Friday, December 22, 2006

USPTO Announces Pilot "e-Office Action" Program

Effective December 16, 2006, the USPTO has announced a 6-month pilot program to provide a limited number of Private PAIR users with the option of receiving electronic notification of some outgoing correspondence related to their US patents and US national patent applications retrievable through Private PAIR instead of a paper mailing of the correspondence.

PCT Applications will not be included in this pilot.

Participants can designate up to 3 e-mail addresses to receive notifications associated with a corresponding Customer Number. Each e-mail notification will list all applications in which new outgoing correspondence was prepared for the corresponding file within the preceding 24 hours, and each notification will be entered into the corresponding application files. The correspondence should be available for downloading through Private PAIR within two business days of the date of the email notification.

The period for reply will begin tolling as of the day the correspondence becomes available for viewing.

If successful, the program will convert to full production around June 2007, at which point the program will be open to all users having a Customer Number and access to Private PAIR.

For further information, contact the Patent Electronic Business Center at (866) 217-9197 (toll-free), or send an e-mail to ebc@uspto.gov.

See USPTO announcement here.

Thursday, December 21, 2006

E.D. Texas Issues Permanent Injunction in Visto v. Seven Networks

Visto has filed patent infringement suits against a number of "push" e-mail companies, including Infowave Software, RIM, Good Technology, and Microsoft. The leading case in Visto's enforcement effort, Visto Corp. v. Seven Networks (2:03cv333-TJW) obtained an infringement verdict last April. Last week, Judge Ward decided a number of post-trial issues in Visto's favor including punitive damages and permanent injunction. This was Judge Ward's first opinion addressing permanent injunctions after eBay, and marks only the second time in five cases where an injunction was granted in the E.D. Tex. In both cases, the court indicated that being a direct competitor of the patentee was a substantial factor in granting the injunction.


Judge Ward's (short) opinion on the injunction follows:


The court grants Visto’s motion for permanent injunction. In eBay v. MercExchange, the Supreme Court held that the traditional four-factor test for permanent injunctive relief applies to patent cases. eBay Inc. v. MercExchange, LLC, U.S. , 126 S.Ct. 1837, 1839 (2006). The Court recited the test as follows:

According to well-established principles of equity, a plaintiff seeking a permanent injunction must satisfy a four-factor test before a court may grant such relief. A plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.
Id. Bearing these factors in mind, the court now turns to the facts of this case to assess the propriety of permanent injunctive relief.

A. Irreparable injury.

Visto has demonstrated irreparable injury. The parties to this case are direct competitors, and this fact weighs heavily in the court’s analysis. Intellectual property enjoys its highest value whenit is asserted against a direct competitor in the plaintiff’s market. In Tivo v. EchoStar Communications Corp., 446 F. Supp.2d 664, 669 (E.D. Tex. 2006), Judge Folsom found irreparable harm because “[t]he availability of the infringing products leads to loss of market share for Plaintiff’s products.” Seven’s arguments to the contrary, focusing on the large market share of Research in Motion, are not persuasive. The court finds that Visto will suffer irreparable injury absent an injunction.

B. Inadequacy of legal remedies.

Visto has also demonstrated the inadequacy of legal remedies. It is true that the jury awarded a large damages verdict. Those damages, however, are designed to compensate Visto fairly and reasonably for its past injury. Under the jury’s verdict, Seven is willfully using its competitor’s intellectual property and a threat of continued infringement exists under this record. Although future damages may compensate Visto for an approximate loss, that does not make them adequate in the sense that they are a suitable proxy for injunctive relief. What makes legal remedies inadequate under the circumstances of this case is the inability to calculate the plaintiff’s future losses with precision. An injunction against the continued use of the plaintiff’s intellectual property is the proper remedy to prevent future infringement.

C. Balancing of hardships.

The court has considered the balance of hardships. The court agrees with Visto that if no permanent injunction is entered, Visto will lose goodwill, potential revenue, and the very right to exclude that is the essence of the intellectual property at issue. Although Seven will be harmed by an injunction, the balance of hardships favors Visto in this case.

D. Public interest.

The question presented by this factor is whether the public interest would be disserved by an injunction. There has been no persuasive showing that the public interest would be disserved by an injunction. In fact, the public interest would be served by issuing an injunction to protect the patent rights at issue. After considering the traditional equitable factors, the court concludes that a permanent injunction is proper in this case. The plaintiff’s motion for entry of a permanent injunction is therefore granted.

Wednesday, December 20, 2006

Scalia's Comment Hints at an Early KSR Decision

Justice Scalia spoke last week at a industry group meeting in Northern Virginia, and addressed numerous issues ranging from the death penalty, judicial pay and "constitutional originalism." During the speech, he briefly addressed the KSR case stating that "I know how that one comes out, but I'm not going to tell you." (link) Attendees at the conference were mixed in their interpretation of this comment. Some obviously speculated that the fix was in, and that the Supreme Court had already made up its mind on the outcome of the case. Others interpreted Scalia's comment as an off-hand remark indicating his personal view of the case, but not necessarily reflecting the view of the entire court. At another point in the speech, Scalia acknowledged to the audience that the court sometimes has difficulties following the original constitutional intent of the framers from 220 years ago, especially "when you guys invent some new technology."

Tuesday, December 19, 2006

Rocket-Dockets Aren't Just For the Eastern District of Texas Anymore

Federal judges in the Northern and Southern Districts of Texas have announced that they will start looking into adopting districtwide patent litigation rules and procedures patterned after those adopted in the Eastern District. Last week (Dec. 12), judges in the Southern District's Houston division met and agreed to consider adopting districtwide rules and procedures for patent litigation. Northern District judges are planning to meet in Dallas in January to consider a timetable for adopting similarly proposed districtwide patent rules.

Draft of proposed rules for the N.D. Tex. here.

Draft of proposed protective order here.

See article from Law.com giving detail and insight on the proposed changes here.

Performance of Software Method Required to Trigger On-Sale Bar

Plumtree Software v. Datamize, LLC (06-1017) - December 18, 2006

The CAFC reviewed the N.D. Ca. grant of summary judgment, finding Datamize's patent invalid for violating the on-sale bar doctrine. Just prior to the one-year date when the patentee filed an application for a software authoring tool used to create an interactive kiosk system, the patentee gave a general presentation on features of the invention to industry members sponsoring a trade show. In exchange for waiving the sponsorship fee, the patentee agreed to provide kiosks at the trade show for other members to use. After the agreement was made, a provisional application was filed, and the patentee proceeded to provide the kiosks a week later.

During subsequent patent litigation, Plumtree successfully argued on a summary judgment motion that Datamize was barred from obtaining patent protection, since the patented subject matter (1) was the subject of a commercial sale or offer for sale, and (2) the invention was be ready for patenting, due to a reduction to practice before the critical date.

In a rather odd decision, the CAFC held that Plumtree did not meet its burden of proof on summary judgment, since it was not clear that the patentee either made a commercial offer to perform the patented method, or in fact performed the patented method for a promise of future compensation. This ruling was made despite the fact that the patentee admitted that the kiosk at the trade show embodied all the claims:

[O]n this record, we cannot sustain the district court’s conclusion that the method claims are invalid under the on sale bar rule. The district court reasoned that "the agreement with SIA embodied all of the claims of the ’040 and ’418 patents" because "the kiosk at the trade show embodied all of the claims.". . . In so holding, the district court relied on Kevin Burns’s testimony that "the network kiosk system that was demonstrated in March of 1995 at the Las Vegas show embod[ied] all the claims" of the ’040 and ’418 patents. These statements reflect confusion as to the nature of the patented product. Here the invention reflected in the method claims is a process for creating a kiosk system, not the kiosk system itself. The kiosk system itself is not patented. The court’s focus on whether the kiosk system somehow embodied the claims of the patent was misplaced, and the district court’s reasoning does not support a grant of summary judgment. Nor does the record support the ultimate result reached by the district court.
For some reason, the CAFC had trouble reconciling the difference between the kiosk, and the software that was running on it. Also, the court found it significant the the agreement did not contain express language that compelled Datamize to use the patented software methods on the kiosks:
[T]he more difficult question is whether the commercial offer was "of the patented invention." We have stated that "the invention that is the subject matter of the offer for sale must satisfy each claim limitation of the patent." . . . Datamize admits that "SkiPath [was] created with the authoring system" and that the authoring system "embodied all the claims of all three of Datamize’s patents." . . . On its face, however, the written agreement between MA [Datamize] and SIA did not unambiguously require use of the patented method. The agreement did require MA [Datamize] to "provide the software/hardware package necessary to produce the interactive touch-screen information center as presented to SIA on January 17, 1995 in McLean, Virginia." . . . This reference to the software/hardware package is ambiguous as to whether it required MA [Datamize] to provide the kiosk system software or to perform the patented method. Moreover, Plumtree has made no showing that extrinsic evidence would compel an interpretation that MA [Datamize] was bound to perform the patented method. Therefore, the record does not provide a basis for summary judgment on this issue.
Moreover, the CAFC could not find anything in the record establishing that Datamize actually performed all the patented steps before the critical date pursuant to the contract.

