Publications / McDermott Newsletters / IP Update, Volume 5, No. 12, December 2002

IP Update, Volume 5, No. 12, December 2002

December 2002

IN THIS ISSUE

Patents / Claim Construction

Claim Construction Embraced on First Appeal Not Immune to Reversal on Second Appeal
by Matthew F. Weil

In the second appeal in this particular litigation, the U.S. Court of Appeals for the Federal Circuit reversed a summary judgment, rejecting the very claim construction it appeared to embrace during the prior appeal. In a further exercise in careful parsing, drawing distinctions certain to impress even seasoned patent attorneys, the Federal Circuit also held that argument by the inventor in connection with a narrowing amendment to a parent application did not necessarily estop the patent holder from seeking a broader construction of that same term in a continuation patent. Middleton, Inc. v. Minnesota Mining & Mfg. Co., Case No. 02-1151 (Fed. Cir. Nov. 27, 2002)

In Middleton, the patent in suit claimed an improved material for finishing the top surface of floors. The key limitation of the claims required that the finish be "uniform." The district court construed "uniform" to require "a uniform thickness, and exclud[ing] material in which there are any variations in thickness." In a previous appeal, the Federal Circuit had noted, "We understand the district court’s interpretation [of the term ‘uniform flexible film’] to mean that the film must have the same thickness throughout, except that normal manufacturing tolerances are allowed. Thus, while the film cannot have a thickness of 1 mil at one location and 25 mils at another, it may have variations in thickness due solely to the practical realities of the film manufacturing process. We note that at oral argument, the parties did not appear to dispute this reading of the district court’s claim construction."

On the present appeal, however, the Federal Circuit upbraided the district court for mistaking this passage as endorsement of the claim construction. Considering the matter, de novo, the Court construed "uniform" to apply to materials that are "uniform" in any number of ways (not just thickness).

The Court also considered the prosecution history of the patent in suit to determine whether the patentee "clearly and unambiguously ‘disclaimed or disavowed’" an interpretation of the term "uniform" that could embrace the accused product. During prosecution of a parent patent, the inventor had distinguished over a prior art reference by arguing that the relevant "uniformity" was a uniformity of thickness. The Court held that this argument, in connection with a bowling alley floor, did not constrain the patent holder from seeking a broader construction in relation to other sorts of floors.

Patents / Federal Circuit Jurisdiction

Claim for Declaratory Relief of Patent Non-infringement Sufficient for Federal Circuit Jurisdiction
By Autumn D. Gresowski

Applying the standard announced by the U.S. Supreme Court in Holmes Group, Inc. v. Vornado Air Circulation Sys., Inc., the U.S. Court of Appeals for the Federal Circuit found that it had appellate jurisdiction over a case because the complaint sought declaratory relief of patent non-infringement. Golan v. Pingel Enter., Inc., No. 01-1626, 2002 U.S. App. LEXIS 23139 (Fed. Cir. Nov. 7, 2002).

In Golan, the plaintiff and the defendant were competitors in after-market motorcycle fuel valves for Harley-Davidson motorcycles. The defendant, Pingel, an assignee of patents for these fuel valves, sent a cease-and-desist letter to Golan. The defendant also sent letters to Golan’s customers stating that its fuel valves infringe Pingel’s patents and trademarks. Golan sued, asserting U.S. federal and state antitrust claims, federal and state unfair competition claims, state business tort claims and seeking declaratory relief of patent non-infringement. Subsequently, Pingel successfully moved for summary judgment on the antitrust, unfair competition and state tort claims. Golan appealed to the Federal Circuit.

Construing Holmes Group broadly, the Federal Circuit held that declaratory relief claims arise under federal law if the cause of action that the declaratory relief claims seeks to aver would arise under federal law. The Court held that a claim for declaratory relief of patent non-infringement seeks to aver a claim of patent infringement and, therefore, arises under the patent laws.

The Federal Circuit then affirmed the district court’s summary judgment rulings regarding the antitrust, unfair competition and tort claims because Golan failed to define the relevant market or to prove Pingel acted in bad faith when it advised Golan’s customers regarding its patent infringement.

Claim Construction / Prosecution History

When Is a Sugar "Mobile?" Oh, Whenever
By Paul Devinsky

Reversing two district court opinions, the U.S. Court of Appeals for the Federal Circuit again emphasized that it will not limit claim terms by the specification and that prosecution history must be unambiguous to be limiting. Inverness Medical Switzerland GmbH v. Warner Lambert Co., Case Nos. 01-1147, -1177 (Oct. 31, 2002); Inverness Medical Switzerland GmbH v. Princeton Biomeditech Corp., Case No. 01-118 (Oct. 31, 2002).

