Publications / McDermott Newsletters / IP Update, Volume 3, No. 7, July 2000

IP Update, Volume 3, No. 7, July 2000

July 2000

IN THIS ISSUE

Patents/Infringement

Commercial Purpose Obviates De Minimis or Experimental Use Exceptions; Mere Offer to Sell a Machine Cannot Serve as the Sole Basis for Infringement of a Patented Method
By Christopher D. Bright and Laura Eversole

The Federal Circuit, in a per curiam opinion by Judges Lourie and Clevenger, with Judge Rader concurring, held that a finding of infringement of a patented method cannot be based solely on the accused infringer’s offer to sell a machine capable of practicing that method. There must be additional evidence that the accused infringer actually practiced the patented method. The Court also held that any commercial use of a patented method obviates the de minimis or experimental use exceptions to infringement. Embrex, Inc. v. Service Eng’g Co., No. 99-1241, 2000 U.S. App. LEXIS 15036 (Fed. Cir., June 28, 2000).

Embrex, Inc. (Embrex), the exclusive licensee of U.S. Patent No. 4,458,630 (the "'630 patent"), sued Service Engineering Corporation (SEC) for infringement of the '630 patent. That patent is directed to a method of inoculating birds against disease by injecting vaccines into a specified region of the egg before hatching. SEC developed a prototype device for inoculating birds by injecting vaccines into regions other than the amnion or the yolk sac, i.e., a part of the egg not literally within the limitations of the claims. Embrex sued SEC for infringement after SEC began soliciting orders for the device. In practice, it turned out that the device delivered most injections into the amnion or the yolk sac.

The jury found that SEC had infringed the patented method. The issue on appeal was whether SEC’s use of the device was merely de minimis and experimental. The Court found that SEC’s injection of eggs with vaccine using its device was primarily for commercial purposes to demonstrate to its potential customers the advantages of its delivery system. Rejecting SEC’s arguments that this testing was de minimis and experimental, the Court stated that "[j]ust because SEC was unsuccessful in selling its machines does not confer infringement immunity upon SEC for its infringing acts."

With regard to substantively proving infringement, the Court noted the familiar rule that the mere sale of a device to practice a patented method is not a sale of the method (citing Joy Technologies, Inc. v. Flakt, Inc.) and stated that "a mere offer to sell a machine such as SEC’s cannot serve as the sole basis for finding infringement of the claimed method." Stated another way, "the sale of devices that may be used to practice a patented method cannot infringe without proof of direct infringement [i.e., demonstrating, at least circumstantially, that the patented method was actually practiced]." In this instance, the Court noted substantial evidence to support the jury finding that the SEC device injected vaccine into the yolk sac.

In his concurrence, Judge Rader expressed his opinion that the patent statute leaves no room for any de minimis or experimental use excuses for infringement. In other words, regardless of extent or nature, any infringement is infringement. Judge Rader reasoned that there is no de minimis excuse for patent infringement under the patent statute because it precludes any "use," not just "substantial use." Instead, the patent statute considers the extent of infringement in damages calculations. Judge Rader also pointed out that the Supreme Court has recently reiterated that there is no intent element to infringement. See Warner-Jenkinson Co. v. Hilton Davis Chem. Co. As a result, infringement cannot depend on whether the accused infringer’s intentions were experimental or commercial.

Patents/Infringement

An Offer to Sell a Component of a Patented Invention for Assembly Outside the U.S. Does Not Constitute an Act of Infringement
By Stephen K. Shahida

The Federal Circuit now has ruled that absent communications with a potential customer in the U.S., there can be no potentially infringing "offer to sell" under U.S. patent law. The Court also held that a mere offer to supply a component of an infringing product for assembly outside of U.S. is not an infringing activity under the U.S. patent law. Rotec v. Mitsubishi, et al., No. 99-1275, 2000 U.S. App. LEXIS 13563 (Fed. Cir., June 13, 2000).

Rotec, a manufacturer of concrete placing systems, holds a patent on a crane and conveyor system designed to carry concrete over long distances. During the summer of 1995, the Chinese government had solicited bids for concrete placing systems to be used in the Three Gorges Dam project on the Yangtze River. A group of five companies joined forces to bid on the project. Rotec filed a suit alleging that the bid amounted to an offer to sell a system that infringed Rotec’s patent in violation of 35 U.S.C. §§ 271(a) and 271(f)(2). The lower court granted the defendants’ summary judgment of non-infringement.

