After finding MercExchange’s patent infringed and not invalid, the district court declined to issue an injunction against eBay. In its decision, the district court found that MercExchange’s (i) willingness to license; (ii) failure to practice the patents itself; and (iii) comments to the media regarding its intent to enforce patent rights all weighed against any presumption that it would suffer irreparable harm without an injunction. 275 F.Supp. 2d 695 (E.D. Va. 2003).
On appeal, the Court of Appeals for the Federal Circuit reversed, finding that, absent exceptional circumstances, a district court should issue a permanent injunction after a finding of infringement.
Now, eBay has appealed to the Supreme Court by filing a petition for certiorari asking the court to hear its case. The petition briefly spells out the traditional four-factor injunctive relief test and argues that the four-factor test should apply to patent cases rather than the de facto per se test applied by the CAFC.
In the four-factor test, the court should consider (i) irreparable harm from not issuing an injunction; (ii) whether an adequate remedy exists in law (damages) (iii) whether the injunction would be in the public interest; and (iv) whether a balance of hardships would tip in the plaintiff’s favor.
eBay argues that the move away from injunction as a per se consequence of infringement does not raise the standard for obtaining injunctive relief — rather, it is a move back to the standard originally intended by Congress.
Interestingly, this question arises at the Supreme Court as a proposed statute that would modify the principles of patent injunctive relief is being considered in Congress.
Schinzing sued Mid-State in Minnesota state court alleging breach of a license agreement for Mid-State’ failure to pay royalties due for its wheel-chair washing machine products. Mid-State removed the case to federal court and raised a number of affirmative defenses and counterclaims, including patent invalidity and non-infringement. After a bench trial, the district court found that the license had been breached and that the patents were not invalid.
The appeal was taken-up by the Eighth Circuit Court of Appeals because the patent issues were raised in a counterclaim rather than in the properly pled complaint.
Basing its decision on Federal Circuit law, the Eighth Circuit panel found that the court had failed to apply an element-by-element comparison of the patent claims to the prior art references presented at trial.
We note that on remand the district court’s comparison of the ’375 patent to the device described in [prior art] should reflect the Federal Circuit’s observation that 35 U.S.C. § 102(b) may bar patentability by anticipation if the earlier device includes every limitation of the later claimed invention, or by obviousness if the differences between the claimed invention and the earlier device would have been obvious to one of ordinary skill in the art. Netscape Communications Corp. v. Konrad, 295 F.3d 1315, 1321 (Fed. Cir. 2002).
In a recent newsletter, the AIPLA profiled recent Supreme Court Nominee John Roberts — focusing on his intellectual property experience. The general consensus is that Roberts is in favor of strong, principled intellectual property rights and that those rights are well founded in the language of the constitution.
Example Roberts cases:
Feltner v. Columbia Pictures, 523 U.S. 340 (1998) (Seventh Amendment guarantees the right to a jury trial on statutory copyright damages);
TrafFix v. Marketing Displays, 532 U.S. 23 (2001) (utility patent is strong evidence but not conclusive evidence that trade dress claim is invalid);
Intergraph v. Intel, 195 F.3d 1346 (Fed. Cir. 2001) (question of whether prior license covered patents in suit); and
Universal Studios v. Peters, No. 04–5138 (D.C. Cir. 2005) (business meter stamp is not equivalent to a postal service stamp when attempting to cure a late claim)
In a companion case to Eolas v. Microsoft, the CAFC has taken another step in expanding the potential use of 35 U.S.C 271(f) to obtain damages for actions done abroad.
AT&T’s patent covers certain speech codecs that are included in Microsoft’s Windows product. As shown above, Microsoft generates its source code in the U.S. That source code is copied and shipped abroad to Foreign computer manufacturers who, pursuant to their license agreement with Microsoft, generate 2nd generation copies of the software that are then installed and sold.
The district court found that Microsoft could be liable for foreign sales under Section 271(f) for shipping components of a patented invention.
On appeal, Microsoft argued that (i) software code cannot be a “component” under 271(f) and (ii) the 2nd generation copies are not “supplied” from the U.S. Rather, Microsoft argued that those 2nd generation copies are manufactured abroad.
Component: The majority panel made quick-work of the “component” argument, finding that the issue was fully determined by Eolas.
Supplied: Using a simple statutory analysis, the majority determined that “supplying” of software necessarily implies making a copy. “Copying, therefore, is part and parcel of software distribution.”
Rule: Thus, “sending a single copy abroad with the intent that it be replicated invokes § 271(f) liability for those foreign-made copies.” Therefore, the district court properly held Microsoft liable for the foreign activity.
