Beware § 292 Qui Tam Actions: "Marking Trolls"
USPTO Misinterpreted Patent Term Adjustment Statute
No Pre-Verdict JMOL Motions, No Review of Jury Damage Award
Factual Expert Declaration Is Vital to Avoid Summary Judgment
Ordinary Observer Test—The Sole Test for Design Patent Invalidity
Contractual Agreement Trumps Statutory Scheme
Reissue Petition Denied for Merely Adding Dependent Claim
Federal Circuit Limits Recovery of Damages and Attorneys' Fees Awards
Federal Circuit Eliminates Presumption of Irreparable Harm in Non-Precedential Opinion
Issues of Fact Render Summary Judgment of Obviousness and Infringement Improper
Bilski-Based Rejections of Computer-Implemented Claims Continue to Be Issued by Board of Appeals
Internet Specimens of Use Need Not Include Pictures of the Goods to Show Bona Fide Use in Commerce
It's the Quality, Not Quantity of the Contribution that Matters
Beware § 292 Qui Tam Actions:
"Marking Trolls"
By Brian Park
Vacating the district court's imposition of a single $500 penalty for to falsely marking a production run of stilts with a patent number, the U.S. Court of Appeals for the Federal Circuit found that the proper measure of damages for false marking is to impose a fine of up to $500 per falsely marked article. The Forest Group, Inc. v. Bon Tool Company, Case No. 09-1044 (Fed. Cir., Dec. 28, 2009) (Moore. J.).
The plaintiff, The Forest Group, is the owner of U.S. Pat. No. 5,645,515 (the '515 patent), claiming an improved spring-loaded parallelogram stilt for use in construction. The '515 patent required the stilts to possess a "resiliently lined yoke." The Forest Group manufactured its S2 stilt and marked the '515 patent number on each product. Bon Tool manufactured a stilt that was identical to Forest Group's S2 stilt. The Forest Group sued Bon Tool for infringement of the '515 patent.
In a separate action, Forest Group also sued Warner Manufacturing Company (Warner) for infringement of the '515 patent. The Warner court issued its claim construction, finding that the '515 patent required a "resiliently lined yoke." In the Warner case, the court granted summary judgment in favor of Warner, finding that the S2 stilts did not have a "resiliently lined yoke" and were therefore not covered by the '515 patent. Prior to that decision, The Forest Group was advised by its counsel to modify the S2 stilts so that they conformed to the '515 patent. Sometime after the November 2007 decision (by the Warner court) and after receiving contrary advice of counsel, The Forest Group manufactured another line of S2 stilts without "resiliently lined yoke[s]." It marked that line with the '515 patent number, as well.
After the district court in the Bon Tool case issued its claim construction, also finding that the '515 patent required a "resiliently lined yoke," it granted summary judgment that Bon Tool's stilts did not infringe on the '515 patent. Bon Tool then counterclaimed that The Forest Group falsely marked its S2 stilts with the '515 patent. The district court found that The Forest Group's actions met the two elements of false marking: the company falsely marked its S2 stilts with a patent number, and it did so with the intent to deceive the public. The district court found the requisite intent by noting that after the Warner court issued its claim construction, Forest Group knew its S2 stilts were not protected by the '515 patent, but chose to manufacture another line of S2 stilts bearing the '515 patent number.
After the district court ordered Forest Group to pay a single fine of $500 for the decision to falsely mark its S2 stilts with the '515 patent number, Bon Tool appealed, arguing that the district court erred in its interpretation of the false marking statute when it imposed a penalty based on the Forest Group's decision to mark the stilts as a group, rather than on a per article basis.
The Federal Circuit agreed and vacated the district court's judgment. The Federal Circuit held that the plain language of the false marking provision of 35 U.S.C. § 292 requires courts to impose a penalty for false marking on a per article basis. Consequently, the Court ruled that the proper measure of damages for false marking is a fine of up to $500 per falsely marked article. The Court went on to note that in cases involving "inexpensive mass produced articles," a court can, in exercise of its discretion, reduce the per article penalty to just a "fraction of a penny per article."
The Federal Circuit also noted that the plain language of § 292(b) allowed for qui tam actions. In doing so the Court acknowledged that its decision could give rise to a new cottage industry: "marking trolls."
USPTO Misinterpreted Patent Term
Adjustment Statute
By Shilpa V. Patel, Ph.D.
The U.S. Court of Appeals for the Federal Circuit recently affirmed a district court decision finding that the U.S. Patent and Trademark Office (USPTO) has misinterpreted the statute 35 U.S.C. § 154(b), which provides for patent term adjustment (PTA) for certain USPTO delays. Wyeth and Elan Pharma International Limited v. David J. Kappos, Case No. 09-1120 (Fed. Cir. January 7, 2010) (Rader J.).
In 1999, 35 U.S.C. § 154(b) was amended to provide adjusted patent term for administrative delays caused by the USPTO. This decision addresses the interplay between two of the three patent term guarantee provisions, namely § 154(b)(1)(A) and § 154(b)(1)(B), also referred to as A and B delays, periods or guarantees, respectively.
