IP Update, Volume 4, No. 2, February 2001
February 2001
IN THIS ISSUE
- Patent/Litigation - Reduction of Compensatory Damage Award on Appeal Does Not Affect Punitive Damages
- Patents/Doctrine of Equivalents - The Federal Circuit Enters The Post-Festo Era
- Patent/Claim Construction - Means-Plus-Function Claim Elements Limited by Data Structures Disclosed as Necessary to Perform The Stated Function
- Trademarks/Dilution - Fame Is Not a Required Element Under State Dilution Statutes
- E-Commerce/Domain Names - In Rem and In Personam Jurisdiction Provisions of Anticybersquatting Consumer Protection Act Are Mutually Exclusive
- Patent/Validity - Public Policy of Enforcing Settlement Agreement Conceding Patent Validity and Enforceability Trumps Lear v. Adkins Challenge
Reduction of Compensatory Damage Award on Appeal Does Not Affect Punitive Damages
By Paul Devinsky
The Federal Circuit, while affirming the reduction of a compensatory damage award, reversed the reduction of a punitive damage award and held that the patentee was not entitled to a new trial based on the damages issue. Tronzo v. Biomet, Inc., Case No. 00-1007 (Fed. Cir. January 17, 2001).
Tronzo obtained a favorable jury verdict against Biomet for patent infringement and state law claims for breach of confidential relationship, fraud and unjust enrichment. The verdict provided for both compensatory and punitive damages. The district court then enhanced the jury’s patent infringement award, dismissed the unjust enrichment claim and capped the total amount to avoid a double recovery. In all, Tronzo was awarded about $7 million in compensatory damages and $20 million in punitive damages. In a 1998 appeal, the Federal Circuit reversed the findings of patent infringement, affirmed liability on the state law counts and reversed the judgment on compensatory damages holding that "Dr. Tronzo had failed to establish the necessary nexus between the damages claimed and the injury sustained." The Federal Circuit remanded the case to the district court for a recomputation of the damage awards.
On remand, the district court exercised its discretion not to receive additional evidence from Tronzo and applied the Federal Circuit’s limits on evidence of damage. As a consequence, it set $520 (the amount of patent prosecution costs) as the amount of compensatory damages. Dr. Tronzo argued that this reduction constituted a remittitur, entitling him to a new trial. Biomet, on the other hand, argued that the reduction in compensatory damages necessitated a reduction of punitive damages as well, since based on a $520 compensatory damage award the ratio of compensatory to punitive damages would be 38,000:1. The district court granted Biomet’s motion, reducing the punitive damage award to $52,000 and denied Tronzo a new trial.
Applying its own law, as well as Eleventh Circuit law on the procedural issues presented, the Federal Circuit affirmed the reduction in compensatory damages. "Dr. Tronzo made strategic decisions in the initial trial concerning what evidence and arguments to advance in support of his theory of damages. We see no error, therefore, in the district court’s refusal to address a new theory presented for the first time on remand." As to punitive damages, the Federal Circuit held that as there was no appeal from the award of punitive damages in the first appeal, the issue was waived. Consequently, the Court reinstated the original punitive damage award and deemed as mooted the issue of remittitur with respect thereto. With respect to compensatory damages, the Court found that under Eleventh Circuit law, the award reduction had been made on purely legal grounds and, therefore, did not raise the issue of remittitur.
Practice Note: The Federal Circuit applies the principle of waiver very strictly but considers waiver a procedural issue to be decided under the law of the regional circuit courts. See, Steam Feeder, LLC v. Sure-Feed Systems, Inc. ,180 F.3d 1343 (Fed. Cir. 1999). Accordingly, in cases where an issue (such as a compensatory damage award) is on appeal, practitioners' should consider the potential waiver effect of that issue on other issues and note an appeal or cross appeal, as appropriate, on issues that might be affected, i.e., in order to preserve such other issue(s) in the event of district court remand and subsequent proceedings.
