Tag Archives: Licenses

“Exemplary Embodiments” as Boiler Plate

US08342852-20130101-D00009Skedco v. Strategic Operations (StOps) (Fed. Cir. 2017)

The district court sided with the accused-infringer StOps – finding (on summary judgment) no-infringement of Skedco’s exclusively licensed U.S. Patent No. 8,342,852 covering a “trauma training system.”

The system is designed to replicate trauma, and includes a pump in fluid connection with a valve that is in connection with a wound site “to simulate a hemorrhage.”

18. A trauma training system … comprising: a collapsible reservoir …, a pump in fluid communication with … said reservoir, at least one valve in fluid communication with said pump, a controller connected to said pump and said at least one valve, and at least one wound site detachably in fluid communication with said valve, wherein fluid is provided to said wound site to simulate a hemorrhage.

The problem for the patentee is that, while the claim appears to separately claim the pump and the valve, the accused device physically links them together – “these valves reside within the pump housing.”  In addition, although the claim requires a controller connected to both the pump and the valve, the accused device’s controller is only connected to the pump.

On appeal, the Federal Circuit has vacated the judgment – finding that the district court erred in its claim construction.

First, although the patent requires a pump in fluid connection with a valve, the federal circuit found that “nothing in the claims requires the pump and valve to be physically separated.”

We see no reason why a device that moves fluid cannot contain another device that regulates flow within it. A pump does not cease moving fluid—i.e., being a “pump”—just because an internal valve adjusts fluid flow. … In short, we agree with the district court that a “pump” is not a “valve,” id. at 1108, but nothing in the claims or specification prohibits a valve from residing within a pump.

Of course, none of the embodiments teach a pump with internal valve.  Responding to that argument, the court appeared to look back primarily to pre-Phillips cases:

“[I]t is the claims, not the written description, which define the scope of the patent right.” Laitram Corp v. NEC Corp., 163 F.3d 1342 (Fed. Cir. 1998). Patents do not need to include drawings of particular embodiments in order to claim them. See CCS Fitness, Inc. v. Brunswick Corp., 288 F.3d 1359 (Fed. Cir. 2002). For this reason, a claim is not limited to inventions looking like those in the drawings. MBO Labs., Inc. v. Becton, Dickinson & Co., 474 F.3d 1323, 1333 (Fed. Cir. 2007). This guidance is especially apt here because the patent refers to the drawings to which StOps points as “exemplary embodiment[s].”

Looking at the second non-infringement justification, the district court had construed the claim to require a controller be actually connected to both a pump and a valve – based upon the requirement of “a controller connected to said pump and said at least one valve.” ON appeal, the Federal Circuit found it was improper to require an actual physical connection between the controller and the the valve:

[W]e think that the correct construction of “a controller connected to said pump and said at least one valve” is “an activation mechanism configured to control a pump and a valve to which it is directly or indirectly joined, united, or linked.”  . . . It [] incorporates the specification’s envisaged indirect connections. . . .

As far as the district court’s “physical” limitation is concerned, we see no reason to import such a requirement into claim 18. The claimed “controller” is merely “an activation mechanism,” and nothing limits this activation to physical channels. Indeed, the ’852 patent includes several embodiments where a remote controller 160 activates a valve. This activation must occur at least in part through a nonphysical connection. See id., figs.3, 9A, 9C. We therefore hold that it was error to limit the claimed connection to physical connections.

Thus, reasoned the district court, the BPS does not have “direct,” “independent,” and “physical” connections between the controller and the valve such that the valve is “controlled by the controller.” Id. at 1105–06, 1108. The court also ruled as a matter of law that claims 18, 19, and 20 were not infringed under the doctrine of equivalents. Having granted summary judgment of noninfringement, the court dismissed Skedco’s complaint. This appeal followed. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1). controller.” Id. at 1105–06, 1108. We hold that it was error for the district court to have included some of these additional limitations into claim 18.

On remand, the district court will be asked to consider infringement under this now broader construction.


Prof Patterson: Teasing Through a Single FRAND Rate

Guest Post by Prof. Mark R. Patterson, Fordham Law

Last week Professor Jorge Contreras provided here an excellent summary of the April 5 decision of Mr. Justice Birss of the UK’s High Court of Justice in Unwired Planet International Ltd. v Huawei Technologies Co. Ltd., [2017] EWHC 711. The case addresses the problems that arise in determining FRAND (fair, reasonable, and non-discriminatory) licensing terms. Professor Contreras highlighted several novel aspects of the decision.  In the paragraphs below I focus on two of them.

A Single FRAND Rate

Mr. Justice Birss determined that there is only a single set of FRAND terms “in a given set of circumstances” (¶ 164). This approach stands in contrast to the approach of, for example, U.S. District Judge James Robart in Microsoft Corp. v. Motorola, Inc., 963 F. Supp. 2d 1176 (W.D. Wash. 2013), who concluded there would a range of possible FRAND royalties. As Professor Contreras wrote, Justice Birss’s approach poses a number of “logical hurdles . . . with respect to the SEP holder’s initial offer to the implementer and how to assess the SEP holder’s compliance with competition law.”

For one thing, Justice Birss does not seem to contemplate that after the first decision regarding FRAND terms for a particular portfolio, other courts or arbitration tribunals will follow along by applying the same rate. Instead, he appears to anticipate that each judge or arbitrator will make his or her own decision about the “single” FRAND rate, independently assessing the reasoning of prior courts or tribunals: “Decisions of other courts may have persuasive value but that will largely depend on the reasoning that court has given to reach its conclusion” (¶ 411).

Justice Birss makes this comment with reference to an Ericsson license to Huawei, not a license of Unwired Planet’s portfolio to a different licensee. Perhaps he contemplates more deference by subsequent courts to earlier determinations regarding the same portfolio, but that is not clear. Perhaps also, as Dennis Crouch has pointed out to me, there might be preclusive effects, even internationally, as a result of a prior decision, though that would presumably only put a ceiling on a rate, not a floor. In the absence of such effects, one can anticipate a multitude of “single” FRAND rates for a given portfolio.

Another factor that might lead to inconsistency among different rate determinations is what appears to be some reluctance to rely on arbitral decisions:

The decisions of other courts, assuming they are not binding authorities, may be useful as persuasive precedents. A point arises in this case about a licence which was the product of an arbitration. A licence agreement settled in an arbitration is more like terms set by a court than it is like a licence produced by negotiation and agreement. Huawei submitted that such a licence would be evidence of what a party was actually paying and as such was relevant. Aside from certain aspects of nondiscrimination which I will address separately, I do not accept that evidence of what a party is paying as a result of a binding arbitration will carry much weight. (¶ 171).

This skepticism regarding arbitrations is important because international arbitrations are used in the FRAND context to avoid country-by-country litigation. The passage suggests that Justice Birss would not treat rates set in an arbitration involving one licensee as very persuasive in a proceeding involving another licensee. On the other hand, the arbitration to which he was referring was one for which Huawei had introduced only the rates determined in the arbitration, not the award itself (id.). Later in the decision, he writes that “[a]n arbitral award is at least capable of having a similar persuasive value” as a court decision if the reasoning is available (¶ 411). In the end, it is not clear whether Justice Birss’s concern is with arbitration per se—he says that “[t]erms which were settled by an arbitrator are not evidence of what willing, reasonable business people would agree in a negotiation” (id.)—or simply that Huawei did not provide a complete picture of the arbitration at issue.

In any event, the overall picture appears to be that every court and tribunal can determine its own “single” FRAND rate and other terms (even when each is interpreting the same FRAND commitment for the same SEP portfolio). As Justice Birss indicates, there will be some limitations based on the non-discrimination element of FRAND, but he also limits that non-discrimination principle, as described below.

Another problem with the single-rate approach arises in connection with the CJEU’s 2015 decision in Huawei v. ZTE. Under the rules for FRAND negotiations established in that case, which the CJEU established as a template for the avoidance of abuse under Article 102 TFEU, the patentee and potential licensees are required to make FRAND offers. If there is only one single FRAND rate, as Justice Birss says, then of course the chances that either party’s offer, let alone both, will match that FRAND rate are very slim.

Justice Birss acknowledges this problem, and purports to resolve it by saying that “[t]he fact that concrete proposals [i.e., the required FRAND offers] are also required does not mean it is relevant to ask if those proposals are actually FRAND or not” (¶ 744(ii)). But the CJEU is clear that the parties’ proposals must be a “written offer for a licence on FRAND terms” (Huawei v. ZTE, ¶ 63) and “a specific counter-offer that corresponds to FRAND terms” (Huawei v. ZTE, ¶ 66). Justice Birss argues that this means only “that each side must make clear they are willing to conclude a licence on FRAND terms, since that is what matters,” (¶ 738), not that the offers themselves must be on FRAND terms. This claim, though, that “[w]hether a particular concrete proposal is actually FRAND is not what the CJEU is focussing on” (id.) is not the most natural reading of the CJEU’s decision.

Justice Birss does allow that “[n]o doubt a prejudicial demand or a sham proposal may itself be abusive (that issue arises below) but that is another matter” (id.). He says further that “only an offer which is so far above FRAND as to act to disrupt or prejudice the negotiations themselves . . . will fall foul of Art 102(a)” (¶ 738). He then concludes that the Unwired Planet offers and Huawei counteroffers in their negotiations, which were in the range of around three to ten times higher or lower than the actual FRAND rate that he determines, were not abusive given the circumstances of the negotiation (¶¶ 756-784).

In the end it is not clear just what are the implications of Justice Birss’s single FRAND rate. The determined rate does not necessarily constrain other courts or arbitral tribunals to impose the same rate, nor with Justice Birss’s interpretation do offers that deviate from the FRAND rate constitute abuse under Huawei v. ZTE. His approach can be contrasted, as Professor Contreras points out, with that of other courts that have interpreted FRAND as describing a range of rates, and although Justice Birss rejects that approach, his own approach seems likely to produce similar results. (It is possible that he chose the single-rate approach because he seems to have had some misgivings about the task of choosing between the parties’ two rate proposals if they were both FRAND, though in the end he concluded that “the court’s jurisdiction is not restricted to the binary question of assessing a given set of terms but extends to deciding between rival proposals and coming to a conclusion different from either side’s case on such a proposal” (¶ 169).)

The Non-Discrimination Principle

Mr. Justice Birss also addresses the non-discrimination element of FRAND. Here he distinguishes what he calls “general non-discrimination” and “hard-edged non-discrimination” obligations. The former requires that rates do not differ based on the licensee but only based “primarily” on the value of the portfolio licensed (¶ 175). Hard-edged discrimination, on the other hand, “to the extent it exists, is a distinct factor capable of applying to reduce a royalty rate (or adjust any licence term in any way) which would otherwise have been regarded as FRAND” (¶ 177).

