Wednesday, December 29, 2010

Some Things To Watch For In 2011

With 2010 winding down, it’s a good time to look ahead a bit and see what 2011 may have in store for us folks practicing IP law.




False Marking Cases



In 2010, we saw the surging tide of false marking cases. This cause of action, that was asserted less than a dozen or so times leading up to 2010, was the basis for over 600 cases filed during the year. What could 2011 bring?  Probably, more of the same, but some potential changes may help:



• In In re BP Lubricants USA Inc., BP Lubricants filed a petition for a writ of mandamus to the Federal Circuit seeking to overturn the denial of its motion to dismiss the complaint for failing to sufficiently plead intent. The complaint had allegations that many of us are all too familiar with now, including vague allegations that “’upon information and belief,’ that defendant is a ‘sophisticated company’ which ‘knows, or should know’ that the patent at issue had expired.” (DOJ Brief In Support of Petition at 4.). In a somewhat surprising move, the Department of Justice (“DOJ”) filed an amicus brief in support of BP’s petition. The DOJ's brief urges the Federal Circuit to hold that the intent element of a false marking action needs to satisfy the heightened pleading requirement of Fed. R. Civ. P. 9(b) and that under this standard, the complaint in the BP case is insufficient as a matter of law.



The BP case squarely presents the question of the requirements for pleading a false marking case. If the Federal Circuit adopts the position urged by BP and the DOJ, in 2011 defendants will have valuable precedent to use in seeking early dismissal of a large number of the false marking “troll” cases that are supported by nothing more than bland, generic allegations of what a company “should know” about its expired patents.



• In 2010, several legislative proposals were made that would have effectively ended the majority of false marking cases. These proposals were lumped in with patent reform legislation which stalled in Congress. Will 2011 include a legislative solution to the false marking problem?



Patent Reform Legislation

• In 2010 (as in many years prior), it looked like progress was being made on patent reform legislation and there was some momentum in Congress for a patent reform bill. During IPO’s annual meeting in September, one Congressional staffer even suggested that a vote on the pending bills was possible in 2010. That didn’t happen. Will 2011 be the year that patent reform legislation finally makes it through Congress?



The Supreme Court

• As noted in an earlier post, the Supreme Court has taken up three patent cases for its current term. Clearly, the most significant of these cases is Microsoft v. i4i which has the potential to fundamentally alter patent litigation by changing the standard of proof required to establish patent invalidity. A change from the “clear and convincing” standard to the “preponderance of the evidence” standard would greatly impact all phases of patent litigation, from pre-filing due diligence through trial and appeal. This is clearly poised to be the most significant event in patent law in 2011! Then again, many thought that Bilsky had that same potential, and looking back now, we know that didn’t happen.  Only time will tell.



The stage is set for 2011 to be an interesting year for patent law.

I hope that everyone has a very Happy New Year and that 2011 brings excitement, fun and prosperity to all!

Friday, December 3, 2010

The Supreme Court is Set to Significantly Re-Shape Patent Rights and Litigation

The Court Agrees to Hear Three Patent Cases in 2011


The Supreme Court has agreed to hear three patent cases in its upcoming term. The first case touches upon the standard for establishing intent in the context of inducement of infringement. In October, the Supreme Court granted certiorari in Global-Tech Appliances Inc. v. SEB S.A. on the question of “whether the legal standard for the ‘state of mind’ element of a claim for actively inducing infringement under 35 U.S.C. 271(b) is ‘deliberate indifference of a known risk’ that an infringement may occur or instead ‘purposeful, culpable expression and conduct’ to encourage an infringement.” The difference in these standards, essentially the difference between “known” and “should have known,” will significantly effect the way that businesses deal with third party patents from the point of conducting clearance searches and obtaining opinions all the way through trial.


The second case on the Supreme Court docket is Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems. In this case, the Supreme Court will consider ownership rights to inventions that were made with government funding under the Bayh-Dole Act. Although this case addresses a fairly narrow question, it could prove to be a significant case to universities and research institutions which rely heavily on federal research grants to sponsor wide ranging research projects which are the source of many inventions.


The third case, Microsoft v. i4i Ltd. 10-290, could prove to have a fundamental impact on every patent case, as it deals with the core issue of the burden of proof for establishing invalidity of a patent claim.


On November 29, 2010, the Supreme Court granted Microsoft’s petition for a writ of certiorari on the question “did the court of appeals [for the Federal Circuit] err in holding that Microsoft’s invalidity defense must be proved by clear and convincing evidence?”  As noted in a previous posting, Microsoft's petition was supported by numerous amici.

 
At trial, Microsoft’s invalidity defense was based on a lack of novelty due to a prior sale of the patentee’s own earlier software. This prior art was not before the patent office during examination and was not considered by the patent examiner. Despite the fact the patent office never had the opportunity to consider this prior art, the patent benefited from the “presumption of validity” and the district court (bound by Federal Circuit precedent) rejected Microsoft’s request for a jury instruction seeking to prove invalidity only by a “preponderance of the evidence." The Federal Circuit affirmed, setting the stage for Microsoft's petition.