VACATED AND REMANDED

Thursday, December 14, 2006

Partial En Banc Decision Clarifies Intent Requirement for Induced Infringement

DSU Medical Corporation v. JMS Co., Ltd. (04-1620), December 13, 2006

DSU sued JMS for infringing 2 of their patents covering guarded, winged-needle assemblies that reduced the risk of needle-stick injuries. DSU also sued Australian company ITL that manufactured a sheathing structure that was used by JMS to produce the infringing needle assembly. ITL manufactured the sheathing structures ("the Platypus") in Malaysia and Singapore before shipping them to JMS in the U.S.

The jury found JMS directly liable for patent infringement, but found ITL did not engage in contributory infringement or inducement to infringe. One of the key factors was the manner in which the Platypus was manufactured by ITL: in the "open shell" configuration, the structure did not meet all the limitations of DSU's patent claims. However, once the structure was placed in a "closed shell" configuration, the structure began to read on DSU's patent:


The catch here was that the Platypus left ITL's factories in a "open shell" configuration, and JML was assembling the needle sets in a "closed shell" configuration prior to importation into the U.S. While there was evidence that other "open shell" configurations were shipped to the U.S. by ITL, there was no direct evidence showing anyone had actually closed the sheaths and used them as an act of direct infringement:

Upon review of the record, this court perceives, as well, an absence of evidence of direct infringement to which ITL contributed in the United States . . . ITL only contributed to placing the Platypus into the closed-shell configuration in Malaysia; not in the United States. Section 271(c) has a territorial limitation requiring contributory acts to occur in the United States.
The court decided to clarify the intent requirement for induced infringement en banc. Specifically, the court perceived that there was conflicting precedent between two specific cases:

• Hewlett-Packard Co. v. Bausch & Lomb, Inc., 909 F.2d 1464, 1469 (Fed. Cir. 1990) - "[p]roof of actual intent to cause the acts which constitute infringement is a necessary prerequisite to finding active infringement" (i.e., proof of intent to cause infringing acts is all that is required in order to establish inducement of infringement).

• Manville Sales Corp. v. Paramount Systems, Inc., 917 F.2d 544, 554 (Fed. Cir. 1990) - "[t]he plaintiff has the burden of showing that the alleged infringerÂ’s actions induced infringing acts and that he knew or should have known his actions would induce actual infringements" (i.e., with knowledge of the patent, the alleged infringer knew or should have known his actions would induce actual infringement).

Relying on the Supreme Court's Grokster copyright case, the CAFC held that the Manville approach was the correct one for inducement:
Although this court stated "that proof of actual intent to cause the acts which constitute the infringement is a necessary prerequisite to finding active inducement," Hewlett-Packard, 909 F.2d at 1469, Grokster has clarified that the intent requirement for inducement requires more than just intent to cause the acts that produce direct infringement. Beyond that threshold knowledge, the inducer must have an affirmative intent to cause direct infringement. In the words of a recent decision, inducement requires "'that the alleged infringer knowingly induced infringement and possessed specific intent to encourage another's infringement.'" . . . [A]ccordingly, inducement requires evidence of culpable conduct, directed to encouraging another's infringement, not merely that the inducer had knowledge of the direct infringer's activities.
AFFIRMED

In a concurring opinion, Chief Judge Michel and Judge Mayer agreed with the decision, but noted that there is no actual conflict between Hewlett-Packard and Manville, and thus, there was no need for intervention by the full court.

Tuesday, December 12, 2006

The Land That eBay Forgot - Patent Infringement Cases Before the International Trade Commission

In light of the Supreme Court's eBay decision, something that didn't get immediate attention was the effect the ruling would have on Section 337 actions before the International Trade Commission (ITC). Unlike district courts, who have a wide range of legal and equitable remedies at their disposal, the ITC is equipped to do only one thing when it comes to patent infringement: grant or deny injunctive relief in the form of exclusion orders to keep infringing products from being imported into the United States.

The ITC has become a favored venue for patent holders, since (1) jurisdiction is derived from the mere act of importation, (2) time for discovery is very limited, which strongly favors a well-prepared complainant that files against an unsuspecting respondent, and (3) cases are all on a "rocket-docket" schedule, concluding in 12-18 months. In the last 10 years, the number of ITC cases has doubled, and it is expected that they will rise further in the years to come.

There are additional reasons to like the ITC if you are a patent holder, according to Robert Hahn, who is co-founder and executive director of the AEI-Brookings Joint Center for Regulatory Studies - the ITC rules in favor of the patent holder in higher proportions than the district courts, and provide injunctive relief 96% of the time when infringement is found (as opposed to 20% in the district courts). This could be critical for many industries, such as electronic component companies, where products are manufactured almost entirely overseas.

In a "hot off the press" paper published just yesterday, Hahn finds that a pro-patent bias exists in patent infringement cases before the ITC, and proposes either removing jurisdiction from the ITC in most patent cases or imposing the same standard for issuing injunctions as applies in the district courts

Unlike district courts, under Section 337(d), the ITC is will issue an exclusion order when it finds that an infringer has violated Section 337 unless, “after considering the effect of such exclusion upon the public health and welfare, competitive conditions in the U.S. economy, the production of like or directly competitive articles in the United States, and United States consumers, it finds that such articles should not be excluded from entry." As an empirical matter, a determination that an exclusion order is "not in the public interest" is rare: the ITC has found an injunction to be inconsistent with the public interest in only three of 113 patent cases studied.

More interestingly, Hahn found that recent ITC rulings that favored the respondent were affirmed in the CAFC at a rate of 74%, while rulings in favor of the complainant were affirmed in only 52% of the cases. However, in the small number of "parallel cases" that were filed (where ITC and district court cases are chained together), an ITC decision in favor of the complainant resulted in the same outcome in a parallel case in a district court 55 percent of the time, whereas an ITC decision in favor of the respondent resulted in the same outcome in a parallel case in a district court 46 percent of the time. Notes Hahn:


these results are striking: no matter how the ITC rules, the federal district court rules the same way only about half of the time. We treat the district court decisions as the appropriate baseline because federal district court patent decisions take legal precedence over the decisions of the ITC. Thus, notwithstanding the limitations on the available data, the results of my research raise further questions about the reliability of ITC decision making: by being right only half the time, the ITC does no better than a coin toss.
Hahn also acknowledges the "trolling potential" of the ITC in light of the eBay ruling:


[A]fter a finding of infringement, the ITC offers injunctive relief about five times more often (96 percent versus 21 percent) than do the district courts. This difference would likely have a large impact on the negotiations between a patent holder and an accused infringer. When a patent case is before the ITC, the patent holder can more credibly threaten to pursue injunctive relief to extract a higher royalty rate. This greater bargaining leverage may induce “patent trolls” to file claims at the ITC in the first instance.

A "must read" for any patent litigator dealing with ITC-related issues. Download or read the article here.

See earlier ITC study (1992) by Sheldon Meyer and Mark Miller here.

See also John Mutti & Bernand Yeung, Section 337 and the Protection of Intellectual Property in the United States: The Complanaints and the Impact, 78 REV. ECON. & STAT. 510-520 (1996) (registration required)

Monday, December 11, 2006

CAFC Issues Post-eBay Injunction Decision

Sanofi v. Apotex (06-1613) December 8, 2006

The Federal Circuit issued it's opinion in the Sanofi case Friday, affirming the lower court's grant of a preliminary injunction against Apotex's generic version of Plavix. Sanofi and Apotex were previously involved in litigation over Plavix and tried to settle the case until the state attorney general issued a regulatory denial of various settlement terms. In light of the regulatory denial, the two companies resumed litigation, and Sanofi obtained a preliminary injunction in the lower court when (1) Apotex stipulated to infringement; and (2) the lower court found that Apotex was unlikely to prove invalidity/inequitable conduct/unclean hands at trial.

Since preliminary injunctions are slightly different from permanent injunction (requiring a "reasonable likelihood of success" versus actual success), there wasn't a heavy reliance on the eBay decision. Nevertheless, the CAFC reviewed Apotex's contentions of invalidity, inequitable conduct and unclean hands and concluded that the lower court properly found that the evidence did not establish that Apotex had a reasonable likelihood of success in rendering Sanofi's patents invalid or unenforceable.

