IP Update, Vol. 9, No. 1, January 2006
January 2006
- Patents / Over Breadth and Written Description - LizardTech II: The Written Description Controversy Continues
- Patents / Offer for Sale - A Turf War Sheds Light on the Meaning of “Offer for Sale”
- Patents / § 271(f) - Apparatus, Method and Process Are All Equal in the Eyes of § 271(f)
- Patents / Licensee’s Standing to Sue - Limited License Term Can Defeat Licensee’s Standing to Sue
- Patents / Claim Construction / Damages - Double or Nothing: How Much Can We Bet on Phillips?
- Semiconductor Chip Protection Act / Pre-emption - Rare Decision on Semiconductor Chip Protection Act
- Trademarks / Reverse Confusion - Likelihood of Confusion vs. Reverse Confusion
- Copyright / Infringement - Seventh Circuit Upholds Judgment Against Individual for Downloading 30 Copyrighted Songs
Patents / Over Breadth and Written Description
LizardTech II: The Written Description Controversy Continues
By Amanda E. Koenig
In response to a request for rehearing, the U.S. Court of Appeals for the Federal Circuit, in a per curium order, has denied a petition for en banc rehearing of its earlier decision, LizardTech, Inc. v. Earth Resource Mapping Inc, and Earth Resource Mapping Ltd. (IP Update, Vol. 8, No. 10, LizardTech I), which held that patent claims broader than the patent’s specification fail to provide an adequate written description under 35 U.S.C. § 112 ¶1. In doing so, the Court exposed a wide range of irreconcilable views held by members of the Federal Circuit on the law pertaining to § 112 ¶1. LizardTech, Inc. v. Earth Resource Mapping Inc., and Earth Resource Mapping Ltd., Case No. 05-1062 (Fed. Cir. Jan. 5, 2006) (per curium) (concurrence by Lourie, J., Michel, C.J. and Newman, J. joining) (dissent by Rader, J., Gajarsa, J. joining) (Linn, J., dissenting) (LizardTech II).
In LizardTech I, the Court invalidated a claim for failing to meet the requirements of § 112 ¶1. First, the Court compared the specification and claims at issue to determine whether the claims fell within the scope of the specification. Finding the claims were broader than the specification, the Court asked whether the specification included enough detail to “convince a person of skill in the art that the inventor possessed the invention and to enable such a person to make and use the invention without undue experimentation.” The panel in LizardTech I found that the patent failed to meet the requirements of § 112 ¶1 on both counts.
In LizardTech II, the concurrence saw little reason to disturb the status quo. It emphasized the written description requirement’s role in ensuring that the inventor discloses his or her invention to the public, arguing that the written description requirement remains distinct from the enablement requirement. The concurrence also rejected the notion of a technology-neutral standard for determining when a patent’s written description is adequate, writing, “[c]ompliance with the written description requirement has been held to be a question of fact, so what constitutes an adequate written description depends on what is claimed and what is described.”
Although “claims may vary from the specification,” the concurrence argued that they may not be interpreted beyond the written description, “otherwise they would be interpreted to cover inventions or aspects of an invention that have not been disclosed.” Further reinforcing the weight it placed on the specification, the concurrence also contended that a patent lacking other embodiments or disclosures, may be limited to the embodiments disclosed, even where such embodiments are not explicitly designated as “preferred.”
In his dissent, Judge Rader urged en banc reconsideration of the written description requirement and vociferously objected to the majority’s approach, writing that it merely contributed to a confusing and murky line of cases, rather than providing a much-needed “neutral standard of application” for the written description doctrine. The dissent felt the Court’s written description doctrine had departed from the original role of § 112 ¶1, which was to guard against new matter.
Most importantly, the dissent found the analysis used in the concurrence troubling in light of JVW Enterprises (IP Update, Vol. 8, No. 11) and Phillips (IP Update, Vol. 8, No. 10). In Phillips, the en banc Court emphasized the preeminence of the claim language in claim construction, while explicitly warning against importing limitations from the specification into the claims. The Court in JVW, following Phillips, rejected a proposed claim construction because it would improperly limit claim language to the specific embodiment disclosed in the written description. Struggling to reconcile the two cases, the LizardTech II dissent wrote: “Of course, the unsatisfying solution to the puzzle is simple: while JVW considered principles of claim construction in light of this court’s recent en banc clarification of claim construction, LizardTech dealt with this court’s evolving written description doctrine.”