The Microsoft case has the potential to significantly change the nature of patent litigation and level the playing field between plaintiffs and defendants. If the Supreme Court reduces the burden of proof for proving invalidity on issues that were not before the patent examiner to a preponderance of evidence, defendants will face a far less daunting task in establishing a successful invalidity defense. Considering the less stringent standard for establishing obviousness under the Supreme Court’s holding in KSR, lowering the burden of proof required to establish an invalidity defense would certainly reduce perceived strength of every issued patent.

Wednesday, November 3, 2010

Another False Marking Case Bites The Dust

False Marking Case Dismissed With Prejudice for Failure to State a Claim under Rule 12(b)(6)

In Shizzle Pop, LLC v. Aviva Sports, Inc. et al., Judge Klausner dismissed Shizzle Pop’s claims for false patent marking, with prejudice. 10-CV-02574 (C.D. Cal., Order dated Nov. 3, 2010. D.I. 54).  Following a first successful motion to dismiss, the plaintiff was given leave to amend its complaint to plead facts that would “state with particularity the ‘intent to deceive’ element of Section 292.” Order at 1. Plaintiff filed an amended complaint, which had a number of generalized allegations based on “information and belief.” Ruling on defendants’ motion to dismiss the amended complaint, the court found that “plaintiff has lengthened its conclusory statements, but still fails to allege any facts or information that supports its ‘beliefs.’” Order at 4. The court further found that the complaint
“…contains no information supporting the belief that Defendants were acting with an intent to deceive. Further factual detail is needed to survive a motion to dismiss under Rule 9(b). For this reason, the Court grants Defendant’s motion to Dismiss for failure to state a claim with prejudice.”  Order at 4.

Congratulations to my Dorsey partner Tom Vitt and his team for a job well done!

Tuesday, October 5, 2010

Microsoft, and a Large Group of Powerful "Friends," Ask The Supreme Court to Eliminate the Clear and Convincing Evidence Standard for Patent Invalidity

In Microsoft Corp. v. i4i, U.S., No. 10-290, Microsoft is seeking certiorari on the question of whether the "clear and convincing" standard is appropriate in challenging patent validity in civil litigation. For most issues in civil litigation, such as the question of patent infringement, the party asserting the claim only needs to meet the lower “preponderance” standard. The question then, is why should patent validity be treated differently between private litigants, and should this always be the case?  For example, if the presumption of administrative correctness and deference to the USPTO are the justifications for the heightened evidentiary standard, why should the heightened standard apply when the prior art used to challenge a patent’s validity was not considered by the examiner during prosecution? These and other questions are being addressed by a powerful collection of amici that have submitted eleven briefs supporting Microsoft’s bid for high court review of this fundamental question of patent law.


As reported by BNA, the list of amici and their counsel include:

• 36 law, business, and economics professors, filed by Mark A. Lemley of the Stanford Law School;

• Acushnet Co., General Motors LLC, Pregis Corp., and SAP America Inc., by James W. Dabney and John F. Duffy of Fried, Frank, Harris, Shriver & Jacobson, Washington, D.C.;

• Apple Inc., by Deanne E. Maynard of Morrison & Foerster, Washington, D.C.;

• CTIA—The Wireless Association, by Michael K. Kellogg of Kellogg, Huber, Hansen, Todd, Evans & Figel, Washington, D.C.;

• Electronic Frontier Foundation, Public Knowledge, the Computer & Communications Industry Association, and the Apache Software Foundation, by Michael Barclay of the EFF, San Francisco;

• Facebook Inc., Intuit Inc., Netflix Inc., Newegg Inc., Toyota Motor Corp., and Trimble Navigation Ltd., by John D. Vandenberg of Klarquist Sparkman, Portland, Ore.;

• Google Inc., Verizon Communications Inc., Dell Computer Corp., Hewlett-Packard Co., HTC Corp., and Wal-Mart Stores Inc., by Paul D. Clement of King & Spaulding, Washington, D.C.;

• Intel Corp., by Dan L. Bagatell of Perkins Coie Brown & Bain, Phoenix;

• The Securities Industry and Financial Markets Association and the Clearing House Association, by John A. Squires of Chadbourne & Parke, New York;

• Teva Pharmaceuticals USA Inc., the Generic Pharmaceutical Association, and Cisco Systems, by Henry C. Dinger of Goodwin Procter, Boston; and

• Yahoo! Inc., by William C. Rooklidge of the Howrey law firm in Irvine, Calif.


This is clearly an issue that is worthy of attention as the outcome could represent a fundamental change in patent law.  i4i’s responsive brief is due on October 29, 2010, and a second wave of amicus briefs in support of the clear and convincing standard will likely follow.

Thursday, September 23, 2010

A NEW “STANDARD” FOR INFRINGEMENT

Proof of Compliance With A Standard May Establish Infringement



In a decision that will likely impact the wireless and telecom sectors for years to come, the Federal Circuit clearly held that “a district court may rely on a an industry standard in analyzing infringement.” Fujitsu Ltd. et al. v. Netgear, Inc., 2010-1045, September 20, 2010. Rather than requiring proof infringement for each individual accused product,
“if a district court construes the claims and finds that the reach of the claims includes any device that practices a standard, this can be sufficient for a finding of infringement. We agree that claims should be compared to the accused product to determine infringement. However, if an accused product operates in accordance with a standard, then comparing the claims to that standard is the same as comparing the claims to the accused product.”
In other words, the Federal Circuit held that proof a standard compliance can be sufficient circumstantial evidence to establish infringement.



