MVS Filewrapper® Blog: Who May Bring a Federal False Advertising Suit?

     The Supreme Court's recent decision in Lexmark International, Inc. v. Static Control Components, Inc. prescribed the appropriate framework for determining whether a plaintiff has standing in a false advertising action under the 15 U.S.C. 1125(a).  Prior to this decision, there were three competing approaches to determining whether a plaintiff has standing to bring suit under the Lanham Act: 

 

·         The Third, Fifth, Eighth and Eleventh Circuits utilized an antitrust standing or a set of factors laid out in Associated General Contractors;

 

·         The Seventh, Ninth and Tenth Circuits used a categorical test which only permits actual competitors to bring false advertising suits under the Lanham Act; and lastly

 

·         The Second Circuit applied a "reasonable interest' approach," under which a Lanham Act plaintiff "has standing if the claimant can demonstrate '(1) a reasonable interest to be protected against the alleged false advertising and (2) a reasonable basis for believing that the interest is likely to be damaged by the alleged false advertising.'"

 

     In this case, the Sixth Circuit applied the Second Circuit's reasonable-interest test and concluded that Static Control had "standing because it 'alleged a cognizable interest in its business reputation and sales to remanufacturers and sufficiently alleged that th[o]se interests were harmed by Lexmark's statements to the remanufacturers that Static Control was engaging in illegal conduct."  The Supreme Court held that in order to have standing, a plaintiff "ordinarily must show that its economic or reputational injury flows directly from the deception wrought by the defendant's advertising; and that occurs when deception of consumers causes them to withhold trade from the plaintiff." Thus, direct application of a zone-of-interest test and proximate-cause requirement "supplies the relevant limits on who may sue under §1125(a)" and supplants the tests previously applied by the lower courts.   

MVS Filewrapper® Blog: 2014 Supreme Court Cases Relating to Intellectual Property

On January 10, 2014 the Supreme Court agreed to review a variety of intellectual property cases in the upcoming session, including two patent cases, a copyright case, and a trademark case (including Lanham Act claim).  A brief overview of these cases is provided and more detail will be available once decisions are entered by the Court.

Limelight Networks, Inc. v. Akamai Technologies, Inc. (U.S., No. 12-786.)

Question Presented to the Supreme Court: Whether the Federal Circuit erred in holding that a defendant may be held liable for inducing patent infringement under 35 U.S.C. § 271(b) even though no one has committed direct infringement under § 271(a).

The Federal Circuit dismissed the “single-entity” rule for finding induced infringement of a method/process claim, finding that steps taken by multiple parties can result in induced infringement. The Federal Circuit stated, “To be clear, we hold that all the steps of a claimed method must be performed in order to find induced infringement, but that it is not necessary to prove that all the steps were committed by a single entity.” If the Supreme Court upholds the Federal Circuit’s ruling, a patentee has increased opportunity to assert induced infringement for method/process claims in the marketplace.

Nautilus, Inc., v. Biosig Instruments, Inc. (U.S., No. 13-369)

Question Presented to the Supreme Court: Does the Federal Circuit’s acceptance of ambiguous patent claims with multiple reasonable interpretations—so long as the ambiguity is not “insoluble” by a court—defeat the statutory requirement of particular and distinct patent claiming? Does the presumption of validity dilute the requirement of particular and distinct patent claiming?

The Federal Circuit reversed a district court decision that a patent claim to a heart rate monitor was invalid for indefiniteness as a matter of law because of its use of the claim term “spaced relationship” in describing the positioning of two electrodes with respect to each other. The Court held that this claim term was not one that is “insolubly ambiguous” when the intrinsic evidence is considered from the perspective of a person of skill in the art. It considered the functionality of the claimed monitor, as described in the specification, as did the USPTO when the claim was under reexamination. “[T]he claims provide inherent parameters sufficient for a skilled artisan to understand the bounds of ‘spaced relationship.’” Judge Schall concurred in the result but would have used a more narrow analysis, explaining that he would not have used the functional limitation to address the definiteness issue.

