IP Update, Volume 7, No. 4, April 2004
April 2004
IN THIS ISSUE
Absent a Showing of Objective Baselessness, Preemption Doctrine and First Amendment Bar State-Law Tort Claims Arising Out of Communications Regarding Patents
By Rania Chamoun Sarkis
Reasoning by analogy to certain antitrust claims, the U.S. Court of Appeals for the Federal Circuit has held that state-law claims arising out of a patent holder’s infringement allegations are barred by the preemption doctrine and First Amendment principles unless the patent holder acted in bad faith and his or her allegations were "objectively baseless." Globetrotter Software Inc. v. Elan Computer Group, Inc., Case Nos. 03-1179, 03-1205 (Fed. Cir. Mar. 23, 2004) (Dyk, J.).
Ken Greer, majority shareholder, chairman and CEO of Elan Computer Group, had been in negotiations to sell Elan to Rainbow Technologies, Inc. when Globetrotter sent letters to Elan and Rainbow asserting that certain Elan products infringed Globetrotter’s patents. When sued by Globetrotter for patent infringement, Greer counterclaimed for tortuous interference with prospective economic advantage and unfair competition under California law. According to Greer, Globetrotter’s allegations forced Greer to sell Elan at a dramatically reduced price and induced Rainbow not to offer Greer a previously contemplated employment agreement.
The district court granted Globetrotter’s summary judgment motion, holding that Globetrotter’s infringement allegations were not objectively baseless and that Globetrotter, therefore, was allowed to notify Rainbow and the market of its claims. In affirming the district court’s decision, the Federal Circuit noted that federal patent law preempts state-law tort liability for a patent holder’s good-faith conduct in communicating assertions of patent infringement and warning about potential litigation. Relying on two antitrust cases, Prof’l Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49 (1993) and Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961), the Court held that state-law tort claims can survive federal preemption only if those claims are based on a showing of "bad faith" in asserting infringement as well as a showing that the allegations were objectively baseless.
A Company that Does Not Direct Any Activities to the United States Cannot Violate an Injunction Proscribing Infringing Activities
By D. Sean Trainor
A non-U.S. company that does not perform any acts in, or direct any activities to, the United States cannot violate a permanent injunction that prohibits infringing activities. International Rectifier Corp. v. Samsung Electronics Co., Ltd., Case Nos. 02-1324, -1334, -1370, -1428 (Fed. Cir. Mar. 18, 2004) (Linn, J.)
International Rectifier Corp. (IR) and Samsung had previously settled a patent infringement lawsuit relating to Samsung’s power MOSFET business. As part of the settlement, Samsung agreed to a permanent injunction that barred it from making, using, offering for sale, selling or importing into the United States any infringing components, products or devices. The permanent injunction specifically excluded products made by Samsung on a foundry basis for IXYS based on IXYS’s designs. IXYS imported infringing products into the United States and IR brought a contempt action against Samsung for violating the permanent injunction.
Despite having sold its power MOSFET business, Samsung continued to fabricate products on a foundry basis for IXYS. IXYS requested that Samsung import the fabricated devices into the United States, but Samsung steadfastly refused. Instead, Samsung sold to IXYS in Korea and delivered the devices to Germany, where IXYS diced wafers into chips, packaged the chips into commercial products and performed any necessary testing.
The U.S. Court of Appeals for the Federal Circuit found that, based on its language, the permanent injunction tracked section 271(a). Noting that patent infringement laws do not have extraterritorial effect, the Federal Circuit found that Samsung had not violated the permanent injunction because none of its activities had occurred in the United States. The Federal Circuit found that, contrary to the district court’s ruling, there is no legally cognizable action for conspiracy to infringe and, therefore, Samsung cannot be liable on the theory that IXYS and Samsung had agreed to subvert the permanent injunction.
Also, even if subversion by agreement was a cognizable action, the Federal Circuit found there was no evidence to support such a theory. Samsung did not control IXYS’s activities. IXYS is a separate and distinct entity from Samsung and IXYS acts independently of Samsung. Moreover, the agreement between Samsung and IXYS pertained only to the manufacture and delivery of devices outside the United States. IXYS’s subsequent importation into the United States is not part of the agreement.
