IP Update, Volume 5, No. 2, February 2002
February 2002
IN THIS ISSUE
- Patents/Obviousness - Determination of Obviousness by Patent Office Must Be Based on Objective Evidence of Record
- Patent/Litigation - Federal Circuit Recognizes Prosecution Laches as Defense to Patent Infringement
- Patents/On-Sale Bar - Experimental Use-Exception to On-Sale Bar Reaffirmed
- Copyright/E-Commerce - Use of Thumbnail Images for Visual Search Engine is Fair Use, but Display of Larger Images Is Copyright Infringement
- Trademarks-E-Commerce - Use of Plaintiff’s Trademark in Metatags and on Website Constitutes Nominative Fair Use
- Patents/PCT - European Patent Office Restricts Technologies to be Searched or Examined Under the PCT for Cases Filed by Non-EPC Applicants
Determination of Obviousness by Patent Office Must Be Based on Objective Evidence of Record
By John Hankins
In a case sure to be often cited by patent prosecutors, the U.S. Court of Appeals for the Federal Circuit vacated the decision of the Board of Patent Appeals and Interferences denying patentability, finding that the Board’s’ analysis of the applicant’s invention did not comport with either the legal requirements for the determination of obviousness or with the requirements of the Administrative Procedure Act (APA) to set forth the findings and explanations needed for reasoned decision-making. In re Lee, Case No. 00-1158 (January 18, 2002).
The patent application was directed to a method of automatically displaying the functions of a video display device and demonstrating how to select and adjust the functions to facilitate response by the user. Two references were combined by the Examiner in rejecting the claims with only a vague reasoning for combining. The Board affirmed the Examiner’s rejection, holding that it was not necessary to present a source of a teaching, suggestion or motivation to combine the references or their teachings. Instead, the Board stated that the conclusion of obviousness may be made from common knowledge and common sense of a person of ordinary skill in the art without any specific hint or suggestion in a particular reference.
The Federal Circuit panel disagreed and held that the Board’s reliance on conclusory statements regarding common knowledge and common sense did not provide the evidentiary basis for its findings that the APA requires of an agency. When patentability turns on the question of obviousness, the search for and analysis of the prior art includes evidence relevant to the finding of whether there is a teaching, motivation or suggestion to select and combine the references. The factual question of motivation is material to patentability, and cannot be resolved on subjective belief and unknown authority, but must be based on objective evidence of record.
Federal Circuit Recognizes Prosecution Laches as Defense to Patent Infringement
By Paul Devinsky
In a 2-1 opinion, the U.S. Court of Appeals for the Federal Circuit for the first time affirmatively recognized "prosecution laches" as a defense to patent infringement and remanded the case for consideration of the defense. Symbol Technologies, Inc. et al. v. Lemelson Medical, Education & Research Foundation, L.P., Case No. 00-1583 (Fed. Cir. Jan. 24, 2002).
Symbol involved patents issued in the name of Jerome Lemelson and held by the Lemelson Medical, Education & Research Foundation (Lemelson Foundation). The district court opinion arose in the context of a lawsuit involving 16 Lemelson patents, generally relating to machine vision and automatic identification technology. Each of the patents involved claimed priority, at least in part, to two applications filed in 1954 and 1956 and issued from a decades-long prosecution lineage involving divisional, continuation and/or continuation-in-part applications.
The plaintiffs in this case manufactured bar code scanners and related products. In response to being notified that their customers had received letters in 1998 from the Lemelson Foundation indicating that the use of the plaintiffs’ products infringed certain Lemelson patents, Symbol brought an action for declaratory judgment asserting, inter alia, that the Lemelson Foundation should be equitably barred from asserting infringement by Symbol’s products because Mr. Lemelson "unreasonably delayed" the prosecution of the patents at issue in the U.S. Patent and Trademark Office (PTO), i.e., "prosecution laches." The Lemelson Foundation argued that Symbol had failed to state a claim upon which relief could be granted. The district court agreed and dismissed the prosecution laches claim. Symbol appealed.
The Federal Circuit reversed, stating that prosecution laches is a valid defense to an infringement action. The court discussed the long history of the doctrine, dating back to two U.S. Supreme Court cases decided in the 1920s, Woodbridge v. United States and Webster Electric Co. v. Splitdorf Electric Co. In the Woodbridge case the Supreme Court held that Woodbridge’s delay of nine years in the issuance of his patent (when the then current statute only provided for a one-year delay) was unreasonable and constituted an unfair disadvantage to others that worked in the same field during those years without notice of Woodbridge’s claims.
