IP Update, Volume 4, No. 12, December 2001
December 2001
IN THIS ISSUE
- Patents/Doctrine of Equivalents - Festo Extended—No Range of Equivalents Even for Limitations in Unamended Original Patent Claims
- Patents/Litigation - Bona Fide Purchaser of License Is Defense Against Infringement
- Patents/Patentable Subject Matter - Newly Developed Plant Breeds Are Subject Matter Under §101
- Patents/On-Sale Bar - Even a Full Conception Does Not Equate to "Ready for Patenting" in Terms of On-Sale Bar
- Copyrights/DMCA - Order Barring Posting and Linking of DVD Decryption Code Does Not Violate Free Speech
- IP/Antitrust Interface - The Interaction Between IP and Antitrust Law: Two Recent Cases from the European Court of Justice Have Changed the Landscape
Patents/Doctrine of Equivalents
Festo Extended—No Range of Equivalents Even for Limitations in Unamended Original Patent Claims
By Paul Devinsky
In a case where the defendant was found to infringe a patent for an electrical outlet cover under the doctrine of equivalents, the U.S. Court of Appeals for the Federal Circuit overturned a jury verdict and the district court’s denial of a judgment as a matter of law (JMOL), holding that the patentee was subject to the complete bar rule of Festo for a limitation as amended as well as for the same limitation appearing in unamended claims. Intermatic Inc. v. Lamson & Sessions Co., Case No. 00-1101, -1116, 01-1028 (Fed. Cir. Dec. 17, 2001).
Intermatic is the owner of U.S. Patent No. 5,280,135 (the ‘135 patent), which is directed to a weatherproof electrical outlet cover. During reexamination of the ‘135 patent, Intermatic amended a claim to add an "insert within the aperture" limitation to overcome prior art. Other claims in the original patent, which were never amended, already contained the "insert within the aperture" limitation.
The district court allowed the jury to determine whether Lamson’s electrical outlet cover infringed the unamended claims of the ‘135 patent under the doctrine of equivalents. Lamson contended that prosecution history estoppel bars Intermatic from claiming that the ribbed portion of its inserts satisfies the "insert within the aperture" limitation under the doctrine of equivalents. Intermatic argued that any applicable prosecution history estoppel was limited only to the claim amended during reexamination.
The jury rendered a decision in favor of Intermatic under the doctrine of equivalents. Lamson’s subsequent motion for JMOL was denied by the district court. The Federal Circuit reversed. Citing its 1985 decision in Builders Concrete, Inc. v. Bremerton Concrete Products Co. (for the proposition that prosecution history estoppel applies to a claim containing a limitation that was added to another, separate claim to avoid prior art, where that limitation appeared in the claim in its original form and was not amended during prosecution), the Federal Circuit held that where "a claim limitation was narrowed in order to obtain allowance of a claim during reexamination, despite the fact that the resulting estoppel may retroactively extend to original, unamended claims. . . any estoppel generated by such an amendment applies to all other claims in the patent containing that limitation." The Federal Circuit reasoned that otherwise a limitation would be subject "to multiple ranges of equivalence depending upon whether or not that limitation was amended in any particular claim."
Moreover, the Federal Circuit held that "arguments made to distinguish prior art during reexamination proceedings are retroactively applied to limit the scope of a claim limitation as of the issue date of the patent, not the date of those arguments were made."
Thus, applying Festo, the Court concluded that "none of the claims at issue are entitled to any range of equivalents regarding the ‘insert within the aperture’ limitation."
Bona Fide Purchaser of License Is Defense Against Infringement
By Matthew Weil
The Federal Circuit, applying "federal common law," has held that a bone fide purchaser of a patent sublicense may use the license to defend against a charge of infringement, even if the license of the sublicensor was procured by fraud. In arriving at its conclusion, the court determined that the Federal Circuit’s own law, and not state law, governs. Rhone-Poulenc Agro, S.A. v. DeKalb Genetics Corporation, Case Nos. 00-1266, -1352 (Fed. Cir. Nov. 19, 2001).
