Tag Archives: Marking

Proposed Changes to Federal Circuit Rules

By Jason Rantanen

Earlier this month, the Federal Circuit released a set of proposed amendments to the Federal Circuit Rules of Practice and Procedure that completely overhaul the existing rules.   These changes are extensive, with the summary alone filling six pages.  The bulk of the proposed amendments focus on the shift from paper to electronic filing, with changes in both terminology and procedure.   Other notes:

  • The proposed rules revise the court’s approach to material deemed confidential.  Parties will be able to designate up to 15 words in a brief “confidential” without needing to file a motion.  More lengthy redactions require a motion “establishing that the additional confidentiality markings are appropriate and necessary pursuant to a statute, administrative regulation, or court rule.”   (Rules 11(c), 17(e), 27(m), 28(d) and 30(h)).
  • Several of the proposed amendments add language relating to the Certificate of Interest, emphasizing the requirement that a Certificate of Interest be included when filing all motions, including motions for a stay or injunction pending appeal (Proposed Rules 8(a)(4) and 26.1).  In addition, the proposed amendments add more language requiring that Certificates be amended promptly when information changes.  (Rule 26.1 and 47.4(b)). As someone pointed out, though, the Federal Circuit Rules already require a Certificate of Interest to be filed with each motion, petition, or response.  See Fed. Cir. R. 47.4.  Rule 47.4(c) also requires that if any of the information changes, the party must file an amended certificate within 7 days of the change.  Does anyone know why all the redundant language is being added in Rules 8(a)(4), 26.1 and 47?

The court’s own summary of the proposed changes is available here: summary_of_proposed_rule_changes_dec_2015, with a redlined version of the actual edits available here: federal_circuit_rules_public_notice_dec_2015.  Given their scale, it’s difficult to get a sense of the changes from the summary alone.  I encourage folks who regularly practice before the court to read through the changes carefully, both for substance and areas of potential unintended error.  If there are any areas of potential ambiguity or overcomplexity, now is the time to point them out.  Comments on any of the proposed changes are due to the court by January 4.

In addition, the court’s website notes that “Reviewers may wish to note that the recent amendments to Rule 28(a)(12) and 28(f), and Rule 30(b)(4)(E), relating to the pagination and marking of appendices and supplemental appendices are final with an effective date of January 4, 2016.”  These rules apply to all appeals docketed on or after Monday, January 4, 2016.

Pending Supreme Court Patent Cases (Update)

by Dennis Crouch

As of December 14, two petitions for certiorari have been granted — both covering the same topic of enhanced damages, a.k.a. willfulness. Another 17 petitions remain pending, a few of which have potential.

  1. Petition Granted:
  1. Petition for Writ of Certiorari Pending:
  • Design Patents: Samsung Electronics Co. v. Apple Inc., No 15-___ (design patent scope and damages calculation)(New Petition)
  • InducementLife Technologies Corporation, et al. v. Promega Corporation, No. 14-1538 (whether an entity can “induce itself” under 271(f)(1))(CVSG)
  • InducementMedtronic Sofamor Danek USA, Inc., et al. v. NuVasive, Inc., No. 15-85 (Commilre-hash – mens rea requirement for inducement)
  • Inducement: Arthrex, Inc. v. Smith & Nephew, Inc., et al., No. 15-559 (Commilre-hash – if actions were “not objectively unreasonable” can they constitute inducement?)
  • Post Grant AdminCuozzo Speed Technologies, LLC v. Michelle K. Lee, No. 15-446 (BRI construction in IPRs; institution decisions unreviewable)
  • Post Grant AdminInterval Licensing LLC v. Michelle K. Lee, No. 15-716 (Can the Patent and Trademark Office appropriately apply the “broadest reasonable interpretation” standard in construing patent claims in post-grant validity challenges?)
  • Preclusion or JurisdictionAlexsam, Inc. v. The Gap, Inc., No. 15-736 (appellate jurisdiction over patents that were dropped from case pre-trial) (New Petition)
  • Preclusion or JurisdictionSpeedTrack, Inc. v. Office Depot, Inc. et al., No. 15-461 (Kesslerdoctrine – enhanced preclusion)
  • Preclusion or Jurisdiction: ePlus, Inc. v. Lawson Software, Inc., No. 15-639 (what happens with a finally-determined permanent injunction after PTO cancels the patent claim?)
  • Preclusion or Jurisdiction: Alps South, LLC v. The Ohio Willow Wood Company, No. 15-567 (If patent ownership is fixed after the filing of a complaint, can jurisdiction be cured by a supplemental complaint)
  • Preclusion or Jurisdiction: Biogen MA, Inc. v. Japanese Foundation for Cancer Research, et al., No. 15-607 (Whether AIA eliminated federal district courts’ jurisdiction over patent interference actions under 35 U.S.C. § 146.)
  • Eligibility Challenges: Retirement Capital Access Management Company, LLC v. U.S. Bancorp, et al., No. 15-591 (Whether subject matter eligibility under 35 U.S.C. § 101 is a ground specified as a condition for patentability under 35 U.S.C. § 282(b)(2))
  • Claim Construction: Media Rights Technologies, Inc. v. Capitol One Financial Corporation, et al., No. 15-725 (Claim Construction: whether there a strong presumption against construing terms as subject to 35 U.S.C. § 112p6 that do not recite the term “means.”)
  • Patent Term Adjustment Dispute: Daiichi Sankyo Company, Ltd. v. Michelle K. Lee, No. 15-652 (Patent Term Adjustment – whether the 180 day deadline applies; could bleed into admin law issues)
  • Damages: STC, Inc. v. Global Traffic Technologies, No. 15-592 (Whether marking the packaging of a patented article with patent notification satisfies the marking provision of 35 U.S.C. § 287(a) where the patented article itself is undisputedly capable of being marked.)
  • Damages: Innovention Toys, LLC v. MGA Entertainment, Inc., et al., No. 15-635 (Stryker/Halo follow-on)
  • Soon to be DeniedArunachalam v. JPMorgan Chase & Co., No. 15-691 (unclear)
  • Soon to be DeniedMorgan, et al. v. Global Traffic Technologies LLC, No. 15-602 (unclear)

Pending Supreme Court Patent Cases

by Dennis Crouch

1.   Petition Granted:

2.   Petition for Writ of Certiorari Pending:

  • Life Technologies Corporation, et al. v. Promega Corporation, No. 14-1538 (Can an entity “induce itself” under 271(f)(1)?)(CVSG)
  • Allvoice Developments US, LLC v. Microsoft Corp., No. 15-538 (“Do patent claims addressed directly to software that is inherently in a computer-readable medium qualify as a ‘manufacture’ under 35 U.S.C. § 101 without express recitation of the medium?”)
  • OIP Technologies, Inc. v. Amazon.com, Inc., No. 15-642 (Do the rules of civil procedure apply when defendant raises a Section 101 eligibility “defense” in a motion-to-dismiss for failure to state a claim upon which relief can be granted?)
  • Fivetech Technology Inc. v. Southco, Inc., No. 15-381 (What is the proper role of intrinsic evidence in claim construction?)
  • Medtronic Sofamor Danek USA, Inc., et al. v. NuVasive, Inc., No. 15-85 (Commil re-hash – mens rea requirement for inducement)
  • SpeedTrack, Inc. v. Office Depot, Inc. et al., No. 15-461 (Kessler doctrine – enhanced preclusion)
  • Cuozzo Speed Technologies, LLC v. Michelle K. Lee, No. 15-446 (BRI construction in IPRs; institution decisions unreviewable).
  • Arthrex, Inc. v. Smith & Nephew, Inc., et al., No. 15-559 (Commil re-hash – if actions were “not objectively unreasonable” can they constitute inducement?)
  • Alps South, LLC v. The Ohio Willow Wood Company, No. 15-567 (If patent ownership is fixed after the filing of a complaint, can jurisdiction be cured by a supplemental complaint)
  • STC, Inc. v. Global Traffic Technologies, No. 15-592 (Whether marking the packaging of a patented article with patent notification satisfies the marking provision of 35 U.S.C. § 287(a) where the patented article itself is undisputedly capable of being marked.)
  • Retirement Capital Access Management Company, LLC v. U.S. Bancorp, et al., No. 15-591 (Whether subject matter eligibility under 35 U.S.C. § 101 is a ground specified as a condition for patentability under 35 U.S.C. § 282(b)(2))
  • Biogen MA, Inc. v. Japanese Foundation for Cancer Research, et al., No. 15-607 (Whether AIA eliminated federal district courts’ jurisdiction over patent interference actions under 35 U.S.C. § 146.)
  • ePlus, Inc. v. Lawson Software, Inc., No. 15-639 (what happens with a finally-determined permanent injunction after PTO cancels the patent claim?)
  • Interval Licensing LLC v. Michelle K. Lee, No. 15-716 (Can the Patent and Trademark Office appropriately apply the “broadest reasonable interpretation” standard in construing patent claims in post-grant validity challenges?)
  • Media Rights Technologies, Inc. v. Capitol One Financial Corporation, et al., No. 15-725 (Claim Construction: whether there a strong presumption against construing terms as subject to 35 U.S.C. § 112p6 that do not recite the term “means.”)
  • Daiichi Sankyo Company, Ltd. v. Michelle K. Lee, No. 15-652 (Patent Term Adjustment – whether the 180 day deadline applies)
  • Innovention Toys, LLC v. MGA Entertainment, Inc., et al., No. 15-635 (Stryker/Halo follow-on)
  • Morgan, et al. v. Global Traffic Technologies LLC, No. 15-602 (unclear)
  • Arunachalam v. JPMorgan Chase & Co., No. 15-691 (unclear)