 

POM Wonderful LLC v. The Coca-Cola Company, U.S. (No. 12-761)

Question Presented to the Supreme Court: Whether the court of appeals erred in holding that a private party cannot bring a Lanham Act claim challenging a product label regulated under the Food, Drug, and Cosmetic Act.

The case arising out of the 9th Circuit resulted in affirming judgment in favor of Coca-Cola, finding that POM's Lanham Act challenge to Coca-Cola’s “Pomegranate Blueberry” name was barred under the Food Drug and Cosmetic Act (FDCA).  Applicability of Section 43(a) of the Lanham Act, 15 U.S.C. 1125(a) (authorizing actions of false/misleading description of goods), The FDCA and/or state law claims will be addressed.

American Broadcasting Companies, Inc. v. Aereo, Inc. (U.S., No. 13-461)

Question Presented to the Supreme Court: Does a company “publicly perform” a copyrighted television program when it retransmits a broadcast of that program to thousands of paid subscribers over the Internet?

The Second Circuit denied reviewal of a panel decision that online streaming of TV programs to individual subscribers is not an infringing public performance. The panel found that the creation of a copy of a broadcast that is transmitted to individual subscribes failed to establish infringement as streaming “to the public.”

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: Supreme Court Addresses Product of Nature Doctrine Relating to Gene Patents

The Supreme Court today handed down its decision in Association for Molecular Pathology v. Myriad Genetics, Inc.  The Court held that isolated DNA is a product of nature and not patent eligible merely because it has been isolated, but that complementary DNA (cDNA) is patent eligible because it is not naturally occurring. 

The Court limited its holding to the patentability of isolated genes and cDNA, concluding that DNA sequences that do not exist in nature (i.e. cDNA) are patent eligible under § 101, but that merely isolating a naturally occurring gene from the surrounding genetic material in not sufficient to render the gene patent-eligible.  The Court also took care not to further limit patent-eligibility for innovative methods for manipulating genes, uses of newly discovered genes, or DNA molecules with altered sequences. 

            Myriad discovered the location and sequence of two genes—BRCA1 and 2.  Mutations in these genes are linked to increased risk of developing breast and ovarian cancer.  Myriad obtained several patents, which include numerous composition claims that cover the BRCA1 and BRCA2 genes, both as isolated DNA (i.e. the genetic sequence as it otherwise exists in the cell, but excised from the rest of the genome) and as cDNA (i.e. only the coding regions of the genomic DNA sequence; all non-coding regions have been removed).  After the patents were granted, Myriad filed suit against a number entities that performed BRCA testing alleging infringement of the patents. 

The case was originally filed in the Southern District of New York by a group of researcher, physicians, advocacy groups, and patients seeking a declaratory judgment that the Myriad patents were invalid under 35 U.S.C. § 101 because the claimed subject matter was ineligible for patent protection.  The district court granted summary judgment to the declaratory judgment plaintiffs, holding the composition claims of the Myriad patents invalid because they covered products of nature.  Myriad appealed to the Federal Circuit, which reversed the district court.  The Supreme Court granted certiorari, but vacated the Federal Circuit decision and remanded the case to the Federal Circuit–without opinion–in light of the Supreme Court’s decision in Mayo Collaborative Services v. Prometheus Laboratories.  On remand, the Federal Circuit held that Myriad’s claims to both isolated DNA and cDNA were patent-eligible, and the Supreme Court again granted certiorari. 

In its decision, the Supreme Court affirmed in part and reversed in part the Federal Circuit. The Court separately addressed the patentability of isolated, naturally occurring DNA molecules and synthetically created cDNA.  The Court framed its decision in terms of the “important implicit exception[s]” to patentability under § 101—laws of nature, natural phenomena, and abstract ideas.  With respect to the claimed isolated DNA molecules, the Court concluded that Myriad did not create anything, but rather merely separated an important and useful gene from its surrounding genetic material, which did not constitute an act of invention.  Because the location and order of the nucleotides existed in nature before Myriad found and separated them, and Myriad had not created or altered the genetic structure of the DNA, the claims to the compositions did not meet the requirements for patent-eligibility under § 101. 

