Filewrapper® | A patent, trademark, and copyright law blog by MVS

MVS Filewrapper® Blog: Federal Circuit Deems Software Patent Ineligible, Provides Little Certainty

Fri, 17 May 2013 14:20:00-0500

In its recent en banc decision in CLS Bank v. Alice Corp, the Federal Circuit has affirmed the finding of subject matter ineligibility of Alice Corp's method and software for management of risk in financial transactions through use of a third party intermediary. The ten-member panel produced seven different decisions, but did not produce any majority opinion. However, seven judges agreed that the method and computer-readable medium claims were patent ineligible. Additionally, eight of the ten determined that the claims should rise or fall under § 101 regardless of claim type.

In the plurality opinion written by Judge Lourie, the court examined Supreme Court precedent on the issue of patent eligible subject matter. Utilizing these precedents, the Federal Circuit proposed an "integrated approach" to § 101 problems—patents should not be allowed to preempt the fundamental tools of discovery; courts should avoid overly formalistic approaches to subject-matter eligibility that invites manipulation by patent applicants; courts should use a flexible, claim-by-claim approach that avoids rigid line-drawing. The analysis asks the following questions:

- Does the claimed invention fall into one of the four statutory classes (process, machine, manufacture, composition of matter)?

- Does the claimed invention meet a judicial exception to patent eligibility (law of nature, natural phenomena, abstract idea)?

- What is the fundamental concept at issue in the claim?

- Will the patenting of the idea preempt the whole idea or does the claim provide enough limitations to limit the scope of the patent grant?

- Is the human contribution more than a trivial addition or tangential, routine, well-understood, conventional limitation?

Under this analysis, the plurality determined that the abstract idea claimed in Alice Corp's patent was not rendered patent eligible because the added limitations were nothing more than "insignificant post-solution activity." They refused to reward the clever use of extravagant language to make the claims sound more limited with terms like "shadow record." Ultimately, the five judge plurality concluded that adding existing computer technology to an abstract idea does not render it patent eligible.

Judge Rader's opinion, concurring-in-part and dissenting-in-part, differed slightly in his proposed analysis for subject matter eligibility. He focused on whether the limitations in the claim restrict the abstract idea to a concrete reality or actual application of the idea. He noted that if the claim covers all practical applications of an abstract idea, it is not meaningfully limited. In contrast to Judge Lourie's opinion, Judge Rader found that when a claim is limited by the requirement for a computer, that is an important indication of patent eligibility. Ultimately, where the claim is tied to a computer in such a way that the computer plays a meaningful role in the performance of the claimed invention and the claim does not preempt virtually all uses of an underlying abstract idea, the claim is patent eligible. For these reasons, Judge Rader deemed Alice Corp's system claims to be patent eligible.

Judge Newman filed an opinion concurring with the majority that the claims should rise or fall together, but dissenting in her opinion that all of the claims are patent eligible. She indicated her concern over the uncertainty surrounding subject matter eligibility, which she believed was not remedied by this en banc decision. She proposed that the court return to the time-tested principles of patent law and abandon its failed § 101 ventures into abstractions, preemption, and meaningfulness. In response to the concern of preemption of experimentation and innovation, Judge Newman stated that the court should reaffirm the long-standing rule that study and experimentation are not infringement.

There continues to be uncertainty regarding the patentability of various types of software inventions. The fragmented opinions of the en banc panel indicate that despite their desire for a clear, consistent approach to section 101 that provides certainty and guidance to applicants and examiners alike, the issue of software patent eligibility is far from resolved.

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

Mon, 13 May 2013 16:50:00-0500

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: Intrinsic Evidence Can Provide Adequate Support to Overcome Indefiniteness

Wed, 01 May 2013 12:54:00-0500

In Biosig Instruments, Inc. v. Nautilus, Inc., the Federal Circuit reversed a decision by the U.S. District Court for the Southern District of New York finding a patent invalid for indefiniteness, relying on intrinsic evidence. Biosig Instruments, Inc. (“Biosig”) is the assignee of U.S. Patent No. 5,337,753 (“the ’753 patent”). The ’753 patent is directed to a heart rate monitor for use with exercise equipment and exercise procedures. Biosig sued Nautilus, Inc. (“Nautilus”) for patent infringement alleging that claims 1 and 11 of the ’753 patent were infringed by Nautilus’s exercise equipment that has a mounted heart rate monitor.

In the late 1990s, Biosig was in negotiations with Stairmaster Company—Nautilus’s predecessor—regarding Biosig’s patented technology, but the companies failed to reach an agreement. Stairmaster, and eventually Nautilus, started to sell exercise equipment with mounted heart rate monitors. Biosig sued Nautilus in August 2004, alleging that the equipment infringed its patent. Following reexaminations and re-filed patent infringement suits, the District Court for the Southern District of New York eventually conducted a Markman hearing on the asserted claims of the ’753 patent in September 2011. Among the terms the court construed was the term “spaced relationship.” The district court construed the term to mean that “there is a defined relationship between the live electrode and the common electrode on one side of the cylindrical bar and the same or a different defined relationship between the live electrode and the common electrode on the other side of the cylindrical bar.” Following the district court’s claim construction, Nautilus moved for summary judgment of non-infringement and invalidity for indefiniteness.

In February 2012, the district court ruled on the summary judgment motions, denying the motion for summary judgment of non-infringement and granting the motion for invalidity based on indefiniteness. The district court’s holding of invalidity for indefiniteness was founded on the conclusion that the term “spaced relationship” was ambiguous, despite the fact that the court had construed the term in its Markman order. Biosig appealed the district court’s grant of summary judgment, with the sole issue on appeal being the indefiniteness of “spaced relationship.”

