Tag Archives: Licenses

Enforcing Foreign Patents in the US: Distinguishing Voda

Patent

Fairchild Semiconductor v. Third Dimension (3D) (D.Maine 2008)

The dispute between Fairchild and 3D turns — in-part — on whether Fairchild’s devices that it manufactures abroad are covered by 3D’s Chinese patents. In a well written opinion, a Maine district court (J. Hornby) rejected 3D’s motion to dismiss – finding that it has power to adjudge the conflict even though the analysis will almost certainly require determination of the scope of the Chinese patents.

Fairchild and 3D have an ongoing “worldwide” license agreement that allows Fairchild to use 3D’s patented technology. The license specifically includes both the Chinese and US patents. For consideration, 3D receives a royalty payment for any Fairchild products “covered by” on or more claims of 3D’s licensed patents. After analyzing 3D’s patents, Fairchild stopped paying the royalty and also sued for a declaratory judgment that it owes no royalties and that its products are not covered by 3D’s patents. The agreement also had a choice of forum (Maine or Texas courts) and choice of law (Maine or Texas law) that applied to the entire agreement. The case is in Federal Court based on diversity jurisdiction.

Courts normally enforce choice of forum & choice of law contractual provisions – especially when negotiated by two sophisticated parties. The catch for cases involving foreign patent rights is the Federal Circuit’s strong aversion to allowing US courts to adjudge foreign patent rights. In the 2007 Voda case, for instance, the appellate court would almost always abuse its discretion by using its supplemental jurisdiction power to adjudge claims of foreign infringement.

Here, the district court distinguished Voda on a few grounds: First, this case reaches the court based on diversity jurisdiction rather than supplemental jurisdiction. Although diversity cases can be booted on convenience factors, diversity jurisdiction is not otherwise discretionary. Here, convenience factors favor Maine as a jurisdiction over China – in particular, both parties are in the US, one has its HQ in Maine, and both previously agreed to litigate in Maine. Second, this case is not a patent infringement case. Rather, it is a contract dispute that – as part of the dispute – questions the scope of a Chinese patent. Third, problems of international relations and comity are lessened because the Chinese patent issue only involves the scope of the Chinese patent and not its validity.

It is unclear whether the Federal Circuit will have jurisdiction over any subsequent appeal since the justification for federal jurisdiction is the diversity of parties rather than patent “arising under” jurisdiction.

 

Patently-O Bits and Bytes

Patent,
  • Poor Economic Forecast and Patent Prosecution:
    • Bad: Patent value is based on potential market for patented products when the market shrinks, so does the value of the patents;
    • Bad: Patent prosecution is generally a cash-heavy endeavor, and many firms are low on cash/credit;
    • Bad: The smaller market and lack of cash may also depress research & development expenditures – potentially leading to a time-lagged depression in patent applications.
    • Good: When times are tough, folks save their scraps. Patents are one way to do that;
    • Good: Patents are something that can be more easily sold or licensed (as compared with trade secrets, for instance). Companies looking for alternative cash streams; to sell-off portions of the corporation; or to retain some value in bankruptcy may look to patent protection.
  • I spent a summer at Heller Ehrman while in law school. The firm dissolved earlier this fall. Using Patent Buddy, I graphed the number of registered patent practitioners at Heller over the past several years. Their patent department shows problems stretching back to 2007.

  • Figure 2 below shows the same information for the law firm of Akin Gump. Patent Buddy’s data comes directly from the PTO’s enrollment database. That database is usually a bit outdated because many patent attorneys are slow to update their records.

   

  

Patently-O Bits and Bytes

Patent,
  • Poor Economic Forecast and Patent Prosecution:
    • Bad: Patent value is based on potential market for patented products when the market shrinks, so does the value of the patents;
    • Bad: Patent prosecution is generally a cash-heavy endeavor, and many firms are low on cash/credit;
    • Bad: The smaller market and lack of cash may also depress research & development expenditures – potentially leading to a time-lagged depression in patent applications.
    • Good: When times are tough, folks save their scraps. Patents are one way to do that;
    • Good: Patents are something that can be more easily sold or licensed (as compared with trade secrets, for instance). Companies looking for alternative cash streams; to sell-off portions of the corporation; or to retain some value in bankruptcy may look to patent protection.
  • I spent a summer at Heller Ehrman while in law school. The firm dissolved earlier this fall. Using Patent Buddy, I graphed the number of registered patent practitioners at Heller over the past several years. Their patent department shows problems stretching back to 2007.

  • Figure 2 below shows the same information for the law firm of Akin Gump. Patent Buddy’s data comes directly from the PTO’s enrollment database. That database is usually a bit outdated because many patent attorneys are slow to update their records.

 
 

  

Inventorship and Claim Scope Decisions

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< ?xml:namespace prefix ="" w />By Ronald A. Krasnow.

Do you fully use an inventorship determination for the benefit of your company or client?  Do you decide on claim scope in view of inventorship?

Consider the Federal Circuit’s decision in Lucent v. Gateway, Dell & Microsoft (decided Sept. 25, 2008 – Fed. Cir. 2007-1546, -1580).  While this case undoubtedly demonstrates that patent legislation should not be outcome driven, it contained an interesting proposed use of inventorship determinations.  In Lucent, the Court decided that claims 1 and 3 were solely owned by Lucent (because they were invented by Lucent’s employees), but that claims 2 and 4 was jointly owned by Lucent and a joint development partner under a joint development agreement.  The Court reasoned that Lucent, who was in control of prosecution, could have split up the claims into separate patents so that it solely owned the invention claimed in claims 1 and 3. (The Court unfortunately did not deal with the reality facing an attorney trying to balance patentable subject matter with inventorship and obviousness under 35 UCS 103(c).)

The Court’s reasoning, created in hindsight, raises a number of practical issues.

The first is, really, how do you make an inventorship decision in view of a joint development agreement?  For example, do you draft the patent application as broadly as the prior art will allow?  Or do you draft the claims only as broad as your company’s inventors contributions?  Can you realistically split up the claims along inventorship lines and still get past Section 103 on parallel applications?

Once the inventorship decision has been made, have you made full use of that decision to the benefit of your company or client.  Most patent attorneys focus on making sure that the patent application names the correct inventors or complying with the laws of the countries where the inventors reside.  But, the Lucent decision suggests that enforcement should also be considered at the time inventorship and claim scope decisions are made.

One other consideration is drafting the joint development agreement. The Lucent decision suggests that large companies with negotiating power might require joint development partners to not license others inside the field of joint research and development program.