The two provisions at issue provide a one-day extension of patent term for every day that issuance of a patent is delayed by a failure of the USPTO to comply with various enumerated statutory deadlines (A delay) and a one-day extension of patent term for every day greater than three years after the filing date that it takes a patent to issue (B delay). The statute further provides that to the extent that the A and B delays overlap, "the period of any adjustment shall not exceed the actual number of days the issuance of the patent was delayed."
The issue in this case stems from the USPTO's calculation of PTA for two U.S. patents co-owned by Wyeth and Elan Pharma. For each patent, the A and B periods overlap. In 2004, the USPTO had amended its interpretation of "overlap" as the period of time between the A and B periods arising and beginning during the pendency of the patent application. Thus, in its PTA calculations, the USPTO used the greater of the A or B period to calculate PTA and did not combine the periods. Wyeth and Elan Pharma sued the USPTO because they disputed the USPTO's calculations. According to Wyeth, the B period could not have started until three years after the application's filing date, such that the A and B periods could only overlap for any A period delay occurring three years after filing of the application.
By Wyeth's calculation, for each of its patents the amount of PTA was greater than the amount calculated by the USPTO. For each patent, the PTO calculated the PTA as the greater of the A or B period minus the days caused by applicant delay. Wyeth calculated the PTA to be the sum of the A and B delays and then subtracted the days of A delay after three years of pendency (i.e., in the B delay period) and the days caused by applicant delay. The Federal Circuit, affirming the district court ruling, agreed with Wyeth's calculations and stated that the statute "language is clear, unambiguous, and intolerant of the PTO's suggested interpretation" and "gives no deference to the greater-of-A-or-B rubric."
The USPTO announced that it will not seek further court review and it "is in the process of changing the manner [in which] it will calculate patent term adjustments."
Practice Note: Going forward, patentees should carefully review the USPTO's calculated PTA, including those for patents that issued recently and are still within the time period permitted by statute to request a recalculation, i.e., within 180 days after grant of the patent, 35 U.S.C. § 154(b)(4)(A), or within two months of issuance of the patent, 37 C.F.R. § 1.705. Furthermore, in allowed applications, patentees should consider requesting reconsideration of the USPTO's calculated PTA based on the Wyeth decision prior to paying the issue fee, 37 C.F.R. § 1.705(b).
No Pre-Verdict JMOL Motions, No Review of
Jury Damage Award
By Paul Devinsky and Jeremiah Armstrong
The U.S. Court of Appeals for the Federal Circuit upheld a permanent injunction and an award of $240 million in damages against Microsoft for patent infringement in connection with certain versions of MS Word software that offer XML editing functionality. The Federal Circuit held that by failing to file certain pre-verdict judgment as a matter of law motions, Microsoft waived two pivotal issues relating to the validity and damage for appeal. i4i Ltd. v. Microsoft Corp., Case No. 09-1504 (Fed. Cir., Dec. 22, 2009) (Prost, J.).
Validity
Microsoft filed a pre-verdict judgment as a matter of law
(JMOL) motion on invalidity but it only included arguments for
anticipation based on the on-sale bar, not arguments regarding
obviousness and other prior art references. In its decision, the
Federal Circuit reminds us that "a party must file a
pre-verdict motion on all theories, and with respect to all prior
art references, that it wishes to challenge with a post-verdict
JMOL." Because Microsoft waived its right to challenge the
factual findings underlying the obviousness verdict, the appellate
court presumed all the underlying factual disputes—none
of which were explicitly enumerated in the jury verdict
form—were resolved by the jury in i4i's favor and
affirmed the district court's ruling on the validity of
i4i's patent.
Damages
The Federal Circuit found that Microsoft also waived its right
to appeal the damages amount, which was based on the plaintiff i4i
expert's claimed royalty rate of $98 per sale of MS Word. The
Federal Circuit explained that in terms of evidentiary review, its
hands were tied. "Had Microsoft filed a pre-verdict JMOL, it
is true that the outcome might have been different. Given the
opportunity to review the sufficiency of the evidence, we could
have considered whether the $200 million damages award was
'grossly excessive or monstrous' in light of MS Word's
retail price and the licensing fees Microsoft paid for other
patents." However, because of the waiver, the Federal Circuit
could not scrutinize or modify the damage award as it did recently
in Lucent Technologies, Inc. v. Gateway, Inc.
The Federal Circuit also upheld $40 million in willfulness damages, raising the value of i4i's Christmas present to $240 million. In regard to the enhanced damages, the Federal Circuit noted that since the jury had found willfulness, the district court had the authority to award as much as treble damages and that the decision to enhance damages by $40 million was within its discretion.
Injunction
After analyzing the eBay factors, the Federal Circuit
affirmed the permanent injunction ordering Microsoft to stop
instructing how to use and stop selling infringing versions of MS
Word, i.e., versions that include i4i's XML editing
technology as of January 11, 2010. However, those who purchased MS
Word prior to the injunction may still use all of the features in
MS Word as purchased and receive technical support.
Factual Expert Declaration Is Vital to
Avoid Summary Judgment
By Brett Bachtell
The U.S. Court of Appeals for the Federal Circuit confirmed a special master's determination that, in the context of a means plus function claim element, the patentee's technical expert failed to tie the accused device to the corresponding structures found in the patent specification. Intellectual Science and Technology, Inc. v. Sony Electronics, Inc., Case No. 09-1142 (Fed. Cir., Dec. 15, 2009) (Rader, J.).
