En Banc CAFC Affirms $90 Million Award Against EchoStar, Issues New Rules for Contempt Proceedings for Where a Product Is Modified Post-Injunction
April 20, 2011
The U.S. Court of Appeals for the Federal Circuit on Apr. 20 affirmed a $90 million award against based on a district court’s judgment that EchoStar Corp. violated one provision of a permanent injunction relating to TiVo Inc.’s digital video recorder technology and set forth new standards governing contempt proceedings in patent infringement cases (TiVo Inc. v. EchoStar Corp., Fed. Cir., No. 09-1374, 4/20/11).
The court was unanimous in its statement on the new contempt standards.
CAFC Affirms Noninfringement Ruling Where No Single Defendant Performed All Steps of Patented Method
April 12, 2011
The U.S. Court of Appeals for the Federal Circuit on Apr. 12 agreed that a method of facilitating communications between healthcare providers and patients was not infringed because the plaintiff was unable to show that any single party directly infringes the patent by performing all of the claimed steps (McKesson Technologies Inc. v. Epic Systems Corp., Fed. Cir., No. 2010-1291, 4/12/11).
Affirming a summary judgment of noninfringement, the court ruled that the defendant could not be liable for indirect infringement since its software customers, physicians, do not perform the step of “initiating a communication,” the first step of the claimed method, nor do they control or direct whether patients using the accused software take this initiating step.
CAFC Reverses Ruling That Beverage Can Patents Did Not Satisfy Written Description Requirement
April 1, 2011
The U.S. Court of Appeals for the Federal Circuit on Apr. 1 reversed a summary judgment that patents related to ways of saving metal when seaming beverage can bodies and ends failed to meet the Patent Act’s written description requirement, Crown Packaging Technology Inc. v. Ball Metal Beverage Container Corp., Fed. Cir., No. 2010-1020, 4/1/11).
District Court Finds Patents Invalid on Written Description and Anticipation Grounds.
Judge Chin Rejects Google Book Settlement With Authors, Publishers
March 22, 2011
Judge Denny Chin of the U.S. District Court for the Southern District of New York on Mar. 22 rejected a proposed agreement to settle class action copyright infringement suits against Google Inc. over its program to scan millions of books for online searching (Authors Guild v. Google Inc., S.D.N.Y., No. 05-CV-8136 (DC), 3/22/11).
As to the ultimate question of whether the proposed deal to settle suits brought against Google by authors and publishers is fair, adequate, and reasonable for purposes of Rule 23(e) of the Federal Rules of Civil Procedure, “I conclude that it is not,” Chin wrote. He said that this settlement raises issues “more suited for Congress than this Court,” particularly because it “would release claims well beyond those contemplated by the pleadings,” and may even violate antitrust law, international law, and Section 201(e) of the Copyright Act.
After Google’s Copying, the Parties Reach a Settlement.
U.S. Senate Passes Patent Reform Bill
March 8, 2011
The U.S. Senate on Mar. 8 passed the Patent Reform Act of 2011 by a vote of 95 to 5. Among other things, S. 23, entitled the “America Invents Act,” changes U.S. law from a system that affords patent protection to the first to invent to one that gives protection to the party who is first to file the application for the claimed invention.
The America Invents Act, if passed by the House of Representatives and signed into law by President Obama, would be the first comprehensive reform to the U.S. patent system in nearly 60 years.
Senator Patrick Leahy (D-Vt.), the bill’s sponsor, on Mar. 11 said in a statement that [t]hese reforms are a catalyst for creativity and for the jobs that go hand-in-hand with innovation. We are keeping faith with the constitutional imperative of encouraging innovation and invention.” On Mar. 8, House Judiciary Committee Chairman Lamar Smith (R-Tex.) hailed the Senate vote. “Today’s vote in the Senate is a victory for American innovators who create businesses, generate jobs and drive economic growth. The current patent system is outdated and is bogged down by frivulous suits and uncertainty regarding patent ownership. Patent reform unleashes American inventors and allows patent hulders to capitalize on their innovations and create new products and more jobs.”
Key Provisions of the Patent Reform Act of 2011.
- Amends federal patent law to define the "effective filing date" of a claimed invention as the actual filing date of the patent or the application for patent containing a claim to the invention -- establishing a first-to-file system to replace the current first-to-invent system, except as specified. It also requires the effective filing date for a claimed invention in an application for reissue or reissued patent to be determined by deeming the claim to the invention to have been contained in the patent for which reissue was sought.
- Establishes a 1-year grace period--a prior art exception--for inventors to file an application after certain disclosures of the claimed invention by the inventor or another who obtained the subject matter from the inventor. Also revises provisions concerning novelty and nonobvious subject matter.
- Repeals provisions relating to inventions made abroad and statutory invention registration.
- Replaces interference proceedings with derivation proceedings by permitting a civil action by a patent owner against another patent owner claiming to have the same invention and who has an earlier effective filing date if the invention claimed by the earlier patent owner was derived from the inventor claimed in the patent owned by the person seeking relief. Such action must be filed within a specified 1-year period.
- Replaces the Board of Patent Appeals and Interferences with the Patent Trial and Appeal Board (the Board).
- Requires reports from: (1) the Small Business Administration (SBA) on the effects of eliminating the use of dates of invention in the patent application process, particularly on small businesses, and (2) the U.S. Patent and Trademark Office (USPTO) on the operation of prior user rights in selected countries in the industrialized world.
- Modifies requirements regarding the oath or declaration required of an inventor.
- Allows a person to whom an inventor has assigned (or is under an obligation to assign) an invention to make an application for patent.
- Creates a damages determination procedure that requires the court or jury to consider only court-identified methodulogies and factors. It authorizes a court to treble the amount of damages found or assessed (inapplicable to specified royalties for provisional rights to inventions claimed in published applications). Allows any party to request that the trier of fact decide infringement and validity questions before the issues of damages and willful infringement are tried. Revises specified defenses and evidentiary requirements, including a bar on using an accused infringer's failure to obtain the advice of counsel to prove that any infringement was willful or induced.
- Allows one who is not the patent owner to request to cancel as unpatentable one or more claims of patent by filing a petition with the USPTO to institute: (1) post-grant review on any ground that could be raised under specified provisions relating to invalidity of the patent or any claim, and (2) inter partes review (replaces inter partes reexamination procedures) on specified novelty and nonobvious subject matter grounds based on prior art consisting of patents and printed publications. Limits the filing of petitions for post-grant review to the 9-month period beginning after the grant of patent or issuance of a reissue patent. Requires any petition for inter partes review to be filed after the later of: (1) 9 months after the grant or reissue, or (2) the date of termination of a post-grant review.
- Disallows both post-grant and inter partes review if the petitioner (or real party in interest or privy) has filed: (1) a related civil action, or (2) the petition more than 6 months after being served with a complaint alleging infringement. Prohibits the petitioner from asserting claims in certain proceedings before the USPTO and International Trade Commission (ITC) and in specified civil actions if such claims were raised or reasonably could have been raised in the respective reviews (in the case of post-grant review, prohibits only raised claims from ITC proceedings and civil actions) that resulted in a final Board decision.
- Prohibits the USPTO Director (Director) from authorizing: (1) inter partes review unless information in the petition and any response shows a reasonable likelihood that the petitioner would prevail on at least one of the challenged claims; or (2) post-grant review unless information in the petition, if not rebutted, would demonstrate that it is more likely than not that at least one of the challenged claims is unpatentable, or unless such petition raises a novel or unsettled legal question important to other patents or applications. Sets a deadline for the Director to make such determinations, which are deemed final and nonappealable.
- Requires the Director to prescribe related regulations.
- Authorizes the Director to determine whether a substantial new question of patentability is raised by patents and publications discovered by the Director or cited under provisions related to the citation of prior art or reexamination requests.
- Allows any person, at any time, to cite to the USPTO: (1) prior art bearing on the patentability of a claim, and (2) statements of the patent owner filed in a proceeding before a federal court or the USPTO in which the patent owner took a position on the scope of any claim of a particular patent. Requires, on written request of the person citing prior art or written statements, that that person's identity be kept confidential.
- Sets forth the Board's required composition and duties. Allows appeals to the U.S. Court of Appeals for the Federal Circuit (CAFC) from specified Board decisions, including examinations, reexaminations, post-grant and inter partes reviews, and derivation proceedings.
- Allows any third party to submit any publication of potential relevance to a patent application.
- Requires a district court to transfer a civil patent action if another venue is clearly more convenient than the venue in which the action is pending.
- Authorizes the Director to set or adjust by rule any fee established or charged by the USPTO. Establishes a $400 fee for original patent applications filed non-electronically.
- Establishes supplemental examinations to consider, reconsider, and correct information. Requires the Director to order reexamination if a substantial new question of patentability is raised by at least one item of information in the request.
- Eliminates the requirement that CAFC judges must reside within 50 miles of the District of Culumbia.
- Defines the term "micro entity" for both an assigned and unassigned application, including specifying for both that an entity qualifies as a small entity if it is so defined in regulations issued by the Director and has not been named on five or more previously filed patent applications.
- Decreases the percentage of certain invention-related royalties and income that must be paid to the federal government and correspondingly increases the percentage that must be given to small business firms when a nonprofit organization has a funding agreement with the government for the operation of a government owned, contractor operated facility. (An existing provision defines the term "funding agreement" as a contract, grant, or cooperative agreement entered into between a federal agency and any contractor for the performance of experimental, developmental, or research work funded in whule or in part by the federal government.)
- Deems any strategy for reducing, avoiding, or deferring tax liability insufficient to differentiate a claimed invention from the prior art when evaluating specified conditions of patentability.
- Prohibits using failure to disclose best mode as a basis on which any claim of a patent may be canceled or held invalid or otherwise unenforceable.
- Intellectual Property Jurisdiction Clarification Act of 2011 - Amends the federal judicial code to deny to state courts jurisdiction over legal actions relating to patents, plant variety protection, or copyrights.
- Grants exclusive jurisdiction to the CAFC of appeals relating to patents or plant variety protection.
- Provides for the removal to a U.S. district court of legal actions invulving patents, plant variety protection, or copyrights, and for the remand of unrelated matters.
- Requires the CAFC to transfer any appeal dealing with designs and unfair competition to the court of appeals for the regional circuit embracing the district from which the appeal has been taken.
S. 23 was supported by an array of companies and associations that included Biotechnulogy Industry Organization, IBM, Exxon, General Electric, Caterpillar, the American Institute of Certified Public Accountants, Microsoft, the Pharmaceutical Research and Manufacturers of America, and the Association of University Technulogy Managers.
S. 23 was opposed by a number of companies and groups, including Dell, Cisco, and the Generic Pharmaceutical Association.
Federal Circuit Reverses $1.67 Billion Damages Award Against Abbott Labs, Finding Asserted Patent Invalid for Weak Written Description
February 23, 2011
Overturning the largest patent infringement verdict ever in a suit against Abbott Laboratories’ Humira antibodies to treat arthritis, the U.S. Court of Appeals for the Federal Circuit Feb. 23 ruled that the plaintiff’s asserted patent is invalid under the written description requirement of the Patent Act at 35 U.S.C. § 112, ¶ 1 because it fails to adequately “describe a single antibody that satisfies the claim limitations” (Centocor Ortho Biotech Inc. v. Abbott Laboratories, Fed. Cir., No. 2010-1144, 2/23/11).
In reversing the award and judgment against Abbott, the court said that Centocor’s patent specification expressed a “mere wish or plan” for obtaining the claimed invention, which is not sufficient for purposes of § 112, ¶ 1.
Abbott’s Humira Antibodies Found Infringing.
In this suit, Centocor Ortho Biotech Inc. and New York University (Centocor) had sued Abbott Laboratories, alleging that Abbott’s Humira® antibody infringes claims of a patent (7,070,775) covering tumor necrosis factor alpha (“TNF-α”) antibodies used to treat arthritis. After a trial, the jury found Abbott liable for willful infringement. The jury rejected Abbott’s argument that the asserted claims were invalid, and awarded Centocor over $1.67 billion in damages--the largest patent infringement verdict ever.
