Patents / Written Description - § 112 Includes a Separate Written Description Requirement
Patents - District Court Strikes Down Gene Patents and Methods of Using Genes as Unpatentable Subject Matter
Patents / Willfulness / Damages - Reissued i4i Panel Opinion Clarifies Willfulness Analysis
**WEB ONLY** Patents / Inequitable Conduct - En Banc Reconsideration of Inequitable Conduct Decision Announced
Patents / Claim Construction - Prior Art References Mentioned in Specification Do Not Provide Corresponding Structure for a Means-Plus-Function Limitation
Patents / Anticipation - Preamble Disregarded in Holding Claim Anticipated by Prior Art
Patents / Standing - Patent Assignment Recorded at USPTO Creates a Rebuttable Presumption of a Valid Assignment
Patents / Federal Circuit Jurisdiction - A Trilogy of Appellate Jurisdictional Jurisprudence
Patents / Claim Construction - The Meaning of “Words of Degree” May Be “Readily” Ascertained
Patents / Claim Construction - Relative Claim Terms Do Not Necessarily Cause Insoluble Ambiguity
Patents / Hatch-Waxman - Filing for Patent Term Extension: Every Calendar Day Counts
Patents / Appeal - Board Does Not Give Deference to Positions Taken by Examiner
Patents/Declaratory Judgment - Knowledge of Litigation History and Impromptu Phone Calls Does Not Warrant Declaratory Judgment
Patents / District Court Jurisdiction - Abuse of Discretion for District Court to Remand to State Court Claims Arising Under Patent Laws
Patents / On-Sale Bar - Denial of Reconsideration Based on Evidence Presented After Summary Judgment Not an Abuse of Discretion
**WEB ONLY** Patent Infringement / Advertising Injury - Insurer Must Indemnify Patent Infringement Claim as Advertising Injury
**WEB ONLY** Patents / Inventorship - Jury Verdict Supported by Substantial Evidence
Trademark / Contributory Infringement - eBay Not Liable for Sales of Counterfeit Tiffany Jewelry
Trademarks / e-Commerce / EU - Google AdWords—Striking a Trademark Balance
Trademarks / Likelihood of Confusion - Single DuPont Factor Dispositive in Likelihood of Confusion Analysis
**WEB ONLY** Copyright / Claim Preclusion - Claim Preclusion Barring a Future Suit Against a New Defendant
Patents / Written Description
§ 112 Includes a Separate Written Description Requirement
Paul Devinsky and Korey Anvaripour
Sitting en banc, the U.S. Court of Appeals for the Federal Circuit, in a 9-2 decision, confirmed that 35 U.S.C. § 112, ¶1 includes a written description requirement separate from the enablement requirement. The Court explained that “[i]f Congress had intended enablement to be the sole description requirement of § 112, first paragraph, the statute would have been written differently.” Ariad Pharmaceuticals, Inc. v. Eli Lilly & Co., Case No. 08-1248 (Fed. Cir., Mar. 22, 2010) (en banc, Lourie, J.) (Newman, J, additional views) (Gajarsa, J., concurring)( Rader, J., dissenting-in-part, concurring-in-part) ( Linn, J., dissenting-in-part, concurring-in-part).
Ariad asserted claims from its patent that relates to the regulation of gene expression by the transcription factor NF-κB. The asserted claims recite methods encompassing a genus of materials comprising the single step of reducing NF-κB binding to NF-κB recognition sites in response to external influences. Lilly argued that the asserted claims are not supported by a written description because the patent specification fails to adequately disclose how the claimed reduction of NF-κB activity is achieved. Lilly argued that Ariad’s disclosure amounted to little more than a research plan and did not satisfy the patentee’s quid pro quo of disclosure as described in the 2004 Federal Circuit decision in University of Rochester v. G.D. Searle & Co., Inc. (See IP Update, Vol. 7, No. 7.)
In its April 2009 panel decision (IP Update, Vol. 12, No. 5), the Federal Circuit rejected Ariad’s claims as invalid for lack of written description but granted an en banc rehearing in August to resolve an issue that has been brewing for more than a decade. There were two questions for the en banc hearing: whether the first paragraph of 35 U.S.C. § 112 contains a written description requirement separate from the enablement requirement, and if a separate written description requirement is set forth in the statute, what is the scope and purpose of the requirement.
Over vigorous dissents from Judges Linn and (soon to be chief judge) Rader, the en banc panel held that § 112, ¶ 1, includes two separate description requirements: a written description of the invention and a written description of how to make and use the invention.
The Court rejected Ariad’s argument that the written description requirement was satisfied by the originally presented claims that form a part of the specification. In doing so, the Court cited the Supreme Court decision in Festo (see IP Update, Vol. 5, No. 5), characterized itself as a “subordinate federal court” and insisted it could not dismiss, as dicta, the statement in Festo that “[t]he patent application must describe, enable and set for the best mode of carrying out the invention.” (Emphasis in the original.)
The Federal Circuit thus concluded that a patentee could not rely on its claims to satisfy the written description requirement, noting that the “principal” function of claims “is to provide notice of the boundaries of the right to exclude and to define limits; it is not to describe the invention. … Claims define and circumscribe, the written description discloses and teaches.”
As the Court explained, this is not to say that the original claims do not contribute to the description and in certain cases even satisfy the written description requirement. Rather, citing its landmark decision in Ruching, the Court explained that in terms of the written description requirement, whether a person of skill in the art is enabled to make the claimed invention is “besides the point.” The question, the Court noted, is whether the specification discloses the claimed invention as “something [the inventors] actually invented.”
Broad Original Generic Claims Do Not Satisfy Written Description Requirement
Citing its 1997 decision in Regents of University of California v. Eli Lilly & Co., the Court explained that the written description requirement of the patent statute requires a description of an invention, not an indication of a result that one might achieve if one made that invention. Here, the Court found “Ariad’s specification describes only a generic invention that it purports to claim and that the asserted claims of the … patent are [therefore] invalid for lack of written description.”
The Court explained that although some original claims may satisfy the written description requirement, very broad or generic claims may not. The Court reasoned that while “a generic claim may define the boundaries of a vast genus of chemical compounds … the question may still remain whether the specification, including original claim language, demonstrates that the applicant has invented species sufficient to support a claim to a genus.” This problem is especially manifest in the case of genus claims that use functional language to define the boundaries of a claimed genus. In such a case, the Court explained, the functional claim may simply claim a desired result and may do so without describing species that achieve that result, thus failing to support the generic invention.
In order to satisfy § 112, the written description should provide “a precise definition, such as by structure, formula, chemical name, physical properties, or other properties of species falling within the genus sufficient to distinguish the genus from other materials.” While functional claim language may meet the written description requirement “when the art has established a correlation between structure and function,” merely “drawing a fence around the outer limits of a purported genus” is not an adequate substitute for describing a variety of materials constituting the genus and showing that one has invented a genus and not just a species.
Responding to a concern voiced by basic researchers (such as Ariad’s university scientists), the court paused to acknowledge that “[r]equiring a written description of the invention limits patent protection to those who actually perform the difficult work of ‘invention’” and makes it more difficult to patent “basic research” that has not yet been fully reduced to a practical implementation. However, the Court did not view this as inimical to the underlying purpose of the patent system, noting “that research hypotheses do not qualify for patent protection possibly results in some loss of incentive,” but there is “no evidence of any discernable impact on the pace of innovation or the number of patents obtained by universities.” Further, the Court stated that “claims to research plans also impose costs on downstream research, discouraging later invention. The goal is to get the right balance, and the written description doctrine does so by giving the incentive to actual invention and not ‘attempt[s] to preempt the future before it has arrived.’”
Actual Reduction to Practice Not Required
The Court did make it clear that “the written description requirement does not demand either examples or an actual reduction to practice” and that “a constructive reduction that identifies the claimed invention can satisfy the written description requirement.” Indeed, the Court noted that even “actual ‘possession’ or reduction to practice outside of the specification” has nothing to do with written description. Rather “the hallmark of written description is disclosure,” and the test for adequate disclosure requires “an objective inquiry into the four corners of the specification from the perspective of a person of ordinary skill in the art.” Based on that inquiry, the specification must describe an invention understandable to that skilled artisan and show that the inventor actually invented the invention claimed.
Judge Newman, in a separate concurring opinion, took on the “basic research” issue squarely, sympathetically noting that the patentees made a “basic discovery” relating to a “previously unknown protein,” and they even postulated that their discovery could “reduce the symptoms of certain diseases.” However, as Judge Newman explained, “the overriding policy of the patent system[s] requires both written description and enablement” and that “basic scientific principles are not the subject matter of patents.” Rather, the “role of the patent system is to encourage and enable the practical application of scientific advances.”
