Federal Circuit Vacates Permanent Injunction in Favor of Court-Imposed Running Royalty
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The U.S. Court of Appeals for the Federal Circuit recently addressed a multitude of issues and vacated an injunction against Abbott Laboratories while upholding in part a ruling that Abbott infringed an Innogenetics patent for detecting and classifying hepatitis C virus genotypes. Innogenetics, N.V. v. Abbott Laboratories, Case Nos. 07-1145, -1061 (Fed. Cir., Jan. 17, 2008) (Moore J.).
Innogenetics’ patent claims a method of genotyping hepatitis C virus (HCV) based on distinct genetic sequences that can be found in the 5 prime untranslated region (5’ UTR) of the HCV genome. Innogenetics sued Abbott, asserting that Abbott’s genotyping assay kits infringe its claims.
After the district court granted summary judgment of literal infringement and excluded proffered evidence regarding Abbott’s obviousness and anticipation defenses, it also granted a judgment as a matter of law (JMOL) that a prior art patent did not anticipate claim 1 of the ’704 patent and granted a permanent injunction, Abbott appealed. Innogenetics cross-appealed, challenging the district court’s JMOL overturning the jury verdict of willful infringement.
The Federal Circuit agreed with the district court’s construction of the claim limitation “detecting a complex as formed” as detecting the formation of probe-target complexes, regardless of whether the method detects the hybridized complex itself or through fluorescence emitted immediately after it is destroyed. As a result, the Court also affirmed the JMOL entered against Abbott for literal infringement, finding that Abbott had not raised any plausible arguments on appeal. The Court next concluded that the district court did not abuse its discretion in precluding Abbott’s expert’s testimony on obviousness which was vague, conclusory and did not offer any motivation for one skilled in the art to combine the particular references to practice the claimed method. The Court also found that the district court had not abused its discretion in denying Abbott a new trial on the issue of obviousness, even in the face of the lower court’s inaccurate preclusion order. Applying Seventh Circuit law, which requires a “miscarriage of justice” or a verdict that, on the record, “cries out to be overturned or shocks our conscience,” the Court found that Abbott had not offered a satisfactory explanation for waiting until the conclusion of trial to alert the court to the inaccurate order and only ordered speculation with regard to the evidence a new expert would have proffered. The Federal Circuit also affirmed the restriction placed on Abbott’s anticipation expert testimony because disclosure of an anticipatory prior art reference on the very last day of discovery had stripped Innogenetics of any meaningful opportunity to prepare a rebuttal.
However, the Court remanded for a new trial on the question of anticipation, finding that the lower court had improperly precluded Abbott’s anticipation expert testimony on the basis that the expert was using a different definition of “method of genotyping” when the meanings were the same except for semantic differences. As for the cross-appeal, the Court affirmed the grant of JMOL of no willful infringement, citing Seagate and the lack of “objective recklessness” in Abbott’s development and sale of its genotyping products. Finally, the Court noted that the reasonable royalties awarded to Innogenetics included an upfront entry fee that contemplates or is based upon future sales by Abbott in a long term market. The Court likened this running royalty to a “compulsory license” and vacated the district court’s grant of a permanent injunction prohibiting future sales of Abbott’s genotyping assay kits.
Absent Full Scope of Enablement, Broad Claims Fail
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Following two recent cases applying the doctrine requiring that broad claims be fully enabled by the specification, the U.S. Court of Appeals for the Federal Circuit again applied the doctrine, invalidating patent claims that had been broadly construed but not sufficiently enabled by the patent specification under 35 U.S.C. 112, ¶ 1. Sitrick v. Dreamworks, LLC, Case No. 07-1174 (Fed. Cir. Feb. 1, 2008) (Moore J.)
Inventor David Sitrick’s two patents involve substituting or integrating a user’s audio signal or visual image into a pre-existing audiovisual presentation. Sitrick sued the defendant movie producers and distributors for releasing DVDs that included the allegedly infringing product called “ReVoice Studio.” The district court granted the defendants’ summary judgment motion that all the asserted claims were invalid for lack of enablement. Sitrick appealed.
The Federal Circuit rebuffed Sitrick’s challenge to the broad claim construction because he had earlier convinced the district court to deny the defendants’ request to limit the claims to video games. Next, because of the broad construction, the Federal Circuit agreed with the district court that the asserted claims required that the technology be enabled for both video games and movies. Finally, assuming the application of the disclosed technology to video games was enabled, the Federal Circuit reviewed the district court’s analysis of the disclosure in regards to movies.
The “enablement requirement is satisfied when one skilled in the art, after reading the specification, could practice the claimed invention without undue experimentation.” Rather than assessing only whether the patent disclosure enables the accused device, this Federal Circuit reminded us that the analysis must consider the “full scope” of the invention for each of the asserted claims. Therefore, “a patentee who chooses broad claim language must make sure the broad claims are fully enabled.”
Here, Sitrick disclosed a “controller” system that receives, modifies and processes audiovisual signals in order to substitute or integrate a “user image” into the presentation. According to the defendants’ experts, identifying and extracting a particular character’s audio signal or visual image from a series of movie frames in order to substitute and integrate a “user image” requires different techniques than doing so in a video game, which instead contains programmatically rendered characters. Citing Sitrick’s lack of contradicting evidence, the Federal Circuit agreed with the district court’s conclusion that the scope of the claimed invention was not enabled (for movies) despite the written description of video game implementation.
Case Note: As this case illustrates, a broadly construed claim coupled with a narrow disclosure creates a high risk of invalidation. As other recent Federal Circuit decisions have also demonstrated, the ramifications of the full scope of enablement doctrine must be considered during both patent prosecution and during claim construction litigation strategy. See, e.g., Auto. Techs. Int’l, Inc. v. BMW of N. Am., Inc., (IP Update, Vol. 10, No. 9) (claim covering both mechanical and electrical sensors was not enabled by disclosure of only mechanical sensor); Liebel-Flarsheim v. Medrad, (IP Update, Vol. 10. No. 4) (claim covering two types of needle holders was not enabled by description of only one of the needle holders).
And So It Starts … Federal Circuit Orders En Banc Review of Bilski
By Paul Devinsky
In a 9-3 decision, the U.S. Court of Appeals for the Federal Circuit denied a petition to review its decision, handed down in In re Nuijten (IP Update, Vol. 10, No. 10), the dissenting judges noting that the law surrounding § 101 is in a “conflicted” state. In re Nuijten, Case No. 06-1371 (Fed. Cir., Feb. 11, 2008) (per curiam) (Linn, J.; Newman, J.; Rader, J., dissenting). Soon after, the Federal Circuit, sua sponte, ordered en banc consideration of another pending appeal from the U.S. Patent and Trademark Office on § 101. In re Bilski, Case No. 07-1130 (Fed. Cir., Feb. 15, 2007) (per curiam).
Writing for the three dissenting judges in Nuijten, Judge Linn argued that prior CCPA precedent forecloses the majority’s conclusion, “that something ‘transient’ or ‘fleeting’ cannot constitute a ‘manufacture’ under 35 U.S.C. § 101.” The dissent also argued that the majority holding conflicts with the Supreme Court decision of Diamond v. Chakrabarty, “holding that patentable subject matter includes ‘anything under the sun that is made by man’” save for the law of nature, physical phenomena and abstract ideas.
The dissent also wondered about how the majority holding would affect the relationship between § 101 and § 103: “[i]n this case, we affirm the PTO’s rejection of claims to a signal simpliciter, but the PTO has allowed a claim to a storage medium containing the very same signal, on the grounds that the storage medium is a manufacture that can be rejected, it at all, only under some provision other than § 101. In particular, the PTO considers the patentability of such claims under the ‘printed matter’ doctrine of § 103.”
