MVS Filewrapper® Blog: USPTO Patent Invalidation Precludes Judicial Equitable Remedies and Sanctions

The U.S. Court of Appeals for the Federal Circuit has issued a decision in ePlus, Inc. v. Lawson.  ePlus sued Lawson asserting infringement of two patents—U.S. Patent Nos. 6,023,683 ("the '683 patent") and 6,505,172 ("the '172 patent").  At trial, the district court held two of ePlus's asserted system claims and three of ePlus's asserted method claims not invalid, and the jury found those same claims infringed by Lawson. 

 

The district court entered an injunction against Lawson, precluding Lawson from "directly or indirectly making, using, offering to sell, or selling within the United States or importing into the United States any of the [adjudged infringing] product configurations and/or installation, implementation, design, configuration, consulting, upgrade, maintenance and support and training and other related and associated services and any colorable variations thereof (the “Infringing Products and Services”)." Lawson appealed, and the Federal Circuit reversed in part, holding the system claims invalid and two of three method claims not infringed.  The Federal Circuit remanded the case to district court to modify the injunction accordingly.

 

On remand the district court modified the injunction so that it only applied to infringement of claim 26 of the '683 patent—the sole remaining method claim.  Further, the district court found Lawson in civil contempt for violating the injunction.  Lawson appealed both the injunction and the contempt order.  While the appeal was pended, the United States Patent and Trademark Office ("USPTO") completed a reexamination of the '683 patent and determined that the sole remaining claim from the litigation—method claim 26—was invalid and cancelled.  In a separate appeal, the Federal Circuit affirmed the USPTO's invalidity determination.  Thus, the present appeal presented two questions:  (1) whether the district court’s modified injunction against Lawson should be set aside in light of the PTO's cancellation of the patent claim on which it was based; and (2) whether the civil contempt sanctions should be set aside. 

 

The Federal Circuit held there was no sufficient legal basis to maintain the injunction and that it must be set aside.  In support of this holding, the Federal Circuit noted, "It is well established that an injunction must be set aside when the legal basis for it has ceased to exist. . . .  Our court has applied these principles to an injunction barring infringement of patents later found to be invalid."  Because the sole remaining claim upon which the injunction was based had been invalidated—by the PTO; affirmed by the Federal Circuit—there was no legal basis for maintaining the injunction.

 

The Federal Circuit also held that the civil contempt sanctions should be set aside.  This was, in part, due to the fact that the injunction was not final and because it was a civil contempt order that was meant to compensate the ePlus for injury suffered as a result of the Lawson's infringing activity.  However, as the only remaining claim upon which the injunction was based was found invalid, the Federal Circuit concluded that "the compensatory award for the violation of the injunction must be set aside in light of the cancellation of claim 26."

 

The full opinion is available here.  

MVS Filewrapper® Blog: Competing Without Practicing—Preliminary Injunctions for Patent Infringement

In Trebo Manufacturing, Inc., v. Firefly Equipment, LLC, the Federal Circuit held that a plaintiff seeking a preliminary injunction for patent  infringement does not need to practice the patent at issue in order to receive an injunction, so long as it sells a competing product.  Trebro brought suit alleging that FireFly's sod harvester product infringed its U.S. Patent No. 8,336,638, and seeking a preliminary injunction to stop the infringement.  The United States District Court for the District of Montana denied Trebro's request for a preliminary injunction, finding insufficient likelihood of success on the merits of the patent infringement claims and no irreparable harm to Trebro. 

 

On appeal, the Federal Circuit vacated, finding that the district court erred in its claim construction, and that it therefore abused its discretion in finding no likelihood of success on the merits.  In addition, the Federal Circuit held that "the fact that Trebro does not presently practice the patent does not detract from its likely irreparable harm."  Because Trebro and FireFly compete in the same tiny, niche market, there is a strong probability of irreparable harm, and "a party that does not practice the asserted patent may still receive an injunction when it sells a competing product."

MVS Filewrapper® Blog: Flawed Evidence Undercuts "Charbucks" Trademark Suit

In Starbucks Corp. v. Wolfe’s Borough Coffee, Inc., the U.S. Court of Appeals for the Second Circuit affirmed a district court’s decision denying injunctive relief in Starbucks’ trademark case against Black Bear Micro Roastery over Black Bear’s use of “Charbucks” for coffee. 