In separate filings at the same district court (U.S. District Court for New Jersey), Inverness sued Warner Lambert and Princeton for infringement of three patents, all directed toward a pregnancy-testing device using a strip of porous material facilitating a chemical reaction between a reagent, proteins found in urine and a colored label. After the district court granted each of the defendants’ summary judgment of non-infringement, Inverness appealed. In separate opinions, the Federal Circuit vacated the judgments.

In Princeton, the summary judgment of non-infringement was based on the district court’s construction of claim limitation "wherein mobility of said labeled reagent within said test strip is facilitated by … a material comprising a sugar" to require a sugar that improved mobility of the reagent at the point of its release from the test strip (i.e., when the reagent comes into contact with urine), which did not occur in the Princeton product. Inverness argued on appeal that the facilitation of mobility could occur either at the time of release or during subsequent transit of the reagent.

Based on the dictionary definition and the discussion in the patents, the Federal Circuit found that "mobility" of the reagent referred to both the point-of-release from the test strip as well as post-release, and the use of the term "mobility" in other claims contradicted Princeton’s construction.

In the Warner Lambert appeal, the same argument was presented regarding the term "mobility." Warner Lambert also argued that the claim limitations "said labeled reagent is dry on said test strip" and "drying said labeled reagent onto a portion of said test strip" required surface disposition of the reagent, which was not present in its product. Inverness argued that the phrases "on" and "onto" should be more broadly construed to include disposition of the labeled reagent within the test strip.

The Federal Circuit noted the dictionary definitions of "on" and "onto" were identical and, unless limited by the specification or prosecution history, could refer to either a surface location or a presence within the test strip: "a word that has an ordinary meaning encompassing two relevant alternatives may be construed to encompass both alternatives." The Court then looked to the specification, which only discussed a surface application of the reagent, but found this to only be a preferred embodiment that did not preclude the claims from encompassing a test strip containing the reagent within its inner layers. Next, the Court addressed the prosecution history of the patents. Warner Lambert argued that Inverness had amended its claims using the "on/onto" language in response to the examiner’s finding that that scope of enablement was limited to surface application of the labeled reagent. Inverness argued that the examiner also had invited it to show that the prior art recognized alternative means, other than surface application, of providing mobilization. The Federal Circuit acknowledged that "failure to object to an examiner’s interpretation of a claim ordinarily disclaims a broader interpretation" but found that was not the case here. Rather, the Federal Circuit found that it was not clear from the prosecution history whether the patentee had foreclosed the broader dictionary definition (which encompassed both surface application and internal positioning of sugar) in response to the examiner’s rejection. Thus, the Court stated that it would be "inappropriate to limit broad definition of a claim term based on prosecution history that is itself ambiguous."

Trademarks / Acquiescence

Failure to Object to the Defendant’s Proposed Name Change May Preclude Later Challenge
By John J. Dabney

The U.S. Court of Appeals for the Second Circuit has held that a trademark owner’s failure to respond to the defendant’s proposed name change constitutes acquiescence, which may preclude the trademark owner from later challenging the junior party’s use of the proposed name. Profitness Physical Therapy Center v. Pro-Fit Ortho. & Sports Physical Therapy P.C., 2002 U.S. App. LEXIS 24124 (2nd Cir. Nov. 26, 2002).

The plaintiff, operating out of Manhattan, owns the mark PRO FITNESS. The defendant, operating out of Queens, used the mark PRO-FIT PHYSICAL THERAPY. The plaintiff sent the defendant a letter demanding that the defendant stop using its name. The defendant replied that it would proceed to change its name to PRO-FIT ORTHOPEDIC AND SPORTS PHYSICAL THERAPY unless the plaintiff objected to that name. The plaintiff never responded and the defendant changed its name. Approximately 18 months later, after the defendant opened a location in Manhattan, the plaintiff sued the defendant for trademark infringement. The district court awarded summary judgment to the defendant based on the plaintiff’s acquiescence to the defendant’s name change and dismissed the action.

The Second Circuit affirmed the finding of acquiescence, but reversed the dismissal of the action. The court explained that the acquiescence defense applies where there is "conduct on the plaintiff’s part that amounts to an assurance to the defendant, express or implied, that the plaintiff would not assert his trademark rights against the defendant." Because the plaintiff never responded to the defendant’s letter regarding the proposed name change, " it was reasonable for the defendant to rely on the plaintiff’s non-response as consent to its doing business under its new mark." As the court put it, "[G]iven the defendant’s good faith offer of accommodation, the ball was in the plaintiff’s court; the plaintiff could easily have clarified its attitude toward the defendant’s new name with a simple letter stating its objections."

