Sign up | Log in

Articles | Cases

Federal Circuit Questions Propriety of De Novo Claim Construction

February 25, 2010

In a decision that affirmed claim construction and other rulings regarding commodities trading patents, the U.S. Court of Appeals for the Federal Circuit on Feb. 25 questioned the propriety of its en banc decision in Cybor Corp. v. FAS Technologies Inc. requiring claim constructions to be reviewed de novo (Trading Technologies International Inc. v. eSpeed Inc., Fed. Cir., No. 08-1392, 2/25/10).

Commodities Trading Technology.

Trading Technologies International Inc. has two patents (6,772,132 and  6,766,304 claiming software for displaying the market for a commodity traded in an electronic exchange. The district court found that the ’304 patent was infringed by one accused product, but not willfully, and that eSpeed Inc.’s two other accused products were not literally infringing. The court then found that Trading Technologies was could not assert infringement under the doctrine of equivalents, that the patents were not invalid or unenforceable, and it awarded  Trading Technologies damages of more than $2.5 million.

Trading Technologies appealed, and eSpeed cross-appealed.

Doubts About Cybor.

On appeal, the parties disputed the meaning of the term “static,” which was construed below to mean “a display of prices comprising price levels that do not change positions unless a manual re-centering command is received.” Though the district court made changes to its claim construction during the proceedings, the Federal Circuit went on to affirm the ruling that the claims require a manual re-centering command.

Along the way, Judge Randall R. Rader called into question the Federal Circuit’s en banc ruling in Cybor Corp. v. FAS Technologies Inc., 138 F.3d 1448 (Fed. Cir. 1998), which held that claim construction is solely a question of law, reviewable by the appellate court without deference. Rader found that holding clearly at odds with the Supreme Court’s statement in Markman v. Westview Instruments Inc., 517 U.S. 370 (1996) that: “the construction of a patent, including terms of art within its claim, is exclusively within the province of the court.” He further observed Markman’s statement that claim construction “falls somewhere between a pristine legal standard and a simple historical fact.” He said that although claim construction is not a purely legal matter, the Markman court found “sufficient reason to treat construction of terms of art like many other responsibilities that we cede to a judge in the normal course of trial, notwithstanding its evidentiary underpinnings.”

Comparing Markman and Cybor, Rader lamented that the latter decision affords the trial court no deference in this case:

The question presented before the Supreme Court was “whether the interpretation of a so-called patent claim . . . is a matter of law reserved entirely for the court, or subject to a Seventh Amendment guarantee that a jury will determine the meaning of any disputed term of an art about which expert testimony is offered.” … Although the Supreme Court addressed only the role of the trial court in claim construction, this court understood that “the Supreme Court was addressing under which category, fact or law, claim construction should fall.” … This court concluded that “[n]othing in the Supreme Court’s opinion supports the view that the Court endorsed a silent, third option—that claim construction may involve subsidiary or underlying questions of fact.” …   

An examination of the Supreme Court’s ruling in Markman shows multiple references to factual components of claim construction:

  1. “[C]onstruing a term of art following receipt of evidence” is “a mongrel practice.”  …
  2. Claim construction “falls somewhere between a pristine legal standard and a simple historical fact.” … 
  3. “We accordingly think there is sufficient reason to treat construction of terms of art like many other responsibilities that we cede to a judge in the normal course of trial, notwithstanding its evidentiary underpinnings.” …  

These references in the Supreme Court opinion leaves this court stranded between the language in the Court’s decision and the language in this court’s Cybor decision.
In order to resolve this case, this court must confront findings by the trial court about the meaning of the disputed claim term “static.” In reaching the meaning of that term, the trial court explored and made findings about the technical background of the invention—the inventive features and the timing of those features against the backdrop of the prior art. In addition, the district court determined the meaning that an artisan of ordinary skill in this discipline would assign the term “static.” The trial court also made findings about the understanding of such an ordinary artisan about the metes and bounds of the asserted claims. In still another factual setting, the district court determined the way that the ordinary artisan would interpret the patent applicant’s statements made to the PTO examiner during the prosecution of the patents-in-suit. These factual determinations about the timing and nature of the history of the patent acquisition process also informed the trial court’s claim construction. In sum, claim construction involves many technical, scientific, and timing issues that require full examination of the evidence and factual resolution of any disputes before setting the meaning of the disputed terms.

Of course, as the Supreme Court repeatedly clarified in Markman, the trial court occupies the best vantage point and possesses the best tools to resolve those evidentiary questions:

  1. “[A] jury’s capabilities to evaluate demeanor to sense the mainsprings of human conduct or to reflect community standards are much less significant than a trained ability to evaluate the testimony in relation to the overall structure of the patent.” … 
  2. “The decisionmaker vested with the task of construing the patent is in the better position to ascertain whether an expert’s proposed definition fully comports with the specification and claims and so will preserve the patent’s internal coherence.” … 

Despite the Supreme Court’s emphasis on the trial court’s central role for claim construction, including the evaluation of expert testimony, this court may not give any deference to the trial court’s factual decisions underlying its claim construction. This court’s prior en banc decision requires a review of the district court’s claim construction without the slightest iota of deference.

The district court’s ruling was affirmed.

Judge Alan D. Lourie concurred with the result.

In a separate concurring opinion, Judge Ron Clark of the U.S. District Court for the Eastern District of Texas, sitting by designation, argued that de novo review under Cybor “may result in the unintended consequences of discouraging settlement, encouraging appeals, and, in some cases, multiplying the proceedings.”

Steven F. Borsand of Trading Technologies International, Inc., Chicago, argued on the company’s behalf. eSpeed was represented by Gary A. Rosen, Law Offices of Gary A. Rosen, Philadelphia. Lora A. Moffatt of Salans LLP, New York, represented GL Trade SA and other amici curiae.

Read the Trading Technologies International Inc. v. eSpeed Inc. opinion.

 

Crocs Shoe Design Patent Is Infringed by Look-Alikes

February 24, 2010

The U.S. Court of Appeals for the Federal Circuit Feb. 24 ruled the International Trade Commission erred in finding the Crocs shoe design patent not infringed by competitors and in finding the company’s utility patent invalid for obviousness (Crocs Inc. v. International Trade Commission, Fed. Cir., No. 2008-1596, 2/24/10).

As to the design patent, the court found that the ITC erroneously placed too much focus on its written claim construction while ignoring the side-by-side similarities between the claimed design and the accused products under the “ordinary observer” infringement test. Further, the court held that the utility patent could not have been obvious because the prior art taught away from the claimed features, which yielded more than predictable results.

Adverse Rulings for Crocs at ITC.

Crocs Inc., assignee of a utility patent (6,993,858) for breathable footwear and a design patent (D517,789) for an ornamental shoe design, filed a complaint with the International Trade Commission, alleging that several companies infringed the patents under 19 U.S.C. § 337 by importing foam footwear into the United States.

The administrative judge found that Double Diamond Distribution Ltd., Holey Soles Holding Ltd., and Effervescent Inc. did not infringe the ’789 design patent and that Crocs failed to satisfy the technical prong of the § 337 domestic industry requirement because Crocs’s products lacked even spacing of ventilator holes around the toe portion of the upper as shown in the design patent. Further, the administrative judge found that Claims 1 and 2 of the ’858 utility patent would have been invalid for obviousness under Section 103 of the Patent Act, 35 U.S.C. § 103.

Crocs appealed.

ITC Overly Emphasized Written Description of Claim Construction.

Egyptian Goddess Inc. v. Swisa Inc., 543 F.3d 665 (Fed. Cir. 2008), the Federal Circuit first examined the ruling that the accused products did not infringe the ’789 design patent.
Judge Randall R. Rader found that the administrative law judge went astray in placing too much emphasis on the written description in the claim construction while ignoring the visual side-by-side comparison of the claimed and accused designs. “This case shows the dangers of reliance on a detailed verbal claim construction,” Rader said, noting that the claim construction focused on particular features of the ’789 patent design and distracted the administrative law judge from the patented design in its entirety. The administrative judge’s “written claim description required uniform strap width and uniform hole spacing—contrary to the claimed invention,” Rader stressed.

“This error distorts the infringement analysis by the ordinary observer viewing the design as a whole,” Rader said, continuing:

Turning to this case, the Commission placed undue emphasis on particular details of its written description of the patented design. Those details became a mistaken checklist for infringement. Without a view to the design as a whole, the Commission used minor differences between the patented design and the accused products to prevent a finding of infringement. In other words, the concentration on small differences in isolation distracted from the overall impression of the claimed ornamental features.

The proper comparison requires a side-by-side view of the drawings of the ’789 patent design and the accused products. …

These side-by-side comparisons of the ’789 patent design and the accused products suggest that an ordinary observer, familiar with the prior art designs, would be deceived into believing the accused products are the same as the patented design. In one comparison after another, the shoes appear nearly identical. If the claimed design and the accused designs were arrayed in matching colors and mixed up randomly, this court is not confident that an ordinary observer could properly restore them to their original order without very careful and prolonged effort.

One of the overall effects of the design is the interaction between the strap assembly portion and the base portion of the shoes where the strap is attached to the base. Multiple major design lines and curves converge at that point creating a focal point attracting the eye of the ordinary observer when viewing the overall effect of the design. Another overall effect of the design is a visual theme of rounded curves and ellipses throughout the design, including the strap forming a sort of continuation of the sidewall of the base to create a visually continuous ring encircling the entire shoe. Other examples of rounded curves or ellipses in the design are the ellipses formed by the strap and the foot opening in the base. Both the claimed design and the accused designs have these overall effects.

In any event, this court perceives that the accused products embody the overall effect of the ’789 design in sufficient detail and clarity to cause market confusion. Thus, the accused products infringe the ’789 design.

Accordingly, the Federal Circuit reversed the ITC’s ruling that the accused products do not infringe the ’789 design patent.

Domestic Prong of § 337 Satisfied.

Further, the appellate court reversed the ruling that Crocs did not satisfy the domestic industry prong of § 337, which requires proof that the patent claims cover the articles of manufacture that establish the domestic industry. “Put simply, the complainant must practice its own patent,” Rader said, noting that the test for the technical prong is essentially the same as that for infringement.
After making a side-by-side comparison of the ’789 patent design drawings and Crocs’s own products under the ordinary observer test, the Federal Circuit found that Crocs’s shoes embody the overall effect of the ’789 design, and thus “infringe.”

Prior Art Taught Away From Features Claimed by Crocs.

Finally, the appellate court reversed the ITC’s obviousness ruling as to the ’858 utility patent.

“The ’858 invention includes a foam strap riveted to a foam base with direct contact—an important part of the combination not in the prior art,” the court, said, adding:

The record shows that the prior art would actually discourage and teach away from the use of foam straps. An ordinary artisan in this field would not add a foam strap to the foam Aqua Clog because foam was likely to stretch and deform, in addition to causing discomfort for a wearer. The prior art depicts foam as unsuitable for straps. The nature of the problem—attaching footwear to the foot—required under the prior art a material with enough elasticity around the Achilles tendon to allow “give and take” as the foot moved in the shoe. A firm inelastic material like foam was likely to cause abrasions at the back of the foot. In addition, foam had another deficient property.

Foam, according to the prior art, did not have a good memory, meaning that the stretching of normal use would likely cause the material to elongate or compress. These deformations would defeat the strap long before the normal life span of the footwear combination. Thus, the prior art only used a non-elastic material for attaching footwear in combination with a buckle or another mechanism that could adjust the length of the strap for a comfortable fit and for a reduction in stretching and deformation. Despite the prior art warnings against inelastic and non-adjustable foam straps, the ’858 patent employed foam without a buckle or some other similar adjustment mechanism. Moreover the ’858 patent riveted the inelastic foam directly to the base of the footwear. This claimed feature defied the prior art’s caution against the poor characteristics of a foam strap. Indeed no prior art reference disclosed a foam strap riveted to a shoe.

Continuing, the court noted that the prior art regarded foam as an unsuitable material for shoe straps. “Thus, the Commission could not properly conclude that a person of ordinary skill would use foam to attach a foam base portion to a wearer,” Rader said.

Even if the ’858 patent were a combination of known elements according to their established functions—which it is not—“it yields more than predictable results; thus, it is non-obvious,” Rader commented, citing KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007). Rather than pushing the foot forward into the shoe—like prior art straps that are elastic or length adjustable—the ’858 patent’s passive restraint system allows the strap to “lend support” only when necessary to keep the shoe positioned correctly on the foot, he explained. “This feature facilitates a loose anatomical fit that makes the claimed invention more comfortable than prior art products.” As this claimed feature yielded more than predictable results, this is another reason why the ’858 patent would not have been obvious at the time of invention, Rader said.

Finally, the court found that the huge commercial success of Crocs shoes and the heavy evidence of copying by competitors were secondary indicators of nonobviousness.

Accordingly, the court ordered a remand for a determination of infringement of the ’858 patent and any appropriate remedies.

The ITC’s ruling was reversed and remanded.

Judges Alan Lourie and Sharon Prost joined the opinion.

Crocs was represented by James C. Otteson of Wilson Sonsini Goodrich & Rosati, Palo Alto, Calif. Clint A. Gerdine, Office of the General Counsel, represented the International Trade Commission, Washington, D.C.

Glenn D. Bellamy of Greenebaum, Doll & McDonald, Cincinnati, represented Double Diamond. Donald R. Dunner of Finnegan, Henderson, Farabow, Garrett & Dunner, Washington, D.C., represented Holey Soles and Effervescent.

Read the Crocs Inc. v. International Trade Commission opinion.
 

CAFC: U.S. Government Used Infringing Night Vision Goggles in Aircraft

February 18, 2010

The U.S. Court of Appeals for the Federal Circuit Feb. 18 ruled that a Honeywell patent covering night vision goggles is not invalid and was infringed by systems used on United States military aircraft while the invention was under a government secrecy order (Honeywell International Inc. v. United States, Fed. Cir., No. 2008-5181, 2/18/10).

After reversing a Court of Federal Claims ruling that the patent is invalid for obviousness and inadequate written description, the court went on to hold that Honeywell has standing to sue the government under the Invention Secrecy Act and that the first sale doctrine does not bar the recovery of damages for infringing systems sold by a Honeywell predecessor.

Judge Haldane Robert Mayer dissented in part, arguing that the invalidity rulings should have been upheld and that the first sale doctrine precludes damages.

Night Vision Goggles.

Honeywell International Inc. has a patent (6,467,914) relating to passive night vision goggles (NVGs) that are compatible with a full color display when both are used in an aircraft cockpit. As a result of the invention, red warning lights inside the cockpit do not disrupt vision through the NVGs, pilots can look under NVGs to view the warning lights, and crew members not wearing NVGs can see these lights as well.

When Allied Corporation filed the original patent application (06/786,269) which led to the ’914 patent, the United States Naval Air Systems Command, pursuant to the Invention Secrecy Act, concluded that a secrecy order should be imposed. The Patent and Trademark Office imposed secrecy orders on the ’269 application, which prevented the patent from issuing, every year until 2000. By this time, Allied Corp. had become AlliedSignal Inc., which then merged with Honeywell Inc. to form Honeywell International Inc. This latter entity acquired the ’269 application, which was amended and then issued as the ’914 patent.

In 2002, not long after the ’914 patent issued, Honeywell sued the United States under the Invention Secrecy Act for pre-issuance use of the invention and under 28 U.S.C. § 1498(a) for post-issuance infringement.