Patents/Doctrine of Equivalents
The Federal Circuit Enters The Post-Festo Era
Contact: Paul Devinsky
In its first two opinions applying the en banc ruling in Festo, still less than two months old, the Federal Circuit left no doubt that a patentee relying on the doctrine of equivalents (DOE) to prove infringement faces an uphill battle absent a pristine file history.
In the first case, Pioneer Magnetics, Inc. v. Micro Linear Corp., Case No. 00-1012 (Fed. Cir. Jan. 23, 2001), the Federal Circuit affirmed the lower court’s finding of no infringement under the DOE because of prosecution history estoppel. The file history of the patent in suit (U.S. Pat. No. 4,677,366) showed that, in response to a prior art rejection, the applicant amended original claim 1 to include the limitations of dependent claims 2-6. Claim 6 had not been rejected based on the prior art. In addition, the applicant added another limitation ("switching analog") into claim 1 not present in any of claims 2-6. There was no explanation in the file history of why the "switching analog" limitation was added. During the litigation, the patentee offered a declaration of the prosecuting attorney, who stated that the limitation was added due to inadvertence, not because of any reasons related to patentability.
The Federal Circuit refused to consider the attorney’s declaration, because it was not part of the "public record" (i.e., the file history) that can be a basis for establishing a reason why an amendment was made. Further, upon its own review of the file history, the Federal Circuit was convinced that the limitation was added in response to the rejection based on prior art. Thus, Festo applied, and the patentee was not entitled to any range of equivalents concerning the "switching analog" limitation.
The second case, Litton Systems, Inc. v. Honeywell Inc., No. 00-1241 (Fed. Cir. Feb. 5, 2001) has been the subject of much Federal Circuit jurisprudence over its long pendency. In Litton, the patentee had amended the claims by changing the term "ion beam source" to "Kaufman-type ion beam source." The file history showed that the amendment was made in response to a rejection, posed under 35 U.S.C. § 112, ¶ 2, that the applicant had not claimed what he regarded as his invention. The Federal Circuit held that this is a clear case of amending the claims for a reason related to patentability. It therefore affirmed the lower court ruling that prosecution history estoppel applied and that Litton was entitled to no range of equivalents for the "Kaufman-type ion beam source" limitation.
The Litton case includes an interesting "wrinkle." Litton argued that "law of the case" should have applied because the Federal Circuit had previously held that Litton was entitled to a "flexible bar" approach to prosecution history estoppel (Litton Sys. Inc. v. Honeywell Inc., 140 F.3d 1449 (Fed. Cir. 1998)). Noting that in Festo the Federal Circuit had expressly repudiated the "flexible bar" approach (which had been applied in the 1998 Litton decision), the Court held that "the law of the case is a discretionary judicial doctrine that precludes reconsideration of an issue decided at an earlier stage of litigation unless exceptional circumstances exist. One such circumstance is when controlling authority has since made a contrary decision of law applicable to the issue . . . . Because we have adopted a contrary rule of law regarding the scope of prosecution history estoppel for amended claim limitations, the law of the case doctrine does not preclude us from [here] applying the complete bar adopted en banc in Festo."
Means-Plus-Function Claim Elements Limited by Data Structures Disclosed as Necessary to Perform The Stated Function
By Michael A. Messina
The Federal Circuit affirmed a district court’s denial of a preliminary injunction based on a construction of a means-plus-function claim element of a software patent that limited the claim element to data structures disclosed to be necessary to perform the stated function. Globetrotter Software, Inc. v. Elan Computer Group, Inc., Case No. 00-1110, 2001 U.S. App. LEXIS 662 (Fed. Cir. Jan. 18, 2001).
The patent in suit is directed to a license management system for controlling the number of concurrent copies of a program in use on a computer network. The claim in issue recites a "license file means" for storing one or more authorized licenses. In the system disclosed in the specification, a copy of the licensed program is stored on a node of the network and, when a request is made to run the licensed program, the system searches for a license file that has an available license. If none is found, the system denies the request to run the licensed program. The specification describes a data structure for storing a copy of the license on a disk memory of at least one of the nodes of the network, and a unique indentification (UID) assigned to each license file, i.e., a UID, which is different from the UID assigned to any other license file.