On the policy side, the Federal Circuit’s reasoning logically leads to other considerations:

  1. If you draft broader claims, should there be an equitable remedy available so that the added inventor (read as joint development partner) does not gain a windfall by access to the broader claims, when it is only the narrow and more subservient claims to which it contributed? 
  2. Should reissue be afforded to allow case to be divided, to shelter the contribution of the dominant technology owner?
  3. Does the party prosecuting the patent applications have any “duty” to an omitted inventor?  For example, if claims to which the omitted inventor contributed are cancelled, or are disclaimed during post-issuance proceedings, does the omitted inventor have any claim for “waste”?

Note: Mr. Krasnow’s new book Intellectual Property Culture (Oxford University Press) was just released [Link]

Shaping Nuanced Patent Injunctions: Broadcom v. Qualcomm

Injunctions, Patent, Patent Cases 2008,

Broadcom v. Qualcomm (Fed. Cir. 2008) [Part II]

On appeal, the Federal Circuit affirmed the permanent injunction against Qualcomm – finding that the district court acted within its equitable discretion and properly followed the injunctive relief guidelines set forth by the Supreme Court in eBay v. MercExchange (2006).

Although recognizing the importance of its eventual decision, the Federal Circuit again refrained from determining whether a finding that a patent has been infringed should serve as presumptive evidence of irreparable harm.

“It remains an open question ‘whether there remains a rebuttable presumption of irreparable harm following eBay.'” Quoting Amado (Fed. Cir. 2008)

Irreparable Harm: The patentee Broadcom is a non-practicing entity in the sense that it does not make or sell the invention claimed in the asserted patents. The patentee does, however, compete indirectly with Qualcomm by making an alternative chipset. Here, the Federal Circuit agreed that eBay does not allow a general rule that would prevent a non-practicing from obtaining injunctive relief and that in this Broadcom had been able to show the potential for irreparable harm.

“Broadcom provided evidence of irreparable harm, despite the fact that it does not currently practice the claimed inventions. This result is consistent with eBay, in which the Supreme Court cautioned that ‘traditional equitable principles do not permit such broad classifications’ as presuming that a patentee cannot establish irreparable harm based on a patentee’s ‘willingness to license its patents’ or ‘its commercial activity in practicing the patents.'”

Adequate Remedy at Law: Broadcom had licensed its patents Verizon. A license can theoretically show that monetary damages are adequate. However, the particular market situation is important for that determination. In this case the Verizon license is a vertical license while a license to Qualcomm would be a horizontal license. Thus, the court agreed that “the Verizon license has little bearing on the effect of a compulsory license to a direct competitor.”

Hardships and Public Interest: The district court created the injunction order with a “sunset provision.” Under the plan, Qualcomm may continue infringing for twenty-months while paying a compulsory license rate. At the end of those twenty months, the company will be enjoined from further infringement. The delayed nature of the injunction consequently removed any notion that the a balance of hardships or the public interest would favor the adjudged infringer because it gives plenty of time to redesign and redeploy to customers without any interruption of service.

This decision is insightful in how it moves the proper focus from whether an injunction should issue to the more nuanced issues of how to shape the injunction in a way that best serves the public interest while still protecting property rights. One problem with complex injunctions and ongoing compulsory licenses is that the district court must continue to monitor and make judgments on the situation. In this case the district court recently found Qualcomm in contempt for failing to pay its ongoing royalties of more than $93 million. As a sanction, the court ordered Qualcomm to pay gross profits – noting that “[w]hile an award of gross profit may overcompensate … it will do so in an amount which bears a direct relationship to the degree of infringement. The more that were sold, the greater the award.”

Notes:

Read more about the case here.

Federal Circuit: Failure to Obtain Non-Infringement Opinion May Serve As Evidence of Intent to Induce Infringement

Inducement, Patent, Patent Cases 2008, ,

Broadcom v. Qualcomm (Fed. Cir. 2008)

A California jury found Qualcomm liable for infringing or inducing infringement of three Broadcom patents covering 3G mobile phone technology. (US Pat. Nos. 6,847,686, 5,657,317, and 6,389,010). On appeal, the Federal Circuit has invalidated one of the patents, but left the judgment and injunction standing.

Seagate and Inducement: Like willfulness, inducing infringement requires proof of culpability. In Seagate, the Federal Circuit altered the standard for willful infringement – making it more difficult for a patentee to obtain treble damages. Consequently, in the willfulness context, there is no longer an “affirmative duty of due care” to avoid infringement. Here, Qualcomm argued (unsuccessfully) that the evidence available to prove inducement should be changed as well.

More generally, the defendant argued that it could not be liable for inducement if it was not liable for willfulness because the specific intent standard for inducement is greater than the recklessness associated with willful infringement. On appeal, the Federal Circuit rejected these arguments – finding the inducement standards unchanged and finding that inducement may be found even when willfulness is absent. The crux of the holding may be that the “specific intent” requirement of inducement is not so specific. Under the leading inducement case DSU v. JMS, proof of inducing infringement requires evidence that the accused “intended to cause the acts that constitute the direct infringement,” and that the accused “kn[ew] or should have known [that] its action would cause the direct infringement.”

The evidentiary argument was whether – for its inducement decision – the jury could consider Qualcomm’s decision to seek advice of counsel as circumstantial evidence of intent. The appellate panel saw such evidence as fair game.

“Because opinion-of-counsel evidence, along with other factors, may reflect whether the accused infringer “knew or should have known” that its actions would cause another to directly infringe, we hold that such evidence remains relevant to the second prong of the intent analysis. Moreover, we disagree with Qualcomm’s argument and further hold that the failure to procure such an opinion may be probative of intent in this context. It would be manifestly unfair to allow opinion-of-counsel evidence to serve an exculpatory function, as was the case in DSU itself, see 471 F.3d at 1307, and yet not permit patentees to identify failures to procure such advice as circumstantial evidence of intent to infringe. Accordingly, we find no legal error in the district court’s jury instructions as they relate to inducement.”

Too Broad: Prosecutors are typically careful to ensure that claims will be given a broad interpretation during litigation. If the claim is too broad, however, it will likely be found invalid. Here, Broadcom’s ‘686 patent digital video signal processor. The district court found that a ‘global controller’ was required for operation of the processor, but the Federal Circuit could not find that limitation in the claims or any justification from the specification. Without that limitation, the claim was invalid as anticipated.

Broadcom’s argument for a narrow interpretation was based on its discussion of prior art admissions in the specification – arguing that its admitted prior art would invalidate a broad claim. The Federal Circuit did not reject that contention per se. Rather, the court rejected Broadcom’s version because the company had failed to show that its admitted prior art would actually anticipate the broad claim. “Because Broadcom has not demonstrated that “every limitation” of claim 1 is found in this reference, its self-invalidating argument must fail.”