Lockheed Martin Corp. intervened with respect to the § 1498 claim as supplier and indemnitor to the government for the C-130J aircraft. L-3 Communications Corp. later intervened as an indemnitor to Lockheed because it supplied displays for the C-130J.

The U.S. Court of Federal Claims found the ’914 patent invalid for obviousness under 35 U.S.C. § 103(a) and, alternatively, for failing to meet the written description requirement of 35 U.S.C. § 112, ¶ 1. It also ruled that Honeywell lacks constitutional standing under the Invention Secrecy Act and that the first sale doctrine bars Honeywell from recovering damages from the government for use of infringing color multifunction displays (CMFDs) and NVGs in F-16 aircraft.

Honeywell appealed.

Obviousness and Written Description Invalidity Rulings Reversed.

Reversing the Court of Federal Claims’ obviousness ruling, the Federal Circuit read element (a)(3) in Claim 2 of the ’914 patent to require the passing of perceptible red light—i.e., red light which is visible to the human eye. “The claimed invention addressed the need for red warning lights in NVG- compatible cockpits, and it is inconceivable that an aircraft would use warning lights that are not perceptible to the crew,” Judge Kimberly A. Moore wrote. However, she found the obviousness ruling based on the conclusion that element (a)(3) does not require the passing of perceptible red light. Further, Moore said that neither the Boehm nor Verney prior art references cited in the decision below discloses the passing of perceptible red light. Since the obviousness determination was “premised on an erroneous claim construction,” the Court of Federal Claims clearly erred in ruling that the claimed invention would have been obvious to one of skill in the art, Moore wrote.
The Federal Circuit then turned to the Court of Federal Claims’ determination that the written description requirement was not met because the originally filed ’269 application claimed only monochromatic CRT displays while Claim 2 of the ’914 patent covers a variety of displays. Moore found that, given statements in the specification of the ’269 application, that application was not limited to only CRTs. Accordingly, she ruled that “the Court of Federal Claims clearly erred in finding that the original application’s disclosure was clearly erred in finding that the original application’s disclosure was limited to CRT displays and that claim 2 of the ’914 patent is invalid under the written description requirement of 35 U.S.C. § 112, ¶ 1.”

Standing Under the Invention Secrecy Act.

Moore then examined the holding below that Honeywell has lacks constitutional standing under the Invention Secrecy Act because the ’914 patent did not issue “upon an application” subject to a secrecy order pursuant to 35 U.S.C. § 181. To the Court of Federal Claims, the patent did not issue “upon” an application subject to a secrecy order, as required under § 181, because there was “no contiguous relationship or dependence” between the ’269 Application and the ’914 patent.

Moore rejected that reasoning, stating:

The court’s interpretation of § 183 contradicts the plain language of the statute and its creation of a “contiguous relationship or dependence” test lacks any foundation in the text of the statute itself. The ’269 application issued, albeit after amendment, as the ’914 patent. Section 184 explicitly includes amendments made to an application. Honeywell owns the ’914 patent, this patent issued from the ’269 application, this application was subject to a secrecy order, and no other requirement of § 183 is in dispute. Honeywell thus has standing to assert a claim for just compensation under the Invention Secrecy Act.

First Sale Doctrine Inapplicable.

Continuing, the Federal Circuit reversed the ruling below that the first sale doctrine precludes Honeywell from recovering damages from the government for use of infringing CMFDs and NVGs in the F-16 aircraft.

“For the first sale doctrine to apply, there must be an authorized first sale,” Moore said, citing Jazz Photo Corp. v. Int’l Trade Comm’n, 264 F.3d 1094 (Fed. Cir. 2001). She acknowledged that the facts of this case are “peculiar,” as the accused CMFDs installed in F-16 aircraft were manufactured and sold to the government by Honeywell Inc. prior to its 1999 merger with AlliedSignal Inc. Still, she found that “Honeywell Inc.’s sale of infringing CMFDs was not authorized because, at the time of the sale, Honeywell Inc. had no rights under the ’914 patent, which AlliedSignal owned.”

Moore added:

The fact that Honeywell now owns the patent does not retroactively authorize the earlier sale. As such, the first sale doctrine does not preclude Honeywell from recovering damages against the government for use of infringing CMFDs and NVGs in the F-16 aircraft. To the extent that the government has recourse, such recourse is not through the first sale doctrine.

The ruling by the Court of Federal Claims was reversed and remanded for a determination on damages.

Judge Sharon Prost joined the opinion.

Judge Haldane Robert Mayer dissented in part, arguing that the ’914 patent is invalid as obvious, that the ’269 application did not disclose the invention of the ’914 patent, and that Honeywell International is barred from recovering damages for infringement by products that predecessor Honeywell Inc. sold to the government.

Honeywell was represented by Lawrence J. Gotts of Paul, Hastings, Janofsky & Walker, Washington, D.C. The government was represented by Christopher L. Crumbley, U.S. Department of Justice. Thomas J. Madden of Venable LLP, Washington, D.C., represented Lockheed Martin. L-3 Communications was represented by John W. Harbin of King & Spalding, Atlanta.

Read the Honeywell v. United States opinion.

 

Federal Circuit Vacates Damages Award That Is Based on Hypothetical Royalty Unrelated to Technology at Issue in Suit

February 5, 2010

The U.S. Court of Appeals for the Federal Circuit ruled in a per curiam opinion Feb. 5 that a patent infringement damages award based on a royalty of 12.5 percent was improper because the lower court considered licenses that were unrelated to the claimed technology (ResQNet.com Inc. v. Lansa Inc., Fed. Cir., No. 2008-1365, 2/5/10).

It found that the methodology of the plaintiff’s expert departed from the multi-factor test damages analysis established in Georgia-Pacific Corp. v. United States Plywood Corp. and the recent ruling in Lucent Techs. Inc. v. Gateway Inc.

However, Judge Pauline Newman argued in her dissenting opinion that the majority has fashioned “a new rule whereby no licenses involving the patented technology can be considered, in determining the value of the infringement, if the patents themselves are not directly licensed or if the licenses include subject matter in addition to that which was infringed by the defendant here.”

12.5% Royalty Set for Infringement of Computer Screen Patent. 

ResQNet.com Inc. brought  suit against Lansa Inc., charging infringement of its patents (6,295,075 and 5,831,608) related to screen recognition and terminal emulation processes that download a screen of information from a remote mainframe computer onto a local personal computer. The district court awarded damages of $506,305 for past infringement based on a hypothetical royalty of 12.5%, plus prejudgment interest. It denied ResQNet’s motion for a permanent injunction, and imposed a license, at a royalty of 12.5%, for future activity covered by the ’075 patent.
ResQNet appealed, and Lansa cross-appealed the damages award.

’608 Patent Not Infringed; ’075 Patent Infringed and Not Invalid.

The Federal Circuit first found no clear error in the district court’s conclusion that the accused NewLook system does not allow each user to customize values to the function key depending on his or needs, as required in the third element of  the ’608 patent. Thus, it affirmed the finding that the ’608 patent was not infringed.

Continuing, the court affirmed the ruling that the ’075 patent was not rendered invalid for obviousness by the Flashpoint references cited by Lansa. It also agreed that Lansa’s advertisement of its NewLook version 1.0 more than a year before the filing of the ’075 patent application did not invalidate the patent. “[T]he district court found that NewLook version 1.0 did not embody all of the elements of claim 1 of the ’075 patent; and Lansa has not argued that its advertisement provided sufficient detail to constitute disclosure of the system embodied in this version of NewLook,” the per curiam court stated. Detecting no clear error in the lower court’s finding that the offer for sale of this earlier version did not constitute prior art, the appellate court affirmed the ruling that Lansa failed to prove invalidity under Section 102 of the Patent Act, 35 U.S.C. §102(b).

Then finding no error in the determination that the NewLook system contains all of the features of the ’075 patent, the appellate court affirmed the infringement ruling.

Expert’s Evidence Found to Have No Link to Claimed Invention.

The Federal Circuit then turned to Lansa’s cross-appeal of the district court’s award of $506,305 in damages for infringement of the ’075 patent. The per curiam court criticized the damages analysis by ResQNet’s expert, Dr. Jesse David, and vacated and remanded the award.

“[T]he district court’s award relied on speculative and unreliable evidence divorced from proof of economic harm linked to the claimed invention and is inconsistent with sound damages jurisprudence,” the Federal Circuit said, citing the multi-factor damages analysis set forth in Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970) and its recent ruling in Lucent Techs. Inc. v. Gateway Inc., 580 F.3d 1301 (Fed. Cir. 2009).

The opinion continued:

The first Georgia-Pacific factor requires considering past and present royalties received by the patentee “for the licensing of the patent in suit, proving or tending to prove an established royalty.” … By its terms, this factor considers only past and present licenses to the actual patent and the actual claims in litigation. This court has long required district courts performing reasonable royalty calculations to exercise vigilance when considering past licenses to technologies other than the patent in suit. …

Yet Dr. David used licenses with no relationship to the claimed invention to drive the royalty rate up to unjustified double-digit levels. Dr. David based his damages on seven ResQNet licenses, five of which had no relation to the claimed invention. These five re-branding or re-bundling licenses (hereinafter, the “re-bundling licenses”) furnished finished software products and source code, as well as services such as training, maintenance, marketing, and upgrades, to other software companies in exchange for ongoing revenue-based royalties. These companies obtained the right to re-brand ResQNet’s products before resale or bundle these products into broader software suites. While the specific numbers involved in these licenses are under a protective order, this court observes that two of them mentioned a top rate of 25%, two more a top rate of 30%, and still another a top rate of 40%. Notably, none of these licenses even mentioned the patents in suit or showed any other discernible link to the claimed technology. Dr. David tabulated an average of the royalty ranges specified in these agreements, a number substantially higher than 12.5%.

The rates in the re-bundling licenses are not consistent at all with the other two licenses in the record. Those two “straight” licenses arose out of litigation over the patents in suit. One of them was a lump-sum payment of stock which Dr. David was unable to analogize to a running royalty rate. The other was an ongoing rate averaging substantially less than 12.5% of revenues.

In his own words, Dr. David recommended a rate for his hypothetical negotiation “somewhere in the middle” of the re-bundling licenses and the straight rate-based license on the claimed technology. … He considered a few of the other Georgia-Pacific factors, but dismissed them because “[f]or the most part, the other factors have no real impact here.” … Thus, Dr. David calculated that a mid-range of 12.5% was the appropriate royalty rate. The inescapable conclusion is that Dr. David used unrelated licenses on marketing and other services—licenses that had a rate nearly eight times greater than the straight license on the claimed technology in some cases—to push the royalty up into double figures. The district court adopted Dr. David’s 12.5% royalty rate and set damages at $506,305.

This court finds two parts of this analysis particularly troubling: first, the extremely high rates in the re-bundling licenses compared with the license on the claimed technology, and second, the unconvincing reasons that Dr. David gave for considering these re-bundling licenses at all. … In sum, Dr. David offers little or no evidence of a link between the re-bundling licenses and the claimed invention. Yet he relies on these licenses to inflate his royalty recommendation.

Thus, the district court in this case made the same legal error that this court corrected in Lucent. This trial court, like the one in Lucent, made no effort to link certain licenses to the infringed patent. For his part, Dr. David did not provide any link between the re-bundling licenses and the first factor of the Georgia-Pacific analysis. Without that link, as this court explained in Lucent: “We . . . cannot understand how the [fact finder] could have adequately evaluated the probative value of [the] agreements.”

The district court’s ruling was affirmed in part, reversed in part, and vacated and remanded in part.

Dissenting Opinion: Bundled Licenses Were Relevant Information.

Dissenting in part, Judge Pauline Newman said that the district court’s opinion expressed “solid reasoning” and took into account the differences between the “bundled” licenses and the other licenses in setting the royalty rate. She said that in this opinion the majority has created “a new rule whereby no licenses involving the patented technology can be considered, in determining the value of the infringement, if the patents themselves are not directly licensed or if the licenses include subject matter in addition to that which was infringed by the defendant here.”

Newman continued:

My colleagues, in setting strict barriers as to what evidence can be considered, leave the damages analysis without access to relevant information. However, it is not necessary that the identical situation existed in past transactions, for the trier of fact to determine the value of the injury. …

Lansa offered no evidence, no testimony, no witness. The role of the trial is to provide evidence for the trier of fact to consider, weigh, and credit as appropriate. … The district court’s endorsement of a royalty of 12.5% was explained as based on the adjudication of validity and infringement, and as a balance of the royalties actually paid for licenses to this technology with software code and the royalties in the litigation settlement, with due consideration to Lansa’s profits on the infringing products. This damages assessment is not analogous to that criticized in Lucent, where the damages award was based on the entire market value of a system in which the infringing component was but a small part. Here, in contrast, the patented technology was a large part of the “bundled” licenses, and these licenses were fairly considered for their content and value.

ResQNet.com was represented by Jeffrey I. Kaplan of Kaplan Gilman & Pergament, Woodbridge, N.J. Lansa was represented by James H. Hulme of Arent Fox, Washington, D.C.

Read the ResQNet.com Inc. v. Lansa Inc. opinion.
 

Induced Infringement Verdict Is Supported by Evidence That Defendant Deliberately Disregarded Known Risk That T-Fal Deep Fryer Was Covered by Patent

February 5, 2010

The U.S. Court of Appeals for the Federal Circuit Feb. 5 upheld a jury verdict of induced infringement under Section 271(b) of the Patent Act because there was evidence in the record that the defendant deliberately ignored the risk that a patent covered a deep fryer it sold to others (SEB S.A. and T-Fal Corp. v. Pentalpha Enterprises Ltd., Fed. Cir., No. 2009-1099, 2/5/10).

The court acknowledged that its 2006 en banc ruling in DSU Medical Corp. v. JMS Co. did not “set out the metes and bounds of the knowledge-of-the-patent requirement.” While here declining to define the scope of knowledge required for inducement, the court found it sufficient that the defendant purchased the plaintiff’s deep fryer and copied its features, did not tell counsel researching the fryer about the copying, and then sold the fryer to others.

Deep Fryer Patent Infringed.

SEB S.A., a French company which sells its cooking appliances in the United States through T-Fal Corp., sued Pentalpha Enterprises Ltd. for infringing its patent (4,995,312) covering a deep fryer with a skirt that is well-insulated from the heat of the fryer’s metal pan. Pentalpha had purchased an SEB deep fryer in Hong Kong and copied its “cool touch” features, and later began selling fryers to Sunbeam Products Inc. in 1997. Pentalpha then obtained a “right-to-use study” from an attorney, who analyzed 26 patents and concluded that none of the claims in those patents read on Pentalpha’s deep fryer. Pentalpha, however, did not inform the attorney that it had copied an SEB deep fryer. Pentalpha learned of SEB’s suit against Sunbeam in April 1998, and that action was settled when Sunbeam agreed to pay SEB $2 million.

With evidence that Pentalpha sold fryers to Sunbeam, Fingerhut, and Montgomery Ward, a jury found that Pentalpha had willfully infringed, and induced infringement of, Claim 1 of the ’312 patent and awarded SEB damages.  Pentalpha appealed.

Deliberate Disregard of Risk of Patent Is Sufficient for Inducement.

