Patents / Enablement
Specification Comprising Summaries of Papers and No Experimental Data Does Not Enable Treatment Claims
Christopher L. May
The U.S. Court of Appeals for the Federal Circuit invalidated claims for a method of treating Alzheimer’s disease because the specification comprised a summary of six scientific papers and reported no data on the use of the compound at issue in humans. In re ’318 Patent Infringement Litigation (Fed. Cir., Sept. 25, 2009) (Dyk, J.; Gajarsa, J., dissenting)
The patent-in-suit claimed a method of using the compound galantamine for the treatment of Alzheimer’s disease. The specification of the patent was a little over one page long, and consisted in its entirety of six scientific papers in which galantamine had been administered to either animals or humans not suffering from Alzheimer’s. During prosecution, the applicant had stated that experiments using animal models were in process and expected to show that treatment with galantamine did result in improvement. The U.S. Patent and Trademark Office (USPTO) allowed the claims without this data, but the data did not become available until after the patent issued. The district court found the patent not enabled for two reasons: because the relevant animal tests were the only evidence of utility and these were not complete at the time the patent was allowed and because the application only surmised how the claimed method could be used without providing sufficient galantamine dosing information.
A majority panel of the Federal Circuit affirmed. First, the Court found that none of the experiments in the specification involved galantamine and Alzheimer’s disease, as well as that the post-issuance data could not be used to show enablement. The Court further found that while tests were not necessarily required for enablement, the plaintiff’s argument that utility could be “established by analytic reasoning” did not have any support in the case law. The Court noted that, even if support existed for such reasoning in USPTO procedure, the reasoning put forward by the plaintiff, i.e., that galantamine affected the ability of acetylcholine to bind nicotinic and muscarinic receptors to the brain, was not described in the specification. Finally, the Court pointed to the testimony of the patentee herself, who testified that when she submitted the patent, she was not sure that cholinesterase inhibitors (which included galantamine) would work for the purpose intended in the patent.
Judge Gajarsa dissented from the Court’s decision, stating that the Court should remand for additional fact-finding by the district court based on its failure to determine if the patent’s written description would have credibly revealed to a person of ordinary skill the compound’s utility.
Patents / Inequitable Conduct
Inequitable Conduct Is Not Easily Shown
Please contact Paul Devinsky
The U.S. Court of Appeals for the Federal Circuit recently reaffirmed the principle that inequitable conduct based on a patentee’s failure to submit material information during prosecution must be supported by evidence of deceptive intent. AstraZeneca Pharmaceuticals LP v. Teva Pharmaceuticals USA, Inc., Case Nos. 08-1480, -1481 (Fed. Cir., Sept. 25, 2009) (Newman, J.).
AstraZeneca sued Teva and Sandoz alleging infringement of its patent covering quetiapine, the generic name for AstraZeneca’s Seroquel®, an atypical antipsychotic agent. The district court granted summary judgment for AstraZeneca, finding no inequitable conduct in obtaining the patent-in-suit.
The material information asserted by defendants Teva and Sandoz related to certain quetiapine analogs. During prosecution, AstraZeneca filed a declaration after the examiner specifically requested that AstraZeneca overcome the structural obviousness rejection “by a side-to-side comparison with the closest prior art compound(s),” including a compound termed “Schmutz X.” The declaration presented the antipsychotic activity not of “Schmutz X,” but of a related compound termed “Schmutz B.” The reason for this substitution was that data for Schmutz X did not exist and “would be very expensive to generate” at the time. The declaration showed that the antipsychotic behavior of certain prior art compounds was “typical.”
The defendants argued both at trial and before the Federal Circuit that AstraZeneca did not disclose to the Patent Office internal data showing “atypical” antipsychotic behavior for perlapine, fluperlapine, Compound 21076 and Compound 24028, and that withholding the data was “deliberately misleading.” In essence, “AstraZeneca presented internal test data about similar compounds that were typical while omitting internal test data about similar compounds that were potentially atypical.”
The Federal Circuit first noted that AstraZeneca did not withhold any relevant references, noting that AstraZeneca had cited references disclosing atypical antipsychotics, including fluperlapine. Pointing to a lack of evidentiary support, the Court then rejected the defendants’ allegations that AstraZeneca made material misrepresentations during prosecution, such as it being “too expensive” to provide data for the Schmutz X compound. AstraZeneca’s reason for substituting Schmutz X data with Schmutz B data was deemed plausible and not a material misrepresentation. Finally, although AstraZeneca withheld its internal data for those “atypical” antipsychotic compounds whose structures were “equally close” to quetiapine, the Court nonetheless found that AstraZeneca’s submission was “directed to the closest prior art compounds” (as asserted by the examiner) and was not an implied misrepresentation. Therefore, the Court concluded, the evidence did not support that AstraZeneca misrepresented or omitted material information.
Similarly, the Court found that the defendants did not establish deceptive intent by clear and convincing evidence. The Court rejected the argument that “lesser showing of intent to deceive” was needed due to “high degree of materiality” and held that “[e]vidence of mistake or negligence, even gross negligence, is not sufficient to support inequitable conduct.”
