IP Update, Vol. 9, No. 7, July 2006
July 2006
Patents / On-Sale - On-Sale Bar Violation “Blows Up” Where Invention Was “Not Ready For Patenting”
Combination of Prior Art Defeats Showing of Likelihood of Success on Merits in Preliminary Injunction Battle
By Astrid R. Spain
In a post-eBay case that echoes the recent Supreme Court decision, the U.S. Court of Appeals for the Federal Circuit applied the “four-factor” test and determined that Abbott Pharmaceuticals USA, Inc. raised a substantial question as to the validity of each of the claims asserted by Abbott Laboratories, and therefore concluded that Abbott did not successfully establish a likelihood of success on the merits and vacated a district court’s grant of a preliminary injunction to Abbott. Abbott Labs. v. Andrx Pharm., Inc., No. 05-1433, Case No. 05-1433 (Fed. Cir. June 22, 2006) (Prost, J.; Newman, J., dissenting).
Abbott owns U.S. Patent No. 6,010,718 (the `718 patent) claiming an extended-release formulation of clarithromycin, branded as Biaxin® XL, a broad spectrum antibiotic from the macrolide family of erythromycin A derivatives. The `718 patent discloses extended release formulations comprising erythromycin derivatives combined with a pharmaceutically acceptable polymer. Abbott also owns U.S. Patent No. 6,551,616 (the `616 patent), issued from a continuation-in-part application of the `718 patent, which claims a method of reducing adverse gastrointestinal side effects of erythromycin-derived drug formulations by using extended-release formulations.
Abbott moved for a preliminary injunction against Teva Pharmaceutical Industries on the grounds that Teva was infringing both the `718 patent and the `616 patent. Teva resisted Abbott's motion by arguing that substantial questions existed under § 103 as to the validity of Abbott's asserted claims. Applying the four-factor test for injunctive relief as instructed by the Supreme Court in eBay v. MercExchange, the district court agreed that Teva had raised a substantial question as to the validity of Abbott's asserted claim of the `616 patent but rejected Teva's invalidity arguments as to the `718 patent. As to irreparable harm, the district court concluded that the balance of hardships favored Abbott and thus granted Abbott's motion for a preliminary injunction.
On appeal, Teva pointed to Abbott's own U.S. Patent No. 5,705,190 (the `190 patent), which discloses a controlled-release pharmaceutical formulation of clarithromycin combined with a water-soluble alginate salt, but does not disclose the polymers claimed in the `718 patent. Teva argued that a person of ordinary skill in the art would be motivated to replace the alginate of the `190 patent with HPMC based on a Pfizer publication, which disclosed using be (HPMC )with azithromycin, a compound related to clarithromycin.
The Federal Circuit panel agreed with Teva and concluded that, because the `190 patent explicitly discloses only clarithromycin controlled-release compositions, yet claims azithromycin compositions, a substantial argument exists that a person of ordinary skill in the art would be motivated to combine the Pfizer publication, namely the use of HPMC in extended-release macrolide compositions, with the `190 patent with a reasonable expectation of success. In considering irreparable harm, the Federal Circuit concluded that neither party was favored in the analysis since Abbott had shown neither likelihood of success on the merits nor the inability to be compensated by money damages, and Teva had shown that monetary damages would be sufficient compensation.
In dissent, Judge Newman argued that the majority opinion misapplied both the criteria for preliminary injunction and the standard of appellate review.
Practice Note: Abbott subsequently filed an emergency motion in the U.S. District Court for the Northern District of Illinois, where the patent infringement case is pending with a trial scheduled for March 2007, to enjoin Teva from further sales of the product pending additional appeals despite the vacatur of the preliminary injunction. In order to permit this motion to be presented to the judge most familiar with the case, Abbott agreed to a briefing schedule concluding on June 29, 2006, and Teva agreed to refrain from further sales pending the outcome of the motion.
Court Has Discretion to Try Inequitable Conduct in a Separate Bench Trial
By Paul Devinsky
Over a sharp dissent, the U.S. Court of Appeals for the Federal Circuit has affirmed that a district court has discretion to try and decide the issue of inequitable conduct separately, in advance of a jury trial on validity and infringement. Agfa Corp. v. Creo Products Inc., Case No. 05-1079 (Fed. Cir. June 26, 2006) (Rader, J.; Newman, J., dissenting).