In a well reasoned dissent, Judge Rader, decried the majority’s “extraterritorial expansion” — arguing that the court “should accord proper respect to the clear language of the statute and to foreign patent regimes by limiting the application of § 271(f) to components literally ‘shipped from the United States.’” as is required under Pellegrini.
The Supreme Court has decided today to hear Illinois Tool Works v. Independent Ink (04-1329).
In this case, the Court of Appeals for the Federal Circuit determined that a rebuttable presumption of market power sufficient to restrain trade under antitrust law arises from the patentee’s possession of a patent used in an explicit tying agreement.
The suit involves an ink jet device patented by Trident, a subsidiary of Illinois Tool Works. Independent Ink manufactures unpatented ink that is usable in Trident’s patented device. However, Trident’s license/purchase agreements require use of Trident’s ink under certain circumstances.
Independent Ink sued alleging an illegal tying arrangement in violation of Section 1 of the Sherman Act. The district court dismissed the claim on summary judgment, but the CAFC reversed — ordering the lower court to presume market power based on the patent tying agreement.
In its opinion, the CAFC admonished the district court for not following clearly established Supreme Court precedent and for dismissing the High Court’s holdings as “vintage.” The appellate panel noted that, although it may be time to abandon the doctrine, it is up to the Supreme Court or Congress to expressly overrule its own precedent — this prerogative does not lie with the district courts. The High Court is expected to hear the case next fall.
Amicus briefs in the petition were filed by the AIPLA, ABA, Pfizer, and the IPO.
Illinois farmer, Edward Showmaker, filed suit against Advanta USA, claiming that the language of the shrinkwrap license agreement on Advanta’s soybean seed violated the misbranding provision of the Plant Variety Protection Act (PVPA). The Advanta’s Garst Brand Seed D445N, Variety 57004 purchased by Mr.. Showmaker was neither patented or PVPA certified. However, the agreement on each of Advanta’s bags stated:
“The soybean seed in this bag contains genetics developed, licensed or owned by Seller. All rights to make, produce or sell seed products derived from this seed reside solely with Seller. Buyer acknowledges this ownership and agrees to the following conditions: … Buyer will not resell or supply any of this seed to any other person or entity. Furthermore, Buyer is strictly prohibited from saving or selling, for seed purposes, any gain products from this seed. Buyer further agrees not to alter, or permit the alteration of the seed … through either genetic engineering, conventional breeding activities or other techniques.”
The United States District Court for the Southern District of Illinois dismissed the case for failure to state a claim upon which relief can be granted because the contractual language in the Agreement did not implicate the PVPA’s misbranding provisions. The Federal Circuit affirmed because Advanta’s shrinkwrap license did not specifically reference the PVPA, any issued PVPA certificates or any pending PVPA applications. Furthermore, Advanta’s shrinkwrap license did not use the terms “Unauthorized Propagation Prohibited” or “Unauthorized Seed Multiplication Prohibited,” which are specifically set forth in PVPA Section 2568(a)(3). The Court stated that Advanta’s contract language did not put the potential purchaser or the public on notice of a plant variety owner’s rights, it merely restricted some activities of the buyer.
NOTE: Alison Baldwin is a partner at McDonnell Boehnen Hulbert & Berghoff LLP in Chicago.Her patent litigation experience has covered a diverse range of topics, from recombinant DNA technology to digital television. In addition to her law degree, Ms. Baldwin holds degrees in biochemistry and plant pathology and has conducted research on the molecular mechanisms involved in plant disease resistance. [Brief Biography].
The Berkeley IP weblog has an interesting post regarding the the “first sale doctrine” and its application to music downloads. The controversy is whether Warner Music Group (WMG) content downloaded through Rhapsody/iTunes is licensed or purchased.
Tom Waits’ contract with WMG entitled him to a high royalty for third-party licenses but a lower royalty for the sale of copies. In a case filed last week, by Waits’ former production company, WMG is likely to take the position that its downloads are sold just like physical products — thus resulting in a lower royalty. Of course, WMG’s expected argument flies in the face of the “terms of service” agreed to by users to any of the popular mp3 download sites.
All of this begs the question of whether associating the sale of mp3 files with the sale of physical CD’s gives purchasers the right to resell under the first sale doctrine. (The U.S. Gov’t thinks not.)
Centocor is the exclusive licensee of a patent on lymphocytic cells that produce chimeric immunoglobulins. (U.S. Patent No. 5,807,715). After a period of negotiations, MedImmune sub-licensed the patent and began paying royalties. Even after signing the agreement, MedImmune asserted to Centocor that it did not infringe and that the patent was unenforceable/invalid. Centocor responded that “it expected MedImmune to continue to adhere to its license obligations.”