The issue arose in the context of dispute in which Monsanto had acquired a sublicense from a licensee (DeKalb Genetics). DeKalb Genetics had acquired the original license by fraud (as the district court determined in a companion case affirmed by the Federal Circuit on the same day it issued this opinion). The patent holder sued Monsanto along with DeKalb for infringement, and Monsanto defended on the basis of the sublicense acquired by it from DeKalb Genetics.
The court reviewed its own precedent and determined that the matter was controlled by its 1998 decision in Heidelberg Harris, Inc. v. Loebach, which recognized a bona fide purchaser defense. In Heidelberg Harris, the Federal Circuit held that "the bona fide purchaser for value rule, as applied to patents, provides that one who acquires an interest in a patent for valuable consideration from the legal title holder, ‘without notice of an outstanding equitable claim or title,’ is entitled to retain the purchased interest ‘free of any equitable encumbrance.’" The court added that, while contractual rights in patents are generally governed by state law, where state law "would be inconsistent with the aims of federal patent policy," federal common law must govern.
In response to Rhone-Poulenc’s argument that the portion of the Heidelberg Harris case regarding the bone fide purchaser rule and subsequent commentary on it was mere dictum, the court noted: "While the question of precedential effect is a close one here, we conclude that there was sufficient discussion of the bona fide purchaser rule in Heidelberg Harris (even though the issue was not argued) that we are compelled to regard it as precedent." On that basis, the Federal Circuit affirmed the decision of the district court.
Patents/Patentable Subject Matter
Newly Developed Plant Breeds Are Subject Matter Under §101
By Kelli Watson
The U.S. Supreme Court recently held that newly developed plant breeds fall within the subject matter of 35 U.S.C. §101, and that neither the Plant Patent Act of 1930 (PPA) nor the Plant Variety Protection Act of 1970 (PVPA) limits the scope of §101. J.E.M. AG Supply, Inc., et al. v. Pioneer Hi-Bred International, Inc., Case No. 99-1996 (Dec. 10, 2001).
J.E.M. AG Supply, Inc., et al. (JEM) answered Pioneer Hi-Bred International, Inc.’s (Pioneer) complaint for patent infringement alleging the resale of hybrid seeds without a license, with a counterclaim of patent invalidity. J.E.M. argued that sexually reproducing plants are not patentable subject matter within the scope of §101, and the PPA and PVPA set forth the exclusive statutory means for the protection of plant life because these statutes are more specific than §101 and, thus, carve out subject matter from §101 for special treatment.
In deciding the issue of whether a utility patent is available for a plant breed, the Court relied on its earlier decision in Diamond v. Chakrabarty, which broadly interpreted the language of §101 to include living things. The Court was not persuaded that the PPA, which confers patent protection to asexually reproduced plants, was meant to fulfill an unmet need of the utility patent statute, and the PPA would not make sense if §101 was intended to grant patents to sexually reproduced plants. The Court reasoned that the passing of the PPA reflected the belief of Congress at that time that plants are not patentable under §101 because they are living things, they could not meet the stringent written description requirements under §101, and the state of science in 1930 did not contemplate today’s methods of producing new plant varieties. The Court, however, found no evidence that Congress intended the PPA to be an exclusive form of protection that precludes utility patent protection. "Whatever Congress may have believed about the state of patent law and the science of plant breeding in 1930, plants have always had the potential to fall within the general subject matter of §101, which is a dynamic provision designed to encompass new and unforeseen inventions."
The Court was similarly not persuaded by J.E.M.’s arguments that the PVPA specifically authorizing limited patent-like protection for certain sexually reproduced plants, evinces Congress’ intent to deny broader utility patent protection and the PVPA altered the subject matter coverage of §101 by implication. Rather, the Court reasoned, like the PPA, the PVPA does not purport to provide the exclusive statutory means of protecting sexually reproduced plants.
The Court further reasoned that there is no repeal by implication because the PVPA and §101 are easily reconciled. The PVPA confers a certificate of protection on the subject plant with exemptions for saving seed and for research; a utility patent confers protection on the subject plant plus resulting hybrids without exemptions.
