Preliminary Injunctions - More Than a Feeling: Supreme Court Reiterates “Likelihood” Standard for Preliminary Injunctions
Hatch-Waxman / Antitrust - There Might Be a Walker Process Claim But No Sham Litigation
Patents / Obviousness - District Court Instructed to Attend Carefully to Evidence of Secondary Considerations of Non-obviousness
Patents / Obviousness - Combination of Two Embodiments in a Single Reference Renders Claims Obvious
Patents / Obviousness - By Candle Light—It Seems Obvious to Try
Patents / Claim Construction / Validity - Suctioning Shallow Wounds Not Obvious
Patents / Patentable Subject Matter - King Pharmaceuticals Patent Invalidated in View of Bilski
Patents / Patent Eligible Subject Matter (§ 101) - Computer-related Method Claims Failing the New Bilski Test for Eligibility
Patents / Obviousness (KSR) - KSR Based Renewed Motion on Obviousness Is a Winner
Patents / Invalidity / Obviousness - Admissions of Prior Art and Niche Market Lead to Obviousness
Trademarks / Arbitration - Overbroad Arbitration Awards Are No Laughing Matter
Trademarks / Dilution - Trademark Dilution in the EU
Trademarks / Use of a Trademark - ECJ on “Genuine Use” of a Trademark
Patents / Employee Inventor Compensation - First Ever English Court Award of Compensation to Employee Inventors
EU Term of Protection for Phonograms - EU-Wide Protection of Old Phonograms Can Last 50 Years
More Than a Feeling: Supreme Court Reiterates “Likelihood” Standard for Preliminary Injunctions
Contact Paul Devinsky
The U.S. Supreme Court clarified the standard that federal courts must apply when determining whether to issue preliminary injunctions. Rejecting the U.S. Court of Appeals for the Ninth Circuit’s rule that a plaintiff who shows a strong likelihood of prevailing on the merits must only demonstrate a possibility of irreparable harm, the Supreme Court reiterated that irreparable injury be “likely in the absence of an injunction.” Winter v. Natural Resources Defense Counsel, Case No. 07-1239 (Supreme Ct., Nov. 12, 2008) (Roberts, C.J.; Breyer, J., concurring in part, dissenting in part; Ginsburg, J., dissenting),
The challenged injunction was issued by the United States District Court for the Central District of California in response to a complaint filed by the Natural Resources Defense Counsel (NRDC) that alleged the U.S. Navy’s sonar training exercises violated federal environmental laws and posed a threat to marine mammals. The NRDC obtained an injunction requiring the Navy to shut down its sonar equipment when a marine mammal was within a fixed vicinity of a training exercise. The district court reasoned that the preliminary injunction was appropriate because the NRDC demonstrated a “combination of probable success on the merits and the possibility of irreparable harm.” On appeal, the Ninth Circuit affirmed, holding that the injunction was supported by “a strong likelihood of success on the merits” and “the possibility of irreparable injury to plaintiff if preliminary relief is not granted.”
The Supreme Court rejected this paradigm, declaring that “the Ninth Circuit’s ‘possibility’ standard is too lenient.” Instead, the Supreme Court held that its “frequently reiterated standard requires plaintiffs seeking preliminary relief to demonstrate that irreparable injury is likely in the absence of an injunction.” Granting a preliminary injunction based only on a mere possibility of harm is “inconsistent” with an injunction’s purpose as an extraordinary remedy requiring a “clear showing” of success by the plaintiff.
While the Supreme Court rebuffed the possibility standard as too soft, it did little to clarify the distinction between a “possibility” and a “likelihood” of irreparable harm. As noted by Justice Ginsburg in her dissent, “[C]ourts do not insist that litigants uniformly show a particular, predetermined quantum of probable success or injury before awarding equitable relief.” Instead, Ginsburg noted that courts often impose a “sliding scale” of the likelihood standard with an aim toward preserving flexibility.
Practice Note: Following on the heels of the Supreme Court's 2006 eBay decision, Winter will likely result in even stricter evaluation by courts of first instance when considering preliminary injunction requests in patent cases.
Hatch-Waxman / Antitrust
There Might Be a Walker Process Claim But No Sham Litigation
By Christine Devlin and William Diaz
In a closely watched pharmaceutical case, the U.S. Court of Appeals for the Ninth Circuit recently held that there was sufficient evidence for a plaintiff’s Walker Process claim, based on a pay-for-delay agreement between a patent holder and a generic manufacturer, to survive summary judgment. The Court also upheld dismissal of the plaintiff’s sham litigation claim. Kaiser Foundation Health Plan Inc. v. Abbott Laboratories, Inc., 2009 U.S. App. LEXIS 584 (9th Cir., Jan. 13, 2009) (Fletcher, J.)
Kaiser sued defendants Abbott and Geneva Pharmaceuticals alleging a Sherman Act Section 1 restraint of trade claim against both defendants and Sherman Act Section 2 monopolization and attempt to monopolize claim against Abbott.
Under the Hatch-Waxman Act, a drug manufacturer seeking approval for a generic form of a patented brand-name drug may file an Abbreviated New Drug Application (ANDA). The ANDA applicant must inform the patent holder of its filing; the patent holder then may bring an action for patent infringement against the applicant. Geneva and other generic manufacturers filed a series of ANDA applications for variations of Abbott’s terazosin hydrochloride for treating hypertension. Abbott then brought patent infringement claims against the generic manufacturers. Abbott and Geneva subsequently entered into an agreement under which Geneva agreed to keep its generic product off the market until a final judgment on Abbott’s ’207 patent. Kaiser claimed that this agreement was a per se unlawful restraint of trade under Section 1 of the Sherman Act. Kaiser based its Section 2 claim on Abbott’s allegedly fraudulent behavior before the U.S. Patent and Trademark Office (USPTO) when filing its ’207 patent.