Regarding the 3 other factors of the Supreme Court's four-factor test, the CAFC found that irreparable harm could be presumed by Sanofi, even though Apotex argued that Sanofi "bargained away" its right to seek preliminary injunctive relief, since Sanofi inserted specific monetary amounts in an earlier settlement agreement, which stated the following:

If the litigation results in a judgment that the ’265 patent is not invalid or unenforceable, Sanofi agrees that its actual damages for any past infringement by Apotex, up to the date on which Apotex is enjoined, will be 50% of Apotex’s net sales of clopidogrel products if Sanofi has not launched an authorized generic and 40% of Apotex’s net sales if Sanofi has launched an authorized generic. Sanofi further agrees that it will not seek increased damages under 35. U.S.C. § 284.
Because this clause contemplated injunctive relief and addressed only past infringement, the CAFC found the provision favored Sanofi:
We disagree with Apotex that by entering into that agreement, Sanofi bargained away its right to seek preliminary injunctive relief, and thus its right to prove irreparable harm, in the event the settlement was not approved. The above provision itself contemplates an injunction in referring to "up to the date on which Apotex is enjoined" and speaks only of damages for past infringement. In addition, based on other provisions in the agreement, it is clear that the parties contemplated the possibility of a preliminary injunction in the event of regulatory denial. Paragraph 15 of the agreement, for example, sets forth the procedural steps the parties must follow when seeking a preliminary injunction. Moreover, merely because a patentee is able to identify a monetary amount that it deems sufficient to avoid or end litigation does not necessarily mean that it automatically foregoes its right to seek a preliminary injunction or that any potential irreparable injury ceases to exist if infringement resumes.
Apotex also argued that the district court erred by applying a presumption of irreparable harm because Sanofi established a likelihood of success on the merits. Apotex contended that applying such a presumption is in direct contravention of the Supreme Court’s decision in eBay. However, because the CAFC concluded that the district court did not clearly err in finding that Sanofi established several kinds of irreparable harm, including irreversible price erosion, the CAFC did not address this contention.

Regarding the balance of hardships and the impact to the public interest, the CAFC also found these factors favored Sanofi, stating that "[t]he patent system provides incentive to the innovative drug companies to continue costly development efforts. We therefore find that the court did not clearly err in concluding that the significant 'public interest in encouraging investment in drug development and protecting the exclusionary rights conveyed in valid pharmaceutical patents' tips the scales in favor of Sanofi."

It appears that the CAFC's decision is consistent with the developing district court trend, finding injunctive relief proper only in "competitor vs. competitor" cases where two actual products are affected by patent rights. Michael Smith from the E.D. Tex. Blog published a recent paper titled"Effect of eBay v. MercExchange on District Courts' Decisions Whether to Grant Injunctions in Patent Cases" and found that, so far, only "productive" patent holders have been able to get injunctions on infringed patents. Download Michael's paper here.

Thursday, December 07, 2006

If At First You Don't Succeed . . .

Klein v. Toupin (2006-1486) - December 6, 2006

This case stemmed from a disciplinary proceeding instituted against Klein over twenty years ago which resulted in an order suspending him from practice for two years. Since his suspension, Klein has filed eight petitions for reinstatement with the PTO, several cases in the federal district courts, and three appeals to this court (including the current appeal), each challenging his original suspension from practice.

Klein asserted that the district court erred in holding that he was barred by the doctrine of res judicata from relitigating his constitutional due process claims because his current claims are based on the "Clopper Memoranda," which he did not discover until May 2002. Klein contends that the Clopper Memoranda support his allegations that the PTO concealed the existence of certain evidence he sought during his suspension proceedings, in violation of his due process rights. The Federal Circuit found that

After examining the record before it, the district court noted that (1) the Clopper Memoranda were part of the record considered by the Administrative Law Judge in initially suspending Klein from practice, (2) the Clopper Memoranda were listed in the PTO’s exhibit list, which was served on Klein on June 3, 1985 through one of his attorneys, (3) Klein cited to the Clopper Memoranda in his reply brief, filed on October 30, 1985, at the disciplinary hearing, and (4) the record in one of Klein’s previous appeals to the district court also included the Clopper Memoranda.
Finding no merit to Klein's argument, the Federal Circuit affirmed the lower court, and approved the district court’s decision to sanction Klein for his failure to heed the CAFC's warning issued during his last appeal to this court, that "[a]ny further filings on the body of facts already in the record will be considered frivolous, and could lead to sanctions."

For more details, and to view the District Court for the District of Columbia opinion, click here.

While the CAFC opinion didn't elaborate on the sanctions, the lower court's opinion made it clear that they have had enough and would not revisit this case again:
Moreover, as Defendants’ counsel pointed out in its papers, there seems to be no end in sight to Plaintiff’s litigation of this issue. On March 10, 2005, before this Court even had the opportunity to rule on the USPTO’s denial of Plaintiff’s seventh petition for reinstatement to the USPTO [the one most recently considered by the CAFC], he filed yet another petition for reinstatement before the USPTO.

Because it appears Plaintiff will, left to his own inclinations, continue to litigate this issue indefinitely and to no avail, and in doing so seriously burden the Court and opposing counsel with responding to his frivolous, rambling pleadings, the Court finds it necessary to bar Plaintiff from filing any further complaints in this Court relating in any way to his 1987 suspension from practice before the USPTO.

The Court acknowledges that imposition of such a sanction is a very serious matter. After examining the pleadings in all of Plaintiff’s litigation in this Circuit, the Court has concluded that such a measure is necessary.

Wednesday, December 06, 2006

Adjudication and Settlement of Patent Disputes

Over the past 5 years or so, there has been an increased focus on the empirical outcome of patent litigation, primarily because the number of such lawsuits have increased noticeably. Jay Kesan & Gwendolyn Ball from the University of Illinois have published a recent study titled "How Are Patent Cases Resolved? An Empirical Examination of the Adjudication and Settlement of Patent Disputes." The study builds on previous findings that detail many of the pathologies of the litigation process:

"divergent expectations" - for trials to occur, the parties must be either behaving irrationally, or there must be some uncertainty about the probability of a victory in the courtroom.

"asymmetric stakes" - if the defendant's loss does not equal the plaintiff's gain, there is little incentive for the defendant to avoid trial and no point in bargaining to a settlement.

The "free rider" problem - defendants having an eye towards settlement have no compulsion to spend money to invalidate "bad" patents, since others (i.e., competitors) will similarly benefit from the effort.

Kesan and Ball also noted many of the existing statistics regarding patents and the probability that they will be litigation in court:

• On average, 10.7 patents per 1000 will be litigated (1%);

• The probability of a patent appearing in litigation increases with the number of later patents citing it, but decreases with the number of backward citations;

• Litigation probability increases with the number of "self citations" (patents cited by other patents owned by the same party);

• Litigation probability increases with the number of claims describing the invention;

• Patents in "crowded" fields are subject to an increased probability that disputes will arise.

Regarding the outcomes of the cases, the following statistics were noted:

• The overall decision rate in favor of patentee is 58%.

• In jury trials, 68% of the cases come out in favor of the patentee; 71% of jury trials find that the litigated patent is valid and infringed.

• In bench trials, only 51% of the cases come out in favor of the patentee. Also, 64% of bench trials find that the litigated patent is valid, but only 59% of bench trials find infringement.

The authors tracked the evolution of patent cases from 1995, 1997 and 2000 and found that most of the previous findings were largely correct. However, the study clarifies the notion that "95% of all cases settle," noting that previous studies did not necessarily consider other procedural terminations, such as summary judgment when determining this statistic. When this is taken into account, the number drops to almost 80%.

The paper also had some other interesting findings as well:

Using the courts to invalidate patents at trial doesn't appear to be an effective policy. Despite the greater ability of the court system to review all evidence pertaining to the validity of patents, less than 2.5% of litigated patents appear to be "weeded out" every year in the courts. Combined with reexamination requests, and average of 300 patents a year were invalidated in the mid-90's (as compared to the roughly 300,000 patents that were granted each year).

Also, despite the recent furor over injunctions, permanent injunctions are relatively rare in adjudicated cases (19% at trial, 4% on SJ). Most injunctions appear in consent judgments and formal settlements, and a few appear in default judgments.

Damages were only awarded in a small number of cases. According to the study,

Damages were awarded in only forty-two non-settled cases from 1995 (of which twenty-nine were jury verdicts), 54 non-settled cases from 1997 (of which twenty-three were jury verdicts) and 30 non-settled cases from 2000 (of which nineteen were jury verdicts). The average amount awarded in these cases was $7.4 million, $3.3 million, and $2.1 million respectively.

You can read or download the study here.

Monday, December 04, 2006

Florida Creates "Board Certification" For IP Lawyers

Last week, the Florida Supreme Court approved a program for board certification in specific areas of law (22 to be exact), including intellectual property law. Any lawyer who is a member in good standing of The Florida Bar and who meets the standards prescribed by the state's Supreme Court may be issued an appropriate certificate identifying the lawyer as a "Board Certified Intellectual Property Lawyer."

Some minimum requirements for intellectual property law board certification include:

  • At least five years of law practice immediately preceding application;
  • Practicing patent application prosecution before the U.S. Patent and Trademark Office qualifies if the lawyer is a registered patent attorney or registered patent agent;
  • At least 30 percent of practice in matters related to intellectual property law during the three years immediately preceding application;
  • Experience requirements during the five years immediately preceding application for at least one of the following categories: patent application prosecution, patent infringement litigation, trademark law and copyright law;
  • Satisfactory peer review assessment of competence in the intellectual property law field as well as character, ethics and professionalism in the practice of law;
  • At least 45 hours of continuing legal education within the three years preceding application; and
  • Passage of a written examination demonstrating knowledge, skills and proficiency in the field
Interestingly, back in 1963, the Supreme Court ruled in Sperry v. Florida that Florida could not prohibit patent agents from performing within the State tasks which are incident to the preparation and prosecution of patent applications before the USPTO, and that 35 U.S.C. 31 preempted any state laws that governed this area.