Justice Birss rejects any hard-edged non-discrimination requirement beyond that which would be required by competition law. Although one might think that the ETSI FRAND policy imposes obligations independent of competition law, especially given Justice Birss’s conclusion that it creates contracts under French law, Justice Birss takes a different view regarding agreed-to licenses: “If parties agree licence terms then their rights and obligations under the ETSI FRAND undertaking will be discharged and replaced by their contractual rights under the licence” (¶ 155).

Justice Birss does not really explain the basis for this statement, though in other respects he is quite careful in his discussion of French law. First, ETSI is not a party to a license between a patentee and technology implementer/licensee. Hence, it is not clear how the agreement between patentee and licensee on the license could discharge ETSI’s rights under the FRAND contract. Furthermore, even if entry into a license could in principle discharge ETSI’s rights, it is not clear why discharge would result from entry into a license that turns out not to be FRAND when ETSI’s own right is to ensure the patentee’s obligation to license on FRAND terms. Moreover, as Professor Contreras says, it seems unlikely that the ETSI participants (or, I would add, the parties to the license) intend this result. It is likely that we will now see licensees seeking to include license provisions that preserve their rights to seek a remedy for hard-edged discrimination.

Beyond the contract question, Justice Birss turns to competition law: “If . . . the FRAND undertaking also includes a specific non-discrimination obligation whereby a licensee has the right to demand the very same rate as has been granted to another licensee which is lower than the benchmark rate, then that obligation only applies if the difference would distort competition between the two licensees” (¶ 503). That is, ETSI’s FRAND policy does no more than serve to restate competition law.

This surprising conclusion is made more surprising by the way in which Justice Birss applied competition law. Huawei argued that under EU competition law it did not have to show actual harm to competition so long as it provided evidence from which such harm could be inferred, and the court agreed (¶¶ 504-510). But Justice Birss then addressed Huawei’s discrimination claim, which was based on lower rates in an earlier Unwired Planet license to Samsung, by pointing out that the difference in royalty payments would be much smaller than Huawei’s profit margin (¶ 517).

A problem here is that Unwired Planet’s proportion of the total number of relevant SEPs was argued by Huawei to be 0.04% and by Unwired Planet to be 1.25% (¶ 261). Therefore, the aggregate effect over all SEPs of the difference between the Samsung and Huawei rates would be about 100 times greater than the effect the court considers. The judge does not provide the actual Samsung-Huawei royalty difference in the public decision, but the aggregate royalty burden for all SEPs, he wrote, would be about 10% given the FRAND rate he determines (id.). He also noted that Huawei’s profit margin was between $6 and $19 per device on prices between $164 to $185 (¶ 517), which produces profit percentages between 3.2% and 11.6%. Thus, it appears that if Samsung’s rate were half of Huawei’s, the difference would be about one-half or more of Huawei’s profits. Surely one could infer competitive harm from that difference.

Obviously Justice Birss’s decision applies only to Unwired Planet and Huawei, but it seems to be putting on blinders not to consider the overall effect that would result from similar decisions across all holders of SEPs. Would only holders of larger portfolios than Unwired Planet’s be subject to non-discrimination claims, or could such claims only be brought by licensees that have entered into licenses for significant proportions of all SEPs? If the latter, could the non-discrimination claims only be brought against the later-licensing patentees, when the competitive effect became more significant? As long as there is any role for hard-edged discrimination, and Justice Birss does allow it such a role, if only one coincident with competition law, these questions will have to be answered by subsequent decisions.

Licensee Marking Requirement

PezPatentRembrandt Wireless v. Samsung (Fed. Cir. 2017)

A jury found for Rembrandt and awarded $15.7 million in damages. On appeal, the Federal Circuit has affirmed on infringement and validity – but rejected the lower court’s finding that the patent had been properly marked.

Back-damages for patent infringement is a bit interesting. The marking statute creates a constructive notice regime for sales of ‘patented articles’ and then cuts-off damages for failure to mark those articles: 

In the event of failure so to mark, no damages shall be recovered by the patentee in any action for infringement, except on proof that the infringer was notified of the infringement and continued to infringe thereafter, in which event damages may be recovered only for infringement occurring after such notice. Filing of an action for infringement shall constitute such notice.

35 U.S.C. § 287.  The marking requirement does not apply only to patentees, but also to “any persons” making or selling the invention “for or under” the patentee.  The courts have interpreted this requirement then as applying to a patent licensee — “thereby limiting the patentee’s damage recovery when the patented article is not marked” by the licensee.  Quoting Amsted Indus. Inc. v. Buckeye Steel Castings Co., 24 F.3d 178, 185 (Fed. Cir. 1994).

Here, Rembrandt had previously licensed the patent at-issue (U.S. Patent No. 8,023,580) to Zhone Tech who sold unmarked products allegedly embodying claim 40 of the patent.  (Zhone was not required to mark under the license agreement).

As soon as Samsung sought to limit its potential damages to the date of actual-notice, Rembrandt dropped its allegations that Samsung infringed claim 40 and also filed a statutory disclaimer with the USPTO disclaiming claim 40.  Samsung was later found to infringe other remaining claims of the patent – and the district court ruled that the disclaimer was sufficient to cure the marking problem.

On appeal, the Federal Circuit disagrees:

Rembrandt’s position, adopted by the district court, effectively provides an end-run around the marking statute and is irreconcilable with the statute’s purpose. Allowing Rembrandt to use disclaimer to avoid the consequence of its failure to mark undermines the marking statute’s public notice function. . . .

The marking statute protects the public’s ability to exploit an unmarked product’s features without liability for damages until a patentee provides either constructive notice through marking or actual notice.


Disclaiming a patent claim does not later erase the fact that the claim was previously in effect and had not been properly marked.

The Court suggested a potential question of whether the focus should be claim-by-claim rather than patent-by-patent, but declined to rule on that issue because it had not been properly raised on appeal.   On remand, the district court will be asked to look into that question and – if needed – recalculated the damage award.

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The case here offers an important distinction – in my mind – between a patent license and a covenant-not-to-sue. Any reasonable license that covers an ‘article’ would include the marking requirement.   In my mind (although perhaps not the court’s) a mere covenant-not-to-sue should not fall under the marking requirement.

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Typical Marking License Language: Licensee mark all Licensed Products made or sold in the United States with an appropriate patent marking. All Licensed Products shipped to or sold in other countries must be marked in such a manner as to provide notice to potential infringers pursuant to the patent laws and practice of the country of manufacture or sale.  Licensor shall have the right to inspect Licensee’s Licensed Products to determine if Licensee is marking in accordance with this paragraph.


Intellectual Ventures Stops Buying Patents

Intellectual Ventures has stopped buying patents on the secondary market based upon an ‘investor driven decision.’ Removal of this dedicated capital from the market likely means a continued depression of patent prices — especially for patents not directly tied to a product currently on the market.

Although IV is only a small part of the secondary patent market, it filled an important niche for patents not currently being infringed and not purchased as part of a larger business transaction such as a merger, buyout, or technology transfer and license agreement.  Rather, IV’s focus has been on aggregating.

Of course, IV will continue to monetize its many assets via enforcement actions as well as sales.  Jack Ellis at IAM-Market describes a recent sale of more than 1,000 IV patents to Dominion Harbor. [LINK]

As Ellis writes, “some canny players may see the gap in the marketplace as presenting an exciting opportunity” to buy up patents at a depressed price.

Unwired Planet v. Huawei: An English Perspective on FRAND Royalties

FRONDGuest Post by Professor Jorge L. Contreras

In the latest decision by the UK High Court of Justice (Patents) in Unwired Planet v. Huawei ([2017] EWHC 711 (Pat), 5 Apr. 2017], Mister Justice Colin Birss has issued a detailed and illuminating opinion regarding the assessment of royalties on standards-essential patents (SEPs) that are subject to FRAND (fair, reasonable and non-discriminatory) licensing commitments.  Among the important and potentially controversial rulings in the case are:

  1. Single Royalty: there is but a single FRAND royalty rate applicable to any given set of SEPs and circumstances,
  2. Significance of Overstep: neither a breach of contract nor a competition claim for abuse of dominance will succeed unless a SEP holder’s offer is significantly above the true FRAND rate,
  3. Global License: FRAND licenses for global market players are necessarily global licenses and should not be limited to a single jurisdiction, and
  4. Soft-Edge: the “non-discrimination” (ND) prong of the FRAND commitment does not imply a “hard-edged” test in which a licensee may challenge the FRAND license that it has been granted on the basis that another similarly situated licensee has been granted a lower rate, so long as the difference does not distort competition between the two licensees.


This case began in 2014 when Unwired Planet, a U.S.-based patent assertion entity, sued Google, Samsung and Huawei for infringement under six UK patents (corresponding actions were filed in Germany).  Unwired Planet claimed that five of the asserted patents, which it acquired from Ericsson in 2013 as part of a portfolio comprising approximately 2000 patents, were essential to the 2G, 3G and 4G wireless telecommunications standards developed under the auspices of the European Telecommunications Standards Institute (ETSI).  Because Ericsson participated in development of the standards at ETSI, any patents shown to be SEPs would necessarily be encumbered by Ericsson’s FRAND commitment to ETSI.

The UK proceedings involved numerous stages, including five scheduled “technical trials” which would determine whether each of the asserted patents was valid, infringed and essential to the ETSI standards.  During these proceedings Google and Samsung settled with Unwired Planet and Ericsson (which receives a portion of the licensing and settlement revenue earned by Unwired Planet from the patents), leaving Huawei as the sole UK defendant.  By April 2016 three of the technical trials had been completed, resulting in findings that two of the asserted patents were invalid and that two were both valid and essential to the standards.  These findings are currently under appeal. The parties then agreed to suspend further technical trials.  In October 2016 a “non-technical” trial began regarding issues of competition law, FRAND, injunction and damages.  Hearings were concluded in December 2016, and the court’s opinion and judgment were issued on April 5, 2017.

A. The High Court’s Decision – Overview

The principal questions before the court were (1) the level of the FRAND royalty for Unwired Planet’s SEPs, (2) whether Unwired Planet abused a dominant position in violation of Section 102 of the Treaty for the Formation of the European Union (TFEU) by failing to adhere to the procedural requirements for FRAND negotiations outlined by the European Court of Justice (CJEU) in Huawei v. ZTE (2014), and (3) whether an injunction should issue in the case.  In the below discussion, Paragraph numbers (¶) correspond to the numbered paragraphs in the High Court’s April 2017 opinion.