Judges Linn and Rader filed separate dissents, finding scant support either in the statute, the Supreme Court case law or the Federal Circuit’s own jurisprudence for the en banc ruling—a ruling that Judge Rader posited lay with a sequence of rulings that started with the Court’s “erroneous” 1997 decision in Eli Lilly, in which, Rader wrote, the Federal Circuit “ultra vires impos[ed] a new written description requirement for original claims.”
District Court Strikes Down Gene Patents and Methods of Using Genes as Unpatentable Subject Matter
William (Bill) Gaede
The U.S. District Court for the Southern District of New York granted the plaintiffs’ motion for summary judgment in the closely watched case Association for Molecular Pathology, et al v. USPTO and Myriad, et al., Case No. 09 Civ 4515 (SDNY, March 29, 2010) (Sweet, D.J.).
In this case, the plaintiff sought to challenge, on statutory and constitutional grounds, whether Myriad’s patent claims directed to the BRCA1 and BRCA2 genes were invalid as unpatentable subject matter. Judge Sweet ruled that Myriad’s patent claims directed to isolated DNA sequences, methods of detecting BRCA mutations and methods of using cells transformed with BRCA to screen for potential drugs are not patentable subject matter under 35 U.S.C. § 101. The court did not reach the plaintiffs’ constitutional claims and dismissed them without prejudice.
Myriad’s gene patents claimed isolated DNA encoding the BRCA1 or 2 proteins (or fragments thereof). Judge Sweet reasoned that these claims were not patent eligible because they claimed a product of nature. Judge Sweet reasoned that products isolated from nature must possess “markedly different characteristics” from the product in nature to constitute patentable subject matter. The court rejected the application of the isolated DNA in gene therapy, or for use in recombinant protein expression, as evidence of a marked difference, focusing instead on the similar properties of the claimed isolated DNA and DNA in nature (i.e., the genetic information encoded in its sequence).
Myriad’s method patents claimed methods of detecting BRCA mutations in a patient. Judge Sweet held these claims invalid under the Bilski machine or transformation test (see IP Update, Vol. 11, No. 11 ) because the claimed methods constituted unpatentable abstract mental processes of comparing or analyzing two gene sequences and the claimed steps of analyzing and comparing failed to recite specific transformation steps. The court noted that even if the analyzing or comparing steps were interpreted to include the steps of isolating DNA from a patient and sequencing that DNA, these transformation steps would be nothing more than data gathering, which is insufficient to meet the transformation requirement.
Myriad’s cell screening patent claimed methods of identifying compounds useful in treating BRCA-associated cancer by screening compounds against cells transformed with BRCA. Here, Judge Sweet found that the claims failed the transformation test because the so-called transformative steps were mere data gathering. Judge Sweet rejected the argument that drugs that affect the BRCA-cell impart a patentable transformation for the claim because compounds that fail in the screen would have no such transformative effect.
Patents / Willfulness / Damages
Reissued i4i Panel Opinion Clarifies Willfulness Analysis
In a re-issuance of an earlier opinion, the U.S. Court of Appeals for the Federal Circuit clarified the willfulness analysis of its earlier decision that affirmed a jury’s $200 million award against Microsoft in a patent infringement action. i4i Ltd. v. Microsoft Corp., Case No. 09-1504, 589 F.3d 1246 (Fed. Cir., Dec. 22, 2009), amended by 2010 U.S. App. LEXIS 5010 (Fed. Cir., Mar. 10, 2010) (Prost, J.).
This case and Microsoft’s petition for rehearing en banc, coming on the heels of the Federal Circuit’s Lucent and ResQNet.com cases in which the Court recently reined in damages awards, have been closely watched. However, Microsoft’s petition for en banc rehearing was denied.
Both i4i panel opinions and comments from the panel during oral argument indicate that the Court’s decision to affirm the large damage award may have been different if it felt free to undertake the more liberal substantial evidence review, which was disallowed because Microsoft failed to file a pre-verdict motion for judgment as a matter of law (JMOL) on the damages issue. Thus, in the reissued opinion, the Court did not change its analysis of the jury’s reasonable royalty rate of $98-per-sale of Microsoft Word, a finding favorable to i4i.
Rather than treble the $200 million damages award, the district court awarded only $40 million in enhanced damages upon the jury’s finding of willful infringement. On appeal, Microsoft challenged the willfulness verdict as unreasonable. In the reissued opinion, the Court explained in more detail the circumstantial evidence i4i presented at trial to prove each prong of the Seagate willfulness standard. Under that test, i4i had to present clear evidence that Microsoft “acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.” i4i also had to show that Microsoft knew or should have known it was risking infringement.
As the Court explained in the reissued opinion, i4i presented sufficient evidence at trial to prove to a reasonable juror that Microsoft was aware of the patent because its employees attended demonstrations of i4i’s software that practiced the patent. Employees also received i4i’s sales kits that touted the technology as both “patented” and cited the associated patent number. Also, i4i placed into evidence a series of internal Microsoft email chains—one of which noted that the “heart” of i4i’s software was patented. Despite that awareness, Microsoft did not attempt to design around the patent and continued development of its own similar software application. Thus, based on the evidence at trial, the Court determined that a reasonable juror could infer that Microsoft preceded despite an objectively high likelihood that it was infringing i4i’s patent.
Patents / Inequitable Conduct
En Banc Reconsideration of Inequitable Conduct Decision Announced
The U.S. Court of Appeals for the Federal Circuit announced it would reconsider, en banc, its January 2010 decision on inequitable conduct in Therasense v. Becton Dickinson (see IP Update, Vol. 13, No. 2) and vacated the earlier panel decision. In its order, the Court made clear it was prepared to take a new look at both the “materiality” and “intent” issues. Therasense Inc. v. Becton, Dickinson & Co., Case No. 08-1511 (Fed. Cir., Apr. 26, 2010) (Dyk, J.).
During prosecution before the United States Patent and Trademark Office (USPTO), the patentee made certain representations to the examiner regarding the patent claims and the prior art that were clearly inconsistent with statements made to the European Patent Office (EPO). In the panel decision the Federal Circuit found that the patentee’s actions rose to the level of inequitable conduct.
The Court has now granted a petition for rehearing en banc from Therasense (now Abbott Diabetes Care), ordering the parties to file new briefs addressing the following issues:
Should the materiality-intent-balancing framework for inequitable conduct be modified or replaced?
If so, how? In particular, should the standard be tied directly to fraud or unclean hands? See Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806 (1945); Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238 (1944), overruled on other grounds by Standard Oil Co. v. United States, 429 U.S. 17 (1976); Keystone Driller Co. v. Gen. Excavator Co., 290 U.S. 240 (1933). If so, what is the appropriate standard for fraud or unclean hands?
What is the proper standard for materiality? What role should the USPTO’s rules play in defining materiality? Should a finding of materiality require that, but for the alleged misconduct, one or more claims would not have issued?
Under what circumstances is it proper to infer intent from materiality? See Kingsdown Med. Consultants, Ltd. v. Hollister Inc., 863 F.2d 867 (Fed. Cir. 1988) (en banc).
Should the balancing inquiry (balancing materiality and intent) be abandoned?
Whether the standards for materiality and intent in other federal agency contexts or at common law shed light on the appropriate standards to be applied in the patent context.
Briefs of amici curiae may be filed without leave of court. The USPTO was also invited to file as amicus curiae.
Practice Note: Based on the questions presented, it would appear that the Court is prepared to finally settle the law of inequitable conduct and may be prepared to overturn some of its earlier panel decisions that are factually difficult to reconcile with each other.
Patents / Claim Construction
Prior Art References Mentioned in Specification Do Not Provide Corresponding Structure for a Means-Plus-Function Limitation
David A. Chase
Addressing the proper construction of a means-plus-function limitation, the U.S. Court of Appeals for the Federal Circuit held that courts cannot use structures from prior art references listed in the patent-in-suit to provide corresponding structure for a means-plus-function limitation. Pressure Products Medical Supplies, Inc. v. Greatbatch Ltd., Case No. 08-1602 (Fed. Cir., Mar. 24, 2010) (Rader, J.) (Newman, J., dissenting in part).
Pressure Products sued Greatbatch (d.b.a. Enpath Medical) for infringing a patent directed to a medical device known as an introducer, which “permits a surgeon to place and remove catheters or pacemaker leads into blood vessels during surgical procedures.” In order to remove an introducer from a patient’s body, a surgeon must split the introducer’s sheath. Pressure Products’ claimed invention included a “means for permitting removal of [the introducer sheath].”
The magistrate judge ruled that “means for permitting removal” required construction as a means-plus-function limitation. The magistrate judge determined that the corresponding structure for the claimed function was “score lines,” which the magistrate judge defined as “one or more line(s) defined in the hemostatic valve and introducer sheath.”