Late Claim Construction: Claim construction can happen at any stage of a case. Here, however, Qualcomm did not request a construction of the “network” term found in the ‘317 patent until after the jury had returned its verdict. On appeal, the Federal Circuit agreed with the lower court that Qualcomm had waived its right to demand construction of that term. “We agree that Qualcomm cannot be allowed to create a new claim construction dispute following the close of the jury trial.”

‘Qualcomm’s eleventh-hour attempt to litigate a newly minted claim construction controversy falls squarely within our holding in Eli Lilly & Company v. Aradigm Corporation, where a party “never requested that the district court construe any terms in [the relevant claim] and never offered a construction of [that claim],” but rather “[o]nly after the presentation of all of the evidence to the jury . . . even suggest[ed] that claim construction might be helpful to determine the proper scope of the claimed invention.” 376 F.3d 1352, 1360 (Fed. Cir. 2004).’

Injunctions: District courts issue injunctions while sitting ‘in equity.’ This typically gives the court discretionary power to shape and craft relief in a way that best achieves the right result. Here, the district court pushed enforcement of the injunction back to January 31, 2009. In the meantime, Qualcomm pays mandatory damages and Broadcom has now power to stop continued infringement in this period.

In the appeal, Broadcom argued that, under eBay, no permanent injunction should be awarded. In particular, Qualcomm had licensed its patents to Verizon for money – indicating that monetary relief is adequate and because the injunction will disrupt (non-Verizon) CDMA carriers (hardship) and will also be tough on the public. On appeal, the appellate panel rejected those arguments and instead found that the district court acted within its proper discretion by issuing the injunction order. (more to come on injunction order)

Notes:

  • In the parallel Broadcom v. ITC, last week the Federal Circuit vacated the ITC’s non-infringement finding of another Broadcom patent. The ITC will reconsider that issue.

A third parallel case, Kyocera v. ITC, is pending appeal at the Federal Circuit. In that case, the cell phone companies are appealing the ITC’s exclusion order regarding yet another Broadcom patent.

Patently-O Bits and Bytes

Bits and Bytes, Patent
  • SanDisk and Samsung are in merger talks. One of the driving ‘synergies’ is that Samsung lays out “several million dollars” annually for flash-memory patent licenses.
  • WSJ says Intellectual Ventures now holds over 20,000 patents. So far, IV had not filed any lawsuits.
  • Patents are not helping Lehman in its collapse. The company employed 20,000+ but only holds 10 issued patents. (It did hold several others as collateral). [After I wrote this I saw two other comments on the same topic Zura BM]
  • Stents: After a new trial, Cordis again won its patent infringement suit against Boston Scientific and Medtronic. Now, Judge Robinson will reinstate the $600 million in damages plus interest from the original 2002 verdict.
  • No Subject Matter Jurisdiction: In ExcelStor v. Papst, the CAFC held that it does not have appellate subject matter jurisdiction over claims of patent licensee fraud or breach of contract.
  • Strike: EPO examiners are scheduled to go on strike tomorrow – but just for one day. They want better patent quality. “Constant decisions in favour of quantity damage the quality of the patents.”
  • Jones Day Hates The WWW? The Cleveland based mega-firm has sued the operator of BlockShopper.com for announcing that two Jones Day associates had purchased expensive homes. BlockShopper apparently crossed the line when it added a link to the firm’s website. [Hricik][Ambrogi][Randazza, who, by the way is a great writer][Levy].
  • Risperdal: Last week, the CAFC held that Apotex could not challenge Janssen’s patent if the purpose was simply to prevent the exclusive generic from potentially extending the start of its 180 days of exclusivity. In a parallel decision, the DC Circuit has held that TEVA has no right to be the exclusive generic. Although no written decision has issued, the court apparently decided that TEVA’s paragraph IV certification was not sufficient because it challenged a patent that had already been de-listed from the orange book by the patentee. Other generics should be on the market very shortly.

 

In re Swanson: CAFC Allows Reexamination Based on Reference Previously Considered by PTO and Courts

Patent, Patent Cases 2008, Reexamination, , ,

In re Swanson (Fed. Cir. 2008)

Back in 1984, the patent examiner rejected Swanson’s claim based on U.S. Patent No. 4,094,647 (“Deutsch”). The claims were then amended and the patent allowed. Later, in an infringement action involving the patent, the Federal Circuit affirmed a judgment that “Deutsch did not anticipate the asserted claims.” Abbott v. Syntron, 334 F.3d 1343 (Fed. Cir. 2003). Surmodics is the patent owner, and the patent is licensed to Abbott.

After losing at the CAFC, Syntron filed for ex parte reexamination of the patent – asserting again that the claims were anticipated by Deutsch. As per usual, the PTO agreed to reexamine the patent – based on a “substantial new question of patentability.” 35 USC §303. On appeal, Swanson argues that the Deutsch reference was considered in both the initial examination and the litigation – and thus cannot serve as the “new” basis for reexamination.

Third-party filed reexaminations provide a check on PTO power, but the SNQ requirement is designed to protect patentees from harassment.

This ‘substantial new question’ requirement would protect patentees from having to respond to, or participate in unjustified reexaminations. Further, it would act to bar reconsideration of any argument already decided by the Office, whether during the original examination or an earlier reexamination. House Report 96-1307, 96th Cong., 2d Sess. (1980).

In its 1997 Portola Packaging case, the CAFC gave teeth to the SNQ requirement – finding that a new question could not be presented by “prior art previously considered by the PTO in relation to the same or broader claims.” Reacting to that decision, in 2002 Congress amended Section 303 and to ensure that a new question may be raised by prior art that was previously considered by the examiner:

35 USC §303 “The existence of a substantial new question of patentability is not precluded by the fact that a patent or printed publication was previously cited by or to the Office or considered by the Office.”

Pointedly, the House Report accompanying the 2002 legislation found that “the Federal Circuit incorrectly interpreted Congress’ original intent.” According to the House Report, “the appropriate test to determine whether a ‘substantial new question of patentability’ exists should not merely look at the number of references or whether they were previously considered or cited but their combination in the appropriate context of a new light as it bears on the question of the validity of the patent.”

SNQ = Reference Never Considered by the PTO for the Particular Purpose: Based on the statutory change, the appellate panel found that a substantial new question is simply one that has never been considered by the PTO. Here, the record shows that the original examiner relied upon Deutsch only as a secondary reference in an obviousness rejection of a broader claim.