With respect to cDNA, the Court concluded that it did not present the same obstacles patentability as naturally occurring, isolated DNA.  Because cDNA molecules do not exist in nature—due to the absence of non-coding intron regions, compared to the genetic DNA sequence—they are not products of nature, and constitute patent-eligible subject matter under § 101. 

Ultimately, the Court concluded that Myriad is entitled to the exclusive right to synthetically create BRCA cDNA, but not the exclusive right to isolate an individual’s BRCA genes.  However, the Court took special care to point out the limits of its decision.  First, the Court emphasized that its decision did not reach any method claims, since those were not before the Court on appeal, but stated that the processes used by Myriad to isolate and generate the claimed DNA were well understood by geneticists at the time.  Presumably, this would run afoul of the Court’s holding in Mayo Collaborative Services v. Prometheus Laboratories.  However, the Court did note that Myriad “could possibly have sought a method patent” for some innovative method of manipulating genes, had it created any. 

The Court also called attention to the fact that its decision in this case did not involve the patent-eligibility of new applications of genes, leaving open the possibility of protection for various uses of newly discovered genes or other DNA sequences, such as those claimed in the unchallenged claims of Myriad’s patents.  These claims include kits for detecting mutations, methods for screening, and nucleic acid probes specifically hybridizable to mutated BRCA.  Finally, the Court stated that its opinion did not address “DNA in which the order of the naturally occurring nucleotides has been altered,” concluding that this type of alteration constitutes a different inquiry. 

The Court held “that genes and the information they encode are not patent eligible under §101 simply because they have been isolated from the surrounding genetic material,” but that DNA sequences that do not exist in nature (i.e. cDNA) are patent eligible under § 101, and left open the possibility of patent-eligibility for innovative methods for manipulating genes, uses of newly discovered genes, and DNA molecules with altered sequences.  This case helps to define the boundaries of the Product of Nature doctrine after Mayo Collaborative Services v. Prometheus Laboratories, and in particular with respect to gene patents, but leaves many issues regarding the scope of the Product of Nature doctrine unresolved. 

MVS Filewrapper® Blog: Supreme Court Rejects Patent Exhaustion Defense for Patented Bean Replanting

The Supreme Court has handed down its much anticipated decision in Bowman v. Monsanto Co., holding that the defense of patent exhaustion does not apply to the practice of planting and harvesting patented seeds through planting and harvesting without the patent holder's permission.

The case centers on the Roundup Ready gene, which confers resistance to glyphosate herbicides such as Roundup. Monsanto owns U.S. Patent Nos. 5,352,605 and RE39,247E, which cover the Roundup Ready gene, as well as seeds incorporating the gene. The Roundup Ready gene stably integrated into the genomic material of soybeans sold by Monsanto, which means that once the seeds are planted, the plants that grow from those seeds and any seeds produced by that plant also have the Roundup Ready gene.

Monsanto markets both the Roundup Ready seeds and the Roundup herbicide to farmers. However, the seeds are sold subject to a licensing agreement that permits a grower to plant the purchased seed in only one growing season-the grower in prohibited from saving any of the harvested seed for replanting in a subsequent growing season. Growers are permitted under the agreement to consume the seeds or to sell the seeds as a commodity for eventual consumption. Due to the popularity of Roundup Ready seeds, a significant proportion of commodity seeds are Roundup Ready.

Vernon Bowman purchased Roundup Ready seeds from a licensed seller each year for his first planting of the growing season. Bowman also made a second planting each season, for which he used seed that was not purchased from a licensed seller. Instead, Bowman purchased commodity seed, planted the seed, treated the plants with glyphosphate herbicide, and harvested the seed from the surviving plants, which he then used for second plantings in subsequent growing seasons. Because these seeds survived the glyphosphate herbicide treatment, they necessarily possessed the Roundup Ready gene. Ultimately, Bowman harvested eight crops through this system of growing and replanting, effectively generating a homogenous Roundup Ready source of seed that was not purchased from Monsanto.