Overproduction of TNF-α can lead to various autoimmune conditions, including arthritis, but the human body does not typically make TNF-α antibodies. As a result, pharmaceutical companies have competed to engineer antibodies that can “neutralize” human TNF-α for use as a drug. Many of the antibodies typically produced in this field by researchers were mice antibodies that lacked the desired neutralizing activity and sufficient binding affinity to stick to human TNF-α. Moreover, as human patients frequently have immunological reactions when treated with antibodies produced in mice or other nonhuman species, reduced immunogenicity became another important quality sought by researchers. Prior to the ‘775 patent, Abbott had obtained its own patent (6,090,382) covering a fully-human antibody to TNF-α that had high affinity and neutralizing activity.
Centocor Disclosed a ‘Mere Wish or Plan’ for Obtaining Claimed Invention.
On appeal, Abbott argued that the asserted claims were invalid under the Patent Act’s written description requirement at 35 U.S.C. § 112, ¶ 1, which states:
The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention.
Noting that Centocor’s later-filed claims assert priority dating to continuation-in-part (CIP) applications filed in 1994, the Federal Circuit said that the key issue here is whether the ’775 patent provides adequate written description for the claimed human variable regions—portions that determine what the antibody is and where on TNF-α the antibody will bind. “One of skill in the art cannot look at a mouse variable region and know how to turn it into a human variable region with the same affinity and activity as the mouse antibody,” Judge Sharon Prost clarified.
To satisfy the written description requirement, “the applicant must ‘convey with reasonable clarity to those skilled in the art that, as of the filing date sought, he or she was in possession of the invention,’ and demonstrate that by disclosure in the specification of the patent,” Prost continued, quoting Carnegie Mellon Univ. v. Hoffmann-La Roche Inc., 541 F.3d 1115 (Fed. Cir. 2008) and Vas-Cath Inc. v. Mahurkar, 935 F.2d 1555 (Fed. Cir. 1991). Ultimately, “the specification must describe an invention understandable to [a person of ordinary skill in the art] and show that the inventor actually invented the invention claimed,” she said, quoting the en banc ruling in Ariad Pharm., Inc. v. Eli Lilly & Co., 598 F.3d 1336 (Fed. Cir. 2010).
While Centocor insisted that the asserted claims are adequately described, Abbott argued under Regents of the Univ. of Cal. v. Eli Lilly & Co., 119 F.3d 1559 (Fed. Cir. 1997), that the 1994 CIP applications fail the written description test by expressing a “mere wish or plan” for how one might obtain the claimed invention.
The Federal Circuit agreed with Abbott, stating:
Thus, while the patent broadly claims a class of antibodies that contain human variable regions, the specification does not describe a single antibody that satisfies the claim limitations. … It does not disclose any relevant identifying characteristics for such fully-human antibodies or even a single human variable region. See id. Nor does it disclose any relationship between the human TNF-α protein, the known mouse variable region that satisfies the critical claim limitations, and potential human variable regions that will satisfy the claim limitations. … There is nothing in the specification that conveys to one of skill in the art that Centocor possessed fully-human antibodies or human variable regions that fall within the boundaries of the asserted claims.
At bottom, the asserted claims constitute a wish list of properties that a fully-human, therapeutic TNF-α antibody should have: high affinity, neutralizing activity, and the ability to bind in the same place as the mouse A2 antibody. The specification at best describes a plan for making fully-human antibodies and then identifying those that satisfy the claim limitations. But a “mere wish or plan” for obtaining the claimed invention is not sufficient. … At the time the 1994 CIP applications were filed, it was entirely possible that that no fully-human antibody existed that satisfied the claims. Because Centocor had not invented a fully-human, high affinity, neutralizing, A2 specific antibody in 1994, a reasonable jury could not conclude that it possessed one.
Merely Disclosing Protein Not Sufficient in This Case.
Still, Centocor insisted that the Noelle v. Lederman, 355 F.3d 1343 (Fed. Cir. 2004), and the Patent and Trademark Office’s revised written description guidelines of March 25, 2008 support the view that fully disclosing the human TNF-α protein provides adequate written description for any antibody that binds to human TNF-α.
The Federal Circuit disagreed, saying that Centocor had made “an unduly broad characterization of the guidelines and our precedent.” Prost noted that the antibody example in the PTO guidelines shows that an applicant can claim an antibody to novel protein X without describing the antibody when (1) the applicant fully discloses the novel protein and (2) generating the claimed antibody is so routine that possessing the protein places the applicant in possession of an antibody. However, generating fully-human antibodies with the claimed properties was not possible in 1994 using “conventional,” “routine,” “well developed and mature” technology, Prost stressed. In Noelle, she noted, the claims broadly covered an antibody that specifically binds human CD40CR protein but the specification only disclosed the mouse CD40CR protein and an antibody to that protein. Drawing support from that case, Prost said that the court there found that Noelle’s specification did not provide adequate written description for such broad claims.
While our precedent suggests that written description for certain antibody claims can be satisfied by disclosing a well-characterized antigen, that reasoning applies to disclosure of newly characterized antigens where creation of the claimed antibodies is routine. Here, both the human TNF-α protein and antibodies to that protein were known in the literature. The claimed “invention” is a class of antibodies containing a human variable region that have particularly desirable therapeutic properties: high affinity, neutralizing activity, and A2 specificity.
Claiming antibodies with specific properties, e.g., an antibody that binds to human TNF-α with A2 specificity, can result in a claim that does not meet written description even if the human TNF-α protein is disclosed because antibodies with those properties have not been adequately described.
Here, Prost noted that Centocor placed great weight on the remark of an expert (Salfeld) that the antibody-antigen relationship is like “a key in a lock.” In doing so, she said, Centocor ignored the expert’s point about the challenge of finding an appropriate antibody on “a ring with a million keys on it.” Prost was not persuaded that generating fully-human antibodies with the claimed properties would be straightforward to a skilled artisan “given the state of human antibody technology in 1994. Unlike the antibody example cited in the PTO guidelines, therefore, simple possession of the known TNF-α protein did not place Centocor in possession of the claimed antibodies.”
Constructive Possession of the Invention Was Never Shown.
In closing, the court acknowledged Centocor’s point that the written description requirement does not demand an inventor to make an invention, and does not require examples or an actual reduction to practice. What it does require is that a skilled artisan can “visualize or recognize” the claimed antibodies based on the specification’s disclosure, the court said, quoting Eli Lilly.
Quoting Ariad, the Federal Circuit concluded as follows:
In other words, the specification must demonstrate constructive possession, and the ’775 patent’s specification fails to do so. … Centocor’s asserted claims to fully-human antibodies “merely recite a description of the problem to be solved while claiming all solutions to it.” … The actual inventive work of producing a human variable region was left for subsequent inventors to complete.
The opinion was joined by Senior Judge Raymond Clevenger and Judge William C. Bryson.
Centocor was represented by Dianne B. Elderkin of Akin Gump Strauss Hauer & Feld, Philadelphia. Abbott was represented by William F. Lee of Wilmer Cutler Pickering Hale and Dorr, Boston.
Amicus curiae Professor Oskar Liivak of Cornell Law School, Ithaca, New York, appeared on his own behalf.
Read Professor Liivak’s amicus brief.
Mary J. Stewart of Eli Lilly and Co., Indianapolis, appeared for amicus curiae Eli Lilly.
Read Eli Lilly’s amicus brief.
CAFC: Federal Jurisdiction Exists Over a Declaratory Judgment Action Where There Is a Federal Cause of Action but Only a State Law Defense
February 17, 2011
The U.S. Court of Appeals for the Federal Circuit ruled Feb. 17 that a declaratory judgment suit was wrongly dismissed for lack of subject matter jurisdiction because the district court ignored the anticipated claim for infringement that could be brought by the declaratory defendant and placed too much attention on the fact that the declaratory plaintiff’s suit only asserted a state law license defense to infringement (ABB Inc. v. Cooper Industries LLC, Fed. Cir., No. 2010-1227, 2/17/11).
While noting that this issue has not been squarely resolved, the appellate court said that the U.S. Supreme Court’s cases do support the general rule that the proper course is for a court to examine the hypothetical claim that could be asserted by the declaratory defendant, and here that claim was for patent infringement—a federal claim.
Declaratory Suit Follows Settlement and Letters from Patentee Over Third-Party Outsourcing.
In this case, Cooper Industries LLC had sued ABB Inc. in federal court, charging that the company infringed its patents (6,037,537; 6,184,459; 6,352,655; 6,398,986; 6,613,250; and 6,905,638) covering electrical equipment containing dielectric fluid, which is used to electrically insulate and thermally protect devices such as transformers. At the heart of that dispute was Cooper’s claim that ABB’s BIOTEMP vegetable oil based dielectric fluid infringed the patents.
That suit was settled in 2005 when ABB took a license, paid Cooper $1 million, and acknowledged that the patents are valid and enforceable and that BIOTEMP is covered by one or more claims of the patents. However, trouble stirred after ABB began outsourcing the manufacture of BIOTEMP to Dow Chemicals under an agreement in which it agreed to indemnify Dow for any claims by Cooper. In June 2009, Cooper wrote to ABB and Dow, stating that such outsourcing “would be a material breach” and that “Cooper will act vigorously to protect its rights in that event.”
One month later, ABB filed for a declaratory judgment in Texas federal district court, seeking a declaration that its activities were authorized under the license agreement. ABB later ABB amended its original complaint, seeking declarations that it “does not infringe … any valid enforceable claim” of the Cooper patents. Cooper moved to dismiss ABB’s declaratory judgment claim for lack of subject matter jurisdiction, arguing that there was no actual controversy involving infringement and that ABB’s complaint raised only a state law license defense to infringement.
The district court agreed to dismiss the suit for lack of subject matter jurisdiction, reasoning that there was no federal question at issue because ABB’s complaint “only entails a determination of the parties’ rights under the [settlement agreement].”
ABB appealed, arguing that its declaratory suit indeed arose under 28 U.S.C. § 1338, which grants federal question jurisdiction in “any civil action relating to patents.”
Similar Warning Letters Led to Jurisdiction in MedImmune.
From the outset, the Federal Circuit pointed to a recent Supreme Court case which held that statements similar to Cooper’s created a case or controversy sufficient to establish declaratory judgment jurisdiction, MedImmune Inc. v. Genetech Inc., 549 U.S. 118 (2007). The petitioner in that case was served with a letter expressing the belief that the accused product was covered by one of the respondent’s patents and that the petitioner would have to pay royalties. Quoting Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270 (1941), MedImmune found that there was jurisdiction for purposes of Article III of the Constitution because there was “a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” Here, Cooper’s letters said that it “will act vigorously to protect its rights” and that it would “vigorously defend its rights,” Judge Timothy B. Dyk stressed.
Continuing, Dyk pointed out that MedImmune rejected the Federal Circuit’s rigid rule that there could not be a case or controversy without a reasonable apprehension of imminent suit. While Cooper insisted that this case only involved a state law dispute over the interpretation of a license, Dyk found that there was a controversy “of sufficient immediacy and reality” surrounding infringement “to warrant the issuance of a declaratory judgment” under the language of MedImmune. “To obtain an injunction or damages remedy, Cooper would have to sue ABB for induced infringement or Dow for direct infringement (which would have obligated ABB to indemnify Dow),” he explained. In a similar case that followed MedImmune, this court found jurisdiction where the declaratory defendant had sent veiled warnings to the declaratory plaintiff and had already sued other companies that produced the same product accused of infringement, Dyk noted, citing Micron Techology Inc. v. Mosaid Technologies Inc., 518 F.3d 897 (Fed. Cir. 2008).
The warning letters from Cooper to ABB and Dow indicate that, under Micron and MedImmune, there was an immediate controversy surrounding infringement. ABB had an interest in determining whether it would incur liability for induced infringement, and it had an interest in determining whether it would be liable for indemnification, which turned on whether Dow would be liable for infringement.
Cooper’s Hypothetical Complaint Here Involves a Federal Claim—Infringement.
Still, Cooper argued that, even if there is an immediate controversy as to infringement, that controversy would be insufficient to create jurisdiction under Section 1338 because ABB raises only a state law defense to the infringement claim.