B. FRAND Commitments – General Observations

Justice Birss begins his opinion with some general observations and background about the standard-setting process and FRAND commitments.  A few notable points emerge from this discussion. (more…)

Sir Edward Coke and International Patent Exhaustion

GomezArosteguiGuest Post by Professor Tomás Gómez-Arostegui (Lewis & Clark Law School)

One of the questions in Impression Prods., Inc. v. Lexmark Int’l, Inc., on which the Supreme Court recently heard oral argument (March 21), is whether the authorized and foreign first sale of a patented item exhausts a U.S. patent holder’s use and distribution rights. The Patent Act of 1952 contains no pertinent provisions on the effect of the first sale of a patented article, and as a consequence many observers believe that the common law will be especially important in deciding the question. The Petitioner, Impression Products, has gone so far as to argue that the common-law backdrop is dispositive.[1] If the Court agrees and decides that the common law should control or influence the case, then assessing the content of that common law becomes paramount.

So what is the common-law rule? In Kirtsaeng v. John Wiley & Sons, Inc., a copyright case, the Court stated that the first-sale doctrine was a “common-law doctrine with an impeccable historic pedigree” that reached as far back as the 17th century and that made “no geographical distinctions.”[2] In reaching that conclusion, the Court relied in large part on English law, particularly Sir Edward Coke’s 1628 treatise in which he rejected post-sale restraints on the alienation of ordinary chattels. Although Coke was not speaking of chattels encumbered by copyrights or patents, let alone goods made and first sold in a different country, the Court nevertheless stated that this no-restraint principle applied to chattels embodying copyrighted works. Notably, the Court offered no other support for its historical account of the common law, apart from citing its 1908 decision in Bobbs-Merrill Co. v. Straus—which treated national (rather than international) copyright exhaustion.[3]

Not surprisingly, Impression Products refers to Coke repeatedly in its brief,[4] as do many amici who have submitted supporting briefs.[5] And at the oral argument last week, Impression Products began by stating that the “principle goes back, of course, to the 15th century.”[6] It also ended its argument by referring to Coke.[7] But more importantly, as Dennis notes in his recent post recapping the oral argument, Justice Breyer, who wrote the majority opinion in Kirtsaeng, seems very much inclined to continue relying on Coke’s account of English common law. Justice Breyer referred to Coke many times[8] and stated, for example, that a patent rule rejecting mandatory international exhaustion would be “very much contrary to what 300 years of restraints on alienation [doctrine] ha[d] in mind.”[9]

In an article posted on SSRN,[10] I examine and reject the Court’s historical account of English common law. Although Kirtsaeng gave the distinct impression that no early cases in England had ever ruled against gray-market importation in an intangible rights case, this is not so in fact. My article discusses two English cases and a few Scottish ones, decided in the long 18th century, and which have thus far escaped the attention of practitioners and scholars. Some of the cases are reported in print, but not all of them appear in traditional law reports, and some of the records only survive in manuscript. I have posted images of the most important manuscripts and less accessible print sources online. The cases demonstrate that the common law did not recognize international exhaustion. On the contrary, the common law observed foreign legal boundaries and permitted right owners and their licensees to stop gray-market goods that embodied intangible rights.

One of the English cases was decided in the Court of Chancery in 1716–1722, and the other in the Chancery and House of Lords in 1802–1804. Both involved patents for the exclusive right of printing, selling, and importing the Holy Bible, New Testament, and Book of Common Prayer. The King held prerogative copyrights in these works and had licensed them by letters patent separately in England and Scotland. At the request of the English licensees, the courts ruled against London booksellers who had imported books printed and sold by the Scottish licensees. Despite the union of the two countries in 1707, the Chancery and House of Lords viewed Scotland as a foreign country for the purpose of prerogative copyrights because the rights granted in the two countries were territorial, legally separate, and potentially distinct. Outside of English common law, a case decided in the Court of Session in Scotland and then in the House of Lords in 1828, extended the proposition to books traveling in the other direction—from England to Scotland.

Notably, these cases considered many of the same arguments that Lexmark and Kirtsaeng raise, such as the territoriality of patent rights; free trade among countries; the potential benefit to consumers of competition from imported gray-market goods; the potential harm to consumers who purchase goods in one country without any notice of their inability to bring those goods into another country; and the potential negative effect that gray-market imports could have on a domestic licensee.

So what do these cases mean for international patent and copyright exhaustion in the United States?

Two consequences follow. First, they call into question the Supreme Court’s decision in Kirtsaeng. Neither the parties nor the Court were aware of these cases and thus the decision issued on an incomplete record of the common law. Second, and most obviously, these newly revealed cases could have an even greater impact in Lexmark. If the Court or any of its members choose to rely on English common law once more—whether presented as controlling, persuasive, or simply historical narrative—that consultation must now occur with a different view of the common law in mind.

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[1] Brief for Petitioner at 10–11, 44–47 (Jan. 17, 2017); Reply Brief for Petitioner at 2–3, 16–17 (Mar. 14, 2017).

[2] 133 S. Ct. 1351, 1363 (2013).

[3] Id. at 1363 (citing Bobbs-Merrill Co. v. Straus, 210 U.S. 339 (1908)).

[4] Brief for Petitioner at 10, 13, 42, 45–46 (Jan. 17, 2017).

[5] E.g., Brief of Public Knowledge et al. at 5, 9, 13–14 (Jan. 23, 2017); Brief of Costco Wholesale Corp. et al. at 20–21, 33–34 (Jan. 24, 2017); Brief for HTC Corp. et al. at 12, 17 (Jan. 24, 2017); Brief of the Association of Medical Device Reprocessors at 36 (Jan. 24, 2017); Brief of Auto Car Association et al. at 21 (Jan. 24, 2017); Brief of Intellectual Property Professors et al. at 6, 26–27 (Jan. 24, 2017).

[6] Oral Argument Transcript at 3 (Mar. 21, 2017).

[7] Id. at 53.

[8] Id. at 14, 26, 28, 33–34, 36.

[9] Id. at 28; see also id. at 26.

[10] H. Tomás Gómez-Arostegui, Patent and Copyright Exhaustion in England circa 1800, available at http://ssrn.com/abstract=2905847.

The Cost of Getting the Law Right

Andrew Pincus (arguing today in Lexmark):

If you look at the Alice case, for example, that obviously had tremendous implications for both the patentees and for people who had entered into license agreements and were paying money for patents that turned out to be invalid. But that was just a consequence of this Court getting the law right.


An Economic Argument Against Mandatory Patent Exhaustion

Guest Post By Prof. Jonathan Barnett, University of Southern California School of Law & Prof. Ted Sichelman, University of San Diego School of Law

As Patently-O has described in several posts (here, here, here), the Supreme Court is poised to decide the fate of the patent exhaustion doctrine in Impression Products v. Lexmark International. Specifically, the Court is likely to answer two important sets of questions: (1) To what extent does exhaustion limit the enforcement of contractual sale and use restrictions on downstream purchasers?; and (2) Does exhaustion apply to foreign sales? If so, how?

Oddly, although exhaustion has major ramifications for IP markets, there have been almost no formal models of the doctrine’s economic effects in the domestic context, and few models in the international context. A recent paper by one of us (Sichelman), together with two economists, Edwin Lai and Olena Ivus, provides a rigorous economic model to determine the effects of (1) a mandatory exhaustion regime, in which the patent owner essentially can never enforce downstream limitations, and (2) a presumptive exhaustion regime, in which the patent owner and a licensee/purchaser can opt out of exhaustion via contract.

Drawing from this paper and other economically oriented analysis, we recently co-authored an amicus brief in Impression Products, which argues in favor of a presumptive understanding of the exhaustion doctrine.  (Interestingly, although academics are usually pegged as strongly in favor of mandatory exhaustion, our brief garnered 44 signatures—significantly more than the brief filed by professors arguing in favor of mandatory exhaustion.)

The major points of the brief and paper are straightforward.

  • The “Paid Twice” Argument is Meritless: Proponents of mandatory exhaustion sometimes argue that it is improper for a patent owner to be “paid twice”—for instance, once upon the initial sale of a patented good and another time upon resale. Although this may sound plausible intuitively, it does not hold up to economic analysis. A patent owner wants to maximize profits, not prices. Multiplying royalties through a chain of purchasers will tend to increase price and therefore depress consumer demand. Thus, there are strong market constraints that restrict the royalty amount a patent owner can charge. There is no sound economic reason why in every case a patent owner should not be able to break up the profit-maximizing aggregate royalty into multiple components payable at different points on the supply chain. Indeed, economic modeling shows that these “double” payments, implemented through use-specific downstream limitations, may sometimes be essential to optimizing incentives to invent and commercialize new technologies.
  • The “Restraints on Alienation” Concern is Ambiguous: The view that is generally espoused is that restraints on personal property are generally not enforced. However, much doubt has been cast on this view. Moreover, in the real property context, reasonable restraints on sale and use have been enforced for hundreds of years. This makes economic sense, especially in the patent context, because a rigorous economic treatment shows that the “restraint on alienation” concern boils down to transaction costs, including negotiation and information costs in downstream licenses and sales. The paper’s model shows that when transaction costs are high relative to the value of the underlying good—think medical device patent owner negotiating with a patient prior to a surgery—then mandatory exhaustion may yield net static benefits by eliminating the possibility of these transaction costs. However, when transaction costs are low—think a patent owner negotiating with a large computer manufacturer—then mandatory exhaustion may prevent customized deals that are economically efficient. Given the extent to which information technology and other industries rely on complex supply chains involving market participants with different needs, mandatory exhaustion may impose significant costs not justified by the benefits.
  • Exhaustion’s Effect on Consumers is Ambiguous: Many proponents of mandatory exhaustion argue that it benefits consumers. However, mandatory exhaustion tends to preclude what economists term “price discrimination”—namely, the ability to charge different prices (and associated terms of use) that reflect consumers’ different product valuations and budget constraints. By forcing patent owners to recoup all their profits from the first purchaser, the patent owner will tend to raise the initial price for the product. This increase, in turn, forecloses consumers who cannot afford the higher price. So while mandatory exhaustion does leave more money in the pockets of the consumers who can afford the product, it often forecloses another class of consumers entirely from buying the product. While some might argue that mandatory exhaustion allows for arbitrage resulting in broader access, any such gains are likely to be short-lived since the patent owner will typically respond by adopting a uniform pricing scheme, often resulting in less access for lower-valuation and lower-income consumers plus weaker incentives for the patent owner to invent and commercialize in the future. In general, the net access and incentive effects of these various factors will differ in any particular market. However, the short story is that there is no sound basis for the popular view that mandatory exhaustion necessarily promotes the interests of consumers—in many cases, just the opposite will be true.

