Reassessing How to Draft “Preferred Embodiments” in Patent Applications

Holding

In Howmedica OsteonicsCorp. v. Zimmer, Inc., Nos. 2015-1232, -1234, -1239, slip op. at 15-16 (Fed. Cir. May 12, 2016), the Federal Circuit held that introductory clauses such as “In the preferred embodiment” may “limit only the sentences in which they are located” and not the succeeding sentences in the same paragraph.

Key Facts and Observations

The dispute involves the “essentially midway” construction in U.S. Patent No. 6,475,243 (“’243 patent”) concerning a socket assembly used in prosthetic hip implants.

The patent owner argued that the “essentially midway” language in the written description concerns a preferred embodiment and cannot be used to limit the claims. Slip op., at 15.  Specifically, the patent owner reasoned that introductory clauses such as “In the preferred embodiment” apply not only to the sentences in which they are located, but also to the succeeding sentences in the same paragraph. Id.

The Federal Circuit disagreed, finding that “context reveals that such introductory clauses limit only the sentences in which they are located in this case.” Id. at 15-16. The Federal Circuit also gave little weight to the generalized disclaimers such as “The invention will be understood more fully . . . in the following detailed description of preferred embodiments of the invention” and “It is to be understood that the above detailed description of preferred embodiments of the invention is provided by way of example only.” Id. at 16.

A closer review of the relevant language in the ’243 patent reveals that the Federal Circuit’s holding 

on “preferred embodiments” may not be as far-reaching as it appears. Specifically, the “preferred embodiments” language appears in the middle of a paragraph in the ’243 patent. See, e.g., ’243 patent, col. 6, l. 64 – col. 7, l. 17. Therefore, the Federal Circuit found that “context reveals that such introductory clauses limit only the sentences in which they are located in this case.” Slip op. at 15-16 (emphasis added).

Practice Tips

In light of this opinion, when drafting preferred embodiments, patent attorneys should consider (1) using the “In a preferred embodiment” language in the beginning of a paragraph, and/or (2) adding another generalized disclaimer such as “The discussion of the preferred embodiments herein shall not be construed to limit only the sentences in which introductory clauses such as ‘In a preferred embodiment’ are located.”

New Federal Circuit Opinions - December 31, 2015

Redline Detection, LLC v. Star Envirotech, Inc., No. 2015-1047 (Fed. Cir. Dec. 31, 2015).

Courts May Correct Obvious Errors in a Patent Claim

CBT Flint Partners, LLC. V. Return Path, Inc., No. 2010-1202 (Fed. Cir. Aug. 10, 2011):

Holding:

An obvious and correctable error in the claim, the construction of which is not subject to reasonable debate does not render the claim indefinite. Slip op. at 8.

Relevant Facts:

One claim of the patent-in-suit contained a “drafting error” for which the district court found at least three reasonable and possible corrections. Slip op. at 5. The district court concluded itself unauthorized to rectify the error and therefore found the claim invalid on the ground of indefiniteness. Id. One of the defendants moved for a finding of an exceptional case, as well as an award of costs and attorney fees. Id. at 6. The district court awarded only costs. Id. Both sides appeal. Id. The Federal Circuit reversed the summary judgment and consequently the award of costs.

Comments:

Note the Federal Circuit explained the correct rule with respect to whether a court may correct a claim error:

It is well-settled law that, in a patent infringement suit, a district court may correct an obvious error in a patent claim. I.T.S. Rubber Co. v. Essex Rubber Co., 272 U.S. 429, 442 (1926) (“Essex”). In Novo Industries, we held that “[a] district court can correct a patent only if (1) the correction is not subject to reasonable debate based on consideration of the claim language and the specification and (2) the prosecution history does not suggest a differ-ent interpretation of the claims.” 350 F.3d at 1357. We concluded that the enactment of 35 U.S.C. §§ 254 and 255 did not overrule Essex or deny authority to the district courts to correct a claim in appropriate circumstances. Id. at 1356. In Novo Industries, we declined to make the proposed corrections to the claim at issue because those corrections were substantively significant and required guesswork as to what was intended by the patentee in order to make sense of the patent claim. Id. at 1357.

Slip op. at 9.

Also note that claim indefiniteness rendered by claim drafting errors does not easily trigger a finding of an exceptional case under 35 U.S.C. § 285.

Scope of Patent Assignment Implicates a Patent Holding Company’s Standing to Bring Infringement Suits

MHL Tek, LLC v. Nissan Motors Corp., No. 2010-1287 (Fed. Cir. Aug. 10, 2011):

Holding:

A patent holding company does not have standing to assert any of the patents-in-suit as none of the patent right was properly assigned. Slip op. at 15.