The Patent Act at 35 U.S.C. § 271(b) states that:

“Whoever actively induces infringement of a patent shall be liable as an infringer.”

Pentalpha argued that its post-trial challenge to the inducement ruling should have been granted because it lacked actual knowledge of the patent during part of the time it was selling deep fryers to Sunbeam.

However, the Federal Circuit stated that “a claim for inducement is viable even where the patentee has not produced direct evidence that the accused infringer actually knew of the patent-in-suit.” Finding the jury’s determination of inducement “justified,” Judge Randall R. Rader said that Pentalpha exhibited deliberate conduct that warranted liability in this case. He explained:

The record contains adequate evidence to support a conclusion that Pentalpha deliberately disregarded a known risk that SEB had a protective patent. The jury heard evidence that Pentalpha purchased an SEB deep fryer in Hong Kong and copied all but the cosmetics. The owner of a company related to Pentalpha testified that Pentalpha’s engineer took a T-Fal deep fryer and used “the same ring that separates . . . the wall making it a cool touch unit and the construction, basically everything the same; thermostat, it was the same; the timer was the same, just a little bit different on the cosmetics of the outside appearance for the deep fryer.” Again, the record shows that Pentalpha hired an attorney to conduct a right-to-use study, but did not tell him that it had based its product on SEB’s product.

A failure to inform one’s counsel of copying would be highly suggestive of deliberate indifference in most circumstances. Here, the jury also heard testimony that indicated that Pentalpha’s president, John Sham, was well versed in the U.S. patent system and understood SEB to be cognizant of patent rights as well. Sham testified that he was the named inventor on 29 U.S. patents and that Pentalpha and SEB had an earlier business relationship that involved one of Pentalpha’s patented steamer products. The record thus contains considerable evidence of deliberate indifference.

Rader observed that the court’s en banc ruling in DSU Medical Corp. v. JMS Co., 471 F.3d 1293 (Fed. Cir. 2006), which was decided after the jury verdict in this case, addressed the intent necessary to support a finding of induced infringement. Under DSU Medical, the plaintiff must show that the alleged infringer knew or should have known that his actions would induce actual infringements. DSU Medical further stated that “[t]he requirement that the alleged infringer knew or should have known his actions would induce actual infringement necessarily includes the requirement that he or she knew of the patent.

Rader pointed out that DSU Medical “did not, however, set out the metes and bounds of the knowledge-of-the-patent requirement.” Rather, he said that it resolved conflicting case law setting forth both a requirement to knowingly induce infringement and to knowingly induce the acts that constitute direct infringement. The knowledge of the patent issue was not at dispute in that case because the record was clear that the alleged infringer had actual knowledge of the patent-in-suit, Rader noted.

Still, inducement does require a showing of “specific intent to encourage another’s infringement,” Rader clarified, quoting Broadcom Corp. v. Qualcomm Inc., 543 F.3d 683 (Fed. Cir. 2008). Specific intent in the civil context is not so narrow as to allow an accused wrongdoer to actively disregard a known risk that an element of the offense exists, he said, citing authority. “This opinion does not purport to establish the outer limits of the type of knowledge needed for inducement,” Rader continued. Declining to “set those boundaries now,” he said that it was sufficient that “Pentalpha deliberately ignored the risk that SEB had a patent that covered its deep fryer.”

Ruling to Set Aside Enhanced Damages Based on Seagate Is Upheld.

SEB cross-appealed the district court’s decision to set aside its original awards of enhanced damages and attorneys’ fees based on the intervening en banc ruling in In re Seagate Technology LLC, 497 F.3d 1360 (Fed. Cir. 2007).

In Seagate, the Federal Circuit rejected the affirmative duty of care stated in earlier precedent. It held that proof of willful infringement requires a patentee to show by clear and convincing evidence that, as a threshold matter, “the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.” Using pre-Seagate law, the district court here instructed the jury that a potential infringer “has an affirmative duty of due care not to infringe” a known patent, and that failure to abide by that duty constituted willful infringement. The jury found Pentalpha liable for willful infringement.

Finding no reversible error, the Federal Circuit upheld the district court’s decision setting aside the enhanced damages and attorneys’ fees awards in light of Seagate. Rader noted that SEB did not seek a new trial on willfulness, and that he might have granted the motion since the district court found that the determination of willfulness could have gone either way under the Seagate test. “SEB’s evidence is not so strong that SEB is entitled to a finding of willful infringement as a matter of law,” he concluded.

The district court’s ruling was affirmed.

The opinion was joined by Judges William C. Bryson and Richard Linn.

SEB was represented by Norman H. Zivin of Cooper & Dunham, New York. Pentalpha was represented by William Dunnegan of Dunnegan LLC, New York.

Read the SEB S.A. and T-Fal Corp. v. Pentalpha Enterprises Ltd. opinion.
 

Abbott’s Glucose Strip Patents Are Found Invalid and Unenforceable

January 25, 2010

The U.S. Court of Appeals for the Federal Circuit Jan. 25 affirmed a ruling that one of Abbott Laboratories’ patents related to glucose test strips is invalid and unenforceable and that two other patents are invalid and not infringed (Therasense Inc. v. Becton, Dickinson and Co., Fed. Cir., No. 2008-1511, 1/25/10).

On the inequitable conduct ruling, the court agreed with the finding below that, in prosecuting one patent, Abbott’s patent attorney and its head of research and development 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 court said.

However, Judge Richard Linn dissented in part, arguing 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.

Glucose Test Strips for Diabetics.

Becton, Dickinson and Co. brought a suit for a declaratory judgment action against Therasense Inc. (now Abbott Diabetes Care Inc.) and Abbott Laboratories (collectively Abbott), asserting that two of Abbott’s glucose test strip patents (6,143,164 and 6,592,745) were not infringed the Becton, Dickinson Latitude Diabetes Management System and the Logic Blood Glucose Monitor.
Abbott countersued Becton, Dickinson, alleging infringement of the ’164 patent, the ’745 patent, and one other patent (5,820,551). Abbott also brought infringement suits against Bayer Healthcare LLC and Nova Biomedical Corp, Becton, Dickinson’s supplier.

After these suits were consolidated, the district court issued a summary judgment order finding that Becton, Dickinson/Nova’s products did not infringe any of the asserted claims of the ’164 or ’745 patents. It also found Claims 1–5, 8, 21–23, 28, 31, and 34 in the ’745 patent invalid for anticipation under Section 102 of the Patent Act. After a bench trial, the court determined that Claims 1–4 of the ’551 patent were invalid for obviousness under Section 103 of the Patent Act and that the entire ’551 patent was unenforceable due to inequitable conduct.

Abbott appealed.

Obviousness of the ’551 Patent Is Upheld.

Abbott first challenged the district court’s holding that Claims 1–4 of the ’551 patent would have been obvious in light of two prior art patents (4,545,382 and 4,225,410).

The key issue for the appellate court was whether the prior art ’382 patent disclosed a glucose sensor without a membrane for use in whole blood. The district court found that the ’382 patent disclosed electrochemical sensors in which “a protective membrane was optional in all cases except the case of live blood, in which case the protective membrane was preferred—but not required.”

The first two named inventors on the ’382 patent are also the first two named on the ’551 patent, observed Judge Timothy B. Dyk of the Federal Circuit. “The claims of the ’382 patent are plainly directed in part to sensors without a membrane, as is made clear by the dependent claims that specifically include a membrane as an additional feature of the device,” Dyk said. While Abbott insisted that a membrane is required for testing blood in ’382 patent, Dyk stressed that “none of the claims in the ’382 patent explicitly distinguishes between blood and other fluids.” Further, he quoted the statement in the ’382 patent specification that “[o]ptionally, but preferably when being used on live blood, a protective membrane surrounds both the enzyme and the mediator layers.” Using the term “preferably” implies that such a membrane is not necessary, Dyk continued, citing Callaway Golf Co. v. Acushnet Co., 576 F.3d 1331 (Fed. Cir. 2009) and other authority.

Having found no clear error in the district court’s conclusion that that the ’382 patent disclosed a membraneless sensor for whole blood testing, the Federal Circuit also found no clear error in the lower court’s determination that those with ordinary skill in the art would have expected such a membraneless sensor to work. Nor did it find clear error in the conclusion below that a skilled artisan would have been motivated to combine this sensor in a disposable form—the contribution of the ’410 patent.

Still, Abbott insisted that this prima facie case of obviousness as to the ’551 patent was overcome by the commercial success of its Exactech product.

However, Dyk found that Abbott was not entitled to a presumption that the product’s commercial success was due to the invention claimed in the ’551 patent. He explained:

This is not a situation where the success of a product can be attributed to a single patent, because Abbott’s Exactech product embodied at least two patents: the ’382 patent and the ’551 patent. Abbott’s expert, Dr. Johnson, admitted that the Exactech strips met all of the limitations of claim 1 of the ’382 patent. Furthermore, for the fifteen years that the product was on the market—during which the ’382 patent was valid and in force for the entire period save for the final three months—Abbott marked the product with the ’382 patent, both before and after the ’551 patent issued. As such, there is no presumption that the product’s success was due only to the ’551 patent.

Accordingly, the appellate court affirmed the ruling that the ’551 patent was invalid for obviousness.

’551 Patent Is Unenforceable for Withholding of Statements Made to EPO.

Next, Abbott challenged the ruling below that the ’551 patent was unenforceable due to inequitable conduct.

The district court found that Abbott made directly contradictory representations to the EPO concerning the teaching of the ’382 patent in the revocation proceeding relating to European Patent EP 0 078 636—a counterpart to the ’382 patent with virtually identical specifications—and that Abbott had not disclosed those contradictory representations to the PTO. The district court found that Abbott had argued to the EPO that the protective membrane of the ’636 patent was optional, but, to overcome anticipation rejections of the ’551 patent based on the ’382 patent, asserted to the PTO that ’382 patent required a protective membrane. It found that these conflicting statements were put forth not only through arguments by Abbott’s patent attorney (Pope), but also in an affidavit from its director of research and development (Sanghera).

Turning away Abbott’s contention that these conflicting statements over the meaning of the “[o]ptionally, but preferably” language were immaterial, Dyk stated:

Pope in his testimony agreed that the plain English reading of what Abbott told the EPO was contrary to what Abbott told the PTO. To deprive an examiner of the EPO statements—statements directly contrary to Abbott’s representations to the PTO—on the grounds that they were not material would be to eviscerate the duty of disclosure. Moreover, if this could be regarded as a close case, which it is not, we have repeatedly emphasized that the duty of disclosure requires that the material in question be submitted to the examiner rather than withheld by the applicant. . . . 

Abbott nonetheless contends that lawyer argument about prior art is not information material to patentability and that since both the EPO and the PTO representations were merely argument, any inconsistency between the two could not be material. This court has held that representations made to the PTO concerning the content of prior art “amount[] to mere attorney argument and our precedent has made clear that an applicant is free to advocate its interpretation of its claims and the teachings of the prior art.” . . . However, all of the cases Abbott cites involve patentees who simply made representations to the PTO about prior art in order to secure the allowance of their patents. . . . None of these cases involved a situation in which contradictory arguments made in another forum were withheld from the PTO. They do not speak to the applicant’s obligation to advise the PTO of contrary representations made in another forum. Before the EPO, Abbott made statements that contradicted the representations Abbott made to the PTO regarding the ’382 patent. 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. . . . In any event, the representations to the PTO were not merely lawyer argument; they were factual assertions as to the views of those skilled in the art, provided in affidavit form.

The district court’s finding that the EPO statements were highly material because they contradicted the position taken before the PTO was not clearly erroneous and was strongly supported by the uncontradicted record.

Further, the Federal Circuit found that the district court “amply supported” the findings that Pope and Dr. Sanghera intended to deceive the PTO by withholding the EPO documents. Agreeing that the EPO submissions were highly material to the prosecution of the ’551 patent and that Pope and Dr. Sanghera intended to deceive the PTO by withholding those submissions, it found no abuse of discretion in the holding that the ’551 patent was unenforceable due to inequitable conduct.

The court then went on to affirm the summary judgment that the BD Test Strip did not infringe the ’164 and ’745 patents, and to affirm the summary judgment that the ’745 patent was anticipated by PCT application WO 98/35225.

The district court’s ruling was affirmed.

The opinion was joined by Senior Judge Daniel M. Friedman, with Judge Richard Linn concurring in part.

Dissent: Majority Ignored Subjective Intent on Materiality.

Dissenting in part, Linn challenged the majority’s decision on inequitable conduct. He said that, when assessing an applicant’s reason for withholding a reference that he or she believed was immaterial, the question is not, “Is it plausible that the reference is immaterial?” Rather, the question for purposes of specific intent is, “Is it plausible that the applicant subjectively believed that the reference was immaterial?” To Linn, this inquiry properly focuses on what the applicant knew or believed to be true about the reference at the time that he or she decided to withhold it. Citing Scanner Technologies Corp. v. ICOS Vision Systems Corp., 528 F.3d 1365 (Fed. Cir. 2008), he argued that Abbott’s submissions to the EPO were “susceptible of multiple reasonable inferences.” Thus, in his view, it was plausible for Pope and Sanghera to subjectively believe that the withheld information was immaterial when they withheld it.

Therasense and Abbott were represented by Rohit K. Singla of Munger, Tolles & Olson, San Francisco. Becton, Dickinson and Nova were represented by Bradford J. Badke of Ropes & Gray, New York. Rachel Krevans of Morrison & Foerster, San Francisco, represented Bayer HealthCare.

Read the Therasense Inc. v. Becton, Dickinson & Co. opinion.

 

Safe-Harbor Provision of § 121 Shields Patent on Parkinson’s Drug From Invalidity Due to Obviousness-Type Double Patenting

January 25, 2010

A patent covering the Parkinson’s disease drug Mirapex is not invalid for obviousness-type double patent because the safe-harbor provision of 35 U.S.C. § 121 insulates a divisional of a previous divisional patent application in which a restriction requirement was entered, the U.S. Court of Appeals for the Federal Circuit ruled Jan. 25 (Boehringer Ingelheim Int’l GmbH v. Barr Labs. Inc., Fed. Cir., No. 2009-1032, 1/25/10).

If Congress intended to limit the safe harbor only to a divisional of the application in which the restriction requirement was entered, it could have said “a divisional application of the original application,” rather than simply “a divisional application,” the court reasoned. Without the protection of § 121, the patent would have fallen to invalidity because the court found that double-patenting was not cured by a terminal disclaimer filed after the original patent expired.

Dissenting in part, Judge Timothy B. Dyk agreed with the majority that Section 121 is not limited to the first divisional application filed as a result of the restriction requirement, but argued that the applicant failed to meet the strict criteria that must be met for this provision to apply.

Pramipexole Found Invalid for Obvious-Type Double Patenting.

Boehringer Ingelheim Int’l GmbH has a patent (4,886,812) claiming certain tetrahydrobenzthiazole compounds, one of which is pramipexole. Boehringer manufactures, markets, and sells pramipexole tablets under the brand name Mirapex for the treatment of Parkinson’s disease.

In 2005, Mylan Pharmaceuticals Inc. notified Boehringer that it had submitted an abbreviated new drug application with the Food and Drug Administration for generic pramipexole. In response, Boehringer sued Mylan for infringing the patent infringement. That action was consolidated with Boehringer’s previously filed patent infringement suit against an earlier ANDA filer, Barr Laboratories Inc.

