ZMJLaw Patent Law Blog

In re Google: eDiscovery and Privileged Communications

Wed, 21 Mar 2012 16:46:00 GMT

In, In re Google Inc., MISC. 106, 2012 WL 371913 (Fed. Cir. Feb. 6, 2012), the Federal Circuit, in a non-precedential opinion, denied a Google’s petition for a Writ of Mandamus seeking to prevent Plaintiff from using some emails from Google engineers at trial. While, the order does not set forth any new Federal Circuit precedent, it is instructive for the underlying eDiscovery and privilege issues that can arise during patent litigation.

In the District Court (Northern District of California), Google had been ordered to produce emails from a Google engineer that Google claimed were privileged communications with Google in-house counsel, and had been inadvertently produced. The District Court, in a detailed, virtually line-by-line, analysis of the email had found that Google had failed to carry its burden of establishing the privilege claim. Factors such as the email’s salutation to a vice president, and not to in-house counsel, the lack of discussion of any patent invalidity or infringement issues within the email, and the textual indication within the email that it was sent in response to a request from management, and not counsel, all contributed to the District Court’s finding.

The Federal Circuit, having no patent law issue, applied the law of the Ninth Circuit and evaluated for a clear abuse of discretion. Finding none, the Federal Circuit denied the petition.

The case provides instructive reminders for litigators, in-house counsel, and management concerning the issues presented by eDiscovery and for evaluating communications with counsel.

MarcTec v. Johnson & Johnson: Exceptional Cases & the Inherit Authority to Award Reasonable Expert Fees

Thu, 26 Jan 2012 16:25:00 GMT

In MarcTec, LLC v. Johnson & Johnson, No. 2010-1285, (Fed. Cir. Jan. 3, 2012), the Federal Circuit affirmed the United States District Court for the Southern District of Illinois’ award of $3,873,865.01 in attorneys’ fees under 35 U.S.C. § 285 and $809,788.02 in expert fees under its inherent authority to award reasonable expert fees in excess of the § 285 statutory limit. On appeal to the Federal Circuit, patent holder-plaintiff, MarcTec LLC (“MarcTec”), argued that the case was not “exceptional” under § 285, and that the district court abused its discretion in awarding expert fees. The Federal Circuit nevertheless affirmed.

MarcTec filed suit against Johnson & Johnson and its subsidiary device manufacturer, Cordis, Corp. (“Cordis”), on November 27, 2007 alleging infringement of U.S. Patents No. 7,128,753 and 7,217,290 (the “‘753” and “‘290” Patents). During procurement of the Patents, the inventor had distinguished the applications from U.S. Patent No. 5,102,417 (the “‘417 Patent”) on the grounds that they include a bonded polymeric material that “is non-flowable and non-adherent at room temperature and becomes flowable, tacky, and adherent upon the application of heat.” Slip. op. at 5. The inventor added claim limitations to capture this difference. See Slip op. at 4.

At claim construction, the district court ruled that (1) the specification of the ‘753 and ‘290 Patents only support “heat bonding,” (2) the claims were amended during prosecution to expressly include “heat bonding” limitations, and (3) the inventor disclaimed coverage of stents based on statements made to the examiner in distinguishing the ‘417 Patent. Subsequently, the defendants moved for summary judgment of non-infringement because (1) the polymer used on Codis’ stent is applied at room temperature, and (2) the ‘753 and ‘290 Patents do not cover stents. MarcTec countered by, notably, presenting expert testimony proffering “junk science” to attempt to show that even though the polymer is applied to the Johnson & Johnson product at room temperature, based on the speed of particles, there was some heating. The district court granted the defendants’ motion. MarcTec appealed and the Federal Circuit affirmed. MarcTec, LLC v. Johnson & Johnson, 394 Fed.Appx. 685 (Fed. Cir. 2010).

Thereafter, the defendants moved the district court for attorneys’ and expert fees under § 285 and the court’s inherent power. The defendants reasoned that the case was exceptional based on (1) MarcTec’s mischaracterization of claim construction law in an attempt to convince the district court to ignore the specification and prosecution history of the ‘753 and ‘290 Patents, (2) MarcTec’s later mischaracterization of the district court’s claim construction, and (3) MarcTec’s “junk science” expert testimony that was excluded as unreliable under Daubert. The district court granted the defendants’ motion and awarded $3,873,865.01 in attorneys’ fees and $809,788.02 in expert fees. MarcTec appealed the “exceptional case” determination and the award of attorney and expert fees.

The Federal Circuit affirmed the exceptional case finding noting that even though MarcTec couldn’t know in advance the exact claim construction that the district court would adopt, the fact that no possible reading of Philips v. AWH Corp., 415 F.3d 1303, 1313-19 (Fed. Cir. 2005) (en banc) supported its position indicated that MarcTec should have known that it had no basis for bringing suit. Regarding the district court’s inherent authority to award expert fees, the Federal Circuit noted that while district courts should typically evaluate attorney and expert fees independently, the fact that MarcTec produced unreliable and irrelevant expert testimony that the defendants were therefore forced to counter weighed in favor of the award.