Relevant Facts:

MHL Tek filed infringement suits against numerous automobile manufacturers over U.S. Patent Nos. 5,663,496 (“the ’496 patent”), 5,741,966 (“the ’966 patent”), and 5,731,516 (“the ’516 patent”). The ’496 and the ’966 patents are divisionals of one parent application, to which the ’516 patent is not related. Slip op. at 4-5. Days after the parent application was filed, the inventors executed an assignment to Animatronics, Inc., granting “the entire right, title and interest, domestic and foreign, in and to the inventions and discoveries in [the Parent Application].” Id. at 10. A subsequent assignment by Animatronics, Inc. to McLaughlin Electronics granted “the entire right, title and interest, domestic and foreign, in and to the inventions and discoveries set forth in the [Parent] Application.” Id. at 10-11. The second assignment carved out rights to the parent application that concern the Animatronics Proprietary Inventions, which was defined separately in the assignment. Id. Prior to the infringement action, the inventors signed documents to assign the patents-in-suit to MHL Tek. During the trial, Animatronics, Inc. assigned MHL Tek the rights to the patents-in-suit as well. Id. at 11.

Comments:

Note that the Federal Circuit explained the language of the assignment, not the patent specification, controls the scope of the assignment. Slip op. at 16. Further, a patent can be found covered under the broad assignment language “inventions and discoveries in [the parent application]” when the specification of the unrelated parent application supports the claims in the patent. Id. at 19.

Insufficiently Corroborated Inventor Testimony Regarding Reduction to Practice Does Not Effectively Swear Behind a Critical Date

In re NTP, Inc., Nos. 2010-1243, -1254, -1263, -1274, -1275, -1276, -1278( Fed. Cir. Aug. 1, 2011)

Holding:

None of NTP’s documents or software files sufficiently corroborates the inventors’ alleged actual reduction to practice prior to the critical date at issue under 37 C.F.R. § 1.131. Slip op. at 19, 21.

A multi-volumed publication received and catalogued at a foreign library under its general library practice remains a prima facie 35 U.S.C. § 102(b) prior art reference after the Patentee fails to carry the burden to prove either that the document was tampered with after the critical date at issue, or the document was not reasonably accessible despite the fact that library’s catalogue system is online and searchable by author, title, classification number, subject heading. Slip op. at 26-27.

Neither hindsight reasoning nor common sense argument constitutes proper grounds for claim rejection based on obviousness. Slip op. at 29-30, 32-33.
A prior art reference is sufficiently enabled for the purpose of anticipating by disclosing a protocol that can guide one of ordinary skill in the art to implement the disclosed system. Slip op. at 35.

Relevant Facts:

This is the companion opinion of the Federal Circuit addressing NTP’s appeals of the BAPI’s decision affirming the rejections of claims in the other seven of NTP’s patents, i.e., United States Patent Nos. 5,436,960 (’960 patent), 5,438,611 (’611 patent), 5,479,472 (’472 patent), 5,625,670 (’670 patent), 5,631,946 (’946 patent), 5,819,172 (’172 patent), and 6,067,451 (’451 patent). Slip op. at 3-4. After finding the BAPI’s construction of the term “electronic mail” unreasonably broad, the Federal Circuit remands in part for further proceedings. Id. at 42.

Comments:

Note that the Federal Circuit lays out major rules for the purpose of antedating references under 37 C.F.R. § 1.131:

A party seeking to antedate a reference based on reduction to practice must present evidence of the actual reduction to practice of the invention prior to the effective date of the reference. 37 C.F.R. § 1.131(b). An inventor cannot rely on uncorroborated testimony to establish a prior invention date. Id. It has long been the case that an inventor’s allegations of earlier invention alone are insufficient – an alleged date of invention must be corroborated. Medichem S.A. v. Rolabo, S.L., 437 F.3d 1157, 1170 (Fed. Cir. 2006); Woodland Trust v. Flowertree Nursery, Inc., 148 F.3d 1368, 1371 (Fed. Cir. 1998). “[E]vidence is assigned probative value and collectively weighed to determine whether reduction to practice has been achieved.” Medichem, 437 F.3d at 1170. “Sufficiency of corroboration is determined by using a ‘rule of reason’ analysis, under which all pertinent evidence is examined when determining the credibility of an inventor’s testimony.” Id.

Slip op. at 15.

