IP Update, Vol. 9, No. 2, February 2006
February 2006
Misrepresentation Requires Higher Level of Materiality than Mere Omission
By Cameron K. Weiffenbach and Paul Devinsky
The U.S. Court of Appeals for the Federal Circuit, on rehearing, vacated its prior holding of inequitable conduct and withdrew its earlier opinion in Purdue Pharma LP et al. v. Enro Pharmaceuticals Inc. et al., Case Nos. 04-1189, -1347, -1357 (Fed. Cir. Feb. 1, 2006) (Plager, S. J.).
Purdue filed an infringement suit against Endo alleging that Endo’s proposed generic versions of controlled release OxyContin pain relief medicine would infringe three Purdue patents. The district court found the patents were infringed but held the patents were unenforceable due to inequitable conduct. In its earlier opinion, (see IP Update Vol. 8, No. 6, June 2005) the Federal Circuit upheld the district court’s judgment of inequitable conduct and, consequently, did not consider Endo’s cross-appeal on the infringement issue. Now, in its decision on rehearing, the Federal Circuit vacated the district court’s inequitable conduct judgment and affirmed the district court’s judgment that the patents were infringed.
The issue that precipitated the inequitable conduct concern centered on the following statement in the Purdue patent specification:
It has now been surprisingly discovered that the presently claimed controlled release oxycodone formulations acceptably control pain over a substantially narrower, approximately four-fold [range] (10 to 40 mg every 12 hours—around-the-clock dosing) in approximately 90% of patients. This is in sharp contrast to the approximately eight-fold range required for approximately 90% of patients for opiod analgesics in general.
As it turns out, this was a prophetic statement as opposed to a statement of scientific fact. In fact, there was no scientific proof or clinical results of a four-fold dosage range for oxycodone as asserted in the specification. The statement was based on the “insight” of one of the inventors who “envisioned” a controlled release of the oxycodone product that would control pain over a four-fold dosage range in 90 percent of the patients. The trial court held that the failure to inform the U.S. Patent and Trademark Office (USPTO) that the assertion “finding,” which Purdue heavily relied on in arguing for patentability, was a material omission. In its rehearing decision, the Federal Circuit relied on the amended rule 56 as the standard for materiality and held that the “failure to inform the USPTO whether a ‘surprising discovery’ was based on insight or experimental data does not in itself amount to a material omission.” However, Purdue’s repeated reliance on that discovery “to distinguish its invention from other prior art opiods while using language that suggested the existence of clinical results supporting the reduced dosage range” does amount to a material omission (emphasis supplied).
The Court went on to note that while “Purdue’s actions met a threshold level of materiality, we stress that the level of materiality is not especially high” (emphasis supplied). According to the Court:
Purdue did not expressly misrepresent to the USPTO that it had obtained experimental results establishing a four-fold dosage range for oxycodone, an act that likely would have been highly material. Instead, Purdue made statements implying that an empirical basis existed for its discovery and then failed to disclose that the discovery was based only on insight. This omission of information was material, but not as material as an affirmative misrepresentation would have been.
As for the intent prong of the inequitable conduct defense, the Federal Circuit held that intent to deceive cannot be inferred solely from the fact that information was not disclosed. Rather, there must be a separate factual basis for finding deceptive intent and that “when the level of materiality is low [as in this case], the showing of intent must be proportionately higher” (emphasis supplied).
The Federal Court ruled that the district court failed to properly weigh the level of materiality when it inferred intent from materiality alone. Therefore, the Federal Circuit vacated the inequitable conduct judgment and remanded the case with instructions to the trial court to reconsider the evidence regarding intent and, should it find that a “threshold” level of intent has been established, to “reweigh its materiality and intent findings to determine whether the sanction of unenforceability due to inequitable conduct is warranted.”
Practice Note
As the Federal Circuit made clear in this case, even if threshold levels of materiality and intent are present, the sanction of unenforceability is not automatic but requires a careful weighing process. Where the level of materiality is low, the showing of intent must be proportionally higher.