“In light of the extremely limited purpose for which the examiner considered Deutsch in the initial examination, the Board is correct that the issue of whether Deutsch anticipates the method disclosed in claims 22, 23, and 25 was a substantial new question of patentability, never before addressed by the PTO”

SNQ Relation to Court Proceedings: In court, the parties had battled out the exact anticipation argument presented in the reexamination. On appeal, the CAFC panel found that “the determination of a substantial new question is unaffected by these court decisions.” According to the court this makes sense because “the two forums [Courts and the PTO] take different approaches in determining validity and on the same evidence could quite correctly come to different conclusions” based on the burden of proof. Quoting Ethicon (Fed. Cir. 1988).

Affirmed

Notes:

  • Judges Gajarsa (Author), Lourie, & Bryson.
  • This opinion gives further strength to ex parte reexamination requests.
  • The CAFC has consistently required that a patent’s presumption of validity be negated by “clear and convincing evidence.” Here, the court made a minor slip by calling the standard ‘statutory.’

“In civil litigation, a challenger who attacks the validity of patent claims must overcome the presumption of validity with clear and convincing evidence that the patent is invalid. 35 U.S.C. § 282. If this statutory burden is not met, “[c]ourts do not find patents ‘valid,’ only that the patent challenger did not carry the ‘burden of establishing invalidity in the particular case before the court.'” Ethicon, 849 F.2d at n.3 (internal citations omitted) (emphasis in original).”

Thanks to Paul Morgan for noting this issue.

Law Review 2008: Ideas for Student Notes.

Patent, ,

Let me know if you use one of these. dcrouch@patentlyo.com.

Greg Aharonian Discussed the WSJ’s “Idiotic Article on Patent Tr-lls”

Patent,

By Greg Aharonian [LINK]

The 11 August 2008 edition of the Wall Street Journal, page R6, has an idiotic article on patent licensing, starting with a review of the Microsoft v. Avistar squabbles. Microsoft earlier was in talks with Avistar to license its technology, but in the midst of discussions, filed reexam requests challenging 29 Avistar patents, causing Avistar a month later to fire 25% of its workforce (27 employees). Avistar is crying foul, while Microsoft is arguing it found legitimate prior art that the PTO must use to reassess the validity of the patents.

I looked at a few of Avistar’s patents (7412482, 7398296, 7152093 – some of the earlier patents are assigned to Collaboration Properties or Vicor Incorporated). On the side of Avistar, many of their patents cite an excellent amount of patent and non-patent prior art. On the side of Microsoft, the patents are in the crowded area of network communications, so a priori I would not be surprised if a company like Microsoft that can afford to spend tons of money for prior art searching has found additional prior art to use in the reexam requests. Unless the prior art they cited is bogus in order to cause delays to squeeze Avistar, I would say that Microsoft’s countermove is a legitimate tactic.

In short, this is a case that has little to do with tr-lls, but rather is a case that should be the basis for an article on the tactics of prior art searching (how much should small companies spend on searching during patent prosecution versus how much should they spend before entering into negotiations or litigation?). Indeed, if anyone has seen any of the Microsoft reexam requests, I’d be interested in knowing the quality of the new prior art that they found. But the article uses this squabble as an intro into the ill-defined, made up problem or tr-lls (tr-lls being the restless-leg-sydrome of the IP world). The author of the article, not wanting to do much thinking, sets the stage of the article as follows:

At the epicenter of the struggle are so-called ‘patent tr-lls’, a derogatory term for small firms whose only business is to buy patents and assert them in court in hope of obtaining large settlements or damages.

This is a sentence of economic nonsense. First, is ‘tr-ll’ really a derogatory term if tr-lls are using the same tactics as the infamous non-tr-ll tr-ll, IBM? If, when IBM was doing this, it didn’t earn the label of derogatory, it shouldn’t be applied now except as a compliment.

Worse, this paragraph completely betrays free markets (something the Journal is glad to do when it is in the interests of its big company buddies), because it forgets the fact that a patent is an asset created by the government in exchange for an inventor’s public disclosure of a new and useful invention. When the asset is so created, there is absolutely nothing freakin wrong with people doing with patents what they do with all other financial assets – buying, selling and exploiting them. To attack this practice is to attack free market economics. If an inventor doesn’t have enough money to fully enforce his or her patent, it is pure free market economics for that inventor to sell the patent (for a fixed sum and/or royalty) to another economic player who can fully enforce the patent. To complain about this is to attack free markets (something too prevalent in big increasingly-uninnovative companies).

Speaking of which, the article quotes head abuse-patent-reform leader Mark Chandler of Cisco (who I would be glad to debate this issue with, while I am totally drunk, and still win):

Mark Chandler, general counsel of Cisco Systems, says companies that don’t produce anything can buy low-cost patents, hire contigency fee lawyers and file lawsuits seeking massive damages for patents that contribute negligible value to a product. Proposed patent reform that links damages to the economic value of the patent would help solve the problem, he says.

Again, Chandler is attacking free-market economics, in that there is absolutely nothing wrong with companies raising funds to help enforce patents where the original inventor does not have the financial resources to do so. And I don’t think that is what Mark is whining about.

Rather what I think he is whining about is that a) companies like Cisco refuse to spend much time and money monitoring issued patents in their field to anticipate such problems (something the bio-pharma-chem companies, acting like grownups, routinely spend lots of money doing so), and b) companies like Cisco (and most of Silicon Valley) refuse to pool their monies and talents to build prior art resources and tools to help kill much of the crap being issued by the PTO that is used to harass children such as Cisco. I have asked around for 15 years in Silicon Valley for funding to build two prior art collections, one to remain in the Valley for everyone’s use, and the second to be donated to the PTO for examiner’s use. No interest whatsoever, and not just no interest in not funding me (hey, I know I am a jerk), but they don’t want to fund anyone to effectively solve the prior art problem. Because the large companies like Cisco (lead by …. IBM) want to continue to get their crappy patents (which would be threatened by any serious prior art effort – that patent peer review project being a logistic scam at IBM’s behest to prevent serious treament) while whining about smaller companies’ crap.

So anyone use the full word ‘tr-ll’ with the ‘o’ in the patent world is either an idiot or a liar. Or both. No crappy patents should be asserted in courts for only one reason – that such crappy patents don’t issue in the first place. But will companies’ like Cisco use their clout to get Congress to investigate incompetent and corrupt PTO management? NO. Until they do, they should stop whining. If someone gives me his address, I will send Mark a pink blankee he can wipe his tears with.

