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

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 . . .

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.

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

"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.

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.

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.

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)

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.

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.

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 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.

The Federal Circuit "Top Ten" No-No's

In an effort to assist counsel in filing briefs and motions that comply with the Federal Rules of Appellate Procedure, the Clerk's Office has prepared lists of the "Top Ten Reasons" why most documents are rejected.

Top 10 Reasons Why Formal Briefs Are Rejected

1. A proof of service does not accompany the Appendix. Fed. R. App. Proc. 25(d).

2. Footnotes are not printed in the same size font as the text of the brief. Practice Note to Rule 32.

3. The brief does not contain a certificate of interest. Fed. Cir. R. 28(a)(1).

4. The cover of the brief does not follow the official caption provided by the Clerk. Fed. R. App. Proc. 32(a)(2)(A – D). A copy of the official caption should be received with the docketing statement.

5. The brief contains an impermissible addendum. Excluding the required addendum in the Appellant or Petitioner’s brief, an addendum attached to any other brief is acceptable if it contains only statutes, rules, regulations, etc. Fed. R. App. Proc. 28(f).

6. The table of contents of any non-confidential brief or appendix must describe the general nature of the confidential material that has been deleted. Fed. Cir. R. 28(d)(1)(B) and Fed. Cir. R. 30(h)(1)(B); Example in Practice Note 28.

7. The Appellant or Petitioner’s brief does not contain the judgment, order, or opinion in question as an addendum placed last within the brief. Fed. Cir. R. 28(a)(12).

8. The brief does not contain a statement of related cases. Fed. Cir. R. 28(a)(4).

9. The appendix must begin with a table of contents identifying the page at which each part begins. Fed. R. App. Proc. 30(d).

10. When the brief and appendix are combined, the cover must so indicate. Fed. Cir. R. 30(d)(1).

Click here for the publication.


Top 10 Reasons Why Motions Are Rejected

1. The motion does not include a certificate of interest. (Fed. Cir. R. 27(a) and 47.4)

2. The person signing the motion has not entered an appearance, or, there is no declaration of authority. (Fed. Circ. R. 47.3(d) and 27(a)(6))

3. The Official Caption or abbreviated caption is incorrect. (Fed. Cir. R. 27(a)(2))

4. Not enough copies are provided with the motion, response or reply. (Fed. Cir. R. 27(j) and Fed. R. App. P. 27(d)(3))

5. A proposed order is not attached where the parties have consented to the motion for a procedural order. (Fed. Cir. R. 27(a)(9)) and 27 (a)(5))

6. The motion does not state grounds for an enlargement of time. (Fed. R. App. P. 27(a)(2)(A) and Fed. Cir. R. 27(a)(4))

7. The motion does not contain a statement of consent. (Fed. Cir. R. 26 (b)(3) and 27(a)(5)).

8. No copy of the decision or order is attached to the motion. (Fed. R. App. P. 27(a)(2)(B)(iii))

9. The title of the response does not reflect a request for further relief. (Fed. R. App. Proc. 27(a)(3)(B))

10. The movant does not include an affidavit or declaration required by Fed. Cir. R. 26(b)(5) and 26(b)(1)(B)).

Click here for the publication.

Patent Tips For China

Todd Dickinson, former USPTO Commissioner and current VP and chief IP counsel at GE, spoke at the recently-held China intellectual property conference in London, and provided some tips for companies looking to expand their patent rights in China:

• Policy regarding ownership of employee inventions is unsettled in China. Currently the law leans towards the employee, which can create problems from a business perspective.

• If the R&D for an invention is carried out in China, the draft patent must first be filed in China before it can be filed anywhere else.

• If a patented technology isn't used within three years, the government has the right to claim the patent for itself under the compulsory licensing law.

• Filing a patent in China may immediately expose the invention to counterfeit.

• Make sure relevant patents are registered in Chinese, not just English - patents not filed in Chinese have a tendency to be disregarded. Keep in mind that translation costs may likely be higher than the filing process itself.

• Make sure customs officials are aware of you and your product. Don't let infringement continue without a challenge.

• Most importantly, while China has taken great steps in protecting IP rights, the system is still perceived as having fundamental flaws. Think hard about releasing key technologies in China. According to Dickinson "at the moment it is just not worth it."

However, see the article "Overcoming Intellectual Property Phobia in China" - according to Chief Justice Jiang Zhipei, commissioner of the Trial Committee and Chief Justice of the Third Civil Trial Chamber (Intellectual Property Right Trial Chamber) of the Supreme People's Court of China, “Ninety per cent of infringement cases launched by foreign firms in China are successful, however very few are embarked upon as it is perceived as being too hard.”