MedImmune then filed suit, asking for declaratory judgment that it owes no royalties. The district court, however, dismissed the case for lack of an actual controversy. On appeal, the CAFC affirmed — finding Gen-Probe v. Vysis (Fed. Cir. 2004) dispositive.
In Gen-Probe, we considered the case of a licensee in good standing who sought a declaratory judgment that it was not infringing the licensed patent, and that the licensed patent was invalid. . . . [W]e determined that the license, “unless materially breached, obliterated any reasonable apprehension of a lawsuit,” and that once the licensor and licensee “formed the license, an enforceable covenant not to sue, the events that led to the formation [of the license] became irrelevant.”
MedImmune argued that Gen-Probe should not be followed because it is “inconsistent with Supreme Court Precedent and with prior Federal Circuit precedent.” The CAFC rejected that argument — finding the cited opinions to be consistent with Gen-Probe.
From a policy perspective, the Court rejected MedImmune’s argument that Gen-Probe creates an unacceptable “Hobson’s choice.”
Every potential infringer who is threatened with suit, or who is sued, for patent infringement must decide whether to settle or fight. In short, the “Hobson’s choice” about which MedImmune complains arises not from Gen-Probe, but from Article III’s requirement that, before a district court exercises jurisdiction in a declaratory judgment suit, there must be an actual controversy between the parties. For the reasons set forth above, such a controversy does not exist here.
The first Patently-O Patent Prosecution TipCast has just been released. The TipCast series is an audio lecture series that is intended to provide helpful hints and information to patent attorneys and agents. TipCast No. 1 provides a tip relating to revival of abandoned applications.
Podcast RSS feed will be setup at a later date. As this is my first TipCast, your comments, suggestions, and advice are all quite welcome.
Thanks goes to Evan Brown and the rethink(ip) group for their inspiration and encouragement. For those interested in the creation of the TipCast — I used my laptop computer hooked to a Logitech USB microphone ($14) and a software package titled Media Wizard (CDH Productions, $50) to record my voice. I also used Media Wizard to mix-in the music. Although I have some radio experience from my days as an announcer at WPRB Princeton, this was my first digital recording.
A client who is also a Patently-O reader sent me a note this morning that the recording was very nicely done, but that it seems like a lot of work on my part — She asks, “why the audio form rather than visual?”
My Response: There is new technology coming along that is going to make the audio format very easy to use — although right now only the real techno-geeks and audiophiles are involved. I have to admit that I still know very little about this, but there is technology available to allow your hand-held device, such as your iPod or even your cell phone, to subscribe to an audio feed. Each time the feed is updated, the device would download the mp3 file and allow you to listen to the newest update. With a touch of a button, you could listen while on your morning commute or while working out at the gym.
Thank you for all the comments and complements on the TipCast. Even my wife was very nice this morning to mention that I certainly have the face for Podcasts. . .
Forget about copyright. Think of it in terms of manners. Do not copy word for word without credit. Show respect for the small things of others.
You should note, that I just copied part of Marty’s post — However, I used proper copying etiquette by letting the reader know the origin of the quote. Over at the TTABlog, John Welch talks about his recent experiences:
The TTABlog strives to provide well-written, readily understandable case summaries and commentary. It takes a considerable amount of work to produce that kind of writing, and it is quite upsetting to find someone else using that work product without permission, or even attribution. Just such an incident occurred today.
I have seen entire posts from Patently-O copied and posted in other blogs, on robot-built websites, in other languages, on newsgroups and in other locales as well. I have even given a few people, such as the editors of IPFrontLine, the freedom to copy entire posts for their own use. The copycat activity is often good publicity for me, the blog, and my firm (MBHB). However, if there is no source identifier, then there is no publicity value.
I have received nice notes from half a dozen law school professors and even a few high-school teachers who asked to copy portions of the blog for their courses. In another instance, I talked with an attorney who wanted to use information from the blog in a bar association presentation. Each time I have said yes. The best part is that, on several occasions, this initial contact was the beginning of a growing friendship — just another example of how copyright is a public good. (I.e., this is an example of how copyright is good for the public.)
In one particularly bad case of copying, I saw a nicely written IP blog post reviewing a new case (not from Patently-O). A few weeks later, I received a mailer from a major law firm reviewing the same case. (No, the particularly bad element is not that it took the major firm several weeks to write a case review.) The particularly bad element is that the major law firm’s case review was almost an exact copy of the the blog post. The greatest difference being that the name of the blogger as author had been replaced with the name of an attorney at the major firm. We IP bloggers are too polite to name names, but the copycats should be on their toes.
