Tag Archives: Damages

Supreme Court Patent Update: 271(e) Safe Harbor

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by Dennis Crouch

Look for opinions in Halo/Stryker and Cuozzo by the end June 2016.

Post Grant Admin: While we await Cuozzo, a set of follow-on cases continue to pile-up.  My speculation is that the Supreme Court will delay any decision in those cases until it finalizes the outcome of Cuozzo. With a host of new friend-of-the-court briefs and interesting constitutional questions, MCM v. HP is perhaps best positioned for certiorari.  Additional pending cases include Versata v. SAP (scope of CBM review); Cooper v. Lee (whether IPRs violate Separation of Powers); Click-to-Call Tech, LP v. Oracle Corp., (Same questions as Cuozzo and now-dismissed Achates v. Apple); GEA Process Engineering, Inc. v. Steuben Foods, Inc. (Flip-side of Cuozzo: Appeal when PTAB exceeds its authority by terminating an instituted IPR proceeding?); Interval Licensing LLC v. Lee (Same as Cuozzo); and Stephenson v. Game Show Network, LLC (Same as Cuozzo)

Design Patent Damages: Samsung has filed its opening merits briefs in the design patent damages case against Apple.  Design patent infringement leads to profit disgorgment, but the question is what profits? [More from Patently-O].

Versus Cisco: There are a couple of newly filed petitions. Interestingly, both filed by Michael Heim’s firm with Miranda Jones on both briefs representing plaintiff-petitioners.  In both cases Cisco is respondent.

  • CSIRO v. CISCO (fact-law divide in proving infringement damages under 35 U.S.C. § 284).
  • COMMIL v. CISCO (appellate disregard of factual evidence).

Of course, Commil was the subject to a 2015 Supreme Court decision that rejected the Federal Circuit’s original opinion favoring Cisco.  On remand, the Federal Circuit completely changed its decision but again sided with Cisco and rejected the jury verdict — holding “that substantial evidence does not support the jury’s finding that Cisco’s devices, when used, perform the “running” step of the asserted claims.”

Safe Harbor for Federal Submissions: In the newly filed Amphastar Pharma case, the Supreme Court has already requested a response from Momenta. The question presented focuses on the safe-harbor provision of 35 U.S.C. § 271(e)(1) and asks: Whether the safe harbor protects a generic drug manufacturer’s bioequivalence testing that is performed only as a condition of maintaining FDA approval and is documented in records that must be submitted to the FDA upon request.  The federal circuit held that Amphastar’s activity in this case was not protected by the safe harbor because it involved information “routinely reported” to the FDA post-approval. [Amphastar Petition]

The big list:

(more…)

Design Patent Damages at the Supreme Court

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by Dennis Crouch

Samsung has filed its opening merits briefs in its design patent damages appeal Samsung v. Apple.  The central issue in the case is the proper statutory interpretation of the design patent damages statute 35 U.S.C. 289 that offers an alternative calculation for damages:

Whoever during the term of a patent for a design, without license of the owner, (1) applies the patented design, or any colorable imitation thereof, to any article of manufacture for the purpose of sale, or (2) sells or exposes for sale any article of manufacture to which such design or colorable imitation has been applied shall be liable to the owner to the extent of his total profit, but not less than $250, recoverable in any United States district court having jurisdiction of the parties.

Nothing in this section shall prevent, lessen, or impeach any other remedy which an owner of an infringed patent has under the provisions of this title, but he shall not twice recover the profit made from the infringement.

The question for the court is “total profit” from what? Is it the sale of the article-of-manufacture (here, the Galaxy phones) or merely the particular component.  For this case, the particular components would be the front face of the phone and the icon-grid displayed on a user interface screen.  Samsung asks: Where a design patent is applied to only a component of a product, should an award of infringer’s profits be limited to those profits attributable to the component? [Samsung Opening Brief – US Supreme Court]

In a statement to Patently-O, Samsung argued that “If the current ruling is left to stand, it would value a single design patent over the hundreds of thousands of groundbreaking technology patents, leading to vastly overvalued design patents.”  The itself brief cites Professor Rantanen’s 2015 essay for the proposition that the high damage is likely result in an “explosion of design patent assertions and lawsuits.”

The design-patent-damages statute was originally enacted in 1887 as a reaction to the last Supreme Court design patent damages cases that limited lost profit awards. Dobson v. Hartford Carpet Co., 114 U.S. 439 (1885); and Dobson v. Dornan, 118 U.S. 10 (1886).  However, Samsung argues that the 1952 amendments are important here.

Reasonable Royalty for Industry Standard Patents

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by Dennis Crouch

The Australian governmental research agency CSIRO has been the plaintiff in a number of E.D. Texas patent cases over the past decade — repeatedly enforcing its wireless local-area-network (LAN) U.S. Patent No. 5,487,069 that has been held to cover WiFi (802.11a and 802.11g).

After a long battle, CISCO stipulated to liability and validity of the patent.  In a bench trial, the court found that a reasonable royalty was about $.83 per WiFi product sold by Cisco.  On appeal, however, the Federal Circuit vacated that Judgment – holding that the royalty rate was likely too high because it internalized the lock-in value of the standardized technology.  There are many ways to create a wireless local network and there really is not any indication that the ‘069 patent offers the best way (even among other available alternatives).  Instead, what makes the ‘069 patent so valuable is that it was chosen as the standard.

The underlying question now on petition for certiorari to the Supreme Court is whether and the extent that CSIRO’s royalty rate should be discounted because the invention was chosen as the standard.  However, CSIRO’s petition focuses on the standard of appellate review:

The Patent Act provides that a “[u]pon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement ….” 35 U.S.C. § 284. In contravention of this broad language, the Federal Circuit has erected a rigid set of legal rules to control the determination of damages by triers of fact. As a result, the Federal Circuit now exercises de novo review over inherently factual questions, resulting in routine reversals.
This Court has held with regard to another patent remedies provision that it is improper for the Federal Circuit to “superimposed an inflexible framework onto statutory text that is inherently flexible.” Octane Fitness. And this Court is considering related questions in relation to another portion of section 284 in Stryker Corp. and Halo Electronics.

The question presented is:

Is the Federal Circuit’s promulgation of rigid legal rules to control the weight to be given by the trier of fact to evidence of patent infringement damages proper under 35 U.S.C. § 284?

 

Because damages are now the fundamental remedy for patentees, this case will be an important one to follow.

[Read the Petition: CSIRO v. Cisco Petition for Certiorari]

Guest Post by Prof. Contreras – CSIRO v. Cisco: The Convergence of RAND and non-RAND Royalties for Standards-Essential Patents

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Wegner’s Top Ten Pending Patent Cases

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Hal Wegner has updated his top-ten list of pending cases:

  1. Impression Products v. Lexmark (cert petition pending) (post-sale and international exhaustion)
  2. Sequenom v. Ariosa Diagnostics (cert petition pending) (patent eligibility)
  3. Samsung v. Apple (cert granted) (design patent damages)
  4. Cuozzo Speed v. Lee (awaiting Supreme Court decision) (claim construction at the PTAB)
  5. Halo Electronics v. Pulse and Stryker v. Zimmer (awaiting Supreme Court decision) (requirements to prove willful infringement)
  6. SCA Hygiene v. First Quality Baby Prods (cert granted) (when does laches apply in patent cases)
  7. Life v. Promega (cert petition pending) (active inducement for export of component)
  8. Cooper v. Lee (cert petition pending) (direct challenge to PTAB administrative review)
  9. MCM Portfolio v. Hewlett-Packard (cert petition pending) (direct challenge to PTAB administrative review)
  10. Helsinn Healthcare v. Teva Pharm. (Federal Circuit case) (whether Metallizing Engineering was overruled by statute – i.e., what is the prior art impact of secret pre-filing commercialization by patentee).

Read Wegner’s Writings published by the Los Angeles Intellectual Property Law Association.  A full list of pending Supreme Court patent cases is available on Patently-O.

 

Apple v Samsung: Mooting the Injunction

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In my recent update on Supreme Court patent cases I skipped over a new Samsung v. Apple petition since one Samsung v. Apple case has already been granted a writ of certiorari.  Although both cases involve smartphone patents, they are entirely separate procedurally.

  • Already Pending: Samsung Electronics Co., Ltd. v. Apple Inc., No 15-777 (design patent damages calculation) (certiorari granted, merits briefing ongoing), appeal from Apple, Inc. v. Samsung Electronics Co., Ltd., 786 F.3d 983 (Fed. Cir. 2015)
  • Newly Filed: Samsung Electronics Co., Ltd.  v. Apple Inc., No 15-1386 (vacating injunction mooted by later opinion) (petition filed), appeal from Apple Inc. v. Samsung Electronics Co., Ltd., 809 F.3d 633 (Fed. Cir. 2015).

The new case itself involves a pair of appeals: In a 2015 decision, the Federal Circuit found that an injunction against Samsung to halt infringement was proper under the eBay standards. The first case did not, however, reach the merits issues involving patent validity and infringement. Then, in February 2016, the court reversed the jury verdict and held that all of the asserted claims were either invalid or not infringed.

The decision on appeal here is that first injunction decision that, up to now, the Federal Circuit has not expressly vacated (even though the underlying basis for the injunction has now been proven not to exist).  Thus, in its petition, Samsung asks simply that the Supreme Court vacate the Federal Circuit’s decision. Question presented:

Should the Court grant the petition, vacate the judgment below, and remand to dismiss the appeal as moot, in accordance with United States v. Munsingwear, Inc., 340 U.S. 36 (1950), where the Federal Circuit’s opinion requiring a permanent injunction is mooted by a later Federal Circuit opinion eliminating all basis for liability by holding two of the three patents at issue invalid and the other one not infringed?

The one big caveat here is that an en banc petition is still pending on the merits side and therefore is not moot. The petition merely glosses over this issue without offering any explanation as to why the Supreme Court shouldn’t just wait for the outcome of the en banc petition. Of course, Samsung understands all of this – and likely would have delayed the filing were it not for the looming deadline for its petition filing. [SamsungInjunctPetition]  To me, it seems that the Federal Circuit panel in the still pending validity/infringing case would permit a motion for stay of relief pendant lite. 

Apple’s En Banc request in the merits case (validity/infringement) is in the midst of briefing.  Apple’s basic argument is that the appellate panel unduly substituted its judgment for that of the jury:

After a thirteen-day trial and three-and-a-half days of deliberation, a jury found that Samsung’s smartphones infringed three Apple patents, confirmed the validity of Apple’s asserted patents, and awarded damages of nearly $120 million. The issues on appeal were primarily factual and subject to deferential substantial evidence review. Yet, in an unprecedented decision, the panel reversed nearly every aspect of the verdict that favored Apple. The panel reached that result by deciding the case on a different record than the jury had before it, and by shifting Samsung’s burden to prove invalidity to require instead that Apple prove validity.