A jury found against Kaiser on the Section 1 claim due to lack of causation, and the district court entered summary judgment against Kaiser on the Section 2 claim based on a lack of evidence to proceed to the jury. Kaiser appealed.
The Ninth Circuit affirmed the jury’s verdict on the Section 1 claim, concluding that the lower court did not abuse its discretion in making several rulings that prevented certain evidence from reaching the jury.
On the Section 2 claim, the Ninth Circuit affirmed one part of the claim and reversed the other. Kaiser first argued that Abbott improperly attempted to extend its patent monopoly by engaging in a pattern of filing sham lawsuits. Under the Noerr-Pennington doctrine, a party is immune from antitrust liability for petitioning any branch of the government. An exception to this immunity, however, is a “sham” lawsuit in which a plaintiff uses the judicial process itself, as opposed to the outcome of the process, to harm competition. Kaiser claimed that Abbott’s 17 lawsuits against would-be generic manufacturers between 1993 and 1998 qualified as a pattern of sham litigation.
The Ninth Circuit, however, noted that Abbott won seven of those 17 lawsuits and had plausible arguments for prevailing on the remaining lawsuits. Further, the Ninth Circuit concluded that while Abbott was litigious, the high number of lawsuits Abbott filed were a product of the Hatch-Waxman Act, which required Abbott to file several lawsuits quickly to preserve its rights under the Act. Ultimately, the Ninth Circuit determined that “there is insufficient evidence in this record to allow a jury to conclude that Abbott’s seventeen lawsuits constituted ‘sham’ litigation.”
Kaiser also argued that Abbott committed Walker Process fraud by enforcing the ’207 patent, alleging Abbott knew it had been procured through fraud on the USPTO. In support of its allegations, Kaiser claimed that Abbott failed to provide an English translation of an earlier Japanese patent application involving a substantially similar crystal form as the one reported in the ’207 patent, as well as that Abbott’s in-house attorney failed to reference a key Federal Circuit decision that was harmful to Abbott’s position on an on-sale bar issue.
The Ninth Circuit held that Kaiser presented sufficient evidence to allow its Walker Process claim to survive summary judgment and reversed the lower court’s ruling. In reaching its decision, the Ninth Circuit, citing the Federal Circuit's 2006 decision in Purdue Pharma L.P. v. Endo Pharms. Inc., applied the Federal Circuit jurisprudence that “[d]irect evidence of intent to deceive or mislead the PTO is rarely available but may be inferred from clear and convincing evidence of the surrounding circumstances.”
Practice Note: A petition for certiorari filed by Aventis Pharma is presently pending at the Supreme Court. The petition stems from the U.S. Court of Appeals for the Federal Circuit ruling in Aventis Pharma v. Amphastar Pharmaceuticals (see IP Update, Vol. 11, No. 6) and asks the Supreme Court to consider whether the mens rea for inequitable conduct can be satisfied by a “sliding scale” under which “less intent” is required as the materiality of an omission or misrepresentation increases.
Patents / Obviousness
District Court Instructed to Attend Carefully to Evidence of Secondary Considerations of Non-obviousness
Please contact Paul Devinsky
The U.S. Court of Appeals for the Federal Circuit reversed a district court’s summary determination of obviousness of a patent for a desiccant container because, among other things, the lower court failed to give due consideration to evidence relating to secondary considerations. Süd-Chemie, Inc. v. Multisorb Technologies, Inc.,Case No. 08-1247 (Fed. Cir., January 30, 2009) (Bryson, J.).
Süd-Chemie argued that secondary considerations, including evidence of unexpected results, copying and commercial success demonstrated that its patent was not obvious to a person of ordinary skill in the art. The district court did not address Süd-Chemie’s secondary considerations evidence, other than to state that the patent did not employ elements that worked together in an unexpected manner. The Federal Circuit found the district court’s conclusory statement inadequate to support a finding of invalidity. The Federal Circuit instructed the district court to “attend carefully to any evidence of … secondary considerations of non-obviousness.” The Court also reaffirmed that secondary considerations constitute independent evidence of non-obviousness and that such evidence can be quite instructive in the obviousness inquiry.
The Federal Circuit further held that conclusory statements in a patent’s specification cannot constitute evidence of unexpected results in the absence of factual support. In this case, the specification noted the surprising discovery that strong, laminated desiccant packaging materials can be produced from uncoated microporous or nonwoven films as opposed to similar films with coatings. According to the Federal Circuit, this statement alone cannot constitute evidence of unexpected results. The patent, however, included working examples showing that uncoated, compatible films formed seals with stronger bonds than those formed between coated, incompatible films. The patent thus contained specific evidence bearing on Süd-Chemie’s assertion of non-obviousness that must be properly evaluated. The Federal Circuit declined to render a decision on the sufficiency of the secondary considerations evidence. Instead, the Court remanded the case to the district court for further development.
Practice Note: The Federal Circuit made clear that there is no post-KSR analytical shortcut for an obviousness inquiry. A thorough and thoughtful analysis of secondary considerations must still be performed for an invalidity determination to survive appeal.