An old friend e-mailed me about this post — his comments are valid:
Your note about blog plagiarism is about the same old stuff of simple plagiarism in any form. "Copying" is too neutral a word. . . . This is serious, serious stuff.
The truth is that if you are a professional and you plagairize, it will come back to haunt you one day.
Here is my copyright policy: Anyone should feel free to copy a short snippets from the blog, so long as you attribute the material source. Shoot me an e-mail if you want to copy an entire post or a series of posts. You can print out individual posts and send them to a client — just don’t white-out my name or replace my name with your own.
Kevin Heller e-mailed to ask why I don’t use the creative commons license? The truth is that I love the CC licensing system — my problem is that I like to get an e-mail or telephone call from the person/organization that wants to use the material.
Aspex Eyewear v. E’lite Optik (Fed Cir. 2005) (04-1292)(NON PRECEDENTIAL).
by Joseph Herndon
In general, a licensee is not entitled to bring suit in its own name as a patentee, unless the licensee holds all substantial rights under the patent.
Aspex appealed the decision of the District Court stating that Aspex lacked standing to sue as an exclusive licensee for infringement of two patents (one naming Richard Chao as the sole inventor and the second being a CIP of the first with brothers David and Richard Chao as the named inventors).
Aspex entered into a written license agreement with Chic that granted Aspex an exclusive license in the U.S. to any rights Chic had acquired from third parties relating to patents involving magnetic eyewear. Later, Richard Chao granted Chic an exclusive license for two patents.
In September 2000, Aspex sued E’Lite for infringement of the two patents. Chic was not named as a party to the suit. The district court concluded that Aspex lacked standing to sue because Chic did not convey any future-acquired patent rights to Aspex, and thus Aspex was not an exclusive licensee of the asserted patents.
On appeal, the Federal Circuit held that the plain language of the Chic-Aspex Agreement makes it clear that the agreement relates only to patents then-owned by Chic, not future-acquired ones. The court contended that if the parties had intended to include future-acquired patents, it more likely would have stated “is and/or will become the owner,” within the agreement. The court also looked to use of the past tense “LICENSED” in term “LICENSED PATENTS” to suggest which patents were at issue.
The court further iterated that even though the license covered patents “relating to magnetic eyewear for eyeglasses,” a provision which certainly covers the two patents at issue, the specific grant provisions control the scope of the license agreement—not the general subject matter of the license. Thus, the court held Chic did not grant an exclusive license to either of the patents to Aspex, and as such, Aspex lacks standing to sue.
Joseph Herndon is a law clerk and at MBHB and is a registered patent agent. Joe has a stellar background in electrical engineering and will graduate from law school this year. herndon@mbhb.com.
At the district court level, Thomas Woolston, creator of the MercExchange and Patently-O Reader, won a $35 million patent infringement suit against eBay for infringement of his patents covering live internet auctions. On March 16, 2005, the Federal Circuit released its decision on appeal, reversing the decision in-part, but setting the stage for a permanent injunction against eBay.
On appeal, the Federal Circuit partially overturned the district court’s decision, finding that at least one of the MercExchange patents invalid but vacating the lower court’s ruling that another patent was invalid.
Perhaps most importantly, MercExchange challenged the district court’s refusal to issue a permanent injunction against eBay’s use of the invention. The CAFC agreed with MercExchange, that the district court “did not provide any persuasive reason that this case is sufficiently exceptional to justify the denial of a permanent injunction.” Specifically, the CAFC found that the fact that MercExchange expressed a willingness to license was not a valid reason for depriving it of the right to an injunction to which it would otherwise be entitled.
If the injunction gives the patentee additional leverage in licensing, that is a natural consequence of the right to exclude and not an inappropriate reward to a party that does not intend to compete in the marketplace with potential infringers. . . . We therefore see no reason to depart from the general rule that courts will issue permanent injunctions against patent infringement absent exceptional circumstances.
Of course, there is only a very small likelihood that eBay would allow its servers to be shut-down rather than settle the case. In addition, it is unclear how an injunction would operate in this case, although it would most likely only alter e-bay’s ‘buy it now’ feature.
Finally, the appellate panel affirmed the portion of the judgment denying an award of enhanced damages or attorney fees for MercExchange.
AFFIRMED IN PART, REVERSED IN PART, VACATED IN PART, and REMANDED.