MarcTec, LLC v. Johnson & Johnson serves as a reminder for litigators and patent prosecutors alike. It suggests, perhaps, an increased willingness to find “exceptional cases” and punish conduct through district courts’ inherent powers.

Typhoon Touch Technologies v. Dell: Risks of Functional Claiming

Tue, 24 Jan 2012 19:25:00 GMT

In Typhoon Touch Technologies, Inc. v. Dell, Inc., 659 F.3d 1376 (Fed. Cir. 2011), the Federal Circuit affirmed a finding of noninfringement where the patent claims relied on functional limitations and the accused device did not actually carry out the functions, but was merely capable of being programmed or configured to do so.

The patents owned by Typhoon claimed priority back to an application filed in 1988, disclosing a now rudimentary form of a touch screen computer designed for collecting data. Through a series of abandoned continuing applications, the patent applicants obtained seemingly broad claims in 1995 and 1997 (US Pat. Nos. 5,379,057 and 5,675,362). The claims obtained were apparently intended to capture the latest developments in touch screen technology. However, the claims relied substantially on functional limitations (i.e., claims directed to the function of the device as opposed to the structure of the device).

A non-practicing entity (Typhoon) acquired the patents and filed the present suit after a period of 10 years where no attempt to enforce the patent occurred. Meanwhile, in that 10 years touch screens became increasingly present in consumer electronics. Ultimately, in the underlying district court case, the parties stipulated to a finding of non-infringement if the district court's claims construction of certain functional terms was adopted.

On appeal, the Federal Circuit recognized from prior decisions that apparatus claims may appropriately use functional language. However, the court reasoned that those prior decisions did not deal with the situation in which an apparatus does not perform the function stated in the claim unless the apparatus is specifically so programmed or configured. Relying on other precedent, the Federal Circuit rejected the proposition that infringement may be based upon a finding that an accused product is merely capable of being modified in a manner that infringes the claims of a patent.

The Federal Circuit affirmed the claim construction of the district court, requiring that a device, to be covered by the claim, actually performs, or is configured or programmed to perform, each of the functions stated in the claim. Typhoon argued to no avail that such a construction essentially added a use requirement to an apparatus claim. The necessary result due to the parties’ stipulation was finding non-infringement.

Ultramercial v. Hulu: The Federal Circuit Continues to Grapple with Computer Programs as Patentable Subject Matter

Mon, 23 Jan 2012 23:58:00 GMT

In Ultramercial, LLC v. Hulu, LLC, 657 F.3d 1323 (Fed. Cir. 2011), the Federal Circuit further refined patentable subject matter, and the ineligibility of “abstract principles,” by stating it “does not presume to define ‘abstract’ beyond the recognition that this disqualifying characteristic should exhibit itself so manifestly as to override the broad statutory categories of eligible subject matter and the statutory context that directs primary attention on the patentability criteria of the rest of the Patent Act.”

The underlying dispute involved U.S. Patent No. 7,346,545 which claims a method for distributing copyrighted content over the Internet. The District Court for the Central District of California granted a motion to dismiss on grounds that the ‘545 patent did not claim patentable subject matter.

On appeal, the Federal Circuit reversed the district court’s decision. The Federal Circuit discussed Bilski v. Kappos, --- U.S. --- (2011) and highlighted the Supreme Court and the Federal Circuit’s difficulty in providing a precise formula or definition for the judge-made ineligible category of abstractness. Citing Research Corp. Techs., Inc. v. Microsoft Corp, 627 F.3d 859 (Fed. Cir. 2010), the court stated that it “does not presume to define ‘abstract’ beyond the recognition that this disqualifying characteristic should exhibit itself so manifestly as to override the broad statutory categories of eligible subject matter and the statutory context that directs primary attention on the patentability criteria of the rest of the Patent Act.”

Relying on Gottschalk v. Benson, 409 U.S. 63 (1972), the Federal Circuit held that although abstract principles are not patentable, an application of an abstract idea may be. Citing Research Corp., the court observed that “inventions with specific applications or improvements to technologies in the marketplace are not likely to be so abstract that they override the statutory language and framework of the Patent Act.” According to the court, the ‘545 patent sought to remedy problems with prior art banner advertising, i.e. it purported to improve existing technology in the marketplace. The Federal Circuit further noted that many of the steps disclosed in the ‘545 patent were likely to require intricate and complex computer programming and that the invention involved an extensive computer interface. The court also went out of its way to distinguish its recent decision in CyberSource Corporation v. Retail Decisions, Inc., 654 F.3d 1366 (Fed. Cir. 2011) by stating that the ‘545 patent (unlike the patent at issue in CyberSource) did not claim a series of steps that could be performed mentally.

CyberSource v. Retail Decisions: Computer Programs as Patentable Subject Matter

Mon, 23 Jan 2012 23:41:00 GMT

In CyberSource Corporation v. Retail Decisions, Inc., 654 F.3d 1366 (Fed. Cir. 2011), the Federal Circuit provides additional guidance on patentable subject matter stating that when a method can be performed mentally, or where the method is the equivalent of human mental work, such methods recite unpatentable abstract ideas. The appeal was decided on August 16, 2011 and involved U.S. Patent No. 6,029,154 which, in part, recites a “method and system for detecting fraud in a credit card transaction between [a] consumer and a merchant over the Internet.” CyberSource Corporation (“CyberSource”) initiated this lawsuit against Retail Decisions, Inc. (“Retail Decisions”) in August 2004.

