*** Intellectual Ventures Launches Massive Litigation Across 3 Industries ***

"Gentlemen, you can't fight in here - This is the War Room!
         -- President Merkin Muffley (Dr. Strangelove, 1964)

For some, this was a surprise.  For most everyone else, it was a matter of "what took so long?"

From this morning's newswire:

Today Intellectual Ventures ("IV") enforced its rights and filed patent infringement complaints in the U.S. District Court of Delaware against companies in the software security; dynamic random access memory (DRAM) and Flash memory; and field-programmable gate array (FPGA) industries.

"Over the years, Intellectual Ventures has successfully negotiated license agreements with some of the top technology companies in the world. However, some companies have chosen to ignore our requests for good faith negotiations and discussions," stated Melissa A. Finocchio, Chief Litigation Counsel, Intellectual Ventures. "Protecting our invention rights through these actions is the right choice for our investors, inventors and current licensees."

Despite the creation of a "Patent Defense Fund" (to protect against patent trolls, don't-you-know) and assurances that IV is "opposed to litigation" (for more on that, see here), IV has decided to launch 3 lawsuits involving over 10 patents in the following industries:

Software Security - defendants include Check Point Software, McAfee, Inc., Symantec and Trend Micro.  To view the complaint, click here.

DRAM / Flash RAM Memory - defendants include Elpida Memory Inc., and Hynix Semiconductor.  To view the complaint, click here.

Field-Programmable Gate Arrays (FPGA) - defendants include Altera Corp., Lattice Semiconductor and Microsemi.  To view the complaint, click here.

Interestingly, IV refers to itself in the complaint as "Intellectual Ventures I" and "Intellectual Ventures II" and notes that "[a] significant aspect of Intellectual Venture's business is managing the two plaintiffs in this case, Plaintiff Intellectual Ventures I and Plaintiff Intellectual Ventures II."  No explanation is given as to how this split is arranged from a business perspective.

However, IV does mention that it "has purchased more than 30,000 assets and . . . has earned nearly $2 billion by licensing these patents to some of the world's most innovative and successful technology companies who continue to use them."

IV also describes itself as a scientific research entity that "has a staff of scientists and engineers who develop ideas" and "has invested millions of dollars developing such ideas . . . [and] has also invested in laboratory facilities to assist with the development and testing of new ideas."

This could be significant, since research entities are given a little more slack when seeking injunctions in a post-eBay world.  In CSIRO v. Buffalo Technology, Inc., E.D. Tex. (6:06-CV-324), June 15, 2007, the district court made the following "irreparable harm" determination on CSIRO (a non-practicing entity) when it granted a permanent injunction:

The majority opinion in eBay rejected the conclusion that “a ‘plaintiff’s willingness to license its patents’ and ‘its lack of commercial activity in practicing the patents’ would be sufficient to establish that the patent holder would not suffer irreparable harm if an injunction did not issue.”


CSIRO has shown that its harm is not merely financial. While CSIRO does not compete with Buffalo for market share, CSIRO does compete internationally with other research groups—such as universities—for resources, ideas, and the best scientific minds to transform those ideas into realities. CSIRO’s reputation is an important element in recruiting the top scientists in the world. Having its patents challenged via the courts not only impugns CSIRO’s reputation as a leading scientific research entity but forces it to divert millions of dollars away from research and into litigation costs. Delays in funding result in lost research capabilities, lost pportunities to develop additional research capabilities, lost opportunities to accelerate existing projects or begin new projects. Once those opportunities have passed, they are often lost for good, as another entity takes advantage of the opportunity. Delays in research are likely to result in important knowledge not being developed at all or CSIRO being pushed out of valuable fields as other research groups achieve critical intellectual property positions. Thus, the harm of lost opportunities is irreparable. They cannot be regained with future money because the opportunity that was lost already belongs to someone else.

Hang on to your hats . . .

PwC Publishes 2010 Patent Litigation Study

PriceWaterhouseCoopers (PwC) recently published its annual 2010 Patent Litigation Study, and this year's publication has some interesting data:

•  Despite a small uptick of granted patents in 2009, the number of filed patent actions dropped to 2,744, a decrease of over 6% from 2008.  This broke a 3-year trend of growth in case filings, since the last drop in 2005.  NPEs are involved in almost 20% of reported decisions


•  Annual median damages continue to hold steady - between 1995 and 2009, median damages ranged between $2.4M to $10.5M.  However, damage awards for NPEs averaged more than triple those for practicing entities since 2001 ($12.9M vs. $3.9M).


•  NPEs continue to be vulnerable to summary judgment - overall, NPEs have a 31% success rate versus 40% for practicing entities.  In instances when a final decision is made at summary judgment, NPEs are successful only 13% of the time (vs. 20% for practicing entities).  However, both have about a 2/3 win rate at trial.


•  NPEs have increased their success rate over the last 4 years.  In 2005, NPEs suffered from a decade-low success rate of 23%.  In 2009, the success rate jumped to 48%.


•  Declaratory judgment actions increase win rates fort alleged infringers.  However, the increased win rate is only significant when the patent holder is an NPE.


•  Despite the large volume of patent cases, median time-to-trial holds steady: 69% of cases reached trial within 3 years from the filing date of the initial complaint.


The Fastest Jurisdictions (Median Time-To-Trial, In Years):

1. ED Virginia -- 0.93
2. WD Wisconsin -- 1.07
3. MD Florida -- 1.71
4. D. Delaware -- 1.89
5. SD Texas -- 2.00
6. ED Texas -- 2.04
7. SD Florida -- 2.27
8. CD California -- 2.28
9. ND Texas -- 2.42
10. D. Minnesota -- 2.45
11. SD New York -- 2.50
12. D New Jersey -- 2.71
13. ND California -- 2.95
14. ND Illinois -- 3.42
15. D. Massachusetts -- 3.64

The Most "Patent Friendly" Jurisdictions:

1. ED Virginia
2. D. Delaware
3. ED Texas
4. MD Florida
5. CD California
6. SD Texas
7. WD Wisconsin
8. ND California
9. ND Texas
10. ND Illinois
11. D Minnesota (tie)
12. D. New Jersey (tie)
13. D Massachusetts
14. SD New York
15. SD Florida

Top 5 Districts by Overall Success:

1. MD Florida -- 59.1% overall, 80% trial success rate
2. ED Texas -- 55.3% overall, 66.7% trial success rate
3. D. Delaware -- 47.3% overall, 64.5% trial success rate
4. CD California -- 47% overall, 72.4% trial success rate
5. ED Virginia - 45.9% overall, 70.6% trail success rate