In the middle of trial, the district court, sua sponte, supplemented the definition of “score lines” to include structures disclosed in “a laundry list of prior art references” listed in the patent-in-suit. Applying the new claim construction, the jury returned a verdict of infringement. Enpath appealed.
On appeal, an expanded (five-judge) panel of the Federal Circuit held that supplementing the definition of a claim term during trial was not objectionable. The Court cited its own precedent that “district courts may engage in a rolling claim construction, in which the court revisits and alters its interpretation of the claim terms as its understanding of the technology evolves.” Nevertheless, four of the five judges vacated the district court’s claim construction, holding that the district court “erroneously used structures from the prior art references listed in the patent to provide a definition for score lines encompassing structures not disclosed expressly in the patent specification.” The four-judge majority reasoned that prior art references, identified in a patent by their titles and citations, do not provide a description sufficient to give the patentee the right to claim the structures disclosed in the prior art.
Judge Newman dissented, finding that the structures disclosed in the cited prior art references were “incorporated by reference in the specification” of the patent-in-suit. Judge Newman rejected the majority’s reliance on Atmel Corp. v. Information Storage Devices, reasoning that Atmel did not create a blanket rule prohibiting a patentee from relying on an incorporated reference to describe a corresponding structure. Rather, Judge Newman distinguished Atmel on the grounds that it involved a situation in which the only structure described to perform the claimed function came from the incorporated reference. In Pressure Products, she noted the incorporated references did not provide the only disclosure of corresponding structure.
Patents / Anticipation
Preamble Disregarded in Holding Claim Anticipated by Prior Art
Contact Paul Devinsky
The U.S. Court of Appeals for the Federal Circuit recently upheld a district court’s decision that a preamble stating an intended use for an invention is insufficient to distinguish a patent claim over prior art. Marrin v. Griffin, Case No. 09-1031. (Fed. Cir., Mar. 22, 2010) (Dyk, J.) (Newman, J. dissenting).
In this patent dispute, the district court granted summary judgment that the patent-in-suit, which related to a beverage cup scratch-off label, was invalid because it was anticipated under 35 U.S.C. § 102(b).
On appeal, a panel majority of the Federal Circuit held that the use recited in the preamble, namely that the scratch-off label was “for permitting a user to write thereon without the use of a marking implement” was not to be treated as a claim limitation. In finding that this use statement in the preamble was not limiting, the Court noted that “use descriptions such as this are rarely treated as claim limitations.” The Court further found that “the mere fact that a structural term in the preamble is part of the claim does not mean that the preamble’s statement of purpose or other description is also part of the claim.” The Court pointed out that “[h]ere, the preamble language only added an intended use, namely, that the scratch-off layer may be used for writing.” The Court agreed with the district court’s finding that the patentees had not relied on the preamble language as a limitation during prosecution. The Court also noted that, during prosecution, the patentees “expressly attested that the ‘writing means’ language was not a claim limitation,” thus “they cannot now assert that it was such a limitation.” The Court accordingly affirmed the district court's judgment of invalidity and non-infringement.
In dissent, Judge Newman asserted that “[t]he majority’s excision of the very portion of the claim that distinguishes the invention from the prior art, only to invalidate the claim on the basis of that prior art, is contrary to law.” Judge Newman went on to describe how the patentees distinguished prior art in their patent specification and noted that such differences “are ignored by my colleagues … [the majority] instead engrafts a meaning on the claim that the inventors did not present and the Patent Office did not examine.”
Practice Note: When drafting patent claims, it is important to ensure that elements potentially necessary to distinguish over prior art are recited in the body of the claim, not merely included in the preamble.
Patents / Standing
Patent Assignment Recorded at USPTO Creates a Rebuttable Presumption of a Valid Assignment
Please contact Paul Devinsky
Addressing the burdens of proof associated with a standing challenge based on the validity of an assignment, the U.S. Court of Appeals for the Federal Circuit upheld the U.S. International Trade Commission’s (USITC’s) determination that the recordation of a patent assignment at the U.S. Patent and Trademark Office (USPTO) created a rebuttable presumption of a valid assignment which shifted the burden to rebut that presumption to the party challenging standing. SiRF Technology, Inc. v. International Trade Commission, Case No. 09-1262 (Fed. Cir., Apr. 12, 2010) (Dyk, J.).
The dispute involved patents generally related to global position systems (GPS). One of the inventors conceived of the GPS-related invention while working for his previous employer, Magellan, where he had signed an employment agreement containing an assignment for “all inventions … which are related to or useful in the business of the Employer … and which were … conceived … during the period of the Employee’s employment, whether or not in the course of the Employee’s employment.” Several months later, the inventor left Magellan and began his employment with Global Locate. The inventor then assigned the invention to Global Locate and the assignment was recorded with the USPTO. Subsequently, Global Locate initiated an investigation at the ITC and the respondents challenged standing based on the prior (employment agreement) assignment to Magellan.
All parties agreed that when challenged to do so, Global Locate had the burden to establish standing. The Federal Circuit concluded that Global Locate met its burden by introducing the assignments from the inventors to Global Locate that had been recorded at the USPTO and that identified Global Locate as the patent owner. The Federal Circuit articulated the core standing issue as to “whether Global Locate also had the burden of establishing that an interest in the patent had not been previously assigned by the [inventor] to Magellan.” The Federal Circuit held, as a matter of federal law, that the recordation of a patent assignment creates a presumption of validity as to the assignment and places the burden to rebut such a showing on one challenging the assignment.”
Turning to the facts of the case, the Federal Circuit found, under federal law, that by use of the typical “employee assigns” language, the Magellan employment agreement contained an automatic assignment clause that immediately granted the employer rights in the subject invention, i.e., without any further action. Turning to whether the invention in question was in fact a subject invention, the Federal Circuit construed the “related to or useful in the business of the Employer” language under state law and found the language ambiguous. As permitted by the applicable state law, the Court looked to admitted extrinsic evidence to discern the meaning of the contract. The extrinsic evidence demonstrated that both companies considered the GPS invention at issue to be owned by Global Locate, not Magellan; i.e., the invention did not meet the “related in or useful in” criteria and therefore did not qualify as an invention subject to the automatic assignment clause. Accordingly, the Federal Circuit upheld the USITC’s decision that appellants failed to carry their burden to rebut the presumption of validity of the assignment from the inventor to Global Locate.
Patents / Federal Circuit Jurisdiction
A Trilogy of Appellate Jurisdictional Jurisprudence
Please contact Paul Devinsky
Three decisions, one each from the U.S. Court of Appeals for the Federal, Fifth, and Eighth Circuits, have addressed the circumstances in which the Federal Circuit acquires exclusive appellate jurisdiction and raises the spectre of Supreme Court review of another Federal Circuit appellate jurisdictional issue based on the pending certiorari petition filed for review of the U.S. Court of Appeals for the Second Circuit’s decision in Ferring v. Meijer.
Contract Claims Involving Patents
Denying a motion to transfer an appeal to the Federal Circuit, the U.S. Court of Appeals for the Fifth Circuit found that the appeal was rightfully before it because the issues presented were solely based on contract claims, with no substantial patent questions being raised. DuVal Wiedmann v. InfoRocket.com, Case No. 09-50787 (5th Cir., March 9, 2010) (per curiam, non-precedential) (King, J., Stewart, J., Haynes, J.).
In 2001, DuVal licensed its patent to InfoRocket in exchange for royalty payments. In August 2004, InfoRocket sent notice of its termination of the license agreement to DuVal. In 2008, DuVal filed suit against InfoRocket.com in the U.S. District Court for the Western District of Texas for breach of contract arising out of the licensing agreement. DuVal’s action did not present any patent claims or address any patent-related issues, however, InfoRocket’s affirmative defenses included non-infringement of the patent, invalidity of the patent and issues pertaining to the Lear doctrine. On summary judgment the district court found that the licensing agreement had been terminated on November 2004 and, therefore, did not reach any patent-related defenses. DuVal appealed to the Fifth Circuit and, after InfoRocket responded, moved to transfer the appeal to the Federal Circuit.
On appeal, the Fifth Circuit noted that whether the Federal Circuit had exclusive jurisdiction turned on whether the case “arose under” a federal patent statute. In denying the motion to transfer the appeal, the court observed that a case raising a federal patent-law defense does not “arise under” patent law, even if the defense is anticipated and even if both parties admit that the defense is the only question truly at issue. Further, the court reasoned that a defendant’s counterclaim cannot serve as a basis for “arising under” jurisdiction. The court concluded by stating, “It is well settled that if the patentee pleads a cause of action based on rights created by contract, the case is not one ‘arising under’ the patent laws.”