Why We Need a Federal Civil Claim for Trade Secret Misappropriation

Guest Post by James Pooley, former Deputy Director General of the World Intellectual Property Organization.  Pooley makes his full argument in a forthcoming George Mason Law Review article available here.

Trade secret theft has been a federal crime since 1996, covered by the Economic Espionage Act (“EEA”). But civil misappropriation claims remain limited to state court filings under common law or local variants of the Uniform Trade Secrets Act (“UTSA”). Calls for federal jurisdiction have grown with the increasing importance of information as a business asset and with the emergence of technology that makes theft of these assets almost infinitely easier. Recent examples involving international actors have galvanized the business community to request a straightforward solution: amend the EEA to provide a federal option for private claims.

Several bills were introduced in the 113th Congress to accomplish this, and to authorize provisional remedies for seizure of relevant property to prevent secret technology from being transferred out of the jurisdiction. The 2014 legislation was not acted on before Congress adjourned.  A revised version is pending now, the Defend Trade Secrets Act of 2015 (“DTSA”), reflected in identical House (H.R.3326) and Senate (S.1890) bills.

The approach of the DTSA is fairly simple: use existing language of the EEA where appropriate, such as the definition of a trade secret, and where other language is required to define the civil aspects, such as misappropriation and damages, use language taken from the UTSA. Indeed, the only meaningful departure from the UTSA is to add a section allowing ex parte seizures of the misappropriated property. But even that portion draws from established provisions of the Lanham Act, tightened up considerably from the 2014 bills in order to discourage abuse.

The DTSA has received virtually unanimous support from industry, and also enjoys unusually bipartisan political sponsorship, with 65 cosponsors in the House (45 Republican and 20 Democrat) and ten in the Senate (six Republican and four Democrat). The only organized opposition has come from a group of law professors who published an “open letter” in 2014 criticizing the previous draft legislation, and who have recently released another letter describing their concerns. Mainly, they argue that we don’t need federal legislation because state laws are uniform enough; that the seizure provisions are too broad; and that the DTSA would limit labor mobility by approving the so-called “inevitable disclosure doctrine.”

As I will explain below, on each of these points the professors are wrong, misled by incorrect assumptions or unjustified speculation. Indeed, in a recent journal article two of them have predicted that the legislation would unleash a never-seen-before class of commercial predator, the “trade secret troll,” who they claim would “roam free in a confused and unsettled environment, threatening or initiating lawsuits for the sole purpose of exacting settlement payments, just like patent trolls.”

This apocalyptic scenario is not only fanciful; it is absurd. While patents are exclusive rights that operate against the world, trade secrets provide no exclusivity and depend on a confidential relationship. The image of a “trade secret troll” may help draw attention to a political argument, but it is a myth, and deserves no serious consideration.

The reality of this legislation is simple and compelling. Giving trade secret owners the option to sue in federal court would fill a critical gap in effective enforcement of private rights against cross-border misappropriation that in the digital age has become too stealthy and quick to be dealt with predictably in state courts. The bills would accomplish this by effecting only very modest changes, relying heavily on existing laws and rules. The seizure provisions in particular are so narrowly drawn that only the most clearly aggrieved plaintiffs would risk invoking the procedure. Having no pre-emptive effect, the federal law would leave in place all relevant state laws and policies, including those relating to mobility of labor.

U.S. trade secret law emerged in the nineteenth century to accommodate the shift from agrarian and cottage production to larger-scale industry, in which the secrets of production would have to be shared with workers or with business partners. Court decisions sought to enforce the confidence placed in those who were given access to valuable information about machines, recipes and processes. At the core of every case was a confidential relationship. Protecting this trust, the courts explained, was a simple matter of enforcing morality in the marketplace.

The common law origins of trade secrets – in contrast to the federal patent statute – meant that the majority of cases were heard in state court. Even when a federal court took diversity or supplemental jurisdiction over a trade secret dispute, it applied the law of the state in which it sat. And at first there was little variation, with most states looking to the Restatement of Torts § 757 as a guide. But as industrial development continued through the middle of the twentieth century, legal foundations shifted, and the reporters of the Second Restatement dropped the subject completely.

Meanwhile, a school of thought had developed among commentators that trade secret law should be abolished altogether because it was inconsistent with, and therefore preempted by, federal patent law. This argument was famously rejected by the U.S. Supreme Court in Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470 (1974). Two important public interests, the Court explained, were served by trade secret law: the “maintenance of standards of commercial ethics and the encouragement of invention.” Without guaranteed secrecy, businesses would be left to expensive self-help security measures that would disadvantage smaller competitors and discourage dissemination of information through sharing. And as a practical matter, there was no conflict between the two systems because they operate so differently: patent law is strong, providing an exclusive right “against the world;” while trade secret rights are “far weaker,” because they do not protect against reverse engineering or independent development.

With the Second Restatement’s decision not to treat the issue, some were concerned that trade secret law would become too fractured and inconsistent for companies which had been increasingly doing business across state lines. Therefore, in 1979 the National Conference of Commissioners on Uniform State Laws issued the first of two versions of the UTSA, proposing harmonized rules on establishing and enforcing trade secret rights. Measured by adoption rates, the UTSA has been a great success, with 47 of the 50 states so far embracing it (New York is the leading holdout). However, measured by its objective of uniformity, the law has been a disappointment. Unlike the UCC, the UTSA has frequently been enacted with customized features.

A few examples will help illustrate the scope of the problem. California dropped the language requiring that a trade secret be not “readily ascertainable,” with the result that the defendant is required to specially plead that circumstance as an affirmative defense. Illinois also eliminated the “readily ascertainable” language, and it prohibits royalty injunction orders, sets a different limitations period and allows permanent injunctions. Idaho requires that computer programs carry a “copyright or other proprietary or confidential marking” to qualify for protection.  Georgia limits protection of customer lists to physical embodiments, in effect allowing employees to appropriate such information in (human) memory. South Carolina’s version of the UTSA requires a court hearing an injunction request to consider “average rate of business growth” in determining a head start period, and prescribes very particular rules for discovery of trade secret information, even for local discovery in aid of an action pending in another jurisdiction.

When Congress considered the EEA in 1996, there was some discussion of adding a civil right of action, but this was deemed impractical in view of the need for swift legislative action. In the years since its enactment, the EEA has had a mixed record of success. As reported by one veteran prosecutor, the average of about eight prosecutions per year is a “languid pace” that probably has done little to create a deterrent effect. In part this may be due to a reluctance of victims to bring cases to the prosecutor, either because of a loss of control or Fifth Amendment effects on civil claims, or it may be due to a lack of resources or interest within the various offices of the U.S. Attorneys, who have discretion whether to accept qualifying cases.

Calls for a federal trade secret law with a private right of action had already begun before the EEA was passed. After it became law, a number of scholars noted the anomaly and suggested that, because the national economy had become primarily knowledge-based, and because even with the UTSA state law was far from uniform, a federal civil law should be enacted. More recent commentary, while continuing to emphasize the drawbacks of variations in state law, also has pointed out the economic advantages of federalization, particularly for small businesses, which rely more heavily on secrecy than on patenting, as well as the procedural advantages for trade secret owners, including national service of process.

