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!

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.

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!

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.

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.

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/

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.