The brief and paper also consider other important aspects of the exhaustion doctrine, such as multi-component products, information asymmetries, switching costs, design-arounds, and the like. Even taking all of these wrinkles into account, the upshot is similar to that above—whether exhaustion is beneficial depends on the particular circumstances at-issue. The same arguments hold in the context of foreign sales.

Based on these considerations, the amicus brief argues that presumptive exhaustion is the best approach for balancing the benefits and costs of downstream limitations in technology markets.  This approach allows a patent owner to opt out of a default exhaustion rule so long as clear notice is provided and the restrictions are otherwise legal (e.g., do not violate the antitrust laws or other public policy concerns). A mandatory, “per se” rule on the other hand assumes all downstream limitations are pernicious, when the economics show otherwise. In this regard, courts are in a suitable position to sort out reasonable from unreasonable downstream limitations, something that courts have done in the past when applying the exhaustion doctrine and, in the related antitrust law of vertical restraints, have done for 40 years since the Supreme Court’s landmark Sylvania decision.

We also argue that it is essential to allow downstream limitations to be enforced via a patent infringement suit rather than a state contract claim—otherwise, it would be too costly to bind remote downstream purchasers, injunctive relief would generally not be available, and a uniform body of federal law would not develop.

In sum, when the economics of exhaustion is carefully considered, the most sensible rule that emerges is a presumptive one that allows for reasonable limitations when clear notice is provided to downstream purchasers.

Mentor Graphics v. Synopsys: Covering All the Bases

Mentor Graphics v. Eve-USA (Synopsys) (Fed. Cir. 2017) [synopsysmentor]

The appeal here is somewhat complicated – as reflected by the Federal Circuit’s 42-page opinion.  The complications begin with the founding of EVE, and emulation software company founded by folks who invented emulation software at Mentor. Synopsys then acquired EVE.   EVE had previously licensed some of Mentor’s patents, but Mentor claims the license was terminated by the Synopsys acquisition.

Ending Assignor Estoppel: The jury found that Synopsys infringed Mentor’s U.S. Patent No. 6,240,376 and awarded $36 million in lost profits damages.  The district court had refused to allow Synopsys to challenge the patent’s validity based upon the doctrine of assignor estoppel.  The judge-made doctrine prohibits a patent’s seller/assignor (such as an inventor who assigned rights to his employer) from later challenging the validity of a patent in patent infringement litigation.   Here, Synopsys agreed that the doctrine applied since the inventors of the ‘376 patent had founded and continued to operate EVE that was the source of the infringement.   However, the adjudged infringer boldly asked the Federal Circuit to eliminate the doctrine (as the PTAB has done) since Supreme Court “demolished the doctrinal underpinnings of assignor estoppel in the decision that abolished the comparable licensee estoppel in Lear, Inc. v. Adkins, 395 U.S. 653 (1969).” On appeal, the Federal Circuit panel disagreed – as it must – following its own precedent such as Diamond Sci. Co. v. Ambico, Inc., 848 F.2d 1220, 1222–26 (Fed. Cir. 1988) and MAG Aerospace Indus., Inc. v. B/E Aerospace, Inc., 816 F.3d 1374, 1380–81 (Fed. Cir. 2016).  The setup here is proper for en banc or Supreme Court petition.  On Point is Mark A. Lemley, Rethinking Assignor Estoppel, 54 Hous. L. Rev. 513 (2016) (arguing that the doctrine “interferes with both the invalidation of bad patents and the goal of employee mobility”).

Indefinite: The district court held on summary judgment that Synopsis’ cross-asserted U.S. Patent No. 6,132,109 is indefinite. On appeal, the Federal Circuit reversed.  The asserted claims require a “circuit analysis visually near the
HDL source specification that generated the circuit.”  And, the district court found that the undefined term-of-degree “near” rendered the claim indefinite.

Patent law requires that the claims “inform, with reasonable certainty, those
skilled in the art about the scope of the invention.” Nautilus, Inc. v. Biosig Instruments, Inc., 134 S. Ct. 2120 (2014).  Terms of degree are certainly permissible, but the patent document must include “some standard” used to measure the term of degree.

Here, the court walked through terms of degree that have been accepted post Nautilus: “spaced relationship”,  “visually negligible”, and “look and feel” based upon the intrinsic evidence or established meaning in the art.

Here, the specification indicates that the nearness of the circuit analysis display is to allow “a designer to make more effective use of logic synthesis and reduce the complexity of the circuit debugging process.”  In addition, the specification provides several diagrams showing the analysis next to the appropriate line of code (below). These descriptions provided enough of a standard for the court to find a reasonable certainty as to the scope of the term and the claim as a whole. “[W]e hold a skilled artisan would understand “near” requires the HDL code and its corresponding circuit analysis to be displayed in a manner that physically associates the two.”  On remand, Synopsys will get a shot at proving infringement of this patent.


Eligibility: A separate Synopsys patent was found ineligible. U.S. Patent No. 7,069,526 (asserted claims 19, 24, 28, 30, and 33). The claims are directed to “A machine-readable medium containing instructions …”  The problem is that the patent expressly defines “machine-readable medium” to include “carrier waves” and therefore is invalid under In re Nuijten, 500 F.3d 1346 (Fed. Cir. 2007).  In Nuijten, the court held that transitory signals are not eligible for patenting because they do not fit any of the statutory classes of “process, machine, manufacture, or composition of matter.” The here court writes: “Because the challenged ’526 claims are expressly defined by the specification to cover carrier waves, they are similar to the ineligible Nuijten claims.”

Claim Preclusion: Finally, the Mentor has successfully appealed the district court claim preclusion holding as to Mentor’s U.S. Patent Nos. 6,009,531 and 5,649,176.  Back in 2006, Mentor had sued EVE for infringing the patents.  That litigation settled with Eve’s license and a dismissal with prejudice.

Here, the Federal Circuit held that claim preclusion cannot apply because the current litigation is based upon acts that occurred subsequent to the prior settlement.

Mentor’s infringement allegations are based on alleged acts of infringement that occurred after the Mentor/EVE license terminated and were not part of the previous lawsuit. Claim preclusion does not bar these allegations because Mentor could not have previously brought them.

What is a bit unclear here is how the license plays in.  The court noted that the current infringement claims are “based on post-license [termination] conduct, so the alleged infringement did not exist during the previous action.”  It is unclear how the court would deal with pre-termination conduct.

Note: The case also includes an important holdings on lost profits damages, willfulness, and written description that we’ll save for a later post.

Origins of Patent Exhaustion in Jacksonian Politics, Patent Farming, and the Basis of the Bargain

Guest Post by Sean M. O’Connor, Boeing International Professor, University of Washington School of Law

As most readers of this blog know, patent exhaustion is usually traced to Chief Justice Taney’s statement in the 1853 case of Bloomer v. McQuewan: “when the machine passes to the hands of the purchaser, it is no longer within the limits of the [patent]. It passes outside of it.”[1] Taken on its own, the quote seems straightforward to establish the modern doctrine, perhaps relying on some underlying common law rule regarding free alienability of goods. But those who read the full opinion carefully can feel less certain of this—something doesn’t seem right. As Judge Taranto correctly noted in the Federal Circuit’s Lexmark International, Inc. v. Impression Products, Inc. opinion, currently on appeal at the Supreme Court, the transactions at issue appear to be licenses or assignments and not sales of patented machines.[2] Recent scholarship has shed further light on the roots of exhaustion. John Duffy and Richard Hynes advance an account of exhaustion as judicial efforts to cabin overlapping fields of law.[3] Christopher Beauchamp revealed the details behind the first patent litigation explosion, drawing similarities to modern concerns.[4] And Adam Mossoff identified Taney’s quote as dicta, while insightfully placing it in the context of Taney’s Jacksonian Democrat politics and judicial activism.[5]

In a paper recently posted to SSRN,[6] I argue that, while this new scholarship is on the right track, it does not go far enough in unpacking the transactions and cases behind Taney’s quote. A careful reconstruction reveals that machine patentees were engaged in “patent farming:” franchising systems that relied on multilevel assignments and licenses down through wholesalers to local craftsmen who built and used patented machines in their businesses. This was because mass manufacturing and nationwide distribution of machines or other complex patented inventions was not feasible in the antebellum period.

These systems were disrupted under the patent term extensions authorized in the 1836 Patent Act, as patentees treated the extensions as new terms that allowed them to demand new deals from existing assignees/licensees. The latter believed that a proviso in the Act preserved their grants into the new term. Things came to a head in 1846’s Wilson v. Rousseau, a complicated set of consolidates cases that essentially had two holdings: 1) the extensions wiped away any existing assignments and licenses, unequivocally stating that the local franchisees could not continue using the machines they had built themselves in the first term; but 2) the proviso created a compulsory license authorizing the existing grantees to continue using the existing machines, but they could no longer make or sell machines even if they held those rights in the first term.[7] Crucially, defendants raised an exhaustion-type argument that the Court rejected.

In Bloomer, the Court was called on to decide whether the proviso also applied to Congressional private act extensions that were silent on existing grantee rights. Writing for the Court, Taney made an in pari materia argument that the private acts had to be “ingrafted” onto the general Patent Act, including the proviso, because otherwise they did not provide enough details on their own. While this fully resolved the matter, Taney engaged in extensive, unnecessary dicta—as he would do in Dred Scott and elsewhere—to explain or justify Congress’ policy decision to include the proviso in the Act. It was here that he argued that, because the local licensee franchisees received no direct benefit from the patent (they could neither sell machines, grant sublicenses, or enforce the patent), such grantees’ machines should be seen as “outside the monopoly,” with continued use rights. But the compelling spatial metaphor proved more than Taney claimed. If the machine were truly outside the patent then the franchisee should be able to resell it, which the Court clearly prohibited by expressly extending Wilson’s proviso interpretation to private act extensions. Taney’s opinion seemed driven by his Jacksonian Democrat political views to limit the reach of federal power—in the form of patents—and to protect local craftsmen from distant patent sharks and financiers.

Contrary to modern cursory histories of exhaustion, Bloomer in fact made no changes to patent law (other than applying the proviso to private act extensions). Subsequent treatises and cases cited Bloomer only for this principle. But one of Taney’s fellow Jacksonians on the Court, Justice Clifford, picked up the dicta and began oddly restating it in cases as if it were a statement of law, even though it was usually inapposite to the facts at hand and itself dicta outside the case’s holding. Incrementally, Clifford seemed to convince other Justices (and lower courts) that there was some kernel of binding law here. Slowly but steadily, Taney’s dicta edged into holdings.