In Webster Electric Co., the original application for the patent in suit was filed in February 1910. Five years later, the applicant filed a divisional application, copying claims of two previously issued patents in order to provoke an interference. In 1916, the original application was issued as a patent. However, priority in the interference was decided against the applicant. After losing the interference, the applicant, in 1918, amended the application to add new claims which were similar to but broader than the claims in the original application. A second patent issued later that year including those newly added claims.
The Supreme Court held that the claims added in the second patent were unenforceable on the grounds of laches. During the years between the filing of the original application in 1910 and the filing of the new claims in 1918, the Supreme Court noted subject matter of the applications was publicly disclosed and in general use, and held that the applicant had exercised unreasonable delay and neglect in bringing forward claims that were broader than those sought in the original application.
In Symbol, the Federal Circuit majority characterized the Webster decision as based on the Supreme Court’s finding of an "unreasonable eight-year delay" in drafting the new claims. The majority explained that the Supreme Court in Webster ratified prosecution laches as a defense to allegations of infringement of claims added in divisional and continuing applications in circumstances in which intervening public rights would be prejudiced, and summarily dispensed with Lemelson’s argument that Webster was limited to cases involving only interferences.
The court also dispensed with Lemelson’s argument that two non-precedential Federal Circuit opinions preclude the court from finding laches. The court stated that there is no explicit constitutional prohibition on non-precedential opinions, whereas there has long been support for the view that non-precedential cases, particularly when they do not "contribute ... significantly to the body of law" cut back on what could be an overwhelming number of repetitive case law. Accordingly, the court declined to consider two non-precedential Federal Circuit decisions (Bott v. Four Star Corp. and Ricoh Co. v. Nashua Corp.) that declined to apply prosecution laches and questioned the continued viability of the defense.
The majority also concluded that the legislative history and commentary from the authors of the 1952 Patent Act (which expressly provides for continuation and divisional applications in §§120 and 121) suggested no intent on the part
of Congress to abrogate the defense of prosecution laches. In particular, the court noted that prior to 1952, continuation practice, although governed by common law and a creature of PTO practice and case law, was nevertheless in existence when the Supreme Court decided Webster. Accordingly, majority noted that the defense of prosecution laches and continuation practice coexisted.
As to the 1952 Patent Act itself, the majority held that the defenses to patent infringement were codified in §282 which includes equitable defenses such as laches, estoppel and unclean hands.
Judge Newman dissented. She believed that the majority had wrongly intervened in equity to regulate what Congress had not by creating a new ground on which to challenge patents that had fully complied with all statutory requirements. This was, in Judge Newman’s opinion, directly contrary to the rule that when statutory provisions such as §§120 and 121 exist, they may be relied on without equitable penalty.
Finally, Judge Newman noted that while it was certainly true that equitable defenses are available in patent infringement actions, 35 U.S.C. §282, "the issue here is not the defense of laches to the tort of infringement; it is whether a statutorily authorized action nonetheless can render the patent permanently unenforceable.… Lest authorized acts of patent prosecution be forever tainted by the potential defense that they should have been done sooner than the statute required, we should adhere to the statute."
Practice Note: The Symbol case, at least for the time being, has established prosecution laches as a potentially viable defense to a charge of patent infringement. The prosecution history of the patent in question should be examined closely to determine if a defense of prosecution laches should be affirmatively plead in response to any complaint, or as was done in Symbol, in a declaratory judgment action to try to eliminate a persistent cloud over the activities of the accused party.
Experimental Use-Exception to On-Sale Bar Reaffirmed
By May Chan
Since the Supreme Court’s decision in Pfaff v. Wells Electronics, Inc., a plethora of cases involving the on-sale bar under 35 U.S.C. §102 (b) have been heard by the U.S. Court of Appeals for the Federal Circuit. In its most recent pronouncement, the Federal Circuit reversed a district court, holding that experimental use remains an exception to an on-sale bar in the post-Pfaff world. EZ Dock, Inc. v. Schafer Systems, Inc., 2002 U.S. App. Lexis 616 (Fed. Cir. Jan. 15, 2002).
EZ Dock sold a polyethylene floating dock system more than one year before the filing date of the patent but maintained that it was for experimental purposes. EZ Dock sold the dock system for 75 percent of the final retail price. The system included a gangplank, connectors, and all hardware which were provided at no additional cost. EZ Dock also installed the dock and agreed to replace or repair any part at no charge to the purchaser. The dock system was installed in a marina which provided a site having heavier boat traffic and more turbulent water flow than the EZ Dock’s marina. EZ Dock personnel visited the dock several times and discovered that the rectangular shaped pylons did not mold properly and eventually caused leaks. Based on this information, EZ Dock changed the pylon shape from rectangular to frustoconical as recited and claimed in the patent. The district court granted summary judgment declaring the patent invalid due to the patentee’s pre-filing date activities.