Monsanto sued Bowman in the U.S. District Court for the Southern District of Indiana, alleging that Bowman's harvesting and replanting of Roundup Ready seeds infringed its patents. In his defense, Bowman asserted that the doctrine of patent exhaustion prevented Monsanto from controlling his use of the seeds because they were the subject of a prior authorized sale. The trial court rejected Bowman's patent exhaustion defense, finding for Monsanto. On appeal, the Federal Circuit affirmed, concluding that the patent exhaustion defense was not available to Bowman because he had created newly infringing articles through the harvesting and replanting-Bowman had replicated Monsanto's patented technology by planting the seeds and thereby creating newly infringing plants and seeds.

The Supreme Court, like the district court and the Federal Circuit, concluded that Bowman could not rely on the doctrine of patent exhaustion. The Court held that while the patent exhaustion doctrine restricts a patentee's right to control what others can do with a particular article sold, it does not affect the patentee's ability to prevent a buyer from making new copies of a patented item. Thus, the Court determined that the patent exhaustion doctrine enabled Bowman to resell the patented commodity soybeans he purchased, or consume the beans, or feed them to his animals without interference from Monsanto, but it did not enable Bowman to make additional patented soybeans without Monsanto's permission.

The Court relied on its precedent in J.E.M. Ag. Supply, Inc. v. Pioneer Hi-Bred Int'l, Inc., where the Court explained that only a patent holder, and not the holder of a certificate issued under the Plant Variety Protection Act, could prohibit a farmer who legally purchases and plants a protected seed from saving harvested seed for replanting. The Court also dismissed Bowman's argument that patent exhaustion should apply in this case because soybeans naturally self-replicate, and therefore the seeds themselves-and not Bowman-were responsible for producing copies. Such a "blame-the-bean" defense was unpersuasive in light of the Bowman's active role in purchasing, planting, selecting, harvesting, and replanting the infringing seeds for eight successive crops.

The Court took care to limit its holding to the situation before it, stating that it is a closer question as to whether the patent exhaustion doctrine would apply where an article's self-replication occurs outside the purchaser's control, or is necessary by incidental step in using the item for another purpose.

MVS Filewrapper® Blog: Supreme Court Decides Foreign First Sale Doctrine

            The Supreme Court recently decided a much anticipated case, finally answering a long awaited question:  Does the first sale doctrine apply to copyrighted works manufactured in other countries?  According to the Supreme Court in Kirtsaeng v. John Wiley & Sons, Inc., the answer to this question is yes.

            John Wiley & Sons sued Supap Kirtsaeng for selling textbooks on eBay that he imported from foreign countries.  The books were printed by a wholly-owned subsidiary of Wiley, Wiley Asia, and were marked with a legend designating them for sale only in Europe, Asia, Africa, and the Middle East.  Wiley alleged that selling the foreign textbooks in the United States infringed its U.S. copyrights on its American editions.  Kirtsaeng attempted to assert that the first sale doctrine precluded liability, but was denied the ability to raise the defense by the district court judge.  The jury found that Kirtsaeng was liable for willful copyright infringement for eight works and awarded $75,000 in damages for each work.

            Kirtsaeng appealed the jury's verdict to the Second Circuit Court of Appeals.  The Second Circuit concluded that the district court was correct to preclude Kirtsaeng from raising the first sale doctrine because the books at issue were manufactured outside the United States.  The appellate court based its decision on the language of the 1976 Copyright Act and the Supreme Court's decision in Quality King Distributors, Inc. v. L'anza Research Int'l, Inc., 523 U.S. 135 (1998).  In Quality King, the Supreme Court held that § 602(a)(1), by referencing the exclusive distribution right of § 106(3), incorporates the later subsections' limitations including, in particular, the "first sale" doctrine of § 109.  However, the Supreme Court in Quality King expressly decided not to answer the question of whether or not a copyright work manufactured abroad was eligible for the first sale doctrine exemption of § 109. 
 

