IP Update, Volume 4, No. 8, August 2001
August 2001
IN THIS ISSUE
- Patents/Appellate Standard of Review - The Patent Office Is Still "Clearly Erroneous" in Zurko
- Patents/Claim Construction - Claim Construction: Don’t Read Too Much Into It
- Patents/Claim Construction - What’s Sauce for the Goose Is Sauce for the Gander—SciMed Revisited
- Patents/Ownership/International Comity - The Federal Circuit Extends Comity to the Decision of French Courts Regarding Patent Ownership
- Trademark/Geographic Misdescriptiveness - The Name of Geographic Locations that Consumers Would Reasonably Believe Are Connected with Goods—When in Fact They Are Not—Are Unregistrable
- E-Commerce/Click-wrap Software Agreements - Arbitration Clause in Click-wrap Agreement Held Unenforceable
Patents/Appellate Standard of Review
The Patent Office Is Still "Clearly Erroneous" in Zurko
By Keith George
After protracted appeals (now four decisions), the U.S. Court of Appeals for the Federal Circuit finds the Patent and Trademark Office (PTO) Board of Appeals is still wrong as to what is patentable in the Zurko patent application, even under the "clearly erroneous" standard. In re Zurko, Case No. 96-1258 (Fed. Cir., August 2, 2001).
In 1997, a first panel of the federal circuit reversed the board’s obviousness rejection in the Zurko application on the grounds that it was clearly erroneous. The commissioner requested a rehearing and argued that the board’s decision should be reviewed under a more deferential standard as specified in the Administrative Procedure Act (APA). The en banc federal circuit held that the "clearly erroneous" standard applied and adopted the first panel decision. However, in Dickinson v. Zurko, the U.S. Supreme Court, while holding that the federal circuit must follow the APA in its review of board decisions, did not expressly identify which of the APA standards to apply. Shortly afterward, in the case of In re Gartside, the federal circuit held that factual findings of the board must be sustained if supported by "substantial evidence" in the record.
In its new decision, the federal circuit, applying the "substantial evidence" standard to the original board decision in Zurko, again reversed the board holding of obviousness.
The "substantial evidence" test involves a review of the record as a whole to determine if there is sufficient relevant evidence that a reasonable person might accept as adequate to support the ultimate agency conclusion. Although the "substantial evidence" test is arguably more deferential than the "clearly erroneous" standard, the court noted that the difference is very subtle and rarely produces any difference in ultimate outcome.
The invention in Zurko relates to a technique for processing and verifying a trusted command using a combination of trusted and untrusted software. The technique involves parsing a trusted command in the untrusted software, submitting it to the trusted software and displaying a representation to the user through a trusted path.
The obviousness rejection relied on a principal reference that discloses a UNIX system in which certain commands are parsed in an untrusted environment and then executed in a trusted environment and a secondary reference that describes a program that repeats back potentially dangerous commands, requesting confirmation from the user before execution. Neither reference expressly teaches that the communications to and from the user for verification utilizes a trusted path. However, the board adopted the examiner’s assertion of general knowledge in the art that trusted communications utilize trusted paths.
The federal circuit held that a mere allegation of general knowledge, without supporting evidence, does not constitute adequate support in the record under the substantial evidence standard. Rather, the federal circuit indicated that the board must point to some concrete evidence in the record as support for an allegation of general knowledge in order to provide reasoned findings "based on substantial evidence," particularly as to core factual findings.
Practice Tip: An examiner often makes a general allegation that a claim limitation is known in the art. Under this decision, applicants should challenge such an assertion on the ground that the examiner must present specific evidence on point and incorporate that evidence into the rejection. If the examiner attempts to add references, the rejection may tend to look more like improper hindsight reconstruction. If the examiner fails to add a supporting reference, then the evidence in the record may be insufficient to support the obviousness rejection.