The highly-publicized cyberattacks of recent years have exposed not only the precarious security of personal financial and health information, but also the vulnerability of American corporate secrets. Thirty years ago information security consisted mainly of guarding the photocopier and watching who went in and out the front door. Now, with the Internet connected to millions of smartphones, and with electronic storage devices the size of a coin, information assets (which account for over 80% of the value of U.S. public companies) can be moved quickly and silently across state and international borders. In that context, existing procedures at the state level seem impossibly quaint. If a case in Illinois requires testimony of a witness in California, the plaintiff has to petition its home court to authorize a deposition, and then file an action in California based on the Illinois order, to secure the required subpoena. During the weeks or months of this process, the witness could easily have left the country, with the secrets in her pocket.

In other words, the time-critical nature of interstate and international misappropriation of valuable digitized data requires an immediate and sophisticated response mechanism, and neither state law nor the EEA criminal framework provides a satisfactory solution. Federal courts, however, can provide the necessary resource. First, they will be operating under a single, national standard for trade secret misappropriation and a transparent set of procedural rules, offering predictability and ease of use. Second, they will provide nationwide service of process and a unified approach to discovery, enabling quick action by trade secret owners even when confronted with actors in multiple jurisdictions. Third, as a result of their extensive experience with complex cross-border litigation involving intellectual property, they will be able to resolve ex parte matters fairly and jurisdictional issues quickly and efficiently. Fourth, their generally more predictable discovery procedures will serve the legitimate needs of trade secret plaintiffs, who typically must develop most of the facts to prove their case through defendants and third parties.

In this context, the objections raised by the law professors are not convincing. First, it is not fair to describe existing state law as “coherent,” “robust and uniform,” so that U.S. businesses already enjoy “a high level of predictability.” The rhetoric does not obscure the reality of a patchwork of differing standards and rules – in some ways more divergent than before enactment of the UTSA – that necessarily creates friction and inefficiency for companies with interstate operations.

Second, while admitting that the current language on ex parte seizure is “more limited in scope” than the 2014 legislation (for example, only property “necessary to prevent the propagation or dissemination of the trade secret” can be seized), the professors think this tightening is not enough and that the provision “may still result in significant harm.” No evidence is provided, but only speculation that mere invocation of the procedure might cause small businesses to “capitulate,” and that the “chilling effect on innovation and job growth . . . could be profound.” Again, the reality could hardly be more different. The DTSA is loaded with limitations making seizure very difficult to achieve, and with liabilities making it prohibitively expensive to be wrong in asking for it. In the unusual case where the plaintiff has no substantial basis for the claim, the defendant will simply file an opposition, the seizure will be dissolved, and the plaintiff will pay for the harm. Surely the benefits of the DTSA are worth that occasional risk.

Third, the professors assert that new language, added to the DTSA to ensure that mobility of labor is respected, embraces the so-called “inevitable disclosure doctrine,” which they view as the equivalent of a judge-made noncompetition agreement. In fact, that “doctrine” is nothing more than a method of analysis under the common-sense UTSA provision allowing injunctions against “threatened misappropriation.” This method has been applied thoughtfully in a majority of jurisdictions, resulting in a wide range of conditional remedies, and has only rarely been applied in a way that stops anyone from taking a new job.

The DTSA is sorely needed to fill a gap in remedies available to U.S. businesses that now operate in an information-based, globalized economy. This is one of those instances where federal structures are required to address a critical set of interstate and international problems. The DTSA has been carefully constructed to deter and punish abuse. Using well-established definitions and norms, it provides a choice to file a familiar claim in an effective forum. And there is absolutely no danger that enacting this statute will generate some new form of “troll” behavior to this point unknown in trade secret law.

= = = = = =

James Pooley was most recently Deputy Director General of the World Intellectual Property Organization in Geneva, where he was responsible for managing the international patent system. For 37 years before that he was a trial lawyer in California, handling primarily trade secret and patent disputes. He taught trade law and litigation as an adjunct professor at the University of California, Berkeley, and at Santa Clara University. He is the author of the treatise “Trade Secrets” (Law Journal Press, updated 2014) and a co-author of the Patent Case Management Judicial Guide (Federal Judicial Center 2009, 2015). His most recent business book is Secrets: Managing Information Assets in the Age of Cyberespionage (Verus Press 2015).  Mr. Pooley currently serves as Chairman of the Board of the National Inventors Hall of Fame.

Guest Post: Why the (Previously) Improving Economy Likely (Also) Reduced Patent Litigation Rates

Guest Post by Ted Sichelman, Professor of Law and Director of the Technology Entrepreneurship and Intellectual Property Clinic and Center for Intellectual Property Law & Markets at the University of San Diego School of Law, and Shawn Miller, Lecturer in Law and Teaching Fellow in Law, Science & Technology at Stanford Law School

As Patently-O has described in detail (e.g., here and here), patent litigation rates have been in flux over the last several years. First, in 2010, rates nominally went up because of false marking suits. Then, in 2011, following passage of the America Invents Act (AIA), patent litigation rates appeared to increase (and the media made much ado over this). Yet, the only thing that changed immediately after the AIA was how we counted patent litigation numbers because of new joinder rules. Indeed, the AIA’s joinder rules actually lowered total defendant counts a bit. Next came inter partes review (IPR) and covered business method (CBM) review, which appear to have substantially decreased litigation rates in 2013 and 2014. Then came Alice Corp. v. CLS Bank and its progeny, which some have claimed decreased litigation rates throughout 2014. And now rates seem to be back up in 2015—why, nobody is sure.

To further understand the drivers of patent litigation, Alan Marco (Chief Economist at the USPTO) and the two of us recently conducted the first rigorous study of the effects of the economy as a whole (the “macroeconomy”) on patent litigation rates over the period 1970-2009 (we stopped at 2009 to avoid the counting mess I just described). The study will be published this month in the Journal of Empirical Legal Studies (a draft is available here).

As background, we examined changes in the rates of total litigation, litigation per issued patent, and litigation per in-force patent. To do so, we used a new USPTO dataset that provides the most accurate numbers on total in-force patents by year gathered to date. Figure 1 below shows the number of in-force patents between 1971 and 2009 (the vertical bars represent periods of recession).

Figure 1

Figure 1. U.S. In-Force Patents (1971-2009) [from USPTO data].

Indeed, although many have noted that the litigation rates per issued patent have been fairly stable, Figure 2 below shows that the litigation rates per in-force patent have risen quite dramatically since the early- to mid-1990s (at least from 1970s rates—Ron Katznelson has argued that rates per in-force patent in the 1920s to the mid-1930s are fairly comparable to the recent rates, at least through the 2000s).

Figure 2

Figure 2. U.S. Patent Litigation Per In-Force Patent (1971-2009)

(Total Patent Litigation in Gold (with annual filings on left y-axis) and Litigation Per In-Force Patent in Blue (with annual values on right y-axis)).

We then performed numerous time-series regressions against important macroeconomic variables like GDP, R & D spending, interest rates, and related factors, controlling for in-force patents and other key variables. Our major findings (over the last 20-25 years) are as follows:

  • In economic upswings (i.e., increasing productivity, low interest rates, low economy-wide financial risk), patent litigation rates generally fall.
  • In recessions, whether rates rise or fall depends on the availability of credit.
    • When credit is freely available in a downturn, overall patent litigation rates generally rise.
    • However, when credit is scarce (like in the most recent recession), overall patent litigation rates generally fall.

We explain the first finding on a “substitution” theory—namely, when selling products and services is highly profitable, companies and investors are less concerned about earning revenue from patent litigation. We speculate that our second finding is driven by the increasing reliance by plaintiffs on external funding. Indeed, the availability of credit has only played a significant role in patent litigation rates since roughly the mid-1990s, when licensing-driven litigation began to rise—first by practicing entities such as IBM and Texas Instruments and, later, by non-practicing entities (NPEs).