Notes:

Marking of Prescription Drug Does Not Create DJ Jurisdiction for Generic Competitor

Patent, ,

PatentLawPic392Prasco LLC v Medicis Pharmaceutical Corp. and Imaginative Research (Fed. Cir. 2008)

Imaginative Research owns of several patents covering a prescription strength benzoyl peroxide wash. Medicis is the exclusive licensee and sells the product under the brand name TRIAZ.  The patents are listed on the box.

Prasco makes a generic version (OSCION) and allegedly competes directly with TRIAZ.

Wanting to avoid the cloud of potential infringement, Prasco filed a declaratory judgment lawsuit against the patentee and licensee alleging non-infringement of the listed patents. The case was dismissed for lack of declaratory judgment jurisdiction, Prasco appealed.

Prasco admits that the DJ defendants did not know about the generic competition until it received the complaint. However, Prasco argued that Article III jurisdiction exists because the defendants (1) listed its patents on a directly competitive product and (2) Medicis had previously sued Prasco (for infringement of a different patent by a different product).  The defendants also refused to sign a covenant not to sue.

Cases or Controversies: Article III of the Constitution limits the reach of federal judicial power to the adjudication of “cases” or “controversies.”  This requirement has been interpreted to encompass only disputes that are “definite and concrete, touching the legal relations of parties having adverse legal interests,” “real and substantial,” and “admi[t] of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts.”

In MedImmune, the Supreme Court rejected the CAFC’s original test for DJ Jurisdiction that required a “reasonable apprehension” of immanent litigation and replaced it with an amorphous requirement of a “substantial controversy . . . of sufficient immediacy.”

On appeal, the CAFC affirmed that Prasco’s controversy is not sufficient to be justiciable.

Although MedImmune clarified that an injury-in-fact sufficient to create an actual controversy can exist even when there is no apprehension of suit, it did not change the bedrock rule that a case or controversy must be based on a real and immediate injury or threat of future injury that is caused by the defendants—an objective standard that cannot be met by a purely subjective or speculative fear of future harm.

The court further held that DJ jurisdiction does not exist “without some affirmative act by the patentee.”

Regarding marking, the court found that the marking of “products with the applicable patents provides little, if any evidence that [the patentee] will ever enforce its patents.”

Patently-O Bits and Bytes No. 59

Patent
  • The Patent Hawk Strikes: Gary Odom enjoyed inventing and patenting so much that he became a patent searcher. He also writes the Patent Hawk blog from his Oregon roost. He has now sued Microsoft in the Eastern District of Texas for infringing his Patent covering toolbar groupings (Patent No. 7,363,592). If you are using Office 2007, you might check to see whether your Microsoft click-through license includes indemnification.
  • Law students ask me about law firm titles, so I created the following “Glossary of Patent Law Firm Professionals”
    • Associate: A lawyer who is not yet a partner, but is on that track.
    • Partner: Could be either equity partner or non-equity partner.
    • Equity Partner: An owner of the firm. Firms may have complex ownership structures and various levels of equity.
    • Non-Equity Partner: A senior associate with a fancy title. Many firms do not tell its clients which partners are equity vs non-equity.
    • Of Counsel: Catch-all used when an attorney wants to work a reduced load or not be fully engaged with the firm. Also, many firms hire lateral would-be partners as of counsel until the firm decides to make a partnership offer.
    • Special Counsel: Same as of counsel.
    • Senior Counsel: Same as of counsel, but indicates a senior level attorney
    • Technical Advisor: non-lawyer, often a patent agent. Some firms separate patent agents from technical advisors based on PTO registration.
    • Law Clerk: non-lawyer, typically also a law student.
    • Docketing clerk: Typically a paralegal. The most important job in a patent prosecution firm.
    • Patent Paralegals and Secretaries: The most difficult positions to fill with qualified individuals willing to work with patent attorneys.
    • Contract Attorney: The person who is treated the worst but is paid fairly well. Spends the day doing document review and checking facebook.
  • Quote of the week: “Next time wear a tie. This is the Federal Circuit.” CAFC Judge to appellate counsel.
  • Inventor Gil Hyatt gets $388 million more – this time from the California Franchise Tax Board. The lawsuit by Hyatt was filed in 1998 after California assessed Hyatt with millions of dollars of income tax while Hyatt claimed he did not live in the state. In the case, the Supreme Court had rejected California’s immunity argument – finding that a Nevada court was not required to give full faith and credit to California’s self-immunity statute. [Link] Gilbert Hyatt is known for receiving a broad patent on the microcontroller. Before the patent was invalidated, Hyatt received $70 million+ in royalties.

   

CAFC Finally Affirms a Finding of Infringement by Equivalents

Claim Construction, Doctrine of Equivalents, Injunctions, Medical Device, Patent, Patent Cases 2008,

PatentLawPic391Dr. Voda v. Cordis Corp. (Fed. Cir. 2008)

Dr. Voda’s case is an exciting tale of an individual inventor litigating against a major corporation in the red sandy soil of western Oklahoma. 

A jury found that Cordis catheters infringed Voda’s patents and adjudged a reasonable royalty to be 7.5% of gross sales. The jury also found the infringement willful and the patents not invalid.  The district court then affirmed the jury verdict but denied Voda’s request for injunctive relief.

Claim Construction: Voda’s claim included the requirement that the catheter be engaged “along a line” of the aorta. The district court, however, found that the claim is not limited to linear portions of the aorta. On appeal, the CAFC confirmed the construction — reminding us that “the context in which a term is used in the asserted claim can be highly instructive.” Phillips. When engaged, it is clear that the catheter may curve along the aorta.

The specification does indicate that the “present invention [includes a] straight portion.” However, the CAFC refused to see that statement as a “clear disavowal of claim scope” because the specification discusses other instances where the same portion could be curved.

Doctrine of Equivalents: Cordis had redesigned some of its products to avoid literal infringement. However, these were found to infringe under the Doctrine of Equivalents. In particular, a “second straight portion” claim element was not literally found in the Cordis products, but the jury found that the products did include an equivalent element.

At the court’s option, either of two tests of equivalent may be used:

Under the insubstantial differences test, “[a]n element in the accused device is equivalent to a claim limitation if the only differences between the two are insubstantial.” Honeywell Int’l Inc. v. Hamilton Sundstrand Corp., 370 F.3d 1131, 1139 (Fed. Cir 2004). Alternatively, under the function-way-result test, an element in the accused device is equivalent to a claim limitation if it “performs substantially the same function in substantially the same way to obtain substantially the same result.” Schoell v. Regal Marine Indus., Inc., 247 F.3d 1202, 1209-10 (Fed. Cir. 2001).