After the Federal Circuit issued its opinion in In re Bilski, 545 F.3d 943 (Fed. Cir. 2008) setting forth the machine-or-transformation test as the exclusive test for patentability of a claimed process, Retail Decisions moved for summary judgment in the district court on invalidity grounds. The district court found that one of the two asserted claims recited an unpatentable mental process for collecting data and weighing values. With regard to the other asserted claim, the district court held that simply appending “[a] computer readable medium containing program instructions” to an otherwise non-statutory process claim was insufficient to make it statutory. CyberSource appealed to the Federal Circuit in April 2009.

The Federal Circuit affirmed the district court’s decision. While the Supreme Court in Bilski v. Kappos, --- U.S. --- (2011), rejected the machine-or-transformation test as the exclusive test for patentability of a claimed process, it did not define what constitutes a patentable process beyond pointing to the definition of “process” in 52 USC § 100(b) and looking to the guideposts of unpatentable subject matter (i.e. laws of nature, physical phenomena and abstract ideas). Here, the Federal Circuit held that the asserted claims both failed to meet the machine-or-transformation test and recited unpatentable subject matter in that they were drawn to a mental process, a subset of unpatentable abstract ideas. Citing Gottschalk v. Benson, 409 U.S. 63 (1972), the Federal Circuit further stated that when a method can be performed mentally, or where the method is the equivalent of human mental work, such methods recite unpatentable abstract ideas.

CBT Flint Partners v. Return Path: Post-Issuance Changes

Tue, 20 Sep 2011 23:28:00 GMT

In CBT Flint Partners, LLC v. Return Path, Inc., Nos. 2010-1202, -1203, 2011 WL 3487023 (Fed. Cir. Aug. 10, 2011) a Federal Circuit panel (Lourie, Bryson, and Linn) provided further guidance as to when a district court may correct so-called “obvious” errors in an issued patent. The court had previously held that “[a] district court can correct a patent only if (1) the correction is not subject to reasonable debate based on consideration of the claim language and the specification and (2) the prosecution history does not suggest a different interpretation of the claims.” Novo Industries, L.P. v. Micro Molds Corp., 350 F.3d 1348, 1357 (Fed. Cir. 2003). In reversing, the Federal Circuit essentially held that the subject of “reasonable debate” is not as to whether or not there are different possible corrections, but rather, the meaning of any different possible corrections.

The case was on appeal from the U.S. District Court for the Northern District of Georgia, where U.S. Patent No. 6,587,550 was held indefinite under 35 U.S.C. § 112, ¶ 2 because claim 13 had a typo for which there were multiple possible corrections. Claim 13 is a method claim relating to detecting, at the ISP level, incoming spam e-mail messages, and either charging the sender a fee to send the message on to the intended recipient or rejecting the message. As issued, the claim said, among other things, “the computer being programmed to detect analyze the electronic mail communication.” (emphasis added). Further muddying the issue was the fact that a co-inventor—who also prosecuted the application—couldn’t recall which of the possible corrections was originally intended. The district court interpreted the Federal Circuit’s guidance in Novo Industries literally and held that because there were at least three possible ways to correct the typo, there was therefore “reasonable debate” and the correction was not “obvious.”

The Federal Circuit reversed the district court’s holding and remanded to the district court. The Federal Circuit held that under any of the three possible corrections for the typographical error, the claim had essentially the same meaning. CBT Flint Partners, LLC, 2011 WL 3487023 at *4. The court distinguished its previous decision by pointing out that “[i]n Novo Industries, we declined to make the proposed corrections to the claim at issue because those corrections were substantively significant and required guesswork as to what was intended by the patentee in order to make sense of the patent claim.” Id. In so doing, the Federal Circuit has effectively given a bit more elbow room for a district court to be able to correct “obvious” errors in issued patents.

Retractable Technologies v. Becton, Dickinson: Claim Differentiaiton and Written Description

Tue, 20 Sep 2011 19:41:00 GMT

In Retractable Technologies, Inc. v. Becton, Dickinson & Co., No. 2010-1402, 2011 WL 2652448 (Fed. Cir. 2011), the Federal Circuit once again found itself in the claim construction thicket. In this case, the Federal Circuit relied on Seachange, Int’l, Inc. v. C-Cor, Inc., 413 F.3d 1361 (Fed. Cir. 2005), and the majority held that any presumption created by claim differentiation here was overcome by a contrary construction dictated by written description and prosecution history.

At trial below, Retractable Technologies, Inc. (“RTI”) sued Becton, Dickinson and Company (“Becton”) alleging infringement of three patents related to retractable needles. Representative language claimed “a hollow syringe body comprising a barrel and having a front and a back end . . . a retraction mechanism . . . comprising a needle holder having a head portion . . . the head portion further comprising an inner head, a continuous retainer member surrounding the inner head. . .” In claim construction, the trial court concluded that “retainer member” and “needle holder” need not be two separate parts and that “body” need not be limited to a one-piece structure. A jury found Becton liable for infringement.