Claim Construction: Don’t Read Too Much Into It
By Shamita Etienne-Cummings
The U.S. Court of Appeals for the Federal Circuit recently vacated a grant of summary judgement of non-infringement based on a lower court claim construction, which it found impermissibly read limitations from the specification into the claims. Dayco Products Inc. v. Total Containment, Inc., Case No. 00-1503 (Fed. Cir. Jul. 20, 2001).
The claims at issue were directed to flexible hoses, which can be sealed together through coupling assemblies. The patents in issue generally describe a cylindrical polymeric hose that has a corrugated inner hose into which a ferrule can be inserted. The disputed claim terms describe the configuration of the hoses’ coupling assembly, which seal the hoses.
During a Markman hearing, the district court narrowly construed the disputed claim language "said projections of said insert means being respectively received in said recesses of said inner hose" to mean "three or more projections that extend outward from the peripheral surface of the insert means with two or more recesses located between the projections . . . resulting in an alignment of the projections with the recesses where the projections are completely received within the recesses of the inner hose." The district court further construed the length of the recesses of the inner hose insert to be different from and greater than that of the projections of the inner hose. Based on this claim construction, the district court held the claims were not infringed, literally or under the doctrine of equivalents.
The federal circuit reversed, holding that the district court "erroneously read additional limitations into the claim language." The court looked to the specification to determine whether any of the disputed claim terms were limited as construed by the lower court. In construing the claims, the court interpreted the claims from the perspective of one of ordinary skill in the art, reasoning that "[o]ne important consideration of claim construction is whether the patent has given notice to the public of the proposed claim construction." Rather than embarking on a speculative and convoluted reading of the claim language, the federal circuit instructed courts to interpret claims "in light of the specification and with a view to ascertaining the invention," rather than reading limitations from the specification into the claims.
Under its de novo analysis, the federal circuit found that the plain language of the claims do not require the limitations inserted by the lower court. The federal circuit noted that the limitations inserted by the lower court are not even disclosed in the specification. Because the specification does not explicitly or implicitly require a particular length of recesses and projections nor the completeness of the insertion of the hose, the claims cannot be construed to contained these limitations. Accordingly, the federal circuit vacated the lower court’s grant of summary determination of non-infringement and remanded the case.
What’s Sauce for the Goose Is Sauce for the Gander—SciMed Revisited
By Paul Devinsky
In round two of the SciMed/ACS war, score one for ACS. The U.S. Court of Appeals for the Federal Circuit has vacated, in part, the district court grant of summary judgement of non-infringement, finding the court erred in constructing certain claim limitations too narrowly. Advanced Cardiovascular Systems, Inc. v. SciMed Life Systems, Inc., Case No. 00-1454 (Fed. Cir. Aug. 6, 2001).
Unlike the balloon catheter patents in SciMed I (see Intellectual Property Update, Vol. 4, No. 4), the patents at issue in this case relate to expandable stents—devices intended to be inserted into blood vessels to maintain a free passage through the vessel.
In the ACS patents in issue, the claims require stents having "connecting elements" or similar terms such as "connecting members" or "struts for connecting." These structures link the expandable, cylindrical elements that, when expanded, support the blood vessel walls. The lower court, looking at the prosecution of an ancestor application where ACS argued patentability over certain prior art based on a recitation to "generally parallel" connecting members (claim language added by amendment in that case but not present in the claims at issue), construed the "connecting elements" limitation as requiring a plurality of connecting members, which were generally parallel to each other and to the stent’s longitudinal axis. On that basis, the SciMed stents were found to be non-infringing.
The federal circuit, based on the plain meaning of the claim language and claim differentiation (another independent claim did include the "generally parallel" limitation), reversed the district court claim construction. The court, while conceding SciMed’s point that the patent drawings depict the connecting members as being parallel to each other and to the stent’s longitudinal axis, noted that the specification does not discuss the orientation of the connecting members and that "[w]ithout a ‘generally parallel’ limitation in the claim or a discussion in the specification about the claimed connecting members being generally parallel, both to each other and to the stent’s longitudinal axis the drawings cannot support the conclusion that such a limitation exists… [W]e will not allow this aspect of the drawings to be imported into the claims as a limitation." With regard to the prosecution history, the court reasoned that ACS relied only on the "generally parallel" claim language to argue patentability for those claims which expressly include that language—not for any claims which have a broader "connecting elements" recitation.