For obviousness finding, note that the Federal Circuit emphasizes the importance of not to “rely on hindsight reasoning to piece together elements to arrive at the claimed invention.” Slip op. at 29, and frankly ignores the “mere common sense” argument advanced by the PTO. Id. at 32-33.

In rel Hall, 781 F.2d 897 (Fed. Cir. 1986), remaining a good law on qualifying printed publications as 35 U.S.C. 102(b) prior art, finds itself a Norwegian cousin.

Priority Determination During Reexamination Is Not Prohibited by 35 U.S.C. § 301 and Proper Under § 303(a) Absent Evidence that Priority Was Examined

In re NTP, Inc., No. 2010-1277 (Fed. Cir. Aug. 1, 2011):


Holding:

The Board properly construed the term “destination processor” as not supporting the function to retransmit the contents of an electronic mail message in view of the written description, without abusing its discretion not to credit NTP’s expert declarations to the contrary. Slip op. at 11-12.

35 U.S.C. § 301 does not prohibit the examiner from undertaking a priority analysis under § 120 during a reexamination proceeding to ascertain whether a priority date is properly claimed in the original examination of the application. Slip op. at 15.

Priority determination during reexamination is not prohibited by § 303(a) as NTP failed to establish that the issues of priority and satisfaction of § 112 requirements were considered by the examiner during the original prosecution when neither rejection nor affirmative statements were issued by the examiner; and statements by an applicant does not constitute evidence of consideration or acceptance by the examiner. Slip op. at 18-19.

Relevant Facts:

Among other related seven appeals, the Patentee challenges the BPAI’s decision affirming the rejection of all 764 claims of its U.S. Patent No. 6,317,592 (“the ’592 patent”) during reexamination. Slip op. at 2. The BPAI held that all claims of the ’592 patent were anticipated by U.S. Patent No. 6,219,694 issued to Lazaridis (“Lazaridis”) on the ground that Lazaridis became qualified as a § 102(e) prior art reference upon the examiner’s conclusion that the ’592 patent cannot claim to an earlier priority date of its parent application, the written description of which was found not to support a “destination processor” performing claimed retransmission the contents of an electronic mail message. Id. at 5. NTP did not dispute the substantive merit of the anticipation based on Lazaridis but its availability as prior art. Id. at 7. Prior to this appeal, NTP sued RIM alleging infringement of the ‘592 patent among other NTP patents, after which the inter parte reexamination initiated by RIM was consolidated with the reexamination proceedings initiated by the PTO. NTP added dependent claims to the ‘592 patent during the reexamination. Id. at 4-5.

Comments:

Note that the Federal Circuit stated that the examiner is not prohibited from determining a new priority date in context of newly available references during reexaminations:

Thus, when a patentee argues that its claims are entitled to the priority date of an earlier filed application, the examiner must undertake a priority analysis to determine if the patentee meets the requirements of § 120. There is no statutory limitation during a reexamination proceeding prohibiting the examiner from conducting a priority analysis. Otherwise, the examiner would be stripped of a critical legal tool needed in performing a proper reexamination. Nothing in §§ 301 et seq. prohibits an examiner from determining whether or not a priority date was properly claimed during the original examination of the application.

Slip op. at 15.

Also note that the Federal Circuit emphasized the context specific approach for finding a substantial new question of patentability under § 303(a) during reexaminations:

In 2002, Congress amended § 303(a) to explain that “[t]he existence of a substantial new question of patentability is not precluded by the fact that a patent or printed publication was previously cited by or to the Office or considered by the Office.” 2002 Amendment. In Swanson, we explained that this amendment meant that “Congress . . . has now rejected this presumption of full consideration. Section 303(a) as amended . . . requires a more context-specific approach that is based on an analysis of what the PTO actually did.” 540 F.3d at 1380. Thus, there is no presumption that the examiner considered whether the written description of the Parent Application supports the claims of the ’592 patent simply because the MPEP requires it.

Slip op. at 16.

Further note that the Federal Circuit pointed out when an issue can be found as considered by the examiner under the context specific approach:

In cases where we have determined the examiner to have considered an issue during the original prosecution, the issue was squarely before the examiner. For example, in Recreative Technologies, the examiner used the same reference during the original prosecution and the reexamination proceedings to reject the patent’s claims for obviousness. In re Recreative Techs. Corp., 83 F.3d 1394, 1398 (Fed. Cir. 1996). This court found that the reexamination was improper because “[t]he question of patentability in view of the . . . reference was decided in the original examination, and thus it can not be a substantial new question.” Id.; cf. WMS Gaming, Inc. v. Int’l Game Tech., 184 F.3d 1339, 1355 (Fed. Cir. 1999) (“The burden on the party asserting obviousness is more easily carried when the references on which the assertion is based were not directly considered by the examiner during prosecution.” (emphasis added)). In contrast, in Swanson, this court found that a reference relied on in the original prosecution could create a substantial new question of patentability where the reference was used for a different purpose during reexamination. 540 F.3d at 1380-81.