View a draft of the proposed rules here.

Tampa Bay Business Journal story here.

Wednesday, November 29, 2006

The Morning After: KSR v. Teleflex

The collective post-mortem has begun over yesterday's oral arguments at the Supreme Court, and it appears that any seismic shifts predicted by anti-TSM advocates will not come to pass (petitioner's counsel earlier predicted a 9-0 reversal of the Federal Circuit). However, the Court has made it clear that at least some changes are-a-coming. Some observations:

(1) TSM will be tweaked. The Justices were clearly not satisfied with the TSM test, and Justice Scalia put an exclamation point on this dissatisfaction by labeling it "gobbledygook." The Court also embarked on a number of etymological exercises, by first trying to figure out what "motivation" actually meant (they were unsuccessful), and then analyzing whether there's a grammatical difference in the meaning of the word "obvious" and the meaning of the word "apparent." While it doesn't look like TSM will be abolished for the reasons given below, it seems apparent that TSM will not be the exclusive determinant of obviousness.

(2) The Court acknowledged that "rocking the boat" at this point could create more problems than solutions. Recognizing that scrapping TSM wholesale would launch the boats of "100,000 cases," the Court seemed to flirt with a Jacobellis-type analysis in an attempt to arrive at a workable obviousness standard: "I know a workable test for obviousness when I see it - but the TSM test isn't it." The Court acknowledged the hindsight benefits of TSM and seemed open to keeping the test in some form, at least to preserve the status quo.

(3) Whatever happens, it looks like it will be unanimous decision. There was little conflict among the Justices during the oral arguments. In fact they seemed pretty loose during the arguments, tossing out quips and off-handed remarks along the way (the arguments were interrupted 9 times by laughter). Remand is probably inevitable, since the case came up on summary judgment, but a few people think that dismissal is still a possibility (a la Metabolite).

(4) Aside from the CAFC and the TSM test, the Court dished out jabs at virtually everyone in the patent community. Joe Miller at the Fire of Genius blog (see below) stated that the opinion contained "some of the harshest language I recall seeing in a Supreme Court oral argument." The WSJ law blog noted that Chief Justice Robert's performance had him "rising quickly up the funniest justice ladder." Some of the targets included:

The USPTO

JUSTICE GINSBURG: May I ask, if that's the position of the PTO, why aren't they proceeding to cancel the patent?

MR. DABNEY: The case is in litigation at this point, Justice Ginsburg, and in patent litigation district courts are vested with authority and this Court is vested with authority to render a judgment of invalidity under Section 282 of the Patent Act.

JUSTICE GINSBURG: But the question is, you say the PTO has recognized that it issued this patent, that it's an invalid issuance. So why aren't they curing their own mistakes, never mind what a court is going to do?

THE PATENT BAR

MR. GOLDSTEIN: Justice Scalia, I this it would be surprising for this experienced Court and all of the patent bar -- remember, every single major patent bar association in the country has filed on our side -

CHIEF JUSTICE ROBERTS: Well, which way does that cut? That just indicates that this is profitable for the patent bar.

(Laughter.)

EXPERTS

MR. GOLDSTEIN: All right. Let me, Justice Breyer. The experts say it's not obvious and the reason nobody did it for 12 years and the reason that Asano was never combined with an electronic throttle control is explained in the record in this case and it's twofold. The first is, and I have to take you now to the picture of Asano because that's what the claim that is supposed to make our invention obvious is. They say you would have done this with Asano. What the experts say is this Asano thing, no one would ever use it at all.

CHIEF JUSTICE ROBERTS: Who do you get to be an expert to tell you something's not obvious.

MR. GOLDSTEIN: You get -

CHIEF JUSTICE ROBERTS: I mean, the least insightful person you can find?

(Laughter.)

THE INVENTION

JUSTICE KENNEDY: [O]ne of the ways the law progresses is we go from case to case, and in this case you have two standards of operation. One is a pedal that basically operates by pressure. The other -- and by levers. Other is by electronics, and these are two different methods of making the carburetor release the fuel. So why not, so somebody combines them. Why is that such a big deal as, as claim 4 says it is. Certainly this inventor would not be the only one to think that the two could and should be combined.

- The decision is expected to be published before the end of the Court's term (around February).

See:

Patently-O

SCOTUS Blog

Info/Law

Fire of Genius

Patent Prospector

Patent Baristas

Legal Times (Law.com)

NYT

Chicago Tribune

Tuesday, November 28, 2006

KSR v. Teleflex Oral Arguments

Download here. Not surprisingly, the server's been bogged down. If the file doesn't appear right away, see here, and refresh until the document comes up.

A Practical and Easy Test To Demonstrate the Effect of Hindsight

Step 1: Sit a person down in front of your TV

Step 2: Insert "The Sixth Sense" into your DVD player

Step 3: Tell the person that Bruce Willis dies during an attack and spends the remainder of the movie as a ghost

Step 4: Press play

(credit: Xenia Kobylarz, IP Law & Business)

Hang on to your seats - KSR v. Teleflex is on the way . . .

Claim Construction and its Discontents

The Amgen case has underscored the long-held view that the process of claim construction needs improvement, and the CAFC needs to do something about it sooner rather than later. More studies are being published affirm the perception that claim construction has become more difficult, if not impossible, to predict.

One study currently being conducted by Hal Wegner found that claim construction errors have been found in approximately 55 percent of all definitive Federal Circuit rulings in the context of infringement or validity where claim construction has been challenged. A total of fifty-seven cases in 2005 (Jan.-Aug.) included at least one definitive claim construction.

Also, as reported earlier on the 271 blog, Professor Wegner found that there has been almost a 300 % increase in split panel CAFC opinions for claim construction cases in the wake of the en banc split opinion in Phillips. When the level of dissents in CAFC opinions over the past three years were measured, it was found that they averaged about 60 cases per year: 2004 (59 dissents), 2005 (61 dissents) and 2006 (62 dissents).

This count measured dissents in part but not pure concurrences, and also includes dissents from denial of en banc rehearing. The 62 figure for 2006 was annualized from a count of 55 through October 12th.

On a similar note, Professor Michael Risch from Stanford Law School has published a working paper titled "Running the Gauntlet: The Failure of Public Notice in Patent Law." Patents often contain technical information intertwined with legal meaning, and inventions are often difficult to describe in words. Professor Risch argues that interpreting a patent is like running the gauntlet: patents are interpreted using different sets of rules at different times, such that meaning depends on who is reading the patent and when. In the paper, he demonstrates that at least ten opportunities exist during the life of a patent for different people to apply different rules in an attempt to discern the complete scope of a patent's claims. More importantly, Risch argues that the conflict between "prosecution standards" and "litigation standards" lies at the heart of the problem.

Of course, the Cybor decision wasn't spared in his paper - Mayer's dissent in Phillips is quoted as an example of the "zone of uncertaintly" that the Supreme Court's Markman decision cautioned against in the construction of patent claims:

[W]e have, however, disregarded our role as an appellate court; the resulting mayhem has seriously undermined the legitimacy of the process, if not the integrity of the institution . . . What we have wrought, instead, is the substitution of a black box, as it so pejoratively has been said of the jury, with the black hole of this court. Out of this void we emit "legal" pronouncements by way of "interpretive necromancy"; these rulings resemble reality, if at all, only by chance. Regardless, and with a blind eye to the consequences, we continue to struggle under this irrational and reckless regime . . .

Monday, November 27, 2006

Decision to Revisit Cybor Denied Amidst Divided Court

Amgen v. Hoechst Marion Roussel (05-1157 ) - November 22, 2006
(Petition for en banc rehearing denied)

Since the Federal Circuit decided in Cybor Corp v. FAS Techs., Inc., 138 F.3d 1448 (Fed. Cir. 1998) that the construction of patent claim language is a question of law that is reviewed de novo, what originally seemed like a moderately reasonable post-Markman ruling has snowballed into a veritable nightmare for the patent bar. Since appeals on claim construction issues give little to no deference to lower court findings, appeals have practically become crapshoots for litigants. The oft-quoted statistic of 50% reversal rates have made it extremely difficult for litigants to understand their true positions until after the CAFC has spoken.

In Amgen, the appeal surrounded the construction of the term “therapeutically effective amount” of erythropoietin, where the CAFC panel reversed the lower court’s construction based on its interpretation of the specification.

HMR requested for a rehearing en banc but was denied by a fractured CAFC, which issued six separate dissenting and concurring opinions. While Cybor was spared this time around, it is clear the the CAFC has some changes in mind on the issue of claim construction. This case also appears to have the "maiden opinion" of Judge Kimberly Moore (what a way to start off your CAFC career!), who does not appear to be a big fan of Cybor:

Opinions Supporting Denial of En Banc Rehearing:

LOURIE - I concur in the decision of the court not to rehear this case en banc. I do so, even though I agree that the panel erred in construing the claim limitation "a therapeutically effective amount." However, this issue is enbancable only on the uniformity or exceptional importance grounds. In this case, the interpretation of "a therapeutically effective amount" with respect to this particular patent specification seems to me to be case-specific, and it does not therefore raise a question of uniformity of decision or exceptional importance.