Intellectual Science and Technology (IST) is the owner of a patent claiming a computer configured to access multiple optical disc drives to simultaneously read information. The patent describes using an intelligent time-division multiplexer to combine the multiple information sets as a single data stream and sending the combined data stream to a host computer.
In early 2006, IST filed nine complaints against different defendants alleging that various audio player/recorder devices made by the various defendants were infringing five of its patents, including the '575 patent. In response to a court order, IST choose claim 1 of the '575 patent to be its representative claim. In response, and before claim construction, several defendants moved for summary judgment of noninfringement. In support of their motion, the defendants relied on a declaration by their expert stating the disclosed structures from the '575 patent corresponding to the means plus function limitation "data transmitting means" were not present in the accused devices. In response, IST submitted a declaration from its expert asserting those requirements were present in the accused devices.
The district court assigned the motion to a special master who agreed with the conclusions of the various experts who testified regarding the disclosed structures (in the '575 patent) corresponding to the "data transmission means" but determined that because the statements made by IST's expert as to whether such structures were found in the accused device were merely conclusory, IST did not make a sufficient showing of infringement to survive summary judgment. Accordingly, the special master recommended granting the defendants' motion for summary judgment of non-infringement. The district court agreed and granted the summary judgment motion. IST appealed.
On appeal, Federal Circuit focused on the comparison of the claim construction of the "data transmitting means" to the allegedly infringing devices; citing its 2000 decision in No. Telecom, the Court noted that in order to satisfy the summary judgment standard, a patentee's expert must set forth the factual foundation for his or infringement opinion in sufficient detail for a court to be certain that features of the accused product would support a finding of infringement. On this issue the law of the regional circuit (the U.S. Court of Appeals for the Sixth Circuit) was in agreement.
In analyzing IST's expert's declaration, the Federal Circuit concluded that it combined vague citations to pages in a service manual with a statement that the structures in the accused devices "perform the same function as the claimed 'data transmitting means' (i.e., transmitting to the host computer), in the same way (i.e., through a time division multiplexed structure) to achieve the same result (i.e., transmitted information sets)" but did not sufficiently identify the structural elements of the claimed "data transmitting means." The Federal Circuit determined that the opaque identification is not enough to permit any reasonable juror to conclude that the identified structure accomplishes the same function in the same way as the claimed structure. The Federal Circuit explained that, at a minimum, the expert needed to supply some description about the specific features of the accused playback signal selection device's manipulation of the information stream and that the expert did not supply any of the details necessary to identify an infringing device.
Practice Note: Especially when addressing means plus function limitations in the context of infringement, a practitioner should bear in mind the Court's admonition that, "[a]sking litigants to provide more than a difficult-to-decipher expert declaration does not impose too high a burden at summary judgment, especially where, as here, the structural elements are allegedly common."
The Federal Circuit noted that when counsel for IST was asked where the IST expert identified the structural elements, counsel conceded that the language is "perhaps not as grammatical as one would wish." Counsel's statement apparently sealed the fate of the appeal.
Plaintiff's Choice to File in a
"Centralized Venue" Will Not Defeat a Motion to Transfer
Venue if the Evidence Is Primarily in a Different
Forum
By Tyler J. Woods
The U.S. Court of Appeals for the Federal Circuit recently granted Nintendo's petition for a writ of mandamus to transfer a patent infringement suit from the U.S. District Court for the Eastern District of Texas to the U.S. District Court for the Western District of Washington, finding that the district court abused its discretion in denying transfer of venue under 28 U.S.C. § 1404(a). In re Nintendo Co., Misc. Doc. No. 914 (Fed. Cir., Dec. 17, 2009) (Rader, J.).
Plaintiff Motiva sued for patent infringement in the Eastern District of Texas alleging that the Nintendo Wii infringed Motiva's patent relating to a human movement measurement system. Nintendo filed a motion to transfer the case to the Western District of Washington, arguing that the Western District of Washington was more convenient because the physical and documentary evidence was located in the Western District of Washington and Japan, the majority of the witnesses lived in Washington and none of the parties were incorporated in Texas. Nintendo also argued that none of the parties had offices in Texas, no witnesses resided in Texas and no evidence was located in Texas. The district court denied Nintendo's motion in part because the Eastern District of Texas could serve as a "centralized location," given that documents were spread between Nintendo's headquarters in Japan and Washington, as well as in minor satellite offices in California and New York. Nintendo appealed.
The Federal Circuit reversed the district court's denial of Nintendo's motion to transfer, finding that nearly all of the public and private interest factors delineated in its 2008 In re TS Tech decision (see IP Update, Vol. 12, No. 1) favored transfer. The Federal Circuit determined that Nintendo of America is incorporated in Washington and has its principal place of business in the Western District of Washington. Further, the Court noted that the majority of the relevant documents, evidence and witnesses are located in the Western District of Washington or Japan; none of the parties, witnesses or evidence have any material connection with the Eastern District of Texas. The Federal Circuit noted that, "in a case featuring most witnesses and evidence closer to the transferee venue with few or no convenience factors favoring the venue chosen by the plaintiff, the trial court should grant a motion to transfer."
The Federal Circuit rejected the district court's reasoning that citizens of a the Eastern District of Texas have a "substantial interest" in adjudicating the case and noted that for products sold throughout the United States the citizens of the plaintiff's chosen venue "have no more or less of a meaningful connection to the case than any other venue."