Bottom 5 Districts by Overall Success:

1. SD Florida -- 26.5% overall, 42.9% trial success rate
2. D. New Jersey -- 32.2% overall, 57.9% trial success rate
3. SD Texas -- 32.4% overall, 66.7% trial success rate
4. WD Wisconsin -- 32.4% overall, 40% trial success rate
5. ND California -- 33% overall, 71.1% trial success rate

For more details, you can download a free copy of the PwC study here (link)

Bombshell Study: Heavily Litigated NPE Patents Overwhelmingly Lose at Trial

To date, litigated patents were viewed as "strong" patents - the types that defendants were supposed to avoid taking to trial. Moreover, litigated patents were seen as more valuable, since they managed to survive an all-out attack on validity by a presumably well-financed defendant. Earlier studies (John R. Allison et al., Valuable Patents, 92 Geo. L.J. 435 (2004) looked at litigated patents, and found that they differed from non-litigated patents in that they (1) include more claims, (2) cite more prior art, (3) are cited more often by later patents, and (4) come from larger "families" of patents/continuations. Each of these factors are now used in conventional methodologies to determine the private value of patents.


John Allison, Mark Lemley and Joshua Walker recently took on the task of identifying every patent that was litigated eight or more times between 2000 and February 2009, including cases still pending, and compared the outcomes of the cases against patents that were litigated only once. In the course of their analysis, they found 106 such patents, which have been litigated in a total of 2,987 different patent assertions in 478 different cases, often against multiple defendants.

What did they find? Serial patent litigants, and particularly NPE's (aka "trolls"), for a lack of a better phrase, "get creamed" when they go to trial:

[T]o our great surprise, we find that the willingness of these patentees to litigate their cases to judgment is a mistake. Far from being stronger than other litigated patents, the most-litigated patents that go to judgment are far more likely to be held invalid or not infringed. The differences are dramatic. Once-litigated patents win in court almost 50% of the time, while the most-litigated – and putatively most valuable – patents win in court only 10.7% of the time.

The results are equally striking for patents owned by non-practicing entities (NPEs), and for software patents. NPEs and software patentees overwhelmingly lose their cases, even with patents that they litigate again and again. Software patentees win only 12.9% of their cases, while NPEs win only 9.2%.

[S]tatistical tests bear this out. We compare the proportion of win rates, testing the null hypothesis that there is no difference between the most-litigated and once-litigated patent outcomes. We test the proportions in several ways, both including and excluding settlements in the denominator of decided cases, and both including and excluding default judgments as plaintiff wins. No matter which test we use, the differences are highly statistically significant – the most-litigated patentees were more likely to lose.

Also,

Considering only the patents themselves, the proportions of initial ownership by large and small entities are almost equal in the most- and once-litigated data sets: 53.5% of most-litigated patents and 47.8% of once-litigated patents were issued to large entities. The picture is quite different, however, when one looks at the proportion of actual assertions in litigation, where large entities account for a surprisingly small percentage of the most-¬litigated patents. Because small entities are disproportionately represented in the actual litigation of most-¬litigated patents . . . patents that were initially issued to large entities represent only 22.4% of the assertions in the most-¬litigated group, compared to 47.8% of the once-¬litigated group.

[W]hen the cases do not settle, large patent plaintiffs are significantly more likely than small ones to win, without regard to how the data are sliced. When we combine the two data sets, large entity plaintiffs win 53.1% of the cases decided on the merits (55.9% if default judgments are included), while small entity plaintiffs win only 12.3% of their cases (23.1% if default judgments are included).

Other interesting findings:

- Just 16.7% of the assertions of the most-litigated patents were made by product-producing companies.

- Software patents constituted 20.8% of the once-litigated patents but 74.1% of the most-litigated patents.

- Owners of non-software patents are far more likely to win their cases than are software patent owners (37.1% versus 12.9% overall)

- The number of defendants per case is a negative predictor of settlement - the more defendants there are per case, the less likely the case is to settle. Also, the more defendants there are per case the more likely those defendants are to win.

The study concludes:

We designed this study to explore the effects of repeat play on litigation behavior, contributing to a literature on the economics of civil procedure as well as the substance of patent law. But what we found was dramatic and unexpected: The patents and patentees that occupy the most time and attention in court and in public policy debates – the very patents that economists consider the most valuable – are astonishingly weak. Non-¬practicing entities and software patentees almost never win their cases. That may be a good thing, if you believe that most software patents are bad or that NPEs are bad for society. But it certainly means that the patent system is wasting more of its time than expected dealing with weak patents. And it also suggests that both our measures of patent value and our theories of litigation behavior need some serious reconsideration.

Read/download "Patent Quality and Settlement among Repeat Patent Litigants" (link)

How Do Economic Downturns Affect Patent Litigation?

In the arena of patent litigation, two competing theories attempt to explain how the macroeconomic environment influences motives to file suit. On one hand, the decline in revenues associated with falling demand encourages firms to reduce litigation in IP suits as a method of reducing costs and maintaining profitability.  On the other hand, the very decline in profits spurs firms to extract greater revenue from dormant assets by litigating more aggressively against perceived infringers.  In other words, the relative rate of return on investing in patent litigation rises during downturns, thereby making it more attractive as a business strategy.

Until now, there has been no systematic study of how macroeconomic conditions affect the rates of patent litigation.  Alan Marco & Ted Sichelman recently took on the task of analyzing this topic and have published their findings in a paper titled "Do Economic Downturns Dampen Patent Litigation?"

In general, Marco and Sichelman found that patent litigation rates may rise or fall following an economic decline depending on the relative shifts in macroeconomic factors driving the downturn. For example, economic declines characterized mostly by drops in GDP, but for which credit remains freely available, are associated with increases in patent litigation rates. On the other hand, declines characterized by the converse situation - as in the current recession - are associated with decreases in litigation rates.

Until the study undertaken here, practicing attorneys disputed whether economic downturns increased or decreased patent litigation rates. One camp - relying on data from all but the current recession - argued that downturns increased litigation, because the rate of return from patent litigation increased relative to selling products and services. In other words, litigation substitutes for traditional sales during downturns. Another camp - emphasizing litigation declines in the current recession - contended that capital constraints present in downturns reduce overall litigation rates.

In the first study of its kind, we resolve this debate by showing that both theories are very likely correct. Specifically, declines in GDP and the NASDAQ index are associated with significant increases in overall patent litigation. This result provides support for the substitution theory. In contrast, increases in the TED spread, a measure of macroeconomic financial risk, as well as T-bill rates are associated with declines in overall litigation rates. This finding supports the capital constraint theory. As such, our study indicates that overall patent litigation rates may rise or fall depending on the nature of the economic downturn. When productivity declines and decreases in sales dominate capital effects, litigation will tend to rise, and vice-versa.