Declaratory Judgment Actions Involving Patents
Granting a motion to transfer an appeal to the U.S. Court of Appeals for the Tenth Circuit, the Federal Circuit found that the issues before it did not involve substantial questions of patent law, rather only contract law. Laboratory Corp. of America Holdings v. Metabolite Labs., Inc., Case No. 2008-1597 (Fed. Cir., Mar. 11, 2010) (Gajarsa, J.) (Dyk, J., dissenting).
Metabolite appealed to the Federal Circuit from a grant of summary judgment in favor of Laboratory Corporation of America Holdings (LabCorp) issued by the U.S. District Court for the District of Colorado. As background, in 1991, Metabolite granted LabCorp a license to practice a patent. In 1998, LabCorp began using an alternative to the patent and stopped paying royalties under the licensing agreement. Metabolite then filed a breach of contract and patent infringement action against LabCorp in the District of Colorado. The jury found that LabCorp both breached the licensing agreement and infringed the patent, awarding Metabolite $3.65 million in damages.
After the Federal Circuit affirmed the lower court decision that LabCorp willfully contributed to and induced infringement of the patent that related to a method of testing for vitamin deficiencies, the ensuing appeal reach all the way to U.S. Supreme Court, where the Court, after accepting certiorari, ultimately dismissed the case without reaching a decision on the issue of subject matter eligibility. (See IP Update, Vol. 9, No. 6.) Thereafter, LabCorp stopped practicing the patent entirely by outsourcing the patented activity to an entity that was separately licensed to practice the patent. In response, Metabolite filed a post-judgment motion, asserting that LabCorp’s referral to a third party violated an injunction. LabCorp simultaneously filed an entirely new action in the same district seeking a declaratory judgment that it had not violated the licensing agreement. Metabolite counterclaimed for breach of contract based on the licensing agreement. The parties filed cross motions for summary judgment and the district court held that no further royalties were due under the license agreement because it had been terminated. Metabolite appealed to the Federal Circuit. LabCorp filed a motion to dismiss or, in the alternative, to transfer the appeal to the Tenth Circuit for lack of jurisdiction.
The issue before the Federal Circuit was whether it had appellate jurisdiction. In framing the analysis, the Court noted that in a declaratory judgment action, jurisdiction is determined not from the declaratory judgment complaint itself, but rather from the “hypothetical” claims which the declaratory judgment defendant would have brought. Thus, the issue was whether Metabolite’s “hypothetical” claim depends on resolution of a “substantial question of federal patent law.” The Court found that Metabolite’s “hypothetical” claim would have been a breach of contract claim premised on LabCorp’s failure to pay royalties based on its outsourcing of certain patented activities. The Court explained that issues of inventorship, infringement, validity and enforceability present sufficient “substantial questions of patent law” to support jurisdiction, but in the present case, the elements to be proven involved the existence of a valid contract, breach and damages. Furthermore, the Court reasoned that the issue of infringement had already been resolved and was no longer in dispute. Finally, the Court noted that the mere presence of a patent as relevant evidence to a claim, by itself, does not present a “substantial issue of patent law.”
In addressing the dissent, the Court noted that neither party had contended that the outsourcing activity, which was the basis for Metabolite’s post-judgment motion and counterclaim in the present case, was different from LabCorp’s prior infringing activity from the prior case. Thus, the issue was not whether the outsourcing fell within the claims of the patent, but whether LabCorp breached the terms of the license agreement by outsourcing. The Court concluded by addressing the dissent’s claim that the res judicata effect of the underlying patent judgment extended jurisdiction to subsequent appeals. The Court claimed, “we do not take jurisdiction over cases simply because they relate to the res judicata effect of our prior judgment.” The Court thus granted the motion to transfer the matter to the Tenth Circuit.
Denials of Motions to Compel Arbitration in Patent Cases
The U.S. Court of Appeals for the Eighth Circuit weighed in on whether the Federal Circuit acquires exclusive appellate jurisdiction based on a denial of a motion to compel arbitration in a patent case. Industrial Wire Products, Inc. v. Costco Wholesale Corp., 576 F.3d 516 (8th Cir., Aug. 6, 2009) (Shepherd, J.).
Costco appealed a district court’s denial of its motion to compel arbitration and stay proceedings involving claims of patent infringement brought against it by Industrial Wire. In 2006 and 2007, Costco entered into an agreement in which Industrial Wire agreed to supply Costco with certain patented containers. The vendor agreement contained an arbitration clause. Costco began to sell a competitor’s product that embodied the patented invention. In 2008, Industrial Wire filed various claims against Costco, including patent infringement, in the U.S. District Court for the Eastern District of Missouri. Costco moved to compel arbitration.
The district court denied the motion, holding that the arbitration clause was not applicable because the claims did not arise from the vendor agreement. Costco appealed to the Eighth Circuit. The Eighth Circuit framed the issue as to whether, in a patent infringement action, an interlocutory appeal concerning arbitration falls within the exclusive appellate jurisdiction of the Federal Circuit. The court noted a split in the Circuits, with the Third and Federal Circuits reaching opposite conclusions.
The Federal Circuit views orders compelling arbitration as mandatory injunctions, and thus, under 28 U.S.C. § 1292(a)(1), the denial of an injunctive order is appealable to the Federal Circuit. The Third Circuit disagrees; it views orders denying motions to compel arbitration as not having an injunctive effect and thus do not vest the Federal Circuit with appellate jurisdiction.
The Eighth Circuit sided with the Third Circuit’s view. The court reasoned that since the district court’s denial of Costco’s motion was neither a “final judgment” (for purposes of 28 U.S.C. § 1295) nor “injunctive,” the Federal Circuit did not have exclusive jurisdiction over the appeal. Therefore, the court found that it had appellate jurisdiction and ruled on whether the arbitration clause covered the patent claims at issue.
Practice Note: Although a split still exists as to whether the Federal Circuit acquires exclusive appellate jurisdiction from a denial of a motion to compel arbitration in a patent case, the instances in which the Federal Circuit acquires exclusive appellate jurisdiction has, to some extent, been clarified. The focus is whether an action involves “substantial questions of federal patent law.” As shown by the LabCorp and DuVal holdings, actions involving patent licensing agreements and/or patent-related defenses do not confer exclusive appellate jurisdiction on the Federal Circuit simply because a patent is involved. The central inquiry is whether the issues presented involve the resolution of substantial issues of patent law, such as inventorship, infringement, validity and enforceability.
According to the U.S. Supreme Court’s 1988 decision in Christianson v. Colt Indus., the Federal Circuit has exclusive jurisdiction in patent based cases in which a substantial issue arising under the patent law must be resolved. Petitioner (Ferring) in the Ferring appeal (which precedes the three cases discussed above), also contended that there exists a split between the Second Circuit on the one hand and the Federal and Seventh Circuits on the other on the issue of determining, in the context of Walker Process (patent misuse) counterclaims, when exclusive appellate jurisdiction lay with the Federal Circuit.
Patents / Claim Construction
The Meaning of “Words of Degree” May Be “Readily” Ascertained
John C. Low, Ph.D.
After analyzing the proper construction of a claim term using a “word of degree,” the U.S. Court of Appeals for the Federal Circuit reversed a district court’s holding of invalidity based on indefiniteness of the claim term “readily.” Hearing Components, Inc. v. Shure, Inc., Case Nos. 09-1364, -1365 (Fed. Cir., Apr. 1, 2010) (Lourie, J.).
One of three patents-in-suit describes earphones with “a fibrous guard that is sound-porous but blocks cerumen, or ear wax.” The preamble of representative claim 1 included the limitation that “said wax guard being readily installed and replaced by a user.” During claim construction, the district court found this phrase indefinite due to the insufficiently explained term “readily.” The district court held that “[i]t would be extremely difficult, if not impossible, for someone attempting to design around claim 1 to determine what test group of users would be used to measure ease of replacement and which degree of difficulty would be sufficient to avoid infringement.”
On appeal, the plaintiff argued as a preliminary matter that the disputed term needed no construction because it was part of a non-limiting preamble. The Federal Circuit disagreed, holding that the “readily installed” phrase was a limitation because the patentee clearly relied on the phrase to distinguish the prior art. However, the Court also held that the phrase was not indefinite because the term could be given a reasonable meaning based on the specification. The Court relied upon two sentences in the specification, which state: “[The wax guard] is simple to install, easy to remove, and convenient to replace, even for older persons. The guard is inexpensive and requires no tools for installation or removal.” The Court found that the second sentence modified the first and concluded that “the written description gives a clear example of a wax guard that is ‘readily installed and replaced by a user’: one that ‘is inexpensive and requires no tools for installation or removal.’” In further support of its conclusion, the Court found that the specification disparaged prior art guards that were not readily installed and replaced and distinguished descriptions of non-analogous prior art device components that were relied upon by the district court for its indefiniteness holding.