The Federal Circuit revised, finding that the lower court erred in granting summary judgment because there is a genuine issue of material facts whether the claimed invention was already patenting at the time patentee sold the dock system and whether the sale was experimental or commercial. The Federal Circuit reasoned that "when an inventor can show changes during experimentation that result in features later claimed in the patent application, this evidence is a strong indication that the activities of the inventor negated any evidence of premature commercial exploitation of an invention ready for patenting." The Federal Circuit reaffirmed its earlier decision in Cont’l Plastic Containers v. Owens Brockway Plastic Prods., that when inventors make a sale for experimental purpose, they are not engaged in "premature commercial exploitation of their invention" and their activities not trigger the
on-sale bar.
Practice Note: There has been a flurry of on-sale bar cases out of the Federal Circuit over the past several months. In July 2001, the Federal Circuit applied the Pfaff test in Group One, Ltd. v. Hallmark Cards, Inc., determining what constitutes a commercial offer for sale. See IP Update Vol. 4, No. 7. In November 2001, the Federal Circuit reviewed two separate cases, Scaltech, Inc. v. Retec/Tetra, L.L.C. (where the issue decided was when a process is ready for patenting) and Special Devices, Inc. v. OEA, Inc., (where the Federal Circuit found that contracting production for "stockpiling" was enough to trigger the bar). See IP Update Vol. 4, No. 11. In December 2001, in Space Sys./Loral, Inc. v. Lockheed Martin Corp., the Federal Circuit held that an invention is not ready for patenting (to trigger an on-sale bar) even where there has been a conception of every element of the claimed invention. See IP Update Vol. 4, No. 12. In January 2002, the court reviewed Linear Technologies Corp. v. Micrel, finding that only a legally enforceable, contractual offer for sale can trigger an on-sale bar. See IP Update Vol. 5, No. 1.
Use of Thumbnail Images for Visual Search Engine is Fair Use, but Display of Larger Images Is Copyright Infringement
By Carrie Ann Shufflebarger
The U.S. Court of Appeals for the Ninth Circuit had held that the creation and use of thumbnail images in an internet search engine constitutes fair use under the copyright laws, but the display of the larger image, including the practice of inline linking and "framing" of the image, violates the copyright owner’s exclusive right to publicly display his work. Kelly v. Arriba Soft Corp., No. 00-55521 (9th Cir. February 6, 2002).
Defendant, Arriba Soft, developed a visual search engine that uses web crawlers to extract and index copyrighted images from internet web sites. The images are displayed to users in the form of small thumbnail images. Arriba Soft’s search engine also enabled users to click on the thumbnail image to display a full-sized version of the image, which was "framed" in material from Arriba Soft’s website. Plaintiff, Kelly, is a photographer who displays his works on various internet websites. Defendant’s web crawler retrieved and indexed plaintiff’s copyrighted photographs and plaintiff brought suit for copyright infringement. The district court granted summary judgment to Arriba Soft, holding that despite Kelly’s prima facie case of copyright infringement, defendant’s actions constituted "fair use" because Arriba Soft’s use of the copyrighted images was significantly transformative, and Arriba Soft’s use did not harm the market for or value of Kelly’s works. Kelly appealed.
The Ninth Circuit affirmed the district court’s holding that Arriba Soft’s use of thumbnails constituted fair use of Kelly’s copyrighted works. The Court held that the thumbnails were much smaller, lower-resolution images that served an entirely different function than plaintiff’s original images. While Kelly’s images are artistic works used for aesthetic purposes, Arriba Soft’s use of the images served as a tool to index and improve access to images on the internet. Significantly, the Court found that internet users are unlikely to enlarge the thumbnails to use them for artistic purposes because the small images are of much lower resolution than the originals, resulting in significant loss of clarity if a user attempted to enlarge the image. Likewise, the Court found that defendant’s use of thumbnails would not harm plaintiff’s market for his works, because defendant was not selling or marketing the images, nor was such action likely by users because of the low resolution of the images.
However, the Court declined to extend fair use protection to Arriba Soft’s inline linking to and framing of Kelly’s full-sized images. Instead, the Ninth Circuit became the first Court to hold that inline linking or framing violates a copyright owner’s public display rights, noting that Arriba Soft was showing Kelly’s original works without his permission. The Ninth Circuit reasoned that unlike defendant’s use of thumbnails, its use of the full-size image was not transformative, and was likely to harm plaintiff’s market for its work.