Patent owner, Globetrotter, sued Elan for patent infringement and requested a preliminary injunction. Elan defended by arguing that the UID is a necessary structure required to perform the function of the recited "license file means," and that the accused systems do not contain a UID. After a Markman hearing in which the district court construed the "license file means" to require a license file in memory and a UID or its equivalent, the district court denied the motion for a preliminary injunction. Globetrotter appealed.
The Federal Circuit affirmed, finding that the specification supported a conclusion that both the disclosed structural/data elements in issue are necessary to perform the function of the "license file means." The Federal Circuit agreed with the district court that, properly interpreted, the function of the "license file means" is to store at least one license and properly found that the corresponding structure described in the specification is the license file. The Federal Circuit further agreed that because a UID is assigned to each license file, regardless of whether that license file contains any other licenses, the UID is properly considered to be a defining characteristic of the license file, and not, as urged by Globetrotter, merely potential content for the license file. The Federal Circuit further noted that every disclosed embodiment of the claimed invention features a UID used to store licenses and to perform the operation claimed. The Federal Circuit, therefore, held that a UID is an essential part of the structure required to perform the claimed function, is structure corresponding to the claimed "means" and that the preliminary injunction was properly denied.
Practice Note: When considering including claims in means-plus-function format in an application, keep in mind that structures found to be essential to perform the recited function will be found to be structures corresponding to the claimed means. Therefore, the specification should clearly delineate essential structure from nonessential structure.
Fame Is Not a Required Element Under State Dilution Statutes
By John Dabney
The Fifth Circuit has held that a plaintiff is not required to prove that its mark is "famous" to obtain relief under the dilution statutes of Texas and Louisiana. Advantage Rent-A-Car, Inc. v. Enterprise Rent-A-Car, Co., 2001 U.S. App. LEXIS 802 (5th Cir. Jan. 22, 2001).
Plaintiff owned the slogan "We’ll Pick You Up" for rental car services. Defendant used the slogan "We’ll Even Pick You Up" for the same services. Plaintiff asserted dilution claims under the federal dilution statute as well as the state dilution statutes of Texas and Louisiana. The District Court entered judgment in favor of defendant on all of the dilution claims, because plaintiff had failed to prove that its slogan was "famous."
On appeal the Fifth Circuit reversed in part and remanded. The court agreed that fame is required in order to prevail on a dilution claim under the federal law and affirmed the District Court’s finding that plaintiff’s mark did not meet that standard. However, the court held that fame is not required to prevail on a claim under either the Texas or Louisiana dilution statutes. Rather, the express terms of both of these statutes require only that plaintiff's mark is sufficiently "distinctive." As the court explained, "Although there seems to be no established difference between fame under the [federal dilution statute] and distinctiveness under the Texas and Louisiana statutes, principally because both are such nebulous standards, the substantive difference, if any, is one of degree." The court noted that in determining whether a particular mark satisfies the distinctiveness standard, state courts have considered those factors that bear on whether a mark is strong for purposes of likelihood of confusion analysis, e.g., whether the mark is inherently distinctive, the length of time the mark has been used, the nature and geographic scope of advertising featuring the mark, and the scope of the mark’s reputation. The court remanded the case to the District Court to determine whether plaintiff’s slogan was sufficiently "distinctive" to qualify for protection under the Texas or Louisiana statutes.
Practice Note: This case demonstrates the importance of alleging dilution claims under both the federal and applicable statute statutes when filing a complaint. In contrast to the federal dilution statute, under many state dilution statutes, a plaintiff is not required to prove that its mark is famous in order to obtain relief — it is enough that plaintiff prove that its mark was sufficiently "distinctive" before the defendant’s first use of the challenged mark in order to prevail.
