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Texas Federal District Court Abuses Discretion in Denying Transfer

December 2 , 2009

The U.S. District Court for the Eastern District of Texas abused its discretion in denying a motion to transfer a patent infringement case because the refusal had “no legally rational basis” under 28 U.S.C. § 1404(a), the U.S. Court of Appeals for the Federal Circuit ruled Dec. 2 (In re Hoffman-La Roche Inc., Fed. Cir, Misc. No. 911, 12/2/09).

Granting a writ of mandamus to drug maker Hoffman-LaRoche Inc., it ordered the Texas district court to vacate the denial of venue transfer and directed transfer of the case to the U.S. District Court for the Eastern District of North Carolina. The Federal Circuit was dismayed that the transfer denial was primarily based on plaintiff Novartis sending 75,000 pages of documents electronically to local counsel in Texas, stating that such an attempt to “manipulate venue” is prohibited under § 1404(a).

Fight Over Venue in HIV Inhibitor Case.

In this case, Novartis Vaccines and Diagnostics Inc. brought suit against Hoffmann-La Roche Inc., Roche Laboratories Inc., Roche Colorado Corp. and Trimeris, Inc. (Hoffmann-La Roche) in the U.S. District Court for the Eastern District of Texas, charging that their development of the drug Fuzeon as an HIV inhibitor constituted patent infringement.

Hoffman-La Roche moved to transfer the case to the Eastern District of North Carolina, arguing that there were no witnesses or any sources of proof within 100 miles of the Eastern District of Texas. Since Fuzeon was developed and tested at Trimeris’ labs in Morrisville, North Carolina, they pointed out that most of the relevant books and documents are currently maintained in the Eastern District of North Carolina and that a trial in that district would be far more convenient for Trimeris’ employee witnesses and four non-party witnesses residing within 100 miles.

Novartis, which is headquartered in California, opposed the motion, contending that the Texas district court was an appropriate venue because the parties, sources of proof, and witnesses were spread throughout the country. Further, Novartis pointed to the fact that it had 75,000 pages of documents relating to the patent sent electronically to local counsel in the Eastern District of Texas.

After the district court ruled in favor of Novartis, Hoffmann-La Roche petitioned the Federal Circuit for a writ of mandamus.

District Court’s Decision Has ‘No Legally Rational Basis.’

The Federal Circuit granted the writ of mandamus, finding that “the district court clearly abused its discretion in denying petitioners’ motion to transfer venue pursuant to 28 U.S.C. § 1404(a).”

Citing In re TS Tech USA Corp., 551 F.3d 1315 (Fed. Cir. 2008), the Federal Circuit observed that Fifth Circuit law governs this case. Quoting In re Volkswagen of America Inc., 545 F.3d 304 (5th Cir. 2008), Judge Arthur Gajarsa noted that mandamus may issue only upon a showing that the facts and circumstances underlying the district court’s application of the public and private forum non conveniens factors do not rationally support the district court’s decision, i.e., the district court reached a “patently erroneous” result or committed a “clear” abuse of discretion.

Criticizing the district court’s reasoning in this case, Gajarsa found nothing relevant linking this case to Texas and wrote:

As in Volkswagen, TS Tech, and our most recent decision, In re Genentech Inc., 566 F.3d 1338 (Fed. Cir. 2009), there is a stark contrast in relevance, convenience, and fairness between the two venues. The accused drug was developed and tested within the Eastern District of North Carolina and documents and sources of proof remain there despite Trimeris now having moved its headquarters to the Middle District of North Carolina. Moreover, the Eastern District of North Carolina’s local interest in this case remains strong because the cause of action calls into question the work and reputation of several individuals residing in or near that district and who presumably conduct business in that community. In addition, there are at least four non-party witnesses residing within 100 miles of the Eastern District of North Carolina, all of whom could be compelled for both deposition and trial testimony if the case were transferred to the district. Furthermore, the district’s less congested docket suggests that the Eastern District of North Carolina may be able to resolve this dispute more quickly.

Meanwhile, there appears to be no connection between this case and the Eastern District of Texas except that in anticipation of this litigation, Novartis’ counsel in California converted into electronic format 75,000 pages of documents demonstrating conception and reduction to practice and transferred them to the offices of its litigation counsel in Texas. But, if not for this litigation, it appears that the documents would have remained a source of proof in California. Thus, the assertion that these documents are “Texas” documents is a fiction which appears to be have been created to manipulate the propriety of venue.

This type of tactic was clearly counseled against in Van Dusen v. Barrack, 376 U.S. 612 (1964). There, the Supreme Court explained that Section 1404(a) “should be construed to prevent parties who are opposed to a change of venue from defeating a transfer which, but for their own deliberate acts or omissions, would be proper, convenient and just.”  … A plaintiff’s attempts to manipulate venue in anticipation of litigation or a motion to transfer falls squarely within these prohibited activities. The district court’s contrary position here has no legally rational basis and prevents § 1404(a) from carrying “out its design to protect litigants, witnesses and the public against unnecessary inconvenience and expense. . . .” Continental Grain Co. v. The FBL-585, 364 U.S. 19, 27 (1960). …

The district court also disregarded Volkswagen and Genentech in holding that the Eastern District of North Carolina had no more of a local interest in deciding this matter than the Eastern District of Texas. While the sale of an accused product offered nationwide does not give rise to a substantial interest in any single venue, TS Tech, 551 F.3d at 1321, if there are significant connections between a particular venue and the events that gave rise to a suit, this factor should be weighed in that venue’s favor. Genentech, 566 F.3d at 1347; Volkswagen, 545 F.3d at 317-18. The Eastern District of North Carolina’s interest in this matter is self-evident. Meanwhile, it is undisputed that this case has no relevant factual connection to the Eastern District of Texas.

The opinion was joined by Judge Alan D. Lourie and Senior Judge Daniel M. Friedman.

Stephen S. Rabinowitz of Fried, Frank, Harris, Shriver & Jacobson, New York, represented Hoffman-La Roche and the other petitioners. Novartis was represented by Rachel Krevans of Morrison & Foerster, San Francisco.

Read the In re Hoffman-La Roche Inc. opinion.
 

Citing KSR, CAFC Agrees E-Mail Patent Is Obvious Based on ‘Common Sense’

December 2 , 2009

Relying on the U.S. Supreme Court’s ruling in KSR Int’l Co. v. Teleflex Inc., the U.S. Court of Appeals for the Federal Circuit on Dec. 2 affirmed a ruling that a patented method for sending bulk e-mail can be found invalid based on the “common sense” of one skilled in the art (Perfect Web Technologies Inc. v. InfoUSA Inc., Fed. Cir., No. 2009-1105, 12/2/09).

Upholding a summary judgment of invalidity for obviousness under Patent Act § 103, the court said that while an analysis of obviousness always depends on evidence that supports the factual inquiry required under Graham v. John Deere Co., “it also may include recourse to logic, judgment, and common sense available to the person of ordinary skill that do not necessarily require explication in any reference or expert opinion.” The court found it particularly relevant here that the level of skill in this art required only a high school diploma, that the first three steps of the method were in the prior art, and the fourth step simply involved repeating the first three.        

E-Mail Patent Found Obvious on Summary Judgment.

Perfect Web Technologies Inc. has a patent 6,631,400 claiming a methods managing bulk e-mail distribution to groups of targeted consumers.
Claim 1 of the ‘400 patent recites the following steps:

(A) matching a target recipient profile with a group of target recipients;

(B) transmitting a set of bulk e-mails to said target recipients in said matched group;

(C) calculating a quantity of e-mails in said set of bulk e-mails which have been successfully received by said target recipients; and,

(D) if said calculated quantity does not exceed a prescribed minimum quantity of successfully received e-mails, repeating steps (A)-(C) until said calculated quantity exceeds said prescribed minimum quantity.

Perfect Web sued InfoUSA Inc. for patent infringement. 

After conducting a Markman claim construction hearing, but without issuing a formal claim construction order, the district court convened a summary judgment hearing. In its obviousness analysis, the district court found that one skilled in the art of e-mail marketing possessed “at least a high school diploma, one year of experience in the industry, and proficiency with computers and e-mail programs.” It concluded that Claim 1 would have been obvious to a skilled artisan under 35 U.S.C. § 103 because steps (A)-(C) of the claimed methods appear in the prior art and step (D) “would be obvious to virtually anyone.” In finding step (D) obvious, it reasoned under the U.S. Supreme Court’s ruling in KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007) that “[a] person of ordinary skill is also a person of ordinary creativity, not an automaton” and that this last step is merely the logical result of common sense application of the maxim ‘try, try again.’

Perfect Web appealed.  

Common Sense in the KSR Framework.

Perfect Web did not challenge the district court’s analysis of the first three factors of the obviousness inquiry set forth in Graham v. John Deere Co., 383 U.S. 1 (1966): (1) the scope and content of the prior art, (2) the differences between the prior art and the claims at issue, (3) the level of ordinary skill in the pertinent art. Rather, it argued that the district court viewed the invention through lens tinted by hindsight and ignored factor (4) of Graham, secondary considerations of nonobviousness, by discounting the expert testimony that the patent was not a common-sense advance. Perfect Web insisted that common sense or knowledge “must be rooted in evidence and factual findings,” because they play “the same role as the inquiry into whether the prior art contains any teaching, suggestion or motivation (‘TSM’) that would have led a person of ordinary skill to produce the claimed invention.”
InfoUSA provided expert evidence that step (D) was a common-sense addition to steps (A-C) and further argued that repeating the selection and transmission steps would have been obvious to try because there were, at most, two or three predictable solutions at the time for ensuring e-mail delivery.

In analyzing this case, the Federal Circuit observed that KSR rejected a rigid application of the “teaching, suggestion, or motivation” test for obviousness and found that common sense can be a source of reasons to combine or modify prior art references to achieve the patented invention. The appellate court quoted a key statement in the KSR ruling:

When there is a design need or market pressure to solve a problem and there are a finite number of identified, predictable solutions, a person of ordinary skill has good reason to pursue the known options within his or her technical grasp. If this leads to the anticipated success, it is likely the product not of innovation but of ordinary skill and common sense. In that instance the fact that a combination was obvious to try might show that it was obvious under § 103.