Use of Plaintiff’s Trademark in Metatags and on Website Constitutes Nominative Fair Use
By John Dabney
The Ninth Circuit has held that under certain circumstances, the use of a plaintiff’s trademark on a website to refer to plaintiff’s services constitutes fair use as a matter of law. Playboy Enterprises. v. Welles, 2002 U.S. App. LEXIS 1561 (9th Cir., Feb. 1, 2002).
Plaintiff owns the famous trademark PLAYBOY. Welles is a former Playboy Playmate of the Year. She was using the trademark PLAYBOY in the metatags of her website and in the masthead and various banner advertisements on her website to identify herself as a past Playboy Playmate of the Year. The plaintiff sued for trademark infringement and trademark dilution. The District Court awarded summary judgment in favor of Welles based on a consideration of the traditional likelihood of confusion and dilution factors, i.e., similarity of the parties’ marks, strength of plaintiff’s mark, etc.
The Ninth Circuit affirmed on different grounds, holding that the district court had committed legal error by applying the traditional likelihood of confusion factors. Instead, the Court held that where a defendant is using the plaintiff’s mark to refer to plaintiff’s services (and not defendant’s services), the appropriate analysis is whether defendant’s use constitutes a nominative use, which requires consideration of the following three factors: the plaintiff’s service must be one that is not readily identifiable without use of its trademark; only so much of the plaintiff’s mark may be used as is reasonably necessary to identify the plaintiff’s service, and the defendant must do nothing that would, in conjunction with the plaintiff’s mark, suggest sponsorship or endorsement by the plaintiff. According to the Court, "[t]his three-factor test . . . better addresses concerns regarding the likelihood of confusion in nominative use cases." Applying the test, the Court found that defendant’s use of the PLAYBOY mark in metatags used in connection with Welles’ website and masthead and banner advertisements was permissible nominative use, because there was no other practical way for Welles to refer to plaintiff without using the PLAYBOY trademark, Welles only made limited use of plaintiff’s mark and she did not use the PLAYBOY mark in a manner that would create a likelihood of confusion.
European Patent Office Restricts Technologies to be Searched or Examined Under the PCT for Cases Filed by Non-EPC Applicants
By Scott Paul
On November 26, 2001, the European Patent Office (EPO) issued a notice regarding its competence to act as an International Searching Authority (ISA) and as an International Preliminary Examining Authority (IPEA) for patent applications filed under the Patent Cooperation Treaty (PCT) directed to certain fields of technology. For PCT applications, the ISA provides an international search, and the IPEA provides an international preliminary examination under Chapter II of the PCT. For residents and nationals of the United States, both the EPO and the United States Patent & Trademark Office (USPTO) are competent to act as the ISA/IPEA.
For applications directed to biotechnology and business methods, the notice states that the EPO will no longer act as an ISA for PCT applications filed after February 28, 2002 or as an IPEA for demands for international preliminary examination filed after February 28, 2002. These restrictions apply only to PCT applications having at least one applicant who is a resident or national of the United States and no applicant who is a national or resident of an European Patent Convention contracting state.
Examples of biotechnology-related inventions include micro-organisms, enzymes, measuring equipment related to micro-organisms and enzymes, peptides, medicinal preparations containing antigens, antibodies or genetic material (which is inserted into cells of a living body), and plants and processes for obtaining them. Examples of business method-related inventions include digital computing or data processing equipment or methods adapted for administrative, commercial, managerial, supervisory or forecasting purposes.
In addition to the above, the EPO will no longer act as an IPEA in the field of telecommunications. Examples of telecommunications-related inventions include multiplex communications, pulse or digital communications, telephonic communications, cryptography, and electrical audio signal processing systems and devices.
The USPTO, when acting in its capacity as the United States Receiving Office, has indicated that it will not determine if a particular PCT application is directed to one of the restricted technologies but will simply forward on to the EPO all applications in which the EPO is indicated as the ISA/IPEA. Therefore, the burden is on the applicant to determine whether the EPO is competent to act as the ISA/IPEA for a particular PCT application. Furthermore, it is not possible to reassign competence to the EPO by changing the applicant to include an inventor who is a national or resident of a European Patent Convention contracting state after the PCT application has been filed. If it is determined that the EPO is not competent to act as the ISA/IPEA, the USPTO can be designated as the ISA/IPEA for residents and nationals of the United States.