However, the Second Circuit reversed the dismissal of the case, because the district court did not determine the geographic scope of the plaintiff’s consent. As the court explained, the plaintiff’s consent to the defendant’s name may have been confined to the defendant’s use of the name solely at the location where the defendant was operating at the time the defendant sent the response letter and, thus, would not apply to locations to which the defendant subsequently expanded.

E-Commerce / Internet Jurisdiction

Posting of DVD Decryption Code on Internet Website Insufficient to Confer Personal Jurisdiction in California
By Carrie Shufflebarger 

In a 4-3 decision, the California Supreme Court has held that an out-of-state defendant who allegedly posted DVD decryption computer code on a website is not amenable to personal jurisdiction under California’s Long-Arm Statute and the "effects test" set forth by the U.S. Supreme Court in Calder v. Jones. Pavlovich v. Superior Court of Santa Clara County, Case No. S100809, 2002 Cal. LEXIS 7959 (Cal. Nov. 25, 2002).

The defendant, Pavlovich, a Texas resident, allegedly posted a computer code to his website that would defeat encryption technology designed to prevent copying of DVDs. Pavlovich had no connections to the state of California other than the fact that his website was accessible there. The plaintiff, DVD Copy Control Association, Inc. (DVD CCA), a California-based trade association created to control and administer licensing of the DVD encryption technology, sued Pavlovich in California for misappropriation of trade secrets. DVD CCA alleged that personal jurisdiction was proper because Pavlovich knew that his actions would adversely impact several California business enterprises, including the motion picture industry and the computer/consumer electronics industry. Pavlovich moved to quash service because of lack of personal jurisdiction, which the trial court denied. The Court of Appeals denied Pavlovich’s petition for a writ of mandate, holding that Pavlovich had "purposefully availed himself of forum benefits under the Calder effects test," and the trial court’s exercise of jurisdiction was "reasonable."

The California Supreme Court reversed, holding that Pavlovich’s conduct did not satisfy the Calder "effects test" for determining "purposeful availment." DVD CCA could not merely assert that Pavlovich "knew or should have known" that his acts would cause harm in the forum. To establish personal jurisdiction, DVD CCA also must show contacts that demonstrate that Pavlovich expressly aimed or targeted his conduct at the forum.

Applying these standards, the court held that the record was void of evidence demonstrating that Pavlovich had expressly aimed his conduct at or intentionally targeted California. Merely posting the decryption computer code on a website was insufficient. Pavlovich did not know that DVD CCA, the licensing agency, was based in California until after the lawsuit was filed. DVD-CCA could not demonstrate "purposeful availment" by merely alleging that Pavlovich knew that posting the computer code would harm other related industries based in California. Pavlovich’s "mere awareness" that the decryption code could be used to illegally pirate copyrighted motion pictures did not satisfy the effects test, because there were no causes of action asserted premised on copyright infringement or illegal pirating. The court declined to exercise jurisdiction over a defendant who merely should have known that his conduct may harm, not the plaintiff, but industries associated with the plaintiff. That putative knowledge alone is insufficient to establish that Pavlovich expressly aimed or targeted California as required by the Calder effects.

Copyright / Translations

Translation of Prayer Book Has Sufficient Originality to Qualify for Copyright Protections
By Paul Devinsky

The U.S. Court of Appeals for the Second Circuit, affirming the district court, held that a translation of a prayer book has sufficient originality for copyright protection, Merkos L’Inyonei Chinuch Inc. v. Otsar Sifrei Lubavitch Inc., Case No. 02-7465 (Second Circuit, Nov. 25, 2002).

Both Merkos L’Inyonei Chinuch Inc. (Merkos) and Otsar Sifrei Lubavitch Inc. (Otsar) publish a prayer book (or siddur) widely used within the Lubavitch movement of Hasidic Judaism. Merkos sued Otsar for copyright infringement, alleging that Otsar’s version of the prayer book violated Merkos’ copyright in the original siddur by copying verbatim the English translation of the Hebrew prayers.

The U.S. District Court for the Eastern District of New York granted Merkos a preliminary injunction, barring Otsar from disseminating its prayer book. Otsar appealed.