Patents / Infringement
Patent Infringement Claims for Acts Done “for the United States” Exclusively Reside Before the Court of Federal Claims
please contact Paul Devinsky
The U.S. Court of Appeals for the Federal Circuit interpreted 28 U.S.C. §1498(a) to mandate that the exclusive jurisdiction to assert patent infringement for acts done “for the United States” is before the Court of Federal Claims. Advanced Software Design et al. v. Federal Reserve Bank of St. Louis et al., Case No. 08-1152, (Fed. Cir. Sept. 30, 2009) (Newman, J.).
Advanced Software (Advanced) asserted that Federal Reserve Banks in St. Louis, Philadelphia and Atlanta infringed three of its patents directed to software methods referred to as “seal encoding” technology, which is used to detect fraudulent checks. On a preliminary motion, the district court dismissed the infringement claims that were based on U.S. Treasury checks, ruling that the alleged acts of infringement were “for the United States” and could be litigated only in the Court of Federal Claims pursuant to 28 U.S.C. §1498(a). Section 1498(a) provides that the Court of Federal Claims is the forum to redress unauthorized use of a patent “by or for the United States.” Under Section 1498(a), work is considered “for the region United States” if it is conducted for the government and with “authorization or consent” of the government.
The district court found that a pilot project based on Treasury checks was conducted by the Philadelphia Reserve Bank and Fiserv, a co-defendant, under a contract entered between them in July 2001. While the United States was not a party to this contract, the Department of the Treasury (Treasury) participated in the pilot program by printing checks with encoded seals. Treasury had requested that a recital in the contract be amended to read “WHEREAS, the Reserve Bank, in conjunction with the Financial Management Services (“FMS”), a bureau in the Department of the Treasury (“Treasury”), desires to evaluate the use of certain seal encoding technology.”, thereby replacing the original recital having the term “acting on behalf of “the FMC to the above “in conjunction with” the FMC. Before the district court, a Treasury official also stated that the Treasury does not view the Reserve Banks as its contractors in connection with arrangements between the banks and other entities. However, the United States had moved to intervene and had also moved for summary judgment on the ground that the accused acts of infringement were “for” the United States. The district court denied these motions as moot and granted the defendants’ motion for dismissal on the ground that §1498(a) applied insofar as Treasury checks were concerned.
The Federal Circuit agreed with the district court that the proper forum is the Court of Federal Claims with respect to infringement based on use of this technology with Treasury checks. The communications from the United States to the Federal Reserve Banks, reinforced by the request by the United States to intervene in the district court and its representations to this court that the accused activities are “for the United States” and with its authorization or consent, established the applicability of § 1498(a). The Federal Circuit noted that the district court found that the government had not provided an explicit written “authorization or consent,” but recognized that no specific contract or explicit “authorization or consent” clause is required by §1498(a).
Practice Note: The Federal Circuit appears to have allowed the Treasury to post-hoc engage §1498(a) by presenting a declaration of a senior official that different from the original contract and deposition of the same Treasury official. Treasury had filed an amicus brief and was offered time to argue, when it again, as in its district court motion, gave its authorization and accepted potential liability under Section 1498(a).
Patents / Prior Art
Manuscript with Title Searchable in Database Is Printed Publication Under 35 U.S.C. §102
by Babak Akhlaghi
Addressing whether a manuscript in U.S. Copyright Office qualifies as a “printed publication” under 35 U.S.C. §102, the U.S. Court of Appeals for the Federal Circuit held that such manuscript qualifies as a “printed publication” on the date that its title is included in a searchable database. In Re Lister, Case No. 09-1060, (Fed. Cir., Sept. 22, 2009) (Prost J.).
Dr. Lister, an avid sportsman, discovered a method for playing golf for recreational golfers. On July 4, 1994, he submitted the manuscript for this method to the United States Copyright Office (Copyright Office), and the Copyright Office issued a certificate of registration on July 18, 1994. On August 5, 1996, Dr. Lister filed a patent application covering his method for playing golf.
After examining the claims of the application, the examiner finally rejected all claims as being anticipated by the Lister manuscript under 35 U.S.C. §102(b). Section 102(b) precludes the patenting of inventions that were described in a printed publication more than one year prior to the application filing date. In order to qualify as a printed publication within the meaning of §102, a reference “must have been sufficiently accessible to the public interested in the art.” A reference is considered publicly accessible if it was “disseminated or otherwise made available to the extent that persons interested and ordinarily skilled in the subject matter or art exercising reasonable diligence, can locate it.” The examiner asserted that the manuscript was sufficiently publicly accessible to be a printed publication within the meaning of §102(b) because an interested researcher would have been able to find it by searching the Copyright Office’s catalog by title. Dr. Lister disagreed and appealed to the Board of Patent Appeals and Interferences, which agreed with the examiner. Dr. Lister then appealed to the Federal Circuit.
On appeal, Dr. Lister argued that the manuscript was not a printed publication as of the critical date because it was not included in a catalog or index that would have permitted an interested researcher to discover it. In this regard, the Federal Circuit noted that the manuscript was included in three relevant databases: the Copyright Office’s automated catalog and two commercial databases, Westlaw and Dialog. The Copyright Office’s automated catalog was not sorted by subject matter and could only be searchable by either the author’s last name or the first word of the title of the work. The government conceded that this database alone could not support a finding of the public accessibility. The Westlaw and Dialog databases, however, could perform keyword searches on the titles but not the full text of the work. The Federal Circuit noted that the title of the manuscript included relevant terms enabling a researcher exercising reasonable diligence to discover the manuscript based on the title search. Accordingly, the Federal Circuit held that the manuscript was publicly accessible as of the date that it was included in either Westlaw or Dialog. However, since the government failed to present substantial evidence of the date on which the manuscript was included in Westlaw or Dialog, the Federal Circuit overturned the §102(b) rejection of the claims and remanded the case.