Agfa owns several patents that claim various features of its computerized Galileo printing system, also known as a computer-to-plate (CTP) system. Agfa sued Creo alleging that Creo’s CTP system infringed its Galileo patents. Creo asserted that Agfa’s patents were unenforceable due to Agfa’s inequitable conduct before the U.S. Patent and Trademark Office (USPTO) because Agfa did not disclose to the examiner at least three prior art systems that were more relevant to Agfa’s applications than the single reference discussed in the specification common to all of Agfa’s applications.
The district court severed the inequitable conduct issue from the rest of the case, and, over Agfa’s objection, conducted a bench trial and ultimately declared all of Agfa’s patents at issue unenforceable. Agfa appealed.
Citing to its 1987 decision in Gardco Manufacturing v. Herst Lighting, the Federal Circuit affirmed the practice separating the inequitable conduct issue for trial without a jury. Declining Agfa’s invitation to depart from Gardco, the panel distinguished the Supreme Court case of Beacon Theaters v. Westover, which held that a trial judge could not conduct a bench trial and thereby preclude a jury trial on equitable declaratory relief claims where that trial would resolve “common” issues with a claim subject to jury resolution. While the panel acknowledged that the present case involved the “overlapping” issues of inequitable conduct, including the materiality of the undisclosed prior art and validity, it concluded that these issues are not “common” as in Beacon Theatres where both the petitioner’s claim and the declaratory relief claim involved the same antitrust issue. The Court concluded that “[b]ecause this case does not involve ‘common’ issues, this court need not apply the Beacon Theatres rule to honor Agfa’s jury trial request.”
Next, the panel confronted Agfa’s contention that Gardco is inconsistent with the 1995 Federal Circuit decision in In re Lockwood where the Court explained that “[t]he thrust of the [Seventh] Amendment was to preserve the right to jury trial as it existed in 1791.” After concluding that footnote 9 in Lockwood “seemed to suggest that inequitable conduct is analogous to a writ of scire facias, and because that writ would have ultimately been decided by a jury in 1791 it was wrong for the trial court to decide the inequitable conduct issue without a jury,” the majority concluded that this “commentary in Lockwood does not disturb the Gardco reasoning” and that the court’s “use of the word ‘analog’ in the footnote was unfortunate.” Rather, the majority concluded that a “closer analysis than was needed in Lockwood reveals that a writ of scire facias was not, in fact, a suit at common law analogous to modern inequitable conduct.”
In a sharp dissent, Judge Newman argued that the majority’s holding that “the factual questions of both intent to deceive and materiality of deceptively withheld information are not subject to the jury right … is a departure from the established jury right, for materiality and intent are quintessential questions of fact, and have been tried to a jury throughout the nation’s history.” In Judge Newman’s view, the majority decision “joins a few cases in which panels of the Federal Circuit diverged from history and the weight of our precedent, as in Gardco.”
On-Sale Bar Violation “Blows Up” Where Invention Was “Not Ready For Patenting”
By Mary Chapin
The Federal Circuit vacated the district court’s finding of invalidity based on the on-sale bar because, despite sworn testimony admitting sales of the patented product more than one year beforehand, the invention was not “ready for patenting” before the critical date. Gemmy Industries Corp. v. Chrisha Creations Ltd., Case No. 05-1110 (Fed. Cir. June 22, 2006) (Newman, J.).
Gemmy’s patent is directed to an inflatable decorative holiday figure. More than a year before Gemmy filed its patent application, Gemmy exhibited certain prototype inflatable Halloween and Christmas figures at a Hong Kong trade show to potential customers. The prototypes were inflated by a hair dryer through a long tube, whereas the patent claims required that the assembly have a fan in the base for inflation. Although the inflatable figures were seen by retailers and quote sheets were made available at the exhibit, the district court found that no sales orders were taken at that time. The first commercial shipments of the products were made within the one-year grace period.