Read/download "Do Economic Downturns Dampen Patent Litigation?" via SSRN (link)

Vaguely Identified Devices in Patent Complaint Fails Twombly

Bender v Motorola Inc., No. 09-1245 (N.D. Cal., February 26, 2010, order)

Rule 8 of the Federal Rules of Civil Procedure requires that a complaint contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” If a complaint fails to satisfy Rule 8, it “must be dismissed” under Rule 12(b)(6) for failure to state a claim upon which relief can be granted. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). To survive a motion to dismiss, the plaintiff must allege “enough facts to state a claim to relief that is plausible on its face.”

Bender filed an Amended Complaint accusing Motorola of infringing a patent directed to a “Buffered Transconductance Amplifier.”  The Complaint did not specify any particular accused devices, and instead, simply alleged that broad categories products were infringing, where the allegedly infringing devices were identified as

products [including], without limitation, cell phones, computers, network drivers, high definition television sets, ultrasound machines, MRI machines, lab equipment, arbitrary waveform generators, audio amplifiers, video amplifiers, hard disc drives, ADC/DAC converters, DVD-RW players, DSL modems, CCD cameras, satellite communication technology, and other products where high performance, high speed analog circuits are used, and/or components thereof.

Motorola filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) on the ground that the Complaint failed to identify any particular accused devices.  The district court granted the motion.

Here, the Amended Complaint is too conclusory to provide “fair notice” of the basis of Plaintiff’s claim that Defendant infringed the ‘188 Patent. Nowhere in the Amended Complaint does Plaintiff identify, with the requisite level of factual detail, the particular product or line of products, that allegedly infringe the ‘188 Patent. Instead, Plaintiff merely claims that the infringing “products include, without limitation, cell phones, computers . . . and other products where high performance, high speed analog circuits are used, and/or components thereof.” [P]laintiff has done nothing more than recite a laundry list of electronic devices. These cursory allegations are insufficient to give the Defendant fair notice of the claims being alleged against it.

Plaintiff argues that his Amended Complaint provides all the information required in Form 18. This contention lacks merit. The form contemplates that the pleader identify the accused device with some semblance of specificity to alert the alleged infringer which device is at issue. It does not contemplate that the accused device or devices be described in terms of a multiplicity of generically-described product lines such as “satellite communications technology” and “audio amplifiers,” as Plaintiff has done here.

Read/download the order here (link)

Source: Docket Navigator

Now It Begins? Litigation Rumors Surface Over Intellectual Ventures

Intellectual Ventures (IV) has insisted for a long while that its accumulation of patents has nothing to do with patent litigation. In fact, the company has prided itself on not filing any lawsuits, despite the claim that its patent portfolio, comprising 27,000 patents, has brought in over $1B in licensing revenue. Recently, IV was rumored to have struck a $120M patent deal with Intuit Inc., and also struck deals with companies like Cisco and Verizon for between $200M and $400M apiece.

Interestingly, no one knows the circumstances surrounding IV's licensing deals - to date, most every license is shrouded in mystery (Intuit's SEC filing stated that the company "entered into an agreement to license certain technology" for past and future licensing rights. The filing did not disclose the technology, the IP or the licensor.) Worse still, IV operates using a multitude of shell companies, making it difficult to track ownership of the patents.

Recently, IV was rumored to be engaging in "catch and release" licensing with some of its patents - after getting a particular patent or portfolio, IV gives prospective licensees a timetable to pay a set amount. After the time period expires, the patent is then sold off to anyone (read: patent plaintiff firm) that feels they can monetize the patent(s), with a "back end" payment being negotiated in favor of IV. In other words, IV has allegedly started to "outsource" their patent litigation.

Zusha Elinson from the Recorder has an excellent piece on IV's alleged foray into patent litigation, where the article covers the saga behind Picture Frame Innovations LLC who recently filed suit (see complaint here) against Kodak and CDW, seeking millions of dollars in damages. Elinson tracks the history of the patent, the inventors, owners, and even looks at the attorneys handling some of the behind-the-scenes matters to show IV's involvement, and concludes that the litigation represents "a new phase" in IV's business model.

- Read "Intellectual Ventures Takes Indirect Route to Court" (link)

NOTE1: An interesting factoid about the litigation is that the lead attorney for the plaintiff is none other than Ray Niro.

NOTE2: The complaint states that Picture Frame Innovations LLC is located at "125 South Wacker Drive, Suite 300 Chicago, IL 60606" - this location appears to be nothing more than a virtual office space.

NOTE3: In case anyone is looking for more information on IV and its collection of shell companies (over 362 of them in all), you can order a report from Avancept LLC that will give you all the grueling details over the span of 650+ pages. To order a report (or read the report summary), click here.

Willful Infringement and Injunctions at the E.D. Tex.

i4i Ltd. v. Microsoft, No. 6:07CV113 (E.D. Tex., August 11, 2009, order) (L. Davis)

In May, a jury found that Microsoft willfully infringed i4i's patent relating to the processing of XML documents with custon XML elements, and awarded i4i $200M in damages. A flurry of post-trial motions followed, among which was a motion by i4i for a permanent injunction, and a JMOL motion by Microsoft to negate the finding of willful infringement.

On the issue of willful infringement, Microsoft argued that the fact that pretrial summary judgment was granted on certain asserted claims, i4i's voluntary dismissal of other claims, and defenses asserted at trial precluded willfulness liability entirely under Seagate.

Judge Davis disagreed:

Microsoft’s arguments are premised on an overly broad reading of Seagate. It argues that the objective prong of the willfulness analysis is met if and only if a defendant failed to present valid defenses during the infringement proceedings . . . most disturbingly, Microsoft’s arguments invite the Court to adopt a view of willful infringement that would allow an accused infringer to stay willfully ignorant despite a high likelihood that its actions infringe a valid patent. Such a view would allow an infringer to escape a finding of willfulness regardless of its conduct at the time the infringement began as long as it presented many defenses after a formal action was filed. Such a view is inconsistent with both Seagate and generally accepted legal principals regarding “objective” legal analysis.

