A Fulwider attorney has indicated that their firm “was never one of ICU’s trial counsel in that matter, and thus made no representations to the court on ICU’s behalf.” In fact, ICU appears to be somewhat of a toxic client. According to the court documents, Fulwider represented ICU in the 1990’s. At some point ICU dropped the firm as a client and sued for malpractice based on Fulwider’s representation of alleged ICU competitors. Fulwider did not admit wrongdoing, but a 2007 press release by ICU claims that ICU “will be paid $8 million in settlement of its claims against Fulwider.”

Federal Circuit Affirms $4.6 million award for litigation misconduct

Attorney Fees, Damages, Patent Cases 2009

ICU Medical v. Alaris Medical System pic-14.jpg (Fed. Cir. 2009)

ICU’s patents covers technology for using syringes to add drugs to an IV. The district court granted summary judgment of invalidity and also awarded attorney fees and found a violation of Rule 11 of the Federal Rules of Civil Procedure. Alaris was awarded $4.6 million in attorney fees and sanctions. On appeal, the Federal Circuit affirmed.

Section 285 of the Patent Act provides for the award of attorney fees to the winning party in “exceptional cases.” In Brooks Furniture, the Federal Circuit discussed a two-part test for whether attorneys fees may be awarded due to litigation conduct. The test requires that “both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.” A district court fee award will be affirmed absent clear error.

The problem – ICU argued that the claim term “spike” could be a non-pointed structure such as a tube even though the specification “repeatedly and uniformly describes the spike as a pointed instrument.” The claim construction was not ICU’s only problem:

For example, the district court found that ICU made “multiple, repeated misrepresentations . . . to the Court regarding its own patents in an effort to conceal what are now characterized as errors in order to rescue the TRO/PI from denial.” These misrepresentations related to (1) ICU’s assertion of claims in the ’509 patent that were identical to claims in the ’592 patent (i.e., assertion of double-patented claims); (2) ICU’s assertion of more double-patented claims from the ’509 patent even after Alaris and the district court warned ICU of the double-patenting issue; (3) ICU’s misrepresentation of Federal Circuit authority; (4) ICU’s representation that figures 13 and 20–22 of the common specification “clearly” disclosed a spikeless embodiment, only to later acknowledge that these figures do not disclose such an embodiment and state that its representation was an “honest mistake.”

Although the Brooks Furniture rule discusses objectively baseless “litigation,” that rule is not construed to focus on the litigation as a whole. Rather, attorney fees may be assessed if any portion of the litigation is brought in bad faith and in an objectively baseless manner. Here, the Federal Circuit found that the lower court had “appropriately exercised its discretion in awarding attorney fees only for [a] portion of the litigation.”

Notes:

  • Federal Circuit Decision 08-1077.pdf
  • District Court award of Fees: 232495.pdf. Bottom line: “The Court finds that Alaris is due $4,587,622.44 in attorney fees and $164,721.19 in costs for the reasons set forth below. . . . This represents a reasonable lodestar calculation for Alaris’ work . . . , and it constitutes a reasonable pro rata amount of Alaris’ total expenditure of $11,000,000 in attorney fees and $2,000,000 in costs overall in this case.”
  • District Court decision to find a Section 285 exceptional case and Rule 11 sanctions. 232494.pdf. Money Quote: “[The submitted declarations] do not substantively justify or excuse ICU’s litigation tactics or show its good faith. These declarations were prepared by ICU’s litigation counsel for the purpose ofopposing the Rule 11 and Fees Motions, and comprise mostly self-serving assertions of good faith by interested witnesses, such as ICU’s CEO (Dr. George Lopez), trial counsel (Fulwider, Patton, Lee & Utecht; Paul Hastings; or Pooley & Oliver), patent counsel (Knobbe Martens) and its paid experts (Dr. Maureen Reitman and Bob Rogers). These materials lack the indicia of credibility provided by declarations or opinions from outside, independent counsel or experts, particularly outside patent, as opposed to litigation, counsel. Most of the materials appear to have been “memorialized” in retrospect, providing marginal support compared to, for example, an ex ante documented and vetted analysis that preceded the litigation or that, al minimum, preceded the TRO/PI request and the inclusion of the “spike” claims in the amended complaint.”
  • Although the district court decision appears to identify the Fulwider firm as “trial counsel,” that appears to have been a mistake made by the court. A Fulwider attorney has indicated that their firm “was never one of ICU’s trial counsel in that matter, and thus made no representations to the court on ICU’s behalf.” In fact, ICU appears to be somewhat of a toxic client. According to the court documents, Fulwider represented ICU in the 1990’s. At some point ICU dropped the firm as a client and sued for malpractice based on Fulwider’s representation of alleged ICU competitors. Fulwider did not admit wrongdoing, but a 2007 press release by ICU claims that ICU “will be paid $8 million in settlement of its claims against Fulwider.”

