Tag Archives: Damages

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.

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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

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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.

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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)

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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:

Pending Supreme Court Patent Cases 2016 (March 4 Update)

Patent, , , , , , , , , ,

by Dennis Crouch

Earlier this week, the University of Missouri Law Review held its annual symposium – this year focusing on the Future of the Administrative State.  That future is a primary front of challenge in the patent system.  Arguments in Cuozzo v. Lee are now scheduled for April 25.  Jeffrey Wall of Sullivan & Cromwell (who also argued Stryker/Halo two weeks ago) is representing Cuozzo along with his colleague Garrard Beeney. On that same day, the Supreme Court will also hear the copyright attorney fee case Kirtsaeng.

Following Justice Scalia’s death, the Supreme Court simplified its docket by denying certiorari to a set of patent cases, including: Arthrex v. Smith & Nephew; STC v. Global Traffic Technologies; ePlus v. Lawson Software, Inc.; Media Rights Technologies v. Capitol One; Alexsam v. The Gap; and ULT v. Lighting Ballast Control.  Achates v. Apple was dismissed after being settled by the parties.

New petitions include Sandoz v. Amgen (BCPIA’s inherent six-month delay following commercial marketing notice); Hemopet v. Hill’s Pet (eligibility of claim directed to tailoring of a pet’s diet based upon genomic characteristics and expression); GEA Process v. Steuben Foods (after instituting, is the PTAB’s termination reviewable?); ParkerVision v. Qualcomm (when should a court reject a jury’s determination that an expert is credible); and WesternGeco v. ION Geophysical (foreign lost profit damages).

  • Petitions Granted:
  1. Petitions Granted with immediate Vacatur and Remand (GVR)
  1. 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: 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.”)
  • Low Quality Brief: Morales v. Square, No. 15-896 (eligibility under Alice)
  1. 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
  1. Prior versions of this report:

 

 

Federal Circuit: Apple’s Slide-to-Unlock Patent is Invalid

Patent, ,

by Dennis Crouch

In the Federal Circuit’s most recent Apple v. Samsung decision, the court has, inter alia, invalidated two of Apple’s asserted patents and held the third was not infringed – despite a jury verdict to the opposite.

At the district court, the jury found that three of Apple’s touch-screen patents (covering slide-to-unlock, spell correction, and automated data-structure detection) infringed by Samsung devices (resulting in $119.6 million in damages)[1] and that one Samsung patent (covering particular photo/video operations) was infringed (resulting in only $158,400 in damages).[2] This case is parallel to (but entirely separate from) the iPhone design patent case now pending before the Supreme Court that resulted in a $600,000,000 judgement for Apple.

Invalidity: Samsung had argued that the slide-to-unlock and automatic spell correction claims were invalid as obvious.  In support of the patents, Apple presented evidence of copying, commercial success, industry praise, and long-felt but unresolved need  — all as secondary considerations of nonobvoiusness.

[S]econdary considerations must be considered in evaluating the obviousness of a claimed invention. But weak secondary considerations generally do not overcome a strong prima facie case of obviousness. This is particularly true when an invention involves nothing more than the predictable use of prior art elements according to their established functions.

(internal quotation marks and citations removed).

The Federal Circuit walked through Apple’s evidence – pointing out its weakness:

  • Copying: What was copied was not the iPhone unlock mechanism in its entirety, but only using a fixed starting and ending point for the slide — features shown in the prior art.
  • Industry Praise: Evidence of approval by Apple fans—who may or may not have been skilled in the art—during the presentation of the iPhone is not legally sufficient.
  • Long-Felt Need: Apple’s contention here is nothing more than an unsupported assertion that Apple’s method is better and more “intuitive” than previous methods. This is not sufficient to demonstrate the existence of a long-felt but unmet need.
  • Commercial Success: “[E]vidence that customers prefer to purchase a device with a slide-to-unlock capacity does not show a nexus [to the claimed invention] when the evidence does not show what alternative device consumers were comparing that device to. For example, it is not clear whether the alternative device had any unlocking feature. A reasonable jury could therefore not find a nexus between the patented feature and the commercial success of the iPhone.

Collectively, the Federal Circuit found this evidence of secondary conditions too weak to overcome the evidence of obviousness based upon the prior art documents.  As such, the appellate panel reversed the jury verdict and lower court denial of Judgment as a Matter of Law — now holding the patent claims invalid as obvious.

Infringement: Apple’s automated data-structure detection claims cover the process of automatically identifying items in within text such as telephone numbers or dates.  The claims require an “analyzer server” that detects the structures. That patent claim term had been previously construed by the Federal Circuit and this narrow construction was adopted by the district court – although not until the last day of trial.  However, Apple’s expert testified that the Samsung device infringed under this narrow definition (Samsung’s expert disagreed) and the jury sided with Apple. On appeal, however, the Federal Circuit reversed – finding that no reasonable jury could have found infringement based upon the testimony:

[Apple’s expert] testimony is not sufficient evidence to allow a jury to conclude that the Samsung software met the “analyzer server” limitation. Our previous construction required more than just showing that accused software was stored in a different part of the memory and was developed separately. We found that the “analyzer server” limitation is a separate structural limitation and must be a “server routine,” consistent with the “plain meaning of ‘server’.” That is, it must run separately from the program it serves. . . . Apple could point to no testimony where its expert stated that the library programs run separately.

Thus, the holding of infringement was reversed and Apple’s $120 million award has vanished.

The court did uphold Samsung’s win, but that award is only $158,400 in damages.  In addition, the court awarded appellate costs to Samsung.

= = = = =

 

 

[1] Apple alleged infringement of five U.S. patents: U.S. Patent  Nos. 5,946,647 (the ’647 patent), 6,847,959 (the ’959 patent), 7,761,414 (the ’414 patent), 8,046,721 (the ’721 patent), and 8,074,172 (the ’172 patent). The jury found infringement of the ’647 patent, the ’721 patent, and the ’172 patent but no infringement of the other two.

[2] The Jury found that Apple infringed Samsung’s U.S. Patent No. 6,226,449 (the ’449 patent) but not U.S. Patent No. 5,579,239 (the ’239 patent).

 

Trolls vs Pirates: Halo/Stryker Oral Arguments

Patent, ,

Today the Supreme Court heard combined oral arguments in the willful infringement cases of:

  • Halo Electronics, Inc. v. Pulse Electronics, Inc., et al. (14-1513); and
  • Stryker Corporation, et al. v. Zimmer, Inc., et al. (14-1520)
  • Read the transcript.

Jeffrey Wall argued on behalf of the patentee-petitioners who argued that the Federal Circuit’s limits on awarding enhanced damages is unduly rigid – especially following the Supreme Court’s Octane Fitness determination.  The U.S. Government has supported the petitioners in this case and presented Assistant to the Solicitor Roman Martinez to argue as amicus curiae.  Carter Phillips argued on behalf of the defendant-respondents.

Wall’s approach was to highlight the general nature of the the statute, which merely states that “the court may increase the damages up to three times the amount found or assessed.” That general statute should be contrasted with the Federal Circuit’s rule that requires separate proof of both objective and subjective willful behavior.  Rather, Wall argued that we should “go back to doing a totality [of the circumstances] inquiry . . . [applying] the principles that historically guided your exercise of discretion.”  Wall also pointed to the what he sees as an important factor in the analysis: that “a patent lawyer can virtually always come up with some non-frivolous defense in litigation” and, that fact makes is virtually impossible to prove that the infringement was objectively reckless.  The U.S. Government agreed that the objectively reasonable defense “creates an arbitrary loophole that allows some of the most egregious infringers to escape enhanced damages.”