Over the last five years, the mean U.S. real GDP growth rate has been about 2-3% per year. Ignoring other factors, and assuming our model applies on a going forward basis since 2009, this increase in productivity has very roughly amounted to a 6-9% decrease in annual patent litigation counts over the same period. In general, it is likely that a sizeable portion of the decrease in patent litigation rates over the last several years has been not merely due to the rise of IPRs and CBMs, and the issuance of Alice Corp. v. CLS Bank, but also to the economy as a whole. So the next time the economy worsens, if credit remains relatively available, all other factors equal, it is likely that patent litigation rates will rise significantly—not by a huge amount, but enough to notice. Whether the current increase in patent litigation is somehow related to a declining macroeconomy, only time will tell.

Please note that the views expressed herein solely express our personal views and do not express the views of the U.S. Patent & Trademark Office.


Circuit Check v. QXQ, Inc.: Analogous Art Doctrine

By Jason Rantanen

Circuit Check Inc. v. QXQ Inc. (Fed. Cir. 2015) Download Opinion
Panel: Louie, Dyk, Moore (author)

Although it shows up only occasionally in the Federal Circuit’s opinions, the analogous arts doctrine can play an important role in structuring and limiting obviousness determinations.  Here, it is a key component of the Federal Circuit’s reversal of the district judge’s grant of Judgment as a Matter of Law that the patents-in-suit were obvious.  An important limitation of this decision, of course, is that the consequence is to reinstate the jury verdict that the patent was not obvious.  Put another way, although the Federal Circuit uses the analogous arts doctrine to restrict the scope of obviousness here, the procedural posture of its review maintains   some degree of indeterminacy.

While obviousness determinations often invoke the hypothetical person having ordinary skill in the art sitting at a lab bench on which is arrayed every existing prior art reference, the analogous art doctrine functions to limit those references.   The basic elements are well established:

To be considered within the prior art for purposes of the obviousness analysis, a
reference must be analogous. Wang Labs., Inc. v. Toshiba Corp., 993 F.2d 858, 864 (Fed. Cir. 1993). Whether a reference is analogous art is a question of fact. Wyers v. Master Lock Co., 616 F.3d 1231, 1237 (Fed. Cir. 2010). Prior art is analogous if it is from the same field of endeavor or if it is reasonably pertinent to the particular problem the inventor is trying to solve. Id.

Here, there was no question that “the disputed prior art—rock carvings, engraved signage, and Prussian Blue—is not part of the field of circuit board testers and test figures.”  Slip Op. at 6.  Thus, the issue was whether the prior art “is reasonably pertinent to the particular problem solved by the inventor.”  The Federal Circuit concluded that a reasonable jury could  have found that it was not:

Although “familiar items may have obvious uses beyond their primary purposes,” KSR Int’l Co. v. Teleflex, Inc., 550 U.S. 398, 420 (2007), a reference is only reasonably pertinent when it “logically would have commended itself to an inventor’s attention in considering his problem,” In re Clay, 966 F.2d 656, 659 (Fed. Cir. 1992). The jury heard testimony that a person of ordinary skill in the art would not have thought about rock carvings, engraved signage, or Prussian Blue in considering how to mark interface plates. J.A. 1387–88, 1397, 1430–32, 1434, 1443–44, 1447. The jury was entitled to weigh this testimony, find that an ordinarily skilled artisan would not find that the disputed prior art “logically would have commended itself to an inventor’s attention,” and thus find the disputed prior art not analogous. See In re Clay, 966 F.2d at 659.

The district judge’s opinion also referenced the idea of keying a car, noting that “any vandal who has ‘keyed’ a car knows that stripping the paint with a key will result in
the underlying metal color showing through.”  Slip Op. at 4 (quoting district court).  But

Just because keying a car, for example, is within the common knowledge of humankind does not mean that keying a car is analogous art. An alleged infringer should not be able to transform all systems and methods within the common knowledge into analogous prior art simply by stating that anyone would have known of such a system or method. The question is not whether simple concepts such as rock carvings, engraved signage, or Prussian Blue dye are within the knowledge of lay people or even within the knowledge of a person of ordinary skill in the art. Rather, the question is whether an inventor would look to this particular art to solve the particular problem at hand. Here, Circuit Check put forward evidence that an inventor would not have considered the disputed prior art when trying to improve marking. It is not hard to arrive at that conclusion. Even though an inventor may be aware of rock carvings, it is not surprising that the inventor would not have looked to rock carvings to improve the process of painting small dots on interface plates for expensive circuit board testers. And, even though an inventor may work in an office with engraved signage, the inventor would not necessarily have considered using the techniques disclosed in engraved signage to solve the problem of marking circuit board tester interface plates.

The Federal Circuit also found substantial evidence to support the jury’s presumed finding of substantial differences between the prior art and the claims, and in support that objective considerations support nonobviousness.

Kessler Doctrine Cuts-Short Customer Lawsuit

SpeedTrack v. Office Depot (Fed. Cir. 2015)

In a civil procedure focused decision, the Federal Circuit has affirmed that SpeedTrack’s infringement action is precluded under an expanded version of the “Kessler doctrine” originally created by the Supreme Court in Kessler v. Eldred, 206 U.S. 285 (1907).  As interpreted by the Federal Circuit, Kessler generally operates to preclude “a patent infringement action against a customer of a seller who has previously prevailed against the patentee because of invalidity or noninfringement of the patent.” Quoting MGA, Inc. v. Gen. Motors Corp., 827 F.2d 729, 734 (Fed. Cir. 1987).  In Brain Life, the Federal Circuit affirmed that the Kessler Doctrine extends beyond ordinary issue preclusion — particularly holding that, since a first defendant won final judgment of non-infringement of some claims in the asserted patent, those non-infringing products are now immune from all claims of the patent.

The allegedly infringing Information Access Platform software in this case originated at Endeca Tech but is now owned by Oracle. The patentee sued a number of customers for infringement.  In the first case to be decided on the merits, the district court judge held that Walmart’s implementation of the IAP did not infringe the asserted claims (affirmed on appeal).   The question is whether this second case should not be cut-short based upon that final judgment.

In its decision, the Federal Circuit “reaffirmed the continued vitality” of the Kessler doctrine – and seemingly expanded the doctrine to find that a win by one customer on at least one claim applies to protect all customers against all claims of the asserted patent. “Given these circumstances, the judgment in the Walmart case ‘settled finally and everywhere’ that the IAP software does not infringe the [asserted] Patent.” (quoting Kessler).  The court also held (extending Kessler), that the doctrine is available to be invoked by a customer even if the manufacture has not intervened:

We conclude that the rationale underlying the Kessler doctrine supports permitting customers to assert it as a defense to infringement claims. Although the Supreme Court in Kessler focused exclusively on the manufacturer’s rights, and expressed no opinion on whether a customer could assert the defense, it recognized the fact that the manufacturer and customer’s interests are intertwined, remarking that ‘[n]o one wishes to buy anything if with it he must buy a law suit.’ Allowing customers to assert a Kessler defense is consistent with the Court’s goal of protecting the manufacturer’s right to sell an exonerated product free from interference or restraint. A manufacturer cannot sell freely if it has no customers who can buy freely. . . Because it is a right that attaches to the noninfringing product, and it is a right designed to protect the unencumbered sale of that product, SpeedTrack’s argument that the Kessler doctrine can only be invoked by a manufacturer must fail.

Why not simply res judicata? One reason is that the Federal Circuit has held that res judicata does not apply to preclude actions when the alleged infringement occurs subsequent-in-time to the original decision.

Good Faith but Mistaken Belief in Invalidity Combined with Good Faith but Mistaken Belief in Infringement…

At the biosimilars conference last week, everyone was puzzled about whether you could be liable for inducement if you had a good faith belief that a patent was invalid but the patent was valid.  That seems to be the law, right now at least, pending Commil.  (Dennis’s write up is here, along with a link to the CAFC decision.)  I think Commil’s wrong for a lot of reasons, but…

Let’s have some fun on Saturday morning and combine it with Frolow (Dennis’s post here.)  Suppose I mark a product as patented, but I’m wrong: although I in good faith marked it, it doesn’t meet the limitations of a claim.  (Obviously, this could occur for various reasons, including manufacturing tolerances.)

So, now let’s say someone is sued for inducing manufacture of the product.  If they’re wrong about infringement, under Frolow, the fact of marking, alone, is enough evidence to get to the jury on literal infringement.  Under Commil, it seems that a mistaken belief in invalidity is also enough to get to the jury, on non-infringement.

So, you could end up with someone (a) in fact not infringing (b) a valid patent, but liable for infringing it because she mistakenly thought she was infringing it.  You could also end up with someone (a) infringing by inducement (b) a valid patent, but not being liable for inducing infringement because she mistakenly thought the patent was invalid.