Notwithstanding, it took twenty years for the dicta to be used in a Supreme Court holding for use-rights only in an actuals sale of goods,[8] and another twenty to find a right of resale as part of what was originally called “emancipation.”[9] Patent exhaustion did not arise from common law principles of free alienability of chattels,[10] nor was it solely a statutory interpretation issue, nor an intentional effort to protect consumer rights or limit anticompetitive behavior generally. Instead, the unifying principle was that the courts were trying to protect the parties’ reasonable expectations and basis of the bargain when unexpected developments, such as unforeseen legislation creating a new kind of patent term extension, appeared. To this end, with few exceptions (such as the antitrust zeal of the early twentieth century), the Supreme Court was clear that emancipation/exhaustion was a default implied license for use (and later, resale) by purchasers of patented goods, but that could be contracted around by express mutually-assented conditions. At the same time, the courts were vigilant against “gotcha” tactics of some patentees and purchasers alike, and many of the cases are best understood as courts policing these abuses.

In the end, courts of the nineteenth century were grappling with an explosion of innovative patent commercialization models similar to today’s experimentation with IP-based transactions. But the response then was not to straightjacket these new models into a single mandatory transaction type. And the Supreme Court should resist that temptation in deciding Lexmark now. To decide that exhaustion is a mandatory rule precluding the use of expressly conditional sales that are the mutually assented basis of the parties’ bargain would be historically and doctrinally inaccurate. Equally important, it would cut off many economically and socially useful IP-goods transactions, especially in the modern globalized value/supply chain production of technology-based goods such as computers, smartphones, and televisions.[11]

= = = = =

[1] Bloomer v. McQuewan, 55 U.S (14 How.) 539, 549 (1853).

[2] See, e.g., Lexmark International, Inc. v. Impression Products, Inc., 2014-1617, 2014-1619 Slip Op. (Fed. Cir. 2016) (describing the transactions at the heart of Bloomer as patent licenses and not sales of goods).

[3] John Duffy and Richard Hynes, Statutory Domain and the Commercial Law of Intellectual Property, 102 Va. L. Rev. 1 (2016).

[4] Christopher Beauchamp, The First Patent Litigation Explosion, 125 Yale L.J. 848 (2015).

[5] Adam Mossoff, Commercializing Property Rights in Inventions: Lessons for Modern Patent Theory from Classic Patent Doctrine, in Competition Policy and Patent Law Under Uncertainty: Regulating Innovation (eds. Geoffrey Manne and Joshua Wright, Cambridge Univ. Press 2011); Adam Mossoff, Exclusion and Exclusive Use in Patent Law, 22 Harvard. J.L. Tech. 321 (2009); Adam Mossoff, A Simple Conveyance Rule for Complex Innovation 118 Tulsa L. Rev. 101, 107-10 (2009).

[6] Sean M. O’Connor, Origins of Patent Exhaustion in Jacksonian Politics, Patent Farming, and the Basis of the Bargain available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2920738.

[7] 45 U.S. 646 (1846).

[8] Adams v. Burke, 84 U.S. 453 (1873).

[9] Keeler v. Standard Folding Bed Co., 157 U.S. 659 (1895).

[10] In the paper, I expand on Judge Taranto’s and Professors Duffy and Hynes’ arguments that Justice Breyer’s citation to Lord Coke’s 1628 Institutes in Kirtsaeng v. John Wiley & Sons, Inc., 133 S.Ct. 1351 (2013), is not dispositive to show a common law basis for exhaustion.

[11] See Brief of 44 Law, Business and Economics Professors, Impression Products, Inc. v. Lexmark International, Inc., available at https://papers.ssrn.com/sol3/papers2.cfm?abstract_id=2923826; Sean M. O’Connor, IP Transactions as Facilitators of the Globalized Innovation Economy 212-27 in Rochelle Dreyfuss et al., Working Within the Boundaries of Intellectual Property: Innovation Policy for the Knowledge Society (Oxford Univ. Press 2010).

Prior Settlement Agreement Helps the Jury find Liability and Damages

by Dennis Crouch

Prism Tech v. Sprint Spectrum (Fed. Cir. 2017) [prismtech]

The Nebraska jury found Sprint liable for infringing Prism’s patents and awarded $30 million in reasonable-royalty damages. U.S. Patent Nos. 8,127,345 and 8,387,155. [verdict]prismverdict

AT&T was also sued under the patents but ended up settling the case for [REDACTED LARGE SUM OF MONEY].  On appeal, Sprint argued (unsuccessfully) that the settlement should not have been shown to the jury under Federal Rule of Evidence 403.

FRE 403 permits exclusion of “relevant evidence” when its “probative value is substantially outweighed by a danger of one … unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence.”

Prior settlement agreements are obviously probative since they help to establish value of the patented technology in the industry.   Traditionally, the settlement value is modeled as less than the value of the patent once its validity and infringement are established.  However, the mixture of risk aversion and litigation costs lead to some settlements that appear greater than the expected value of patent rights.

Here, the Federal Circuit found found “adequate basis for admitting the AT&T Settlement Agreement.” The agreement covered the same patents and – at trial – Prism’s expert explained differences between usage of AT&T and Sprint to help the jury use the prior agreement as comparable.

That Agreement covered the patents at issue here, though not only the patents at issue here. In that common situation, evidence was needed that reasonably addressed what bearing the amounts in that Agreement had on the value of the particular patents at issue here.

For me, the larger potential issue is that the jury is more likely to find the patent valid and infringed if it know that AT&T already paid a [REDACTED LARGE SUM OF MONEY] to settle the case.  This would suggest at least a bifurcated trial.  However, Sprint did not appear to make that argument on appeal.

= = = =

A very interesting argument raised by Sprint on appeal was based upon Rude v. Wescott, 130 U.S. 152 (1889).  In particular, Sprint argued that prior licenses can be used to prove an “established royalty” but not to prove a “reasonable royalty.”  Of course, a single license would not be sufficient to prove the established royalty. See also Cornely v. Marckwald, 131 U.S. 159 (1889).


The Court held in Rude that there was insufficient evidence to prove what has been called an “established royalty” as a measure of damages at law for patent infringement—i.e., “such a number of sales by a patentee of licenses to make, use and sell his patents, as to establish a regular price for a license.”  On appeal, the Federal Circuit rejected the argument as too-old: “The Court in Rude used both the language of patent damages law and the language of evidence law, and both have changed significantly since Rude.”  In addition, the court likely cut-short certiorari on the issue by finding that Sprint had failed to properly preserve the arguments for appeal.

Affirming Arbitration Award

Bayer Cropscience v. Dow Agrosciences (Fed. Cir. 2017) (non-precedential).

The case here involves a set of genetically modified crops containing the pat gene, which confers resistance to the herbicide glufosinate.  Some of the crops include additional genetically modified resistance n a “molecular stack” with additional herbicide resistant genes such as aad-12 ( 2,4-D herbicide tolerance) and dmmg.

The parties here have a long history of licenses and cross-licenses. However, after an accusation of IP theft,  in 2012 Bayer sued Dow for infringing its U.S. Patent Nos. 5,561,236, 5,646,024, 5,648,477, 7,112,665, and RE44,962.  In response, Dow filed a set of for inter partes reexam requests (still pending)

That litigation was dismissed because of an arbitration agreement – that resulted in a $455 million arbitration award for Bayer for lost profits and reasonable royalty and also an arbitration judgment that the patents were not invalid.

In a non-precedential opinion, the Federal Circuit has affirmed the district court’s confirmation of the arbitration award with the minor exception of interest calculation.  Here, the arbitrator awards are powerful becaues they can only be overturned based upon quite “demanding standards” involving “manifestly disregard the law.”  A portion of the award included what appears to be post-expiration royalties. However, the Federal Circuit held that the manifest-disregard standard is so high that even those damages cannot be vacated (one of the five patents has not yet expired).

= = = =

This case is actually the first time that I have seen the arbitration award submitted to the USPTO as required by 35 U.S.C. § 294(d).

(a) A contract involving a patent or any right under a patent may contain a provision requiring arbitration of any dispute relating to patent validity or infringement arising under the contract. . . .

(d) When an award is made by an arbitrator, the patentee, his assignee or licensee shall give notice thereof in writing to the Director. . . . The Director shall, upon receipt of either notice, enter the same in the record of the prosecution of such patent. If the required notice is not filed with the Director, any party to the proceeding may provide such notice to the Director.

(e) The award shall be unenforceable until the notice required by subsection (d) is received by the Director.

However, anyone inspecting the award will notice substantial redacted portions (including portions relating directly to the validity and infringement issues).  I would suggest that submission does not fully comply with the requirements of Section 294.

Google v. Oracle: Fair Use of a Copyrighted API

by Dennis Crouch

Google v. Oracle (Fed. Cir. 2017) (pending software API copyright case)

In its return-trip to the Federal Circuit, the Oracle’s JAVA-Copyright case against Google appears have some chance of once again making interesting precedent.  I previously described the case as follows:

When Google wrote its program-interface (API) for Android, the company made a strategic decision to mimic the method-calls of Java.  Java was already extremely popular and Google determined that free-riding on Java popularity would facilitate its catch-up game in the  third-party app marketplace.  As an example, Google used the Java method header “java.lang.Math.max(a,b)”.  When called, the “max” function returns the greater of the two inputs.  In Android’s API, Google copied a set of 37 different Java “packages” that each contain many classes and method calls (such as “max()”).  Overall, Google copied the header structure for more than six-thousand methods.  Although Java is offered for both open source and commercial licenses, Google refused to comply with either regime.

Java’s originator Sun Microsystems was known for broadly sharing its creations without enforcing its IP rights.  That aura changed when Sun was purchased by Oracle.

Back in 2012, the N.D. Cal. district court ruled that the portions of Java structure that Google copied were not themselves entitled to copyright protection.  On appeal, however, the Federal Circuit reversed and ordered a new trial. In particular, the Federal Circuit panel led by Judge O’Malley held that the Java API taxonomy copyrightable as a whole and rejected the applicability of idea/expression merger doctrine. “Merger cannot bar copyright protection for any lines of declaring source code unless Sun/Oracle had only one way, or a limited number of ways, to write them.”

On remand, the jury sided with Google – finding that the accused use was a “fair use” and therefore not infringement.  On appeal, Oracle asks the court to overturn that verdict – both based upon the evidence presented and the additional evidence excluded.

Oracle has filed its opening brief that is supported by eleven additional amicus briefs. [Oracle Brief: 02-10-17_oracle-opening-brief-second-appeal].  Google’s will be due next month as well as amicus supporting the broader conception of fair use.

Although the briefs provide good arguments for the limited nature of fair use and the ‘creativity’ associated with API development, none of them squarely addressed how partial failings under 17 USC 102(b) should impact the fair use determination under Section 107.

102 (b) In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.