MR. MARTINEZ: So recklessness, everyone agrees, is an objective inquiry. And in every other area of law where courts are conducting an objective inquiry, what you ­­ what you’re supposed to do is you’re supposed to take a reasonable man, and you put him in the ­­ the actual person who is accused of wrongdoing, in his shoes. And you take what that actual person knew, and you figure out whether a reasonable man in that person’s shoes would have thought that there was a very high risk that the conduct at issue was unlawful.

And what the Federal Circuit does is not that. What they are essentially doing is taking the reasonable man and giving him the benefit of omniscience, giving him the benefit of hindsight and saying, what facts do we know at the time of trial? And now that we know these facts at the time of trial, . . .

JUSTICE BREYER: I didn’t think they were doing that. I thought what they were doing was saying, we are not going to allow punitive damages in a case where the patent is so weak.

. . . .

MR. MARTINEZ: I think it’s possible to imagine ­­let me ­­ let me make it concrete.

Imagine a case in which there’s intentional violation or a reckless violation based on the facts known at the time. And later the ­… infringer is sued, and he hires a law firm that scours the world, and they find the library in Germany that has a Ph.D. dissertation that has some [publication] that arguably anticipated the invention at issue. So that’s a new fact. It wasn’t in anyone’s head. No one was aware of it at the time the infringement occurred. And maybe that law firm then puts together a reasonable but wrong theory under which the patent is invalid in light of that prior art. We think that’s a case in which the ­­ the conduct was culpable at the time of ­­ of infringement, and we think that’s a case that would warrant enhanced damages.

. . .

MR. PHILLIPS: We’re not talking about a situation here where it’s obvious when something is infringed. There are thousands of patents, hundreds of thousands of patents. There are lots of entities creating new products every day, new services,

. . . .

MR. WALL: [W]e and the PTO and many of Respondents’ amici recognize, the system as it currently stands is out of balance. And we have tried, and I believe we have succeeded, in crafting an approach that balances the Court’s concerns with the need to respect the rights of patentees, including small companies like Halo.

Justice Breyer offered some concern for software companies being accused of infringing weak patents:

MR. WALL: Justice Breyer, the sky didn’t fall for a century and a half, and it’s not going to fall if you reverse the Federal Circuit’s framework, just as it didn’t fall after Octane and Highmark in the fees context.

JUSTICE BREYER: It hasn’t fallen? Go look at the market shares of the different companies that are seriously involved in software. . . . I think it’s unfortunate that Congress hasn’t passed a special regime for those kinds of patents, but they haven’t.

. . .

MR. PHILLIPS: This is not a classic copying case. I mean, in a lot of ways this case comes down to sort of trolls versus pirates in terms of how you want to analyze it.

. . . .

JUSTICE SOTOMAYOR: Mr. Phillips, there’s a whole lot of worry articulated by Justice Breyer and reflected in your briefs about protecting innovation.But there’s not a whole lot of worry about protecting the patent owner. I can’t  forget that historically enhanced damages were automatic, and they were automatic because of a policy judgment that owning a patent entitled you to not have  people infringe willfully or not willfully. And I accept that at some point there was a different judgment made that ­­ that good­faith infringers should be treated differently than other infringers, willful infringers.

But I don’t know that that swung things so far the other way that it can only be that, if you come up with something, any defense whatsoever in the litigation that’s not frivolous, that that gets you out of enhanced damages.

Some of the conversation focused on the replacement test:

JUSTICE SOTOMAYOR: It can’t be that they can give enhanced penalties on whim.

MR. WALL: That’s right.

JUSTICE SOTOMAYOR: All right? So if it’s not whim, what is it? How do we articulate a test that protects what Justice Breyer is concerned about, which I think is a legitimate concern, but doesn’t entrench a position that just favors you?

MR. WALL: We think the statute was invoked for various purposes, not just to punish infringement. . . . [W]hat the parties are really debating is the nature of the infringement. That needs to be intentional or reckless based on the facts as they were known to the infringer. . . . the strength of the notice . . . Reed factors . . .

JUSTICE SOTOMAYOR: I Don’t want to adopt that test. How do I articulate this in a more generalized way?

MR. WALL: I think what you would say is that in judging whether a reasonable person would have thought that there was a really high risk, you’ve got to take account of both the strength of the notice, what kind of notice were they on of the patent, and what would have been commercially reasonable in the industry as it exists. And I think that ­­ those factors and those limitations are going to take account of the vast bulk of what Justice Breyer and what Respondents are are concerned about.

. . . .

MR. PHILLIPS: [Good luck finding] tort cases in which the eggshell plaintiff gets punitive damages because the defendant overreacted.

In addition to the elements of the test, the court is also addressing the standards of proof and review.

JUSTICE GINSBURG: Can we at least peel off the clear and convincing evidence that seems to come out of nowhere and the standard of de novo review rather than abuse of discretion?

MR. PHILLIPS: I would desperately ask you not to take out de novo review because we’re talking about an objective standard; it’s really almost ­­ it’s essentially a question of law. The issue is, is there an objectively reasonable basis for what’s been done here? [and clear and convincing evidence standard is dicta to this case]

. . . .

JUSTICE GINSBURG: You ­­ care about de novo review in the Federal Circuit rather than testing the district court’s determination for abuse of discretion.

A substantial amount of example-time focused on “copying”, which Mr. Wall identified as the “typical” case and the extent that enhanced damages should be limited to “willful” behavior.

For this case, it appears likely that the majority will overrule Seagate but the question remains open as to what will be the replacement rule.

 

 

 

Pending Supreme Court Patent Cases 2016 (February 17 Update)

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

by Dennis Crouch

Justice Scalia died this week. May he rest in peace. Although he (as well as Justice Kagan) had left the University of Chicago before I arrived, their influence continues to be felt in that institution.  (Posner, Obama, Sunstein, Meltzer & Epstein, etc. were all still around). On her blog, Professor Ouellette (Stanford) has a nice post about the mixed bag of Justice Scalia’s IP scholarship legacy.  Most recently, Justice Scalia may be best remembered for calling-out Federal Circuit jurisprudence on obviousness as “gobbledygook.”  In many cases, I would expect that his ‘vote’ was less important than the ideas he brought to the table and the way he changed the debates.

I don’t see Scalia’s death having any impact on Halo/Stryker — where I predict the Federal Circuit will be reversed.  Cuozzo is perhaps a different story where I expect a divided court to affirm in a situation where Justice Scalia may have voted to reverse.  Oral arguments are still set for February 23, 2016 in Halo and Stryker. Tony Mauro has an interesting article on the case titled “Coin toss decides which advocate will argue key patent case.”  Professor Mann provides an argument preview on SCOTUSblog.

New petitions this week include the reappearance of Limelight v. Akamai.  The Supreme Court previously shot-down the Federal Circuit’s expanded definition of inducing infringement, but on remand the Federal Circuit expanded its definition of direct infringement (to include joint enterprise liability).  The case is interesting and I hope that the court grants certiorari, but I would side with the patentee here.

In Medinol v. Cordis, the patentee questions whether the laches doctrine still applies in patent cases. This case parallels SCA Hygiene and comes on the heels of the Supreme Court’s Petrella decision which eliminated the laches defense for back-damages in copyright cases.