Slip op. at 18.

The Federal Circuit Upheld Exceptional Case Finding Based on a Patent Holding Company’s Filing of Objective Baseless Patent Infringement Lawsuits

In re Eon-Net LP, No. 2009-1308 (Fed. Cir. July 29, 2011):

Holding:

The claimed terms “document,” “file,” “extract,” and “template” are properly construed by the district court as limited to information originating from a hard copy document as the specification “unequivocally compels” the import of such limitation. Slip op. at 15-16.

The district court did not clearly err in its exceptional case finding under § 285 as the record below establishes Eon-Net’s litigation misconduct, the written description clearly refuting Eon-Net’s claim construction warrants the finding of a baseless infringement action, slip op. at 17-18, and the action was brought in bad faith for an improper purpose to extract a nuisance value settlement. Id. at 22.

The district court did not abuse its discretion imposing Rule 11 sanctions against both Eon-Net and its counsel under Ninth Circuit law on the ground that the alleged infringements were legally baseless and Eon-Net’s counsel failed to perform a reasonable pre-suit investigation. Slip op. at 25-26.

Relevant Facts:

Eon-Net appeals the district court’s finding of non-infringement of Eon-Net’s patents, an exceptional case under § 285, and violation of Federal Rule of Civil Procedure 11. Slip op. at 2. Alleging infringement of the patent-portfolio-in-suit, Eon-Net’s counsel had filed over 100 lawsuits on behalf of Eon-Net or its related entities, with almost all of these cases resulting in early settlements or dismissals. Id. at 7. Earlier in the case, Eon-Net appealed the district court’s grant of defendant’s motion of summary judgment of non-infringement and motion for sanctions under Rule 11, both of which were remanded by the Federal Circuit on the ground that the district court failed to afford Eon-Net notice and the opportunity to argue infringement and claim construction during the briefing on the motions. Id. at 8.

Eon-Net did not appeal the determination of the amount of attorney fees and costs awarded pursuant to § 285. Id. at 17.

Comments:

Note that, in addressing Eon-Net’s claim differentiation argument regarding claim construction, the Federal Circuit applied the rationale that “claim differentiation is a rule of thumb that does not trump the clear import of the specification.” Edwards Lifesciences, LLC v. Cook Inc., 582 F.3d 1322, 1331 (Fed. Cir. 2009). Slip op. at 15.

Also note that the Federal Circuit reiterated the different standards of review with respect to a district court’s finding of an exceptional case:

A determination whether to award attorney fees under § 285 involves a two-step process. First, a district court must determine whether the prevailing party has proved by clear and convincing evidence that the case is exceptional. Forest Labs., Inc. v. Abbott Labs., 339 F.3d 1324, 1327 (Fed. Cir. 2003). We review de novo whether the district court applied the proper legal standard, and we review the court’s exceptional case finding for clear error. Id. at 1328. Second, if the district court finds the case to be exceptional, the court must then determine whether an award of attorney fees is appropriate and, if fees are appropriate, the amount of the award. Cybor, 138 F.3d at 1460. We review that determination for an abuse of discretion. Id.

Slip op. at 16.

Further note that the Federal Circuit stated the general test for finding an exceptional case under 35 U.S.C. § 285:

Indeed, “[l]itigation misconduct and unprofessional behavior may suffice, by themselves, to make a case exceptional under § 285.” Rambus Inc. v. Infineon Techs. AG, 318 F.3d 1081, 1106 (Fed. Cir. 2003). Absent litigation misconduct or misconduct in securing the patent, sanctions under § 285 may be imposed against the patentee only if both (1) the patentee brought the litigation in bad faith; and (2) the litigation is objectively baseless. Brooks Furniture Mfg., Inc. v. Dutailer Int’l, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005).

Slip op. at 17.

Finally, a claim construction position of a patent holding company, once found by the court as meritless, not only would lead to summary judgment of non-infringement, but also an automatically triggered finding of an objectively baseless lawsuit under the first prong of the Brooks Furniture test pursuant to § 285. Moreover, such an unwarranted claim construction would also most likely trigger the language of “legally and factually baseless” together with the absence of “reasonable and competent inquiry prior to the filing,” regardless of the wording difference of Rule 11.