In the ensuing appeal, the Federal Circuit pointed out that the only alleged activity that possibly could be subject to U.S. patent law was limited to the work of one company, work that only focused on a conveyor component for the concrete delivery system. The claims of the patent-in-suit covered a combination tower crane supported conveyor system.

Rotec’s first assertion was that the allegedly infringing activities constituted an "offer to sell" under § 271(a). The Federal Circuit held that there was no "offer to sell" because there was no competent evidence of any communication with a third party purchaser within the U.S. "In the absence of a communication with a third party" the Court observed, "it is difficult to imagine any commercial detriment of the rightful patentee taking place." Also, the Federal Circuit compared infringement allegations based on an "offer to sell" with the Supreme Court’s decision in Deepsouth v. Laitram, wherein the Court held that selling less than a complete invention in the U.S. cannot be considered an infringing act, noting that an "offer to sell" should be treated the same way.

Rotec also alleged infringement under § 271(f)(2) based on its contention that there was an "offer to supply" a component of a patented invention for assembly outside of U.S. The Court disagreed, stating that the statute is clear on its face, imposing liability only on those who actually "supply" a component of a patented invention for assembly outside of the U.S. Because there was no evidence that the defendants supplied any component of a patented invention in or from the U.S., the Court affirmed the dismissal of that claim as well.

Although agreeing with the majority panel that Rotec could not enforce its patents against the defendants, Judge Newman filed a separate concurring opinion. First, Judge Newman stated that the non-infringement holding under § 271(a) should be based on the straightforward ground that no offer for sale was made wherein the sale, even if consummated, could infringe the patent. Further, Judge Newman faulted the majority’s reliance on Deepsouth in light of the congressional intent to overrule Deepsouth when enacting § 271(f)(2). Judge Newman wrote "it is incorrect to read § 271(f) in isolation from § 271(a)." She went on to conclude "the panel majority’s reliance on Deepsouth to remove the benefit of the amendment of § 271(a) from the 'loophole' plugged in § 271(f) is misguided, for the purpose of § 271(f) was to overrule Deepsouth."

Trademark/Opposition

Fame Remains a Critical Factor in Trademark Analysis
By Robert W. Zelnick

The U.S. Court of Appeals for the Federal Circuit, in reversing the dismissal of a trademark opposition by the Trademark Trial and Appeal Board (TTAB), held that the fame of the plaintiff’s mark, FRITO-LAY, was entitled to substantial weight, and that the parties' goods were not as "unrelated" as the TTAB found. Recot Inc. v. M.C. Becton, Case No. 99-1291 (Fed. Cir., June 7, 2000).

The issue of trademark infringement is determined by evaluation of a multi-factor test, commonly referred to as the "DuPont factors." Those factors include the fame of the plaintiff’s mark, the relatedness of both parties goods or services, the channels of trade through which both products are sold, the sophistication of consumers and the care they exercise in making purchases, etc. There is no fixed formula for the weight to be accorded each factor, and courts generally have some discretion when doing so.

In Recot, the TTAB found that the mark FRITO-LAY was unquestionably a famous mark. However, it ultimately did not accord that fame significant importance under the DuPont test. Instead, the TTAB discounted the fame of the mark, and focused instead upon the "unrelatedness" of the goods, which were dog treats and human snacks.

The Federal Circuit found the TTAB’s reasoning erroneous in two significant ways. First, the Federal Circuit reinforced that under both its precedent and TTAB precedent, the fame of a mark is "important" in the infringement analysis and that, while not dispositive of the analysis, always must be accorded "full weight."

The Federal Circuit warned would-be infringers that famous marks are entitled to a broad range of protection: "When a famous mark is at issue, a competitor must pause to carefully consider whether the fame of the mark, accorded its full weight, casts a 'long shadow which competitors must avoid.'"