Gemmy filed suit charging patent and copyright infringement and other commercial torts. Gemmy filed an affidavit of its president stating that Gemmy had been selling its inflatable product line since the date of the Hong Kong show and that each product is made up of a base containing a fan unit. Chrisha, citing the affidavit’s admission of product sales, moved for summary judgment of invalidity based on the on-sale bar. In response, Gemmy submitted a new declaration by its president seeking to modify the statements of his prior affidavit to say he knew the prototypes at the Hong Kong display underwent several structural changes, including the box fan in the base and other claimed elements, before the commercial product was available for sale. A sales representative and contemporaneous photographs corroborated that the early prototypes were inflated using an external hair dryer.
The district court granted Chrisha’s motion for summary judgment of invalidity based on the on-sale bar, finding that Gemmy “developed, displayed to customers, marketed and quoted to customers for sale [prior to the critical date].”
On appeal, Gemmy argued that the inflatable figures were incompletely developed when exhibited in Hong Kong. Gemmy also argued that there was undisputed evidence that the exhibited prototypes were inflated with a hair dryer, not the base fan required by the claims, and therefore not “ready for patenting” under the requirements of Pfaff v. Wells Electronics. Although the burden was on Chrisha to show the product was both ready for patenting and the subject of a commercial offer for sale before the critical date under Pfaff, Chrisha argued the initial affidavit of Gemmy’s president shifted the burden of proof, requiring Gemmy to explain why its president initially made an incorrect averment and provide evidence of its first sale and when the engineering design was completed.
While the Federal Circuit agreed that a party cannot simply contradict an earlier sworn statement, it found credible evidence existed to support the contradiction. It further found the district court’s determination that the exhibited prototypes did not have a base containing a fan unit irreconcilable with its determination on summary judgment that the prototype was ready for patenting. Thus, the Federal Circuit concluded that the undisputed evidence that the product displayed was not the patented invention removes it from meeting the requirement of Pfaff that “the patented invention must be ‘fully disclosed’ in the product that was on sale.”
Gemmy also argued the commercial offer of sale requirement under Pfaff also was not met, as the “quote sheets” distributed in Hong Kong omitted key terms of a sale and were comparable to a publication of promotional information indicating no more than preparation to place the product on sale. Although Chrisha argued the purpose of the displays to customers in Hong Kong was to solicit orders and that orders must have been taken at some time because deliveries were made about eight months later, the Federal Circuit noted that the district court did not state that its summary judgment was based on any discovery sanction even though Gemmy, under a claim of privilege, refused discovery of its sales records and engineering design documents. In light of these findings, the Federal Circuit vacated the summary judgment of invalidity and preliminary injunction predicated thereon, concluding that the on-sale issue could not be decided adversely to Gemmy on summary judgment because disputed material facts, if viewed favorably to Gemmy, do not support the judgment.
Patent Licensing Negotiations Qualify as “Commercial Activity” Exception to Foreign Sovereign Immunities Act
By Paul Devinsky
In this combined decision, the U.S. Court of Appeals for the Federal Circuit agreed with the district court that an agency of a foreign government cannot hide behind sovereign immunity to shield itself from a declaratory judgment action where it had tried to license the patents in suit. Intel Corp. v. CSIRO, Case No. 06-1032; Microsoft Corp. v. CSIRO, Case No. 06-1040 (Fed. Cir. July 14, 2006) (Michel, C.J.).
CSIRO, Australia’s national science agency, is the assignee of the patent in suit directed to wireless local area networks. CSIRO asserts that the patent covers the IEEE standards 802.11a and 802.11g, i.e., the preferred specifications for high-speed data transfer. CSIRO initiated licensing negotiations with Dell, Intel, Microsoft and others. It proposed licensing terms, emphasizing that its offer was “available for only a limited time.” In the case of Dell, CSIRO followed up with a formal license, noting that “this offer is only open for acceptance for a period of 187 days, after which time the licenses under this Voluntary Licensing Program will not be available.”
Following CSIRO’s attempts to license the patent to various American companies, declaratory-judgment actions were filed. Intel, Dell and others sought declaratory judgment of non-infringement and invalidity. CSIRO moved to dismiss the complaint for lack of subject-matter jurisdiction, based on the Foreign Sovereign Immunities Act (FSIA). The district court denied the motion, finding that there was an actual case or controversy and that the “commercial activity” exception set forth in the FSIA applied.