Judge Richard Linn further observed that, while KSR warned against “the distortion caused by hindsight bias and . . . ex post reasoning,” it also said: “Common sense teaches . . . that familiar items may have obvious uses beyond their primary purposes, and in many cases a person of ordinary skill will be able to fit the teachings of multiple patents together like pieces of a puzzle.” Linn further acknowledged KSR ‘s clear statement that courts “need not seek out precise teachings directed to the specific subject matter of the challenged claim” in noting that courts may look to a wider diversity of sources to bridge the gap between the prior art and a conclusion of obviousness.

Drawing from other language in KSR, the Federal Circuit said:

KSR expanded the sources of information for a properly flexible obviousness inquiry to include market forces; design incentives; the “interrelated teachings of multiple patents”; “any need or problem known in the field of endeavor at the time of invention and addressed by the patent”; and the background knowledge, creativity, and common sense of the person of ordinary skill.

When considering these sources, the Supreme Court remarked that “[r]igid preventative rules that deny factfinders recourse to common sense, however, are neither necessary under our case law nor consistent with it.” Thus, the Supreme Court instructed that factfinders may use common sense in addition to record evidence. As an example of this flexibility, KSR noted that courts should avoid “overemphasis on the importance of published articles and the explicit content of issued patents.” … Nor are expert opinions always a prerequisite, for “[i]n many patent cases expert testimony will not be necessary because the technology will be easily understandable without the need for expert explanatory testimony.” …

Step (D) Merely Involves Repeating Earlier Steps.

Bearing in mind the instructive language of KSR, the Federal Circuit here upheld the summary judgment of obviousness.

The appellate court held that “while an analysis of obviousness always depends on evidence that supports the required Graham factual findings, it also may include recourse to logic, judgment, and common sense available to the person of ordinary skill that do not necessarily require explication in any reference or expert opinion.” Key factors to the application of common sense here were that this field did not require a complex level of skill and that step (D) merely repeated steps (A-C), which were already in the prior art.

Linn explained:

Although the obviousness analysis should “take account of the inferences and creative steps that a person of ordinary skill in the art would employ,” the Supreme Court emphasized that this evidentiary flexibility does not relax the requirement that, “[t]o facilitate review, this analysis should be made explicit.” … “[T]he analysis that ‘should be made explicit’ refers not to the teachings in the prior art of a motivation to combine, but to the court’s analysis.” … We reiterate that, on summary judgment, to invoke “common sense” or any other basis for extrapolating from prior art to a conclusion of obviousness, a district court must articulate its reasoning with sufficient clarity for review.

In this case, we find that the predicate evidence on which the district court based its “common sense” reasoning appears in the record, namely the facts that step (D) merely involves repeating earlier steps, and that a marketer could repeat those steps, if desired. The district court also adequately explained its invocation of common sense. In claim 1, steps (A)-(C) involve targeting a group of recipients, sending e-mail to those recipients, and calculating the number of successfully delivered e-mails. Perfect Web concedes that prior art references disclose these three steps. Step (D), the only remaining step, recites “repeating steps (A)-(C) until said calculated quantity exceeds said prescribed minimum quantity.” Thus, this last step, and the claim as a whole, simply recites repetition of a known procedure until success is achieved. Recognizing this, the district court explained: “If 100 e-mail deliveries were ordered, and the first transmission delivered only 95, common sense dictates that one should try again. One could do little else.” … If the relevant technology were complex, the court might require expert opinions. ... Here, however, the parties agreed that ordinary skill in the relevant art required only a high school education and limited marketing and computer experience. No expert opinion is required to appreciate the potential value to persons of such skill in this art of repeating steps (A)-(C).

Other Noteworthy Points.

Continuing, the court commented on other points:

Expert Testimony. Linn noted that the testimony of Perfect Web’s expert (Krishnamurthy) “did not address the references that Perfect Web admits disclose steps (A)-(C), and said nothing about the nonobviousness of repeating steps (A)-(C). His opinion is therefore insufficient to prevent summary judgment.”

‘Obvious to Try.’ Linn said that the record also shows that step (D) also would have been “obvious to try” under KSR. “Even without experimentation, simple logic suggests that sending messages to new addresses is more likely to produce successful deliveries than re-sending messages to addresses that have already failed,” he wrote.  

Claim Construction. While Perfect Web also argued that the district court should have construed the claims before deciding validity, Linn noted that the parties disputed only two claim terms in step (D), neither of which was relevant to the obviousness of repeating steps (A)-(C). He added that InfoUSA’s construction of these terms was not adopted by the district court. Even if the claims had been construed differently, “Perfect  Web identifies no construction that would change our analysis,” Linn said.

Long-Felt Need. Perfect Web had faulted the district court for ignoring its evidence of secondary considerations of nonobviousness, particularly evidence that the ’400 patent solved a long-felt need for an efficient bulk e-mail system. However, Linn said that Perfect Web failed to show that the drawbacks it cited in the prior art “constituted a long-felt, unmet need alleviated by the patent.”

Linn added:

Perfect Web provided no evidence to explain how long this need was felt, or when the problem first arose. ... Nor does the evidence show that the ’400 patent met any such “need.” Krishnamurthy made the bare assertion that the patent provided “improved efficiency,” …, but cited no supporting data to show, for example, that the invention actually reduced marketing costs, time, or the number of consumers who opt out. “Moreover, as we have often held, evidence of secondary considerations does not always overcome a strong prima facie showing of obviousness.” … In the end, Perfect Web’s unsupported contentions are legally insufficient to raise a genuine issue of material fact.

The summary judgment of invalidity for obviousness was affirmed.

Judges Timothy B. Dyk and Sharon Prost joined the opinion.

Perfect Web was represented by John C. Carey of Carey Rodriguez Greenberg & Paul, Miami. InfoUSA was represented by John C. Rozendaal of Kellogg, Huber, Hansen, Todd, Evans & Figel, Washington, D.C.

Read the Perfect Web Technologies Inc. v. InfoUSA Inc. opinion.

 

Chief Judge Michel of the Federal Circuit Tells Bar Association That He Will Retire in May of 2010

November 20, 2009

Chief Judge Paul R. Michel of the U.S. Court of Appeals for the Federal Circuit Nov. 20 told the audience at the Federal Circuit Bar Association dinner at the Mayflower Hotel in Washington, D.C., that he is retiring in May 2010. Earlier in the day, Michel, who was appointed by President Ronald Reagan in 1988, submitted a letter advising President Barack Obama that he will step down from the bench effective May 31, 2010.
           
First, ‘A Word to the Wise’ on Patent Reform.

Michel began his keynote statement by taking issue with a provision in the “so-called patent reform bill,” Senate Bill S.515, that would allow for interlocutory appeals. He said that this measure is “a kind of a torpedo, at least potentially,” for it “would provide for an interlocutory appeal from any claim construction ruling in any case at any stage in the District Court.” Michel predicted that, if enacted, this provision would swamp the court in paper by “doubling or tripling our current filings.” The problem with this provision, he said, is that it allows for appeals to the Federal Circuit in cases where the claim construction is not dispositive of infringement. Michel said that his court already has an “automatic interlocutory appeal provision” in that it takes appeals from grants of summary judgment based on claim construction. He argued that the Senate Bill provision is much different and will likely lead to longer periods of delay at the court. “[I]f the Court gets a double or triple load, we can’t handle it.”

Noting that judges are not allowed to advocate on such issues, Michel urged the bar association to have this particular provision “adjusted.” He added:

We are not allowed to lobby. So we don’t. But you are. And you have clients, and you have this association and many other bar associations. So, enough. A word to the wise.

Vacancy at the Court.

Continuing, Michel applauded the long and distinguished service of Judge Alvin A. Schall, who in October moved to senior status at the Federal Circuit. This creates a vacancy, and “the other little secret here is there are five other judges of our active 11 who could retire tomorrow, or take senior status,” he said.

Noting that there is “no former district judge on our Court,” Michel suggested that a vacancy might best be filled by someone with extensive experience in patent litigation. He also noted that it would be useful to have someone on the court widely experienced in “contract law, international trade law, or veterans benefits laws—huge chunks of our jurisdiction.” Further, Michel pointed out that diversity might be considered since there is no Asian-American on the court and “we don’t have and have never had an African-American judge on our Court.” Still, the key factor in this process, Michel stressed, is that “the appointees to the Court are selected based on merit, on experience, on quality, on intellect, on intelligence, on energy, and not because they’re, you know, somebody’s cousin or whatever the other considerations might be.”

The Time for Transition.

Finally, Michel announced that he had submitted his letter of notice to President Obama earlier in the day, and that it was time to transition to other things rather than taking senior status. Refusing to be limited to the objective role of judge, he announced a desire to become an advocate for improving patent law.

Michel summed it up this way:

I have loved every day of being a judge, and I had always imagined I would stay a senior judge until I was carried out of the courthouse in a pine box. But I’ve come to a different conclusion, because I see a huge need for someone to be able to speak out on behalf of the court system generally — of the judges, the lawyers, and the litigants. To be able to speak on public matters, even controversial matters, even political matters that affect the administration of justice in this country. And we who serve in the active judiciary are not permitted to do that because of restrictions in the code of conduct. There are many challenges. In my view, the judicial branch is being severely neglected by other authorities in this country. A few quick examples: we have about 900 Article 3 federal judges in America today. But 100 of them are missing because there are 100 unfilled vacancies and most of them have existed for years. For a decade and a half, the judiciary has asked the Congress to increase the number of judges by another hundred because of the huge growth in the case load. And these pleas have gone, up to now, entirely unheeded. In addition, our 450 courthouses, about half of them are severely unsafe because of the physical conditions where you have violent criminals walking down the same hallways with jurors and witnesses and, yes, also with judges. The workloads are going up. No one has had a pay raise in 20 years. Can you imagine a private sector job in which a pay raise over 20 years was out of the question? It’s not a healthy condition. So I’m hoping to speak out on these issues. I don’t know if will do any good but I’m going to try the best I can.

Read the transcript of Chief Judge Michel’s remarks.

 

A Patented Nutritional Supplement Composition Is Rendered Invalid by Prior Art Muscle Magazine Ads

November 19, 2009

The U.S. Court of Appeals for the Federal Circuit Nov. 19 ruled that a patented composition of nutritional supplements to enhance muscle performance or recovery from fatigue is rendered invalid under Section 102 (b) of the Patent Act by anticipatory advertisements for a protein supplement listing ingredients that include every claimed element (Iovate Health Sciences Inc. v. Bio-Engineered Supplements & Nutrition Inc., Fed. Cir., No. 2009-1018, 11/19/09).