To defend against an allegation of infringement based on a practicing-the-standard theory, “an accused infringer is free to either prove that the claims do not cover all implementations of the standard or to prove that it does not practice the standard.” Further, the Federal Circuit recognized “that in many instances, an industry standard does not provide the level of specificity required to establish that practicing that standard would always result in infringement.” In some cases, “the relevant section of the standard is optional, and standards compliance alone would not establish that the accused infringer chooses to implement the optional section.” In such cases, the plaintiff cannot rely on the standard alone to establish infringement.



From a plaintiff’s perspective, the cost and complexity of proving infringement when an industry standard is involved may now be greatly reduced. Rather than proving that numerous complex devices meet every element of the claim, the patent owner now must establish that the relevant portion of the standard in question (1) always infringes the claim, i.e. “a patent covers every possible implementation of a standard,”; (2) is mandatory for compliance with the standard,  and (3) the accused device is compliant with the standard. The significant advantage for the plaintiff is that elements (1) and (2) need only be proven once, rather than for each accused product. In cases like Fujitsu, which dealt with the 802.11 wireless standard and involved a large number of accused products, this results in a significantly lower burden for the plaintiff to carry.



Fujitsu reiterates that it is not enough for a plaintiff to establish that an accused device is "capable of infringement; the patent owner must show evidence of specific evidence of direct infringement."  Thus, when a feature in the standard may be switched on and off or is optional for compliance, proof of compliance with the standard is not enough.  The plaintiff must then prove that the switchable or optional feature was actually implemented and used in the accused device.

Since there are a large number of cases pending, and likely many more coming, involving industry standards featuring devices, such as cell phones, Wi-Fi, Wi-Max and Bluetooth compliant devices, this will certainly be an issue presented time and time again in the foreseeable future.

Monday, September 20, 2010

False Marking FAQ

Over the last nine months, we have seen a significant surge of false patent marking cases.  Indeed, twenty new cases were filed in the EDTX on Friday alone!  The case law developments that have been fueling this trend have been reported here as they happened, but I just put together an FAQ on the topic that provides a high level summary of the issues and risks of false marking in one place.  Consider it a false marking 101 article.  The article is available at http://www.dorsey.com/eu_ip_businessesbeware_091610/

Friday, September 10, 2010

Federal Circuit Holds That “Any Person” Has Standing to Bring False Patent Marking Claims

But Foreshadows Possible Defenses


In Stauffer v. Brooks Brothers, Mr. Stauffer’s claims of false patent marking under 35 U.S.C. 292 were dismissed by the district court for lack of standing.  In a not-so-surprising but long awaited decision, the Federal Circuit held that “even though a relator may suffer no injury himself, a qui tam provision [i.e. 35 U.S.C. 292] operates as a statutory assignment of the Untied States’ rights, and ‘the assignee of the claim has standing to assert the injury in fact suffered in by the assignor.’” Stauffer v. Brooks Brothers, 2009-1428, -1430, -1453 (Fed. Cir., August 31, 2010). What exactly is the necessary “injury in fact” suffered by the United States? “[A] violation of that statute [35 U.S.C. 292] inherently constitutes an injury to the United States… .  Because the government would have standing to enforce its own law, Stauffer, as the government’s assignee, also has standing to enforce section 292.” Opinion at 9 (emphasis added).  To the extent that there remained much doubt, it is now clear - anyone can bring a false marking claim and no specific individualized injury is required.


What is perhaps more interesting than the issues decided in Stauffer are the issues that were mentioned, but left for another day. First, the Stauffer opinion discusses a constitutional challenge to 35 U.S.C. 292 under the “take care” clause of Article II of the Constitution that was raised by amicus Ciba Vision. After introducing this potential challenge, the opinion states:

While Ciba raises relevant points, the district court did not decide, and the parties did not appeal, the constitutionality of section 292. Thus, we will not decide its constitutionality with the issue having been raised or argued by the parties. (emphasis added)

While not clearly foreshadowing the outcome, the Federal Circuit is clearly sending out an invitation to take on this issue head on in future cases.   Given the relatively thin procedural safeguards set out in Section 292, this is certainly a live issue that has the potential to put an end to the continuously growing number of false marking cases as we know them.

Second, in the remand order, the opinion states:

We remand for the court to address the merits of the case, including Brooks Brothers’ motion to dismiss pursuant to Rule 12(b)(6) ‘on the grounds that the complaint fails to allege an ‘intent to deceive’ the public – a critical element of a section 292 claim – with sufficient specificity to meet the heightened pleading requirements for claims of fraud imposed’ by Rule 9(b).
As reported previously, a number of district courts have already dismissed cases for failing to meet the heightened pleading standard of Rule 9(b), so this issue will likely be presented to the Federal Circuit in the not-to-distant future.  If the Federal Circuit ultimately confirms that the heightened pleading standard is indeed required for false patent marking cases, the ability for "any person" to adequately plead a claim of false marking should be greatly diminished.

