Publications / McDermott Newsletters / IP Update, Volume 4, No. 9, September 2001

IP Update, Volume 4, No. 9, September 2001

September 2001

IN THIS ISSUE

Patents/Prosecution History Estoppel

The Impenetrable Festo Rule Finally Springs A Leak
By Keith George

Since Festo, the U.S. Court of Appeals for the Federal Circuit has consistently ruled that a narrowing amendment made for any reason related to patentability creates prosecution history estoppel, resulting in a complete bar to equivalents for the amended claim element. The Federal Circuit has now found a case providing an example of a substantive amendment that was not a narrowing amendment and which thereby avoided the Festo complete bar rule. TurboCare Division of Demag Delaval Turbomachinery Corp. v. General Electric Co., Case No. 00-1349 (August 29, 2001).

TurboCare’s patent related to a two-position, labyrinth-type shaft seal for steam turbines. At start up, a spring biases the seal to its large clearance position, to thereby minimize contact with the shaft and reduce rubbing damage. As the turbine accelerates to full load operation, steam pressure moves the seal to a small clearance position to minimize leakage of steam.

The original independent claim referred to a "small diameter position corresponding to … small clearance of the seal ring with regard to the rotating shaft." As disclosed, steam pressure moved the seal ring radially inward until the shoulders of the ring of the seal engaged shoulders formed in the casing. To overcome a prior art rejection, the applicant submitted a new independent claim that expressly required that the small clearance position be limited by contact between the seal and the casing shoulders.

The district court interpreted the "contact" limitation as requiring direct contact between shoulders of the casing and the seal. The accused General Electric seals included adjustable dowels on the seal. The dowels, not the seals, contact the shoulders of the casing. Consequently, there is no direct contact between the seals and the shoulders to limit the small clearance position. The Federal Circuit agreed that the patent claims required direct seal to shoulder contact and affirmed the finding of no literal infringement.

However, the Federal Circuit held that prosecution history estoppel did not preclude infringement under the doctrine of equivalents, finding that the addition of the express "contact" requirement only redefined the "small clearance position" limitation that had been part of the original independent claim.

The Court looked to the specification for a definition of the original claim language regarding the "small diameter position corresponding to … small clearance" and found that applicant had given that original language the same meaning as the express "contact" language added to the patent claim.

Since the Court found that the original term had the same narrow meaning as the more express language added by amendment, it concluded that applicant had not narrowed the scope of the independent claim by the amendment. Hence, the Festo bar to equivalents did not apply.

Practice Note: The detailed description relied on by the Court presumably related to the preferred (and only disclosed) embodiment as to how to limit the seal movement. Nevertheless, as a claim construction issue, the Court held that the claim had not been narrowed, thereby implying the original claim was limited to the preferred embodiment. This is an area of claim construction in which there is confusing and difficult to reconcile Federal Circuit case law. In any event, under the rational of TurboCare, in order to overcome an Examiner’s broad interpretation of a claim limitation, one option is to argue that the limitation already distinguishes the prior art. In view of TurboCare, it may now be possible to "copy" a definition of such a distinguishing term from the specification directly into a claim, and thereby "redefine" the term without a "narrowing" amendment to the claim. While that may lead to a narrow scope of protection for that element, it may preserve the availability of infringement by equivalents. But beware, TurboCare is a very fact specific analysis.

Patents/Litigation

Rule One—Win Below: "Black Box" Jury Verdict on Non-Obviousness Stands
By David Stein

The U.S. Court of Appeals for the Federal Circuit shows us why overturning a black box jury verdict of obviousness may be harder than hitting 70 home runs in a season. McGinley v. Franklin Sports, Inc., 2001 WL 939088 (Fed. Cir., Aug. 21, 2001).

McGinley’s patent claimed a regulation baseball with egg- or fingerprint-shaped marks, which is used to show beginning pitchers where to grip the ball for throwing a variety of pitches. The patent was issued over two prior arts patent cited to the Patent and Trademark Office (PTO): one disclosed a regulation baseball with circular marks to indicate finger placement; the other disclosed a lightweight "replica" baseball with egg- or finger-shaped markings. At trial, Franklin Sports relied on these same references in arguing that the McGinley patent was invalid for obviousness.