The Second Circuit affirmed, rejecting Otsar’s assertions that the translation is not copyrightable: "Originality in [the copyright] context means only that the work was independently created by the author … and that it possesses at least some minimal degree of creativity." The court explained that "[t]he translation process requires careful literary and scholarly judgment. …The fact that [a] … translation is designed to serve a practical purpose does not make it ineligible for copyright protection."

The court also rejected Otsar’s merger argument, i.e., that copyright law does not permit imposition of a monopoly over a religious prayer. Specifically, Otsar argued that the translation presents a medium where the expression of an idea has effectively merged with the idea itself because the translation in question is the sole viable translation of the prayer book within the Lubavitch community.

While the court found that this argument has some force, it found it to be ultimately unpersuasive. While including the translation in past editions of the prayer book makes the work attractive to Lubavitch Jews, those persons can still use a prayer book having a different translation. The court stressed that "the art of translation involves choices among many possible means of expressing the ideas and in that sense the merger argument is inapposite. …"

Finally, the court rejected Otsar’s argument that jurisdiction was lacking because adjudication of the dispute requires determinations of religious law and doctrine. "Courts may decide disputes that implicate religious interests as long as they do so based on ‘neutral principles’ of secular law without undue entanglement in issues of religious doctrine."

Software Patents / EPO

Software Patents in Europe
By Justin Hill,PhD

November 2002 saw progress but still no agreement on the correct level of patent protection for software in Europe. As many readers will know, the current European Patent Office (EPO) Proposed Directive on Computer Implemented Inventions was drafted after a lengthy consultation process taking into account the opinions of all sections of industry, academia, interested institutions and professional bodies. The aim of the proposed directive is to clarify the level of protection available for computer implemented inventions, particularly software, and to ensure that it is harmonised throughout Europe.Supporters of open source software, who either wanted no protection at all or a considerable reduction from present levels, dominated responses to the draft received from individuals. Some commentators believe that a well-organised open source lobby overwhelmed the largely e-mail-based consultation process.

Inevitably the consultation process led to a compromise in that the draft directive fell some way short of the level of protection available for software under well established EPO case law. For example, the principles of the IBM decisions [1999] RPC 861 have not found their way into the draft directive. These include patent protection for software per se and software recorded on a carrier, provided in both cases it is capable of having a technical effect when run on a computer. Article 5 of the draft directive, which sets out allowable forms of claim, currently only explicitly recognises types of [programmed] computer apparatus and methods of operating such apparatus. The nature of the software industry is such that without protection for software per se, or at least software on a carrier, software providers in Europe would have more limited patent protection available to them than do providers in other fields of technology. This seems contrary to TRIPs and also leaves software businesses in Europe at a competitive disadvantage compared to U.S. and Japanese counterparts.

Experienced commentators have, therefore, been pressing for an amendment to Article 5 and an extension of its scope to parallel the position under EPO case law. In spite of broad agreement on the directive’s underlying principles, on 14 November 2002, the EU’s Competitiveness Council failed to agree unanimously that the initial proposal under the draft Directive should be amended in line with EPO case law. At present, Spain is maintaining a parliamentary reservation, while France is maintaining a general reservation pending the European Parliament’s opinion on first reading.

It is worth considering how the effectiveness of patent protection for software would be reduced if the initial draft is not amended to reflect the current status quo under EPO case law. The true level of protection afforded by a software patent depends on a combination of the infringement provisions and remedies provided by the jurisdiction in question, as well as the claim format and language used to define the patent monopoly. A change away from protection for qualifying software, independently or on a carrier, could undermine the value of software patents and could mean that some previously granted European software patents will be found to be at least partially invalid. For patent protection of software to be in line with protection available for other fields of technology, a patent should provide an exclusive right to, e.g., manufacture, use, sell, offer for sale and export the alleged infringing product. Software products tend to be loaded or pre-programmed on hardware, packaged on carrier mediums or, increasingly, distributed electronically. Clearly, in the latter two cases, only claims to software per se, or software recorded on a carrier are well placed to cover certain supply, handling and exporting activities—activities which would not be covered directly by claims to a programmed apparatus or method of operating the same.

The draft directive now proceeds to European Parliament for first reading following scrutiny by a parliamentary committee on 18 March 2003. The EU Council’s common position is expected to follow later in the year.

Antitrust / Microsoft

District Court Approves Settlement Between Microsoft and Federal Government
By Paul Devinsky

In approving a proposed settlement of the antitrust action brought by the U.S. Department of Justice against Microsoft Corp., Judge Kollar-Kotelly of the U.S. District Court for the District of Columbia issued two opinions.  In the first, she determined the proposed settlement generally comported with the Tunney Act, which requires that courts subject any consent decree proposed in civil antitrust suits brought by the federal government to a “public interest” analysis.