Tuesday, August 24, 2010

Secondary Considerations are Primary in the Post-KSR Obviousness Analysis

Two recent Federal Circuit cases emphasize the importance of the so-called “secondary considerations of non-obviousness” in deciding the question of patent validity.  In Transocean v. Maersk Contractors, the Federal Circuit reversed the district court’s grant of summary judgment of obviousness because the district court did not give any weight to “significant objective evidence of nonobviousness” presented by the patentee, Transocean.  The Federal Circuit held that:
The district court erred by failing to consider Transocean’s objective evidence of nonobviousness…While it is true that we have held in individual cases that objective evidence of nonobviousness did not overcome the strong prima facie case – this is a case-by case determination. [citations omitted] To be clear, a district court must always consider any objective evidence of nonobviousness presented in a case.
Opinion at 11.



Two days after deciding Transocean, the Federal Circuit decided Geo M. Martin Co. v. Alliance Machine Sys. Int’l LLC, 2009-1132, -1151 (Fed. Cir., August 20, 2010). In Geo M. Martin, the Court affirmed the district court’s JMOL holding (following a hung jury) that the asserted claims were obvious as a matter of law. In this case, the district court properly considered the “secondary considerations” of non-obviousness, but concluded that they did not overcome the strong prima facie showing of obviousness. For several points argued by the patentee, such as commercial success, failure of others, and industry praise, the Federal Circuit found insufficient evidence of a nexus between the alleged “secondary consideration” and the claimed invention. In addition, the patent owner argued that alleged copying by others also supported a finding of non-obviousness. The timing of the alleged copying, however, had the opposite impact on the Court. Rather than supporting non-obviousness, both the district court and Federal Circuit found the evidence supported acts of “simultaneous invention” and that “simultaneous inventions, made ‘within a comparatively short space of time,” are persuasive evidence that the claimed apparatus ‘was the product only of ordinary mechanical or engineering skill.’” [citations omitted] Opinion at 20. When all was said and done, “[b]alancing all of the secondary considerations, this court agrees…the [patentees] evidence of non-obviousness, even if fully considered by a jury, would fail to make a difference in this case.”  Opinion at 21.

These cases do not break significant new ground on the law of obviousness, but do provide continuing guidance as to the growing importance of secondary considerations of non-obviousness in determining patent validity.

** One final note:  Congratulations to my Dorsey & Whitney partners Tom Vitt and Sri Sankaran, who successfully represented Alliance Machine Systems in the Geo M. Martin case.

Friday, August 20, 2010

Where In The World Is The “Offer to Sell”?

It Doesn’t Matter for Liability Under 35 U.S.C. 271(a)

In Transocean v. Maersk Contractors, 2009-1556 (Fed. Cir., Aug. 18, 2010) the Federal Circuit dealt squarely with the issue of an offer to sell made outside the U.S. for use of a product in the United States. The facts were largely undisputed. A contract was entered into in Norway by two U.S. companies for the use of an oil drilling ship within the U.S. waters in the Gulf of Mexico. The ship was made outside the U.S. pursuant to the contract. The ship was later modified to be non-infringing (pursuant to an earlier order entered in a different case), so use of the actual modified ship was found not to be an act of infringement. However, the contract contemplated the unmodified design and this design was therefore the subject of the “offer to sell.”


The Federal Circuit held that:
Opinion at 19.  Thus, it is now clear: It doesn’t matter where the offer is made, only where the future sale is contemplated. If that contemplated sale is directed to the U.S., liability for infringement under 35 U.S.C. 271(a) may attach for the offer. Of course, if there is only an offer and no actual infringing sale, damages may become a difficult question. That, however, is a question for another day.
In order for an offer to sell to constitute infringement, the offer must be to sell a patented invention within the United States. The focus should not be on the location of the offer, but rather the location of the future sale that would occur pursuant to the offer.


Although not an issue squarely presented in Transocean, the language of this opinion suggests that an “offer” that is made within the United States, but contemplates performance outside the United States would not be within the scope of 35 U.S.C. 271(a).  In reaching its holding, however, the Court noted the policy considerations that underlie it holding.  The Court stated that “[a company making an offer outside the U.S.] would generate interest in its product in the U.S. to the detriment of the U.S. patent owner, the type of harm that offer to sell within the U.S. liability is meant to remedy.”  Despite this policy guidance, it would seem that, at least in some cases, an offer made in the U.S. for a sale contemplated outside the U.S. could also have a negative impact on the U.S. patent owner, yet under a fair reading of Transocean may not be actionable.

Wednesday, August 11, 2010

A “Golden Hour” for Defendants Accused of Joint Infringement

After a 27 page discussion on inequitable conduct, Judge Dyk dedicated a mere two paragraphs affirming a district court grant of JMOL that rejected a jury finding of infringement of both method claims and system claims. Golden Hour Data v. emsCharts, 2009-1306 -1396 (Fed. Cir. August 9, 2010).  For both the method and system claims, the Federal Circuit majority agreed with the district court that “that the evidence of control or direction was insufficient for the jury to infer control or direction.” Opinion at 27.

The claims of Golden Hour’s patent (U.S. Patent No. 6,117,073) are directed to an “integrated data management system for tracking a patient incident.” Claim 1, a system claim, requires (1) a dispatch module and (2) a billing module. Claim 15, a method claim, required steps of (1) collecting flight information, (2) collecting patient information from a clinical encounter, and (3) integrating the patient information and flight information.