Patents / Inherency / Double Patenting
Inherent Anticipation Curtailed in Method Patent Case and Retroactive Effect of Terminal Disclaimers Investigated
By Evan A. Parke
Further refining the doctrines of obviousness-type double patenting and anticipation by inherency, the U.S. Court of Appeals for the Federal Circuit reversed a district court ruling that held that a first patent owned by the plaintiff was inherently anticipated while affirming the plaintiff's second patent was invalid due to obviousness-type double patenting. Perricone v. Medicis Pharm. Corp., Case Nos. 05-1022, -1023 (Fed. Circ. Dec. 20, 2005) (Rader, J.) (Bryson, J., concurring in part and dissenting in part).
Dr. Perricone’s first patent related in part to a method of treating skin sunburn. The asserted prior art (Pereira) disclosed formulas for extending the shelf-life of lotions. Though Pereira was silent on the issue of sunburn treatment, the district court had ruled it inherently anticipated because “treating and preventing sunburn is inherent in the normal use” of the lotions disclosed. Perricone appealed
In reversing the district court, the Federal Circuit made clear that new uses of existing products “are indeed patentable subject matter.” The Court then explained that the question was “not whether Pereira’s lotion if applied to skin sunburn would inherently treat that damage, but whether Pereira discloses the application of its composition to skin sunburn.” (emphasis in original). Concluding that Pereira did not, the Federal Circuit reversed the district court.
Although the Court affirmed the district court’s finding that Dr. Perricone’s second patent was invalid due to obviousness-type double patenting, it emphasized that there is “[no] prohibition on post-issuance terminal disclaimers.” The Court noted that terminal disclaimers may be filed even after a patent has been issued. The Court further stated that although a terminal disclaimer “can indeed supplant a finding of invalidity for double patenting,” the Court left for another day the question whether a terminal disclaimer if now filed by Perricone would have a retroactive effect.
A Turf War Sheds Light on the Meaning of “Offer for Sale”
By Stephen K. Shahida
In one of its first decisions of the new year, the U.S. Court of Appeals for the Federal Circuit has dealt with a seldom implicated provision of 35 U.S.C. § 271(a): an offer for sale. FieldTurf Int’l Inc. v. Sprinturf, Inc., Case No. 04-1553 (Fed. Cir. Jan. 5, 2006) (Newman, J.).
By way of background, the architect for a California school district had issued a request for proposal (RFP) for a sports playing field using a synthetic turf. The RFP specified the turf should have the same features as FieldTurf Int’l Inc.’s patented product. Responding to SportFields’ complaint that California law does not favor such sole source procurement in an RFP, the bid specifications were amended. SportFields, however, continued to complain that the amendments still did not clearly permit any substitute to FieldTurf’s product. In response, the school invited SportFields to submit a bid regardless as it was too late to change the specifications again. Having submitted the lowest bid, SportFields was awarded the contract.
FieldTurf sued SportFields for patent infringement, alleging, among other things, that under § 271(a), SportFields’ bid constituted an unqualified offer to sell the product specified in the RFP. The district court disagreed, holding that although a bid is an offer of sale, the particular bid in the case was not an offer to sell the patented product because SportFields intended to sell its own non-infringing product. The undisputed facts in the record clearly established that all parties knew the actual product that SportFields intended to sell was a non-infringing product. The Federal Circuit affirmed, stating the district court correctly considered the nature of the product that SportFields intended and understood to be offering for sale.
Apparatus, Method and Process Are All Equal in the Eyes of § 271(f)
By Stephen K. Shahida
The U.S. Court of Appeals for the Federal Circuit has denied Shell Oil Company’s petition for an en banc hearing of the Court’s October 2005 holding that § 271(f) applies to all inventions, including those protected by method claims. Union Carbide Chemicals v. Shell Oil, Case Nos. 04-1475, -1512 (Fed. Cir. Jan. 10, 2006) (en banc) (Lourie, J., dissenting).
As reported in the October 2005 IP Update, Vol. 8, No. 10, a three-judge panel of the Court had overruled the district court’s holding that § 271(f) was not directed to process claims; therefore, Shell Oil’s supply of catalysts to its foreign affiliates, which use the catalysts in their allegedly infringing processes, did not create liability. Focusing on the words of the statute, the Federal Circuit rejected the lower court’s interpretation, emphasizing that the term “any component of a patented invention” as recited in the statute is broad and inclusive.