The question of obviousness was submitted to the jury, which declined to find the patent invalid for obviousness. However, on Franklin Sports’ motion for judgment as a matter of law, the district court overturned the jury’s verdict and held the patent invalid. Because the matter had been submitted to the jury on a general—or "black box"—verdict form, the district court had no way of knowing precisely what facts the jury had found and whether it had properly applied the law to those facts.

Combing through the factual record and indulging every conceivable inference in favor of the jury’s fact-finding, the Federal Circuit reversed the district court and reinstituted the jury’s verdict, holding that there was some evidence in the record from which the jury could reasonably conclude that the patent was not invalid (e.g., reasons to reject combining prior art references).

A strong dissent expressed concern that the majority’s decision renders a general jury verdict on the legal question of obviousness essentially immune from review by either the trial court or the appeals court. The dissent characterized Franklin Sports’ case for invalidity as a compelling one, asserting it was undeniable that two prior art references rendered the plaintiff’s patent invalid and noting that a baseball designer of even minimal skill in the art would have found it blatantly obvious to modify the prior art as plaintiff had done. The dissent expressed concern that the majority had not lent adequate weight to its duty to review the jury’s factual findings for substantial evidentiary support before drawing the conclusion that the verdict on obviousness was legally correct.

Practice Note: District courts, preparing to put a legal question (such as obviousness or prior invention—see following case note) into the hands of a jury, will have to think hard about whether to use a general verdict form, which may in some cases be functionally immune from challenge, or to press for a more detailed, special verdict form, which would likely open the door to more effective challenges to a jury’s verdict.

Patents/Litigation

Rule One (Revisited)—Win Below: "Black Box" Jury Verdict of Prior Invention Stands
By Matthew Weil

The U.S. Court of Appeals for the Federal Circuit also affirmed judgment of invalidity based on a jury verdict of prior invention. In so doing, it also staked out a high standard for overturning a "black box" jury verdict of invalidity. Monsanto Company v. Mycogen Plant Science, Inc., Case No. 00-1002, (Fed. Cir. August 16, 2001).

At trial, the jury found in favor of Mycogen, determining that Monsanto’s scientists were not the first inventors. In so finding, the jury was not asked to make specific findings regarding conception, diligence or reduction to practice. However, in denying Monsanto’s motion for Judgment as a Matter of Law (JMOL), the district court worked through the possible scenarios that could justify the jury’s verdict and all of the evidence of record and entered a judgment of invalidity under § 102(g) based on certain non-Monsanto scientists’ earlier conception coupled with diligence. Reapplying the district court’s JMOL standard anew, the Federal Circuit affirmed.

In the appeal, Monsanto argued that Mycogen had waived its § 102(g) defense because it never explicitly argued to the jury that it should prevail under the theory of an earlier conception coupled with diligence. Indeed, when the relevant instruction was read to the jury, Mycogen neither commented upon the instruction nor drew attention in closing argument to evidence in the record that might support application of the rule. Applying the law of the regional circuit, however, the Federal Circuit held a party is not required to explicitly argue a theory in order to place it before the jury. The jury instructions, not closing argument, determine what issues are before the jury.

The Federal Circuit seem unconcerned by the fact that Mycogen’s belatedly articulated diligence theory relied heavily upon the assumption that the jury read and understood lab notebooks that had been placed in evidence that demonstrated a low but sustained level of experimental work on the invention in question. The Federal Circuit rejected Monsanto’s claims that such lab notebooks or other written documents must always or even sometimes be explained to the jury. According to the Court, the cases cited by Monsanto for this proposition deal with a lack of evidence or a lack of credibility, not with a lack of clarity in the evidence or a presumed lack of understanding by the finder of fact.

Practice Note: Cases like Monsanto and Franklin Sports, supra, signal a profound reluctance on the part of the Federal Circuit to second-guess juries.

Patents/Infringement/Implied License

Mere Offer to License Patent for Use as a Standard Does Not Imply License in Patent
By Michael Switzer

The U.S. Court of Appeals for the Federal Circuit affirmed the International Trade Commission’s (ITC) determination that a patent owner’s offer to grant royalty-free licenses and place the content of a patent in the public domain conditional upon the acceptance of the underlying technology as a standard did not cause a waiver of the patent owner’s rights when the underlying technology was not adopted as the standard. Winbond Electronics Corp. v. International Trade Commission, Case Nos. 01-1031,-1032,-1034 (Fed. Cir. August 22, 2001).