Federal Circuit Affirms $4.6 million award for litigation misconduct

Attorney Fees, Damages, Patent, Patent Cases 2009

ICU Medical v. Alaris Medical System pic-14.jpg (Fed. Cir. 2009)

ICU’s patents covers technology for using syringes to add drugs to an IV. The district court granted summary judgment of invalidity and also awarded attorney fees and found a violation of Rule 11 of the Federal Rules of Civil Procedure. Alaris was awarded $4.6 million in attorney fees and sanctions. On appeal, the Federal Circuit affirmed.

Section 285 of the Patent Act provides for the award of attorney fees to the winning party in “exceptional cases.” In Brooks Furniture, the Federal Circuit discussed a two-part test for whether attorneys fees may be awarded due to litigation conduct. The test requires that “both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.” A district court fee award will be affirmed absent clear error.

The problem – ICU argued that the claim term “spike” could be a non-pointed structure such as a tube even though the specification “repeatedly and uniformly describes the spike as a pointed instrument.” The claim construction was not ICU’s only problem:

For example, the district court found that ICU made “multiple, repeated misrepresentations . . . to the Court regarding its own patents in an effort to conceal what are now characterized as errors in order to rescue the TRO/PI from denial.” These misrepresentations related to (1) ICU’s assertion of claims in the ’509 patent that were identical to claims in the ’592 patent (i.e., assertion of double-patented claims); (2) ICU’s assertion of more double-patented claims from the ’509 patent even after Alaris and the district court warned ICU of the double-patenting issue; (3) ICU’s misrepresentation of Federal Circuit authority; (4) ICU’s representation that figures 13 and 20–22 of the common specification “clearly” disclosed a spikeless embodiment, only to later acknowledge that these figures do not disclose such an embodiment and state that its representation was an “honest mistake.”

Although the Brooks Furniture rule discusses objectively baseless “litigation,” that rule is not construed to focus on the litigation as a whole. Rather, attorney fees may be assessed if any portion of the litigation is brought in bad faith and in an objectively baseless manner. Here, the Federal Circuit found that the lower court had “appropriately exercised its discretion in awarding attorney fees only for [a] portion of the litigation.”

Notes:

  • Federal Circuit Decision 08-1077.pdf
  • District Court award of Fees: 232495.pdf. Bottom line: “The Court finds that Alaris is due $4,587,622.44 in attorney fees and $164,721.19 in costs for the reasons set forth below. . . . This represents a reasonable lodestar calculation for Alaris’ work . . . , and it constitutes a reasonable pro rata amount of Alaris’ total expenditure of $11,000,000 in attorney fees and $2,000,000 in costs overall in this case.”
  • District Court decision to find a Section 285 exceptional case and Rule 11 sanctions. 232494.pdf. Money Quote: “[The submitted declarations] do not substantively justify or excuse ICU’s litigation tactics or show its good faith. These declarations were prepared by ICU’s litigation counsel for the purpose ofopposing the Rule 11 and Fees Motions, and comprise mostly self-serving assertions of good faith by interested witnesses, such as ICU’s CEO (Dr. George Lopez), trial counsel (Fulwider, Patton, Lee & Utecht; Paul Hastings; or Pooley & Oliver), patent counsel (Knobbe Martens) and its paid experts (Dr. Maureen Reitman and Bob Rogers). These materials lack the indicia of credibility provided by declarations or opinions from outside, independent counsel or experts, particularly outside patent, as opposed to litigation, counsel. Most of the materials appear to have been “memorialized” in retrospect, providing marginal support compared to, for example, an ex ante documented and vetted analysis that preceded the litigation or that, al minimum, preceded the TRO/PI request and the inclusion of the “spike” claims in the amended complaint.”
  • Although the district court decision appears to identify the Fulwider firm as “trial counsel,” that appears to have been a mistake made by the court. A Fulwider attorney has indicated that their firm “was never one of ICU’s trial counsel in that matter, and thus made no representations to the court on ICU’s behalf.” In fact, ICU appears to be somewhat of a toxic client. According to the court documents, Fulwider represented ICU in the 1990’s. At some point ICU dropped the firm as a client and sued for malpractice based on Fulwider’s representation of alleged ICU competitors. Fulwider did not admit wrongdoing, but a 2007 press release by ICU claims that ICU “will be paid $8 million in settlement of its claims against Fulwider.”

In re Ferguson: Patentable Subject Matter

BPAI, Patent, Patent Cases 2009, Patentable Subject Matter, Software, , ,

In re Ferguson (Fed. Cir. 2009)

Scott Harris has been discussed several times on Patently-O. Harris is a former Fish & Richardson partner. Fish handles the most patent litigation of any firm in the country. In addition to being a patent attorney, Harris is an inventor. He has contracted with the plaintiffs firm Niro Scavone in several actions to enforce patents against Google and other companies. Harris is one of the named inventors of the Ferguson application and he handled the [futile] appeal.

The claimed invention focuses on a “method of marketing a product” and a “paradigm for marketing software.” These claims focus on methods and structures for operating a business.

Methods Under Bilski: Claim 1 reads as follows:

A method of marketing a product, comprising:

developing a shared marketing force, said shared marketing force including at least marketing channels, which enable marketing a number of related products;

using said shared marketing force to market a plurality of different products that are made by a plurality of different autonomous producing company, so that different autonomous companies, having different ownerships, respectively produce said related products;

obtaining a share of total profits from each of said plurality of different autonomous producing companies in return for said using; and

obtaining an exclusive right to market each of said plurality of products in return for said using.

Under Bilski, this case is open and shut. The claim is not even arguably tied to a machine — especially under the Nuijten construction of machine to be a “concrete thing, consisting of parts, or of certain devices and combination of devices [including] every mechanical device or combination of mechanical powers and devices to perform some function and produce a certain effect or result.” (Quoting Burr v. Duryee, 68 U.S. (1 Wall.) 531, 570 (1863)). Thus, the 1863 touchability definition of machine appears to hold weight. On the second Bilski prong, the claim does not require transformation of any article into a different state or thing. The only transformation is that of legal rights and organizational relationships that were explicitly excluded in the Bilski decision: “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.”

Harris asked the court to consider a different test of patentable subject matter: “Does the claimed subject matter require that the product or process has more than a scintilla of interaction with the real world in a specific way?” The CAFC panel rejected that proposal primarily based on the precedential value of Bilski: “In light of this court’s clear statements that the “sole,” “definitive,” “applicable,” “governing,” and “proper” test for a process claim under § 101 is the Supreme Court’s machine-or-transformation test, see Bilski, passim, we are reluctant to consider Applicants’ proposed test.” The court went on to determine that the “scintilla” test would create too much ambiguity as well.