GAJARSA, LINN and DYK - We concur in the denial of rehearing en banc. Our concurrence should not be read as an endorsement of Cybor . In an appropriate case we would be willing to reconsider limited aspects of the Cybor decision. In our view an appropriate case would be the atypical case in which the language of the claims, the written description, and the prosecution history on their face did not resolve the question of claim interpretation, and the district court found it necessary to resolve conflicting expert evidence to interpret particular claim terms in the field of the art. This is not such a case.

Opinions Opposing Denial of En Banc Rehearing:

MICHEL and RADER - Four practical problems have emerged under the Markman-Cybor regime: (1) a steadily high reversal rate; (2) a lack of predictability about appellate outcomes, which may confound trial judges and discourage settlements; (3) loss of the comparative advantage often enjoyed by the district judges who heard or read all of the evidence and may have spent more time on the claim constructions than we ever could on appeal; and (4) inundation of our court with the minutia of construing numerous disputed claim terms (in multiple claims and patents) in nearly every patent case . . . I believe the time has come for us to re-examine Cybor's no deference rule. I hope that we will do so at our next opportunity, and I expect we will.

NEWMAN - I do not share the view, expressed here by some colleagues, that this court should not intrude upon panel decisions when major errors of claim construction are pointed out on petition for rehearing en banc. The Federal Circuit has a special obligation to provide predictability and consistency in patent adjudication, for our panel decisions are of nationwide effect; indeed, this obligation was a justification for the court's holding, a decade ago, that the district court's claim construction receives non-deferential review on appeal. This appellate position imposes on us the obligation to state the correct law, even on rehearing en banc. If the meaning of "therapeutically effective amount" is treated as a question of law, its correct definition as well as the methodology by which it is defined are squarely within the criteria for rehearing en banc. And if the meaning is recognized as a case-specific finding of fact, appellate review warrants deference to the trier of fact, a deference here lacking.

RADER - I urge this court to accord deference to the factual components of the lower court’s claim construction. As is often the case, the district court was better positioned than this court to reach the proper construction. Indeed, in this case, the trial court held a nine-day trial, including testimony of artisans informed of the meaning of "therapeutically effective amount" at the time of invention. The trial court, while noting that it did not rely on expert testimony to construe the claim, specifically noted that such testimony offered during the trial fully supported the district court's claim construction. Given this court’s rule toward limited reliance on extrinsic evidence in claim construction, district court judges have learned to disclaim any reliance on expert testimony. Yet, in this case the trial court took testimony for nine days – hardly necessary if the judge was merely reading and relying upon the intrinsic patent document alone.

MOORE - I dissent because I believe this court should have taken this case en banc to reconsider its position on deference to district court claim construction articulated in Cybor. Five judges of this court have written opinions in this case expressing disagreement with the two judge panel majority’s claim construction even under the de novo standard of review. I commend the district court for its thorough, detailed, thoughtful, and competent efforts in construing this claim limitation. The district court did everything we have asked it to do, and in my opinion, did it correctly. While this may not be a basis for taking the case en banc, reconsideration of the deference accorded to the district court in this case would have been. Therefore, I would grant en banc review.

Is Supreme Court review likely? It seems the answer is yes - with eight of the twelve judges expressing some willingness to tweak Cybor amidst this fractured decision, it is all but certain that a frenzy of petitioning will soon follow to support certiorari (Dennis Crouch at Patently-O has labeled this case and the Tamoxifen antitrust cases as "the two most likely to be granted certiorari in 2007").

Fannie Mae Agrees to Royalty-Free License on '503 Patent

After receiveing considerable heat from the banking industry (see 271 blog post here), Fannie Mae announced that it would allow any lender to use new patented lending technology "on a non-exclusive and royalty-free basis." While Fannie Mae appears to be relatively open to granting licenses, the company refused to place the technology entirely in the public domain.

Tuesday, November 21, 2006

Alternate Structures Leave Open the Possibility of Equivalents

Depuy Spine, Inc. v. Medtronic Sofamor, November 20, 2006 (05-1311)

This case revolved around pedicle screws and receiver members used in spinal surgeries. Pedicle screws are implanted into the vertebrae during surgery. The head of each pedicle screw is connected to a receiver portion, and a threaded rod connects the receiver portions of several screws. Together, the screws, receiver portions, and rods are used to stabilize spinal column segments.

Depuy appealed, among other things, the district court's grant of summary judgment that Medtronic's Vertex product did not infringe Depuy's U.S. Patent No. 5,207,678 literally or under the doctrine of equivalents.

On the issue of equivalents, the Federal Circuit considered whether Medtronic receiver's "cylindrical-conical shape" was equivalent to the '678 patent's "spherically shaped portion." Relying heavily on the "all elements" rule in Tronzo v. Biomet, Inc., 156 F.3d 1154 (Fed. Cir. 1998), the district court did not find a conical shape to be equivalent to a spherical shape without reading the limitation out of the claim, and that the Vertex model did not do "substantially the same thing" as the device in the ’678 patent.

The court noted that, as a practical matter, the "all elements" rule informs a doctrine of equivalents analysis by requiring that equivalence be assessed on a limitation-by-limitation basis, rather than from the perspective of the invention as a whole, and that no limitation be read completely out of the claim (i.e., "vitiated"). Thus, the "all elements" rule generally is not met—and therefore a claim limitation can be said to be vitiated—if the theory or evidence of equivalence is not able to establish that the differences between the limitation in the claim and the accused device are insubstantial.

In this case, the court found that there were sufficient questions of facts remaining between the two structures that precluded summary judgment:

We find no support in the present case for the district court’s conclusion that applying the doctrine of equivalents would vitiate or read out the "spherically-shaped" limitation. Our decision in Tronzo is factually distinguishable. In Tronzo, the invention related to artificial hip sockets and the patent at issue was a continuation-in-part. The independent claims that were added in the continuation covered a prosthesis socket with no specific shape. Because the written description only disclosed a conical shape for the prosthesis and characterized other shapes as "prior art" and "inferior" to a conical shape, we held that the independent claims were unsupported by the written description, not entitled to the parent’s filing date, and thus invalid in view of intervening prior art . . . The theory of equivalence, therefore, did not identify a specific element of the accused product as an equivalent to the "generally conical" limitation; rather, the patentee argued that any shape would be equivalent to a conical shape, despite clear indications in the written description to the contrary. We concluded that such a theory was insufficient as a matter of law and thus "would write the ‘generally conical outer surface’ limitation out the claims."

Here, unlike the patentee in Tronzo, DePuy did not propose that any shape would meet the "spherically-shaped" limitation. Rather, DePuy’s expert presented particularized declarations demonstrating its theory that a specific element of the accused device—the hollow conically-shaped portion of the receiver member—was insubstantially different from the corresponding "spherically-shaped" limitation because it supported the screw head, allowed for flexible movement, and—when the compression member is engaged—creates a rigid lock between the screw head and the receiver. Indeed, the expert expressly identified certain shapes that were different from the accused device but would not be capable of supporting the screw head, allowing flexible movement, and creating a rigid lock when the compression member is engaged. Also, unlike the patent at issue in Tronzo, the written description in the ’678 patent does not label other shapes as "prior art" and "inferior." Thus, unlike the theory presented in Tronzo, DePuy’s theory of equivalence was not improper.

AFFIRMED-IN-PART, REVERSED-IN-PART, AND REMANDED

Friday, November 17, 2006

"Patent Troll, Meet Sample Troll"

Last week, the copyright and music world was abuzz when Shawn "Jay-Z" Carter was served with a complaint alleging that samples contained in his 2003 single "Justify My Thug" infringed on Madonna's "Justify My Love." Interestingly, Madonna was not the plaintiff. Instead, a company called Bridgeport Music Inc. alleged to own the rights to the Madonna song and was suing on its own behalf.

Bridgeport is a one-man corporation (termed a "catalog company") owned by a former music producer named Armen Boladian. Just like certain patent "trolls," it has no employees and no reported assets other than copyrights. While most catalog companies quietly license rights for television commercials, cover songs, and selling sheet music to interested fans, Bridgeport has found that trolling for sampling cash can result in some big paydays.

Since 2001, Bridgeport launched nearly 500 counts of copyright infringement against more than 800 artists and labels. In 2005, in the case of Bridgeport Music v. Dimension Films, the Sixth Circuit created a jaw-dropping rule in faor of Bridgeport, stating that any sampling, no matter how minimal or undetectable, is a copyright infringement (quoting the court: "get a license or do not sample. We do not see this as stifling creativity in any significant way" - view the decision here). In March of this year, Bridgeport convinced a court to enjoin the sales of the best-selling Notorious B.I.G. album "Ready to Die" for illegal sampling. A jury awarded Bridgeport $4.2 million in damages.