Although the API was found not to violate the limitations of 102(b), I would suggest that this close-call should have a relevant impact on the scope of fair use.  I would also suggest that platform-interoperability and being able to take advantage of a skilled work-force (i.e., Java Programmers) should be included within the fair use debate even if they don’t fully reach the 102(b) threshold.  Prof. Randy Picker works in this area and tries to tease-out what counts as legitimate restrictions on access and those that are illegitimate.

The Fair Use provision is written as follows:

107 [T]he fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include —

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or value of the copyrighted work.

The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above

In walking through these factors, Oracle argues:

  1. Google’s purpose was purely commercial; not transformative; and not in good faith.
  2. API’s packages should be given strong protections because they are “undisputedly creative.”
  3. The API’s represent the “heart” of Java.
  4. The copying led to significant harms both to current and potential markets.

McNealy and Sutphin are former Sun Microsystems executives who helped develop and promote Java. In their amicus brief, the pair provide a nice overview of how Java works and its purpose.  The key portion of the brief here is the allegation that Google’s copying allowed it to “steal the legions of developers already using the Java platform.” The question for me is whether that is a harm protectable through copyright. [2017-02-17_mcnealy-sutphin_amicus-brief]  Software engineers Spafford, Ding, Porter, and Castleman add that the Java API should be given strong copyright protection because “design and expression of an API reflects the creative choices and decision-making of its author.” [2017-02-17_spafford-ding-porter-castleman_amicus-brief]

A group of 13 law professors have filed their brief in support of the copyright holder Oracle – arguing, inter alia, that (1) fair use is narrow by design; and (2) there is no special fair use test for copyrighted software.  Again here, the scholars do not address the 102(b) bar or the functional nature of the API – other than by noting that Google’s copying “achieve[d] the same functions as Oracle” and therefore was not transformative.   [2017-02-17_ip-scholars_amicus-brief]   Falling in-line, the RIAA suggests that the purpose-focused-transformation-test has no basis in the statute and should not be relied upon for fair use analysis.  [2017-02-17_riaa-amer-assn-of-publishers_amicus-brief]  Likewise, New York’s IP Law Association [2017-02-17_nyipla_amicus-brief] argues that a mere “change in context” cannot be seen as transformative for first amendment analysis.

The old Perfect-10 case almost seems to treat Google as if it is a library providing a major public service.  A number of briefs attempt to counter this pro-Google bias.  CCA (smaller mobile carries), for instance, argues that “Google’s current marketplace dominance with respect to mobile software platforms, online advertising, and online traffic is the result of many strategic decisions, including its decision to flout Oracle’s copyrights in Java – harming competition and CCA members.”  The ask her is simply: Treat Google as you would any other commercial market participant. [2017-02-17_competitive-carriers-assn_amicus-brief]

In perhaps the most moderate brief of this first round, the BSA argues that the equitable origins of the Fair Use analysis suggest favoring broad admissibility of evidence – unlike what happened in this case. [2017-02-17_bsa-the-software-alliance_amicus-brief].  Fair use should be limited to its origins as a “narrow and equitable tool for promoting public benefits like criticism, comment, news reporting, teaching, scholarship, or research.” [2017-02-17_paca-digital-licensing-assn_photographers_amicus-brief]. Former Register of Copyrights Ralph Oman agrees with this approach. “Google’s copying of the Java APIs is inconsistent with the historic goals of the Fair Use Doctrine.” [2017-02-17_ralph-oman_amicus-brief].

The MPAA, Screen Actors Guild and other combined efforts in a short brief arguing simply that the market for a copyrighted work should not be limited to the existing market for the work, but should also include “traditional, reasonable, or likely to be developed markets.” Quoting Am. Geophysical Union v. Texaco Inc., 60 F.3d 913, 930 (2d Cir. 1994). [2017-02-17_mpaa-ifta-sag-aftra_amicus-brief]. Here, the district court refused to consider (or allow the jury to consider) potential markets for JAVA including television, automobile, and wearabledevice markets. The Copyright Alliance agrees that the district court’s approach to looking at impact on current market (rather than potential market) in the fair use analysis is “particularly problematic for small businesses and individual creators . . . who may not have the resources to enter all potential or derivative marketes at once.”  [2017-02-17_the-copyright-alliance_amicus-brief]


Another Case Implying Joint-Attorney-Client Relationships in Prosecution

It is common for different entities to have input into prosecution, as where a licensee has input into prosecution of pending applications.  In such circumstances, the parties likely can assert a “common interest” privilege so that third parties cannot access their communications.  However, courts continue to conflate the existence of a common interest with implied joint attorney client relationships.

In the most recent example (others are in our book), DePuy Orthopaedics, Inc. (“DePuy”) entered into a research agreement with Orthopaedic Hospital (“OH”).  OH would develop products and DePuy would pay a royalty if any were commercialized. Some patent applications were filed. OH later contended that DePuy had developed products that required it pay OH a royalty; DePuy refused, and OH brought a declaratory judgment.  See DePuy Orthopaedics, Inc. v. Orthopaedic Hosp., 2016 WL 7030400 (Dec. 1, 2016).

In the course of the lawsuit, OH moved to compel all documents from DePuy related to prosecution of the patent applications.  DePuy refused to provide the documents. In doing so, it conceded that the parties shared a common interest with respect to the patent applications, but contended that DePuy’s in-house attorney did not jointly represent both OH and DePuy when doing so.

The court held that as a matter of law DePuy’s in-house lawyer represented both it and OH.  In doing so, it applied the test for determining whether a lawyer represents a client.  Thus, because the lawyer jointly represented both OH and DePuy, nothing was privileged between them in this dispute.

As I’ve written, this is legally incorrect.  The issue isn’t whether DePuy’s in-house lawyer represented one client, but whether she represented two.  When that is the issue, courts that appropriately analyze this issue recognize that a different analysis is required.  For example, implying a joint-client relationship can create conflicts of interest.  Further still, with respect to in-house counsel, this could create the unauthorized practice of law (for example, if she were not licensed in the state where the activities occurred, but registered by the state, and the “representation” went beyond that necessary to practice before the USPTO.  It could also result in liability by in-house counsel to third parties, and in-house counsel typically don’t have malpractice insurance.

This same fact pattern has bitten several outside firms and in-house counsel before.  Any time a lawyer is prosecuting patents where there is some agreement where a “non-client” has input — a joint venture agreement, a license, a joint development agreement — the lawyer should be extremely careful to ensure that the “non-client” knows it is not a client.

Supreme Court Update: Are Secondary Indicia of Invention Relevant to Eligibility?

by Dennis Crouch

The Supreme Court is on recess until Feb 17.

I don’t know if my end-of-April prediction will hold true, but I do expect Neil Gorsuch to become a Justice on the United States Supreme Court.  As a 10th Circuit Judge, Gorsuch never decided a patent case, but does have a handful of interesting IP cases.

There are a few petitions filed that we have not discussed here: 

 In its newest petition, DataTreasury takes 101 for a new spin by taking the 101/103 analysis to its next logical level.  If we are going to include a 103 analysis as part of the eligibility doctrine then lets go whole hog.  Thus, DataTreasury asks: whether a court must consider secondary indicia of invention as evidence in its eligibility analysis? In the case, the Federal Circuit had affirmed the PTAB judgment without opinion under R.36. A second eligibility petition is found in TDE Petroleum Data Solutions, Inc. v. AKM Enterprise, Inc., dba Moblize, Inc. TDE asks the court to “please reconcile Diehr and Alice.” (I’m not literally quoting here).  The patent at issue (No. 6,892,812) claims a four-step process of “determining the state of a well operation.” (a) store several potential “states”; (b) receive well operation data from a plurality of systems; (c) determine that the data is valid by comparing it to a threshold limit; and (d) set the state based upon the valid data.

In Wi-LAN v. Apple, the patentee revives both Cuozzo and Markman claim construction arguments – this time focusing on “whether claim terms used to define the metes and bounds of an invention are generally given their “plain and ordinary meaning,” or are redefined (limited) to match the scope of the exemplary embodiments provided in the specification.”

duPont v. Macdermid asks whether summary judgment of obviousness is proper because of the factual disputes at issue.  Similarly, in Enplas v. Seoul Semiconductor, the petitioner argues that a finding of anticipation by the PTAB must be supported by findings each and every element of the subject patent claim is disclosed in the prior art.  In Enplas, the Federal Circuit affirmed the PTAB on a R.36 Judgment Without Appeal — it difficult for the petitioner to point to the particular deficiencies.


=== THE LIST===

1. 2016-2016 Decisions:

  • Design Patent Damages: Samsung Electronics Co. v. Apple Inc., No 15-777 (Total profits may be based upon either the entire product sold to consumers or a component);  GVR order in parallel case Systems, Inc. v. Nordock, Inc., No. 15-978.  These cases are now back before the Federal Circuit for the job of explaining when a component

2. Petitions Granted:

3. Petitions with Invited Views of SG (CVSG): 

4. Petitions for Writ of Certiorari Pending:

  • Claim Construction: Wi-LAN USA, Inc., et al. v. Apple Inc., No. 16-913 (“plain and ordinary meaning”)
  • Is it a Patent Case?: Boston Scientific Corporation, et al. v. Mirowski Family Ventures, LLC, No. 16-470 (how closely must a state court “hew” federal court patent law precedents?) (Appeal from MD State Court)
  • Anticipation/Obviousness: Google Inc., et al. v. Arendi S A.R.L., et al., No. 16-626 (can “common sense” invalidate a patent claim that includes novel elements?) (Supreme Court has requested a brief in response)
  • Anticipation/Obviousness: Enplas Corporation v. Seoul Semiconductor Co., Ltd., et al., No. 16-867 (“Whether a finding of anticipation under 35 U.S.C. § 102 must be supported by findings that each and every element of the subject patent claim is disclosed in the prior art?”)
  • Anticipation/Obviousness: E.I. du Pont de Nemours and Company v. MacDermid Printing Solutions, L.L.C., No. 16-905 (summary judgment of obviousness proper)
  • Jury Trial: Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, et al., No. 16-712 (“Whether inter partes review … violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.”) [oilstatespetition]
  • Jury Trial: Nanovapor Fuels Group, Inc., et al. v. Vapor Point, LLC, et al., No. 16-892 (Can a party forfeit a properly demanded trial by jury without an explicit, clear, and unequivocal waiver?)
  • Is it a Patent Case?: Big Baboon, Inc. v. Michelle K. Lee, No. 16-496 (Appeal of APA seeking overturning of evidentiary admission findings during reexamination – heard by Federal Circuit or Regional Circuit?)
  • LachesMedinol Ltd. v. Cordis Corporation, et al., No. 15-998 (follow-on to SCA); Endotach LLC v. Cook Medical LLC, No. 16-127 (SCA Redux); Romag Fasteners, Inc. v. Fossil, Inc., et al, No. 16-202 (SCA Redux plus TM issue)
  • Eligibility: TDE Petroleum Data Solutions, Inc. v. AKM Enterprise, Inc., dba Moblize, Inc., No. 16-890 (Please reconcile Diehr and Alice)
  • Eligibility: DataTreasury Corporation v. Fidelity National Information Services, Inc., No. 16-883 (secondary indicia as part of eligibility analysis).
  • Eligibility: IPLearn-Focus, LLC v. Microsoft Corp., No. 16-859 (evidence necessary for finding an abstract idea)