Patents / Claim Construction
Claim Differentiation Does Not Trump the Clear Import of Specification
Mary Boyle, Ph.D.
The Federal Circuit affirmed the construction of several claim terms to describe surgical grafts and affirmed a district court’s summary judgment of non-infringement by the defendants’ devices under those constructions. Edwards Lifesciences LLC v. Cook Inc., No. 09-1006 (Fed. Cir., Sept. 22, 2009) (Lourie, J.).
Edwards is the owner of the four patents in suit, which are related and share a common specification. The technology in suit is for rigid tube-shaped devices, called “intraluminal grafts,” that are inserted inside weakened blood vessels to reinforce them or into blocked vessels to hold them open. Intraluminal grafts are composed of a plastic or fabric sleeve called a “graft body” that covers a wire-mesh tube structure. In the prepackaged state, the wires are collapsed and the device is compact in form. The intraluminal graft is guided through the circulatory system by the surgeon until it reaches its final destination at the site to be repaired. When the surgeon releases the device, the wire framework either expands by itself like a spring or the surgeon forces it open using a balloon. In either case, the device fits snugly against the blood vessel wall in its final position.
The district court construed the claim term “graft” as “intraluminal graft,” described in the specification as “the invention.” This construction was supported by the fact that all disclosed embodiments had wires, which are found in intraluminal grafts but not in other types of grafts. The claimed grafts were construed to include malleable wires (i.e., expanded using a balloon tool) only. This construction was supported by the specification common to all the claims-in-suit, which expressly disclaimed grafts with “resilient” or self-expanding, wires.
The patentee argued that the district court’s constructions were erroneous, specifically that “grafts” were not limited to “intraluminal grafts; “intraluminal grafts” did not necessarily have wires; and the wires could be resilient as well as malleable. The Federal Circuit disagreed on all counts. Among other things, the Court reasoned that “graft” and “intraluminal graft” were consistently used in the specification in an interchangeable manner deemed to have the effect of equating the two terms. The Federal Circuit specifically rejected the argument that the doctrine of claim differentiation trumped the usage in the specification to prevent the term “graft” from being so limited. The Court also rejected the argument that the applicants amended and broadened the claims during prosecution to recite “graft” instead of “intraluminal graft,” because, among other things, the accompanying remarks by the inventors stated that the claims were for “intraluminal grafts.” Similarly, the Court rejected the argument that applicants broadened the claims reciting “malleable wires” by replacing them with claims for “wires” in light of the fact that applicants thereafter continued to conduct the prosecution as if the wires were required to be malleable. The Federal Circuit also held that “malleable” and “resilient” were mutually exclusive.
The defendants were awarded summary judgment of non-infringement on the grounds that their devices all contained resilient wires, not malleable wires. Based on the intrinsic evidence, the Federal Circuit rejected the argument that malleable and resilient were equivalent for doctrine of equivalents purposes and affirmed the judgment.
Patents / Damages
The ‘‘Entire Market Value’’ Rule—Not So Appealing
Contact Paul Devinsky
The U. S. Court of Appeals for the Federal Circuit vacated a $357 million verdict for indirect patent infringement against Microsoft, on the basis that plaintiff Lucent Technologies had failed to offer sufficient evidence to support an “entire market value” calculation to reach that sum. Lucent Technologies, Inc., v. Gateway, Inc. Case Nos. 08-1485, -1487, -1495 (Fed. Cir., Sept. 11, 2009) (Michel, J.).
Lucent sued Microsoft for infringing a patent directed to a method for entering information without a keyboard, using a graphical interface that displays the information to be entered. Lucent’s main accusation was against Microsoft’s Outlook product (widely used for e-mail and calendaring), which employs a graphical interface for entering dates, the “date-picker” feature. The jury found that Outlook’s date-picker feature indirectly infringed Lucent’s patent and awarded damages in the amount of $357,693,056.18.
On appeal, the Federal Circuit focused its damage analysis on three of the Georgia-Pacific factors. Factor 2, the rates paid for the use of comparable patents, weighed strongly against the jury’s award. The Court found that none of the licenses in evidence were comparable and that the licensing price paid by Microsoft for these licenses fell far short of the damages awarded. Factors 10 and 13, which relate to the nature of the patented invention and the benefits to its users and the portion of the realizable profit that should be credited to the invention as distinguished from non-patented elements, respectively, were analyzed together and also were found to be at odds with the damages verdict. The Court concluded that Outlook’s date-picker feature “is but a tiny feature of one part of a much larger software program.” The Federal Circuit therefore found insufficient evidence to support an “entire market value” damages calculation that would justify the hefty sum awarded by the jury.