“Reasonable Examiner” Standard for Determining Materiality Is Alive and Well
By Cameron K. Weiffenbach and Paul Devinsky
In its second major inequitable conduct opinion in a week, the U.S. Court of Appeals for the Federal Circuit has determined the U.S. Patent and Trademark Office (USPTO) rule 56, as amended in 1992, in no way supplemented or replaced the case law precedent in determining the threshold of materiality. This rule merely “provides an additional test of materiality” along with the “but for” tests and the “but it may have” and “reasonable examiner” standards. Digital Control Inc. v. The Charles Machine Works, Case No. 05-1128 (Fed. Cir., Feb. 8, 2006) (Clevenger, S. J.).
Digital appealed a decision of the district court, which found two patents to be unenforceable for inequitable conduct due to inventor misrepresentations made in a rule 131 affidavit and his failure to cite prior art cited in another, unrelated patent application to the examiner. After a bench trial on the issue of intent, the district court determined on summary judgment that the misstatements and omission were material under the “reasonable examiner” standard even though the patents were filed and prosecuted after the 1992 amendment to rule 56. The trial court also found the misstatements and omission were made with intent to deceive the USPTO.
Noticing “summary judgment that a patent is unenforceable for inequitable conduct is permissible, but uncommon,” the Federal Circuit affirmed the finding of materiality as to the misrepresentations but reversed the summary judgment as to the materiality of the omission to cite the prior art.
Historical Development of Rule 56
The Court reminded us that the doctrine of inequitable conduct arose out of three significant Supreme Court cases in the 1930s and 1940s in which the Court found patents unenforceable due to USPTO fraud. Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co.; Hazel-Atlas Glass Co. v. Hartford-Empire Co. and Keystone Driller Co. v. Gen. ExcavatorCo. As noted by the Federal Circuit, in these cases the Supreme Court “did not precisely articulate what rendered a patent unenforceable,” but the courts generally perceived it to be “akin” to common law fraud, requiring a “showing that the information that was misrepresented or withheld … was material and a showing of wrongfulness, such as deceptive intent, willful misconduct or gross negligence.” In 1949 the USPTO implemented the first version of rule 56 prescribing that “any application fraudulently filed or in connection with which any fraud is practiced or attempted on the Patent Office, may be stricken from the files” [37 C.F.R. 1.56 (1951)].
As explained in the 1984 Court of Customs and Patent Appeals (CCPA) case of Am. Hoist & Derrick Co. v. Sowa & Sons, Inc., several different standards for materiality emerged: the objective “but for” test, i.e., “where the misrepresentation was so material the patent should not have issued”; the subjective “but for” test, i.e., where the misrepresentation actually caused the examiner to approve the application”; and the “but it may have standard,” i.e., “the where the misrepresentation may have influenced the patent examiner.” In Am Hoist, the CCPA embraced USPTO Rule 56 as “the appropriate starting point” but held “[t]here is not reason to be bound by any single standard” as “a finding of inequitable conduct requires a balancing of materiality and intent.” Thus, the Court in Am Hoist concluded that where “a reasonable examiner would merely have considered particular information to be important but not crucial to his decision” the requisite finding of intent must be high. Conversely, where an objective but for “standard of materiality is shown, a lesser showing of facts from which intent may be inferred may be sufficient.” In doing so, the CCPA effectively adopted the USPTO “reasonable examiner” standard for determining materiality.
Since the “reasonable examiner” standard did not identify specific criteria for determining materiality, the USPTO amended rule 56 in 1992 to clarify materiality. The rule as amended prescribed that information was material if it was not cumulative to information already of record and (1) establishes either by itself or in combination with other information “a prima facie case of unpatentability of a claim” or (2) the information “refutes, or is inconsistent with, a position the applicant takes in: (i) [o]pposing an argument of unpatentability relied on by the Office or (ii) [a]sserting an argument of patentability.”
Federal Circuit Decision in Digital
The Federal Circuit has now explained that rule 56 as amended in 1992 created “an arguably narrower standard of materiality” but did not supplement the 1977 version. According to the Court, the 1992 version of rule 56, like the “but for” tests and the “but it may have” and “reasonable examiner” standards, merely represents another test for materiality.