In the view of the dissent “[t]hese distinctions make no practical sense and are poorly supported by precedent, which, to the contrary, requires a more holistic approach to the question of whether a claim is directed only to an unpatentable abstraction or whether it is directed to a patentable application of such an abstraction to an otherwise statutory invention.”
A scant four days later, the en banc Federal Circuit sua sponte ordered en banc review of the pending appeal in Bilski, asking the parties to brief the following five questions:
1. Whether … [Bilski’s patent application] claims patent-eligible subject matter under 35. U.S.C. § 101?
2. What standard should govern in determining whether a process is patent-eligible subject matter under § 101?
3. Whether the claimed subject matter is not patent-eligible because it constitutes an abstract idea or mental process; when does a claim that contains both mental and physical steps create patent-eligible subject matter?
4. Whether a method or process must result in a physical transformation of an article or be tied to a machine to be patent-eligible subject matter under § 101?
5. Whether it is appropriate to reconsider State Street Bank & Trust Co. v. Signature Financial Group, Inc. and AT&T Corp. v. Excel Communications, Inc., in this case and, if so, whether those cases should be overruled in any respect?
The Bilski application claim in issue is directed to a method of managing the risk of bad weather through commodities trading; it does not claim or require a computer or storage media.
The Federal Circuit has requested only one supplemental brief from each party to be filed simultaneously on March 6, 2008. Amicus briefs may be filed without leave of court and are due 30 days later. The order sets the case for re-hearing on May 8 at 2:00 p.m. It should be standing room only.
It would seem likely that many of the amicus briefs filed in the Supreme Court in the case of LabCorp v. Metabolite (IP Update, Vol. 9, No. 6) (dismissed, after oral argument, as cert having been improvidently granted) will be recycled here.
Practice Note: Although business method patents have been ubiquitous for the 10 years since the Federal Circuit handed down its State Street decision, in the past several years there have been rumblings about the holding from the Supreme Court on at least three separate occasions: eBay, Inc. v. MercExchange, (IP Update, Vol. 9, No. 5), LabCorp v. Metabolite, (dissent, IP Update, Vol. 9, No. 6) and Microsoft v. AT&T (IP Update, Vol. 10, No. 5).
Narrow Claim Construction Goes Down the Drain
By Paul Devinsky
Reversing a summary judgment of non-infringement based on a claim construction that excluded a disclosed embodiment, the U.S. Court of Appeals for the Federal Circuit, finding no disclaimer or estoppel during prosecution, vacated the district court claim construction and remanded the case. Oatey Co. v. IPS Corp., Case No. 07-1214 (Fed. Cir., Jan. 30, 2008) (Newman, J.).
The patented invention concerns washing machine outlet boxes to collect hoses for the input and output water flow of washing machines. Oatey’s patent is directed to an outlet box easily installed in a wall during building construction that accommodates two output drain ports and that has a “tailpiece” to collect the effluent from these ports and release it into a single drain pipe. Prior outlet boxes required that the installer perform several welds to join separate drain pipes from the drain ports into a single pipe below the outlet box.
As described in the preferred embodiments, the tailpiece may be integrally formed with the bottom wall or welded to the bottom wall of the box. In either event, the tailpiece contains two fluid passageways that feed into a drain pipe. The patent drawings also illustrate an alternate embodiment in which instead of two fluid passageways, two juxtaposed drain ports are separated only by a dividing wall. The Oatey claims recited “first and second juxtaposed drain ports” in the bottom wall.
The district court construed this clause to require “two separate identifiable physical elements that are adjacent or near each other,” thus excluding the alternate disclosed embodiment where a single opening was divided by a wall in the tailpiece. Oatey stipulated it could not meet its burden of proving infringement on this claim construction and appealed.
The Federal Circuit, after string citing a line of cases for the proposition that “[w]e normally do not interpret claim terms in a way that excludes embodiments disclosed in the specification,” went on to note that there was no “disclaimer or estoppel during prosecution, as would preclude recovery of such lost scope” and that the patent specification “explicitly” stated that the opening in the bottom wall of the box, in conjunction with the tailpiece, “may itself define the drain ports.” Thus, the Federal Circuit reversed, concluding that “where claims can reasonably be interpreted to include a specific embodiment, it is incorrect to construe the claims to exclude the embodiment, absent probative evidence on the contrary.”
Wilson Strikes Out: No Such Thing as Equivalents as a Whole
By Paul Devinsky
The patent in question, making its third appearance at the plate (i.e., at the U.S. Court of Appeals for the Federal Circuit) resulted (this time) in a ruling that absent element-by-element equivalents, there can be no infringement by equivalents. Miken Composites v. Wilson Sporting Goods, Case No. 06-1628 (Fed. Cir., Feb. 6, 2008) (Linn, J.)
Wilson is the owner of a patent that relates to the use of structural members inside bats to improve their impact response. The parties’ contentions regarding infringement revolved around two claim limitations: an “insert” positioned within a bat frame and a “gap” between the insert and the bat frame.
Several of the accused bats were conceded to contain “inserts” within the meaning of the claim language. Others, carbon bats manufactured using a successive layering process, were argued by Miken not to contain the claimed insert. For either construction, Miken argued that there was no “gap” between the bat frame and insert (if any).
The district court concluded that the layered construction carbon bats did not infringe because they did not have an insert and that the other (non-layered) bats did not infringe because there was no “gap” or “space sufficient to allow contact upon elastic deflection.” Wilson appealed.
The Federal Circuit, citing to its own prior consideration of the same patent in DeMarini Sports, held that the claimed insert was “anything put or fit into something else” and that “the bat frame, which includes the impact portion and the handle, completely surrounds and is separate from the ‘insert.’”
Despite that construction, Wilson nevertheless argued that it does not matter whether an insert is placed into a pre-existing frame or whether a frame is built around it. The Federal Circuit knocked that one out of the park, noting that the patent uses the term “‘insert’ in the sense of its ordinary meaning as something inserted or intended for insertion,” and that Wilson’s contention not only “ignores” the ordinary and customary meaning of the term “insert”, but moreover, violates the principles articulated in Phillips by attempting to broaden “the ordinary meaning of a term in the absence of support in the intrinsic record indicating that such a broad meaning was intended.”
On the issue of infringement of the carbon bats, Wilson relied upon its expert’s “load deflection tests” that established that the layers of the carbon bats were capable of independent movement. The Court slammed the bat on that argument as well, agreeing with the district court “that these tests demonstrate, at most the equivalency of the accused products as a whole … and that Wilson has not provided any factual basis or expert testimony to support an objective inquiry on an element-by-element basis.”
As for the non-layered bats that do contain “inserts,” the district court held that they did not infringe because they did not contain a “gap” or separation between the insert and impact portion, notwithstanding Wilson’s microscopy evidence that revealed “irregular and sporadic” separations that were “intermittent and discontinuous in nature.” To the contrary, the district court held that because the non-layered bats were designed to maintain an interference fit between the insert and impact portion there was no gap or separation as the claim requires.
Before the Federal Circuit, Wilson contended that the “real invention” of the patent is a bat comprising a frame and an insert which “yield a mechanical system with characteristics similar to a leaf-spring,” and that its load deflection tests show that the microscopic voids permit sufficient independent movement between the bat frames and inserts to yield such characteristics and to satisfy the “gap” limitation.
Once again Wilson struck out. The Federal Circuit held that “the undisputed presence of intermittent and intimate contact throughout the interface between the impact portion and the inserts of the bats, precludes a finding of infringement, because there is substantial contact inherent in bats where separations are intermittent and discontinuous or irregular and sporadic” (emphasis in original). The Court also held that even if the load deflection test demonstrate the existence a leaf spring characteristics in the accused bats, it does not establish the existence of the claimed gap.