On appeal, the Federal Circuit’s analysis began with a summary of the standards of indefiniteness, stating “[a] claim is indefinite only when it is ‘not amenable to construction’ or ‘insolubly ambiguous.’” The Court went on to discuss words of degree, for which “the court must determine whether the patent provides ‘some standard for measuring that degree.’” In this instance, the Court concluded that the term was not indefinite, as it “was amenable to construction,” whereas “indefiniteness . . . would require a showing that a person of ordinary skill would find ‘spaced relationship’ to be insolubly ambiguous—that it fails to provide sufficient clarity delineating the bounds of the claim to one skilled in the art.” The Federal Circuit specifically relied on the intrinsic evidence that the district court used in construing the term in its Markman order. In doing so, the Federal Circuit noted that the specification described the “spaced relationship” of the electrodes in terms of their function, and cited the evidence submitted during the reexamination, including a declaration by the inventor, used to traverse a rejection by the USPTO. In light of the specification and intrinsic evidence, the Federal Circuit held that the term “spaced relationship” was not indefinite; and therefore, that the grant of summary judgment was in error. Accordingly, the Federal Circuit reversed the district court’s invalidity determination and remanded the case for further proceedings.

MVS Filewrapper® Blog: New and Useful - April 23, 2013

Tue, 23 Apr 2013 11:45:00-0500

· In K-Tech Telecoms v. Time Warner Cable, the Federal Circuit confirmed that the standard for evaluating the adequacy of complaints alleging direct patent infringement remains Form 18 of the Appendix of Forms to the Federal Rules of Civil Procedure ("Form 18"). K-Tech filed separate complaints against Direct TV and Time Warner Cable (“TWC”) on the same day, alleging infringement of four patents. Direct TV and TWC each moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), asserting the complaint, as filed, lacked sufficient factual specificity to state a cause of action for direct patent infringement. K-Tech sought, and was grated, leave to amend the complaints. After K-Tech filed its amended complaints, TWC and Direct TV again moved to dismiss under 12(b)(6). The district court granted the motions to dismiss, stating that the amended complaints failed to cure the defects with the original complaint, namely that the complaints did not explain why K-Tech believed the defendants were utilizing the methods and products protected by the asserted patents, rather than using other noninfringing methods and products, and therefore failed to meet the standards articulated in Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009). K-Tech appealed the dismissal two weeks before the Federal Circuit issued its decision in R+L Carriers, Inc. v. DriverTech LLC (In re Bill of Lading Transmission & Processing System Patent Litigation), 681 F.3d 1323 (Fed. Cir. 2012). The Federal Circuit consolidated the appeals.

On appeal, K-Tech argued that the amended complaints complied with Form 18 and that the district court applied the incorrect standard. The defendants argued that sufficiency with respect to Form 18 must be interpreted in light of Twombly and Iqbal, and Ninth Circuit law, and that the amended complaints failed to meet either the plain language of Form 18 or the requirements of Twombly and Iqbal. The court relied on its recent decision in R+L Carriers in reasserting the sufficiency of Form 18 for pleading patent infringement, and that to the extent any conflict exists between Form 18 and Twombly/Iqbal, the form controls. Because Form 18 does not include any indication that a patent holder must explain why it believes that a defendant is utilizing the methods and products protected by the asserted patents, rather than using other noninfringing methods and products, such assertions are not required to survive a motion to dismiss. Further, the court held that the failure of K-Tech to identify a particular allegedly infringing device or devices—by name, model number, or otherwise—did not bar K-Tech from filing a complaint in accordance with Form 18, stating, “A defendant cannot shield itself from a complaint for direct infringement by operating in such secrecy that the filing of a complaint itself is impossible. Nor is a defendant immune from a direct infringement claim because he does not make a ‘device’ but, rather, infringes through a system or method.”

· In Lazare Kaplan Int’l, Inc. v. Photoscribe Techs., Inc., the Federal Circuit reversed a decision by the U.S. District Court for the Southern District of New York granting summary judgment of invalidity of two claims of a patent owned by Lazare Kaplan (“LK”), and asserted against Photoscribe Technologies, Inc. and the Gemological Institute of America (collectively “Photoscribe”). The Federal Circuit also reversed the district court’s granting of a motion under Federal Rule of Civil Procedure 60(b) filed by Photoscribe that vacated the district court’s prior judgment finding the same claims not invalid. LK sued Photoscribe alleging infringement of Lazare Kaplan’s patent covering systems and methods for microinscribing gemstones. In the ensuing trial, the asserted claims of the LK patent were adjudged not invalid and not infringed, either literally or under the doctrine of equivalents. LK appealed the judgment of noninfringement, but Photoscribe did not appeal the judgment that the asserted claims were not invalid. On appeal, the Federal Circuit vacated the judgment as based on erroneous claim construction and remanded the case. On remand, the district court retried both the invalidity and infringement issues, and granted Photoscribe’s motions for summary judgment of invalidity and for relief from the prior judgment under Rule 60(b) while denying LK’s motion for summary judgment of infringement. LK again appealed the district court’s ruling.

The Federal Circuit, in the second appeal, reversed the grant of relief under Rule 60(b) and vacated the finding of invalidity, with instructions to the district court to reinstate the original judgment of non-invalidity. The court concluded that the district court erred by allowing Photoscribe to address validity on remand despite its failure to file a cross-appeal from the adverse final judgment on validity in the original trial. The court also concluded that under Second Circuit precedent, Rule 60(b) could not provide the relief granted by the district court. The court then remanded the case again, with instructions for the district court to assess infringement under the construction the Federal Circuit had set forth in the prior appeal.

Judge Dyk dissented in the opinion, arguing that the inconsistency of allowing the patentee to assert infringement based on a broad claim construction while defending against invalidity based on a narrower claim construction should be alleviated by Rule 60(b), notwithstanding the fact that Photoscribe did not appeal the original judgment that the asserted claims were not invalid.