In the Digital case, the Federal Circuit found that under the “reasonable examiner” standard, there was uncontroverted evidence that the misstatements made by Dr. Mercer in his rule 131 declaration met the “threshold level” of materiality. However, as to the failure to disclose the Rorden patent, there is a genuine issue of contested fact as to whether the Rorden patent was cumulative of the prior art of record. The Court noted “the scope and content of prior art and what the prior art teaches are questions of fact.” As explained in the Court, this issue of material fact “was not properly decided at summary judgment.”
As for intent to deceive, even though there was ample evidence of intent, the Federal Circuit vacated the judgment of inequitable conduct because the district court commingled its findings of materiality in finding intent, i.e., “the district court did not parse its analysis of the misstatements in the Rule 131 declaration from its analysis of the failure to disclose the Rorden patent.” The Court was unable to “ascertain whether the district court would have ruled the patents unenforceable based solely on the misrepresentations in the Rule 131 declaration, whether the district court’s factual findings on intent would survive trial on the merits of the cumulative prior art issue, and in particular, whether the district court’s assessment of Dr. Mercer’s credibility would be different if the court were to determine after trial that the Rorden reference was in fact cumulative.”
Practice Note
In view of its holding in Am Hoist (the “reasonable examiner” standard encompasses the other standards and the present holding that the 1992 amended rule 56 is a narrower standard of materiality like the “but for” tests), the Federal Circuit in Digital has now determined the “reasonable examiner” standard remains the standard to be applied in inequitable conduct cases when determining the “threshold level” of materiality. Thus, parties in litigation should urge and apply this standard. It is important to note that under the “reasonable examiner” standard, a misstatement or omission can be material even if the misstatement or omission would not have rendered the claimed invention unpatentable.
Patents / Willful Infringement and Collateral Estoppel
Willful Infringement Still in Fashion at the Trocar-Cabana
By Michael W. Connelly
Addressing issues of willful infringement, collateral estoppel and the relevance of prior jury verdicts, the U.S. Court of Appeals for the Federal Circuit recently affirmed the findings of the district court. Avoiding willful infringement is not a superficial exercise, a different product for infringement is a different product for damages and hypothetical royalty negotiations conducted in the shadow of a prior jury verdict may make that jury verdict admissible. Applied Medical Resources Corp. v. U.S. Surgical Corp., Case No. 05-1149 (Fed. Cir. Jan. 24, 2006) (Lourie, J.).
Key to this case is the fact that U.S. Surgical had previously lost an infringement case to Applied Medical on the same patents and similar products. During the prior litigation, U.S. Surgical's product (a trocar, which is used as an access port into the body during laparoscopic surgery) was found to infringe Applied Medical’s patent, costing U.S. Surgical a 7 percent royalty rate and a permanent injunction. U.S. Surgical, prior to the issuance of the injunction, had redesigned the product and begun to sell the new product only a month after the injunction was issued. Applied Medical instituted a new case against the redesigned device and won summary judgment of infringement. The trial court held a separate trial to determine damages. In denying U.S. Surgical’s pretrial motions, the trial court held that the jury was not bound by the royalty rate set in the prior litigation (the aforementioned 7 percent) and that evidence from the prior litigation (including the willfulness determination) was relevant to the present case. The jury then found willful infringement and awarded damages in the amount of $64.5 million. U.S. Surgical appealed.
On the issue of collateral estoppel, the Federal Circuit noted U.S. Surgical had “conceded that [the prior product and the current product] were different infringements” because it had previously taken the position that the two products were different. The Federal Circuit found “a separate infringement beginning at a different time requires a separate evaluation of reasonable royalty damages.”
U.S. Surgical also argued that the trial court erred in not granting its motion for judgment as a matter of law for no willful infringement. U.S. Surgical cited its well-documented design-around program and the fact it had obtained three opinions of counsel. The trial court and Federal Circuit noted several problems with the opinions, including that one did not go toward infringement and the fact that one arrived after sales of the new product began (in addition to other evidence showing U.S. Surgical’s goal was to minimize the time to develop a new product and avoid the injunction). The Federal Circuit found the jury could have inferred from the evidence that U.S. Surgical sought legal opinions "for their potential evidentiary value on the issue of willful infringement in future litigation" and not as legitimate advice as to whether the new product infringed. In affirming the finding of willful infringement, the Federal Circuit rejected U.S. Surgical’s theory that there is a formula, based on obtaining legal opinions, to avoiding willfulness.