[AppleEnBancPetition]

Pending Supreme Court Patent Cases 2016 (May 18 Update)

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by Dennis Crouch

It is now time to begin looking for an opinion in the Halo/Stryker regarding whether the Federal Circuit’s test for willful infringement is too rigid. Those cases were argued in February 2016.  We can also expect a decision in Cuozzo prior to the end June 2016.

Supplying Components Abroad: The Solicitor General has finally filed its brief in Life Tech v. Promega. The brief supports certiorari — but only for one of the two questions presented: namely,

whether a supplier can be held liable for providing ‘all or a substantial portion of the components of a patented invention’ from the United States when the supplier ships for combination abroad only a single commodity component of a multi-component invention

The patent in the case involves a DNA amplification kit used for personal identification.  And, although the allegedly infringing kids were made in the UK, one commodity-component (the Taq polymerase) was supplied from the U.S.  Focusing on the language of the statute, the Solicitor Generals argues that liability for export of a single component of a multi-component invention “is contrary to Section 271(f)’s text and structure, and it is inconsistent with the presumption against extraterritoriality.”  Separately, the brief argues that the Federal Circuit was correct in its holding that a party can actively induce itself – thus 271(f)(1) inducement does not require a third party to be induced. [USPromega CVSG Petition].

Post Grant Admin: I previously discussed GEA Process Engineering. That case involves the Flip-side of Cuozzo and asks whether an appeal can follow when the PTAB exceeds its authority by terminating an already instituted IPR proceeding?  The respondent (Steuben Foods) had previously waived its right to respond, but the Supreme Court has now requested a response.  That move makes certiorari more likely, but the result will depend upon the outcome in Cuozzo.

Attorney Fees: Newegg Inc. v. MacroSolve, Inc., No. 15-1369.  Professor Mark Lemley’s brief on behalf of Newegg asks that the attorney-fee framework of Octane Fitness actually be implemented. [NewEggPetition].  Although Octane Fitness gives district courts discretion in determining whether to award fees, Newegg argues that the E.D. Texas court improperly applied “a special, heightened burden of proof.”  The Supreme Court is currently considering the Kirtsaeng attorney fee case for copyright law. That decision may shed some light on the patent cases as well.

A new petition in Automotive Body Parts, No. 15-1314,  focuses on a question of civil procedure regarding a clerk’s transfer of a design patent case out of E.D.Tx in a manner that violated the local rules.  Here, the clerk transferred the case immediately after the judge ordered transfer even though the local rules call for a 21 day delay.  The case is rising through a petition for mandamus, but my view is that the petition fails to show why transfer is so harmful (except for the reality that patent plaintiffs are usually given more respect in E.D.Tx.).

The court was scheduled to discuss Cooper v. Lee at its May 12 conference. No action was taken following that conference – lightly suggesting to me that the court is holding judgment until it resolves Cuozzo.  Apart from the AIA Trial challenges, most potential life changing case on the docket for patent attorneys is Cubist v. Hospira that focuses on the role of secondary indicia of non-obviousness. As with most Supreme Court patent cases over the past decade, Cubist argues that the Federal Circuit’s rules are too restrictive and should instead follow a looser factor-based analysis when considering the issue.  In the next couple of weeks, the court will consider the Cubist petition as well as that of Dow v. NOVA  (appellate review standard); Vehicle Intelligence (abstract idea); and WesternGeco (damages calculation for 271(f) infringement by exporting components).

Secret Offers to Sell: The Federal Circuit is not slowing down its patent jurisprudence in any way – except for the rash of R.36 affirmances. An important case is Helsinn that focuses on whether the AIA abrogated the rule in Metallizing Engineering.

The big list: (more…)

A Comparison of the EU Trade Secrets Directive and the US Defend Trade Secrets Act

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Guest post by Mark Ridgway and Taly Dvorkis, Allen & Overy, LLP, London. 

It has been a busy year for law makers seeking better protection for trade secrets.  Much coverage has been given to the Defend Trade Secrets Act (DTSA), which provides a federal private right of action for trade secret protection.  President Obama signed the DTSA on May 11, and the law takes effect immediately.  Patently-O has covered the DTSA legislation and legislative process in several posts here.

On May 17 the European Council is expected to formally adopt the Trade Secrets Directive, requiring all Member States to provide certain minimum standards for trade secret protection.  Member States will have two years to implement the provisions of the Directive into their own national laws.

How do the US and EU positions on trade secrets compare?  Below are the key similarities and differences between the DTSA and the European Trade Secrets Directive.

What has led to these Legislative Changes?

The desire for harmonization of trade secret protection has spurred these movements both in the US and the EU.  According to the European Commission, the lack of a uniform European approach has resulted in a “fragmentation of the internal market” and “weakening of the overall deterrent effect of the relevant rules.”  The EU Directive seeks to harmonize the laws of the various member states by providing a consistent definition of what qualifies as a “trade secret.”  Additionally, the Directive addresses the remedies available to trade secret holders and the measures courts can use to prevent the disclosure of trade secrets in legal proceedings.

In the U.S., the DTSA arose from a desire to federalize trade secret protection, which had thus far been dominated by state law (although most states had previously adopted the Uniform Trade Secrets Act (UTSA), published by the Uniform Law Commission in 1979).  While certain federal protection previously existed in the form of the Economic Espionage Act of 1996, the DTSA provides an individual right sue in federal court, thus obviating the need to bring private actions in various state courts where procedures differ greatly.

How is “Trade Secret” Defined?

Under both the EU Trade Secrets Directive and the DTSA, to qualify as a trade secret the information at issue must be kept confidential and must derive economic value from being kept confidential.

Article 2 of the Trade Secrets Directive defines a trade secret as information which meets all of the following requirements:

  1. is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;
  2. has commercial value because it is secret;
  3. has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

This definition tracks the definition for “undisclosed information” provided in article 39(2) of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), which requires all signatories to afford some level of protection for confidential information.

The DTSA definition of “trade secret”, meanwhile, consists of “all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if-

  1. the owner thereof has taken reasonable measures to keep such information secret; and
  2. the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, the another person who can obtain economic value from the disclosure or use of the information.”

As seen, whether in Europe or in the U.S., to be considered a trade secret the information must be kept confidential and derive an economic value from the fact that it is confidential.  Both the EU Directive and the DTSA are aimed at protecting commercial confidential information.  What is not required is that the information be entirely novel, a distinction from other forms of intellectual property.  Further, the EU Directive makes explicit that combinations of otherwise publicly available information can be protected provided they are not readily accessible or generally known.

Confidentiality in Litigation

The EU Directive and DTSA have similar provisions for the preservation of confidentiality during legal proceedings for trade secret misappropriation.  In the U.S. the ability to file confidential documents under seal to maintain secrecy has long been an option open to litigants.  The DTSA specifically sets out that a court may not authorize or direct the disclosure of information unless the owner is first given the opportunity to file a submission under seal describing the interest in keeping the information confidential.  The DTSA therefore extends the option of filing briefs under seal to include disclosure at trial and in court opinions, and also allows non-parties to request that certain information be kept confidential.

The EU Directive similarly addresses preserving confidentiality during legal proceedings.  The Directive sets out that an applicant must first supply a “duly reasoned” application as to why certain information should be kept confidential.  The maintenance of secrecy is therefore not the default position, and requires court approval.  It remains to be seen how the national laws of the Member States will implement the Directive and how courts will interpret what qualifies as a “duly reasoned” application.  In some countries this will require minimum changes (for instance, in the U.K. no change will be required), while in others it will be a more significant cultural and legal shift.

Protection for Whistle-blowers

The protections for whistle-blowers and press freedom have been a significant part of the public debate concerning the EU Directive.  Opponents of the Directive expressed concern that, as a result of the Directive, journalists and whistle-blowers could be criminalized for publishing information that companies consider secret.  However, the EU Directive specifically sets out that it should not prevent whistle-blowers and those publishing trade secrets to serve the public interest from doing so.  Moreover, there are no criminal provisions in the Directive.  The Directive states:

The measures, procedures and remedies provided for in this Directive should not restrict whistleblowing activity. Therefore, the protection of trade secrets should not extend to cases in which disclosure of a trade secret serves the public interest, insofar as directly relevant misconduct, wrongdoing or illegal activity is revealed. This should not be seen as preventing the competent judicial authorities from allowing an exception to the application of measures, procedures and remedies in a case where the respondent had every reason to believe in good faith that his or her conduct satisfied the appropriate criteria set out in this Directive.

This exception for whistle-blower activity is much broader than that provided by the DTSA.  The DTSA provides immunity from liability for disclosing a trade secret only when the disclosure is confidential and made to the government or in a court filing (under seal).  There is no specified exception for journalists or other public good-doers, although arguably the First Amendment provides protection.  The DTSA does include a provision by which employers must notify their employees of the protection available under the new law, a notice requirement which is not present in the EU Directive.  Employee is defined broadly by the DTSA to include those working as contractors or consultants.

Remedies

The most controversial part of the DTSA has been the introduction of an ex parte seizure order as a federal measure.  Under the DTSA, a court can issue an order for the seizure of property “necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action.”  Additional remedies include injunctions and damages, where an injunction is deemed most appropriate for any continuing harm.  For previous harm, a court may award damages for actual loss or any unjust enrichment.  A court can also choose to award damages measured by a reasonable royalty for the unauthorized use of the trade secret.  As with other protection of intellectual property, violation of the DTSA done wilfully or maliciously may result in a court awarding enhanced damages as well as attorneys’ fees.

The EU Directive similarly allows for injunctions, damages measured as lost profits, account of profits, or a reasonable royalty for the trade secret use (paid as a lump sum).  The Directive also allows for provisional and precautionary measures, and says that Member States can provide for more far reaching protection, so long as the safeguards in the Directive are met.

The EU Directive does not call for enhanced damages for malicious activity, but rather approaches damages from the opposite viewpoint, specifying that Member States may limit the liability for damages of employees for misappropriating trade secrets if the employee acted without intent.

Employee Mobility and Non-Compete Agreements

In the sensitive area of employee mobility and competition, the Directive specifically states that it shall not offer any ground for restricting the mobility of employees.  However, the Directive does not include any requirement to harmonize the laws in relation to post-termination restrictions or non-compete clauses, meaning that national laws will continue to apply.

The DTSA addresses employee mobility in requiring that an injunction against a former employee be “based on evidence of threatened misappropriation” of trade secret information and not simply on the fact that the person may know certain information.  The DTSA also states that any injunction preventing or limiting future employment cannot conflict with applicable state laws protecting employee mobility.  Shortly before the DTSA took effect, the White House released a report that criticizes non-compete agreements and state laws that offer too much protection for such agreements.  While no immediate action is expected following the report, it is offered as a discussion point in considering what is necessary in non-compete agreements and how states should treat them.