CSIRO filed a timely notice of appeal and the district court certified the issue for interlocutory appeal, noting that it was unaware of any cases “expressly holding that initiation and involvement in licensing negotiations over a U.S. patent constitutes commercial activity sufficient to vitiate sovereign immunity under the FSIA,” although it was “difficult to conceive of how CSIRO’s conduct could be characterized as anything other than commercial.”
Pursuant to the FSIA, a foreign state is presumptively immune from the jurisdiction of United States courts, and unless a specified exception applies, a federal court lacks subject-matter jurisdiction over a claim against a foreign state. CSIRO argued that patent licensing negotiations that do not result in a fully executed, binding contract do not qualify as “commercial activity.” “Commercial activity” is statutorily defined to mean “either a regular course of commercial conduct or a particular commercial transaction or act.” CSIRO conceded that if its negotiations with potential licensees had been successful (i.e., if the proffered license agreement had been signed), it would not be entitled to claim immunity under the FSIA because the commercial activity exception would apply. In the alternative, CSIRO argues that the declaratory judgment suits are not “based upon” the alleged commercial activity. The Federal Circuit rejected both arguments.
Citing the Supreme Court decision in Republic of Argentina v. Weltover, the Federal Circuit explained that the meaning of “commercial activity” in the context of the restrictive theory of sovereign immunity and the public/private dichotomy it creates, occurs when a sovereign ‘exercise[s] only those powers that can also be exercised by private citizens.’” The Court went on to hold that “CSIRO’s acts of (1) obtaining a United States patent and then (2) enforcing its patent so it could reap the profits thereof – whether by threatening litigation or by proffering licenses to putative infringers – certainly fall within [that] category. Indeed, we have expressly recognized, in another context, that a patentee’s attempt to conduct license negotiations is a commercial activity.’”
The Court also held that a contract need not be fully consummated in order to qualify as commercial activity and that the present declaratory-judgment actions are, within the meaning of the FSIA, “‘based on’ CSIRO’s commercial acts of obtaining and asserting a United States patent.” Noting that to the extent that CSIRO made certain representations as to the scope and validity of [its] patent when it proffered licenses . . . these are central to [plaintiff’s] claims of non-infringement, invalidity and patent misuse.”
Conditional License Protects Patentee from the Patent Exhaustion Doctrine
By Firasat M. Ali and Arturo E. Sandoval
The U.S. Court of Appeals for the Federal Circuit recently affirmed in part, reversed in part and vacated in part a district court’s summary judgment of non-infringement in favor of third-party installers who purchase microprocessors and chipsets from Intel Corporation, which itself is authorized to sell such products under a conditional agreement with LG Electronics. LG Electronics, Inc. v. Bizcom Electronics, Inc., Case Nos. 05-1261, -1262, -1263, -1264, -1302, -1303, -1304 (Fed. Cir. July 7, 2004) (Mayer, J.).
LG is the owner of patents that relate to personal computers. LG has a conditional license with Intel under which it authorizes Intel to sell microprocessors and chipsets to third parties. LG’s patents do not cover the microprocessors or the chipsets themselves, but cover those products when combined with additional components. Under the agreement, Intel is required to notify its customers that combining Intel products with non-Intel products is not permitted. The defendants are third-party installers that purchased microprocessors and chipsets from Intel and used them to assemble computers for original equipment manufacturers.
On appeal, the Federal Circuit agreed with the district court that Intel’s sales of its licensed products to defendants do not warrant the inference of a license with respect to the asserted patents. The panel noted that, regardless of any non-infringing uses, Intel expressly informed the defendants that Intel’s license agreement with LG did not extend to any of defendants’ products made by combining an Intel product with non-Intel products. The Court concluded that, in light of this express disclaimer, no license can be implied.