Briartek IP v. DeLorme, delves into interesting separation of powers and jurisdiction issues, asking: Whether a binding consent order, entered between the federal government, the ITC, and an ITC respondent, deprives federal district courts of jurisdiction over a declaratory judgment action, seeking to invalidate the patent at issue, filed by the ITC respondent … against the patent holder: a non-party to the consent order.  The Federal Circuit had affirmed without substantive opinion.

Finally, last but not least, is Click-to-Call Tech v. Oracle Corp. who has copied the questions from Cuozzo and the recently denied Achates v. Apple.  These questions challenge the seeming the absolute bar on judicial review of Patent Trial & Appeal Board’s power to institute IPR proceedings.  Although this particular petition is unlikely to be granted. It lends additional credence to the other two.  The petition is also a mechanism for the patentee here to keep the issue alive.

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: Cooper v. Lee, No. 15-955 (whether IPRs violate Separation of Powers).
  • Post Grant Admin: Click-to-Call Tech, LP v. Oracale Corp., No. 15-1014 (Same questions as Achates v. Apple and Cuozo)
  • 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
  • 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?)
  • 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)
  • Inducement: Arthrex, Inc. v. Smith & Nephew, Inc., et al., No. 15-559 (Commil re-hash – if actions were “not objectively unreasonable” can they constitute inducement?)
  • Claim Construction: Universal Lighting Technologies, Inc., v. Lighting Ballast Control LLC, No. 15-893 (intrinsic vs extrinsic evidence for claim construction).
  • 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: Alexsam, Inc. v. The Gap, Inc., No. 15-736 (appellate jurisdiction over patents that were dropped from case pre-trial)
  • Preclusion or Jurisdiction: ePlus, Inc. v. Lawson Software, Inc., No. 15-639 (what happens with a finally-determined permanent injunction after PTO cancels the patent claim?)
  • 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: Joao Bock Transaction Systems, LLC v. Jack Henry & Associates, Inc., No. 15-974 (defining an abstract idea)
  • Claim Construction: 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.”)
  • 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: 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.)
  • Damages: Innovention Toys, LLC v. MGA Entertainment, Inc., et al., No. 15-635 (Stryker/Halo follow-on – potential wait-and-see)
  • Low Quality Brief: Morales v. Square, No. 15-896 (eligibility under Alice)

3. Petitions for Writ of Certiorari Denied:

  • 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)
  • 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
  • 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
  • W.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

4. Prior versions of this report:

 

 

3M Liable for $26 Million for Fraudulent Patent Enforcement

Patent, ,

By Dennis Crouch

Transweb v. 3M (Fed. Cir. 2016)

Although 3M was the initial litigation aggressor, TransWeb’s response is the more successful.  Here, the lower court sided with TransWeb – finding 3M’s asserted patent claims invalid based upon pre-filing public uses by TransWeb and unenforceable due to inequitable conduct during prosecution. In addition, the jury awarded TransWeb $26 million for antitrust violations based upon 3M’s attempts to maintain its monopoly by asserting a fraudulently obtained patent. On appeal, the Federal Circuit has affirmed.  The technology at issue here involves Plasma-fluorinated filters as covered by 3M’s U.S. Patents 6,397,458 and 6,808,551.

Public Use based upon Oral Testimony: The evidence of pre-filing public use came from TransWeb’s founder Kumar Ogale who orally testified that he attended an expo in May 1997 and handed out “T-Melt” samples (more than one year before 3M’s 1998 priority filing date).  Although it was clear that Ogale did attend the expo and that samples were distributed, 3M challenged the oral testimony based upon the lack of corroborating evidence that Ogale handed-out samples that included the plasma-fluorinated material at the expo.  Oral testimony of an interested party is ordinarily insufficient to invalidate an issued patent.  Rather, the ‘clear and convincing’ evidence standard requires further documentation or testimony to that corroborates the account.  However, “there are no hard and fast rules as to what constitutes sufficient corroboration, and each case must be decided on its own facts.”  In this case, the Federal Circuit rejected 3M’s argument that each and every factual conclusions leading to an invalidity determination must be corroborated by additional evidence.  Rather, the rule of corroboration is a “flexible, rule of reason demand” designed to ensure that “as a whole” the oral testimony is credible.  Here, there was corroborating evidence that Ogale attended the expo and distributed materials; that his company had been producing the plasma-fluorinated material for several months and had filed for patent protection on some aspects of the material; etc.  Reviewing this evidence, the Federal Circuit found “abundant support” for Mr. Ogale’s testimony and for the jury’s verdict of prior public use.

Inequitable Conduct:  As an equitable judgment, the determination of whether a patent is unenforceable due to inequitable conduct is ordinarily within the purview of the judge rather than the jury.  Here, however, the judge permitted the jury to offer an ‘advisory opinion’ of unenforceability that the judge then enforced based upon reaching the same conclusion.  On appeal, the Federal Circuit only reviewed the judge’s conclusions.

The basic facts are that 3M had a sample of TransWeb’s filter and notified the examiner of that fact.  Based upon this notice, the examiner rejected the pending claims as obvious.  At that point, 3M offered the ‘dubious’ assertion that the TransWeb samples were only received after signing of a confidentiality agreement and thus could not constitute prior art.  That assertion was, of course, sufficient for the examiner who withdrew the rejection.  In reviewing what happened, the district court also found that 3M’s in-house counsel “undertook an intentional scheme to paper over the potentially prior art nature” of its TransWeb samples that a 3M collaborator (and later subsidiary) had received from TransWeb one-moth after the aforementioned expo.   Based upon these (and additional facts explained in the decision), the appellate panel affirmed that the fraud upon the patent office was both intentional and material – thus affirming the inequitable conduct finding.

Antitrust Violation:  In the 1965 Walker Process decision, the Supreme Court held that an antitrust-plaintiff can prevail by showing (1) that a patentee enforced its patent, knowing the same to have been obtained by willful fraud upon the patent office leading to (2) monopolization (or attempted monopolization). Although the “willful fraud” element of a Walker Process claim was previously described as a higher burden than that used in inequitable conduct. Following Therasense, the court now sees these as “nearly identical.”

The jury found that the actual harm suffered by TransWeb for the monopolization was a measly $34,000 in lost profits.  However, TransWeb also spent over $10 million in legal fees fighting the patent infringement claims ($7.7 million) and asserting the antitrust claims ($3.2 million).  Under the Sherman Act, “any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws . . . shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney’s fee.”  Following that rule, the district court awarded $3.2 million for the cost-of-suit but then trebled the $7.7 million as the damages for fraudulent patent enforcement.  On appeal, the Federal Circuit affirmed that result – holding that “3M’s unlawful act [of enforcing its fraudulently obtained patent] was in fact aimed at reducing competition and would have done so had the suit been successful.”

 

Michael Williams (Quinn Emanuel) represented TransWeb in the appeal while Seth Waxman (Wilmer) represented 3M.

 

Pre-Issuance Damages under Section 154(d)

Patent, ,

Rosebud LMS v. Adobe Systems (Fed. Cir. 2015)

In one of its first interpretation of the pre-issuances damages statute, 35 U.S.C. § 154(d), the Federal Circuit has affirmed that “actual notice of the published patent application” is a necessary element of infringement, even when the infringer buries its head in the sand to avoid knowledge of the application.

Section 154(d) defines the poorly-named concept of “provisional rights”[1], which I refer to as “pre-issuance damages.”   Under the statute,

a patent shall include the right to obtain a reasonable royalty from any person who, during the period beginning on the date of publication of the application . . .  and ending on the date the patent is issued–(A)(i) makes, uses, offers for sale, or sells in the United States the invention as claimed in the published patent application or imports such an invention into the United States . . . and (B) had actual notice of the published patent application.