 

Starbucks sued Black Bear in 2001, alleging, among other things, trademark dilution in violation of 15 U.S.C. §§ 1125(c), 1127.  In December 2005 the district court ruled in favor of Black Bear and dismissed Starbucks’ complaint.  Starbucks appealed this original decision, but while the appeal was pending, Congress passed the Trademark Dilution Revision Act of 2006 (“TDRA”), which amended portions of the federal trademark law relevant to the case, resulting in the case being remanded.   The district court again ruled in favor of Black Bear, and Starbucks again appealed.  On appeal, the Second Circuit remanded again, instructing the district court to reconsider Starbucks dilution claim based on its interpretation of the TDRA provisions.  Once again, the district court found in favor of Black Bear, and once again Starbucks appealed.

On appeal, the Second Circuit made its own conclusions regarding the elements of Starbucks’ dilution case, under the TDRA.  The appellate court refused to revisit its previous conclusion that the “Charbucks” mark is only minimally similar to Starbucks famous mark.  The court also rejected Starbuck’s arguments that Black Bear’s admitted intent to create an association raises a strong presumption of actual association, and that Starbuck’s proffered survey evidence proved a high degree of association.  The court then conducted its own weighing of the factors, and concluded that—although four of the six factors favored Starbucks—the overall determination based on the weight afforded each factor favored a finding that there was not a likelihood of dilution. The court concluded that what ultimately tipped the balance was that Starbucks meet its burden due to the combination of fundamentally flawed survey evidence and minimal similarity of the marks.

The full court opinion is available here.  

MVS Filewrapper® Blog: Exhausting Patent Rights Without a "Sale"

In LifeScan Scotland, LTD v. Shasta Technologies, LLC, the Federal Circuit clarified the ability of a patnet holder to enforce patent rights in a product it has given away, but not "sold."  Defendant Shasta Technologies appealed from a decision of the United States District Court for the Northern District of California granting LifeScan Scotland a preliminary injunction.  The injunction prohibits Shasta from making, using, or selling blood glucose test strips. The District Court found that Shasta's strips likely indirectly infringed LifeScan's U.S. Patent No. 7,250,105 ("the '105 patent"). The '105 patent does not cover any corresponding test strips. Rather, the technology described in the '105 patent relates to an apparatus for measuring glucose. LifeScan manufactures a system called "OneTouch Ultra" blood glucose monitoring system, which uses this technology. LifeScan distributes 60% of its patented meters through health care providers, who in turn provide the meters to diabetic individuals for free.

   

Shasta does not sell or make blood glucose meters, but instead competes with LifeScan in the market for test strips. Shasta's "GenStrip" test strips are designed to work with LifeScan's meters. LifeScan's suit alleged that Shasta's GenStrip test strips indirectly infringed the '105 patent.  In turn Shasta claimed the sale and distribution of LifeScan's meters exhausted its rights under the method patent because the meters substantially embody the invention.

   

The District Court agreed with LifeScan, granting it a preliminary injunction. The District Court reasoned that patent exhaustion applies only to a "sale" where the patentee received "consideration" in exchange for the patented product. The district court concluded that because LifeScan did not receive consideration when it distributed the patented product, patent exhaustion does not apply.

   

On appeal, the Federal Circuit relied on Quanta Computer, Inc. v. LG Electronics, Inc., which holds that a method claim is exhausted by the sale of a product that "substantially embodies" the invention.  The appellate court also held, as a matter of first impression, that "[w]here a patentee unconditionally parts with ownership of an article, it cannot later complain that the approach that it chose results in an inadequate reward and that therefore ordinary principles of patent exhaustion should not apply."   As a result, LifeScan could not circumvent the application of patent exhaustion principles by distributing a product embodying the patent for free, and reversed the district court’s grant of a preliminary injunction.

   

MVS Filewrapper® Blog: New and Useful - February 21, 2013

·         In U.S. Polo Assoc., Inc. v. PRL USA Holdings, Inc., the Second Circuit Court of Appeals found that the natural zone of expansion doctrine did not permit the United States Polo Association (“USPA”) to expand its offerings into a line of fragrances and affirmed the district court’s entry of a permanent injunction prohibiting such use.  The USPA filed a declaratory judgment to approve use of its Double Horseman mark, accompanied by the words “U.S. POLO ASSN.,” “USPA,” and/or “1890,” in the sale of men’s fragrances.  PRL counterclaimed, seeking entry of a permanent injunction precluding such use—which the district court granted.  USPA’s argument was centered on the, so called, natural zone of expansion doctrine.  USPA argued that its history of selling branded apparel provided it with the right to expand into related markets, i.e., apparel sales give rise to the right to expand into fragrances.  The district court gave little weight to USPA’s survey and found that PRL’s survey gave strong evidence of a likelihood of confusion.  The Second Circuit found that the district court’s holdings regarding the survey evidence did not abuse its discretion and that the previous litigation and USPA’s history did not support USPA’s argued natural right to expand.