Non Method Claims: The application also included claims directed to a “paradigm for marketing software” made up of a marketing company that markets software in return for a contingent share of income. Although “instructive,” the Federal Circuit did not directly follow Bilski. Rather, the court looked to determine whether the claimed paradigm fit within one of the four statutory classes listed in Section 101:

Inventions Patentable: “… any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof…”

In a gentle Koan, the Court stated that it “need not resolve the particular class of statutory subject matter into which Applicants’ paradigm claims fall, [however], the claims must satisfy at least one category.” In fact, the court did attempt to resolve the particular class, but was unable to fit the paradigm claim into any of the four.

Applicants’ paradigm claims are not directed to processes, as “no act or series of acts” is required. Nuijten, 500 F.3d at 1355. Applicants do not argue otherwise. Applicants’ marketing company paradigm is also not a manufacture, because although a marketing company may own or produce tangible articles or commodities, it clearly cannot itself be an “‘article[]’ resulting from the process of manufacture.” Nuijten, 500 F.3d at 1356. Again, Applicants do not argue otherwise. And Applicants’ marketing company paradigm is certainly not a composition of matter. Applicants do not argue otherwise.  

Again applying the touchability notion of machine, the Court also rejected the notion that the company paradigm could be a machine:

Applicants do assert, however, that “[a] company is a physical thing, and as such analogous to a machine.” But the paradigm claims do not recite “a concrete thing, consisting of parts, or of certain devices and combination of devices,” Nuijtent, and as Applicants conceded during oral argument, “you cannot touch the company.”

Ending in a flourish, the court found that in fact, the Ferguson paradigm claims are “drawn quite literally to the paradigmatic abstract idea.” (quoting Warmerdam).

Judge Newman offers a poignant concurring opinion.  

Patent Reform Act of 2009

Damages, Patent, Patent Legislation, Reexamination, , , , , ,

Patent reform legislation has now been introduced in both the House and the Senate. The provisions call for major reforms and mirror much of the proposed legislation from 2008. If anything, this is not a consensus Bill. File Attachment: SenateBill.pdf (116 KB) File Attachment: HouseBill.pdf (180 KB)

Proposed changes in the Senate Bill include:

  • First to File: Moving to a first-to-file system that credits invention based on the filing date of the patent application rather than on the date of actual invention.   The provision eliminates the one-year grace period for most cases. Thus, any independent third-party publication prior to filing is considered prior art regardless of the date of invention. Likewise, secret prior art (102(e)) cannot be ‘sworn behind’ based on prior invention. This provision obviously hurts folks who delay in filing patent applications.
  • Damages: Must look to the invention’s “specific contribution over the prior art” to determine damages. There is an interesting provision that a reasonable royalty may be calculated as the price of licensing a “similar noninfringing substitute in the relative market.” In some cases, this could push damages to zero if the noninfringing substitute is in the public domain. The provision also codifies that treble damages are limited to instances where a judge finds that an adjudged infringer recklessly continued to infringe after receiving particularly specified written notice sufficient to create declaratory judgment jurisdiction and without relying on reasonable advice of counsel.
  • Expanded Reexamination Proceedings: Reexaminations may be requested based on published prior art, or evidence of prior public use or sale in the US. Inter partes reexaminations would begin to look more like court cases and would be heard by administrative patent judges. The Bill would clarify that parties would be estopped from filing inter partes reexamination requests after a district court judgment.
  • Additional Post Grant Review: Within 12 months of issuance, a third party can file a cancellation petition based on any ground of invalidity (rather than simply prior art). The post grant reviews would also be conducted by the administrative patent judges.
  • Pre-Issuance Submissions: Third parties can submit prior art during examination of the patent as well as a statement regarding the relevance of the art. The art should be submitted the latter of (1) six months after publication or (2) before the first office action on the merits.
  • Patent Litigation Venue: “A party shall not manufacture venue by assignment, incorporation, or otherwise to invoke the venue of a specific district court.” Venue is only proper were (a) defendant is incorporated; (b) defendant has its principle place of business; (c) where the defendant is permanently located and has committed substantial acts of infringement; or (d) where the plaintiff resides if the plaintiff is a nonprofit or individual inventor. The court should transfer venue to avoid evidentiary burdens when transfer can be accomplished without causing undue hardship to the plaintiff.”
  • Interlocutory Appeals: The Federal Circuit will have jurisdiction over interlocutory appeals of claim construction when approved by the lower court.
  • Administrative Patent Judges: The BPAI would become the Patent Trial and Appeal Board (PTAB). Interferences would be gone, however they would be replaced by derivation proceedings as well as reexamination and post-grant trials.
  • PTO Powers: The PTO has power to set its fees, including reducing fees.
  • Oath: Easing the rules to more easily allow rights-holders to file patent applications on behalf of the inventor.
  • Federal Circuit Judges: Making legal it for a Federal Circuit judge to reside more than 50 miles from DC.