· In Aspex Eyewear, Inc. v. Zenni Optical LLC, the Federal Circuit affirmed a decision by the US District Court for the Southern District of Florida holding that Aspex was collaterally estopped from pursuing the suit against Zenni based on earlier litigation between Aspex and Altair Eyewear, Inc. for infringement of the same patents. The previous Altair litigation involved the same three patents, U.S. Patents No. 5,737,054 (the ’054 patent), No. 6,012,811 (the ’811 patent), and No. 6,092,896 (the ’896 patent), with many of the same claims asserted. The district court in the Altair litigation held that the ’811 and ’896 patents were not infringed, and the asserted claim of the ’054 patent was invalid for obviousness. The district court’s rulings were affirmed by the Federal Circuit.

The district court applied the Altair rulings to the issues in the suit against Zenni, holding that the accused products were materially indistinguishable and the previous decisions settled the question of whether the accused Zenni product could infringe the asserted patents, and Aspex was therefore collaterally estopped from bringing suit against Zenni. Aspex appealed the district court’s decision, arguing that the issues at stake were not identical because the claim terms that were construed and applied in the Altair litigation were not the same as the claim terms requiring construction in the Zenni suit. The Federal Circuit concluded that every claim asserted against Zenni contained the same limitation, in the same context, that was previously determined to be dispositive of non-infringement. As a result, even though some of the claims asserted against Zenni were not construed of applied, this did not create a new issue to defeat preclusion. The court further determined that Aspex had a full and fair opportunity to litigate the asserted patents, and the selection of additional claims for litigation and additional terms for construction could not override the holding of non-infringement.

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

Wed, 10 Apr 2013 10:39:00-0500

· In In re Hubbell the Federal Circuit confirmed the rejection of all of the pending claims in an application, filed with Jeffrey Hubbell, Jason Schense, Andreas Zisch, and Heike Hall as named inventors. The invention disclosed in the application was based on research performed while all of the named inventors were at California Institute of Technology (CalTech). As a result, the application is assigned to CalTech. Approximately five years before the CalTech application was filed, Hubbell left CalTech for Eidgenossische Technische Hochschule Zurich (ETHZ). A second application filed based on research Hubbell and Schense conducted at ETHZ was filed less than a year before the CalTech application, which is assigned to ETHZ and Zurich University. Aside from Hubbell and Schense, the two patents do not have identical inventive entities, or common owners or assignees. The ETHZ application, which issued as a U.S. patent in 2009, was used as the basis for an obviousness-type double patenting rejection, which was upheld by the Board of Patent Appeals and Interferences.

Hubbell appealed the Board decision, arguing that the judicially created obviousness-type double patenting rejection should not apply where an application and a conflicting patent share common inventors, but do not have identical inventive entities, were never commonly owned, and are not subject to a joint research agreement. Alternatively, Hubbell argued that should the court find the obviousness-type double patenting rejection is applicable, he should either be allowed to file a terminal disclaimer as an equitable measure, or the court should employ a two-way obviousness analysis for the rejected claims.

The Federal Circuit affirmed the Board, finding that both the MPEP and Federal Circuit precedent supported application of the obviousness-type double patenting rejection to cases where an application and a conflicting patent have one or more inventors in common but the inventive entities are not identical and the applications were never commonly owned. The court rejected Hubbell’s argument that the case precedent only involved applications that were once commonly owned by the same entity, and did not apply to his application because CalTech never controlled the ownership of the second application. The court based its decision on the underlying concerns over the possibility of harassment by multiple assignees that exists when issued patents lack common ownership—if the claims of the ETHZ application were to issue, a potential infringer could be subject to suit from both CalTech and ETHZ. The court also rejected Hubbell’s argument that a terminal disclaimer should be permitted, based on the fact that there is no statutory basis for doing so. Finally, the court affirmed the Board’s rejection of Hubbell’s request to have the two-way obviousness analysis applied in the case. The court concluded that Hubbell’s application did not meet the requirements to apply the narrow exception to the general rule of the one-way test.

Judge Newman dissented in the opinion, concluding that the majority’s decision is a “flawed ruling on incorrect law.” Specifically, Judge Newman concluded that because there are different inventive entities and that there is not common ownership, obviousness-type double patenting does not apply, but if there indeed is obviousness-type double patenting, then a terminal disclaimer is necessarily available. Judge Newman took issue with the circularity of the majority opinion—a terminal disclaimer is not available because there is not common ownership, yet if there is not common ownership or common inventorship, there cannot be double patenting.

· In Dawson v. Dawson, the Federal Circuit upheld the USPTO Board of Patent Appeals and Interferences (BPAI) decision determining that an earlier-filed patent application for topically treating and preventing infections of the eye, naming Dr. Chandler Dawson as inventor, had priority over a later-filed patent application, also naming Dr. Chandler Dawson as inventor. The earlier-filed application was submitted by Dr. Dawson and Dr. Lyle Bowman and assigned to InSite Vision Incorporated. The University of California San Francisco (UCSF) filed the later-filed application, without the involvement of Dr. Dawson but naming Dr. Dawson as the sole inventor, for the sole purpose of instituting an interference. The BPAI determined that UCSF had not met its burden to show that Dr. Dawson had conceived of the invention prior to his collaboration with Dr. Bowman.

On appeal to the Federal Circuit, UCSF asserted that the invention embodied in the InSite application was conceived of by Dr. Dawson while he was employed at UCSF and before he joined InSite, and therefore priority of the invention should rest in the UCSF later-filed application. UCSF argued that the conception requirement was met by the time Dr. Dawson made a presentation at a WHO conference, as demonstrated by documents produced from that conference. UCSF argued that even though the conference documents lacked the particular carrier and concentrations recited in the claims, conception was achieved because the documents showed that Dr. Dawson had formed the idea that of topical use of azithromycin would be effective for treating eye infections, and that the subsequent preparation of an effective ointment was merely corroboration of the idea.