Practice Note: For venue purposes, carefully consider the location of the parties, the evidence and the witnesses before selecting a venue. Do not simply select a venue based on the fact that products are sold within that venue or that it is a centralized location.
Ordinary Observer Test—The Sole
Test for Design Patent Invalidity
By Babak Akhlaghi
The U.S. Court of Appeals for the Federal Circuit has now ruled that the ordinary observer test should be the sole test for design patent invalidity. International Seaway Trading Corp. v. Walgreens Corp., Case No. 09-1237 (Fed. Cir., Dec. 17, 2009) (Dyk, J.).
International Seaway Trading (Seaway) filed suit against Walgreens, claiming infringement of Seaway's design patents for casual, lightweight footwear, typically referred to as clogs. Walgreens filed for summary judgment, asserting that Seaway's design patents were invalid as anticipated by a prior art design patent owned by Crocs. In granting summary judgment, the district court held that the ordinary observer test was the sole test for the design patent invalidity under § 102. In reaching its conclusion, the district court compared the exterior portions of the designs of the patent-in-suit that were visible during normal use to the prior art Crocs design patent, but the comparison did not extend to the insoles. The district court reasoned that the comparison of the insoles was not required because "the law requires a court to consider only those portions of the product that are visible during normal use, regardless of whether those portions are visible during the point of sale."
Seaway appealed, contending that the district court erred in holding that the ordinary observer test is the sole test for anticipation and, even if the ordinary observer test is the sole test for the design patent anticipation, the district court misapplied the ordinary observer test by failing to compare the clogs' insoles with the prior art Crocs patent.
On the first issue, the Federal Circuit agreed with the district court that the ordinary observer test is the sole test for anticipation, concluding that its 2008 Egyptian Goddess opinion (see IP Update, Vol. 11, No. 9) (http://tinyurl.com/ye3pzb5), holding that the ordinary observer test is the sole test for design patent infringement, should be extended to design patent anticipation. The Court noted that "it has been well established for over a century that the same test must be used for both infringement and anticipation. This general rule drives from the Supreme Court's proclamation 120 years ago in the context of utility patents: '[t]hat which infringes, if later, would anticipate, if earlier.'" Therefore, the Court affirmed the district court's holding that the ordinary observer test is the sole test for anticipation.
Turning to Seaway's contention regarding the insoles as part of the protected design, the Federal Circuit, pointing to its 2002 decision in Contessa Foods, stated the law requires that all ornamental features of the product visible at any time in the normal use lifetime of the product must be considered. Here, the Federal Circuit noted that the point of sale of a clog clearly occurs during its normal use lifetime. Therefore, the Court vacated and remanded the case for a determination of whether the differences between the insole patterns of the Seaway design patents and in the prior art support a finding of either anticipation or obviousness.
Contractual Agreement Trumps Statutory
Scheme
By Shon Lo
Addressing an intersection between patent and contract law, the U.S. Court of Appeals for the Seventh Circuit affirmed a lower court's holding that defendant Xenon Pharmaceuticals (Xenon) breached a license agreement by failing to pay plaintiff Wisconsin Alumni Research Foundation (WARF) a share of the fees received for sub-licensing the jointly owned patent subject to the agreement. Wisconsin Alumni Research Foundation v. Xenon Pharmaceuticals, Inc., Case Nos. 08-1351, 06-3901 (7th Cir., Jan. 5, 2010) (Sykes, J.).
In 2000, WARF and Xenon entered into a sponsored option agreement that gave Xenon an exclusive option to license any technology resulting from research projects jointly sponsored by Xenon and the University of Wisconsin. In 2001, WARF and Xenon jointly filed a patent application relating to the cholesterol-lowering enzyme Stearoyl CoA Desaturase (SCD), at which time WARF and Xenon also entered into an exclusive license agreement, giving Xenon an exclusive right to make, use and sell patented products under the joint patent application within the field of human health care. Under the exclusive license agreement, Xenon agreed to pay WARF a percentage of any product sales, royalties or sublicense fees it received. In 2004, Xenon gave Novartis Pharma AG (Novartis) a license to the technology covered by the joint patent application. WARF demanded a percentage of the sublicense fees from Xenon under the terms of the exclusive license agreement, but Xenon refused, claiming it could license its undivided interest in the joint patent application without regard to the agreement.
The Seventh Circuit, citing Rail-Trailer Co. v. ACF Indus, noted that under the provisions of 35 U.S.C. § 262, "each co-owner [of a patent] is at the mercy of the other in that the right of each to license" is independent. However, the statutory rule is "subject to an important exception: joint patent owners may vary their rights by contract." Pointing out several provisions in the exclusive license agreement that undermined Xenon's contention that § 262 gave it the right to freely license its portion of the interest in the patent application without accounting to WARF, including one that required Xenon pay WARF a share of the fees derived from any sublicense, the Seventh Circuit held that Xenon "cannot avoid paying royalties or sublicense fees to [WARF] simply by labeling the Novartis transaction a 'license' rather than a 'sublicense.'"