In response to the en banc petition, (with Judge Gajarsa not participating,) an 11-member en banc panel denied the petition for a rehearing in a 7 to 4 vote. In his dissent, Judge Lourie, joined by Chief Judge Michel and Judge Linn, urged that the “tenor of [§ 271(f)] relates to physical inventions, i.e., apparatus or compositions, not methods.” The dissent added that “[A] component of a process is a step in the process; it is not the physical material to be used in the process.”
Practice Note
Given the majority’s denial of the petition, and absent a review by the Supreme Court, it appears as settled law that § 271(f) covers all “inventions,” whether presented as apparatus, method or process claims. U.S. companies need to remain mindful of § 271(f), even if only supplying components used for assembly or for other inclusion in products or processes abroad.
Patents / Licensee’s Standing to Sue
Limited License Term Can Defeat Licensee’s Standing to Sue
By G. Matthew McCloskey
Addressing for the first time the issue of whether an exclusive patent licensee, with all substantial rights to a patent but for only a limited portion of the patent term, had standing to bring suit on the patent, the U.S. Court of Appeals for the Federal Circuit held the licensee did not have standing to sue. Aspex Eyewear, Inc., et al. v. Miracle Optics, Inc., Case No. 04-1265 (Fed. Cir. Jan. 10, 2006) (Lourie, J.).
Aspex Eyewear, Inc. and Contour Optik, Inc. appealed to the Federal Circuit the dismissal by a district court of their patent infringement suit against Miracle Optics, Inc. The patent at issue was assigned to Contour, which executed a license agreement with non-party, Chic Optic, Inc., which in turn sublicensed all of its rights under the patent to Aspex. Prior to the grant of the sublicense, Aspex and Contour filed suit against Miracle for infringement. The district court determined that under the license agreement between Contour and Chic, ownership of the patent had transferred to Chic and, thus Contour did not have standing to bring suit. Contour appealed.
The Federal Circuit, finding that Contour had ownership at the time the original complaint was filed, reversed and remanded. Citing the landmark 1891 Supreme Court Waterman case, the Federal Circuit reiterated that the essential issue regarding the right to sue on a patent is who owns the patent. In this instance the issue was whether Contour had transferred substantially all of its patent rights to Chic Optic (in which case Contour lacked standing). In its analysis, the Court noted that under the license agreement with Contour, Chic received the exclusive right to make, use and sell in the United States products covered by the patent; the first right to commence legal action against third parties for infringement of the patent; the right to retain any award of damages from such actions; and a virtually unrestricted right to sublicense all of its rights to a third party. The license agreement, however, contained a termination date ending Chic’s rights with one extension available. The definite and “hard” termination date effectively limited Chic’s use of the patent to less than five years of the patent’s term.
Even though Chic had substantial rights in the patent, the Court found the limited term of the license was a dominant factor that, when coupled with important public policy considerations, militated against Chic having ownership of the patent and thus standing to sue. The two public policy considerations cited by the Court were preventing multiple lawsuits on the same patent against the same accused infringer and preventing a party with lesser rights from bringing a lawsuit that could render the patent invalid or unenforceable in an action not involving the patentee. The Court concluded that Chic simply did not own the patent and was merely an exclusive licensee.
Patents / Claim Construction / Damages
Double or Nothing: How Much Can We Bet on Phillips?
By Kori Anne Bagrowski
After the district court broadly construed the claims, a jury found SeaChange to have willfully infringed the patent in suit, both literally and under the doctrine of equivalents, and awarded nCube double actual damages and its attorney fees. The U.S. Court of Appeals for the Federal Circuit has now upheld the district court’s claim construction and award. nCube Corp. v. SeaChange Int’l. Inc., Case Nos. 03-1341,-1366 (Jan. 9, 2006) (Radar, J.) (Dyk, J., dissenting).
The patent at issue was directed to a method and apparatus for scalable, high bandwidth storage retrieval and transportation of multimedia data on a network. The claim construction dispute centered on the key claim term of “upstream manager;” which the district court found to mean an element that routes messages by using either logical or physical addresses. In arriving at this construction, the district court construed the term to be broader than the single embodiment described in the specification, which did not describe the use of physical addresses. Based on its construction, the jury concluded that SeaChange willfully infringed the claim, both literally and by equivalents and the district court held the case to be “exceptional,” awarding nCube multiple damages and attorney fees. SeaChange appealed.
The Federal Circuit affirmed the district court’s claim construction, reasoning that the meaning of the claim term was not “so amorphous that one of skill in the art can only reconcile the claim language with the inventor's disclosure by recourse to the specification.” The Federal Circuit reasoned that the claim at issue was not limited to message routing using only logical addresses, refusing to read into the independent claim a limitation from a dependant claim, reasoning that to do so would be improper and would make the claims redundant. The Federal Circuit also found the district court’s construction was consistent with the prosecution history.