The Federal Circuit disagreed. “[I]t is the character of the threatened action, and not of the defense, which will determine whether there is federal-question jurisdiction in the District Court,” the court said, quoting Public Serv. Comm’n of Utah v. Wycoff Co., 344 U.S. 237 (1952). Thus, focusing on a declaratory defendant’s hypothetical well-pleaded complaint to determine subject matter jurisdiction, the court reasoned as follows:
Because the actual controversy in this case is over infringement, the declaratory defendant’s hypothetical coercive complaint here is a patent infringement suit. It is well-established that a claim for infringement arises under federal law. Even if the only issue in that suit would be a state law defense, subject matter jurisdiction does not depend on whether a federal law issue will be the crux of the case but instead whether “federal patent law creates the cause of action.” … Cooper could unquestionably bring its patent infringement claim in the federal courts, even if ultimate resolution of the case depended entirely on ABB’s state law defense, because an infringement suit is a federal cause of action. Therefore, the defendant’s cause of action here arises under federal law, and the cases suggest that the district court possesses subject matter jurisdiction over a declaratory action seeking a declaration that there is no infringement liability.
Though Cooper argued that this rule should not apply because ABB’s sole defense is based on the state law license, Dyk noted that a Supreme Court case left open the question of whether federal courts have jurisdiction over a declaratory judgment action where there is a federal cause of action but only a state law defense. Textron Lycoming Reciprocating Engine Div., AVCO Corp. v. Auto. Workers, 523 U.S. 653 (1998).
In Textron, Justice Stephen Breyer argued in his concurring opinion that the Court should have resolved the question and found that the anticipated federal claim would have created subject matter jurisdiction over the declaratory judgment action even though the defense arose under state law. While Dyk could find no authority directly on point, he concluded that there was indeed federal question jurisdiction in this case. For support, he cited Franchise Tax Bd. of Cal. v. Constr. Laborers Vacation Trust, 463 U.S. 1 (1983), for the general rule that declaratory judgment jurisdiction exists where the defendant’s coercive action arises under federal law. “We see no reason to depart from that general principle where the defense is non-federal in nature,” Dyk said. Further, he emphasized Franchise Tax Board’s statement that “federal courts have consistently adjudicated suits by alleged patent infringers to declare a patent invalid, on the theory that an infringement suit by the declaratory judgment defendant would raise a federal question over which the federal courts have exclusive jurisdiction.”
Finally, the appellate court turned away Cooper’s reliance on two older Supreme Court cases, Luckett v. Delpark, Inc., 270 U.S. 496 (1926), and Wilson v. Sandford, 51 U.S. 99 (1850). These cases involving a suit to collect royalties under a license and a suit for forfeiture of a license stand “only for the unremarkable proposition that a plaintiff’s coercive complaint in a normal civil action does not arise under federal law when it is based on a contract or license,” Dyk wrote. Noting that those cases predate the Declaratory Judgment Act, he said that they in no way suggest that a declaratory judgment of non-infringement does not arise under the patent laws.
The dismissal of ABB’s suit for lack of subject matter jurisdiction was reversed.
The opinion was joined by Chief Judge Randall R. Rader and Judge Alan Lourie.
ABB Inc. was represented by David L. Burgert of Porter & Hedges, Houston. Cooper Industries was represented by Robert J. McAughan Jr. of Locke Lord Bissell & Liddell, Houston.
CAFC: To “Use” a System Under§ 271(a), One Must Put It Into Service, or Control System as a Whole and Benefit From It
January 20, 2011
The U.S. Court of Appeals for the Federal Circuit ruled Jan. 20 in a case of first impression that, consistent with its NTP v. Research in Motion Ltd. ruling involving method claims, one must put an invention into service, i.e., control the system as a whole and obtain benefit from it, in order to infringe system claims by “use” under § 271(a) of the Patent Act (Centillion Data Systems LLC v. Qwest Communications International Inc., Fed. Cir, No. 2010-1110, 1/20/11).
Billing System Noninfringement Ruling Appealed.
In this case, Centillion Data Systems LLC appealed the district court’s summary judgment that Qwest’s Logic, eBill Companion, and Insite billing systems did not infringe its billing system patent (5,287,270). The accused products include two parts: Qwest’s back office systems and front-end client applications that a user may install on a personal computer.
Rather than conducting an element by element comparison to determine whether the claimed system was infringed, the district court only considered infringement by “use” under 35 U.S.C. § 271(a), particularly whether Qwest could be liable for infringement of a system claim that requires both a back office portion as well as a personal computer operated by a user.
While Centilion appealed the noninfringement ruling, Qwest cross-appealed the ruling that the ‘270 patent was not invalid for anticipation.
§271(a) ‘Use’ of a System Claim Is Defined Under NTP Case.
The Federal Circuit began by observing that this case raises a matter of first impression—“use” of a system claim under Section 271(a) where the elements are in the possession of more than one actor.
However, a similar case involving asserted method claims found that customers located in the United States who sent messages via the accused Blackberry handheld device made “use” of the overall system in the United States even though one of the system relays was located in Canada, Judge Kimberly A. Moore noted, citing NTP Inc. v. Research in Motion Ltd., 418 F.3d 1282 (Fed. Cir. 2005). There, the court distinguished use of a claimed method from that of a claimed system and held that “[t]he use of a claimed system under section 271(a) is the place at which the system as a whole is put into service, i.e., the place where control of the system is exercised and beneficial use of the system obtained.”
Relying on NTP, the district court defined “use” under Section 271(a) as “put[ting] the system into service, i.e., . . . exercis[ing] control over, and benefit[ting] from, the system’s application.” It held that under BMC Resources Inc. v. Paymentech L.P., 498 F.3d 1373 (Fed. Cir. 2007) and Cross Medical Products v. Medtronic Sofamor Danek, Inc., 424 F.3d 1293 (Fed. Cir. 2005), an accused infringer must either practice every element or control or direct the actions of another practicing the element in question.
Accordingly, the district court determined that no single party practices all of the limitations of the asserted claims. As to Qwest, it found that the company does not “use” the system under § 271(a) by providing the back-end portions of the accused systems and the software for a user to load on its “personal computer processing means.” Under this reading of “use,” it held that Centillion could not show that Qwest “practiced each and every element of the system claim.”
The district court further held that Qwest’s customers did not “use” the patented system under § 271(a) since Centillion could not show that the customers directed or controlled the “[data] processing means” of the accused systems’ “back-end.”
Though noting that NTP dealt with the situs of infringement rather than the nature of the infringing act, Moore here adopted its definition of “use” under § 271(a) and held that to “use” a system for purposes of infringement, a party must put the invention into service, i.e., control the system as a whole and obtain benefit from it. “The district court correctly determined that this definition from NTP was the proper one to apply,” she wrote.
However, the Federal Circuit rejected the district court’s conclusion that in order to “use” a system under § 271(a), a party must exercise physical or direct control over each individual element of the system. Moore explained:
The “control” contemplated in NTP is the ability to place the system as a whole into service. In other words, the customer in NTP remotely “controlled” the system by simply transmitting a message. … That customer clearly did not have possession of each of the relays in the system, nor did it exert the level of direct, physical “control” that the district court requires. To accept the district court’s interpretation of “use” would effectively overturn NTP because the predicate “use” in that case would no longer fall under the definition of “use.”
We agree that direct infringement by “use” of a system claim “requires a party . . . to use each and every . . . element of a claimed [system].” In order to “put the system into service,” the end user must be using all portions of the claimed invention. For example, in NTP, the end user was “using” every element of the system by transmitting a message. It did not matter that the user did not have physical control over the relays, the user made them work for their patented purpose, and thus “used” every element of the system by putting every element collectively into service.
‘Use’ by Qwest’s Customers.
Continuing, the appellate court examined both modes of the Qwest system operation to determine if there was customer “use” under § 271(a), On-Demand Operation. In the on-demand function, a customer creates a query that the Qwest back-end system processes and provides a result for download. “We hold that the on-demand operation is a “use” of the system as a matter of law,” Moore said, noting that the customer puts the system as a whole into service, i.e., controls the system and obtains benefit from it. She added:
The customer controls the system by creating a query and transmitting it to Qwest’s back-end. The customer controls the system on a one request/one response basis. This query causes the back-end processing to act for its intended purpose to run a query and return a result. The user may then download the result and perform additional processing as required by the claim. If the user did not make the request, then the back-end processing would not be put into service. By causing the system as a whole to perform this processing and obtaining the benefit of the result, the customer has “used” the system under § 271(a). It makes no difference that the back-end processing is physically possessed by Qwest. The customer is a single “user” of the system and because there is a single user, there is no need for the vicarious liability analysis from BMC or Cross Medical.
Standard Operation. During normal functioning, after a user subscribes, Qwest’s back-end systems create periodic summary reports (standard operation) which are available for the user to download. The Federal Circuit held that this form of operation is also a “use” as a matter of law. Though this mode is not a one request/one response scenario, “[l]ike the on-demand operation, the back-end processing in normal operation is performed in response to a customer demand, Moore explained, writing:
The difference though is that a single customer demand (the act of subscribing to the service) causes the back-end processing monthly. But in both modes of operation, it is the customer initiated demand for the service which causes the back-end system to generate the requisite reports. This is “use” because, but for the customer’s actions, the entire system would never have been put into service. This is sufficient control over the system under NTP, and the customer clearly benefits from this function.
Since the district court concluded as a matter of law that no single party could be liable for “use” of the patented invention, it did not compare the accused system to the claim limitations. Having found that conclusion wrong, the Federal Circuit declined to determine for the first time on appeal whether any individual customer has actually installed the Qwest software, downloaded records, and analyzed them as required by the claims. Further, it made no comment as to whether Qwest may have induced infringement by a customer.
Qwest Not Vicariously Liable for ‘Use’ by Its Customers.
Citing Fantasy Sports Properties Inc. v. Sportsline.com Inc., 287 F.3d 1108 (Fed. Cir. 2002), Centillion argued that Qwest’s operation of the back-end processing “uses” the system under § 271(a).
However, Qwest argued that it could not be liable for a “use” of the system under § 271(a) because it does not control the claimed personal computer.
The Federal Circuit “agree[d] with Qwest that, as a matter of law, it does not “use” the patented invention under the appropriate test from NTP.” Citing NTP, Moore stated:
To “use” the system, Qwest must put the claimed invention into service, i.e., control the system and obtain benefit from it. … While Qwest may make the back-end processing elements, it never “uses” the entire claimed system because it never puts into service the personal computer data processing means. Supplying the software for the customer to use is not the same as using the system. …
Following our vicarious liability precedents, we conclude, as a matter of law, that Qwest is not vicariously liable for the actions of its customers. Qwest in no way directs its customers to perform nor do its customers act as its agents. While Qwest provides software and technical assistance, it is entirely the decision of the customer whether to install and operate this software on its personal computer data processing means.
Centillion’s reliance on Fantasy Sports is misplaced, Moore said, noting that in that case the district court erred by not considering direct infringement along with indirect infringement since the defendant housed all of the necessary software on its servers. ”This does not equate to a holding that in order to prove ‘use’ of a patented invention, a patent owner must only show that the accused infringer makes software available,” she said, pointing out that an entire system is not used until a customer loads software on its personal computer and processes data. “Qwest clearly does not fulfill this claim requirement.”
Qwest Does Not ‘Make’ Claimed Invention Under §271(a).
While Centillion claimed that there was a genuine issue of material fact as to whether Qwest “makes” the claimed invention under § 271(a), the Federal Circuit disagreed because Qwest manufactures only part of the claimed system. In order to “make” the system under § 271(a), Moore explained, “Qwest would need to combine all of the claim elements—this it does not do.”
Further, the court found that there is no vicarious liability because Qwest’s customers do not act as its agents as a matter of law nor are they contractually obligated by Qwest to act.
Fact Issues as to Invalidity for Anticipation.
Finally, the Federal Circuit ruled that the district court erred in granting a summary judgment that the ’270 patent was not anticipated under §102 of the Patent Act by NYNEX’s prior art COBRA billing system. There is a factual dispute as to whether the records generated by COBRA are “summary reports” as construed by the district court, and also a factual dispute as to whether such reports are created “as specified by the user” under the patent’s broad language, Moore said.
The summary judgment of noninfringement was vacated and remanded, and the summary judgment of no invalidity for anticipation was reversed and remanded.
The opinion was joined by Judges Richard Linn and Alan Lourie.
Centillion was represented by Victor M. Wigman of Blank Rome, Washington, D.C. Qwest was represented by Vincent J. Belusko of Morrison & Foerster, Los Angeles.