Practice Note: WARF's appeal was originally filed in the U.S. Court of Appeals for the Federal Circuit. In a non-precedential opinion, the Federal Circuit determined that it lacked subject matter jurisdiction because the dispute did not arise under the patent laws, notwithstanding inclusion of the Bayh-Dole Act, 35 U.S.C. §§ 200 et seq. in the complaint.
Reissue Petition Denied for Merely Adding
Dependent Claim
By Leigh J. Martinson
In a precedential opinion, the Board of Patent Appeals and Interferences (BPAI) held that 35 U.S.C. § 251 does not permit reissue if only narrower claims were added as a "hedge" against invalidity of the original claims. Ex parte Yasuhito Tanaka, Appeal No. 2009-000234, (BPAI, Dec. 9, 2009) (per curiam).
The statue 35 U.S.C. § 251 states that for reissue of a defective patent, the patent must be wholly or partly inoperative or invalid because of defects in the specification or drawing, or because the patentee has claimed more or less than he or she had a right to claim. Further according to the statute, the inoperative or invalid patent must have arisen through error without any deceptive intent.
Yasuhito Tanaka (Tanaka) filed a reissue application in which the only amendment was the addition of a dependent claim. Tanaka filed a declaration that stated "the original patent is at least partially inoperative by reason of claiming more or less than [he] had a right to claim in the original patent," and that it was "not until after the original patent issued that I discovered that the originally presented claims did not adequately define the invention because they were more specific than necessary." The examiner rejected the claims as being based upon a defective reissue declaration, because the error identified in the reissue declaration is not an error correctible by reissue under 35 U.S.C. § 251. Tanaka appealed.
The BPAI noted that although the U.S. Court of Appeals for the Federal Circuit has acknowledged that 35 U.S.C. § 251 should be construed liberally, it does not enable correction of every error. The BPAI pointed out that the error presented appeared to be based on the fact that the patentee included too few claims. Pointing to the Manual of Patent Examining Procedure (MPEP) at § 1402 (8th ed., rev. 7, July 2008), the BPAI stated that the U.S. Patent and Trademark Office (USPTO) does not allow for a reissue application in which the only error specified to support reissue is the failure to include one or more claims that are narrower than at least one of the existing patent claims unless there is an allegation that one or more of the broader patent claims is overly broad. The BPAI also determined that the declaration was vague as to whether the claims were inoperative as too broad or too narrow and noted that a mere reiteration of the statutory language "more or less" does not clearly identify the error to be corrected by reissue. The BPAI concluded that Tanaka was seeking an additional claim in order to hedge against the possible invalidity of one or more of the original claims. Affirming the examiner's decision, the BPAI added that the appellant was attempting to have it both ways by seeking to add narrower claims to the original patent without complying with the requirements of the statute.
Practice Note: When seeking reissue, be sure to address the specific requirements of the statute. Merely adding a dependent claim is not enough to satisfy the error requirement under 35 U.S.C. § 251.
Federal Circuit Limits Recovery of Damages
and Attorneys' Fees Awards
By Scott W. Clark
In reducing a $1.425 million award, the U.S. Court of Appeals for the Federal Circuit recently ruled (in a non-precedential opinion) that a district court erred in calculating both damages and attorneys' fees. In re Electro-Mechanical Industries, Case Nos. 08-1530, 09-1137 (Fed. Cir., Dec. 22, 2009) (Moore J.).
Universal Support Systems LLC (Universal) originally brought suit against Electro-Mechanical Industries (EMI) for alleged infringement of its patent directed to a foot design for metal racks that hold telecommunications equipment. EMI subsequently filed for bankruptcy and sought to have the value of Universal's patent infringement claim put at zero. The bankruptcy court referred the matter back to the district court for a determination as to liability and damages.
After a claim estimation hearing, the district court concluded that the patent was not invalid and found that six of the eight feet made by EMI infringed Universal's asserted patent. The district court found that Universal was entitled to damages of $425,000, based upon an 11 percent reasonable royalty that was enhanced for willful infringement, effectively doubling the underlying $212,000 damages award. The district court also found the case to be so exceptional as to warrant enhancing the reasonable attorneys' fees from $700,000 to $1 million.
On appeal, the Federal Circuit found that the district court erred in its damages calculation because there were no infringing sales of two of the six types of EMI feet designs, reducing the damages from $212,000 to $170,000. Although the feet infringed when they were manufactured, they were modified prior to sale and thus did not constitute infringing sales. Universal had offered no evidence of damages related to manufacture. The Federal Circuit did, however, uphold the district court's finding of willfulness, entitling Universal to enhanced damages of $341,000. The Federal Circuit also found that the district court's award of attorneys' fees incorrectly included $200,000 in expert witness fees. According to the Court, absent a finding of fraud or abuse, the district court could not impose expert witness fees above the $40 per day attendance fee plus certain travel reimbursements. The Federal Circuit also rejected the district court's enhancement of attorneys' fees, finding that only an award of reasonable attorneys' fees is allowed under the statute. The award was vacated and remanded to the district court for a new fee determination consistent with the Court's opinion.
Practice Note: Absent a finding of fraud, expert witness fees are not recoverable beyond the nominal amount provided by statute. Also, even in exceptional cases, a district court cannot enhance an award of attorneys' fees.
Federal Circuit Eliminates Presumption of
Irreparable Harm in Non-Precedential Opinion
By David M. DesRosier
In a non-precedential opinion, the U.S Court of Appeals for the Federal Circuit recently held that there is no longer a presumption of irreparable harm "based just on proof of infringement" of a valid, enforceable patent. Although the holding is not binding, it provides insight into the Federal Circuit's view on whether the Supreme Court's 2006 decision in eBay v. MercExchange eliminated the traditional presumption of irreparable harm. Automated Merchandising Systems, Inc. v. Crane Co., Case No. 09-1158 (Fed. Cir., Dec. 16, 2009) (Michel, J.).
Plaintiff Automated Merchandising Systems (AMS) sued defendant Crane for infringement of various patents related to vending machine optical detection technology. In the U.S. District Court for the Northern District of West Virginia, AMS moved for a preliminary injunction, arguing that Crane's sales of infringing products were depriving AMS of market share and that AMS would likely go out of business before litigation could conclude if the court did not enjoin Crane's activities. The district court granted the motion, holding that AMS's minimal evidentiary showings of lost revenue, lost market share and price erosion were sufficient to support a finding of irreparable harm, which is one requirement of issuing a preliminary injunction. In finding AMS's evidentiary showings sufficient, the district court held that, due to the presumption of irreparable harm from patent infringement, the burden was on defendant Crane to show that any harm was finite, calculable and compensable. After the district court held that Crane failed to meet this burden, Crane appealed the district court's ruling.
The Federal Circuit reversed, holding that in eBay, the Supreme Court discarded the presumption of irreparable harm based just on proof of infringement and, thus, that the basis for the district court's preliminary injunction was unsound. The Court stated that, pursuant to eBay, the burden is now on the patentee to prove irreparable harm by demonstrating that its potential losses cannot be compensated by monetary damages. Here, AMS had introduced some evidence regarding lost sales, but the Court stated that lost sales are always compensable through damages and cannot alone support a finding of irreparable harm. AMS also presented evidence showing that, soon after Crane introduced its allegedly infringing products, one of AMS's dealers asked AMS to no longer list it as a distributor. Finally, AMS suggested that Crane's activities would lead to price erosion, but presented no evidence on this issue. The Court held that plaintiff AMS did not meet its evidentiary burden with these sparse showings and therefore vacated the district court's grant of a preliminary injunction because AMS did not prove irreparable harm.
Judicial Precedent Trumps USPTO's
Procedural Rules for Priority Interferences; Claim Terms Must Be
Construed in Light of the Host Specification
By Jeremiah Armstrong
In a patent interference involving the adequacy of an application's written description, the U.S. Court of Appeals for the Federal Circuit reminded both the district court and the Board of Patent Appeals and Interferences (BPAI) that judicial precedent always trumps the U.S. Patent and Trademark Office's (USPTO) procedural rules. Koninklijke Philips Electronics N.V. v. Cardiac Science Operating Co., Case No. 209-1241 (Fed. Cir., Jan. 5, 2010) (Gajarsa, J.).
In the BPAI interference, Cardiac Science claimed priority over Philips' issued patent, which discloses a cardiac defibrillator that delivers electrical shocks to a patient's heart during ventricular fibrillation. To initiate the interference, Cardiac Science put into its patent application 37 claims from the Philips patent. In an effort to terminate the interference proceedings, Philips filed several preliminary motions with the BPAI. Several of those motions were later considered by both the district court and then the Federal Circuit.
Foremost, to challenge the adequacy of the Cardiac Science application's written description, Philips requested that the BPAI construe a key claim term in light of the written description of the Philips patent. Citing Manual of Patent Examining Procedure (MPEP) § 41.200(b), the BPAI held that it was unnecessary to consider the Philips patent when construing the claim in Cardiac's application. Likewise, in a separate motion, Philips requested that upon a broad construction of the relevant term, the majority of claims in the Cardiac Science application should be found anticipated or at least obvious based on third-party prior art. That contingent motion was denied because the BPAI did not construe the term. Thus, the BPAI found in favor of the Cardiac Science application for priority and cancelled most claims in the Philips patent.
Challenging the BPAI's priority decision, Philips promptly filed suit under 35 U.S.C. § 146 in the U.S. District Court for the Western District of Washington. At an early hearing, Philips asked the district court to overturn the BPAI's rulings on Philips' preliminary motions regarding validity and claim construction. Philips also requested a claim construction hearing at the district court and stated that if the hearing was denied, Philips would re-litigate the preliminary motions in the district court so that new, live evidence could be considered. The district court denied Philips' request for a claim construction hearing and affirmed all of the BPAI's decisions because the "reasons for denying or dismissing the motion were grounded in the application of the [BPAI's] own procedures and regulations." Then, the district court sua sponte dismissed the complaint with prejudice.
On appeal, the Federal Circuit first ruled that the district court improperly granted sua sponte summary judgment based on the applicable U.S. Court of Appeals for the Ninth Circuit law, which was applied because the issue was not unique to patent law and also because there still existed genuine issues of material fact as to the written description and anticipation. Next, the Federal Circuit held that the district court improperly affirmed the BPAI's application of MPEP § 41.200(b) when it denied Philips' challenge to the written description in the Cardiac Science patent application. Existing Federal Circuit authority was clear that § 41.200(b) does not apply to an interference proceeding when one party challenges another's written description. Thus, the sufficiency of the written description in the Cardiac Science application should have been considered using the meaning of the pertinent claim language of the senior party's patent (i.e., the Philips patent). According to the Court, the district court should therefore have undertaken claim construction of the key claim term. Moreover, the district court should have addressed Philips' validity challenges as to whether or not the key term was construed because, in an anticipation or obviousness challenge, the court should have interpreted the claim in light of the specification in which is appears. Therefore, the Federal Circuit reversed and remanded the case back to the district court.