The Federal Circuit concluded that district court did not abuse its discretion, either in finding the case to be exceptional or in awarding attorney fees and double damages. The Federal Circuit reasoned that the case for literal infringement was not closed and the defendants deliberately copied the invention without investigating the scope of the patent. The Court concluded that defendant’s actions negated any good faith belief that could excuse the conduct.
Judge Dyk dissented as to the finding of infringement. Judge Dyk believed the majority broadened a poorly drafted patent to cover an invention that was not actually claimed or described in the invention; and that the term “upstream manager” should be limited to use of logical addresses. In his dissent, Judge Dyk cited the en banc decision in Phillips, noting that the specification plays a key role in claim construction, and that the specification of the patent at issue did not support the majority’s claim construction. Judge Dyk reasoned the single embodiment of the invention, using a logical address, was strong evidence that the claims should not encompass an essentially opposite structure; i.e., a physical address. Moreover, Judge Dyk reasoned that the unasserted claims, directed to logical addresses, evidenced the applicant’s intent to limit the patent. Thus, based on what he regarded as the correct (narrower) claim construction, Judge Dyk would reverse the verdict of infringement.
Practice Note
The claim construction in this case should be compared with the result in Lizard Tech v. Earth Res. Mapping, Inc. (discussed above) where the court found that a claim that was broader than the supporting disclosure to be invalid under the written description requirement of 35 U.S.C. § 112, ¶1.
Semiconductor Chip Protection Act / Pre-emption
Rare Decision on Semiconductor Chip Protection Act
By Daniel R. Foster
The U. S. Court of Appeals for the Ninth Circuit upheld a jury verdict of infringement of the Semiconductor Chip Protection Act (SCPA) where the alleged infringer used the plaintiff's bitstream logic to program an application specific integrated circuit chip. Altera Corp. v. Clear Logic, Inc., Case Nos. 03-17323, 03-17334 (9th Cir. Sept. 15, 2005) (Hug, J.).
Altera manufactures programmable logic devices, or PLDs, which are chips that can be programmed to perform various functions. Clear Logic manufactures single-function chips, called application-specific integrated circuits (ASICs). Unlike PLDs, ASICs cannot be programmed by the customer. Clear Logic creates ASICs compatible with Altera chips by having Altera’s customers send it the bitstream file generated by use of the Altera chip programmed to a certain function. Clear Logic uses this bitstream to create an ASIC for the customer that mimics the operation of a programmed Altera chip.
Altera sued Clear Logic under the SCPA, the federal statute that protects mask works embodied in semiconductor chip products. Altera also asserted various state law claims. Altera asserted that Clear Logic copied Altera’s placement of groupings of transistors on the chip and claimed such copying was a violation under the SCPA. Clear Logic denied liability and asserted reverse engineering as an affirmative defense. The jury found in Altera’s favor on all claims, awarding approximately $36 million in damages and entering an injunction against Clear Logic. Clear Logic appealed.
On appeal, Clear Logic argued that Altera’s placement of groupings of transistors was a system or idea and was not entitled to protection under the SCPA. The Ninth Circuit agreed the SCPA grants the owner of a mask work the exclusive right to reproduce the mask work and does not protect ideas described or embodied in the mask work, but found that Altera’s layout design was not just a mere idea. The Court reasoned that the boundaries and organization of those groupings of transistors were more than conceptual and properly considered part of the mask work.
The Ninth Circuit also held Altera’s state law claims for intentional interference with contract and inducement of Altera’s customers to breach their software license agreements were not preempted by federal copyright law because the state law claims were based on use, not reproduction of the bitstream, i.e., a right not included within the Copyright Act’s protections.
Trademarks / Reverse Confusion
Likelihood of Confusion vs. Reverse Confusion
By Paul Devinsky
The U.S. Court of Appeals for the Third Circuit has affirmed a district court's finding of no reverse confusion, notwithstanding failure of the district court to apply the correct legal test. Freedom Card, Inc. v. JPMorgan Chase & Co., Case No: 04-3876 (3rd Cir. Dec. 22, 2005) (McKee, J).