Patents / International Trade Commission
Defenses Found in 35 U.S.C. 271(g) Are Not Available in §1337(a) Actions Before the ITC
By Evan Parke
Addressing the issue of whether the defenses found in 35 U.S.C. §271(g) may be used in §337 actions before the International Trade Commission (ITC), the U.S. Court of Appeals for the Federal Circuit affirmed and adopted the ITC’s decision denying the availability of these defenses. Kinik Co. v. International Trade Commission, Case No. 02-1550 (Fed. Cir. Mar. 25, 2004) (Newman, J.).
Minnesota Mining and Manufacturing and Ultimate Abrasive Systems (collectively, 3M) initiated an action against Kinik before the ITC pursuant to 19 U.S.C. §1337(a)(1)(B)(ii) (successor to §337(a) of the Tariff Act of 1930). 3M alleged that the claims of its patent were being practiced in Taiwan to create products that were later imported by Kinik into the United States. Kinik
argued that even if it practiced the claims of 3M’s patents, the resulting product is "materially changed by subsequent processes," placing Kinik within the defenses found in §271(g) ("A product which is made by a patented process will, for purposes of this title, not be considered to be so made after—(1) it is materially changed by a subsequent process…).
The commission ruled in favor of 3M, holding that the §271(g) defenses were not available to Kinik. The commission explained that the legislation introducing §271(g) had been carefully crafted to preclude its defenses from applying in §337(a) actions, noting that the Process Patent Amendments Act of 1988, which amended Title 35 to include §271(g), states that "[t]he amendments made by this subtitle shall not deprive a patent owner of any remedies available … under section 337 of the Tariff Act of 1930, or under any other provision of law." The commission also cited the language "for purposes of this title" found in the introductory clause of §271(g) as limiting, reasoning that "such a clause would have been unnecessary unless it served to avert conflict between the Patent Act and the Tariff Act, for the contemporaneous record shows that such conflict was recognized."
On appeal, Kinik argued that §271(g) defenses should be available since §1337(c) provides that "all legal and equitable defenses may be presented in all cases."
The Federal Circuit affirmed the commission concluding that the commission’s holding is "supported by the text of the statutes, by the legislative history, and by precedent."
Federal Circuit Limits Plain Meaning of Claim Term Based on Implicit Conclusions in Specification
By Thomas Haag
In a case involving the scope of a patent claim’s recitation of the term "hydrosol," the U.S. Court of Appeals for the Federal Circuit affirmed a district court’s granting of a motion for summary judgment for non-infringement. Specifically, the Federal Circuit agreed with the district court in finding that the claim term "hydrosol," as it relates to pharmaceutical compositions, did
not include hydrosols formed within the body after administration. Novartis Pharmaceuticals et al., v. Eon Labs Manufacturing, Inc., Case Nos. 03-1211, -1260 (Fed. Cir. Apr. 4, 2004) (Dyke, J.).
The widely used and now off-patent immunosuppressant cyclosporine is nearly insoluble in aqueous solutions and, therefore, difficult to deliver. Novartis addressed this problem by developing and patenting a pharmaceutical composition to better administer cyclosporine to patients. The invention is covered by the claims of U.S. Pat. No. 5,389,382 (the `382 patent) that relate to a hydrosol comprising of solid particles of cyclosporine and a stabilizer that maintains the size distribution of the particles. Eon Labs produces and sells orally ingestible capsules that contain cyclosporine dissolved in ethanol containing no water.
Novartis sued Eon for indirect patent infringement alleging that the ingestion of Eon’s capsules results in the formation of the claimed hydrosol in the stomach of the user. The district court’s construction of the term "hydrosol" was limited to a synthetic pharmaceutical preparation where the cyclosporine is in solid and not soluble form. Furthermore, the district court looked to statements made during prosecution that the claimed hydrosol was intended to be administered via intravenous injection, as opposed to oral ingestion. Accordingly, the district court held that the dispersion formed in the stomach of the user after ingestion of Eon’s capsules was not a "hydrosol," at least as far as Novartis’ claims were concerned.