The Federal Circuit also held that the district court had not abused its discretion in allowing evidence of the prior litigation to be introduced to the jury, finding the information was relevant to the reasonable royalty analysis because the hypothetical negotiation would have been conducted in the wake of the prior verdict. The Federal Circuit noted the prior jury’s determination of willfulness was relevant because U.S. Surgical had, in effect, introduced the topic by tying the redesign effort to the desire to avoid another willfulness verdict.
Patents / Post-Trial Motions and Willfulness
Golden Blount II: Federal Circuit Agrees-in-Part with District Court After Remand for Sufficient Reasoning
By Bonnie Warren
Addressing for the second time the district court’s findings on infringement and willfulness, the U.S. Court of Appeals for the Federal Circuit affirmed the district court’s findings as to those issues, vacated-in-part the district court’s lost profits damages calculation and remanded the case to the district court for the limited purpose of determining whether certain products should be included in that calculation. Golden Blount, Inc. v. Robert H. Peterson Co., Case No. 04-1609, 05-1141, 05-1202 (Fed. Cir. Feb. 15, 2006) (Linn, J.) (Golden Blount II). Interpreting Knorr-Bremse, the Federal Circuit found its prior ruling only precludes an inference that an undisclosed written opinion would have been negative. Once attorney-client privilege is waived, however, the opinions may be substantively challenged.
Golden Blount brought suit against Peterson alleging, among other things, that Peterson willfully infringed certain claims of his patent directed to fireplace burners. See Golden Blount, Inc. v. Robert Peterson Co., IP Update, Vol. 7 No. 5, May 2004 (Golden Blount I). Following a three-day bench trial, the district court rendered its opinion concluding, among other things, that Peterson willfully infringed the asserted claims.
Peterson appealed and argued, among other things, the court erred in its claim construction, and the conclusion of infringement was flawed and not supported by evidence. On review, the Federal Circuit addressed the sufficiency of the district court’s opinion and concluded the district court’s analysis on infringement was insufficient. Thus, the Federal Circuit vacated-in-part and remanded the case for a more detailed infringement analysis.
Willfulness
Applying a clear error standard of review, the Federal Circuit decided the lower court properly considered the relevance of oral opinions of counsel and other evidence in finding willfulness. Peterson claimed reliance on three oral opinions of counsel. The lower court determined that these opinions were rendered based upon incomplete information and without review of the prosecution history or the accused product. The Federal Circuit’s opinion in Knorr-Bremse Systems Fuer Nutzfahrzeuge GmbH v. Dana Corp., (see IP Update, Vol. 7, No. 9, September 2004) found that the failure to produce a written opinion of counsel does not permit an adverse inference that the opinion would have been negative. Here, however, the Federal Circuit found inference was not the issue, and Knorr-Bremse did not prevent a patent owner from challenging the competence of opinions of counsel when the attorney-client privilege was not invoked. Therefore, once privilege is waived, the patentee can challenge the competence of the opinion as evidence of willfulness.
Rule 52 Practice
On remand both parties filed proposed findings of fact. The district court adopted Peterson’s proposed findings of non-infringement. Shortly thereafter, Golden Blount filed a rule 52(b) motion to amend the judgment, and alternatively a rule 59 motion for a new trial. After hearing oral arguments on Golden Blount’s motion, the district court decided it had made a mistake in adopting Peterson’s findings and requested Golden Blount provide “the necessary findings and necessary final judgments.” Golden Blount subsequently submitted another set of proposed findings, which the district court adopted and entered. Thereafter, the district court found Peterson had infringed. The district court also calculated lost-profit damages and trebled the award, and it awarded Golden Blount attorneys’ fees and post-judgment interest.
Peterson appealed, arguing the district court erred in vacating all of its findings because Golden Blount’s rule 52(b) motion only sought amendment of some of the findings, and the motion was untimely filed. Peterson also argued that certain of its burners should have been excluded from the damages calculation because they were returned before having been sold to retailers for assembly into a non-infringing configuration.