Though Barr and Boehringer have settled, Mylan insisted that the ’812 patent—the third in a chain of related patents, all of which share a common specification—is invalid for type double patenting in view of the second patent (4,843,086) in the chain. On the last day of the 2008 bench trial, Boehringer sought to overcome the obviousness-type double patenting defense based on the then-expired ’086 patent by filing a terminal disclaimer of the ’812 patent with the Patent and Trademark Office.

The district court ruled that Boehringer’s terminal disclaimer was ineffective in overcoming the obviousness-type double patenting rejection it was filed after the ’086 patent had expired. The court also rejected Boehringer’s argument that the safe-harbor provision of 35 U.S.C. § 121 barred the use of the ’086 patent as an invalidating reference. The court went on conclude that the compound claims of the ’812 patent were obvious in view of the method-of-use claims of the ’086 patent and granted judgment to Mylan.

Boehringer appealed.

Retroactive Terminal Disclaimer Is Ineffective.

The Federal Circuit began by observing the statement in In re Lonardo, 119 F.3d 960 (Fed. Cir. 1997) that the judicially created doctrine of double patenting “is intended to prevent a patentee from obtaining a time-wise extension of patent [rights] for the same invention or an obvious modification thereof.” Judge Richard Linn said that this doctrine “is an important check on improper extension of patent rights through the use of divisional and continuation applications, at least for patents issued from applications filed prior to the amendment of 35 U.S.C. § 154 to create twenty-year terms running from the date of the earliest related application.”

“The question here is whether a retroactive terminal disclaimer—i.e., a terminal disclaimer that is filed after the expiration date of an earlier commonly owned patent—is effective to overcome obviousness-type double patenting,” Linn continued. He agreed with the district court’s ruling that Boehringer could not cure the obviousness-type double patenting problem by filing a terminal disclaimer after the ’086 patent had expired, stating:

By failing to terminally disclaim a later patent prior to the expiration of an earlier related patent, a patentee enjoys an unjustified advantage—a purported time extension of the right to exclude from the date of the expiration of the earlier patent. The patentee cannot undo this unjustified timewise extension by retroactively disclaiming the term of the later patent because it has already enjoyed rights that it seeks to disclaim. Permitting such a retroactive terminal disclaimer would be inconsistent with “[t]he fundamental reason” for obviousness-type double patenting, namely, “to prevent unjustified timewise extension of the right to exclude.” . . . We therefore hold that a terminal disclaimer filed after the expiration of the earlier patent over which claims have been found obvious cannot cure obviousness-type double patenting. …

In this case, assuming that the claims of the ’812 patent are obvious in light of the claims of the ’086 patent, Boehringer would have had no right to exclude others from practicing the subject matter encompassed by the ’812 patent after the expiration date of the ’086 patent. However, because the ’812 patent purported to remain in force after June 27, 2006, and because Boehringer did not disclaim it before then, Boehringer enjoyed an unjustified advantage—a purported time extension of the right to exclude from June 27, 2006 forward. There is nothing that Boehringer can do now to “un-exercise” the right that it has already improperly enjoyed. Boehringer’s terminal disclaimer therefore cannot cure a finding of invalidity of the ’812 patent for obviousness-type double patenting.

Safe Harbor of § 121 Applies to a Divisional of a Divisional.

Having found that the retroactive terminal disclaimer could not defeat Mylan’s obviousness-type double patenting defense, the appellate had to consider whether Section 121 of the Patent Act precluded use of the ’086 patent as an invalidating reference. When the PTO requires an applicant to withdraw claims to a patentably distinct invention (a restriction requirement), Section 121 shields those withdrawn claims in a later divisional application against rejection over a patent that issues from the original application.

35 U.S.C. § 121 specifically states that:

A patent issuing on an application with respect to which a requirement for restriction under this section has been made, or on an application filed as a result of such a requirement, shall not be used as a reference either in the Patent and Trademark Office or in the courts against a divisional application or against the original application or any patent issued on either of them, if the divisional application is filed before the issuance of the patent on the other application . . . .

Mylan argued that this provision applies only to a divisional of a patent in which a restriction requirement was entered and does not apply to a divisional of a divisional.
The Federal Circuit disagreed. Linn explained that the Section 121 refers to restriction among “two or more independent and distinct inventions” and provides that a patent issuing on either the original application subject to a restriction requirement (“an application with respect to which a requirement for restriction under this section has been made”) or a divisional application (“an application filed as a result of such a requirement”) cannot be used as a reference against either “the original application” or “a divisional application.”
Linn continued:

The most straightforward reading of the statutory text is that the safe harbor of § 121 applies even when the PTO issues a restriction requirement that leads to more than two separate applications. … Moreover, § 121 refers broadly to “a divisional application,” and does not state that the divisional must be a direct divisional of the original application. Had Congress intended to limit the safe harbor only to a divisional of the application in which the restriction requirement was entered, it could have said “a divisional application of the original application,” rather than simply “a divisional application.”

We have recognized the reach of § 121 in situations where the patent subject to a double-patenting challenge and the application in which the restriction requirement was entered share a common lineage. … We have also held that § 121 applies specifically to continuing applications deriving from a divisional application filed as a result of a restriction requirement. ... We see no reason why § 121 would not likewise extend to a divisional of a divisional.

We therefore reject Mylan’s argument that § 121 is inapplicable solely because the ’812 patent issued from an application that was a divisional of a divisional and hold that, assuming all other requirements of § 121 are met, the safe-harbor provision may apply to a divisional of a divisional of the application in which a restriction requirement was entered. We note that this holding is fully consistent with the purpose of § 121—namely, to prevent a patentee who divides an application in which a restriction requirement has been made from risking invalidity due to double patenting. …

Requirements of § 121 Satisfied.

Linn then addressed the district court’s holding that the safe harbor was inapplicable because the application resulting in the ’812 patent was not filed “as a result of a restriction requirement” under the language of the statute, but instead was filed because of concerns over potentially interfering matter in a patent owned by Eli Lilly. To the district court, the “as a result of” requirement of § 121 must be satisfied by both the ’086 and ’812 patents, and that while the ‘086 patent met this requirement, the restriction did not “carry over” to the application that had matured to the ’812 patent because it was filed due to the problem posed by the Lilly patent.

The Federal Circuit agreed with the district court that the “as a result of” requirement must be satisfied by both the ’086 reference patent and the ’812 challenged patent. However, it stressed that “Section 121 is not concerned with any overlap in non-elected inventions prosecuted within any particular divisional application or in how any such applications are filed. To prevent loss of the safe harbor in dividing out claims to non-elected inventions, what is required is consonance with the restriction requirement.” Quoting Gerber Garment Inc. v. Lectra Sys. Inc, 916 F.2d 683 (Fed. Cir. 1990), Linn noted that “[c]onsonance requires that the line of demarcation between the ‘independent and distinct inventions’ that prompted the restriction requirement be maintained. . . . Where that line is crossed the prohibition of the third sentence of Section 121 does not apply.”

Finding the requirements of § 121 satisfied in this case, Linn continued:

According to Mylan, this means that an applicant must strictly follow an examiner’s election procedure and not overlap claims to independent and distinct inventions in any single divisional application. We disagree. An overlap of claims to independent and distinct inventions within a given divisional application is neither contrary to the restriction requirement nor relevant to the requirements of the third sentence of § 121. Rather, what consonance requires is that the claims prosecuted in two or more applications having common lineage in a divisional chain honor, as between applications, the lines of demarcation drawn by the examiner to what he or she considered independent and distinct inventions in the restriction requirement. … The divisions need not be limited to a single one of the examiner’s demarcated inventions to preserve the right to rely on the safe harbor of § 121.

Here, as noted earlier, the restriction requirement imposed during prosecution of the ’947 application divided the claims into groups, each covering what the examiner demarcated as an invention “independent and distinct, each from the other.” … None of the inventions claimed as between the ’374 original patent, the ‘086 division, and the ’812 division of the division, crosses the examiner’s lines of demarcation of inventions identified in the restriction requirement.

The district court’s ruling was reversed, and the case was remanded.

Judge Sharon Prost joined the opinion.

Dissenting Opinion Argues Narrower View of § 121.

Judge Timothy B. Dyk agreed with the majority that Section 121 is not limited to the first divisional application filed as a result of the restriction requirement, but extends to later divisional applications filed “as a result of” the restriction and that are consonant with the restriction requirement.  However, he argued that the majority “misinterpreted” both the “consonance” and “as a result of” requirements for § 121

Observing the statement in Geneva Pharms. Inc. v. GlaxoSmithKline PLC, 349 F.3d 1373 (Fed. Cir. 2003) that Section 121 has a “strict test,” Dyk insisted that “it is not enough that the original application was filed as a result of the restriction requirement; the subsequent contested patent application itself must have been the result of the restriction, and must be consonant with the restriction requirement.” He said that the parent application here, a divisional of the grandparent application, was not consonant with the original restriction requirement, as the applicants combined in a single application claims that the original examiner determined were drawn to separate inventions. Dyk added that the child application was also not consonant because it contained separate inventions. “It is not the inventions that must preserve the examiner’s line of demarcation among separate inventions, but rather, the applications that must be consonant with the restriction requirement,” Dyk stressed.

Further, Dyk argued that the child application in this case was not separated from the parent “as a result of” the restriction requirement, but rather as the result of the applicant’s voluntary choice. Since the separation was not due to the administrative requirements imposed by the PTO, the child application should not be afforded the protections of § 121 with respect to the parent application, Dyk reasoned.

Boehringer Ingelheim was represented by Bruce M. Wexler of Paul, Hastings, Janofsky & Walker, New York. Mylan Pharmaceuticals was represented by Shannon M. Bloodworth, Perkins Coie LLP, of Washington, D.C.

Read the Boehringer Ingelheim Int’l GmbH v. Barr Labs. Inc. opinion.
 

CAFC Rejects PTO’s Calculation of Patent Term Adjustments Under §154(b)

January 7, 2010

The U.S. Court of Appeals for the Federal Circuit ruled Jan. 7 that the Patent and Trademark Office has miscalculated patent term extension adjustments provided under § 154(b) for patents delayed issuance due to the fault of the agency (Wyeth v. Kappos, Fed. Cir., No. 2009-1120, 1/7/10).

Rejecting the PTO’s reading of Section 154(b), the court said that the agency’s interpretation was not entitled to deference because it was at odds with the plain and unambiguous statutory language. The court’s decision should widely benefit holders of new and recently issued patents.

Patentees Contest PTO’s Term Adjustments Math.

Wyeth and Elan Pharma International Ltd. (Wyeth) own two patents (7,179,892 and 7,189,819) relating to the treatment of Alzheimer’s disease. Under 35 .S.C. §154, a patent has a term of 20 years from the date the application was filed. This 20-year term is a change from an early regime that set the term at 17 years from patent issuance. To compensate patent owners under the new regime for delays caused by the Patent and Trademark Office during prosecution, Congress in 1999 amended 35 U.S.C. § 154(b) by providing three “guarantees”:

• the A guarantee requiring the PTO to extend the term by one day for each day that the PTO delayed prosecution by failing to meet certain deadlines;
• the B guarantee requiring the PTO to extend to the patent term by one day for each day issuance is delayed due to the PTO’s failure “to issue a patent within 3 years after the actual filing date of the application in the United States”; and
• the C guarantee requiring the PTO to extend the patent term for each day of delay due to interferences, secrecy orders, and appeals

In this case, only the A and B guarantees were at issue. The PTO read the statute to require either the greater of section A or B delay to apply—but not both—when the agency delayed prosecution of an application after the 3 years. Under this interpretation, the B guarantee started with the filing of the application, not three years later. Thus, for example, if a patent entitled to 20 days of A adjustments issues 20 days after the three year mark, then it would only be entitled to a total of 20 days of adjustment.

Wyeth, however, argued that the adjustments guaranteed under sections A and B both apply when there is an “overlap” in which the PTO delayed prosecution after the 3 years. According to Wyeth, the PTO’s method of calculation resulted in an incorrect term adjustment for the ’892 and ’819 patents.

After its petitions for reconsideration of term adjustment were rejected, Wyeth filed suit. The U.S. District Court for the District of Columbia sided with Wyeth on summary judgment.

The PTO appealed.

PTO’s Reading at Odds With Plain Language of Statute.

The Federal Circuit affirmed the summary judgment, finding that “Section 154(b)’s language is clear, unambiguous, and intolerant of the PTO’s suggested interpretation.”

Starting with the statute itself, the appellate court emphasized that the A and B guarantees are subject to this “In general” limitation in § 154(b)(2)(A): 

To the extent that periods of delay attributable to grounds specified in paragraph (1) overlap, the period of any adjustment granted under this subsection shall not exceed the actual number of days the issuance of the patent was delayed.

This limitation restricts the period of adjustment when any of the “periods of delay” “overlap,” Judge Randall R. Rader said. He noted that a violation of the A guarantee—delays in meeting examination deadlines—begins with a “failure of the [PTO]” to meet one of the deadlines specified in subparagraphs (i)–(iv). This period ends when “the action described . . . is taken,” he said, quoting §154(b)(1)(A). For purposes of the A clause, he continued, the “period of delay” thus runs from the date the PTO misses the specified deadline to the date (past the deadline) of response to the underlying action.

Rader then turned to the B violation—which, under § 154(b)(1)(B), begins when the PTO fails “to issue a patent within 3 years after the actual filing date of the application in the United States . . . .” It ends when “the patent is issued,” he said, still quoting the statute. The “period of delay” under this express language runs from the three-year mark after filing until the application issues, he stressed, adding:

Reading this framework into section 154(b)’s limitation provision makes it clear that no “overlap” happens unless the violations occur at the same time. Each “period of delay” has its own discrete time span whose boundaries are defined in section 154(b)(1). That is, each has a start and an end. Before the three-year mark, no “overlap” can transpire between the A delay and the B delay because the B delay has yet to begin or take any effect. If an A delay occurs on one day and a B delay occurs on a different day, those two days do not “overlap” under section 154(b)(2).

Under the PTO’s strained interpretation, B delay can occur anytime after the application is filed. To the contrary, the language of section 154(b) does not even permit B delay to start running until three years after the application is filed. The PTO’s position cannot be reconciled with the language of the statute.

Still, the PTO insisted that the legislative history suggests that Congress did not intend to give patentees already eligible for A adjustments additional compensation where the A delay occurred during the first three years of prosecution.

Rader was unmoved. He said that the “legislative history—always a very dull instrument for extracting the essence of statutory meaning—provides no reason to depart from the language of section 154(b).”

Further, the Federal Circuit rejected the PTO’s argument that its interpretation of the statute deserved deference under Chevron U.S.A. Inc. v. Natural Resources Def. Council Inc., 467 U.S. 837 (1984). “Because the language of the statute itself controls this case and sets an unambiguous rule for overlapping extensions, this court detects no reason to afford special deference to the PTO’s interpretation,” it wrote.

The summary judgment in favor of Wyeth was affirmed.

The opinion was joined by Senior Judge S. Jay Plager and Judge Kimberly A. Moore.

Wyeth and Elan were represented by Patricia A. Carson of Kaye Scholer, New York. The PTO was represented by Christine N. Kohl, U.S. Department of Justice, Washington, D.C.