Accordingly, it is imperative for a patent holding company and its counsel to conduct good faith pre-suit due diligence, including reviewing patent file histories and creating preliminary infringement claim charts, in order to fight off any later Rule 11 accusations. A low settlement offer dos not, by itself, establish a Rule 11 violation, as long as the patentee and its counsel take necessary steps to perform thorough pre-suit due diligence.

An Arm of a State That Licenses a Patent Under a Field-of-Use License Can Nullify the Forum-Seeking Advantage Otherwise Provided by DJ Jurisdiction

A123 Sys., Inc. v. Hydro-Quebec, No. 2010-1059 (Fed. Cir. Nov. 10, 2010).

Holding:

Where a district court action involves a patent licensed by an arm of a state under a field-of-use license, and the state has waived Eleventh Amendment sovereign immunity in a later-filed action involving the same patent in another district, the action must be dismissed in the first district.

Relevant Facts:

The University of Texas System (“UT”) owned two patents directed to cathode materials for batteries, which UT licensed to Hydro-Quebec (“HQ”) under an exclusive license. A123 Systems, Inc. (“A123”) filed suit in the District of Massachusetts, seeking a declaration of noninfringement and invalidity of the patents. HQ moved to dismiss A123’s declaratory judgment suit, arguing, inter alia, that UT was a necessary and indispensable party because UT had transferred to HQ less than all substantial rights in the patents, granting HQ only a field-of-use license. HQ also argued that UT could not be joined as a defendant because UT is entitled to Eleventh Amendment sovereign immunity.

A123 countered that HQ held itself out as an exclusive licensee of all the technology claimed in the patents. A123 also argued that that UT waived its Eleventh Amendment sovereign immunity by its voluntary participation in a later infringement suit in the Northern District of Texas involving the same patents.

The district court disagreed with A123 and agreed with HQ on the first two grounds.

At the Federal Circuit, A123 repeated its arguments and further asserted that UT, even if a necessary party, was not an indispensable party under Federal Rule of Civil Procedure 19 (“Rule 19”). The Federal Circuit affirmed the district court’s decision, additionally holding that UT is an indispensable party under Rule 19 and the declaratory judgment action could therefore be dismissed.

The Federal Circuit agreed with the district court’s finding, based on testimony by executives of HQ and UT as well as the four corners of the license, that HQ received an exclusive license to only a significant portion of the field of technology, not all fields of technology described and claimed in the patents. Accordingly, UT was held to be a necessary party who must be joined in a declaratory or infringement action. The Federal Circuit also pointed to Biomedical Patent Management Corp. v. California, Department of Health Services, 505 F.3d 1328 (Fed. Cir. 2007), for the holding that a state university’s participation in one lawsuit does not amount to a waiver of immunity in a separate lawsuit.

Finally, the Federal Circuit evaluated whether UT is indispensable under the factors of Rule 19. The Federal Circuit found that Although HQ and UT undoubtedly share the same overarching goal of defending the patents’ validity, neither that goal nor UT’s decision to file suit jointly with HQ in Texas demonstrates that UT’s interests will be adequately represented by HQ in this action because HQ only has a field-of-use license. In addition, the Federal Circuit reasoned, because HQ is a field-of-use licensee and UT has retained non-overlapping rights in the patents in suit, UT may very well be able to assert infringement claims against A123 that HQ cannot, creating the risk of multiple lawsuits and of inconsistent relief. Finally, the district court considered A123’s interest in having a forum to litigate its defenses to claims of infringement, finding that A123 may assert counterclaims for a declaration of noninfringement and invalidity in the Texas action. Accordingly, the Federal Circuit determined, three of the four Rule 19(b) factors weigh in favor of holding UT to be an indispensable party. Thus, UT was held to be not only a necessary party but also an indispensable party, making dismissal appropriate.

Comments:

HQ and UT jointly initiated their infringement suit in the Northern District of Texas a month after HQ moved to dismiss A123’s declaratory judgment suit in the District of Massachusetts. Where a patent is licensed from an arm of a state, such as a university or research institute, under a field-of-use license, the state licensor apparently has absolute discretion to nullify the forum-seeking advantage otherwise provided by declaratory judgment jurisdiction to a party threatened with suit. The state licensor has an incentive to exercise this discretion to protect its patent, giving the licensee a potential advantage.