On the subjective prong, Judge Davis focused on whether Microsoft "knew or should have
known" of the likelihood that their actions would infringe:

As Microsoft does not argue (and did not argue to the jury) that any of these “defenses” would have been apparent and considered by a reasonable person in Microsoft’s position prior to its infringing activity, these arguments are irrelevant and inappropriate. Furthermore, the pretrial summary judgment and i4i’s voluntary dismissal of accused products are irrelevant to the remaining claims that the jury found were valid and the remaining products that the jury found were willfully infringing. Additionally, Microsoft’s remaining defenses of invalidity were rejected by the jury and i4i presented sufficient evidence to support its infringement and validity positions.

Second, Microsoft argues that i4i presented insufficient evidence under the subjective prong of Seagate. Microsoft effectively argues that anything short of a “cease-and-desist” letter would be ineffective to put it on notice of an objective risk of infringement. In fact, i4i presented sufficient evidence, both direct and circumstantial, that Microsoft was aware of the likelihood that its activities were infringing.

On the issue of i4i's motion for a permanent injunction, the court applied the 4-factor eBay test and found that an injunction was warranted:

First, i4i has overwhelmingly shown that it has been irreparably injured by Microsoft’s continuing infringement of the ‘449 patent and could not be compensated with monetary damages. The fact that there is direct competition in a markplace weighs heavily in favor of a finding of irreparable injury . . . Simply because i4i adapted to a market where Microsoft fills 80% of the market space does mean that i4i has not suffered an irreparable injury. The evidence shows that i4i lost a, perhaps irretrievable, opportunity in the early days of the custom XML market. See PX 172. This continuing loss of market share and brand recognition is the type of injury that is both incalculable and irreparable.

[T]he balance of hardships also favors i4i. As i4i notes, Microsoft is the world’s largest software company with yearly revenues exceeding $60 billion. . . . i4i’s business is comprised almost exclusively of XML authoring products based off of the ‘449 patent . . . Thus, the evidence clearly indicates that while custom XML is a small fraction of Microsoft’s business, it is central to i4i’s.

[Wi]th regard to the public interest, i4i does not request that Microsoft disable infringing WORD products that are sold prior to the effective date of any injunction. i4i also indicated at the hearing, that it would be amenable to Microsoft providing support to customers who purchased infringing WORD products before the effective date of its proposed injunction. Thus, i4i’s proposed injunction would have little effect, if any, on the daily operations of Microsoft’s current customers. In addition, where products do not relate to a significant compelling public interest, such as health or safety, this factor weighs in favor of an injunction.

To read more, download the (65-page) opinion here (link)

District Court Awards almost $2.5M In Sanctions For NPE Asserting Unenforceable Patents

Nilssen, et al v. Wal-Mart Stores Inc, et al, No. 1-04-cv-05363 (N.D. Il., June 30, 2009, order) (R. Gettleman)

Plaintiff Ole K. Nilssen held a number of patents on compact fluorescent lamps ("CFLs") and exclusively licensed them to his not-for-profit Cayman Islands foundation, plaintiff Geo Foundation, Ltd. Plaintiffs entered into a license agreement with Technical Consumer Products, Inc. ("TCP") under which TCP would manufacture "off-brand" CFLs. That license agreement required Geo to bring litigation against the defendants alleging that their sale of off-brand CFLs infringe Nilssen's patents.

At the same time, Nilssen was prosecuting another patent infringement suit against Osram Sylvania, Inc. ("Osram"). On July 6, 2006, after a six day bench trial, the judge in that case issued an opinion holding that Nilssen's patents were unenforceable because of inequitable conduct by Nilssen in the PTO. The case was exceptional and the judge awarded attorneys' fees of some $5.5 million against plaintiffs. The Federal Circuit subsequently affirmed the district court's decision (link).

The defendants in this case followed with a Summary Judgment motion to find the patents unenforceable for the same inequitable conduct. The court quickly granted the motion, noting

This court sees no reason to revisit Judge Darrah's or the majority opinions in the Osram litigation. Far too much judicial resources have been devoted to this losing litigation. Plaintiffs have been found in the Osram case to have intentionally failed to inform the PTO of related litigation, made materially false priority claims with the intent to mislead the PTO, misrepresented that Nilssen was entitled to small entity status (allowing him to maintain his patents for far less money than he would otherwise been required) and failed to cite material prior art when prosecuting its patents with the PTO. Plaintiffs' conduct was intentional, material and repeated. If this isn't an exceptional case, this court fails to see what is.

Accordingly, the parties stipulated to the following amounts, which the court recently approved:

Ikea Illinois, LLC: $994,241 Attorney's Fees, $30,196 Costs
Lowe's Home Centers, Inc.: $815,512 Attorney's Fees
Costco Wholesale Corporation: $642,500 Attorney's Fees, $6,000 Costs

Total amount: $2,488,449

Read the original SJ opinion here (link)

Read the Ikea award here (link)

Read the Lowe's award here (link)

Read the Costco award here (link)

Distric Court Warns that "Patentee's Time For Trolling" Will End Without More Definite Infringement Contention

Diagnostis Systems Corp. v. Symantec Corp. et al., SACV 06-1211 DOC (C.D. Cal., June 5, 2009 Order) (Nakazato, A.)

DSC is a wholly-owned subsidiary of Acacia Research Corporation (“Acacia”), and both entities are in the business of acquiring, licensing, and enforcing patented technologies. DSC filed suit against Symantec and others in 2007 alleging patent infringement. At the time DSC's Preliminary Infringement Contentions ("PICs") were due, DSC did not set forth a specific theory of infringement.

In June 2008, DSC was given the source code to 8 of the accused software products, along with executable copies and operating manuals for the accused products. Despite having this information, DSC did not elaborate further on the PICs.

Fed up, the defendants moved the court under Rules 26(e)(1)(A) and 37, as well as for an order compelling DSC to provide a more definite infringement statement. Rule 26(e)(1) states:

“[a] party who has made a disclosure under Rule 26(a) -- or who has responded to an interrogatory, request for production, or request for admission -- must supplement or correct its disclosure or response: (A) in a timely manner if the party learns that in some material respect the disclosure or response is incomplete or incorrect, and if the additional or corrective information has not otherwise been made known to the other parties during the discovery process or in writing; or (B) as ordered by the court.”

Naturally, DSC opposed the motion, claiming that the motion seeks to obtain protected work product information, and that more time and information was needed.

The court flatly rejected DSC's arguments:

The bottom line is that, after a plaintiff-patentee has had a reasonable opportunity to review the source code for the defendant’s accused software product, the patentee’s time for trolling the proverbial waters for a theory of infringement comes to an end, and the patentee must fish or cut bait with respect to its specific theory of infringement by providing PICs to the defendant that clearly identify and explain how the source code for the accused product infringes upon specific claims for the patent-in-suit. For DSC, trolling time is over.