The entire market value rule calculates damages for infringement by multiplying the entire market value (e.g., sales revenue) of the infringing product by a royalty rate (percentage multiplier) that is representative of the infringing portion of the product. The entire market value rule is only applicable for calculating damages when “the patent-related feature is the basis for customer demand.” Here, the minor date-picker feature of Outlook could hardly be called “the basis for customer demand.” Furthermore, the Court reasoned that in order to arrive at the damages verdict, the jury likely used the entire market value rule with a royalty rate between 5 percent and 8 percent of the entire market value of Outlook. According to the Court, there was insufficient evidence to show that the date-picker feature warranted such a high rate: “We find it inconceivable to conclude, based on the present record, that the use of one small feature, the date-picker, constitutes a substantial portion of the value of Outlook.” The Court suggested that a 0.1 percent royalty rate would probably have been acceptable, though this rate would likely result in damages amounting to less than $6.5 million.
Practice Note: Plaintiffs that wish to rely on the entire market value rule need to have evidence showing that the infringing feature is a substantial component of the infringing product.
Patents / Standing
Standing on Shaky Ground
Amanda E. Koenig
The U.S. Court of Appeals for the Federal Circuit recently issued two opinions that focus on standing to sue for patent infringement and provide in-depth analysis of the standing issue. Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc., et al., Case Nos. 08-1509 and -1510 (Fed. Cir., Oct. 1, 2009) (Linn, J.), is instructive with respect to competing chains of ownership in an invention, while touching upon grant language, the bona fide purchaser rule and the Bayh-Dole Act. In AsymmetRx, Inc., v. Biocare Medical, LLC, Case No. 09-1094 (Fed. Cir., Sept. 18, 2009) (Lourie, J.), the Federal Circuit provided an analysis of the scope of rights one must hold in a patent to have standing to sue for infringement. Taken together, the two decisions represent a rich outline of the standing issue and of the pitfalls waiting to trap the unwary.
Board of Trustees
In Board of Trustees, plaintiff Board of Trustees of the Leland Stanford JuniorUniversity (Stanford) sued Roche Molecular Systems, Inc. et al. (Roche) for infringement of three patents that claim methods for using the polymerase chain reaction (PCR) to measure the amount of HIV in blood samples and using those measurements to infer the effectiveness of antiretroviral drugs.
The standing question arose because Mark Holodniy, one of the named inventors of the patents, “signed multiple contracts defining his obligations to assign his invention rights.” First, upon joining Stanford, Holodniy signed a “Copyright and Patent Agreement” (CPA) in which he agreed “to assign or confirm in writing to Stanford and/or Sponsors that right, title and interest in” any inventions he conceived of or first reduced to practice. At the behest of Stanford, however, Holodniy also visited Cetus, a company collaborating with Stanford, to acquire background knowledge about PCR technology. In doing so, Holodniy signed a “Visitor’s Confidentiality Agreement” (VCA) with Cetus. The VGA stated: “I will assign and do hereby assign to CETUS, my right, title, and interest in each of the ideas, inventions and improvements.” (Emphasis added.)
In 1991, Roche purchased Cetus’s PCR business, including its agreements with Stanford and its researchers and began making HIV detection kits. In 1992, Stanford filed the patent application to which the three patents-in-suit claim priority. After extensive negotiations between the two entities, Stanford filed suit against Roche in 2005. In its defense, Roche alleged, inter alia, that it possessed ownership rights in the patents-at-issue and as a result Stanford lacked standing. In response, Stanford argued that it was a bona fide purchaser and that the Bayh-Dole Act superseded any transfer of rights from Holodniy to Cetus.
The Federal Circuit found that Stanford did not possess standing to sue for infringement of the patents-in-suit. First, the Court found that the CPA between Stanford and Holodniy was merely a promise to assign, while the VCA was a present transfer of Holodniy’s future inventions to Cetus. Thus, “Cetus immediately gained equitable title to Holodniy’s inventions” and any subsequent assignment to Stanford was negated. Second, the Court dismissed Stanford’s claim that it was a bona fide purchaser. Because “[a]n organization can be charged with notice of its employees’ assignments” the Court found that “Stanford had at least constructive or inquiry notice of the VCA.” Therefore, Stanford did not qualify as a bona fide purchaser. Finally, the Court rejected Stanford’s argument that “the Bayh-Dole Act negated Holodniy’s assignment to Cetus because it empowered Stanford to take complete title to the inventions.” While Bayh-Dole empowers the government to take title to certain inventions under specified circumstances, it neither “automatically void[s] ab initio the inventors’ rights in government-funded inventions” nor “voids prior contractual transfers of rights.” Similarly, “claiming title under Bayh-Dole does not override prior assignments.”
AsymmetRxinvolved two patents that “relate to the p63 antibodies and methods for using them to detect malignant carcinoma.” Harvard University owns both patents-in-suit. In 2002, “Harvard entered into a Biological Materials License Agreement with [defendant] Biocare (‘the Biocare License’) … to make, use, and sell the p63 antibodies.” In 2004, Harvard entered into a separate agreement with plaintiff AsymmetRx (the AsymmetRx license) under which “AsymmetRx received ‘an exclusive commercial license’ under the [patents-in-suit] and ‘a license’ to use the p63 antibodies.” The grants to AsymmetRx under the AsymmetRx License were limited in a number of respects, including field of use, sublicensing, patent filing and maintenance, as well as the right to bring infringement actions.