A Horizontal Agreement Restricting the Availability of a Patent Does Not Constitute Patent Misuse of Another Patent

Princo Corp. v. Int’l Trade Comm’n, No. 2007-1386 (Fed. Cir. June 18, 2010) (en banc).

Holding:

A horizontal agreement restricting the availability of a patent does not constitute misuse of another patent, even if the agreement has anticompetitive effects. Slip op. at 23.

When a patentee offers to license a patent, the patentee does not commit patent misuse that patent by inducing a third party not to license its separate, competitive technology. Id.

Relevant Facts:

Phillips and Sony developed competing patented CD technology, but entered an agreement to commercialize Phillips’ technology because it was simple and worked well. Phillips administered a licensing program that offers packaged licenses to Phillips and Sony patents. Princo alleged patent misuse on several grounds.

In U.S. Philips Corp. v. Int’l Trade Comm’n (Philips I), 424 F.3d 1179 (Fed. Cir. 2005), the Federal Circuit held that Philips’s package licensing practice that ties nonessential patents to essential patents does not constitute patent misuse because Philips charges a uniform fee and essentially, nonessential patents are included in the packages free of charge and the licensees are not required to use them.

Here, the issue is whether an agreement that would prevent the development of alternatives to the licensed technology would constitute misuse under a theory of elimination of competition or price fixing. A Federal Circuit panel initially ruled against Philips and the ITC.

The Federal Circuit granted Philips and the ITC’s petition for rehearing en banc. Philips argued that regardless of whether Philips and Sony agreed to suppress the technology embodied in the Sony patent, such an agreement would not constitute patent misuse and would not be a defense to Philips’s claim of infringement against Princo. The majority agreed with Philips.

Judge Prost authored a concurring opinion, in which Judge Mayer joins. Judge Dyk authored a dissenting opinion, in which Circuit Judge Gajarsa joins.

Comments:

The Federal Circuit is simply saying that the doctrine of patent misuse has a limited application, that misuse of one patent does not necessarily constitute misuse of another patent, and that the focus of patent misuse must be on the patent at issue.

Interestingly, even if the doctrine of patent misuse does not apply, the accused infringer may prevail under separate antitrust laws. Here, the Federal Circuit held that the Phillips-Sony agreement is not anti-competitive. However, if the agreement were to be anti-competitive, this opinion suggests that Princo could still prevail against Philips under the antitrust laws and recover damages (including attorney fees).

The U.S. Suprement Court Rules on Bilski: Business Methods May Fall Within Patentable Subject Matter

Bilski v. Kappos, No. 08-964 (S.Ct. June 28, 2010).

Justice Kennedy authored the opinion of the Court, concluding that petitioners’ claimed invention is not patent eligible. The Court held, however, that business methods could fall within patentable subject matter under Section 101.

Holdings:

(a) Section 101 specifies four independent categories of inventionsor discoveries that are patent eligible: “process[es],” “machin[es],”“manufactur[es],” and “composition[s] of matter.” The invention at issue is claimed to be a “process,” which §100(b) defines as a “proc-ess, art or method, and includes a new use of a known process, ma-chine, manufacture, composition of matter, or material.”

(b) The machine-or-transformation test is not the sole test for patent eligibility under §101.

(c) Section 101 similarly precludes a reading of the term “process” that would categorically exclude business methods.

(d) Even though petitioners’ application is not categorically outside of §101 under the two atextual approaches the Court rejects today,that does not mean it is a “process” under §101. Petitioners seek to patent both the concept of hedging risk and the application of that concept to energy markets. Under Benson, Flook, and Diehr, how-ever, these are not patentable processes but attempts to patent abstract ideas. Claims 1 and 4 explain the basic concept of hedging and reduce that concept to a mathematical formula. This is an unpatentable abstract idea, just like the algorithms at issue in Benson and Flook.

35 U.S.C. § 120 Requires Each Application in a Priority Chain to Refer to the Prior Applications

Encyclopaedia Britannica, Inc. v. Alpine Elecs. of Am., Inc., Nos. 2009-1544, -1545 (Fed. Cir. June 18, 2010).

Holding:

35 U.S.C. § 120 requires an intermediate application in a priority chain to contain a specific reference to the earlier filed application. Slip op. at 7-8.

Relevant Facts:

The asserted patent has the priority claim as follows: “Continuation of application No. 10/103,814, filed on Mar. 25, 2002, which is a continuation of application No. 08/202,985, filed on Feb. 28, 1994, now Pat. No. 6,546,399, which is a continuation of application No. 08/113,955, filed on Aug. 31, 1993, now abandoned, which is a continuation of application No. 07/426,917, filed on Oct. 26, 1989, now Pat. No. 5,241,671.” The ’955 application did not contain a specific reference to the ’917 application. If the asserted patent is not entitled to the priority date of the ’917 application, then the ’917 application is prior art and anticipates the asserted patent. The district court held that the asserted patent is not entitled to the priority date of the ’917 application. The Federal Circuit affirmed.