Which Side of the Mushroom did Alice Eat From?

If you don’t know the story, Alice meets up with a hookah-smoking caterpillar who tells her that if she eats out of one “side” of a (round) mushroom, she’ll get bigger, but out of the other side, she’ll get smaller.  He doesn’t fully explain to Alice what will happen to make her taller and shorter, and so here is a fun read:

This time Alice waited patiently until [the caterpillar] chose to speak again. In a minute or two the Caterpillar took the hookah out of its mouth and yawned once or twice, and shook itself. Then it got down off the mushroom, and crawled away in the grass, merely remarking as it went, ‘One side will make you grow taller, and the other side will make you grow shorter.’

‘One side of what? The other side of what?’ thought Alice to herself.

‘Of the mushroom,’ said the Caterpillar, just as if she had asked it aloud; and in another moment it was out of sight.

Alice remained looking thoughtfully at the mushroom for a minute, trying to make out which were the two sides of it; and as it was perfectly round, she found this a very difficult question. However, at last she stretched her arms round it as far as they would go, and broke off a bit of the edge with each hand.

‘And now which is which?’ she said to herself, and nibbled a little of the right-hand bit to try the effect: the next moment she felt a violent blow underneath her chin: it had struck her foot!

She was a good deal frightened by this very sudden change, but she felt that there was no time to be lost, as she was shrinking rapidly; so she set to work at once to eat some of the other bit. Her chin was pressed so closely against her foot, that there was hardly room to open her mouth; but she did it at last, and managed to swallow a morsel of the lefthand bit.

‘Come, my head’s free at last!’ said Alice in a tone of delight, which changed into alarm in another moment, when she found that her shoulders were nowhere to be found: all she could see, when she looked down, was an immense length of neck, which seemed to rise like a stalk out of a sea of green leaves that lay far below her.

Since law professors are, no doubt, going to beat the hell out of the Alice-in-Wonderland connection, I thought I’d stake my claim early. I’ve been reading a lot of law professor views, and several (if not many) think software patents are dead, or largely so.  Kappos, in contrast, thinks Alice ate out of the side that’s going to make software patents larger, or at least not shrink. His view is here.

My guess is Alice is going to cause us all to bang our heads, stub our toes, and wander through Wonderland for many years to come.


Fee Shifting as a Risk Management Exercise

By Dennis Crouch

I have written before that patent plaintiffs may welcome more fee-shifting so long as they are balanced in the way that they apply both to plaintiffs and defendants. In Octane Fitness, the Supreme Court followed this pathway – giving trial court judges discretionary authority to determine which cases are sufficiently “exceptional” to warrant an attorney fee award.

Because of the expense, unpredictability, and potential delays of patent litigation, patent assertion entities spend a considerable amount of time managing and hedging against downside risks. They do this by finding contingency fee attorneys and partners willing provide substantial up-front monies in order to fund an enforcement campaign. Still, in the wake of Octane Fitness, some assertion entities have at least informed their investors of potential risk. Spherix Inc, for instance, recently filed a quarterly report remarking on the topic:

Recent rulings also create an increased risk that if the Company is unsuccessful in litigation it could be responsible to pay the attorney’s fees and other costs of defendants by lowering the standard for legal fee shifting sought by defendants in patent cases.


Of course, for masters-of-risk-management, the increased risk of owing attorney fees upon losing a case is just another risk to be managed.

Athena Fee Shifting Protection (FSP): A new product being offered by Athena FSP is designed to help in this regard. In return for a percentage share of any eventual award or settlement, Athena FSP will promise to pay any attorney fee award lodged against their partner. For patent assertion entities, this model eliminates the downside risk of losing a fee shifting award by reducing the potential upside by a few points. (Note: the standard policy limit is $3m).

Although Athena FSP’s product looks like insurance, the company wants to ensure that its product is not regulated as insurance. One difficulty with insurance is that state regulators typically enforce a rule against providing insurance for intentional torts — and losing on an exceptional-case finding has many parallels to intentional torts. Because of the upside-only payout, a better analogy may be to think of Athena FSP as an investor who, instead of paying cash for shares, takes a percentage of revenue in return for co-signing the loan.

I asked Athena’s Director Ashley Keller whether there is some fear that judges will be more likely to award fees in their cases since the partnership with Athena FSP seems designed as a plan toward malfeasance. The well-considered retort is twofold: Athena’s approach is to conduct an extensive deep dive into the potential lawsuit as a way to vet the case and only partner in situations where an exceptional case award is quite unlikely. That vetting process can then serve as evidence that an outside entity was willing to put significant money at risk based upon its thorough analysis that the case was not exceptional. In other words, if this was an insurable risk then it shouldn’t be seen as exceptional.

Curbing Trolls by Reforming the Patent Marking Statute

Guest Post by François deVilliers, Chief IP Counsel, Plantronics, Inc.

35 U.S.C. 287(a) provides that constructive notice of a patent may be given by marking the patented article with the patent number, and that “In the event of failure so to mark, no damages shall be recovered by the patentee in any action for infringement, except on proof that the infringer was notified of the infringement and continued to infringe thereafter, in which event damages may be recovered only for infringement occurring after such notice.”

This section is badly structured – instead of affirmatively specifying the requirements for infringement damages to accrue, the drafters addressed this issue in the negative sense only after specifying first that an article may be marked. This of course begs the question, what if there is no article to mark?

There is no duty to mark or to give notice in lieu thereof “if there is no product to mark,” as held by the Supreme Court in Wine Railway Appliance Co. v. Enterprise Railway. Equipment Co. (1936)(interpreting the predecessor statute) and by the Federal Circuit in Texas Digital Systems., Inc. v. Telegenix, Inc. Damages accrue from the moment infringement of the issued patent commences, with a six year “statute of limitations” provided in 35 U.S.C. 286.

The logic is supposedly that “[t]wo kinds of notice are specified–one to the public by a visible mark, another by actual advice to the infringer. The second becomes necessary only when the first has not been given; and the first can only be given in connection with some fabricated article. Penalty for failure implies opportunity to perform.” (Wine Railway.)

This has led to the odd situation in which a company that is vigorously engaged in the rough and tumble of commerce with its patented product, benefiting consumers, creating jobs and increasing GDP, is in a less favorable position than an entity that does nothing. What was intended to be beneficial (notice is deemed to be given by marking) has advanced the interests of the patent troll over those of the operating company.

Trolls exploit this odd situation by waiting for industries or standards to become established, or for sales to accrue, before presenting their now-inflated licensing demands. Finding a previously ignored or forgotten asset, the clichéd “Rembrandt in the attic,” is similarly rewarded. “The patent might be expiring, but we’ve got ya going back six years, buddy!”

By the time this delayed claim is presented, the alleged infringer or standards-setting body has had no opportunity to mitigate the effect of the claim by adopting different technology or taking other steps. They’re stuck with the cost and disruption of trying to resolve a claim that might not have existed, or might have existed on a much smaller scale, had they received timely notification of the patent. Dubious claims are also more intimidating, merely because of the amount at issue. The alleged infringer is penalized by the delay, while the idle or covert or brand-new patent owner benefits.

Such exploitation also contravenes a fundamental goal of the marking statue, which is to protect against innocent infringement. Nike, Inc. v. Wal-Mart Stores, Inc. (Fed Cir 1998).

But, you may say, what of the inventor in the garage, who doesn’t have the needed capital or expertise to commercialize their patent? What if a company is exploiting the patented technology in a faraway city? Shouldn’t this inventor be entitled to fair compensation? Of course. But that is what the internet and its search engines are for. Times have changed – if someone is making money off a patented product, a patentee will be able to find it and send a notice letter. At a minimum, even if the patent is not directed to a findable product, it is easy enough to identify likely infringers or companies that might be interested in licensing the patent.

The onus should be on the patent owner to assert their rights – use it or lose it. A simple patent reform could affirmatively specify that damages only accrue after actual or constructive notice, and that constructive notice can be given by marking. If it is not possible to mark, then actual notice should be required. Patent numbers for method patents can be included on products produced by the method, on devices that practice the method, in documentation accompanying software that practices the method, or on websites or in apps that practice the method. If it is really impossible to avail yourself of the benefit of constructive notice by marking, then the onus is on you to police your rights.