The first defendant, emsCharts, developed a client billing module. The second defendant, Softtech, provided a flight dispatch and information module. “The two companies formed a strategic partnership, enabled their two programs to work together, and collaborated to sell the two programs as a unit.” Opinion at 7-8. According to an emsCharts press release, the defendants’ “partnership allows emsCharts to combine their existing product line with Softtech’s CAD [Computer Aided Dispatch] technology, enabling them to deliver a complete pre-hospital data solution for Emergency Medical Services.” J. Newman dissent at 5. Although the press release uses the term “partnership” and the majority refers to it as a “strategic partnership,” the opinion does not further elaborate on any actual legal relationship between Softtech and emsCharts with regard to the integrated system.

With respect to sales of the integrated system, the majority stated that “[s]uch a sale might well create liability on the part of emsCharts for the sale of the patented system, whether or not emsCharts controlled Softtech. The problem is that by agreement, claims 1 and 6-8 were submitted to the jury only on a joint infringement theory. Such a verdict can only be sustained if there was control or direction of Softtech by emsCharts.” Opinion at 28. Despite acknowledging the “strategic partnership” between the parties, the majority held that the necessary “control or direction” was still lacking.

The majority first considered the process claims and relied on Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318, 1329 (Fed. Cir. 2008) and BMC Resources, Inc. v. Paymentech, L.P, 498 F.3d 1373 (Fed. Cir. 2007), for the well established proposition that “control or direction” of one party by another is required for joint infringement of process claims. Without elaboration (or citation), however, the majority then extended this test to the system claims as well.

In her dissent, J. Newman suggests that “a collaborative effort as here, a “strategic partnership” to sell the infringing system as a unit, is not immune from infringement simply because the participating entities have a separate corporate status.” Dissent at 5. Judge Newman does not cite any precedent for this position, however.

Although only two paragraphs long (less than half the length of this post), Golden Hour is interesting for two reasons. First, it clearly applies the “controlling party” or “mastermind” standard for joint infringement to system claims as well as process claims. (This was suggested in BMC Resources, but not clearly part of the holding). Second, it is a case where two parties accused of joint infringement clearly worked closely together to integrate and sell the accused system and yet the resulting “strategic partnership” between the defendants was still not deemed close enough by the majority to support a jury verdict of joint infringement.

Thursday, July 8, 2010

Recent District Court Decisions Hold False Marking to Heightened Pleading Requirements

Recent decisions from the Federal Circuit have not provided defendants with any “silver bullets” to obtain early dismissal of cases alleging false patent marking. To the contrary, these decisions (which established that the fine for false marking is based on each article marked and confirmed that a product marked with an expired patent number is indeed an unpatented article), may serve to embolden relators and result in them bringing additional false marking cases. Although the standard for pleading false marking cases has not yet been addressed by the Federal Circuit, recent district court decisions have been holding false marking allegations to a higher pleading standard under Fed. R. Civ. P. 9(b) and dismissing cases that fail to meet this standard. These district court cases may provide some hope to defendants in false marking cases.


In a Memorandum Opinion dated June 17, 2010 in Simonian v. Cisco Systems, 10-CV-1306 (N.D. Ill), Judge Der-Yeghiayan dismissed Mr. Simonian’s complaint on Cisco’s motion to dismiss under Rule 12(b)(6). In dismissing the complaint, the Court acknowledged that there was no binding precedent on point, but reasoned that false marking allegations are fraud-based claims and therefore “are subject to the heightened pleading requirements of Rule 9(b).” Opinion at 6. With respect to the intent prong of the false marking claims, Mr. Simonian alleged, upon information and belief, that Cisco is “a sophisticated company and has many decades of experience applying for, obtaining, and/or litigating patents.” The court found that this general allegation was “unsupported by specific facts,” and that “Simonian has failed to plead specific facts showing Cisco’s knowledge of the mismarking or its intent to deceive the public.” Opinion at 8. As such, the Court held that “Simonian’s complaint does not meet the heightened pleading requirements of Rule 9(b)” and dismissed the complaint. The court dismissed Simonian’s claims without prejudice, however, and specifically provide that Mr. Simonian may file a motion for leave to file an amended complaint. (Simonian has since filed a motion seeking leave to file an amended complaint and Cisco has filed are opposition to this motion, which is now before the court.)

Similarly, in Advanced Cartridge Technologies v. Lexmark, Int’l., Judge Merryday dismissed Advanced Cartridge Technologies’ false marking allegations for failing to meet the pleading requirements with respect to intent under Rule 9(b).  Advanced Cartridge Technologies v. Lexmark, Int’l, 10-CV-486 (M.D. Fl.), see Order dated June 30, 2010 (“Order”).   In this case, the complaint simply stated that “defendant knows, or reasonably should know, that marking the Cartridge Products with patents that do not cover the Cartridge Products, or patents that are invalid or expired, will deceive the public.” See Order at 2. As to this allegation, the court concluded that “[p]roviding only sparse factual detail, the complaint utterly fails to ‘state with particularity the circumstances constituting fraud.’” Order at 2.  As with the Simonian case, the plaintiff/relator was given leave to file an amended complaint to attempt to remedy the inadequate pleadings.