Google Loses Award of §285 Attorneys’ Fees Since Plaintiff’s Patent Infringement Was Not Frivolous or Objectively Baseless
January 11, 2011
The U.S. Court of Appeals for the Federal Circuit Jan. 11 vacated an award of attorneys’ fees to Google Inc. pursuant to Section 285 of the Patent Act because it found that the infringement plaintiff’s suit, while unsuccessful, was not frivolous or objectively baseless (iLOR LLC v. Google Inc., Fed. Cir., No. 2010-1117, 1/11/11).
Finding that the district court clearly erred in ruling that this was an “exceptional” case warranting an awarding of attorneys’ fees under Section 285, the Federal Circuit said that this suit was not objectively baseless because the plaintiff here “could reasonably argue that its broad claim construction position was correct and that Google infringed its claims.”
Google Prevails on Infringement Question, Is Awarded Attorneys’ Fees.
In this suit, iLOR LLC charged that Google Inc.’s Google Notebook infringed its U.S. patent 7,206,839 relating to Internet functionality, which in Claim 26 requires “the toolbar being displayable based on a location of a cursor in relation to a hyperlink.”
At trial, Google argued that the “being displayable” limitation only covered methods where the toolbar was automatically displayed when a cursor was proximate to the hyperlink. However, iLOR read the claim to also cover an embodiment where a right-mouse click was required to display the toolbar.
The district court agreed with Google and construed the claim to mean that “the toolbar is ‘automatically displayed’ upon the placement of the cursor in proximity to a hyperlink with no further action on the part of a user.” It went on to grant a summary judgment of noninfringement and dismiss the suit with prejudice.
In an initial appeal, the Federal Circuit found no error in the district court’s denial of a preliminary injunction, agreeing that the language of the claim and the specification suggested that the toolbar display was automatic and “based on the location of the cursor” in relation to the hyperlink. iLOR LLC v. Google Inc., 550 F.3d 1067 (Fed. Cir. 2008).
Here, iLOR appealed the district court’s award to Google of $627,039 in attorneys’ fees and other costs for a total of $660,351.
Google Fails to Meet Brooks Furniture Test.
Under Patent Act Section 285, 35 U.S.C. § 285, a “court in exceptional cases may award reasonable attorney[s’] fees to the prevailing party.”
The Federal Circuit observed that Section 285 must be viewed in the context of Supreme Court authority recognizing that the right to bring and defend litigation implicates First Amendment rights and that bringing allegedly frivolous litigation can only be sanctioned if the lawsuit is “objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits.” Professional Real Estate Investors, Inc. v. Columbia Pictures Industries Inc., 508 U.S. 49 (1993). As to whether a case is “exceptional,” Judge Timothy B. Dyk said that the relevant standard under Brooks Furniture Manufacturing Inc. v. Dutailier International Inc., 393 F.3d 1378 (Fed. Cir. 2005), asks whether “there has been some material inappropriate conduct related to the matter in litigation, such as willful infringement, fraud or inequitable conduct in procuring the patent, misconduct during litigation, vexatious or unjustified litigation, conduct that violates Fed. R. Civ. P. 11, or like infractions.”
Dyk noted that Brooks Furniture relied on Professional Real Estate in holding that, absent misconduct during patent prosecution or litigation, sanctions may be imposed against a patent plaintiff “only if both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.” Under the strict standard of Brooks Furniture, the plaintiff’s case must have no objective foundation, the plaintiff must actually know this, and both the objective and subjective prongs “must be established by clear and convincing evidence,” Dyk said, quoting Wedgetail Ltd. v. Huddleston Deluxe Inc., 576 F.3d 1302 (Fed. Cir. 2009).
Looking at whether the second prong was present here, Dyk explained that “[t]he objective baselessness standard for enhanced damages and attorneys’ fees against a non-prevailing plaintiff under Brooks Furniture is identical to the objective recklessness standard for enhanced damages and attorneys’ fees against an accused infringer for § 284 willful infringement actions under In re Seagate Technology LLC, 497 F.3d 1360 (Fed. Cir. 2007) (en banc).”
Even though iLOR was ultimately unsuccessful in its patent infringement suit, “Google has not met its high burden to show by clear and convincing evidence that this suit was brought frivolously or that iLOR’s position on claim construction was objectively baseless, the Federal Circuit wrote. It said that the claim terms, specification, and prosecution history supported iLOR’s broad claim interpretation, which was ultimately found incorrect. “But simply being wrong about claim construction should not subject a party to sanctions where the construction is not objectively baseless,” Dyk stressed. He acknowledged that claim construction issues are often complex and “not always predictable.” Having found that Google failed the objective element of the two Brooks Furniture requirements, he said there was no need to look at the issue of subjective bad faith.
While the appellate court vacated the award of attorneys’ fees under § 285, it did find that the awarding Google costs for copying, court reporting, and transcripts was proper under 28 U.S.C §1920. The court then set aside the award of expert fees to Google under § 285, pointing out that that this case was not brought in bad faith.
The “exceptional” case finding was reversed, and the suit was remanded.
The opinion was joined by Chief Judge Randall R. Rader and Judge Richard Linn.
iLOR was represented by David E. Schmit of Frost Brown Todd, Cincinnati. Google was represented by Frank E. Scherkenbach of Fish & Richardson, Boston.
On Supreme Court Remand, Federal Again Upholds Validity of Patented Methods to Calibrate Drug for Treating Crohn’s Disease
December 17, 2010
The U.S. Court of Appeals for the Federal Circuit, in a case that was remanded in light of the U.S. Supreme Court’s in Bilski v. Kappos, again concluded Dec. 17 that methods of calibrating the proper dosage of a drug to treat Crohn’s disease fall within the realm of patentable subject matter under Section 101 of the Patent Act (Prometheus Laboratories v. Mayo Collaborative Services, Fed. Cir., No. 2008-1403, 12/17/10).
The appellate court said that the Supreme Court did not reject its machine-or-transformation test, which holds that a process is patentable under Section 101 if (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing. Rather, the Bilski court stressed that the machine-or-transformation test is not the sole test for determining the patent eligibility of process claims, Judge Alan D. Lourie explained.
Under Bilski, patent eligibility in this case turns on whether Prometheus’s asserted claims are drawn to a natural phenomenon, the patenting of which would entirely preempt its use, or whether the claims are drawn only to a particular application of that phenomenon. “We conclude they are drawn to the latter,” Lourie wrote.
Reversal of Invalidity Ruling Is Vacated, Remanded in Light of Bilski.
Prometheus is the exclusive licensee of two patents (6,355,623 and 6,680,302) claiming methods for calibrating the proper dosage of thiopurine drugs, which are used for treat inflammatory bowel diseases (“IBD”) such as Crohn’s disease and ulcerative colitis.
After Prometheus sued Mayo Collaborative Services for patent infringement, Mayo moved for summary judgment of invalidity on the ground that the patents are invalid for claiming unpatentable subject matter under 35 U.S.C. § 101. To Mayo, the patents impermissibly claim natural phenomena—the correlations between, on the one hand, thiopurine drug metabolite levels and, on the other hand, efficacy and toxicity—and the claims wholly preempt use of the natural phenomena.
As reported in an earlier Intellirights story, the Federal Circuit in September 2009 reversed a district court’s ruling that these patents were invalid under Section 101 as drawn to non-statutory subject matter. Prometheus Laboratories, Inc. v. Mayo Collaborative Services, 581 F.3d 1336 (Fed. Cir. 2009). The district court identified three claimed process steps: (1) administering the drug to a subject; (2) determining metabolite levels; and (3) warning that an adjustment in dosage may be required. It said that the “administering” and “determining” steps are merely necessary data-gathering steps for any use of the correlations,” and that the final step—the “warning’ step”—is only a mental step. It went on to state that the warning step does not require any actual change in dosage and that natural phenomena is claimed because “it is the metabolite levels themselves that ‘warn’ the doctor that an adjustment in dosage may be required.”
In rejecting that analysis, the Federal Circuit drew from the U.S. Supreme Court’s ruling in Diamond v. Diehr, 450 U.S. 175 (1981) and its own decision in In re Bilski, 545 F.3d 943 (Fed. Cir. 2008) cert. granted, 129 S. Ct. 2735 (June 1, 2009), and concluded that the method steps were not invalid under Section 101 for merely reciting natural phenomena — correlations between certain thiopurine drug metabolite levels and therapeutic efficacy and toxicity. Beyond simply claiming natural correlations and data-gathering steps, these claims “are in effect claims to methods of treatment, which are always transformative when a defined group of drugs is administered to the body to ameliorate the effects of an undesired condition,” the appellate court wrote. It held that Prometheus’s asserted claims recite transformative “administering” and “determining” steps, and that Prometheus’s claims are drawn not to a law of nature, but to a particular application of naturally occurring correlations, and thus do not preempt all uses of the recited correlations between metabolite levels and drug efficacy or toxicity.
However, its decision was vacated and remanded in light of the Supreme Court’s ruling in Bilski v. Kappos, 130 S. Ct. 3218 (2010).
Even Under Bilski, Claims Still Drawn to Patentable Subject Matter.
On remand from the Supreme Court, the Federal Circuit said that “Bilski did not undermine our preemption analysis of Prometheus’s claims” but rejected the notion of the machine-or-transformation test as an “exclusive” test.
“In light of the Supreme Court’s decision in Bilski, patent eligibility in this case turns on whether Prometheus’s asserted claims are drawn to a natural phenomenon, the patenting of which would entirely preempt its use as in Benson [Gottschalk v. Benson, 409 U.S. 63 (1972)]or Flook [Parker v. Flook, 437 U.S. 584 (1978)], or whether the claims are drawn only to a particular application of that phenomenon as in Diehr,” Lourie stated. “We conclude they are drawn to the latter.”
As before, we again hold that Prometheus’s asserted method claims recite a patent-eligible application of naturally occurring correlations between metabolite levels and efficacy or toxicity, and thus do not wholly preempt all uses of the recited correlations. As discussed below, the claims recite specific treatment steps, not just the correlations themselves. And the steps involve a particular application of the natural correlations: the treatment of a specific disease by administering specific drugs and measuring specific metabolites. As such, and contrary to Mayo’s assertions, the claims do not preempt all uses of the natural correlations; they utilize them in a series of specific steps. … The inventive nature of the claimed methods stems not from preemption of all use of these natural processes, but from the application of a natural phenomenon in a series of steps comprising particular methods of treatment. Other drugs might be administered to optimize the therapeutic efficacy of the claimed treatment.
We similarly reaffirm that the treatment methods claimed in Prometheus’s patents in suit satisfy the transformation prong of the machine-or-transformation test, as they “transform an article into a different state or thing,” and this transformation is “central to the purpose of the claimed process.” … The transformation is of the human body and of its components following the administration of a specific class of drugs and the various chemical and physical changes of the drugs’ metabolites that enable their concentrations to be determined. We thus have no need to separately determine whether the claims also satisfy the machine prong of the test.
Contrary to the district court and Mayo’s arguments on remand, we do not view the disputed claims as merely claiming natural correlations and data-gathering steps. The asserted claims are in effect claims to methods of treatment, which are always transformative when one of a defined group of drugs is administered to the body to ameliorate the effects of an undesired condition. More specifically, Prometheus here claimed methods for optimizing efficacy and reducing toxicity of treatment regimes for gastrointestinal and non-gastrointestinal autoimmune diseases that utilize drugs providing 6-TG by administering a drug to a subject. The invention’s purpose to treat the human body is made clear in the specification and the preambles of the asserted claims. …
When administering a drug such as AZA or 6-MP, the human body necessarily undergoes a transformation. The drugs do not pass through the body untouched without affecting it. In fact, the transformation that occurs, viz., the effect on the body after metabolizing the artificially administered drugs, is the entire purpose of administering these drugs: the drugs are administered to provide 6-TG, which is thought to be the drugs’ active metabolite in the treatment of disease, to a subject. … The fact that the change of the administered drug into its metabolites relies on natural processes does not disqualify the administering step from the realm of patentability. As Prometheus points out, quite literally every transformation of physical matter can be described as occurring according to natural processes and natural law. Transformations operate by natural principles. The transformation here, however, is the result of the physical administration of a drug to a subject to transform—i.e., treat—the subject, which is itself not a natural process. “It is virtually self-evident that a process for a chemical or physical transformation of physical objects or substances is patent-eligible subject matter.” Bilski, 545 F.3d at 962. The administering step, therefore, is not merely data-gathering but a significant transformative element of Prometheus’s claimed methods of treatment that is “sufficiently definite to confine the patent monopoly within rather definite bounds.”