            In reviewing the Second Circuit’s decision, the Supreme Court took Quality King one step further, holding that the first sale doctrine applies to copyrighted works both manufactured in the U.S. and abroad, notwithstanding the 1976 Act's provision against importation of copyrighted works in §§ 602 and 603.  As some have noted, this unique situation occurred because, as written, the 1976 Act—as it relates to the importation of foreign works and the first sale doctrine—has two equally plausible statutory constructions, as evidenced by the fact that the circuit courts are divided on the issue.

            The Supreme Court's decision in Kirtsaeng focused mainly on the correct statutory interpretation of § 109(a) of the 1976 Act. Specifically, the Court answered "whether the words 'lawfully made under this title' restrict the scope of §109(a)'s 'first sale' doctrine geographically." Wiley's interpretation of  § 109(a) follows the Second and Ninth Circuit which apply "a form of geographical limitation" on the imposition of the first sale doctrine, stating that the doctrine only covers works manufactured and created in America.  Kirtsaeng, on the other hand, suggests the words "lawfully made under this title" impose a "non-geographical limitation" on the first sale doctrine.  The Supreme Court agreed, stating:

In our view, §109(a)'s language, its context, and the common-law history of the "first sale" doctrine, taken together, favor a non-geographical interpretation. We also doubt that Congress would have intended to create the practical copyright-related harms with which a geographic interpretation would threaten ordinary scholarly, artistic, commercial and consumer activities. We consequently conclude that Kirtsaeng's nongeographical reading is the better reading of the [1976] Act.

In making its decision, the Court relied on what it considered to be a proper reading of “'lawfully made under this title” in § 109(a) of the 1976 Act.  The Court found "linguistic difficulty" with previous circuit's interpretations of § 109(a).  The Ninth Circuit's interpretation was particularly difficult to reconcile in the Court's opinion, as the interpretation contained a "half-geographical/half-nongeographical interpretation" of the phrase "lawfully made under this title."  The Ninth Circuit, for example in Denbicare U.S.A. Inc. v. Toys "R" Us, Inc., has interpreted the first sale doctrine to cover both (1) copies manufactured aboard but first sold in the United States and (2) copies manufactured abroad but first sold in the United States with the American copyright owner's permission.  According to the Court, "it would seem that those five words either do cover copies lawfully made abroad or they do not" and declined an attempt to read a half-geographic limitation in § 109(a) of the Act.

The Court also looked to the common law to solidify what it held to be the proper statutory interpretation of § 109(a).  "The 'first sale' doctrine is a common-law doctrine with an impeccable historic pedigree . . . [and] makes no geographical distinctions [in the application of the 'first sale' doctrine."  The Court drew on the conclusion reached in Bobbs-Merrill v. Straus, the first case to discuss and interpret the 'first sale' doctrine.  In Bobbs-Merril the Court stated "that the copyright laws were not 'intended to create a right which would permit the holder of the copyright to fasten, by notice in a book . . . a restriction upon the subsequent alienation of the subject-matter of copyright after the owner had parted with the title to one who had acquired full dominion over it."

           The Court's decision in Kirtsaeng provides a clarification of the 'first sale' doctrine as it applies to copyrighted works manufactured in other countries.  It remains to be seen how this long-awaited decision will affect both book publishers and the public at large.

MVS Filewrapper® Blog: U.S. Supreme Court Addresses Jurisdiction In Patent Related Case

In an unanimous decision in Gunn v. Minton, the United States Supreme Court clarified:  (1) 28 U.S.C. § 1338(a) does not necessarily deprive state courts of subject matter jurisdiction for cases dealing with patent law, such as a legal malpractice claim asserted against an attorney representing someone in patent litigation; and (2) a state-based malpractice claim asserted a patent attorney does not necessarily evoke federal subject matter jurisdiction. 