The statute further requires that the patented invention be “substantially identical to the invention as claimed in the published patent application.”  Although actual notice is required, the statute does not appear to require any affirmative act by the patentee to provide that notice.

The action here involves Rosebud’s allegations against Adobe for infringing its U.S. Patent No. 8,578,280.  Prior to the present lawsuit, Rosebud had previously sued Adobe for infringing the two additional applications – the ‘parent’ and ‘grandparent’ of the ‘280 patent.  At the time of the prior lawsuit, the application leading to the ‘280 patent had already published. However, Rosebud did not introduce any evidence showing that Adobe had particular knowledge of the published application.  Instead, Rosebud presented circumstantial evidence that: (1) Adobe had actual notice of the predecessor patent that shared an identical specification (Adobe was sued for infringing the parent/grandparent and it was cited by an examiner as prior art against Adobe) (2) Adobe followed Rosebud products, based upon confidential internal Adobe emails; and (3) standard practice in the industry” suggest that Adobe’s counsel knew of the published application that resulted in the ‘280 patent.

Although the Federal Circuit agreed that circumstantial evidence could prove actual notice, the evidence presented here was insufficient to lead to that conclusion.  Further, the court reiterated that proof of “constructive notice” is insufficient to prove actual notice.

Rosebud attempted to the SynQor decision regarding pre-suit damages for inducement that require “actual knowledge” of the asserted patent.  In that case, the court approved of jury instructions that asked whether “Defendants knew or should have known” that its actions would induce actual infringement and had “reason to be aware of the existence of the patent.”  In the case, the holding of actual knowledge (affirmed on appeal) was based upon (1) marking of products with the parent’s patent number; (2) defendant’s effort’s to imitate SynQor’s products; and some evidence of patent monitoring by the defendant.   In Rosebud, the Federal Circuit did not cite or refer to this SynQor analysis.

I’ll pause here to suggest that Adobe got away with something here – It is unbelievable to me that Adobe’s counsel did not know of the published application – the sole child application of the patent that was the subject of an infringement lawsuit.

One reason why Adobe won on this issue seems to be that Rosebud delayed its push for discovery and the district court decided the summary-judgment motion before the close of discovery.  Rosebud hade provided a R. 30(b)(6) deposition notice to Adobe on the topic of knowledge of the application, but the deposition had not yet taken place.  On those points, the Federal Circuit found no abuse of discretion:

The district court did not abuse its discretion in granting summary judgment before the close of discovery. Rosebud had notice of Adobe’s intent to file an early motion for summary judgment, and did not oppose this request or indicate at the time that it needed further discovery on issues relevant to the motion. Moreover, Rosebud did not serve its Rule 30(b)(6) deposition notice or its subpoenas on Adobe’s outside counsel until several weeks after it received Adobe’s motion for summary judgment. It appears that Rosebud delayed filing much of its discovery until after it received Adobe’s motion for summary judgment, without informing Adobe or the court that such discovery might be necessary. Given this timing, we see no abuse of discretion in the district court’s action.

No pre-issuance damages for Rosebud.

= = = = =

[1] There is already a substantial amount of confusion regarding the filing of provisional patent applications, and Section 154(d) has nothing to do with provisional applications other than borrowing the name.

Pending Supreme Court Patent Cases 2016 (February 3 Update)

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

by Dennis Crouch

With Washington DC snowed-in, action within the Supreme Court has also been somewhat slow.  Briefing is now complete in ePlus v. Lawson. In that case, a district court originally held an adjudged infringer in contempt-of-court for refusing to comply with its injunction order. Following the contempt order, the USPTO independently cancelled the patent claims and, at that point, the Federal Circuit vacated both the injunction and the contempt order. ePlus presents the following questions:

1. Whether civil contempt of a permanent injunction order that has been affirmed on appeal and is binding on the litigants under the law of judgments, may be set aside based on a legal development that came after both the permanent injunction and the contumacious conduct, and that did not call into question the correctness of the injunction when it was entered.
2. Whether, under Plaut v. Spendthrift Farm, 514 U.S. 211 (1995), the PTO, an administrative agency, may issue an order that retroactively overrides a federal court’s judgment on a question of law that is not subject to further judicial review, so long as some other part of the litigation is pending.

BIO/PhRMA filed a brief in support of the petition.  The ePlus case is one of several challenging the structure of administrative review proceedings running in parallel with court litigation.  William Jay (Goodwin Proctor) is representing ePlus with Mark Perry (Gibson Dunn)  on the other side.

Oral arguments for the parallel willfulness cases of Halo and Stryker are set for February 23, 2016.  The cases are consolidated to a single one-hour hearing. The attorneys for Halo/Stryker will chose a representative who gets 20-minutes; the US Department of Justice (who generally supports the Halo/Stryker position) will have 10-minutes of oral arguments; and Pulse/Zimmer will choose an attorney for a 30-minute opposition.  For those attending, the other case being heard that day is the criminal case of Taylor v. US involving the Hobbs Act that creates federal criminal liability for “interference with commerce by threats of violence.” 18 U.S.C. 1951.  The question is whether the required element of interstate commerce must be proven beyond a reasonable doubt in order to obtain a criminal conviction.

A new petition for certiorari has been filed in Cooper v. Lee, No. 15-955 (whether IPRs violate Separation of Powers).  The petition by Robert Greenspoon links itself with the Cuozzo challenge — noting that Cuozzo raises the “smaller issue” while Cooper raises “larger issues.”

Other new petitions include a filing from Joao Bock Transaction Systems, LLC v. Jack Henry & Associates, Inc., No. 15-974 (defining an abstract idea) and Systems, Inc. v. Nordock, Inc., No. 15-978 (design patent damage calculations).  The Federal Circuit decided Joao Bock with a R.36 affirmance (without opinion affirming that claim 30, et. al, of U.S. Patent No. 7,096,003 are invalid as effectively claiming abstract ideas).  Regarding Nordock, although it is not as high profile, its simplicity may make it a better vehicle than Samsung v. Apple for challenging design patent damage calculations. In any event Nordock’s timing is good and I would expect that the court will at least withhold judgment until it decides whether to grant certiorari in Samsung v. Apple.

1. Petitions Granted:

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

3. Petitions for Writ of Certiorari Pending:

  • Post Grant Admin: Cooper v. Lee, No. 15-955 (whether IPRs violate Separation of Powers).
  • Post Grant Admin: 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)
  • 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?)
  • 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)
  • Inducement: Arthrex, Inc. v. Smith & Nephew, Inc., et al., No. 15-559 (Commil re-hash – if actions were “not objectively unreasonable” can they constitute inducement?)
  • Claim Construction: Universal Lighting Technologies, Inc., v. Lighting Ballast Control LLC, No. 15-893 (intrinsic vs extrinsic evidence for claim construction).
  • Preclusion or Jurisdiction: Vermont v. MPHJ Technology Investments, LLC, No. 15-838 (Federal court jurisdiction in anti-troll consumer protection case)
  • Preclusion or Jurisdiction: Alexsam, Inc. v. The Gap, Inc., No. 15-736 (appellate jurisdiction over patents that were dropped from case pre-trial)
  • Preclusion or Jurisdiction:
    ePlus, Inc. v. Lawson Software, Inc., No. 15-639 (what happens with a finally-determined permanent injunction after PTO cancels the patent claim?)
  • 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: Joao Bock Transaction Systems, LLC v. Jack Henry & Associates, Inc., No. 15-974 (defining an abstract idea)
  • Claim Construction: 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.”)
  • 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: 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.)
  • Damages: Innovention Toys, LLC v. MGA Entertainment, Inc., et al., No. 15-635 (Stryker/Halo follow-on – potential wait-and-see)
  • Low Quality Brief: Morales v. Square, No. 15-896 (eligibility under Alice)

3. Petitions for Writ of Certiorari Denied:

  • 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
  • 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
  • W.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

4. Prior versions of this report:

WHAT YOU NEED TO KNOW ABOUT THE AMENDED DEFEND TRADE SECRETS ACT

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Guest post by James Pooley.  Pooley is the former Deputy Director General of WIPO. He recently testified at the Senate Judiciary Committee in favor of the Defend Trade Secrets Act. See his earlier Patently-O guest posts . He wishes to thank Prof. Peter Menell for contributing to this post.