In 2007, AsymmetRx sued defendant Biocare for patent infringement. Biocare raised a license defense in a motion for summary judgment, which the district court granted. AsymmetRx appealed. On appeal, the parties “focused on whether the district court properly interpreted the language of the Biocare License in finding that Biocare did not infringe any patent rights of AsymmetRx.” The Federal Circuit, however, chose to resolve the issue by addressing the antecedent question of “whether AsymmetRx had the statutory right to bring an action for infringement without joining the patent owner, Harvard.” Although neither party raised the standing issue, the Court relied on the longstanding principle that “an appellate court must satisfy itself that it has standing and jurisdiction whether or not the parties have raised them.”
After a detailed analysis of the relevant case law and the AsymmetRx License, the Federal Circuit concluded that AsymmetRx did not have standing to sue without Harvard. First and foremost, the Court reminded the parties that “the exclusive right to sue is ‘particularly dispositive’ in cases where, as here, we are deciding whether a patent owner must be joined as a party.” Under the AsymmetRx License, “although AsymmetRx has the option to initiate suit for infringement,” that right was not absolute and, indeed, was restricted. For instance, if AsymmetRx brought an infringement suit, it was obligated “to consider Harvard’s views and the public interest.” Moreover, Harvard’s approval was necessary to settle any suit. Finally, Harvard could elect to join a suit brought by AsymmetRx and, if it did so, Harvard jointly controlled the suit with AsymmetRx. The AsymmetRx License also contained a number of other restrictions on AsymmetRx’s rights to the patents-in-suit, and the Court concluded by writing the following: “When viewing the retention of the right to sue in conjunction with all of the other rights retained by Harvard, it is clear that Harvard conveyed less than all substantial rights under the ’256 and ’227 patents. While any of these restrictions alone might not have been destructive of the transfer of all substantial rights, their totality is sufficient to do so.”
Practice Note: The Board of Trustees and AsymmetRx cases provide a number of important guidelines for litigators and transactional attorneys alike:
- One should know the differences between a present assignment of rights in a future invention and a promise to assign.
- Because an organization can be charged with notice of its employees’ assignments, thus nullifying its status as a bona fide purchaser, organizations must closely monitor and control the types of agreements its employees enter with other organizations.
- Claiming title under Bayh-Dole does not override prior assignments and will not provide an organization with an opportunity to regain ownership in an invention.
- Licenses that restrict a licensee’s ability to sue for infringement of the licensed patents are unlikely to grant enough rights in the licensed patents to give the licensee standing to sue for infringement of those patents.
- Litigators should perform an in-depth analysis of standing at the outset of all infringement suits.
Trade Secret Protection
Pricing Information Disclosed Without Restriction Is Not a Trade Secret
Michelle C. Replogle
The U.S. Court of Appeals for the Tenth Circuit reversed a district court’s holding that a price quote was a trade secret because the quote had been disclosed to the customer without reservation. Applying Oklahoma law, the Tenth Circuit determined that, while pricing information generally can qualify as a trade secret, if an individual discloses pricing information to others who are under no obligation to protect the confidentiality of the information the trade secret right is extinguished. Southwest Stainless, LP v. John Sappington et al., Case No. 08-5127 (10th Cir., Sept. 21, 2009) (Lucero, J.).
Southwest Stainless is a metals manufacturer that operates in Tulsa, Oklahoma. When owners Sappington, Emmer and Siegenthaler defected from Southwest Stainless to a rival metal company, Rolled Alloys, Inc., they took with them years of expertise in the metals industry and personal relationships with many area customers. After Rolled Alloys started winning business away from Southwest Stainless, Southwest Stainless responded with a lawsuit against both the former owners and Rolled Alloys alleging, among other things, misappropriation of trade secrets.
At issue during trial was whether Southwest Stainless’ pricing information qualified as a trade secret under the Oklahoma Uniform Trade Secrets Act. The district court concluded that Sappington and Rolled Alloys had willfully and maliciously misappropriated Southwest Stainless’ pricing information, in particular a Hughes Anderson price quote, and ordered an additional $31,200 in exemplary damages. The district court placed great emphasis on the general measures that Southwest Stainless took to keep its pricing information confidential, including employees’ confidentiality agreements, passwords protection of company information, regular employee reminders of the confidential nature of company information and significant expenditures aimed at accumulating and maintaining the confidential information.
In reversing the district court, the Tenth Circuit acknowledged that Southwest Stainless took measures to keep its company information private, but pointed to other critical facts found by the district court as demonstrating that this was not always the case. For instance, some customers ordered using monthly-updated “posted pricing,” which allowed the customers to know prices on certain items in advance. Customer feedback information also revealed how competitors were pricing their products, and Southwest Stainless did not prevent its customers and vendors from disclosing pricing information to others. With respect to a Hughes Anderson quote, the facts revealed that the bid was known by others outside of Southwest Stainless, that Southwest Stainless took no measures to prevent Hughes Anderson from disseminating the information and that Rolled Alloys could have properly asked for the information from Hughes Anderson itself.
As Southwest Stainless provided the quote to Hughes Anderson without any obligation to keep the information confidential, the Tenth Circuit concluded that the pricing information did not amount to a trade secret and reversed the district court judgment.