Loading New Genetic Data on an Old Computer Not Sufficient to Make System Patentable
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The U.S. Patent and Trademark Office’s Board of Patent Appeals and Interferences (BPAI) affirmed an examiner’s rejection of the claims of U.S. App. Ser. No. 09/563,817 (the ’817 application) as both lacking utility under 35 U.S.C. §101 and non-obviousness under 35 U.S.C. §103. The ’817 application claimed computer-based systems of screening gene fragments and, as such, the BPAI’s decision spoke both to the patentability of biotechnical and software/database inventions. Ex parte Nehls et al., Appeal No. 07-1823, (BPAI), (Jan. 28, 2008) (Grimes, APJ; Green, APJ and Adams, APJ, concurring-in-part).
The claim at issue before the BPAI was directed at a computer-based system for identifying DNA fragments of the genome comprising a data storage means having about 1,000 DNA gene-trapped sequences (GTSs), a searching means for comparing a target sequence to each GTS in the storage means and a retrieval means for obtain the GTS homologous to the target sequence. The BPAI held that the utility of the claimed system depended on the utility of the GTSs because if the sequences lacked utility, then so did a system for identifying them.
The BPAI held that the GTSs disclosed by Nehls et al. were gene fragments not accompanied by a persuasive explanation that they were anything other than research intermediates or had any uses that distinguished them from any other human gene fragment. As such, the claimed system did not have substantial or specific utility similar to the expressed sequence tags (ESTs) in the Federal Circuit’s utility decision in In re Fisher.
The BPAI also upheld the examiner’s rejection of the claimed system as obvious over Altschul et al.—a well-known reference describing the popular computer DNA sequence analysis software referred to as the Basic Local Alignment Search Tool (BLAST). Even though the claimed system specifically required a data storage means comprising 1000 unique GTSs not disclosed in Altschul, the examiner argued that the content of the data storage means does not alter how the claimed BLAST-like computer system functions. As such, the examiner reasoned that this claim recitation merely provided “non-functional descriptive material.”
The BPAI indicated that the relevant case law for this analysis stemmed from cases and computer-related inventions involving “printed matter,” which must be functionally related to the substrate on which it is printed to provide patentable weight. For “data structures” to patentably distinguish computer-related inventions, they must be functionally related to the computer’s operation.
In applying the law to the ’814 application, the BPAI held that the 1,000 unique GTSs did not affect, enhance or otherwise change the process of comparing a target sequence to a database of other sequences as shown by Altschul. The BPAI opined that the claimed data storage means comprising 1,000 unique GTSs and the computer system were independent of one another. The BPAI also opined that a claim to a computer system for searching a phone book placed in a database or a database of MP3s would similarly not be patentable absent some novel and non-obvious characteristic of the computer hardware or search tools. The BPAI was further unconvinced by Nehls et al.’s arguments that the claimed 1,000 GTSs are limiting functional descriptive material because nucleic acids are patentable. The BPAI countered that although nucleic acids are patentable, their digitized sequence or “abstract representation” in a database as claimed, is not.
Convoyed Sales and Acceptable Substitutes
By Shon Lo
Addressing the issue of lost-profit damages, the U.S. Court of Appeals for the Federal Circuit upheld the functional relationship test for convoyed sales and clarified what is an acceptable substitute under Grain Processing. American Seating Co. v. USSC Group, Inc., Case Nos. 07-1112, -1135 (Fed. Cir. Jan. 29, 2008) (Mayer J.).
American Seating owns U.S. Patent No. 5,888,038, directed at a wheelchair restraint system for securing wheelchairs to a mass transit vehicle that can be unobtrusively stored when no wheelchairs are present. American Seating filed suit in the Western District of Michigan against USSC for patent infringement. The two USSC’s devices at issue were the VPRo I and the VPRo II. The district court held that the VPRo I infringed, but the VPRo II did not. The jury awarded lost-profit damages totaling approximately $2.3 million. The lost-profit damages included diverted collateral sales of accompanying passenger seats sold with the infringing restraint system, as well as lost sales from bait-and-switch offers to sell the VPRo I, but delivering the VPRo II. The trial court set aside damages awarded for the portion of the verdict relating to convoyed sales, thereby reducing the overall award to $676,850.
On appeal, the Federal Circuit upheld the trial court’s ruling on convoyed sales and determined that the jury properly awarded damages for lost profits for USSC’s bait-and-switch sales of the non-infringing VPRo II. A “convoyed sale” refers to the relationship between the sale of a patented product and a functionally associated non-patented product. The Federal Circuit found that a patentee may recover lost profits on convoyed sales in cases where unpatented components are sold with a patented item if both the patented and unpatented products “together were considered to be components of a single assembly or parts of a complete machine, or they together constituted a functional unit.” The Court emphasized that an inherently functional relationship between the patented and unpatented components is required. According to the panel, American Seating failed to establish a functional relationship; the restraint system operated independently of the passenger seats, and customers purchased the two together for convenience only. Thus, it was proper to set aside damages for convoyed sales of the seats.
The Court also found that American Seating was entitled only to receive lost-profit damages from sales in which USSC employed a bait-and-switch tactic by first offering to sell the VPRo I and then substituting the non-infringing VPRo II. The court held that presence of a non-infringing replacement product does not preclude lost-profit damages in all circumstances. Rather, the infringer must show all purchasers viewed the replacement product as equivalent to the patented device for it to be considered an acceptable substitute under Grain Processing. Here, the evidence presented was sufficient to support the jury’s conclusion that the VPRo II was not an acceptable substitute to all purchasers. Therefore, including in the lost profits the sales from USSC’s infringing offers to sell the VPRo I was appropriate.
The Words “A” or “An” Do Not Always Mean “One or More”
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The U.S. Court of Appeals for the Federal Circuit, in affirming a jury verdict of infringement and a damages award of close to $74 million, considered a variety of claim construction issues and held, among other things, that the word “an” in one of the claim limitations should be construed to be singular and not plural. TiVo Inc. v. EchoStar Communications, Case No. 06-1574, 2008 U.S. App. LEXIS 2073 (Fed. Cir., Jan. 31, 2008) (Bryson, J).
Less than 10 years ago, TiVo’s time-shifting digital recording technology became a “must have” digital TV accessory and became widely imitated. In 2004, TiVo sued EchoStar, accusing its DVRs of infringing both hardware and software claims. The jury ultimately found literal infringement of both types of claims and awarded TiVo a total of $74 million in damages. The district court issued a permanent injunction against EchoStar; but that injunction was stayed by the Federal Circuit pending appeal.
The appeal involved a plethora of claim construction issues. Digging deep into the district court claim construction rulings, the Federal Circuit affirmed the judgment of infringement of the software claims, but reversed the judgment of infringement for the hardware claims. Since the damages calculation at trial was not predicated on the infringement of particular claims, and because the Court upheld the jury’s verdict that all of the accused devices infringed the software claims, the Court affirmed the damages award and ordered that the stay of the injunction be lifted.
A particularly interesting claim construction issue centered on the “assembles” limitation found in the hardware claims. To support its non-infringement argument, EchoStar argued that “assembles” limitation covers only an assembly of audio and video components into a single, interleaved MPEG stream. It argued that the accused DVRs do not infringe the hardware claims because they do not assemble audio and video components into a single interleaved MPEG stream, but instead assemble the audio and video streams into two separate MPEG streams. TiVo argued that the Echostar DVRs still infringed because the limitation “an MPEG stream” should be interpreted to mean “one or more MPEG streams.”
