Patent Law Blog (Patently-O)

USPTO Continuation Rule Changes

• Small Business Administration concludes that the continuation rule changes "are likely to have a significant economic impact on a substantial number of small entities, including small businesses and small independent inventors."
• AIPLA’s also opposes the proposed changes.
• Five law firms support the rule change — interestingly, those firms all sent in the same form letter (or at least derivative works). [Matt Buchanan has more].  CORRECTION: The fifth letter — from Quine IP Group — is a recent addition and actually opposes the change.

Supreme Court Moves Toward Hearing AT&T v. Microsoft Software Export Case

When can a U.S. patent be used to recover damages for infringement occurring abroad? The answer is actually quite often.  Over the past couple of years, plaintiffs have recovered huge damages (or settlements) in U.S. courts for activities that at least partially occurred abroad.  In NTP v. RIM, RIM’s BlackBerry system was considered to be used “in the United States” because the e-mail exchange was being controlled by and for the beneficial use of U.S. customers.  In Eolas v. Microsoft and AT&T v. Microsoft, the Court of Appeals for the Federal Circuit (CAFC) agreed that the transmittal of computer code could create liability under 271(f) a “component” of a patented invention “supplied” from the U.S. In Shell v. Union Carbide the court further clarified that method claims could have components as well — in this case, the component was a compound used in the patented chemical process.  To now, each of these cases have stalled after the CAFC decision when the Supreme Court failed to accept them on petition for certiorari.  The lone remaining case is AT&T v. Microsoft.  In that case, the Supreme Court has asked the U.S. Solicitor General for the views of the U.S. Government before the Court makes its decision on certiorari.  As a historical note, the Supreme Court has not addressed the issue of extraterritorial infringement since the DeepSouth Packing case of 1972, which prompted Congress to pass Section 271(f).

AT&T v. Microsoft (on petition for certiorari).

This issue is huge for Microsoft and for U.S. software developers. Microsoft develops much of its software in the U.S., and ships the code around the world.  In the Eolas case, of the half-billion dollar verdict, $330 million was premised on exported code.

In the AT&T case, the CAFC essentially held that Microsoft’s act of shipping its code to a foreign office constitutes patent infringement and any consequential sales or licensing of the shipped code will create patent infringement damages.

The software here involves enhancing the sound quality of synthesized speech while maintaining a high data compression.

In its petition, Microsoft asks two questions:

1) Whether digital software code – an intangible sequence of “1’s” and “0’s” – may be considered a “component[] of a patented invention” within the meaning of Section 271(f)(1); and, if so

2) Whether copies of such a “component[]” made in a foreign country are “supplie[d] . . . from the United States.”

The petition attempts to show that the CAFC has gone astray by interpreting the statute in a manner “appropriate to the technology at issue” rather than according to its “plain meaning and legislative history” as required by Supreme Court precedent.

The petition also impliedly argues that software itself should not be patentable.  

The decision below is premised on a commonly held misunderstanding of the nature, and thus the patentability, of software.

Noted attorney Ted Olson and his able team (including Matthew McGill) are handling the appeal.

AT&T’s Opposition

AT&T quickly notes that Microsoft has already appealed this identical issue in the Eolas case, and lost there as well. In addition, AT&T discusses Microsoft’s highly public (but yet unsuccessful) lobbying for patent reform in Congress as evidence that this is an issue that has been considered and rejected by the lawmaking body. Of course, AT&T also argues that the lower court decision does nothing to “expand the extraterritorial reach of U.S. patent laws.

Petitioner’s extraterritoriality argument is a red-herring.  Years before . . . the court defined the limits of section 271(f) in order to avoid “the appearance of ‘giving extraterritorial effect to United States patent protection.’”

Waymark (looking only to activity within the U.S. when adjudging infringement).

Amicus in Support of Petitioner by the Software & Information Industry Association (SIIA).

The SIIA is a trade group with over 750 corporate members argued that the CAFC’s new rule upsets settled expectations.

SIIA makes what I see as an important distinction that in Microsoft’s case, the code supplied from the U.S. is not actually incorporated into the infringing products.  Rather, the code shipped abroad, copied, and then the copies are installed in the foreign country.  They argue that the act was never intended to capture millions of infringing acts based on the supply of only a single component.

Next Steps:

The SG is expected to take several months to provide its input, and this case will not be heard until 4th Quarter 2006. It is currently too-late for parties to file amici briefs.  However, the SG will accept input from the public on this important issue.

Documents:

• Microsoft Petition
• AT&T Opposition
• SIIA Amicus Brief
• Microsoft Reply
• AT&T Supplemental Opposition
• Microsoft Supplemental Reply
• Microsoft Appendix
• CAFC Decision
• District Court Decision (Pauley S.D.N.Y.) [Thanks to Arun Chandra at Hogan Hartson for the heads-up].

Links:

• NTP v. Research in Motion, (271(f) “component” does not apply to method claims).
• AT&T v. Microsoft, 414 F.3d 1366 (Fed. Cir. Jul. 13,2005) (271(f) “component” applies to method claims and software being sold abroad);
• Eolas v. Microsoft, 399 F.3d 1325 (Fed. Cir. Mar. 2,2005) (271(f) “component” applies to method claims);
• Pellegrini v. Analog Devices, 375 F.3d 1113 (Fed. Cir. 2004) (271(f) “component” does not cover export of plans/instructions of patented item to be manufactured abroad);
• Bayer v. Housey Pharms, 340 F.3d 1367 (Fed. Cir. 2003) (271(g) “component” does not apply to importation of ‘intangible information’).