William G. James II of Kenyon & Kenyon, Washington, D.C., represented amicus curiae Hospira Inc. Jeffrey B. Elikan of Covington & Burling, Washington, D.C., represented amicus curiae Pharmaceutical Research and Manufacturers of America. 

Read the Wyeth v. Kappos opinion.
 

B.P.A.I. Cannot Apply Rule 41.200(b) and Ignore Original Disclosure If Patentee Challenges an Applicant’s Written Description in an Interference

January 5, 2010

The U.S. Court of Appeals for the Federal Circuit ruled Jan. 5 that a federal district court erroneously concluded that the Board of Patent Appeals and Interferences can apply 37 C.F.R. § 41.200(b) and disregard the original disclosure when a patentee challenges an applicant’s written description in an interference proceeding (Koninklijke Philips Electronics N.V. v. Cardiac Science Operating Co., Fed. Cir., No. 2009-1241, 1/5/10).

Reversing and remanding the dismissal of a patentee’s suit to review the Board’s decision under to 35 U.S.C. § 146, the appellate court faulted the Board and the district court for viewing the applicant’s contested claim under Rule 41.200(b), which states: “A claim shall be given its broadest reasonable construction in light of the application or patent in which it appears.” In doing so, it said, the Board and the lower court ignored the following statement by the Federal Circuit in Agilent Technologies Inc. v. Affymetrix Inc.: “[W]hen a party challenges written description support for an interference count or the copied claim in an interference, the originating disclosure provides the meaning of the pertinent claim language.” Any conflict between 41.200(b) and Agilent “must be resolved as directed in Agilent,” the court said, noting that “the PTO lacks the substantive rulemaking authority to administratively set aside judicial precedent.”

Interference Over Cardiac Defibrillator.

Koninklijke Philips Electronics N.V. is the assignee of a patent (6,241,751) disclosing a cardiac defibrillator that delivers electrical shocks to a patient’s heart during ventricular fibrillation. Almost a year after the ’751 patent issued, Cardiac Science filed a continuation application, No. 10/159,806 (the Owen application). To provoke interference proceedings, Cardiac Science copied claims 1–37 of the ’751 patent into the Owen application and claimed an earlier priority date.

The U.S. Patent and Trademark Office declared an interference under 35 U.S.C. § 135(a) between the Owen application and the ’751 patent. The Board of Patent Appeals and Interferences formulated one count for the interference, which it copied verbatim from Claim 15 of the ’751 patent and Claim 15 of the Owen application.

At the center of the parties’ dispute was the term “impedance-compensated defibrillation pulse” in the count. According to Philips, the ’751 patent narrowly defined the term “impedance-compensated defibrillation pulse” in its specification as corresponding to “an overall capacitance and charge voltage tailored to the patient impedance and the desired energy level.” In contrast, Philips asserted that the Owen specification disclosed “configuring capacitors based only on patient impedance.” Because Owen’s specification failed to disclose desired energy level as an additional parameter for configuring capacitors, Philips argued that all of Owen’s claims except for Claim 38 were unpatentable for lack of written description.

However, the Board found that the ’751 patent’s written description was irrelevant to its analysis under the PTO’s interference procedures, and it cited 37 C.F.R. § 41.200(b)’s statement that: “A claim shall be given its broadest reasonable construction in light of the application or patent in which it appears” as authority to disregard the ’751 patent in construing the claim term in Owen. Among other things, the Board rejected one of Philips’ motions arguing that the Owen application was unpatentable because it failed to provide an adequate written description as required under § 112, ¶ 1, and it rejected another motion contending that Owen was anticipated or rendered obvious by the prior art Gliner patent (5,749,904).

After denying Philips’ motions, the Board found in favor of the Owen application for priority and cancelled the ’751 patent Claims 1–37. Although Philips sought review of the Board’s decision pursuant to 35 U.S.C. § 146, the U.S. District Court for the Western District of Washington sua sponte dismissed the suit against Cardiac Science with prejudice.

Philips appealed.

Summary Judgment Improperly Granted.

Treating the dismissal with prejudice as a de facto summary judgment, the Federal Circuit applied Ninth Circuit law to this procedural question. Judge Arthur Gajarsa observed that a district court in the Ninth Circuit may enter summary judgment (1) as long as the losing party has had a full and fair opportunity to present arguments and (2) the parties have no genuine dispute as to a material fact.

“The district court did not satisfy either standard in this case,” Gajarsa stated. First, he found that the district court ignored Philips’ request to present new evidence and never heard Philips’ argument that the ’751 patent had priority, and thus did not give Philips a full and fair opportunity to ventilate the issues raised in its complaint. “Second, there remains a genuine dispute as to material facts between the parties,” he continued, noting that the parties still disagree as to whether Owen contains an adequate written description for the term “impedance-compensated defibrillation pulse” and on whether the Gliner patent anticipates Owen’s Claim 38.

37 C.F.R. § 41.200(b) Was Erroneously Applied.

Continuing, the Federal Circuit found that the district court abused its discretion by basing the summary judgment on an erroneous conclusion of law. Gajarsa cited three key errors by the district court: 1) error in concluding that the ’751 patent written description was irrelevant; 2) error in holding that the Board can apply 37 C.F.R. § 41.200(b) and disregard the original disclosure when a patentee challenges an applicant’s written description in an interference proceeding, and 3) error in assuming that it did not have to construe the term “impedance-compensated defibrillation pulse.”

Gajarsa found the district court’s at odds with the holdings of Agilent Technologies Inc. v. Affymetrix Inc., 567 F.3d 1366 (Fed. Cir. 2009) and In re Spina, 975 F.2d 854 (Fed. Cir. 1992). “When interpretation is required of a claim that is copied for interference purposes, the copied claim is viewed in the context of the patent from which it was copied,” Spina said, addressing which specification was relevant when interpreting a claim for a written description challenge. After Spina, Rowe v. Dror, 112 F.3d 473 (Fed. Cir. 1997) distinguished a written description challenge from a priority challenge under 35 U.S.C. § 102, holding that when a party challenges a claim’s validity based on prior art, “the PTO and this court must interpret [a] claim in light of the specification in which it appears.” Agilent again addressed the differences between a written description challenge and a validity challenge in interference proceedings. Agilent held that, “when a party challenges written description support for an interference count or the copied claim in an interference, the originating disclosure provides the meaning of the pertinent claim language.” However, Agilent said that, “[w]hen a party challenges a claim’s validity under 35 U.S.C. § 102 or § 103, however, this court and the Board must interpret the claim in light of the specification in which it appears.”

Though the Board may believe that there is a conflict between this court’s holdings and § 41.200(b), Gajarsa said, “any conflict between the two must be resolved as directed in Agilent.” He wrote:

Agilent made clear that 37 C.F.R. § 41.200(b) does not apply in an interference proceeding when one party challenges another’s written description. The court applied the Spina rule to a case with the same preliminary motion as in this case: Philips filed a “preliminary motion challenging the validity of the copied claims on the grounds that the [Owen] application did not describe the invention adequately under § 112 ¶ 1.” … As in Agilent, “[t]his case calls for application of the Spina rule, because the question is ‘whether the copying party’s specification[, Owen,] adequately supported the subject matter claimed by the other party[, the inventors of the ‘751 patent].’” …

Based on their failure to apply our precedent, the Board and the district court fundamentally erred by summarily rejecting Philips’ written description challenge. A district court must base its analysis of written description under § 112, ¶ 1 on proper claim construction. … Here, the district court did not construe the disputed term at all. Nor did the court analyze the Owen application’s written description, assuming that the Board’s procedural grounds obviated claim construction. The district court failed to recognize that “the Board should decide issues relating to . . . patentability that are fairly raised and fully developed during the interference, despite the permissive language of § 135(a) with respect to patentability issues.” …

Cardiac Science does not dispute that Philips fairly raised and fully developed its written description challenge before the Board. Consequently, the district court should have corrected the Board’s error by deciding whether the Owen application’s written description satisfied § 112, ¶ 1. On remand, the district court must construe the term “impedance-compensated defibrillation pulse” in light of the ’751 patent written description and then determine whether the Owen application’s written description satisfies § 112, ¶ 1.

The district court and the Board’s legal errors stem from a failure to appreciate the consequences of the PTO’s rulemaking authority. The PTO lacks substantive rulemaking authority. … Unfortunately, the district court and the Board did not heed this court’s prior warnings that PTO regulations disregarding Spina have limited applicability. In 1994, the PTO proposed an amendment to 37 C.F.R. § 1.633(a)—the precursor of 37 C.F.R. § 41.200(b)—to “specify that a claim shall be construed in light of the specification of the application or patent in which it appears.” … The PTO explained that “[t]his amendment would administratively set aside the judicially created rule of In re Spina . . . to the extent it held that the interference rules require that an ambiguous claim copied from a patent for interference purposes be construed in light of the disclosure of the patent.” … This amendment is currently codified at 37 C.F.R. § 41.200(b). In 1997, we explained that it “does not accept the PTO’s statement that it can ‘administratively set aside the judicially created rule of In re Spina.’ Judicial precedent is as binding on administrative agencies as are statutes.” … We remind the district court and the Board that they must follow judicial precedent instead of 37 C.F.R. § 41.200(b) when a party challenges another’s written description during an interference proceeding because the PTO lacks the substantive rulemaking authority to administratively set aside judicial precedent.

Accordingly, the Federal Circuit reversed the dismissal and instructed the district court on remand to construe the term “impedance-compensated defibrillation pulse” in light of the ’751 patent written description and then determine whether the Owen application’s written description satisfies § 112, ¶ 1. If the court finds that Owen’s written description is adequate, it must then address Philips’ argument that Claims 1–4, 13, 15, 20–22, and 39 in Owen are unpatentable over the Gliner patent.

The opinion was joined by Chief Judge Paul R. Michel and Senior Judge Daniel M. Friedman.

J. Michael Jakes of Finnegan, Henderson, Farabow, Garrett & Dunner, Washington, D.C., represented Philips.  Eric H. Chadwick of Patterson, Thuente, Skaar & Christensen, Minneapolis, represented Cardiac Science.

Read the Koninklijke Philips Electronics N.V. v. Cardiac Science Operating Co. opinion.
 

CAFC: Patent Act Imposes $500 Fine for Each Falsely Marked Article

December 28, 2009

The U.S. Court of Appeals for the Federal Circuit ruled Dec. 28 that Section 292(a) of the Patent imposes a $500 for each falsely mark unpatented article, not $500 for each decision to falsely mark articles (Forest Group Inc. v. Bon Tool Co., Fed. Cir., No. 2009-1044, 12/28/09).

The court vacated an award of a fine of only $500 where multiple construction stilts were falsely marked with a patent number, reasoning that the statute “requires a fine to be imposed for every offense of marking any unpatented article.”

Falsely Marked Construction Stilts.

Forest Group Inc. is the assignee of a patent (5,645,515) on an improved spring-loaded parallelogram stilt of the type often worn on the legs of construction workers.

Forest sued Bon Tool Co. for patent infringement, and Bon Tool counterclaimed with a charge of false marking pursuant to Section 292 of the Patent Act, 35 U.S.C. § 292.

The district court concluded that Forest presented no evidence that the accused stilts had a “resiliently lined yoke” claimed in the ‘515 patent and granted summary judgment of noninfringement to Bon Tool.

Further, the court found that Forest falsely marked its S2 stilts with the  ’515 patent number after November 15, 2007—the date of the summary judgment of noninfringement favoring another defendant in a different case on the ground that the S2 stilts lacked the claimed yoke feature and were not covered by the ’515 patent. However, the district court found that Forest did not have the requisite intent to falsely mark before that date. Finally, the district court ruled that this was not an “exceptional” case that warranted an award of attorneys’ fees pursuant to Section 285 of the Patent Act.

Bon Tool appealed.

No Clear Error as to Lack of Intent Before November 2007.

Bon Tool first challenged the district court’s finding that Forest lacked the intent to deceive required for a false marking charge prior to November 15, 2007.

However, the Federal Circuit found no clear error in the decision below. Observing that a false marking claim requires the elements of (1) marking an unpatented article and (2) intent to deceive the public, it said that the district court found that Forest genuinely believed that the S2 stilts were covered by the ’515 patent prior to that date. Judge Kimberly A. Moore further noted the district court’s point that neither patentee had “strong academic backgrounds” or “in-depth appreciation of patent law” and that one (Lin) was not a native English speaker. “Based on the facts in this case, the district court did not clearly err in finding that Forest did not have the requisite knowledge that its own S2 stilts did not fall within its patent claims until November 15, 2007,” Moore said.

Court Reads § 292(a) as Requiring a Per Article Fine.

Section 292(a) of the Patent Act states:

Whoever marks upon, or affixes to, or uses in advertising in connection with any unpatented article, the word “patent” or any word or number
importing that the same is patented, for the purpose of deceiving the public . . . Shall be fined not more than $ 500 for every such offense.

Bon Tool then argued that the district court erroneously fined Forest only $500 even though multiple S2 stilts were falsely marked.

The Federal Circuit agreed. Refusing to follow precedent decided by the First Circuit 100 years ago in London v. Everett H. Dunbar Corp., 179 F. 506 (1st Cir. 1910), Moore noted that such early false marking cases imposed a single fine of $500 because the penalties were then imposed for each day that products were falsely marked. However, she said, such a “time-based approach does not find support in the plain language of § 292,” which “clearly requires a per article fine.” 

Moore explained:

The plain language of the statute does not support the district court’s penalty of $500 for a decision to mark multiple articles. Instead, the statute’s plain language requires the penalty to be imposed on a per article basis. The statute prohibits false marking of “any unpatented article,” and it imposes a fine for “every such offense.” … The statute requires a fine to be imposed for every offense of marking any unpatented article. The act of false marking is the offense punished by the statute. The phrase “for the purpose of deceiving the public” creates an additional requirement of intent but does not change the relationship between the act of marking an article and the penalty. We conclude that the statute clearly requires that each article that is falsely marked with intent to deceive constitutes an offense under 35 U.S.C. § 292. …

Policy considerations further support the per article interpretation of § 292. The marking and false marking statutes exist to give the public notice of patent rights. “Congress intended the public to rely on marking as a ‘ready means of discerning the status of intellectual property embodied in an article of manufacture or design.’” … Acts of false marking deter innovation and stifle competition in the marketplace. … If an article that is within the public domain is falsely marked, potential competitors may be dissuaded from entering the same market. False marks may also deter scientific research when an inventor sees a mark and decides to forego continued research to avoid possible infringement. …  False marking can also cause unnecessary investment in design around or costs incurred to analyze the validity or enforceability of a patent whose number has been marked upon a product with which a competitor would like to compete. … 

These injuries occur each time an article is falsely marked. The more articles that are falsely marked the greater the chance that competitors will see the falsely marked article and be deterred from competing. … This court’s per article interpretation of § 292 is consonant with the purpose behind marking and false marking.

Forest’s proposed statutory construction—that the statute imposes a single $500 fine for each decision to falsely mark—would render the statute completely ineffective. Penalizing those who falsely mark a mere $500 per continuous act of marking, which act could span years and countless articles, would be insufficient to deter in nearly all cases. Congress’ interest in preventing false marking was so great that it enacted a statute which sought to encourage third parties to bring qui tam suits to enforce the statute.

Accordingly, the appellate court vacated the award of $500 in penalties for a single offense of false marking and ordered the district court on remand to recalculate fines based on a determination of how many articles were falsely marked after November 15, 2007.