Second, the Federal Circuit found error in the TTAB’s assessment of the degree of relatedness of the parties' goods, finding that dog treats and human snacks were, in fact, somewhat related. The Court noted that the TTAB erred in failing to consider evidence that several large companies sell both human food and pet food. Moreover, the Federal Circuit ordered the TTAB on remand to consider relevant evidence that FRITO-LAY-branded products, bearing images of dogs, apparently are being sold in connection with the Disney movie "101 Dalmatians," which it suggested could further link the parties' goods in the minds of consumers.

Practice Note: While the oft-cited expression "as different as apples and oranges" suggests that apples and oranges are completely different, those responsible for trademark selection should stop and consider just how different apples and oranges really are — especially where a famous mark is concerned— in the grand spectrum of goods and services.

Patent/Best Mode

Unclaimed Subject Matter Not Directly Related to Operation of the Claimed Invention Does Not Trigger Best Mode Requirement
By Michael A. Messina

In refusing to read the limitation "fine line" into a claim drawn to plasma etching process, the Federal Circuit reversed a summary judgement holding of patent invalidity and reiterated its position that the best mode requirement is coextensive with the scope of the invention as claimed. Northern Telecom Limited. v. Samsung Electronics Co., Ltd., Case No. 99-1208-1227 (Fed.Cir., June 13, 2000).

Northern Telecom owns U.S. Patent 4,030,967 (the "'967 patent") entitled "Gaseous Plasma Etching of Aluminum and Aluminum Oxide." The '967 patent contains one independent claim, directed to a process for gaseous etching of aluminum and aluminum oxide, including an initial step of plasma etching in the presence of a gaseous trihalide. The accused infringing process employs a boron trichloride plasma, which chemically reacts with and removes metal surface atoms from a layer comprising an alloy of aluminum and silicon.

The Federal Circuit reversed the lower court, finding no merit in Samsung’s defense that the '967 patent did not disclose the "best mode" of manufacturing fine line semiconductor devices, which the '967 patent inventors knew required the use of aluminum silicon alloy. In doing so, the Court construed the claim based on intrinsic claim construction materials, finding that "[f]ine line etching is simply not part of the claimed invention." The Court refused to consider extrinsic evidence in the form of a Northern Telecom report on semiconductor miniaturization finding that "[t]he use of extrinsic evidence to construe the scope of a claim is improper where the ordinary and accustomed meaning of a claim term does not render the scope of the claim unclear and where the patentee has not chosen to be his own lexicographer."

The Federal Circuit also affirmed the district court’s construction of the claim terms "aluminum and aluminum oxide" and "plasma etching" over Samsung’s challenge, noting that the lower court had adopted Samsung’s construction of those terms in finding Samsung’s process to be an infringement:

. . . we look with "extreme disfavor" on appeals that allege error in claim constructions that were advocated below by the party now challenging them . . .

In finding that the intrinsic claim construction materials supported the district court’s claim construction, the Federal Circuit did not reach the issue of judicial estoppel. The panel used this case as an opportunity to clarify the rule of Athletic Alternatives v. Prince Mfg., regarding the preference for a narrow meaning for a claim term over a broader one where the prosecution history admits of both, as being limited to those cases where ". . . the prosecution history led to '[t]wo strong and contradictory interpretive strands . . . [where] [e]ach strand, considered alone, leads to a coherent and distinct meaning of the disputed claim.'" In other words, application of the Athletic Alternatives rule "does not turn on ambiguity — it [turns] on clarity."

Patent/Litigation

Declaratory Judgment Suit Inappropriate to Challenge Adverse District Court Infringement Ruling
By Natalia Blinkova

A patent infringement and trade secret misuse litigant cannot file a collateral declaratory judgment action to contest a district court’s ruling on its patent and trade secret misuse defense. Rather, the defendant must appeal the adverse ruling in the original action. Glitsch, Inc. v. Koch Eng’g Co., Inc., 2000 U.S. App. LEXIS 15319 (Fed. Cir., June 30, 2000).

After the district court entered an order finding Glitsch liable for patent infringement and trade secret misappropriation, but before it had addressed the issue of damages, Glitsch moved for leave to amend its answer to assert the defenses of patent and trade secret misuse. In its complaint, Glitsch claimed that Koch and Sulzer improperly had agreed to allocate geographic markets, in violation of the Sherman Act, rendering the patents and trade secrets in suit unenforceable. The court denied the motion as untimely.

