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.