Notes:

** 35 U.S.C. 271(f)

(1) Whoever without authority supplies . . . from the United States . . . a substantial portion of the components of a patented invention . . . in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

(2) Whoever without authority supplies . . . from the United States any component of a patented invention that is especially made . . . for use in the invention and not a staple article . . . suitable for substantial noninfringing use. . . , knowing that such component is so made . . . and intending that such component will be combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

CAFC's Jurisdiction Extends to Settlement Disputes Where Settlement References the Patent Act

Parental Guide of Texas v. Thomson (Fed. Cir. 2006).

The most interesting aspect of this case is that the CAFC was willing to decide it.  In a post-settlement dispute over damages, Parental Guide originally appealed to the Fifth Circuit.  On motion, the Fifth Circuit transferred the case to the CAFC because the settlement agreement “expressly refers to the patent statute, 35 U.S.C. § 284.”

Because it was “at least plausible” that a determination of Section 284 would be necessary to decide the case, the appellate panel felt compelled to hear the appeal.

 

Judge Linn Dissent: File Wrapper Should Not Serve as Prior Art

Bruckelmyer v. Ground Heaters (Fed. Cir. 2006).

The majority held that an unpublished patent application that eventually issued as a Canadian patent was a “printed publication” under 35 U.S.C. § 102(b).  Judge Linn dissented:

[T]he text of an issued patent does not generally serve to guide researchers to the file history for a more expansive disclosure of the described invention, and it certainly does not lead researchers to the file history for disclosure of subject matter not described in the issued text. . . . The fact that an additional drawing, disclosing additional structure, is present in the application file is a matter of sheer happenstance nowhere indicated in the issued patent. For this reason, it is my view that, as in Cronyn, the anticipatory drawings at issue in this case are "not accessible to the public because they have not been cataloged or indexed in a meaningful way." . . . In this case, in addition to not being meaningfully indexed, as discussed above, no copies were known to have been made or distributed during the critical period, and the ’119 application was available for viewing only at the Canadian Patent Office in Hull, Quebec.

 

Unpublished Foreign Patent Application Invalidates Later Filed Patent

Bruckelmyer v. Ground Heaters (Fed. Cir. 2006).

Bruckelmyer has two patents on methods of thawing frozen ground so that a layer of concrete can be laid on top of the ground. The trial court found Bruckelmyer's patents obviated by a Canadian patent application and decided the case on summary judgment.

Interestingly, the Canadian patent application included two important figures that were cancelled during prosecution.  Those figures were reportedly required for a finding of obviousness.

On appeal, Bruckelmyer argued that the unpublished Canadian patent application was not a “printed publication” under 35 U.S.C. Section 102(b) and thus, was not prior art.

The CAFC found that the original application was “publicly accessible,” and thus a prior art “printed publication” because the Canadian prosecution file was open to the public more than a year before Bruckelmyer filed his application.

A given reference is "publicly accessible" 

upon a satisfactory showing that such document has been disseminated . . . to the extent that persons interested and ordinarily skilled in the subject matter . . . exercising reasonable diligence, can locate it and recognize and comprehend therefrom the essentials of the claimed invention without need of further research or experimentation.

In re Wyer, 655 F.2d 221, 226 (CCPA 1981).

Here, the Court found that this particular application could be located because the related patent discussed a solution for the same problem addressed by Bruckelmyer's patents.

Thus, the application was found to be prior art even though there was no evidence that it was actually disseminated.

LiveBlogging The Blog Law Conference

Day one of our blog law conference has been a great success.  Cathy Kirkman of Wilson Sonsini and I are co-hosts of this LSI conference that has been billed as the first CLE covering the “law of blogs.”

• Joe Gratz has a synopsis and photos. 
• Denise Howell brings her own insight and notes that  “[t]omorrow should be particularly exciting, featuring among other things EFF's Kurt Opsahl, fresh off today's oral argument in Apple v. Does.”
• Veteran David Maizenberg noted his highlight — he met blog diva Denise Howell in person. (Tomorrow I get to moderate a panel with Denise, Bennet Koren, and Greg Kopta).
• Cathy Kirkman gives some links.
• Kevin O’Keefe gave very well received talk and has some notes at his blog.
• Some discussion today of Robert Scoble and his disruptive book Naked Conversations (with Shel Israel).

In Lava Trading Dissent, Judge Mayer Laments de Novo Review

Lava Trading v. Sonic Trading Management (Fed. Cir. 2006, 05–1177)

The majority overturned a lower court claim construction, but Judge Mayer dissented:

The decision today is yet another example of the unfortunate consequences of Markman v. Westview Instruments, Inc., 52 F.3d 967 (Fed. Cir. 1995) (en banc), Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448 (Fed. Cir. 1998) (en banc), and Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc), which cemented this court’s jurisprudence with respect to claim construction as being purely a matter of law subject to de novo review. Because claim construction is treated as a matter of law chimerically devoid of underlying factual determinations, there are no "facts" on the record to prevent parties from presenting claim construction one way in the trial court and in an entirely different way in this court. By not dismissing this case, we issue a decision based on an undeveloped record. We set ourselves up to have to decide claim construction again later, which could well differ from the ruling today. Furthermore, allowance of an appeal of the trial court’s perfunctory, offhand ruling from the bench, for all intents and purposes allows an interlocutory appeal of claim construction, which portends chaos in process.