Employees of SEEQ, the original assignee of U.S. Patent No. 4,451,903 (the ‘903 patent), came up with the idea of including within memory chips, identification information for that memory chip (e.g., manufacturing and programming information). The idea was named "Silicon Signature." In 1981, SEEQ proposed to JEDEC that it adopt the Silicon Signature as a standard. During JEDEC’s evaluation, SEEQ stated its willingness to grant royalty-free licenses to any manufacturer and to place the subject matter of the ‘903 patent in the public domain if JEDEC accepted Silicon Signature as a standard. Although JEDEC recommended adoption of Silicon Signature, JEDEC did not actually implement Silicon Signature as a standard.

Respondents and intervenor argue that SEEQ’s discussions with JEDEC created an implied license to the ‘903 patent or alternatively was a waiver of SEEQ’s rights to exclude others from practicing the ‘903 patent.

The Federal Circuit affirmed the ITC’s determination that for an implied license to arise by equitable estoppel, "the alleged infringer must have knowledge of the patentee and its patent and must reasonably infer that the patentee acquiesced to the allegedly infringing activity for some time." In holding that there was no implied license, the Federal Circuit cited to the lack of evidence showing respondents had knowledge of the statements made by SEEQ to JEDEC prior to the litigation.

The Federal Circuit further held that there was no waiver or implied license because JEDEC did not accept Silicon Signature as the standard, finding SEEQ’s promise to grant a license to have been conditioned on the acceptance of Silicon Signature as a standard.

Patents/Claim Construction

Use of Terms in Specification Defines the Scope of Terms in Claim
By Shamita Etienne-Cummings

The Federal Circuit, relying on statements made in the specification to narrowly construe disputed claim terms, upheld a lower court’s finding of noninfringement. Bell Atlantic Network Services, Inc. v. Covad Communications Group, Inc., Case No. 00-1475 (August 17, 2001).

The patent-in-suit describes data transmission systems that can be used to provide digital subscriber line (DSL) services with variable rates and modes. Claim 1 of the patent-in-suit recites an asynchronous transceiver that transmits information in a plurality of different modes over first and second channels. Claim 21 of the patent-in-suit specifically recites an asynchronous DSL (ADSL) transceiver that transmits information by selectively changing the transmission rates over first and second channels. The defendant filed a summary judgement motion for noninfringement, arguing that because the accused products use a DSL transceiver, which employs a fixed bandwidth to transmit and receive data with most of the frequency being allocated to the downstream channel, there could be no infringement. The fixed bandwidth feature of the DSL transceiver prohibits shifting bandwidths between the upstream and downstream channels.

Shortly after conducting a Markman hearing, the district court, relying exclusively on intrinsic evidence in construing the disputed claim terms, concluded that "it would not broaden claims 1 and 21 beyond their support in the specification, as the three modes discussed in the patent specification literally occupy the field of possibilities contemplated by the [patent-in-suit]." The court, therefore, granted the motion, finding that based on the specification and the prosecution history, the claimed invention specifically included an ADSL/AVR transceiver that divides the available bandwidth into two channels and selects and changes the transmission rates of the data transmitted within the channels.

The Federal Circuit agreed, reasoning that "when a patentee uses a claim term throughout the entire specification, in a manner consistent with only a single meaning, he has defined that term ‘by implication.’" The Federal Circuit observed that throughout the specification and during prosecution of the patent-in-suit, the patentee used the terms "mode" and "rate" to refer to separate and distinct concepts. The Court further found that throughout the specification the patentee consistently referred to the transceiver as an ADSL/AVR transceiver. Therefore, even if a particular claim failed to specifically recite a "plurality of different modes" or an ADS/AVR transceiver, the specification required that the claimed invention include both of these features.

Patents/Infringement/Repairs vs. Reconstruction

Refurbishment of Patented, Single-Use Cameras Constitutes Permissible Repair
By Stephen Scherrer

The U.S. Court of Appeals for the Federal Circuit has concluded that the refurbishing of certain imported single-use cameras constituted a permissible "repair" rather than a prohibited "reconstruction." Jazz Photo Corporation v. International Trade Commission, Case No. 99-1431, 99-1504, 99-1595, 99-2596, 99-1601, 2001 U.S. App. LEXIS 18798 (Fed. Cir., August 21, 2001).