Because these cases were dismissed without prejudice, the plaintiff/relator has been given a second bite at the apple. It remains to be seen whether these plaintiff’s will be able to plead sufficient facts, even upon information and belief, to meet the heightened pleading requirement under Rule 9. It will also be interesting to see if other courts follow these cases in holding false marking cases to the heightened pleading standards under Fed. R. Civ. P. 9(b) and whether this will provide a substantial change in litigating false marking cases.

Monday, June 28, 2010

Bilksi Comes Out With A Wimper, Rather Than With A Bang

After receiving dozens of amicus briefs and pondering the case for close to seven months following oral argument, the Supreme Court has finally released its much anticipated decision in Bilsky. Bilski v. Kappos, 561 U.S. ___(2010).   In short, the Court affirmed the judgment of the en banc Federal Circuit that the claims of the Bilski patent are not directed to patent eligible subject matter. In doing so, however, the Court specifically rejected the Federal Circuit's “machine or transformation test” as the sole test for patent eligibility for process or method claims. Instead, it viewed Bilski’s claims as “abstract ideas” that are outside the scope of patent eligible subject matter.

This result is not too surprising to this commentator.   As I mentioned last June when cert was granted, "[the Supreme Court's] past decisions over the years on the question of patentable subject matter, however, tend to avoid bright line standards and lean towards a more liberal scope of patentable subject matter, but certainly don’t embrace the scope of “anything under the sun made by man” as the Court once suggested.
The following quotations are from the syllabus and/or opinion of the Court and reflect the Court's holding. 

  • "The machine-or-transformation test is not the sole test for patent eligibility under §101. The Court’s precedents establish that although that test may be a useful and important clue or investigative tool, it is not the sole test for deciding whether an invention is a patent-eligible “process” under §101."

  • "[T]he Federal Circuit incorrectly concluded that this Court has endorsed the machine-or-transformation test as the exclusive test. Recent authorities show that the test was never intended to be exhaustive or exclusive."

  • "Section 101 similarly precludes a reading of the term “process” that would categorically exclude business methods. The term “method” within §100(b)’s “process” definition, at least as a textual matter and before other consulting other Patent Act limitations and this Court’s precedents, may include at least some methods of doing business."

  • "Section 273 thus clarifies the understanding that a business method is simply one kind of“method” that is, at least in some circumstances, eligible for patenting under §101."

  • "This Court’s precedents establish that the machine-or transformation test is a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under §101. The machine-or-transformation test is not the sole test for deciding whether an invention is a patent-eligible “process.”

  • "[I]n deciding whether previously unforeseen inventions qualify as patentable “process[es],” it may not make sense to require courts to confine themselves to asking the questions posed by the machine-or-transformation test."
  • "Even though petitioners’ application is not categorically outside of §101 under the two broad and  textual approaches the Court rejects today, that does not mean it is a “process” under §101."
  • "Rather than adopting categorical rules that might have wide-ranging and unforeseen impacts, the Court resolves this case narrowly on the basis of this Court’s decisions in Benson, Flook, and Diehr, which show that petitioners’ claims are not patentable processes because they are attempts to patent abstract ideas. Indeed, all members of the Court agree that the patent application at issue here falls outside of §101 because it claims an abstract idea."
  • "The concept of hedging, described in claim 1 and reduced to a mathematical formula in claim 4, is an unpatentable abstract idea, just like the algorithms at issue in Benson and Flook. Allowing petitioners to patent risk hedging would preempt use of this approach in all fields, and would effectively grant a monopoly over an abstract idea."

  • "Petitioners’ remaining claims are broad examples of how hedging can be used in commodities and energy markets. Flook established that limiting an abstract idea to one field of use or adding token post solution components did not make the concept patentable. That is exactly what the remaining claims in petitioners’ application do."

  • "Today, the Court once again declines to impose limitations on the Patent Act that are inconsistent with the Act’s text. The patent application here can be rejected under our precedents on the unpatentability of abstract ideas. The Court, therefore, need not define further what constitutes a patentable “process,” beyond pointing to the definition of that term provided in §100(b) and looking to the guideposts in Benson, Flook, and Diehr."

  • "And nothing in today’s opinion should be read as endorsing interpretations of §101 that the Court of Appeals for the Federal Circuit has used in the past."
More to come regarding the concurring opinions of Justice Stevens (joined by Justices Ginsburg, Breyer and Sotomayor) and Justice Breyer (joined by Justice Scalia) in a later post.



[Many thanks to Randall Berman, an associate with Dorsey & Whitney, for his assistance in quickly preparing this post]

Friday, June 11, 2010

False Marking Cases Are Likely to Live Another Day

Articles Marked With Expired Patent Numbers Are
"Falsely Marked," But Intent Will Be More Difficult For Relators to Establish

As reported in earlier posts, the number of false patent marking cases exploded following the Federal Circuit’s holding in The Forest Group v. Bon Tool, 590 F. 3d 1295 (Fed. Cir. 2009) that held that every falsely marked product constitutes a separate offense subject to fine under 35 U.S.C. 292. The vast majority of the recently filed false marking cases are based on the theory that a product marked with an expired patent number is an “unpatented article.” This issue was squarely presented in Pequignot v. Solo Cup, where the district court held that this was indeed the case. Many false marking defendants have been anxiously awaiting the Federal Circuit decision in Pequignot hoping that the Federal Circuit would reverse the finding of the district court with respect to expired patents and provide an opportunity to quickly defeat or dismiss many of these cases. Those folks will now be disappointed. In its June 10, 2010 decision, the Federal Circuit unequivocally held that “articles marked with expired patent numbers are falsely marked.” (See http://cafc.bna.com/09-1547.pdf)