Glitsch then filed a separate declaratory judgement (DJ) action in the same district court, alleging the same patent and trade secret misuse claims that were the subject of its prior motion in the original action. The district court granted summary judgment for Koch, holding that Glitsch had already waived its right to litigate the affirmative defense of misuse in the original action. Glitsch appealed.

The Federal Circuit affirmed the district court’s ruling that Glitsch was not entitled to relief on its DJ complaint, but did so on different grounds, finding that Glitsch was not entitled to use a DJ action to collaterally attack the order denying Glitsch’s motion to amend its answer. The Federal Circuit found Glitsch’s attempt to use a DJ action to raise a defense that should have been litigated in the first action to be improper. Such a tactic, the Court stated, is barred for policy reasons:

When a court enters an order that a party does not like, the party’s recourse is to seek relief on appeal; it is not appropriate for the party to contest the court’s order by filing a new action seeking a declaratory judgment challenging the court’s ruling in the first case.

Otherwise, the Court reasoned, a party could routinely bring a DJ action, in effect, asking the court in the DJ suit to review an order issued in an earlier suit, thereby circumventing the decision of the first court relating to the same matter.

If permitted, this practice would negate the district court’s ruling on the untimeliness of Glitsch’s misuse defense, would permit what amounts to an interlocutory appeal of an adverse ruling on the merits of that defense and would undermine several strong policies of federal procedure: (1) that litigation relating to a single matter should take place in a single action; (2) that a district court’s order in one action should be reviewed by the statutory method of appeal, not by a collateral proceeding for a DJ; and (3) that, with limited exceptions, review of a district court’s ruling should take place only after a final judgment is entered in the case.

Glitsch, relying on the Supreme Court decision in Mercoid Corp. v. Mid-Continent Investment Co., argued that for public policy reasons, the defense of patent misuse is special, and that even when a court rejects that defense in one action, the defendant may assert it in another. In Mercoid, the Supreme Court held that principles of public policy required that the issue of patent misuse be available to Mercoid in a second patent infringement case even if had not been raised as a defense in the first.

The Federal Circuit disagreed and distinguished Mercoid from the case at hand. Unlike Mercoid, Glitsch did not involve two successive infringement actions, but only a single infringement suit, from which Glitsch could have appealed. Instead, Glitsch chose to file a DJ seeking a different ruling on the patent misuse issue. While Mercoid had no other means of raising its patent misuse defense, Glitsch had and continues to have the remedy of appeal in the original action.

In short, the Court reasoned that "the rationale of Mercoid does not justify allowing a party to launch a collateral attack on a ruling in the first action, the effect of which would be to alter the judgment in that action."

Patent/Litigation

Testimony of Inventor After Patent Issuance Is Not Relevant When Determining Compliance with § 112, ¶ 2
By Scott D. Paul

Equating the § 112, ¶ 2 requirement that the claims reflect "that which the applicant regards as his invention" with the definiteness requirement, the Federal Circuit has now held that it is inappropriate to consider testimony from the inventor obtained in the context of litigation in assessing whether a claim reflects that which applicant regards as his invention. Solomon v. Kimberly-Clark Corp., No. 00-1033 (Fed. Cir., June 30, 2000).

Solomon sued Kimberly-Clark (K-C), alleging that K-C’s product infringed Solomon’s U.S.Pat.No. 4,560,381 (the "'381 patent"). K-C moved for summary judgment of invalidity alleging that the patent was invalid under 35 U.S.C. § 102(f) because Solomon was not the true inventor of the claimed invention, and alternatively under 35 U.S.C. § 112, ¶ 2 because the '381 patent failed to claim the subject matter Ms. Solomon regarded as her invention. The lower court granted the motion on § 112, ¶2 based on Solomon’s deposition testimony as to the meaning of the claim term "depression" — testimony which was allegedly contrary to what was claimed in the patent — but found that K-C had not proven the claims invalid under § 102(f).

The Federal Circuit reversed, noting that § 112, ¶ 2 requires that claims are set forth that which "the applicant regards as his invention," and that they do so with sufficient "definiteness."