Affirming a summary judgment of invalidity for anticipation under §102(b), the court found that Flex magazine advertisements for Weider’s Victory Professional Protein products were accessible and described all the claimed elements more than a year before the 1996 application filing date for the asserted patent.

Patent Found Anticipated by TwinLab and Weider Ads.

Iovate Health Sciences, Inc. is the exclusive licensee of a patent (6,100,287 assigned to University of Florida Research Foundation Inc. that claims the use of nutritional supplements to enhance muscle performance or recovery from muscle fatigue. Specifically, the patent teaches a composition containing a ketoacid and an amino acid that is either cationic (positively charged) or dibasic (containing two basic groups).

Iovate and the University Foundation brought a patent infringement suit against Bio-Engineered Supplements & Nutrition Inc. and Medical Research Institute (collectively BS&N).
The U.S. District Court for the Eastern District of Texas granted BS&N a summary judgment of invalidity, agreeing that advertisements for TwinLab Mass Fuel and Weider’s Victory Professional Protein products anticipated various asserted claims under Patent Act Section 102(b), 35 U.S.C. §102(b).

Iovate and the University Foundation appealed.

Magazine Ads Describe All of Claimed Elements.

The Patent Act at 35 U.S.C. § 102(b) provides that:

A person shall be entitled to a patent unless . . . the invention was . . . described in a printed publication in this or a foreign country . . . more than one year prior to the date of the application for patent in the United States.

To qualify as a printed publication in this case, an advertisement must have been disseminated or otherwise made accessible to persons interested and ordinarily skilled in the art prior to November 13, 1996, the Federal Circuit began. “To be anticipatory, the ad must also describe, either expressly or inherently, each and every claim limitation and enable one of skill in the art to practice an embodiment of the claimed invention without undue experimentation,” Judge Alan D. Lourie added, citing In re Gleave, 560 F.3d 1331 (Fed. Cir. 2009).
Continuing, the court said in a footnote that it only had to consider the ad pertaining to Weider’s Professional Protein product because the ad for TwinLab Mass Fuel did not disclose the composition containing arginine as required by Claim 7 of the ‘287 patent. Further, it noted the parties’ agreement that, prior to the 1996 critical date, Weider’s Professional Protein product was advertised in Flex magazine and the magazine was accessible to those interested in the art of nutritional supplements.

After examining the Professional Protein ad in Flex, the appellate court agreed that it “discloses each and every limitation” of the asserted claims. Lourie stated:

There is no dispute that the Professional Protein ad discloses a composition comprising a cationic or dibasic amino acid (ornithine) and a ketoacid (alpha-ketoglutarate) as well as the additional limitations found in claims 2 (glutamine), 5 (alpha-ketoisocaproic acid), 7 (arginine), 8 (conjugated amino acid and ketoacid, here ornithine-alpha-ketoglutarate), 9 (administered orally), and 18 (used on a human). It is also undisputed that the ad discloses the administration of the nutritional supplement for the purpose of enhancing muscle performance or recovery from fatigue (by building muscle strength, promoting muscle growth, and achieving faster recuperation and post-workout recovery).

Continuing, the court rejected Iovate’s argument that the claims require administering an effective amount of the claimed composition. But even if they did, the Professional Protein ad instructs one on how much protein should be taken daily, it said. Moreover, the court rejected Iovate’s argument that the Professional Protein ad did not enable one to practice the claimed invention. “[A]ll one of ordinary skill in the art would need to do to practice an embodiment of the invention is to mix together the known ingredients listed in the ad and administer the composition as taught by the ad,” Lourie wrote.

The summary judgment of invalidity was affirmed.

Judges Sharon Prost and Haldane Robert Mayer joined the opinion.

In a two-sentence concurring opinion, Mayer said that he would have also found the claims invalid under § 102(b) for being on sale more than a year before the application filing date.

Iovate and University of Florida Research Foundation were represented by Charles A. Weiss of Kenyon & Kenyon, New York. Bio-Engineered Supplements & Nutrition was represented by Philip D. Segrest of Husch Blackwell Sanders Welsh & Katz, Chicago. Medical Research Institute was represented by Robert P. Latham of Jackson Walker, Dallas.  

Read the Iovate Health Sciences Inc. v. Bio-Engineered Supplements & Nutrition Inc. opinion.
 

CAFC Dismisses PTO Rules Appeal, but Does Not Vacate Judgment Below

November 13, 2009

The Federal Circuit Nov. 13 issued an en banc order that dismisses the appeal, but does not vacate the district court ruling in a suit challenging the Patent and Trademark Office’s controversial 2007 rules package which was rescinded last month (Tafas v. Kappos, Fed. Cir., No. 2008-1352, 11/13/09).

The court agreed with co-plaintiff Triantafyllos Tafas that vacatur would be inappropriate because it would allow the Patent and Trademark Office to invalidate an adverse judgment rendered below in district court.

Inventor Joins Motion by GlaxoSmithKline and PTO for Dismissal.

Inventor Triantafyllos Tafas is co-plaintiff with GlaxoSmithKline in a suit challenging the PTO’s 2007 rules package. The agency had proposed placing limitations on the number of continuation applications and claims that applicants could file as a way of reducing the backlog of patent applications. (72 Fed. Reg. 46,716).

In October 2009, Tafas agreed to join the GlaxoSmithKline-PTO motion to dismiss the appeal of the case to the Federal Circuit after PTO Director David Kappos issued a press release announcing the withdrawal of the rules package. However, Tafas opposed the GlaxoSmithKline-PTO motion to vacate the district court’s decision below that enjoined the rules’ enforcement.

En Banc Court Agrees to Dismissal, but Not to Vacate Judgment.

The Federal Circuit, which had agreed in a July 2009 order to take the case en banc, on Nov. 13 granted the parties’ joint motion to dismiss the appeal.

“The parties’ joint motion for dismissal of the appeal is proper because the USPTO has rescinded the rules that formed the basis of this litigation,” Chief Judge Paul R. Michel stated. “The appeal is therefore moot and dismissal of the appeal is not only appropriate, but required,” he said.

However, Michel found that it would be improper in this case to grant the GlaxoSmithKline-PTO motion to vacate the ruling below. He explained:

In U.S. Bancorp Mortgage Co. v. Bonner Mall Partnership, 513 U.S. 18 (1994), the Supreme Court held that when a party procures the conditions that lead to a case becoming moot, that party should not be able to obtain an order vacating the lower court decision that was adverse to that party. Vacatur, held the Court, is appropriate if the mootness arises from external causes over which the parties have no control, or from the unilateral act of the prevailing party, but not when the mootness is due to a voluntary act by the losing party, such as a settlement.

The motion seeks to paint this case as falling into the former category, but it appears to us to fall squarely into the latter. This is not a case in which the regulations have been overridden by a statutory change; instead, it is a case in which the agency itself has voluntarily withdrawn the regulations and thus set the stage for a declaration of mootness. The motion’s statement that an intervening regulatory change is directly analogous to an intervening statutory change is not persuasive. The agency does not control Congress; but it does control the decision to rescind the regulations. Thus, it was the USPTO (the losing party in the district court action) that acted unilaterally to render the case moot, and vacatur is not appropriate.

The parties’ joint motion for dismissal was granted, but the GlaxoSmithKline-PTO motion to vacate the judgment below was denied.

Tafas was represented by Steven J. Moore of Kelley Drye & Warren, Stamford, Conn.

GlaxoSmithKline was represented by F. Christopher Mizzo and Jeffrey Bossert Clark of Kirkland & Ellis, Washington, D.C.

The Patent and Trademark Office was represented by Joshua Waldman, U.S. Department of Justice, Washington, D.C.

Read the Tafas v. Kappos en banc order.
 

CAFC Dismisses PTO Rules Appeal, but Does Not Vacate Judgment Below

November 13, 2009

The Federal Circuit Nov. 13 issued an en banc order that dismisses the appeal, but does not vacate the district court ruling in a suit challenging the Patent and Trademark Office’s controversial 2007 rules package which was rescinded last month (Tafas v. Kappos, Fed. Cir., No. 2008-1352, 11/13/09).

The court agreed with co-plaintiff Triantafyllos Tafas that vacatur would be inappropriate because it would allow the Patent and Trademark Office to invalidate an adverse judgment rendered below in district court.

Inventor Joins Motion by GlaxoSmithKline and PTO for Dismissal.

Inventor Triantafyllos Tafas is co-plaintiff with GlaxoSmithKline in a suit challenging the PTO’s 2007 rules package. The agency had proposed placing limitations on the number of continuation applications and claims that applicants could file as a way of reducing the backlog of patent applications. (72 Fed. Reg. 46,716).

In October 2009, Tafas agreed to join the GlaxoSmithKline-PTO motion to dismiss the appeal of the case to the Federal Circuit after PTO Director David Kappos issued a press release announcing the withdrawal of the rules package. However, Tafas opposed the GlaxoSmithKline-PTO motion to vacate the district court’s decision below that enjoined the rules’ enforcement.

En Banc Court Agrees to Dismissal, but Not to Vacate Judgment.

The Federal Circuit, which had agreed in a July 2009 order to take the case en banc, on Nov. 13 granted the parties’ joint motion to dismiss the appeal.

“The parties’ joint motion for dismissal of the appeal is proper because the USPTO has rescinded the rules that formed the basis of this litigation,” Chief Judge Paul R. Michel stated. “The appeal is therefore moot and dismissal of the appeal is not only appropriate, but required,” he said.

However, Michel found that it would be improper in this case to grant the GlaxoSmithKline-PTO motion to vacate the ruling below. He explained:

In U.S. Bancorp Mortgage Co. v. Bonner Mall Partnership, 513 U.S. 18 (1994), the Supreme Court held that when a party procures the conditions that lead to a case becoming moot, that party should not be able to obtain an order vacating the lower court decision that was adverse to that party. Vacatur, held the Court, is appropriate if the mootness arises from external causes over which the parties have no control, or from the unilateral act of the prevailing party, but not when the mootness is due to a voluntary act by the losing party, such as a settlement.

The motion seeks to paint this case as falling into the former category, but it appears to us to fall squarely into the latter. This is not a case in which the regulations have been overridden by a statutory change; instead, it is a case in which the agency itself has voluntarily withdrawn the regulations and thus set the stage for a declaration of mootness. The motion’s statement that an intervening regulatory change is directly analogous to an intervening statutory change is not persuasive. The agency does not control Congress; but it does control the decision to rescind the regulations. Thus, it was the USPTO (the losing party in the district court action) that acted unilaterally to render the case moot, and vacatur is not appropriate.