Citing Baldwin Graphic Sys. v. Siebert, the Federal Circuit noted that as a general rule, the words “a” or “an” in a patent claim carry the meaning of “one or more.” The Court noted, however, that whether “a” or “an” is treated as singular or plural depends heavily on the context of its use. The Court said that the general rules do not apply when the context clearly evidences that the usage is limited only to the singular. In this case, the Court found that the language of the claims and the written description make clear that the singular meaning should apply. The Court reasoned that when read in context of earlier and later claim limitations, it was clear that the patent contemplated a single MPEG stream. The Court also noted that while the open-ended claim term “comprising” is used to refer generally to the limitations of the hardware claims, the “assembles” limitation itself does not contain that term. Rather, the claim language simply refers to the assembly of two components into “an MPEG stream.”
Definite Trouble for Functional Claim Constructions
By Anish Desai
Addressing the issue of claim term definiteness, the U.S. Court of Appeals for the Federal Circuit affirmed the district court’s decision that the claims of the patent-in-issue were invalid for failing to meet the requirements of 35 U.S.C. § 112 ¶ 2. Halliburton Energy Services, Inc. v. M-I LLC , Case No. 07-1149 (Fed. Cir., Jan. 25, 2008) (Michel, J.).
The plaintiff, Halliburton Energy Services, was the assignee of U.S. Patent No. 6,887,832 (the ’832 patent), which relates to drilling fluids used in oil fields. The district court granted summary judgment in favor of the defendant, M-I LLC, holding claims of the ’832 patent invalid as indefinite based on the use of the term “fragile gel.” Halliburton conceded that the claimed drilling fluids were limited to “fragile gels,” and offered a three-part construction of the term. A “fragile gel” easily transitions between liquid and gel state upon introduction or removal of force, is capable of suspending drill cuttings and contains little or no organophilic clay or lignite. The Federal Circuit addressed this three-part construction and the ruling of indefiniteness of “fragile gel.”
The Court found the third part of the Halliburton’s construction, regarding clay and lignite, improper since the specification clearly stated that this was “preferable.” The first and second parts of Halliburton’s construction came directly from the specification; however, the Court argued that simply because an articulated definition can be found in the specification does not mean the construction meets the definiteness requirement. The Court rejected Halliburton’s argument that an evaluation of definiteness cannot include whether the patent expressly or clearly differentiates itself from specific prior art. The specification of the ’832 patent stated that Figure 3 distinguished the fluids of the invention from prior art fluids, and therefore, the Court found that a person of ordinary of skill would have looked to the figure to determine the bounds of the claims. Halliburton’s admission that one type of prior art fluid disclosed the same features as the fluid of the present invention was “fatal” to its claim, since no limit was placed on what was invented beyond the prior art. With regard to second part, Halliburton argued that the definition “is capable of” meant “adequate for the circumstances.” The Court found that a skilled artisan would not be able to determine what was within the scope of the claims since a wide variety of factors could affect adequacy.
In conclusion, the Court noted that both the first and second part of Halliburton’s construction of “fragile gel” were purely functional definitions (i.e., “defined by what it does rather than what it is”). The Court found that when a claim limitation is defined purely in functional terms, the task of determining whether the limitation is sufficiently definite is highly dependent on context and invited patent drafters to resolve ambiguities in functional limitations by using quantitative metrics rather than qualitative features.
TriMed Strikes Out Stryker Before Federal Circuit
By Todd Hales
Even though the claim recited the absence of structure, or a hole, the U.S. Court of Appeals for the Federal Circuit found the claim language articulated sufficient structure to perform the recited functions, fell outside the ambit of § 112 ¶ 6 and required a construction that presented a genuine issue of material fact as to infringement. TriMed, Inc. v. Stryker Corp., Case No. 07-1327 (Fed. Cir., Jan. 29, 2008) (Moore, J.).
TriMed owns U.S. Patent No. 5,931,839 (the ’839 patent) directed to implantable devices for fixing bone fractures using screws, pins and a plate. The plate has holes on one end for receiving the screws and on the other end for receiving the pins. In one embodiment of the ’839 patent, the bone fracture is secured by placing the plate over the fracture, extending from a stable bone to the fractured bone fragment. The screws are inserted through the holes on the one end to secure the plate to the stable bone, and the pins are inserted through the holes on the other end at an angle so that, when the pins are inserted through the bone, the pins extend through the fractured bone fragment, traverse the fracture and extend into the stable bone. Stryker manufactures and sells wrist fracture fixation devices that operate in essentially the same manner and with essentially the same structure as that described in the ’839 patent.
Claim 1 states in part, “said holes in said plate providing means for allowing the pin to slide axially therein but preventing compression across the fracture, and stabilizing said near end of the pin against displacement in the plane of the plate.” The district court found this claim language invoked § 112 ¶ 6 and should be construed to require the holes in addition to another structure that performs the two recited functions of allowing the pin to slide and stabilizing the near end of the pin. Because the Stryker device did not include another structure that performed the recited functions, the district court granted Stryker’s motion for summary judgment of non-infringement.
On appeal, Stryker argued that the prosecution history supported a means-plus-function construction of the claim and required an additional structure to perform the recited functions. In an interview summary during prosecution of the ’839 patent, TriMed stated that agreement was reached that recitation in the claim of the functions “in a means-plus-function format and better defining the holes of the plate would distinguish over the prior art.” TriMed subsequently amended Claim 1 to include the disputed claim language, which included a recitation of the term “means” in conjunction with the two recited functions.
Notwithstanding the above correlation between the interview summary and the amended claim language, the Federal Circuit disagreed that the language should be governed by § 112 ¶ 6. The Court explained that stating “use of means-plus-function language would help overcome prior art does not magically transform language that clearly does not meet our legal tests for § 112 ¶ 6 into means-plus-function language.” The Court stated that, while the term “means” was used in the claim amendment, the remarks accompanying the amendment indicated that TriMed “intended for holes by themselves to constitute structure sufficient” for performing the recited functions. The Court further noted that TriMed submitted two declarations supporting the assertion that the functions could be performed solely by the holes. Based on this new construction of the claims, the Court reversed the district court’s grant of summary judgment and remanded the case to the district court for further proceedings.
Practice Note: It is noteworthy that the Court placed such an emphasis on the remarks accompanying the amendment. Notwithstanding the strong correlation between the statement in the interview summary and the amended claim language, the Court gave significant weight to the self-serving remarks. This case serves to remind us that such statements can sometimes be at least partially influential.
Inequitable Conduct Extendible to Patents No Longer in Suit
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The U.S. Court of Appeals for the Federal Circuit affirmed a district court judgment holding several patents unenforceable due to inequitable conduct. Monsanto Co. v. Bayer Bioscience N.V., Case No. 07-1109, (Fed. Cir., Jan 25, 2008) (Gajarsa, J.).
Monsanto brought a declaratory judgment action against Bayer Bioscience challenging the validity and enforceability of four Bayer patents, U.S. Patent Nos. 5,545,565 (the ’565 patent), 5,767,372 (the ’372 patent), 6,107,546 (the ’546 patent) and 5,254,799 (the ’799 patent), which related to Monsanto’s transgenic corn products involving chimeric Bacillus thuringiensis (Bt) genes. The court granted summary judgment finding unenforceability due to inequitable conduct. The Federal Circuit vacated and, on remand, Bayer dismissed all claims with respect to the ’799, ’372 and ’546 patents leaving only the ’575 patent in suit. Following a bench trial, the court ultimately held all four patents unenforceable for inequitable conduct.