Professor Tim Wu from Columbia Law School details the actions of Bridgeport, and discusses the impact this behavior is having on the music industry. He also proposes some solutions to the "sample troll" problem:

Legal solutions to the sample-troll problem are relatively easy—much easier than fixing the patent-troll problem. First, there's only one appellate court, the 6th Circuit, that takes the ridiculous position that any sample, no matter how minimal, needs a license. Most copyright scholars think the decision is both activist and bogus—in the words of leading commentator William Patry, "Bridgeport is policy making wrapped up in a truncated view of law and economics." Other courts can easily counter Bridgeport. They just need to say that the infringement rules for sampling are the same rules that apply for the rest of copyright. Dumbledore may resemble Gandalf, but he's no infringement. Similarly, if you can't even recognize the original in a sample, it shouldn't violate federal law to use it.

Congress could also easily act against the sample trolls. All that is needed is a "sampling code": a single section of the law that declares the usage of some fixed amount of a sound recording, say, seven notes or less, to be no infringement of the copyright law. That would give artists a simple rule to live by, while still requiring licenses for big samples that would compete with the original. It's a win-win scenario. With a single line of code, Congress can make this problem go away.

See more details on Tim Wu's webpage here.

Thursday, November 16, 2006

Claim Interpretation Destroys Literal Infringement, But Not Equivalents

Abraxis Bioscience, Inc. v. Mayne Pharma (06-1118) - November 15, 2006

Mayne appealed a judgment of literal infringement and infringement under the doctrine of equivalents, arguing that the district court erred in the construction of the term "edetate," (EDTA) which is a limitation in each of the asserted claims.

This term was construed by the district court as "EDTA as well as compounds structurally related to EDTA regardless of how they are synthesized." Based on the district court’s construction of "edetate" as encompassing structural analogs of EDTA, the court found that Mayne’s generic propofol formulation infringed.

The Federal Circuit focused closely on the specification, and found that the inventors' definition of edetate listed several derivatives of EDTA that are suitable for the invention, but all of the listed derivatives were salts of EDTA, but not structural analogs. Other statements in the specification that listed agents as advantageous, preferable and "exceptional" convinced the court that the feature was limited to EDTA salts. One particular statement in the specification was noted by the court:

We then investigated the possible use of other agents which might have the action that we sought. We unexpectedly found that edetate, which is not regarded as a broad spectrum antimicrobial agent was the only agent that would meet our requirements.
This statement indicated that edetate possessed particular chemical properties that allowed it to work as an effective antimicrobial agent and that the term "derivatives" was not intended to extend broadly.

Since Mayne's use of DTPA was not a derivative or salt of EDTA, the court reversed the finding of literal infringement.

However, on the issue of doctrine of equivalents, the court upheld the finding of infringement. Performing the function-way-result test, the court concluded that DTPA performs substantially the same function in substantially the same way to achieve the same result as edetate. This was further supported by findings made by the district court that DTPA was specifically chosen for Mayne's generic propofol formulation because of its structural similarities to edetate and the likelihood that it would match the product characteristics and stability profile of Abraxis’ patented formulation.

The court also found that Abraxis did not clearly disavow DTPA by claiming edetate, since there was no evidence that the patentees made a "clear and unmistakable surrender" of DTPA during prosecution. In fact, the Federal Circuit agreed with the lower court that "the antimicrobial activity of calcium trisodium DTPA was unforeseeable during prosecution."

This is an interesting case, which underscores one of the major problems in patent law: claim interpretation. The claims in the patents for this case went through numerous stages of interpretation through filing, prosecution, litigation and appeal. In retrospect, this seems like a perfectly reasonable opinion. However, there's also a strong argument that anyone reading the patents and file wrappers prior to this case could not possibly have predicted this type of outcome.

N.D. Cal. Patent Rules Governed by Federal Circuit Law

O2 Micro International Ltd. v. Monolithic Power Systems (06-1064) - November 15, 2006

02 Micro appealed the lower court’s grant of summary judgment of non-infringement in favor of Monolithic Power Systems ("MPS"), where the reason for non-infringement was primarily based on the district court denying Micro leave to amend its infringement contentions and refusing to allow supplementation of its expert report.

This case concerned the interpretation and application of the N.D. California's local rules for patent cases (download rules here). Generally, a party claiming patent infringement in the Northern District must serve preliminary infringement contentions within ten days of the initial case management conference. The preliminary contentions generally become the final contentions thirty days after the claim construction ruling unless a party serves final infringement contentions. Outside of this thirty day period, amendments or modification to the contentions can only be made "by order of the Court…upon a showing of good cause."

02 Micro filed preliminary infringement contentions and served its final infringement contentions after a Markman hearing was held. While discovery was ongoing during this time, the contentions relied on the same theory of infringement.

However, after Micro deposed MPS's chief engineer, Micro developed a new, and presumably better, theory of infringement, even though Micro had documents supporting the new theory almost a year earlier. After (unsuccessfully) attempting to negotiate with MPS to stipulate to the new theory, Micro went ahead and introduced the new infringement contentions to the judge 3 months later. The judge refused to grant the motion to amend the infringement contentions, finding the delay constituted a lack of diligence, and that MPS would be prejudiced by the delay.

On appeal, the Federal Circuit decided that the N.D. Cal. Patent Rules were governed by Federal Circuit law. While declining to broadly rule on all local patent rules, the court decided that, in this instance, "issues concerning the validity and interpretation of such local rules are 'intimately involved in the substance of enforcement of the patent right,' . . . and must be governed by the law of this circuit."

The Federal Circuit acknowledged Micro's argument that refusing to allow any amendment to contentions based on new information developed in discovery could be contrary to the spirit of the Federal Rules. However, the court added:

[W]e see nothing in the Federal Rules that is inconsistent with local rules requiring the early disclosure of infringement and invalidity contentions and requiring amendments to contentions to be filed with diligence. If the parties were not required to amend their contentions promptly after discovering new information, the contentions requirement would be virtually meaningless as a mechanism for shaping the conduct of discovery and trial preparation.

Thus, we reject 02 Micro’s apparent argument that "good cause" must exist for amending its infringement contentions, without regard to its diligence in doing so,
merely because new evidence was revealed during discovery.

Finding that Micro was not diligent in submitting the new contentions, the court affirmed the lower court and also found no abuse of discretion in refusing to supplement Micro's expert report.

Tuesday, November 14, 2006

E.D. Texas Rules Big for Defendant Comcast

In Caritas v. Comcast (2-05-cv-339), district Judge David Folsom of the Eastern District of Texas in Texarkana found in October that Comcast had not infringed on Caritas' patent, based on the underlying Markman ruling. Last week, Folsom formally entered that judgment.

This case could have had devastating effect on the Voice over IP (VoIP) industry, especially as it pertains to cable providers’ VoIP offerings - during settlement meetings, it was reported that Caritas was asking for $2.2 billion dollars from Comcast, and it was almost certain that other VoIP providers would have been subsequently targeted if Comcast settled or lost in court.

One of the patents at issue, U.S. Patent 6,661,799, reads as follows:

1. A system for controlling communication among a plurality of conferees, the system comprising:

a digital computer for controlling and monitoring telephonic connections over an Internet Protocol (IP) communication network; and

a switch interface in communication wit the digital computer over said IP communication network and further in communication with a dial up communication network, wherein:

the digital computer transmits digital control signals to the switch interface over the IP communication network;

the switch interface transmits telephonic control signals to the dial up communication network in response to said digital control signals to establish at least one telephonic connection for a conference among the plurality of conferees; and

the digital computer subsequently monitors the at least one telephonic connection over the IP communication network.


Caritas claimed the patent could be read to include calls that were made partly using VoIP connections and partly across the public switched telephone network (PSTN). During litigation, a hotly contested issue was the meaning of term, “telephone connection in a telephone network.” The Markman ruling held that the patent owned by Caritas was intended as a way to set up conference calls on the PSTN, and not a way to have actual voice signals transmitted over an IP network. The court subsequently issued a ruling asserting that the term, “telephone connection in a telephone network,” means a circuit-switched connection between telephones."

Since Comcast didn't use circuit-switched connections, Caritas stipulated to a judgment of non-infringement, and is expected to appeal the decision to the Federal Circuit.

While this wasn't a jury verdict, you nevertheless have to wonder is the current pro-plaintiff environment is starting to slip at the E.D. Tex. - in September, Michael Smith at the E.D. Texas Blog speculated that the win rate for plaintiffs this year is hovering about 60% ("a whopping one percent over the national average")

See Caritas's current patent portfolio here.

See Jessie Seyfer's reporting in The Recorder on this case here.

Monday, November 13, 2006

Federal Circuit Interprets Another "Permanently Secured" Patent Element

Akeva LLC v. Adidas/Salomon (06-1090) - Non Precedential

Akeva sued Adidas for infringement of certain claims of two of its patents: U.S. Patent No. 6,662,471 (the '471 patent) and U.S. Patent No. 6,604,300 (the '300 patent). These patents describe improvements to athletic shoe heels, where the specifications of both patents describe a "flexible member" improvement that can be incorporated in rear soles that are detachable, or rotatable, or permanently secured. The district court construed these patents as covering shoes with rotatable or detachable rear soles only.