Citing various lay and medical dictionary definitions, the Federal Circuit concluded that the term "hydrosol" could be either broadly defined to include a dispersion of solid particles in aqueous colloidal solution formed in a patient’s stomach, or narrowly limited to a medicinal preparation consisting of a dispersion of solid particles in an aqueous colloidal solution formed outside the body. In order to discern the proper definition, the Federal Circuit noted that where there exists multiple possible definitions of a claim term, the patent specification will serve to point away from the improper meaning and toward the proper meaning. The Court noted several facts in the record that supported its affirmation of the district court’s narrower definition. First, the specification contained no examples of the formation of a hydrosol inside the body. Second, the specification referred to the hydrosol as a pharmaceutical composition, something generally prepared outside the body. The Court also found that the hydrosol of the invention was intended to be intravenously injected and not orally ingested. As support for this assertion, the Court noted that Novartis had distinguished its invention from the prior art by indicating that the claimed hydrosol was particularly suited to intravenous administration.
The Court distinguished the matter at hand from Zenith Laboratories, Inc. v. Bristol-Myers Squibb Co., where it refused to limit a claim to a biologically active compound in crystalline form to its pre-ingested form. In that case, the Court stated, there was no ambiguity as to what the plain meaning of the claim language was and there was no express or implied pre-ingestion limitation.
The Court also distinguished the more recent Schering Corp. v. Geneva Pharmaceuticals, Inc., where a claim to an active compound produced by the ingestion of a precursor compound was intrinsically anticipated by a patent on the precursor compound. In that case, the Court noted, the parties agreed that the claims at issue related to a metabolite (active compound) of a drug (precursor). However, in the current case, the Court found that the heart of the dispute lay in the fact that there was no agreement that the claim recitation "hydrosol" encompassed the product formed after ingestion.
Finally, the Court held that dispersion produced in the user’s stomach by Eon’s capsules did not infringe the claim under the doctrine of equivalents. The Court held that to extend the scope of the claims at issue to encompass a dispersion formed inside the stomach would necessarily read the Court’s construction of "hydrosol" limitation out of those claims. To do so would vitiate a claim requirement that the hydrosol by prepared outside the body.
In dissent, Judge Clevenger complained that the majority read too much into the record to disregard the plain meaning of the term hydrosol. Judge Clevenger argued that the ordinary meaning of "hydrosol" contains no manufacturing limitation, and Novartis never explicitly disclaimed or clearly disavowed the term’s scope to alter its ordinary broad meaning. Accordingly, the dissent believed that the Court unnecessarily limited the plain meaning of the claim term.
Section 121 of the 1952 Patent Act May Not Insulate a Divisional Application and Patent Issuing Thereof from the Original Patent Being Used as a Reference
By David M. Tennant
In reversing the district court summary judgment that an earlier patent, which stemmed from the same application as the patent-in-suit, could be not used as a reference against the patent-in-suit for double patenting, the U.S. Court of Appeals for the Federal Circuit held that an earlier restriction requirement (not in issue in the later-filed application) does not insulate the patent maturing from the later-filed application against double patenting. Bristol-Myers Squibb Company. v. Research Corporation Technologies, Inc., Case Nos. 03-1077 (Fed. Cir. Mar. 17, 2004) (Bryson, J.) (Newman, J. dissenting).
This case turned on an interpretation of prosecution history of the `927 patent and its predecessor, the `707 patent, the letter issued in 1979 and expired in 1998. In the original application who filed in 1972 and a restriction requirement was imposed between compound claims and method of treatment and composition claims. The applicants elected the compound claims. Later, during the prosecution of the same application, a different examiner imposed a second restriction requirement dividing the compound claims into four groups. The applicants later presented all of the original claims for examination in a continuation application and abandoned the original application. In that continuation application, another restriction requirement was imposed, which did not reflect the invention groupings of the restriction made in the original filing. Two years later, following an election of a claim group, the continuation application issued as the `707 patent. The applicants then filed yet another divisional application with a preliminary amendment presenting, in slightly rewritten form, both the non-elected method of treatment and composition claims (from the original application) and the non-elected compound claims (from the divisional application). In turn, the examiner imposed two different and, according to the applicants, somewhat conflicting restriction requirements in the same action. The applicants elected claims for prosecution from one of those restriction requirements, arguing that compliance with it would involve the election of one or more groups of the other requirement. After the resulting prosecution led to an unsuccessful appellate proceeding, the applicants filed another divisional application and another restriction requirement was imposed. In 1987, this application matured into the `927 patent.
The patentee argued that the `927 patent was insulated from double patenting predicated on the `707 patent because the claims of the `927 patent were directed to the non-elected claims following the original restriction requirement.