In the second, the court analyzed the settlement, as well as an alternate plan put forth by nine state attorneys general who were not satisfied with the federal government’s proposed settlement, and sought to impose stricter remedies against Microsoft.  The judge rejected the proposed harsher remedies, finding that the government’s proposal was tailored to address the practices that were actually found to have violated the Sherman Act.  United States et al. v. Microsoft Corp., Case Nos. 98-1232 and 98-1233 (D.C.D.C. Nov. 1, 2002). 

The U.S. government and 18 state attorneys general sued Microsoft in 1998, accusing the company of unlawfully maintaining its PC operating system monopoly by destroying the potential threat posed by “middleware,” such as the combination of the Netscape Navigator Web browser and Sun Microsystems Java programming language:  The middleware could potentially replace the traditionally operating system as the central feature of a PC.  The government alleged Microsoft used a variety of anti-competitive tactics to block such middleware in order to ensure its own dominance in the marketplace. 

The district court held a full trial, and its findings were subject to appellate review by the U.S. Court of Appeals for the District of Columbia Circuit.  The court of appeals affirmed the district court (Judge Thomas Penfield Jackson), finding that Microsoft had engaged in anti-competitive conduct to maintain a monopoly in the market for PC operating systems in violation of Section 2 of the Sherman Act, but reversed the district court’s finding that Microsoft violated the act by attempting to monopolize the market for internet browsers.  On this last point, the appellate court threw out the claim completely, finding that a remand would be pointless.

The court of appeals also vacated the district court’s remedy:  an order to break Microsoft into two companies, one to handle the Windows operating system and another to develop and sell applications programs.  The case was remanded with instructions to “fashion an appropriate remedy for Microsoft’s antitrust violations.” 

On remand, the case was reassigned to Judge Kollar-Kotelly, who immediately ordered the parties to try to reach a settlement.  In November 2001, the proposed settlement was announced.

Judge Kollar-Kotelly found the proposed settlement to be “far from an amalgam of scattered rules and regulations pieced and patched together to restrict Microsoft’s anti-competitive business conduct, [rather] the proposed final judgment adopts a clear and consistent philosophy such that the provisions form a tightly woven fabric. …  The proposed final judgment takes account of the theory of liability advanced by the plaintiffs, the actual liability imposed by the appellate court, the concerns of the plaintiffs with regard to future technologies and the relevant policy considerations.” 

The district court found one serious problem with the proposed settlement—the court only retained jurisdiction to rule on matters brought before the court by parties to the case:  “The court considers it imperative, in this unusually complex case, for the court’s retention of jurisdiction to be clearly articulated and broadly drawn.  Such clarity and broad reservation of power are necessary to ensure that the court may require action of the parties when it deems appropriate and need not wait for the parties to file a motion before action is taken.”

The decree will last for a term of five years; the government has the option of applying for a single five-year extension.  Although most decrees last for at least 10 years, the court found that in this case the rapid pace of change in the technology industry justifies a shorter term. 

One of the most controversial provisions of the settlement requires Microsoft to disclose the application program interfaces (APIs) that Microsoft middleware products use to interoperate with Windows.  APIs function as links that allow software applications, such as word processors and spreadsheets, to access blocks of code within the operating system in order to perform functions like displaying text on the computer screen.  Software developers cannot write applications for a specific operating system without access to the APIs for that system.  The main feature of middleware, such as the Netscape and Java combination, is its ability to expose its own set of APIs and thus serve as a platform for other applications.

The court noted that the API disclosure provision is crafted broadly enough to apply to future middleware technologies, not just the Navigator and Java combination that is prevalent now:  “Such expansion is appropriately forward-looking and accords with the general law of remedies in antitrust law.”

The court rejected objections to the timetable under which API disclosure was required, which, for new Microsoft middleware, is no later than the date of release of the last major beta test version, and for Windows products, either the first release of a beta version made available via a Microsoft Software Developer Network subscription or when 150,000 or more beta copies are released.

Microsoft is not required to disclose APIs if doing so would compromise the “security of a particular installation of anti-privacy, anti-virus, software licensing, digital rights management, encryption or authentication systems.”  The court found this the exception to not be overly broad, because it applies only when disclosure would cause an actual security breach, not merely a potential, hypothetical or likely breach.

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