The Court disagreed with the district court’s finding that the specification did not address the level of disability required of the terms “older persons” and those “advanced in years [who are] unable either to see clearly enough or to perform fine physical actions well enough to replace the filters.” The Court held that the examples in the specification applied irrespective of the age or level of disability of the users and that the specification “clearly ‘supplies some standard for measuring the scope of the phrase.’” The Court remanded the case for further claim construction and reserved judgment on related issues pending the court’s construction. The Court also found in favor of the plaintiff on all other issues contested on appeal.
Patents / Claim Construction
Relative Claim Terms Do Not Necessarily Cause Insoluble Ambiguity
Please contact Paul Devinsky
The U.S. Court of Appeals for the Federal Circuit affirmed a district court’s denial of the defendant’s motion for judgment as a matter of law (JMOL) on validity, holding that relative terms do not necessarily render a patent claim insolubly ambiguous. Power-One, Inc. v. Artesyn Technologies, Inc., Case Nos. 08-1501; -1507 (Fed. Cir., Mar. 30, 2010) (Kendall, J., sitting by designation).
Power-One sued Artesyn Technologies for infringement of its power systems patent. A jury trial was held, and the patent was found to be valid and infringed. Following the trial, Artesyn appealed the district court’s claim construction, asserting that the court’s construction of the term “POL regulator” was inadequate for failing to articulate the scope of the claims in a meaningfully precise manner. Specifically, the court’s construction of the terms “adapted to” and “near” were asserted to be facially vague and subjective, thereby leaving the jury free to make its own determination as to the claims’ scope in violation of Markman.
The Federal Circuit found that the intrinsic record supported the district court’s construction of “POL regulator” despite the use of relative claim language. A regulator is a power supply that receives power at one level and provides regulated output power at another level. The environment in which the terms were used in the construction of POL regulator dictated their preciseness. The phrase “to be placed near the one or more devices being powered as part of a distributed board-level power system” indicated that the voltage regulator was to be placed on the printed circuit board somewhere close the load. That the term “near” meant close to or at the load was supported by the specification, which disclosed that the POL regulator was just upstream from the load being powered. Additionally, the patent’s functionality requirement that the POL regulator be located “adjacent to the corresponding electronic circuit so as to minimize the length of the low voltage, high current lines” restricted the boundaries of where the regulator could be located in relation to the load it was powering. The Court concluded that one of ordinary skill in distributed power systems would know where to place the regulator in order to accomplish the stated objective.
Similarly, the Court found that the phrase “adapted to power a portion of the devices on the board” when read with the intrinsic record also made clear that a POL regulator is one that is “capable of delivering power, at the appropriate density, to one or more loads on the circuit board.” The language of the specification that states “a POL regulator would be included with each respective electronic circuit to convert the intermediate bus voltage to the level required by the electronic circuit” would unambiguously indicate to one of ordinary skill “that the output power of a POL regulator would be at a level required by, and therefore ‘adapted to,’ the electronic circuit receiving power from the POL regulator.”
Based on the these facts, the Court found that the intrinsic evidence supported the district court’s claim construction and the terms “near” and “adapted to” were not facially vague or subjective. The Court clarified that “[c]laims using relative terms such as ‘near’ or ‘adapted to’ are insolubly ambiguous only if they provide no guidance to those skilled in the art as to the scope of that requirement.” The Court noted that a claim need not be defined using a precise numerical measurement to be capable of giving a jury meaningful guidance as long as the claim language, when taken in context of the entire patent, provides a sufficiently reasonable meaning to one skilled in the art of distributed power systems.
Patents / Hatch-Waxman
Filing for Patent Term Extension: Every Calendar Day Counts
Please contact Paul Devinsky
After a patent term extension (PTE) application for its anti-coagulant Angiomax patent was denied yet again by the U.S. Patent and Trademark Office (USPTO), The Medicines Company (MDCO) has, for the second time, challenged the USPTO’s decision by filing an Administrative Procedure Act (APA) lawsuit against the USPTO in the U.S. District Court for the Eastern District of Virginia. Medicines Co. v. Kappos, Case No. 1:10-cv-00286 (E.D. Va., Mar. 16, 2010) (Hilton, J.).
At issue is whether The Medicines Company’s (MDCO’s) PTE application was timely filed. Under 35 U.S.C. § 156(d)(1), a PTE application must be submitted to the USPTO “within the sixty-day period beginning on the date the product received permission … for commercial marketing or use.” At 6:17 p.m. on Friday, December 15, 2000, MDCO received a facsimile from the Food and Drug Administration (FDA) indicating that Angiomax had been approved. MDCO then filed its PTE application on February 14, 2001 (i.e., 62 days after December 15, 2000). MDCO has argued, in part, that its application was timely filed because the term “date” in § 156(d)(1) should be interpreted to mean “business day,” not “calendar day.” Under a “calendar day” interpretation, the Friday evening transmission did not trigger the 60-day clock from starting until Monday, December 18, 2000. MDCO has also argued that denying its PTE application runs counter to the remedial purposes of the Hatch-Waxman Act. MDCO has maintained that the USPTO is not bound by the FDA’s “calendar day” interpretation of the term “date” in the analogous statute regarding how the extension regulatory review period is calculated (35 U.S.C. § 156(g)(1)(B(ii)).
On March 16, 2010, the U.S. District Court for the Eastern District of Virginia adopted these arguments of MDCO, deciding in favor of MDCO in its first APA suit by vacating the USPTO’s prior decision that the Angiomax PTE application was late. Medicines Co. v. Kappos, E.D. Va., No. 1:10-cv-00081. Just three days later, on March 19, the USPTO again denied MDCO’s PTE application. This most recent USPTO decision highlights that the USPTO is doggedly adhering to its “calendar day” interpretation of the statute and in doing so, it believes it is acting consistently with both the FDA interpretation of § 156(g)(1)(B(ii) and with congressional intent to provide a “non-extendable period, … by which all players would know their future rights.” The USPTO also points out that MDCO repeatedly acknowledged to various governmental bodies, including in its first unamended PTE application, and to the public, via its Annual Report, that FDA approval was on December 15.
With the Angiomax patent set to expire on May 23, 2010, MDCO has filed this most recent APA suit, arguing, in part, that the USPTO’s disregard of the district court’s opinion and failure to allow MDCO to address its decision is “arbitrary and capricious, an abuse of discretion, and contrary to law.”
Practice Note: Although it has yet to be determined whether MDCO will ultimately prevail in its suit again the USPTO and obtain the PTE it seeks, one thing is clear: the USPTO will not consider a PTE application it deems late. Therefore, PTE applications should be filed well before the 60-day deadline. In fact, the USPTO aptly points out in one of its decisions against MDCO that a PTE application is a short document, which, except for listing the approval date, can be prepared in its entirety prior to FDA approval.
Patents / Appeal
Board Does Not Give Deference to Positions Taken by Examiner
by Babak Akhlaghi
In a precedential decision, the Board of Patent Appeals and Interferences (the Board) clarified that on appeal the Board reviews particular findings contested by an appellant anew in light of all the evidence and argument on that issue. The Board also clarified that de novo review is limited to those issues contested by the appellant and that the Board as a general matter does not, take on itself to unilaterally review uncontested aspects of the rejection. Ex Parte Frye, Appeal No. 09-006013 (BPAI, Feb. 26, 2010).
The appellant’s claims directed to a shoe having a forwardly-inclined, reverse wedge required that “the rear heel section of the insole and the forward toe section of the insole meet at a point substantially halfway with respect to the upper surface.” (Emphasis added.) The appellant asserted that the examiner erred in rejecting several claims as anticipated under 35 U.S.C. § 102(b) by a prior art patent. The examiner found that the prior art discloses an insole with the claimed shape. The examiner further found that the location where the rear heel section and the forward toe section meet appeared to be the same location as shown in appellant’s drawings and deemed to be “substantially halfway.” The appellant contended that the location at which a prior art shoe (Snabb’s) insole transitions from a section having a rearwardly decreasing thickness to a section having a constant thickness would never be considered to be at a halfway point of the shoe.
In reviewing the issue, the Board clarified that, on appeal, the examiner’s findings are given no deference. The Board, however, noted that it does not as a general matter review the examiner’s findings that are not specifically challenged on appeal. Here, the Board agreed with the appellant that the examiner’s finding that Snabb discloses a meeting point located “substantially halfway” with respect to the upper surface of the shoe as recited in the claims rests on an unreasonably broad interpretation of “substantially halfway.” The Board noted that the meaning of substantially includes “reasonably close to: nearly, almost, about.” Accordingly, the Board reversed the examiner’s rejection—finding that the examiner had interpreted the prior art in a manner that was “unreasonably broad.”