Not all of the asserted claims, however, contain the administering step. That omission, which occurs in claims 46 and 53 of the ’623 patent, does not diminish the patentability of the claimed methods because we also hold that the determining step, which is present in each of the asserted claims, is transformative and central to the claimed methods. Determining the levels of 6-TG or 6-MMP in a subject necessarily involves a transformation. Some form of manipulation, such as the high pressure liquid chromatography method specified in several of the asserted dependent claims or some other modification of the substances to be measured, is necessary to extract the metabolites from a bodily sample and determine their concentration. As stated by Prometheus’s expert, “at the end of the process, the human blood sample is no longer human blood; human tissue is no longer human tissue.” … That is clearly a transformation. In fact, Mayo does not dispute that determining metabolite levels in the clinical samples taken from patients is transformative, but argues that this transformation is merely a necessary data-gathering step for use of the correlations. On the contrary, this transformation is central to the purpose of the claims, since the determining step is, like the administering step, a significant part of the claimed method. Measuring the levels of 6-TG and 6-MMP is what enables possible adjustments to thiopurine drug dosage to be detected for optimizing efficacy or reducing toxicity during a course of treatment. The determining step, by working a chemical and physical transformation on physical substances, likewise sufficiently confines the patent monopoly, as required by the machine-or-transformation test.
A further requirement for patent-eligibility is ensuring that the involvement of the transformation in Prometheus’s claimed process is “not merely insignificant extra-solution activity.” Flook, 437 U.S. at 590. As made clear from the discussion above, the administering and determining steps are transformative and are central to the claims rather than merely insignificant extra-solution activity.
The crucial error the district court made in reaching the opposite conclusion was failing to recognize that the first two steps of the asserted claims are not merely data-gathering steps. … While it is true that the administering and determining steps gather useful data, it is also clear that the presence of those two steps in the claimed processes is not “merely” for the purpose of gathering data. Instead, the administering and determining steps are part of a treatment protocol, and they are transformative. As explained above, the administering step provides thiopurine drugs for the purpose of treating disease, and the determining step measures the drugs’ metabolite levels for the purpose of assessing the drugs’ dosage during the course of treatment.
In re Grams Distinguished.
Further, the court distinguished this case from In re Grams, 888 F.2d 835 (Fed. Cir. 1989), saying that the administering and determining steps are not “merely” data-gathering steps or “insignificant extra-solution activity,” but are part of treatment regimes for various diseases using thiopurine drugs. While noting that the final “wherein” clauses of the claims involve mental steps that are “not patent-eligible per se,” it stressed that “the claims are not simply to the mental steps.” Here, Lourie pointed out that “[a] subsequent mental step does not, by itself, negate the transformative nature of prior steps.”
“Viewing the treatment methods as a whole,” Lourie said, “Prometheus has claimed therapeutic methods that determine the optimal dosage level for a course of treatment.” When asked, under Grams, “What did the applicant invent?,” he said, “the answer is a series of transformative steps that optimizes efficacy and reduces toxicity of a method of treatment for particular diseases using particular drugs.”
The opinion was joined by Chief Judge Randall R. Rader and Judge William C. Bryson.
Prometheus was represented by Richard P. Bress of Latham & Watkins, Washington, D.C.
Jonathan E. Singer of Fish & Richardson, Minneapolis, represented Mayo.
Amicus curiae Christopher M. Holman Christopher M. Holman of the University of Missouri-Kansas City School of Law, represented himself.
Jennifer Gordon of Baker Botts, New York, represented amicus curiae Novartis Corp.
Jay Z. Zhang of Myriad Genetics Inc., Salt Lake City, represented amicus curiae Myriad Genetics.
Edward R. Reines of Weil Gotshal & Manges, Redwood Shores, Calif., represented amicus curiae American Intellectual Property Law Association.
Katherine J. Strandburg of DePaul University College of Law, Chicago, represented American College of Medical Genetics and other amici curiae.
Roy T. Englert Jr. of Robbins, Russell, Englert, Orseck, Untereiner & Sauber, Washington, D.C., represented Arup Laboratories Inc. and other for amici curiae.
Jeffrey P. Kushan of Sidley Austin, Washington, D.C. represented amicus curiae Biotechnology Industry Organization.
Read the Dec. 17 opinion in Prometheus Laboratories v. Mayo Collaborative Services.
Federal Circuit: District Court Abused Discretion by Refusing to Transfer Case to California Based Mainly on Dell’s Presence in Texas
December 3, 2010
A Texas federal district court abused its discretion by refusing to transfer a case to a California district court pursuant to 28 U.S.C. § 1404(a) based mainly on the fact that patent infringement defendant Dell Inc. is located in Texas, the U.S. Court of Appeals for the Federal Circuit ruled Dec. 3 (In re Acer America Corp., Fed. Cir., Misc. No. 942, 12/3/10).
Vacating the denial of the defendants’ motion to transfer, the appellate court reasoned that many of the defendants and most of the witnesses and evidence were located in the U.S. District Court for the Northern District of California and granted a writ of mandamus ordering transfer.
Relevant Factors Favor Northern California as Venue.
In this case, MedioStream Inc. brought a patent infringement suit against Acer America Corp., Dell Inc., and 10 other companies in the U.S. District Court for the Eastern District of Texas. The defendants petitioned the court for a motion to transfer pursuant to 28 U.S.C. § 1404(a), which authorizes transfer “[f]or the convenience of parties and witnesses, in the interest of justice.”
However, the district court refused the motion, largely on the fact that Dell is headquartered in Round Rock, Texas. The defendants petitioned the Federal Circuit for a writ of mandamus directing the district court to transfer the case to the U.S. District Court for the Northern District of California.
This court has applied Fifth Circuit law in other recent cases granting a mandamus “to correct a patently erroneous denial of transfer,” Judge Alvin Schall observed, citing a line of authority. In re Nintendo Co., 589 F.3d 1194 (Fed. Cir. 2009); In re Hoffmann-La Roche Inc., 587 F.3d 1333 (Fed. Cir. 2009); In re Genentech, Inc., 566 F.3d 1338 (Fed. Cir. 2009); In re TS Tech USA Corp., 551 F.3d 1315 (Fed. Cir. 2008). In determining whether the transferee venue is clearly more convenient, the Fifth Circuit applies the public and private factors used in forum non conveniens analysis, he continued, citing the en banc ruling in In re Volkswagen of America Inc., 545 F.3d 304 (5th Cir. 2008).
The private interest factors include (1) the relative ease of access to sources of proof; (2) the availability of compulsory process to secure the attendance of witnesses; (3) the cost of attendance for willing witnesses; and (4) all other practical problems that make a trial easy, expeditious, and inexpensive. The public interest factors include (1) the administrative difficulties flowing from court congestion; (2) the local interest in having localized interests decided at home; (3) the familiarity of the forum with the law that will govern the case; and (4) the avoidance of unnecessary problems of conflicts of laws or in the application of foreign law.
“All of the U.S.-based companies in this case except for Dell are headquartered in California, including six companies actually located within the Northern District of California,” Schall said. However, “no party is headquartered in the Eastern District of Texas,” he said, clarifying that Dell’s base of Round Rock is 300 miles from Marshall, Texas, where the case was brought. Even the inventor, prosecuting patent attorneys, and identified potential employee witnesses of MedioStream all reside within the Northern District of California, Schall explained in a footnote. “Our prior orders in venue transfer cases make clear that the combination of multiple parties being headquartered in or near the transferee venue and no party or witness in the plaintiff’s chosen forum is an important consideration,” he said, citing Nintendo.
Noting that convenience of the witnesses is an “important factor in a § 1404(a) calculus,” the court said that many of the witnesses here reside in the Northern District of California. These witnesses would incur significant expenses for airfare, meals, and lodging, as well as losses in productivity from time spent away from work, if required to try the case in Texas, the court explained. As these costs would be significantly minimized or avoided by transferring the case to Northern California, Schall said, “the witness convenience factor clearly favors transfer.”
Since a venue’s ability to compel testimony through subpoena power is also an important factor in the § 1404(a) analysis, the subpoena powers of the Northern District of California will be much more useful in this case compared to the powers of the Eastern District of Texas, Schall continued. “This factor surely tips in favor of transfer.” Further finding that “a significant portion of the evidence” and a greater local interest in this case rest in the Northern District of California, the appellate court granted the petition for writ of mandamus.
Schall concluded this way:
In sum, the convenience of the parties and witnesses, the sources of proof, the local interest, and the compulsory process factors all significantly favor transfer. Meanwhile, no factor remotely favors keeping this case in the Eastern District of Texas. Although Dell may be a likely source of evidence at trial and is closer to the Eastern District of Texas, the district court’s conclusion that Dell’s presence in Texas was enough to preclude transfer here is in our view a clear abuse of discretion.
The opinion was joined by Judges Arthur Gajarsa and Kimberly Moore.
Acer Corp. was represented by Elaine Y. Chow of K&L Gates, San Francisco. Apple Inc. was represented by Mark C. Scarsi of Milbank, Tweed, Hadley & McCloy, Los Angeles. ASUS Computer International was represented by Joshua M. Masur of Turner Boyd, Palo Alto, Calif. Dell was represented by Scott F. Partridge of Baker Botts, Houston. Microsoft Corp. was represented by George F. Pappas of Covington & Burling, Washington, D.C. Nero Ag and Nero Inc. were represented by M. Craig Tyler of Wilson Sonsini Goodrich & Rosati, Austin, Texas. Sonic Solutions was represented by Roderick M. Thompson of Farella Braun & Martel, San Francisco. Sony Corp. was represented by Lewis V. Popovski of Kenyon & Kenyon, New York.
Respondent MedioStream Inc. was represented by Byron W. Cooper of Goodwin Procter, Menlo Park, Calif.
Supreme Court Will Hear Microsoft’s Appeal on the Evidentiary Standard Required to Defeat i4i’s Markup Language Patent
November 29, 2010
The U.S. Supreme Court on Nov. 29 agreed to hear Microsoft’s argument on appeal that the Federal Circuit erred by requiring clear and convincing evidence to defeat plaintiff i4i’s markup language patent even though the Patent and Trademark Office never reviewed an allegedly invalidating prior art software system before the patent issued (Microsoft Corp. v. i4i Limited Partnership, U.S., No. 10-290, 11/29/10).
While Microsoft directly stands to lose an infringement damages judgment of more than $290 million, also at stake in this case is whether the high court will decide to adjust the presumption of validity that patent holders have grown accustomed to under the Federal Circuit’s clear-and-convincing test that has been applied for 30 years.
Microsoft Petitions for Review of Federal Circuit Evidentiary Standard.
In this case, i4i Limited Partnership and Infrastructures for Information Inc.(i4i) filed an infringement complaint in the U.S. District Court for the Eastern District of Texas against Microsoft Corp., alleging that the software giant violated their patent (5,787,449) covering a system and method for the “separate manipulation of the architecture and content of a document.”
As noted in an earlier Intellirights story, a jury verdict and court ruling went in favor of i4i, and the Federal Circuit affirmed a damages judgment of more than $290 million. i4i Limited Partnership v. Microsoft Corp., 598 F.3d 831 (Fed. Cir. 2010).
Microsoft filed a petition with the U.S. Supreme Court in August 2010, arguing that the Federal Circuit’s requirement of clear and convincing evidence for proving the ‘449 patent invalid was inappropriate in this case. The heart of Microsoft’s invalidity defense is the argument that the invention in the ‘449 patent was placed on sale more than a year before the application filing when a software called “S4” was sold to client SEMI—a violation of the on-sale bar at 35 U.S.C. §102(b). While at trial Microsoft pointed to statements that i4i officials made to investors and Canadian government officials about the relationship between S4 and the ‘449 patent, it was unable to provide the jury with conclusive proof because i4i had destroyed the S4 source code before filing this suit. Though Microsoft had sought a jury instruction that it only had to prove invalidity by a preponderance of the evidence, the district court ruled that Federal Circuit case law required proof of invalidity under a clear and convincing evidence standard.
In its petition, Microsoft seized upon language in KSR International Co. v. Teleflex, Inc., 550 U.S. 398 (2007), where the high court found it “appropriate to note” that the rationale for the presumption of patent validity presumption—that the PTO, in its expertise, has approved the claim—seems much diminished” here because the PTO never considered the S4 reference during prosecution of the ‘449 patent.