The court rejected UCSF’s arguments, reasoning that the WHO documents themselves demonstrated the lack of conception because they constituted “a ‘preliminary’ statement about a ‘possibility’ or ‘potential use,’ alongside a recommendation for continued work and a ‘report back’ in the future.” The court concluded that this fell short of the requirement for a definite and permanent idea of the complete and operative invention, as it is to be applied in practice, as set out in Hybritech Inc. v. Monoclonal Antibodies, Inc. The court further held that UCSF failed to make a sufficient showing with respect to the individual interference counts—the specific concentrations, the suspending agent, or the claimed “amount effective to treat infection in a tissue of the eye.” Finally, the court rejected UCSF’s argument that the BPAI had improperly required a showing of reduction to practice in order to prove conception, concluding that UCSF’s argument was based on an erroneous view of what is needed to prove conception, and holding that “there is a critical difference between conceiving a way to make an idea operative and knowing that a completed invention will work for its intended purpose.”

Judge Reyna dissented in the opinion, concluding that the record was sufficient to demonstrate that Dr. Dawson possessed a definite and permanent idea of his complete and operative invention when he was employed by UCSF, not InSite, and therefore UCSF had demonstrated prior conception.

· In Saffran v. Johnson &Johnson, Dr. Bruce N. Saffran (Saffran) sued Johnson & Johnson and Cordis Corporation (collectively “J&J”), alleging that J&J infringed a number of claims in Saffran’s U.S. patent. The patent involved methods and apparatus that would sequester macromolecules within a defined area, for example a sheet that could be wrapped around a bone fracture that would keep growth factors from diffusing out of the fractured area. The claims of the patent were also drawn to the additional capability of controlled release of a substance incorporated into the apparatus via a “means for release.” The alleged infringing device was a drug-eluting stent comprising a metallic mesh with a microscopic layer of polymer that coats the surface of each strut, the polymer being mixed with a macromolecular drug that would gradually escape through gaps in the polymer matrix. The U.S. District Court for the Eastern District of Texas held that J&J infringed the patent based on its construction of the terms “device” and “release means”. J&J appealed to the Federal Circuit, arguing that the district courts construction of the two terms was erroneous, and that a proper construction precluded infringement.

On appeal, the Federal Circuit construed the term “device”—as used in the preamble and body of independent claim 1, in the bodies of independent claims 8 and 15, and at least by reference in each of the dependent claims—to mean a continuous sheet and to exclude stents having open mesh holes. The court came to this conclusion based on the prosecution history, during which the patentee sought to distinguish the prior art by asserting that the device used in the invention is a sheet rather than the structure disclosed in the prior art reference. The court confirmed that this corresponded to the disclosure in the specification, and Saffran’s argument that the specification contained alternative embodiments did not persuade the court otherwise.

The court confirmed that “[u]nder § 112, ¶ 6, the question is not what structures a person of ordinary skill in the art would know are capable of performing a given function, but what structures are specifically disclosed and tied to that function in the specification” and “a patentee cannot rely on claim differentiation to broaden a means-plus-function limitation beyond those structures specifically disclosed in the specification.” Thus, the court construed “release means” to only include treating material attached to the substantially impermeable sheet via hydrolyzable bonds or an equivalent thereof.

Based on its construction of “device” and “release means” the court concluded that J&J did not infringe the asserted Saffran patent.

MVS Filewrapper® Blog: Federal Circuit affirms importance of secondary indicia of non-obviousness

Fri, 05 Apr 2013 11:39:00-0500

The Federal Circuit has recently decided the case of Power Integrations, Inc. v. Fairchild Semiconductor International, Inc. Power Integrations, Inc. (Power) sued Fairchild Semiconductor International, Inc. (Fairchild) in the U.S. District Court for the District of Delaware, alleging infringement of Power’s four patents covering chargers for mobile phones. In a bifurcated trial, the claims of the patents were found valid, and Fairchild was found to have willfully infringed and assessed $33 million in damages, which was subsequently remitted to $12 million. Fairchild appealed to the Federal Circuit, arguing that the district court’s claim construction of two terms—“frequency variation signal” and “soft start circuit”—was erroneous, and that the district court’s denial of its JMOL of non-obviousness was in error. Power cross-appealed the district court’s determination that the jury’s original damages award of was contrary to law, seeking the original $33 million in damages.

Claim Construction

Fairchild argued on appeal that the district court’s construction of the “frequency variation signal” language improperly imported limitations from the preferred embodiments provided in the patent specification. Fairchild sought a much broader construction, based on what it argued was the plain and ordinary meaning, thereby eliminating any need to turn to the disclosures of the patent. The Federal Circuit concluded that the testimony of Power’s expert that there was no plain and ordinary meaning and in the absence of contrary evidence from Fairchild, the expert opinion was dispositive. The court then confirmed the district court’s reading of the specification, ultimately concluding the construction of “frequency variation signal” was proper.

Fairchild also argued that the district court’s construction of “soft start circuit” as a means-plus-function limitation was erroneous because the claim did not use the term “means” and provided sufficient structure to preclude application of 35 U.S.C. § 112, paragraph 6. The court concluded that the recitation of a “circuit” in conjunction with a sufficiently definite structure for performing the identified function was adequate to bar means-plus-function claiming.

Obviousness

With respect to obviousness, Fairchild argued that the Power patents were obvious in light of the prior art, because the only difference compared to the patents-in-suit was that the prior art included erasable programmable read only memory (EPROM) absent from the patents and it would have been obvious to a person of skill in the art to simply remove the EPROM. The court found that a person of skill in the art would understand that the EPROM in the prior art was used to achieve a different result than, and was thus unnecessary for, the “frequency-jittering” achieved by the claimed invention of the patent-in-suit. However, the court also found that there was substantial evidence of “objective considerations of non-obviousness”—that is, secondary indicia—to support the jury’s verdict that Power’s patent would not have been obvious to the ordinarily skilled artisan. Specifically, the court focused on:

(1) testimony that the EPROM in the prior art added expense and imposed design constraints as “a good indication that removing the EPROM provided otherwise unexpected benefits”;

(2) testimony that “each and every one of [the prior art] references . . . included [EP]ROMs,”

(3) more than 11 years having passed between issuance of the obviousness reference and the filing of the patent-in-suit without anyone disclosing removing the EPROMs;

(4) testimony that no one in the industry was able to come up with the patented invention;

(5) evidence of commercial success; and significantly (6) Fairchild competed with Power by reverse engineering and copying of Power Integrations’ products.