Patents / Claim Construction
Intrinsic Record Key to Claim Construction, Trumps Expert Testimony
Please contact Paul Devinsky
Vacating a jury verdict of non-infringement of two patents, the U.S. Court of Appeals for the Federal Circuit held that a district court misconstrued the claims of the patents-in-suit by importing limitations into the claims that were not a component of the plain language of the claims. Kara Technology Inc. v. Stamps.com, Inc., Case Nos. 09-1027, -1028 (Fed. Cir., Sept. 24, 2009) (Moore, J.) (non-precedential).
In 2004 Kara Technology Inc. (Kara) filed suit against Stamps.com for infringement of two patents. The patents concerned technology that allows a customer to print a secured document, such as a stamp or an airline ticket, at home using preprinted label sheets.
On appeal, the central issue was whether the preprinted labels required an embedded key to authenticate the document. Kara argued that the preprinted labels did not require an embedded key, rather that they only required some unique mark. The Federal Circuit agreed with Kara, claiming that nothing in the plain language of the claims required that the preprinted label include a key. The Court outlined general principles of claim construction, stating that words of a claim are generally given their ordinary and customary meaning as understood by a person of ordinary skill in the art at the time of the invention; the claims of a patent must not be limited to only those embodiments detailed in the specification; and the intrinsic evidence, and particularly the claim language, shall be the primary resources for construing claims. In applying the aforementioned principles, the Court concluded that the district court improperly limited the patentee’s clear and broader claims. The Court also noted that, by viewing not simply the asserted claims, but all of the claims of the two patents together, it is clear that the claims at issue on appeal did not require a key in the preprinted data. In particular, the Court observed that none of the claims at issue on appeal recite the term “key,” whereas all of the other independent claims require either an “encryption key” or “key data.” According to the Court, this further indicated that the claims at issue on appeal did not require the use of a key in the preprinted paper.
Both parties utilized expert testimony to advance their respective positions, and the Court resolved these competing postures by referring to the “written record of the patent.” The Court noted that it is not uncommon in patent cases to have dueling experts and further stated, “when construing claims, however, the intrinsic evidence and particularly the claim language are the primary resources” and the extrinsic evidence such as expert testimony is less significant than the intrinsic record in determining the legally operative meaning of claim language. The Court issued a reminder for courts to discount any expert testimony that is clearly at odds with the claim construction mandated by the claims themselves, the written description and the prosecution history, in other words, with the written record of the patent.
Copyright; Trade Dress/ Infringement
Ninth Circuit Affirms No Infringement by Bratz Dolls
Elisabeth (Bess) Malis
The U.S. Court of Appeals for the Ninth Circuit recently affirmed the U.S. District Court for the Southern District of California’s holding that an airbrush art business lacked evidence to prove copyright and trade dress infringement by the makers of Bratz dolls. Art Attacks Ink, LLC v. MGA Entertainment Inc., Case No. 07-56110 (9th Cir., Sept. 16, 2009) (Pregerson, H.).
Plaintiff Art Attacks Ink (Art Attacks) is an airbrush business that designed merchandise featuring cartoonish female characters named the “Spoiled Brats.” Art Attacks copyrighted the characters in 1996. In 2001, defendant MGA Entertainment, Inc. (MGA) began selling “Bratz” dolls, whose features bore distinct similarities to the Spoiled Brats’ oversized eyes, heavy makeup, bare midriffs and large heads and feet. In 2004, Art Attacks filed suit against MGA for trademark, trade dress and copyright infringement. A jury found for MGA on the trademark claim, but did not reach a verdict on trade dress or copyright. After declaring a mistrial, the district court granted MGA’s motion for judgment as a matter of law on the outstanding claims. Art Attacks appealed.
The Ninth Circuit affirmed. First, Art Attacks could not prove beyond a “bare possibility” that MGA had access to the copyrighted Spoiled Brats characters. Despite Art Attacks displaying its designs at several county fairs in California, some of which were attended by millions of people, Art Attacks failed to show that any MGA representative attended such fairs or was exposed to the Spoiled Brats characters. The court also rejected Art Attacks’ argument that MGA had access based on the designs’ wide dissemination because there was no evidence that significant numbers of people would notice the Art Attacks county fair booth over others and Art Attacks only sold a small amount of Spoiled Brats T-shirts per year. Furthermore, the company’s website did not prominently feature the Spoiled Brats and did not include meta tags that would enable search engines to flag the site for users searching for the characters.
The court also rejected Art Attacks’ trade dress claim because the company could not demonstrate secondary meaning. Testimony from a single source and Art Attacks’ advertising efforts through its fair booths and website failed to prove sufficient purchaser association between Spoiled Brats characters and Art Attacks. The court also reasoned that despite Art Attacks’ owning the copyright to the characters for over five years, extensive use of a trade dress does not alone create secondary meaning.
Accordingly, the Ninth Circuit affirmed the district court’s grant of summary judgment in favor of MGA on the copyright infringement and trade dress claims.
Trademarks / Infringement
Quick, Tasty and Possibly Infringing Pizza
Jeremy T. Elman
Addressing the issue of trademark genericness and infringement, the U.S. Court of Appeals for the Fifth Circuit vacated a district court’s summary judgment ruling that the term was generic and that there was no likelihood of confusion. The Great American Restaurant Co. v. Domino’s Pizza LLC, et al., Case No. 08-40654 (Sept. 30, 2009) (per curiam).