Microsoft’s petition argued as follows:
The Federal Circuit has repeatedly disregarded KSR’s invitation to reconsider its heightened evidentiary standard. Instead, it has clung to its pre-KSR caselaw and continued to apply the clear-and-convincing-evidence standard even to invalidity defenses based on prior-art evidence that the PTO never considered.…
The consequences of the Federal Circuit’s rigidity are dramatic, as this case—the largest patent infringement verdict ever to be affirmed on appeal— well illustrates. Respondents i4i Limited Partnership and Infrastructures for Information Inc. (collectively,“i4i”) alleged that certain versions of Microsoft’s word-processing software, Microsoft Word, infringed i4i’s patent. … At trial, Microsoft contended that i4i’s patent is invalid because the disclosed invention had been embodied in a software product sold in the United States more than a year before the patent application was filed, … , thus rendering the invention unpatentable under the “on-sale bar” of 35 U.S.C. § 102(b). That prior-art software was never considered by the PTO during prosecution of the patent. … Yet because i4i had destroyed the source code for its early software before filing its action against Microsoft, i4i’s technical expert and counsel were able to stress to the jury repeatedly that Microsoft could not prove by clear and convincing evidence that the software embodied the patented invention. Ultimately, the jury concluded that Microsoft had failed to sustain this heightened standard of proof, and the district court subsequently entered a permanent injunction and a money judgment against Microsoft in excess of $290 million. … This case thus places in stark relief the distortive consequences of the Federal Circuit’s clear-and-convincing-evidence standard.
Microsoft’s view is supported by numerous amici, including 36 law, business and economics professors, who argued in their brief that “the Federal Circuit has steadfastly hewed to the uniform rule it created, even in circumstances in which that rule makes no sense.” That brief, submitted by Stanford University Law Professor Mark A. Lemley, noted that this high level of deference for every patent is unwarranted because the PTO is “subject to enormous information and budgetary constraints” and “bad patents routinely slip through.” Thus, the 36 professors asked the Supreme Court “to do what the Federal Circuit will not—apply a legal standard for the presumption of validity that reflects the modern patent system.”
However, i4i’s opposition brief argued that the Supreme Court should not take this case because Microsoft never raised this issue in seeking en banc review at the Federal Circuit. Further, it noted that “Congress is currently considering additional patent reforms that are closely related to the clear-and-convincing standard.”
The opposition brief of i4i continued:
In particular, pending legislation would establish a “post-grant review” process that would further expand the PTO’s ability to consider validity challenges. … These congressional efforts to reform patent law could be disrupted by a grant of certiorari, which would signal that the Court might upset the settled clear-and-convincing standard. Moreover, the fact that Congress continues to focus attention on measures related to that standard, while leaving §282 undisturbed, underscores that the Federal Circuit’s longstanding interpretation of that provision is correct and should not be altered by the courts.
Supreme Court Grants Review.
However, in a Nov. 29 order, the U.S. Supreme Court granted Microsoft’s certiorari petition and agreed to address the following question:
The Patent Act provides that "[a] patent shall be presumed valid" and that "[t]he burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity." 35 U.S.C. § 282. The Federal Circuit held below that Microsoft was required to prove its defense of invalidity under 35 U.S.C. § l02(b) by "clear and convincing evidence," even though the prior art on which the invalidity defense rests was not considered by the Patent and Trademark Office prior to the issuance of the asserted patent. The question presented is: Whether the court of appeals erred in holding that Microsoft's invalidity defense must be proved by clear and convincing evidence.
Chief Justice John Roberts recused himself from this case.
Microsoft’s petition was submitted by Thomas G. Hungar of Gibson Dunn & Crutcher, Washington, D.C.
The i4i opposition brief was filed by Seth P. Waxman of Wilmer Cutler Pickering Hale and Dorr, Washington, D.C.
Microsoft’s petition is supported in the following briefs filed by amici:
En Banc Federal Circuit Hears Arguments on Inequitable Standard Conduct in Therasense Case
November 9, 2010
The judges of the U.S. Court of Appeals for the Federal Circuit convened on Nov. 9 to hear arguments on the proper scope for the doctrine of inequitable conduct (Therasense Inc. v. Becton, Dickinson & Co., Fed. Cir., No. 2008-1511, oral argument 11/9/10).
The judges expressed queried whether Supreme Court authority supports Abbott Laboratories’s “but for” theory that inequitable conduct should only apply if an applicant’s asserted prosecution misconduct caused the patent to issue. At the same time, the judges seemed dissatisfied with a materiality test based solely on that stated in current PTO Rule 56(b)(2), expressing concern that such a test would not alleviate the deluge of information currently heaped upon examiners by applicants who fear the threat of facing inequitable conduct charges.
En Banc Questions at Issue in Therasense.
Pursuant to its April 26 per curiam order, the appellate court here agreed to resolve en banc whether the materiality-intent balancing standard for inequitable conduct should be modified or replaced altogether. The inequitable conduct defense places patents in jeopardy of being held unenforceable where an affirmative misrepresentation of a material fact, a failure to disclose material information, or a submission of false material information is coupled with the intent to deceive the Patent and Trademark Office during prosecution.
In recent years, many in the patent bar have complained that the defense prolongs litigation, is a “plague” on the patent system, and is too draconian a measure because it makes an entire patent unenforceable when often the cited misconduct only concerns one patent claim.
The parties here were asked to file briefs addressing the following questions:
1. Should the materiality-intent-balancing framework for inequitable conduct be modified or replaced?
2. If so, how? In particular, should the standard be tied directly to fraud or unclean hands? See Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806 (1945); Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238 (1944), overruled on other grounds by Standard Oil Co. v. United States, 429 U.S. 17 (1976); Keystone Driller Co. v. Gen. Excavator Co., 290 U.S. 240 (1933). If so, what is the appropriate standard for fraud or unclean hands?
3. What is the proper standard for materiality? What role should the United States Patent and Trademark Office’s rules play in defining materiality? Should a finding of materiality require that but for the alleged misconduct, one or more claims would not have issued?
4. Under what circumstances is it proper to infer intent from materiality? See Kingsdown Med. Consultants, Ltd. v. Hollister Inc., 863 F.2d 867 (Fed. Cir. 1988) (en banc).
5. Should the balancing inquiry (balancing materiality and intent) be abandoned?
6. Whether the standards for materiality and intent in other federal agency contexts or at common law shed light on the appropriate standards to be applied in the patent context
Abbott’s Patent Found Unenforceable.
Inequitable conduct has been long viewed as a nettlesome defense for patent holders in infringement cases. The party asserting inequitable conduct must prove a threshold level of materiality and intent by clear and convincing evidence. A court must then determine whether the questioned conduct amounts to inequitable conduct by balancing the levels of materiality and intent, “with a greater showing of one factor allowing a lesser showing of the other.” Digital Control Inc. v. Charles Mach. Works, 437 F.3d 1309 (Fed. Cir. 2006).
“Specific intent”—not simple negligence, or even gross negligence—was held as proper intent standard in the en banc Kingsdown ruling. Still, the balancing test has vexed many in the patent bar who consider inequitable conduct a “plague” that is asserted too frequently in patent cases.
As reported in an earlier story, a glucose test strip patent (5,820,551 of Abbott Diabetes Care Inc. and Abbott Laboratories was found unenforceable where Abbott’s patent attorney (Pope) and its head of research and development (Sanghera) withheld from the Patent and Trademark Office contradictory statements that they made regarding relevant company prior art in proceedings at the European Patent Office. “An applicant’s earlier statements about prior art, especially one’s own prior art, are material to the PTO when those statements directly contradict the applicant’s position regarding that prior art in the PTO,” the Federal Circuit wrote. The majority said that “[t]his is one of those rare cases in which a finding of inequitable conduct is appropriate, particularly in light of the critical nature of the representations to the PTO in securing allowance of the ’551 patent and the district court’s careful and thorough findings as to materiality and intent.”
However, Judge Richard Linn strongly objected, insisting that the majority ignored evidence that it was plausible for these representatives to subjectively believe that the withheld information was immaterial when they withheld it.
Linn argued in dissent:
Far from a mere blanket denial of deceptive intent, the individuals’ explanation includes specific, detailed reasons as to why they subjectively believed that the withheld information was immaterial during prosecution. Such an explanation will defeat a charge of inequitable conduct if it is “plausible.” The question, thus, is not whether it is plausible that the information is immaterial—a question asked under the objective materiality prong—but rather, whether it is plausible that the individuals subjectively believed that the reference was immaterial at the time they withheld it—a question presented under the subjective intent prong.
Abbott petitioned for a panel rehearing and a rehearing en banc, and many amici filed briefs in support of addressing the law of inequitable conduct en banc. In response, the Federal Circuit denied the petition for panel rehearing but agreed to address the inequitable conduct conundrum en banc. In doing so, the court vacated the January 25 panel decision and reinstated Abbott’s appeal.
Judges Question Abbott’s ‘But For’ Standard.
Chief Judge Randall R. Rader turned the Nov. 9 proceedings over to John M. Whealan, George Washington University Law School dean, who represented Abbott.
Whealan opened by asking the court to “restore the doctrine of inequitable conduct to its proper origins” as grounded in Supreme Court precedent. He said that the doctrine should apply “only in egregious cases of fraud where the conduct that occurs caused the issuance of the patent.” Whealan said that the Federal Circuit can accomplish this by 1) reaffirming the subjective intent standard set forth in Kingsdown, 2) applying a materiality standard that requires causation and reliance, and 3) eliminating the balancing sliding scale step that allows a finding of high materiality to infer intent.
There is significant agreement among the parties and amicus briefs as to #1 and #3, but there is some agreement and disagreement on #2, Whealan said.
As to subjective intent, it is too often the case that courts simply look at a patentee’s knowledge of a reference 10 years after the fact, find the reference highly material, and simply infer intent to deceive the PTO because there is no excuse given for the failure to disclose the reference. That is not the correct test, Whealan said, stressing that subjective intent for the purposes of inequitable conduct requires that “the person accused appreciated the importance of the information.” Basically, it requires one to look at the information, know of its importance to the PTO, and then decide to hide it from the PTO, Whealan argued. This factor should really be considered first in the analysis in many cases, not second, Whealan said.
As to materiality, Whealan said that common law fraud, copyright fraud and trademark fraud all require that the person who committed the accused act obtained the right at issue because of the conduct. This is the “but for” test, Judge Alan D. Lourie asked. Yes, but the real focus is on causation and reliance, Whealan said, noting that common law fraud requires a misrepresentation, intent to deceive, and that the person got a patent that would not have otherwise been issued. No harm, no foul, Lourie asked. “That’s right,” Whealan said.
However, Judge Timothy B. Dyk stepped in, citing the Restatement for the proposition that common law fraud does not in fact require “but for” causation. Whealan did not contest Dyk’s reading of the Restatement, but said that Precision Instrument, Hazel-Atlas, and Keystone Driller represent three examples where the Supreme Court focused on whether the patent was procured by fraud. But Hazel-Atlas said that there would still be fraud if what was in the affidavit was true, right, Dyk responded. Still, in that case, there was a fraudulent statement and the patent issued, so there was “a direct connection between the act and the actual conduct,” said Whealan. “The doctrine is not meant to punish and penalize. The doctrine is meant to not reward people that got something they shouldn’t have gotten.”
Judge Arthur Gajarsa later asked Whealan if his desired inequitable conduct standard would apply if there was an affidavit containing an error or false statement that related to patentabilty. If the patent would not have issued without the mistake or false statement, that would indeed be inequitable conduct, Whealan said. When Gajarsa asked if inequitable conduct would be limited to all such cases, Whealan said that Gajarsa had cited only a single example of “but for” causation. “The point is, when people make minor mistakes or mistakes and the patent would have issued anyway, the public is not affected. … If you want to punish them, if you want to disbar them, if you want to take steps against them, that’s what you should do. But you should not use an equitable doctrine, which is not meant to do those things, to step in 10 years later …”
Further, Gajarsa asked if an inequitable conduct finding would be proper if a patentee applicant falsely claimed small-entity status and paid a lower maintenance fee than he or she should have (as was held in Nilssen v. Osram Sylvania Inc., 504 F.3d 1223 (Fed. Cir. 2007)), Whealan said no. “It may be perjury, but it’s not inequitable conduct,” Whealan insisted, noting that the fee status is a “collateral” issue—not the reason the patent was issued.