Last Thursday the Senate Judiciary Committee favorably voted out the Defend Trade Secrets Act (“DTSA”), which would amend the Economic Espionage Act (“EEA”) to give trade secret plaintiffs the option of filing civil claims for misappropriation directly in federal court. The vote reflected broad bipartisan support (there are now 27 cosponsors in the Senate) and followed a substantive hearing on December 2 at which I had the privilege to testify. Since that time a number of senators engaged in discussions about how to improve the legislation. The result was a series of amendments, all of which have been adopted. Because the bill is likely to proceed quickly at this point, it would be useful to describe what has changed and what those changes could mean for practitioners and companies.

The notable amendments generally fall into four categories: (1) harmonizing with existing standards under the Uniform Trade Secrets Act (“UTSA”); (2) tightening up the process for preventive seizure of secrets; (3) ensuring that injunctions do not unreasonably restrain employee mobility; and (4) providing an exception for whistleblowers who disclose confidential information in order to report a crime to the authorities. The first three of these are laid out in a “Substitute” for S.1890, and the fourth is described in a separate amendment proposed by Senators Patrick Leahy and Chuck Grassley.

HARMONIZING WITH THE UTSA

Bringing the DTSA in closer alignment with familiar provisions of the UTSA, the amendments have slightly changed the definition of a trade secret. The EEA had previously required that qualifying information not be known or readily ascertainable to “the public,” while the UTSA had used the phrase “persons who can obtain economic value from its disclosure or use.” While it was never clear whether this difference would actually matter when applied in litigation, the UTSA formulation has now been adopted, so that the two laws are congruent. (Some still point to the different list of examples of protectable information in the UTSA and EEA definitions, but this has never been shown to make any difference in the broad meaning of the common basic term “information.”)

The amendments have also changed the term of the statute of limitations from five years to three. Although a number of states have designated longer periods (from four to six years), this brings the DTSA into line with the UTSA as it was originally proposed. In the same vein, the enhanced damages provision, which had allowed a punitive assessment up to three times the compensatory award, has been adjusted to match the provisions of the UTSA at twice the amount of compensatory damages.

SEIZURE PROVISIONS

The ex parte seizure provisions have been substantially tightened, providing more assurance that this remedy will not be abused. First, the bill now expressly refers to seizure as available only in “extraordinary circumstances.” Second, an ambiguity identified by Senator Whitehouse at the December hearing has been resolved by clarifying that the target of the seizure must be in “actual” possession of the trade secret and property to be seized. Third, access to the seized material is more limited: only federal law enforcement can perform the seizure, with assistance as necessary from state authorities and an independent technical expert, but the applicant is barred. And following the seizure, the court may have the material sorted by a special master who, like the technical expert, must be under confidentiality restrictions. Fourth, in issuing its order the court must direct when the seizure may be carried out, and whether force may be used to access locked areas. Finally, in a new section the bill requires the Federal Judicial Center to develop “best practices” for seizure and handling of electronically stored information.

MOVING ON FROM “INEVITABLE DISCLOSURE”

One of the most interesting and potentially impactful provisions of the amendments concerns the preservation of employee mobility. Recognizing the critical importance of preventive relief to a right that can be so easily destroyed, the UTSA has always permitted injunctions against “threatened misappropriation,” and the same language is used in the DTSA. But because the DTSA would establish a national standard, some expressed fears that the “inevitable disclosure doctrine,” which has been expressly rejected in some states, might be used by federal judges to block an employee from taking a new job. The draft bill had tried to address this concern with a proviso that no injunction could “prevent a person from accepting an offer of employment under conditions that avoid actual or threatened misappropriation,” but this did not quiet the controversy.

To understand the nature of the dispute we need to wind back the clock to 1995, when the Seventh Circuit issued its decision in Pepsico v. Redmond, 54 F.3d 1262 (7th Cir. 1995), affirming a five-month injunction against a former marketing executive who had lied about his plans to take an identical position with another company that was about to launch a directly competitive product. Although the court had emphasized the executive’s bad behavior, it also summarized that “defendant’s new employment will inevitably lead him to rely on the plaintiff’s trade secrets.” Commentators promptly wrenched this phrase from its context and warned that Pepsico could be used to justify enjoining someone from taking a job just because of what he or she knew. This is how the so-called “inevitable disclosure doctrine” was born.

Having (mis)construed Pepsico this way, it was easy for some to make it a target, raising the alarm that “inevitable disclosure” was the equivalent of a post-hoc judicially-imposed non-compete agreement. Perhaps unsurprisingly, the backlash was particularly strong in California, where employees are protected by a robust public policy against restrictive covenants. In Whyte v. Schlage Lock, 101 Cal. App. 4th (2002), an intermediate appellate court issued a blistering condemnation of the doctrine and flatly declared it unacceptable under California law. It did this in response to the plaintiff’s argument that the doctrine should be available as an “alternative” to proving “threatened misappropriation.” Just what kind of evidence might be enough to establish a threat under the UTSA was not addressed. However, that question was answered several years later in another appellate decision, Central Valley General Hospital v. Smith, 162 Cal. App. 4th 501 (2008). The court said that evidence of bad behavior, like a prior misappropriation, an intention to misappropriate, or a refusal to return confidential material, would be enough to supply the inference.

In the meantime, however, the ideological battle lines had been drawn, and the forces mustering against inevitable disclosure, reinforced by many academic and popular articles, were determined to stamp it out if possible, or at least to protect their own jurisdiction from infection. The fervor of the debate apparently distracted everyone from critically examining what “inevitable disclosure” meant, or how it was actually being applied in places that didn’t have a reflexive opposition to it. It turns out that the doctrine was almost never used as the opponents assumed, that is where the only threat indicator was how much the employee knew. In fact, in those cases judges typically explained their denials by reminding the plaintiff that if all this information had been so critically important they could have demanded that the employee sign a non-compete agreement.

Following last December’s hearing, and in the wake of continuing concerns over the relevant DTSA language, I reached out to my friend Mark Lemley, professor at Stanford Law School. Mark and I had worked together before on issues relating to California’s “high velocity” labor market, and after some discussion about what appeared to be this false conflict over the inevitable disclosure doctrine, we suggested to Senate staff that the issue could better be reframed around the kind and quality of evidence that should be required – under the UTSA or the DTSA – to prove “threatened misappropriation,” and that the inquiry should focus on the employee’s behavior, not merely on how much they knew.