As you can see, this is very much the type of reform that companies like Google would like to see. Google is regularly faced with charges of patent infringement and rarely sues for infringement. Some of these changes will benefit the system as a whole, but it is clear that this is not “balanced” reform. The damages provision will almost certainly reduce patent awards. And, perhaps equally important, the damages provision provides adjudged infringers a real cause to appeal jury awards if they did not directly follow the expert testimony.

I believe that the expanded use of reexaminations and post grant review and prior art submissions will be beneficial, and I have faith that the administrative patent judges will be able to handle their newfound responsibilities. That said, these provisions provide challengers with new ways to attack patent rights.

The plaintiff bar in the Eastern District of Texas is quite good, and defendants are doing what they can to escape from their grasp. The venue provision moves in that direction and would thus weaken the value of patents.

The trick with the first to file system is to realize that it is not about some mythical race to invent between competitors. Rather, it is about keying the priority on the date of filing the application rather than the date of invention or even one year prior to filing. This provision weakens patent rights because more materials will be considered prior art. It is possible to switch to a first-to-file system without eliminating the grace period so dramatically – this legislation does not, however meet that standard.

The Bill is sponsored by both Senators Leahy (D-VT) and Hatch (R-UT). Representative Conyers (D-Mich) introduced parallel legislation in the House, the legislation is largely similar, but does contain some differences. (I have not reviewed the House version in detail). Some opposition has already formed. Reps Manzullo (R-IL) an Michaud (D-ME) issued a joint press release titled “New patent bill encourages IP theft, destroys American jobs.” Their focus was on the damages provision.

There are some changes from the 2008 legislation.

  • The Bill does not require that all applications be published at 18 months.
  • Applicants would not be required to search prior art.
  • The 2009 Bill allows public use or sale in the US to be reasons for challenging patents.
  • CHECK 21 provisions are gone.
  • Fee Diversion is allowed in the 2009 Bill. (Oddly, Leahy explained that PTO Examiners perfer a system of fee diversion)
  • The 2009 Bill does not address inequitable conduct.

Links:

Federal Circuit Takings Case: Set Up for Supreme Court Review

Patent, Patent Cases 2009, Takings, ,

Casitas Municipal Water v. US (Fed. Cir. 2009) (en banc denial) (MAYER, SCHALL , and MOORE*)

Casitas is not a patent case, it is a takings case involving regulatory restrictions on water use imposed by US Government. The Federal Circuit has jurisdiction over this takings claim against the US Government because it is on appeal from the Court of Federal Claims (CFC). Although the Federal Circuit has denied the Federal Government’s motion for en banc rehearing, a set of diverging opinions sets this case in position for likely Supreme Court review.