When Judge Linn asked Whealan if a holding of invalidity is a prerequisite for inequitable conduct under his theory, Whealan said that it often would, but not always. The best way to apply it is to determine if the information at issue would have invalidated the patent. The controlling question, he said, is whether the accused conduct was material to the patentee obtaining the patent.
Linn then asked if the inequitable conduct doctrine motivates applicants to provide the PTO with the best prior art. Whealan said that “the current doctrine, despite its efforts, has ruined the disclosure requirement” by making applicants so overly cautious about committing inequitable conduct that they flood the PTO with references, many of which are unnecessary and irrelevant. “That’s just the opposite of what we want to encourage.”
PTO Asks Court to Look at Materiality.
Representing amicus curiae United States Patent and Trademark Office, Solicitor Raymond Chen agreed that there is currently an environment of “reference flooding.” If this court is clear that a high threshold of bad faith conduct is required for intent and provides clarity on materiality consistent with the criteria set out in current Rule 56, the situation would improve, Chen insisted. Current Rule 56 “sets forth a much more focused, definite, and tailored set of criteria that really give applicants understanding of what is the kind of information we most need.”
Chen challenged the “but for” test proposed by Whealan, saying that it allows for too much gamesmanship and mischief by applicants. “Forty years of this court’s jurisprudence understood that the kinds of inequitable conduct that could render a patent unenforceable is broader than merely ‘but for,’” Chen said. A reasonable examiner standard is also lacking, Chen said, because it leads to more dumping of references on PTO examiners such that applicants are “deluging us in pathological overcompliance.”
When Dyk and Lourie questioned Chen further on the “but for” test, he stressed that the relevant Supreme Court cases make clear that an applicant coming to the PTO must come in equity. The possible prior use at issue in Keystone that cast doubt on the patent’s validity is exactly the kind of information that Rule 56(b)(2) seeks, Chen said. Specifically, 37 C.F.R. § 1.56(b)(2) deems material any information that “refutes, or is inconsistent with” an applicant’s position in opposing unpatentability or asserting patentability.
An examiner should have relevant information in the first instance, and the information should not be brought forth 10 years later, after a patent has issued and an infringement defendant asserts the inequitable conduct defense in litigation, Chen said. “As a matter of policy, it’s not in the public interest to go through all of that ordeal when there is an opportunity to decide that up in the very first instance. That’s the whole point of acting in equity in front of the Patent Office. There is a public interest at stake here. It’s not just a private party versus a private party.”
When Judge Kimberly Moore probed about Whealan’s point that adopting a rule centered on Rule 56(b)(2) would still be too broad and require more flooding of the PTO, Chen said that the current problems in the system are due to the overbroad reasonable examiner standard. The reasonable examiner standard is “unpredictable in its application,” but Rule 56(b)(2) is different because it looks at the pivot point where one has information contrary to a position or argument put forth earlier with and knows that the information undermines that position, Chen said. Saying that he still had “some difficulty with” the scope of Rule 56(b)(2), Judge William C. Bryson asked if the rule Chen desired would require disclosure of a reference that expressed a “tiny sliver” of scientific opinion contrary to the position the applicant took on a question related to patentability. Yes, while that might be a minority view expressed in that reference, the applicant would have to reveal it as such to the PTO, Chen said.
In response to questioning by Judge Pauline Newman, Chen acknowledged the “plague” that inequitable conduct places on the patent system. He agreed that heightening the intent standard consistent with Kingsdown and “ratcheting up” the requirements for pleading inequitable conduct under the court’s ruling in Exergen would also help improve the situation.
‘There Is No Rule 56(b)(2) Plague.’
Rachel Krevans of Morrison Foerster, San Francisco, began on behalf of defendant Bayer Healthcare by arguing that the “plague” is not in the amount of times patents are held unenforceable for inequitable conduct, placing this number at only four for a span of two years. “There is no Rule 56(b)(2) plague,” Krevans said. Rather, she argued that the “plague” is in the number of times inequitable conduct is pled. “That’s what this court addressed in Exergen,” she argued. While it is still early and the effects of Exergen are not evident, Exergen should work in making pleading requirements more stringent and cutting down on frivolous pleading of inequitable conduct, Krevans said.
When Gajarsa asked how many times Fed.R.Civ.P. Rule 11 is used to curb such frivolous pleadings at the district court level, Krevans said that it has not been applied very much. Gajarsa, noting that specific pleading requirements and Rule 11 sanctions have long been part of the Federal Rules but not enforced in the context of inequitable conduct, questioned why more tightening is not needed.
You should make intent a higher standard and set materiality more narrowly by adopting current Rule 56, Krevans said. When Moore said that she could see “no daylight” between current Rule 56 and the reasonable examiner standard, Krevans said that the reasonable examiner test asks whether an examiner would want to see what was not disclosed. That test is much broader than current Rule 56(b)(2), which asks one who advocates X to submit information that says not-X to the patent examiner. Moore, still unpersuaded, expressed concern Rule 56(b)(2) would “swallow the whole” and require applicants to flood the PTO with references. Rule 56(b)(2) does not require an attorney to go and find every reference that might be inconsistent with a position taken, but to disclose the references he or she knows of, Krevans clarified.
Linn then expressed concern about setting a materiality standard at a point determined by the PTO, noting that the agency could set one threshold and then create another one a week later. Krevans acknowledged that it is “very, very difficult” for patent practitioners to have their conduct judged after the fact under different standards. Still, she said that applicants are held by the standard in place at the relevant time. Linn suggested that the current situation is due to the fact that inequitable conduct law has “drifted into the realm of the Patent Office’s duty to disclose and has drifted away from its roots” in the Supreme Court cases being discussed. Yes, but for a different reason than Mr. Whealan indicates, Krevans said, stressing that Keystone found the five patents unenforceable where possible prior use was not disclosed. The Supreme Court cases at issue here do not excuse the conduct in this case under a “but for” test, she said.
‘The Lynchpin of Our Patent System Is Disclosure.’
Bradford Badke of Ropes & Gray, New York, who split time with Krevans on behalf of defendant Becton, Dickinson, stressed that a “but for” test would result in severe underreporting and undermine the public interest.
“The lynchpin of our patent system is disclosure. We don’t have an opposition system like they have in Europe, and we depend on the duty of disclosure,” Badke said. He went on to argue that the “but for” test would encourage applicants to lie and deceive more often during patent prosecution.
While Mr. Whealan argues that inequitable conduct should only apply in egregious cases, this is one of those cases, Badke insisted. If inequitable conduct is not found here, it would be hard to ever find it, he argued. Here, Badke noted that this case showed a strong motivation to deceive, strong knowledge of materiality, reliance on the submission by the examiner, and a patent issued. This is not a case where a lawyer was unaware of a reference, Badke said, insisting that “there was a plan” by Pope and Sanghera to withhold the EPO statements from the PTO.
Appreciating the Materiality of the Undisclosed Information.
In rebuttal, Whealan insisted that Pope and Sanghera may have had knowledge, but that they did not appreciate the importance of the withheld information. However, Moore cited the district court’s finding that Pope and Sanghera had knowledge and that they lacked credibility. While Pope and Sanghera had knowledge, there is “not a shred of evidence” that they appreciated that this public document was material, important information, and that they then decided not to disclose it, Whealan argued. When Bryson asked if the district court found a specific intent to deceive, Whealan pointed to Linn’s dissenting opinion, which said that there was an honest dispute as to whether over whether Pope and Sanghera had a good faith belief that this information was material. “They thought it was cumulative,” Whealan argued.
When Dyk asked if the “but for” test was met here, Whealan said no, emphasizing that the undisclosed information did not go to the reason the patent was granted. The prior art was in front of the examiner, who allowed the patent, he said. “This was a characterization of the prior art” that neither the district nor this court relied on to invalidate the patent, Whealan said.
Further, he argued that adopting a Rule 56(b)(2) standard would lead other infringement defendants to endlessly search “an unlimited amount of information that is not disclosed” in attempts to have patents held unenforceable. That should not be the result, and this inequitable conduct ruling should be overturned, Whealan concluded.
Read the briefs filed in this case:
Brief of Therasense (Abbott)
Becton, Dickinson’s Response Brief
Amicus Briefs in Support of Therasense
• Sanofi-Aventis and Microsoft
• Ole Nilssen
Amicus Briefs in Support of Neither Party
• Apotex Inc.
• United States Patent & Trademark Office
• Intellectual Property Owners Association
• Federal Circuit Bar Association
• American Intellectual Property Law Association
• Biotechnology Industry Organization
• American Bar Association
• Boston Patent Law Association
• Houston IP Law Association
• San Diego IP Law Association
• Kentucky IP Law Students
• IP Law Association of Chicago
• Washington State IP Law Association
• Eli Lilly Patent Attorneys
• SAP America Inc.
• Acacia Research
• Dolby Laboratories
• Professor Hricik
• Professor Mammen
• Johnson & Johnson + Procter & Gamble
• 22 Patent Law Firms
• ECore International
• Pharmaceutical Research and Manufacturers of America
Finding No Likelihood of Confusion, Judge Denies Order to Block Sony’s Promotion of ‘The Illusionist’ Film That Is Set for Dec. 25 Release
November 4, 2010
A federal district court judge in California on Nov. 4 denied a request for a temporary restraining order to prohibit Sony Pictures from marketing its film “The Illusionist,” finding little likelihood that the public will confuse this film with one of the same name released in 2006 (Illusionist Distribution LLC v.Sony Pictures Classics Inc., C.D. Cal., No. CV 10-08062 DMG (MANx), 11/4/10).
Refusing to stop the marketing of Sony’s film that is set for a Christmas day release, the court said that the plaintiff’s “Illusionist” mark is “weak” and merely “generically describes a movie about an illusionist rather than Plaintiff’s product in particular.”
Fight Over ‘Illusionist’ Film Mark.
Plaintiff Illusionist Distribution LLC released its 2006 film called “The Illusionist” starring Ed Norton, Jessica Biel, and Paul Giamatti, which was nominated for an Academy Award. The plot centers on a stage magician named Eisenheim (played by Norton) who appears to possess extraordinary powers and falls in love with a duchess named Sophie (played by Biel). The climax of the film occurs when Eisenheim uses his superior skills as an illusionist to help Sophie flee a planned marriage to a crown prince, who is scheming to overthrow his aged father, the emperor.
“The Ilusionist” film set to be released by Sony Pictures Classics Inc. in December 2010 is an animated art movie based on a screenplay written in the 1950s by famed French mime, actor, and film director Jacques Tati. It is set in Scotland in the 1950s or 1960s, has virtually no dialogue or voiceovers, and involves a main character who is a struggling, aging magician whose life is transformed by a young girl who believes his tricks are real.
Illusionist Distribution brought this suit against Sony and others, charging that the film constitutes a false designation of origin, false designation of affiliation, and false or misleading representation of fact under the federal Lanham Act. Illusionist Distribution filed an ex parte application for a temporary restraining order against Sony’s promotion, marketing, distribution, and release of its picture.
Plaintiff’s Mark Is ‘Weak;’ Confusion Unlikely.
To prevail on a trademark infringement claim, a plaintiff must show that (1) it has a valid, protectable trademark; and (2) the defendant’s use of the mark is likely to cause, Judge Dolly M. Gee observed. As its “The Illusionist” mark is unregistered, Illusionist Distribution has a valid, protectable trademark only if its mark is sufficiently distinctive or has acquired a secondary meaning in the market, she explained. The company insisted that the mark had acquired secondary meaning as a “box office success,” citing $18 million in the theatrical release marketing and advertising in the United States, $11 million in DVD release marketing, and more than $88 million in gross receipts worldwide.
A “large expenditure of money,” however, “does not in itself create legally protectable rights,” Gee said, quoting Toyota Motor Sales U.S.A. Inc. v. Tabari, 610 F.3d 1171 (9th Cir. 2010). Other than these expenditures, she said, Illusionist Distribution provided no other evidence that its mark had acquired secondary meaning.