On review for the second time, the Federal Circuit explained rule 52(b) provides the district court discretion to amend any or all of its findings, and the district court did not abuse its discretion in amending its findings. The Court also concluded the rule 52(b) motion was timely. Accordingly, the Court affirmed the district court’s decision in regard to the motion. Because the district court failed to address the burners allegedly returned, the Federal Circuit vacated-in-part the district court’s lost profits damages calculation and remanded the case for the limited purpose of determining whether those burner products should be included in that calculation.
Patents / Claim Indefiniteness
A Claim Is Not Indefinite if One of Ordinary Skill in the Art Court Reasonably Construe the Claim
By D. Sean Trainor
The U.S. Court of Appeals for the Federal Circuit has now held that a claim is not indefinite under 35 U.S.C. § 112, ¶ 2, even where a claim element lacks antecedent basis, if one of ordinary skill in the art could reasonably discern the meaning of the claim element, even though discerning the meaning may be difficult. Energizer Holdings, Inc. v. International Trade Comm’n, Case No. 05-1018 (Fed. Cir. Jan. 25, 2006) (Newman, J.).
Energizer Holdings had accused several respondents of violations of section 337 of the Tariff Act of 1930 based on alleged infringement of its patent, which is directed to zero-mercury-added alkaline batteries. Energizer asserted the respondents infringed certain claims that recite “ … an anode gel comprised of zinc as the active anode component . . . and said zinc anode has a gel expansion of less than 25% after being discharged for 161 minutes to 15% depth of discharge at 2.88A.” The International Trade Commission (ITC) held the claims invalid because “said zinc anode” lacked antecedent basis, and the claimed test parameters were imprecise. Energizer appealed.
The Federal Circuit reversed, stating that the definiteness “focuses on whether those skilled in the art would understand the scope of the claim when the claim is read in light of the rest of the specification.” The Federal Circuit acknowledged that the ITC and the courts cannot redraft the claims to correct material errors, but if one of ordinary skill in the art would reasonably understand the claim, then the claim is not indefinite by virtue of its departing from the “antecedent basis” rule, which is a patent drafting rule administered during examination.
Neither the ITC nor the intervenors argued they did not understand the claim due to the absent antecedent basis. The Federal Circuit found that a claim that is amenable to construction is not indefinite, even if the task of construing the claim is difficult. The Court determined the claim at issue could be construed, and the antecedent basis was present by implication.
Practice Note
The Federal Circuit did not deal specifically with the ITC’s assertion that the claim was indefinite due to imprecise test parameters. In any event, when analyzing a claim for indefiniteness, that analysis must include consideration of whether one of ordinary skill in the art could determine the meaning of the claim, regardless of any difficulty in doing so.
Claim Differentiation Cannot Expand Claim Scope Beyond Specification
By Dennis A. Duchene
Vacating a preliminary injunction granted by the district court, the U.S. Court of Appeals for the Federal Circuit held that the district court’s claim construction was improper because it used the claim differentiation to expand the claim scope beyond that supported by the specification. Curtiss-Wright Flow Control Corp. v. Velan, Inc., Case No. 05-1373 (Fed. Cir. Feb. 15, 2006) (Rader, J.).
In construing Curtiss-Wright’s claim for a de-header valve, the district court broadly defined the term “adjustable” to mean the valve can be adjusted in a manner that is “not limited by any time, place, manner, or means of adjustment.” The district court arrived at this construction by first applying the ordinary meaning of the term “adjustable” and then determining a narrower construction of the term would be inconsistent with other claims in the same patent that provide for adjustment of the device while in operation.
The Federal Circuit cited the Phillips opinion for the general rule that the specification (rather than a dictionary) is the single best guide to the meaning of a claim term. The Court then noted the specification of Curtiss-Wright’s patent stressed the importance of one aspect—that the device be adjustable while in use—as opposed to the prior art in which the adjustment is made when the device is not in use. The Court further noted the district court’s construction encompassed embodiments in which the adjustment was made when the device was not in use, and such embodiments were not supported by the specification.
The Court determined the district court misapplied the presumption of claim differentiation to impermissibly broaden the meaning of the term “adjustable” beyond that supported by the specification. In this regard, the Court noted that claim differentiation is a presumption, but it is not a rigid rule. First, the Court recognized it is possible for different claims using different language to have the same scope. Second, the Court admonished that claim differentiation cannot contradict the correct meaning of the claim as defined by the “overall context of this invention and this field of art as described in the specification.” Accordingly, the Court held the district court’s error in claim construction and resulting grant of the preliminary injunction was an abuse of discretion.