In Rem and In Personam Jurisdiction Provisions of Anticybersquatting Consumer Protection Act Are Mutually Exclusive
By Carrie A. Shuffelbarger
Under the Anticybersquatting Consumer Protection Act (ACPA), a plaintiff cannot simultaneously maintain both an in personam cause of action against the registrant of a domain name and an in rem action over the domain name itself; the two actions are mutually exclusive under ACPA. Alitalia-Linee Aeree Italiane S.P.A. v. CasinoAlitalia.com and Technologica JPR, Inc., Civil Action No. 00-394-A, 2001 U.S. Dist. LEXIS 534 (E.D. Va. January 19, 2001).
Plaintiff Alitalia has used the mark ALITALIA in connection with its airline business since 1957. Defendant JPR, an entity registered under the laws of the Dominican Republic, registered the domain name casinoalitalia.com with Network Solutions Inc. (NSI) and used the domain name to host an online gambling website. Alitalia filed a complaint against JPR alleging, inter alia, trademark infringement, unfair competition and cybersquatting under ACPA. Alitalia moved for summary judgment, alleging that it could proceed concurrently both in rem against the domain name and in personam against JPR.
The court disagreed, holding that a mark owner may file an in rem cause of action only where the court finds that the owner of the mark either (i) is unable to obtain in personam jurisdiction over a defendant or (ii) through due diligence is unable to find a person who would have been a defendant under the in personam provision. Accordingly, either there is in personam jurisdiction over the defendant, in which event the in rem cause of action must be dismissed, or there is not in personam jurisdiction, in which case the plaintiff can proceed only against the domain name under ACPA.
Having determined that Alitalia could not proceed concurrently both in personam and in rem, the court analyzed whether personal jurisdiction was proper under the Virginia long-arm statute and constitutional due process. The court determined that by providing an interactive website accessible to Virginia consumers, JPR had committed a tortious act outside of Virginia that caused injury in Virginia, thereby bringing the conduct within the purview of the Virginia long-arm statute. The court also found that exercising in personam jurisdiction over JPR comported with due process because JPR purposefully directed its activities to Virginia and had transacted business through the site with at least five Virginia residents, thereby putting JPR on notice that it was purposefully directing its activities at Virginia. Accordingly, the court dismissed the in rem cause of action against casinoalitalia.com.
Public Policy of Enforcing Settlement Agreement Conceding Patent Validity and Enforceability Trumps Lear v. Adkins Challenge
By May Chan
The Federal Circuit barred a party to a settlement agreement from challenging the validity and enforceability of a patent, finding a strong public interest and policy in upholding and enforcing voluntarily settlement agreements. Flex-Foot, Inc. and Van L. Phillips v. CRP, Inc., Case No. 99-1489 2001 U.S. App. LEXIS 1432 (Fed. Cir. Feb. 2, 2001).
In 1989, Flex-Foot brought an infringement action against CRP, Inc., d/b/a Springlite regarding U.S. Patent No. 4,822,363 ("the ‘363 patent") for a prosthetic device. Springlite counterclaimed that the ‘363 patent was invalid. In March 1994, the parties settled and the action was dismissed with prejudice. The 1994 settlement agreement contained clear and unambiguous language that Springlite waived its right to any future challenges on the validity and enforceability of the ‘363 patent and required arbitration of any infringement claims.
In 1997, Flex-Foot filed an arbitration against Springlite alleging a different prosthetic foot device infringed the ‘363 patent. The American Arbitration Association found for Flex-Foot.
Springlite then filed a motion in a district court to vacate the arbitration award and consider an invalidity defense. The district court confirmed the arbitration award and enjoined Springlite from challenging the validity and enforceability of the ‘363 patent based on collateral estoppel.
The Federal Circuit affirmed that Springlite is estopped, on the basis of contractual estoppel, from challenging the validity and enforceability of the ‘363 patent. The Federal Circuit distinguished the case from the Supreme Court decision in Lear v. Adkins, 395 U.S. 653 (1969), stating that licensee estoppel is not contrary to public policy where a party has voluntarily entered into a settlement agreement containing clear and unambiguous language foregoing a right to future challenges. "Settlement agreements must be enforced if they are to remain effective as a means for resolving legal disagreements," the Federal Circuit concluded.
