Monday, May 31, 2010

DTV Patent War Watch (10)

May 26, 2010: Vizio scored a victory in this round that could soon conclude its dispute with Funai, when the Federal Circuit ruled that Vizio’s work-around (design-around) DTVs do not satisfy the “suitable for use,” “for identifying,” or “for decoding” limitations in claims 1, 5, and 23 of U.S. Patent No. 6,115,074 . Vizio, Inc. v. Int'l Trade Comm'n, No. 2009-1386 (Fed. Cir. May 26, 2010). The Federal Circuit remanded this case back to the ITC for an order consistent with its decision. In other words, the ITC will presumably modify its exclusion order to allow Vizio’s design-around DTVs to be imported into the U.S.

Note: Funai has a pending enforcement proceeding against Vizio regarding the design-around products. Presumably, that proceeding may end soon in Vizio’s favor in light of this Federal Circuit decision.
In a related U.S. Customs ruling in favor of Amtran Logistics, Inc., TPV International (USA), Inc., and Envision Peripherals, Inc., the U.S. Customs ruled in August 5, 2009, that the DTVs containing three semiconductor chips identified as Model BCM35243 (Broadcom), Model MT5382PTR (MediaTek), Model ZR39775HGCF-B (Zoran), are not subject to Exclusion Order 337-TA-617. The U.S. Customs also ruled in favor Vizio on July 8, 2009.

The Federal Circuit decision did not specify what chips Vizio’s design-around DTVs use and the U.S. Customs has not published its ruling in favor of Vizio. It is possible, however, that Vizio’s design-around DTVs use the same above-referenced semiconductor chips.

Sunday, May 30, 2010

Covenant Not to Sue for Patent Infringement Before Verdict Divests DJ Subject Matter Jurisdiction

Dow Jones & Co. v. Ablaise Ltd., No. 2009-1524 (Fed. Cir. May 28, 2010).


A patentee’s covenant not to sue for any acts of future infringement of a patent before verdict extinguishes any current or future case or controversy between the parties, and divests the district court of subject matter jurisdiction. Slip op. at 19.

Relevant Facts:

Dow Jones filed a declaratory judgment (DJ) action in a district court. After the Markman hearing, Ablaise offered Dow Jones a covenant not to sue on one patent. Dow Jones demanded the covenant to include Dow Jones’ parent company, which Ablaise refused. The district court denied Ablaise’s motion to dismiss the invalidity claim with respect to the patent based on the covenant. Ablaise appealed. The Federal Circuit reversed as to this issue (but affirmed the district court’s grant of summary judgment that the asserted claims of another patent are invalid as obvious).

The Court noted that “[s]ubject matter jurisdiction is a threshold requirement for a court’s power to exercise jurisdiction over a case, and no amount of ‘prudential reasons’ or perceived increases in efficiency, however sound, can empower a federal court to hear a case where there is no extant case or controversy.” Slip op. at 19.

If the covenant not to sue was not offered by the patentee until after the jury had determined that the patent was not infringed, however, the post-verdict covenant does not divest the court’s DJ jurisdiction, because that controversy had already been resolved by the jury's verdict. Id. at 15.

The Federal Circuit: Quanta v. LG Did Not Eliminate Territoriality Requirement for Patent Exhaustion in Jazz Photo

Fujifilm Corp. v. Benun, No. 2009-1487 (Fed. Cir. May 27, 2010)


Quanta Computer, Inc. v. LG Electronics, Inc., 128 S. Ct. 2109 (2008), did not eliminate the territoriality requirement for patent exhaustion announced in Jazz Photo Corp. v. United States International Trade Commission, 264 F.3d 1094 (Fed. Cir. 2001). Slip op. at 7.

Relevant Facts:

Fuji owns U.S. patents directed to single-use cameras, or lens-fitted film packages (LFFPs). Once a LFFP is used by a consumer it is taken to a film processor who opens the LFFP and processes the film. The film processor does not return the empty LFFP (shell) to the consumer. Jazz bought used LFFPs outside the U.S., refurbished them, and sold them as new in the U.S. The district court ruled in Fuji’s favor on infringement, approved $2 per infringing LFFP running royalty, and held Jazz in contempt of a preliminary order enjoining importation of infringing LFFP. The Federal Circuit affirmed.


Footnote 6 in the 2008 Supreme Court case of Quanta Computer, Inc. v. LG Electronics, Inc. has created lingering questions as to whether the Supreme Court intended to eliminate the territoriality requirement for patent exhaustion. Clearly, if a party purchases and refurbishes patented products in the U.S., and then re-sell them in the U.S., patent exhaustion applies to these products and there is no patent infringement. However, if a party purchases and refurbishes patented products outside the U.S., and then imports them to the U.S. for sale, does patent exhaustion apply to these products?

Footnote 6 states:

"LGE suggests that the Intel Products would not infringe its patents if they were sold overseas, used as replacement parts, or engineered so that use with non-Intel products would disable their patented features. But Univis teaches that the question is whether the product is ‘capable of use only in practicing the patent,’ not whether those uses are infringing. Whether outside the country or functioning as replacement parts, the Intel Products would still be practicing the patent, even if not infringing it."