Even a Full Conception Does Not Equate to "Ready for Patenting" in Terms of On-Sale Bar
By Kara Fletcher
The U.S. Court of Appeals for the Federal Circuit reversed a district court summary judgment decision that found an invention "ready for patenting" under Pfaff v. Wells based on a complete conception. Space Sys./Loral, Inc. v. Lockheed Martin Corp., Case No. 00-1269, 2001 U.S. App. LEXIS 24360, at *1 (Fed. Cir., Nov. 13, 2001).
The invention in Space Systems is an attitude control system for maintaining the position and orientation of a satellite. The inventor, an employee of Space Systems predecessor, conceived of the invention and his employer submitted the concept as an "engineering proposal" to a contractor for a feasibility study that took many months. All of this occurred more than a year before a patent application was filed on the invention. The contractor was given the inventor’s rough drawings, which showed the essential principles of each element of the invention as eventually claimed, a discussion of how the invention was to work, albeit with lesser detail than the patent application, as well as the inventor’s cost estimate for developing the system. Space Systems argued that the materials given to the contractor were not enabling as many months of development were required in order to develop essential information for an operable invention and that at the time the inventor conceived of the invention, he did not even know if it would work. Space Systems argued that the fact that a conception is eventually shown to be workable does not retrospectively convert the conception into an invention that was "ready for patenting."
The district court, on summary judgment, ruled that a § 102(b) bar had arisen, holding that all that is required for an invention to be ready for patenting is "legal conception of every element of every claim," which it defined as a mental act; and that a "fully conceived" invention could be placed on-sale even if not enabled.
The Federal Circuit reversed, holding that as a matter of law, an invention is not ready for patenting even if there is a conception that included every element of a claimed invention unless there was a reduction to practice or an enabling description. "To be ‘ready for patenting’ the inventor must be able to prepare a patent application, that is, to provide an enabling disclosure."
The Federal Circuit found that under the facts of this case, the invention description provided to the contractor was not enabling and, thus, the invitation was not ready for patenting at the time of the submission. As the Federal Circuit explained: "when development and verification are needed in order to prepare a patent application that complies with § 112, the invention is not yet ready for patenting."
Order Barring Posting and Linking of DVD Decryption Code Does Not Violate Free Speech
By Paul Devinsky
The U.S. Court of Appeals for the Second Circuit has upheld an injunction barring the posting of and linking to DVD decryption code on websites as not violative of the First Amendment. Universal City Studios Inc. v. Corley, Case No. 00-9185 (2d Cir., Nov. 28, 2000).
The Digital Millennium Copyright Act (DMCA) prohibits the circumvention of technological measures that control access to copyrighted works. The anti-trafficking provision, § 1201(a)(2), provides that no person shall make, import or traffic in any technology that is primarily designed for circumventing such technological access violating controls.
Universal City Studios (Universal) sued several internet website operators for violating the anti-trafficking provision based on publication of a program known as the DeCSS code for overcoming the encryption used with DVD movies, thus permitting the DVDs to be copied or modified. The U.S. District Court found a violation of the DMCA and issued an injunction. The website operators appealed.
The appellate court agreed that First Amendment rights are available for
computer code:
A recipe is no less ‘speech’ because it calls for the use of an oven, and a musical score is no less ‘speech’ because it specifies performance on an electric guitar. . . . But the fact that a program has the capacity to direct the functioning of a computer does not mean that it lacks the additional capacity to convey information, and it is the conveying of information that renders instruction ‘speech’ for purposes of the First Amendment."
However, the court found the injunction merely addressed the non-speech, functional aspect of the code that instructs the operation of the computer:
Unlike a blueprint or a recipe which cannot yield any functional result without human comprehension of its content. . . computer code can instantly cause a computer to accomplish tasks and instantly render the results of those tasks available throughout the world via the Internet. The only human action required to achieve these results can be [as] limited and instantaneous as a single click of a mouse. These realities of what code is and what its normal functions are require a First Amendment analysis that treats code as combining nonspeech elements, i.e., functional and expressive elements.