5. Petitions for Writ of Certiorari Denied or Dismissed:


Sovereign Immunity Excuses University of Florida from IPR Challenge

by Dennis Crouch

As public universities continue to obtain more patents, issues of sovereign immunity continue to arise. In a recent decision, the Patent Trial and Appeal Board (PTAB) dismissed a trio of inter partes review proceedings against the University of Florida based upon its claim of sovereign immunity.[1]

The 11th Amendment to the US Constitution limited the “Judicial power of the United States” so that it does not “extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.”[2] Although the text of the amendment appear to include several important limitations that might exclude an administrative action (“judicial power; “suit in law or equity”), the Supreme Court has broadly interpreted the statute precluding many adjudicative administrative proceedings.  For anyone who is not an American lawyer, you may need to pause here to recognize that each of the 50 American states are treated as sovereign governments and, although the Federal Government sets the “supreme law of the land,” its powers are limited by the U.S. constitution and federalist structure.

The Supreme Court has interpreted this amendment to encompass a broad principle of sovereign immunity, whereby the Eleventh Amendment limits not only the judicial authority of the federal courts to subject a state to an unconsented suit, but also precludes certain adjudicative administrative proceedings, depending on the nature of those proceedings, from adjudicating complaints filed by a private party.  Following Supreme Court precedent from other areas of law, the Federal Circuit held in Vas-Cath[3] that Missouri’s sovereign immunity allowed it to avoid an interference proceeding.

The petitioner Covidien argued that the PTAB should think of the IPR as an in rem action directed at the patent rather than at the patent owner.  However, the PTAB rejected that argument – finding that the procedural elements of inter partes reviews and estoppel provisions make it look much like contested litigation – the very thing protected by the 11th Amendment.

The Panel:

On the whole, considering the nature of inter partes review and civil litigation, we conclude that the considerable resemblance between the two is sufficient to implicate the immunity afforded to the States by the Eleventh Amendment. Although there are distinctions, such as in the scope of discovery, we observe that there is no requirement that the two types of proceedings be identical for sovereign immunity to apply to an administrative proceeding. Further, we note that there are several similarities between civil litigation and inter partes review that are not unlike those compared in Vas-Cath for interferences.


Outcome here – Dismissed before Institution based on Sovereign Immunity of the patentee.  Moving forward it will be interesting to see whether the Federal Circuit is willing to hear an appeal or instead apply the standard law that institution decisions are not subject to appeal.

The dispute between the parties extends back to a license agreement between UFL and Medtronic/Covidien of the patent at issue. UFL exerted its right to audit the books, but was refused by Medtronic.  UFL then sued in state court on the contract.  Medtronic counterclaimed for DJ of invalidity/noninfringement and removed the case to federal court on the patent claims and on diversity grounds.  The district court however remanded back to state court on sovereign immunity grounds.  That remand is now on appeal at the Federal Circuit, although the court has just issued a show-cause – asking whether the case should be transferred to the 11th Circuit.  Under the AIA-revised statute, cases go to the Federal Circuit if either the civil action “arises under” US patent law or a “compulsory counterclaim” arises under patent law.  Here, it is clear that the counterclaim is a patent claim, but the big question is whether it is “compulsory” – normally defined as one that “arises out of the transaction or occurrence that is the subject matter of the opposing party’s claim.”[4]

Of interest though, in the order to show cause, the court suggests that it might keep the case in the “interest of justice” rather than transfer it. [5][federalcircuitjurisdictionorder]

= = = =

[1] See Covidien LP v. University of Florida Research Foundation Inc., Case Nos. IPR 2016-01274; -01275, and -01276 (PTAB January 25, 2017).

[2] U.S. CONST. amend. XI.

[3] Vas-Cath, Inc. v. Curators of Univ. of Missouri, 473 F.3d 1376 (Fed. Cir. 2007).

[4] Fed. R. Civ. P. 13(a)(1)(A).

[5] 28 U.S.C. § 1631.


Can Your Patent Block Repair and Resale and Prevent Arbitrage?

resaleby Dennis Crouch

The first rounds of merits briefs have now been submitted to the Supreme Court in Impression Prods. v. Lexmark. The case questions the extent a patentee can control the entire resale and repair market for its products.  For products originally sold in the US, the Federal Circuit held that express use/resale limits at the point of first-sale are effective – even against subsequent bona fide purchasers. For products sold overseas, the Federal Circuit held that US Courts should presume no exhaustion of the US patent – this would automatically prohibit 3rd party importation into the US.

As a property law professor, I tend to think about about the mass confusion among the students as they try to work through the law associated with real covenants and equitable servitudes on land.  It creates substantial confusion among lawyers. But what we want is a system where property rights can be fairly and openly traded without even having lawyers extensively involved with each of our purchases.  With personal property courts long ago rejected servitudes (such as use and resale restrictions) that bind subsequent purchasers. Unlike real property, personal property moves and is often transferred without substantial paperwork or record-keeping, and allowing a set of unique restrictions has the potential of gumming up the marketplace.  The Federal Circuit in this case went all the way to the other side — holding that the presumption in foreign sales is that no US patent rights are exhausted.  I purchased my last couple of smart phones through the used market – and have also repaired them several times.  Under the law, I probably should have taken steps to ensure that all of the original equipment manufacturers affirmatively granted repair and resale rights.  Coming together, the Federal Circuit’s approach here has the potential to limit the market for the repair and reselling of goods.  I would suggest that those activities are incredibly beneficial to our society in terms of resource allocation and avoiding waste as well as empowering citizens and avoiding anticompetitive market behavior.  Although these policy goals are relevant to the Supreme Court decision-making, the Court’s primary analysis pathway should be doctrinal.

In these cases, the most important brief is often the amicus filing by the U.S. Government. Here, the brief USG brief was filed on January 24 by President Trump’s newly appointed acting solicitor general (Noel Francisco) who (like Obama’s SG) has taken the position of supporting the challenger (Impression) against the patentee (Lexmark) and the Federal Circuit.  Time will tell whether this stance is more generally predictive of the new administration’s stance on patent rights and patent enforcement. [15-1189_amicus_reversal_united_states]

The Government frames the questions presented as follows:

  1. Whether a U.S. patent owner may invoke patent law to enforce restrictions on the use or resale of a patented article after the first authorized sale of the article in the United States.
  2. Whether and under what circumstances a U.S. patent owner may authorize the sale of a patented article in a foreign country, either under a foreign patent or otherwise in accordance with foreign law, while reserving its exclusive rights under U.S. patent law.

Answering these questions, the Government argues simply that “restrictions on post-sale use or resale are not enforceable under U.S. patent law” and that the Federal Circuit’s approach is wrong.  This is the same rule that applies generally to attempts to place a restrictive covenant on personal property.  As a minor caveat, the Government takes the position that, under limited circumstances, a foreign sale might not exhaust the associated U.S. patent rights.

The basic justification for this approach is to ensure that we have a working commercial market. The brief quotes the 1895 Keeler decision: “The inconvenience and annoyance to the public” if patent rights are not exausted by the first authorized sale [is] “too obvious to require illustration.”

Since A.B. Dick was overruled in 1917, this Court has rejected every attempt to invoke patent law to control the use or resale of an article after the first authorized sale in the United States.

At the international level, the Government suggests that the court allow express reservation of rights for foreign sales – this would thus allow a German company to sell its products in Germany (with an express export restriction) and then use its U.S. to patent to prevent those products from being sent to the U.S.  This gives the manufacturer more control over the market and would allow for price discrimination (i.e., charging higher prices in the U.S.).

In its merits brief, petitioner Impression Prods. takes a harder stand on international exhaustion — arguing that the court should follow its own prior precedent in the copyright case of Kirtsaeng and hold that any authorized sale by the patentee exhausts all U.S. patent rights – even if the authorized sale is abroad.  [15-1189-merits-petitioner]   Professor Feldman agrees in her brief, naming the Federal Circuit’s actions as “reversal from below” [15-1189_amicus_pet_professor_robin_feldman] as did the Huawei brief (although in different words) [15-1189_amicus_pet_huawei_technologies].

A common argument for exhaustion is that it allows for a robust resale market that greatly benefits consumers and helps price discrimination by allowing third party arbitrage.  Although U.S. prices are low for some goods, they are very high for others (such as pharmaceuticals and printer ink).  International exhaustion would help to solve that problem (although there are many regualtory hurdles associated with importing .  In its brief, the AARP join with EFF and Public Knowledge (and others) to argue this point: “Manufacturers currently exploit weak exhaustion rules to harm consumers. . . . Limitations on resale and repair rights lead to monopolization rather than competition.” [15-1189_amicus_pet_public_knowledge]

Costco is a business that is actively engaged in the sort of price lowering arbitrage discussed by AARP and argues that the Federal Circuit’s exhaustion rules “impose enormous costs for manufacturers, retailers, and consumers.”  They effectively ask – will the american retailers need to inspect patent licenses for all of the components and sub-components found in the products they sell? [15-1189_amicus_pet_costco_wholesale_corporation]  Similarly, an interesting trade group – the Association of Service and Computer Dealers International filed its brief and explained how the no-exhaustion rules impact the market for hard drives, DVDs, Flash Memory, and other consumer product. [15-1189_amicus_pet_ascdi] The UCC (Article 2) provides some protections here, but does not, for instance, provide authority to repair.

FSU Professor Frederick Abbott has an interesting take. Abbott is an expert on international trade law.  He writes:

A fundamental flaw in the approach of the Federal Circuit involves its reasoning that a rule of territoriality of patent rights precludes U.S. courts from taking into account activities of U.S. patent owners outside of the United States. The international agreements governing the international patent system do not prescribe such a rule of territoriality. . . The rule of independence of patents prescribed by the Paris Convention[] provides that acts taken by patent authorities in one country do not affect patent rights in other Paris countries.  recognition by this Supreme Court that first sales in foreign countries exhaust U.S. patent rights would not affect patents granted outside the United States.