It is amazing that nobody has addressed this issue in current patent reform efforts directed to curbing the patent troll problem. The marking statute should protect innocent infringers and it doesn’t. Marking should benefit those who practice the patent, but the current state of the law benefits those who don’t.


Medtronic: Much ado about nothing in light of Frolow and “Marking Admission”

Here’s my Monday morning rant… Unless you’ve been under a rock (or yoga mat — see below), you know that the Supreme Court held that in a dec action for non-infringement by a licensee, the patentee still bears the burden of proof. You may not have noticed a case a while back called Frolow v. Wilson Sporting Goods, from the Federal Circuit, and available here and summarized previously by Dennis on the main page here.  Boiled down, under quite divided and unclear rationales, a divided three-judge panel held that marking by a licensee, or paying a royalty on products, is “circumstantial evidence” of infringement.  In the particular case, as to some rackets, although the licensee had marked them, there was no evidence they actually met every limitation of any asserted claim. Nonetheless, the court held there was some evidence of infringement — marking and royalties — and so a question for the jury.  It viewed marking as an admission, just as if a corporate representative admitted infringement in deposition… Ignoring the fact that, imho, that’s quite wrong analytically and as a practical matter (long story, but licensing and royalties don’t generally work like the court thinks they do, or at least not in my experience), a licensee who sues for non-infringement of a product that it has either (a) marked or (b) paid a royalty on will have to try the case, even though the patentee has the burden of proof, and even if the licensee shows that those products do not literally come within any claim. Odd.  Also odd is, although it said it was not adopting marking estoppel, in practical effect, it did…

Supreme Court Action Today

By Dennis Crouch

Supreme Court Action on 10/7/2013

Extraterritorial Application of US Patent Law: The Supreme Court has issued an invitation to the Solicitor General to file the Views of the Obama Administration (CVSG) in Maersk Drilling USA, Inc. v. Transocean Offshore Deepwater Drilling, Inc., Sct. No. 13-43 (2013). The focus of the case is location – and, what is meant by an “offer to sell . . . within the United States” under 35 U.S.C. § 271(a). The Federal Circuit held that the actual location of the offer is immaterial so long as the offer contemplated performance within the United States.

Subject Matter Eligibility: The Supreme Court has denied certiorari in the § 101 case challenging PerkinElmer’s patented “method for determining whether a pregnant woman is at an increased risk of having a fetus with Down’s syndrome.” Intema Ltd. v. PerkinElmer, Inc., Supreme Court No. 12-1372. The case with a much greater shot is Alice v. CLS Bank and perhaps its companion WildTangent v. Ultramcercial. Briefing of the petition continues in those cases.

False Marking: The Supreme Court has denied certiorari in PubPat’s False Marking case. PubPat had challenged the AIA’s retroactive rejection of non-competitor qui tam suits for false marking. Public Patent Foundation, Inc. v. McNeil-PPC, Inc., Sct. No. 13-161.

Prior Art Presumed Enabling: The Supreme Court has denied certiorari in the Finjan’s challenge to the PTO’s presumption that prior art is enabling. Finjan, Inc. v. U.S. Patent and Trademark Office, Sct. No. 12-1245.

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Patent Cases Where Petition for Certiorari has been Filed:

Limelight v. Akamai, Sct. No. 12-786, is still pending at the Supreme Court and awaiting comments from the US Solicitor General (CVSG) before the court decides whether to grant the petition for writ of certiorari. The question presented in that case is whether indirect infringement (inducement) requires underlying direct infringement by a single actor. The Federal Circuit says “no.”

Hyundai Motor America, Inc. v. Clear with Computers, LLC, Sct. No. 13-296. This pending case is a follow-up to the Supreme Court’s 2011 decision in Microsoft v. i4i where the court held that invalidity defenses must be proven with clear and convincing evidence. That decision included a concurrence by Justice Breyer indicating that questions of law (such as obviousness) need not be proven with clear and convincing evidence. “The question presented is whether, following i4i, a district court may … instruct a jury to apply the heightened ‘clear and convincing’ standard not only to disputed factual aspects of an invalidity claim, but also to the legal aspects of such a claim – including the ultimate question of a patent’s invalidity?”

The petition for writ of certiorari in Sony v. 1st Media, Sct. No. 12-1086, is fully briefed but has not yet been decided. That case involves the extent of district court discretion in evaluating the equitable doctrine of patent unenforceability. The case largely challenges the strict requirements of Therasense.

In Fox Group, Inc. v. Cree, Inc., Sct. No. 12-1378, the asserted patent was found invalid under 35 U.S.C. § 102(g)(2) since the subject matter of the patent had previously been invented. The statute only works if the prior inventor did not abandon, suppress, or conceal the prior invention and here the prior inventor concealed how to make the invention, did not commercialize it, and did not apply for a patent. However, the prior inventor did disclose the fact of the invention and publicly offered some non-enabling clues to the invention. Although briefing is now complete, the Supreme Court took no action in this case yet.

Nautilus v. Biosig is pending at the Supreme Court and awaiting a response from Biosig. The case questions whether the “Insolubly Ambiguous” standard for indefiniteness is overly strict.

Another pending petition is Nokia v. v. International Trade Commission, Sct. No. 12-1352. The case focuses on patent enforcement entities and the “domestic industry” requirement for USITC jurisdiction.

Organic Seed Growers and Trade Ass’n v. Monsanto Co, Sct. No. 13-303, is also pending as a petition for writ of certiorari. The case argues that organic farmers have jurisdiction to challenge Monsanto’s GMO seed patents.

Saffran v. Johnson & Johnson, Sct. No. 13-405. In this case, the patentee essentially asks the Supreme Court to decide the issue before the en banc Federal Circuit in Lighting Ballast Control. I.e., “Whether the Federal Circuit should have given deference to the district court’s factual findings in construing the patent claims.” This petition is something of a place-holder to give the patentee time to see the outcome of Lighting Ballast.

Artesyn Technologies, Inc. v. SynQor, Inc., Sct No. 13-375. In this pending case, the losing defendant has asked that the Supreme Court tell the Federal Circuit to “Follow KSR” and also “Follow Global-Tech” rather than recreating the formal TSM test and allowing recklessness serve as proof of knowledge for induced infringement. In the similar pending petition of Arthrex, Inc. v. Smith & Nephew, Inc., Sct. No. 13-290, the petitioner asks for a further definition of “willful blindness” for inducement.

Power Integrations, Inc. v. Fairchild Semiconductor International, Inc., Sct. No. 13-269. This damages case focuses on when lost-sales outside of the US can be captured under US law. Here, the patentee argues that those sales should be accounted-for when they are “direct and foreseeable result of patent infringement inside the United States.” Briefing is ongoing at the petitions stage.

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Patent cases where the Supreme Court has granted certiorari and will be hearing the case this term:

Medtronic Inc. v. Boston Scientific Corp., Sct. No. 12-1128 (Does a Declaratory Judgment plaintiff who is also an ongoing licensee of the patent have the burden of proving non-infringement?).

Highmark Inc. v. Allcare Health Mgmt. Sys., Sct. No. 12-1163 (When must deference be given to a lower court judgment regarding an exceptional case finding under §285?).

Octane Fitness, LLC v. Icon Health and Fitness, Inc., Sct. No. 12-1184 (What is the proper definition of an “exceptional case”?).

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Hal Wegner follows these developments closely and his Top-Ten lists are available through the LAIPLA website: http://www.laipla.net/hal-wegners-top-ten-patent-cases/

Contractual Override of Trade Secret Law

By Dennis Crouch

Convolve and MIT v. Compaq and Seagate (Fed. Cir. 2013)

MIT has a long history with patent enforcement, including its historic link with Franklin Pierce Law Center (now UNH) and housing of the Lemelson-MIT Program. Of late, the not-for-profit institution has become quite a patent plaintiff. In addition to this case, MIT is the patent-owner-plaintiff in the Akamai and Ariad cases as well as many others. This case reaches back more than a decade when MIT and Convolve sued a group of defendants for both trade secret misappropriation and infringement of its U.S. Patent Nos. 6,314,473 and 4,916,635. In 2007, the Federal Circuit decided a prior appeal in this case on mandamus – In re Seagate Tech., LLC, 497 F.3d 1360 (Fed.Cir. 2007) (en banc) (holding that willful patent infringement at least requires showing of objective recklessness).