The court concluded that this evidence was sufficient to support the verdict of non-obviousness.

Damages

The court also considered the “underlying question [of] whether Power Integrations is entitled to compensatory damages for injury caused by infringing activity that occurred outside the territory of the United States.” The court answered that question with an emphatic “No.”

Finally, the court considered whether the district court improperly precluded Power from introducing evidence of price erosion that occurred prior to notifying Fairchild of its infringing activity. The court held that the district court’s decision to exclude the evidence was incorrect because “a price erosion analysis relating to damages arising from post-notice infringement must measure price changes against infringement-free market conditions, and thus the proper starting point of such a price erosion analysis is the date of first infringement.”

The court remanded the case for the district court to construe those claims and determine what effects the new constructions have on validity and infringement, and for a new trial on damages resulting from Fairchild’s direct infringement.

MVS Filewrapper® Blog: New and Useful - April 5, 2013

Fri, 05 Apr 2013 08:42:00-0500

· In Power Integrations, Inc. v. Fairchild Semiconductor International, Inc. the Federal Circuit clarified several points relating to claim construction, determinations of non-obviousness, and calculation of damages. The court confirmed that claiming a “circuit” in conjunction with a sufficiently definite structure for performing the identified function is adequate to bar means-plus-function claiming. The court also confirmed that secondary considerations of non-obviousness could constitute evidence sufficient to support a finding of non-obviousness. Finally, the court held that plaintiffs are not entitled to compensatory damages for injury caused by infringing activity that occurred outside the territory of the United States, regardless of any foreseeability of world-wide damages. A more in-depth analysis of this case will be posted shortly.

· In Rubin v. The General Hospital Corp., Dr. Berish Y. Rubin and Dr. Sylvia L. Anderson (collectively, Rubin) sued The General Hospital Corporation (GH Corp.) in the U.S. District Court for the District of Massachusetts requesting correction of inventorship of two patents assigned to GH Corp., or alternatively invalidation of the two patents. Rubin alleged that the inventors named in the patents used confidential information—from a manuscript and abstract submitted by Rubin to the American Journal of Human Genetics—to complete the inventions described and claimed in the patents. The district court granted summary judgment to GH Corp.

The Federal Circuit affirmed the grant of summary judgment, reasoning that the dispute was fundamentally a question of priority of the invention. The court ultimately agreed with the district court, concluding that Rubin and Anderson could not be added as joint inventors or be substituted for the named inventors of the patents because they did not meet the requirements of 35 U.S.C. § 116 for joint invention or §256 for correction of inventorship, and that the issue of priority is appropriately determined by PTO interference proceedings.

· The U.S. District Court for the Southern District of N.Y. has handed down its decision in Capitol Records, llc. V. ReDigi Inc. ReDigi considers itself the "world's first and only online marketplace for digital used music." ReDigi's website "invites users to sell their legally acquired digital music files, and buy used digital music from others at a fraction of the price currently available on iTunes." ReDigi's website sold various records belonging to Capitol Records. Capitol Records brought an action against ReDigi, alleging direct copyright infringement, inducement of copyright infringement, contributory and vicarious copyright infringement. In its defense, ReDigi asserted that the “first sale” doctrine precluded a finding of copyright infringement. The district court disagreed, however, holding that the very nature of transferring digital files over the internet constituted copyright infringement because in order to transfer a file, a copy of the file must be made on the transferring computer. Because the “first sale” doctrine does not protect against reproduction of copyrighted material, ReDigi could not successfully assert the defense for the present action.

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

Thu, 28 Mar 2013 10:42:00-0500

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: Changes to Implement and Guidelines for Examination under AIA

Tue, 19 Mar 2013 17:03:00-0500

The United States Patent and Trademark Office has released its rules regarding changes under first inventor to file provisions of the Leahy-Smith America Invents Act. The rules published by the USPTO in the Federal Register on March 16, 2013 provide guidelines for implementing the new patent law and guidelines for examination of patent applications under the new standards. The documents cover a broad range of topics, with a high degree of specificity, but we provide highlights from both of the Federal Register publications are as follows:

- First-to-file standards only apply to applications filed on or after March 16, 2013

If an application claims priority to an application filed prior to March 16, 2013, it will be examined under the pre-AIA guidelines, i.e., first to invent standard. The application may not claim new matter, i.e., matter not supported by the originally filed application (priority application). If the application does have new matter, it will be examined under the first-to-file standards.

- Required statements from the applicant in transition applications

Transition applications are those where a non-provisional application is filed on or after March 16, 2013 that claims priority or the benefit of the filing date of an earlier application. If the application contains, or at any time contained, a claim to an invention that has an effective filing date of March 16, 2013 or after, the applicant is required to file a statement indicating that there is matter or was matter claimed that has an effective filing date on or after March 16, 2013. The guidelines clearly state that the particular limitation does not have to be specified. Thus, if any new matter is added to the claims of a transition application, the Applicant must inform the patent office in a statement.

- In certain respects, prior art under the statute is broader than before

For applications being examined under the first-to-file standards, prior art is broader than before. Now any patent or published patent application is prior art as of its earliest effective U.S., foreign, or international filing date. Furthermore, the first-to-file standard eliminates the requirement that prior public use or sale be “in this country,” and therefore may now be anywhere in the world.