The Federal Circuit also noted that a § 112, ¶ 2 analysis differs depending upon whether it is done during prosecution or litigation. During patent prosecution, evidence beyond the patent specification may be used to determine a compliance with the statute; for example, an inventor’s statements to the Patent and Trademark Office may be considered. However, after a claim has issued, the evidence which may be considered is more limited. The Court looked to the well-settled rule regarding compliance with the "definiteness" portion of § 112, ¶ 2, noting that the inquiry is typically limited to how one skilled in the art would interpret the claims in view of the specification. The Court held that the same standard should apply to analyzing whether an issued patent claim complies with the "that which the applicant regards as his invention" portion of the statute. Therefore, the Court found that inventor testimony obtained in the context of litigation is not probative in assessing validity under § 112, ¶ 2.

With regard to the § 102(f) issue, the Federal Circuit agreed with the district court that K-C failed to meet its burden. In particular, the Court found that K-C failed to provide clear and convincing evidence of a different inventor, and that despite some vague and inconsistent deposition testimony by Ms. Solomon, there was not sufficient evidence to justify a conclusion of invalidity. The Federal Circuit characterized as "misguided" K-C’s suggestion that Solomon’s patent attorney might be the true inventor, noting that a patent attorney performing his job of obtaining a valid patent with maximum coverage should not be a competitor of the client, i.e., by asserting inventorship, as a result of that representation.

Patent/PTO Practice

USPTO Issues Examination Guidelines for 35 USC §112, ¶6 Claim Elements
By Dawn L. Palmer

The U.S. Patent and Trademark Office (PTO) has now announced "Supplemental Examination Guidelines for Determining the Applicability of 35 U.S.C. §112, ¶6," Federal Register, Vol. 65, No. 120 (June 21, 2000), supplementing guidelines on this topic issued in 1994, to assist examiners in determining the applicability of 35 U.S.C. §112, ¶6 to a claim element and the impact on patentability that follows.

These guidelines are intended by the PTO to reflect recent Federal Circuit rulings regarding (1) application of §112, ¶6 to a claim element, (2) the required written description support for a §112, ¶6 claim element and (3) the required showing for prima facie §112, ¶6 equivalence by the prior art.

Invoking §112, ¶6:

The guidelines articulate three factors that require an examiner to treat a claim element under §112, ¶6:

(1) use of the "means for" or "step for" language;

(2) a modification of the "means for" or "steps for" languagewith functional language; and

(3) the absence of sufficient structure, material or acts for achieving the specified function.

If an examiner concludes that a claim element meets this three-part test, the examiner is required to indicate that §112, ¶6 applies to the construction of that limitation. If the first part of the test is met, but the examiner finds that either the second and third parts are not met, the examiner is expected to provide a reasoned explanation. If the applicant disagrees, the burden then shifts to the applicant to establish why §112, ¶6 should apply.

If an examiner finds that the first part of the test is not met, an applicant may amend the claim to include "means for" or "step for" language as appropriate, and thereby invoke §112, ¶6. Alternatively, the applicant can simply inform the PTO of its intent to invoke §112, ¶6 by making a showing that the limitation is written as a function to be performed and does not recite sufficient structure, material or acts to perform the claimed function. If the applicant does neither, the next office action may be made final with regard to this issue.

Written Description:

A claim element invoking §112, ¶6 is interpreted to cover the corresponding structure, material, or acts described in the specification and their equivalents. Therefore, the guidelines explain that the requirements of §112, ¶2 are not met if the specification does not adequately describe the corresponding structure, material or acts. However, the guidelines provide that a written description may be adequate if it would be clear to those skilled in the art what structure(s) perform the recited function.

If an examiner concludes that the structure corresponding to the claim element is implicit in the specification, the guidelines require that either the applicant or the examiner clarify the record regarding identification of the structure disclosed in the specification that corresponds to the claim element. An applicant may do this by an amendment to the specification, or the examiner can state on the record which structure(s), material(s) or act(s) are believed to perform the function recited. If an applicant contests the examiner’s characterization, the applicant must submit a statement of its reasons.

Establishing Prima Facie Equivalence by the Prior Art:

The guidelines require the examiner to explain the rationale for any finding of equivalence by the prior art. The rationale may be based upon any of four factors identified in the guidelines (which remain substantially similar to those provided in 1994), or on other factors.

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