Limitation Period

In the U.S., the limitation period for a company to bring an action under the DTSA is three years after the date on which the misappropriation is discovered or could have been discovered with reasonable diligence.  The EU Directive gives the Member States the freedom to set the limitation period for their respective national laws, but sets the maximum period at six years (albeit Member States have discretion as to when the clock starts to run).

Conclusion

It is obviously desirable that trade secret protection be consistent across borders, whether state or national, as protection is only as strong as its weakest link.  In the U.S., the DTSA specifically sets out a requirement that the Attorney General provide a report on the threats of trade secret theft outside the U.S. and the protection of trade secrets afforded by U.S. trading partners.  How the EU Directive and DTSA play out as Member States implement the Directive and courts interpret the laws will help shape trade secret protection around the globe.

Guest Post: 35 USC 289—Grant of Certiorari in Samsung v Apple = The Opportunity for a Better-Crafted Standard for Awarding Total profits

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Guest post by Gary L. Griswold.  Mr. Griswold is a Consultant residing in Hudson, WI and was formerly President of and Chief Intellectual Property Counsel for 3M Innovative Properties Company. The paper reflects the views of the author. He wishes to thank Bob Armitage and Mike Kirk for their excellent contributions to the essay.

In August, 2015, I published an article on Patently-O entitled “35 USC 289-After Apple v Samsung, Time for a Better-Crafted Judicial Standard for Awarding “Total Profits.” [i] The article appeared before the Supreme Court granted certiorari in this appeal.[ii] My use of the word “after” was, thus, a bit premature. The crafting of a new judicial standard may actually be accomplished over the next several months, as the Supreme Court considers the damages issue in Apple v. Samsung case later in its current term.

The statutory basis for awarding damages in this case is no “small-change.” 35 USC 289 provides the design patent holder with the infringer’s “total profits” on the “article of manufacture” to which the patented design “has been applied”[iii]. My August article referenced a Patently-O article by Professor Rantanen that included an analysis of the Federal Circuit’s Apple v Samsung decision and its ramifications, suggesting that the section 289 damages provision could induce “an explosion of design patent assertions and lawsuits.”[iv] Indeed, section 289 holds the potential for design patent procurement and assertion to become the next big “patent assertion entity” business model.

Some commentators have suggested that design patents, being sought and accumulated differently from utility patents, are not likely to stimulate much PAE interest. Whatever merit in that view, it needs to be tempered with the realization that greed is the mother of all of this type of business-model invention. One need only reflect on the fact that more than 1,000 qui tam actions for false marking were filed by opportunistic plaintiffs following the 2009 Federal Circuit decision in Forest Group, Inc. v. Bon Tool Co. before such actions were thankfully banished by the “Leahy-Smith America Invents Act.”[v] The prospects for design infringement revenue generation based on the “total profits”-recovery provision in 35 USC 289 could make successful design patent assertion a staggeringly profitable business. The potential for such an outcome as well as an example of such assertion was referenced in the briefs relating to the Apple v. Samsung certiorari petition[vi].

The possibility of a surge in design-patent PAE activity is almost certainly one of many reasons why the Supreme Court granted certiorari—and why it should not squander the opportunity presented in the Apple v. Samsung appeal to provide a reasoned and principled demarcation between those fact patterns where a “total profits” remedy is clearly warranted and those where it is not.

In deciding this appeal, the Supreme Court may focus on what constitutes an “article of manufacture” under section 289. The statute provides a design patent infringer “shall be liable to the [design patent] owner to the extent of [the infringer’s] total profit” if the infringer “applies the patented design … to any article of manufacture.” [vii](emphasis added) But, the patented design is not necessarily synonymous with the article of manufacture itself.

Indeed, for section 289 purposes, an “article of manufacture” has been held to be the entire substrate to which the patented design is applied. For example, it has been held that a boat becomes the “article of manufacture” when the patented design is for the windshield applied to the boat[viii]. Other examples of “articles of manufactures” whose total profits might be subject to a section 289 recovery include (1) a large agricultural combine, when the patented design is for a tire tread applied to a tire used on the combine; (2) an automobile, when the patented design is for the automobile’s rear taillights; and (3) an HDTV, when the patented design is for a semiconductor used in the television.

In my earlier articles, I described such “total profits” recovery scenarios as a problem in need of a judicial solution. I suggested eliminating access to section 289 “total profits” recoveries in situations where a consensus exists that a remedy of this type would be entirely unwarranted. My approach would interpret section 289 as authorizing a total-profits recovery only “if the patented design is substantially the basis for customer demand for the entire article”.[ix] If it is the basis for consumer demand, the section 289 total-profits recovery would apply to the article; if not, a recovery of total profits would not be available for the article.

This approach bears some similarity to the determination of utility patent damages under the entire market value rule[x]. A utility patent on a boat windshield does not allow the value of the boat to be used as the basis for determining a reasonable royalty absent a demonstration that the windshield was the basis for the customer demand for the boat.

In addition, the “customer demand” limitation is consistent with the apparent rationale for enacting section 289 in the first place. Current section 289 and its predecessors replaced a Supreme Court decision[xi] that provided limited damages to design patent owners even where the infringers had applied the patented design to an article of manufacture in order to create the customer demand for the article of manufacture. In such a situation, forcing the copyist to turn over its total profits obtained on the infringing article represents good policy.

However, even under a “customer demand” limitation, section 289 is no timid remedy. It would not involve any form of “apportionment” of the profits to be awarded to the design patent holder on the ground that some proportion of the profits might be attributable to non- design patented factors. Apportionment is not consistent with the Congressional intent when section 289 and its predecessors were enacted.

Moreover, even if the section 289 remedy is unavailable, the patent owner is not left without the right to recover damages. All the remedies otherwise available for patent infringement remain, whether or not a section 289 “total profits” recovery can be secured as long as there is no double recovery of damages[xii].

The Apple v. Samsung case is of particular importance because imposing the “customer demand” standard on section 289 recoveries does not require another act of Congress. The courts are free to interpret statutes to effectuate the purpose Congress had in enacting them. Under section 289, Congress did nothing to preclude the courts from determining what qualifies—and does not qualify—as an “article of manufacture.”

The Federal Circuit sees this judicial flexibility otherwise. It (incorrectly) saw its hands as having been tied by Congress in Apple v. Samsung, stating: “We are bound by what the statute says, irrespective of policy arguments that may be against it”[xiii]. Fortunately, the Supreme Court has the opportunity to see the situation differently.

The Supreme Court may—and should—see it differently. It can define an “article of manufacture” as being limited to objects for which the patented design is substantially the basis for customer demand. Courts have acted similarly in the past to assure that application of a statute will not result in foreseeable outcomes which are clearly inappropriate and manifestly unintended. The emergence of the “entire market value” rule is a good example of where the alleged “infringing product” cannot be reflexively used as the basis for a damages calculation where the “patented invention” is a mere component or feature of the product and not the product itself.

The Court will have, however, some competing approaches to consider in the course of deciding this appeal. Another possible approach to interpreting section 289 is the so-called “separate product” exception. This exception to a section 289 recovery limits the availability of total profits to the smallest separately sold product to which the patented design is applied. While this exception has the potential to limit the possibility of some of the ludicrous outcomes noted above, it is no panacea. For example, it fails to exclude a section 289 recovery where a design patented graphical user interface (GUI) is used in an electronic device which does not involve a separately sold product. This is a serious deficiency because of the difficulty in finding any policy rationale for awarding total profits on an electronic device simply because a design on a GUI used in it is patented.

Apple has, nonetheless, suggested in its responsive brief to “Defendant-Appellants’ Petition for Rehearing en banc” what amounts to a more generalized rendition of a “separate product” exception: “As the panel correctly recognized, this distinctive design was not severable from the inner workings of Samsung’s smartphones, see Op.27-28, in a way that a cupholder is analytically distinct from the overall look-and-feel of a car.”[xiv] (emphasis added) While “severability” appears to be a more general “exception” criterion than simply being a “separate” product, the “severability” approach does not appear to address the deficiency explained above for the “separate product” exception.

If there is a concern with the “customer demand” limitation, it would be whether the limitation is so broad that it swallows most or all of the “total profits” rule. Indeed, there are many factors which cause a purchaser to acquire a particular article of manufacture—most notably its functional aspects. However, to apply the “customer demand” approach, one begins with the customer looking for something in a product space and then making the specific decision to purchase. Everyday products with new, ornamental designs such as specially shaped paper clips are a good example.[xv] While they have a known function, they are most likely purchased for their appearance. An option would be to only consider the ornamental features of a product to determine whether they were substantially the basis for customer demand, but that may well be too narrow and could lead to a total profit remedy for minor differences from an ornamental perspective.

The Supreme Court would not have granted certiorari without a sense that its guidance was needed to properly titrate a powerful damages provision. It can best do so by allowing section 289 to remain a viable incentive to create and commercialize new designs, but then limiting the articles of manufacture qualifying for a “total profits” recovery to those where the patented design is substantially the basis for customer demand for the article of manufacture. Such a holding would secure section 289 as both a distinguishing and distinguished feature of U.S. design patent law.

[i] Griswold, Gary. “35 USC 289 – After Apple v. Samsung, Time for a Better-Crafted Judicial Standard for Awarding “Total Profits”? Patently-O. August 14, 2015. https://patentlyo.com/patent/2015/08/griswold-patent-damages.html

[ii] See U.S. Supreme Court Orders List from March 21, 2016 at 2. http://www.supremecourt.gov/orders/courtorders/032116zor_h3ci.pdf

[iii] 35 U.S.C. § 289:

“Whoever during the term of a patent for a design, without license of the owner, (1) applies the patented design, or any colorable imitation thereof, to any article of manufacture for the purpose of sale, or (2) sells or exposes for sale any article of manufacture to which such design or colorable imitation has been applied shall be liable to the owner to the extent of his total profit, but not less than $250, recoverable in any United States district court having jurisdiction of the parties.

Nothing in this section shall prevent, lessen, or impeach any other remedy which an owner of an infringed patent has under the provisions of this title, but he shall not twice recover the profit made from the infringement.”