Gunn represented Minton in a patent infringement suit.  During that suit Minton’s patent was held invalid as violating the “on sale” bar in 35 U.S.C. § 102(b) for leasing the subject matter of the patent more than one year prior to the date of the patent application.  Minton argued, in a motion for reconsideration, that the lease was part of testing and fit within the experimental use exception to the on sale bar.  The district court denied the motion and the Court of Appeals for the Federal Circuit affirmed the district court’s ruling.  Subsequently, Minton sued his attorneys for legal malpractice claiming that they failed to timely raise the experimental use argument, which resulted in the improper invalidation of his patent and loss of the patent infringement lawsuit.  This malpractice lawsuit was brought in Texas state court.  The attorneys that represented Minton in the patent infringement suit argued that regardless of the timing of the experimental use argument, it would have failed.  The Texas trial court agreed.  Minton appealed the ruling to the Texas Supreme Court.  On appeal Minton argued that the Texas court did not have proper subject matter jurisdiction because this claim properly fits under federal question jurisdiction pursuant to 28 U.S.C. § 1338(a), which provides exclusive federal jurisdiction thereby depriving state courts of jurisdiction.  The Texas Supreme Court ruled in favor of Minton’s argument and Gunn appealed the holding to the United States Supreme Court.

The United States Supreme Court held that § 1338(a) does not deprive state courts of subject matter jurisdiction over the malpractice claim because federal law did not create the cause of action.  Section 1338(a) only deprives state court jurisdiction where the cause of action is created by federal law.  Specifically, § 1338(a) states, “No state Court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents . . . .”  This cause of action, however, does not arise under the Patent Act; rather it is a state legal malpractice claim based on previous litigation arising under the Patent Act.  To determine whether federal jurisdiction would be proper at all the United States Supreme Court relied on its precedent Grable & Sons Metal and Prods., Inc. v. Darue Eng’g & Mfg. to determine whether a federal issue is actually disputed.  Grable provides four prongs that must each be met for federal jurisdiction to be proper over a state law claim.  The federal issue must be:  (1) necessarily raised, (2) actu­ally disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state bal­ance approved by Congress.  Slip. op. at p. 6 (citing Grable, 545 U.S. 308, 314 (2005)).  The Supreme Court held that Minton met the first two prongs, but failed on the third and fourth.  The Supreme Court’s analysis of the third prong determined that it did not matter how the state court handled the hypothetical questions related to the timing of the experimental use argument because either way it would not change the result of the actual patent litigation.  With respect to the fourth prong, the Court held that permitting state courts to engage in “a hypothetical patent issue” for the purpose of resolving a state legal malpractice claim does not disrupt the balance between state and federal responsibilities.  Id. at p. 12.  Moreover, the Court noted that states “have ‘a special responsibility for maintaining standards among members of the licensed professions.’”  Id. (quotation omitted).  The Court's conclusion was that no federal subject matter jurisdiction existed under 28 U.S.C. § 1338(a) and that state jurisdiction would be proper to handle this claim.  Therefore, the Texas Supreme Court's ruling was reversed.

New and Useful - Janurary 14, 2013

·         The Supreme Court handed down its decision in Already, LLC v. Nike, Inc.  The Court held that Nike’s covenant not to sue Alreadyfor alleged infringement of Nike’s AIR FORCE 1 trademark—entered into after Nike had filed suit and Already had filed a counterclaim challenging the mark’s validity—rendered both Nike’s claims and Already’s counterclaims moot.  The Court held that because Already failed to show that it engages in or has sufficiently concrete plans to engage in activities that would arguably infringe Nike’s trademark yet not be covered by the covenant not to sue, its claims could not survive Nike’s motion to dismiss. 