Patents / Obviousness
Combination of Two Embodiments in a Single Reference Renders Claims Obvious
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Affirming the district court’s claim construction but holding that the court erred as a matter of law in failing to hold the patent obvious, the U.S. Court of Appeals for the Federal Circuit reversed the district court’s denial of judgment as a matter of law (JMOL). Boston Scientific Scimed, Inc. v. Cordis Corporation, Case No. 08-1073 (Fed. Cir., Jan. 15, 2009) (Lourie, J.).
The patent-in-suit claims an expandable, drug-eluting stent with a coating that has a “non-thrombogenic” surface. Boston Scientific sued Cordis Corporation and alleging that Cordis’ stent infringed.
The Federal Circuit reviewed the district court’s claim construction de novo and agreed with the lower court. Relying on the language of the claims, the specification and the prosecution history, the Federal Circuit affirmed the construction of the term “non-thrombogenic” as “a material that does not promote thrombosis for a period of time that extends both during and after release of the biologically active material” and “long term” as “a period of time” that “extends both during and after release of the biologically active material.” The Court held that it was not improper for the district court to refer to the medical dictionary definitions of the grammatically related terms “thrombogenic” and “thrombolytic” to define the term “non-thrombogenic.” Without expressly limiting the role of dictionary definitions to grammatically related terms, the Court held that the district court did not err in relying on such definitions “to inform the meaning of the claim terms.”
The Court also reviewed the finding of non-obviousness de novo and reversed the jury finding of non-obviousness upheld by the district court because one of the references rendered the asserted claim obvious. One figure of the reference showed a stent made of a drug-eluting polymer with a barrier topcoat, referring to the stent and topcoat as separate layers, while another figure showed a metallic stent with a drug-eluting polymer coating identified with the same numeral as the drug-eluting polymer stent. The Court reasoned that it would have been obvious to combine the two figures disclosing a drug-eluting polymer stent with a drug-free coat (but with the possibility of additional coats) and a metal stent with a drug-eluting polymer coat to arrive at the invention of the asserted claim. The Court further explained that, although all of the limitations were found in two separate embodiments pictured side by side, the reference taught all of the limitations of the asserted claim and the record did not contain substantial evidence for the jury to conclude otherwise. The Federal Circuit applied the reasoning of KSR, stating that “[i]f a person of ordinary skill can implement a predictable variation, § 103 likely bars its patentability,” and found that one of ordinary skill in the art would have been motivated without a leap of inventiveness to combine the two adjacent embodiments into a metal stent with two coating layers.
Practice Note: Cordis’ effective trial graphic labeling the elements and illustrating how the two embodiments from the prior art reference would be combined was successful in persuading the Federal Circuit that the asserted claim was invalid.
Patents / Obviousness
By Candle Light—It Seems Obvious to Try
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The U.S. Court of Appeals for the Federal Circuit reversed a district court’s denial of a motion for summary judgment of invalidity, holding that the lower court had misconstrued KSR and failed to take into account inferences and creative steps one of ordinary skill in the art may take. Ball Aerosol and Specialty Container, Inc. v. Limited Brands, Inc., Case No. 08-1333 (Fed. Cir., Feb. 9, 2009) (Lourie, J.).
Ball Aerosol and Specialty Container, Inc. (BASC) sued Limited Brands, Inc. (Limited) for infringement of a patent directed to a candle tin with a removable cover that also acted as a base designed to prevent the heat of the candle from scorching a table or other surface.
Applying KSR, the district court denied Limited’s motion for summary judgment of invalidity based on determination that Limited had failed to provide an adequate motivation to combine the prior art. The court noted that the analysis of a motivation to combine “should be made explicit.” Limited appealed.
On appeal, BASC asserted that the prior art references taught away from the patent by providing alternative solutions for the scorching problem. BASC further noted the commercial success of its candles.
The prior art references cited against the patent disclosed “protuberances” or “bumps” on the bottom of a candle as well as a cover for a candle which doubled as a stand. Further, the problem of scorching caused by bottoms of hot candles was well known in the art.
The Federal Circuit found that the district court misapplied KSR, noting that the KSR opinion does not require an “explicit” motivation to combine, but only an explicit analysis of obviousness by the court. The Court quoted from the Supreme Court’s KSR opinion: “[w]hen there is a design need or market pressure to solve a problem and there are a finite number of identified, predictable solutions, a person of ordinary skill in the art has good reason to pursue the known options.” Under the flexible inquiry set forth by the Supreme Court, the district court therefore erred by failing to take account of “the inferences and creative steps” (or even routine steps) that an inventor would employ and by failing to find a motivation to combine related pieces from the prior art. According to the Court, it was obvious to try to combine the prior art references and the result of this combination was predictable and grounded in common sense.
Finally, the “minimal indications of commercial success” asserted by BASC do not negate a clear finding of obviousness. Therefore, the district court’s denial of Limited’s motion for summary judgment of invalidity for obviousness was reversed.
Patents / Claim Construction / Validity
Suctioning Shallow Wounds Not Obvious
By Daniel Bucca, Ph.D.
In a split decision turning on claim construction, the U.S. Court of Appeals for Federal Circuit affirmed a jury verdict that patents directed to wound healing by application of suction were not shown to be invalid for being obvious. The Court further affirmed the jury verdict that the patents were not unenforceable, not invalid for indefiniteness and not infringed. Kinetic Concepts, Inc. v. Blue Sky Medical Group, Inc., Case Nos. 07-1340, -1341, -1342 (Fed. Cir., Feb. 2, 2009) (Prost, J.; Dyk, J., dissenting).