The district court’s inequitable conduct finding was based on the actions of Dr. Meulemanns, the Bayer representative who prosecuted the patents at issue. During prosecution of the ’565 patent, an obviousness rejection was issued based on an abstract submitted by Bayer. Dr. Meulemanns overcame the rejection, arguing that the abstract failed to teach the claimed genes. The abstract was obtained during a poster session attended by Dr. Mariani, a Bayer scientist who had taken detailed notes pertaining to the substance of the poster. Dr. Mariani recalled detailed information regarding the substance of her notes and testified that the notes in effect, taught the genes of the ’565 patent. She further testified that the notes had been disseminated to Dr. Meulemanns and his group. Dr. Meulemanns testified that he spoke with Dr. Mariani about the poster, but asserted that she did not remember “anything” about the presentation. The district court found this explanation to lack credibility, particularly in light of Mariani’s ability to testify with clarity and detail about the contents of the notes during her deposition. The district court found the notes to be material to patentability, both under the “reasonable examiner” test and because they would have established a “prima facie case of unpatentability.” Skeptical regarding Dr. Meulemanns’ testimony, the district court found the requisite intent to deceive the U.S. Patent and Trademark Office (USPTO).
On appeal, Bayer argued that the district court erred in finding the ’565 patent unenforceable and that it lacked jurisdiction to rule on the ’799, ’372, and ’546 patents. The Court affirmed the materiality of the Mariani notes because they in fact, taught the genes of the ’565 patent. Moreover, the Court held that absent a credible reason for Meulemanns to have not understood the content of Mariani’s notes after having discussed them with Mariani, the district court did not clearly err in inferring the requisite intent. On the issue of jurisdiction, the Court reiterated its position in Nilssen and held that since the court maintained jurisdiction in the case under rule 285, it was likewise sanctioned to rule on the issue of inequitable conduct for the patents no longer in suit.
English Court Confirms Claims to Computer Program Claims Are Patentable Subject Matter
Contact Paul Devinsky
The English High Court has now handed down a decision which moves the UK position on software claims back into line with that of the European Patent Office (EPO) and other mainland European Agencies. This decision makes clear that claims to computer programs are allowable in the UK, provided they meet the general requirements for patentability. Further, such claims are irrespective of whether or not the code is defined as being recorded on a carrier. Astron Clinica Limited and others v. The Comptroller General, 2008 EWHC 85 (Pat), (Jan. 25, 2008).
The decision deals with a number of consolidated appeals from the United Kingdom Intellectual Property Office (UKIPO). The cases in question relate to software for various applications, ranging from controlling laser printers to drug discovery. However, all cases had in common the fact that claims directed to computer programs on a suitable carrier had been rejected by the patent office for falling into an excluded category of subject matter (equivalent to a non-statutory subject matter rejection under 35 U.S.C. § 101 in the United States). These rejections had occurred despite the fact that the corresponding method and apparatus claims were allowed. The essential question was therefore whether claims directed to computer programs could be granted in the UK.
Significantly, the judge noted that software products tended to be distributed via internet download or via a compact disk bearing the code. Without the ability to protect this type of product using computer program claims, infringements could only be pursued via contributory infringement (secondary infringement). Worse still, the Court reasoned that there would be little or no protection against production and sale of an infringing product intended for use overseas. This was unacceptable in his view.
The Court acknowledged the importance of avoiding different interpretations of the provisions of the European Patent Convention between the EPO and National Courts and the highly persuasive authority of the EPO Boards of Appeal. In this case, the judge felt obliged to follow the widely reported four-step test articulated in the Aerotel decision, although this did allow him to arrive at a situation broadly in line with EPO case law on claim format. (See Aerotel v. Telco, Macrossan’s Application  EWCA Civ 1371.)
Practice Note: Specifications destined for filing in Europe, and particularly the United Kingdom, may now include claims directed to a computer program, i.e., to the software itself as well as to the software recorded on the carrier, as well as, of course, conventional method and apparatus claims.
A Creative Look at Proving Infringement
Contact Paul Devinsky
The U.S. Court of Appeal for the Federal Circuit reiterated its position on calculating damages in patent infringement suits using a multi-factor “reasonable royalty” equation and explicitly affirmed its precedent that the “statutes specifically authorizing the patenting of plants did not eliminate the availability of utility patent protection covering plants.” Monsanto Co. v. David, Case No. 07-1104 (Fed. Cir., Feb. 5, 2008) (Lourie, J).
The facts of this case were similar to those in Monsanto v. McFarling The defendant, Loren David, is a commercial farmer, who—as part of an agreement to purchase and license Monsanto’s patented, genetically modified soybean seeds—was required, among other things, to only use the seeds for planting that particular season. Through circumstantial evidence, Monsanto showed that David had violated the terms of his agreement. The district court held that David had willfully infringed Monsanto’s patent and granted the plaintiff, in addition to the reasonable royalty base, enhanced damages including attorneys’ fees and costs.
On appeal, David first argued that that Monsanto’s patent, which claimed a genetic sequence, could not be infringed by saving and planting seeds containing that gene. Specifically, he claimed that the Plant Patent Act of 1930 and the Plant Variety Protection Act of 1970 extinguished the right to patent a plant by any other means. The Court dismissed this argument out of hand, stating that “the broad language of 35 U.S.C. § 101 relating to patentable subject matter remains unmodified by the existence of the P.V.P.A. and the P.P.A.”
Monsanto pieced together a story of David’s activities using, in addition to expert testimony, a wealth of circumstantial evidence that tracked David’s purchases and planting dates to infer that he had infringed. David attempted to have the testimony of Monsanto’s expert, Koppatschek, excluded based upon the fact that his opinion had been based on testing results assembled by the plaintiff. The Court found David’s arguments challenging Koppatschek’s reliance on the seed report tests solely because they were produced by Monsanto’s scientific team rather than by Koppatschek himself misplaced and unpersuasive. The Court also found David’s inconsistent and unsubstantiated claims about his planting procedures insufficient to rebut Koppatschek’s conclusions and Monsanto’s proposed timeline of events.
David also contested the district court’s award of a reasonable royalty, attorneys’ fees and costs asserting three things: that this is not an exceptional case; that the licensing agreement provision explicitly granting an award of attorneys’ fees is not enforceable; that the monetary amount of the award issued “does not bear a reasonable relation to the result achieved.” The Court found all of David’s arguments to be unpersuasive, affirming the enforceability of Monsanto’s licensing agreement and deeming David’s “deceitful” litigation tactics and his “apparent disregard for patent right … and the judicial process” as sufficient to affirm the district court’s finding of an exceptional case.
Practice Note: As a reminder to potential defendants, the Court seemed to imply that David might have had more success in undermining Monsanto’s claims had he formulated a more appropriately stated Daubert motion, focusing on the scientific basis of Monsanto’s expert opinion, instead of the origin of the data that underlay the report.
Ninth Circuit Gives Copier Leasor Second Shot at Lanham Act Claims
By Paul Devinsky
The U.S. Court of Appeals for Ninth Circuit reversed the F.R.Civ. Pro. 12(b)(1) dismissal of a complaint alleging false statements and antitrust violations, finding that the factual allegations, if taken as true, would support the Lanham Act and Sherman Act claims. Newcal Industries Inc. v. IKON Office Solutions, Case No. 05-16208 (9th Cir., Jan. 23, 2008) (Thomas, J.).
Newcal and IKON compete to lease name-brand copier equipment to commercial customers and to provide service contracts for the maintenance of such equipment during the lease term. Newcal filed suit, alleging that IKON was engaging in a scheme to defraud IKON customers by amending their customers’ lease agreements and service contracts without disclosing that the amendments would lengthen the term of the original agreement. Newcal alleged antitrust violations under the Sherman Act, false advertising under the Lanham Act and racketeering under RICO; it sought declaratory judgment that IKON’s fraudulently procured contracts were invalid.