With regard to the issue of patent exhaustion, the panel disagreed with the trial court that the system claims in all except one of LG's patents were exhausted, but agreed that the exhaustion doctrine did not apply to the method claims. The patent exhaustion doctrine, commonly referred to as the first sale doctrine, is triggered by an unconditional sale. The first of two sales at issue was LG's grant to Intel of a license covering its entire portfolio of patents on computer systems and components, which the panel regarded as a sale for exhaustion purposes. The second sale at issue was Intel's sale, with LG’s authorization, of its microprocessors and chipsets to each defendant. The panel pointed out that this second sale involved a component of the asserted patented invention, not the entire patented system. Although Intel was free to sell its microprocessors and chipsets, those sales were conditional, and Intel’s customers were expressly prohibited from infringing LG’s combination patents. The panel reiterated that the exhaustion doctrine does not apply to an expressly conditional sale or license and concluded that LG’s rights in asserting infringement of its system claims were not exhausted. The panel also agreed with the trial court that LG’s asserted method claims were not exhausted and pointed out that the sale of a device does not exhaust a patentee’s rights in its method claims. The Court noted that, even if the exhaustion doctrine were applicable to method claims, it would not apply because there was no unconditional sale.
With regard to the doctrine of equivalents, LG contended that performing some of the write requests is a permissible equivalent to performing all write requests as required by the claim language, and that, while performing no write requests may vitiate the claim language, performing some does not. The Court pointed out that there is inevitably a range of equivalents for performing all write requests, even if that range is narrow, and no set formula exists for determining whether a finding of equivalence would vitiate a claim limitation in violation of the all limitations rule. The panel noted that performance of substantially all or nearly all write requests by the accused devices would invoke the doctrine of equivalents without vitiating the claim language. Finding the existence of a genuine issue of material fact as to whether the accused device can function within the narrow range of equivalents, the panel vacated the trial court’s grant of summary judgment of non-infringement on this ground.
No Suppression or Concealment Found Where Time from Reduction to Practice to Commercialization Less than Seven Months
By Robert Greenfeld
The United States Court of Appeals for the Federal Circuit affirmed a district court judgment of no invalidity under § 102(g). Flex-Rest, LLC v. Steelcase, Inc., No. 05-1354, -1367 (Fed. Cir. July 13, 2006) (Linn, J.).
Flex-Rest owns two patents on computer keyboard positioning systems. Both patents were directed to systems for holding a keyboard in a “negative tilt” position, such that the handrest is above the keys.
The parties stipulated that one of the defendant's devices was conceived and reduced to practice before the patent at issue was conceived. Within seven months after reduction to practice, a patent application was filed on the prior art device and the device was shown at a trade show. The district court gave a § 102(g) instruction that “anything made or built in the United States by another person before the date of the claimed invention can be prior art . . . even if it is not publically [sic] available before the date of the claimed invention.” The district court denied, based on insufficient evidence, giving an instruction offered by the plaintiff that the prior art device was “suppressed or concealed.”
Relying on Dow Chemical Co. v. Astro-Valcour, Inc., the Federal Circuit agreed that there was insufficient evidence to warrant the plaintiff's proffered jury instruction because the plaintiff failed to “make out a prima facie case of suppression.” The Federal Circuit noted two types of suppression or concealment: intentional and inferential, the latter one based on an unreasonable delay in publicizing the invention. The Court concluded that plaintiff failed to present sufficient evidence to support a jury instruction regarding intentional suppression or concealment because the plaintiff did not offer any evidence indicating intent to withhold the prior art device from the public. Merely keeping the device secret while preparing a patent application and preparing to commercialize it “is not, by itself, indicative of intentional suppression or concealment.”
The Court also concluded that there was no inferential suppression or concealment because the plaintiff offered no evidence to indicate that the defendant's delay of six and one-half months between reduction to practice and commercialization of the prior art device was the result of anything other than reasonable steps to bring the invention to market, based upon time spent on design, money spent on tooling and lead times for the tooling. The Court found that it was unlikely that the defendant could have brought the prior art device to market much sooner than the trade show seven months after reduction to practice.
Practice Note: The Federal Circuit affirmed that even though assertion of § 102(g) prior art is a defense, the burden remains on the patentee to show prima facie evidence of suppression or concealment.
Patents / Doctrine of Equivalents
Doctrine of Equivalents Survives in View of Claim Amendment Deemed Only Tangential to Equivalents in Question
By Kori Anne Bagrowski
In a rare decision involving application of the doctrine of equivalents for an amended claim term, the U.S. Court of Appeals for the Federal Circuit agreed with a district court that prosecution history estoppel did not preclude the application of the doctrine of equivalents where only a tangential relationship existed between the claim amendments and the equivalent in question. Primos, Inc. v. Hunter's Specialties, Inc., Case Nos. 05-1001, -1376 (Fed. Cir. June 14, 2006) (Lourie, J.).