Comments:

The remaining question is whether the later asserted patent is entitled to any earlier priority date (e.g., Fed. 28, 1994 or Aug. 31, 1993). The district court said no, but the Federal Circuit decides to “leave [this question] for another day.” Slip op. at 13. It is likely, however, that the later asserted patent should be allowed to claim the priority date of Aug. 31, 1993, because that part of the priority chain is not defective.

False Marking: The Inference From a Knowingly False Statement IS Rebuttable With Evidence of Good Faith

Pequignot v. Solo Cup Co., No. 2009-1547 (Fed. Cir. June 10, 2010).

Holding:

The combination of a false statement and knowledge that the statement was false creates a rebuttable presumption of intent to deceive the public, rather than irrebuttably proving such intent. Slip op. at 9.

An article covered by a now-expired patent is “unpatented” with the meaning of 35 U.S.C. § 292(a). Id.

Relevant Facts:

Peguignot brought a qui tam action under 35 U.S.C. § 292 against Solo for allegedly false marking its products with expired patents and the “may be covered” language. Solo claimed that it relied on counsel’s opinion in good faith for marking its products. The Federal Circuit affirmed the district court’s ruling that Solo has provided sufficient evidence that its purpose was not to deceive the public and thus is not liable for false marking.

Comments:

Recently, private parties have brought a large number of false marking cases in qui tam actions. Here, the Federal Circuit recognizes that “[t]he bar for proving deceptive intent here is particularly high, given that the false marking statute is a criminal one, despite being punishable only with a civil fine.” Slip op. at 12. As a result, the outcome of this case may curb future qui tam actions under 35 U.S.C. § 292.

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).

Holding:

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).
.
Comments:

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)

Holding:

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.

Comments:

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).

Holding:

“[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.

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).

Holding:

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.

Comments:

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.

One Challenging Patent Assignment Has the Burden to Rebut the Validity of Assignment

SiRF Tech., Inc. v. Int'l Trade Comm'n, No. 2009-1262 (Fed. Cir. Apr. 12, 2010).

Holding:

One challenging the patent assignment has the burden to rebut the validity of assignment. Slip op. at 12.

Relevant Facts:

Global Locate owns several patents related to GPS technology. The International Trade Commission found that SiRF infringes Global Locate’s patents. Among several issues, SiRF challenges Global Locate’s standing to sue. Specifically, one inventor worked at a third party company Magellan and under his employee inventions agreement, he had the obligation to assign Magellan “all inventions . . . which are related to or useful in the business of the Employer . . . and which were . . . conceived . . . during the period of the Employee’s employment, whether or not in the course of the Employee’s employment.” Slip op. at 9. The Commission found that the invention was not “related to or useful in the business of the Employer.” The Federal Circuit affirmed the Commission’s decision.

Comments:

The question of standing to assert a patent claim is jurisdictional, and the Federal Circuit reviews this question de novo. Because the patents were assigned to Global Locate, however, the burden of proof on this issue rested with the challengers. The Federal Circuit affirmed the Commission’s factual determination under the “substantial evidence” standard, finding that the challengers have not sustained their burden is supported by substantial evidence. Slip op. at 13.

35 U.S.C. § 116 Does Not Provide a Private Right of Action to Challenge Inventorship of a Pending Patent Application

HIF Bio, Inc. v. Yung Shin Pharms. Indus. Co., Ltd., No. 2006-1522 (Fed. Cir. Mar. 31, 2010).

Holding:

35 U.S.C. § 116 does not provide a private right of action to challenge inventorship of a pending patent application, but 35 U.S.C. § 256 provides a private right of action to challenge inventorship under § 1338(a) for an issued patent. Slip op. at 9.

Relevant Facts:

Two scientist began investigating the effect of a chemical, YC-1, on a protein complex known as HIF-1, and filed and assigned a patent application to the plaintiffs. During the research, they discussed their hypothesis with another scientist who allegedly filed a separate application on the same idea and assigned it to another company. The plaintiffs sued the defendant in a state court, and the defendant removed the case to a federal district court. After dismissing the RICO claim, the district court declined to exercise supplemental jurisdiction and remanded the case to the state court. The defendant appealed, and the Federal Circuit initially held that the Federal Circuit lacked appellate jurisdiction to review a district court’s remand order that was based upon the district court’s decision not to exercise supplemental jurisdiction. The Supreme Court subsequently reversed the Federal Circuit’s decision. On remand, the Federal Circuit held that the district court did abuse its discretion because two of the remanded causes of action “arise under” 28 U.S.C. 1338(a), but the district court should have dismissed these purported causes of action for failure to state a claim for which relief can be granted.

