MVS Filewrapper® Blog: New and Useful - July 10, 2013

·         In Convolve v. Compaq Computer the Federal Circuit affirmed in part the United States District Court for the Southern District of New York ruling that Compaq Computer Corp., Seagate Technology, LLC., and Seagate Technology, Inc. did not misappropriate 11 of 15 alleged trade secrets from Convolve, Inc.  In addition, the Federal Circuit affirmed the district court’s judgment that 8 claims of U.S. Patent No. 4,916,635 (“the ’635 patent”) are invalid.  However, the Federal Circuit vacated the district court’s ruling that Compaq did not infringe several claims of U.S. Patent No. 6,314,473 (“the ’473 patent”), and remanded the case for further proceedings relating to that patent. 

Convolve and Massachusetts Institute of Technology (“MIT”) sued Compaq and Seagate for both trade secret misappropriation and patent infringement, all related to technology developed by Dr. Neil Singer while a graduate student at MIT.  The technology involves seeks in computer hard drives, and minimizing the vibrations created by those seeks—the ’635 patent discloses a method “for generating an input to a system to minimize unwanted dynamics in the system response and to reduce energy consumed by the system during moves,” and an apparatus for shaping commands to a system “to reduce endpoint vibration.” The ’473 patent covers the same type of technology, but relating specifically to data storage devices such as computer disk drives.  The ’473 patent is owned by Convolve, a company owned by Dr. Singer, and the ’635 patent is owned by MIT.  Convolve is the exclusive licensee of MIT software motion control technology called Input Shaping, which Convolve alleges is covered by the trade secrets and patents involved in the case. 

Convolve entered into licensing discussions with Compaq, which included a non-disclosure agreement (NDA) signed by both parties and covering confidential information disclosed between August 13, 1998 and October 15, 2000, but explicitly excluding any information that: (1) the recipient possessed prior to disclosure; (2) was a matter of public knowledge; (3) was received from a third party without a duty of confidentiality attached; (4) was independently developed by the recipient; (5) was disclosed under operation of law; or (6) was disclosed by the recipient with the discloser’s prior written approval.  The NDA further stated that any confidential material or presentations must be particularly identified as confidential.  Compaq sought to include Seagate as the potential designer and manufacturer of hard disk drives incorporating Convolve’s technology to include in Compaq’s computers.  Convolve then disclosed its technology to Compaq and Seagate, but Convolve and Compaq/Seagate never entered into a licensing agreement.

Convolve filed suit alleging breach of contract, misappropriation of trade secrets, patent infringement of the ’473 patent, ’635 patent and breach of good faith and fair dealing.  The district court granted Compaq and Seagate’s motions for summary judgment, dismissing Convolve’s claims of breach of contract, infringement of the asserted claims of the ’473 and ’635 patents, and misappropriation of a subset of the trade secrets asserted against Compaq and Seagate; and granting Seagate’s motion for summary judgment for invalidity of the ’635 patent.  

Regarding the alleged trade secrets, the Federal Circuit upheld the district courts findings and judgment that Compaq and Seagate had not misappropriated 7 of the asserted trade secrets because Convolve disclosed the information in the absence of a written confidentiality follow-up memorandum mandated by the NDA.  The Federal Circuit also affirmed the district court’s ruling that 6 of the asserted trade secrets were either generally known before any disclosure by Convolve or were not used by Seagate following any disclosure by Convolve.  Further, the court rejected Convolves argument that Seagate’s actions constituted trade secret misappropriation under the California Uniform Trade Secret Act notwithstanding the NDA, concluding that where the parties have contracted the limits of their confidential relationship regarding a particular subject matter, one party should not be able to circumvent its contractual obligations or impose new ones over the other via some implied duty of confidentiality.

The Federal Circuit vacated the district court’s grant of summary judgment to Seagate and Compaq for non-infringement of the asserted claims of the ’473 patent, concluding that there were material issues of fact that precluded a grant of summary judgment  as to direct or indirect infringement.  The court also concluded that there was sufficient evidence to preclude summary judgment for induced infringement on the basis of the court’s recent holding in Toshiba Corp. v. Imation Corp. that when an alleged infringer instructs users to use a product in an infringing way, there is sufficient evidence for a jury to find direct infringement.

·         The Federal Circuit in Wyeth v. Abbott Laboratories upheld the U.S. District Court for the District of New Jersey's grant of summary judgment that claims 1 and 2 of U.S. Patent No. 5,516,781 and claim 1 of U.S. Patent No. 5,563,146 are invalid for nonenablement.  The patents relate to the use of rapamycin for the treatment of restenosis.  The patents disclosed use of the rapamycin species sirolimus to reduce thickening of arterial walls.  Wyeth sued the defendants for patent infringement for their products that elute everolimus and zotarolimus.  These compounds fall under the umbrella of rapamycin, but are not mentioned in the specification of the Wyeth patents.

The main issue on appeal was whether practicing the full scope of the claims requires excessive experimentation.  The specification describes assays used to determine whether a potential rapamycin compound exhibits the desired characteristics of immunosuppressive and antirestenotic effects.  Wyeth argued that even though millions of compounds would meet these criteria, one of skill in the art would know that an effective compound had to be small enough to permeate cell membranes.  However, that still leaves tens of thousands of compounds to test and the specification gave no indication of which types of rapamycin compounds would be preferable over others, leaving scientists to synthesize and screen each and every compound. 

While synthesizing and screening compounds is considered routine experimentation, the Court noted in Cephalon, Inc. v. Watson Pharm., Inc. that routine experimentation is "not without bounds."  One indication of excessive experimentation is length of time that would be spent to do the experiments.  Wyeth's expert admitted that it would take technicians weeks to complete each of the assays. 

A final indicator that the invention is not enabled is the unpredictability of the field.  Simply offering a starting point for further research in field like organic chemistry does not properly enable an invention.  Due to the uncertainty, there needs to be more concrete guidance given in the specification in order to avoid undue experimentation.

Ultimately, the Federal Circuit determined that synthesizing and screening tens of thousands of candidate compounds constituted undue experimentation.  While they did not draw a definitive line between routine experimentation and undue experimentation, the Court did provide some guidance on what could be considered excessive experimentation in organic chemistry.

·         In Commil USA v. Cisco Systems, Cisco Systems appealed a district court final judgment in favor of Commil, asserting that the district court gave erroneous jury instructions, improperly precluded Cisco from presenting evidence of good-faith belief of invalidity, and abused its discretion by granting a new partial trial.  On appeal, the Federal Circuit found that the district court gave erroneous instructions to the jury with respect to indirect infringement and that evidence of a good-faith belief of invalidity may negate the intent required to show induced infringement.  The Court determined that the district court did not err in granting the partial new trial.

In regard to the issue of indirect or induced infringement, the jury had been instructed in part that to show induced infringement, "Cisco knew or should have known that its actions would induce actual infringement."  In light of the Supreme Court's decision in Global-Tech Applicances, Inc. v. SEB S.A., which held that induced infringement "requires knowledge that the induced acts constitute patent infringement," a finding of induced infringement may no longer be based on recklessness or negligence.  As such, the Federal Circuit concluded that the jury instructions were erroneous as a matter of law.  The Court found that this erroneous instruction could have changed the result of the trial.  Due to the prejudicial effect of the jury instruction, the Court vacated the verdict of induced infringement and remanded for a new trial. 

With respect to invalidity, Cisco had provided evidence to support its good-faith belief that the patent at issue was invalid.  However, the district court granted Commil's motion in limine to exclude that evidence.  Federal Circuit case law has shown that evidence of a good-faith belief of non-infringement tends to show that an accused inducer of infringement lacked the requisite intent.  Similarly, the Court in this case found that a good-faith belief of invalidity serves the same purpose as a good-faith belief of non-infringement as far as specific intent is concerned.  The Court noted that "one could be aware of a patent and induce another to perform the steps of the patent claim, but have a good-faith belief that the patent is not valid.  Under those circumstances, it can hardly be said that the alleged inducer intended to induce infringement."  The Federal Circuit ultimately held that a good-faith belief of invalidity can negate the specific intent required for induced infringement.

Judge Newman dissented with regard to this portion of the ruling, finding that the Court had changed the law of induced infringement.  She stated that a good-faith belief in invalidity does not avoid liability for infringement because infringement in fact does not depend on the belief of the accused infringer.  Judge Newman relied on tort theory to support her position that "A mistake of law, even if made in good faith, does not absolve a tortfeasor."

With respect to the decision to grant a partial new trial on the issues of indirect infringement and damages, the Federal Circuit determined that it did not violate the Seventh Amendment because the issues were distinct and separable.  The jury in the partial trial was asked to determine whether Cisco possessed a good-faith belief of invalidity, but not whether the patent was in fact invalid.  Cisco argued that these issues are intertwined, but the Court determined that they could be separate issues. 

Judge O'Malley disagreed with this part of the decision, believing that Cisco was deprived of its right to a jury trial under the Seventh Amendment.  She noted that because statements by Cisco's counsel were prejudicial towards the Jewish inventors of Commil, the entire trial was affected.  As a result, Commil was entitled to an entire retrial of all of the issues instead of a partial new trial.

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