This case is noteworthy for the Court’s claim construction and discussion of conflicting expert testimony. The patents at issue in this case were directed to apparatuses and methods for treating wounds by applying suction. The issue of invalidity for obviousness turned on the construction of the term “treating a wound” and on the credibility of conflicting experts. The principle prior art developed at trial described treatment of fistulae, which are abnormal connections between two organs or vessels that normally do not connect, among other ailments. Kinetic, the patent holder, distinguished the prior art at trial by arguing that the term wound does not cover the fistulae and other ailments described in the prior art. The Federal Circuit agreed with this construction. The Court based its reasoning on the fact that the examples in the specification describe surface or skin wounds. According to the Court, expanding the term wound to include fistulae would expand the scope of the claims far beyond anything described in the specification. Justice Dyk dissented, arguing that the Court was reading a limitation into the claims to preserve validity and that the patent was invalid as obvious. Nonetheless, the two-judge majority concluded that the claim term should be construed in the context of the specification.
The Court further held that there was substantial evidence in the record for the finding of non-obviousness despite contradictory evidence. The Court, applying U.S. Court of Appeals for the Fifth Circuit law, held that the jury was correctly instructed that it was the sole judge of credibility. The Federal Circuit explained that, under Fifth Circuit jurisprudence, in cases of conflicting expert testimony, the jury is entitled to make credibility determinations and believe the witness it considers more trustworthy. Based on this rationale, the Federal Circuit found that the district court record was sufficient to allow the jury to reach its conclusion that the prior art did not teach methods to treat a wound with negative pressure as required by the claims.
Patents / Patentable Subject Matter
King Pharmaceuticals Patent Invalidated in View of Bilski
By Kristin Connarn
In a highly publicized case, the United States District Court for the Eastern District of New York tied invalidity based on prior art to the issue of patentable subject matter post-Bilski. King Pharmaceuticals, Inc. v. Eon Labs, Inc., Case No. 04-cv-5540 (E.D. N.Y., Jan. 20, 2009) (Trager, J.).
King Pharmaceuticals brought an action against Eon Labs on patents relating to methods of informing patients about and administering the muscle relaxant metaxalone-marketed by King under the brand name “Skelaxin®”-with food. Eon moved for summary judgment of invalidity of King’s patents, alleging anticipation by six prior art references and obviousness of a subset of claims. Eon’s primary argument was that, despite the fact the prior art did not explicitly disclose the claimed features “with food,” such a feature was at least inherent (or obvious) from the prior art.
A dependent claim in the contested patent added the limitation that the metaxalone is from a container with printed labeling advising of the food effect. Thus, the only difference between that claim and the prior art is the addition of the printed label. Several other claims differ from the prior art only in the content of the written material that accompanies the metaxalone. The court stated that “a variation in written material that is not functionally related to the invention does not render a known product patentable.” A third set of claims removed all physical steps and claimed a process of informing patients of the benefits of administering the drug with food.
Despite the fact that Eon alleged invalidity based on anticipation and obviousness, the court found invalidity of some claims in light of Bilski. The court held that King’s discovery of a naturally occurring side effect of the known practice of administering metaxalone with food does not entitle it to a valid patent. Furthermore, the court decided that the act of informing a patient of an inherent property is likewise unpatentable. Specifically, the claims failed the Bilski test because the act of informing another person of an inherent property of metaxalone does not transform the metaxalone into a different state or thing. The court concluded that all of the claims of the King patents are invalid under 35 U.S.C. § 102(b) or § 101 in light of Bilski.
Practice Note: This case provides an indication of how courts may apply Bilski to biotechnology and chemistry cases. In this instance, the court was quick to invalidate claims based on lack of patentable subject matter in light of Bilski.
Patents / Patent Eligible Subject Matter (§ 101)
Computer-related Method Claims Failing the New Bilski Test for Eligibility
By Eric M. Shelton
The U.S. Court of Appeals for the Federal Circuit in In re Bilski (see IP Update, Vol. 11, No. 11), modified the test for patent eligibility of process claims, but left unresolved whether or when recitation of a computer suffices to tie a claim to a “particular machine.” In a series of recent decisions, the U.S. Patent and Trademark Office Board of Patent Appeals and Interferences (the BPAI or Board) has considered the issue and found computer-related method claims as failing the machine prong of the Bilski test.
In Ex parte Gutta, Appeal No. 2008-3000 (BPAI, Jan. 15, 2009) (Pate, III, APJ), the applicant claimed a “computerized method performed by a data processor” for recommending items to a target user, based at least in part on the selection history of a third party, and displaying the result. The Board raised a new ground of rejection against the claims under § 101. The Board characterized the recitation of a “computerized method performed by a data processor” as a field-of-use limitation in which a general purpose computer is associated with the method steps in an unspecified manner. The step of “displaying” was characterized as insignificant post-solution activity that need not be performed by any particular structure.
Ex parte Barnes, Appeal No. 2007-4114 (BPAI, Jan. 22, 2009) (Silverberg, APJ) dealt with a “fault identification method” that identified faults in a volume of seismic data. Again, the Board, citing Bilski, raised § 101 as a new basis of rejection. The Board noted that the claims “call for the gathering, analyzing and displaying of data without any details as to how the data is gathered, analyzed or displayed.” The Board determined that the claims did not specifically call for a machine, but instead were drawn to “analyzing of data.” According to the Board, a “claim that is drawn only to the analyzing of data … seeks to pre-empt the use of a fundamental principle.” Additionally, displaying of data “without more (e.g., a reference as to how and why it is displayed)” was deemed “insignificant postsolution activity.” Based on these remarks, the Board decided the claims failed the Bilski patent eligibility test.