The MercExchange patents are also under reexamination at the Patent Office. However, if the litigation concludes before the reexam is complete, there is some question as to whether the reexam can be used by eBay to re-open the case. One issue stems from the 1803 case of Marbury v. Madison where the Supreme Court held that the Judiciary, not the Executive Branch that determined the law. In this case, the PTO (Executive Branch) would be telling the Judiciary to change its mind.
March 16, 2005 04:02 PM US Eastern Timezone eBay Statement on U.S. Court of Appeals Ruling in MercExchange Case
SAN JOSE, Calif.–(BUSINESS WIRE)–March 16, 2005–eBay (Nasdaq:EBAY) is pleased with today’s decision by the U.S. Court of Appeals that invalidates one of MercExchange’s patents, and as a result, throws out all the related damages. Looking forward, we believe that any injunction that might be issued by the District Court with respect to the other patent will not have an impact on our business because of changes we have made following the District Court’s original verdict. The U.S. Patent and Trademark Office is actively reexamining all of MercExchange’s patents, having found that substantial questions exist regarding the validity of MercExchange’s claims. The Patent and Trademark office has already initially rejected all of the claims of one of MercExchange’s patents. We are confident in our position against MercExchange and do not believe that these matters will have any impact on our business.
Sparton, a military contractor, sued the U.S. government to recover money under 28 U.S.C. Section 1498(a) for unlicensed use of its patented inventions by the U.S. government. The U.S. Claims Court has jurisdiction over this type of claim and held that Sparton’s two patents were invalid because they were offered for sale more than one year before the patents were filed. Specifically, the Claims Court found that an engineering proposal submitted by Sparton to the Navy created the bar.
On apppeal, the Federal Circuit panel (Archer) explained that, although "the Supreme Court has not explained what is necessary for a "commercial offer for sale," we have held that two elements are necessary. Namely, a court must find that (1) there was a "commercial offer"; and (2) that offer was for the patented invention."
Sparton argued that the proposal that they submitted was not an offer for the patented invention, and thus, could not present an on-sale bar. Both sides agreed that the proposal did not describe the complete patented invention. However, the lower court had construed the proposal using standard contract law to determine that the proposal/offer would also include the patented invention.
The Federal Circuit agreed with the patentee, finding that the claim’s court’s "result is illogical. . . . With no conception of an invention, there cannot be an offer for sale or a sale of that invention."
Evident sued Church & Dwight for infringement of its licensed technology covering toothpaste. The patent owner, Peroxydent, was joined to the lawsuit early-on through a counterclaim by Church & Dwight. After a bench trial, the district court found that the inventors had withheld material references from the PTO with intent to deceive. As a result, the patent was unenforceable due to inequitable conduct. This holding was affirmed without opinion. Evident Corp. v. Church & Dwight Co., Inc., 78 Fed. Appx. 113 (Fed. Cir. Oct. 9, 2003). The district court also determined that the case was exceptional and awarded almost $1.3 million to Church & Dwight for attorney fees and expenses. Evident & Peroxydent were found jointly liable for the fees — these fees are the subject of the appeal.
On appeal, Peroxydent and Evident argue that Evident had no standing to sue in the first place, and thus, that the court did not have jurisdiction to find attorney fees.
In effect, Evident and Peroxydent, being on the losing side of both their own patent infringement claim and an opposing claim for attorney fees, now appear to seek escape from the judgment by arguing that Evident lacked standing in the first place and that the original lawsuit was improperly filed.
The court found that the defendants’ counterclaim that brought Peroxydent into the suit eliminated any standing problem.
Nonetheless, regardless whether Peroxydent was brought into the suit by the accused or the licensee, there is no standing problem. . . . Accordingly, we conclude that Peroxydent’s presence in the litigation as a third-party defendant fully satisfied any standing requirements.
Each month I post a note discussing the academic side of patent law. My on-line sources for material are the SSRN electronic library, a few hard copy journals, and several more that are freely available on-line. Most of my material, however, comes from articles directly e-mailed to me from professors and law review editors. Please feel free to e-mail articles for February’s edition. (Include information on where the article is being published). — DDC
1) In a forthcoming paper, Professor Joseph Miller provides a new solution for making claim construction more predictable. His idea is to require that patentees provide certain additional disclosures up-front — Disclosures that will appear in express statements on the face of the patent itself.
Four additional patentee disclosures: (a) the field of art to which the claimed invention pertains; (b) all problems that the claimed invention helps solve; (c) a lexicon of all claim terms to which the applicant gives a meaning other than its accustomed meaning to people having ordinary skill in the pertinent art; and (d) a list of preferred objective reference sources, such as technical treatises and dictionaries (general or specialized), to which an interested reader should refer to learn about the ordinary meaning of the remaining claim terms to a person having ordinary skill in the art. [SSRN Link]
According to Miller’s approach, in any subsequent claim construction process, whether for licensing, design-around, or litigation purposes, parties would have the benefit of patents enriched with this new information. The paper will come out in March in the Lewis & Clark Law Review.