The Federal Circuit Affirmed its Written Description Doctrine

Ariad Pharms., Inc. v. Eli Lilly & Co., No. 2008-1248 (Fed. Cir. Mar. 22, 2010).

Holding:

35 U.S.C. §112, paragraph 1, contains a written description requirement separate from an enablement requirement. Slip op. at 23.

The test for sufficiency is whether the disclosure of the application relied upon reasonably conveys to those skilled in the art that the inventor had possession of the claimed subject matter as of the filing date. Id.

Relevant Facts:

Ariad sued Eli Lilly for infringement of U.S. Patent 6,410,516. A jury found the asserted claims valid and infringed. A panel of the Federal Circuit reversed the district court’s denial of Lilly’s motion for judgment as a matter of law (“JMOL”) and held the asserted claims invalid for lack of written description. Ariad petitioned for rehearing en banc, challenging the Federal Circuit’s interpretation of 35 U.S.C. § 112, first paragraph, as containing a separate written description requirement. The Federal Circuit affirmed its written description doctrine and affirmed the panel’s ruling.

Comments:

The difference (or lack of it) between the written description requirement and the enablement requirement means little for electrical and mechanical inventions, but not always true for chemical or chemical-like inventions having genus claims:

Perhaps there is little difference in some fields between describing an invention and enabling one to make and use it, but that is not always true of certain inventions, including chemical and chemical-like inventions. Thus, although written description and enablement often rise and fall together, requiring a written description of the invention plays a vital role in curtailing claims that do not require undue experimentation to make and use, and thus satisfy enablement, but that have not been invented, and thus cannot be described. For example, a propyl or butyl compound may be made by a process analogous to a disclosed methyl compound, but, in the absence of a statement that the inventor invented propyl and butyl compounds, such compounds have not been described and are not entitled to a patent.

Slip op. at 29.

Good Faith Efforts to Design Around an Infringement Verdict Are Not Sufficient to Avoid a Contempt Proceeding

Tivo, Inc. v. EchoStar Corp., No. 2009-1374 (Fed. Cir. Mar. 4, 2010).

Holding:

Good faith efforts to design around an infringement verdict are not sufficient to avoid a contempt proceeding. Slip op. at 12.

A contempt hearing may be proper even if the redesigned devices do not infringe in the exact same manner that has already been adjudicated to infringe. Id. at 9.

A contempt finding is improper if there is “more than a colorable difference” between the accused product and the adjudged infringing product such that “substantial open issues with respect to infringement” exist. Id. at 5.


Relevant Facts:

TiVo owns U.S. Patent 6,233,389 covering essential DVR features. Tivo sued Echostar and obtained a permanent injunction. In the previous appeal, EchoStar did not appeal the injunction. Subsequently, EchoStar redesigned its DVR software, but the district court found EchoStar in contempt of its injunction order. The Federal Circuit found that the district court did not abuse its discretion in imposing sanctions against EchoStar.


Comments:

Judge Rader wrote in his dissenting opinion that “this decision discourages good faith efforts to design around an infringement verdict.” Indeed, EchoStar is a really sympathetic figure here, because it was slapped with contempt despite that (1) it made good faith efforts to design around and (2) the redesigned software does not infringe in the exact same manner that has already been adjudicated to infringe.

The majority opinion, however, appears to suggest that EchoStar could have avoided this predicament if it had appeared the district court’s permanent injunction order previously. Because EchoStar did not do that, under the “abuse of discretion” review standard, the Federal Circuit had to affirm the district court’s contempt finding.

In light of this decision, I believe that the losing party will continue good faith efforts to design around an infringement verdict (sorry, Judge Rader), but there will be more appeals of injunction orders to the Federal Circuit. In addition, the losing party should also seek clarification from the issuing district court in order to avoid a potential contempt finding.

I do agree with Judge Rader in the sense that this decision, in its current form, seems very discouraging and inconsistent with sound public policy. A contempt finding, by its punishing nature to deter future violations, should have a bad faith element. If a party tried to comply with the orders in good faith by designing around, it seems to be unfair to hold it in contempt.