In Ex parte Becker, Appeal No. 2008-2064 (BPAI, Jan. 26, 2009) (Siu, APJ) the Board again issued a new ground of rejection under § 101. The rejected claims recited a “method for creating a hierarchically structured automation object and embedding said automation object into an engineering system.” The Board indicated even if the claims did transform data, that “transformation of data, without a machine, is insufficient to establish patent eligibility.” The Board concluded that the claims failed the Bilski test, as they did not require a particular machine or apparatus, nor transformed an article into a different state or thing.
Ex parte Atkin, Appeal No. 2008-4352 (BPAI, Jan. 30, 2009) (Martin, APJ) is the second Board decision extending the Bilski test for eligibility of process claims to apparatus claims. The first such decision, Ex Parte Cornea-Hasegan (see Practice Note for In re Comiskey, IP Update, Vol. 11, No. 12 ), relied on a portion of In re Comiskey which was subsequently revoked by the Federal Circuit. In Atkin, the Board first rejected claims directed to a “method for converting a unidirectional domain name to a bidirectional domain name” as simply manipulating a series of characters, without being tied to a machine or transforming an article. Then, the Board issued twin rejections under §§ 101 and 112 against claims directed to a system. The Board declared that the term “system” may be broadly interpreted as including a method, rather than simply an apparatus, and decided that elements such as “a label definer,” “an inferencer” and “a character reorderer” did not imply any particular structure, “encompass any and all structures for performing the recited functions” and “are at least as broad as [the] method claims.” Thus, the system claims were rejected on the same grounds as the method claims and were further deemed not enabled. The Board left the examiner to consider whether additional claims directed to a computer readable medium having data stored in it (known as “Beauregard claims”) are patent eligible. Such claims have received mixed treatment by the Board under Bilski.
Ex parte Nawathe, Appeal No. 2007-3360 (BPAI, Feb. 9, 2009) (Homere, APJ) dealt with a “computerized method” for representing multiple documents as fixed sets of tables in a relational database. In this appeal, the applicants specifically argued § 101 eligibility, including a machine-or-transformation test for eligibility, although (as a result of the timing of the appeal) not in view of Bilski. The Board determined the term “computerized” related to “a general purpose processor … as opposed to a particular computer specifically programmed for executing the steps of the claimed method.” Further, the Board stated “the documents are not an article (i.e., physical entities). Rather, they are mere data that represent such entities.” Thus, the method claims were rejected under the Bilski test. In contrast, similar apparatus claims, with elements written in “means-plus-function” form, identified as corresponding to modules in a computer, were deemed eligible because the claims recited “a physical apparatus with physical modules for transforming a data structure” and consequently were not directed to an abstract idea.
Practice Note: Thus far, the many Board decisions rejecting computer-related method claims have not provided guidance as to how such claims may be presented in such a manner as to satisfy Bilski. Typical computer-implemented method claims are at risk to be found not tied to a “particular machine,” merely imposing a field-of-use limitation or involving insignificant post-solution activity. Moreover, the Board seems comfortable with the concept of expanding Bilski beyond process claims. Thus far, § 112, ¶ 6 claim elements (that are statutorily structural recitations) combined with adequate disclosure of corresponding structure (to avoid § 112, ¶ 2 issues) appears to be the safest (if not wholly satisfactory) route ensure subject matter eligibility under Bilski.
Patents / Obviousness (KSR)
KSR Based Renewed Motion on Obviousness Is a Winner
By Paul Devinsky
The U.S. Court of Appeals for the Federal Circuit affirmed a district court grant of a post-KSR renewed summary judgment on obviousness (after denying a pre-KSR motion). Friskit, Inc. v. Real Networks, Inc., Case No. 07-1583 (Fed. Cir., Jan. 12, 2009) (Bryson, J.) (non-precedential).
The asserted claims relate to a system for delivering streaming media content that permits users to search and play back online media content. All of the essential components of the claimed invention—searching archived digital media files, building playlist from the search results and sequentially playing back the playlist—pre-date the patents-in-suit, but were limited in their application to streaming media.
Some prior art media players offered their own integrated mini-browsers, giving users a single interface with which to navigate to music sites, create a playlist of desired music files, download the music files and play them back in their designated order. Friskit contended that the inventive step of the patents-in-suit was the combination of pre-existing media search and playback technologies to create an on-demand, digital music service.
At the district court, Real Networks moved for summary judgment that the asserted claims were invalid for obviousness. Although the district court initially denied the motion, Real Networks renewed its motion in light of the Supreme Court’s intervening decision in KSR. After the trial court granted the renewed motion, Friskit appealed.
Friskit also challenged the district court’s conclusion that the “direct control” claim limitation is disclosed in the prior art. Again, the Federal Circuit disagreed noting that the term, “directly controllable” means “that the search module must control the media player ‘without intervention from other modules or components.’” The Court went on to find that the prior art included an integrated “mini-browser” designed to search for and retrieve music files from online music portals and included the capability of constructing a playlist from any links selected by the mini-browser.
The district court accepted Real Network’s argument that the operating system serves merely as a relay without affecting the server’s control over media playback because the prior art practices the same drag-and-drop method that, according to Friskit, infringed the “direct control” limitation. Here, the Federal Circuit agreed with Friskit that the district court erred in concluding that there was no genuine dispute as to whether the “direct control” limitation was found in the prior art.