Practice Note
This case demonstrates the Court’s continuing emphasis on applying the principle of Phillips: the specification is the single best guide to the meaning of a claim term, and other claim construction tools cannot contradict this basic principle.
Claim Interpretation Gets Drilled
By Amol Parikh
The U.S. Court of Appeals for the Federal Circuit reversed and remanded an order denying a preliminary injunction because the district court’s unduly restrictive claim interpretation led directly to the denial of the preliminary injunction. Varco, L.P. v. Pason Systems USA Corp., Case No. 05-1136 (Fed. Cir. Feb. 1, 2006) (Rader, J.).
The patent at issue was directed to the system and method for automatically regulating the release of a drill string on a drilling rig in response to a combination of four parameters. The claim construction dispute focused on a “selecting” step and a “relaying” step. The district court interpreted “selecting” to require “manual operation of valve selectors and manual calibration of regulators” and interpreted “relaying” to mean “transmitting a signal by means of pneumatically operated valves.” In arriving at these constructions, the district court relied heavily on the specification and prosecution history. Varco appealed and argued the district court improperly narrowed the claims by importing limitations from the specification.
The Federal Circuit agreed and held the district court impermissibly imported limitations into the claims resulting in an unduly narrow claim construction. The Court explained that claim terms are generally given their ordinary and customary meaning, and the inquiry into how a person of ordinary skill in the art understands a claim term provides an objective baseline from which to begin claim interpretation.
Focusing on the claim language, the Court found the “selecting” step was not limited to manual operations. On the contrary, other claims expressly stated that selection was performed automatically, and the specification and prosecution history clearly indicated that manual operations related to calibration prior to automatic selection. As to the “relaying” step, the Court found that although the preferred embodiment used pneumatic valves operating as relays, it would be improper to use the preferred embodiment to limit the claim as nothing in the claim itself required the use of pneumatically operated valves to perform the “relaying” step.
On remand the Court stated the district court may consider the proper interpretation of the disputed claim, validity challenges to the disputed claim and infringement of the disputed claim by the defendant’s system. Further, because the case appears to present an instance of after-arising technology, the Court noted that the district court may find it appropriate to consider infringement under the doctrine of equivalents.
Practice Note
Although Phillips re-emphasized the importance of the specification for construing claims, noting that the specification is often the single most important claim construction tool, caution must still be taken to avoid importing limitations from the specification into the claims.
Federal Circuit Updates Law on Motivation to Combine
By Matthew F. Weil
The U.S. Court of Appeals for the Federal Circuit has upheld the rejection of a pending application and, in the process, considered anew the questions of when there is sufficient motivation to combine two references to sustain an obviousness rejection as well as what factors should be considered when making the determination. In re Johnston, Case No. 05-1321 (Fed. Cir. Jan. 30, 2006) (Newman, J.).
Johnston applied for a patent on a spiral pipe with a diameter in excess of 12 or 15 feet. The pipe is formed by bending a long sheet of metal or other ductile material into a helix and then joining the adjacent edges by welding. The U.S. Patent and Trademark Office examiner rejected the claims as obvious in view of several references describing silos, storage tanks and other cylindrical structures formed from strips of metal bent into a helical shape and joined at the edges. Johnston argued the examiner’s construction of "pipe" was too broad, and “pipe” in the construction trades is well understood to mean structures used to carry fluids or as electrical conduits.
The Court observed that Johnston himself, in his specification, gave "pipe" the same broad meaning when he stated that pipes may be used as overpasses, storage buildings, homes, silos and water tanks (and extolled the value of his invention in such large-diameter structures).
Johnston also objected to the examiner’s combination of various prior art references to support an obviousness rejection and argued the examiner had not identified an appropriate motivation to combine. Here too the Federal Circuit affirmed, observing “many factors are relevant to the motivation-to-combine aspect of the obviousness inquiry, such as the field of the specific invention, the subject matter of the references, the extent to which they are in the same or related fields of technology, the nature of the advance made by the applicant, and the maturity and congestion of the field.” Observing that “[a]n explicit teaching that identifies and selects elements from different sources and states that they should be combined in the same way as the invention at issue, is rarely found in the prior art,” the Court found it sufficient under the facts of this case that the teachings were in the same field of endeavor and dealt with related subject matter.