Quanta, 128 S. Ct. at 2119 n.6 (citations omitted).

After the Quanta case, different district courts have issued different opinions on this issue. In this opinion, the Federal Circuit has made its position clear that sale outside the U.S. does not exhaust patents.

Interestingly, the Supreme Court recently granted certiorari in a copyright case involving a similar issue, Omega, S.A. v. Costco Wholesale Corp., 541 F.3d 982 (9th Cir. 2008), cert. granted, Costo Wholesale Corp. v. Omega, S.A., S. Ct. No. 08-1423 (2010). This case concerns the Copyright Act’s first sale rule, in which Costco sold Omega watches in the U.S. that Omega had manufactured and first sold outside the United States. If the Supreme Court rules that the first sale applies in this case, then it is possible that the Supreme Court may apply the same rationale to patent exhaustion. The caveat, of course, is that the Costco v. Omega case arises out of the Copyright Act, which is different from Patent law. The Supreme Court have applied different sets of standards to copyright and patent laws previously, and may do so here even if it would rule that the first sale applies to foreign sales in copyright cases.

The Federal Circuit Issued New Standards for Application of Patent Prosecution Bar

In re Deutsche Bank Trust Co. Ams., No. 2010-M920 (Fed. Cir. May 27, 2010).


“[A] party seeking imposition of a patent prosecution bar must show that the information designated to trigger the bar, the scope of activities prohibited by the bar, the duration of the bar, and the subject matter covered by the bar reasonably reflect the risk presented by the disclosure of proprietary competitive information.” Slip op. at 13.

“[T]he party seeking an exemption from a patent prosecution bar must show on a counsel-by-counsel basis: (1) that counsel’s representation of the client in matters before the PTO does not and is not likely to implicate competitive decisionmaking related to the subject matter of the litigation so as to give rise to a risk of inadvertent use of confidential information learned in litigation, and (2) that the potential injury to the moving party from restrictions imposed on its choice of litigation and prosecution counsel outweighs the potential injury to the opposing party caused by such inadvertent use.” Id.

Relevant Facts:

Deutsche seeks a protective order including a patent prosecution bar preventing anyone who gains access in the litigation to certain confidential documents from any involvement in prosecuting any patent in the related technical field, and for a limited period after, the conclusion of this litigation. The district court granted the patent prosecution bar as to all of Island’s trial counsel except for its lead counsel. Deutsche petitioned for a writ of mandamus. The Federal Circuit granted in part the petition, vacated the discovery order, and remanded the case to the district court for reconsideration of its order under the new standards.

Thursday, May 27, 2010

Wednesday, May 26, 2010

ITC Investigates Intellectual Property Rights Infringment in China

From ITC's website:

May 25, 2010
News Release 10-055
Inv. No. 332-519
Contact: Peg O'Laughlin, 202-205-1819


The U.S. International Trade Commission (USITC) has launched the second of two investigations into the effect on the U.S. economy and U.S. jobs of intellectual property rights (IPR) infringement in China.

The investigation, China: Effects of Intellectual Property Infringement and Indigenous Innovation Policies on the U.S. Economy, is the second report requested by the Committee on Finance, U.S. Senate, in a letter received on April 20, 2010.

In its letter requesting the investigations, the Committee stated: "Despite widespread evidence of the harm to U.S. industries, authors, and artists resulting from IPR infringement in China, the U.S. Government has not conducted a comprehensive economic analysis of the effect of China's ineffective IPR protection and enforcement on the U.S. economy and U.S. jobs." As requested, the USITC will deliver two reports to the Committee. The first investigation, China: Intellectual Property Infringement, Indigenous Innovation Policies, and Frameworks for Measuring the Effects on the U.S. Economy, was instituted on May 5, 2010.

In the second investigation, the USITC, an independent, nonpartisan, factfinding federal agency, will describe the size and scope of reported IPR infringement in China; provide a quantitative analysis of the effects of reported IPR infringement in China on the U.S. economy and U.S. jobs; and discuss actual, potential, and reported effects of China's indigenous innovation policies on the U.S. economy and U.S. jobs, and quantify these effects to the extent feasible. The second report will build upon the qualitative findings described in the first report. The USITC expects to deliver the second report to the Committee by May 2, 2011.

The USITC will hold a public hearing in connection with the two reports at 9:30 a.m. on June 15, 2010. Requests to appear at the hearing should be filed no later than 5:15 p.m. on June 1, 2010, with the Secretary, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436. For further information, call 202-205-2000.

The USITC also welcomes written submissions for the record. Written submissions (one original and 14 copies) should be addressed to the Secretary of the Commission at the above address and should be submitted at the earliest practical date, but no later than 5:15 p.m. on November 16, 2010. All written submissions, except for confidential business information, will be available for public inspection.

Further information on the scope of the investigation and appropriate submissions is available in the USITC's notice of investigation, dated May 25, 2010, which can be obtained from the USITC Internet site ( or by contacting the Office of the Secretary at 202-205-2000.