Notwithstanding this dispute, the Court affirmed the district court’s summary judgment on obviousness. In connection with Real Networks’ first motion for summary judgment Friskit argued that its patents “deliver the glue to put existing technologies together into a single application.” However, the Court noted that characterization of the claimed invention “did not overcome the showing of obviousness” because, according to KSR, “the predictable use of prior art elements according to their established functions is likely to be within the grasp of one of ordinary skill in the art.” Thus, when Real Networks filed its post-KSR motion for summary judgment on obviousness, Friskit argued that the novel aspect of the claimed invention was the manner in which integration was achieved and that the “fundamentally new feature” of the invention was the “programmatic control” of a media player through executable code communicated by a server network.
However, the Court noted that even if “programmatic control” and “direct control” were not literally present in the prior art, “the evidence before the district court made it clear that it would have been trivial for one of ordinary skill in the art, starting with the prior art devices, to develop the control mechanisms described in the claims at issue,” noting the use of web browsers in combination with media players demonstrated a form of direct but remote operation and that programming tools for implementing such control were well known at the time of the invention.
Friskit also argued that the district court failed to address the objective indicia of non-obviousness, the so-called “secondary considerations.” On this issue, the Court noted that “secondary consideration evidence” such as commercial success, copying and long-felt need does not necessarily overcome a strong showing of obviousness, as was made in the present case. Friskit had failed to show that the success of the accused Real Networks products was attributable to the subject matter that it contends is non-obvious—programmatic control of the media player by the server module and direct control by the search module.
As for alleged copying of the Friskit products, the Court noted that “[c]opying by the accused infringer, has limited probative value in the absence of evidence of failed development efforts by the infringer.”
Patents / Invalidity / Obviousness
Admissions of Prior Art and Niche Market Lead to Obviousness
Please contact Paul Devinsky
The U.S. Court of Appeals for the Federal Circuit upheld a district court’s decision that claims were obvious based on a newly cited single prior art reference combined with admissions of prior art in the specification. Tokyo Keiso Co. v. SMC Corp., Case Nos. 08-1045, -1112 (Fed. Cir., Jan. 9, 2009) (Lourie, J.) (non-precedential).
Tokyo Keiso owns a patent directed to a volume flow meter that measures the flow volume of fluids passing through a pipe. Tokyo Keiso sued SMC Corporation in a California district court for infringement patent. The district court found the patent claims to be obvious as a matter of law based on another patent and article on the subject of the invention, neither of which the U.S. Patent and Trademark Office (USPTO) had considered in its examination. Tokyo Keiso appealed.
On appeal, Tokyo Keiso argued that the district court erred by failing to conduct a claim-by-claim analysis, instead analyzing a non-existent claim that was broader than any of the asserted claims. The Federal Circuit affirmed the finding of obviousness, noting that the patent specification concedes as prior art most of the limitations of the asserted claims and then finding that the remaining limitations were disclosed in the article. The Court also noted that the combination would have been obvious since the prior art article was “within the same field of endeavor” as the patent and both addressed the same problem (i.e., acoustic interaction) and the same solution (i.e., the use of a plastic measuring line).
Finally, Tokyo Keiso asserted that the district court did not properly consider evidence of objective indicia of non-obviousness, including unrebutted evidence showing a long-felt need and commercial success. On this issue, the Federal Circuit implicitly endorsed the district court’s rejection of a “long-felt need” argument in support of non-obviousness, reiterating what the district court stated: “given the fact that the flow meter business involves a niche market, it is not surprising that it took a few years for a company to expand on the prior art at issue here.”
Practice Note: Patent drafters should be mindful of admitting prior art in the specification, especially when claim limitations are directed to the prior art.
Trademarks / Arbitration
Overbroad Arbitration Awards Are No Laughing Matter
By Elisabeth Malis
The U.S. Court of Appeals for the Ninth Circuit recently vacated in part an arbitrator’s award in a dispute over a breached trademark licensing agreement, holding the arbitrator acted with manifest disregard of the law by upholding an overly restrictive covenant not to compete and acted beyond his scope of authority in issuing a permanent injunction against non-parties to the license agreement. Comedy Club, Inc. v. Improv West Assoc., Case Nos. 05-55739, -56100 (9th Cir., Jan. 29, 2009) (Gould, R.).
Comedy Club, Inc. (CCI) owns and operates comedy clubs throughout the United States. On June 13, 1999, CCI entered into a trademark licensing agreement with Improv West whereby CCI was granted the exclusive right to use Improv West’s trademarks (Improv and Improvisation) in opening comedy clubs around the country. The agreement contained an in-term covenant not to compete, prohibiting CCI and its affiliates from owning or operating any non-Improv comedy venues until the agreement expired in 2019. CCI breached the agreement by failing to adhere to a development schedule set forth in the contract.
When Improv West attempted to withdraw CCI’s license due to breach, CCI filed an action in district court seeking declaratory relief that it still retained rights to the trademarks and the covenant not to compete was void under California law. The district court granted Improv West’s request for arbitration. The arbitrator held that CCI’s breach forfeited its rights to the trademarks, the covenant not to compete was valid until 2019 and CCI and its affiliates were enjoined from owning or operating any non-Improv comedy clubs pursuant to the covenant not to compete for the duration of the agreement. While the district court upheld the arbitration award in its entirety, the Ninth Circuit held that the arbitrator exhibited manifest disregard of the law by upholding the covenant not to compete and exceeded his authority in binding CCI’s affiliates to the arbitration award. The Supreme Court, on a petition for a writ of certiorari, vacated the Ninth Circuit opinion and remanded the case for reconsideration in light of the Supreme Court’s holding in Hall Street Associates v. Mattel.