The district court dismissed Newcal’s declaratory judgment action, but permitted it to amend the other claims. After Newcal filed an amended complaint, IKON again moved to dismiss for failure to state a claim. The district court dismissed the complaint, concluding that Newcal had failed to allege a legally cognizable “relevant market” under the Sherman Act, that it had failed to allege any false statement of fact under the Lanham Act and that it had failed to meet RICO standing requirements. Newcal appealed.
The Ninth Circuit reversed, finding that if all facts alleged in the complaint are assumed to be true, Newcal had pled sufficient allegations to support its claims. As for Newcal’s Lanham Act claims (for false and misleading statements), the Court articulated the elements necessary to state a prima facie case under § 43(a) for false or misleading description or representation of fact in commercial advertising or promotion that misrepresents the nature, characteristics or qualities of the person’s goods, services or commercial activities:
a “prima facie case requires a showing that (1) the defendant made a false statement either about the plaintiff’s or its own product; (2) the statement was made in commercial advertisement or promotion; (3) the statement actually deceived or had the tendency to deceive a substantial segment of its audience; (4) the deception is material; (5) the defendant caused its false statement to enter interstate commerce; and (6) the plaintiff has been or is likely to be injured as a result of the false statement, either by direct diversion of sales from itself to the defendant, or by a lessening of goodwill associated with the plaintiff’s product.”
After examining the statements that Newcal alleged were false or misleading, the Ninth Circuit agreed with the district court that the while certain statements were mere “puffery” (generalized, unquantified, non-specific and subjective statements unlikely to induce consumer reliance), other (quantified) statements, e.g., IKON “deliver 95% up-time service in their IKON Contracts” did present factual questions and that if the statement was false at the time it was made, it does provide sufficient basis to survive a Rule 12(b)(6) motion.
Similarly, the Ninth Circuit found Newcal’s allegations regarding IKON’s contract extension clauses (i.e., that IKON knew at the time that it offered the service contracts covered in the complaint that it would be fraudulently extending the original contracts beyond their initial 60-month term), the statement could be intentionally misleading.
As for Newcal’s antitrust claim alleging that IKON possessed market power in the replacement-equipment and service aftermarkets for companies that had leased IKON equipment, IKON moved to dismiss, relying, among other things, on a line of cases holding that a contractually created group cannot constitute a relevant market. The Ninth Circuit reversed, holding that a relevant market under the Sherman Act can consist of a contractually created submarket for replacement equipment and service for customers of a single manufacturer’s product.
Following the reasoning of Eastman Kodak v. Image Technical Services, the Ninth Circuit held that Newcal’s complaint raised factual questions as to the existence of the alleged submarket consisting of only IKON customers because IKON was not merely enforcing a contractual provision, but “exploiting its unique position—its unique contractual relationship—to gain monopoly power in a derivative aftermarket in which its power is not contractually mandated.”
Practice Note: This decision underscores the limitations of motions to dismiss, where the burden for a defendant is high. Here the Ninth Circuit upheld the complaint on the antitrust claim as it had to accept as true all of the allegations made in the complaint. Perhaps a better strategy would have been to move for summary judgment after a record on Newcal’s factual allegations had been developed.
Trademark Owner’s Ability to Stop Repackaging of Authentic Goods Remains Limited
By Robert W. Zelnick and Sarah Brown
Addressing the reach of the Supreme Court’s landmark Coty decision, the Fifth Circuit upheld a grant of summary judgment to defendants who repackaged plaintiff’s products with a disclaimer, holding that there was no issue of material fact and that the packages “cannot cause confusion.” Farouk Systems, Inc. v. Target Corp. Inc., Case No. 06-20883; 2008 U.S. App. LEXIS 1225 (5th. Cir., Jan. 2008) (per curiam).
Defendant Pro’s Choice Beauty Care combined bottles of Farouk’s BIOSILK hair-care products into boxed sets for sale by Target. The plaintiff’s products were visible through a front cut-out, and the BIOSILK mark appeared on all sides of the packaging. A disclaimer appeared on the back panel, in type size significantly smaller than the BIOSILK mark. The disclaimer stated that the original product had been repackaged and distributed by Pro’s Choice, which was unrelated to and not licensed by the trademark holder, and that Pro’s Choice assumed full responsibility for the product and the package. Farouk brought federal and state trademark claims against Target and Pro’s Choice. The defendants were granted summary judgment, and Farouk appealed.
In an unpublished decision, the Fifth Circuit affirmed the grant of summary judgment for defendants. The Court began by noting that while likelihood of confusion is a question of fact in the Fifth Circuit, summary judgment is still appropriate if there is no material fact issue and the movant is entitled to judgment as a matter of law. Farouk first argued that summary judgment was inappropriate because it had not had an opportunity to conduct discovery or obtain expert survey evidence. The Court disagreed, saying a party cannot evade summary judgment by simply arguing that additional discovery is needed.
Next, the Court turned to the packaging itself. Farouk conceded that the repackaged products were genuine, unaltered and in their original bottles, as well as that no defects had been found in the repackaged products. As a result, consumers were correct in believing that by buying the packaged sets, they were buying genuine BIOSILK products. Farouk argued that the disclaimer was not sufficiently prominent and did not contain all the elements required under the Supreme Court’s Coty decision and that consumers might believe Farouk created or commissioned the packaged sets. The Court countered that trademark law does not apply to the sale of genuine goods, even when the trademark owner does not consent to the sale. Further, repackagers are allowed to use another’s trademarks to truthfully identify a product as being or containing the product to which the trademark belongs. The Court rejected a per se rule that a repackaging disclaimer must be in the same size as the trademark or that all the elements of a Coty disclaimer are required on all packages. The Court said a review of the packaging plainly showed that the disclaimer was sufficiently conspicuous to dispel any confusion about who packaged Farouk’s genuine goods.
Practice Note: A trademark owner challenging repackaging should introduce evidence of a bona fide threat to its reputation presented by the repackaging; e.g., evidence that products combined in a set should not be used together, that the packaging does not sufficiently protect the products from damage, that the repackaged goods are beyond their shelf life, etc.
Trademark / Infringement
Addressing issues of trademark infringement and Florida’s Deceptive and Unfair Trade Practices Act, the U.S. Court of Appeals for the Eleventh Circuit affirmed a summary judgment ruling that a mark describing the nature of the services provided by the trademark holder was generic and that the trademark holder could not demonstrate a likelihood of confusion based on a stylized logo. Welding Services, Inc. v. Forman, 509 F.3d 1351 (11th Cir., 2007) (Gibson, J.).
Plaintiff Welding Services and defendants Terry Forman and Welding Technologies are rival companies providing services for maintaining heavy equipment. Since 1990, Welding Services has used the abbreviation “WSI.” A stylized logo consisting of the “WSI” initials surrounded by a circle has been in use since February 1994. In 2003, former Welding Services employees, including Forman, formed a rival company, Welding Technologies, in 2003. They began using a logo with the company’s initials “WTI” with an orange “rotational symbol.” Welding brought suit alleging trademark infringement on its abbreviation and stylized logo, as well as other causes of action.
The Eleventh Circuit stated that the first issue was whether the “WSI” abbreviation was generic. The court held that “a would-be proprietor’s use of the words in the mark to refer to the kind of services it and its competitors provided is powerful evidence that the words in the putative mark are being used generically. Both Welding and Forman provide “welding” services and it is part of the “WSI” mark. The Court held, however, that abbreviations of generic words may become protectable abbreviation has a meaning distinct from the underlying words in the mind of the public. Here, the “WSI” abbreviation was not found to be distinct from the generic “welding” wording.