2) I just found out that an old college friend is quickly becoming a leader in the area of Patent-Antitrust law. In the recent Issue of the Richmond Journal of Law & Technology, Aaron Rabinowitz writes on Antitrust Liability for Refusals to Deal in Patented Goods. The article highlights the circuit split between the Ninth Circuit and the Federal Circuit over whether patent holders must have a business reason for refusing to sell or license patented products. In Kodak II, 125 F.3d 1195 (9th. Cir. 1997), the California based appeals court determined "that a patentee who refuses to license his patented invention to others without legitimate business justifications for doing so has violated antitrust law." However, CSU v. Xerox, 203 F.3d 1322 (Fed. Cir. 2000), the Federal Circuit held that a patentee may refuse to license or sell a patented invention without violation of the patent laws, regardless of his business justification.
3) Bill Burgess, a 3L at Penn has written an interesting comment on the "Failed Promise of Cybor" published in the UPenn Law Review.In Cybor, the Federal Circuit held that claim construction is a matter of law that is reviewed de novo by the Appellate Court. Bill makes the arguments that (i) the ‘bright-line rule’ of Cybor has resulted in less rather than more consistency in how claims are construed and (ii) Cybor is actually inconsistent with the Supreme Court’s Markman decision.
The Federal Acquisition Regulation (FAR) provides a uniform policy for acquisition of supplies and services by U.S. federal government agencies. The FAR is is like the tax code in that carelessness is dangerous. One common point of carelessness concerns intellectual property rights. Companies have inadvertently given the government licenses in source code and inventions because they did not conduct their business in accordance with the regulations. In a recent presentation, Robert Cogan of Nath & Associates laid out several important points on the topic. [PPT].
The most common avoidable consequences of failing to follow the FAR include:
Having your proprietary notices on technical proposals ignored so that the government may publish them without violation of statute;
Inadvertently granting the government a license in an invention or in computer source code or object code; and
Allowing the government to procure products from competitors using your technical information.
Although it is important to maintain a good relationship with contracting officers, it is your responsibility to ‘say no’ to contract clauses that would result in a loss of your intellectual property.
Independent Ink v. Illinois Tool Works (Fed. Cir. 2005).
by Deana Larkin
Trident, a wholly-owned subsidiary of Illinois Tool Works, is a manufacturer of printheads and owns U.S. Patent No. 5,343,226 covering the technology.The ‘226 patent discloses an ink jet device and a supply system with a hand actuated peristaltic pump.Trident also manufactures ink for use with the patented printheads.Although the ink is not protected by any of Trident’s patents, their standard license agreements grant the right to “manufacture, use and sell… ink jet printing devices…” to other printer manufacturers only “when used in combination with ink and ink supply systems supplied by Trident.”
Independent Ink also manufactures ink useable in Trident’s patented printheads.Independent filed suit in the Central District of California against Trident and Illinois Tool Works alleging, among other things, an illegal tying arrangement in violation of section 1 of the Sherman Act. The district court, however, dismissed the case on summary judgment.
On appeal, the Federal Circuit reverses and remands the district court’s grant of summary judgment in favor of Trident on the tying claim.
According to the Appellate Court, Trident’s licenses are “explicit tying agreement[s]” because the sale of a patented product is conditioned on the sale of an unpatented one. Although the district court required affirmative proof of market power from the plaintiff, the Federal Circuit reiterated that the Supreme Court has clearly established a presumption of market power unique to patent and copyright tying cases, it holds that this presumption is rebuttable.
“Once the plaintiff establishes a patent tying agreement, it is the defendant’s burden to rebut the presumption of market power and consequent illegality that arises from patent tying.”
Rebuttal evidence requires expert testimony or “credible economic evidence of the cross-elasticity of demand, the area of effective competition, or other evidence of lack of market power.”
Furthermore, the Court admonishes the district court for not following clearly established Supreme Court precedent and for dismissing the High Court’s holdings as “vintage.”Commenting that it may be time to abandon the doctrine, a significant portion of the opinion emphasizes that it is up to the Supreme Court or Congress to expressly overrule its own precedent — this prerogative does not lie with the district courts.
Note: Deana Larkin is an attorney at the law firm McDonnell Boehnen Hulbert & Berghoff LLP in Chicago with a background in biotechnology. Ms. Larkin received a PhD in biochemistry from the University of Houston where her research concerned RNA-Protein interactions. [Brief Bio]
Commissariat a L’Energie Atomique (CEA) v. Chi Mei OptoElectronics (CMO) (Fed. Cir. 2005).