The parties’ joint motion for dismissal was granted, but the GlaxoSmithKline-PTO motion to vacate the judgment below was denied.

Tafas was represented by Steven J. Moore of Kelley Drye & Warren, Stamford, Conn.

GlaxoSmithKline was represented by F. Christopher Mizzo and Jeffrey Bossert Clark of Kirkland & Ellis, Washington, D.C.

The Patent and Trademark Office was represented by Joshua Waldman, U.S. Department of Justice, Washington, D.C.

Read the Tafas v. Kappos en banc order.
 

At Bilski Argument, Justices Search for Test to Decide Whether A Business Method Is a Patentable ‘Process’ Under Patent Act

November 09, 2009

The justices of the U.S. Supreme Court on Nov. 9 expressed much concern over what the proper test should be for determining whether a business method is a patentable “process” under Section 101 of the Patent Act (Bilski v. Kappos, U.S., No. 08-964, argued 11/9/09).

While the justices were clearly opposed to a loose standard that allows limitless patenting of methods that have been in practice for hundreds of years, at the same time they seemed to fear setting too rigid a bar for unforeseen future technologies. The questioning also seemed to reveal an unwillingness to declare that business methods are altogether unpatentable.

Method of Hedging Commodities Risk Rejected Under §101.

The Patent Act at 35 U.S.C. §101 states that:

Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.

The Act at Section 100(b) states that “process” means “process, art or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material."

At issue in this case is a patent application (Serial No. 08/833,892) filed by Bernard Bilski and Rand Warsaw (Bilski) claiming a method of managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price. The Board of Patent Appeals and Interferences sustained the examiner’s rejection of all 11 claims of the application as not directed to patent-eligible subject matter under 35 U.S.C. §101.  Bilski’s appeal was first argued before a panel of the Federal Circuit, but then the court sua sponte took the appeal en banc.

In 2008, the en banc court affirmed the rejection of all 11 claims, ruling that they “are not directed to patent-eligible subject matter” under Section 101 of the Patent Act since they (1) are not tied to a particular machine or apparatus or (2) do not transform a particular article into a different state or thing. In re Bilski, 545 F.3d 943 (Fed. Cir. 2008). This “machine-or-transformation test” is the only test to be used in determining whether a claimed process is eligible for patenting under § 101, the court held, citing Supreme Court authority.

In so doing, the Federal Circuit also concluded that its test for patentability under Section 101 based on whether a process leads to a “useful, concrete and tangible result,” as set forth in State Street Bank & Trust Co. v. Signature Financial Group, 149 F.3d 1368 (Fed. Cir. 1998), is no longer applicable. Moreover, the 9-3 majority opinion rejected a “technological arts” test that would deny patentability to a claimed process unless it is directed to an advance in science or technology, In his dissenting opinion, Judge Haldane Robert Mayer offered this test as a higher barrier to the “legal tsunami” of business method patents spawned by State Street.

Two Questions Taken by the High Court.

Bilski petitioned to the U.S. Supreme Court, asking the following questions:

1. Whether the Federal Circuit erred by holding that a “process” must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing … despite this Court’s precedent declining to limit the broad statutory grant of patent eligibility for “any” new and useful process beyond excluding patents for “laws of nature, physical phenomena, and abstract ideas.”

2. Whether the Federal Circuit’s “machine-or-transformation” test for patent eligibility, which effectively forecloses meaningful patent protection to many business methods, contradicts the clear Congressional intent that patents protect “method[s] of doing or conducting business.” 35 U.S.C. § 273.

The Supreme Court granted certiorari on June 1, 2009.

The oral argument on Nov. 9 came with much anticipation and passion, for concerned stakeholders from a wide array of industries—including computers, pharmaceuticals, medical diagnostics, and financial services—submitted amicus briefs stridently supporting protection for elements critical to their respective fields. Moreover, this case represents the first time in almost 30 years that the high court has addressed Section 101 patentability, since the rulings in Diamond v. Chakrabarty, 447 U.S. 303 (1980) and Diamond v. Diehr, 450 U.S. 175 (1981).

Concern for Patent Scope That Is Too Broad.

During the Nov. 9 oral argument, Bilski’s counsel, J. Michael Jakes of Finnegan, Henderson, Farabow, Garrett & Dunner, Washington, D.C., began by asserting that the Federal Circuit’s “rigid” and “narrow” test requiring that methods either be tied to a particular machine or transform specific subject matter “doesn't find any basis in either the language of Section 101 or anywhere in the patent statute.” Acknowledging that patentable methods are not completely unbounded, he observed Diehr’s statement that a patent-eligible "process" cannot claim "laws of nature, natural phenomena, [or] abstract ideas."

When Justice Sonia Sotomayor asked him why human activities should be covered under the useful arts, Jakes noted that doctors perform surgical methods that are patentable, and that Congress at Section 287(c) carved out an exclusion that prevents doctors from being sued for infringement. He argued that the patent system has two key aspects—encouraging new innovation and disclosure—that serve to benefit society in exchange for the patent grant. People should be encouraged to create new things, such as a surgical method or a method of hedging consumption risk, and the doctor who comes up with a new procedure should have an incentive not to keep his new method a secret, Jakes argued.

Jakes was then peppered by questions from various justices who worried that too broad a reading of Section 101 would allow virtually any form of human activity to be patented. Justice Ruth Bader Ginsburg asked whether one could patent a method of estate planning or selecting a jury, Justice Stephen Breyer drew laughter when he said that he had “a really original method of teaching antitrust law,” and Justice Antonin Scalia asked about patenting a method of horse whispering. Chief Justice John Roberts said that Claim 1 of Bilski’s application seems to present “classic commodity hedging that has been going on for centuries.” Also concerned about granting a patent monopoly on such activity, Justice Anthony Kennedy noted that the British came up with a method of calculating insurance risk in the 17th century, saying “it's difficult for me to think that Congress … would have wanted to give only one person the capacity to issue insurance.”

Jakes responded that these methods are “potentially” patentable, and that they should not be categorically excluded from being patent-eligible subject matter under Section 101. Rather, he insisted that other sections of the Patent Act such as 102 and 103 should be used to bar any such methods claimed in suspect patent applications.
Breyer also pointed out that there are actually two other counterbalancing factors about patents that Jakes failed to mention—higher prices for patented items and hurdles posed by the need to seek permissions­—both of which impede advancement. As to where the line should be drawn in the information world of today, Breyer said, “if I am honest, I have to tell you: I don't know.”

Jakes still went on to confront the machine-or-transformation test that the Federal Circuit formulated in the ruling below, arguing that it rigidly stands as the sole test to be applied for all processes. He stressed that Congress has already made a place for business methods by providing prior user rights in Section 273. The real question to be asked, he said, is the following: “Are we trying to patent an abstract idea?” Jakes insisted that Bilski’s method is not merely an abstraction “within somebody's head” because it involves real physical steps. He continued:

Why should transformation be the key? The key should be: Is it a practical application of a useful result?

Our method, we believe, is a practical application. As the Patent Office has said, it does involve physical steps. I think that was one of the clues that the Patent Office has relied on in saying whether or not something is abstract. Since it is not an abstract method, it's rooted in the real world, we think it should be eligible to have its examination at the Patent Office and it shouldn't be thrown out on an arbitrary test.

Problems With a Test That Is Overly Narrow.

Deputy Solicitor General Malcolm L. Stewart, U.S. Department of Justice, began on the government’s behalf by distinguishing the achievements of expert communicator Dale Carnegie and telephone inventor Alexander Graham Bell.

“I think at a certain level of generality you could describe both Dale Carnegie and Alexander Graham Bell as people who devised methods of communicating more effectively,” but Bell’s invention was patentable because “it operated in the realm of the physical,” Stewart said. He noted that Bell’s process was implemented through a machine by which sound was transformed into electric current, then the current was transmitted over a distance, and then converted back into sound. “Innovations as to new techniques of public speaking, new techniques of negotiations, techniques that go to the substance of what is said … may be valuable,” but “[t]hey are not patent eligible because they don't deal in the realm of the physical,” he insisted.

Stewart then rejected the position that the Federal Circuit’s test is rigid or inflexible, noting that the test only says that one has to identify a link to a machine or transform matter to have a patentable process. However, Chief Justice Roberts expressed concern about any test that overemphasizes formalism, noting that it hardly makes sense to allow a method patent to issue simply based “on the most tangential and insignificant use of a machine.” Thus, he was clearly troubled by the “machine” prong of the Federal Circuit’s test that might allow a business method to be patented merely because it involves some trivial use of a calculator to run numbers.

When Sotomayor asked if things would be simpler if business methods were just excluded from the scope of subject matter under Section 101, Stewart said, “I think that would be incorrect, and it would create problems of its own.” He said that business methods are supported by the State Street decision, and that categorically excluding business methods “would eliminate new machines, including programmed computers, that are useful because of their contributions” and “be a fairly sweeping holding.”

Ginsburg asked Stewart if the “technological arts” test offered in Judge Mayer’s dissenting opinion would make things simpler, and Jakes gave two reasons against using that test. “First, people could dispute whether particular advances are properly regarded as technological advances, and second, we would still have the difficult problems that the Chief Justice has referred to, where you have a process that is described as involving technology at some step along the way, and courts will still have to make the determination, is that sufficiently substantial step to make the process, as a whole, a technological one.”

When pressed by Sotomayor, Stewart conceded that a test could be formulated to allow an exception for a “new and as yet unforeseen technology” even though the process did not involve a machine or a transformation. However, he stressed that such an exception is not warranted in this case because Bilski’s hedging method “is in no sense different in kind from risk management techniques that have been undertaken for centuries.”

This oral argument left more questions than answers, but whatever test the high court formulates, it is likely that stakeholders in some industries may not be very pleased with the result.

Read the Bilski v. Kappos oral argument transcript.
 

“MATTRESS.com” Is Generic Mark, Not Registrable For Online Retail Store Services in the Field of Mattresses and Bedding

November 06, 2009

The U.S. Court of Appeals for the Federal Circuit on Nov. 6 affirmed the Trademark Trial and Appeal Board’s ruling that “MATTRESS.com” is a generic mark not worthy of protection for online retail store services in the field of mattresses, beds, and bedding (In re 1800MATTRESS.COM IP LLC, Fed Cir., No. 2009-1188, 11/6/09).

In its decision, the appellate court agreed that the combination of “MATTRESS” and “.com” is generic for the online sale of mattresses and found this case similar to In re HOTELS.com, which rejected protection for “HOTELS.com” in the context of online hotel reservation services.

“MATTRESS.com” Mark Is Refused Registration.

Dial-A-Mattress Operating Corp. filed an application (Serial No. 78/976,682) to register the trademark “MATTRESS.COM” for “online retail store services in the field of mattresses, beds, and bedding.” The trademark examiner refused registration under Section 23(c) of the Trademark Act, 15 U.S.C. § 1091(c), reasoning that the mark is generic.

The Trademark Trial and Appeal Board affirmed the refusal, and 1800Mattress.com IP LLC appealed in place of Dial-A-Mattress.
 
Substantial Evidence Supports Refusal.

The Federal Circuit agreed with the PTO that substantial evidence supported the TTAB’s genericness ruling. Judge Alan D. Lourie observed that the genericness analysis asks two questions:

1) what is the genus of goods or services at issue?; and

2) is the term sought to be registered or retained on the register understood by the relevant public primarily to refer to that genus of goods or services?

As to the first element, Lourie noted that the parties agreed that the genus of services is “online retail store services in the field of mattresses, beds, and bedding.” Thus, he said, “the mark is generic if the relevant public understands MATTRESS.COM to refer to such online retailers.”

As to the second element, Lourie quoted from In re Steelbuilding.com, 415 F.3d 1293 (Fed. Cir. 2005): “An inquiry into the public’s understanding of a mark requires consideration of the mark as a whole. Even if each of the constituent words in a combination mark is generic, the combination is not generic unless the entire formulation does not add any meaning to the otherwise generic mark.”

Here, the TTAB considered each of the constituent words, “mattress” and “.com,” and determined that they were both generic. It then considered the mark as a whole and found that the combination added no new meaning, relying on the prevalence of the term “mattress.com” in the website addresses of several online mattress retailers that provide the same services as those sought by the applicant. “Such reliance is permissible to illuminate what services the relevant public would understand a website operating under the term “mattress.com” to provide,” Lourie said, citing In re Reed Elsevier Props. Inc., 482 F.3d 1376 (Fed. Cir. 2007) and In re Hotels.com, 573 F.3d 1300 (Fed. Cir. 2009).

Lourie continued as follows:

Because websites operate under the term “mattress.com” to provide mattresses, and they provide them online, the Board properly concluded that the relevant public understands the mark MATTRESS.COM to be no more than the sum of its constituent parts, viz., an online provider of mattresses. Indeed, the Board’s reasoning tracked our later reasoning in In re Hotels.com. In that case, we addressed the Board’s rejection of the mark HOTELS.COM for hotel reservation services. … There, as here, the Board had addressed the genericness of each of the constituent words and then had used the prevalence of “hotel.com” or “hotels.com” in hotel reservation service websites to find the combination generic. We affirmed the Board’s giving “controlling weight to the large number of similar uses of ‘hotels’ with a dot-com suffix, as well as the common meaning and dictionary definition of ‘hotels’ and the standard usage of ‘.com’ to show a commercial internet domain.” ... Similarly, here, the Board permissibly gave controlling weight to the large number of similar uses of “mattress.com” as well as the common meanings of “mattress” and “.com.”

Furthermore, even if, as Dial-A-Mattress asserts, some of the websites containing “mattress.com” in their domain names do not actually sell mattresses online, the fact that many of the websites do sell mattresses online supports the Board’s conclusion that the term “mattress.com” is primarily used to identify services in the same genus as Dial-A-Mattress’s services. … We therefore find substantial evidence to support the Board’s conclusion that “[c]onsumers would see MATTRESS.COM and would immediately recognize it as a term that denotes a commercial website rendering retail services featuring mattresses.”

The TTAB’s ruling was affirmed.

The opinion was joined by Senior Judge Daniel M. Friedman and Judge Sharon Prost.

1800MATTRESS.COM was represented by Francis J. Duffin of Wiggin and Dana, New Haven, Conn. The Patent and Trademark Office, Arlington, Va., was represented by Solicitor Raymond T. Chen.

Read the In re 1800MATTRESS.COM IP LLC opinion.

 

Federal Circuit Reverses Cancellation of “Cold War Museum” Mark

November 5, 2009

The U.S. Court of Appeals for the Federal Circuit Nov. 5 ruled that “the Cold War Museum” service mark was improperly cancelled because the petitioner never overcame the presumption that the mark had acquired distinctiveness under Lanham Act Section 2(f) and the Trademark Trial and Appeal Board refused to consider the mark owner’s evidence of acquired distinctiveness in the original record (Cold War Museum Inc. v. Cold War Air Museum Inc., Fed Cir., No. 2009-1172, 11/5/09).

“The Cold War Museum” Mark Is Found Descriptive, Cancelled.

In 2004, Francis Gary Powers Jr. was granted a registration for “The Cold War Museum” service mark under Lanham Act Section 2(f), 15 U.S.C. §1052(f),  after showing evidence that the mark had acquired distinctiveness through “substantially exclusive and continuous use … for … five years.“ This evidence included more than 200 pages of material.

Three years later, the Cold War Air Museum petitioned for cancellation, arguing that the words “cold war museum” were merely descriptive for museum services related to the Cold War.

The Trademark Trial and Appeal Board agreed and cancelled the mark.

Cold War Museum appealed.

Challenger Never Overcame Presumption of Validity.

On appeal, the Federal Circuit reversed the cancellation.

On one key point, the appellate court ruled that Air Museum had not overcome the presumption that the registered mark had acquired distinctiveness.

A party seeking to cancel a registration must overcome the registration’s presumption of validity by a preponderance of the evidence, the court observed. Judge Kimberly A. Moore related that “the presumption of validity that attaches to a Section 2(f) registration includes a presumption that the registered mark has acquired distinctiveness. To rebut this presumption, a party seeking to cancel a Section 2(f) registration must produce sufficient evidence for the Board to conclude, in view of the entire record in the cancellation proceeding, that the party has rebutted the mark’s presumption of acquired distinctiveness by a preponderance of the evidence.”

Despite this standard, “Air Museum failed to present any evidence whatsoever relating to the distinctiveness of the mark,” Moore said, adding:

Indeed, Air Museum failed even to argue that the mark had not acquired distinctiveness. Instead, Air Museum’s arguments and evidence related exclusively to the mark’s descriptiveness, which, as discussed above, is irrelevant to the validity of a Section 2(f) registration. Because Air Museum failed to even argue the issue of acquired distinctiveness in its petition for cancellation, it failed to rebut the registration’s presumption of validity. Therefore, the Board erred as a matter of law in concluding that Air Museum had established a prima facie case that the mark had not acquired distinctiveness.

Court Clarifies Burden Shifting in Cancellations.

In light of Air Museum’s failure to rebut the registration’s presumption of validity, the court found that the TTAB also erred as a matter of law in shifting the “burden” to the Cold War Museum to prove that the mark had acquired distinctiveness. Finding the TTAB’s discussion of the evidentiary burdens in cancellations “less than precise,” Moore took the opportunity to “clarify those burdens” here:

In a cancellation proceeding, unlike an opposition, the registration has a presumption of validity. … The party seeking cancellation must overcome this presumption by a preponderance of the evidence. … The party seeking to cancel registration of a mark always bears the burden of persuasion, that is, the ultimate burden of proving invalidity of the registration by a preponderance of the evidence.

Initially, the party seeking cancellation also bears the “burden to establish a prima facie case” that the registration is invalid. … In a Section 2(f) case, the party seeking cancellation bears the initial burden to “establish a prima facie case of no acquired distinctiveness.” … To satisfy this initial burden, the party seeking cancellation must “present sufficient evidence or argument on which the board could reasonably conclude” that the party has overcome the record evidence of acquired distinctiveness—which includes everything submitted by the applicant during prosecution. … The burden of producing additional evidence or argument in defense of registration only shifts to the registrant if and when the party seeking cancellation establishes a prima facie showing of invalidity. The Board must then decide whether the party seeking cancellation has satisfied its ultimate burden of persuasion, based on all the evidence made of record during prosecution and any additional evidence introduced in the cancellation proceeding.

Air Museum, as the party seeking cancellation, bore the burden of persuasion as well as the initial burden of establishing a prima facie case. If Air Museum had satisfied its initial burden sufficient to establish a prima facie case that the registration had not acquired distinctiveness, the burden of production would have shifted to the Cold War Museum. However, Air Museum failed to present any evidence or argument of lack of distinctiveness, and therefore the Board erred in finding that any “burden” was shifted to the Cold War Museum.

Entire Registration File Is Automatically Part of Cancellation Record.

Moreover, the court found that the TTAB erred by failing to consider Cold War Museum’s evidence of acquired distinctiveness. Although Powers did not resubmit the 200 pages of material for purposes of the cancellation proceeding, it was unnecessary to do so, the court held, citing 37 C.F.R. § 2.122(b).

The entire registration file—including any evidence submitted by the applicant during prosecution—is part of the record in a cancellation “without any action by the parties,” Moore said, quoting Section 2.122(b). She continued:

The unambiguous language of 37 C.F.R. § 2.122(b) provides that the entire file of the registration at issue is automatically part of the record, without any action necessary by the parties. Therefore, the evidence of the mark’s acquired distinctiveness submitted during prosecution was automatically part of the record before the Board, and the Board was required to consider this evidence in determining whether Air Museum had met its burden of proving a lack of acquired distinctiveness by a preponderance of the evidence.

The cancellation of the mark was reversed.

Judges Richard Linn and Alan D. Lourie joined the opinion.

Cold War Museum was represented by A. Neal Seth of Baker & Hostetler, Washington, D.C.

Cold War Air Museum was represented by W. Thomas Timmons of Dallas.

Read the Cold War Museum Inc. v. Cold War Air Museum Inc. opinion.
 

Inventor Responds to PTO’s Withdrawal of Controversial Rules Package, Consents to Dismissal of Case Appealed to CAFC

October 20, 2009

The attorneys of inventor Triantafyllos Tafas announced Oct. 20 that their client, in response to the Patent and Trademark Office’s withdrawal of its 2007 proposed rules package, has agreed to consent to the dismissal of a suit he and co-plaintiff GlaxoSmithKline filed against the agency which was on appeal to the Federal Circuit.
The Tafas announcement comes after the PTO on Oct. 8 issued a press release stating that it was rescinding the rules package and filing a joint motion with GlaxoSmithKline to dismiss the suit challenging the legality of the rules.

Tafas Makes a ‘Gesture of Gratitude and Goodwill’ Toward PTO.

The Tafas announcement appeared on the website of the firm Kelley Drye & Warren. Steven J. Moore and James E. Nealon, partners in the firm’s Stamford, Conn., office, represented Tafas in the case.

In the PTO’s Oct. 8 press release, agency director David Kappos said “[t]hese regulations have been highly unpopular from the outset and were not well received by the applicant community.” He expressed the hope that these actions would lead to engaging “the applicant community more effectively on improvements that will help make the USPTO more efficient, responsive, and transparent to the public.” However, the PTO’s announcement made no mention of Tafas’s position on the agreement with GlaxoSmithKline.

On Kelley Drye & Warren’s website, Tafas was quoted as saying, “I applaud the decisive action taken by the USPTO’s new Director David Kappos to rescind the claims and continuation rules.”

The firm’s press release added that papers were being filed that day in the Federal Circuit to approve and support the USPTO’s proposed dismissal of its appeal. The press release continued:

As a gesture of gratitude and goodwill towards the USPTO for rescinding the claims and continuation rules, Dr. Tafas also confirmed that he intended to withdraw his last remaining substantive legal challenge still existing in the case at the district court level. This challenge was unaffected by the USPTO’s withdrawal of its changes to the claims and continuation rules. Once the USPTO’s appeal is dismissed, Dr. Tafas’ concession will obviate the need for any further contested litigation at the district court level concerning the validity of the USPTO rules.

Background: Tafas and GlaxoSmithKline Fought Rules Package.

The PTO issued its rules package in August of 2007, proposing to place limitations on the number of continuation applications and claims that applicants could file. (72 Fed. Reg. 46,716) The agency took the action largely to reduce the backlog of applications currently on file.

After Tafas and GlaxoSmithKline challenged the rules, the U.S. District Court for the Eastern District of Virginia granted them a summary judgment enjoining the rules’ enforcement. However, the Federal Circuit on Mar. 20 vacated that ruling in part and upheld three of the four new rules. Tafas v. Doll, 559 F.3d 1345 (Fed. Cir. 2009).

The Federal Circuit then on July 6 agreed to hear the suit en banc, announcing that the “March 20, 2009 opinion, is vacated and the appeal is reinstated.” Tafas v. Doll, Fed. Cir., No. 2008-1352, 7/6/09. On Aug. 21, the appellate court ordered additional briefing on the case. Tafas v. Kappos, Fed. Cir., No. 2008-1352, 8/21/09.

Read the Tafas announcement on Kelley Drye & Warren’s website.

 

PTO Rescinds Controversial Rules Package, Files Joint Motion With Plaintiff GlaxoSmithKline to Dismiss Suit

October 08, 2009

The Patent and Trademark Office on Oct. 8 announced that it is rescinding the controversial rules package proposed in 2007 and that it is filing a joint motion with plaintiff GlaxoSmithKline to dismiss the suit challenging the legality of the rules.

“These regulations have been highly unpopular from the outset and were not well received by the applicant community, PTO Director David Kappos said, expressing hope that these actions lead to engaging “the applicant community more effectively on improvements that will help make the USPTO more efficient, responsive, and transparent to the public.”

Background: Inventors Fight Rules Package.

The PTO issued its rules package in August of 2007, proposing to place limitations on the number of continuation applications and claims that applicants could file. (72 Fed. Reg. 46,716) The agency took the action largely to reduce the backlog of applications currently on file. Inventor Triantafyllos Tafas and drug maker GlaxoSmithKline challenged the rules in federal district court.

The U.S. District Court for the Eastern District of Virginia granted Tafas and GlaxoSmithKline a summary judgment enjoining enforcement of the new rules, but the Federal Circuit on March 20, 2009 vacated that ruling in part and upheld three of the four new rules. Tafas v. Doll, 559 F.3d 1345 (Fed. Cir. 2009).

However, the Federal Circuit on July 6 agreed to hear the suit en banc, announcing that the “March 20, 2009 opinion, is vacated and the appeal is reinstated.” Tafas v. Doll, Fed. Cir., No. 2008-1352, 7/6/09. On Aug. 21, the appellate court ordered additional briefing on the case. Tafas v. Kappos, Fed. Cir., No. 2008-1352, 8/21/09.

Kappos and GlaxoSmithKline Strike a Deal.

With the brief filing deadlines looming, Kappos and GlaxoSmithKline came to an agreement, which was announced by the PTO Oct. 8. In that announcement, the PTO said that it will file a motion to dismiss and vacate the Tafas v. Kappos suit, and that GlaxoSmithKline “will join the USPTO’s motion for dismissal and vacatur.”

In the press release, Kappos added the following:

These regulations have been highly unpopular from the outset and were not well received by the applicant community. In taking the actions we are announcing today, we hope to engage the applicant community more effectively on improvements that will help make the USPTO more efficient, responsive, and transparent to the public.

We are grateful to GlaxoSmithKline for working with us to file this joint motion to both dismiss the appeal and vacate the district court’s decision. This course of action represents the most efficient way to formally and permanently move on from these regulations and work with the IP community on new ways to take on the challenges these regulations were originally designed to address.

The PTO’s announcement, however, is silent as to the intentions of Triantafyllos Tafas, the other plaintiff in the case.

Read the PTO’s Oct. 8 press release.

 

Infringement Suit Should Have Been Brought in Claims Court Since Reserve Banks Were Acting `For the Government’

September 30, 2009

A patent infringement suit against three Federal Reserve banks and a private contractor should have been brought in the U.S. Court of Federal Claims, not a federal district court, because the defendants were acting “for the Government” of the United States in adopting an allegedly infringing technology for detecting fraudulent checks, the U.S. Court of Appeals for the Federal Circuit ruled Sept. 30 (Advanced Software Design Corp v. Federal Reserve Bank of St. Louis, Fed. Cir., No. 2008-1152, 9/30/09).

Affirming a district court’s ruling, the appellate court found that the allegedly infringing activity was “for the United States” and with its authorization and consent, and that any claims relating to United States Treasury checks had to be dismissed because they were not brought in the Court of Federal Claims, as required by 28 U.S.C. §1498(a).  

Fraudulent Check Detection.

Inventor Calin A. Sandru and his company, Advanced Software Design Corp., (Advanced Sofware) have patents (6,792,110; 6,549,624; and 6,233,340) for detecting fraudulent negotiable instruments. Advanced Software sued the Federal Reserve Bank of St. Louis, the Federal Reserve Bank of Philadelphia, the Federal Reserve Bank of Atlanta, and Fiserv Inc., alleging that their “seal encoding” technology infringes the patents.

However, the U.S. District Court for the Eastern District of Missouri granted a summary judgment dismissing the infringement claims that were based on U.S. Treasury checks, ruling that the alleged acts of infringement were “for the United States” and could be tried only in the Court of Federal Claims pursuant to 28 U.S.C. §1498(a).

Advanced Software appealed.

Private Defendants Were Acting `for the Government.’

28 U.S.C. §1498(a) states that:

Whenever an invention described in and covered by a patent of the United States is used or manufactured by or for the United States without license of the owner thereof or lawful right to use or manufacture the same, the owner’s remedy shall be by action against the United States in the United States Court of Federal Claims for the recovery of his reasonable and entire compensation for such use and manufacture. . . .

For the purposes of this section, the use or manufacture of an invention described in and covered by a patent of the United States by a contractor, a subcontractor, or any person, firm, or corporation for the Government and with the authorization or consent of the Government, shall be construed as use or manufacture for the United States.

When an alleged infringement is by a non-government entity (“a contractor, a subcontractor, or any person, firm, or corporation”), the statute states that the accused activity is “for the United States” if it is conducted “for the Government” and “with the authorization or consent of the Government,” the court noted, quoting Section 1498(a). Though Advanced Software pointed to the fact that the United States was not a party, but an amicus curiae, and that it had not unequivocally provided “authorization or consent” for the Reserve Banks or Fiserv to act on behalf of the government, the court found that both of the statutory criteria had been satisfied in this case.

Judge Pauline Newman agreed with the district court’s conclusion that authorization or consent was established by Treasury’s correspondence with the Reserve Banks, including a letter by Richard Gregg, then Commissioner of Treasury Financial Management Service, to the Federal Reserve Bank of St. Louis stating that seal encoding technology testing was successful and would be adopted. Still, quoting Hughes Aircraft v. United States, 534 F.2d 889 (Ct. Cl. 1976), she clarified that there is no “requirement that authorization or consent necessarily appear on the face of a particular contract. On the contrary, ‘authorization or consent’ on the part of the Government may be given in many ways other than by letter or other direct form of communication …”

Newman continued:

We also affirm the district court’s rulings that the Fiserv dealings with the Reserve Banks and their actions with respect to Treasury checks are “for the Government” in the sense required by §1498(a). The district court correctly ruled that §1498(a) does not require that the government be party to any contract, but may apply to activities by “any person, firm, or corporation” for the benefit of the government. 28 U.S.C. §1498(a). For example, in Hughes Aircraft the court found that the government’s participation in the Skynet II satellite program was “for the Government” although the satellites would be owned by the United Kingdom, because the program was vital to the military defense and security of the United States. …

Advanced Software questions whether the government is “a principal beneficiary” of the accused infringement, since it was not the Treasury, but the bank of first deposit, that almost always bore the loss upon identification of a fraudulent Treasury check. It is not necessary to be the sole beneficiary, however, in order to be a beneficiary for the purposes of §1498(a). … The defendants point to the national interest in averting fraud in Treasury checks, and to the resources Treasury has saved by adopting this efficient technology. … We agree with the district court that these are significant benefits to the United States, along with the financial benefits accruing to the member banks and the Reserve Banks. All benefit from the detection of fraudulent Treasury checks.

The district court’s ruling was affirmed.

The opinion was joined by Judges Sharon Prost and Kimberly Moore.

Keith A. Rabenberg of Senniger Powers, St. Louis, represented Advanced Software. The Federal Reserve banks and Fiserv were represented by William H. Levit Jr. of Godfrey & Kahn, Milwaukee. The United States, as amicus curiae, was represented by Susan L.C. Mitchell, attorney, commercial litigation branch, United States Department of Justice, Washington, D.C.

Read the Advanced Software Design Corp v. Federal Reserve Bank of St. Louis opinion.

 

Stanford University’s Suit Is Dismissed for Lack of Standing

September 30, 2009

A patent infringement suit by Stanford University must be dismissed for lack of standing because the university was unable to prove that it owned rights in patents relating to HIV treatments that were transferred by one of the inventors in a prior assignment, the U.S. Court of Appeals for the Federal Circuit ruled Sept. 30 (Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems Inc., Fed. Cir., No. 2008-1509, 9/30/09).

Patents Related to HIV Treatments.

The Board of Trustees of the Leland Stanford Junior University is the listed assignee of three patents (5,968,730; 6,503,705; and 7,129,041) that relate to using polymerase chain reaction (PCR) assays to quantify Human Immunodeficiency Virus (HIV) in human blood samples, and then correlating those measurements to the therapeutic effectiveness of antiretroviral drugs.

After Stanford brought an infringement suit against Roche Molecular Systems, Roche Diagnostics Corporation, and Roche Diagnostics Operations, Inc., the U.S. District Court for the Northern District of California found the patents invalid for obviousness under Section 103 of the Patent Act.

Stanford appealed.

Roche cross-appealed, arguing that it had ownership interests in the patents and asserting the affirmative defense that Stanford lacked standing to sue.

Roche Acquired Rights in Patents.

The Federal Circuit affirmed the dismissal of Roche’s ownership counterclaim, vacated the obviousness ruling, and remanded the case with instructions to dismiss Stanford’s suit for lack of standing.

A 1989 contract in which one inventor (Holodniy) agreed that “I will assign and do hereby assign” rights to the inventions was construed here by the court as assigning his future inventions to a company (Cetus), whose PCR assets were acquired by Roche. “Therefore, Cetus immediately gained equitable title to Holodniy’s inventions,” and “Cetus’s equitable title converted to legal title no later than the parent application’s filing date,” Judge Richard Linn wrote. Though Holodniy executed an assignment of his rights in the parent application to Stanford in May of 1995, this subsequent assignment was negated “because Cetus’s legal title vested first,” he continued.

The appellate court went on to find that Roche’s ownership claim was barred by California’s four-year statue of limitations. However, noting that Roche’s claim of ownership was both a counterclaim and an affirmative defense, the court found that Roche’s failure to timely seek judgment of ownership did not change the fact that Stanford was unable to establish that it possessed Holodniy’s interest in the patents in suit. This failure by Stanford defeats its right to assert its cause of action against Roche, the court said, quoting authority stating that “all co-owners normally must join as plaintiffs in an infringement suit.” Int’l Nutrition Co. v. Horphag Research Ltd., 257 F.3d 1324 (Fed. Cir. 2001).

The Federal Circuit held that Stanford thus lacked standing to assert its claims of infringement against Roche, and that the district court lacked jurisdiction over Stanford’s infringement claim and should not have addressed the validity of the patents.

The opinion was joined by Judges Kimberly Moore and Sharon Prost.

Stanford University was represented by Ricardo Rodriguez of Cooley Godward Kronish, Palo Alto, Calif. Roche was represented by Adrian R. Pruetz of Pruetz Law Group, El Segundo, Calif.

Read the Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems Inc. opinion.
 

CAFC Affirms Ruling That Method for Treating Alzheimer’s Disease With Galanthamine Is Invalid for Lack of Enablement

September 25, 2009

The U.S. Court of Appeals for the Federal Circuit ruled Sept. 25 that Janssen Pharmaceutica’s patented method of treating Alzheimer’s disease with the drug galanthamine is invalid for lack of enablement under Patent Act § 112, ¶ 1 (In re ’318 Patent Infringement Litigation, Fed. Cir., No. 2009-1594, 9/25/09).

Affirming a district court’s ruling, the court said that the patent specification here “does no more than state a hypothesis and propose testing to determine the accuracy of that hypothesis,” which “is not sufficient.”

However, in a dissenting opinion, Judge Arthur J. Gajarsa argued that the nonenablement ruling should have been vacated and remanded because district court erroneously focused on “what the prior art does or does not teach—the primary factual consideration underlying obviousness—while neglecting to consider what the patent text discloses to an ordinarily skilled artisan—the primary factual consideration underlying enablement.”

Galanthamine Treatment for Alzheimer’s.

Janssen Pharmaceutica N.V. has a patent (4,663,318) on a method for treating Alzheimer’s disease with galanthamine, or galantamine.

A host of drug manufacturers seeking Food and Drug Administration approval to market generic galanthamine filed “Paragraph IV” with the FDA pursuant to 21 U.S.C. § 355(j)(2)(A)(vii)(IV), which constitutes a technical act of infringement.

Janssen in turn sued each manufacturer for patent infringement, and the suits were consolidated.

After a bench trial, the district court found that the ‘318 patent invalid for lack of enablement under Patent Act § 112, ¶ 1, 35 U.S.C. § 112, ¶ 1. To the district court, the specification did not demonstrate utility because relevant animal testing experiments were “not finished . . . by the time the ’318 patent was allowed” and the specification provided only “minimal disclosure” of utility. Alternatively, it found that the specification and claims did not “teach one of skill in the art how to use the claimed method” because the application “only surmise[d] how the claimed method could be used” without providing sufficient galanthamine dosage information.

Janssen appealed.

Enablement and Utility Interplay.

The Federal Circuit began by emphasizing the Patent Act’s statement at 35 U.S.C. § 112, ¶ 1 that:

The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention.

Noting that enablement is “closely related” to the utility requirement of 35 U.S.C. § 101, it then stressed that section’s language:

Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.

Inventions must have “substantial utility” and “specific benefit exist[ing] in currently available form,” Judge Timothy B. Dyk observed, quoting Brenner v. Manson, 383 U.S. 519 (1966). He continued:

The utility requirement prevents mere ideas from being patented. As we noted in Genentech, Inc. v. Novo Nordisk A/S, 108 F.3d 1361, 1366 (Fed. Cir. 1997), “[p]atent protection is granted in return for an enabling disclosure of an invention, not for vague intimations of general ideas that may or may not be workable. . . . Tossing out the mere germ of an idea does not constitute enabling disclosure.” See also In re Fisher, 421 F.3d 1365, 1373 (Fed. Cir. 2005) (inventions fail to meet the utility requirement if their “asserted uses represent merely hypothetical possibilities, objectives which the claimed [inventions] . . . could possibly achieve, but none for which they have been used in the real world”).

The utility requirement also prevents the patenting of a mere research proposal or an invention that is simply an object of research. Again as the Supreme Court stated in Brenner, “a patent is not a hunting license. It is not a reward for the search, but compensation for its successful conclusion.” 383 U.S. at 536. A process or product “which either has no known use or is useful only in the sense that it may be an object of scientific research” is not patentable. Id. at 535. As we observed in Fisher, inventions do not meet the utility requirement if they are “objects upon which scientific research could be performed with no assurance that anything useful will be discovered in the end.” 421 F.3d at 1373. Allowing ideas, research proposals, or objects only of research to be patented has the potential to give priority to the wrong party and to “confer power to block off whole areas of scientific development, without compensating benefit to the public.” Brenner, 383 U.S. at 534. …

Specification Fails to Show Utility.

Within that framework, the Federal Circuit noted that patent applications claiming new methods of treatment are typically supported by test results. Still, it clarified that “that testing need not be conducted by the inventor” and “human trials are not required for a therapeutic invention to be patentable.”

However, here, the court could find noting at all in the specification to support galanthamine’s utility in treating Alzheimer’s. Dyk noted that the ‘318 patent specification was “only just over one page in length” and provided virtually no  basis for its stated conclusion that it was possible to administer “an effective Alzheimer’s disease cognitively-enhancing amount of galanthamine.” He further pointed out that the specification provided short summaries of six scientific papers in which galanthamine had been administered to humans or animals, but “did not provide analysis or insight connecting the results of any of these six studies to galanthamine’s potential to treat Alzheimer’s disease in humans.”  Dyk added that, in responding to indefiniteness and obviousness rejections, the patentee, Dr. Bonnie Davis, said that “experiments [are] underway” using animals to show that the drug improves the condition of those suffering from Alzheimer’s. He stressed that “Dr. Davis did not learn the results of the animal testing experiments—which suggested that galantamine could be a promising Alzheimer’s disease treatment—until July 1987, after the ’318 patent had issued,” and “no such testing results were ever submitted to the PTO.”

Citing Rasmusson v. SmithKline Beecham Corp., 413 F.3d 1318 (Fed. Cir. 2005), Dyk said, “at the end of the day, the specification, even read in the light of the knowledge of those skilled in the art, does no more than state a hypothesis and propose testing to determine the accuracy of that hypothesis. That is not sufficient.” He concluded that “[t]he ’318 patent’s description of using galantamine to treat Alzheimer’s disease thus does not satisfy the enablement requirement because the ’318 patent’s application did not establish utility.”
The district court’s ruling was affirmed.

Judge Haldane Robert Mayer joined the opinion.

Dissenting Opinion Takes Aim at  District Court’s Analysis.

In a dissenting opinion, Judge Arthur J. Gajarsa said that the real question here is “whether, at the time Dr. Davis filed her application, the patent’s written description would have credibly revealed to an ordinarily skilled artisan galantamine’s utility for AD treatment.” Finding that the district court never performed the correct enablement analysis to answer this question, he stated:

In terms of the present case, if Dr. Davis used her unique neuroendocrine perspective to examine the prior art and arrive at a novel insight about galantamine based on selected prior art findings, then the invention may be nonobvious; and if her patent disclosed those selected findings in such a manner that a person of ordinary skill would credit her insight regarding galantamine’s utility, then the invention is enabled.

Unfortunately, the district court committed error here by focusing generally on what the prior art does or does not teach—the primary factual consideration underlying obviousness—while neglecting to consider what the patent text discloses to an ordinarily skilled artisan—the primary factual consideration underlying enablement.

Gajarsa went on to argue that the finding on nonenablement ruling should have been vacated and remanded for a proper analysis by the district court.

Janssen was represented by George F. Pappas of Covington & Burling, Washington, D.C. William A. Rakoczy of Rakoczy Molino Mazzochi Siwik, Chicago, represented defendants Mylan Pharmaceuticals Inc., Mylan Laboratories Inc., and Alphapharm Pty Ltd. George C. Lombardi of Winston & Strawn, Chicago, represented Barr Laboratories and other defendants.

  Read the In re ’318 Patent Infringement Litigation opinion.
 

CAFC Finds No Inequitable Conduct by Patentee Who Omitted Compounds Not Structurally Similar to Claimed Quetiapine

September 25, 2009

The U.S. Court of Appeals for the Federal Circuit ruled Sept. 25 agreed that a patentee did not commit inequitable conduct by failing to provide the patent examiner with testing data on compounds that were not structurally similar to those identified in an obviousness rejection (AstraZeneca Pharmaceuticals LP v. Teva Pharmaceuticals USA Inc., Fed. Cir., No. 2008-1480, 9/25/09).

Affirming a district court’s ruling, the court said that the infringement defendants provided no evidence that the omitted compounds showed “atypical” results and were material to patentability. Further, the court found no evidence that the patentee intended to deceive the Patent and Trademark Office in failing to submit this information.  

Quetiapine Antipsychotic.

AstraZeneca Pharmaceuticals LP is the assignee of a patent (4,879,288) claiming the antipsychotic drug quetiapine, which it markets under the brand name “SEROQUEL®.” The ’288 patent explains that this product is an “atypical” antipsychotic drug, which means that, unlike “typical” antipsychotics, it does not produce involuntary body movements including torsion spasms, muscle spasms and dystonia of the face, neck, or back. The ’288 patent expires on September 26, 2011.

Teva Pharmaceuticals USA Inc. and Sandoz Inc. each filed abbreviated new drug applications for approval to sell their production of quetiapine under 21 U.S.C. § 355(j)(2)(A)(vii)(IV), certifying under “Paragraph IV” that the ’288 patent is invalid and/or not infringed. Since Paragraph IV certifications are, by statute, a technical act of patent infringement, AstraZeneca filed infringement suits against Teva and Sandoz.

The district court granted summary judgment that there was no inequitable conduct in the prosecution of the ’288 patent application.

Teva and Sandoz appealed.

No Material Omission During Prosecution.

Teva and Sandoz argued that inequitable conduct occurred during prosecution when AstraZeneca failed to provide the Patent and Trademark Office with the internal test results for perlapine, fluperlapine, Compound 21076, and Compound 24028, which were not relied upon in the examiner’s structural obviousness rejection. Teva and Sandoz also attacked AstraZeneca’s substitution of the Schmutz B compound in place of the Schmutz X compound during prosecution.

However, the Federal Circuit affirmed the ruling no inequitable conduct.

This charge, Judge Pauline Newman observed, requires proof by clear and convincing evidence of both (1) an affirmative misrepresentation of material fact, a failure to disclose material information, or submission of false material information, and (2) an intent to deceive the examiner by such material falsity. “Appellants do not assert that AstraZeneca had data for Schmutz X and withheld it; nor do they argue that Schmutz X is in fact atypical, and no data are presented to this effect,” she said. Rather, Newman noted that the argument here seems more that because of the structural similarity between Schmutz X and Compound 24028, Schmutz X could be atypical, and thus should have been synthesized and its antipsychotic properties tested.

Newman rejected the suggestion that AstraZeneca’s failure to test in this way was a material withholding or omission, stating:

Although there may be situations in which the failure to conduct specific tests of specific compounds can be criticized, in this case there was no evidence that the information gleaned, if such tests had been conducted, would have been material to patentability. It was not disputed that it was unpredictable whether a given compound would exhibit atypical antipsychotic properties. The record demonstrates that structural similarity is not a predictor of whether antipsychotic behavior would be typical or atypical. As AstraZeneca points out, the properties of these structurally similar compounds vary significantly with minor structural changes. The Appellants made no showing as to whether the structural similarity between Schmutz X and Compound 24028 would establish whether Schmutz X would have atypical properties. In the context of the knowledge in this field, as reflected in the various references, AstraZeneca’s provision of its existing test data for Schmutz B, instead of preparing and testing Schmutz X, cannot constitute a material misrepresentation. The district court correctly so held.

Further, Newman noted that the patent examiner did not dispute AstraZeneca’s scientific position and accepted the proffered data on Schmutz B as the closest prior art. “Accordingly, AstraZeneca’s substitution of Schmutz B in place of Schmutz X was not a material misrepresentation, and the non-provision of the data on Compound 24028, which is structurally less similar to quetiapine, was not a material omission,” she wrote.

No Intent to Mislead PTO.

Having found no material omission by AstraZeneca, the appellate court also failed to find any proof that the company intended to deceive the PTO during prosecution.

Quoting Dayco Products Inc. v. Total Containment Inc., 329 F.3d 1358 (Fed. Cir. 2003), it stressed that “inequitable conduct requires not intent to withhold, but rather intent to deceive. Intent to deceive cannot be inferred simply from the decision to withhold [information] where the reasons given for the withholding are plausible.” It said that Teva and Sandoz offered no evidence of intent, but only pointed to the omitted data. The trouble with this rationale, the court said, is that “an applicant would not know how much of its research effort must be filed with the PTO, although of no interest to the examiner, or run the risk of accusation of wrongdoing no matter where the line is drawn.”

Newman continued:

As we have discussed, the omitted test data were not material because the compounds were not the structurally closest compounds, whereas AstraZeneca and the examiner focused on the structurally closest compounds. Although the Appellants argue that this is an inadequate reason, no evidence of bad faith has been proffered concerning the omission of data for the less similar compounds, AstraZeneca presented plausible reasons for its presentation of arguments and data during the prosecution, and although the Appellants dispute AstraZeneca’s reasoning, intentional withholding for the purpose of deceiving the examiner is unsupported by evidence sufficient to avert summary judgment.

The district court’s ruling was affirmed.

Judges Randall R. Rader and Sharon Prost joined the opinion.

AstraZeneca was represented by Henry J. Renk of Fitzpatrick Cella, Harper & Scinto, New York. Teva was represented by Ira J. Levy of Goodwin Proctor, New York. Sandoz was represented by Douglass C. Hochstetler of Schiff Hardin, Chicago.

Read the AstraZeneca Pharmaceuticals LP v. Teva Pharmaceuticals USA Inc. opinion.

 

Federal Circuit Vacates Judgment That Stamps.com Did Not Infringe Patents for Verifying Authenticity of Printed Documents

September 24, 2009

The U.S. Court of Appeals for the Federal Circuit on Sept. 24 vacated a summary judgment of noninfringement in favor of Stamps.com because it found that the district court based its ruling on an incorrect reading of a claim term in patents for verifying the authenticity of printed documents (Kara Technology Inc. v. Stamps.com Inc., No. 2009-1027, 9/24/09).

Further, finding issues of material fact in dispute, the court reversed a summary judgment that Stamps.com did not breach the terms of a nondisclosure agreement with the patentee.

Document Authentication Technology.

Kara Technology Inc. has two patents (6,505,179 and 6,735,575) on technology for verifying the authenticity of printed documents. In May of 2000, Kara and Stamps.com executed a nondisclosure agreement regarding the technology, but Stamps.com backed away from the business relationship two months later. In October of 2001, Stamps.com announced that the U.S. Postal Service had approved beta testing of its PC-based postage products allowing consumers to print stamps from home.

Kara sued Stamps.com for patent infringement and breach of contract.

However, the district court granted a summary judgment of no patent infringement and no breach of contract.

Kara appealed.

`Security Indicia’ Misconstrued by District Court.

Reviewing the claim construction de novo, the appellate court turned its attention to Claim 36 of the ’179 patent, which is representative of the claims disputed on appeal. Claim 36 recites a method in which:

said security indicia created in part by information contained in said preestablished media data and whereby said security indicia is validatable at a subsequent time partially under control of data contained in said preestablished paper data … 

In its Markman ruling, the district court construed “security indicia” to require that the indicia must “be created under control of a key” and found that the “information contained in” the preestablished data must be a “key.”

However, the Federal Circuit agreed with Kara’s argument that the preestablished data does not have to contain a key, and that the security indicia does not have to be created or validated by a key in that data.

Judge Kimberly A. Moore explained:

The claims at issue do not state that the preestablished data contain a key; they state that the data contain “information.” Specifically, the plain language of the claims requires that the security indicia be “created in part by information contained in preestablished media data.” …  This language does not require that the preprinted data contain a key, and certainly not a cryptographic key (as argued by Stamps.com), from which the security indicia would be generated. The preestablished data must, as the claim requires, simply contain information that will be used to create the security indicia—the information will be part of what creates the security indicia. Similarly, the claim requires that “security indicia is validatable at a subsequent time partially under control of data contained in said preestablished paper data.” This merely requires that the data in the preestablished paper data (in this case the serial number on the preprinted label) is part of what must be used to validate the security indicia. It in no way requires a key in the preestablished paper data.

Continuing, Moore noted that “when the inventor wanted to restrict the claims to require the use of a key, he did so explicitly.” She said that, although certain embodiments in the specification mention a key being embedded in the preestablished data, [t]his is not enough … to limit the patentee’s clear, broader claims.”

Citing Corning Glass Works v. Sumitomo Elec. U.S.A., Inc., 868 F.2d 1251 (Fed. Cir. 1989) and the en banc ruling in Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005), Moore added:

The claim language read in the context of the specification does not require that a key be contained in the preestablished data, the patentee did not act as his own lexicographer or disavow claim scope. It is the claims that define the metes and bounds of the patentee’s invention. … The claims, not specification embodiments, define the scope of patent protection. The patentee is entitled to the full scope of his claims, and we will not limit him to his preferred embodiment or import a limitation from the specification into the claims. …

Accordingly, the appellate court vacated the summary judgment of noninfringement.

Fact Issues Remain as to Breach of Contract.

Finally, the appellate court reversed the summary judgment in favor of Stamps.com on the breach of contract claim.

While agreeing that one of Kara’s claim was barred by Texas’s four-year statute of limitations, the court found material issues of fact existing as to another claim based on an alleged breach of the nondisclosure agreement that Kara did not become aware of until Stamps.com publicly announced the U.S. Postal Service’s beta testing. “Stamps.com did not carry its burden of establishing no material fact as to the date Kara discovered this misuse,” Moore said, remanding this issue.

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

The opinion was joined by Judge Alvin A. Schall and Senior Judge S. Jay Plager.

Kara was represented by Eliot D. Williams of Baker Botts, New York. Stamps.com was represented by Philip J. Graves of Graves Law Office, Los Angeles.

Read the Kara Technology Inc. v. Stamps.com Inc. opinion.
 
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