The Court also considered whether the stylized logo was eligible for protection. The Court found an absence of likelihood of confusion between the “WSI” logo, which consists of stylized letters in a circle, and the “WTI” logo, which consists of plain block letters with an orange “swoosh” design, meant to convey rotational movement. Based on those dissimilarities, the Court stated that there was no likelihood of confusion.
Practice Note: Companies should be cautious of creating trademarks and logos that describe the products and services they provide. Marks that are separate and distinct from their proprietor’s products and services tend to enhance the scope of protection and value of the marks.
No Proof of Access Summary Judgment
Contact Paul Devinsky
In late December 2007, the United States Court of Appeals for the Fifth Circuit affirmed a district court’s grant of summary judgment of no copyright infringement and also dismissed the appeal of an order awarding costs for “want of jurisdiction.” Armour v. Knowles et al., Case No. 06-20934 (5th Cir., Dec. 21, 2007) (Higginbotham, J.: Smith, J.; Owen, J.) (per curiam).
In early 2003, Jennifer Armour, an aspiring singer and songwriter, recorded a demo tape that included an instrumental version of her song “Got a Little Bit of Love for You.” A month later, Armour registered a copyright of an a cappella version of her song, and in May 2006, she registered a copyright of an instrumental version of the same song. Meanwhile, Beyoncé Knowles recorded and commercially released the song “Baby Boy” on June 24, 2003, which quickly received large amounts of radio airtime. Upon hearing Beyoncé perform “Baby Boy” at a concert, Armour was so struck by the similarities between “Baby Boy” and her song that she filed a suit alleging copyright infringement. At the district court level, Armour argued that she had a valid copyright to “Got a Little Bit of Love for You,” that Beyoncé copied parts of her song (notably portions of the melody) and that the two songs sounded substantially similar. Beyoncé successfully moved for summary judgment, the district court concluding that no reasonable jury could find the two songs substantially similar. Armour appealed the judgment.
On appeal, Armour again attempted to prove the factual copyright prong circumstantially by proving access and similarity. As the 5th Circuit stated, “[t]aking the access and summary judgment standards together, a plaintiff can survive summary judgment only if his evidence is significantly probative of a reasonable opportunity for access.” In this regard, Armour claimed that her manager sent copies of her demo tape sometime between January and March 2003 to numerous individuals in the music industry, a number of whom were thought to be associated with Beyoncé Knowles. Armour contended that Beyoncé had access to the demo tape prior to composing the allegedly infringing portion of “Baby Boy.” However, in her responses to Beyoncé’s requests for admission, Armour admitted that the demo tapes sent to those associated with Beyoncé were sent well after Beyoncé created the allegedly infringing portion of “Baby Boy.” Because Armour was unable to prove access, the 5th Circuit affirmed the district court’s grant without even reaching the question of substantial similarity.
Singing the Same Tune: Ninth Circuit Joins Second Circuit in Requiring Synchronization and Reprint Licenses for Karaoke Lyrics
By Rita W. Siamas
Addressing for the first time whether obtaining a compulsory license to reproduce musical compositions on karaoke machines also allows for song lyrics to be displayed in coordination with the music, the U.S. Court of Appeals for the Ninth Circuit held that a compulsory license does not include the right to print or display song lyrics with the recordings. Leadsinger, Inc. v. BMG Music Publishing, Case No. 06-55102 (9th Cir., Jan. 2, 2008) (Smith, Jr., J.).
Leadsinger manufactures an “all-in-one” karaoke player. Instead of using the traditional compact disc and graphic (CD+G) format, Leadsinger imbeds “song chips” containing songs and lyrics inside a microphone. When connected to a television, Leadsinger’s microphone plays music through the TV’s audio system while the song lyrics appear on the TV screen.
Karaoke versions of songs may be created without the copyright holder’s permission by paying a statutory royalty fee for a “compulsory license” under Section 115 of the Copyright Act. Leadsinger had already paid for a compulsory license to reproduce and distribute the songs in its machines, but the owner of the lyric copyrights, BMG, said that the license did not allow Leadsinger to display the lyrics in sync with the music or reprint the lyrics in a booklet. BMG demanded that Leadsinger and other karaoke companies pay a “lyric reprint fee” and a “synchronization fee” to use the lyrics.
Leadsinger refused and filed for declaratory judgment asking the district court to declare that it had the right to print or display song lyrics with song recordings arguing that its karaoke products fall under the definition of “phonorecord,” like CDs or records, which are covered by a compulsory license. Alternatively, Leadsinger argued that its use of the lyrics was allowed as a fair use because the synchronized lyrics served “educational” purposes.
The district court, after concluding that a compulsory license did not allow Leadsinger to display visual images and lyrics in real time with music and that the allegations in Leadsinger’s complaint did not support its fair use claim, dismissed Leadsinger’s complaint. Leadsinger appealed.
A three-judge panel of the Ninth Circuit affirmed, determining that a compulsory license did not permit Leadsinger’s use of the song lyrics because Leadsinger’s karaoke device was not a phonorecord, but was rather an “audiovisual work” due to the lyrics and content being displayed in connection with the song. The Ninth Circuit thus follows the Second Circuit’s 1996 decision in ABKCO Music, Inc. v. Stellar Records, Inc. (the only circuit court precedent on the issue), where the Second Circuit held that CD+Gs are not covered by compulsory licenses because they are audiovisual works. The Ninth Circuit also held that Leadsinger’s use of the lyrics did not qualify as fair use based on its commercial nature.
As a result, the Court found that in addition to any compulsory licenses required to produce and distribute phonorecords and any reprint licenses required to reprint song lyrics, Leadsinger must obtain synchronization licenses to display images and song lyrics with the recorded music.
Practice Note: While Leadsinger aligns the Ninth Circuit with the Second Circuit, it conflicts with a May 2007 Utah district court decision holding that synchronization licenses are not required for karaoke products that display only the text of lyrics, because they represent a display of a literary rather than an audiovisual work. While the Tenth Circuit has not yet addressed the existence or scope of synchronization rights, a circuit split could materialize if the Utah case is appealed and the district court’s decision is upheld.
Preliminary Injunctions Must Specifically Identify Protected Trade Secrets
By Eric M. Shelton
Reviewing a preliminary injunction, the U. S. Court of Appeals for the Seventh Circuit vacated the injunction for failing to specifically identify protected trade secrets. Patriot Homes, Inc. v. Forest River Housing, Inc., 2008 U.S. App. LEXIS 444, Case No. 06-3012 (7th Cir., Jan.10, 2008) (Evans, J.).
The dispute arose between competing modular housing manufacturers. After failing to purchase Patriot, Forest River hired away four employees to form Sterling, a new subsidiary. The departing employees took computer files and other business materials. After Sterling distributed brochures including floor plans for homes identical to those sold by Patriot, Patriot filed suit seeking an injunction and damages for copyright and trade-secret violations. Sterling did not deny that the four employees took the information and used it, but instead asserted that the materials were in the public domain and were not protected trade secrets.
To demonstrate the public availability of the materials, Sterling issued Freedom of Information Act (FOIA) requests to a number of states seeking documents submitted to satisfy approval requirements for Patriot’s products. A substantial amount of materials were produced, none of which had been marked confidential. Subsequent attempts by Patriot to assert the confidentiality of these documents were essentially ignored by the states.
In June 2006, the district court entered a preliminary injunction, enjoining Sterling from “[u]sing, copying, disclosing, converting, appropriating, retaining, selling, transferring, or otherwise exploiting Patriot's copyrights, confidential information, trade secrets, or computer files.” Sterling appealed the order as being too vague.