History: The Ventura River Project provides water supply to Ventura County, California. In 1956, the US Government granted the local government the “perpetual right to use all water that becomes available through the construction and operation of the Project.” Then, in 1997, steelhead trout living in the Project became an endangered species under the Endangered Species Act (ESA), and the US Government required that Casitas construct a fish ladder and divert water over the fish ladder. Casitas complied, but filed suit in the CFC alleging that the Federal Government had taken its property without just compensation (and also under breach of contract). The CFC classified the Government action as “regulatory” rather than a “physical.” In takings law, compensation for regulatory takings is much more difficult to obtain, and Casitas admitted that it could not prove the required elements. This conclusion followed the Federal Government argument that “it did not seize, appropriate, divert, or impound any water, but merely required water to be left in the stream.”

Appeal: On appeal, the Federal Circuit reversed. Writing for the majority, Judge Moore concluded “that the government physically appropriated water that Casitas held a usufructuary right in.”

Here, the government admits for the purposes of summary judgment that it required Casitas to build the fish ladder facility, which is a man-made concrete structure that was not a portion of the existing … The government also admits that the operation of the fish ladder required water, which prior to the fish ladder’s construction flowed into the Casitas Reservoir … Specifically, the government admits that the operation of the fish ladder includes closing the overshot gate …and that the closure of this gate causes water that would have gone into the Casitas Reservoir via the Robles-Casitas Canal to be diverted into the fish ladder. … These admissions make clear that the government did not merely require some water to remain in stream, but instead actively caused the physical diversion of water away from the Robles-Casitas Canal … and towards the fish ladder, thus reducing Casitas’ water supply.

In dissent, Judge Mayer rejected the physical takings argument. At base, he argued, Casitas does not actually own the water. Rather, under California law, all water sources within California “belong to the public.” Even if Casitas did own the water flow, Mayer would have seen the endangered species requirements as regulatory because the requirements simply force a specific use of the water rather than take it away.

En Banc Rehearing: In what looks like a 7-5 (or 6-6) vote, the Federal Circuit denied a rehearing en banc. Judge Moore wrote a new opinion defending her original approach in the original opinion. In particular, Judge Moore focused on the “facts as presented” in the case. “[T]he government conceded (1) that Casitas had a property right in the water diverted from the Ventura River, and (2) that the government required Casitas to build and operate the fish ladder in such a way as to permanently appropriate water in which Casitas had the conceded property right.” Based on those two facts, the holding of a physical takings was easy.

Judge Gajarsa would have heard the case en banc. Gajarsa (joined by Chief Judge Michel and Judge Dyk) saw the taking as clearly regulatory in form because nothing had actually been taken by the US Government.

This denial implicates fundamental questions regarding takings law. The panel majority’s opinion suggests that a government action can be construed to be a physical taking even if no physical proprietary interest has actually been taken by the United States. This is contrary to present Supreme Court law and contrary to our case law. Accepting this analysis of the panel majority eliminates the fine distinction and balance that has been established by the Supreme Court between physical and regulatory takings. Moreover, it eliminates the ability of the legislature to provide for limited and parsimonious legislation protecting endangered species.

Notes:

  • Republican vs. Democrat: Moore’s position is clearly one of stronger property rights while Gajarsa/Mayer’s position is in favor of regulatory power of the government. It appears that this decision falls along political lines. Those thinking of the regulation as a physical taking (Moore, Schall, Rader, JJ) are all Republican appointees. Three of the five thinking of the regulation as regulatory in nature are Democratic appointees (Linn, Dyk, Gajarsa, JJ are all Clinton appointees; Michel, CJ, and Mayer, J, are Reagan appointees). At least three of the four other judges voted to deny a rehearing. Of those four, three are Republican appointees (Newman, Lourie, Prost, JJ, are all Republican appointees; Bryson, J, is a Clinton appointee). As you can see here, eight of the twelve active Federal Circuit judges are Republican appointees.
  • En Banc Denial
  • Original CAFC Opinion: Casitas Mun. Water Dist. v. United States, 543 F.3d 1276 (Fed. Cir. 2008).
  • Original CFC Opinion

Looking Ahead: Preclusive Effect of Prior Claim Construction

CAFC, Claim Construction, Patent

Shire v. Sandoz, M-893 (Fed. Cir. 2009)

In a recent order, the Federal Circuit agreed to hear an interlocutory appeal considering the issue preclusive effect of a prior claim construction decision. The patent in suit has been construed at least twice before, but the lower court here “refused to give preclusive effect” to either prior ruling. This will be an interesting case to follow.