Ultimately, Senator Dianne Feinstein proposed the relevant portion of the DTSA amendments, which now allows an order against threatened misappropriation, provided that it not “prevent a person from entering into an employment relationship, and that conditions placed on such employment shall be based on evidence of threatened misappropriation and not merely on the information the person knows.” (In a belt-and-suspenders approach, the DTSA also includes a directly related amendment proposed by Senator John Cornyn that the order may not “otherwise conflict with an applicable State law prohibiting restraints on the practice of a lawful profession, trade, or business.”)

The new language on threatened misappropriation has at least two very positive effects. First, it makes express the apparent consensus from the courts that “threatened” misappropriation may not be established merely by the importance of the information that someone knows. This makes sense not only as a matter of public policy but also of evidence law. Second, it relieves us from the energy-draining debate over “inevitable disclosure,” which was pretty much a straw man that people loved to punch. Courts will not have to consider whether a jurisdiction accepts or rejects this abstract “doctrine,” but instead will ask: what is the actual evidence from which we should conclude that this person (or their new employer) can’t be trusted to honor the integrity of the plaintiff’s trade secrets? Outcomes in particular cases should not be substantially different.

WHISTLEBLOWER PROTECTION

A second major amendment was offered separately by Senators Leahy and Grassley, addressing a new, and in my opinion long neglected, question: how do we assure that employees and contractors who come upon evidence of illegal activity, but who are constrained by nondisclosure agreements from communicating those facts, can safely speak to their lawyers and to law enforcement officials? One might think that this question would already have been reliably answered by now, but it hasn’t been. In a wide-ranging and thoughtful on the subject, Tailoring a Public Policy Exception to Trade Secret Protection, Professor Peter Menell of the UC Berkeley School of Law explores not only the sparse, murky, and sometimes contradictory legal authority, but also the psychology of whistleblowing and the importance of a clear “safe harbor” for those who are thinking of reporting wrongdoing. As he notes, “[t]he same routine non-disclosure agreements that are essential to safeguarding trade secrets can be and are used to chill those in the best position to reveal illegal activity.”  As a practical matter, employees and contractors face a stark dilemma, where the upside is a clear conscience (and possibly a reward for uncovering fraud) but the downside can involve painful and relentless retaliation as well as personal, financial, legal, and professional risk. Insulating the whistleblower from costly trade secret exposure serves larger societal interests in law enforcement, tax compliance, and surfacing and deterring securities fraud and fraud against the government..

Yet because of the difficulty of enforcing trade secrets once they leak, companies risk potentially significant losses if employees or contractors mistakenly disclose legitimate trade secrets—i.e., those that do not reveal illegal conduct. Peter’s article provided a balanced and effective solution to this dilemma that protects whistleblowers without jeopardizing disclosure of legitimate trade secrets. The proposed safe harbor insulates whistleblowers and their counsel from trade secret liability for disclosing trade secret information in confidence to government officials or as part of a lawsuit alleging retaliation by an employer provided that the information is filed under seal. (The federal Trade Secrets Act, 18 U.S.C. § 1905, generally prohibits governmental employees from disclosing trade secrets.) The proposed statutory exception to trade secret liability provides clear assurance to potential whistleblowers that they do not violate their NDAs merely by consulting legal counsel regarding reporting allegedly illegal conduct to a responsible government official through a confidential channel. In addition, this safe harbor insulates lawyers advising potential whistleblowers about their options and serving as conduits for presenting evidence of allegedly illegal conduct to the government. The efficacy of the safe harbor is enhanced by requiring that NDAs prominently include notice of the law reporting safe harbor to ensure that those with knowledge of illegal conduct are aware of this important public policy limitation on NDAs and exercise due care with trade secrets in reporting such activity.

After Peter’s article appeared just as the DTSA was gaining momentum in the fall, the Senate staff reached out to him to help craft appropriate language. The Leahy/Grassley amendment provides immunity under federal or state law against any claim for violation of an individual’s nondisclosure obligations for disclosure, made in confidence, to (a) an attorney or government official, for the purpose of reporting or investigating a violation of law, or (b) a filing made under seal in a lawsuit “or other proceeding.” In order to ensure that employees (a term that also includes contractors) know about their rights, employers are required to give an appropriate notice in the nondisclosure agreement (as is often done now with state inventor statutes), although this can be a reference to the company’s separate policy document. A failure to comply with the notice provision would block any award of attorneys’ fees or enhanced damages against an employee under the DTSA. Significantly – and this point was emphasized by Senator Feinstein at the hearing on January 28 – the whistleblower protection would not extend to any otherwise improper acts by the employee, such as hacking information in violation of the Computer Fraud and Abuse Act.

CONCLUSION

The DTSA in its current form is a strong bill, meeting its original objective of giving plaintiffs access to federal courts, which are better equipped to handle cases of interstate or international misappropriation of trade secrets. In my opinion, all reasonable objections have been adequately addressed, and there are sufficient protections built in against abuse. Moreover, passage of this bill would substantially improve the environment for both plaintiffs and defendants, by making trade secret litigation more predictable, establishing a national standard for issues like “threatened misappropriation,” and striking the right balance of interests to promote responsible efforts by whistleblowers to report possible violations of law.

REPORT AND ANALYSIS OF RECENT AMENDMENTS TO S. 1890 (The Defend Trade Secrets Act 2016)

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By Professor Sharon K. Sandeen, Mitchell Hamline School of Law  

The Defend Trade Secrets Act (S. 1890) passed out of the U.S. Senate Committee on the Judiciary today, but not before it was amended to address a number of concerns that were voiced by opponents over the past two years. The following is my quick analysis of the changes.  Note that there were actually two sets of amendments to the legislation. The so-called manager’s amendment (labeled “S. 1890 Substitute Amendment”) and amendments offered by Senators Leahy and Grassley (labeled “Leahy-Grassley1”). The following page and line references are to the Substitute Amendment. The Leahy-Grassley amendments are discussed thereafter.  [S.1890 Substitute Amendment][Leahy-Grassley1].

1. S. 1890 Substitute Amendment

Page 1:

The legislation is now to be known as the “Defend Trade Secrets Act of 2016” instead of “2015.”

Page 2, line 2:

“Misappropriated” added and language “aggrieved by misappropriation” deleted

Sandeen Comment: This change was apparently made in response to expressed concerns that “aggrieved” might be introducing a new concept of wrongdoing into trade secret law. Since “misappropriation” is a defined term in the DTSA (copied from the UTSA), it is better to stick with that language.

Page 2, lines 11-12:

With respect to the ex parte civil seizure remedy, the language “but only in extraordinary circumstances” was added.

Sandeen Comment: I am not sure what this language adds other than to emphasize the fact that this remedy should rarely be granted. But that begs the question: Why is the remedy needed at all if it will rarely or ever be granted? No one has ever explained to me why egregious cases that might justify such a remedy would not be championed by the U.S. Department of Justice in a criminal case. But there is a clue in later amendments to the EEA criminal provisions that give trade secret owners standing to assert secrecy concerns in such cases. (See report on new Section 3 below).

Page 2, lines 24-25:

The language “another form of equitable relief” was added to limit the circumstances under which an ex parte seizure order could be granted.

Sandeen Comment: As I understand the limitations built into the civil seizure provision, such an order is not to be granted unless other available equitable relief is inadequate. What seems to be lost in the discussion of all forms of equitable relief is that there are legal remedies available, including potential exemplary damages. Typically, equitable relief is not available when such is the case. In this regard, I wonder if “another form of equitable relief” would include a royalty injunction.

Page 4, line 5 et seq:

A new section (V) has been created (and subsequent subsections re-lettered accordingly) to highlight that “the person against whom seizure would be ordered” must have actual possession of both the trade secret and the property to be seized.