·         In Function Media, L.L.C. v. Google, Inc., the Federal Circuit Court of Appeals held that the denial of a pre-trial motion for summary judgment of non-infringement is not sufficient to show that the district court delegated claim construction to the jury.  Function Media (“FM”) sued Google for infringement of three patents directed at “facilitate[ing] advertising on multiple advertising outlets such as newspapers and websites.”  Slip op. at p. 2.  The district court held that one patent was invalid for being indefinite “because the specification did not disclose sufficient structure for its sole independent claim’s means plus function term ‘means for transmitting.’”  Id. at pp. 5–6 (citations omitted).  A jury found the asserted claims in other two patents invalid and not infringed.  FM moved for judgment as a matter of law (“JMOL”) that the claims were not invalid, which the district court granted with respect to four claims.  This did not alter the jury verdict of non-infringement. 

FM appealed on a number of grounds, including an assertion that the district court gave the claim interpretation to the jury.  The argument was based on the fact that the district court denied Google’s motion for summary judgment of non-infringement. FM argued that the denial of summary judgment demonstrated that there were unresolved issues regarding claim scope, which were subsequently left to the jury rather than construed by the court.  The Federal Circuit did not agree that the district court improperly gave the claim interpretation to the jury, the Federal Circuit stated, “We hold that the denial of a pre-trial motion for summary judgment of non-infringement does not, by itself, show that the district court delegated claim construction to the jury.  This is especially true where, as here, the jury was instructed to apply the district court's claim constructions.”  Id. at pp. 21–22. 

·         In Cephalon, Inc. v. Watson Pharma., Inc. , the Federal Circuit Court of Appeals reversed a district court’s holding of invalidity for lack of enablement stating, “Watson failed as a matter of law to show with clear and convincing evidence that Cephalon’s patents require undue experimentation to practice the invention.”  Slip op. at p. 2.  Throughout the discussion of enablement, the Federal Circuit highlighted that the burden is on Watson to show lack of enablement—undue experimentation—and to do so by clear and convincing evidence.  The district court’s analysis was that, “the disclosures lacked teachings directed to formulating and co-administering two separate dosage forms . . . to achieve an effervescent reaction.  The lack of disclosure of such methods of co-administration would, according to the court, necessitate undue experimentation to practice the invention.”  Id. at p. 11 (citations omitted).  Watson merely provided “[u] nsubstantiated statements indicating that experimentation would be ‘difficult’ and ‘complicated.’”  Id. at pp. 15–16.  The Federal Circuit found that these statements did not meet the standard of clear and convincing evidence to establish undue burden as opposed to reasonable experimentation.  As such, the Federal Circuit reversed the district court’s holding of invalidity and remanded.

·         The United States Patent and Trademark Office published the final rules and guidelines governing First-Inventor-to-File.  (http://www.uspto.gov/news/pr/2013/13-10.jsp)  There were two separate Federal Register publications and each is briefly discussed below.  A more thorough discussion of each is forthcoming.

o   Changes to Implement First Inventor to File Provisions of Leahy-Smith America Invents Act

This publication sets forth the changes that will be necessary to implement the First-Inventor-to-File standards.  It addresses changes regarding each of the following:

§  The addition of definitions in the AIA to the rules of practice;

§  The submission of affidavits or declarations regarding:  disclosures in priority disputes under the first-to-file standards and prior public disclosures;

§  Standards regarding a U.S. Patent or Published Applications having a prior art effect as of the filing date of a foreign priority application;

§  Elimination of the provisions regarding statutory invention registrations; and

§  Adoption of requirements for nonprovisional applications filed on or after March 16, 2013, that claim priority to or the benefit of the filing date of an application filed prior to March 16, 2013.

o   Examination Guidelines for Implementing First Inventor to File Provisions of Leahy-Smith America Invents Act

This publication sets forth the changes the changes to the examination guidelines under the First-Inventor-to-File standard.  The publication is also meant to clarify and respond to questions provided during the public comment period regarding whether there is a requirement that the mode of disclosure by an inventor or joint inventor be the same as the mode of disclosure of an intervening disclosure.

Another issue headed for en banc review by the Federal Circuit: How to assess redesigned products

In an order Friday, the Federal Circuit granted en banc review of its second case in the past three weeks and its third over the past three months.  This time it's a case involving Tivo relating to the contempt proceedings against Echostar relating to Tivo's DVR patents.  After Echostar was found to infringe Tivo's patent and was permanently enjoined from infringement, it redesigned its DVR software.  Tivo asked the district court to hold Echostar in contempt for violating the injunction.  The district court agreed with Tivo, and the Federal Circuit affirmed.