 

·        The USPTO has issued a Request for Comments and Notice of Roundtable Events for Partnership for Enhancement of Quality of Software-Related Patents.  The notice provides two separate roundtable events with the same agendas, one occurring in Silicon Valley on Tuesday February 12, 2013, beginning at 9 a.m. and the second occurring in New York City on Wednesday, February 27, 2013 beginning at 9 a.m. (both local time).  Topics on the agenda include: (1) how to improve clarity of claim boundaries that define the scope of patent protection for claims that use functional language; (2) identification of additional topics for future discussion by the Software Partnership; and (3) opportunity for oral presentations on the Request for Comments on Preparation of Patent Applications. Written comments are requested in response to the first two discussion topics. Written comments on the third discussion topic must be submitted as directed in the forthcoming Request for Comments on Preparation of Patent Applications.  Registration for the events is requested by February 4, 2013.  For additional information see the official notice.

·       The USPTO has also extended a pilot program allowing an applicant to request a twelve-month time period to pay the search fee, the examination fee, any excess claim fees, and the surcharge (for the late submission of the search fee and the examination fee) in a nonprovisional application, under specific conditions.  The program has been extended until December 31, 2013, with the possibility of further extension.  To qualify, the applicant must satisfy the following conditions: (1) Applicant must submit a certification and request to participate in the Extended Missing Parts Pilot Program with the nonprovisional application on filing, (2) the application must be a nonprovisional utility or plant application filed within the duration of the pilot program; (3) the nonprovisional application must directly claim the benefit under 35 U.S.C. 119(e) and 37 CFR 1.78 of a prior provisional application filed within the previous twelve months (the specific reference to the provisional application must be in an application data sheet); and (4) applicant must not have filed a nonpublication request. Additional information is available here.

 

·       The Second Circuit Court of Appeals affirmed in part and remanded in part a decision by the Southern District of New York finding willful infringement on the part of a retailer for infringing the Fendi trademark by selling allegedly counterfeit Fendi-branded products.  The district court awarded $12,324,062.66 in trebled damages, prejudgment interest, costs, and attorneys' fees, including disgorgement of Ashley Reed's based on a finding of willful infringement.  The Second Circuit affirmed the district court’s finding of infringement and willfulness, but remanded for clarification of the period of disgorgement. 

 

·        The Federal Circuit has issued a new opinion on determining obviousness.  A more thourough examination of the dicision in The C.W. Zumbiel Company, Inc. v. Kappos will be available soon here at Filewrapper. 

Court Redefines Knowledge Requirement for Induced Infringement

 In a recent decision, authored by Justice Alito and joined by all the other Justices but Justice Kennedy, the Supreme Court redefined the knowledge requirement for finding induced infringement under 35 U.S.C. § 271(b).  The case—which centered on a patent for an innovative fryer—provided an opportunity for the Court to elucidate what is required for active inducement of infringement:  that the party accused of inducing infringement must have knowledge that the induced acts constitute patent infringement.  The Court then further held that this knowledge requirement could be satisfied by willful blindness, a concept borrowed primarily from criminal law.
 The Court began its analysis of induced infringement with a brief examination of the statute, finding the text “short, simple, and with respect to the question presented in this case, inconclusive.”  The Court did, however, note that the language of § 271(b) included an implied element of intent.  The Court then defined precisely what that intent element necessitates, relying on the 1964 decision in Aro Mfg. Co. v. Convertible Top Replacement Co. (Aro II) to support the determination that knowledge under § 271(b) specifically requires knowledge of the patent.  The Court reasoned that knowledge for contributory infringement under § 271(c), which was specifically addressed in Aro II, was necessarily the same as knowledge for inducement.  Aro II established “that a violator of § 271(c) must know ‘that the combination for which his component was especially designed was both patented and infringed.’”  The Court adopted this knowledge standard to § 271(b), concluding that “induced infringement under § 271(b) requires knowledge that the induced acts constitute patent infringement.” 
In so deciding, the Court definitively rejected deliberate indifference as the standard for knowledge—the standard the Federal Circuit had relied on in affirming the District Court’s finding of inducement.  The Court nevertheless affirmed the Federal Circuit, however, because it concluded that the knowledge requirement could be satisfied by a showing of willful blindness. Stating that such a proposition was supported both by traditional concepts of culpability and by the precedent, the Court held that “defendants cannot escape the reach of [] statutes by deliberately shielding themselves from clear evidence of critical fact that are strongly suggested by the circumstances.”  The Court acknowledged that willful blindness is principally a criminal law concept, having been endorsed in that context as early as the Court’s decision in 1899 in Spurr v. United States, 174 U.S. 728.  Yet the Court concluded that “[g]iven the long history of willful blindness and its wide acceptance in the Federal Judiciary, we can see no reason why the doctrine should not apply in civil lawsuits for induced patent infringement under 35 U.S.C. § 271(b).” 
Ultimately, the Court provided a two-part test for willful blindness for inducement.  First, a defendant must subjectively believe there is a high probability that a patent exists and would be infringed, and second must take deliberate actions to avoid knowing that fact.  In this case, the facts supported such a finding.  Specifically, the defendant was aware when it copied the plaintiff’s product that the product was an innovation in the U.S. market; defendant decided to copy an overseas model of the product, which it knew would not bear U.S. Patent markings; and the defendant decided not to inform an attorney it hired to give a right-to-use opinion that it copied the plaintiff’s product.  Taken together, the Court concluded the defendants actions were tantamount to “manufacture [of] a claim of plausible deniability in the event that [defendant] was later accused of patent infringement.” 
The Court’s decision provides a definitive—albeit somewhat heightened—standard for proving induced infringement under 35 U.S.C. § 271(b).  It remains to be seen how this subjective standard will be applied going forward. 
For the complete opinion, click here.
 