Of course, finding that a product is falsely marked is not the end of the inquiry. In order to be liable for false marking, the marker must act “for the purpose of deceiving the public.” Under the Federal Circuit’s holding in Clontech Labs. v. Invitrogen, this intent element can be satisfied if it is proven that the statements about marking were false and the marking party knew the statements were false. It is here where Solo prevailed and where the Federal Circuit provided some helpful guidance to those accused of false marking. First, the Federal Circuit clearly held that Clontech only establishes a presumption of intent and that such a presumption can be rebutted with evidence of good faith. Second, the burden of proof needed to rebut the Clontech presumption is only a preponderance of evidence. Finally, the court agreed that when ‘the false markings at issue are expired patents that had previously covered the marked products, the Clontech presumption of intent to deceive is weaker” and therefore easier to rebut. In this case, Solo was able to rebut the Clontech presumption by establishing that the marking at issue was made for legitimate business reasons not related to “deceiving the public” and that it had acted consistently with the advice of counsel it had received. As both the district court and Federal Circuit noted, “Pequignot has provided not a scintilla of evidence that Solo ever ignored its counsel’s advise or, more importantly manifested any actual deceptive intent.”


In addition to expired patent numbers, Solo also marked certain packaging materials used for both patented and unpatented articles using the language that the products “may be covered” and referenced a website where more specific patent information could be found. The Federal Circuit noted, in dicta, that “it is highly questionable whether such a statement could be made ‘for purposes of deceiving the public,’ when the public would not reasonably be deceived into believing the products were definitely covered by a patent.”  In finding no intent to deceive the court noted that Solo proffered evidence to rebut a presumption of intent, including “provid[ing] the consumer with an easy way to verify whether a specific product was covered; the consumer could ‘contact www.solocup.com’ for details.” Thus, while the broad language was still an act of “false marking,” there was ample evidence to rebut a presumption of intent to deceive the public.

Some takeaways from Pequignot:

• Marking with expired patents is “false marking.” This case is not a silver bullet that will result in false marking cases being dismissed en mass.

• If marking is false, and known by the marker to be false, there is a rebuttable presumption of intent to deceive the public.

• The presumption of intent to deceive the public can be rebutted with a preponderance of evidence establishing good faith reasons for the marking and/or reasons mitigating bad faith

• Referring to a collection of products and patents and indicating that the product “may be covered” still results in “false marking” but for a relator to establish that a marker had the requisite intent to deceive with such equivocal language should be difficult.

Wednesday, March 10, 2010

Federal Circuit Further Refines Design Patent Analysis Post-Egyptian Goddess

Over the last few months, the Federal Circuit has issued three precedential opinions that provide further guidance (or some might say misguidance) regarding the analysis of design patents in the post Egyptian Goddess era.


Claim Construction and Functional Elements in Design Patents



NO INFRINGEMENT


On March 9, 2010, the Federal Circuit decided David A. Richardson v. Stanley Works, Inc. (2009-1354) and addressed the manner in which functional elements of a design patent should be addressed in claim construction and infringement of design patents. The patented design and a representative drawing of the accused "fubar" product are illustrated above. The district court construed Richardson's design patent by noting that what was claimed was that "shown and described in the '167 patent." The district court then continued by identifying those elements that were ornamental and excluding those elements that were deemed functional. Having so construed the claim, the district court held that the accused "fubar" did not infringe Richardson's design patent.

The Federal Circuit affirmed. With respect to claim construction, the Federal Circuit rejected the Richardson's position that Egyptian Goddess effectively overruled cases such as OddzOn Prods. v. Just Toys, Inc., 122 F.3d 1396 (Fed. Cir. 1997) where the court held that "[w]here a design contains both functional and non-functional elements, the scope of the claim must be construed in order to identify the non-functional aspects of the design as shown in the patent." The court further stated that "[a] claim to a design containing numerous functional elements, such as here, necessarily mandates a narrow construction." The court went on to discount the contribution of a myriad of functional elements in the claimed design and agreed with the district court's conclusion that "[f]rom the perspective of an ordinary observer familiar with the prior art, the overall visual effect of the Fubar is significantly different from the Stepclaw [patented design]."  From this ordinary observer's point of view, this holding had way more analysis than was needed to affirm - the two designs shown above are just too different.

Invalidity of Design Patents
On December 17, 2009, the court decided International Seaway Trading Corp. v. Walgreens Corp. (2009-1237), and held that the test for anticipation of a design patent is the same as the test for infringement, which is the "ordinary observer" test. The point of novelty test, abolished from the infringement analysis in Egyptian Goddess, is now a thing of the past in the validity context as well.  As a result, a piece of prior art need not be exact to anticipate a design patent claim, it must only satisfy the standards of the "ordinary observer" test.  "Just as 'minor differences between a patented design and an accused article's design cannot, and shall not, prevent a finding of infringement,' [cite omitted] so too minor differences cannot prevent a finding of anticipation."