[iv] Rantanen, Jason, “Apple v. Samsung: Design Patents Win.” Patently-O. May 18, 2015. https://patentlyo.com/patent/2015/05/samsung-design-patents.html

[v] Laurie Rose Lubiano, “The America Invents Act applies the brakes to the false marking bandwagon.” LEXOLOGY, January 3 2012. http://www.lexology.com/library/detail.aspx?g=401c9bea-d643-4521-bc7d-c63d5b4a25f5

[vi] Samsung Petition for a Writ of Cert. Case No. 15-777. at 36-38. http://www.scotusblog.com/wp-content/uploads/2016/01/15-777_PetitionForAWritOfCertiorari.pdf

[vii] 35 U.S.C. § 289

[viii] Order on Motion for Partial SJ, In re Pacific Coast Marine Windshields Ltd. v. Malibu Boats LLC, Case No. 6:12-cv-33 (M.D. Fl. August 22, 2014)

[ix] See Griswold, https://patentlyo.com/patent/2015/08/griswold-patent-damages.html; See also Griswold, Gary. “35 USC § 289 – An Important Feature of U.S. Design Patent Law: An Approach to its Application.” IPO Law Journal. April 6, 2015. http://www.ipo.org/wp-content/uploads/2015/04/griswold_an-approach.pdf

[x] See Cornell University v. Hewlett-Packard Co., 609 F.Supp. 2d 279, 288-89 (N.D.N.Y. 2009):

(1) The infringing components must be the basis for customer demand for the entire machine including the parts beyond the claimed invention, (2) the individual infringing and non-infringing components must be sold together so that they constitute a functional unit or are parts of a complete machine or single assembly of parts, and (3) the individual infringing and non-infringing components must be analogous to a single functioning unit. It is not enough that the infringing and non-infringing components are sold together for business advantage. Notably, these requirements are additive, not alternative, ways to demonstrate eligibility for application of the entire market value rule.

See also Virnetz, Inc. v. Cisco Systems, Inc., 113 F.3d 1308, 1326 (Fed. Cir. 2014) (Judge Prost: “we recently affirmed that ‘[a] patentee may assess damages on the entire market value of the accused product only where the patented feature creates the basis for customer demand or substantially creates the value of the component parts.”)

[xi] See Dobson v. Dornan, 118 U.S. 10, (1886); Dobson v. Hartford Carpet Co., 114 U.S. 439 (1885); Dobson v. Bigelow Carpet Co., 114 U.S. 439 (1885); Bigelow Carpet Co. v. Dobson/Hartford Carpet Co. v. Same, 10 F. 385,386; 1882 U.S. App. LEXIS 2295 (E.D. Pa. 1882).

[xii] 35 U.S.C. § 289, paragraph 2: “Nothing in this section shall prevent, lessen, or impeach any other remedy which an owner of an infringed patent has under the provisions of this title, but he shall not twice recover the profit made from the infringement.”

[xiii] Apple v. Samsung, Fed. Cir. Opinion at 27, fn. 1.

[xiv] See Brief in Opp’n to Rhg, Apple v. Samsung, Case No. 2014-1335; 2015-1029 at 27-28 (Fed. Cir. July 20, 2015)

[xv] See, e.g., Design Patent No. USD647,138: https://docs.google.com/viewer?url=patentimages.storage.googleapis.com/pdfs/USD647138.pdf

 

Immediate action for Human Resource Departments on the Defend Trade Secrets Act

Patent, ,

by Dennis Crouch

The Key: Starting May 12, 2016 all employers will be required by Federal Law to provide a notice-of-immunity to employees and contractors “in any contract or agreement with an employee [or independent contractor] that governs the use of a trade secret or other confidential information.” (If the DTSA is enacted as expected.)

Whistle Blower Immunity: The Defend Trade Secrets Act (DTSA) amends 18 U.S.C. 1832 to provide limited whistle blower immunity. The headline for the provision is “immunity from liability for confidential disclosure of a trade secret to the government or in a court filing.”  Thus, an action that would otherwise count as trade secret misappropriation will be immunized if the disclosure:

(A) is made (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

The statute is clear that the immunity extends to protect against both state and federal law; both civil and criminal allegations.  A statute also (unnecessarily in my view) includes a provision that allows someone “who files a lawsuit for retaliation by an employer for reporting a suspected violation of law” to disclose trade secrets to his attorney and “use the trade secret information in the court proceeding” so long as documents containing the trade secrets are filed under seal and are not disclosed except by court order.[1]

Under these rules, it seems that the party planning to disclose another’s trade secret in open court should first seek an order of permission from the judge. And, at that point, the court will be required to allow the third party to explain the importance of the trade secret.[2]

Required Notice to Employees and Independent Contractors: Under the provision, employers are required to provide notice of the immunity “in any contract or agreement with an employee [or independent contractor] that governs the use of a trade secret or other confidential information.”  The statute suggests that this may be done via reference to a policy document rather than restating the entire immunity provisions in each agreement.  The statute does not appear to have any small-business exception to the notice requirement.

Failure to Comply with the Notice Requirement has a fairly small penalty: If the employer later sues the employee (or independent contractor) for trade secret misappropriation under the DTSA, the employer will not be able to collect exemplary double-damages or attorney fees.  No other specific penalties are provided, but neither does the statute indicate that these are the sole potential penalties.  I could imagine the FTC pursuing employers who fail to provide the notice (but likely only as part of a larger enforcement campaign). In addition, you might imagine a class action suit against major employers who fail to provide the notice. Finally, since this is a requirement of all contracts involving trade secret or confidential information, failure to provide the notice in a particular instance could be seen as evidence that either (1) there was no agreement or (2) the agreement did not involve trade secrets.[3]

Who Needs the Notice?: The notice requirement applies to employees as well as “any individual performing work as a contractor or consultant for an employer.”  Although the statute does not define ‘individual,’ I believe that the best interpretation is that individuals include only humans and not business entities. This conclusion is based upon the statute’s implicit distinction between “entities” and “individuals.”  A common situation might be a start-up company contracting with a cleaning company to do the janitorial work.  Do the people doing the actual vacuuming and cleaning need to have received the notice?  The statutory answer to that will depend upon how a court construes the language “performing work as a contractor or consultant for an employer.”  At this point, a cautious trade secret holder who wants the benefits of notice would ensure that those individuals are also provided notice.

Timing:  The DTSA will be effective once enacted and apply to “any act” that “occurs on or after the date of enactment.”  I expect that President Obama will sign the DTSA on May 11, 2016 and that will be its enactment date.  The notice requirement will “apply to contracts and agreements that are entered into or updated after the date of enactment of this subsection.”  Thus, as of May 12, 2016 employers must begin providing notice under the law.

Earlier this week, the White House issued a new white paper on the problems created by the existence of so-many covenants not-to-compete binding low-skilled workers.  Of course, this new notice requirement will mean that more employer HR departments will now be considering if it is time to add those contracts (along with the notice requirement).

= = = = =

[1] A potential hole in the provisions involves arbitration proceedings (that are common in employee disputes) since, immunity applies to court disclosures and disclosures to government officials, but not expressly to private arbitrators.

[2] This process is outlined in the newly added 18 U.S.C. § 1835(b).

[3] I think it is an important topic for another time stems from how the statute subtly distinguishes between a “contract” and an “agreement” and also between “trade secrets” and “other confidential information.”

Pending Supreme Court Patent Cases 2016 (May 3 Update)

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by Dennis Crouch

Laches: The Supreme Court granted SCA’s writ of certiorari on the question of whether laches defense applies to block back-damages in patent cases. The Federal Circuit says “yes” while the Supreme Court recently said “no” in a parallel copyright case (Patrella).  The Supreme Court decided Patrella 6-3 with Justice Scalia in the majority offering the potential of a tight-split in this case.  The court looks to be sitting-on the parallel case of Medinol v. Cordis until SCA is decided.

CheerCopyrightCopyright on Useful Articles: Although not a patent case, the court also decided to hear a “useful article” copyright case.  Star Athletica v. Varsity Brands.  The case asks whether the stripes and chevrons found in a cheerleader uniform are sufficiently “separable” from the uniform in order to be copyrightable.  The useful article doctrine is generally considered to be setting up a boundary line between the domains of copyright and patent.

More Challenges to USPTO Authority: MCM filed its petition for writ of certiorari directly challenging USPTO authority to conduct inter partes review proceedings with two easy questions:

  1. Does IPR violate Article III of the Constitution?
  2. Does IPR violate the Seventh Amendment to the Constitution?

[MCM Petition and Appendix] MCM’s brief was filed Tom Goldstein along with Ned Heller.  The question for the Supreme Court is whether to extend or contract from its position in Stern v. Marshall, 131 S. Ct. 2594 (2011) where the court held that Article III of the U.S. Constitution prohibits Congress from withdrawing “from judicial
cognizance any matter which, from its nature, is the subject of a suit at the common law, or in equity, or admiralty.” Quoting Murray’s Lessee v. Hoboken Land & Improvement Co., 59 U.S. 272  (1856)).

The brief raises a set of interesting old cases focusing both on the separation of powers and the tradition that patent-revocation for invalidity requires a jury to decide disputed facts.

  • Ex Parte Wood & Brundage, 22 U.S. 603 (1824)
  • McCormick Harvesting Mach. Co. v. C. Aultman & Co., 169 U.S. 606 (1898)
  • Mowry v. Whitney, 81 U.S. 434 (1871)
  • Murray’s Lessee v. Hoboken Land & Improvement Co., 59 U.S. 272 (1856)
  • Neilson v. Harford, Webster’s Patent Cases 295 (1841)
  • Pennock v. Dialogue, 27 U.S. 1 (1829)
  • United States v. Am. Bell Tel. Co., 128 U.S. 315 (1888)

Cooper v. Lee raises some parallel issues. Its petition will be considered by the Court in its May 12. [Update: The court has “rescheduled” consideration of Cooper’s brief – perhaps awaiting its own determination in Cuozzo.]

Hereby Assign Future Inventions: In Shukh v. Seagate, the petitioner raises the long-brewing question involving the Federal Circuit’s interpretation of patent assignments.  In particular, the Federal Circuit has ruled – as a matter of federal patent law – that patent rights are assignable before their invention is even contemplated. The petition asks:

[W]hether FilmTec’s “automatic assignment” rule should be overruled because it extinguishes inventors’ constitutional and statutory rights to inventorship and ownership.

In Stanford v. Roche, Justices Breyer, Ginsburg and Sotomayor criticized the Federal Circuit’s rule and suggested that the issue should be presented in a future case. The majority expressly noted that its opinion did not decide the issue. [Shukh v. Seagate – Redacted Public Petition]

Disparaging Trademarks: A pair of disparaging trademark cases have also been petitioned: Lee v. Tam (“Slants”) and  Pro-Football v. Blackhorse (“Redskins”).   The Federal Circuit previously held the limit on registering disparaging marks to be an unconstitutional abrogation of the freedom of speech.

The big list: (more…)

Supreme Court to Review (and likely Reject) Laches as a Defense in Patent Infringement Cases

Patent, ,

by Dennis Crouch

The Supreme Court has granted SCA Hygeine’s petition for writ of certiorari with merits briefing over the summer and a likely fall 2016 hearing on the question:

Whether and to what extent the defense of laches may bar a claim for patent infringement brought within the Patent Act’s six-year statutory limitations period, 35 U.S.C. § 286.

SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, Supreme Court Docket No. 15-927 (2016).  This case is another patent-copyright parallel and follows the Supreme Court’s 2014 copyright laches case in Petrella v. Metro-Goldwyn-Mayer, 134 S. Ct. 1962 (2014).  In Petrella, the Supreme Court held that laches cannot be used to further shorten the three-year copyright limitations period set forth in 17 U.S.C. § 507(b).  Following Petrella, however, the Federal Circuit rejected the copyright parallels and instead embraced patent law exceptionalism — holding en banc that laches remained a viable defense and can bar infringement claims accruing within the six-year limitations period of 35 U.S.C. § 286. (6-5 holding).

In both patent and copyright cases the issue of laches arises more often than you might think because of the legal treatment of “ongoing” infringement.   Each infringing act is seen as a new act of infringement.  Thus, the six-year limits period starts anew each time a new copy of the infringing product is made, sold, or used.  If someone has been making an infringing product for the past 10 years, the statute would let the patentee them reach back 6 years for damages. Courts often see that result as as problematic when the patentee sits on its rights for so long (and since most civil claims have a shorter period of limitations) and thus apply the laches doctrine to limit collection of back damages even when within the six-year period.

Look for the court to reverse the Federal Circuit’s ruling based upon the historic interplay between equity and law.  As in Petrella, I expect that the court will base its decision on the rule that that laches is a defense to equitable relief but does not limit the recovery of legal damages.  Although Petrella was 6-3, I expect that the dissenters will see the value in linking patent and copyright regimes.

= = = = =

The court also granted certiorari in Star Athletica v. Varsity Brands – that case focuses on the functionality doctrine in copyright law.  In particular focusing on copyrightability of the stripes and chevrons integrated into cheerleader uniforms. Question presented: What is the appropriate test to determine when a feature of a useful article is protectable under § 101 of the Copyright Act?

The petition outlines the ten-different-tests that folks use to determine whether the work of authorship is capable of being “identified separately from, and … existing independently of, the utilitarian aspects of the article.”

 

Implementing and Interpreting the Defend Trade Secrets Act

Patent, , , , , , ,

By Dennis Crouch

With today’s 410-2 House vote, the Defend Trade Secrets Act (DTSA) has now passed both the House and Senate and is headed to President Obama for his expected signature.[1]  The DTSA amends the Economic Espionage Act to create a private civil cause of action for trade secret misappropriation based upon the Congressional sense that trade secret theft exists and is harmful.[2]  Trade secret misappropriation (as a civil matter) has previously been purely a matter of state law.  Although there is substantial uniformity between the states,[3] there are also a number of differences and perceived procedural weaknesses.[4]  The DTSA would not eliminate or preempt the various state trade secret rights but rather would operate as an additional layer of potential protection.[5] The law is designed to go into effect on its day of enactment and apply to any misappropriation that occurs on or after that date.

On March 10, 2017, the University of Missouri’s Center for Intellectual Property and Entrepreneurship (CIPE) along with our new Business, Entrepreneurship, and Tax Law Review (BETR) will host a symposium on Implementing and Interpreting the Defend Trade Secrets Act.  I expect that we will live-stream the event and will also publish speaker articles in BETR.  There is a lot to figure out. Contact me if you are interested in sponsorship opportunities (dcrouch@patentlyo.com).

The central provision of the DTSA will be codified as 18 U.S.C. § 1836(b) and reads:

An owner of a trade secret that is misappropriated may bring a civil action under this subsection if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.

Defining Trade Secret: The DTSA broadly defines the term “trade secret” to mean “all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if—(A) the owner thereof has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, the another person who can obtain economic value from the disclosure or use of the information.”  Although this definition is broad and certainly includes abstract ideas and laws of nature, it might not encompass information that is only stored in the human mind.[6]

Defining Misappropriation of a Trade Secret:  The statute also defines “misappropriation” in detail.  My rough approximation is as follows: without permission (A) obtaining a trade secret that was knowingly obtained through improper means or (B) disclosing or using a trade secret without knowing either (1) that it is a trade secret or (2) that it was obtained through improper means.  These “improper means” include “theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means.” However, misappropriation does not include “reverse engineering, independent derivation, or any other lawful means of acquisition.”  The DTSA does not otherwise include a more general fair-use or news-reporting exception.  However, the First Amendment will certainly serve as a backstop.  Further, these definitions do not include any express territorial limit – it will be very interesting to see the extent that these limits will be implied into the law.  Thus, if a U.S. company is holding trade-secrets in India that are stolen in India, could the U.S. company bring action against the Indian entity that caused the injury (presuming personal jurisdiction over the defendant)?

Remedies Civil Seizure: A key procedural benefit of the DTSA is to offer a mechanism for Civil Seizure ordered by courts and enforced by Federal, State, and/or local law enforcement as a preventive measure (akin to a temporary restraining order).

Remedies: Once misappropriation is found, the court will be authorized to grant injunctive relief as “reasonable.”  If “exceptional circumstances” render injunctive relief is “inequitable” then a court may order a reasonable royalty for the misappropriator’s continued use of the trade secret.  Depending upon how the statute is interpreted, this setup appears to create a presumption of injunctive relief – a stark difference from contemporary patent law doctrine under eBay v. MercExcange.  The statute also provides for compensatory damages for either (i): (I) “actual loss of the trade secret” and, in addition (II) “any unjust enrichment” not compensated in (I); or (ii) a reasonable royalty for the use.  Willful misappropriation can double damages.[7] In these calculations, I suspect that courts will take into account both the market-value of the trade secret as well as the “expenses for research and design and other costs of reproducing the trade secret” that were avoided by the misappropriation. The provision also includes an attorney fee shifting provision limited to cases involving bad-faith or willful-misappropriation.

Remedy against Former Employees: Most trade secret cases involve former employees moving (or starting-up) to a competitor.  A major concern raised against early versions of the bill was that the DTSA would empower employers to prevent such movement.  As amended, the bill now indicates that injunctive relief that would “prevent (or place conditions on) a person from entering into an employment relationship” must be “based on evidence of threatened misappropriation and not merely on the information the person knows.”[8]  Of course, such “threat” does not necessarily mean that the employee expressly threatened misappropriation but rather will likely be based upon circumstantial evidence regarding likelihood of misappropriation (i.e., ‘threat level’).[9]  In addition, the injunction preventing or limiting employment cannot “otherwise conflict with an applicable State law prohibiting restraints on the practice of a lawful profession, trade, or business.”  This bit appears to be directed toward giving credence to non-compete and other limits in various states. However, of key importance is that it only limits injunctive relief and does not appear to limit any cause of action against former employees.  As a consequence, this sets the likelihood of a fight between certain state employment laws that favor employee rights against the new federal trade secret law.

Whistle Blowers: Professor Peter Menell was instrumental in proposing a public policy immunity provision that is included in the DTSA.  The provision would offer immunity from liability (whistle blower protection) for confidential disclosure of a trade secret to the Government or in a Court Filing (made under seal).  The provision includes a notification requirement that employers should immediately implement.

= = = = =

Notes:

[1] Defend Trade Secrets Act of 2016, S. 1890.

[2] Although trade secret rights are thought of as a form of intellectual property, the bill is clear that the DTSA “shall not be construed to be a law pertaining to intellectual property.”  The result of this could, for example, mean that the intellectual property licensee exception in bankruptcy law would not apply to licenses of trade secret information.  See 11 U.S.C. § 365(n).  [In Bankruptcy Law, Trade Secrets are defined as a form of IP, but it is unclear to me at this point which statute would prevail.]  Because the DTSA is an amendment to the Economic Espionage Act – a criminal law – it will also be codified in Title 18 of the United States Code that is generally directed to “crimes and criminal procedure.”  Although I don’t know exactly, there may be aspects of Title 18 (such as general definitions) that will shape the interpretation of federal trade secret law.  As an example, 18 U.S.C. § 2(b) offers a “general principle” of respondeat superior that “[w]hoever willfully causes an act to be done which if directly performed by him or another would be an offense against the United States, is punishable as a principal.”

[3] Consider the popularity of the Uniform Trade Secrets Act in the various states.

[4] Jury trial should still apply to the extent it has in state cases.

[5] The Economic Espionage Act already includes a rule of construction that the statute “shall not be construed to preempt or displace any other remedies, whether civil or criminal, provided by United States Federal, State, commonwealth, possession, or territory law for the misappropriation of a trade secret, or to affect the otherwise lawful disclosure of information by any Government employee under section 552 of title 5(commonly known as the Freedom of Information Act).”  The DTSA reaffirms this principle by stating that “[n]othing in the amendments made by this section shall be construed to modify the rule of construction under section 1838 of title 18, United States Code, or to preempt any other provision of law.”  The bill provides for original jurisdiction of these trade secret cases in federal district court. However, it does not create exclusive jurisdiction – as such it would be proper for a party to bring such a claim in state court (when permitted by the state court). However, in that case, the other party may attempt to remove the case to Federal Court.  You might also query as to whether the federal claim is a ‘compulsory claim’ under the law such that if someone brings a state-law claim and loses they would later be estopped from bringing the federal claim.

[6] There may also be constitutional limitations on a company owning and controlling that information.

[7] This provision suggests by implication that misappropriation may be non-willful despite the fact that the misappropriation definition includes a mens rea element.

[8] My understanding is that Jim Pooley and Mark Lemley were instrumental in suggesting the addition of this provision that has now put the Bill in form where it is broadly supported by the politicians.

[9] Improperly obtaining a trade secret is a form of misappropriation – this creates some potential confusing situations in the interpretation of the provision.

Pending Supreme Court Patent Cases 2016 (April 18 Update)

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by Dennis Crouch

Cuozzo: Prof Mann provides his preview of the April 25 oral arguments in Cuozzo v. Lee; and Cuozzo has filed its reply brief. Neither document address my the mootness concern regarding Cuozzo’s demand for an ordinary construction of claim terms rather than their broadest reasonable interpretation.  As far as I have seen, nothing in the record suggests that a change in claim interpretation standard would alter the PTO’s determination.

Following its April 15 Conference, the Supreme Court denied certiorari in a set of cases, including Vermont v. MPHJ; Limelight v. Akamai; Hemopet v. Hill’s Pet Nutrition; and Tas v. Beachy. In its April 1 Conference, the Court denied cert in Retirement Capital v. US Bancorp. That case had questioned whether subject matter eligibility under 35 U.S.C. § 101 is a ground specified as a condition for patentability under 35 U.S.C. § 282(b)(2).