Plaintiff Great American Restaurant Company (Great American) operates a chain of restaurants in the Dallas, Texas, area called “ Brooklyn’s Old Neighborhood Style Pizzeria.” The plaintiff has a registered trademark for the name of the restaurants, as well as for “A taste of the old neighborhood.” Defendant Domino’s Pizza LLC (Domino’s) recently introduced “Brooklyn Style Pizza” (BSP), and used the phrase “[a] taste of the old neighborhood” for 10 months to advertise the pizza. Because Domino’s is a much larger company, this presented a case of reverse confusion, where the larger and more well-known company is alleged to have used the mark of a smaller, senior user.
Great American filed claims against Domino’s in the U.S. District Court for the Eastern District of Texas under both the Lanham Act and common law for trademark infringement of both of its trademarks. The Eastern District granted summary judgment to Domino’s on both counts. Two central factual issues were contested before the district court and on appeal: whether the Great American marks are generic and whether there was a likelihood of confusion as to the source of Domino’s BSP.
The Fifth Circuit vacated the summary judgment findings. After stating the general rule that generic trademarks are entitled to no protection, the Fifth Circuit found that there was a genuine issue of fact as to whether “Brooklyn Style Pizza” was generic. The court stated that there was evidence from multiple sources indicating that there is no such thing as “Brooklyn Style Pizza,” so it could not be a generic term or even a descriptive term. The Fifth Circuit vacated summary judgment on that basis.
The Fifth Circuit also vacated summary judgment of no likelihood of confusion. Great American presented direct evidence of actual confusion, showing that customers attempted to use Domino’s coupons at Great American restaurants. The court also held that the similar use of the trademarked phrase “[a] taste of the old neighborhood” was “exact,” even though Domino’s eventually discontinued its use. Lastly, since this was a reverse confusion case, evidence that Domino’s had acquired secondary meaning in the “BSP” mark weighed in favor of Great American. Therefore, the court found that Great American had presented enough evidence of a likelihood of confusion to create a genuine issue of material fact and vacated summary judgment on that basis as well.
Practice Note: Marks that have no common and easily understandable meaning are not generic and can be protected as trademarks.
Trademarks / AdWords
Advocate General Provides Opinion in Google AdWords Case
Please contact Paul Devinsky
In a combined reference for a preliminary ruling from the Cour de Cassation in France, Advocate General Maduro advised the European Court of Justice (ECJ) to rule that search engines selling keywords to advertisers cannot be liable for trademark infringement. Joined cases C-236/08, C-237/08, C-238/08) Google France & Google Inc. v. Louis Vuitton Malletier, Google France v. Viaticum & Luteciel, Google France v. CNRRH, Pierre-Alexis Thonet, Bruno Raboin & Tiger, franchisée Unicis (Sept. 22, 2009).
Google’s AdWords advertising system allows advertisers, in return for payment, to select keywords so that their advertisements are displayed alongside natural search results in response to running a search on Google. These advertisements typically consist of a short commercial message and a link to the advertiser’s site; they are differentiated from natural results by their placement and design. In the current cases it was established that entering certain trademarks into Google’s search engine triggered the display of advertisements offering counterfeit versions of the products covered by the trademarks or identical or similar products of competitors. The Cour de Cassation referred the disputes to the ECJ for guidance on whether the use by Google, in its AdWords advertising system, of keywords corresponding to trademarks constitutes an infringement of those marks under Directive 89/104/EEC (Trademarks Directive) and whether Google could benefit from the hosting safe harbour under Directive 2000/31/EC (E-Commerce Directive).
In the Advocate General’s view, by allowing advertisers to select keywords corresponding to the claimants’ trademarks, Google was using such marks in the course of trade. However, allowing advertisers to select keywords so that their advertisements are presented as results did not involve the sale of any product to the public. The use was limited to a selection procedure internal to Google AdWords and concerned only Google and the advertisers. Consequently, there was no trademark infringement for the purposes of Article 5(1) of the Trademarks Directive because AdWords was not identical or similar to any of the goods and services covered by the trademarks.
The Advocate General accepted that by displaying advertisements in response to keywords corresponding to trademarks, Google establishes a link between those keywords and the sites advertised. However, this did not constitute trademark infringement. Internet users processed advertisements the same way they processed natural search results. Even assuming that internet users were searching for the site of the trademark proprietor, there was no risk of confusion on the part of the consumer as to the origin of goods and services.
The Advocate General did not consider that Google’s use of trademarks in its AdWords program constituted trademark infringement where the mark had a reputation. Trademark rights could not be construed as classic property rights enabling the trademark proprietor to exclude any other use. The Advocate General expressed concern that, if trademark proprietors were allowed to prevent those uses on the basis of trademark protection, they would establish an absolute right of control over the use of their trademarks as keywords.
With respect to whether Google’s possible contribution through AdWords to trademark infringements by third parties in itself constituted trademark infringement, the Advocate General said that trademark proprietors would have to point to specific instances giving rise to Google’s liability in the context of illegal damage to their trademarks. He suggested that this would need to be determined under national laws.
While accepting that there is nothing in the wording of the definition of “information society services” in the E-Commerce Directive to exclude its application to the provision of hyperlinks and search engines and therefore to Google’s search engine and AdWords, the Advocate General considered that the liability exemption for hosts under Article 14 of that directive could not apply to AdWords. While the search engine is a neutral information vehicle applying objective criteria, that was not the case with AdWords because Google had a direct pecuniary interest in internet users clicking on the advertisements’ links.