Though factually complex, the dispositive issue was whether, as a matter of law, the restriction requirement that was imposed in the original application was applicable to the 1977 application, which issued as the `707 patent. The Federal Circuit found that, because the later continuation application began a new proceeding with the original claims again being presented, and in that proceeding a new and substantively different restriction requirement was imposed, §121 does not operate to insulate the `927 patent against double patenting predicated on its `707 patent. However, the Federal Circuit acknowledged that, on remand, further analysis may reveal other grounds for concluding that the protection of §121 should extend to some or all of the claims of the `927 patent.
In dissent, Judge Newman acknowledged that four different examiners imposed "somewhat variant restriction requirements," which reflect the examiner’s divergent views of how the subject matter should be divided for search and examination. However, in her view, the "fact that four examiners made somewhat inconsistent requirements for restriction does not change the controlling weight of the examiner’s steady determination of the applicant’s compliance with their requirements. A discretionary action having no substantive consequence and that is unreviewable is not a ground of patent invalidity. …"
Restrictions Imposed on Use of Goods Made by Licensed Product Not Misuse of a Patent
By David Gay, Ph.D. and Deborah Cadena, Ph.D.
Addressing for the first time licensing restrictions placed on goods made by, but not incorporating, the licensed good, the U.S. Court of Appeals for the Federal Circuit held patent misuse to be inapplicable as a defense for breach of restrictions placed on the use of second generation genetically modified seeds. The Court also found the licensing restrictions not to have an anticompetitive effect, but held a liquidated damages provision to be a penalty and unenforceable under Missouri law. Monsanto Co. v. McFarling, Case Nos. 03-1177, -1228 (Fed Cir. Apr. 9, 2004) (Clevenger, J.).
Monsanto manufactures ROUNDUP, a herbicide containing the chemical glyphosate that inhibits plant growth. Monsanto also markets ROUNDUP READY genetic modification technology, which inserts a gene for an enzyme variant causing resistance to glyphosate. The technology is used to create genetically modified seeds and plants that grow in the presence of ROUNDUP. Claims directed to the gene variant, glyphosate-tolerant plants and seeds are included in one of six patents covering Monsanto’s technology.
Monsanto licenses its ROUNDUP READY technology to seed companies for the manufacture of glyphosate-tolerant seeds under an agreement prohibiting their unconditional sale. Farmers are required to license the seeds under terms restricting their use to a single season and prohibiting saving the seeds for replanting or resupply to third parties. Liquidated damages for breach of any provision was 120 times the royalty fee for purchase of the seeds. Monsanto sued McFarling for breach of the seed-saving restriction.
McFarling asserted Monsanto misused its patents, impermissibly tying the patented gene technology to the unpatented second generation seeds by prohibiting seed-saving, and broadened the scope of the granted patent. The Federal Circuit held that the licensing restriction prohibiting saving and replanting of the second generation seeds was not an improper extension of Monsanto’s patent rights because the patent claims covered the second generation seeds. The licensed and patented first generation seeds and the second generation seeds made by the licensed product were "nearly identical copies." The Court also found the antitrust argument unpersuasive since any anticompetitive effect due to the licensing restriction is within the rights granted by the patent.
The liquidated damages provision was held to be an unenforceable penalty clause. The multiplier was found not to be a reasonable forecast for the harm caused by a breach of the seed-saving provision because it applied equally to several different types of crops, without an adjustment for different growth rates, and equally to different restrictions, failing to account for different types of damage. The multiplier also measured the number of bags purchased when the number of bags replanted, supplied or sold may be a more accurate measure of the incurred harm.
Intent to Release Third Party from Infringement Claims Must Appear in the Terms of the Release
By Peter J. Gimino, III
Applying standard California principles of contract interpretation, the U.S. Court of Appeals for the Federal Circuit has held that a settlement agreement releasing an entity and its parents does not operate to insulate future parents from infringement liability. Unova, Inc. v. Acer Inc., et al., Case No. 03-1244 (Fed. Cir. Mar. 31, 2004) (Lourie, J.)
In May 2001, Unova and Compaq Computer Corporation entered into a settlement agreement resolving certain infringement claims regarding Unova’s notebook computer "smart battery" technology. A year later, Hewlett-Packard became Compaq’s parent and, soon thereafter, Unova filed this action against Hewlett-Packard, and others, for infringement of the same "smart battery" patents contemplated by the Unova/Compaq settlement.