The only patent cases surviving the April 15 conference are (1) Interval Licensing v. Lee that asks the same question as Cuozzo: Can the Patent and Trademark Office appropriately apply the “broadest reasonable interpretation” standard in construing patent claims in post-grant validity challenges?; and (2) Medinol v. Cordis that focuses on whether “the equitable defense of laches [may be used to] bar legal claims for damages that are timely under the express terms of the Patent Act.”   Medinol is conceptually linked to the SCA Hygiene case that also raises the laches issue. The court will consider both cases in its April 22 conference and may likely couple the decision to grant/deny.  The court is also scheduled to consider Cloud Satchel (abstract idea eligibility) and Globus Medical (appellate jurisdiction) at Friday’s conference. Neither of these cases offer much hope for the respective petitioner.

In Cooper v. Lee, the US Government filed its brief opposing certiorari. The government argues that Cooper’s Article III challenge to the IPR system “lack’s merit.”

[P]atents are quintessential “public rights” whose issuance and cancellation Congress may permissible entrust to a non-Article III tribunal. . . . Pursuant to its constitutional authority to “promote the Progress of Science and useful Arts” by establishing a patent system, Congress created the PTO – an agency with “special expertise in evaluating patent applications.” Kappos v. Hyatt, 132 S. Ct. 1690 (2012). It directed that agency to issue a patent if “it appears that the applicant is entitled to a patent” under standards set by federal law, 35 U.S.C. 131. Patents are accordingly rights that “exist only by virtue of statute.” Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225, 229 n.5 (1964). They “dispose of public rights held by the government on behalf of the people.” Teva Pharm. USA, Inc. v. Sandoz, Inc., 135 S. Ct. 831, 849 n.2 (2015) (Thomas, J., dissenting).

The government also argues that the posture of the case lacks merits – in particular that Cooper’s collateral challenge to the procedures doesn’t work.  Cooper has argued that “inter partes review violates Article III of the Constitution by authorizing an Executive Branch agency, rather than a court, to invalidate a previously issued patent.”

Daniel Bohnen has filed a brief on behalf of UK’s Chartered Institute of Patent Attorneys (CIPA) in support of the Sequenom v. Ariosa petition.   The brief argues that the court should look to “maintain international harmonisation in the law of patent-eligibility.”[AriosaCIPA].  More briefs in support of the petitioner are expected this week as is Ariosa’s opposition brief (if any).

Finally, Nova has filed its opposition in Dow v. Nova and is attempting to refocus attention on the merits of the indefiniteness decision rather than the procedure for reaching that decision.  The difference in question presented is interesting:

Dow: Whether factual findings underlying a district court’s determination on the definiteness of a patent claim under the Patent Act, 35 U.S.C. 112, like a district court’s factual findings underlying construction of a patent claim, are subject to appellate review only for clear error or substantial evidence rather than de novo review.

Nova: Whether the court of appeals correctly invalidated Dow’s patent claims as indefinite under 35 U.S.C. § 112.

Explaining its shift of the question, Nova argues that “Dow’s petition rests on a false premise that the Federal Circuit refuses to give deference to factual findings” that underlie the definiteness determination.  Nova is correct as to the Federal Circuit’s position — the only question here is whether the Supreme Court will order the appellate court to follow its own law in this case. [DowPetition][NovaOpposition]

The big list: (more…)

Epic Trade Secret Case Billion Dollar Verdict

Patent, ,

by Dennis Crouch

I expect that 2016 will be the year that Congress to creates a federal cause of action for trade secret misappropriation.  Acting in rare unanimous fashion, the Senate recently passed the Defend Trade Secret Act (DTSA) with republican leadership.  The house is expected to follow with President Obama also indicating support.  In his most recent State of the Union Address, President Obama noted that “[n]o foreign nation, no hacker, should be able to . . . steal our trade secrets.”

Meanwhile, state-law trade secret and business tort claims continue to wield power.

In Epic Systems v. Tata Group, a W.D.Wisc. jury has awarded Epic just shy of $1 billion on state-law trade-secret misappropriation, computer-fraud (trafficking in passwords under the CFAA), breach-of-contract claims, and unfair competition.  The damages included $240 million for compensatory damages and $700 million in punitive damages.

Tata Group (one of India’s largest companies) is accused of downloading documentation for hospital management software and then providing that documentation to its subsidiary Med Mantra.  This appears to be a case of exceeding authorization.  Thus, although Tata employees were permitted access the documentation, the breach came when the documentation was shared beyond what was contractually permitted.   If it collects, the verdict will more than double Epic’s annual profits.

The verdicts:

Following any post-verdict decisions, the appeal will be handled by the 7th Circuit. The damages theory of the case is tricky — it is unclear to what extent Epic should be permitted to use Wisconsin (or US) law to collect for damages either caused or felt in India.

Defend Trade Secret Act Moving Forward

Patent, , ,

by Dennis Crouch

I am always amazed how gridlock is pushed aside to implement intellectual property laws.  In a unanimous vote yesterday, the Senate passed the Defend Trade Secret Act (DTSA, S. 1890) that would create a federal cause of action for trade secret misappropriation and provides for damages and injunctive relief (including a seizure order to prevent dissemination).  Neither Senators Ted Cruz nor Bernie Sanders voted.  The identical bill H.R. 3326 is pending in the House of Representatives and includes 127 co-sponsors (mostly Republican).  President Obama has announced his support as well.

From Senator Hatch:

Trade secrets–such as customer lists, formulas, algorithms, software codes, unique designs, industrial techniques, and manufacturing processes–are an essential form of intellectual property. Other forms of intellectual property, such as patents, copyrights, and trademarks, are covered by Federal civil law. Trade secrets, by contrast, are the only form of U.S. intellectual property where the owner does not have access to a Federal civil remedy for misuse or misappropriation. As a result, billions of dollars each year are lost to trade secret theft, which stifles innovation by deterring companies from investing in research and development. Currently, the only Federal vehicle for trade secret protection is the 1996 Economic Espionage Act, which makes trade secret theft by foreign nationals a criminal offense. But this remedy criminalizes only a small subset of trade secret theft and relies on the thinly stretched resources of the Department of Justice to investigate and prosecute such offenses. . . . State laws today are perhaps even more variable in their treatment of trade secrets than they were at the time the Uniform Trade Secrets Act was proposed in 1979. This next mixed bag of differing legal regimes forces victims of trade secret theft to wade through a quagmire of procedural hurdles in order to recover their losses. . . . Put simply, State law is designed for intrastate litigation and offers limited practical recourse to victims of interstate trade secret theft–the contrast between intrastate and interstate. Maintaining the status quo is woefully insufficient to safeguard against misappropriation. U.S. companies must be able to protect their trade secrets in Federal court.

Most trade secret cases involve former employees who take knowledge with them as they move to a new venture.  The bill apparently includes minor safeguards for whistle-blowing employees and bar a court from preventing a person from moving to a new job. However, as far as I know, no employee groups have supported the Bill.

More info: 

Misappropriation is defined as “(A) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or (B) disclosure or use of a trade secret of another without express or implied consent by a person who–(i) used improper means to acquire knowledge of the trade secret; (ii) at the time of disclosure or use, knew or had reason to know that the knowledge of the trade secret was–(I) derived from or through a person who had used improper means to acquire the trade secret; (II) acquired under circumstances giving rise to a duty to maintain the secrecy of the trade secret or limit the use of the trade secret; or (III) derived from or through a person who owed a duty to the person seeking relief to maintain the secrecy of the trade secret or limit the use of the trade secret; or (iii) before a material change of the position of the person, knew or had reason to know that–(I) the trade secret was a trade secret; and (II) knowledge of the trade secret had been acquired by accident or mistake.”

Improper means “(A) includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means; and (B) does not include reverse engineering, independent derivation, or any other lawful means of acquisition.”

 

 

Effective Date: The amendments shall apply with respect to any misappropriation of a trade secret for which any act occurs on or after the date of the enactment of this Act.

Not Intellectual Property: The new trade secrecy law “shall not be construed to be a law pertaining to intellectual property for purposes of any other Act of Congress.”  Thus, for example, the bankruptcy IP exception 365(n) would not apply to licenses of trade secret information.

Pending Supreme Court Patent Cases 2016 (April 1 Update)

Patent, , , , , , , , , , , , ,

by Dennis Crouch

Design Patent Damages: The Supreme Court has granted Samsung’s petition for writ of certiorari on the issue of design patent damages under 35 U.S.C. 289.  The statute allows for disgorgment of the infringer’s “total profit,” but the question is total-profit-as-to-what? Certainly not the entire company. The Federal Circuit has ruled that the total profit applies to the article of manufacture (here a mobile phone) while Samsung argues that the profit should be reduced to the profits associated with the component at issue (the screen). The Supreme Court rejected the second proposed issue of design patent scope.

No Standing for Cuozzo?: I wrote some about the standing and appellate jurisdiction issue in Cuozzo earlier this week.  [Link].  Up to now, Cuozzo has not explained how a Phillips claim construction would impact the outcome of its inter partes review.  Cuozzo’s reply brief may address that issue – either way they almost have to come-up at oral arguments under questioning from Justice Breyer or Justice Sotomayor.

Post Sale Restraints: A key new petition was filed in Impression Products v. Lexmark on the issue of patent exhaustion and the extent that a manufacturer can rely upon patent rights to create post-sale use requirements and restrictions and limits on international trade. [Link]. In Sequenom, v. Ariosa, the court is subtly asked to reconsider and scale-back the language of Mayo v. Prometheus.  The petition actually asks the court to stop mis-interpreting Mayo. [Link].  Vehicle Intelligence and Safety as well as Cloud Satchel also raise Section 101 challenges, but those cases are battling long odds.

Reviewing a Jury Verdict of Definiteness: New petition Dow v. Nova raises the interesting question regarding the standard for appellate review of factual findings that serve as the underlying basis for a definiteness determination. Based upon a logical extension of Teva v. Sandoz, those factual findings should be given deference even though the ultimate determination of definiteness is a question of law.  An important distinction from pure claim construction is that (as here) juries may be tasked with the job of ruling whether a claim is indefinite.  In that situation, the juries do not separate their factual conclusions from legal conclusions creating some amount of confusion.  The original Federal Circuit opinion cited to Teva, but not for its holding regarding deference. I would not be surprised by a GVR order from the Supreme Court asking the Federal Circuit to reconsider based upon that holding. [DowPetition].

Flexible Obviousness Test Does Not Apply to Secondary Indicia of Nonobviousness: In Cubist Pharma v. Hospira, the petitioner-patentee challenges the Federal Circuit’s increasingly bright line limits on secondary indicia of nonobviousness.  How do those limits mesh with the flexible doctrine outlined in Section 103 and explained by Deere and KSR.  [CubistPetition].

Did the AIA Shrink Federal Circuit Appellate Jurisdiction?: Finally, in Globus Medical, the question focuses on Federal Circuit jurisdiction over appeals in former-patent-cases, but where the only issue appealed is a non-patent issue.  This same issue was previously decided in favor of Federal Circuit jurisdiction. However, the AIA modified the language of the Federal Circuit appellate jurisdiction statute and opened the door to a re-visitation.  28 U.S.C. 1292.  However, the argument barely carries the weight of its linguistics if that.