Sandeen Comment: While seemingly limiting the scope of the civil seizure remedy, this addition confirms what the opponents of DTSA were afraid of: that the civil seizure remedy can be used to seize property in addition to the actual trade secrets. While the person against whom seizure would be ordered must be shown to have either misappropriated a trade secret or conspired to misappropriate a trade secret, this language is actually much broader than it may seem on the surface. This is because the definition of misappropriation under the DTSA (and the UTSA) can apply to third-parties who were not directly involved in the initial misappropriation, provided they have the requisite (but obviously later acquired) knowledge. For instance, new employers.

Page 5, line 13:

Deletes the language “that are unrelated to the trade secret that has allegedly been misappropriated” in describing the elements of any civil seizure order.

Sandeen Comment: This was apparently intended to limit the scope of a civil seizure order, which is a good thing if it works.

Page 5, line 16 – page 6, line 11: 

Uses “prohibiting” instead of “restricting” and makes other changes to the provision concerning the required content of a civil seizure order, the most significant change being the addition of a new sub section (iv) which requires the court to “provide guidance to law enforcement officials” concerning how they are to execute the order.

Sandeen Comment: This language was undoubtedly added to address concerns that Senator Sheldon Whitehouse raised during the hearing on DTSA that was held before the U.S. Senate Committee on the Judiciary in December of 2015. His principal concern related to the use of force in the event that the person against whom seizure would be ordered was uncooperative.  

Page 7, line 13 – page 8, line 22:

The “Materials in Custody” provision was re-labeled and expanded, particularly with respect to the newly labeled sub-section “Storage Medium” and new provisions labeled “Protection of Confidentiality” and “Appointment of a Special Master.”

Sandeen Comment: The added language was undoubtedly added in an attempt to address concerns about the scope of any civil seizure order (including the very real possibility that property not relevant to the trade secret case might be seized), the handling of seized information, and the practical reality that federal court staff is ill equipped to manage such materials. Nothing in the legislation indicates who will pay for the services of a Special Master.

Page 9, line 2-15:

Deleted the language that used to allow state and local officials to execute a civil seizure order and instead specifies that a civil seizure order must be executed by federal law enforcement personnel.  State and local law enforcement personnel can be involved, but they cannot be involved in the actual seizure of property. Further, the court may allow for the use of a technical expert to assist federal law enforcement officials in executing the civil seizure order, again without specifying who will pay for the technical expert.

Sandeen Comment: These amendments address some of the concerns that have been expressed about how a civil seizure order will be executed and how it can be done without including the legitimate business information of the “person against whom civil seizure is ordered.” However, the more that efforts are made to address the concerns of critics, the more the risks of such a remedy are revealed. If this remedy will be used very infrequently as its proponents argue, Congress should ask if the marginal benefits of this remedy are worth its tremendous costs, particularly given the fact that: (1) criminal prosecution and seizure are possible in egregious cases; and (2) plaintiffs in trade secret cases have very robust legal remedies in the event of the loss of trade secrecy.

Page 11, line 6 et seq:   

The standing to file a motion for encryption has been broadened to include both parties to the litigation and “a person who claims an interest in the subject matter seized.”

Sandeen Comment: This is a positive development, but obviously it acknowledges that non-parties may be affected by a civil seizure order and be forced to hire an attorney to protect their interests.

Page 11, line 23 – page 12, line 8: 

The provisions concerning the effect of injunctions on employment were re-worked, re-lettered and expanded. First, the original language was amended so that any injunction must “be based upon evidence of threatened misappropriation and not merely on the information a person knows.” Second,   the legislation now includes language which states that an injunction cannot “otherwise conflict with an applicable State law prohibiting restraints on the practice of a lawful profession, trade, or business.”

Sandeen Comment: This is a very positive development that makes it clear that State law governing restrictive covenants, including non-compete agreements, will continue to apply as limits on the scope of injunctive relief. More specifically, it rejects the worst aspects of the inevitable disclosure doctrine which many states (most notably California) have found to be inconsistent with their laws against restrictive covenants, particularly those that restrict employee mobility. Issues of choice of law remain, of course. 

Page 13, line 9: 

The measure of potential exemplary damages has been lowered to 2 times instead of 3 times.

Sandeen Comment: This is a positive development, particularly for the proponents of the DTSA who claim that its primary purpose is greater uniformity in trade secret law. The new language is consistent with the UTSA. However, it appears that this change may have been part of a compromise since (as discussed below), the criminal penalties for a violation of the EEA have been increased.

Page 13, line 23: 

The statute of limitations has been lowered to 3 years from 5 years.

Sandeen Comment: This change also makes the statute of limitations consistent with the language of the UTSA (although some UTSA states have not adopted the statute of limitations specified in the UTSA). This is a positive development because businesses can now be more certain when threats of trade secret litigation will end. Since the statute of limitation follows the discovery rule, plaintiffs will have plenty of time to bring a lawsuit once the facts giving rise to such claims are discovered.

Page 14, line 8:

The definitions provisions of the DTSA must be read alongside the existing definition provisions of the EEA, which is where you will find the definition of a trade secret. A change from earlier versions of the legislation is that the word “public” in 18 U.S.C. §1839 (3)(B)  (the definition of a trade secret) will be substituted with “another person who can obtain economic value from the disclosure or use of the information.”

Sandeen Comment: This is another positive development that makes the definition of a trade secret under the EEA (as amended) more consistent with the language of the UTSA. Without this amendment, the EEA might be interpreted to include information that is in the public domain under state law. Not changed in the EEA to be consistent with the UTSA is the first part of the definition of a trade secret which, under the EEA, includes a litany of types of information that might qualify for trade secret misappropriation. However, this greater specificity always struck me as necessary since the EEA was initially, and will remain in part, a criminal statute.

Page 17, line 21 – Page 19, line 2:   

A new Section 3 was added titled “Trade Secret Theft Enforcement” and old Section 3 was re-labeled as Section 4. This section increases the penalties for a violation of 18 U.S.C. §1832 from $5,000,000 to the greater of $5,000,000 or 3 times the value of the stolen trade secrets to the organization, including the costs of reproducing the trade secrets. Second, it adds a new provision titled “Rights of Trade Secret Owners” that essentially allows trade secret owners to be heard in criminal court concerning the need to protect their trade secrets. Lastly, it amends 18 U.S.C. §1961 (the RICO statute) to add a violation of the EEA as a predicate act.

Sandeen Comment: At first blush, these changes seem to more directly address the concerns that motivated the proposed legislation and should have been tried first before risking the disruption of U.S. trade secret law by creating a federal civil cause of action for trade secret misappropriation. What they reveal is the concern that trade secret owners have about the effectiveness of federal criminal prosecution to stop (or punish) the most egregious cases of trade secret misappropriation. They also reflect the risks to trade secrets posed by the public nature of criminal prosecutions. Robust criminal laws are already on the books to punish those who would engage in the most egregious forms of trade secret misappropriation, but trade secret owners might be hesitant to report such crimes out of fear that their trade secrets might be lost in the process. Allowing trade secret owners to express their confidentiality concerns in a criminal court seems like a good idea. More study of the implications of the RICO provision is needed, particularly with respect to the potential for the over assertion of criminal prosecutions which was a major concern of business interests when the EEA was first adopted.

Page 22, line 23 et seq.:

The re-numbered “Sense of Congress” provision (now Section 5) added point (4) concerning the civil seizure order and Congress’ sense that the need for such a remedy should be balanced  against the risk of interrupting the business of third parties and the legitimate interests of the party accused of wrongdoing.