No Clear Error in Denial of Attorneys’ Fees.

Finally, the appellate court upheld the decision denying Bon Tool attorneys’ fees as a prevailing party under Section 285 of the Patent Act. While Bon Tool insisted that Forest’s case was frivolous, Moore cited the district court’s finding that Forest had a reasonable belief that its products—and the exact replicas sold by Bon Tool—were covered by the ’515 patent until November 15, 2007.  
 Further, though Bon Tool did not infringe the ’515 patent, the district court did not find the patent invalid, Moore added. Accordingly, the Federal Circuit ruled that the district court did not clearly err in finding that this case was not “exceptional” for purposes of 35 U.S.C. 285.

The district court’s ruling was affirmed in part, vacated in part, and remanded.

Judge Randall R. Rader and Senior Judge S. Jay Plager joined the opinion.

Bon Tool was represented by Richard A. Ejzak of Cohen & Grisgy, Pittsburgh. Forest Group was represented by Kristin K. Tassin of Dry & Tassin, Houston.

Read the Forest Group Inc. v. Bon Tool Co. opinion.
 

CAFC: Trademark Specimen of Use for Website Need Not Contain a Photo

December 23, 2009

The U.S. Court of Appeals for the Federal Circuit on Dec. 23 rejected a rule applied by the Trademark Trial and Appeal Board requiring that specimens of use from the Internet include pictures (In re Sones, Fed. Cir., No. 2009-1140, 12/23/09).

Vacating and remanding the TTAB’s decision denying an registration application for the mark “ONE NATION UNDER GOD” for charity bracelets, the court said that this “bright-line rule has no basis in trademark statute or policy.”

However, in a dissenting opinion, Judge Pauline Newman argued that there was no justiciable controversy here because this appeal was mooted by the applicant’s conduct in “filing the application based on actual use, and supplying a picture, voluntarily.”

Registration Denied for ‘One Nation Under God’ Charity Bracelets.

Michael Sones filed an intent-to-use application (Serial No. 78/717,427) for the mark “One Nation Under God” for charity bracelets with the U.S. Patent and Trademark Office under Lanham Act Section 1(b), 15 U.S.C. § 1051(b). After Sones submitted his statement of use with a specimen of use, the PTO rejected it, stating that the specimen “does not show a picture of the goods in close proximity to the mark.” Sones appealed the PTO’s final office action rejecting his registration application to the Trademark Trial and Appeal Board, which affirmed the agency’s decision. In re Sones, Serial No. 78/717,427 (T.T.A.B. Sept. 30, 2008).

Sones appealed to the Federal Circuit.

TTAB’s Bright-Line Test Requiring Photo Is Rejected.

Consistent with 15 U.S.C. § 1127, a trademark owner uses a mark “to identify and distinguish his or her goods, including a unique product, from those manufactured or sold by others and to indicate the source of the goods, even if that source is unknown.” To ensure that an applicant uses a mark in commerce for these purposes, the PTO at 37 C.F.R. § 2.56(a) requires the applicant to submit a specimen of use “showing the mark as used on or in connection with the goods.”

Sones argued that the TTAB improperly imposed a bright-line rule that a trademark specimen of use taken from a website must contain a picture.

Judge Richard Linn began by observing that the PTO found support for its “rule” that a website specimen of use must have a picture of the goods in Lands’ End Inc. v. Manbeck, 797 F. Supp. 511 (E.D. Va. 1992). Land’s End, which addressed a specimen of use from a mail order catalog, concluded that the applicant’s use of the term “KETCH” with the picture of the purse and corresponding description qualified as a display associated with the goods. The PTO then interpreted and adopted Land’s End in the Trademark Manual of Examining Procedure (TMEP), defining a new test for catalogs.

Under this test, examining attorneys should accept any catalog or similar specimen as a display associated with the goods, provided that (1) it includes a picture of the relevant goods, (2) it includes the mark sufficiently near the picture of the goods to associate the mark with the goods, and (3) it includes information necessary to order the goods. This test still appears in the latest version of the TMEP, § 904.03(h) (6th ed. Oct. 12, 2009), and the PTO has since applied it and Lands’ End to electronic specimens of use, Linn noted. Further, he observed that the TTAB followed Land’s End and the TMEP test in In re Dell Inc., 71 USPQ2d 1725 (T.T.A.B. 2004). There, the board reversed a refusal to register because it found that a webpage specimen containing a picture of a desktop computer and the registered mark sufficed in displaying the product and enabling online ordering.

“We do not interpret Lands’ End or the law of trademarks to require that specimens of use from the Internet must always have pictures,” Linn announced.

First, he noted that “Lands’ End itself did not impose the three parts of the TMEP test as absolute requirements.” Rather, he explained that the catalog in that case included a picture, and that the court there cited other factors in approving the specimen, such as the ability to order the purses through the catalog and the prominence of the mark. Linn also pointed to the following statement by the Land’s End court: “A crucial factor in the analysis is if the use of an alleged mark is at a point of sale location.” Thus, the critical inquiry there case was whether the customer had the opportunity to look to the displayed mark as a means of identifying and distinguishing the source of the goods. “Nowhere did the court say that a photograph is mandatory, much less apply this rule to website catalogs,” Linn insisted.

Continuing, the Federal Circuit said that “the Board’s bright-line rule has no basis in trademark statute or policy.” On this point, it noted that a trademark’s purpose is to distinguish goods and to identify the source of goods. To this end, the Lanham Act requires an applicant to show “use in commerce,” which is “the bona fide use of a mark in the ordinary course of trade,” it said, quoting 15 U.S.C. § 1127. Again quoting the statute, Linn stressed that the mark must be “placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto.” However, he said, “[t]he statute thus specifies no particular requirements to demonstrate source or origin; for displays, the mark must simply be ‘associated’ with the goods.”

Linn continued his criticism of the TTAB’s rule that a trademark specimen of use taken from a website must contain a picture:

For brick-and-mortar stores, there is no rule that specimens of use must show pictures. According to the TMEP, “a label is an acceptable specimen” where the mark “is applied to the goods or the containers for the goods,” even by shipping or mailing labels. … On containers, “a showing of the trademark on the normal commercial package for the particular goods is an acceptable specimen.” … Thus, a product box that bears the trademark, but does not display a picture of the goods or allow customers to see the goods, may be an acceptable specimen. … As to displays associated with goods, the Board has found that a display bearing a trademark for chemicals at a trade show booth was an adequate specimen, even though the chemicals were not present or visible at the booth. … Similarly, our predecessor court found that a menu describing a sandwich’s ingredients sufficiently associated a trademark with the sandwich. … While the menu “frequently has a small illustration of the sandwich,” the court found that customers could order based on the “word or pictorial depiction of the sandwich.” Id. (emphasis added). Thus, tangible specimens—whether labels, containers, or displays—can show use in commerce by describing the goods in sufficient detail in relation to the marks.

Given these criteria for physical specimens of use, we see no reason why websites must necessarily have pictures to associate a trademark with the goods being sold. The PTO recognizes that “[i]n effect, the website is an electronic retail store, and the web page is a shelf-talker or banner which encourages the consumer to buy the product. A consumer using the link on the web page to purchase the goods is the equivalent of a consumer seeing a shelf-talker and taking the item to the cashier in a store to purchase it.” … At oral argument, when asked whether, if Sones’ product description were printed on boxes of charity bracelets instead of a website, the PTO would still reject it, the PTO’s counsel replied, “the Office would probably consider them acceptable specimens.” … If, as the TMEP suggests, ordering from a website is “the equivalent” of picking up a box in a store, and boxes do not need photographs per se to link a trademark to the goods inside, then neither should websites. The PTO argues that websites differ from menus, for example, because “you can sell just about anything these days over the Internet via website.” … But the ubiquity of Internet commerce does not prove that consumers always need product pictures to associate trademarks with goods.

We decline to follow the TMEP’s interpretation of Lands’ End and the three-part test, as applied to websites. We note that the TMEP is instructive, but “is not established law.” … Moreover, it is unclear to what extent the TMEP requires pictures for electronic specimens such as websites. The TMEP states the three-part test under § 904.03(h) for “Catalogs.” But this section is immediately followed by a separate category for “Electronic Displays,” § 904.03(i). While this latter section states that “[a] website page that displays a product, and provides a means of ordering the product, can constitute a ‘display associated with the goods,’” it does not recite the three-part test. Nor does it say that a picture is required for all electronic displays—what matters is whether “the mark is associated with the goods” on the webpage.

In light of the foregoing, we hold that a picture is not a mandatory requirement for a website-based specimen of use, and that the test for an acceptable website-based specimen, just as any other specimen, is simply that it must in some way evince that the mark is “associated” with the goods and serves as an indicator of source. Precedent such as Lands’ End and Dell establishes that a visual depiction of a product is an important consideration in determining whether a submitted specimen sufficiently associates a mark with the source of the goods. It might well be that the absence of a picture will render website specimens ineffective in many cases and will be, as the PTO argues, “[a] crucial factor in the court’s analysis.” … But a picture is not the only way to show an association between a mark and the goods, and we cannot approve of the rigid, bright-line rule that the PTO applied here.

Accordingly, the board’s decision was vacated.

Remand Ordered.

On remand, Linn ordered, “the PTO must consider the evidence as a whole to determine if Sones’ specimen sufficiently associates his mark with his charity bracelets so as to ‘identify and distinguish the goods.’” He outlined some factors for the PTO to consider:

• whether Sones’ webpages have a “point of sale nature.”

• whether the actual features or inherent characteristics of the goods are recognizable from the textual description, given that the more standard the product is, the less comprehensive the textual description need be.

• Somes’ use of the “TM” designation next to the “One Nation Under God,” which, under “lends a degree of visual prominence to the term,” Linn said, quoting Dell.
The TTAB’s ruling was vacated and remanded.

Judge Randall R. Rader joined the opinion.

In a dissenting opinion, Judge Pauline Newman argued that “[t]his court’s elaborate opinion is on a non-issue, for an absent controversy.” In her view, the appeal should be dismissed because it was mooted by Sones’ conduct in “filing the application based on actual use, and supplying a picture, voluntarily.”

James R. Menker of Holley & Menker, Atlantic Beach, Fla., represented Sones. The Patent and Trademark Office, Arlington, Va., was represented by associate solicitor Thomas V. Shaw.

Read the In re Sones opinion.
 

CAFC Affirms $290 Damages Judgment Against Microsoft’s Word Program

December 22, 2009

The U.S. Court of Appeals for the Federal Circuit Dec. 22 affirmed a judgment ordering Microsoft Corp. to pay a Canadian collaboration software maker $290 million for infringing its document technology patent with versions of Microsoft Word (i4i Limited Partnership v. Microsoft Corp., Fed. Cir., No. 2009-1504, 12/22/09).

The appellate court rejected Microsoft’s invalidity and noninfringement arguments and upheld the damages awards and permanent injunction in favor of the plaintiff. After the January 11, 2010 effective date, the injunction prohibits Microsoft from selling, offering to sell, importing, or using copies of Word with the infringing custom XML editor. Microsoft is also prohibited from instructing or assisting new customers in the custom XML editor’s use.

Microsoft Word Found Infringing.

i4i Limited Partnership and Infrastructures for Information Inc.(i4i) sued Microsoft Corp. for infringing their patent (5,787,449) covering a system and method for the “separate manipulation of the architecture and content of a document.”

A jury on May 20 entered a verdict for i4i, finding that Microsoft Word 2003 and Microsoft Word 2007 infringed the ’449 patent. Judge Leonard Davis of the U.S. District Court for the Eastern District of Texas followed the verdict with an Aug. 11 final judgment and permanent injunction.

The final judgment found the ’449 patent valid and enforceable, and that Microsoft willfully infringed the patent. It also found that inventor Michel Vulpe did not engage in inequitable conduct in prosecuting the patent and that i4i’s damages award was not barred by laches. The court awarded $200 million in damages, $40 million in enhanced damages for willful infringement, $37 million in prejudgment interest, and post-verdict damages of $144,060 per day counting back to May 21, 2009.

Among other things, the permanent injunction barred Microsoft from selling, offering to sell, and/or importing in or into the United States any infringing and future Word Products that have the capability of opening an “extensible mark-up language,” or XML file. The injunction was to go into effect 60 days after the August 11 order.

Microsoft appealed.

No Invalidity for Obviousness or Anticipation.

The Federal Circuit first affirmed a number of claim constructions reached by the district court. It then turned to Microsoft’s argument that i4i’s invention would have been obvious in light of the Kugimiya patent (5,587,902), when combined with either an SGML editor known as Rita or the DeRose patent (6,101,512).

While the Federal Circuit reviews the legal question of obviousness de novo, Judge Sharon Prost said that “[t]he extent to which we may review the jury’s implicit factual findings depends on whether a pre-verdict JMOL was filed on obviousness.” Here, citing Fed. R. Civ. P. Rules 50(a) and (b), she found that Microsoft had waived its right to challenge the factual findings underlying the jury’s implicit obviousness verdict because it did not file a pre-verdict JMOL on obviousness for the Rita, DeRose and Kugimiya references.” Then pointing to Duro-Last Inc. v. Custom Seal Inc., 321 F.3d 1098 (Fed. Cir. 2003), Prost noted a party must file a pre-verdict JMOL motion on all theories, and with respect to all prior art references, that it wishes to challenge with a post-verdict JMOL.
Applying this limited standard, Prost upheld the jury finding of nonobviousness, stating:

The jury found all of the asserted claims not invalid, meaning the jury must have believed that there were differences between the prior art and asserted claims, and that a person of ordinary skill would not have been motivated to combine the references. … Because we must view the evidence in the light most favorable to the verdict, all of these questions must be resolved against Microsoft, and in favor of i4i. In light of the jury’s implicit factual findings, Microsoft has not established that the asserted claims would have been obvious.

Microsoft did, however, move for a pre-verdict JMOL that the ’449 patent was invalid for anticipation under 35 U.S.C. § 102(b) based on the sale of a software program called S4 to the SEMI company. S4 was created by Vulpe and ’449 patent co-inventor Stephen Owens, but its code was destroyed “after the project with SEMI was completed (years before this litigation began),” according to the Federal Circuit.

Still, the appellate court concluded that there was sufficient evidence to support the jury verdict of no anticipation. Prost explained:

At trial, the jury heard conflicting testimony on whether S4 met the “metacode map” limitation. In evaluating the evidence, the jury was free to disbelieve Microsoft’s expert, who relied on the S4 user manual, and credit i4i’s expert, who opined that it was impossible to know whether the claim limitation was met without looking at S4’s source code. Although the absence of the source code is not Microsoft’s fault, the burden was still on Microsoft to show by clear and convincing evidence that S4 embodied all of the claim limitations. The jury’s finding of validity was supported by the testimony of the inventors (Vulpe and Owens), as well as their faxes to an attorney regarding the patent application.

Microsoft’s Damages Strategy Backfires.

Having affirmed the jury verdicts of no invalidity, the appellate court then went through an extensive analysis which found substantial evidence in support of the jury’s general verdict of infringement. However, Prost observed that, because Microsoft did not file a pre-verdict JMOL motion challenging the sufficiency of the damages’ evidence, she could not undertake a stringent examination of the $200 million damages figure reached by i4i’s expert (Wagner), who calculated a royalty rate ($98), then multiplied that rate by the number of Word products actually used in an infringing manner (2.1 million).