Previously, the Federal Circuit had appellate jurisdiction over cases if the district court’s jurisdiction could at least in-part be traced to 28 U.S.C. 1338 (giving district court’s jurisdiction over patent cases). The AIA amended the statute to give appellate jurisdiction to the Federal Circuit in any “civil action arising under” the patent laws.  Since appellate jurisdiction ordinarily attaches at the notice-of-appeal filing stage, Globus Medical argues that former patent cases no longer “arise under” the patent laws once final judgment is issued and no patent questions are appealed.

Denials: Cert was denied in Daiichi Sankyo v Lee (term adjustment); ParkerVision (standard for setting aside jury verdict based upon errors in expert testimony); Biogen (district court jurisdiction over interferences post-AIA); Morales v. Square (eligibility); Joao Bock v. Jack Henry (eligibility); and BriarTek v. DeLorme (USITC preclusion issue).

The big list:

1. Petitions Granted:

2. Petitions Granted with immediate Vacatur and Remand (GVR)

3. Petitions for Writ of Certiorari Pending:

  • Indefiniteness: The Dow Chemical Company v. Nova Chemicals Corporation (Canada), et al., No. 15-1160 (standard for appellate review of jury verdict of definiteness that is inherently based upon the jury’s factual findings) [DowPetition]
  • Exhaustion: Impression Products, Inc. v. Lexmark International, Inc., No. 15-1189 (unreasonable restraints on downstream uses)
  • Obviousness: Cubist Pharmaceuticals, Inc. v. Hospira, Inc., No. 15-1210 (bright line limits on secondary indicia of nonobviousness) [CubistPetition]
  • Infringement by Joint Enterprise: Limelight Networks, Inc. v. Akamai Technologies, Inc., et al., No. 15-993 (can a defendant be held liable for the collective performance of method steps by multiple independent parties?)
  • Post Grant Admin: Versata v. SAP, No. 15-1145 (scope of CBM review)
  • Post Grant Admin: Cooper v. Lee, No. 15-955 (whether IPRs violate Separation of Powers; two amici now filed in support)
  • Post Grant Admin: Click-to-Call Tech, LP v. Oracale Corp., No. 15-1014 (Same questions as Cuozzo and now-dismissed Achates v. Apple)
  • Post Grant Admin: GEA Process Engineering, Inc. v. Steuben Foods, Inc., No. 15-1075 (Flip-side of Cuozzo: Can there be no appeal when the PTAB exceeds its authority by terminating an instituted IPR proceeding?)
  • Post Grant Admin: Interval Licensing LLC v. Michelle K. Lee, No. 15-716 (Can the Patent and Trademark Office appropriately apply the “broadest reasonable interpretation” standard in construing patent claims in post-grant validity challenges?)
  • Post Grant Admin: Stephenson v. Game Show Network, LLC, et al., No. 15-1187 (is BRI proper for IPR validity challenges?; Same as Cuozzo) [GameShowNetworkPetition]
  • Laches: Medinol Ltd. v. Cordis Corporation, et al., No. 15-998
  • Laches: SCA Hygiene Products Aktiebolag, et al. v. First Quality Baby Products, LLC, et al., No. 15-927 (three amici filed in support)
  • Biologics Notice of Commercial Marketing: Sandoz Inc. v. Amgen Inc., et al., No. 15-1039 (Does the notice requirement of the BPCIA create an effective six-month exclusivity post-FDA approval?) (cross-petition asks for recourse on failure to dance).
  • Design Patents: Systems, Inc. v. Nordock, Inc., No. 15-978 (design patent damage calculations – similar issues as Samsung v. Apple)
  • Inducement: Life Technologies Corporation, et al. v. Promega Corporation, No. 14-1538 (whether an entity can “induce itself” under 271(f)(1))(CVSG, awaiting government brief)
  • Preclusion or Jurisdiction: Vermont v. MPHJ Technology Investments, LLC, No. 15-838 (Federal court jurisdiction in anti-troll consumer protection case)
  • Preclusion or Jurisdiction: Globus Medical, Inc. v. Sabatino Bianco, No. 15-1203 (Appellate jurisdiction of the Federal Circuit) [GlobusMedicalPetition]
  • Eligibility Challenges: Sequenom, Inc. v. Ariosa Diagnostics, Inc., et al., No. 15-1182 (scope of the natural phenomenon eligibility exclusion)
  • Eligibility Challenges: Retirement Capital Access Management Company, LLC v. U.S. Bancorp, et al., No. 15-591 (Whether subject matter eligibility under 35 U.S.C. § 101 is a ground specified as a condition for patentability under 35 U.S.C. § 282(b)(2))
  • Eligibility Challenges: Hemopet v. Hill’s Pet Nutrition, Inc., No. 15-1062 (natural phenom case of tailoring a diet to a pet’s genomic characteristics)
  • Eligibility Challenges: Cloud Satchel, LLC v. Barnes & Noble, Inc., et al., No. 15-1161 (abstract idea eligibility) [CloudSatchelPetition]
  • Eligibility Challenges: Vehicle Intelligence and Safety LLC v. Mercedes-Benz USA, LLC, et al., No. 15-1201 (abstract idea eligibility) [VehicleIntelligencePetition]
  • Damages: Innovention Toys, LLC v. MGA Entertainment, Inc., et al., No. 15-635 (Stryker/Halo follow-on – potential wait-and-see)
  • Damages: WesternGeco LLC v. ION Geophysical Corporation, No. 15-1085 (consequential lost-profit damages for infringement under Section 271(f))
  • Written Description: Tas v. Beach, No. 15-1089 (written description requirement for new drug treatments)

4. Petitions for Writ of Certiorari Denied or Dismissed:

  • Daiichi Sankyo Company, Ltd. v. Michelle K. Lee, No. 15-652 (Patent Term Adjustment – whether the 180 day deadline applies; could bleed into admin law issues)
  • Parkervision, Inc. v. Qualcomm Incorporated, No. 15-1092 (“Whether and under what circumstances an inconsistency in expert testimony permits a court to set aside a jury verdict and grant the losing party judgment as a matter of law.”)
  • Joao Bock Transaction Systems, LLC v. Jack Henry & Associates, Inc., No. 15-974 (defining an abstract idea)
  • Biogen MA, Inc. v. Japanese Foundation for Cancer Research, et al., No. 15-607 (Whether AIA eliminated federal district courts’ jurisdiction over patent interference actions under 35 U.S.C. § 146.)
  • BriarTek IP, Inc. v. DeLorme Publishing Company, Inc., et al., No. 15-1025 (Preclusive impact of ITC consent judgment).
  • Morales v. Square, No. 15-896 (eligibility under Alice)
  • ePlus, Inc. v. Lawson Software, Inc., No. 15-639 (what happens with a finally-determined permanent injunction after PTO cancels the patent claim?)
  • Media Rights Technologies, Inc. v. Capital One Financial Corporation, et al., No. 15-725 (Claim Construction: whether there a strong presumption against construing terms as subject to 35 U.S.C. § 112p6 that do not recite the term “means.”)
  • Alexsam, Inc. v. The Gap, Inc., No. 15-736 (appellate jurisdiction over patents that were dropped from case pre-trial)
  • Universal Lighting Technologies, Inc., v. Lighting Ballast Control LLC, No. 15-893 (intrinsic vs extrinsic evidence for claim construction).
  • STC, Inc. v. Global Traffic Technologies, No. 15-592 (Whether marking the packaging of a patented article with patent notification satisfies the marking provision of 35 U.S.C. § 287(a) where the patented article itself is undisputedly capable of being marked.)
  • Achates Reference Publishing, Inc. v. Apple Inc., et al., No. 15-842 (IPR institution decisions unreviewable, even when addressed in a final written decision by PTAB) [Note – This case was dismissed after being settled by the parties]
  • Alps South, LLC v. The Ohio Willow Wood Company, No. 15-567
  • Allvoice Developments US, LLC v. Microsoft Corp., No. 15-538
  • OIP Technologies, Inc. v. Amazon.com, Inc., No. 15-642
  • Fivetech Technology Inc. v. Southco, Inc., No. 15-381
  • Tyco Healthcare Group LP, et al. v. Ethicon Endo-Surgery, Inc., No. 15-115
  • Nautilus, Inc. v. Biosig Instruments, Inc., No. 15-561
  • Chunghwa Picture Tubes, Ltd., et al. v. Eidos Display, LLC, et al., No. 15-288
  • Kenneth Butler, Sr. v. Balkamp Inc., et al., No. 15-273
  • Arthrex, Inc. v. KFx Medical Corporation, No. 15-291
  • Arthrex, Inc. v. Smith & Nephew, Inc., et al., No. 15-559 (Commil re-hash – if actions were “not objectively unreasonable” can they constitute inducement?)
  • Daiichi Sankyo, Inc., et al. v. Apotex Inc., No. 15-281
  • Mylan Pharmaceuticals Inc. v. Apotex Inc., No. 15-307
  • Luv N’ Care, Ltd. v. Munchkin, Inc., No. 15-242
  • Automated Merchandising Systems, Inc. v. Michelle K. Lee, Director, United States Patent and Trademark Office, No. 15-326
  • I/P Engine, Inc. v. AOL Inc., et al., No. 14-1358
  • Interval Licensing LLC v. AOL Inc., et al., No. 14-1362
  • Content Extraction and Transmission LLC v. Wells Fargo Bank, National Association, et al., No. 14-1473
  • L. Gore & Associates, Inc. v. Bard Peripheral Vascular, Inc., et al., No. 15-41
  • NetAirus Technologies, LLC v. Apple Inc., No. 14-1353
  • Muffin Faye Anderson v. Kimberly-Clark Corporation, No. 14-10337
  • MobileMedia Ideas LLC v. Apple Inc., No. 15-206
  • SpeedTrack, Inc. v. Office Depot, Inc. et al., No. 15-461 (Kessler doctrine)
  • Rodney K. Morgan, et al. v. Global Traffic Technologies LLC, No. 15-602
  • Lakshmi Arunachalam v. JPMorgan Chase & Co., No. 15-691

5. Prior versions of this report:

Supreme Court Grants Cert on Design Patent Damages

Patent, ,

By Jason Rantanen

This morning, the Supreme Court granted certiorari on the design patent remedies question in Samsung Electronics Co. v. Apple Inc.  It did not grant certiorari on the functionality/ornamentality question raised in Samsung’s petition.

The question presented is:

2. Where a design patent is applied to only a component of a product, should an award of infringer’s profits be limited to those profits attributable to the component?

Prior PatentlyO discussion available here.  Tom Cotter also has an extensive discussion of this case on his Comparative Patent Remedies blog.