Gee went on to find that the two films were alike in name only and that there was no likelihood of confusion shown under the eight-factor test set forth in AMF Inc. v. Sleekcraft Boats, 599 F.2d 341 (9th Cir. 1979): (1) the similarity of the marks; (2) the strength of the plaintiff’s mark; (3) the proximity or relatedness of the goods or services; (4) the defendant’s intent in selecting the mark; (5) evidence of actual confusion; (6) the marketing channels used; (7) the likelihood of expansion into other markets; and (8) the degree of care likely to be exercised by purchasers of the defendant’s product.
Notwithstanding that the marks at issue are identical, there is little likelihood of consumer confusion. Plaintiff’s mark is weak. It generically describes a movie about an illusionist rather than Plaintiff’s product in particular. As SPC points out, there are works galore with that title, including a film released in 1983, as well as at least 14 books published since 1952, 12 of which are still in print. … In addition, a wide variety of consumer products employ the term “illusionist” in some variation in their registered trademark. … More still, thousands of magicians perform under the description “illusionist.”
Although both products are movies about illusionists, they are so different that there is little chance that consumer confusion will ensue.…
Defendants’ film has always been called “The Illusionist” (or, in the original French, “L’Illusionniste”) and their choice of title has nothing to do with Plaintiff’s film. … There is no indication that Defendants intend to market their film to the same audience as Plaintiff’s. Defendants’ movie is geared toward animation aficionados and fans of independent art films. Plaintiff’s movie has been advertised as a mainstream, live-action “period piece” of interest to the general public. … Plaintiff presents no evidence of actual consumer confusion. In sum, the Sleekcraft factors weigh against a finding of likely consumer confusion between the two films. Plaintiff is thus unlikely to meet either of the prongs to establish trademark infringement.
‘A Strong First Amendment Defense.’
In addition to finding that Illusionist Distribution lacked a protectable mark and failed to show a likelihood of confusion, the court pointed to another ally for Sony—the First Amendment. It found that Sony has “a strong First Amendment defense” under the test articulated in Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989), which was adopted by the Ninth Circuit. This test reads the Lanham Act to apply to artistic works—particularly an artistic work’s title—“only where the public interest in avoiding consumer confusion outweighs the public interest in free expression,” Gee said, quoting E.S.S. Entertainment 2000, Inc. v. Rock Star Videos Inc., 547 F.3d 1095 (9th Cir. 2008). “An artistic work’s use of a trademark that otherwise would violate the Lanham Act is not actionable unless the use of the mark has no artistic relevance to the underlying work whatsoever, or, if it has some artistic relevance, unless it explicitly misleads as to the source or the content of the work,” she added, quoting E.S.S. Neither element applies here, Gee said, noting that “The Illusionist” is artistically relevant in describing the main character of the film and that the title does not explicitly mislead as to the source of the work. “Accordingly, Plaintiff’s claim will likely fail on First Amendment grounds as well.”
Since the only basis for the unfair competition claim here is the allegation of trademark infringement, the court went on to conclude that Illusionist Distribution’s unfair competition claim “is also likely to fail.”
Finally, the court found that Illusionist Distribution was not entitled to injunctive relief based on the relevant factors: (1) a likelihood of success on the merits; (2) a likelihood of irreparable harm in the absence of preliminary relief; (3) the balance of equities in its favor; and (4) injunctive relief being in the public interest.
Illusionist Distribution clearly failed on the first two elements, and the third factor favors the defendants because they “cannot simply release their film under a different name,” the court said. Here, Gee noted that “[t]he December 25, 2010 release date was specifically chosen in order to make Defendants’ picture eligible for year-end award consideration, including consideration for Academy Awards,” and that any delay would jeopardize the film’s chances for such an award.
As to the final injunctive relief factor, Gee concluded this way:
While the public has an interest in trademark enforcement, it has no interest in seeing the enforcement of unprotectable marks. The public has a substantial interest in preventing artistic expression from becoming stifled by overzealous intellectual property protection.
The ex parte application was denied.
Illusionist Distribution was represented by Behzad Nahai and Edward Wei of Nahai Law Group, Los Angeles. Sony was represented by Asheley G. Dean and Neil R. O'Hanlon of Hogan Lovells US LLP, Los Angeles, and by Dori Ann Hanswirth and Nathaniel S. Boyer of Hogan Lovells, New York.
Read the Illusionist Distribution LLC v. Sony Pictures Classics Inc. ruling
CAFC Rejects Lilly’s Bid to Clarify Law of Double Patenting En Banc in Case That Found Its Gemcitabine Cancer Treatment Invalid
November 1, 2010
The U.S. Court of Appeals for the Federal Circuit on Nov. 1 refused to address the law of double patenting en banc in a case which found Eli Lilly’s patent claiming gemcitabine as a cancer treatment invalid based on an earlier patent that the company was issued for using gemcitabine to treat viral infections (Sun Pharmaceutical Industries Ltd. v. Eli Lilly and Co., Fed. Cir., No. 2010-1105, 11/1/10).
However, Judge Pauline Newman, joined by Chief Judge Randall R. Rader and Judges Alan D. Lourie and Richard Linn, dissented from the review denial, saying that “inconsistent precedent warrants clarification” en banc. “Until recently the law of double patenting was clear, but it has become distorted by divergent statements, leading to this flawed ruling,” Newman wrote.
District Court Finds ‘826 Patent Invalid Based on ‘614 Patent.
Eli Lilly and Co. markets the drug Gemzar® for the treatment of various forms of cancer. The active ingredient in Gemzar® is gemcitabine. Lilly’s patent (5,464,826) issued on Nov. 7, 1995 claims a method of using gemcitabine for treating cancer, while its earlier patent (4,808,614) claims a method of using gemcitabine for treating viral infections.
Sun Pharmaceutical Industries Ltd. filed an Abbreviated New Drug Application with the Food and Drug Administration for marketing approval on a generic version of Gemzar® and certified that the ’614 and ’826 patents were invalid or not infringed.
Sun filed this declaratory action against Lilly, seeking a judgment that the ’826 patent is invalid and not infringed.
The district court concluded that, given that Claim 12 of the ’614 patent discloses gemcitabine’s anticancer use, Claims 2, 6, and 7 of the later ’826 patent, which claim a method of using gemcitabine for cancer treatment, are not patentably distinct as a matter of law.
Double Patenting Decision Upheld.
As reported in a July Intellirights story, the Federal Circuit affirmed that ruling. Sun Pharmaceutical Industries Ltd. v. Eli Lilly and Co., 611 F.3d 1381 (Fed. Cir. 2010).
In that decision, the panel relied on the decisions in Geneva Pharmaceuticals Inc. v. GlaxoSmithKline PLC, 349 F.3d 1373 (Fed. Cir. 2003), and Pfizer Inc. v. Teva Pharmaceuticals USA Inc., 518 F.3d 1353 (Fed. Cir. 2008). Finding that precedent controlling, Judge Sharon Prost said that Geneva and Pfizer both found claims of a later patent invalid for obviousness-type double patenting where an earlier patent claimed a compound, disclosing its utility in the specification, and a later patent claimed a method of using the compound for a use described in the specification of the earlier patent. Quoting language from both cases, she observed that a “claim to a method of using a composition is not patentably distinct from an earlier claim to the identical composition in a patent disclosing the identical use.”
The panel decision rejected Lilly’s argument that, in Geneva and Pfizer, the specification of the earlier patent disclosed a single use for the claimed compound, which was an essential part of the patented invention and thus necessary to patentability. To Lilly, the double patenting analysis of those cases does not apply to the later ’826 patent claims reciting a method of using gemcitabine for cancer treatment because, though the specification of the earlier ’614 patent disclosed gemcitabine’s use in treating both viral infections and cancer, the antiviral use provided the essential utility necessary to the patentability of the ’614 patent.
Prost disputed the suggestion that Pfizer involved a single disclosed utility that was alone essential to the patentability of the claimed compound. Further, she stressed that “the analysis in the Pfizer decision shows that obviousness-type double patenting encompasses any use for a compound that is disclosed in the specification of an earlier patent claiming the compound and is later claimed as a method of using that compound.”
Pfizer never implies that its reasoning depends in any way on the number of uses disclosed in the specification of the earlier patent. … Instead, its broad analysis reflects that the court considered the multiple uses for the compound that were discussed in the specification of the earlier patent. Indeed, the Pfizer decision ultimately invalidated claims in the later patent that were separately directed to these multiple uses, including inflammation, inflammation-associated disorders, and the specific inflammation-associated disorders of arthritis, pain, and fever.…
Thus, the holding of Geneva and Pfizer, that a “claim to a method of using a composition is not patentably distinct from an earlier claim to the identical composition in a patent disclosing the identical use,” extends to any and all such uses disclosed in the specification of the earlier patent.
Further, Prost rebuffed Lilly’s argument that the district court erred in relying on the specification of the issued ’614 patent, rather than the specification of an earlier application, to determine the relevant disclosed uses of the compound gemcitabine for its obviousness-type double patenting analysis. “Both Geneva and Pfizer make clear that, where a patent features a claim directed to a compound, a court must consider the specification because the disclosed uses of the compound affect the scope of the claim for obviousness-type double patenting purposes,” she said. “In other words, the double patenting doctrine is concerned with the issued patent and the invention disclosed in that issued patent, not earlier drafts of the patent disclosure and claims.”
Dissenting Judges: Clarity on Double-Patenting Is Needed.
“The law of double patenting is contrary to the panel’s holding,” Newman argued in her dissenting opinion. Here, she quoted earlier circuit authority stating that the rule that “[d]ouble-patenting is altogether a matter of what is claimed.” General Foods Corp. v. Studiengesellschaft Kohle mbH, 972 F.2d 1272 (Fed. Cir. 1992). “This law was also fully established in our predecessor court,” Newman added, citing In re Vogel, 422 F.2d 438 (CCPA 1970).
Uniformly, unlike examination for obviousness based on prior art, the issue of obviousness-type double patenting is directed to whether the invention claimed in a later patent is an obvious variant of the invention claimed in an earlier patent. The panel opinion violates a vast body of precedent.
The panel apparently was misdirected by an overly-broad statement in Geneva Pharmaceuticals, Inc. v. GlaxoSmithKline PLC, 349 F.3d 1373 (Fed. Cir. 2003). Genevastated that “[o]ur predecessor court recognized that a claim to a method of using a composition is not patentably distinct from an earlier claim to the identical composition in a patent disclosing the identical use.” …
Extending Genevato cover the facts of this case does not further the policy of obviousness-type double patenting. “Obviousness-type double patenting is a judicially created doctrine intended to prevent improper timewise extension of the patent right by prohibiting the issuance of claims in a second patent which are not ‘patentably distinct’ from the claims of a first patent.” … The panel failed to explain how Lilly’s claims to the use of gemcitabine to treat cancer, discovered after gemcitabine’s antiviral use was disclosed in the original application, improperly extend the patent right to gemcitabine as a compound, let alone how these claims would “shock one’s sense of justice.” For purposes of this case, there is no dispute that Lilly would be entitled to a separate patent on the anticancer use if Lilly had not included the disclosure of anticancer use in the specification of the continuation-in-part filed the same day. Such disclosure does not “improperly extend” any patent.…
A change of law “in ways that negatively impact the patentability of important later-discovered uses” serves no public purpose in areas in which commercial development requires patent protection. Id.If the majority of the court now believes, as a matter of policy, that the law should be changed in this new direction, en banc treatment is particularly appropriate, for the court’s rule is that the earlier precedent prevails unless overruled en banc. A situation in which the court ignores this rule, and applies whatever law the panel prefers, is an indictment of the ability of this court to provide stable law in the areas entrusted to us.
Sun Pharmaceutical was represented by James F. Hurst of Winston & Strawn, Chicago. Lilly was represented by Charles E. Lipsey of Finnegan, Henderson, Farabow, Garrett & Dunner, Reston, Va.
Matthew D. McGill of Gibson, Dunn & Crutcher, Washington, D.C., represented amicus curiae Washington Legal Foundation. Leslie Morioka of White & Case, New York, represented amicus curiae Biotechnology Industry Organization. David W. Ogden of Wilmer Cutler Pickering Hale and Dorr, Washington, D.C., represented amicus curiae Pharmaceutical Research and Manufacturers of America. Elizabeth J. Holland of Kenyon & Kenyon, New York, represented amici curiae Teva Parenteral Medicines Inc. and Teva Pharmaceuticals USA Inc.
Read the Nov. 1 order
denying en banc review in Sun Pharmaceutical Industries Ltd. v. Eli Lilly and Co.