DSC contends that “MicroStrategy inappropriately seeks to invade the work product
privilege that protects DSC’s consulting experts’ opinions from inadverent or unintentional disclosure.” (JS at 16:2-19.) This contention is frivolous and misleading because MicroStrategy is not asking DSC to disclose its expert’s opinions. Rather, MicroStrategy is merely asking DSC to provide PICs that specifically describe or explain its theory of infringement and, specifically, how the source code for its accused products, and other aspects of its accused products, purport to infringe upon the claims for DSC’s ‘590 Patent so that MicroStrategy can properly evaluate its defense.

Download a copy of the opinion here (link)

Source: Docket Navigator

Another District Court Gets Impatient With PTO Delays

Field Logic Archery, LLC v. G5 Outdoors, LLC, No. 06-1724 (D. Min., April 20, 2009)

From Magistrate Judge Noel's report and recommendation:

The above referenced case was filed on May 9, 2006. After it had been pending for over a year, the parties stipulated to a stay pending the resolution of a "Reissue Application," that had been filed with the United States Patent and Trademark Office (USPTO) in June of 2007. It now appears that the USPTO did nothing with the Reissue Application for nearly a year and half. It did not substantively address the application in any way until October, 2008. Following a case management conference, the parties filed a "Joint Statement Regarding Status of Case" on April 8, 2009, one month shy of three years since the case was filed. In that status report the parties state that the USPTO has notified the parties that it intends to review the Plaintiff's responses to the USPTO's office action within the next sixty days. After that, the parties report, Plaintiff should know the likely time-line for completing the review of the reissue application.

As the case has been pending for nearly three years in this Court, and as there is no clear end in sight for the administrative process begun in the USPTO nearly two years ago, it is recommended that the instant case be dismissed without prejudice while the parties complete their administrative proceedings before the USPTO. If at the end of that process there are still issues to litigate, Plaintiff is free to file the lawsuit anew.

Read the report here (link)

Cornell Damage Apportionment Making Way Through Courts

The other week in Cornell University v. Hewlett-Packard, Judge Randall, sitting by designation in the Northern District of New York, chopped Cornell's damage award from $184M to $54M, stating that "Cornell simply stepped one rung down the Hewlett- Packard revenue ladder from servers and workstations to the next most expensive processor incorporating product without offering any evidence to show a connection between consumer demand for that product and the patented invention"(see more here).

In the high-profile case of Star Scientific v. R.J. Reynolds, (MJG 01-CV-1504, D. Md.) defendant counsel pounced on this ruling and filed a motion in limine to prevent Star from expanding their damages theory before the jury:

In Cornell University v. Hewlett-Packard Company, No. 01-CV-1974 (N.D.N.Y. Mar. 30, 2009) (Ex. 1), the Honorable Randall R. Radar, sitting by designation from the United States Court of Appeals for the Federal Circuit, issued a significant ruling limiting the scope of the royalty base for damages in patent infringement cases, and made clear that Star’s pie-in-the-sky damages theory in this case should be stricken.

[T]he decision in Cornell bears directly on three of the fatal flaws in Star’s damages theory, as addressed in RJR’s pending motions in limine on damages (see Dkt. Nos. 603 and 749): (1) Star seeks a royalty base derived from cigarette sales, even though the output of the patented proces sends with tobacco, not with the cigarettes that only result many steps later; (2) there is no nexus between the farmers’ alleged use of the patented process and cigarette sales sufficient to invoke application of the entire market value rule; and (3) Star improperly aggregates license agreements under an A + B + C + D formula, even though only A – a license agreement setting forth a royalty base tied to pounds of tobacco – is related to Star’s patents. If Star is permitted to mislead the jury with its seriously flawed damages theory, the decision in Cornell demonstrates why the resulting award could not withstand review.

See also, "With Tobacco-Patent Suit, Star Scientific Presses for Clout" (link)

ND Illinois One Step Closer To Adopting Patent Rules

The judges of the Northern District of Illinois have issued for public comment proposed local rules to guide the pretrial procedures on patent cases. The proposed local patent rules were drafted by a committee of experienced lawyers, who are affiliated with the Intellectual Property Law Association of Chicago (IPLAC), and four district judges.

A copy of the proposed rules may be downloaded here (link).

The proposed rules are modeled after the same rules used in the Eastern District of Texas and the Northern District of Califormia regarding infringement, noninfringement and invalidity contentions. However, the claim construction process is different: claims are construed at the end of fact discovery, where the accused infringer gets to file an opening claim construction brief, followed by a response brief by patentee, followed by a reply brief by the accused infringer.

David Donoghue over at the Chicago IP Litigation Blog has a great outline of the timelines and procedures dictated by the Patent Rules, and I have taken the liberty of reproducing David's summary below:

• standard protective order in place from the beginning of the case, unless and until it is modified, to avoid discovery delays being blamed upon entry of a protective order;

• Automatic document production requirements of plaintiff when initial disclosures are served and of defendant when initial noninfringement and invalidity contentions are served;

• Plaintiff serves initial infringement contentions two weeks after initial disclosures and defendant respond with initial noninfringement and invalidity contentions two weeks after that, followed two weeks later by plaintiff's response to the invalidity contentions;

• Plaintiff files final infringement contentions twenty one weeks after its initial contentions and defendant responds four weeks later with final noninfringement, invalidity and unenforceability contentions (after the final contentions, leave of Court is required for any amendments);

• No party can seek a stay pending reexam after serving its final contentions;

• The claim construction process begins two weeks after defendant's final invalidity contentions are served;

• Defendant files an opening claim construction brief along with a joint appendix including the patents in suit and their prosecution histories consecutively paginated, plaintiff then files a responsive brief within four weeks, and defendant has two weeks to file a reply;

• Fact discovery closes forty two days after the claim construction rulings, which triggers expert discovery followed by a dispositive motion deadline.

The Patent Rules are scheduled such that a patent trial should occur within two years of serving the complaint. Assuming that schedule is enforced, it would result in a significant speeding up of, at least, the larger patent cases in the Northern District.

Anyone wishing to comment on the proposed rules may do so via e-mail to

ilnd_localrules_comments@ilnd.uscourts.gov

or by submitting written comments to

Michael Dobbins, Clerk of Court,

219 S. Dearborn Street, Room 2050,

Chicago, IL 60604.

U.S. Court Report Shows Patent Litigation Continues to Be Flat

The Judicial Business of the U.S. Courts released its annual report this week on the business of the Federal Judiciary for the fiscal year ending September 30, 2008. Overall, the report provides statistical data on the work of the Federal Judiciary, compares data for the current year to that for previous fiscal years, and, wherever possible, explains why increases or decreases occurred in judicial caseload.