Finally, Stanford’s IP Clinic filed a law professor’s brief signed by Mark Lemley, Dan Burk, Sam Ernst, Shubha Ghosh, Orly Lobel, Pamela Samuelson, Jessica Silbey, and others that explains:

A clear exhaustion rule promotes the alienability of patented articles and reduces transaction costs. Unlike clear, reliable property rights, idiosyncratic arrangements of rights that depend on what covenants or conditions an upstream seller has attached to a chattel impose high information costs on purchasers. . . . Exhaustion doctrine also prevents patentees from extracting a patent royalty at multiple stages in a product’s distribution chain, which would compensate them in excess of the societal benefit their inventions have provided.


It will be interesting to see how the ‘other side’ responds here .


Supreme Court 2017 – Patent Preview

by Dennis Crouch

A new Supreme Court justice will likely be in place by the end of April, although the Trump edition is unlikely to substantially shake-up patent law doctrine in the short term.

The Supreme Court has decided one patent case this term. Samsung (design patent damages).  Five more cases have been granted certiorari and are scheduled to be decided by mid June 2017. These include SCA Hygiene (whether laches applies in patent cases); Life Tech (infringement under 35 U.S.C. § 271(f)(1) for supplying single component); Impression Products (using patents as a personal property servitude); Sandoz (BPCIA patent dance); and last-but-not-least TC Heartland (Does the general definition of “residence” found in 28 U.S.C. 1391(c) apply to the patent venue statute 1400(b)).

Big news is that the Supreme Court granted writs of certiorari in the BPCIA dispute between Sandoz and Amgen.   The BPCIA can be thought of as the ‘Hatch Waxman of biologics’ – enacted as part of ObamaCare.   The provision offers automatic market exclusivity for twelve years for producers of pioneer biologics.   Those years of exclusivity enforced by the FDA – who will not approve a competitor’s expedited biosimilar  drug application during the exclusivity period.   The statute then provides for a process of exchanging patent and manufacturing information between a potential biosimilar producer and the pioneer – known as the patent dance.  The case here is the Court’s first chance to interpret the provisions of the law – the specific issue involves whether the pioneer (here Amgen) is required to ‘dance.’ [Andrew Williams has more @patentdocs]

A new eligibility petition by Matthew Powers in IPLearn-Focus v. Microsoft raises eligibility in a procedural form – Can a court properly find an abstract idea based only upon (1) the patent document and (2) attorney argument? (What if the only evidence presented supports eligibility?).  After reading claim 1 and 24 (24 is at issue) of U.S. Patent No. 8,538,320, you may see why the lower court bounced this. Federal Circuit affirmed the district court’s ruling without opinion under Federal Circuit Rule 36 and then denied IPLF’s petition for rehearing (again without opinion).

1. A computing system comprising:

a display;

an imaging sensor to sense a first feature of a user regarding a first volitional behavior of the user to produce a first set of measurements, the imaging sensor being detached from the first feature to sense the first feature, the first feature relating to the head of the user, and the first set of measurements including an image of the first feature, wherein the system further to sense a second feature of the user regarding a second volitional behavior of the user to produce a second set of measurements, the second feature not relating to the head of the user; and

a processor coupled to the imaging sensor and the display, the processor to:

analyze at least the first set and the second set of measurements; and determine whether to change what is to be presented by the display in view of the analysis.

24. A computing system as recited in claim 1, wherein the system capable of providing an indication regarding whether the user is paying attention to content presented by the display.

=== THE LIST===

1. 2016-2016 Decisions:

  • Design Patent Damages: Samsung Electronics Co. v. Apple Inc., No 15-777 (Total profits may be based upon either the entire product sold to consumers or a component);  GVR order in parallel case Systems, Inc. v. Nordock, Inc., No. 15-978.  These cases are now back before the Federal Circuit for the job of explaining when a component

2. Petitions Granted:

3. Petitions with Invited Views of SG (CVSG): 

4. Petitions for Writ of Certiorari Pending:

  • Is it a Patent Case?: Boston Scientific Corporation, et al. v. Mirowski Family Ventures, LLC, No. 16-470 (how closely must a state court “hew” federal court patent law precedents?) (Appeal from MD State Court)
  • Anticipation/Obviousness: Google Inc., et al. v. Arendi S A.R.L., et al., No. 16-626 (can “common sense” invalidate a patent claim that includes novel elements?) (Supreme Court has requested a brief in response)
  • Civil Procedure – Final Judgment: Johnson & Johnson Vision Care, Inc. v. Rembrandt Vision Technologies, L.P., No. 16-489 (Reopening final decision under R.60).
  • Anticipation/Obviousness: Enplas Corporation v. Seoul Semiconductor Co., Ltd., et al., No. 16-867 (“Whether a finding of anticipation under 35 U.S.C. § 102 must be supported by findings that each and every element of the subject patent claim is disclosed in the prior art?”)
  • Post Grant Admin: Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, et al., No. 16-712 (“Whether inter partes review … violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.”) [oilstatespetition]
  • Eligibility: IPLearn-Focus, LLC v. Microsoft Corp., No. 16-859 (evidence necessary for finding an abstract idea)
  • Post Grant Admin: SightSound Technologies, LLC v. Apple Inc., No. 16-483 (Can the Federal Circuit review USPTO decision to initiate an IPR on a ground never asserted by any party)
  • Is it a Patent Case?: Big Baboon, Inc. v. Michelle K. Lee, No. 16-496 (Appeal of APA seeking overturning of evidentiary admission findings during reexamination – heard by Federal Circuit or Regional Circuit?)
  • LachesMedinol Ltd. v. Cordis Corporation, et al., No. 15-998 (follow-on to SCA); Endotach LLC v. Cook Medical LLC, No. 16-127 (SCA Redux); Romag Fasteners, Inc. v. Fossil, Inc., et al, No. 16-202 (SCA Redux plus TM issue)
  • Eligibility and CBM: DataTreasury Corporation v. Fidelity National Information Services, Inc., No. 16-883 (I have not seen the petition yet, but underlying case challenged whether (1) case was properly classified as CBM and (2) whether PTAB properly ruled claims ineligible as abstract ideas) (Patent Nos. 5,910,988 and 6,032,137).

5. Petitions for Writ of Certiorari Denied or Dismissed:

Supreme Court Grants Cert in Amgen v. Sandoz & Sandoz v. Amgen

By Jason Rantanen

Today, the Supreme Court granted certiorari in two dueling petitions involving the Federal Circuit’s 2015 interpretation of the Biologics Price Competition and Innovation Act of 2009.  Here are the questions presented:

Amgen v. Sandoz

(1) Whether a biosimilar applicant is required by 42 U.S.C. § 262(l)(2)(A) to provide the reference product sponsor with a copy of its biologics license application and related manufacturing information, which the statute says the applicant “shall provide;” and (2) whether, where an applicant fails to provide that required information, the sponsor’s sole recourse is to commence a declaratory judgment under 42 U.S.C. § 262(l)(9)(C) and/or a patent-infringement action under 35 U.S.C. § 271(e)(2)(C)(ii).

Sandoz v. Amgen

(1) Whether notice of commercial marketing given before Food and Drug Administration approval can be effective; and (2) whether, in any event, it is improper to treat Section 262(l)(8)(A) – the Biologics Price Competition and Innovation Act of 2009’s “Notice of commercial marketing” provision which states that a biosimilar applicant shall provide notice to the incumbent seller of the biological product “not later than 180 days before the date of the first commercial marketing of the biological product licensed under” an abbreviated pathway for biosimilars – as a stand-alone requirement and as creating an injunctive remedy that delays all biosimilars by 180 days after approval.

Kevin Noonan discussed the underlying opinion on the PatentDocs blog, describing it as “a seriously fractured decision….”

You can read the Federal Circuit opinion here:  s15-1499

A Resource for In-House Lawyers

Patent lawyers who are not licensed should register or should be extremely careful to limit their practice to “practice before the patent office” or various unauthorized practice of law issues, privilege waiver, and other problems can result.  In-house lawyers have to be really careful to ensure the state registration includes advice to affiliates, and not just the corporate employers, and any kind of charge by the employer for the lawyer’s services can raise lots of issues.  (Fun times.)

So, I’m writing a paper on privilege (patent agent, and patent lawyers who are in-house but not licensed in the state they practice in). In the course of doing so , I’ve been reading these state statutes and also thinking about them.  I compiled a list and thought I’d share it. The ABA’s first, since it compiles them, but many links are broken and so the correct ones follow.  So, if you don’t see your state, go to the ABA site.  If you see your state, use this link.

If you haven’t thought through the privilege issues, you should give  your in-house friends a heads up. You can also use lack of authority to attack many things, like opinions of counsel, privilege…

  • http://www.americanbar.org/content/dam/aba/administrative/professional_responsibility/in_house_rules.authcheckdam.pdf
  • AL: https://www.alabar.org/assets/uploads/2014/08/Auth.-House-Counsel-ruleVIII.pdf
  • CA: http://www.courts.ca.gov/cms/rules/index.cfm?title=nine&linkid=rule9_46
  • DE: http://courts.delaware.gov/rules/pdf/SupremeCourtRules.pdf RULE 55.2
  • ID: https://isb.idaho.gov/pdf/rules/ibcr.pdf RULE 225
  • IA: https://www.legis.iowa.gov/docs/ACO/CourtRulesChapter/06-14-2012.31.pdf RULE 31.16
  • KS: http://www.kscourts.org/rules/Rule-List.asp?r1=Rules+Relating+to+Admission+of+Attorneys RULE 712
  • KY: https://govt.westlaw.com/kyrules/Document/NC4429FD0A91C11DA8F5EE32367A250AE?viewType=FullText&originationContext=documenttoc&transitionType=CategoryPageItem&contextData=(sc.Default)
  • MI:http://courts.mi.gov/courts/michigansupremecourt/rules/documents/rules%20for%20the%20board%20of%20law%20examiners.pdf RULE 5
  • MN: https://www.revisor.mn.gov/court_rules/rule.php?type=pr&subtype=admi&id=9
  • NE: https://supremecourt.nebraska.gov/supreme-court-rules/ch3/art12
  • OH: http://www.supremecourt.ohio.gov/LegalResources/Rules/govbar/govbar.pdf RULE VI SECTION 6
  • OK: http://www.okbar.org/Portals/13/PDF/Governance/Rules-Creating-Control.pdf ART II SECTION 5
  • RI: https://www.courts.ri.gov/Courts/SupremeCourt/Supreme%20Court%20Rules/AdmissionBar-ArticleII.pdf RULE 9
  • TN: http://tncourts.gov/rules/supreme-court/7 SECTION 10.01
  • VA: http://www.vsb.org/pro-guidelines/index.php/corp-council/