Supreme Court Clarifies Ownership Rights in Federally Funded Inventions Under the Bayh-Dole Act

In a 7-2 decision released yesterday, the Supreme Court ruled the University and Small Business Patent Procedures Act of 1980 (“the Bayh-Dole Act”) does not displace the general rule that rights in an invention belong to the inventor, and does not automatically vest title to federally funded inventions in the contractors receiving the federal funds.  Chief Justice Roberts, writing for the majority, wrote that the Act does not “reorder[] the normal priority of rights in an invention” through language allowing contractors to retain title to “invention[s] of the contractor.”

The Majority based its opinion on the general rule of patent law that rights in an invention belong to the inventor, a rule confirmed by the Court’s precedent.  Although the Court recognized that this general rule can be superseded by congressional act—and in fact has previously been superseded by legislation relating to the Atomic Energy Commission, the Department of Energy, and NASA, for example—it noted that the Bayh-Dole Act contains no language specifically vesting ownership of federally funded inventions with the federal government, or with anyone else, including the contractor.  Further, the Court held that language in the Act permitting contractors to “elect to retain title” was not the equivalent of vesting title in those contractors.  Thus, the Act does not automatically vest rights in the invention in the contractor by virtue of the fact that the invention was funded (at least in part) by the federal government.

The Court effectively held that the provisions of the Bayh-Dole Act affecting the rights of contractors in federally funded inventions apply only under circumstances where the contractor has already acquired those rights, i.e. upon effective assignment of the rights by the inventor to the contractor.  The dissent, written by Justice Breyer and joined by Justice Ginsberg, argue that such a position undermines the purpose of the Act, and runs contrary to the policies behind the Act, by “allow[ing] individual inventors, for whose invention the public has paid, to avoid the Act’s corresponding restrictions.”  The Majority addresses this concern by remarking that the issue of inventor’s individual rights is unlikely to become common because the assignments generally included in employment agreements will usually work to vest the rights to the invention in the contractor.

It is worth noting that under the facts of this case—where the inventor signed a separate agreement and assignment with another company after entering into an agreement with, and while still in the employ of, the contractor—the assignment to the contractor turned out to be ineffective.  This suggests that there may be other particular circumstances where the contractor may not obtain right in the invention despite the existence of an assignment by the inventor.

This case serves as an important reminder for employers, and especially contractors receiving federal research funds, to make sure that they require proper and effective assignments are executed.  The Court reaffirmed that mere employment is insufficient to vest title in an employee’s invention in the employer, and further held that the Bayh-Dole Act does not guarantee otherwise.

For the full opinion, click here.

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