The district court granted summary judgment in favor of Hewlett-Packard based on the release contained within the Unova/Compaq settlement. On appeal, the Federal Circuit reversed. Because the Unova/Compaq settlement contained a California choice of law provision, the Federal Circuit relied on well-settled principles of California law that contracts are to be interpreted in a manner to give effect to the mutual intent of the parties, that the clear and explicit language of a contract, devoid of any absurdity, will govern its interpretation and the terms of a contract are to be read together as a whole. Based on those principles and upon a review of the language of the Unova/Compaq settlement, the Court held that neither Unova nor Compaq intended to include Hewlett-Packard in the release of any claims.
The Court explained that the present-tense language that Unova "hereby releases Compaq, its parents, and its Subsidiaries" applied only to past acts of infringement and did not apply to Hewlett-Packard, which was not Compaq’s parent as of the date of the release. The Court found it significant that, when reading the settlement as a whole, other provisions expressly referred to future entities, limited their application to Compaq-branded products and contemplated the possibility of separate, subsequent licensing arrangements between Unova and Hewlett-Packard. The Court confirmed its interpretation of the Unova/Compaq settlement by reference to the surrounding circumstances, including the fact that Hewlett-Packard and Unova were engaged in separate litigation at the time of the Unova/Compaq settlement.
The Dictionary Definition of a Claim Term Controls Absent Express Statements to the Contrary
By D. Sean Trainor
The U.S. Court of Appeals for the Federal Circuit reiterated that, absent an express intent to impart a special meaning to a claim term, the term is limited to the ordinary and customary meanings as understood by those of ordinary skill in the art. International Rectifier Corp. v. IXYS Corp., Case Nos. 02-1414, -1554 (Fed. Cir. Mar. 18, 2004) (Linn, J.).
International Rectifier (IR) alleged that IXYS infringed patents related to vertical planar power metal-oxide-semiconductor transistor devices. On summary judgment, the district court found that the accused IXYS devices infringed the IR patents. IXYS appealed, citing errors in the district court’s construction of three terms: "polygonal," "annular" and "adjoining."
As to the term "polygonal," IR and IXYS agreed that the ordinary and customary meaning of the term as "a closed plan figure bounded by straight lines," but disagreed as to whether the term covered figures not having well-defined angles. The Federal Circuit first consulted dictionaries and determined that a "polygon" is a "closed plane figure bounded by straight lines." Finding that the patentee had not indicated a special meaning for "polygon," the Federal Circuit reversed the district court’s construction that allowed for "polygonal" regions having rounded corners.
Using the same analysis, the Federal Circuit rejected the district court’s construction of the term "annular." The Federal Circuit consulted various dictionary definitions to arrive at the ordinary and customary meaning of the term "annular" as "of or relating to an area formed by two concentric circular or curved regions." The Federal Circuit noted that the patentee had deviated from the ordinary meaning of the term "annular" such that the term encompassed areas between two concentric polygons, or an area shaped like a polygonal band, but determined that the written description did not cover any broader meaning of "annular."
Citing various dictionaries, the district court defined the term "adjoining" as "‘adjoin,’ ‘adjoining,’ and its synonym ‘adjacent’ [as] indicat[ing] that two objects need not be in physical contact to be ‘adjoining’ ... [because] ‘adjoin’ can mean ‘to be close to or in contact with one another,’ while ‘adjacent’ is a synonym of adjoining and means ‘not distant; nearby.’" The Federal Circuit rejected such a definition noting that dictionaries, including the one relied upon by the district court, expressly distinguish between "adjoining" and "adjacent" in that "adjoining" and "adjacent" are synonymous, but "that, as between adjacent and adjoining, adjoining may more strongly indicate existence of common bounding lines or points of junction." Because the patentee did not expressly indicate a broader meaning of "adjoining," the Federal Circuit reversed the district court and granted summary judgment of non-infringement because the regions of the accused products were fully separated and thus could not be adjoining.
The Specifications of Patents Prove Vital to Collateral Estoppel Analyses
By Evan Parke
Addressing whether a prior court’s decision could give rise to collateral estoppel on the issues of enablement and claim construction, the U.S. Court of Appeals for the Federal Circuit held that the district court must examine the teachings of the specifications of the patents-in-suit before finding a party collaterally estopped. Monsanto Co. v. Bayer Bioscience N.V., Case No. 03-1201 (Fed. Cir. Mar. 30, 2004) (Bryson, J.).