This case is particularly interesting to me, as this afternoon I’m giving a talk at the Washington & Lee School of Law on a current work in progress on the Takings Clause and changes to substantive patent law.  I’ll be touching on the design patent remedies issue as an area of potential tension–regardless of how this decision turns out, it will be an imporant subject to keep an eye on!

Pending Supreme Court Patent Cases 2016 (March 17 Update)

Patent, , , , , , , , , , ,

by Dennis Crouch

President Obama has announced his nomination of Merrick Garland to become the next Supreme Court Justice. Garland is Chief Judge of the D.C. Circuit Court of Appeals and would bring tremendous intellectual firepower to the Court and is clearly more moderate many potential nominees. All indications indicate that President Obama is correct in his appraisal of Garland as “widely recognized not only as one of America’s sharpest legal minds, but someone who brings to his work a spirit of decency, modesty, integrity, even-handedness and excellence.”  That said, there is little chance that Garland will be confirmed except perhaps after the election (assuming that a Democratic contender wins).

Samsung’s design patent case is looking like a strong contender for grant of certiorari. The court will again consider the case this week.  We continue to await the views of the solicitor general in Life Tech v. Promega (whether an entity can “induce itself” under 271(f)(1)) (CVSG requested in October 2015).

The key new petition this fortnight is Versata v. SAP.  Versata raises four questions stemming from the USPTO’s covered business method (CBM) review of its “hierarchical pricing engine” patents.

  1. Whether the phrase “covered business method patent”—and “financial product or service”—encompasses any patent claim that is “incidental to” or “complementary to a financial activity and relates to monetary matters.”
  2. Whether the Federal Circuit’s standard for identifying patents falling within the “technological inventions” exception departs from statutory text by looking to whether the patent is valid, as opposed to whether it is “technological.”
  3. Whether a software-related invention that improves the performance of computer operations is patent eligible subject matter.
  4. Whether, as this Court will decide in Cuozzo Speed Technologies, LLC v. Lee, No. 15-446, the Patent Trial and Appeal Board should give claim terms their broadest reasonable construction in post-grant adjudicatory proceedings, or should instead give them their best construction.

Jeff Lamkin and his MoloLamkin team filed the brief.  [Versata Cert Petition].  SAP is on the hook for a $300+ million verdict if Versata is able to win this appeal.

The second new case is Tas v. Beach (written description requirement for new drug treatments).  Tas is a Turkish researcher representing himself pro se in the interference case against Johns Hopkins.  Interesting issues, but the case has no chance.  No cases have been dismissed or denied.

I pulled up MPHJ’s response to Vermont’s petition (filed by Bryan Farney). The opening paragraph spells out the case:

This “groundbreaking” case, as Petitioner describes it, has been going on, unjustifiably and unconstitutionally, for nearly three years now – all because Petitioner has refused to admit or accept that its state law claims against MPHJ are preempted by federal law, barred by the First Amendment “right to petition” clause, and that Congress has decided that federal preemption questions involving the patent laws must be decided by the federal court system.
 The big list:

1. Petitions Granted:

2. Petitions Granted with immediate Vacatur and Remand (GVR)

3. Petitions for Writ of Certiorari Pending:

  • Infringement by Joint Enterprise: Limelight Networks, Inc. v. Akamai Technologies, Inc., et al., No. 15-993 (can a defendant be held liable for the collective performance of method steps by multiple independent parties?)
  • Post Grant Admin: Versata v. SAP, No. 15-1145 (scope of CBM review)
  • Post Grant Admin: Cooper v. Lee, No. 15-955 (whether IPRs violate Separation of Powers; two amici now filed in support).
  • Post Grant Admin: Click-to-Call Tech, LP v. Oracale Corp., No. 15-1014 (Same questions as Cuozzo and now-dismissed Achates v. Apple)
  • Post Grant Admin: GEA Process Engineering, Inc. v. Steuben Foods, Inc., No. 15-1075 (Flip-side of Cuozzo: Can there be no appeal when the PTAB exceeds its authority by terminating an instituted IPR proceeding?)
  • Post Grant Admin: Interval Licensing LLC v. Michelle K. Lee, No. 15-716 (Can the Patent and Trademark Office appropriately apply the “broadest reasonable interpretation” standard in construing patent claims in post-grant validity challenges?)
  • Laches: Medinol Ltd. v. Cordis Corporation, et al., No. 15-998
  • Laches: SCA Hygiene Products Aktiebolag, et al. v. First Quality Baby Products, LLC, et al., No. 15-927 (three amici filed in support)
  • Biologics Notice of Commercial Marketing: Sandoz Inc. v. Amgen Inc., et al., No. 15-1039 (Does the notice requirement of the BPCIA create an effective six-month exclusivity post-FDA approval?)
  • Design Patents: Samsung Electronics Co. v. Apple Inc., No 15-777 (design patent scope and damages calculation)
  • Design Patents: Systems, Inc. v. Nordock, Inc., No. 15-978 (design patent damage calculations – similar issues as Samsung v. Apple). []
  • Inducement: Life Technologies Corporation, et al. v. Promega Corporation, No. 14-1538 (whether an entity can “induce itself” under 271(f)(1))(CVSG, awaiting government brief)
  • Preclusion or Jurisdiction: BriarTek IP, Inc. v. DeLorme Publishing Company, Inc., et al., No. 15-1025 (Preclusive impact of ITC consent judgment).
  • Preclusion or Jurisdiction: Vermont v. MPHJ Technology Investments, LLC, No. 15-838 (Federal court jurisdiction in anti-troll consumer protection case)
  • Preclusion or Jurisdiction: Biogen MA, Inc. v. Japanese Foundation for Cancer Research, et al., No. 15-607 (Whether AIA eliminated federal district courts’ jurisdiction over patent interference actions under 35 U.S.C. § 146.)
  • Eligibility Challenges: Retirement Capital Access Management Company, LLC v. U.S. Bancorp, et al., No. 15-591 (Whether subject matter eligibility under 35 U.S.C. § 101 is a ground specified as a condition for patentability under 35 U.S.C. § 282(b)(2))
  • Eligibility Challenges: Hemopet v. Hill’s Pet Nutrition, Inc., No. 15-1062 (natural phenom case of tailoring a diet to a pet’s genomic characteristics)
  • Eligibility Challenges: Joao Bock Transaction Systems, LLC v. Jack Henry & Associates, Inc., No. 15-974 (defining an abstract idea)
  • Patent Term Adjustment Dispute: Daiichi Sankyo Company, Ltd. v. Michelle K. Lee, No. 15-652 (Patent Term Adjustment – whether the 180 day deadline applies; could bleed into admin law issues)
  • Damages: Innovention Toys, LLC v. MGA Entertainment, Inc., et al., No. 15-635 (Stryker/Halo follow-on – potential wait-and-see)
  • Damages: WesternGeco LLC v. ION Geophysical Corporation, No. 15-1085 (consequential lost-profit damages for infringement under Section 271(f))
  • Jury Role: Parkervision, Inc. v. Qualcomm Incorporated, No. 15-1092 (“Whether and under what circumstances an inconsistency in expert testimony permits a court to set aside a jury verdict and grant the losing party judgment as a matter of law.”)
  • Written Description: Tas v. Beach, No. 15-1089 (written description requirement for new drug treatments).
  • Low Quality Brief: Morales v. Square, No. 15-896 (eligibility under Alice)

4. Petitions for Writ of Certiorari Denied or Dismissed:

  • ePlus, Inc. v. Lawson Software, Inc., No. 15-639 (what happens with a finally-determined permanent injunction after PTO cancels the patent claim?)
  • Media Rights Technologies, Inc. v. Capital One Financial Corporation, et al., No. 15-725 (Claim Construction: whether there a strong presumption against construing terms as subject to 35 U.S.C. § 112p6 that do not recite the term “means.”)
  • Alexsam, Inc. v. The Gap, Inc., No. 15-736 (appellate jurisdiction over patents that were dropped from case pre-trial)
  • Universal Lighting Technologies, Inc., v. Lighting Ballast Control LLC, No. 15-893 (intrinsic vs extrinsic evidence for claim construction).
  • STC, Inc. v. Global Traffic Technologies, No. 15-592 (Whether marking the packaging of a patented article with patent notification satisfies the marking provision of 35 U.S.C. § 287(a) where the patented article itself is undisputedly capable of being marked.)
  • Achates Reference Publishing, Inc. v. Apple Inc., et al., No. 15-842 (IPR institution decisions unreviewable, even when addressed in a final written decision by PTAB) [Note – This case was dismissed after being settled by the parties]
  • Alps South, LLC v. The Ohio Willow Wood Company, No. 15-567
  • Allvoice Developments US, LLC v. Microsoft Corp., No. 15-538
  • OIP Technologies, Inc. v. Amazon.com, Inc., No. 15-642
  • Fivetech Technology Inc. v. Southco, Inc., No. 15-381
  • Tyco Healthcare Group LP, et al. v. Ethicon Endo-Surgery, Inc., No. 15-115
  • Nautilus, Inc. v. Biosig Instruments, Inc., No. 15-561
  • Chunghwa Picture Tubes, Ltd., et al. v. Eidos Display, LLC, et al., No. 15-288
  • Kenneth Butler, Sr. v. Balkamp Inc., et al., No. 15-273
  • Arthrex, Inc. v. KFx Medical Corporation, No. 15-291
  • Arthrex, Inc. v. Smith & Nephew, Inc., et al., No. 15-559 (Commil re-hash – if actions were “not objectively unreasonable” can they constitute inducement?)
  • Daiichi Sankyo, Inc., et al. v. Apotex Inc., No. 15-281
  • Mylan Pharmaceuticals Inc. v. Apotex Inc., No. 15-307
  • Luv N’ Care, Ltd. v. Munchkin, Inc., No. 15-242
  • Automated Merchandising Systems, Inc. v. Michelle K. Lee, Director, United States Patent and Trademark Office, No. 15-326
  • I/P Engine, Inc. v. AOL Inc., et al., No. 14-1358
  • Interval Licensing LLC v. AOL Inc., et al., No. 14-1362
  • Content Extraction and Transmission LLC v. Wells Fargo Bank, National Association, et al., No. 14-1473
  • L. Gore & Associates, Inc. v. Bard Peripheral Vascular, Inc., et al., No. 15-41
  • NetAirus Technologies, LLC v. Apple Inc., No. 14-1353
  • Muffin Faye Anderson v. Kimberly-Clark Corporation, No. 14-10337
  • MobileMedia Ideas LLC v. Apple Inc., No. 15-206
  • SpeedTrack, Inc. v. Office Depot, Inc. et al., No. 15-461 (Kessler doctrine)
  • Rodney K. Morgan, et al. v. Global Traffic Technologies LLC, No. 15-602
  • Lakshmi Arunachalam v. JPMorgan Chase & Co., No. 15-691

5. Prior versions of this report: