MVS Filewrapper® Blog: Bring on the New Year—What is in Store for IP in 2014?

Happy New Year to all of our FilewrapperÒ followers! We hope 2013 was a productive year and wish you the best in 2014. As the New Year quickly approaches we would like to share with you a few predictions for 2014 for you to look forward to and for which to prepare!

·         Increased opportunities for quasi-litigation under AIA.  Various new mechanisms are available to challenge patents under the America Inventors Act (also referred to as “AIA” or “Patent Reform”) many provisions of which took effect in 2013. New strategies are available to challenge patents at the USPTO instead of challenging in court, providing distinct advantages—and some disadvantages.  Inter Partes Review, Post-Grant Review and transitional programs specific for business method patents are quasi-litigation proceedings which are heard by a panel of USTPO administrative law judges.  Ex Parte Reexamination—which has been available since 1981—also remains to allow a patent challenge to be heard by a patent examiner, requiring little from the challenger other than filing required papers with some evidence of patent invalidity.  The cost for ex-parte reexamination has significantly increased, although it remains a far less expensive option than litigation with the courts.

·         (Finally) an international design patent application is available!  Design patents protect a product’s new, original and ornamental design.  Design patents present a smart option for investment in protecting a product, since they cost significantly less than utility patents and are generally granted at a much faster rate.  In addition to these benefits of filing design patents, changes in international design registration under the Hague Agreement may facilitate more effective international protection for your design inventions.  Effective December 18, 2013 a single international application designating a variety of countries for protection can be filed through the International Bureau of WIPO.  This is beneficially a single international application to be filed at one location, which will ultimately be examined by many different Offices thereafter to provide more prompt and cost effective options for design protection.  Over 60 countries and territories—including the European Union—are members of the Hague Agreement.  However, there are various countries that are excluded from this treaty (e.g. Australia, Canada, China, Mexico, Japan, India, and Brazil), which would require a separate application as has been done in the past for foreign design patents.  Nonetheless, the Hague Agreement provides significant improvements for international design protection.

·         (Some USPTO) Fees Decrease January 1, 2014.  In addition to the new classification of “micro-entity” status for Applicants to receive 75% reduction of some USPTO fees that took effect in 2013, the New Year also brings certain fee reductions.  Notably, Issue Fee payments for granted patents are substantially reduced (from $1,780 to $960 for large entity), along with the removal of publication fees and assignment recordation fees.  Reissue patent, design patent and plant patent issue fees are also decreasing.  In addition, in 2014 certain PCT fees will be eligible for payment under small and micro entity status.

·         The search continues for a test to determine patentable subject matter under §101.  The Supreme Court will hear CLS Bank v. Alice in 2014 after the Federal Circuit’s en banc decision in 2013 found many software patents to be ineligible.  The Supreme Court will again try to define an abstract idea in considering whether claims to a computerized method (using a computer-readable medium and a computer to implement instructions) is patentable subject matter.  Both the Federal Circuit and patentees are still searching for a test under §101 that is “consistent, cohesive, and accessible [to provide] guidance and predictability for patent applicants and examiners, litigants, and the courts.”

·         We may receive further guidance on Claim Indefiniteness.  The Supreme Court is expected to grant certiorari on Nautilus v. Biosig Instruments involving indefiniteness under §112, second paragraph to determine whether claims having multiple reasonable interpretations are too ambiguous and would render a patent unenforceable for lack of written description.

·         Protecting American from “Patent Trolls.”  As previously reported on FilewrapperÒ, there is legislative movement in the House and Senate to limit lawsuits which can be filed by non-practicing entities (NPEs or Patent Trolls).  There seems to be great energy around limiting “frivolous” lawsuits in our court system.  In early 2014, the Senate will consider a companion bill to Senate 1720 ("Patent Transparency and Improvements Act of 2013"), which is said to already have support from the White House.  If legislation passes the Senate, then the House and Senate bills will need to be reconciled before being sent to the President.

·         New Patent Director.  Stay tuned for further administrative changes at the USPTO as the new Director, Michelle Lee, takes office January 13, 2014. The former Google executive has been made deputy director of the USPTO, and in that capacity will take on the duties of acting director.  Lee has issued statements planning to “attack” the backlog of unexamined patents (remains at more than 500,000) and improve patent quality with improved inter partes review.

MVS Filewrapper® Blog: New and Useful - January 31, 2013

·       In Soverain Software LLC v. Newegg Inc. the Federal Circuit vacated in part and reversed in part an Eastern District of Texas decision finding Newegg Inc. liable for infringement of U.S. Patent Nos. 5,715,314, 5,909,492, and 7,272,639, all relating to electronic commerce.  The Federal Circuit offered clarifying insight on the obviousness doctrine.  The background facts are as follows:  Soverain Software purchased three software patents through bankruptcy proceedings and then proceeded to sue seven different entities for infringing the patents.  Six of the defendants settled and entered paid up license agreements with Soverain.  The seventh defendant, Newegg, refused to settle and argued that the asserted patents are all invalid and even if valid, Newegg’s system is different and non-infringing.  At trial, the district court refused to permit Newegg to present its obviousness argument to the jury and ruled that the patents were valid as a matter of law.  The jury found that Newegg had infringed two of the patents but not the third; the district court, however, entered judgment as a matter of law that Newegg infringed the third patent.  Newegg appealed and the Federal Circuit found all three patents obvious.  The federal circuit had three major discussion points:  (1) each element of the disputed claims was found in the prior art, (2) combining those elements would be obvious to one of skill in the art, and (3) licenses entered in settlement to a lawsuit do not constitute evidence of commercial success. 

 

·       In Rexnord Industries, LLC v. Kappos the Federal Circuit reversed a BPAI decision holding claims for a mechanical conveyor belt patentable.  The patent in question was asserted by Habasit Belting, Inc. against Rexnord Industries in an infringement suit in Delaware district court.  Rexnord filed a request for inter partes reexamination.  The examiner in the reexamination found all of the claims to be unpatentable for anticipation or obviousness. Habasit appealed the examiner’s findings, and the BPAI reversed, concluding that the claims of the patent were not anticipated by any of the references cited in the reexamination, and were unobvious over the cited references.  Rexnord appealed the BPAI decision to the Federal Circuit, arguing that the BPAI erroneously refused to review all of the arguments that Rexnord had presented as grounds for unpatentability.  The PTO countered that the BPAI only needed to consider the issue raised by Habasit on appeal, and had no obligation to consider other grounds that had been presented during reexamination, relying on a BPAI rule that “bars the presentation of new arguments outside appellant’s opening brief.”  The Federal Circuit noted that Rexnord was not the appellant before the BPAI since Habasit appealed the examiner’s decision, and concluded that the alternative bases for obviousness raised in the reexamination were properly raised on appeal to the Federal Circuit because they were fully raised in the reexamination and were not an issue for patentability until after the Board reversed the examiner.  The court then found the claims obvious on these additional grounds.

       

·       In Hall v. Bed Bath & Beyond, the Federal Circuit affirmed a Southern District of New Your district court’s dismissal of counts against Bed Bath & Beyond (BB&B) executives and counterclaims filed by BB&B, but concluded that the district court’s dismissal of Hall’s design patent infringement, unfair competition, and misappropriation claims for failure to state a claim on which relief can be granted under Federal Rule of Civil Procedure 12(b)(6).  BB&B argued in its motion to dismiss, and the district court agreed, that the complaint was insufficient because if failed to include any claim construction, but the Federal Circuit held the complaint met the requirements for pleading design patent infringement previously set out by the court in Phonometrics, Inc. v. Hospitality Franchise Systems, Inc.  Specifically, the court found the complaint (i) alleged ownership of the patent, (ii) named each defendant, (iii) cited the patent that was allegedly infringed, (iv) stated the means by which the defendant allegedly infringed, and (v) pointed to the sections of the patent law invoked, and in doing so met its burden to withstand a motion to dismiss under Rule 12(b)(6), Twombly and Iqbal. 

 

·       In LG Display Co. v. Obayashi Seikou Co., 2013 U.S. Dist. LEXIS 10785 (D.D.C. 2013) The district court for the District of Columbia issued a ruling in a case between LG and Obayashi Seikou Co., LTD that goes back nearly a decade, centering on LG’s allegations that a former employee stole proprietary information and passed it along to Obayashi Seikou Co., who then obtained several patents on the technology.  Prior to the U.S. litigation, the parties had entered into a settlement agreement, and after the settlement failed, litigated the settlement agreement in the Korean courts.  In the Korean litigation LG secured a judgment from Korea’s highest court holding that the settlement agreement was valid, and the defendants were required to transfer their patents to LG, under the terms of the agreement.  LG then filed suit in the District of Columbia seeking recognition of the Korean judgment, as well as claiming misappropriation of trade secrets, conversion, and unjust enrichment.  The district court granted in part LG’s motion for partial summary judgment, recognizing the Korean judgment, but concluded that ownership of two related patents involved factual disputes and was not ready for summary judgment. 

Federal Circuit clarifies how to analyze likelihood of success at preliminary injunction stage

The Federal Circuit Wednesday affirmed a district court's denial of preliminary injunction to the plaintiffs (a patentee and its licensee with a right to enforce the patent) in a design patent case. The district court held there was a substantial question regarding the validity of the patent that was not shown to lack substantial merit, and therefore the plaintiffs were not likely to succeed on the merits.

On appeal, the Federal Circuit took the opportunity to clarity how district courts should assess likelihood of success in patent cases, particularly when invalidity is raised in response to the motion for preliminary injunction. Specifically, the court observed:

[W]hen analyzing the likelihood of success factor, the trial court, after considering all the evidence available at this early stage of the litigation, must determine whether it is more likely than not that the challenger will be able to prove at trial, by clear and convincing evidence, that the patent is invalid. We reiterate that the "clear and convincing" standard regarding the challenger's evidence applies only at trial on the merits, not at the preliminary injunction stage. The fact that, at trial on the merits, the proof of invalidity will require clear and convincing evidence is a consideration for the judge to take into account in assessing the challenger's case at the preliminary injunction stage; it is not an evidentiary burden to be met preliminarily by the challenger.

If the trial court is persuaded, then it follows that the patentee by definition has not been able to show a likelihood of success at trial on the merits of the validity issue, at least not at this stage. This decision process, which requires the court to assess the potential of a "clear and convincing" showing in the future, but in terms of what is "more likely than not" presently, rests initially in the capable hands and sound judgment of the trial court.

Applying this standard, the Federal Circuit determined the district court did not abuse its discretion in denying the injunction.

More detail of Titan Tire Corp. v. Case New Holland, Inc. after the jump.

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En banc Federal Circuit scraps point of novelty test for design patent infringement

In an en banc decision this morning, the Federal Circuit has unanimously held that the "point of novelty" test for design patent infringement should no longer be applied.  As stated by the court:

[W]e hold that the "point of novelty" test should no longer be used in the analysis of a claim of design patent infringement. Because we reject the "point of novelty" test, we also do not adopt the "non-trivial advance" test, which is a refinement of the "point of novelty" test. Instead, in accordance with Gorham and subsequent decisions, we hold that the "ordinary observer" test should be the sole test for determining whether a design patent has been infringed. Under that test, as this court has sometimes described it, infringement will not be found unless the accused article "embod[ies] the patented design or any colorable imitation thereof."

In addition, the court held that claim construction is not necessary (and, in fact, not "preferable") in a design patent case, but is permitted.  As stated by the court:

Given the recognized difficulties entailed in trying to describe a design in words, the preferable course ordinarily will be for a district court not to attempt to "construe" a design patent claim by providing a detailed verbal description of the claimed design.

With that said, it is important to emphasize that a district court's decision regarding the level of detail to be used in describing the claimed design is a matter within the court's discretion, and absent a showing of prejudice, the court’s decision to issue a relatively detailed claim construction will not be reversible error. At the same time, it should be clear that the court is not obligated to issue a detailed verbal description of the design if it does not regard verbal elaboration as necessary or helpful.  In addition, in deciding whether to attempt a verbal description of the claimed design, the court should recognize the risks entailed in such a description, such as the risk of placing undue emphasis on particular features of the design and the risk that a finder of fact will focus on each individual described feature in the verbal description rather than on the design as a whole.

A discussion of the panel decision may be found in this post, and detail regarding the en banc petition is in this post.

More detail of Egyptian Goddess, Inc. v. Swisa, Inc. after the jump.

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Federal Circuit grants rehearing en banc in design patent case

The Federal Circuit today granted a petition for rehearing en banc in a design patent case, Egyptian Goddess, Inc. v. Swisa, Inc.  In that case, the court held that when a design patent's "point of novelty" is a combination of existing design elements, the point of novelty must be a "non-trivial" advance over the prior art.  This essentially incorporated an obviousness-type inquiry into the infringement analysis, as in order to infringe a design patent, the allegedly infringing article must incorporate a point of novelty of the patented design.

Judge Dyk dissented, arguing that the new test conflated the tests for design patent validity and infringement.

Update (11/27):  A copy of the order granting rehearing en banc is availble here.  According to the order, there are three issues to be considered:

  1. Should "point of novelty" be a test for infringement of design patent?
  2. If so, (a) should the court adopt the non-trivial advance test adopted by the panel majority in this case; (b) should the point of novelty test be part of the patentee's burden on infringement or should it be an available defense; (c) should a design patentee, in defining a point of novelty, be permitted to divide closely related or, ornamentally integrated features of the patented design to match features contained in an accused design; (d) should it be permissible to find more than one "point of novelty" in a patented design; and (e) should the overall appearance of a design be permitted to be a point of novelty? See Lawman Armor Corp. v. Winner Int'l, LLC, 449 F.3d 1190 (Fed. Cir. 2006).
  3. Should claim construction apply to design patents, and, if so, what role should that construction play in the infringement analysis? See Elmer v. ICC Fabricating, Inc., 67 F.3d 1571, 1577 (Fed. Cir. 1995).

It is interesting that the court is considering completely scrapping both the point of novelty test and the concept of claim construction in the context of design patents.  In any event, it is good that the court is reconsidering its holding in Lawman Armor, as that case has caused considerable controversy (see here and here for examples), and resulted in the court issuing a supplemental opinion to clairfy its original ruling.

More detail on the case may be found in our original post here.

Patently-O provides this reportI/P Updates offers thoughts on the case here.

"Ordinary observer" can be commercial buyer when buyer uses designed item as part of retail product

In a recent decision, the Federal Circuit affirmed a district court’s order granting summary judgment of non-infringement of two design patents.  Specifically, the court acknowledged that the Supreme Court's decision in Gorham Co. v. White held that an "ordinary observer" for purposes of design patent infringement cannot be an expert.  Nevertheless, in this case, the "ordinary observer" was not the end-user of the product, but rather industrial buyers who used the designed items as component parts assembled into a final retail product.

Based on this determination of the "ordinary observer," the district court's determination of no infringement was affirmed, as it was undisputed that to these "industrial buyers," the designs were not substantially similar.

More detail of Arminak & Assocs., Inc. v. Saint-Gobain Calmar, Inc. after the jump.

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When point of novelty is a combination of existing elements, it must be a "non-trivial" advance

In a case decided yesterday, the Federal Circuit clarified the point-of-novelty test for design patents when the point of novelty is a combination of existing design elements.  The court adopted the rule that "to constitute a point of novelty, the combinations must be a non-trivial advance over the prior art."  The court likened this analysis to an obviousness inquiry of a validity analysis. 

In a strong dissent, Judge Dyk stated that this "non-trivial" test conflates the criteria for infringement and validity, is both too broad and too narrow, would be to difficult to apply to design patent cases, and does not have support in Federal Circuit case law.  

More detail of Egyptian Goddess, Inc. v. Swisa, Inc. after the jump.

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Analysis of overall appearance determines whether patented design is dictated by function

            In PHG Technologies, LLC v. St. John Companies, Inc., the Federal Circuit vacated the preliminary injunction of the district court finding St. John raised a substantial questions of validity of the two patents-at-issue.

            At issue were two design patents owned by PHG: the '405 and '197 patents.  The '405 and '197 patents depend from a utility patent for patient identification labels.  The '405 patent claims an ornamental design for the medical label sheet and the '197 patent claims the ornamental design for a label pattern for a medical label sheet.  The difference between the two patents is that the border is part of the design claimed in the '405 patent but not part of the design claimed in the '197 patent.   St. John also sold medical patient identification labels.  Prior to PHG's design patents issued, PHG notified St. Johns's that the design of St. John's medical label sheet infringed the pending PHG patents.  St. John did not respond to PHG's letter and continued to sell its medical label sheet.  After PHG's patents issued, it filed suit against St. John alleging infringement moving for a preliminary injunction against St. John's continued sale of its accused medical label sheet.  The district court granted PHG's motion for a preliminary injunction finding PHG's patents valid in that the design claimed was not dictated by function, and that St. John's  accused design appropriated the novelty of PHG's patented design.  The district court concluded that PHG demonstrated a likelihood of success on the merits, established that it would be irreparably harmed if an injunction did not issue, and showed that the balance of hardships and public interest weighed in favor of enjoining St. John continuing to sell its accused design.

             In vacating the district court's preliminary injunction, the Federal Circuit found, with respect to St. John's challenge of the likelihood of success on the merits that the district court erred, based on the evidence of record, in not making a full inquiry with respect to the design of the label as it affects the utility of the label.

To read the complete decision, click here.

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