Aventis owned a set of patents directed to an agent designed to provide plants with resistance to certain insects. The patents used agrobacterium as a transforming agent to insert into plants a specific piece of DNA, the gene encoding the "Bt toxin." After the issuance of Aventis’ patents, Monsanto filed an action seeking a declaratory judgment that its corn products did not infringe upon Aventis’ patents. Aventis counterclaimed. The court on summary judgment found for Monsanto, ruling that Aventis was collaterally estopped by an earlier decision from arguing that its patents are enabled with respect to corn or that its claims cover corn. The prior decision (Plant Genetic Systems, N.V. v. DeKalb Genetics Corp.) involved the corporate predecessors of the litigants in the declaratory judgment action and pertained to a similar, but different, set of patents. The court in Plant Genetic Systems ruled that the patents there in suit, which teach the use of agrobacterium to insert a different set of DNA (the "bar" gene) into corn, were not enabled as of 1987. The court also ruled that the intrinsic evidence supported claim constructions that prevent those patents from reading onto corn products.
On appeal, the Federal Circuit reversed the summary judgment rulings. Although the Federal Circuit agreed that collateral estoppel might apply since the specification, considered in view of the state of the art in 1987 did not, as determined in Plant Genetic Systems, enable the invention. The Federal Circuit held that in this case the district court must first determine whether the specifications of the patents-at-issue enable the invention. With respect to the claim construction issue, the Court noted that the claim construction in the earlier case was "based principally on evidence specific to the patent at issue in that case," and ruled that the patent holder "should not now be precluded from arguing that the same claim term appearing in the claims of the [different patent] has a different meaning."
Non-moving Party Must Present "More than a Mere Scintilla of Evidence" to Withstand a JMOL
By Elizabeth Kim
The U.S. Court of Appeals for the Federal Circuit upheld a district court’s judgment as a matter of law (JMOL) that the plaintiff’s patents were not infringed, after an earlier jury verdict of infringement that had awarded $17.2 million in damages. The Court found that the plaintiff in the underlying infringement case failed to present "more than a mere scintilla of evidence in its favor" needed by a non-moving party to withstand a JMOL. Summit Technology, Inc. v. Nidek Co., Case No. 03-1214 (Fed. Cir. Mar. 26, 2004) (Linn, J.).
Summit’s patents relate to laser eye surgery systems, which re-shape the cornea to correct vision problems. These systems direct laser pulses to different areas of the cornea to remove portions of corneal tissue.
One asserted claim limitation required each laser pulse to maintain "a substantially constant energy per unit area during each pulse." The Court noted that this limitation, as construed by the district court, required Summit to prove that each pulse from the accused device ablated approximately the same depth of corneal material.
Nidek argued that the accused device did not infringe, because it delivered pulses that had Gaussian energy density distributions and, therefore, ablated non-uniform depths of corneal material. Summit argued that Nidek’s argument was flawed, because it related to the energy density distribution instead of the energy per unit area.
The Federal Circuit agreed with Nidek and in doing so elaborated upon Summit’s evidentiary shortcomings. According to the Court, Summit failed to show that each pulse from the accused device ablated a substantially uniform depth of material across the pulse. The Court seemed to deviate from its earlier interpretation, requiring each pulse to remove substantially the same depth of corneal material compared to every other pulse and move toward an interpretation that required each pulse to remove a uniform depth of material across the pulse itself.
Another claim limitation required the area of a light spot formed by a focused laser beam to be "at least as large as the area of the cornea desired to be operated upon." The Court again concluded that Summit failed to provide "more than a mere scintilla of evidence" needed to support the jury verdict.
Patents / Declaratory Judgment Actions
Splitting the Case-Or-Controversy Baby, Federal Circuit Dismisses Part of Patent Case
By David M. Stein
The U.S. Court of Appeals for the Federal Circuit has now decided that a declaratory judgment action in a patent case satisfies the "case or controversy" requirement of Article III even where the product in issue enjoys very limited sales, but declined to find jurisdiction over not-yet-released products. Sierra Applied Sciences, Inc. v. Advanced Energy Industries, Inc., Case No. 03-1356 (Apr. 13, 2004) (Michel, P.R.)