USITC general factfinding investigations, such as this one, cover matters related to tariffs or trade and are generally conducted at the request of the U.S. Trade Representative, the House Committee on Ways and Means, or the Senate Committee on Finance. The resulting reports convey the Commission's objective findings and independent analyses on the subject investigated. The Commission makes no recommendations on policy or other matters in its general factfinding reports. Upon completion of each investigation, the USITC submits its findings and analyses to the requester. General factfinding investigations reports are subsequently released to the public, unless they are classified by the requester for national security reasons.

New Federal Circuit Opinions - May 26, 2010

Deere & Co., Inc. v. Int'l Trade Comm'n, No. 2009-1016 (Fed. Cir. May 26, 2010).

Vizio, Inc. v. Int'l Trade Comm'n, No. 2009-1386 (Fed. Cir. May 26, 2010).

Tuesday, May 25, 2010

Misleading Silence Leads to Equitable Estoppel

Aspex Eyewear, Inc. v. Clariti Eyewear, Inc., Nos. 2009-1147, -1162 (Fed. Cir. May 24, 2010).


An accused infringer’s development of its allegedly infringing product line, in reliance on a patentee’s silence after aggressive letters, represents a significant change in economic position and constitutes material prejudice sufficient to support equitable estoppel. Slip op. at 11.

“Prejudice may be shown by a change of economic position flowing from actions taken or not taken by the patentee.” Id.

Relevant Facts:

Aspex first contacted Clariti concerning a potential infringement in 2003. In the series of letters exchanged between the parties in 2003, Aspex did not name the patent in question. In 2006, more than three years later, Aspex contacted Clariti again regarding the patent in question, and after the parties exchanged additional letters, Aspex filed a patent infringement lawsuit. The district court granted Clariti’s summary judgment (SJ) motion, dismissing Aspex’s infringement claims on the ground of equitable estoppel based on the three years of silence. The Federal Circuit affirmed.


In the context of patent infringement, equitable estoppel requires three elements to be established: “(1) the patentee, through misleading conduct, led the alleged infringer to reasonably believe that the patentee did not intend to enforce its patent against the infringer; (2) the alleged infringer relied on that conduct; and (3) due to its reliance, the alleged infringer would be materially prejudiced if the patentee were permitted to proceed with its charge of infringement.” Slip op. at 6.

Judge Rader authored a dissenting opinion, in which he pointed out that “[s]ilence alone will not create an estoppels” (Rader Op. at 1) and SJ was inappropriate because of “lingering questions of fact.” Id. at 6.

Monday, May 24, 2010

Thursday, May 13, 2010

Inequitable Conduct Leads to a Finding of Exceptional Case and Award of Attorney Fees and Costs

Taltech Ltd. v. Esquel Enters. Ltd., No. 2009-1344 (Fed. Cir. May. 12, 2010).


District courts may award reasonable attorney fees to a prevailing party “in exceptional cases” under 35 U.S.C. § 285 for conducts such as inequitable conduct before the PTO and misconduct during litigation. Slip op. at 3.

Regarding materiality, as long as a patent applicant was asserting an argument of patentability, it is irrelevant whether these arguments were the ultimate reasons for the patent’s allowance. Id. at 14.

Relevant Facts:

Taltech owns United States Patent No. 5,568,779 (“’779 patent”) drawn to seams including thermal adhesive to reduce pucker, and TAL Apparel Limited is a licensee of the ’779 patent. Esquel filed a DJ action. After trial, the district court found that the inventor engaged in inequitable conduct before the PTO for nondisclosure of prior art URS and misrepresentation. Based on these findings, and a finding of litigation misconduct, the district court declared the case exceptional under 35 U.S.C. § 285. The July 13, 2007, final judgment awarded Esquel attorney fees and costs based on the exceptional case finding. TAL appealed. The Federal Circuit vacated the inequitable conduct determination and remanded the case for the district court to determine whether the prior art URS was cumulative to another reference. On remand, the district court reached the same determinations and entered a supplemental final judgment which also imposed interest from the date of the earlier July 13, 2007, judgment. In this present appeal, the Federal Circuit affirmed the award of attorney fees and costs, but reversed the post-judgment interest rate because the interest should run from the supplemental judgment date.


This case illustrates the grave consequences of inequitable conduct before the PTO. Although the courts generally are reluctant to find inequitable conduct because of the high standard, a finding of inequitable conduct could lead to a finding of “exceptional cases” under 35 U.S.C. § 285 and award of attorney fees and costs to the prevailing party.

Moreover, the Federal Circuit reviews the district court’s determination of inequitable conduct for an abuse of discretion, and a finding that a case is exceptional within the meaning of 35 U.S.C. § 285 for clear error.. Slip op. at 4. Once a case is determined to be exceptional, the Federal Circuit reviews a district court’s decision to award attorney fees under an abuse of discretion standard. Id. at 4-5. Because of these standards of review, it is an uphill battle for the appellant to challenge a district court’s findings on appeal.

Monday, May 10, 2010