An action was brought under § 337 of the Tariff Act of 1930 by Fuji against 27 respondents, including the appellants Jazz Photo, for infringement of 15 patents owned by Fuji. The action was based on the respondent’s importation of used, single-use cameras. The cameras were sold and used in the United States, bought by overseas facilities after use and refurbished and then imported back into the United States. The "refurbishing" steps included removing the cardboard cover; cutting open the plastic casing; inserting new film and a container to receive the film; replacing the winding wheel; replacing the battery; resetting the counter; resealing the outer case; and adding a new cardboard cover.

The International Trade Commission (ITC) determined that 26 of the respondents, including the appellants, had infringed all or most of the claims of 14 Fuji U.S. patents. The ITC’s decision rested on its ruling that the "refurbishment" of the cameras constituted prohibited reconstruction rather than permissible repair.

The Federal Circuit held that because the single-use cameras had been initially sold in the United States, the patents protecting these cameras were exhausted and could not be asserted against subsequent owners of the cameras. The Federal Circuit further concluded that the "refurbishing" of the cameras, including the above steps, constituted repair of the cameras and not reconstruction. Therefore, the refurbished cameras imported to the United States were immune to an infringement action based on principles of patent exhaustion.

The Federal Circuit stressed the impracticality of attempting to lay down hard and fast standards for permissible repair versus impermissible reconstruction but did note that "reconstruction of a patented entity, comprised of unpatented elements, is limited to such a true reconstruction of the entity as to in fact make a new article after the entity, viewed as a whole, has become spent. In order to call the monopoly … into play for a second time, it must, indeed, be a second creation of the patent entity."

The Federal Circuit considered the useful capacity of the article, and the nature and role of the replaced parts in achieving the useful capacity. In effect, the Federal Circuit decided that the single-use cameras had a life beyond its "single" use and that the refurbishing steps taken by the overseas facilities were not enough for a "second creation" of a patented entity.

The Federal Circuit further disagreed that the terms of sale imposed an implied license, which limited the cameras to a single use. Fuji contended that the right to repair the patented cameras was impliedly limited by the circumstances of sale due to instructions and warnings printed on the covers of the cameras.

The Federal Circuit concluded that the words printed on the camera were only instructions and warnings of risk—not conditions placed on sale. The Federal Circuit therefore reversed the ITC finding exhaustion for those cameras that were initially sold in the United States. For those cameras initially sold outside the United States, the Court ruled that the patent exhaustion doctrine did not apply. For those cameras in which the refurbishing activities were more extensive than those described above, the Federal Circuit affirmed the ITC’s judgment of impermissible reconstruction.

Trademarks/Domain Names/Parody

Use of Another Party’s Trademark in a Domain Name Is Not Protected Speech
By Carrie Shufflebarger

Registration and use of a domain name containing the trademark of another is not protected speech, even if the domain name is used to host a website that contains a legitimate parody of the trademark holder. People for the Ethical Treatment of Animals v. Doughney, 2001 U.S. App. LEXIS 19028 (4th Cir. August 23, 2001).

Defendant Michael Doughney registered the domain name peta.org, which he used to host a web site entitled "People Eating Tasty Animals." Doughney intended for this website to be a parody of plaintiff, People For the Ethical Treatment of Animals (PETA). PETA sued Doughney, asserting claims for service mark infringement, unfair competition, dilution and cybersquatting. Doughney asserted that his use of the domain name peta.org was a constitutionally protected parody of PETA. The U.S. District Court for the Eastern District of Virginia granted summary judgment to PETA, and Doughney appealed.

The Fourth Circuit affirmed the district court, rejecting Doughney’s First Amendment claim. The court noted that to constitute a protectable parody, the alleged parody must convey two simultaneous, yet contradictory messages: "That it is the original, but also that it is not the original and is instead a parody. If these messages are not simultaneously conveyed, then the parody fails and is vulnerable under the trademark laws since consumer confusion is likely." In this instance, the court found that Doughney’s use of the domain name alone did not suggest parody insofar as the domain name itself only conveyed the message that it was related to PETA and did not convey the requisite second, contradictory message needed to establish a parody, namely that the domain name was not related to PETA but rather is a parody of PETA. Because the content message was not conveyed simultaneously with the first message, the Court rejected Doughney’s argument that the second message was conveyed through the content of the website located at peta.org, finding that an internet user would not realize that they were not on the official PETA website until after they had used PETA’s mark to access the parody content. As such, the use of the domain name itself did not constitute parody.

McDermott Will & Emery

McDermott Will and Emery