This appeal involved a patent for a “Game Call Apparatus,” which hunters use to simulate animal sounds. The invention contained a diaphragm mouth consisting of a frame, a membrane to produce sound, a flexible peripheral edge and a shelf or plate extending above the membrane. Patentee Primos filed a patent infringement suit against its competitor, Hunter’s. Hunter's accused device is a diaphragm mouth call device that, among other features, contains a dome extending above the membrane, instead of a shelf or plate, as claimed in Primos’ patents.
The Federal Circuit first reviewed the district court’s finding of literal infringement, holding that the district court correctly construed “engaging” to mean “to come into contact with” rather than “sealing.” The Federal Circuit referred to Phillips in its review of the district court's claim construction, determining that the court properly focused on the intrinsic record to construe the terms to have their customary meaning as understood by a person of ordinary skill in the art. Since “engaging” and “sealing” were both expressly recited in the same claim, they could not be construed as having the same meaning. Moreover, the figures in the specification illustrated a device positioned with several points of contact between the roof of the user’s mouth and the device.
The Federal Circuit also agreed with the district court that the prosecution history did not preclude application of the doctrine of equivalents. In this case, interestingly, the Festo presumption that the patentee surrendered the territory between the original claim limitation and the amended claim limitation was successfully rebutted. The presumption was overcome because the rationale underlying the amendment had only a tangential relationship to the equivalent in question. At issue was the term “plate, ” which had been amended to require that the plate (1) have a "length," and (2) be “differentially spaced” above the membrane. The Court agreed with the district court that the addition of the term “length” did not narrow the claim because every physical object has a length. The Court further agreed with the district court that the territory surrendered by the “differentially spaced” amendment comprises plates that are not differentially spaced above the membrane. Pointing out that the accused device, however, included a dome, rather than a plate, and that the dome includes the spacing, the Court concluded the amendment was merely tangential to the contested element in the accused device, and thus prosecution history estoppel did not prevent application of the doctrine of equivalents. Finally, the Court rejected the argument that application of the doctrine of equivalents should have been precluded because substitution of the accused dome for the claimed "plate" would vitiate the "plate" limitation and thereby violate the all limitations rule.
Use of Phrase “This Invention” and Disparaging Remarks About Non-Preferred Embodiments Limit Claim Scope
By Matthew G. Cunningham
Finding that a district court properly limited the claim scope to the patentee’s preferred embodiment because the specification repeatedly referred to this embodiment as “the invention,” the U.S. Court of Appeals for the Federal Circuit affirmed the grant of summary judgment of non-infringement. Honeywell Int’l, Inc. v. ITT Industries, Inc., Case No. 05-1407 (Fed. Cir. June 22, 2006) (Lourie, J.).
Honeywell’s U.S. Patent No. 5,164,879 (the ’879 patent) discloses an electronic fuel injection system for motor vehicles. To prevent charge buildup, the invention provides that the polymer includes a conductive filler material to create a pathway to dissipate charge out of the system. The ’879 claims recite, inter alia, a “fuel injection system component” comprising “electrically conductive fibers.”
The accused ITT “quick connect” products are nut-like structures that join components of a fuel injection system together and are composed of a polymer-carbon fiber housing. In construing the ’879 claims, the district court accorded the term “electrically conductive fibers” its ordinary meaning, which includes both metal and carbon fibers. Further, the district court construed “fuel injection system component” to mean only a fuel filter. As a result, the court granted summary judgment of non-infringement because ITT’s products were not fuel filters.
On appeal, Honeywell argued that the ordinary meaning of “fuel injection system component” is broader than just fuel filters and pointed to statements during prosecution to support the broader construction. The Federal Circuit rejected these arguments and instead focused on the specification as “the single best guide” in construing a claim. Here, the Court pointed to several instances where the specification of the ’879 patent referred to the fuel filter as “this invention” or “the present invention” and further noted the lack of reference to the fuel filter as merely a preferred embodiment. Also, the fuel filter was the only embodiment disclosed in the specification as having a polymer housing with electrically conductive fibers and, consequently, could not merely be a preferred embodiment. Finding that Honeywell’s representations during prosecution cannot enlarge the content of the specification, the Court concluded that the scope of “fuel injection system component” was properly limited in view of the specification. The Federal Circuit again relied on the specification to modify the district court’s construction of “electrically conductive fibers” to the extent it included carbon fibers because patentee repeatedly elaborated in the specification why carbon fibers were not suitable in the invention. Since the specification demeaned the properties of carbon fibers, the Court concluded that the patentee intended to disavow carbon fibers from the scope of the claims. Thus, ITT’s products, which only contain carbon fibers, also did not meet the claim limitation of “electrically conducive fibers.”