Practice Note: The Board opinion is also notable because its signatories include the U.S. Patent and Trademark Office’s (USPTO’s) Director David Kappos, who is a statutory member of the Board under 35 U.S.C. §6(a). In a post devoted to Frye on his public blog, Kappos lauds the decision for “preserving a complete de novo review on the one hand, while not diverting Board effort into issues not raised by the appellant on the other hand, preserves the right balance between thorough review and administrative efficiency.” (See http://www.uspto.gov/blog/director/entry/ex_parte_frye_bpai_s for Kappos’ full comments.)
Knowledge of Litigation History and Impromptu Phone Calls Does Not Warrant Declaratory Judgment
Please contact Paul Devinsky
The U.S. Court of Appeals for the Federal Circuit recently affirmed a district court dismissal of a pre-emptive suit brought by Innovative Therapies, Inc., seeking a ruling of invalidity for certain patents covering vacuum-assisted technology. Innovative Therapies v. Kinetic Concepts, Inc., Case No. 09-1085 (Fed. Cir., Apr. 1, 2010) (Newman, J.).
The Federal Circuit’s opinion upheld the district court’s denial of declaratory judgment for plaintiff Innovative Therapies, Inc. (ITI), finding that plaintiffs had failed to show that a “controversy of such ‘immediacy and reality’ as to require the district court to accept declaratory jurisdiction” existed.”
ITI initiated the suit in September 2007 to secure a declaratory judgment stating that five patents owned by Kinetic Concepts, Inc. (KCI), are invalid and/or not infringed by a device to be sold by ITI, the “Svedman Wound Treatment System.” ITI argued that three factors demonstrated that sufficient adverse interests existed to entitle ITI to adjudication: KCI had sufficient knowledge of ITI’s Svedman device, given ITI’s representations to the Food and Drug Administration (FDA) that the device had the same “technological characteristics” as KCI’s pre-existing wound therapy device and subsequent FDA approval; phone calls between KCI executives and ITI, during which ITI informed KCI executives of the Svedman device and received a prediction from them that KCI potentially could sue ITI; and KCI’s history of litigation to enforce its patents.
In dismissing ITI’s complaint, the district court had ruled that the factors described above did not establish an actual controversy at the time ITI launched its suit and thus no declaratory jurisdiction existed. In affirming the district court’s opinion, the Federal Circuit noted that representations to a third person about “technological characteristics,” such as the representations made by ITI to the FDA, do not establish a “justiciable controversy with the patentee.” That is to say, even if KCI knew of the FDA approval for the Svedman device, such knowledge in and of itself did not create a controversy for the purposes of declaratory judgment.
Second, the Court agreed with the district court’s finding that phone calls with KCI executives, who had been former colleagues of ITI representatives, produced “impromptu responses,” not an “assertion of patent rights.” The content of the conversations failed to produce a controversy that would require the exercise of declaratory jurisdiction. The Court further noted that KCI’s history of litigation to enforce its patents shows a general propensity toward litigation, but did not establish an actual controversy between KCI and ITI over the Svedman device. The Court noted that prior litigation serves as one of several factors in the “totality of circumstances” assessed before exercising declaratory jurisdiction.
Finally, the Court ruled that subsequent events, such as the fact that KCI did sue ITI for infringement over the Svedman device in January 2008, did not affect the ruling that declaratory judgment would be improper. Acts occurring after the filing of ITI’s original complaint “did not establish that an actual controversy existed at that earlier time.”
Practice Note: Declaratory judgment should be reserved for near-certain or actual controversy and may be denied even if litigation between the parties appears to be inevitable or if litigation has commenced after filing of complaint seeking declaratory judgment.
Patents / District Court Jurisdiction
Abuse of Discretion for District Court to Remand to State Court Claims Arising Under Patent Laws
Please contact Paul Devinsky
The United States Court of Appeals for the Federal Circuit, in a case on remand from the United States Supreme Court, ruled that a district court abused its discretion in remanding a case to state court after declining to exercise supplemental jurisdiction over claims that arose under the federal patent laws, but also ruled that the case should be remanded to state court in any event after the district court dismisses such federal claims for failure to state a claim upon which relief can be granted. HIF Bio, Inc. v. Carlsbad Technology Inc., Case No. 06-1522 (Fed. Cir., Mar. 31, 2010) (Gajarsa, J.).
The plaintiffs originally filed this case in 2005 in California state court, alleging various state law causes of action and a single RICO claim under 18 U.S.C. §§1961-68. The entire case was removed to federal district court. Promptly upon removal, the district court dismissed the RICO claim, decided not to exercise supplemental jurisdiction over the remaining state-law claims and remanded the case back to state court. One of the defendants appealed to the Federal Circuit.
In the first appeal, the Federal Circuit dismissed the case, finding that the remand by the district court could not be reviewed under 28 U.S.C. §§1447(c) and (d) because it was “based on lack of subject matter jurisdiction.” The Supreme Court granted certiorari and concluded that such remand orders are not based on lack of subject-matter jurisdiction and instead are discretionary. The Supreme Court remanded the case back to the Federal Circuit for further proceedings. (See IP Update, Vol. 12, No. 5.)
On remand, the sole remaining issue was whether the district court abused its discretion in remanding plaintiffs’ amended complaint to California state court. Noting that a district court does not have discretion to remand claims that arise under federal laws, the Court first evaluated two causes of action that related to inventorship of two contradictory patent applications. The Federal Circuit found that the causes of action could only be resolved by “determining the true inventor(s) of competing patent applications.” The Federal Circuit further held that the claims arose under the federal patent laws and that the district court properly had jurisdiction, i.e., under 28 U.S.C. § 1338(a).
However, the Court found that, because the inventorship dispute involved pending applications, there was no private right of action because of 35 U.S.C. §116 does not provide a private right of action to challenge inventorship of a pending patent application.” (Emphasis added.)
Moreover, the Federal Circuit found that none of the remaining causes of action—ownership, conversion, actual and constructive fraud, intentional interference with contractual relations and prospective economic advantage, negligent interference with contractual relations and prospective economic advantage, breach of implied contract and unfair competition—arose under the federal patent laws and thus did not form a basis for district court jurisdiction.
The Federal Circuit held that the district court abused its discretion in remanding the case to state court because two of the causes of action arose under the patent laws for purposes of 28 U.S.C. §1338(a) jurisdiction. The Federal Circuit further held, however, that on remand the district court should dismiss both of those causes of action for failure to state a claim upon which relief can be granted. The Court directed the district court to remand the remaining causes of action to state court as they did not arise under federal law.
Patents / On-Sale Bar
Denial of Reconsideration Based on Evidence Presented After Summary Judgment Not an Abuse of Discretion
Michael J. Keller
The U.S. Court of Appeals for the Federal Circuit upheld a summary judgment of invalidity, finding a process for producing larger roses by inserting specifically sized nets over the buds was on sale more than one year before the patent application was filed. Delaware Valley Floral Group, Inc. v. Shaw Rose Nets, LLC., Case No. 2009-1357 (Fed. Cir., Mar. 11, 2010) (Prost, J).
Patentee Shaw admitted 18 times during a deposition that he invented the process claimed in U.S. Patent No. 5,765,305 in 1994 and sold roses grown with the patent process to a flower distributor the same year. The patent application was not filed until January 16, 1996. In an earlier interrogatory response Shaw stated the dates of conception and sale were 1995 and explained the discrepancy during his deposition as a “typo.” In response to a motion for sanctions under FRCP 11, Shaw submitted an errata sheet to his own deposition and a declaration from Muthiah, an employee hired in 1995, to show the date of invention was 1995. In response to a motion for summary judgment, Shaw executed a declaration stating he had confused the dates. In granting summary judgment, the district court found Shaw’s efforts to show his real date of conception was 1995 to be untimely. Shaw did not dispute that the invention was ready for patenting in 1994. Shaw’s motion for reconsideration on the basis of declaration from two employees was also denied because the evidence was not unavailable prior to the grant of summary judgment.
On appeal, Shaw raised two issues of material fact: the date of conception and whether the invention was ripe for patenting. Shaw also sought review of the district court’s denial of his request for reconsideration. The Federal Circuit upheld the trial court’s determination that roses grown by the patent process were on sale in the United States more than one year prior to filing the patent application, and that the process was ready for patenting at the time of sale. In doing so, the Court found the district court did not abuse its discretion. Shaw’s corrections to his own deposition testimony were deemed untimely since they were not made until after Shaw was confronted with a motion for sanctions under FRCP 11. Additionally, the declaration of Muthiah was determined to be inadmissible because the testimony as to these facts needed to be made with personal knowledge. The denial of the request for reconsideration was similarly upheld on the basis that Shaw failed to show the declarants were unavailable prior to the motion for summary judgment.