On this point, Prost contrasted this case with Lucent Technologies Inc. v. Gateway Inc., 580 F.3d 1301 (Fed. Cir. 2009), where a $358 million verdict against Microsoft was vacated after the Federal Circuit found that it lacked  sufficient evidentiary basis. Here, “[t]hough Microsoft could have similarly filed a pre-verdict JMOL, for whatever reason, it chose not to,” Prost said, noting that the court is thus “constrained to review the verdict under the much narrower standard applied to denials of new trial motions.”

Upholding the damages award, Prost continued:

We must affirm unless the appellant clearly shows there was no evidence to support the jury’s verdict …

Under this highly deferential standard, we cannot say that Microsoft is entitled to a new trial on damages. The damages award, while high, was supported by the evidence presented at trial, including the expert testimony—which the jury apparently credited. … On appeal, the question is not whether we would have awarded the same amount of damages if we were the jury, but rather whether there is evidence to support what the jury decided. … Here, the jury’s award was supported by the testimony of Wagner, i4i’s damage expert, who opined that a reasonable royalty was between $200 and $207 million. The award was also supported by the testimony of Wecker, i4i’s survey expert, who explained that the survey’s conservative assumptions (i.e., that none of the companies who failed to respond infringed) meant the damages figure was “really an underestimate” and “way low.” As we have recognized previously, any reasonable royalty analysis necessarily involves an element of approximation, and uncertainty. ... Given the intensely factual nature of a damages determination and our deferential standard of review, we are not in a position to second-guess or substitute our judgment for the jury’s.

While the court also went on to affirm the enhanced damages award of $40 million and the permanent injunction against Microsoft, it did find that the district court erred in setting the injunction’s effective date.

The district court ordered Microsoft to comply with the injunction “within 60 days.” However, Microsoft had submitted testimony of an employee (Tostevin) showing that it would take at least five months to comply with the injunction. Since the district court cited no other evidence and the record revealed no competing evidence, the Federal Circuit found it appropriate to modify the effective date to January 11, 2010.

Prost said that, after this effective date, “the injunction prohibits Microsoft from selling, offering to sell, importing, or using copies of Word with the infringing custom XML editor. Microsoft is also prohibited from instructing or assisting new customers in the custom XML editor’s use.”

The district court’s ruling was affirmed in all other respects.

The opinion was joined by Judges Alvin A. Schall and Kimberly A. Moore.

i4i was represented by Donald R. Dunner of Finnegan, Henderson, Farabow, Garrett & Dunner, Washington, D.C. Microsoft was represented by Matthew D. Powers of Weil, Gotshal & Manges, Redwood Shores, Calif. John W. Thornburgh of Fish & Richardson, San Diego, represented amici curiae Dell Inc. and Hewlett-Packard Co. Richard A. Samp represented amicus curiae Washington Legal Foundation, Washington, D.C.

Read the i4i Limited Partnership v. Microsoft Corp. opinion.

 

Ordinary Observer Is Sole Test to Decide Design Patent Invalidity

December 17, 2009

The U.S. Court of Appeals for the Federal Circuit ruled Dec. 17 as a matter of first impression that the ordinary observer test is the sole test for determining invalidity of a design patent (International Seaway Trading Corp. v. Walgreens Corp., Fed. Cir., No. 2009-1237, 12/17/09).

Following Supreme Court precedent and its ruling in Egyptian Goddess Inc. v. Swisa Inc. that the ordinary observer test is the only test to apply in the infringement context, the court here held that this test should also be the exclusive one for deciding whether a patented design is invalid for anticipation.

Judge Raymond Clevenger agreed with this ruling, but faulted the majority for ordering a remand to compare the insole of the asserted shoe design patent with that of a prior art Crocs patent to determine whether the differences bar a finding of anticipation or obviousness. Bifurcating the insole design differences from the exterior design differences in this way “invites the problems we sought to eliminate by rejecting the ‘point of novelty’ test” in Egyptian Goddess, he argued.

Asserted Design Patents Found Anticipated by Crocs Design.

In this case, International Trading Seaway brought suit against Walgreens Corp. and Touchsport Footwear USA Inc., claiming infringement of its shoe design patents (D529,263; D545,032; and D545,033). The U.S. District Court for the Southern District of Florida granted summary judgment for defendants, finding that the claims of the asserted patents were invalid under 35 U.S.C. § 102 as anticipated by a patent (D517,789) assigned to Crocs Inc. (“the Crocs patent”).

Seaway appealed.

Supreme Court Authority, Egyptian Goddess Followed.

Seaway first argued the district court should have applied the point of novelty test in addition to the ordinary observer test during its anticipation analysis.

The Federal Circuit disagreed. It noted that this question was not answered in the en banc decision in Egyptian Goddess Inc. v. Swisa Inc., 543 F.3d 665 (Fed. Cir. 2008), which made the ordinary observer test set forth in Gorham Mfg. Co. v. White, 81 U.S. 511 (1871) the sole test for determining design patent infringement. The Egyptian Goddess ruling stated “that the ‘point of novelty’ test should no longer be used in the analysis of a claim of design patent infringement” and that “the ‘ordinary observer’ test should be the sole test for determining whether a design patent has been infringed.”

“After careful consideration, we have concluded that the district court was correct in concluding that Egyptian Goddess necessarily requires a change in the standard for anticipation,” Judge Timothy B. Dyk announced. He said that although the Federal Circuit’s cases have utilized the point of novelty test for infringement and anticipation, this test was not mandated by the Supreme Court in Smith v. Whitman Saddle Co., 148 U.S. 674 (1893), or precedent from other courts.“ In Whitman, the Supreme Court utilized only the ordinary observer test for determining infringement and invalidity,” he stressed. Further, he noted that it has been well established for over a century that the same test must be used for both infringement and anticipation. On this point, he quoted this well known maxim trumpeted by the Supreme Court 120 years ago in the context of utility patents in Peters v. Active Mfg. Co., 129 U.S. 530 (1889): “[t]hat which infringes, if later, would anticipate, if earlier.”

Dyk continued as follows:

The same rule applies for design patents. …

In light of Supreme Court precedent and our precedent holding that the same tests must be applied to infringement and anticipation, and our holding in Egyptian Goddess that the ordinary observer test is the sole test for infringement, we now conclude that the ordinary observer test must logically be the sole test for anticipation as well. In doing so, we will prevent an inconsistency from developing between the infringement and anticipation analyses, and we will continue our well-established practice of maintaining identical tests for infringement and anticipation.

We note as well that the problems inherent in the point of novelty test in the infringement context also exist in the anticipation context. The test is just as difficult to apply in the context of anticipation as in the context of infringement, encouraging the focus on minor differences between the allegedly anticipatory reference and the patented design. So too, applying the point of novelty test in the context of anticipation, as in the context of infringement, creates the need to canvass the entire prior art to identify the points of novelty. In addition, eliminating the point of novelty test for anticipation “has the advantage of avoiding the debate over the extent to which a combination of old design features can serve as a point of novelty under the point of novelty test.” … Just as the problems deriving from the point of novelty test exist in both the infringement and anticipation contexts, the benefits of applying the refined ordinary observer test are identical in both.

Remand Based on Failure to Compare Insoles.

Having decided that the ordinary observer test must logically be the sole test for anticipation, the appellate court went on to conclude that the exterior appearance of the patented designs would be substantially similar to the prior art in the eyes of an ordinary observer. However, rejecting the district court’s reliance on Contessa Food Prods. Inc. v. Conagra Inc., 282 F.3d 1370 (Fed. Cir. 2002), it faulted the district court’s reasoning that the insoles of the asserted patents and the prior art patents did not need to be compared because insoles are “hidden by the user’s foot.” Thus, Dyk ordered the district court on remand to compare the insoles of the asserted patents with the Crocs patent from the perspective of the ordinary observer and determine whether the differences bar a finding of anticipation or obviousness.

The district court’s ruling was affirmed in part, vacated in part, and remanded.

Judges William C. Bryson joined the opinion in its entirety.

Dissent Says That Insole Is ‘Carved Out of the Overall Design.’

Dissenting in part, Judge Raymond Clevenger challenged how, in his view, “the insole design is carved out of the overall design and independently remanded for further proceedings.” He argued that “the ordinary observer test requires assessment of the designs as a whole” and that “[t]he majority has forged a new rule for design patent anticipation, if not for infringement as well.”

Clevenger explained:

The effect of the majority bifurcation of the insole design differences from the exterior design differences, and the piecemeal adjudication of the exterior design differences, is to treat the patents on remand as without any exterior design. The fact finder will only assess anticipation on the basis of design differences on the insoles. I think this violates the rule for anticipation that the designs have to be compared as a whole. The effect of the summation of all the design differences is what counts, not the comparison of differences one by one, isolated from each other. Such an approach invites the problems we sought to eliminate by rejecting the "point of novelty" test. As the court stated in Egyptian Goddess, when there are several different alleged points of novelty, "[t]he attention of the court may therefore be focused on whether the accused design has appropriated a single specified feature of the claimed design, rather than on the proper inquiry, i.e., whether the accused design has appropriated the claimed design as a whole." … Remanding for adjudication of anticipation solely on the insole inappropriately focuses the fact finder on a single specified feature of the claimed design.

George L. Pinchak of Tarolli, Sundheim, Covell & Tummino, Cleveland, represented International Seaway Trading. Mark P. Walters of Darby & Darby, Seattle, represented Walgreens and Touchsport.

Read the International Seaway Trading Corp. v. Walgreens Corp. opinion.

 

Fact Issues Bar Obviousness Summary Judgment for LendingTree

December 7, 2009

The U.S. Court of Appeals for the Federal Circuit ruled Dec. 7 that genuine issues of material fact as to whether prior art references disclose the claimed features of a system for matching potential buyers and sellers over a computer network preclude a summary judgment that the patent is invalid for obviousness under Section 103 of the Patent Act (Source Search Technologies LLC v. LendingTree LLC, Fed. Cir., No. 2008-1505, 12/7/09).

The appellate court went on to find that, just as material fact issues bar a summary judgment of obviousness, they also preclude a summary judgment of infringement.

System for Matching Buyers and Sellers Found Infringed but Invalid.

In this appeal, Source Search Technologies LLC contested the district court’s ruling on summary judgment that its patent (5,758,328) claiming a computerized procurement service for matching potential buyers with potential vendors over a network is invalid for obviousness under Section 103 of the Patent Act, 35 U.S.C. §103. Defendants LendingTree LLC and IAC/InterActiveCorp cross-appealed the district court’s summary judgment that they infringed the patent.

Obviousness Issues Remain as to ‘Quotes’ Limitation.

On appeal, the Federal Circuit vacated both the invalidity and infringement rulings, finding material issues of fact in dispute.

As to invalidity, the Federal Circuit said that “the district court erred in finding claim 14 obvious in view of the prior art e-commerce systems and the bricks and mortar referral services.”

Claim 14, through independent claim 12, requires the e-commerce system to obtain “quotes” from potential sellers and to forward “said quotes” to the potential buyer. While the district court did not construe “quotes,” it did construe the term “request for a quotation” to mean “a request for the price and other terms of a particular transaction in sufficient detail to constitute an offer capable of acceptance.” The district court thus intended “quote” to mean “price and other terms of a particular transaction in sufficient detail to constitute an offer capable of acceptance,” and neither party here disputes that reading on appeal, Judge Randall R. Rader said.

However, Rader stressed that the prior art FAST parts-procurement system relied upon by the district court in its obviousness analysis was an e-commerce service that generated “non-binding, inventory availability responses, not contractual offers,” which are required under the ‘328 patent.

Finding genuine issues of material fact as to whether the e-commerce and pre-Internet “bricks and mortar” prior art references disclosed the “quotes” limitation required in Claim 14, Rader held that the district court erred in granting the summary judgment of obviousness. He explained:

Thus, even where a FAST customer pre-authorized the system to submit an offer on their behalf, this prior art system did not forward a “quote” from a seller, as the term was effectively construed by the district court. Indeed, the potential seller retained the option to reject or to renegotiate the terms of the offer. As well, when the FAST system placed an order automatically, the system would necessarily never send a “quote” back to the buyer as required by the district court’s construction. Similarly, none of the other prior art e-commerce systems on the record returned “quotes,” as defined in claim 14, to its users.

Nor do the bricks and mortar references fill the gap by supplying a qualifying “quote.” Quite the opposite, those referral systems had even greater points of difference in comparison to claim 14. The clients of these prior art services contact the “network” which in turn connects them with service providers. After establishing a connection between the client and service provider, these systems left the burden on the client to set up an appointment with the provider. Only at a meeting between the client and service provider would a quote, in any meaningful sense of the word, arise. The prior art referral systems, however, had nothing to do with this post-connection process or any later “quote.” The record explains this difference between the claimed invention and the prior art. Unlike the ’328 patent, the referral systems of the bricks and mortar prior art involved non-fungible, non-commodity services that could not be quantified or quoted immediately over the phone. In other words, a referral system would have no way to know the cost to remodel a kitchen without first notifying a contractor to visit the location and put together an estimate. Similarly, a referral system would have no way to know the cost of representing a client in a legal proceeding without first sending an attorney to ascertain the specific facts in the dispute.

For this reason, among others, LendingTree’s argument that the ’328 patent discloses nothing more than a computerized version of the bricks and mortar prior art fails. … Simply computerizing the bricks and mortar referral systems would not yield the invention taught in the ’328 patent. If a prior art attorney-referral network was computerized, a potential client would still have to provide all the details of their desired representation before obtaining a quote. These details would undoubtedly be given directly to the attorney—not the referral network.

Combining the bricks and mortar references with any of the e-commerce systems produces the same conclusion. In simple terms, none of the prior art discloses a qualifying “quote” that is directly forwarded to a client. Even if the prior art included a quoting feature, a person with ordinary skill in this art would still have to take the further step of equating the “filtering” done by human judgment in the bricks and mortar systems with the search results of the e-commerce procurement services. The record shows that the prior art lacked any meaningful filtering process in all of the e-commerce prior art. Indeed, the claimed invention places great emphasis on addressing this problem. A person of ordinary skill in this art may not have even recognized the problem addressed by the filtering feature of the claimed invention in 1996, at the dawn of the internet era. And even if the problem was apparent to one of ordinary skill, a solution may not have been a straightforward step.

Fact Issues Also Bar Summary Judgment of Infringement.

Having found that a material issue of fact precluded summary judgment on obviousness because the prior art does not contain a “request for a quotation” feature, the appellate court held that the summary judgment of infringement was similarly barred.

Rader stated:

The same analysis applies to infringement. Under the district court’s construction, a “quote” effectively means a “price and other terms of a particular transaction in sufficient detail to constitute an offer capable of acceptance.” This record shows factual issues regarding the “quotes,” if any, forwarded to buyers by LendingTree’s website. Without the presence of undisputed facts showing that LendingTree site provides “quotes” as in claim 14, this court must vacate the district court’s summary judgment on this point.

However, the court did go on to affirm the district court’s ruling that the ’328 patent is not invalid for indefiniteness.

The district court’s decision was vacated in part, affirmed in part, and remanded.