Claims Should be Construed within the Context of the Accused Device

Lava Trading v. Sonic Trading Management (Fed. Cir. 2006, 05–1177)

In today's case of Lava Trading, the CAFC again found that knowledge of the accused product is import for providing "a proper context for an accurate claim construction. . . . Without the vital contextual knowledge of the accused products or processes, this appeal takes on the attributes of something akin to an advisory opinion on the [patent] scope. " 

This decision falls in line with the recent Wilson Sporting Goods case that held “while a claim is not to be construed in light of the accused device, in an infringement case, it must inevitably be construed in context of the accused device.”

After Winning Jury Verdict, RealNetwork Speaks-Out for Patent Reform

RealNetworks last week won their patent case against the Boston company Ethos Technologies. [Article] Ethos had asserted that Real infringed two of Ethos’ patents related to downloading technology.  According to reports, the jury returned a “unanimous verdict finding that Real did not infringe on any of the 10 claims asserted against in the suit, which was filed in 2002 and sought over $200 million in damages. Moreover, the jury invalidated 7 of the 10 claims.”

In a recent interview, I asked Dave Stewart, Real’s VP and Deputy General Counsel, whether this case altered Real’s position on patent reform:  

[Dave Stewart]  Our experience in the Ethos litigation confirms our longstanding position on patent reform.  We believe the patent system is in need of reform to improve both the quality of the patents issued as well as the time it takes to issue a patent.  As a general matter, we have been supportive of most of the Business Software Alliance's patent reform efforts.  One important step in this regard would be to ensure that all fees paid by inventors be specifically designated for use by the USPTO, which is significantly under funded.

Dave’s response is probably representative of many of the leading technology companies — reform is needed to improve quality and reduce pendency.

Constitutionality of Andrew Corp. v. Beverly Mfg.

By Jeff Steck

In a recent district court decision, Andrew Corp. v. Beverly Mfg. Co., (N.D. Ill. Feb. 16, 2006), already summarized in these pages, the court excluded a non-infringement opinion from evidence when opinion counsel—because of a conflict of interest—ought never to have provided the opinion in the first place. (The opining law firm found itself representing both the patentee and the accused infringer.) The case, then, will be tried under the fiction that the accused infringer, Beverly, knew of the relevant patent but failed to obtain legal advice. Beverly, of course, will be at much greater risk of enhanced damages for willful infringement. The court appreciated that Beverly may be guilty of nothing worse than an unfortunate selection of counsel, and it recognized that choosing a remedy was “unpleasant,” but the court did not take into account the possibility that any resulting award of enhanced damages may well be unconstitutional.

Enhanced damages in an infringement action are a form of punitive damages, and the award of punitive damages is subject to substantive Due Process restrictions. State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 417 (2003). Consistent with Due Process, the Supreme Court requires that “punitive damages should only be awarded if the defendant’s culpability, after having paid compensatory damages, is so reprehensible as to warrant the imposition of further sanctions to achieve punishment or deterrence.” Id. at 419. The “reprehensible” actions that permit an award of punitive damages must themselves be tied to the actions that gave rise to liability in the first place:

A defendant’s dissimilar acts, independent from the acts upon which liability was premised, may not serve as the basis for punitive damages. A defendant should be punished for the conduct that harmed the plaintiff, not for being an unsavory individual or business.

538 U.S. at 422-423. It is by no means clear that the actions of Beverly’s counsel—even if they can be imputed to Beverly—were sufficiently reprehensible to warrant what (in a typical patent case) could amount to millions of dollars in enhanced damages. Even if they were, the connection between Beverly’s purported infringement and its counsel’s ethical lapse is tenuous: it would have done little good to the patentee if Beverly had retained different opinion counsel. (To the contrary, if any counsel were going to advice Beverly to cease infringement, one would think that counsel representing the patentee itself would have done so.)

Through little or no fault of its own, Beverly has been deprived of what is traditionally the most important exculpatory evidence on willfulness. The substantive effect of Due Process on enhanced damages for willful infringement is not entirely clear, but it is questionable whether punitive damages can be based on a fictitious reconstruction of an infringer’s state of mind.

Jeffrey Steck is a partner at MBHB and an experienced litigator. He was also an editor of the California Law Review at the University of California at Berkeley, where he received his JD.

Links:

• Patently-O Summary of Andrew Corp. v. Beverly Mfg.
• District Court Decision in Andrew Corp. v. Beverly Mfg.
• David Hricik’s Discussion of the Issues
• Conflicts of Interest in Patent Prosecution

Terminal Disclaimer Does Not Negate Patent Term Extension

King Pharma v. Teva, 78 USPQ2d 1237 (D.N.J. 2006).

In a pharmaceutical patent dispute, Teva argued that Wyeth’s patent on zaleplon drug products (Sonata) had expired because of a terminal disclaimer. Wyeth (and its exclusive licensee King) argued that patent’s term was ongoing because of a Patent Term Extension due to FDA regulatory review delay.

Under 35 U.S.C. 156(a), the term of a patent “shall be extended” after a series of provisions are satisfied.  The district court found the language of the statute unambiguous and gives the court “no discretion.”