In discounting the First Amendment defense, the Court of Appeals recognized that the essential purpose of the DeCSS code is to prevent unauthorized access in the same way other property owners prohibit access with locks, safes and security devices:
Just as what computer code can accomplish must inform the scope of protection so the capacity of a program like DeCSS to accomplish unlawful access to copyrighted materials must inform and limit the scope of its First Amendment protection.
The court also rejected the web operators’ argument that the "posting" prohibition is a content-based regulation of speech because it specifically targets scientific expression. Rather, the court found that the posting prohibition only concerned the ability of the DeCSS program to instruct a computer to decrypt DVDs, a functional capability that is not speech within the meaning of the First Amendment.
This type of regulation is just as content-neutral as a restriction on trafficking in skeleton keys targeted for their capacity to unlock jail cells even though some of the keys happened to bear a slogan or other legend that qualified as a speech component.
The Second Circuit also rejected as "extravagant" the web operators’ claim that the DMCA as applied by the district court unconstitutionally eliminates fair use of copyrighted materials:
We know of no authority for the proposition that fair use, as protected by the Copyright Act, much less the Constitution, guarantees copying by the optimum method or in the identical format of the original. Although the Appellants insisted at oral argument that they should not be relegated to a ‘horse and buggy’ technique in making fair use of DVD movies, the DMCA does not impose even an arguable limitation on the opportunity to make a variety of traditional fair uses of DVD movies, such as commenting on their content, quoting excerpts from their screenplays and even recording portions of the video images and sounds on film or tape by pointing a camera, a camcorder or a microphone at a monitor as it displays the DVD movie. The fact that the resulting copy will not be as perfect or as manipulable as a digital copy obtained by having direct access to the DVD movie in its digital form, provides no basis for a claim of unconstitutional limitation of fair use.
The Interaction Between IP and Antitrust Law: Two Recent Cases from the European Court of Justice Have Changed the Landscape
By Lawrence Cohen
As background, Article 81 (formerly 85) of the EC Treaty prohibits agreements and concerted practices between undertakings that have as their object or effect the prevention or distortion of trade between member states of the EU. All such agreements are automatically void (Article 81(2)). However, it is possible
to get individual exemption for such agreements where consumers get a fair share of the benefits. Such an exemption may arise either where the agreement falls within a block exemption, or where an individual exemption from the EC Commission is obtained. An individual exemption cannot be requested retrospectively.
There are block exemptions that cover two-party technology transfer agreements, specialization, research and development agreements and distribution agreements. Multiparty agreements, such as patent pools, require an individual exemption. For each of these block exemptions, there is a "white list" of acceptable clauses,
a "gray list" of clauses that require individual analysis and a "black list" of prohibited clauses.
In addition, Article 82 sets out absolute prohibitions on abuse of a dominant position. While normally it is not an abuse to refuse to licence intellectual property rights (Volvo v. Veng-ECJ), in extremis it might be. For example
compulsory licensing has been required of a copyright listing for television programs, so a comprehensive multichannel listing could be published.
Recently there have been two important decisions from Europe that affect IP rights and IP licences.
First, in Creehan v. Courage, (Sept. 2001), the European Court of Justice held that any agreement that offends Article 81(1) is automatically void and may be terminated by either party. Further, if terminated, loss falls where it lies on termination. Whether back damages can be claimed depends on local law, and the bargaining strength of the parties. As a result, all IP agreements which do not satisfy the block exemption or have individual exemption, and that have cross border effect within the EU (equivalent to interstate effect within the United States) are automatically terminable, regardless of language to the contrary in the agreement.
Second, even an arbitration clause may not be sufficient to keep agreements which are subject to challenge under Articles 81 or 82 out of court. Most countries will not enforce arbitration awards which are contrary to public policy. In Eco Swiss v. Benetton (ECJ, 1999), it was held that compliance with Article 81 of the EU Treaty is always a matter of public policy within the EU, and the Courts may deal with this issue notwithstanding an arbitration clause. In many IP agreements which contain clauses that are "black" or "gray" listed, an arbitration clause may not serve as a predictable and a definitive enforcement approach.