Issues of Fact Render Summary Judgment of
Obviousness and Infringement Improper
By Isaac Crum
Holding that material facts precluded summary judgment, the U.S. Court of Appeals for the Federal Circuit recently remanded a district court's grant of summary judgment of infringement and obviousness. Source Search Technologies, LLC v. LendingTree, LLC et al., Case Nos. 08-1505, -1524 (Fed. Cir., Dec. 7, 2009) (Rader, J.).
On summary judgment, the district court held that the asserted claims of a patent directed to a "computerized procurement service for matching potential buyers with potential vendors over a network" were infringed but invalid on obviousness grounds. The patented method allows the buyer, the seller and the network itself to filter or prioritize results based on qualifications or pre-selected criteria and returns to the buyer a "quotation" for "goods and services." Based on the district court's claim construction, the Federal Circuit held that a "quote" required a "price and other terms of a particular transaction in sufficient detail to constitute an offer capable of acceptance."
In its obviousness analysis, the Federal Circuit held that none of the asserted prior art taught returning such a "quote." The e-commerce prior art references provided only "non-binding, inventory availability responses, not contractual offers" (emphasis in original) and the brick and mortar references "involved non-fungible, non-commodity services that could not be quantified or quoted immediately over the phone." Thus, none of the prior art "disclose[d] a qualifying 'quote' that is directly forwarded to a client." In addition, the e-commerce prior art lacked any meaningful filtering process as required by the claimed invention and, while some filtering may be done by human judgment in a brick and mortar system, applying such filtering to an e-commerce system "may not have been a straightforward step." Since neither the e-commerce prior art references nor the brick and mortar references clearly taught the filtering and quotation limitations, the Court vacated the district court's grant of summary judgment on obviousness.
Regarding infringement, LendingTree argued that summary judgment was improper because its service lacked the "request for quotation" and "goods and services" limitations. Relying on an analysis similar to its obviousness analysis, the Court held that there were insufficient facts to support the district court's conclusion that the LendingTree's website returns an "offer capable of acceptance" to its users. Without the presence of such undisputed facts "showing that [the] LendingTree site provides 'quotes'" the Court vacated the lower court's grant of summary judgment. The Court went on, however, to sustain the district court's ruling that the loans provided by LendingTree met the "goods and services" limitation since a loan is a "standardized" financial operation in which the borrower and lender have a "shared understanding of the promises made and the financial services offered."
Finally, the Court rejected LendingTree's arguments that the phrase "goods and services" was indefinite. The Court reasoned that once a specific market is chosen, the "goods and services" at issue become clear. According to the Court, to hold otherwise would unnecessarily burden a patentee by requiring them to "list every possible good or service."
Bilski-Based Rejections of
Computer-Implemented Claims Continue to Be Issued by Board of
Appeals
By Eric M. Shelton
In a decision applying the Bilski "machine-or-transformation test" (see IP Update, Vol. 11, No. 11), the U.S. Patent and Trademark Office's Board of Patent Appeals and Interferences (the Board) continued its practice of invalidating computer implemented method claims under § 101. Ex parte Gutta, Appeal No. 2008-3000 (BPAI, Jan. 15, 2010) (Pate, III, APJ).
The application included claims directed to a "computerized method performed by a data processor," including steps directed to obtaining, partitioning, modifying and processing user selection histories, then generating and displaying a score based on the histories. The applicants appealed to the Board to overcome a rejection under § 102. Although the Board agreed in part with the applicants on anticipation, on its own initiative the Board raised a new rejection against the method claims as patent ineligible under § 101.
Applying the machine prong of the Bilski test, the Board sought to identify claim limitations using a specific machine in a manner that imposed meaningful limits on the scope of the claims. The Board found that recitation of a "computerized method performed by a data processor" was merely a field-of-use limitation that did not impart eligibility. Of the claimed steps, the Board indicated that only the "displaying" step might have tied the claims to a particular machine. However, the Board found that the recited displaying step "need not be performed by any particular structure" and "may be accomplished simply by writing the resulting score on a piece of paper." The Board further concluded the step was mere post-solution activity insufficient to impart eligibility. Under the transformation prong of the Bilski test, the Board found the data used by the method represented intangible histories, not physical and tangle objects as required under Bilski.
Practice Note: The U.S. Patent and Trademark Office (USPTO) recently issued guidelines for examination under § 101 (see IP Update, Vol. 12, No. 9) (http://tinyurl.com/ya395a7). The guidelines explain that computer-implemented process claims can successfully provide a "particular machine" under Bilski. Specifically, the guidelines indicate a "particular machine" exists if a "claim clearly convey[s] that the computer is programmed to perform the steps of the method." For example, Gutta's claims may have satisfied the Bilski test if it had been clear that a computer performed the displaying step. However, the future is uncertain for either the Bilski machine-or-transformation test or the interim guidelines in view of the forthcoming decision from the Supreme Court in Bilski. (See Hot Topic dated November 10, 2009) (http://tinyurl.com/yckqjbk).