Thus, if the enumerated conditions are satisfied, the patentee is entitled to a term extension calculated pursuant to Section 156.

Teva’s motion to dismiss was consequently denied because “a terminally disclaimed patent is eligible for extension under [Section] 156.”

 

CAFC Oral Arguments Available in MP3 Format

The CAFC has announced a new program of posting digitally formatted oral arguments on its website.  According to the www.cafc.uscourts.gov website,

All future argued cases will be available twenty-four hours after argument is completed. Counsel should read this notice containing guidelines for oral arguments.

The files are in MP3 format.  A portion of the cases argued since January 2006 are already available. The audio files can be found through the following link:

• http://www.cafc.uscourts.gov/oralarguments/

 

Noninfringement Opinions Excluded Based on Attorney Conflict of Interest

Andrew Corp v. Beverly Mfg., (N.D.Ill. 2006, 04–6214:146).

Andrew sued Beverly for willful infringement of Andrew’s cable-hanger patents. Beverly then brought forth three opinion letters written by its counsel in an attempt to avoid the willfulness charge.

The opinion letters provide, for instance that Beverly’s new product “does not fall within the claims of [Andrew’s] patent.”

As it turned out, Beverly’s law firm recently merged — and the merged firm represents both Andrew and Beverly.

On motion to disqualify the opinions, the firm responded that “lawyers who represented Andrew have never discussed any Beverly matter with the [lawyers] who represented Beverly and visa versa.”

District Judge Holderman, however, found a clear conflict:

[The firm’s] attorneys took positions directly adverse to its client Andrew in the [two] opinion letters on behalf of its other client Beverly, without obtaining informed consent from both Andrew and Beverly, in violation of Local Rule 83.51.7 and 83.51.10. These opinion letters advised Beverly that its products did not infringe Andrew’s patents, attacked Andrew’s patents, provided potential litigation arguments and provided a factual basis for a potential defense against future claims by Andrew of willful infringement. [The firm] possessed sufficient information to have determined that its work for Beverly was adverse to its existing client Andrew, that it would affect its relationship with Andrew and that the [firm] as a whole was disqualified under the imputed conflict rule.

Remedy: Because of the conflict, the court determined that the opinions could not, as a matter of law, be competent.  As such, all opinion letters from the firm were excluded from the case.  

Links:

• David Hricik’s Discussion of the Issues

Unpublished Opinions Will Be Citable

In the past, I’ve been given some grief for covering unpublished opinions on the blog. The Federal Circuit has even threatened sanctions against any attorney who cites those opinions in a court filing. Now however, the Supreme Court has voted to require courts to allow citation of unpublished (nonprecedential) appellate opinions.

Chief Justice John Roberts has been quoted as strongly against these hidden opinions— “A lawyer ought to be able to tell a court what it has done.”

According to a Law.com article by Tony Mauro, 9th Circuit Judge Alex Kozenski has been firmly against allowing citation of unpublished opinions:

When the people making the sausage tell you it's not safe for human consumption, it seems strange indeed to have a committee in Washington tell people to go ahead and eat it anyway.

The rule will not be effective until January 1, 2007.

• Federal Circuit Warns Against Citations of Non-Precedential Opinions
• Citation of Unpublished Opinions 
• Citation of Unpublished Opinions
• CAFC's Opposition to the Change
• J. Craig Williams Lends His Voice
  

Conflicts of Interest in Patent Prosecution

Professor David Hricik is a leading Intellectual Property Ethicist.  He recently posted some questions about your thoughts on patent prosecution conflicts.  Do these situations create conflicts of interest:

First example:  In prosecuting application for Client A, lawyer receives an office action rejecting claims over a prior art reference that is owned by Client B. Is there a conflict? [your comments].

Second Example: Is it per se unethical for a lawyer to provide a non-infringement or invalidity opinion about another client's patent? [your comments].

Professor Hricik is also a speaking at our upcoming conference on blog law.

Hat tip to Steve Nipper.

Movie Review: Envy -- an inventor's story

Envy
Staring Ben Stiller, Jack Black and Christopher Walken

$13.99 from Amazon.com

This movie is pretty stupid.  Jack Black invents the “Vapoorizer.”  Jack offers his best friend Ben Stiller a 50/50 cut, but Ben refuses.  Jack gets rich and Ben is green with envy. As usual, I don’t understand Christopher Walken’s role.

I’m a patent attorney, and maybe that’s the reason that I laughed throughout the movie.  Of course, on occasion I was the only one in the theater laughing. Still, its much more interesting than the Federal Judicial Center’s Patent Video. And, don’t forget Christopher Walken.

CAFC: Damage Recovery for Infringing Sales Precluded Later Recovery for Infringing Use

Glenayre Electronics v. Jackson (Fed. Cir. 2006, 04–1568).

Jackson won a $12 million jury verdict for infringement.  However, those damages were remitted by the court who found that "the jury’s $12,000,000 damages award reflects a whopping royalty rate of 30%, a rate five times greater than the very highest rate disclosed in any license agreement offered into evidence." Instead, the lower court found that the maximum reasonable royalty would be 6% of sales plus a $250,000 lump-sum payment, and proposed a remittitur to $2.65 million as an alternative to a new trial. Jackson accepted the new award, but also pursued claims against Glenayre for indirect infringement based on activity of its customers. The lower court refused to allow those claims to proceed — finding that Jackson had been fully compensated by the initial verdict.