In Hall Street, the Supreme Court offered several possible readings of the manifest disregard doctrine as grounds to modify or vacate an arbitration award, including the reasoning utilized by the Ninth Circuit. As Hall Street did not directly conflict with the Ninth Circuit’s prior analysis, the Court re-affirmed its conclusion that manifest disregard of the law is appropriate grounds to vacate an arbitration award.
Utilizing the manifest disregard standard, the Ninth Circuit reiterated that the license agreement’s broad covenant not to compete violated California law because prohibiting CCI from operating comedy venues in the United States for 14 years stifled competition in a “substantial share of the affected line of commerce.” In addition, the Court re-affirmed that in binding CCI’s affiliates (broadly defined to include non-party relatives and former spouses) to the license agreement and covenant not to compete, the arbitrator exceeded his authority under California law, which typically does not bind non-parties to arbitration agreements in the absence of an agency relationship.
The Ninth Circuit affirmed its prior holding in its entirety and adjusted the arbitration award to only prohibit CCI from opening non-Improv venues in counties where CCI currently operates Improv clubs and to limit the definition of affiliates to those persons with agency relationships to the signatories of the trademark agreement.
Trademarks / Dilution
Trademark Dilution in the EU
Please contact Paul Devinsky
In a reference from the UK Court of Appeal concerning trademark dilution, the European Court of Justice (ECJ) held that the issue of whether there is a link between an earlier mark with a reputation (i.e., a “famous mark”) and a later mark is one to be assessed globally, taking into account all relevant circumstances. Here, despite the fact that the mark in issue, Intel, enjoyed a huge reputation for certain types of goods and services, albeit dissimilar to the goods and services of the later mark, and is unique, these facts were found by the ECJ to be not sufficient to establish that there was a link between the marks or unfair advantage or detriment to the earlier mark. Rather, the ECJ held that in order to prove that use of the later mark was detrimental to the distinctive character of the earlier mark, it was necessary to evidence a change in the economic behavior of consumers of goods and services for which the earlier mark was registered. Intel Corp. v. CPM UK Limited, Case No. C-252/07 (ECJ, Nov. 27, 2008).
Intel Corporation is the proprietor of various UK and European Community trademarks consisting of or incorporating the word INTEL, broadly covering computers and computer-linked goods in Classes 9, 16, 38 and 42. CPM is the proprietor of a UK registration for INTELMARK for “marketing and telemarketing services” in Class 35. In 2003, Intel brought an action for a declaration of invalidity against the registration of INTELMARK, arguing that use of that mark would take unfair advantage of, or be detrimental to, the distinctive character or repute of the INTEL trademark. The Trademarks Registry and the High Court dismissed the application. The Court of Appeal considered that the mark INTEL was unique and that the marks INTEL and INTELMARK were similar, but found that the goods and services for which INTEL was registered were dissimilar to those for which INTELMARK was registered. However, the Court of Appeal was uncertain as to whether, on such facts, the proprietor of the earlier mark having a reputation was entitled to the protection provided by Article 4(4)(a) of the Trademarks Directive (89/104/EEC) and stayed the proceedings pending a reference to the ECJ.
The ECJ held that whether there is a link between an earlier mark with a reputation and a later mark had to be assessed globally, taking into account all relevant circumstances of the case. The ECJ set out relevant factors in establishing a link between an earlier mark with a reputation and a later mark, including the similarity between the marks, the nature of the respective goods or services, whether the customers overlapped, the strength of the earlier mark’s reputation, the degree to which it was unique and the existence of the likelihood of confusion. Given the circumstances that a mark had a huge reputation for certain types of goods and services, that those goods or services were dissimilar to the goods and services of the later mark and that the earlier mark is unique, the Court found these were not sufficient circumstances to establish a link between the conflicting marks or unfair advantage or detriment to the earlier mark. However, the existence of such a link may be implied where the later mark is found to call the earlier mark to the mind of consumers.
The ECJ found that the stronger the link between two marks, the greater the likelihood of finding unfair advantage or detriment. In addition to proving a link between two marks, the owner of the earlier mark must establish that there was either injury or a serious risk that injury would occur in the future. Where this is proven, the burden would then shift to owner of the later mark to establish good cause for using the mark.
To prove that use of the later mark was detrimental to the distinctive character of the earlier mark with a reputation, the earlier mark did not have to be unique, i.e., there could be one or more later users. However, a first conflicting use could be sufficient to give rise to a detriment.
Practice Note: Whilst in some respects the ECJ’s judgment has clarified the grounds for dilution, it has in other respects complicated matters by adding a requirement that the owner of an earlier mark has to show an effect on the economic behavior of consumers to establish detriment to the distinctive character of its mark without providing guidance on the types of evidence required.
Trademarks / Use of a Trademark
ECJ on “Genuine Use” of a Trademark
By Sandra Reinheimer
The European Court of Justice (ECJ) has now held in that the hand-out of promotional items as a reward for the purchase of other goods does not establish the “genuine use” of a trademark for such promotional goods under Articles 10 and 12 of Directive 89/104/EEC (Trademark Directive). Silberquelle GmbH v. Maselli-Strickmode GmbH, Case No. C-495/07, (ECJ, 15 January 2009).
The Oberster Patent- und Markensenat of Austria had referred the case to the ECJ for a preliminary ruling under Article 234 of the EC-Treaty on the interpretation of the Trademark Directive.