Although dicta, the International Seaway court also discussed the test for obviousness of design patents. Here, the court stated that '[f]or design patents, the role of one skilled in the art in the obviousness context lies only in determining whether to combine earlier references to arrive at a single piece of art for comparison with the potential design or to modify a single prior art reference. Once that piece of prior art has been constructed, obviousness, like anticipation, requires application of the ordinary observer test, not the view of one skilled in the art." This sounds like something new. Indeed, in setting out this proposition, the court did not cite any precedent. Further, the "ordinary observer" test in this context may be viewed as inconsistent with the language of 35 U.S.C. 103(a) which states that a "patent may not be obtained though the invention is not identically disclosed or described as set forth in section 102 of this title, if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains." As noted above, the discussion regarding obviousness is properly viewed as dicta.  It will be interesting to see how the law of obviousness of design patent claims develops in future cases, or if it become essentially moot in view of the broader play that the "ordinary observer" gives to the anticipation analysis.

Will differences in the insole design prevent anticipation?

The subject matter in Int'l Seaway was a design for foam clogs. The Federal Circuit held that the district court incorrectly omitted certain features (the insole design illustrated above) from its validity analysis, based on whether those features would be visible during "normal use." The Federal Circuit held that "normal use should not be limited to only one phase or portion of the normal use lifetime of an accused product," such as the time when a shoe is being worn. Instead, "normal use in the design patent context extends form the completion of manufacture or assembly until the ultimate destruction, loss, or disappearance of the article." Noting that the insole design depicted in the patent would be visible at various points in the life cycle of the article, the Federal Circuit found that it was an error for the district court to ignore these features in the validity analysis simply because they were not visible when the shoe was being worn. The court remanded for the district court "for further proceedings on the limited issue of whether the differences in the insole patterns between the prior (Crocs) are and the patented designs bar a finding of anticipation or obviousness." This remand order is somewhat troubling. As noted in J. Clevenger's dissent, "the ordinary observer test requires assessment of the designs as a whole." "[T]he differences in the inner sole designs must be appreciated in conjunction with all of the design differences." J. Clevenger aptly concludes that "[p]artial judgments of anticipation on segments of a design prohibit assessment of designs as a whole, in violation of long-standing law... ."  Although preaching a "design as a whole" analysis, the majority's holding and remand order is clearly fostering an approach that will encourage a district court's "dissection of a design as a whole into its component pieces."

Claim Construction and Domestic Industry for Design Patents
On February 24, 2010, the Federal Circuit issued its opinion in Crocs, Inc. v. Int'l Trade Commission (2008-1596). In this case, the court reversed ITC determinations of no infringement and no domestic industry of Crocs' design patent. Despite earlier warnings from the Federal Circuit that construing a design patent claim in words, rather than by simple reference to the figures, was a risky proposition, the ITC issued a narrow claim construction that focused on areas of difference between the claimed design and the accused product. The Federal Circuit criticized the commission’s "concentration on small differences in isolation distracted from the overall impression of the claimed ornamental features." Instead, "[t]he proper construction requires a side-by-side view of the drawings of the [patent design] and the accused products." Despite some obvious differences apparent (to me at least) in some to these comparisons, the court found that "these side-by-side comparisons...suggest that an ordinary observer, familiar with the prior art designs would be deceived into believing the accused products are the same as the patented design."  Unfortunately, the Federal Circuit opinion does not reference the "prior art designs," so it is not clear how to evaluate the differences between the claimed design and the accused products.  (An example of the images shown in the Federal Circuit opinion are shown below in the first two images (side view).  The top view illustrated below as compared with Fig. 6 of the patent where not part of the Federal Circuit's side-by-side comparison.  I don't know that I would be deceived here, but I suppose that reasonable "ordinary observers" are free to differ.) 


"NEARLY IDENTICAL" - DESIGN PATENT INFRINGED

With respect to the domestic industry requirement, the court found that Crocs' products were indeed within the scope of the design patent and those products therefore satisfied the "technical prong" of the domestic industry requirement.

Wednesday, March 3, 2010

False Marking Revisited - The New Wave of Patent Prospecting Is On

In my December 30, 2009 post, I speculated that “the holding in the Forest Group may still create an incentive for more qui tam actions being brought for false marking. After all, even a fraction of a penny applied to a billion items can still amount to millions of dollars in potential recovery. [The holding in Forest Group] may invigorate a new class of litigation prospectors… .” A short two months later, it is clear that this is indeed the case.

Based on case filings as reported by Justin Gray, on his Gray on Claims blog, ( http://www.grayonclaims.com/false-marking-case-information ), during the period from September 5, 2007 through November 13, 2009, only ten cases were filed alleging false patent marking. In the two month period since December 30, 2009, at least 69 false marking cases have been filed. These cases have been filed by twenty two (22) different plaintiffs. One plaintiff, Mr. Simonian, is the named party in 28 cases, another, Dr. Hollander, is the named plaintiff in seven cases. Most, if not all, of these cases are based on a manufacturer marking product with patents that are now expired.

Clearly, false marking is an area that will continue to be exploited by a new breed of plaintiffs during 2010. As I said just before the new year, given this “new class of litigation prospectors, the time is right to review your patent marking and clean up any marking that may no longer be applicable.”