Internet Specimens of Use Need Not
Include Pictures of the Goods to Show Bona Fide Use in
Commerce
By Sara E. Coury
The U.S. Court of Appeals for the Federal Circuit recently reversed a Trademark Trial and Appeal Board (TTAB) decision requiring that webpage specimens of use must include a picture of the goods. In re Michael Sones, Case No. 09-1140 (Fed. Cir., Dec. 23, 2009) (Linn, J.; Newman, J., dissenting).
Sones filed an intent-to-use application for the mark ONE NATION UNDER GOD for charity bracelets. The application was allowed on August 15, 2006. With his Statement of Use, Sones submitted printouts from his website that contained a product listing, "ONE NATION UNDER GOD CHARITY BRACELET >> for $2.00" and the text "ONE NATION UNDER GOD CHARITY BRACELET, CHOICE OF BLUE OR RED $2.00 EACH." The website also had a shopping cart function and included buttons labeled "Add to Cart" and "View Cart." However, the listing did not display a picture of the goods.
The U.S. Patent and Trademark Office (USPTO) rejected Sones's Statement of Use on the grounds that his specimen did not show a picture of the goods in close proximity to the mark. In response, Sones submitted rebuttal arguments but did not submit a replacement specimen. The examining attorney again cited the rule that a display is acceptable only if it includes a picture of the relevant goods and made the refusal final. The TTAB affirmed the refusal to register. Sones appealed.
The Federal Circuit reversed noting that neither Lands' End v. Manbeck, the case upon which the USPTO rule was based, nor the Lanham Act require that specimens of use from the internet must always have pictures. The Court noted that in Lands' End, the use of photograph of the goods in catalog was secondary in importance to the "point of sale nature of the display." Therefore, contrary to the USPTO's interpretation, Lands' End did not establish a bright-line rule that displays must contain pictures of the goods.
As for the Lanham Act, the Court noted that under the act, bona fide use of a mark in the ordinary course of trade can be shown by placing a mark "in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto." Accordingly, for displays, the mark must merely be "associated" with the goods.
The Federal Circuit also analogized website specimens to physical specimens of use, e.g., labels, containers or banners, for which no picture of the goods is required. For instance, a container must simply bear the mark and contain the goods to be an acceptable specimen of use. Therefore, the Court held that there was no reason why websites must have pictures in order to associate a trademark with the goods being sold.
In dissent, Judge Newman accused her colleagues of issuing an improper advisory opinion since the applicant had filed a new application for registration and filed in it a picture of the mark used in association with the goods. In Judge Newman's view this mooted any "live controversy."
It's the Quality, Not Quantity of the
Contribution that Matters
By Peter Siavelis and Rita J. Yoon
The U.S. Court of Appeals for the Seventh Circuit, finding that quality matters over quantity in determining whether a contribution amounts to joint authorship, held that even though a bandmate's contributions amounted to only 10 percent of a song, the bandmate qualified as a co-author because his contributions made the song commercially viable. Janky v. Lake County Convention and Visitors Bureau, Case Nos. 07-2350, 07-2762, 08-1606 (7th Cir., Aug. 3, 2009) (Evans, J.).
The tourism bureau of Lake County, Indiana commissioned a song to promote its county. Cheryl Janky composed the song, which originally focused on the state of Indiana, and obtained a copyright registration under her name only. Janky's bandmate, Henry Farag, suggested some changes to the lyrics to emphasize Lake County over Indiana. Janky adopted Farag's changes, which accounted for about 10 percent of the total lyrical content of the revised song.
Janky applied for a new copyright on the revised song, this time listing Farag as the co-author of a "joint work." Farag then gave the tourism bureau a royalty-free license to use the song. Several years later, Janky sued the tourism bureau for copyright infringement, alleging that she was the sole owner of the copyright on the song and that Farag's license to the bureau was invalid. The district court granted summary judgment in Janky's favor on the issue of copyright ownership. Lake County appealed.
In reversing the district court, the Seventh Circuit noted that individuals are co-authors of a work only if they intend to create a joint work and contribute independently copyrightable material. Here, Janky's second copyright registration, which identified Farag as co-author and the song as a "joint work," was strong evidence of intent to create a joint work.
As to independent copyrightability, the Seventh Circuit rejected the de minimis test for joint authorship used by some courts, which requires more than a de minimis contribution by each author. Even though Farag's changes accounted for only about 10 percent of the lyrical content, the court held that the tourism bureau would not have adopted the song without Farag's changes. Farag's changes were significant, the court explained, because they affected the song's commercial viability by shifting the focus to Lake County instead of Indiana. As a result, "Farag's contributions went beyond general ideas, refinements, and suggestions" and passed the test of independent copyrightability.
The court cautioned, however, that this case was a close call. "Placing a contribution in one hopper or the other is not always an easy task." Here, "Farag contributed ideas and gave expression to those ideas, but had he done much less, his work would not garner the protection of copyright."
Practice Note: When applying for copyright registration, an applicant should carefully consider the overall significance of contributions to the work made by a potential co-author. Such considerations should include an honest assessment of the intent of the parties, as well as the creative process leading to the subject work.
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