On appeal, the CAFC found that Jackson could not “double dip.”

Jackson’s theory is that he has an absolute, inviolable right to pursue an additional damages award based on Glenayre’s customers’ use of infringing products sold by Glenayre, even though he has already collected compensation for direct infringement by Glenayre because of the same sales. We disagree.

It is possible that a plaintiff could get separate damages for sales and use.  However, in this case, Jackson had presented evidence of customer use during the original trial, and the CAFC found that those damages were included within the $2.65 million award calculation.

Judge Newman dissents:

The district court, today affirmed by the panel majority, incorrectly held that there cannot be contributory infringement by a direct infringer. From this ruling and its flawed premises, I respectfully dissent. . .

The panel majority departs in major ways from precedent, in holding that, as a matter of law, there is no liability for a manufacturer's contributory infringement, or even for direct infringement by users of an infringing device, when damages have been accepted that are limited to the manufacturer's direct infringement. See Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476 (1964) (Aro II). . .  

The [Supreme] Court (in Birdsell) established that while sales by the patentee or an authorized licensee can trigger the first sale doctrine, the collection of damages for infringement does not. Payment of damages by an infringing manufacturer is not an automatic "implied license" to itself or others to continue the infringement.

 

Patent Advisory Committee Nominations

PTO Director Jon Dudas has opened nominations for the Patent Public Advisory Committee (PPAC). The PPAC is a group of nine individuals selected by the Commerce Secretary (on the advice of the PTO Director).  The committee's purpose is to advise the PTO Director on the management of operations of the Office.  The nine-member PPAC is on a three-year rotating schedule.  Each year three new members are appointed. 

Nominations for this year’s appointment may be sent to [email protected]. Although formal nominations are probably required, I’m sure that the Chief of Staff would not mind receiving some informal suggestions as well.

 

Federal Circuit Immigration Appeal: A Modest Proposal

One portion of the immigration legislation being debated would consolidate all immigration appeals to the Court of Appeals for the Federal Circuit (CAFC).

In a recent law.com article, appellate lawyer Howard Bashman provides some background on the issue and wonders why we should stop there:

There assuredly are other categories of appeals that the regional federal appellate courts view as dry, needlessly complex, burdensome or inconsequential.  Perhaps these cases, too, could be sent to the Federal Circuit, so that the regional federal appellate courts would be left to handle only the extraordinarily interesting cases that appellate judges anticipate receiving when they take their oath of office.

Mark Lemley of Stanford agrees that immigration proposal would be bad for the CAFC:

Patent lawyers ought to be concerned about this. Right now, patents are the focus of the court's jurisdiction, and the White House has increasingly been appointing patent lawyers to the Federal Circuit. If S.2454 passes, the court will become a political battleground, and there will be strong pressure in both parties to appoint ideologues with a particular view of immigration.

The IPO has also weighed-in on this matter, and provided this letter to Senator Bill Frist. 

According to a source, this section of the Bill has now been removed.

Links:

• Law.com article;
• IPO Letter to Senator Frist;
• April 4 Senate Committee Hearing on the Topic.

Personal Jurisdiction over Patent Holder Arises Based on Licensee's Activities

Breckenridge Pharmaceuticals v. Metabolite Labs. (Fed. Cir. 2006, 05–1121).

Metabolite (patent holder) and PamLab (exclusive licensee) sued Breckenridge in Colorado — asking for a TRO stopping Breckenridge from selling its Folbee product, which is similar to PamLab’s FOLTX.  The plaintiffs, however, dismissed their suit after their motion for TRO was denied.  Their next step was to send letters to retailers warning them against selling generic equivalents of FOLTX.  The letters to the retailers not name Breckenridge or threaten a lawsuit, but did include a PamLab brochure.

Breckenridge then sued Metabolite and PamLab in Florida for declaratory judgment of non-infringement and for various torts based on Florida law. 

Metabolite was dismissed from the suit for lack of personal jurisdiction, and summary judgment was granted to PamLab because Metabolite, as patent holder, was an indispensable party.

On appeal, the CAFC agreed with the lower court that Federal Circuit law should be applied to determine whether personal jurisdiction would comport with due process — because even the non-patent issues were “intimately linked to patent law.” 

The panel summarized its licensor due process case law:

In sum, our case law has held as follows: where a defendant has sent cease and desist letters into a forum state that primarily involve a legal dispute unrelated to the patent at issue, such as an injunction obtained for misappropriation of trade secrets, the exercise of personal jurisdiction is improper. Silent Drive, 326 F.3d at 1202. Likewise, a defendant may not be subjected to personal jurisdiction if its only additional activities in the forum state involve unsuccessful attempts to license the patent there. Hildebrand, 279 F.3d at 1356. The same is true where the defendant has successfully licensed the patent in the forum state, even to multiple non-exclusive licensees, but does not, for example, exercise control over the licensees’ sales activities and, instead, has no dealings with those licensees beyond the receipt of royalty income. Red Wing Shoe, 148 F.3d at 1357-58.

In contrast, the defendant is subject to personal jurisdiction in the forum state by virtue of its relationship with its exclusive forum state licensee if the license agreement, for example, requires the defendant-licensor, and grants the licensee the right, to litigate infringement claims. Akro, 45 F.3d at 1546. Finally, the defendant will also be subject to personal jurisdiction in the forum state if the exclusive licensee (or licensee equivalent) with which it has established a relationship is not headquartered in the forum state, but nonetheless conducts business there. Genetic Implant, 123 F.3d at 1457-59.