Finally, with regard to the claims reciting "generally parallel connecting elements," the federal circuit noted that even though the connecting members of the accused SciMed stents included curved portions, those members might still be considered parallel to each other. The court remanded the case on this issue for the district court to consider extrinsic evidence, "such as expert testimony, inventor testimony, dictionaries and technical treatises and articles" to determine how one skilled in the art would construe the "generally parallel" claim limitation.
Practice Note: In this instance, the federal circuit remanded the case to the district to consider extrinsic claim instruction evidence, citing to the "genuine ambiguity" language of Vitronics, 90 F.3d 1576 at 1584. Could this be the claim construction tail that wags the dog? Will district courts now routinely take and consider extrinsic claim construction evidence to guard against a similar remand?
Patents/Ownership/International Comity
The Federal Circuit Extends Comity to the Decision of French Courts Regarding Patent Ownership
By Natalia Blinkova
The U.S. Court of Appeals for the Federal Circuit has recently upheld a district court’s decision to extend international comity to the ruling of a French court regarding ownership of a patent. In deferring to the decision of French courts determining ownership of a U.S. patent pursuant to a French contract, the court reasoned that "[a] contractual agreement to apply French law as to ownership is just as valid as an agreement to apply the law of a particular state." Int’l Nutrition Co. v. Horphag Res. Ltd., 2001 U.S. App. LEXIS 15807 (Fed. Cir. July 16, 2001).
In 1985, SCIPA, a French company, entered into a joint development contract with Horphag Overseas LTD., a company incorporated under English law. The agreement was entered into in France. Under the agreement "any patent applications resulting from the collaboration shall be filed jointly by the parties." The agreement further provided Bordeaux, France as the site of any litigation regarding interpretation or performance issues.
Also in 1985, the ‘360 patent in suit issued to Jack Mesquelier of SCIPA, who, consistent with the agreement, assigned his rights in the patent jointly to SCIPA and Horphag. In 1994, SCIPA assigned its rights in the ‘360 patent to International Nutrition Company (INC), a Lichtenstein corporation. In 1995, Horphag initiated suit against SCIPA and INC in France to clarify ownership of the ‘360 patent.
The French court declared the 1994 assignment from SCIPA to INC void for violating a French statutory prohibition against a unilateral assignment of joint ownership rights in a patent. INC subsequently brought suit in U.S. District Court for the District of Connecticut, alleging infringement of the ‘360 patent by several defendants, including Horphag. In that case, the court granted summary judgment to Horphag that INC lacked standing to bring the suit, as it was not the owner of the ‘360 patent.
The federal circuit, applying 2nd Circuit law, upheld the district court’s decision extending international comity to the French court regarding its ruling on the ownership issue. In so doing, the court defined comity as "…the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation…" The affirmative defense of comity is appropriate, the court observed, where the foreign court abides by "fundamental standards of procedural fairness." The federal circuit rejected INC’s argument that patent ownership is a matter of U.S. patent law, and an act of comity based on a determination of ownership under French law is contrary to U.S. patent law. The court found comity appropriate because ownership is not a question arising under the patent laws, and "…the French courts merely determined who owned a United States patent pursuant to a French contract." As the French courts are courts of competent jurisdiction, and the laws and public policy of the forum state (Connecticut) and the rights of its residents will not be violated, comity is proper.
INC further argued that the French courts’ decision conflicts with 35 U.S.C. §262, because it invalidated SCIPA’s 1994 unilateral assignment to INC. The federal circuit again disagreed, stating that "Section 262 only permits unilateral exploitation ‘in the absence of any agreement to the contrary.’" Here, because the agreement constituted an "agreement to the contrary," no conflict existed between the French decisions and §262. The court similarly rejected INC’s argument that it was a bona fide purchaser and thus entitled to rights under the 1994 assignment, noting that INC was aware of the ownership dispute regarding the ‘360 patent at the time of the 1994 assignment.