That opinion has now been vacated, and the Federal Circuit has granted en banc review to address whether and in what circumstances a contempt proceeding is appropriate to address alleged infringement of a newly accused device.  Specifically, the questions presented are:

  1. Following a finding of infringement by an accused device at trial, under what circumstances is it proper for a district court to determine infringement by a newly accused device through contempt proceedings rather than through new infringement proceedings? What burden of proof is required to establish that a contempt proceeding is proper?
  2. How does “fair ground of doubt as to the wrongfulness of the defendant’s conduct” compare with the “more than colorable differences” or “substantial open issues of infringement” tests in evaluating the newly accused device against the adjudged infringing device? See Cal. Artificial Stone Paving Co. v. Molitor, 113 U.S. 609, 618 (1885); KSM Fastening Sys., Inc. v. H.A. Jones Co., 776 F.2d 1522, 1532 (Fed. Cir. 1985).
  3. Where a contempt proceeding is proper, (1) what burden of proof is on the patentee to show that the newly accused device infringes (see KSM, 776 F.2d at 1524) and (2) what weight should be given to the infringer’s efforts to design around the patent and its reasonable and good faith belief of noninfringement by the new device, for a finding of contempt?
  4. Is it proper for a district court to hold an enjoined party in contempt where there is a substantial question as to whether the injunction is ambiguous in scope? 

Consistent with its typical practice in en banc cases, the Federal Circuit is permitting amicus briefs on these issues.

To read the full order granting en banc review in Tivo, Inc. v. Echostar Corp., click here.

To read our post regarding the original appeal, click here.

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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Grant of stay while preliminary injunction motion pending abuse of discretion

In a recent decision, the Federal Circuit found that a district court's grant of a stay pending inter partes reexamination without considering the patentee's pending motion for a preliminary injunction was an abuse of discretion. The Federal Circuit held the grant of the stay effectively denied the preliminary injunction motion, thereby making the stay order appealable. The court then held the district court should have considered the preliminary injunction motion and, after considering the four preliminary injunction factors, made a determination regarding the injunction before staying the proceedings for the reexamination.

More detail on Procter & Gamble Co. v. Kraft Foods Global, Inc. after the jump.

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Existence of other licenses under patent does not preclude finding of irreparable harm

In a decision Tuesday, the Federal Circuit affirmed a district court's grant of a permanent injunction.  The district had previously granted a permanent injunction after a jury found willful infringement.  In a previous appeal, the Federal Circuit affirmed the finding of willful infringement, but vacated the permanent injunction because the district court did not consider the four-factor test mandated by the Supreme Court's decision in eBay v. MercExchange (which was decided while the appeal was pending).

On remand, the district court again granted a permanent injunction.  The Federal Circuit affirmed, holding there was no abuse of discretion, although it was a "close case."  The patentee had previously licensed the patent to two other parties (one as the result of settlement of a previous infringement suit), but the court held the existence of previous licenses did not mean an injunction could not issue.  Instead, it was one factor to consider among others when considering whether there is irreparable harm, including "the identity of the past licensees, the experience in the market since the licenses were granted, and the identity of the new infringer."  Finding no abuse of discretion by the lower court, on this or the other three factors, the Federal Circuit affirmed the injunction.

More detail of Acumed LLC v. Stryker Corp after the jump.

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District court's order dismissing the action with prejudice held to be nonfinal due to counterclaims

In a decision Thursday, the Federal Circuit affirmed a district court's denial of a preliminary injunction, and held it did not have jurisdiction over the remainder of the appeal because there was no final judgment.  It was undisputed there was no infringement under the district court's claim construction of the single element at issue.  After denying the requested preliminary injunction and granting the defendant's motion for summary judgment of noninfringement, the district court entered an order that stated, among other things, that the "action" was "dismissed with prejudice," and that it was "final and appealable."  However, the defendant had asserted counterclaims that were not mentioned in any of the briefing.  

The Federal Circuit agreed with the district court's claim construction, and affirmed the denial of the preliminary injunction.  However, the court held it did not have jurisdiction over the remainder of the appeal, because the defendant's counterclaims were still pending, making the judgment nonfinal.  The court did have some advice for the plaintiff and the district court on remand in two footnotes, stating:

While we do not address the district court's grant of summary judgment of noninfringement, we note that the claim construction we affirm herein was the basis for that decision, there being no dispute over infringement of claim 26 under that claim construction.

Because we exercise jurisdiction only over the matters discussed above, we do not address the district court's sua sponte dismissal of [the plaintiff's] remaining claims in this appeal. Nevertheless, we suggest that the district court may wish to reconsider that determination in light of the Sixth Circuit's prohibition against sua sponte dismissals except in limited circumstances.
More detail of iLOR, LLC v. Google, Inc. after the jump.

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