The present case began with a non-disclosure agreement and then failed license negotiation between Convolve and Compaq. The signal shaping technology in question is useful in computer read/write operations and Convolve agreed that Seagate (Compaq’s hard drive supplier) could be included in the conversation. No license was reached but Convolve and MIT sued two years later when the features (allegedly) showed up in Compaq/Seagate technology.

Contractual Override of Trade Secret Law: The main trade secret problem for Convolve in this case is the language of the non-disclosure agreement (NDA) that the parties signed. The agreement states that any confidential material or presentations must be particularly identified as confidential and Convolve was unable to show that it followed the procedures required by the NDA. In addition the trade secret claims regarding marketing information failed under NY law because NY trade secret law does not extend to marketing concepts. The Federal Circuit writes:

[B]arring waiver of the NDAs marking requirements (discussed below) we conclude that Seagate did not breach the NDA to the extent it may have appropriated the information disclosed. Because the disclosure of the information was not subject to the confidentiality obligations of the NDAs, moreover, barring some other basis upon which to predicate a promise of confidentiality (which we also discuss below) information relating to those ATSIs lost any trade secret status it might have had upon disclosure.

A major legal and practical point here, that should already be well understood, is that is that a contractual agreement to transfer otherwise secret information will override trade secret protections that may be in place.

Patent Infringement: The district court also dismissed the patent infringement side of the action based upon a finding of non-infringement. On appeal, the Federal Circuit vacated that decision – finding that sufficient factual dispute existed to allow the plaintiff to overcome the summary judgment motion of non-infringement for the ‘473 patent.

While a very close call, we find that Convolve presented enough evidence to preclude summary judgment on its inducement claims. Convolve did not merely demonstrate that the drives are capable of infringing, but provided evidence of specific tools, with attendant instructions, on how to use the drives in an infringing way. Unlike Fujitsu Ltd. v. Netgear, Inc., 620 F.3d 1321 (Fed. Cir. 2010), upon which the district court relied, the evidence here does not demonstrate that the infringing option in the Seagate drives was disabled by default. See Toshiba Corp., 681 F.3d at 1365 (analyzing the holding in Fujitsu). Accordingly, given the procedural posture in which the claim is presented to us, we conclude that Convolve may proceed with its inducement claims on remand.

Thus, on remand, the case will continue to determine whether the ‘473 patent was actually infringed.

Frolow v. Wilson: Marking Estoppel and Arising Under Jurisdiction

by Dennis Crouch

Jack Frolow v. Wilson Sporting Goods (Fed. Cir. 2013)

The decision here focuses on the evidentiary value associated with the fact that a patent licensee marked its products as patented but then later claimed that the same products are not covered by the listed patent. After the break, I also discuss the arising-under jurisdictional issue raised by the situation but not challenged by the court.

Background: Frolow's patent covers a tennis racket with a particular moment-of-inertia and center of percussion. U.S. Patent Reissue No. Re 33,372. Wilson licensed the original patent back in 1989 but Frolow later sued – alleging breach of contract and patent infringement based upon Frolow's test that showed 42 Wilson rackets were covered by the patent but that were not subject of royalty payments. The district court partially dismissed the case on FRCP Rule 56 summary judgment – holding that Frolow had failed to present material facts sufficient to create a genuine dispute as to whether 37 of the rackets were covered by the patent and/or license. At trial, the district court then granted Wilson's FRCP Rule 50 judgment as a matter of law – holding that the patentee had failed to present sufficient evidence that the remaining five rackets fell within the scope of the patent. On appeal, the Federal Circuit has reversed the summary judgment holding.

Three Judges Four Decisions: The decision structure here is odd to say the least. All three judges agreed on the outcome but were still able to produce four separate opinions. The majority opinion is written by Judge Moore and signed by Judge Clevenger. Judge Moore and Clevenger each provided their own separate opinions with "additional views." And, Judge Newman filed a concurring opinion that agreed with the final judgment.

Here, Wilson had marked all of its rackets as patented and listed the Frolow patent number on each. Frolow asked the court to apply a doctrine of "marking estoppel" to prevent Wilson from later arguing that the products are not covered by the patent. The appellate court refused to adopt the doctrine of marking estoppel, but did find that Wilson's marking should serve as factual evidence of extra-judicial admission tending to prove infringement. In the process, the appellate court rejected the lower court's ruling that the marking was irrelevant to infringement analysis.

Placing a patent number on a product is an admission by the marking party that the marked product falls within the scope of the patent claims. The act of marking is akin to a corporate officer admitting in a letter or at a deposition that the company's product infringes a patent. A defendant, of course, is free to introduce counter evidence or explanation. Thus, the district court erred when it concluded that Wilson's marking had "no bearing on whether literal or doctrine of equivalents infringement has occurred."

Like any other type of extrajudicial admission, evidence of marking is relevant evidence. And such an admission, that the accused product falls within the asserted claims, is certainly relevant on the issue of infringement. Of course, whether a party's marking, in view of the record as a whole, raises a genuine issue of material fact, will depend on the facts of each case. . . . .

On remand, a new jury may be finally asked to decide the infringement question.

In her concurring opinion, Judge Newman suggested that the marking by Wilson should create a presumption of infringement rather than simply circumstantial evidence of infringement. That would place the burden on Wilson to disprove infringement in a manner akin to the rule created in Medtronic v. Boston Scientific, 695 F.3d 1266 (Fed. Cir. 2012). In that case, the court ruled that a licensee in good standing who files a declaratory judgment lawsuit challenging the patent has the burden of proving non-infringement. The Medtronic case is now pending before the Supreme Court on petition for writ of certiorari.

The additional separate opinions by Judges Clevenger and Moore focused on the potential unfair prejudice associated with telling the jury that Wilson had marked its rackets as covered by Frolow's patent. For Clevenger argued that evidence should probably be excluded under Fed. R. Evid. 403 because of the danger of unfair prejudice that outweighs the evidentiary value. Judge Moore disagreed.

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Arising Under Jurisdiction?

One oddity about the case is that the patent claim was dismissed early on for failure to state a claim. In particular, Frolow admitted in the complaint that Wilson had a license and that the only problem was Wilson's failure to pay the required royalty amount. Based on meritless allegations, the court dismissed the patent claim. See Vulcan Engineering Co., Inc. v. Fata Aluminum, Inc., 278 F.3d 1366 (Fed. Cir. 2002); Cyrix Corp. v. Intel Corp., 77 F.3d 1381 (Fed. Cir. 1996); United States v. Studiengesellschaft Kohle m.b.H., 670 F.2d 1122 (Fed. Cir. 1981) ("The license waives this right to judicial relief against what, but for the license, would be an infringement."); Schering Corp. v. Zeneca, Inc., 958 F. Supp. 196 (D. Del. 1996) ("Zeneca's license provides an absolute immunity from Schering's infringement action," citing DeForest Radio Telephone and Telegraph Co. v. United States, 273 U.S. 236 (1927)).

After dismissing the patent claim, the district court was left only with the contract dispute. Certainly, that aspect of the case still involved lots of patent issues. Since the scope of licensed products was contractually defined as products that fall under the patent, the court had to figure out which rackets are "infringing" in order to know which ones are covered by the license. However, we know now (under Gunn v. Minton) that the contract claim probably does not arise under federal patent law. The absence of the patent issues was not a problem for the district court here, since there was also diversity jurisdiction. However, the jurisdictional basis is important for knowing whether the appeal goes to the Federal Circuit or to the regional circuit court of appeals. Only cases arising under the patent laws are appealed to the CAFC.

The question in my mind is whether this case arose under the patent laws. In Hunter Douglas v. Harmonic Design, 153 F.3d 1318 (Fed. Cir. 1998), the Federal Circuit found a distinction between claims cases dismissed for lack of subject matter jurisdiction under FRCP R. 12(b)(1) and claims dismissed for failure to state a claim under FRCP R. 12(b)(6). According to the court, 12(b)(1) dismissal indicates a lack of arising under jurisdiction while a claimed dismissed on 12(b)(6) can still be said to have arising under jurisdiction.  This creates a difficult to comprehend result because we may result in a situation where the well pleaded complaint is considered to include a federal patent claim even though the court dissmisses that same claim for on 12(b)(6) for failure to state a claim in the pleadings.  