The CAFC looked to Voda’s experts to find evidence of insubstantial difference. In particular, Voda’s expert testified that the Cordis “curve portion” was essentially straight and that “cardiologists would have difficulty distinguishing the two during use.”  In addition, Voda introduced evidence that the Cordis curve portion “performed the same function as a straight portion, in the same way, to achieve the same result. . . . Accordingly, we affirm the jury’s findings of infringement with respect to these claims.”

Notes:

  • EBay: Voda argued for an injunction based on the irreparable harm to its exclusive licensee. The CAFC rejected that justification — finding that the irreparably harmed must be the party seeking the injunction.
  • Seagate: The CAFC vacated the willfulness finding that was based on pre-Seagate law.
  • Festo: The CAFC did find that some of Voda’s claims were not infringed under the DOA. Those claims had been narrowed during prosecution and were subject to prosecution history estoppel.
  • Prior Appeal: In the 2007 appeal in this case, the CAFC held that Voda could not assert its foreign patents covering the same product in US courts. [LINK]
  • See Lemley & Allison: THE (UNNOTICED) DEMISE OF THE DOCTRINE OF EQUIVALENTS

 

Open Source License Conditions Enforceable Through Copyright Law

License, Patent,

Jacobson v. Katzer (Fed. Cir. 2008)

In an interesting decision, the CAFC held that open source license conditions are enforceable under the copyright laws. Jacobson’s open source license at issue here allowed anyone to use his software so long as his conditions are met (such as making any modified code freely available).

Copyright vs Contract: The district court held that violation of the open source conditions are remedied through a contract claim rather than copyright. The CAFC sided with the copyright holder – holding that “Copyright holders who engage in open source licensing have the right to control the modification and distribution of copyrighted material.”

Copyright holders who engage in open source licensing have the right to control the modification and distribution of copyrighted material. As the Second Circuit explained in Gilliam v. ABC, 538 F.2d 14, 21 (2d Cir. 1976), the “unauthorized editing of the underlying work, if proven, would constitute an infringement of the copyright in that work similar to any other use of a work that exceeded the license granted by the proprietor of the copyright.” Copyright licenses are designed to support the right to exclude; money damages alone do not support or enforce that right. The choice to exact consideration in the form of compliance with the open source requirements of disclosure and explanation of changes, rather than as a dollar-denominated fee, is entitled to no less legal recognition. Indeed, because a calculation of damages is inherently speculative, these types of license restrictions might well be rendered meaningless absent the ability to enforce through injunctive relief.

. . . .

The clear language of the Artistic License creates conditions to protect the economic rights at issue in the granting of a public license. These conditions govern the rights to modify and distribute the computer programs and files included in the downloadable software package. The attribution and modification transparency requirements directly serve to drive traffic to the open source incubation page and to inform downstream users of the project, which is a significant economic goal of the copyright holder that the law will enforce. Through this controlled spread of information, the copyright holder gains creative collaborators to the open source project; by requiring that changes made by downstream users be visible to the copyright holder and others, the copyright holder learns about the uses for his software and gains others’ knowledge that can be used to advance future software releases.

This decision is based on the court’s interpretation of 9th Circuit law. However, its impact on patent law may be a reminder that the court will allow patent infringement actions even when the infringement is based on violation of an intricate or exotic licensing contract.

Reading Quanta Narrowly

Articles and Publications, First Sale / Exhaustion, Patent

David McGowan is a law professor at the University of San Diego School of Law. Much of his research involves the interplay between new technologies and antitrust law. I asked him to comments on the Supreme Court’s recent patent-antitrust decision: Quanta.

By David McGowan

To the extent possible, parties and not courts should set the terms for practicing inventions.  Parties have better information than courts; they are likely to set more efficient terms.  The Supreme Court’s opinion in Quanta Computer, Inc. v. LG Electronics, Inc, does not embrace this principle, though it may not reject it very broadly. The opinion may and should be narrowly construed.

PatentLawPic380I presume readers of this blog are generally familiar with the ruling. Intel took from LG electronics a license providing Intel a defense to infringement and immunity from contributory infringement by Intel’s customers, who knew Intel’s license did not extend to them.  The Court nevertheless held the Intel license exhausted LG’s rights insofar as Intel chips were concerned.

The Court’s analysis on the main point is too formal. Because the chips embodied substantially all the relevant LG inventions and had no substantial use unrelated to practicing those inventions, the Court thought it irrelevant that Intel customers knew their chips implied no LG license.

But an invention is an intellectual achievement distinct from its embodiment in a product.   There is no logical reason the sale of a product should exhaust rights in an invention.  There is a logical objection: Forcing patentees to load up initial sales with all the terms necessary to tailor rights to potential uses will tend to increase transaction costs of initial licenses and probably result in lumpier, less tailored contracting in general.  Better to let Intel buy its peace at a price that reflects its business and let its customers do the same. 

The statute does not compel the Court’s holding, which rests on history.  The Court should have limited rather than extended the cases it relied on.  These, such as Bauer and Motion Picture Patents, invoked exhaustion to defeat post-sale restrictions on use of a product.  But such restrictions may facilitate price discrimination or make sense for other business reasons.  Intel and LG, and firms like them, know better than courts when this is the case. 

Against this it might be argued that a robust exhaustion doctrine economizes on downstream transaction costs.  Conceptually that is true, and perhaps persuasive at the retail consumer level, but Quanta was not such a case.  Taken to its logical conclusion, this argument implies patentees are better off suing everyone and negotiating settlements than licensing anyone and giving up the ability to tailor terms.  That implication is perverse.

The Court’s devotion to history is odd because it has not shown much regard for history of late.  In eBay v. Mercexchange it was unimpressed by the long history of presumptive injunctive relief for infringement.  In the antitrust context, in Leegin Creative Leather it recently overruled the longstanding per se prohibition on minimum resale price maintenance.  And in Illinois Tool Works the Court reversed the relatively longstanding presumption that patents imply market power in tying cases. 

Quanta is at least in tension with Leegin and Tool Works.  Those cases recognize that post-sale restrictions may be efficient, a point Leegin makes directly and which is implicit in Section 271(d)(5) of the Patent Act, on which the Tool Works Court relied. In placing economic substance over transactional form, Leegin and Tool Works follow Continental TV, Inc. v. GTE Sylvania, which overruled the Court’s per se prohibition on vertical nonprice restraints.  Like exhaustion, that rule had been based on transactional formalism rather than economic analysis.