Maselli-Strickmode GmbH (Maselli) manufactures and sells clothing. It registered the Austrian word mark “WELLNESS” amongst others for alcohol-free drinks under Class 32 of Nice Classification. Maselli had never sold any of the alcohol-free drinks, but handed them out as a gift in bottles marked “WELLNESS-DRINK” along with the clothing sold. Silberquelle GmbH (Silberquelle) sells alcohol-free drinks and applied successfully for cancellation of the trademark “WELLNESS” in Class 32 on the grounds of non-use before the Austrian Patent and Trademark Office. On Maselli’s appeal, proceedings were stayed pending a decision on the interpretation of “genuine use” of a trademark under the Trademark Directive by the ECJ.
The ECJ was asked to decide if a trademark was being put to genuine use under the Trademark Directive if it was used for goods which the proprietor of the trademark gave free of charge to purchasers of his other goods after conclusion of the purchase contract. Finding no genuine use in this case, the ECJ stressed that the facts here differed from cases in which the proprietor of a mark sold promotional items in the form of souvenirs or other derivative products.
Pursuant to the ECJ’s case law, “genuine use” of a trademark within the meaning of the Trademark Directive had to be understood to denote actual use, consistent with the essential function of a trademark, which was to guarantee the identity of the origin of goods or services to the consumer or end user by enabling him, without confusion, to distinguish the goods or services from others which have another origin.
The ECJ held that the protection a trademark conferred and the consequences of registering it in terms of enforceability against third parties could not continue to operate if the mark lost its primary purpose, which was to create or preserve an outlet for the goods or services that bear the sign of which it is composed, as distinct from the goods or services of other undertakings.
Patents / Employee Inventor Compensation
First Ever English Court Award of Compensation to Employee Inventors
Contact Paul Devinsky
For the first time ever, the English High Court has awarded compensation to employee inventors in recognition of their efforts in inventing a patented product. Kelly and Chiu v. GE Healthcare Limited, (EWHC, Feb. 11, 2009) (Floyd, J.).
The claimants were employed by the defendant as research scientists and, as part of that work, they were co-inventors on two patent families covering a radiopharmaceutical heart imaging agent known as Myoview, which went on to generate sales in excess of £1.3 billion. They claimed under a UK provision which provides that a court may award compensation to an employee inventor when a patent is of “outstanding benefit to the employer.”
The court reasoned that, in order to assess the level of benefit to the defendant, it was necessary to assume that the Myoview had been put on the market without patent protection and then to compare an estimate of how it would have performed with the actual benefit obtained by the defendant. The court further reasoned that, in addition to patent protection, Myoview was also protected by regulatory data exclusivity and that this had to be taken into account when considering the scenario without patent protection.
Nevertheless, the court found that the defendant had obtained an outstanding benefit from the patents in at least two ways: protecting sales of the product against generic competition after the expiry of regulatory data exclusivity (and the consequent reduced profits); the patented blockbuster product was a major factor in securing various mergers which have transformed the defendant.
The court assessed the benefit of the patents to the employer to be £50 million as an “absolute rock bottom figure.” The court rejected the defendant’s argument that any award to the claimants should be based on their existing remuneration and instead awarded the two claimants £1 million and £500,000 respectively, as their percentage of the benefit obtained by the defendant.
Practice Note: This case is significant as it is the first time that the UK courts have awarded compensation to employee inventors under this law, even though it has been in force since 1977. Indeed, the relevant law was amended in 2005 so as to widen the scope of the relevant benefit obtained by the defendant to include the invention as well as the patent itself. This case, however, was decided on the old law and will inevitably lead to increased interest in employee inventor compensation in the UK.
EU Term of Protection for Phonograms
EU-Wide Protection of Old Phonograms Can Last 50 Years
Contact Paul Devinsky
The European Court of Justice (ECJ) stipulated in a preliminary ruling that phonograms are protected in all EU-member states for a term of 50 years after their first recording if they were protected in at least one EU-member state on or before July 1, 1995. Such protection ranges over all EU-member states, even over those in which the phonogram was never protected by national law and benefits both EU and non-EU producers of phonograms. Sony Music Entertainment Germany GmbH v. Falcon Neue Medien Vertrieb GmbH, Case No. C-240/07, (ECJ, Jan. 20, 2009).
The ruling of the ECJ was made in referral proceedings according to Article 234 Treaty of the European Union initiated by the German Federal Court of Justice (FCJ) on occasion of a law suit between Sony and Germany-based Falcon. Falcon distributed two CDs with music recordings of Bob Dylan. A U.S. producer of phonograms previously published those recordings in 1964 and 1965 on phonograms, for which he acquired rights inter alia in the United Kingdom, but not in Germany. Those rights were later on transferred to Sony. Sony sued Falcon in Germany and claimed entitlement to injunctive relief and damages.
The competent German local court of first instance and the competent German court of appeal both dismissed the claims because phonograms that were manufactured prior to the effective date of the German Copy Right Act (Jan. 1, 1966) were not protected in Germany. In the final proceedings on appeal before the German FCJ, the court concluded that the claim depended on whether Sony may successfully refer to the 50-year term of protection of producers of phonograms set forth in Art. 3 para. 2 sent. 1 of the EC directive 2006/116/EC of Dec. 12, 2006. According to Art. 10 para. 2 No. 1 of that directive, the term of protection applies to all phonograms that were protected by national law in at least one EU-member state on or before July 1, 1995. The FCJ therefore suspended the proceedings and referred the matter to the ECJ asking whether such protection applies to EU-member states in which the phonogram was never protected by national law and/or to non-EU producers of phonograms. The ECJ answered in both questions in the affirmative, referring to the wording of Art. 10 para. 2 No. 1 of directive 2006/116/EC and to the general purpose of that directive to harmonize the national protections of copyrights and related rights in the EU-member states.