Jeffrey I. Kaplan of Kaplan Gilman Gibson & Dernier, Woodbridge, N.J., represented Source Search Technologies. LendingTree and IAC/InterActiveCorp were represented by Claude M. Stern of Quinn Emanuel Urquhart Oliver & Hedges, Redwood City, Cal.

Read the Source Search Technologies LLC v. LendingTree LLC opinion.
 

Patent Holding Co.’s Acts Toward Hewlett-Packard Warrant Jurisdiction

December 4, 2009

A patent holding company’s actions in contacting Hewlett-Packard twice regarding a patent, imposing short response deadlines, and making an implied assertion of rights under the patent against HP’s Blade Server products created jurisdiction for HP’s suit for a declaratory judgment of noinfringement and invalidity, the U.S. Court of Appeals for the Federal Circuit ruled Dec. 4 (Hewlett-Packard Co. v. Acceleron LLC, Fed. Cir., No. 2009-1283, 12/4/09).

Reversing a dismissal of HP’s declaratory suit, the court pointed out that this non-competitor patent holding company sent HP two letters that impose short response deadlines, and that HP may not have been unreasonable in interpreting this conduct as an implicit assertion of rights under the patent. Noting that HP might be reasonable in reacting differently by filing suit against this patent holding company, the court said “Acceleron is solely a licensing entity, and without enforcement it receives no benefits from its patents.”

Non-Competitor Holding Co. Sends Letters to HP About Blade Servers.

In this suit, the U.S. District Court for the District of Delaware dismissed a suit by Hewlett-Packard Co., which asserted noninfringement and invalidity as to Acceleron LLC’s patent (6,948,021) for “[p]ackaging a hot-swappable server module (server blade) in a computer network appliance.”

The district court acknowledged that Acceleron wrote two letters to HP regarding the ‘021 patent and HP’s Blade Servers, that both letters gave HP a two-week deadline to respond, that Acceleron failed to propose a confidentiality agreement, and that Acceleron failed to accept the terms of HP’s 120-day standstill proposal or to provide a counter-proposal or some other reassurance it would not sue HP. Still, it found that this conduct and the fact that that Acceleron was a non-competitor holding company made HP’s suit “too speculative a prospect to support declaratory judgment jurisdiction.”

HP appealed to the Federal Circuit.

MedImmune Lowered Jurisdictional Bar, but Did Not Completely Remove It.

Under the U.S. Supreme Court’s ruling in MedImmune Inc. v. Genentech Inc., 549 U.S. 118 (2007), a court has subject matter jurisdiction under the Declaratory Judgment Act only if “the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” The Federal Circuit’s ruling in SanDisk Corp. v. STMicroelectronics Inc., 480 F.3d 1372 (Fed. Cir. 2007) held that declaratory judgment jurisdiction exists “where a patentee asserts rights under a patent based on certain identified ongoing or planned activity of another party, and where that party contends that it has the right to engage in the accused activity without license.”

HP argued that the fact that Acceleron wrote it letters, specifically identifying the ’021 patent and HP’s product line, i.e., an ongoing activity, is all that is required under SanDisk for the court to find declaratory judgment jurisdiction.

The Federal Circuit disagreed, stating that such a showing alone would be insufficient. Quoting language from MedImmune, Chief Judge Paul Michel wrote:

Intentionally or not, MedImmune may have lowered the bar for determining declaratory judgment jurisdiction in all patent cases; certainly it did so in the licensor-licensee context. …

But a lowered bar does not mean no bar at all. Indeed, a declaratory judgment plaintiff must show that the dispute is “definite and concrete, touching the legal relations of parties having adverse legal interests; and that it be real and substantial and admit of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts. … Thus, a communication from a patent owner to another party, merely identifying its patent and the other party’s product line, without more, cannot establish adverse legal interests between the parties, let alone the existence of a “definite and concrete” dispute. More is required to establish declaratory judgment jurisdiction.

Acceleron’s Conduct, Viewed Objectively, Warrant Jurisdiction.

That said, Acceleron could not persuade the appellate court that there was no justiciable controversy here because it did not assert rights under the ‘021 patent or threaten to sue HP.  After MedImmune, a patent owner cannot defeat declaratory judgment jurisdiction by simply avoiding words such as “litigation” or “infringement,” Michel said. He also found it implausible after MedImmune and later cases to expect that a competent lawyer drafting such correspondence for a patent owner would identify specific claims, present claim charts, and explicitly allege infringement. Michel stressed that the objective words and actions of the patentee control the test for declaratory judgment jurisdiction, and that “conduct that can be reasonably inferred as demonstrating intent to enforce a patent can create declaratory judgment jurisdiction.”

Finding that Acceleron’s conduct toward HP in this case raised a justiciable controversy, the appellate court reversed the dismissal of HP’s suit for lack of jurisdiction. It wrote:

Acceleron argues that a patent owner may contact another party to suggest incorporating the patented technology into the other party’s product, or to attempt to sell the patent to the other party. Given the circumstances of this case, such an assertion appears disingenuous. We do not doubt that such scenarios as presented by Acceleron occur, and perhaps quite frequently. However, we doubt that in those situations, the patent owners would assert a patent as “relevant” to the other party’s specific product line, impose such a short deadline for a response, and insist the other party not file suit. As the district court correctly recognized, these factors “must be considered along with all the circumstances at bar.” … We also agree with the district court that “the receipt of such correspondence from a non-competitor patent holding company . . . may invoke a different reaction than would a meet-and-discuss inquiry by a competitor, presumably with intellectual property of its own to place on the bargaining table.” …Under the totality of the circumstances, therefore, it was not unreasonable for HP to interpret Acceleron’s letters as implicitly asserting its rights under the ’021 patent.

Acceleron repeatedly emphasizes that “[a]t the time HP filed its complaint, Acceleron could not have asserted its rights in the ’021 patent against HP because it had not even determined if it had a basis to assert the patent against HP.” However, it is irrelevant whether Acceleron had conducted an adequate investigation or whether it subjectively believed HP was infringing. “The test [for declaratory judgment jurisdiction in patent cases], however stated, is objective .…

Acceleron points to the language in the letter from Mr. Ritz, a counsel from HP, in which he stated that HP was “interested to learn any further information” Acceleron had in order to “conduct a complete and accurate assessment.” Acceleron thus argues that “HP’s letter admits that HP had not determined that its legal interests were adverse to Acceleron.” We are not persuaded. First of all, Mr. Ritz’s letter was dated October 1, 2007. HP did not file the declaratory judgment action until October 17. HP may well have conducted a thorough infringement analysis in the interim. More importantly, HP is not required to make a formal declaration of having an adverse legal interest. Indeed, HP’s filing of the suit seeking declaratory judgment is indicative of its belief that Acceleron was threatening to assert its rights to the ’021 patent against HP.

Finally, we observe that Acceleron is solely a licensing entity, and without enforcement it receives no benefits from its patents. This adds significance to the fact that Acceleron refused HP’s request for a mutual standstill—and such a limited standstill is distinguishable from a covenant not to sue, such as that cited by the district court in Prasco LLC v. Medicis Pharmaceutical Corp., 537 F.3d 1329, 1341 (Fed. Cir. 2008).

This court has explained that “declaratory judgment jurisdiction generally will not arise merely on the basis that a party learns of the existence of a patent owned by another or even perceives such a patent to pose a risk of infringement, without some affirmative act by the patentee.” … The facts of this case, when viewed objectively and in totality, show that Acceleron took the affirmative step of twice contacting HP directly, making an implied assertion of its rights under the ’021 patent against HP’s Blade Server products, and HP disagreed. Therefore, we hold that there is declaratory judgment jurisdiction arising from a “definite and concrete” dispute between HP and Acceleron, parties having adverse legal interests.

Case ‘Marks a Shift From Past Declaratory Judgment Cases.’

In closing, Michel acknowledged that, there is no bright-line rule for distinguishing cases that satisfy the actual case-or-controversy requirement, and that the decision here “undoubtedly marks a shift from past declaratory judgment cases.” He explained the decision here this way:

MedImmune has altered the way in which the Declaratory Judgment Act applies to patent law cases, requiring that legal interests be evaluated in patent cases under the general criteria of the Act. Our jurisprudence must consequently also evolve, and in this case the facts demonstrate adverse legal interests that warrant judicial resolution.

The district court’s ruling was reversed.

The opinion was joined by Judges Pauline Newman and Kimberly Moore.

Hewlett-Packard was represented by Charlene M. Morrow of Fenwick & West, Mountain View, Calif.  Acceleron was represented by Jason W. Cook of Alston & Bird, Dallas.

Read the Hewlett-Packard Co. v. Acceleron LLC opinion.
 

CAFC Reverses Ruling That Cement Mixture Is Invalid as Indefinite

December 3, 2009

The U.S. Court of Appeals for the Federal Circuit ruled Dec. 3 that a patented cement mixture was erroneously found invalid for indefiniteness under Section 112, ¶2, of the Patent Act because its chemical formula was understandable to one of skill in the art despite a typographical error (Ultimax Cement Manufacturing Corp. v. CTS Cement Manufacturing Corp., Fed. Cir., No. 2008-1218, 12/3/09).

The appellate court faulted the district court for concluding that the absence of a comma between the “(f cl)” chemical symbols for chlorine and fluorine in the claimed formula was not a correctable error. While courts cannot rewrite claims to correct material errors, here “one of ordinary skill in the art would know that the formula should contain a comma, the Federal Circuit said.

Cement Mixture Patents.

In this patent infringement suit, Ultimax Cement Manufacturing Corp., Hassan Kunbargi, and KA Group (collectively Ultimax) appealed a decision granting CTS Manufacturing Corp. and others a summary judgment of noninfringement, invalidity, laches, and indefiniteness relating to certain claims of three patents 4,957,556; 6,113,684; and 6,406,534 on fast-hardening, high-strength cement mixtures.

By Failing to Construe Claim Term in Context, Lower Court Erred.

On appeal, the Federal Circuit first reversed the district court’s claim construction of the term “soluble CaSO4 anhydride.” The lower court read this term to require that the compound include not only calcium sulfate, but also an acid from which water has been removed. Because CTS’s cement did not contain an acid from which water had been removed, the lower court granted summary judgment of noninfringement.

In reversing this claim construction, Judge Alan D. Lourie stressed the statement in Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005), that “claims must be read in view of the specification, of which they are a part.”  Lourie said that, without the benefit of Phillips, which was decided later, the district court “erroneously relied on expert testimony and a single dictionary definition to the exclusion of other dictionary definitions and, most importantly, the context in which the term was used within the claim and the specification.” He noted that “anhydride,” when placed next to “CaSO4,” is intended as a modifier, modifying “CaSO4,” or “calcium sulfate.” Here, while “the context must define what compound has had water removed,” Lourie said, there was no evidence in this case of any acid from which water is removed to yield CaSO4. “Any water removed here is that associated with the method of obtaining calcium sulfate, such as mining, not water originally associated with an acid,” he explained. Thus, he reasoned that, in the context of the entire specification, the claim drafters must have intended to say “soluble anhydrous CaSO4,” or “soluble anhydrous calcium sulfate.”

Having reversed the ruling that the claims require an acid from which water is removed, the appellate court remanded the issue of infringement of the ’556 patent to the district court.
Next, the Federal Circuit reversed the summary judgment that the ’556 patent was unenforceable based on laches. Though the district court accepted CTS’s argument that Ultimax waited 12 or more years to file the infringement suit, Lourie found genuine issues of material fact as to whether Ultimax could have known of CTS’s alleged infringement before it conducted discovery on the ’684 patent in 2002.

’684 Patent Not Indefinite: Formula Was Correctable to One of Skill.

Further, the Federal Circuit faulted the district court for concluding that it could not correct a typographical error in a chemical formula recited in the ’684 patent, and that the patent was invalid for indefiniteness under 35 U.S.C. § 112, ¶2, as possibly claiming 5000 different chemical compounds. Here, even given the weight of testimony by a neutral expert, the lower found that it could not insert a comma between fluorine and chlorine to correct the disputed “(f cl)” notation in the ’684 patent.

In its analysis, the Federal Circuit quoted the following passage from Young v. Lumenis Inc., 492 F.3d 1336 (Fed. Cir. 2007):

“Claims are considered indefinite when they are not amenable to construction or are insolubly ambiguous. Thus, the definiteness of claim terms depends on whether those terms can be given any reasonable meaning. Indefiniteness requires a determination whether those skilled in the art would understand what is claimed.”

Lourie then pointed out that a claim to a formula containing over 5000 possible combinations is not necessarily ambiguous if it sufficiently notifies the public of the scope of the claims. “Merely claiming broadly does not render a claim insolubly ambiguous, nor does it prevent the public from understanding the scope of the patent,” he wrote.

Further, Lourie found that the district court erred in declining to view the “(f cl)” notation in light of the knowledge of one of ordinary skill. Quoting Novo Indus. L.P. v. Micro Molds Corp., 350 F.3d 1348 (Fed. Cir. 2003), he observed that “[a] district court can correct a patent only if (1) the correction is not subject to reasonable debate based on consideration of the claim language and the specification and (2) the prosecution history does not suggest a different interpretation of the claims.” Those determinations must be made from the view of the skilled artisan, and a skilled artisan here would have realized that it was appropriate to insert a comma between fluorine and chlorine in this case, Lourie concluded.

Relying on language in Energizer Holdings v. Int’l Trade Comm’n, 435 F.3d 1366 (Fed. Cir. 2006), the appellate court continued:

“Claim definiteness is analyzed not in a vacuum, but always in light of the teachings of the prior art and of the particular application disclosure as it would be interpreted by one possessing the ordinary level of skill in the pertinent art.” … Thus, although courts cannot “rewrite claims to correct material errors,” id., if the correction is not subject to reasonable debate to one of ordinary skill in the art, namely, through claim language and the specification, and the prosecution history does not suggest a different interpretation, then a court can correct an obvious typographical error. In that regard, we note that the court has determined that the claimed formula C9S3S3Ca(f cl)2 “corresponds to no known mineral,” and that one of ordinary skill in the art would know that the formula should contain a comma.

Accordingly, the appellate court reversed the summary judgment that the formula and compound including the notation “(f cl)” are indefinite. It also directed the district court to enter summary judgment that Claim 17 of the ’684 patent is not indefinite based on either formula.

Continuing, the Federal Circuit found that Ultimax had waived the argument that the ’534 patent is not invalid, and that its argument as to infringement was thus moot. Therefore, Ultimax’s appeal with respect to the ’534 patent was dismissed.

Further, the court affirmed the summary judgment in favor of CTS on Ultimax’s trade secret theft claim. Agreeing that Ultimax could not first show that it had a trade secret, Lourie pointed out that information disclosed in a patent is generally known. “Indeed, one of the primary purposes of patent systems is to disclose inventions to the public.”

The district court’s ruling was affirmed in part, dismissed in part, vacated in part, reversed in part, and remanded.

The opinion was joined by Judges Timothy B. Dyk and Sharon Prost.

Saied Kashani of Saied Kashani Law Offices, Los Angeles, California, represented Ultimax. James W. Geriak of Orrick, Herrington & Sutcliffe, Irvine, Cal., represented CTS.  

Read the Ultimax Cement Manufacturing Corp. v. CTS Cement Manufacturing Corp. opinion.
 
More Articles...
<< Start < Prev 1 2 3 4 5 6 7 8 9 Next > End >>

Page 5 of 9