Thus, the crux of the due process inquiry should focus first on whether the defendant has had contact with parties in the forum state beyond the sending of cease and desist letters or mere attempts to license the patent at issue there. Where a defendant-licensor has a relationship with an exclusive licensee headquartered or doing business in the forum state, the inquiry requires close examination of the license agreement. In particular, our case law requires that the license agreement contemplate a relationship beyond royalty or cross-licensing payment, such as granting both parties the right to litigate infringement cases or granting the licensor the right to exercise control over the licensee’s sales or marketing activities.

Here, the CAFC found that the licensing relationship between Metabolite and PamLab, that PamLab’s sales activities in Florida create are sufficient to give the court jurisdiction over Metabolite.

As such, we hold that, through its relationship with PamLab, which sells products in Florida, Metabolite has purposefully availed itself to the privilege of conducting activities within Florida.

Reversed, vacated, and remanded

Notes:

• Although apparently a different patent, the patent at suit here is related to Metabolite’s method for diagnosing hyperhomocysteinemia.  The validity of that patent is currently being considered by the U.S. Supreme Court in the case of LabCorp v. Metabolite.

Patent Legislation: PDQ Act of 2006

• [PDQ Redline.doc (63 KB)] Redline showing how the proposed changes would integrate into the Statute. (Created by Aaron Homer, a law student in Texas)
• Patents Depend on Quality Act of 2006 [LINK] introduced April 5, 2006;
• News reports;
• Nipper on Patent Reform;
• Buchanan on Patent Reform.

Agreed-upon Claim Construction from Settlement Agreement Goes Unchallenged by CAFC

Semitool v. Dynamic Micro (Fed. Cir. 2006).

This case settled originally, but Semitool revived the litigation after Dynamic began selling a new product.  Interestingly, the settlement agreement included a provision for how the patent claims should be construed in any future enforcement proceeding — according to the district court’s claim construction order.

In the revived proceeding, the district court applied its old construction and found the new product noninfringing.  On appeal, the CAFC also applied the agreed upon claim construction — rather than questioning it de novo.

Because it resides inside the processing chamber, the condenser in the Tornado cannot supply a drying gas as construed by the Final Claim Construction order issued by the district court. DMS is entitled to judgment as a matter of law that it does not infringe Semitool’s patents

 

New Blog: Jim Hawes' IP Thoughts

My mentor Jim Hawes has been a patent attorney for almost fifty years.  Now, he has started his own blog: IPthoughts (IPthoughts.blogspot.com). A couple of his recent posts caught my attention. 

• The Risks of Being a Patent Attorney: Jim takes a serious long term look at the risks associated with patent prosecution. His advice — go into litigation.
• U.S. Design Patent Application Disclosures: Are you ever afraid that your design patent applications fail the written description requirement of 35 U.S.C. 112. . . Perhaps you should be.

Another recent project of Jim’s is garnering some attention: IP Law Book Reviews.  I have also been working with Jim to co-author the bi-annual updates of Patent Application Practice 2d.

Joint Patent Infringement Occurs When Infringement Results From Participation and Combined Action Of Multiple Parties

On Demand Machine v. Ingram and Amazon.com (Fed. Cir. 2006, 05–1074).

One aspect of this case involves the concept of “joint infringement.”  The district court instructed the jury as follows:

It is not necessary for the acts that constitute infringement to be performed by one person or entity. When infringement results from the participation and combined action(s) of more than one person or entity, they are all joint infringers and jointly liable for patent infringement. Infringement of a patented process or method cannot be avoided by having another perform one step of the process or method. Where the infringement is the result of the participation and combined action(s) of one or more persons or entities, they are joint infringers and are jointly liable for the infringement.

On appeal, the appellate panel found “no flaw in this instruction as a statement of law.”  This raises a number of interesting questions.  Many of these questions will be answered in the Freedom Wireless appeal that is currently being briefed. In that case, the lower court gave the following jury instructions:

if separate companies work together to perform all the steps of a claim of a patent, the companies are jointly responsible, that is, responsible as a group for the infringement of the patent.  Even if no single company performs all the steps of the claim, the companies are jointly responsible.

Based on these instructions, the jury found infringement.  In an unpublished order (Dec 05), the CAFC granted a stay of the injunction because of the questionable theory of joint infringement — noting that the CAFC has not directly addressed addressed the theory of joint infringement and there is relatively no precedent on that issue.

Notes:

• CAFC's Stay of the Freedom Wireless Injunction [PDF]
• Patently-O discussion of this opinion’s preamble interpretation.

 

Upcoming CLE's

This Week:

• Patent Preparation and Prosecution, through Dunes CLE.  April 6–7 in Las Vegas.  Patently-O is a media sponsor of the event, and I will be presenting on Friday afternoon.
• ABA’s IP Law Conference, April 6–8 in Arlington, VA (DC).  This conference is worth it for the opening panel — Mark Banner, Chief Judge Michel, Judges Ellis (E.D.Va) and Illston (N.D.Ca), Professor Kimberly Moore, Joe Re (KMOB), Bob Krupka (K&E), Dale Cendali (OMelveny), William Lee (Wilmer). Best practices in IP Trials.