In the world of IP, the number of cases sank by 11% in 2008. However, most of this drop is attributable to the reduction of new copyright cases (-26.5%). Trademark and patent cases, stayed relatively flat (-1.1% and +0.4%, respectively).

Claims of a patent litigation "explosion" continue to be unsupported by the latest data. Going back to 2004, the number of patent cases filed per year break down this way:

2004 - 3,075 patent cases
2005 - 2,720 patent cases
2006 - 2,830 patent cases
2007 - 2,896 patent cases
2008 - 2,909 patent cases

Considering that 9,573 IP lawsuits were filed in 2008, patent litigation made up only 30% of all IP litigation. Further, as 223,093 civil cases were filed in 2008, patent litigation made up only 1.3% of all litigation in the U.S.

In terms of IP cases commenced in 2008 by jurisdiction, the incoming caseload broke down this way:

(1) CD California - 1,394 new IP cases

(2) SD New York - 694 new IP cases

(3) ND California - 478 new IP cases

(4) ND Illinois - 385 new IP cases

(5) D New Jersey - 361 new IP cases

(6) ED Texas - 358 new IP cases

(7) ED Pennsylvania - 279 new IP cases

(8) SD Florida - 265 new cases

(9) MD Florida - 220 new IP cases

(10) WD Texas - 218 new IP cases

(11) ND Texas - 195 new IP cases

(12) SD California - 194 new IP cases

(13) SD Texas - 192 new IP cases

(14) ND Georgia - 179 new IP cases

(15) D Massachusetts - 170 new IP cases

For the 2,875 patent cases that were terminated in 2008, only 3.8% of the cases ever reached trial. 1,517 cases (52%) were terminated before pretrial, while 402 (14%) were terminated during or after pretrial. 847 patent cases were terminated with no court action.

To read more, and to download the (412 page) report, click here (link).

Directing Method Step to Be Performed Outside U.S. Negates Joint Infringement

Ormco Corporation v. Align Technology Inc., C.D. Ca. (8-03-cv-00016), February 23, 2009

Ormco sued Align, and its "Invisalign" process, over patents relating to orthodontic appliances designed and manufactured using "digital shape data."

Specifically, Align's accused process involved the following: impressions of teeth are scanned to produce a 3D image, and are saved as an "ADF" file. The ADF file is then stored on servers in the US and in Costa Rica. Using Align's "Tootshaper" software, operators in Cost Rica create representations of the patient's teeth to fit the aligners. After further processing by the toothshaper software, the data is saved as a new ADF file and transmitted back to the US.

Ormco argued that Align “is liable under § 271(a) under a joint infringement theory when it performs one step of the claims and directs it [sic] Costa Rican subsidiary to perform the remaining steps on its behalf.” Acknowledging that joint infringement was a viable option, the district court negated infringement of one of the claims, due to the steps being performed in Cost Rica:

Theories of joint infringement are cognizable under § 271(a) where multiple actors are involved, and the patentee can show that one party “control[s] or direct[s] each step of the patented process,” even if some steps are “performed” by others. BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373, 1380 (Fed. Cir. 2007), rehear’g en banc denied (2008). However, the “joint” aspect does not eliminate the need to show all steps or stages of the claimed process are performed in the United States. The theory of joint infringement concerns who performed the steps of a claim, not where the steps were performed.

In addition, Align argued indirect infringement under 35 U.S.C. § 271(f), which creates liability for anyone who supplies from the United States one or more components of a patented invention

“where such components are uncombined in whole or in part, in such manner as to
actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States.”

Infringement can be established via showing either “all or a substantial portion of the components of a patented invention” were supplied, or “any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use” was supplied.

The parties disputed whether 35 U.S.C. § 271(f) applied to method claims. Align pointed to dicta from Microsoft Corp v. AT & T Corp., which did not concern a method claim, as leaving the question “expressly unresolved.” There, the Court commented,

“If an intangible method or process, for instance, qualifies as a ‘patented
invention’ under § 271(f) (a question as to which we express no opinion), the
combinable components of that invention might be intangible as well.”

However, the district court noted the Federal Circuit's unpublished opinion in Union Carbide Chemicals and Cardiac Pacemakers, where the court held that Microsoft did not “overturn[] this court's prior precedents that have held that § 271(f) applies to method claims.” The district court then stated:

While Cardiac Pacemakers is nonprecedential, the Court finds it persuasive, and
declines to read Microsoft’s dicta as overruling Union Carbide’s clear holding.

Also, the court added in the footnote that "Cardiac Pacemakers makes clear that Union Carbide remains the law until an en banc Federal Circuit or the Supreme Court says otherwise."

There is also a very detailed and interesting analysis by the court regarding software "components", and whether or not they are "combined" or "substantial parts" of patented components for the purposes of § 271(f).

You can read/download a copy of the opinion here (link)

"No Risk For Me" Ex Parte Reexamination Sinks Motion to Stay in ED Tex

Affinity Labs of Texas, LLC v. Dice Electronics, LLC, 9-08-cv-00163 (TXED February 20, 2009, Order).

Plaintiff Affinity filed suit against the defendants on a patent directed toward systems and methods for connecting a portable audio player to an automobile sound system. This case was one of three companion cases involving the same patent. After a request for ex parte reexamination was accepted at the PTO, the defendants filed a joint motion to stay.

To get perspective on the timeline, the relevant events are as follows:

Jan. 29, 2008: patent issues.

Aug. 25, 2008: Affinity Labs files suit against Defendants.

Sept. 30 - Nov. 10, 2008: Defendants make a total of four applications for extension of time to file their Answers.

Nov. 7, 2008: attorney files a request for ex parte reexamination of the patent with the PTO on behalf of Dice Electronics, LLC.

Dec. 9, 2008: The PTO grants the request and orders reexamination of all thirty five claims of the patent.

Jan. 12, 2009: Defendants move to stay the litigation in light of the pending reexamination.

Judge Clark, ruling on the motion, had this to say:

The parties exchanged Initial Mandatory Disclosures on January 21, 2009. Affinity Labs disclosed its asserted claims, Infringement Contentions, and associated documents on February 2, 2009, and Defendants are required to disclose their Invalidity Contentions and associated documents by March 20, 2009. As discussed in more detail below, much of the discovery essential to the case has already occurred.