Becton appealed and challenged various trial court rulings, including the claim constructions. Becton argued that “retainer member” and “needle holder” must be separate pieces because the claims list the terms as separate limitations. The Federal Circuit disagreed. Writing for the majority, Judge Lourie noted that the claim language recited “retainer member” as a sub-element of the “needle holder” and, as such, the two elements could structurally overlap.

As for “body,” Becton argued that the specification described the “invention” as comprising a one-piece body while disparaging prior art with two-piece bodies. For its part, the majority noted that while the patents contained independent claims that recited “body” and dependent claims that limited “body” to “one-piece body,” none of these claims expressly recited a “body” that contained multiple pieces. The majority went on to state that although these claims can be read to imply “body” as not limited to single structure, that implication was weak. Citing Seachange, Int’l, Inc. v. C-Cor, Inc., 413 F.3d 1361 (Fed. Cir. 2005), the majority held that any presumption created by claim differentiation here was overcome by a contrary construction dictated by written description and prosecution history. The Court thus sided with Becton and reversed the trial court’s claim construction of “body.”

In dissent, Judge Rader invoked Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) which, he argued, stands for the proposition that the claims themselves, not the written description portion of the specification, define the patented invention. He added that claim language is to be given its ordinary and customary meaning one skilled in the art at the time of invention. According to Judge Rader, “body” did not have special or technical meaning and did not contain a one-piece limitation. He further noted that neither claim language nor written description shows intent by RTI to limit scope of body to one-piece body. Judge Rader would have upheld the trial court’s construction of the term.

Therasense: Redefining the Intent and Materiality Elements to Prove Inequitable Conduct

Tue, 05 Jul 2011 14:55:00 GMT

In Therasense, Inc. v. Becton, Dickinson & Co., 2011 WL 2028255 (Fed. Cir. 2011), the Federal Circuit overhauled the doctrine of inequitable conduct in an en banc, 6-1-4 opinion. This opinion redefines the intent and materiality elements that a party must show to prove inequitable conduct. Specifically, the Court held that the party asserting a claim for inequitable conduct based on nondisclosure of information to United States Patent and Trademark Office (“PTO”) must prove by clear and convincing evidence that the applicant made a “deliberate decision to withhold a known material reference.” The Court further held that a reference is material if a claim of the patent would not have issued had the applicant disclosed the reference to the PTO. This opinion is expected to have far-reaching implications for patent prosecutors and litigators.

Therasense and Abbott Laboratories (collectively, “Abbott”) sued Becton, Dickinson & Co., Nova Biomedical Corp. (Becton, Dickinson’s supplier) and Bayer Healthcare in the Northern District of California, alleging that defendants’ blood glucose test strips infringed claims of three United States patents, including U.S. Patent No. 5,820,551 (“the ’551 Patent”). The district court held that the ’551 Patent was invalid in light of an earlier patent to Abbott, U.S. Patent No. 4,545,382 (“the ’382 Patent”). The court also held that the ’551 Patent was unenforceable due to Abbott’s inequitable conduct in prosecuting the application for the ’551 Patent. Specifically, the district court found that Abbott made representations to the PTO that contradicted earlier arguments that it made in briefs submitted to the European Patent Office (“EPO”) when Abbott prosecuted the European counterpart to the ’382 Patent.

Of particular relevance was a limitation of claim 1 of the ’551 patent, which provides that the active electrode on Abbott’s claimed test strip is configured “without an intervening membrane….” The PTO rejected claim 1 as unpatentable over the ’382 Patent, which disclosed test strips that “optionally, but preferably” included a protective membrane. To distinguish its claimed invention from the ’382 Patent, Abbott represented that the invention disclosed in the ’382 Patent required a membrane, despite the language in the ’382 Patent providing that a membrane was optional, but preferable. Abbott argued to the PTO that the “optionally, but preferably” language in the ’382 Patent was “mere patent phraseology.” In a declaration submitted to the PTO, Abbott’s Director of Research and Development represented that the ’382 Patent should be understood as disclosing a test strip that requires a membrane, whereas the invention claimed in the application for the ‘551 Patent did not require a membrane. Ultimately, the PTO allowed the claim.

Three years earlier, however, in prosecuting the counterpart to the ’382 Patent in the EPO, Abbott represented that the test strip claimed in the counterpart to the ’382 Patent did not require a membrane. There, Abbott argued that the “optionally, but preferably” language in that application was properly understood to mean that a membrane is optional but preferred when used with live blood. Accordingly, Abbott’s representations to the PTO concerning the scope of its ’382 Patent contradicted arguments that it made to the EPO three years earlier.

The district court concluded that Abbott’s briefs to the EPO were material and that Abbott acted with an intent to deceive the PTO when it failed to disclose those briefs to the PTO. Abbott appealed, and the Federal Circuit affirmed. The Federal Circuit, however, granted Abbott’s petition for rehearing en banc, “[r]ecognizing the problems created by the expansion and overuse of the inequitable conduct doctrine.”