Practice Note: Practitioners must be mindful that it is risky business to forgo written description of multiple embodiments, refer to a preferred embodiment as “the invention,” or talk about non-preferred embodiments in a discouraging manner.
Federal Circuit Declines to Clarify Whether All Words in Product-By-Process Claim are Limiting
By Astrid R. Spain
The U.S. Court of Appeals for the Federal Circuit has denied a patentee’s petition for rehearing en banc of a panel decision (reported in IP Update, Vol. 9, No. 3; March 2006) that affirmed summary judgment of invalidity based on lack of novelty of SmithKline's patent claiming the product paroxetine, branded as Paxil®, by its process of manufacture. SmithKline Beecham Corp. v. Apotex Corp., Case No. 04-1522 (Fed. Cir. June 22, 2006) (Gajarsa, J.; Newman, J.; Rader, J., dissenting).
The original panel decision held that SmithKline’s product-by-process patent was anticipated by its own product patent and clarified that, once a product is fully disclosed in the art, future claims to that same product are precluded even if that product is claimed as made by a new process. The panel acknowledged, but intentionally side-stepped, the conflict perceived by the district court between Scripps Clinic & Research Foundation v. Genentech, Inc, and Atlantic Thermoplastics Co., Inc. v. Faytex Corp. Judges Newman and Rader, each joined by Judge Gajarsa, separately dissented from the Court’s decision denying rehearing. Judge Newman argued that, when viewed in the contexts in which they arose and to which they apply, Scripps Clinic (novel product capable of description only by the way it is made) and Atlantic Thermoplastics (any product whose production requires use of a certain process) do not conflict.
In dissent, Judge Rader stated that the apparent conflict between Scripps Clinic and Atlantic Thermoplastics has led to confusion that was further perpetuated by the original panel decision’s implication that the specific language of the claims is not relevant to anticipation.
Copyright / Ownership / Release
Ninth Circuit Finds for Studios and Lopez in “Flashdance” Controversy
By Irina Kushner
In affirming the district court’s grant of defendants’ motions to dismiss under Rule 12(b)(6), the U.S. Court of Appeals for the Ninth Circuit upheld the validity of a General Release signed by a dancer allowing Paramount to use her life story as the basis for the film Flashdance. Marder v. Lopez, Case No. 04-55615 (June 12, 2006) (Pregerson, J.).
The movie Flashdance was released in 1983 by Paramount Pictures. The movie told the story of a “woman construction worker from Pittsburgh, Pennsylvania, who performs at night as an exotic dancer.” Flashdance grossed over $150 million in box office receipts. The plaintiff-appellant, Maureen Marder, alleged that the movie was “modeled after her life story and career as a nightclub dancer.” Prior to the release of the film, Marder executed a General Release, purporting to “discharge Paramount, its subsidiaries, and its executives from claims arising out of the creation of the film.” As consideration, Marder received $2300.
In early 2003, Sony released a music video for the Jennifer Lopez song, “I’m Glad.” According to Marder, the video re-created several well-known scenes from Flashdance. Marder filed suit in November 2003, asserting a “claim against Paramount for a declaration of her rights as co-author of Flashdance and a co-owner of the copyright” and claims against Sony and Lopez under the Lanham Act, the Copyright Act and the state law right of publicity and unfair competition. Defendants filed motions to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. The district court granted defendants’ motions. Marder appealed.