Plaintiff CEA is a French governmental agency that develops new technologies for sale and license to the private sector for commercial use. One such technology is their design for liquid crystal display (LCD) technology used for flat panel monitors.
Defendant CMO is a Taiwanese company and is one of the largest manufacturers of LCD monitors in the world. CMO serves as an original equipment manufacturer (OEM) for Dell and other companies.
Early on in the litigation, the Delaware district court dismissed CEA’s suit for lack of personal jurisdiction over CMO. On appeal, the Federal Circuit vacated the dismissal.
Specifically, the appellate panel found that the trial court had erred in denying CEA’s request for discovery on the issue of personal jurisdiction. According to the Court, CEA had established at least a prima facie case that the court had personal jurisdiction over the Defendant — and thus should be entitled to further discovery.
Indeed, CEA has gone beyond factual allegations, and has already made a prima facie case for CMO’s use of an established distribution network that likely results in substantial sales of its products in Delaware. As we have discussed, this showing likely satisfies the standard set forth by Justice Brennan in Asahi, of the "regular and anticipated flow of products from manufacture to distribution to retail sale." However, CEA is entitled to jurisdictional discovery to determine whether it can satisfy Justice O’Connor’s more restrictive version of the stream of commerce theory.
VACATED AND REMANDED
NOTE: This is the second case in a row where the Federal Circuit has reversed findings of no personal jurisdiction. The last case was Pedre Promotional.
Supreme Court Expected to Determine Whether Early Drug Research Necessary for FDA Approval Can Constitute Patent Infringement.
Merck v. Integra LifeSciences, U.S. Supreme Court (Case No. 03-1237).
The appeal to the Supreme Court questions the limits of the safe harbor statute (35 USC 271(e)(1)) that permits a drug manufacturer to perform experiments needed to obtain FDA approval of their drugs without incurring liability for patent infringement, even if their activities infringe other’s patent rights.
Under the Fold: The Drug Price Competition and Patent Term Extension Act (Hatch-Waxman) created a safe harbor that permits drug manufacturers to perform the experiments needed to obtain FDA approval of their drugs without incurring liability for patent infringement, even if their activities infringe others patent rights.
However, the statute, codified at 35 USC § 271(e)(1), was limited by a 2003 decision by the Court of Appeals for the Federal Circuit. The Federal Circuit affirmed a lower court’s finding that the safe harbor against patent infringement does not apply to pre-clinical activities to identify and develop new drugs that will eventually be subject to FDA approval — and thus, that Merck was liable to Integra for patent infringement.
The Case: Integra alleged that Merck and Scripps infringed patents owned by Integra relating to peptides involved in interactions between cell surfaces and the extracellular matrix. Under contract from Merck, Scripps identified several potential anti-tumor peptide candidates and selected the most promising peptide by conducting in vivo and in vitro experiments to evaluate the specificity, efficacy, and toxicity of the peptide candidates for various diseases. Scripps also performed tests to assess the histopathology, toxicology, circulation, diffusion, plasma half-life, and proper mode of administering of the peptides candidates.
The Appeals Court held that these activities did not fall under the safe harbor (§ 271(e)(1)) because they were not done "solely for purposes reasonably related to the development and submission of information" to the FDA.
"the focus of the entire exemption is the provision of information to the FDA . . . [a]ctivities that do not directly produce information for the FDA are already straining the relationship to the central purpose of the safe harbor." (CAFC Opinion).
"Expansion of § 271(e)(1) to include the Scripps-Merck activities would effectively vitiate the exclusive rights of patentees owning biotechnology tool patents."
Supreme Court:
Merck has now appealed the case to the Supreme Court of the United States, petitioning the High Court to hear the question:
Under 35 U.S.C. 271(e)(1), it is generally not an act of infringement to use a patented invention “solely for uses reasonably related to the development and submission of information under a Federal law” regulating the manufacture, use, or sale of drugs. The question presented is whether the court of appeals erred in limiting that exemption to clinical studies designed to provide information for Food and Drug Administration approval of a new drug.