In the majority opinion, Judge Rader began by tracing the origin of the inequitable conduct doctrine to pre-1950’s United States Supreme Court cases involving the equitable defense of unclean hands. The majority explained that each of those cases involved “particularly egregious misconduct, including perjury, the manufacture of false evidence…and deliberately planned and carefully executed schemes to defraud not only the PTO but also the courts.” According to the Majority, the inequitable conduct doctrine has “metastasized” by departing from these Supreme Court cases, and its overuse now “plague[s]” the courts and the entire patent system.

To curb abuse of the inequitable conduct doctrine, the Court tightened both the intent and materiality standards required to prove a claim for inequitable conduct. The Court held that cases involving nondisclosure of information requires proof by clear and convincing evidence that “the applicant made a deliberate decision to withhold a known material reference.” Courts must now weigh the intent and materiality elements independently and may no longer use a “sliding scale” to overcome a weak showing of intent by a strong showing of materiality and vice versa. Furthermore, the Court held that the materiality required to establish inequitable conduct is “but-for” materiality. Prior art “is but-for material if the PTO would not have allowed a claim had it been aware of the undisclosed prior art.”

The Court remanded the case to the Northern District of California with instructions that the district court determine whether Abbott’s failure to provide the EPO briefs to the PTO was material under the Federal Circuit’s new but for standard. The Court also instructed the district court to determine whether Abbott intended to deliberately deceive to PTO, that is, whether it “knew of the EPO briefs, knew of their materiality, and made the conscious decision not to disclose them in order to deceive the PTO.”

In a separate opinion, Judge O’Malley concurred with the Majority’s heightened standard for the intent to deceive element, but dissented concerning the new test for materiality. In her opinion, the materiality test adopted by the majority and the materiality test championed by the dissent are too inflexible, particularly because the inequitable conduct doctrine has its roots in equity. Referring to the majority and dissenting opinions, Judge O’Malley noted, “Their respective materiality inquires are black or white, while equity requires judicial consideration of shades of gray.”

In a lengthy dissent, Judge Bryson (joined by Judges Gajarsa, Dyk and Prost) criticized the majority’s new test for materiality. According to the dissent, the Majority, in adopting its new materiality standard, departs from decades of precedent and “comes close to abolishing the [doctrine of inequitable conduct] altogether.” The dissent also expressed fears that new test for materiality may result in applicants concealing information from the PTO, providing applicants with “little to lose by following a course of deceit.”

Time will tell how the Court’s opinion in Therasense will impact patent prosecution and litigation. Patent applicants may no longer feel compelled to submit marginally-relevant information to the PTO out of fear that their failure to disclose such information will lead to a claim for inequitable conduct. Taken too far, however, the Court’s opinion may result in the failure of patent applicants to disclose critical prior art to the PTO, which may result in the issuance of lower quality patents. Or, perhaps, applicants will continue to submit marginally-relevant prior art to the PTO in the hopes of burying more material prior art. In the litigation context, district courts should expect far fewer counterclaims and defenses of inequitable conduct. In any event, Therasense can be regarded as a significant “win” for patent holders and patent prosecutors.

Global Tech v. SEB: Induced Infringement Under the Doctrine of Willful Blindness

Tue, 09 Aug 2011 16:08:00 GMT

In Global-Tech Appliances, Inc. v. SEB S. A., 563 U.S. ___, (2011), the Supreme Court clarified an ambiguity in 35 U.S.C. 271(b) regarding the intent needed to impose liability for induced infringement. Section 271(b) states "[w]hoever actively induces infringement of a patent shall be liable as an infringer.” Departing from a standard applied by the Federal Circuit, the Supreme Court held in its 8-1 decision that "willful blindness" is sufficient.

SEB obtained U.S. Pat. 4,993,312 for a deep fryer with a “cool touch” outer housing. Sunbeam asked Pentalpha (a Hong Kong subsidiary of Global-Tech) to supply deep fryers. Pentalpha purchased a SEB fryer made for the foreign market lacking U.S. patent markings and copied all but the fryer's cosmetic features. Pentalpha acquired a right-to-use study without telling its attorney it had copied directly from SEB. The study failed to locate SEB's patent and found no infringement. Pentalpha sold fryers to Sunbeam, which resold them in the U.S. SEB sued Sunbeam and Sunbeam notified Pentalpha of the lawsuit, but Pentalpha continued selling fryers to other U.S. resellers. SEB subsequently settled with Sunbeam and sued Pentalpha and its other U.S. resellers in 1999 asserting direct 271(a) and actively induced 271(b) infringement.

In 2006, a jury found willful infringement and inducement by Pentalpha, which appealed on the grounds it had no actual knowledge of SEB's patent until the Sunbeam litigation in 1998. The Fed. Cir. affirmed, acknowledging that a showing of “specific intent to encourage another’s infringement” was required, but that such “specific intent” includes “deliberate indifference” shown by a subjective determination that they knew of and disregarded an overt risk that an element of the offense existed.

On appeal, the Supreme Court held that “deliberate indifference” to a known risk that a patent exists does not satisfy the knowledge required by 271(b). However, the Fed. Cir. was affirmed because the evidence was plainly sufficient to support a finding of Pentalpha's knowledge under the doctrine of “willful blindness.”

“Willful blindness” is well established in criminal law such that defendants cannot escape the reach of “knowing” or “willful” statutes by deliberately shielding themselves from clear evidence of critical facts that are strongly suggested by the circumstances. All federal courts of appeal but one require that: 1) the defendant must subjectively believe there is a high probability that a fact exists, and 2) the defendant must take deliberate actions to avoid learning of that fact. In contrast, the Federal Circuit “deliberate indifference” standard permits a finding of knowledge when there is merely a "known risk" that the induced acts are infringing; it does not require active efforts by an inducer to avoid knowing about the infringing nature of the activities. With all facts taken together, Pentalpha subjectively believed there was a high probability that SEB's fryer was patented and took deliberate steps to avoid knowing that fact. Consequently, the requisite intent existed for induced infringement.

McKesson v. Epic: Federal Circuit Affirms Non-Infringement Based on Divided Infringement Analysis

Tue, 05 Jul 2011 15:34:00 GMT

In McKesson Technologies, Inc. v. Epic Systems Corp., No. 2010-1291, 2011 WL 2173401 (Fed. Cir. May 26, 2011), a three judge panel consisting of Newman, Bryson and Linn affirmed a district court decision of non-infringement based on a divided infringement analysis. The method claims at issue were directed to a process of automatically and electronically communicating between at least one health-care provider and a plurality of patients serviced by the health-care provider.

Both McKesson and Epic agreed on appeal that no single party performed every step of the asserted method claims. McKesson argued, however, that the special nature of the doctor-patient relationship is something more than a mere arms length relationship and that the patients actions should be attributable to the health care provider, because “[t]he phrase ‘doctor’s orders’ says it all” and because of the existence of a doctor-patient privilege. The Federal Circuit did not agree, stating that the “doctor-patient relationship does not by itself give rise to an agency relationship or impose on patients a contractual obligation such that the voluntary actions of patients can be said to represent the vicarious actions of their doctors.”

Because McKesson was unable to attribute the performance of all the steps of the asserted method claims to a single party, the Federal Circuit affirmed the finding of noninfringement.

The Federal Circuit has since decided to hear the appeal en banc and has vacated the panel's April 12, 2011 opinion.

In re Tanaka: Addition of Narrower Claims During Reissue

Tue, 05 Jul 2011 15:36:00 GMT

In re Yasuhito Tanaka, --- F.3d ----, No. 2010-1262, 2011 WL 1437887, 98 U.S.P.Q.2d 1331 (Fed. Cir., April 15, 2011), the Federal Circuit ruled that a reissue application that merely adds dependent claims satisfies the requirements for seeking reissue. This decision could effectively broaden the scope of reissue proceedings in patent cases.

The Tanaka case involved a reissue application in which a single new dependent claim was presented, but the original claims were unchanged. The examiner rejected the claims, holding that “[t]he Applicant has not specified an error that broadens or narrows the scope of the claims . . . The original claim 1 remains . . . therefore the broadest scope of the patent remains the same.” The Board of Patent Appeals and Interferences agreed.

On Appeal, however, the Federal Circuit reversed, citing three prior cases. Most notably, the court quoted In re Handel, for the proposition that “adding dependent claims as a hedge against possible invalidity of original claims ‘is a proper reason for asking that a reissue be granted’” and that “’[t]he term ‘inoperative’ has been construed to mean inoperative adequately to protect the invention, which may be due to failure of the solicitor to understand the invention.’” 312 F.2d 943, 946 n.2 (CCPA 1963) (Rich, J.). Based on Handel and two other cases, the Federal Circuit held that “[t]he omission of a narrower claim from a patent can render a patent partly inoperative by failing to protect the disclosed invention to the full extent allowed by law,” which provides a basis for reissue.

In a dissenting opinion, Judge Dyk noted that the prior cases relied upon by the court did not address the issue at hand: the language from those cases is pure dicta. Further, the majority’s decision seems contrary to two very old Supreme Court decisions on the subject, Gage v. Herring, 107 U.S. 640 (1883), and Miller v. Bridgeport Brass Co., 104 U.S. 350 (1881).

Despite the dissent, the conclusion of the majority in Tanaka is reasonable and defensible. While the Tanaka majority relied on dicta from prior cases, the dissent is built upon very old cases, with different facts, and an earlier version of the reissue statute. While the law remains to be developed, the Tanaka decision authorizes the addition of dependent claims through reissue, even with no other changes to the patent. This development may allow patent holders a broader avenue to strengthen their patent after it issues – an avenue that has not clearly existed before.

Old Reliable v. Cornell: Exploring the Contours of the "Exceptional Case" Requirement

Tue, 14 Jun 2011 16:59:00 GMT

In Old Reliable v. Cornell, 635 F.3d 539 (Fed. Cir. 2011), the Federal Circuit reversed a trial court’s “exceptional case” finding under 35 U.S.C. § 285 and attorney fee award against a patentee. The panel held that absent misconduct, sanctions may be imposed against patentee only if (1) litigation is brought in subjective bad faith, and (2) litigation is objectively baseless.

To initiate the suit, the patentee, Old Reliable, filed a complaint against Cornell contending that one of Cornell’s products (“VT-1”) infringed one of its patents – Patent No. 5,069,950. Cornell countered that the ‘950 patent was invalid because it was anticipated by a prior Cornell product (“VT-2”) and was anticipated, or rendered obvious, by several other prior art references. The trial court granted Cornell’s motion for summary judgment for patent invalidity, ruling that the VT-2 product was anticipatory prior art. After ruling that the case became “exceptional” after the named inventor of the ‘950 patent admitted in deposition testimony that VT-1 and VT-2 did “exactly the same thing” as his invention, the trial court granted deemed the case “exceptional” and awarded Cornell attorney fees, expenses and costs of approximately $200,000.

Old Reliable appealed to the Federal Circuit. Writing for the panel, Judge Mayer started out by setting forth the governing principle that a trial court may award attorney fees to a prevailing party in patent litigation if the court deems the case “exceptional” pursuant to § 285. The panel further noted that exacting Standard set forth in Brooks Furniture Manufacturing v. Dualier International Inc., 393 F3d 1378 (Fed. Cir. 2005) provided that absent misconduct, sanctions may be imposed against patentee only if (1) litigation is brought in subjective bad faith, and (2) litigation is objectively baseless. Relying iLOR, LLC v. Google, 631 F3d 1372 (Fed. Cir. 2011), the panel stated that unless an argument is “so unreasonable that no reasonable litigant could believe it would succeed,” it cannot be deemed objectively baseless for purposes of awarding attorney fees under § 285.

Reversing the trial court’s ruling, the panel observed that while Old Reliable’s arguments in support of validity of the ‘950 patent were ultimately unsuccessful, the “exacting standard” for establishing a case to be exceptional was not met given that Old Reliable had reasonable grounds for arguing that the ‘950 patent was valid. In other words, while Old Reliable’s infringement assertions failed to persuade the trial court, these assertions were non-frivolous and thus not “objectively baseless.” Having so concluded, the panel did not reach the question of Old Reliable’s subjective intent.

As such, the Federal Circuit’s evolving doctrine guiding “exceptional case” determinations envisions a threshold “objective” requirement in which subjective considerations play no role, i.e. an actor may have a completely wrongful intent but if the conduct itself does not meet the objective threshold, that intent is irrelevant. Given the relatively high hurdle required to satisfy this objective standard, exceptional case findings may end up being few and far between.

In re Jung: The Examiner's Prima Facie Burden

Tue, 05 Jul 2011 15:38:00 GMT

In In re Jung, 637 F.3d 1356 (Fed. Cir. 2011), a Federal Circuit panel consisting of Judges Gajarsa, Dyk, and Linn decided a case involving the examiner’s prima facie burden. The Federal Circuit denied the appeal stating that they saw no reason to impose a heightened burden on the examiners beyond the notice requirement of 35 U.S.C. § 132.

On appeal, the appellant, Jung, asked the Federal Circuit panel to reverse the Board of Patent Appeals and Interferences’s (Board) ruling which affirmed the examiner’s rejection, and to effectively alter the examiner’s burden in making a prima facie case. In summarizing its holding, the Circuit Panel stated that “Jung contends that establishing a prima facie case requires more than just notice under [35 U.S.C.] § 132, and that whatever else may be required is part of the examiner’s burden in rejecting any claim. According to Jung, until the burden is met by the examiner, the rejection need not be challenged on the merits by the applicant. This court disagrees and sees no reason to impose a heightened burden on the examiners beyond the notice requirement of § 132.” In re Jung, No. 2010-1019, slip op. at 11 (Fed. Cir. March 28, 2011).

During prosecution, Jung submitted an application including a claim term for a “well-charge-level controller” which was not defined in the claims, and was only defined in terms of structure in the specification. While there was one exemplary recitation in the specification that was functional, the Board’s ruling pointed out that “[the examiner is to] consult the Specification to determine the meaning of the claim terms, [however, the examiner is to] take care not to limit the claim to a specific embodiment[] disclosed in the Specification when the claim terms appear to have a broader meaning.” In re Jung, No. 2008-3711, slip op. at 7 (BPAI Nov. 21, 2008) (citing In re Van Geuns, 988 F.2d 1181, 1184 (Fed. Cir. 1993) and Phillips v. AWH Corp., 415 F.3d 1303, 1323 (Fed. Cir. 2005) (en banc) (“[T]he line between construing terms and importing limitations can be discerned with reasonable certainty and predictability if the court’s focus remains on understanding how a person of ordinary skill in the art would understand the claim terms. For instance, although the specification often describes very specific embodiments of the invention, we have repeatedly warned against confining the claims to those embodiments.”)) The examiner followed this line of reasoning and interpreted the claim terms as broadly as possible. See, e.g., In re Morris, 127 F.3d 1048, 1054 (Fed. Cir. 1997). The Federal Circuit Panel affirmed the Board’s decision and held that the examiner had acted properly.

In re Jung serves as a good reminder to patent practitioners concerning the burdens that the examiner and the applicants each bear in the process of seeking patent protection.

Innovention v. MGA: Determining Whether Potential Obviousness References are Analogous Art

Tue, 05 Jul 2011 15:38:00 GMT

In Innovention Toys v. MGA Entertainment, 637 f.3d 1314 (Fed. Cir. 2011), the Federal Circuit reversed a decision by the Eastern District of Louisiana due to its limited application of the analogous arts test. The District Court had declined to apply two magazine articles that described a computer game as obviousness prior art references to the asserted claims for a board game because it held that electronic games are non-analogous to real-world board games. The Federal Circuit’s opinion indicated that the District Court’s view of analogous art was too narrow and that the computer game articles are analogous art because they are “‘reasonably pertinent’ to the problem that the inventor was trying to solve.”

The patent-at-issue claimed a chess-like strategy-based board game where the playing pieces included mirrored surfaces which would divert the path of laser beams. The objective of the game described in the patent-at-issue was to illuminate the opposing player’s “key piece” with a laser beam by strategically moving the mirrored pieces around the board and then activating a laser.

The defendant asserted that the asserted claims were obvious in light of prior art, including two published magazine articles that described a computer game called Laser Chess. The District Court held that because the articles described a computer game, whereas the patent-at-issue claimed a real-world board game, the articles were non-analogous and the asserted claims were not obvious. The District Court based this determination on its finding that computer games and board games are not in the “same field of endeavor.”

The Federal Circuit determined that the District Court had too narrow of an interpretation regarding analogous art and did not correctly apply the analogous art test. The analogous art test has two parts: (1) whether the reference is from the “same field of endeavor” and (2) whether the reference is “reasonably pertinent to the particular problem” with which the inventor is involved. The District Court failed to apply the second part of the analogous art test.

According to prior decisions by the Federal Circuit, a reference is “reasonably pertinent to the particular problem” if it “logically would have commended itself to an inventor’s attention in considering his problem” or if it “has the same purpose as the claimed invention” and therefore “relates to the same problem.” In re Clay, 966 F.2d 656, 659 (Fed. Cir. 1992).

Here, the Federal Circuit found that the articles would have been reasonably pertinent to the problem facing an inventor of a real-world laser-based board game because the patent-at-issue and the articles were directed to the same purpose: “detailing the specific game elements comprising a chess-like, laser-based strategy game.” Accordingly, the articles were analogous to the patent-at-issue and could be used as obviousness references against it.

Uniloc v. Microsoft: Evolving Patent Damages

Tue, 05 Jul 2011 15:40:00 GMT

In Uniloc USA, Inc., et al. v. Microsoft Corporation, 632 F.3d 1292 (Fed. Cir. 2011), the Federal Circuit issued a significant opinion impacting the determination of damages in patent cases, including rejection of the so-called “25% rule” and clarification of the “entire market value” rule.

Uniloc sued Microsoft in 2003, in the District of Rhode Island, for alleged infringement of U.S. Patent No. 5,490,216, which is generally directed to a software registration and activation system intended to reduce unlicensed use of software through casual copying. In 2009, after a 10-day trial, a jury returned a verdict for Uniloc and awarded $388 million in reasonable royalty damages. In post-trial proceedings, among other things, the district court granted Microsoft’s motion for a new trial on damages.

The Federal Circuit affirmed the district court’s ruling as to damages, on two grounds. First, the Federal Circuit agreed with Microsoft that Uniloc’s expert should have been precluded from using – even as a “starting point” – the (widely accepted) rule of thumb that a licensee should pay 25% of its expected profits for the product that incorporates the intellectual property at issue. Unequivocally, the Court held that, as a matter of Federal Circuit law, “the 25 percent rule of thumb is a fundamentally flawed tool for determining a baseline royalty rate in a hypothetical negotiation.” (Emphasis added.)

Second, the Federal Circuit agreed with Microsoft and the district court that using the defendant’s total revenue ($19 billion) as a reasonableness “check” at trial – i.e., to show that the calculated royalty rate accounted for only 2.9% of Microsoft’s revenue – tainted the jury and was improper under the entire market rule. Moreover, rejecting Uniloc’s reliance on prior dicta, the opinion stated: “The Supreme Court and this court’s precedents do not allow consideration of the entire market value of accused products for minor patent improvements simply by asserting a low enough royalty rate.”

The Uniloc decision underscores the Federal Circuit’s recent efforts to address patent policy concerns regarding the determination of damages in patent cases. See, e.g., Wordtech Systems, Inc. v. Integrated Networks Solutions, Inc., 609 F.3d 1308 (Fed. Cir. 2010); ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860 (Fed. Cir. 2010); Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301 (Fed. Cir. 2009). To establish a reasonable royalty and damages, patentees are going to be held to a higher standard that requires them to sufficiently tie expert testimony to the particular facts of a case.