- Interference proceedings have been replaced by the new derivation proceedings

Under the first-to-invent standards interference proceedings existed to determine who invented first. Under the new first-to-file patentability standards, interference proceedings have been replaced by derivation proceedings. The derivation proceedings are instituted to determine if a prior public disclosure of an invention was actually derived from the inventor and is one that does not bar the invention from patentability

MVS Filewrapper® Blog: New and Useful - March 15, 2013

Fri, 15 Mar 2013 13:54:00-0500

In Brilliant Instruments, Inc. v. GuideTech, LLC, the Federal Circuit reversed a district court’s order granting summary judgment of non-infringement of three related patents. The three asserted patents relate to circuits that measure the timing errors of digital signals in high-speed microprocessors. The inventor of the three patents left employment with the plaintiff, GuideTech, and founded the defendant Brilliant Instruments. Plaintiff alleged that two of Brilliant’s products infringed its patents. The district court granted summary judgment of non-infringement GuideTech argued that the district court erred in concluding no genuine issue of material fact existed with respect to infringement of the three patents, particularly in light of GuideTech’s expert reports describing the defendant’s products and delineating a theory of literal infringement and infringement under the doctrine of equivalents. Ultimately, the Federal Circuit concluded that the evidence, particularly the expert reports, provided a sufficient basis for a genuine issue of material fact.
In Move, Inc. v. Real Estate Alliance, Ltd., the Federal Circuit vacated the district court’s grant of summary judgment of non-infringement. Plaintiff owns a patent directed to methods for locating available real estate properties using a zoom-enabled map on a computer. Defendant operates and maintains multiple interactive real estate websites. In granting summary judgment of non-infringement the district court held that the “search by map” and “search by zip code” functions on the defendant’s websites did not meet the “selecting” steps required by the asserted claim. The Federal Circuit agreed that there was no genuine issue of material fact regarding literal infringement; however, the Court faulted the district court for not analyzing induced infringement under 35 U.S.C. § 271(b). The Federal Circuit highlighted its precedent in Akamai noting that a lone defendant can still be liable for induced infringement.
In Radio Sys. Corp. v. Lalor, the Federal Circuit affirmed in-part and reversed in-part a district court’s order granting summary judgment of non-infringement. The plaintiff is the owner of two patents directed to improvements on electronic animal collars—the ’014 patent and ’082 patent. Based on the claim construction, the district court awarded summary judgment of non-infringement of the ’014 patent. The Federal Circuit agreed with the claim construction and affirmed the non-infringement based on the claim construction. The Federal Circuit also affirmed the district court’s holding that the plaintiff was equitably estopped from asserting ’014 patent, due to the fact that the plaintiff had previously sent the defendant a cease and desist letter based on the ’014 patent and then remained silent for some years. The Federal Circuit, however, disagreed with the district court’s finding that the plaintiff was equitably estopped from asserting the ’082 patent, which had not issued at the time the first cease and desist letter was sent. Thus, the Federal Circuit held that the elements of equitable estoppel had not been met with respect to the ’082 patent

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

Thu, 21 Feb 2013 08:54:00-0500

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.

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

Thu, 21 Feb 2013 08:40:00-0500

· 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.

MVS Filewrapper® Blog: Federal Circuit Addresses Subject Matter Jurisdiction in Patent-Related Cases

Thu, 14 Feb 2013 09:35:00-0500

In Semiconductor Energy Lab. Co., Ltd. v. Yujiro Nagata, the Federal Circuit weighed in on federal subject matter jurisdiction and provided two important reminders:

(1) Just because a cause of action originates from a patent, standards in the patent statute, or even from other patent litigation, it is the present cause of action and claims that dictate whether subject matter jurisdiction is proper; and

(2) Subject matter jurisdiction, in this case federal question, must be sufficiently pled.

The background of this case is as follows: Semiconductor Energy Laboratory (“SEL”) owns U.S. Patent 6,900,463 (“the ’463 patent”). Dr. Yujiro Nagata (“Dr. Nagata”) is a named co-inventor of the ’463 patent. Dr. Nagata assigned his rights in any applications and patents related to the ’463 patent to SEL’s founder in 1991. He later signed a substitute Declaration and Assignment of those applications and patents. Dr. Nagata assisted SEL in a patent infringement lawsuit during the span of 2002 and 2003.

SEL sued Samsung for infringement of the ’463 patent in 2009. Dr. Nagata was contacted by Samsung to serve as a fact witness, which he agreed to do. Subsequently, SEL contacted Dr. Nagata assuming that he would cooperate with them during the litigation, as he had previously done. During the litigation, Dr. Nagata testified that he did not sign the 1991 Declarations and Assignments, but that his signature was forged. Samsung then argued that the ’463 patent was unenforceable because of inequitable conduct. Due to Dr. Nagata’s testimony the lawsuit was settled for less money than SEL otherwise would have considered.

SEL went on to sue Dr. Nagata in federal court, with five claims: (1) Declaratory Judgment – Violation of Federal Patent Law; (2) Declaratory Judgment – Anticipatory Breach of Contract; (3) Slander of Title; (4) Quiet Title; and (5) Unjust Enrichment. SEL asserted that the claim for declaratory judgment of violation of federal patent law was a federal question—one of the two bases for federal subject matter jurisdiction—and sought supplemental jurisdiction for the other causes of action. Dr. Nagata moved to have the case dismissed for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1). The district court granted the motion and dismissed the case with prejudice. SEL appealed.

In order to invoke federal subject matter jurisdiction under federal question, the “complaint must either plead a federal cause of action or necessarily implicate a substantial issue of federal law.” SEL v. Nagata, Slip op., at p. 5. SEL’s argument in support of its “Declaratory Judgment – Violation of Federal Patent Law” claim was based on the doctrine of assignor estoppel. The Federal Circuit summarized the doctrine of assignor estoppel as, “an equitable doctrine that prohibits an assignor of a patent or patent application, or one in privity with him, from attacking the validity of that patent when he is sued for infringement by the assignee.” Id. at p. 6. SEL argued that the doctrine should be extended to apply not only as a defense limiting arguments by assignors, but offensively to estop assignees from undermining the validity of a patent as well. The Federal Circuit went on to note SEL did not plead or offer any precedent establishing that assignor estoppel is a federal cause of action. As such, the Court concluded,

SEL thus effectively invites us to create a new federal cause of action recognizing a supposed violation of the assignor estoppel doctrine under the Declaratory Judgment Act. . . . Despite SEL’s contentions, assignor estoppel is a form of estoppel, and with rare exception, estoppel is a shield; it is an affirmative defense, not a claim for relief on its own.