The catchphrase of the Hunter Douglas decision by Judge Clevenger is whether the federal claim being stated is "wholly insubstantial."  Other courts similarly look to see whether the federal claim is a "frivolous" federal claim. If the federal claim meets either of these tests then it is said to arise under federal law even if the court later dismisses that claim.  

The question that the appellate court failed to address here is whether it had appellate jurisdiction and, that question will turn on wether the original patent claim was frivolous or wholly insubstantial.  Because jurisdictional questions are generally not waivable, Wilson could immediately file for reconsideration based upon the court's lack of appellate jurisdiction. This also makes sense because the Gunn decision was released well after briefing and oral arguments were complete. 

Design Patent Litigation: Notice Pleading Requirements Remain Low

Totetowelby Dennis Crouch

Hall v. Bed, Bath & Beyond, Inc. and Nachemin, __ F.3d __ (Fed. Cir. 2013)

This design patent decision is interesting and important on several levels and so I have divided the post into two sections. This section focuses on the district court's clear error in dismissing the infringement lawsuit on the pleadings.  The second section will focus on the Federal Circuit's dismissal of the charges filed personally against the employees who caused the allegedly infringement.

The set-up here is interesting.  Mr. R.J. Hall designed a new product known as a “Towel Tote” that is basically an absorbent scarf with pockets on the ends.  [Buy one here.] After filing his design patent application, Hall sat down with Mr. Farley Nachemin at Bed Bath & Beyond (BB&B) to see whether the company would retail his product.  Instead of moving forward with Hall, BB&B mailed Hall's product to Pakistan and had it copied and manufactured for retail distribution back in the US.

When his patent issued, Hall sued BB&B as well as Nachemin and other executives for design patent infringement and a number of state-law business claims such as, false advertising, misappropriation, and unfair competition.  U.S. Design Patent No. D596,439.  The district court then dismissed the case on the pleadings –  finding that the complaint did not particularly identify the “new, original, and ornamental” features of the design patent. On appeal, the Federal Circuit rejects that decision and instead holds that, even under Iqbal and Twombly, a pleading does not require this level of information. Rather, following the law of utility patents, the court holds here that a proper design patent infringement complaint only requires the following five elements:

  1. An allegation of ownership of the patent;
  2. The name of the defendant;
  3. The patent number;
  4. A statement of the means by which the defendant allegedly infringes; and
  5. Relevant sections of the patent laws.

Citing Phonometrics, Inc. v. Hospitality Franchise Systems, Inc., 203 F.3d 790 (Fed. Cir. 2000).  In this case, the district court's ruling was well off-base because the design patentee need not prove the design's points of novelty even at trial since validity is presumed and infringement no longer relies on the points-of-novelty test.

In the litigation, BB&B had filed a counterclaim alleging that that Mr. Hall himself had violated the Lanham Act by telling the company his product was “protected by patent” even before the patent issued.  BB&B also alleged that the Hall committed false marking by continuing to mark his product “patent pending” even several months after the patent had issued.  On appeal, the Federal Circuit holds that these statements “cannot be viewed as even plausibly misleading.”  With regard to the the false marking claim, the court also adds that the defendant had failed to plead competitive harm, which is now a core element of false marking under the Leahy-Smith America Invents Act of 2011.

+ + + + +

Judge Newman wrote the majority opinion that was joined by Judge Linn.

Judge Lourie wrote in dissent – basically arguing that more deference should have been given to the district court's role of ensuring that the pleadings are clear enough.  Judge Lourie acknowledged legal mistakes of the district court, but also directed attention to a separate aspect of the district court decision. The district court wrote: “Rather than plead in a coherent fashion, making clear how the facts support a particular theory of infringement as to a given Defendant, Plaintiff has conflated all his facts, pleading without making any distinctions of any kind. This ambiguity in pleading is unacceptable.”   


  • As with most design patents, this one issued without substantive examination on the merits.  The application was filed in November 2008 and the first correspondence from the USPTO was a notice of allowance mailed in May 2009. The patent issued shortly thereafter.
  • Professor Tushnet has more on her site with more focus on the Lanham Act claims: http://tushnet.blogspot.com/2013/01/do-you-know-where-your-towel-is-and.html

Federal Circuit Rejects Due Process Challenge to AIA on False Marking Retroactivity

By Dennis Crouch

Ken Brooks v. Dunlap and US Government (Fed. Cir. 2012)

As expected, the Federal Circuit has rejected Brooks’ argument that the Leahy-Smith AIA’s retroactive elimination of his false-marking cause-of-action was unconstitutional. Brooks is a patent attorney operating out of northern California. He has no apparent relation with Dunlap other than his discovery that Dunlap’s guitar string winders were (allegedly) falsely marked with patent numbers that had expired and invalidated. Under the pre-AIA law, “any person” had standing to bring suit for false marking and collect 1/2 of any resulting fine (with the US government receiving the other half). 35 U.S.C. § 292 (2010). In response to a rash of several hundred false-marking claims, section 292 was amended to restrict private standing to only persons “who has suffered a competitive injury as a result of a [false marking] violation.” 35 U.S.C. § 292 (2012).

Brooks filed his lawsuit in September 2010 – one year before the AIA was enacted. However, the AIA includes a retroactivity clause stating that “[t]hese amendments . . . shall apply to all cases, without exception, that are pending on, or commenced on or after, the date of the enactment of this Act.” Based upon that change, the district court dismissed the case for lack of standing.

On appeal, Brooks offered a due process challenge — arguing that the Due Process Clause of the U.S. Constitution bars Congress from applying the AIA’s amendments to § 292 to pending qui tam actions. In general, there is no rule against changing the legal regime in a way that adversely affects particular parties who have conformed their actions to benefit from the prior rules. If the change constitutes a Fifth Amendment Takings then the government must provide compensation. And, the legal change would very likely be an improper ex post facto law if it criminalized past actions as felonies. Apart from these exceptions, a retroactive change in the law will be enforced so long as it passes the very low standard of rational basis review. As the Supreme Court wrote in 1984, the “burden is met simply by showing that the retroactive application of the legislation is itself justified by a rational legislative purpose.” Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717 (1984).

In considering the Congressional record, the Federal Circuit easily found a rational basis for the retroactive nature of the law, including eliminating “the perceived abuses and inefficiencies stemming from false marking claims that were initiated before the AIA was signed into law” and avoiding “a live question about the constitutionality of the then-existing qui tam provision.”

At bottom, Congress made a considered choice to modify the private cause of action in § 292(b) and apply that modification to pending as well as future cases. Given Congress’s legitimate concerns with respect to the cost and constitutionality of pending qui tam actions, we conclude that the retroactive application of amended § 292 to pending actions was a rational means of pursuing a legitimate legislative purpose.

Dismissal affirmed.

Age of Patents when Asserted

By Dennis Crouch

The chart above is a histogram showing the age of utility patents at the time when an infringement complaint is filed. I used the Derwent LitAlert patent database and limited the search to only lawsuits filed Sept 16, 2011 – Sept 15, 2012 (this avoids false marking cases). I also excluded cases that were identified as declaratory judgment lawsuits in the LitAlert database. The data has some holes but it is roughly accurate.

Patent Infringement Litigation: Filings on the Rise


Terry Ludlow of ChipWorks recently created a time-series chart showing the number of US patent lawsuits per quarter. I have reproduced the chart with permission. [LINK]

The headline here: More patent lawsuits are being filed now than ever – even more than in the heyday of the false-marking litigation. Just as a caution – the recent rise in the number of lawsuits does not actually mean that there is more patent litigation going one. Rather, a substantial portion of the increase in Q4 2011 is due to the new joinder rules that force a patent holder to file separate lawsuits against similar defendants rather than bundle them all into a single action.

Thus, as an example, last week the patent holding company NovelPoint Security filed 30+ separate patent infringement lawsuits in the Eastern District of Texas. In the past, NovelPoint might have instead pursued all of those actions within a single complaint.

* * * * *

The NovelPoint Security patents both include David C. Reardon of Springfield Illinois as the sole inventor. See U.S. Patents 6,212,635 and 5,434,562. Neither patent is listed as assigned within the USPTO assignment database. Reardon is an interesting character – he is an electrical engineer but is much better known as a pro-life / anti-abortion advocate. Reardon runs the Eliot Institute that he founded. The patents themselves focus on computer security systems using public/private key encryption and claim a 1997 priority date based upon a provisional patent application filed