The Court of Appeals agreed and vacated the injunction. According to the Court, an injunction must “be precise and self-contained, so that a person subject to it who reads it and nothing else has a sufficiently clear and exact knowledge of the duties it imposes,” as violating the injunction can lead to criminal contempt charges. The injunction was not specific, “require[d] a lot of guesswork,” and ultimately it failed to detail what was the prohibited conduct. Sterling’s success in obtaining allegedly confidential information through FOIA requests cast doubt on the information’s trade-secret status. Thus, without clear guidance, Sterling was unable to tell if using FOIA-accessible information violated the injunction.
The Court acknowledged that, especially in the early stages of litigation, it is not easy to determine what is confidential or a trade secret. Nevertheless, injunctions must clearly delineate an enjoined party’s responsibilities, as “trade secret injunctions that are too vague must be set aside.”
Practice Note: The opinion suggests some flexibility in making this delineation, as the Court approved of an injunction which “provided a procedure for interpreting and applying the injunction and distinguishing between plaintiff's trade secrets and information in the public domain.” This case illustrates the potential for public accessibility of confidential documents submitted for regulatory approval, particularly before state agencies without formal procedures for maintaining confidentiality and/or where materials are submitted without confidentiality markings.
Oaths/Declarations to Comply With Express Language of Rule 63
Contact Paul Devinsky
The U.S. Patent and Trademark Office (USPTO) recently indicated that, in order to comply with 37 CFR 1.63(b)(3), an oath or declaration must acknowledge a duty to disclose information material to patentability as defined in 37 CFR 1.56. Accordingly, all oaths or declarations filed on or after June 1, 2008, will be required to include the language expressly set forth in 37 CFR 1.63, including that in 37 CFR 1.63(b)(3). The notice applies to oaths or declarations filed in all non-provisional patent applications, including reissue applications.
All oaths or declarations filed on or after June 1,2008, will be required to include the language expressly set forth in 37 CFR 1.63, including that in 37 CFR 1.63(b)(3). This notice applies to oaths or declarations filed in all nonprovisional patent applications, including reissue applications.
According to the USPTO, some applicants continue to use “material to the examination of the application” rather than the express statutory “material to patentability,” and “in accordance with 1.56(a)” rather than the express statutory “as defined in 1.56.” If an oath or declaration filed on or after June 1, 2008, does not include the express language set forth in 37 CFR 1.63(b)(3), the USPTO will object to the oath or declaration as failing to comply with 37 CFR 1.63. A supplemental oath or declaration pursuant to 37 CFR 1.67 will then be required.
One Step Forward, Two Steps Back—Patent Reform Delayed but Sponsors Remain Committed, Commentary Surges
By Paul Devinsky
On February 13, 2008, Senate Judiciary Chairman Patrick J. Leahy (D-Vermont), co-sponsor of the Patent Reform Act of 2007 (S. 1145), indicated that the Senate will delay consideration of the bill until at least April because it is unlikely that the bill will be scheduled for floor action before the two-week congressional recess running through March 28. Nonetheless, Senator Leahy and the bill’s co-sponsor, Senator Orrin Hatch (R-Utah), announced their enduring commitment to patent reform in a February 15 editorial in the Washington Times. In the editorial, entitled “Meaningful Patent Reform,” the senators emphasized the need to modernize the patent system. “The last time the patent system was significantly changed, the structure of DNA had not been discovered; gasoline was around 27 cents a gallon; and we had not yet sent a man to the moon. […] We are living in the Information Age, and the products and processes that are being patented are changing as quickly as the times themselves.” The senators acknowledged existing disagreements about the bill but pledged to work through them to its enactment, “As legislators, we know we are headed in the right direction when everyone is complaining that the entire bill is not going their way. […] But at the end of the day, we are confident that we will resolve the remaining issues in ways that should make everyone comfortable and will ensure final passage.”
In the wake of the deferral of Senate action, external commentary about the bill has only increased in the first months of 2008. Summaries of significant comments follow:
Former USPTO Commissioners
On January 30, 2008, former U.S. Patent and Trademark Office (USPTO) commissioners Gerald Mossinghoff and Stephen Kunin issued a 35-page position paper entitled “The Need for Consensus on Patent Reform.” Generally, Mossinghoff and Kunin support many provisions of the Act but call for significant revisions before adoption. The paper, funded by the Coalition for 21st Century Patent Reform, cited proposals for mandatory apportionment of patent damages, changes to venue rules, immediate interlocutory appeal of claim construction rulings to the Federal Circuit, revised standards for willful infringement and delayed patent application publication as problematic. Nevertheless, Mossinghoff and Kunin commented that “the time for fair compromises that provide these fixes is now. Too much is at stake to delay.”
Biotechnology Industry Organization (BIO)
On January 30, 2008, BIO released a report entitled “Proposed Patent Reform Legislation: Limitations of Empirical Data Used to Inform the Public Policy Debate.” BIO’s report alleges that the three papers most frequently cited as demonstrating a need for patent reform (by the Federal Trade Commission, the National Academy of Sciences and the National Research Council) are not actually based on empirical data, but instead rely largely on “conjecture, anecdotes and individual publicized cases.” Prepared by two professors from the Center for Biomedical Ethics at the University of Virginia, the report claims that existing empirical data actually shows that the patent system is working to promote innovation and that the alleged problems with the patent system are being solved with market-based solutions and through the courts. The allegedly flawed studies are “To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy,” by the FTC; “A Patent System for the 21st Century,” by the NAS; and “Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health,” by the NRC.
The Bush Administration
On February 4, 2008 the U.S. Department of Commerce Assistant Secretary for Legislative and Intergovernmental Affairs sent a letter to Senator Leahy. Among other proposed reforms, the administration opposes the patent damages section of the bill, stating that it does not believe it is necessary to impose a statutory directive to be “rigidly” applied by courts in calculating damages. Rather, the judiciary needs “the flexibility to determine a reasonable royalty based on the circumstances of a particular case.” The administration will continue to oppose the bill in its entirety unless the damages section is significantly revised, as the administration believes that “the resulting harm to a reasonably well-functioning U.S. intellectual property system would outweigh all the bill’s useful reforms.” Significantly, the statement was issued by the Commerce Department, not the White House, perhaps signaling the intent of the Administration to accept whatever congressional compromise emerges.
The Electronic Frontier Foundation (EFF)
On February 4, 2008, the EFF sent a letter to Senators Leahy and Specter. EFF opposes the bill’s proposed elimination of re-examination proceedings in light of its efforts challenging overbroad patents through its “Patent Busting Project.” The bill’s proposed post-grant review procedures are an inadequate substitute for re-examination proceedings, according to the EFF, because third parties (like itself) would only be allowed to challenge the validity of issued patents within 12 months of issuance. Also, most non-profit entities would be precluded from challenging invalid patents in the second window of post-grant review because they could not demonstrate that they are economically harmed by a patent, as the bill currently requires. “The public has a right to defend itself against patents that should never have been granted,” EFF stated, continuing, “Reexamination proceedings are essential for us to continue this work.”
The Patent Office Professional Association (“POPA”) and 13 Other Labor Unions
On February 6, 2008, POPA and 13 associated unions sent a facsimile letter to all senators. POPA, representing thousands of patent examiners, and 13 other labor unions have urged the Senate to oppose the act in its current form, arguing that the act will undermine U.S. competitiveness. The letter cited the act’s proposals towards damages calculation, post-grant procedures and publication of pending applications as major areas of concern, cautioning, “All of these changes increase the likelihood of American innovations being stolen and provide incentives for American manufacturers to simply license their technology for production overseas.”