Akeva argued that the ordinary meaning of the claim should be given to the term and that the ordinary meaning would encompass permanent, removable, and rotatable soles to athletic shoes. However, after reviewing the specification, the Federal Circuit found no evidence that permanent soles were covered by the claims:

No embodiments, however, of the '471 patent include permanently attached heels. Of course, the absence of an embodiment does not necessarily exclude that embodiment from the scoop of the invention. Liebel-Flarsheim Co. v. Medrad, Inc., 358 F.3d 898, 906 (Fed. Cir. 2004). But here, the specification when read as a whole clearly demonstrates that the scoop of the invention is athletic shoes with detachable heels which may include an optional flexible plate . . . Akeva cites Golight, Inc. v. Wal-Mart Stores, Inc., 355 F.3d 1327, 1331 (Fed. Cir. 2004), in which the court found no disclaimer where the specification states the invention "includes" some feature where it is only one of several features described as significant or important. However, this case is distinguishable because the detachable sole of the '471 patent is not one of several features, it is the primary feature of the invention.
The '300 patent specification stated that "[t]he flexible region also need not be used only in conjunction with a detachable rear sole, but can be used with permanently attached rear soles as well." However, the Federal Circuit discounted this passage, stating that, when read in the context of the rest of the specification, the teachings disclaimed permanently attached rear soles that do not at least rotate.

Akeva also tried to avail itself of Microsoft Corp. v. Multi-Tech Sys., Inc., 357 F.3d 1340, 1349-50 (Fed. Cir. 2004) to have the Federal Circuit consider prosecution of an earlier patent to construe later-used claim terms. However the court balked on this proposition: "[i]n those cases, the patents had the same specification. Here, the '126 patent on which Akeva relies has a different disclosure than the '300 patent."

Affirmed

271 Blog Note: For similar Federal Circuit cases that encountered considerable complications on these types of terms, see

Dorel v. Graco - stuggling with the term "removably attached"

K2 Corp v. Salomon S.A. - same problem with "permanently affixed" (see Managing IP article titled "Rulings construe claim portions out of context" here)

Friday, November 10, 2006

Recent Trend In Japanese Patent Litigation Alarms Plaintiffs

IPLaw360 is reporting that patent plaintiffs in Japan are becoming frustrated over the state of litigation in the newly-created Tokyo and Osaka patent courts of Japan. Recent procedural reforms were enacted to speed up litigation, and one of the reforms empowered judges to invalidate patents during litigation, rather than simply dismissing claims over a concurrent invalidation proceeding.

After a brief uptick in the number of patent cases filed, patent holders have been taken aback by recent rulings that have gone sharply against the plaintiff - one estimate speculated that the success rate for plaintiffs is currently at 15%. Similar criticisms were voiced against courts in South Korea, where the success rate at getting preliminary injunctions is "less than 20%."

U.S., Japan and EU Start Discussions On Cross-Border Recognition of Granted Patents

Representatives from the patent offices of Japan, the United States and Europe have announced that they will begin discussions toward the introduction of a system for mutual recognition of patents. Under the proposed system, patents awarded in one country (e.g., U.S.) would be immediately recognized in the other regions (e.g., Japan, Europe) without further examination.

Heads of three patent authorities (JPO, EPO, USPTO) intend to sign an agreement at the Trilateral Cooperation conference to be held next Friday (Nov. 16) in Tokyo on setting up a working panel for the purpose. The standardized application forms are planned to be introduced for a trial run in the spring of 2007, with the official introduction planned for 2008.

The working group will hold its inaugural meeting in March 2007 in the United States to discuss issues regarding (1) problems involved in establishing the patent mutual recognition system; (2)possible revisions to intellectual property laws in countries concerned, and (3) what form the system will take.

While the U.S. "first-to-invent" system is one topic that is slated to be discussed, no word was given on the manner in which software and business-method patents would be treated among the participants.

You can download a draft agenda of the Nov. 16 user meeting here.

Wednesday, November 08, 2006

Experimenting With KSR v. Teleflex - Can Hindsight Be Mitigated? (Part 2)

Given Professor Mandel's findings on hindsight and obviousness (see yesterday's post), his studies went beyond empirical analysis and looked at how the Federal Circuit was applying the suggestion test under hindsight conditions. His analysis focused on the suggestion test as a rule of evidence in patent law, which was previously analyzed by Christopher Cotropia here. Is the court's approach "lowering the obviousness bar?" The answer appears to be "no."

Critics of the suggestion test contend that, simply because combining references is not suggested by a prior suggestion, teaching, or motivation, this does not necessarily mean that it was not obvious to combine the references. PHOSITAs, for instance, may not bother to record obvious aspects of ordinary skill in their field, or technological advance may move so rapidly that there is not time to record or publish obvious combinations.

Mandel submits that this contention misses the point:

This line of argument critiquing the suggestion test glosses over or misses critical doctrine concerning the suggestion requirement. Under Federal Circuit case law, a decision-maker may rely on an implicit suggestion or motivation to combine prior art references—the suggestion or motivation does not need to be recorded or documented. Federal Circuit precedent provides two implicit bases, the "nature of the problem to be solved" and the "knowledge of persons of ordinary skill in the art," as acceptable bases for combining prior art in the non-obvious analysis. A decision-maker can depend on these criteria, therefore, to identify motivations for combination that no PHOSITA has bothered to record or document, either because the combination seems basic, because technological advance is occurring rapidly, or for some other reason. The Federal Circuit recently confirmed that a suggestion may be implicit: "A suggestion, teaching, or motivation to combine the relevant prior art teachings does not have to be found explicitly in the prior art." (In re Kahn, Ruiz v. Chance)
Another line of criticism is that the suggestion test is appropriate, but is applied improperly by the Federal Circuit, particularly when suggestions from the nature of the problem to be solved, or the knowledge of a PHOSITA, are purportedly ignored. However, a review of Federal Circuit non-obvious decisions suggests that the court rarely engages in such conduct.

In almost all non-obvious opinions, the Federal Circuit explicitly identifies the nature of the problem and knowledge of a PHOSITA as potential sources for finding a suggestion to combine references. Cotropia's study (see above) of all reported Federal Circuit non-obvious decisions over a recent three-year period found many cases in which the Circuit actually relied on one of implicit forms of suggestion or motivation.

In the few cases in which the Circuit appeared to ignore the potential implicit potential evidence in applying suggestion test, Cotropia concluded that the Circuit was actually simply applying a rule of evidence to exclude unreliable suggestion evidence, such as mere conclusory statements that a given combination was obvious. Over the last three years, only four non-obvious cases decided by the Federal Circuit appeared to ignore implicit evidence of a suggestion to combine references. One of those four was KSR v. Teleflex.

Thus, while bifurcating obviousness appears to have the greatest effect on mitigating hindsight, Mandel argues that the suggestion test should be retained as a "second-best" option:

The hindsight bias thus remains unresolved in current patent jurisprudence. It is appropriate, therefore, to repeat a call to bifurcate the non-obvious issue whenever possible—this remains the only means identified to eliminate the hindsight bias in patent decisions . . . Bifurcation is the only means identified to achieve non-obvious decisions that comport with the non-obvious requirement enacted in the Patent Act and developed in Supreme Court precedent.

For circumstances in which the non-obvious issue cannot be bifurcated (most significantly, cases tried to judges), the suggestion, teaching, or motivation test remains a legitimate second-best option. The results reported here indicate that the suggestion test does not distort non-obvious decisions in the manner claimed by critics. In addition, as discussed below, the test may help mitigate the hindsight bias for certain types of invention that would not have been identified in these studies (e.g., complex technology inventions). As the hindsight bias is known to substantially prejudice non-obvious decisions, the suggestion test should be retained because the problem it confronts (erroneous decisions that an invention is obvious in hindsight) is known and significant, while the problem the test is alleged to create (over-compensation for the hindsight bias) is unconfirmed and conjectural.

Tuesday, November 07, 2006

Experimenting With KSR v. Teleflex - Can Hindsight Be Mitigated? (Part 1)

Earlier this year, Professor Gregory Mandel published a paper that empirically studied the effects of hindsight bias, and concluded that this bias has the potential to seriously undermine obviousness determinations in patent law. Specifically, the study found that, once outcome information is known (i.e., the invention), people are cognitively incapable of preventing that information from influencing their understanding of past events. As a result, individuals consistently (and unconsciously) exaggerate what could have been anticipated in foresight.

In light of the KSR v. Teleflex case being considered by the Supreme Court, Professor Mandel decided to expound on his previous study and empirically test each competing theory before mock juries.