Trademark/Geographic Misdescriptiveness
The Name of Geographic Locations that Consumers Would Reasonably Believe Are Connected with Goods—When in Fact They Are Not—Are Unregistrable
By John Dabney
The U.S Court of Appeals for the Federal Circuit has now held that a mark is primarily geographically deceptively misdescriptive and, thus, unregistrable if the examining lawyer establishes that the mark’s primary significance is a generally known geographic location and that consumers would reasonably believe the applicant’s goods are connected with the geographic location in the mark, when in fact they are not. In re Save Venice New York, Inc., Case No. 00-1450 2001 U.S. App. LEXIS 16868 (Fed. Cir., July 27, 2001).
The applicant sought to register the composite mark consisting of the phrases THE VENICE COLLECTION and SAVE VENICE INC. for, among other things, tableware, lamps, bedding and carpets. The applicant’s goods did not come from Venice, Italy. The Trademark Trial and Appeal Board (TTAB) held that the mark was primarily geographically and deceptively misdescriptive and thus unregistrable.
The federal circuit affirmed. Applying the first part of a two-part test, the court affirmed the TTAB’s finding that the primary significance of the applicant’s mark is a geographical reference to Venice, Italy. Regarding the second part of the test the federal circuit affirmed the TTAB’s finding that consumers would be likely to believe that the applicant’s goods come from Venice.
Among other things, the court relied on evidence showing that Venice was well known for many of the goods for which the applicant sought registration. The fact that some of the applicant’s goods were related to (as opposed to actually being) goods that are well known as emanating from Venice was sufficient in order for consumers to reasonably believe that such goods were connected with Venice. As the court noted, "[B]ecause we consider that consumers may assume that geographic regions, like other commercial actors, are likely to expand from their traditional goods or services into related goods or services, we hold that the registrability of a geographic mark may be measured against the public’s association of that region with both its traditional goods and any related goods or services that the public is likely to believe originate there." Because the applicant’s goods did not come from Venice, Italy, the mark was held to be unregistrable.
E-Commerce/Click-wrap Software Agreements
Arbitration Clause in Click-wrap Agreement Held Unenforceable
By Carrie Shufflebarger
Web users downloading free SmartDownload software from Netscape’s internet website are not bound by an arbitration provision in a software license agreement where the user was not required to view the license agreement or manifest assent to its terms prior to downloading the software. Specht v. Netscape Communications Corp., Case No. 00 Civ. 4871, 00 Civ. 6219 and 00 Civ. 6249, 2001 U.S. Dist. LEXIS 9073 (S.D.N.Y. July 3, 2001).
Netscape enabled internet users to download free software from its internet website through its "SmartDownload" function. In order to obtain this free software, web users simply click on a button labeled "Download." If the web user scrolls down the page past the "Download" button to the next screen, the web user sees a link stating, "Please review and agree to the terms of the Netscape SmartDownload software license agreement before downloading and using the software." The web user is not required to actually view the license agreement or manifest assent to its terms before executing the free download.
The plaintiffs brought suit against Netscape in federal court, alleging that the software transmitted private information about the plaintiffs’ file transfer activity on the internet to Netscape, thereby violating two federal statutes. Netscape moved to compel arbitration pursuant to the terms of the Netscape SmartDownload software license agreement. The court declined to compel arbitration, finding that Netscape’s failure to require SmartDownload users to indicate assent to the license as a precondition to downloading and using the software to be fatal to its argument that a contract was formed. The mere act of downloading the software is not a manifestation of assent to the terms of the software license agreement.
In declining to compel arbitration, the court distinguished situations involving shrink-wrap or click-wrap licenses whereby users have to affirmatively view the terms of a license and click "I accept" to manifest intent to be contractually bound before initiating the download of or use of a product. Without this step, Netscape could not show that the plaintiffs were aware that a contract had been formed.