Both Leegin and Tool Works reject doctrines that trace to the same cluster of cases, such as Bauer and Motion Picture Patents, the Quanta Court cites favorably. Yet the Quanta Court said nothing to explain how its holding relates to antitrust precedents (or Section 271(d)(5)) recognizing that post-sale restrictions may be efficient.  One therefore might try to read Quanta as qualifying even its recent antitrust cases.

On this reading, at least insofar as pass-through restrictions are concerned Quanta implicitly qualifies the Federal Circuit’s Mallinckrodt precedent, which, in the misuse context, upholds patentees’ ability to impose lawful conditions on use.   Professor Ghosh has suggested (http://lawprofessors.typepad.com/antitrustprof_blog/2008/06/the-quandry-of.html) the Court’s footnote seven, which says exhaustion does not necessarily bar breach of contract claims, may point in this direction.

This reading of Quanta is neither compelled nor desirable.  It is possible to reconcile Quanta with the Court’s recent (and sensible) antitrust decisions by focusing on two things not at issue in Quanta. 

First, the initial license to Intel was not conditional.  The cases the Court cited also involved unconditional sales. Quanta therefore should not be read to extend to conditional licenses, and thus not to undercut Mallinckrodt directly.  Second,  Quanta presented no question regarding pass-through conditions and should not be held to govern them.  Intel merely bought immunity from suit for contributory infringement.  The Court did not stress this fact, but it is fair to repay the woodenness of its analysis with a strict reading of its holding.

A weakness of this reading is that it renders Quanta trivial.  One wonders why the Court would take a such a case.  Possibly the Court believes patent law and the Federal Circuit have got out of hand and must be reigned in.  But its majority opinions have not matched the robust commentary cert grants have prompted.  They are fairly narrow and unambitious.  So is Quanta, and it deserves to be read that way. 

Outsourcing of Patent Preparation: PTO Says Beware

Patent, Patent Prosecution, Transnational, ,

In a recent notice, the PTO has indicated that it may be illegal to outsource invention information to a foreign county for the purposes preparing a US patent application.

  1. A foreign filing license from the USPTO does not authorize the exporting of subject matter abroad for the preparation of patent applications to be filed in the United States.
  2. Applicants who are considering exporting subject matter abroad for the preparation of patent applications to be filed in the United States should contact the Bureau of Industry and Security (BIS) at the Department of Commerce for the appropriate clearances.

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What’s Sauce For the Private Goose…

Articles and Publications, Patent,

Ilya Shapiro is a Senior Fellow at the libertarian Cato Institute in DC. He was also my classmate in both college and law school. In a recent op-ed for the Legal Times, Shapiro supported BPMC’s contention that the state of California should not be immune from charges of patent infringement.

What’s Sauce For the Private Goose…

by Ilya Shapiro (This article appeared in the Legal Times on June 2, 2008.)

… In Biomedical Patent Management Corp. v. California Department of Health Services, the biotechnology company known as BPMC is suing the state of California for patent infringement—specifically, of the company’s patent on a form of prenatal screening for fetal abnormalities. Ignoring the merits of the suit, the federal district court in San Francisco dismissed it on the ground of “sovereign immunity”: Under the Supreme Court’s reading of the 11th Amendment, a state cannot be sued in federal court without its consent. The U.S. Court of Appeals for the Federal Circuit—which handles all appeals in patent litigation—affirmed the lower court decision.

So BPMC has turned to the Supreme Court, which in recent years has been increasingly willing to reverse the Federal Circuit. The company wants the Court to strip California’s immunity in this case because the state’s Department of Health Services previously waived immunity when it joined a suit brought by a state contractor about the same patented procedure. That is, after California actively litigated the earlier suit (which sought and failed to obtain a declaratory judgment that the contractor was not infringing BPMC’s patent), the state should be precluded from turning around to claim immunity when it gets sued over the same issue.

Moreover, as BPMC notes, the University of California (among other state agencies) routinely submits to federal court jurisdiction when it pursues claims for violations of its own patent rights. Given that California uses the patent system (and courts’ enforcement thereof), it has relinquished whatever sovereign immunity the state enjoys—immunity that is legally suspect in any event when the sovereign engages in commercial activities.

And, boy, does California use the patent system. The state universities alone own more than 3,300 patents that generate $210 million in annual revenue. California has filed 21 patent infringement suits since 1990 and won more than $900 million in judgments since 2000.

And yet the state has also wielded sovereign immunity arguments to get suits dismissed at least six times since 1987 (including suits by Genentech and Eli Lilly & Co.).

While the worst peddler of this double standard, California is by no means alone. At least 32 states have filed at least 173 patent suits since the mid-1990s.

UNFAIR ADVANTAGE

Business groups hope that the Supreme Court will remove what they see as a competitive advantage enjoyed by state entities: Private patent holders can’t seek recompense for a state’s unlicensed use of software or medical devices, while states can turn to the courts to protect their patents. Medical innovators and technological entrepreneurs in the private sector suffer.

“It’s audacious for a state to use the federal courts to sue for patent infringement, but to block infringement suits against it as a sovereign that cannot be sued,” says Robin Conrad of the National Chamber Litigation Center in a press release. The center has filed an amicus brief on behalf of the U.S. Chamber of Commerce in the case—only the second time the Chamber has ever filed in a Supreme Court patent case.

This hypocrisy should not even be in play any more, not since Congress passed the Patent Remedy Act of 1992. That legislation was intended to “clarify that states .?.?. are subject to suit in federal court by any person for infringement of patents.”

That sounds clear enough. But in 1999 the Supreme Court ruled in a trademark case, College Savings Bank v. Florida Prepaid Postsecondary Education Expense Board, that Congress’ legislative powers under Article I of the Constitution were insufficient to trump states’ sovereign immunity. Except in 2006 the Court held the opposite in a federal bankruptcy case, Central Virginia Community College v. Katz. The votes in these seemingly contradictory decisions were 5-4.

In fact, neither case should have been close: When a state repeatedly and voluntarily invokes federal court jurisdiction in a series of similar cases—under patent or any other law—it generally has waived immunity against suits brought by private parties under those same laws. And the precedent is well established that a state waives sovereign immunity when it seeks to adjudicate its rights in federal court. For example, the Supreme Court unanimously held in the 2002 case of Lapides v. Board of Regents of the University System of Georgia that a state loses its 11th Amendment immunity when it removes a case from state to federal court.