Id. at p. 7 (citations omitted). In light of this, the Court held that the doctrine of assignor estoppel as applied to patent law was not at issue in this case, since here it was the assignee, Dr. Nagata, who was undermining the validity of the patent. The court held that the underlying dispute in this case was an evidentiary one in the original case and the proper remedy were through the laws of evidence that permit impeachment and other methods of countering the credibility of a witness. Therefore, the district court’s dismissal of the case was affirmed.

This case raises two important points to consider when contemplating litigation. The first is that the present cause of action and claims dictate whether subject matter jurisdiction is proper, despite the fact that the dispute may have evolved from the patent statute or even patent litigation. The second is that the plaintiff’s complaint controls the litigation, or lack thereof when the case is dismissed under FRCP 12(b)(1). In this case, this meant that although there was arguably a basis to seek extension of a federal law doctrine, the insufficiency of the pleadings precluded the federal court from fully addressing the issue.

Accent Packaging, Inc. v. Leggett & Platt, Inc.: Reminders on Claim Construction, Discovery Matters

Wed, 06 Feb 2013 10:58:00-0500

In Accent Packaging, Inc. v. Leggett & Platt, Inc., the Federal Circuit affirmed in part and reversed in part the district court’s grant of summary judgment of non-infringement. Accent is the assignee of U.S. Patents 7,373,877 (the '877 patent) and 7,412,992 (the '992 patent). The patents are drawn to a wire tier device useful for baling and handling recyclables and solid waste to facilitate better handling. Accent sued Leggett for patent infringement and violation of the Missouri Trade Secret Act. Leggett filed a motion to dismiss the trade secret claim for failure to state a claim and the claim was dismissed. During discovery, Accent’s expert inspected Leggett’s allegedly infringing device. Leggett produced a redacted copy of its own patent application that Leggett argued covered its device, engineering drawings, marketing and promotional materials related to the device, and an operating manual for the device. Accent filed a motion seeking additional discovery, including: (1) information related to an alleged sale of Leggett’s device.; (2) a deposition pursuant to FRCP 30(b)(6) to address infringement and claim construction; and (3) production of the redacted parts of the previously produced patent application. The district court denied the motion for additional discovery and both parties filed motions for summary judgment. The district court denied Accent’s motion for summary judgment of infringement and granted Leggett’s motion for summary judgment of non-infringement. Subsequently, Accent appealed to the Federal Circuit. The Federal Circuit opinion provides three reminders:

Reminder #1: Claim construction should allow the claim to cover the preferred embodiments

The '877 Patent

The district court granted summary judgment of non-infringement of the '877 patent largely based on its claim construction of the terms “each” and “a respective one.” The court construed the terms to require four elongated operator bodies, with every operator body coupled only to one gripper, knotter, cutting element or cover. On appeal, Accent argued that the pertinent claim language did not require that each elongated operator body be coupled to one and only one of those articulated elements. The Federal Circuit overruled the district court’s claim construction of the terms “each” and “a respective one” stating the construction essentially excluded a preferred embodiment from the scope of the claims, as a preferred embodiment showed “two elongated operator bodies . . . operably coupled to both the knotter and the cover.” In supporting this holding, the Federal Circuit quoted its previous holding in the 2004 case, On-Line Technologies, Inc. v. Bodenseewerk Perkin-Elmer GmbH stating, “We have held that ‘a claim interpretation that excludes a preferred embodiment from the scope of the claim is rarely, if ever, correct.’” 386 F.3d 1133, 1138 (Fed. Cir. 2004).

The '992 Patent

Accent appealed the district court’s claim construction of the term “of at least about ninety degrees.” The asserted claims of the '992 patent require, “a mount for [the] cover permitting the cover to be pivoted away from said knotter to a knotter access position remote from said wire-maintaining position and through a pivot arc of at least about 90?.” Accent argued that Leggett’s device would pivot through the required ninety degrees if it weren’t for its SafeLatch^TM stop. The district court held that this was “a distinction without a difference, noting “[t]he SafeLatch^TM stop is in fact part of the . . . device.” Accent also argued that the device infringed the '992 patent because the SafeLatch^TM stop can be easily removed, which permits the cover to pivot at least ninety degrees. The Federal Circuit found this argument unpersuasive, again citing its own precedent: “[A] device does not infringe simply because it is possible to alter it in a way that would satisfy all the limitations of a patent claim.” High Tech Med. Instrumentation v. New Image Indus., Inc., 49 F.3d 1551, 1555 (Fed. Cir. 1995). In light of this reasoning, the Federal Circuit affirmed the district court’s summary judgment of non-infringement of the '992 patent.

Reminder #2: Plausibility in pleading also applies to discovery motions

As noted above, Accent’s motion for additional discovery was denied by the district court. Accent appealed this ruling and the Federal Circuit affirmed the district court’s ruling. The Federal Circuit stated that Accent’s problem was “that it never ‘set forth a plausible basis for believing that specified facts . . . probably exist.’” Slip op. at 10 (quoting Raby v. Livingston, 600 F.3d 552, 561 (5th Cir. 2010). The Federal Circuit found it important that Accent had received “extensive information” regarding Leggett’s allegedly infringing device through production, and Accent’s counsel and expert had thoroughly inspected the device. Despite all this evidence, “Accent failed to set forth a plausible basis for believing that additional discovery” was necessary. Moreover, the evidence already present suggested the facts were opposite Accent’s argument. Thus, the Federal Circuit affirmed the district court’s denial of Accent’s motion for additional discovery.