On request from the Court, the Solicitor General of the U.S. submitted the Government’s view that the case should be heard. The Government brief makes two major points, one legal and the other social:
Gov’t Brief: The decision of the court of appeals reflects an incorrect view of the law, and is likely to restrict significantly the development of new drugs. Fairly read, the decision below holds that “pre-clinical” research regarding a potential new drug is not protected by the FDA exemption because that exemption is limited to “clinical” research necessary to obtain ultimate FDA approval of a new drug. That holding is inconsistent with the text of the FDA exemption, reflects a mistaken and unduly narrow view of the types of information relevant to the FDA’s two-step process for evaluating potential new drugs, and is in tension with this Court’s decision in Eli Lilly & Co. v. Medtronic, Inc., 496 U.S. 661 (1990). Moreover, the court of appeals’ decision poses a direct and substantial threat to new drug research by dramatically narrowing the scope of protections enacted by Congress in Section 271(e)(1). Although this case is not an ideal vehicle for considering the issue, see p. 18, infra, the potential impact of the court of appeals’ legal conclusion is sufficiently important that the petition for a writ of certiorari should be granted.
Eli Lilly and Co. was also granted leave to file a brief as amicus curiae in the case. Justice O’Connor and Justice Breyer took no part in the consideration or decision of the petition for writ of cert. It is reported that both Justices own stock in Merck.
Academics Take Sides: Judge Richard Posner (In Lessig Blog) has advocated the creation of a fair-use exception for patents on research tools:
Link: For example, a generic drug manufacturer is permitted to use the patented drug to demonstrate that its generic equivalent is indeed therapeutically equivalent (the "testing" exception created by the Hatch-Waxman Act). More broadly, an inventor can use the information in the patent to try to invent around the patent. And Landes and I advocate an expansion of the patent fair-use principle to allow scientists to use patented research tools (such as the oncomouse) without license–provided the scientists aren’t allowed to use the tools to produce their own patented products!
In response, Lichtman has noted that Judge Posner’s proposal "is problematic for the simple reason that, often, the key market for research tools is to sell those tools to other researchers. If a researcher’s use of patented research tool is fair use, that would significantly degrade the incentive to create those research tools inthe first place. Moreover, even if your approach works, it is in sharp conflict with the Bayh-Dole instinct that society might very well be better off in a world where academic researchers patent their work. As you know, that legislation was passed in response to evidence that university breakthroughts were sitting on the shelves both because (a) they could not be owned exclusively under old NIH rules; and (b) universities had too little incentive to bring their work to the attention of industry."
Lamle is the inventor of Farook, a game similar to Tic Tac Toe. In 1997 Lamle and Mattel agreed on an exclusive license. The contract terms were discussed via e-mail but a licensing agreement was never signed by Mattel.
After a pre-toy fair, Mattel concluded that it did not wish to license Farook. Mattel notified Lamle of its decision by fax sent to Lamle at the office of a business associate. The fax arrived while Lamle was present at his associates office attending a meeting with potential investors.
Lamle sued for breach of contract and patent infringement. However, the district court granted summary judgment to Mattel on all claims. "Its order and judgment listed six grounds for its decision, each being one sentence long, with no citations to any case or to the record, and providing no explanation as to the facts or law upon which it was relying." Specifically, the district court found that the agreement did not include all the essential terms and was additionally barred by the statute of frauds.
The federal circuit disagreed, finding that there were outstanding questions that could not be determined on summary judgment. Applying California law, the appellate court first held that the the existence of an oral agreement depended upon the intention of the parties — a subject that was not properly addressed on summary judgment.
The question as to whether an oral agreement, including all the essential terms and conditions thereof, which according to the mutual understanding of the parties is to be subsequently reduced to writing, shall take effect forthwith as a completed contract depends on the intention of the parties, to be determined by the surrounding facts and circumstances of a particular case.
Then, the e-mail outlining the terms of the deal was sufficient to overcome the Statute of Frauds that requires contracts that could not be performed within one year of their making to be contained within a written agreement.
Vacated and Remanded
In Dissent, Judge Newman could not find an oral agreement because the parties had specifically agreed that "any obligation would be contained in a formal written agreement."
As a matter of law, there can have been no patent license and manufacturing and sales agreement between Mattel and Mr. Lamle, when no such license and no manufacturing and sales agreement were ever entered into. Thus I must, respectfully, dissent from the court’s decision, for it is founded on incorrect principles of law.
eBay v. MercExchange (on petition for certiorari)
Schinzing v. Mid-States Stainless (8th Cir. 2005)
The Supreme Court has 
Showmaker v. Advanta USA (Fed. Cir. 2005)
The Berkeley IP weblog has an 
MedImmune v. Centocor (Fed. Cir. 2005). 
The first Patently-O Patent Prosecution TipCast has just been released. The TipCast series is an audio lecture series that is intended to provide helpful hints and information to patent attorneys and agents. TipCast No. 1 provides a tip relating to revival of abandoned applications. 