On appeal, Marder claimed “that she contributed to the creation of Flashdance by providing Paramount with details of her life story with the understanding that Paramount would use this information to create an original screenplay.” She further claimed that “she conferred with writer Joe Eszterhas in creating the screenplay.” The Court rejected Marder’s appeal. Central to the Ninth Circuit’s decision was the Release signed by Marder. The Ninth Circuit held that the Release’s language "[was] exceptionally broad and … fatal to each of Marder's claims against Paramount.” Although the Court noted that the agreement appears unfair to Marder since she received a mere $2300 for the release of all claims, “there [was] simply no evidence that her consent was obtained by fraud, deception, misrepresentation, duress, or undue influence.”
The Court considered Marder’s argument that her claims, particularly her copyright claim, were not barred by the breadth of the Release because she retained co-ownership and co-authorship rights even after execution of the Release. The Ninth Circuit disagreed, stating “this argument contravenes the plain language of the Release which states that Marder released Paramount from “each and every claim...of any kind or character.” The Court further reasoned that it was “reasonable to infer that when Marder signed the agreement, she knew or should have known that copyright claims ‘would fall within the scope of the broad language.’” In addition, the Court affirmed the district court’s dismissal of Marder’s claims against Sony and Lopez. Without any evidence of copyright ownership, it was impossible for Marder to establish a prime facie case of copyright infringement.
Intellectual Property / Misappropriation
Ability to Trade Options on Exchange-Traded Funds Without a License Affirmed
By Irina Kushner
The U.S. Court of Appeals for the Second Circuit recently affirmed the ruling of a district court that an options exchange, by creating, listing and facilitating the trading of options on shares in an exchange-traded fund (ETF) designed to track a proprietary market index, does not misappropriate intellectual-property rights of the creator of the index. Dow Jones & Company, Inc. v. International Securities Exchange, Inc., Case Nos. 05-4812-cv, 05-4972-cv (June 16, 2006) (Leval, J.).
Dow Jones is the creator of the widely known Dow Jones Industrial Average (DIJA), a stock index that reflects an average of the stock market value of the shares of 30 leading U.S. companies. McGraw-Hill is the creator of the Standard and Poor's 500 Index (S&P 500), which reflects the average stock market value of shares of 500 leading U.S. companies. Dow Jones created the DIAMONDS® ETF to track performance of the DJIA, while McGraw-Hill created the SPDR® ETF to track the performance of the S&P 500.
In 2005, defendant International Securities Exchange, Inc. (ISE), an options exchange, announced its intention to trade options on shares of DIAMONDS® and SPDR®. The plaintiffs filed suit, alleging that, by “issuing and trading options on DIAMONDS and SPDR®, the defendants will misappropriate plaintiffs’ intellectual-property interest in the underlying indexes and engage in unfair competition.” The complaints further alleged that the marketing of SPDR® and DIAMONDS® options infringes on and dilutes the plaintiffs’ trademarks. Finding that ISE’s unlicensed trading did not infringe on the plaintiffs’ intellectual property rights, the district court dismissed plaintiffs' complaints and denied Dow Jones’ motion for a preliminary injunction. The plaintiffs appealed.
On appeal, the Second Circuit first addressed the plaintiffs’ argument that, because they have an intellectual-property right in the index and the ETF that tracks the index, defendants may not create, list, trade and clear options on the ETF shares without licenses from plaintiffs. Finding that plaintiffs’ failed to establish some wrongful appropriation or use of their intellectual property, the Court unanimously held that ISE’s creating, listing, trading and clearing of options on the ETF did not constitute misappropriation of plaintiffs’ intellectual property, nor did it constitute unfair competition. The Court reasoned that “[b]y authorizing the creation of ETFs using their proprietary formulas, and the sale of the ETF shares to the public, the plaintiffs have relinquished any right to control resale and public trading of those shares, notwithstanding the fact that plaintiffs’ intellectual property may be embedded in those shares.” With respect to the alleged trademark violations, the Second Circuit held that Dow Jones’ complaint consisted of nothing more than “conclusory allegations unsupported by factual assertions,” and thus failed to state a proper claim under Rule 12(b)(6). Remarking that McGraw-Hill’s complaint did not suffer from the “same deficiency” as Dow Jones’ complaint, the Court nevertheless found the allegations contained therein legally insufficient to survive the motion to dismiss.
Practice Note: As long as the options trading is accurately described by its brand name and does not imply an affiliation with the owner of the product, such use will not infringe or dilute the index owner’s trademark.