Coming Soon:

• Blog Law and Blogging for Lawyers, through LSI.  April 21–22 in San Francisco.  I am co-chairing this conference and am very excited about the excellent panel that we’ve pulled together.  More info here.
• PTO Business Method Partnership Meeting, May 3 at the USPTO. Meet the examiners and supervisors behind your indefiniteness and unpatentable subject matter rejections. . . . Actually these folks are very cool and hold this meeting to answer questions and get input on how things are going.

CAFC: Patent Rights are Not Protected by the Fifth Amendment

Zoltek v. United States (Fed. Cir. 2006, 04–5100).

The US government contracted with Lockheed Martin to design and build F-22 stealth fighters.  Zoltek has argued that manufacture of carbonized sheets used in the aircraft violates its method patents, even though the sheets were partially manufactured in Japan.  The lower court dismissed Zoltek’s federal claims because they “arose in Japan.”  However, the lower court also ruled that the US government’s alleged infringement could be actionable as a Fifth Amendment taking.

On appeal, the CAFC issued a decision per curiam, and three additional opinions.

Process Claims Abroad: Because a process is not infringed unless “each of the steps is performed within this country," the US has no liability under Section 1498(a).

Patent Infringement as a Taking: In the 1894 case of Schillinger v. United States, the Supreme Court ruled that a patent holder could not sue the government for patent infringement as a Fifth Amendment taking. This case remains good law.

Judge GAJARSA Concurring:

I agree that we are bound by our panel decision in NTP, Inc. v. Research in Motion, Ltd., in which we held that "direct infringement under section 271(a) is a necessary predicate for government liability under section 1498." However, the NTP proposition is, in my view, the result of an unchecked propagation of error in our case law, and its viability may eventually be challenged. 

Judge DYK Concurring:

I join the court’s per curiam opinion but write separately to express my view that the court correctly held in NTP, Inc. v. Research in Motion, Ltd., that the government can only be liable for infringement under section 1498(a) if the same conduct would render a private party liable for infringement under section 271(a).

Judge PLAGER Dissenting: Patent rights are property rights protected whose taking should be compensable under the Fifth Amendment. . . .

NOTE: There is lots more more here for a law review article.

Amazon avoids infringement of on-demand book printing patent

On Demand Machine v. Ingram and Amazon.com (Fed. Cir. 2006, 05–1074).

The district court found Ingram and Amazon.com liable for infringement of On Demand’s patented on-demand book printing system.  The defendants appealed on claim construction.

The CAFC disagreed with the lower court on many points of claim construction.  Interestingly, for the second time in as many weeks, an appellate panel found that the preamble of a claim was limiting.  Here the preamble was written as follows:

8. A method of high speed manufacture of a single copy of a book comprising . . .

According to the court, high speed manufacture of a single copy is “fundamental” to the invention because “the specification highlights that the customer may have a printed and bound copy within "three to five minutes.”  Here, the defendants can avoid infringement because the customer must wait a week to get their copy of the book.

Notes:

• Bill McCoy’s Take
• Discussion of the lower court decision

. . . From a Reader:

This CAFC decision should be of considerable interest to the book publishing, printing and distributing industries for several reasons.

First, this is a decision against a "print on demand" book printing patent of general industry interest, as evidenced by a pending SECOND adverse reexamination against it. This second reexamination is not even mentioned in this decision, only the first one is. Yet some of this Court's comments about prior art, etc. may become relevant in this pending second reexamination?

On another matter, of general patent litigation interest, the Court says: "The court's award of a royalty-bearing license during appeal and refusal to issue an immediate injunction are reviewed on the standard of abuse of discretion.” [emphasis added]

Later on, in its Conclusion, the Court merely adds: "The cross-appeal relates to the district court's denial of an immediate injunction upon entry of the district court's judgment, and the court's setting of a royalty for continuing operations during appeal. That remedy is within the district court's discretion. However, in view of our holding of non-infringement, the cross-appeal is moot, and is dismissed."

There is no mention of the Sup. Ct. taking of eBay v. MercExchange for decision, in which even the Solicitor's brief criticizes the CAFC for not spelling out the statutory test for granting injunctions. Yet they did it again! - the above is ALL this Panel said on this subject. I.e., even in this latest case, the Court does not cite or discuss the statute, or even the standards for stays of injunction during an appeal. Note that this panel did not approve a stay of an injunction pendant lite here, it merely held this issue to be MOOT, hence the above is mere DICTA.

Finally, this Court's specific non-infringement distinctions should be cautionary for specification and claim drafters to avoid inadvertent or unintended claim scope limitations.

Federal Circuit Further Limits Doctrine of Equivalents under “Specific Exclusion” Principle

Bicon, Inc. v. The Straumann Co., (Fed. Cir. 2006, 05–1168)

By Thomas Fairhall

The Federal Circuit’s decision in Bicon appears to mark a further narrowing in the scope and availability of the doctrine of equivalents (DOE), particularly for patents where the claim recites physical structures.  Significantly, the court’s doctrine of equivalents discussion makes no mention of the familiar tests for DOE coverage, i.e., the function/way/result test of the Graver Tank decision, or the “insubstantial differences” test of Hilton Davis Chemical Co. v. Warner-Jenkinson Co., 62 F.3d 1512 (Fed. Cir. 1995), rev’d & remanded, 520 U.S. 17 (1997).   Rather, the Court invoked a new exclusion principle essentially foreclosing coverage under the Doctrine in cases where a claim contains a detailed recitation of structure, stating that such a claim is accorded “limited recourse to the doctrine of equivalents.”   Slip op. at 17.     For support of this rule, the court cites cases purportedly standing for “an exclusion rule” that denies any coverage under the doctrine for subject matter where such subject matter is “inconsistent with the language of the claim.”  Slip op. at 17-18, citing Sci-Med Life Sys. Inc. v. Advanced Cardiovascular Sys., 242 F.3d 1337 (Fed. Cir. 2001); Ethicon Endo-Surgery Inc. v. U.S. Surgical Corp., 149 F.3d 1309 (Fed. Cir. 1998), and other cases. 