Applying the two-part test used to guide the case or controversy, the Court considered whether the patent holder had made explicit threats or taken other action to create a reasonable apprehension of suit, and whether the potential accused infringer had engaged in conduct that could constitute infringement (or taken concrete steps to engage in such conduct).
The Court found that no case or controversy existed in connection with a device when the design had not yet been finalized when the complaint was filed. The Court analyzed the Article III requirement for "immediacy and reality." The Court explained that the "immediacy" inquiry focuses on the period of time between the date on which a complaint is filed and the date on which potentially infringing activities will begin (i.e., when the product will be sold, offered for sale, etc…). The "reality" requirement focuses on whether the design is substantially fixed, particularly with respect to potentially-infringing characteristics, on the date the complaint is filed.
Here, there was no immediacy because there was no evidence that the new product was built and operational until about one year after the complaint was filed. Nor was there "reality," as the design of the new product was still changing as of the date the complaint was filed. Therefore, there was no way to determine whether the eventual design would potentially infringe the patents in issue. The court accordingly found no jurisdiction over this new product.
As to another accused product, however, the Court concluded that the case or controversy requirement was satisfied even though the handful of units at issue would be de minimus in terms of damages, and even though the patent holder had initially alleged infringement in connection with those products years before the suit was filed.
In this case, the patent holder had written a letter to the potential infringer in December of 1995 expressly accusing it of infringement. The accused infringer responded with a letter in January of 1996, stating that it was no longer manufacturing the product at issue and had no plans to do so in the future, so it considered the charges moot. The patent holder did not respond to this letter. There was no further communication between the parties for four years. The court noted that, although there was a reasonable apprehension of suit created by the December 1995 letter, the patent holder’s lack of response to the January 1996 letter, coupled with the passage of time, dissolved any reasonable apprehension of suit. That reasonable apprehension was, however, later
revived by subsequent letters with generalized accusations of infringement as to Sierra’s various products.
Combination Products Must Contain Active Ingredient Not Previously Marketed for Patent Term Extension Eligibility
By David Gay, Ph.D
Construing the patent term extension provision of the Hatch-Waxman Act (H-W), the U.S. Court of Appeals for the Federal Circuit upheld a U.S. Patent and Trademark Office (USPTO) ruling denying extension for a new product combination where the individual components had been previously marketed. Arnold Partnership v. Dudas, Case No. 03-1339 (Fed. Cir. Mar. 24, 2004) (Rader, J.).
Vicoprofen is marketed as a pain treatment having a combination of the two active ingredients hydrocodone and ibuprofen, both of which had been previously marketed individually. The U.S. Food and Drug Administration (FDA) required, and granted, regulatory approval for the Vicoprofen combination prior to marketing in 1997. Hydrocodone in combination with ibuprofen is claimed in U.S. Pat. No. 4,587,252 assigned to Arnold Partnership and exclusively licensed to Abbott Laboratories. The patent is due to expire on December 18, 2004.
Arnold filed for patent term extension under the H-W Act for restoration of a portion of the time consumed in gaining regulatory approval. The USPTO denied term extension because Vicoprofen did not comply with the "first commercial marketing" requirement due to the previous marketing of the individual components. Arnold challenged this ruling in federal district court alleging that the statute should be applied to a product as a whole and that the combination of hydrocodone and ibuprofen was never marketed previously.
The H-W provision at issue provides for term extension if the approval is for the first permitted commercial marketing of the product and defines "product" as a "drug product," which means "the active ingredient of a new drug ... product ... as a single entity or in combination with another active ingredient." The Federal Circuit interpreted the plain language of this provision to permit term extension for a patent claiming an active ingredient of a new drug product. Pointing to the use of the disjunctive "or" in the final phrase, the Court reasoned that drug products having single or multiple active ingredients fall into the same statutory category. The final phrase requires examination of term extension eligibility on a component-by-component basis, rather than as a combination. Upholding the denial of term extension for the Vicoprofen combination, the Court concluded that, in order to permit term extension of a patent claiming a composition comprising two active ingredients, at least one of the claimed active ingredients must not have been previously marketed. The Court additionally acknowledged that its reading of the term extension provision may not be harmonious with FDA practices requiring approval for combination drugs, but discharged this issue as one appropriately addressed by Congress.