Practice Note: If the ECJ agrees with the Advocate General, trademark proprietors, even those of marks with a reputation, will have no recourse against Google under trademark law, at least insofar as it derives from the Trademarks Directive. However, on the Advocate General’s view, AdWords does not qualify for safe harbour protection so that liability may arise under national laws in certain jurisdictions on account of AdWords potentially contributing to internet users being directed to counterfeit sites. This may lead to an inconsistency of approach to the lawfulness of AdWords across Europe.
Patents / Patent Eligible Subject Matter
Description of Invention in Specification May Overcome Broad Interpretation Underlying Assertion of Ineligibility
Eric M. Shelton
A recent decision by the U.S. Patent and Trademark Office Board of Patent Appeals and Interferences (Board) illustrates how the written description of an invention can defeat a broad reading of a claim resulting in a rejection under § 101. Ex parte Azuma, Appeal No. 2009-003902 (BPAI, Sep. 14, 2009) (Hoff, APJ).
The application claimed “[a] computer program product comprising: a computer usable medium having computer usable program code embodied therewith.” The examiner rejected the claim under 35 U.S.C. §101 as being directed to subject matter ineligible for patenting. The examiner found that even though the specification suggests that the computer usable medium may be a CD-ROM or DVD-ROM, it also suggests that “other configurations are possible as well.” Accordingly, the examiner concluded that the computer usable medium is open to any reasonable interpretation and that one of ordinary skill in the art can appreciate that a computer usable medium can be interpreted as a carrier wave or a network signal, both of which were held to be non-statutory subject matter in the recent Nuijten decision. (See IP Update, Vol. 10, No. 10).
The Board reversed. Pointing to the examiner’s finding that the specification also suggests that “other configurations are possible as well,” the Board pointed out that the specification teaches in particular that “various other [hardware] configurations are possible.” According to the Board, since hardware is a tangible medium, the reference to various other hardware configurations meets the tangibility requirement to be a manufacture. Based upon the specification as a whole, the Board concluded that the description of a “computer usable medium” is based upon tangible storage media.
Practice Note: For “Beauregard” claims claiming a computer medium, such rejections under Section 101 in view of Nuijten were recently recognized by guidelines released by the USPTO. The guidelines for examination under Section 101 suggest that such rejections may be overcome by amending claims to recite a “computer storage medium,” to distinguish from transitory transmission media. This decision suggests there may be another way to overcome such rejections, depending on what and how the claimed computer medium is disclosed in the specification.
Patents / Continuation Rules
USPTO Abandons Pursuit of Controversial Changes to Rules; Proposes Changes to Examiner Productivity System
Eric M. Shelton
On October 8, 2009, Under Secretary of Commerce for Intellectual Property and Director of the U.S. Patent and Trademark Office (USPTO) David Kappos officially announced that the agency is rescinding its highly controversial new continuation rules and that a motion to dismiss and vacate the district court decision on these regulations litigated in Tafas v. Dudas (now Tafas v. Kappos) will be filed jointly with one of the plaintiffs-appellees, GlaxoSmithKline (GSK). A press release by the USPTO is available here. Published in the Federal Register in August 2007, the new patent rules set limits on continuation applications, requests for continued examination (RCE) and examination of claims in each patent application. (See IP Update, Vol. 10, No. 9.)
In October 2007, the new rules were challenged in federal district court only days prior to their scheduled enactment. On the eve of their enactment, the district court preliminarily enjoined enforcement of the new rules and subsequently granted the challengers’ motion for summary judgment on the grounds that the USPTO lacked substantive rulemaking authority and that the Final Rules were substantive. The USPTO appealed to the Federal Circuit, where a majority panel found that all but one of the new rules were procedural rules within the scope of the USPTO’s rulemaking authority. The majority vacated the district court’s invalidation of the remaining rules and remanded the case for further proceedings. On July 6, 2009, the Federal Circuit vacated its prior decision and granted en banc review of the case, which was later stayed until 60 days after the confirmation of the new director, David Kappos.
Instead of further pursuing the controversial continuation rules, Kappos decided to revise the incentive structure for USPTO examiners. This structure, and the “count system” it employs, has remained essentially unchanged for more 30 years and has been criticized by observers and during a number of governmental reviews of the PTO. One commonly cited defect is that examiners receive the same amount of credit for handling a new application as they do for an Request for Continued Examination (RCE), even though an RCE generally requires less effort due to an examiner’s familiarity with the application. Accordingly, some believe examiners have had little incentive to begin new applications or allow examined applications to be patented if further credit could be obtained by rejection.
Many were surprised that in only five weeks, the count system reform was negotiated between USPTO management and the examiners union, which subsequently approved the reform by a nearly two-thirds vote. A copy of the proposal is available here. Under the proposed changes, examiners receive diminishing credit for each round of RCE examination, encouraging examiners to pursue new applications in order to receive greater credit. Other changes include allowing more time for examiners to work on each application and additional time for examiners to initiate telephone contact with applicants to identify and resolve issues earlier in prosecution. Implementation of the proposed changes is pending while the package of changes is finalized and subsequent ratification by the examiners’ union.