2009-M893.2-6-09.1.PDF

Federal Circuit Begins Publishing Orders on Motions

CAFC, Patent

The Federal Circuit has taken another valuable step toward transparency in its operations. Notably, the court has begun to post electronic versions of orders resolving motions that are processed through its Senior Staff Attorney. Publication began on January 30, 2009. I have sought some clarification from the Court on its statement that “certain orders are not posted on this page.”

The outcomes of motions are important to the parties involved as well as amicus filers. There have also been occasions when the outcome of a motion impacts stock prices. Perhaps the most common stock-swinging issue involves the Federal Circuit’s decision on whether to stay injunctive relief pending appeal. Previously, these orders were difficult to obtain electronically or remotely.

Certain motions may be decided by the Clerk – especially when a motion is unopposed. Others go to a Federal Circuit judge assigned to handle motions that month. My understanding is that the Senior Staff Attorney will ordinarily present the motion (and response) to the judge with a potential order as well. If a case is already scheduled on the hearing calendar, motions will be transmitted to the panel for adjudication.

Most of the orders are mundane. Here is a sample from last week:

  • IGT v. Alliance Gaming: Denying motion to dismiss on for lack of subject matter jurisdiction (no final order).
  • Blackboard v. Desire2Learn: Granted motion to remove protective order covering the E.D. Tex. supplemental claim construction judgment.
  • Garber v. CME: Extension of time granted.
  • The Forrest Group v. Bon Tool: Motion granted to allow Paul Hletko to file an amicus brief. Forrest Group had opposed.
  • Excel Innovations v. Indivos Corp: Motion granted to allow Mark Davies to take over as principal counsel.

Links:

  • Search for CAFC Orders [LINK]
  • CAFC Guide to Motion Practice [LINK]
  • Top 10 easy-to-fix problems with motions [LINK]

Federal Split Decision Highlights Unpredictability of Claim Construction (Once Again)

Claim Construction, Obviousness, Patent, Patent Cases 2009,

Kinetic Concepts v. Blue Sky Medical Group (Fed. Cir. 2009)

Virtually every theory or defense in patent law requires claim construction before coming to a final conclusion. This case focused on obviousness and considered how the results turn on the construction of the claim term “treating a wound.” A two-member majority (Judges Prost and Bryson) narrowly construed the term to only include treatment of surface wounds (instead of internal organs) and affirmed a nonobviousness holding. The dissent (Judge Dyk) saw a broader definition leading him to a conclusion that the claims were obvious in light of the prior art.

Hal Wegner aptly notes that it would be “difficult without an intensive study of the record to determine whether the majority or the dissent has properly construed the claims under Federal Circuit precedent: Indeed, it is possible that both constructions are acceptable. Kinetic Concepts thus once again points to the continued imperative of statutory claim construction reform.”

As per usual, Judge Dyk’s dissent is sharp – finding that the majority erred first by finding that the term should be limited to the disclosed embodiments and erred again by narrowly misreading the scope of the disclosed embodiments:

“In my view, the majority improperly holds that the claim term “wound” can be limited to the disclosed embodiments in the specification, and, having done so, then misreads the specification as showing only embodiments treating harm to the surface of the body or skin wounds. Under the correct construction of this claim term, the asserted claims of U.S. Patent Nos. 5,636,643 (“’643 Patent”) and 5,645,081 (“’081 Patent”) would have been obvious.”

Notes: Read the decision 07-1340.pdf.