 

The problem is that, by definition, a claim term that is expanded under the DOE is, in some fashion, “inconsistent” with the literal scope of the claim.   Bicon suggests that such inconsistencies are resolved by barring application of the DOE.  Bicon is difficult to reconcile with prior precedent upholding findings of infringement under the DOE, decisions which by definition accommodate inconsistency between the claims and the accused device.

 

The particular invention at issue in Bicon pertained to a dental implant.   The court was examining language in the claim preamble, which, in a separate portion of the opinion, was found to be an affirmative limitation of the claim.   The claim at issue, claim 5 of U.S. Patent 5,791,731, recited:

 

5.         An emergence cuff member for use in preserving the interdermal papilla during the procedure of placing an abutment on a root member implanted in the alveolar bone of a patient in which

            [a] the abutment has a frusto-spherical basal surface portion and

            [b] a conical surface portion having a selected height extending therefrom comprising . . . [body of claim].

 

The accused device had a trumpet-shaped, concave surface, which was argued to be equivalent to the convex frusto-spherical basal surface of part [a] of the preamble.     In rejecting the patentee’s equivalency argument, the court stated:

           

The problem that [the patentee] faces in this regard is that limitation [a] and [b] of the claim contain a detailed recitation of the shape of the abutment, including that it has a frusto-spherical basal portion.  A claim that contains a detailed recitation of structure is properly accorded limited recourse under the doctrine of equivalents. See Tanabe Seiyaku Co. v. Int’l Trade Comm’n, 109 F.3d 726 732 (Fed. Cir. 1997)(“The sharply restricted nature of the claims has much to do with the scope we accord to the doctrine of equivalents.”). That principle has special application in a case such as this one, where the claim recites a particular shape for the basal portion of the abutment that clearly excludes distinctly different and even opposite shapes.  In such cases, we have explained, “by defining the claim in a way that clearly excluded certain subject matter, the patent implicitly disclaimed the subject matter that was excluded and thereby barred the patentee from asserting infringement under the doctrine of equivalents.”   Sci-Med Life Sys. Inc. v. Advanced Cardiovascular Sys., 242 F.3d 1337, 1346 (Fed. Cir. 2001) [further citations omitted]; Ethicon Endo-Surgery, Inc. v. U.S. Surgical Corp., 149 F.3d 1309, 1317 (Fed. Cir. 1998)(subject matter is “specifically excluded” from coverage under the doctrine of equivalents if its inclusion is “inconsistent with the language of the claim.”)

 

Both of the structures in the Straumann system that are possible candidates for equivalence to the abutment base recited in the claim fall victim to this principle of specific exclusion.  As we have noted, the basal portion of the Straumann abutment is frusto-conical, not frusto-spherical, and the neck of the Straumann root member is concave, not convex.  These shapes are clearly contrary to, and thus excluded by, the patentee’s characterization of its abutment as having a convex, frusto-spherical shape.

 

Slip op. at 17-18. 

 

There are several things of note in this analysis.  Significantly, the Federal Circuit does not engage in any function/way/result analysis under Graver Tank, or any examination of whether the differences in geometry between the accused device and the claimed invention are insubstantial under Hilton-Davis.    Rather, the Federal Circuit seems to be excluding availability of the doctrine of equivalences completely, based solely on a textual analysis of the claim itself and noting that the accused product is not within the literal scope of the patent.

 

The decision raises the question of whether the bar on availability of the doctrine of equivalents, based on the “specific exclusion principle”, is a question of law that might be amenable to summary judgment.  If so, it would avoid the factual disputes associated with a function/way/result or insubstantial differences analysis.   It is at least arguable that this “specific exclusion principle” is one of law and amenable to summary judgment.

 

The rule of exclusion based on a textual analysis of a claim brings to the fore the tension in the doctrine between the two opposing principles of 1) allowing some additional claim scope beyond the literal bounds of the claim in an appropriate case under the Doctrine, while (2) preserving the public notice function of claims.  The decision in Bicon lands squarely on the side of the upholding the latter principle at the expense of the former.   It doing so, it is consistent the trend of the Federal Circuit cutting back on the scope of the DOE.  Creative litigants will surely apply the Bicon exclusion principle to other areas besides the mechanical arts.   Virtually any claim is amenable to a “specific exclusion principle” argument. 

 

If the Federal Circuit’s specific exclusion doctrine is interpreted as meaning that a selection of a particular claim term operates as a matter of law as a disclaimer of coverage under the doctrine for subject matter not within the literal definition of that term, then the death knell for the doctrine has basically been rung.

 

Links:

• Discussion of Bicon’s claim preamble ruling.