Infringement Allegations Are Actionable Under State Law Only When Objectively Baseless
By Paul Devinsky and Rania Chamoun Sarkis
The U.S. Court of Appeals for the Federal Circuit has now found that a patent holder’s infringement allegations are actionable only under state law for tortious interference with prospective economic advantage or unfair competition if those allegations are objectively baseless. Globetrotter Software Inc. v. Elan Computer Group Inc., Case No. 03-1179 (Fed. Cir. Mar. 23, 2004) (Dyk, J.).
Globetrotter Software holds a patent directed toward a license management system for controlling the number of concurrent copies of a program, in use of a computer network . (`297 patent) Globetrotter sued Elan Computer and others.
The defendant, Greer, counterclaimed for tortious interference and unfair competition under state law, arguing that Globetrotter, in bad faith, notified Rainbow of the alleged patent infringement by Elan solely to cause Rainbow to abandon its planned purchase of Elan’s outstanding shares, with the result that Rainbow acquired Elan for a much lower price and did not enter into a planned agreement with Greer.
After the district court construed the terms "license file means" and "prevent" limitations of the `297 patent, it granted summary judgment of non-infringement to Elan on the ground that the claimed "license file means" and "prevent" limitations were not satisfied in the Elan system.
The district court also granted summary judgment to Globetrotter on Greer’s tortious interference and unfair competition counterclaims, reasoning that Globetrotter’s patent suit was not "sham" litigation, and that Globetrotter was entitled to notify Rainbow and the market of its claims. Both sides appealed.
The Federal Circuit, citing Zenith Elecs. Corp. v. Exzec Inc., noted that federal patent law preempts state tort law liability where a patent holder, in good faith, communicates an assertion of infringement of its patent and a warning about potential litigation, and that state law claims can survive federal preemption only to the extent they are based on a showing of bad faith action in asserting infringement.
Based in part on the Supreme Court ruling in Professional Real Estate Investors Inc. v. Columbia Pictures Indus. Inc., the panel here found that the Zenith bad faith standard cannot be satisfied without a showing that the claims asserted were objectively baseless: "an objectively reasonable effort to litigate cannot be sham regardless of subjective intent."
Citing Golan v. Pingel Enter Inc.,the panel also noted that the Court adopted a similar standard for pre-litigation communications alleging patent infringement, holding that "bad faith is not supported where the information is objectively accurate."
"The objectively baseless standard of Professional Real Estate applies to state-law claims based on communications alleging patent infringement, such as those in this case. A plaintiff claiming that a patent holder has engaged in wrongful conduct by asserting claims of patent infringement must establish that the claim of infringement were objectively baseless."
Interference Board May Terminate Interference Without Reaching Patentability
By Christopher D. Bright
The U.S. Court of Appeals for the Federal Circuit has reaffirmed its long-standing practice of affording broad discretion to decisions by the Board of Patent Appeals and Interferences on matters of interference procedure. In re Sullivan, No. 03-1278 (Fed. Cir. Mar. 22, 2004) (Linn, J.).
At issue in this appeal were procedural determinations by the Board. First, the Board entered an amendment offered by the opposing party in order to preserve jurisdiction over the interference. Then, the Board decided the issue of priority and remanded to the Examiner, declining to reach the issue of patentability. The Federal Circuit affirmed as to both.
Under 35 U.S.C. §135(b), an applicant cannot provoke an interference with patent claims that have been issued more than one year simply by adding claims to a pending application that are the "same or substantially the same subject matter" as the issued claims. To cure a §135(b) defect in the interference at issue in this case, the Board allowed a further amendment. It then re-declared the interference. On appeal, the Federal Circuit agreed with the Board that Sullivan failed to establish that the re-declared interference was improper.
The Federal Circuit also held that the Board did not abuse its discretion by resolving the issue of priority but declining to reach patentability. At an early stage in the interference, Sullivan conceded that he was not the earlier inventor. Sullivan argued, however, that the Board should nevertheless proceed with the interference and hold that the invention was not patentable to either party for obviousness under §103. The Board disagreed and instead terminated the interference, instructing the Examiner that he might want to consider the patentability of the opposing party’s involved patent application claims during ex parte prosecution. Citing its earlier pronouncement in Berman v. Housey--that "once priority is determined in an interference, the Board has discretion to terminate the interference without more" – the Federal Circuit affirmed.