EASY CALL

So, as the solicitor general’s office collects agency views and mulls the administration’s position, it should recognize that Biomedical Patent Management Corp.—an unwieldy name for an important case—not only represents the chance to right the balance between a state and its citizens with respect to intellectual property. It also provides the perfect opportunity for the Court to clarify its jurisprudence on the relationship between Congress’ Article I powers and states’ 11th Amendment immunity.

Sovereign immunity is properly a shield against lawsuits challenging a state’s governmental action, not a sword with which to carve out economic advantage over private competitors. If the Supreme Court declines to hear this case, thereby letting the Federal Circuit ruling stand, it would reinforce that unfair advantage—and strike a blow against private sector innovation.

Whoever it is that replaces the outgoing Paul Clement should not agonize over this one. The next solicitor general should advise the Supreme Court to grant this petition for review. And the justices should take his advice.

The Death of Google’s Patents?

Patent, Patentable Subject Matter, Software, ,

By John F. Duffy* [File Attachment (42 KB)]

            The Patent and Trademark Office has now made clear that its newly developed position on patentable subject matter will invalidate many and perhaps most software patents, including pioneering patent claims to such innovators as Google, Inc.

            In a series of cases including In re Nuijten, In re Comiskey and In re Bilski, the Patent and Trademark Office has argued in favor of imposing new restrictions on the scope of patentable subject matter set forth by Congress in § 101 of the Patent Act.  In the most recent of these three—the currently pending en banc Bilski appeal—the Office takes the position that process inventions generally are unpatentable unless they “result in a physical transformation of an article” or are “tied to a particular machine.”[1] Perhaps, the agency has conceded, some “new, unforeseen technology” might warrant an “exception” to this formalistic test, but in the agency’s view, no such technology has yet emerged so there is no reason currently to use a more inclusive standard.[2]  

            The Bilski en banc hearing attracted enormous attention, and yet there has remained a sense among many patent practitioners that the PTO’s attempts to curtail section 101 would affect only a few atypical patent claims.  The vast bulk of patents on software, business and information technology are thought by some not to be threatened because those innovations are typically implemented on a machine—namely, a computer—and the tie to a machine would provide security against the agency’s contractions of § 101.  Even if that view were right, the contraction of patent eligibility would be very troubling because the patent system is supposed to be designed to encourage the atypical, the unusual and the innovative.  But that view is wrong.

            The logic of the PTO’s positions in Nuijten, Comiskey and Bilski has always threatened to destabilize whole fields of patenting, most especially in the field of software patents.  If the PTO’s test is followed, the crucial question for the vitality of patents on computer implemented inventions is whether a general purpose computer qualifies as a “particular” machine within the meaning of the agency’s test.  In two recent decisions announced after the oral arguments in the Bilski case, Ex parte Langemyr (May 28, 2008) and Ex parte Wasynczuk (June 2, 2008),[3] the PTO Board of Patent Appeals and Interferences has now supplied an answer to that question: A general purpose computer is not a particular machine, and thus innovative software processes are unpatentable if they are tied only to a general purpose computer.  

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CAFC Leans on District Court to Open Sealed Case

Patent

Kuney v. Bean (BayState v. Bowers) (Fed. Cir. 2008)

Professor Kuney is in the midst of writing a detailed account of the BayState v. Bowers case file. In that case, the CAFC affirmed the enforceability of a shrink wrap license term that barred reverse engineering of the software. In that case, a number of amici briefs argued that reverse engineering sits at the core of capitalism.

Like most patent lawsuits, the documents filed and exchanged in the case are kept from the public – sealed under a stipulated protective order signed by the Massachusetts District Court. To open the file, Kuney filed a motion to intervene in the case and to modify the protective order. Bowers agreed to open access to the documents, but Bean (BayState’s successor in interest) initially refused. Although Bean and Kuney later agreed to a modified protective order, the court refused to enter it and rejected Kuney’s motion to intervene.

On appeal, the CAFC found that the lower court had abused its discretion and vacated.

Opening a Sealed File: “Intervention is the proper means for a non-party to challenge a protective order.” When making a determination of whether to open records, the courts should begin with “a presumption of public access to judicial records.” In a decade old case, the First Circuit explained the value of public access as fostering “the important values of quality, honesty, and respect for the judicial system.” In this case, the CAFC recognized that Kuney needs the documents to do his scholarly work. However, the district court created no record of weighing the value of public access against the presumption of privacy.

Because the district court failed to explain its reason for dismissal, this case is vacated “for a balancing of the public and private interests in determining whether to grant or deny Professor Kuney’s motion.”

Will Sprint Communications lead to a rethink of patent law’s standing doctrine?

Patent,

By TJ Chiang

Last week, the Supreme Court decided Sprint Communications Co. v. APCC Services, a case that received more attention for Chief Justice Roberts’ citation to Bob Dylan than the mundane federal jurisdiction issues involved. The case involved the collection of small debts by payphone operators from long-distance phone companies. Because the amounts involved were small, payphone operators assigned their claims to “aggregators,” who effectively brought the suit on their behalf. The issue was whether these aggregators, who had nothing but an assignment of the right to sue the phone companies, had standing in federal court.

The Court held that “an assignee of a legal claim for money owed has standing to pursue that claim in federal court.” As an example of this longstanding ability to assign legal claims to strangers who had not suffered any personal injury, the Court cited the early patent statute, which permitted (then and now) inventors to assign their patents to others.

The irony of the shout-out to patent law is that both the Supreme Court and the Federal Circuit have consistently held that the assignee of a legal claim for money owed on a patent does not have standing to pursue that claim in federal court. A bare assignment of the legal claim for past infringement damages—precisely the type of assignment in Sprint Communications, since the plaintiffs were not assigning their payphones to the aggregators—does not confer standing to sue. See, e.g., Crown Die & Tool Co. v. Nye Tool & Machine Works, 261 U.S. 24 (1923); Mars, Inc. v. Coin Acceptors, Inc., No. 07-1409 (Fed. Cir. June 2, 2008). Instead, the assignment must include the patent itself or an exclusive license.

There are certainly sound policy reasons for requiring the patentee to be a party to an infringement suit, not least because a judgment of invalidity might not be binding absent such participation. At the same time, the patentee standing requirement is a source of frequent litigation at the Federal Circuit. Moreover, because standing is jurisdictional, the issue of proper parties can require an entire case to be relitigated due to a procedural defect. Perhaps the time is ripe for some rethinking in this area, as Sprint Communications and Crown Die appear to be in some tension with each other.

[NOTE: This summer TJ Chiang is transitioning from his position as an associate at Quinn Emmanuel to become a professor at George Mason Law School. Along with yours truly and Jon Dudas, TJ Chiang is a graduate of the University of Chicago Law School. SSRN]