In denying the parties’ previous request to extend these deadlines, the court noted that despite requesting and receiving several extensions of their time to answer, “Defendants are again seeking to delay the proceedings by six weeks.” Doc. # 43 at p. 1. The theme of delay is also present in the request for ex parte reexamination, which was not made until more than two months after Affinity Labs filed suit.

The filing of a request for ex parte reexamination by only one of the twenty-four Defendants in these three cases raises a strong inference of gamesmanship. Congress’s intent when it established the inter partes reexamination procedure as part of the American Inventors Protection Act of 1999 was to “‘make reexamination a viable, less-costly alternative to patent litigation by giving third-party requesters the option of inter-partes reexamination procedures’ in which they are ‘afforded an expanded, although still limited, role in the reexamination process.’” Cooper Techs. Co. v. Dudas, 536 F.3d 1330, 1332 (Fed. Cir. 2008) (quoting Senator Orrin Hatch, 145 Cong. Rec. S13259 (Oct. 27, 1999)). No Defendant in this case has taken advantage of Congress’s hard work in offering this option. Rather, one Defendant has reached back in history to the non-binding “no risk for me” ex parte reexamination process, allowing all Defendant to lay behind the log, hoping for favorable developments with the passage of time. Instead of streamlining the process, Defendants’ choice guarantees the imposition of additional costs on Affinity Labs, and indicates a lack of desire to resolve the issues in the case in a timely manner.

* * *

It would be naive to believe that counsel for at least some of the Defendants are not coordinating mutually beneficial defense strategies. No Defendant has been confident enough to ask the PTO for a binding inter partes reexamination. All are waiting to let [reexamination counsel], on behalf of Defendant Dice Electronics, LLC, take a shot at defeating Affinity Labs. Of course, if things do not go well at the PTO, each Defendant in turn can file a request for ex parte reexamination. Defendants could then still assert the same and similar claims in this court. This is underscored by the fact that, when asked whether they were willing to be bound by the result if Affinity Labs succeeds in the ex parte reexamination, Defendants made it clear that they were not.

Based on these and other consideration, the motion for staying the case was denied.

While I'm not sure what may have happened during earlier conferences/proceedings, Judge Clark, as the saying goes, was a "skilletful of rattlesnakes" towards the defendants. It was especially interesting that "defense coordination" was such an issue - is that not to be expected when a plaintiff files suit against 24 defendents?

Read the opinion here (link) (via Docket Navigator)

Business Method Patents - Down, But Not Out (At Least Not Yet)

Transamerica Life Insurance Company et al v. Lincoln National Life Insurance Company, N.D. IA (1-06-cv-00110)

Lincoln accused Transamerica and others of infringing U.S. Patent 7,089,201, titled "Method and apparatus for providing retirement income benefits." One of the claims recited in the preamble "a computerized method for administering a variable annuity plan having a guaranteed minimum payment feature associated with a systematic withdrawal program, and for periodically determining an amount of a scheduled payment to be made to the owner under the plan."

On February 13, the jury returned a verdict in favor of Lincoln, finding the patent valid and infringed - a reasonable royalty of $13,098,349 was assessed against Transamerica.

Read the verdict form here (from Docket Navigator).

NOTE: It appears that Bilski was not decided in time for this case. Presumably, Transamerca will appeal and/or negotiate a settlement based on the opinion.

Unlikely Duo Set Out to Set The Record Straight On NPEs and Patent Litigation

"When the cat and mouse agree, the grocer is ruined."

-- Iranian proverb

Today it was announced that Nathan Myhvold is teaming up with Professor Mark Lemley to conduct a two-year study on patent litigation, and further analyze the frequency and effect of non-practicing entity (NPE) litigation on the patent system. No matter what side of the debate your opinion falls, there is little doubt that the findings of the study will be one of the most anticipated events.

From today's press release:

"I tend to be an advocate of patent reform, while Nathan is generally more skeptical," Lemley said. "If we collaborate on a project together it will... be harder for critics to say that it has just one point of view."

Though an effort to pass patent reform legislation that would make it more difficult to file patent lawsuits stalled in Congress last year, the issue may yet be revisited on Capitol Hill.

Lemley said that he's seen estimates on the number of suits filed by non-practicing entities that range wildly, from 2% to 50% of all patent litigation. In addition, many struggle even to define what makes a so-called "patent troll" that acquires patents to use in court, and what makes a legitimate non-practicing entity.

"There is some gray area," Lemley said, "What do you do about an IP-holding subsidiary of a company?"

Intellectual Ventures executive editor Wayt Gibbs said that an impartial study of patent litigation is necessary. "This is very important to innovation policy," Gibbs said. "It shouldn't be subjected to guesses and debates by highly interested parties."

Gibbs said the study is focused on the years 2000 through 2007, and includes "data on every single patent case filed" in that period. The roughly two-year project is being undertaken by a number of different Intellectual Ventures employees alongside Lemley, and is expected to produce several papers.

- See: "Famed patent firm backs study on touchy subject" (link)

For more on recent activities of Intellectual Ventures,

- See "Microsoft's big brains spill into patent firm" (link)

See also "Venture firm picks up Transmeta chip patents" (link)

Housecleaning: ED Tex. Declines Venue in 3 Patent Cases

Yesterday, Patently-O noted that the CAFC's TS Tech decision was beginning to have an impact on venue determinations in the ED Tex.

This morning's Docket Navigator Docket Report discloses that on January 29 and 30, the ED Tex. issued 3 orders declining venue in patent cases:

"Under the circumstances presented here, the convenience of witnesses and localized interests weigh in favor of transfer with the other factors neutral or weighing slightly in favor of transfer. . . . [T]here is little convenience to the parties for this case to remain in Texas, while there are several reasons why it would be more convenient for the parties to litigate this case in Oregon."

- Odom v. Microsoft Corporation, 6-08-cv-00331 (TXED January 30, Order).

"Plaintiff along with six of the seven named defendants have their principal places of business in California; the remaining defendant has its principal place of business in Washington. The original patent owner was also a California-based company. [Plaintiff] alleges direct infringement through the websites of the Defendants, none of which are located in this venue; most are located in California. It is likely that many witnesses for both [plaintiff] and Defendants reside in California and/or Washington, and that many documents related to this case are also located in California. The Court finds that the overall nature of this case, considering all of the involved parties, is
regional and would therefore be more conveniently handled by the Northern District of California."

- PartsRiver, Inc. v. Shopzilla, Inc., 2-07-cv-00440 (TXED January 30, 2009, Order).