Reminder #3: Sufficient factual material to render plausibility is required for all claims

Accent appealed the district court’s dismissal of the trade secret claim arguing that the court ruled on the motion before Accent even had a chance to respond in writing to the motion to dismiss. Accent’s trade secret misappropriation claim was based on the argument that the specifications and tolerances of its commercial device constituted trade secrets. Accent argued that Leggett misappropriated those secrets by copying Accent’s commercial device delivered to one of Accent’s customers. However, the Federal Circuit found it important that Accent’s own complaint acknowledged that its commercial device was sold in the regular stream of commerce. Thus, the device was not subject to reasonable efforts to maintain its secrecy. In affirming the district court’s grant of summary judgment for Leggett, the Federal Circuit relied on Twombly and Iqbal, holding that the “complaint fails to state a claim to relief that is plausible on its face.”

MVS Filewrapper® Blog: New and Useful - February 6, 2013

Wed, 06 Feb 2013 09:39:00-0500

· In Allergan, Inc. v. Barr Labs the Federal Circuit affirmed a decision by the District of Delaware finding that Barr Laboratories, Inc. and Sandoz Inc. had infringed a patent owned by Allergen, Inc., and finding the patent-in-suit valid. Barr and Sandoz each filed abbreviated new drug applications (ANDA) for a generic version of the drug covered by the Allergen patent, and both ANDAs asserted that the Allergen patent was invalid or would not be infringed by the manufacture, use, or sale of the new drugs for which the applications were submitted. Allergen sued Barr and Sandoz for infringement, and the suits were consolidated for a bench trial on invalidity and infringement. The district court construed a single disputed claim and determined Allergen had defined the disputed term in such a way in the specification as to cover the Barr and Sandoz products. The district court also declined to adopt the defendants’ arguments for invalidity based on obviousness. The defendants’ obviousness case at trial relied on the testimony of an expert. However, the district court determined that the expert’s testimony was undermined by his lack of credibility, as exposed on cross-examination. As a result, the district court declined to review the prior art references and weigh their import absent the guidance of an expert, and therefore concluded that Barr and Sandoz had failed to prove obviousness. The defendants appealed both the infringement and invalidity determinations, specifically asserting that the district court erred in not reviewing the prior art references and weighing their import notwithstanding the problems with the expert testimony.

On appeal, the Federal Circuit confirmed the district court’s claim construction and infringement determination. The Federal Circuit also confirmed the district court’s determination with respect to the expert witness and the resulting conclusions regarding invalidity and obviousness. Specifically, the court held that the district court did not err in its decision because the case was sufficiently complex to require expert testimony in making the determination of obviousness, and “common sense and logic were not sufficiently illuminating in this case to carry Barr and Sandoz's burden of proving obviousness.”

· In Arkema Inc. v. Honeywell International, Inc. the Federal Circuit reviewed a district court’s denial of declaratory judgment jurisdiction for a case involving two suppliers of an automotive coolant. Arkema Inc. brought a declaratory judgment action seeking judicial determination that its plans to supply automotive coolant to car manufacturers would not infringe Honeywell’s U.S. patents. This declaratory judgment action followed foreign litigation wherein Honeywell asserted European patents coving the same technology against Arkema. After the litigation commenced, Honeywell obtained two additional patents, and Arkema sought to amend its complaint to include declaratory judgment on these two additional patents. The district court denied Arkema’s motion, concluding that there was insufficient case or controversy for the court to exercise declaratory judgment jurisdiction. The district court then certified for appeal its order denying Arkema’s motion.

The Federal Circuit reversed the district court, addressing each of the district court’s rationales for declining jurisdiction in turn. In particular, the Federal Circuit held that the district court’s reliance on Arris Grp., Inc. v. British Telecommc’ns PLC was misplaced because while acts of direct infringement by a customer are sufficient to support DJ action by a supplier, they are not necessary. Further, the appellate court concluded that “[t]here is no requirement that Arkema identify the particular manufacturers that will purchase the [automotive coolant] or the particular automobile purchasers who will purchase the cars from the manufacturers, or the particular dates on which this will occur.” The Federal Circuit instead concluded that the basis for Arkema’s declaratory judgment jurisdiction was formed by the foreign litigation of the same technology along with contracts entered into by Arkema with customers for the supply of the automotive coolant. The case was remanded for reconsideration.

· In Accent Packaging, Inc. v. Leggett & Platt, Inc. the Federal Circuit reversed a grant of summary judgment by the United States District Court for the Southern District of Texas for the alleged infringer, Leggett & Platt. The district court granted summary judgment of non-infringement based on it construction of the terms “each” and “a respective one” within the phrase “with each of the operator bodies being operably coupled with a respective one of said gripper, knotter, cutting element and cover.” The district court construed the terms to mean that there could only be a single function for a single “operator body,” and as a result the accused device could not infringe the claims because it used operator bodies with multiple functions. Accent appealed the grant of summary judgment, challenging the district court’s claim construction.

The Federal Circuit reversed the grant of summary judgment, concluding that the district court improperly construed the terms at issue. The appellate court, conducting its own de novo claim construction, determined that the narrow construction asserted by Accent was improper because it excluded the preferred embodiment disclosed in the specification. The court held that the preferred embodiment featured an elongated operator body that is operably coupled to one or more operator elements, and because “a claim interpretation that excludes a preferred embodiment from the scope of the claim is rarely, if ever, correct” (On-Line Techs., Inc. v. Bodenseewerk Perkin-Elmer GmbH, 386 F.3d 1133, 1138 (Fed. Cir. 2004)), the district court’s claim construction doing just that was erroneous. Based on the Federal Circuit’s own claim construction, it remanded the case and ordered the district court to grant summary judgment of infringement to Accent. A more in depth analysis of this case will be posted shortly.