Sandeen Comment: While this is helpful language, it is interesting that this language is included in the “Sense of Congress” provision and not in the text of the civil seizure provision itself. While Congress is at it, I would urge it to add point (5) to the “Sense of Congress” and state that the DTSA should be interpreted and applied in a manner that is consistent with the commentary to the UTSA.

Page 23, Line 4 et seq:  

New Section 6 was added titled “Best Practices” to require the Federal Judicial Center “using existing resources” to, within two years, recommend best practices related to civil seizure orders.

Sandeen Comment: Again, this indicates that concerns about the abuse of civil seizure orders remain.

2. Leahy-Grassley Amendments

These amendments would add a section to the DTSA, in a place to be determined, titled “Immunity from Liability for Confidential Disclosure of a Trade Secret or in a Court Filing.” This new section is designed to protect whistleblowers from liability for the disclosure of trade secrets to the government and in the context of retaliation lawsuits, provided that steps are taken by the whistleblower to keep such information confidential. It also would require employers to give notice of such immunity to employees, thereby requiring an exception to confidentiality provisions.

Sandeen Comment: This is a very positive development for those who are concerned that the assertion of trade secret rights can be used to prevent the timely disclosure of information that is needed by law enforcement authorities. However, it only applies where there is an alleged violation of law and not, more broadly, in situations where threats to public health exist, for instance.  

= = = = =

[Prior Patently-O Posts on the DTSA]

Pending Supreme Court Patent Cases 2016 (January 20 Update)

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by Dennis Crouch

This week, the Supreme Court granted certiorari in the administrative patent review case of Cuozzo v. Lee. Cuozzo raises the following two questions: (1) Whether the court of appeals erred in holding that, in inter partes review (IPR) proceedings, the Patent Trial and Appeal Board may construe claims in an issued patent according to their broadest reasonable interpretation rather than their plain and ordinary meaning; and (2) whether the court of appeals erred in holding that, even if the Board exceeds its statutory authority in instituting an IPR proceeding, the Board’s decision whether to institute an IPR proceeding is judicially unreviewable. The petitioner (Cuozzo) now has forty-five days to file its opening merits brief with amici briefs due one week later.

The other major patent issue before the court this term involves the enhanced damages questions raised in the parallel cases of Halo and Stryker. Oral arguments are set for those cases for February 23, 2016. Although not a party, the Solicitor General has requested permission to participate in oral argument as amicus curiae and for divided argument filed. The US Government generally supported the petitioners’ position that the Federal Circuit has unduly limited the availability of enhanced damages for willful infringement and other egregious acts by an adjudged infringer.

This week, the Supreme Court also issued a GVR in Medtronic v. NuVasive – ordering the Federal Circuit to reconsider whether the mens rea evidence presented was sufficient to prove active inducement under Commil.

1. Petitions Granted:

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

3. Petitions for Writ of Certiorari Pending:

  • Design Patents: Samsung Electronics Co. v. Apple Inc., No 15-777 (design patent scope and damages calculation)
  • 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)
  • Inducement: Arthrex, Inc. v. Smith & Nephew, Inc., et al., No. 15-559 (Commil re-hash – if actions were “not objectively unreasonable” can they constitute inducement?)
  • Post Grant Admin: 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)
  • 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?)
  • Claim Construction: Universal Lighting Technologies, Inc., v. Lighting Ballast Control LLC, No. 15-893 (intrinsic vs extrinsic evidence for claim construction).
  • Preclusion or Jurisdiction: Vermont v. MPHJ Technology Investments, LLC, No. 15-838 (Federal court jurisdiction in anti-troll consumer protection case)
  • Preclusion or Jurisdiction: Alexsam, Inc. v. The Gap, Inc., No. 15-736 (appellate jurisdiction over patents that were dropped from case pre-trial) (New Petition)
  • Preclusion or Jurisdiction:
    ePlus, Inc. v. Lawson Software, Inc., No. 15-639 (what happens with a finally-determined permanent injunction after PTO cancels the patent claim?)
  • 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))
  • Claim Construction: 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.”)
  • 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: 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.)
  • Damages: Innovention Toys, LLC v. MGA Entertainment, Inc., et al., No. 15-635 (Stryker/Halo follow-on – potential wait-and-see)

3. Petitions for Writ of Certiorari Denied:

  • 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
  • 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
  • W.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

4. Prior versions of this report:

 
 

Samsung v. Apple: Functional Design Patents and Profit Disgorgement

Patent

by Dennis Crouch

Six amici briefs have now been filed in support of Samsung’s petition for writ of certiorari in its design patent defense against Apple.  

Law Professor Brief: [SamsungLemley] In a petition primarily drafted by Professors Mark Lemley and Mark McKenna, and filed by Lemley, a group of 37 law professors strongly support Samsung’s position that design patent rights should be severely limited. The brief first looks at design patent scope and argues that design patent rights should only be permitted to cover non-functional and ornamental aspects of a product.  “Crucially, design patents protect only ornamentation. They may not cover the functional aspects of a product.”  As I and others have written, the functionality limitation in design patents is much weaker than that of trademark and copyright law.  The brief argues, however, that those regimes should be squared so that utility patent remain the sole domain of for the protection of functional design elements.  “Giving a design patent owner control over utilitarian features undermines the policy goals of the [trademark] functionality doctrine.”

Regarding damages, the brief argues that entire-profit-disgorgement for design patent infringement “makes no sense in the modern world”,  leads to “absurd results”, is “draconian”, and is not required by the statute.   Remember, the idea here is that Apple is collecting all of Samsung’s profits on its infringing Galaxy phones even though only some of the components of the devices infringe.

Public Knowledge and the Electronic Frontier Foundation: [SamsungPKEFF] PK and the EFF argue that we are likely to move into a world of design-patent-trolls filled with “abusive [design] patent litigation.”  PK also suggest a constitutional crisis – that these high damage awards for design patent infringement may violate the Fifth and Fourteenth Amendments (due process).   For part of their argument, the groups quote my 2010 design patent article where I wrote that  “design patent prosecution is a relatively quick, inexpensive, and assured process without substantive examination as compared with either utility patent prosecution or trade
dress registration.”  From my analysis, they reached the conclusion that “the low-quality patent concerns common with abusive utility patent litigation are even more so present with design patents.”

CCIA: [SamsungCCIA]  Although less-so than PK and EFF, the CCIA is fairly consistent in arguing for narrower patent rights.  Here, the organization makes the argument that entire-profit-disgorgement raises constitutional questions by going beyond the “exclusive Right to their respective … Discoveries.”

Systems, Inc: [SamsungSystems] Longtime patent litigator Philip Mann filed a brief on behalf of Systems who is litigating design patent damages issues.  The brief outlines several examples of how the profit disgorgement rule is having a “very real and accelerating” negative impact on  the business community. The brief cites its own case of Nordock v. Systems as well as Pacific Coast Marine Windshields v. Malibu Boats and Microsoft v. Corel.

Tech Companies: [SamsungTech] A group of oft-patent-defendants, including eBay, Dell, Facebook, Google, HP, and NewEgg joined together in a brief arguing for a narrowed interpretation of ‘article of manufacture’ from Section 289 rather than focusing on the entire retail product.

Marginalized Americans: [SamsungHLF] A set of groups that self-identify as “communities that are marginalized in American society” have filed a brief arguing that these strong design patent rights threaten to raise retail prices and limit access to affordable new technology, including smartphones and internet access.