"Plaintiff's first-filed patent infringement claim did not permit plaintiff to amend its complaint to seek a declaratory judgment concerning defendant's business torts claims that were previously filed in Missouri. "The original complaint involves claims for patent infringement of [plaintiff's] patent. The amended complaint, and the subject of the Missouri case, is for unfair competition and the Lanham Act based on [plaintiff's] alleged business conduct. The subject matter of these cases do not substantially overlap. The Missouri case, then, is the first filed case for the controversy regarding [plaintiff's] business conduct. [Plaintiff], therefore, violated the first to file rule when it amended its complaint in this action to add counts already asserted in the Missouri case."

- Catalina Marketing Corporation v. LDM Group, LLC, 2-07-cv-00477 (TXED January 29, 2009, Order)

See Also: The Metropolitan Corporate Counsel, "The Eastern District Of Texas - No Longer The Venue Of Choice?" (link) - discussion of TS Tech, including interview withe TS Tech's counsel.

The First Domino? C.D. Ca. Invalidates Business Method Patent Under Bilski

Fort Properties, Inc. v. Master Lease LLC, (SACV07-365 AG) C.D. Ca., January 22, 2009

Fort Properties filed suit against Master Lease, seeking a declaration from the court that Master Lease's patent on business methods for creating an investment instrument out of real property (US patent 6,292,788) was not infringed and/or invalid.

Shortly after the CAFC decided Bilski, Fort Properties filed a SJ motion arguing that the patent was invalid under 35 U.S.C. 101. The district court agreed with Fort Properties, relying first on the prosecution history of the patent:

[T]he Court is convinced that review of the ‘788 Patent is appropriate in this case. Defendant’s application to the U.S. Patent Office was declined twice because the examiner found the claims were not “in the technological arts” and thus not patentable under Section 101 . . . The patent examiner who rejected those applications then apparently left the U.S. Patent Office, and the application was assigned to another patent examiner . . . who ultimately allowed the claims in April 2001. While the Notice of Allowance did not address the Section 101 issues, Defendant’s previous correspondence with [the examiner] discussed the “useful, concrete and tangible results” of the claims. . . . Defendant also noted [the examiner, during an interview] “explained his view that the claims as written met the statutory requirement of patentable subject matter under 35 U.S.C. § 101, and provided a useful, concrete, and tangible result.” . . . The Court finds that [the examiner's] decision to allow the claims relied in large part on the “useful, concrete, and tangible result” test rejected by Bilski. The Court thus examines the claims of the ‘788 Patent under the proper machine-or-transformation test.

Machine

Defendant explicitly acknowledged during the patent application process that the recited methods “need not be performed by a computer.” (Ex. 2:199.) In its opposition brief, Defendant acknowledges that “the ‘machine’ prong of the Benson test is not what gives rise to patentability in [the ‘788 Patent], but rather the ‘transformation of an article.’”

Transformation

Defendant points out . . . the “creation of deedshares,” arguing that “[t]he creation of the deedshare certainly qualifies as the ‘transformation and reduction of an article.’” “Certainly,” Defendant argues, “there can be no greater transformation for an article than the very creation of the article itself.” But the deedshares themselves are not physical objects or substances. See Bilski, 545 F.3d at 963. As Plaintiff explains, “what is allegedly created is nothing more than an arrangement of conceptual legal rights, which may or may not be in a printed document.” Nor do the deedshares represent physical objects or substances. See Bilski, 545 F.3d at 963. Again, the deedshares represent only legal ownership interests in property. Those ownership rights are not physical objects. Creation of a deedshare does not constitute transformation of an article or thing under Bilski.

Download a copy of the opinion here.

EDNY Nixes Therapeutic Pharma Patent Using Bilski

King Pharmaceuticals, Inc et al v. EON Labs, Inc., E.D.N.Y (1-04-cv-05540), Jan. 20, 2009

In a highly publicized case, King Pharmaceuticals brought an action against Eon Labs on patents relating to methods of informing patients about and administering the muscle relaxant metaxalone - marketed by King under the brand name "Skelaxin®" - with food. An exemplary patent claim follows:

A method of increasing the oral bioavailability of metaxalone to a patient receiving metaxalone therapy comprising administering to the patient a therapeutically effective amount of metaxalone in a pharmaceutical composition with food.

Relying on six prior art references, Eon moved for summary judgment, alleging invalidity under 35 U.S.C. §§ 102(b), and 103(a). Eon's primary argument was that, despite the fact the prior art did not explicitly disclose the claimed features "with food," such a feature was at least inherent (or obvious) from the prior art. The district court agreed with Eon, finding the feature inherent in the prior art:

For over forty years it has been known to give metaxalone with food. The fact that King discovered a naturally occurring side effect to the known practice of administering metaxalone with food does not entitle it to a valid patent . . . Here, the overarching purpose of both the prior art and claim 1 is to treat effectively musculoskeletal disorders with metaxalone. The fact that taking it with food happened to increase bioavailability in addition to decreasing nausea is no different from the result in the Abbott Labs case [471 F.3d 1363, 1369 (Fed. Cir. 2006)], in which the addition of water neutralized Lewis acids in both the prior art and the claimed invention, even though the prior art did not recognize that particular effect of adding water. Likewise here, the prior art's failure to recognize that taking metaxalone with food also increased bioavailability does not make it a new method.

With regard to obviousness, the court ruled:

[T]he question is whether a person of such skill, confronted with [Prior Art #1] teaching to take one 400 mg tablet of metaxalone four times daily and [Prior #2] suggestion to take metaxalone with food, would have seen a benefit to administering a 400 mg tablet of metaxalone at mealtimes. It seems quite clear that the answer is yes.

The opionion became more interesting when Eon challenged claims on the basis of 35 U.S.C. § 101 and Bilski, and tying it together with inherency/obviousness. Specifically, Eon claimed that claims reciting the features of "informing the patient that the administration of metaxalone with food results in [] . . . compared to administration without food" did not distinguish certain claims from the prior art, and rendered other claims unpatentable. Again, the district court agreen with Eon:

Because the food effect is an inherent property of the prior art and, therefore, unpatentable, then informing a patient of that inherent property is likewise unpatentable . . . [The claim] fails this test, because the act of informing another person of the food effect of metaxalone does not transform the metaxalone into a different state or thing . . . Such a claim, which effectively allows a patentee to exclude others from informing people of (unpatentable) scientific discoveries is anathema to the aims of the patent statute, which favors disclosure. [The claim] is, therefore, invalid.

Regarding an independent method claim that was based on "informing a patient", the court remarked the claim "does away with all physical steps and attempts to claim a monopoly on information. This claim is unpatentable under 35 U.S.C. § 101."

Read/download the opinion here (link)