Practice Note: This case underscores the need for diligence by inventors in filing patent applications and for counsel to investigate facts beyond the file history as part of pre-suit due diligence. The outcome is also a caution to all counsel to double-check material facts admitted in discovery and make timely corrections when errors are found.
Patent Infringement / Advertising Injury
Insurer Must Indemnify Patent Infringement Claim as Advertising Injury
Elisabeth (Bess) Malis
The U.S. Court of Appeals for the Ninth Circuit reversed and remanded a grant of summary judgment in favor of an insurance company that refused to defend its insured against third-party claims of patent infringement, holding that the patent infringement claims were covered under the insurance policy as advertising injury. Hyundai Motor America v. National Union Fire Insurance, Case No. 08-56527 (9th Cir., Apr. 5, 2010) (Graber, J.).
In 2005, Orion IP, a patent holding company, sued Hyundai Motor America (Hyundai) alleging that the “build your own vehicle” feature on Hyundai’s website infringed its patented system of generating customized product proposals for customers looking to purchase a new car. Hyundai sought a defense from its insurer, National Union, based on a provision in the insurance agreement stating National Union will defend Hyundai in suits seeking damages for “advertising injury.” National Union refused to defend Hyundai, and the jury awarded Orion $34 million in damages. Hyundai brought the current action to recover its defense costs, asserting National Union had a duty to defend against Orion’s claims. The district court granted summary judgment in favor of National Union, holding that patent infringement does not constitute an “advertising injury.” Hyundai appealed.
The Ninth Circuit reversed, concluding that in the factual context of the case, Orion’s patent infringement claims were allegations of “misappropriation of advertising ideas” and thus fell within the scope of Hyundai’s insurance policy. First, Hyundai’s “build your own vehicle” feature constitutes advertising because the feature is marketed to the public at large, notwithstanding the fact that each individual user’s ultimate experience with the marketing tool is a customized experience. Second, the court acknowledged that while California and Ninth Circuit courts have previously rejected claims that patent infringement constitutes advertising injury, patent infringement may constitute an advertising injury when the advertising technique is itself patented. Finally, the Court ruled that there was a direct causal link between the advertisement and the alleged injury because Orion alleged that the “build your own vehicle” feature itself infringed on Orion’s patent.
Accordingly, the Ninth Circuit reversed and remanded, holding that National Union owed a duty to defend against the patent infringement claims.
Practice Note: This decision demonstrates that, depending on the nature of the patent in issue, infringement claims relating to marketing features or techniques on websites can be characterized as advertising injury.
Patents / Inventorship
Jury Verdict Supported by Substantial Evidence
Please contact Paul Devinsky
In a non-precedential opinion, the U.S. Court of Appeals for the Federal Circuit upheld a district court’s denial of Applera’s motions for judgment as a matter of law (JMOL) or for a new trial on ownership of the patents-in-suit. Applera Corp. v. Illumina, Inc., Case Nos. 09-1253, -1260 (Fed. Cir., Mar. 25, 2010) (Moore, J., non-precedential).
Dr. Stephen Macevicz is a patent attorney with a Ph.D. in biophysics and is the sole inventor of the patents-in-suit. In 1992, Dr. Macevicz joined Applera as in-house counsel. At that time, he signed an Employee Invention Agreement (EIA) which required him to assign to Applera any inventions that he developed during his employment unless three criteria were met: the invention was developed entirely on his own time; “no equipment, supplies, facility or trade secret of the Company was used in its development”; and “(i) it does not relate to the business or actual or demonstrably anticipated research or development of the Company, or (ii) it does not result from any work performed by [him] for the company.”
Applera had a policy that permitted its patent attorneys to take on outside work. In 1993, as part of his outside work, Dr. Macevicz prosecuted a patent application for Dr. Brenner, a subsequent Nobel Prize winner not affiliated with Applera. The following year, Dr. Macevicz himself developed a method of sequencing DNA and filed patent applications that matured into the patents-in-suit. In 1995, Dr. Macevicz left Applera and joined Solexa, which was subsequently acquired by Illumina.
Applera filed the present suit seeking a declaratory judgment against Dr. Macevicz and Solexa raising issues of ownership, non-infringement and invalidity of the patents-in-suit. The issue of inventorship survived summary judgment and was presented to the jury, which returned a verdict in favor of Dr. Macevicz and Solexa. The jury found that Dr. Macevicz’s inventions met all three of the exceptions laid out in his EIA and, therefore, were owned by him. Applera moved for JMOL or, in the alternative, for a new trial. The district court denied Applera’s motion and held that ample evidence supported the jury’s verdict.
The Federal Circuit agreed that substantial evidence supported the jury’s finding that all three criteria were met. The Court noted there was no dispute that Dr. Macevicz developed the inventions on his own time. Moreover, the evidence showed that Dr. Macevicz described his inventions in his personal laboratory notebook, that he used his own home computer to prosecute the patents and that there was no evidence he used any of Applera’s trade secrets. Finally, the Court looked at whether the inventions relate to Applera’s business or (result from work performed by Dr. Macevicz for Applera. Dr. Macevicz argued that in order to meet the third criterion, he only had to satisfy one of the two conditions. Applera contended that both conditions must be satisfied. The Court sided with Dr. Macevicz and refused to rewrite the EIA by changing the “or” to an “and” in the third criterion. The Court noted that Dr. Macevicz presented evidence that the inventions-in-suit originated from his own earlier work on sequencing by hybridization as well as inspiration gained from working on Dr. Brenner’s patent application and did not result from work he performed for Applera. Finding that substantial evidence supported the jury’s findings, the Court affirmed the district court.
Trademark / Contributory Infringement
eBay Not Liable for Sales of Counterfeit Tiffany Jewelry
Upholding a district court’s 2008 ruling that eBay was not liable for trademark infringement based on sales of counterfeit Tiffany & Co. jewelry on eBay’s website, the U.S. Court of Appeals for the Second Circuit held that an online service provider must possess more than a general knowledge or reason to know that its service is being used to sell counterfeit goods in order to impose contributory trademark infringement liability. Tiffany v. eBay, Case No. 08-3947 (2nd Cir., Apr. 1, 2010) (Sack, J.).
In 2004, Tiffany sued eBay for trademark infringement, trademark dilution and false advertising. Tiffany’s claims were based upon third-party sales of counterfeit jewelry through eBay’s website and eBay’s use of the TIFFANY trademark in internet advertisements. Following a bench trial the district court decided in eBay’s favor on all claims.
At the district court, Tiffany argued that eBay was liable for direct trademark infringement by using Tiffany’s TIFFANY mark on eBay’s website and by purchasing sponsored links to trigger internet advertisements through various internet search engines. The district court found that eBay’s use of the mark was permitted under the doctrine of nominative fair use, which allows a defendant to use a plaintiff’s trademark to identify the plaintiff’s goods so long as there is no likelihood of confusion concerning the source of the defendant’s product or the mark holder’s sponsorship or affiliation. Tiffany appealed.
Without adopting or rejecting the doctrine of nominative fair use, the 2nd Circuit held that eBay’s use was lawful because 2nd Circuit precedent holds that a defendant may lawfully use a plaintiff’s trademark if doing so is necessary to describe the plaintiff’s product and such use does not imply a false affiliation or approval by the plaintiff of the defendant. The court found eBay’s use of the TIFFANY mark on its website and in sponsored links was lawful because eBay used the mark to describe accurately the genuine Tiffany brand goods offered on the eBay website and because eBay did not use the mark in a manner to suggest that Tiffany was affiliated with eBay or endorsed the sale of Tiffany brand products through eBay’s website.
Next, the court considered whether eBay was liable for contributory trademark infringement based on its provision of services it provides to third parties who use the eBay website to sell counterfeit Tiffany products. Tiffany argued that eBay was contributorily liable because eBay allegedly continued to supply its services to sellers of counterfeit goods while knowing or having reason to know that counterfeit Tiffany merchandise was being sold on its website. Notwithstanding Tiffany’s argument, the 2nd Circuit agreed with the district court that eBay was not contributorily liable because Tiffany failed to show that eBay knew or had reason to know of specific instances of actual infringement beyond those it took action against once it learned of them. The court noted the great time and expense eBay had incurred, and continued to incur, in developing and maintaining multiple anti-fraud mechanisms and a take-down policy for trademark owners to report sales of counterfeit goods. Further, for any specific reports of infringement that eBay received, it addressed the particular listings immediately with a variety of actions, including removal of the listing and banning users identified as selling counterfeit goods. Although eBay may possess some general knowledge that counterfeit goods are being sold on its website, the Court stated that for contributory infringement liability to exist, “a service provider must have more than a general knowledge or reason to know that its service is being used to sell counterfeit goods. Some contemporary knowledge of which particular listings are infringing or will infringe in the future is necessary.”