In a nutshell, the petitioner in KSR argues that the "suggestion test" - which requires that there be some pre-existing suggestion, teaching, or motivation to combine references - violates the Patent Act and the Supreme Court’s non-obvious precedent in Graham because the suggestion test purportedly lowers the obviousness bar and results in obvious advances being improperly found as non-obvious. Specifically, one argument is that combining references may have been obvious even if there was no explicit suggestion, teaching, or motivation to combine the references in the prior art.

Participant mock jurors in Mandel's study were given a hypothetical fact scenario concerning an invention, where the scenario was based on facts surrounding an actual issued patent that was challenged on non-obvious validity grounds in litigation and was the subject of a reported decision. The scenario included background information about the field of art of the invention, a variety of prior art reference information, a description of the problem that a person cast in the role of the inventor was working on, and a questionnaire.

To test the impact of the Federal Circuit’s suggestion instructions on the hindsight bias, foresight, hindsight, and suggestion instruction versions of the scenarios were designed. A separate condition was developed to examine the impact of the Supreme Court’s Graham framework on the hindsight bias. The results were as follows:

• Participants rated inventions non-obvious significantly more frequently in foresight than in hindsight in both the scenario without a suggestion to combine prior art references and the scenario with a suggestion to combine;

• For the scenario with no suggestion to combine, 42% of participants in the foresight condition thought that a solution to the problem was obvious, while 71% of participants in the hindsight condition thought that a solution was obvious;

• Results were similar for the scenario that included the explicit suggestion to combine: 49% of participants in the foresight condition thought that a solution to the problem was obvious, while 85% of those in the hindsight condition thought that a solution was obvious.

Thus, the study empirically demonstrated that use of the suggestion test was not a determinative factor in finding non-obviousness:
Regardless of whether there was a suggestion to combine references, mock jurors were no more likely to consider an invention non-obvious when instructed on the Federal Circuit’s suggestion, teaching, or motivation requirement than they were in the hindsight condition without instruction . . . As expected, Graham instructions had no significant effect on judgments of obviousness.
Professor Mandel continues:

[B]ased on the results of the instant study, the suggestion requirement does not cause the problems attributed to it. Critics of the suggestion requirement argue that, as a result of the suggestion test, inventions are improperly held to be non-obvious in situations where there is no explicit suggestion to combine elements in the prior art, even though the combination may have been obvious. For the scenarios in this study for which no suggestion to combine prior art references existed, mock jurors who received the Federal Circuit’s suggestion, teaching, or motivation instruction were no more likely to conclude that an invention was non-obvious than mock jurors who received no such instruction. The study indicates that the harm
hypothesized to be caused by the suggestion test does not materialize.

That being said, the study results are by no means a ringing endorsement of the suggestion requirement. The results indicate that the suggestion test also does not achieve its primary goal - ameliorating the hindsight bias. Mock jurors who received the suggestion instruction were subject to the same hindsight bias as those who received no instruction. This outcome was consistent whether or not there was a suggestion to combine references in the scenario.

Thus, Mandel proposes that bifurcating obviousness where possible seems to be the most viable solution for the time being. Bifurcation is not a perfect or complete solution, but has been demonstrated to produce far more accurate non-obvious decisions than current methods and jurisprudence. In addition, bifurcation would eliminate the need for the suggestion, teaching, or motivation requirement in the first instance. If there is no hindsight bias then there is no need to mitigate its effect.

Read Professor Mandel's article "Patently Non-Obvious II: Experimental Study on the Hindsight Issue Before the Supreme Court in KSR v. Teleflex"

The earlier study: "Patently Non-Obvious: Empirical Demonstration that the Hindsight Bias Renders Patent Decisions Irrational"

271 Blog: Should Obviousness in Patent Cases be Bifurcated to Avoid Hindsight Bias? (Part 1 of 2)

271 Blog: Should Obviousness in Patent Cases be Bifurcated to Avoid Hindsight Bias? (Part 2 of 2)

Friday, November 03, 2006

Friday Funny

The Techknowledgy Blog posted this side-splitter on domain names, and the care that must be given in reconciling the plain-English name with the domain name when organizing a web site:

Speedofart.com anyone? How about Penisland.net? These are but a few of the unintentional bad domain names floating around out there these days. We've all heard horror stories about some company painstakingly picking the perfect name for a product, only to find out that the term they so carefully chose actually means "goat boogers" in many of the countries where they intend to market their wares. Well, a similar thing can happen with domain names. Consider the first two listed, which are legitimate sites for Speed of Art and Pen Island respectively. There are more.

Consider a site called "Who Represents" where you can find out who Tom Cruise's agent is: www.whorepresents.com (its his sister). Or you can visit www.therapistfinder.com if you are looking for a good - get this - therapist (what were you thinking!). Believe it or not, www.molestationnursery.com will take you to the site of Mole Station Native Nursery from Australia. My kids got a kick out of www.ipanywhere.com . . . Finally, if you're planning for a holiday at the lake, you will definitely want to visit www.gotahoe.com.

Should Legal Methods Be Denied Patents?

A lot of buzz was created when the New York Times came out against tax strategy patents in an editorial published on October 31 (see earlier 271Blog post here). Putting aside the aversion to business method patents themselves, a central concern of tax strategy patent critics is that these patents have the potential to create huge problems for end-users, since the patents are more closely aligned with man-made regulatory law then they are with laws of nature. Accordingly, given the right scope of a particular patent, an end-user could be faced with the option of (1) paying more money in taxes, or (2) paying money for legal advice and a potential a license to use a patented tax-saving strategy.

Andrew Schwartz from Wachtell Lipton published a draft article recently, called "The Patent Office Meets the Poison Pill: Why Legal Methods Cannot Be Patented." Andrew correctly points out that the Patent Office views legal methods as just a type of business method, and hence patentable under State Street. Thus, the Patent Office has granted patents for specific type of legal method patent, namely methods of avoiding or minimizing tax liability under the federal Internal Revenue Code.

However, Schwartz contends that there appears to be no relevant distinction between tax strategies and other types of legal methods, such as corporate structures or litigation techniques. Being a construct of positive law (or a "law of man"), they should not be held out as statutory subject matter, since the patentability of something should depend from its function under a law of nature, regardless of whether or not a regulatory law allows the invention to be legally practiced.

Schwartz points out that legal methods per se are distinguishable from business methods, since most, if not all, novel business methods either improve economic efficiency, or utilize or harness a law of nature, for human benefit. Accordingly, the current legal position on business methods is a workable model that should remain relatively undisturbed. However, when it comes to patents relating to legal methods, very few of the policy justifications for patent protection exist. For one, economic theory suggests that the nature of methods that are primarily focused on complying with legal methods are not susceptible to concepts of "innovation" like other areas. Second, legal methods cannot be kept secret, and thus cannot suffer detrimental effects when patenting is denied altogether:

Our legal system reveres precedent, and novel legal structures or techniques are generally frowned upon. Hence, by their nature, legal methods only become valuable once they have been approved—in public—by a court or regulator. During any period when a legal method is maintained as a secret, it is, in a sense, inchoate, and practically worthless until it receives official sanction. A tax strategy that has never been tested in court or approved by the IRS, for example, may not be worth the paper upon which it is printed, because it could at any moment be deemed by the government to be invalid.

When the poison pill was first introduced, for example, its legality—and thus utility—under state (particularly Delaware) law was unclear, and few companies had been willing to adopt it. After the Delaware Supreme Court, in Moran v. Household Int’l Inc., upheld the poison pill as proper under that state’s corporate law, however, its legitimacy was established, and it became widely used.

As soon as a legal method is approved by the government, it suddenly becomes valuable. But, at that very moment, the legal method also becomes part of the generally applicable law that everyone is expected to know, and obliged to follow. It would therefore be most inappropriate, and possibly even violative of Due Process—to give a private party the power to exclude others from employing a legal method that she pioneered.

There is a minor nit that warrants some picking here, that is not based on the premise of the article, but rather on the practical considerations surrounding the filing and enforcement of patents. The article does a good job distinguishing between legal methods, and patents related to regulated industries (such as the UNOCAL reformulated gasoline patent that overlapped into California's low-emissions law). However, tax strategy and other legal method patents will rarely, if ever, claim the law or regulatory provision itself that is pertinent to the legal practice of the invention. In other words, no one will claim "a tax-favored annuity, governed by section 403(b), purchased by 501(c)(3) organizations, comprising . . ." Patent law disfavors the explicit citation of standards or regulations within the body of claims, since the changing nature of most standards would render such a claim indefinite. But without this type of language, it is would be extremely difficult to argue that a "legal method" was being claimed.

Nevertheless, it is an insightful article that is worthy of a read, and can be viewed here.

As an aside, it appears that at least one (literal) legal method has already been granted by the USPTO - US Patent 6,607,389, "Systems and methods for making jury selection determinations" (this one's good for a laugh).

See also US Patent Publication 20030040996, "System and method for managing concentration of corporate debt" (discussing issuances of debt securities and remedies for currently traded debt securities, depending on the capital structure of the corporation, that can be adopted by the Board, like a Poison Pill) - currently this application was successfully appealed, but remains rejected under 101 and 112 issues, as well as a 103 rejection - see prosecution history here.

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