Freedom Card (formerly Urban Television Network or UTN) marketed a credit card primarily to those with bad credit records under the name “Freedom Card.” For several years prior, JP Morgan Chase & Co. had partnered with Shell Oil in marketing the “Chase Shell MasterCard,” a rewards card for the high-end credit market. After Chase ended its relationship with Shell, it rebranded the card as the Chase Freedom Card. When UTN objected to Chase's use of Freedom Card as part of the card name, Chase halted promotion of the card. Chase subsequently filed a lawsuit seeking a declaratory judgment that its marketing of the Chase Freedom Card did not infringe on any rights held by UTN, and moved for summary judgment. The district court, applying the Third Circuit’s 10-factor test for likelihood of confusion set forth in Interpace Corp. v. Lapp, Inc., determined there was no likelihood of confusion and granted summary judgment of non-infringement. UTN appealed.
The Court noted this was not a likelihood of case but a case of reverse confusion; a situation which occurs when a larger, more powerful company uses the trademark of a smaller, “less powerful senior owner and thereby causes likely confusion as to the source of the senior user's goods or services.” Citing its 2000 decision in A & H Sportswear Inc. the Court explained that in such a case, the Lapp test is modified since the intent of the junior user is not to trade on the goodwill of the senior user's mark but to “exploit confusion to push the senior user out of the market.” However, the court rejected UTN's argument that because the district court applied the wrong test in this case, the judgment must be reversed, noting that A & H did not establish “a bright-line rule requiring reversal and remand whenever a district court fails to properly apply the Lapp factors.”
Here, after reanalyzing the facts at issue, the Court found that, as a matter of law, UTN had not presented a reverse confusion claim and affirmed the district court, albeit on alternative grounds. The Court also voiced “serious doubts” about whether UTN's claim was really a reverse confusion claim, noting Chase did not “overwhelm” UTN's Freedom Cards, since Freedom Card was out of the market for more than a year before Chase launched its Chase Freedom card and there was only very limited advertising of the Chase Freedom Card before its promotion was suspended in response to UTN's communication.
On reevaluating UTN’s claim of reverse confusion and applying the A & H Sportswear test, the court noted that UTN had admitted during U.S. Patent and Trademark Office (USPTO) examination of its application to register the mark “FREEDOM CARD” that the word “freedom” was extensively used with regard to a wide range of products, including financial services.
The court concluded that “UTN’s own statements and actions; together with Chase's undisputed evidence of the widespread and common use of ‘freedom,’ undermine UTN’s belated attempt to establish likelihood of confusion.”
Seventh Circuit Upholds Judgment Against Individual for Downloading 30 Copyrighted Songs
By Candice Lee
The U.S. Court of Appeals for the Seventh Circuit has held that downloading copyrighted songs from the internet is copyright infringement and cannot be defended as fair use. BMG Music v. Gonzalez, Case No. 05-1314 (7th Cir. Dec.12, 2005) (Easterbrook, J.).
Gonzalez downloaded more than 1,370 copyrighted songs through a file-sharing network and saved them to her computer. The evidence showed that she did not own legitimate copies of 30 of the downloaded songs. Charged with copyright infringement, Gonzalez argued that downloading songs to sample them and determine whether or not she would later purchase the music was a fair use.
The district court held Gonzalez failed to meet the elements of fair use—she was not engaged in nonprofit operations, and downloading music from unlicensed sites has an adverse affect on the potential market for the copyrighted work. Given the potential market for the copyrighted work, such as compact discs, radio and licensed internet sites, the district court also found that downloading full copies of copyrighted material without compensation to the authors cannot be considered “fair use.” Further, the district court rejected Gonzalez’s claim that she was a minor offender: “[c]omputer users [cannot] defend their downloads by observing that other persons are greater offenders. A claim, that a downloader obtained ‘only 30’ copyrighted songs is no more relevant than a thief’s contention that he shoplifted ‘only 30’ compact discs ...”
The Court of Appeals upheld the district court’s award of statutory damages of $750 per song. If BMG had sought anything more, up to the statutory limit of $30,000 per occurrence, Gonzalez would have been entitled to a jury trial. However, since no jury would be entitled to award less than the statutory minimum, no triable issue remained. The Seventh Circuit agreed with the district court that Gonzalez had not, as a matter of law, carried her burden of proving that she did not know her acts constituted copyright infringement. The Court of Appeals observed that, under the law, if a notice of copyright appears on the published phonorecord to which a defendant had access, no weight should be given to a defendant’s claim of innocent infringement. The Court determined that, although the data Gonzalez downloaded did not have copyright notices, she had access to legitimate copies and could have (had she inquired) learned the music was under copyright.