In considering Tiffany’s trademark dilution claim, the 2nd Circuit agreed with the district court that eBay was not liable for dilution because eBay did not use the TIFFANY marks in efforts to create an association with its own product. Rather, eBay used the marks to truthfully advertise and identify the availability of authentic Tiffany merchandise on the eBay website.
As for Tiffany’s false advertising claims, the district court found that eBay’s advertisements were not literally false because genuine Tiffany products were available on the eBay website. Moreover, the district court found that the advertisements were not misleading for three reasons: eBay’s use was permitted under the nominative fair use doctrine, Tiffany did not prove that eBay had specific knowledge of counterfeit jewelry offered in individual listings, and to the extent the advertisements were in fact misleading, it was not due to eBay’s conduct but to that of the sellers of counterfeit Tiffany merchandise.
In deciding to remand Tiffany’s false advertising claims, the 2nd Circuit recognized that the district court’s three reasons were relevant to certain of Tiffany’s other claims but not the false advertising claim. The court explained that to properly evaluate whether eBay’s advertisements so misled consumers as to constitute false advertising, a court must determine whether extrinsic evidence indicates that the advertisements were misleading or confusing. Because the district court’s analysis of Tiffany’s false advertising claim did not reflect consideration of such extrinsic evidence, the 2nd Circuit remanded the case to the district court for the limited purpose of reconsidering the false advertising claims.
Trademarks / e-Commerce / EU
Google AdWords—Striking a Trademark Balance
Please contact Paul Devinsky
The eagerly awaited decision of the European Court of Justice (ECJ) found that Google’s AdWords system, which uses trademarks in its search engine, does not infringe EU trademark rights. Google France S.a.r.l. v. Louis Vuitton Malletier SA, Case No. C-236/08 (E.C.J., Mar. 23, 2010).
Google’s AdWords system allows advertisers to purchase keywords (which may include trademarks) that trigger sponsored advertising links in internet search results. The ECJ was asked to consider (in three joined cases: Louis Vuitton, Viaticum and Luteciel) whether it is lawful to use trade marks as keywords where consent has not been given by the brand-owners.
Article 5(1)(a) of the Trade Marks Directive provides that the proprietor of a trademark is entitled to prevent a third party from using, without the proprietor’s consent, a sign identical with the trademark when that use is in the course of trade, is in relation to goods or services which are identical with, or similar to, those for which that trademark is registered or is liable to affect the functions of the trade mark.
The ECJ found that neither Google’s role as a referencing service provider nor its role in creating the technical conditions supporting the use of the sign is in and of itself a use of the sign in a manner that constitutes trademark use. Accordingly, under the ECJ decision, a mere referencing service provider does not use a sign in the course of trade. Consequently, Google did not violate the brand owners’ trademark rights.
The ECJ also considered the rights of brand-owners in terms of whether they have the right to prevent use of their trademarks in AdWords if that use adversely affects the function of their trademarks. The primary function of a mark is that of indicating origin—a function that the brand owners argued is adversely affected where a third party’s advertisement does not enable normally informed and reasonably attentive internet users to ascertain who (other then the proprietor of the mark) may be using a mark, or if the user is in privity of some sort with the proprietor or is a true third party (or where the third party use only enables internet users to do so with great difficulty).
On this issue, the ECJ recognized that a brand-owner has the right to ensure that third parties do not cause confusion as to the origin of the goods advertised, especially in the context of counterfeit goods. The ECJ noted that purchasers and users of AdWords need to appreciate the need for transparency in the display of advertisements and that third parties may not create the impression of a link in the course of trade between the goods or services in question and the proprietor of the trademark.
Some guidance was also provided by the ECJ as to whether Google’s AdWords service was an “information society service” within the meaning of the Electronic Commerce Directive (2000/31). If so, absent notice of the unlawful conduct, Google could not be held liable for the conduct of the advertisers. The exemption from liability under the EC Directive applies only if the activity of the information society service provider is of a mere technical, automatic and passive nature, which implies that the service provider has neither knowledge nor control over the information which is transmitted or stored.
Therefore, Google is and will remain exempt from liability as an internet referencing service provider in situations where it does not play an active role that would give it knowledge of, or control over, the data stored, unless it has knowledge of the infringement—e.g., in the form of notice—and does not thereafter remove the objectionable data.
Trademarks / Likelihood of Confusion
Single DuPont Factor Dispositive in Likelihood of Confusion Analysis
Rita J. Yoon
The U.S. Court of Appeals for the Federal Circuit held that the Trademark Trial and Appeal Board (the Board) did not err in relying on a single DuPont factor, dissimilarity of the marks, to find no likelihood of confusion. Odom’s Tennessee Pride Sausage, Inc. v. FF Acquisition, L.L.C., Case No. 09-1473 (Fed. Cir., Mar. 19, 2010) (Mayer, J.).
Odom’s Tennessee Pride Sausage, a food producer, opposed the registration of supermarket chain FF Acquisition’s trademark application for a farm boy design, arguing that FF’s design was likely to cause consumer confusion with Odom’s federally registered design marks, also depicting a farm boy. The Board concluded that FF and Odom’s design marks were so markedly dissimilar—inter alia, FF’s farm boy has a piece of straw in his mouth and is wearing shoes while Odom’s marks do not have these design elements—that no likelihood of confusion could exist as a matter of law and granted summary judgment in favor of FF. Odom appealed.
Odom argued that the Board erred by basing its decision on a single DuPont factor, dissimilarity of the marks, and improperly focused on individual aspects of the applicant and opposer’s design marks as opposed to their overall commercial impressions. The Federal Circuit disagreed, concluding that the Board properly compared individual aspects of both parties’ marks because “it is these individual aspects that collectively create a difference in the overall impressions made by the marks.”
Further, in affirming the Board’s decision, the Court held that a single DuPont factor can outweigh other relevant DuPont factors in a likelihood of confusion analysis, particularly if the single factor is the dissimilarity of the marks.
Copyright / Claim Preclusion
Claim Preclusion Barring a Future Suit Against a New Defendant
Considering claim preclusion doctrine, the U.S. Court of Appeals for the First Circuit affirmed a finding of preclusion in a subsequent suit against a different defendant. Airframe Sys., Inc. v. Raytheon Co., Case No. 09-1624 (1st Cir., Mar. 31, 2010) (Lynch, J.).
Airframe Systems sells software licenses. Aircraft Integration Systems (AIS) was one of its licensees. AIS, owned by Raytheon, sent a letter on Raytheon letterhead to a then-employed Airframe technician seeking support for a problem. The employee solved the problem by allegedly downloading source code onto an AIS computer without Airframe’s authorization.
L-3 Communications purchased AIS from Raytheon in 2002. In 2003, Airframe discovered that AIS possessed the code. Also in 2003, in an unrelated litigation against L-3, Airframe discovered the AIS letter to Raytheon.
Airframe sued L-3 and the former employee in the U.S. District Court for the Southern District of New York in 2005, alleging unauthorized possession of the code under the Copyright Act. By court invitation, Airframe later filed a letter seeking to amend its complaint to further allege unauthorized use. The court never decided that issue, but dismissed the complaint for failure to state a claim because the complaint did not allege actual use of the code. Airframe did not appeal either the decision or the court’s failure to decide whether to permit the filing of an amended complaint.
In 2007, Airframe sued those same parties and Raytheon in the U.S. District Court for the District of Massachusetts, newly alleging unauthorized use. That court dismissed the action under claim preclusion. Airframe appealed with respect to the Raytheon defendant.
The First Circuit upheld the decision because the New York and Massachusetts actions were sufficiently related and the parties were closely related. The court rebuffed Airframe’s assertion that the difference between its new unauthorized use claim and the unauthorized possession claim renders claim preclusion inappropriate. As viewed by the First Circuit, the question was whether the actions share a common nucleus of facts. The court held that they did because they arose from the same series of events in the same timeframe.
Second, citing modern claim preclusion doctrine, the court “flatly reject[ed]” Airframe’s assertion that Raytheon could not assert claim preclusion because Raytheon is not identical to L-3. Raytheon shares a close relationship with L-3 vis-à-vis their former and current ownership of AIS. The court noted that Airframe knew of Raytheon’s relationship to AIS at the time of the New York action, but nevertheless chose to sue only L-3 for infringement and was now left “to live with those choices.”
Practice Note: Carefully consider the corporate history of any alleged infringer when investigating possible defendants to litigation.