Practice Note
The Federal Circuit’s non-obviousness case law has been the subject of considerable criticism, most recently in a well-publicized petition for certification filed in the KSR Int’l case. That petition, and a supporting amicus brief filed by twenty-four law professors, argues the Federal Circuit’s obviousness standards are too low, and the KSR opinion is inconsistent with the Supreme Court’s decision in Sakraisa (a 1979 case and the Supreme Court’s most recent obviousness ruling). Sakraisa held that merely combining known elements with no change in functions fails for obviousness. Under the Sakraisa standard, the Teleflex patent—and countless others that take a known technology and implement it on the internet—would likely fail for obviousness.
(Web only) Patents / Interference
Inventor’s Testimony Insufficiently Corroborated to Establish Date of Invention
By David A. Gay, Ph.D.
On appeal following remand to establish whether an interference-in-fact existed between interfering patents, the U.S. Court of Appeals for the Federal Circuit affirmed the district court’s finding of an interference-in-fact but reversed its award of priority based on lack of corroboration for the inventor’s testimony. Medichem, S.A. v. Rolabo, S.L., Case No. 05-1179 (Fed. Cir. Feb. 3, 2006) (Gajarsa, J.).
Medichem and Rolabo are manufacturers of loratadine, the active antihistamine ingredient in Claritin. Medichem’s U.S. Patent No. 6,084,100 (the `100 patent) and Rolabo’s 6,093,827 (the `827 patent) both claim a process for preparing loratadine. The claims in the `100 patent require the presence of a tertiary amine and are a species of the claims in the `827 patent. In an earlier appeal, the Federal Circuit determined the district court lacked jurisdiction because it failed to establish as a precondition for determining priority the existence of an interference-in-fact (see IP Update Vol. 7, No. 1, January 2004). On remand and to decide the second prong of the two-way interference-in-fact test, the district court found Medichem’s invention was obvious in view of Rolabo’s genus in part because Rolabo’s invention did not exclude the use of tertiary amines. Priority was awarded to Medichem. Rolabo, the party having the earlier priority date, appealed and argued Medichem’s invention was unobvious and the district court erred in awarding priority based on uncorroborated oral testimony of the inventors.
The Federal Circuit affirmed the existence of an interference-in-fact, finding the species to be obvious in view of the genus. The Court reasoned the use of a tertiary amine in the claimed Rolabo process was obvious because there was clear guidance in the prior art that the addition of a tertiary amine can optimize the type of chemical reaction employed.
Turning to the priority issue, the Court commenced its analysis with a detailed review of the law and policy underlying the requirement for independent corroboration of an inventor’s oral testimony. The Court noted that corroboration is fundamental to the credibility of an inventor’s testimony, and the independent nature of the evidence is key to establishing its sufficiency. The Court found documentary evidence of the inventors lacked corroborative value because it failed to provide an independent source of authority. The inventors notebooks were unwitnessed, and a spectral analysis of loratadine was found, at most, to corroborate the existence of the compound rather than to reduce to practice of the claimed process. A laboratory notebook of a non-inventor also was found to be insufficient because it similarly lacked independence from the inventor. The non-inventor’s notebook was neither signed nor witnessed. It contained entries by the inventor, but the non-inventor failed to testify at trial as to the notebook’s genuineness. The Court concluded the evidence was insufficient as a matter of law to independently corroborate Medichem’s reduction to practice.
Patents / Appealable Procedures
Conditional Cross-Appeal Challenging Claim Construction Not Permitted
By Mary C. Chapin
A party who prevails on a judgment of non-infringement has no right to file a conditional cross-appeal seeking review of claim construction rulings in the event of reversal of the judgment of non-infringement. That was the holding of the U.S. Court of Appeals for the Federal Circuit in Nautilus Group, Inc. v. ICON Health and Fitness, Inc., Case. No. 05-1603 (Fed. Cir. Feb. 15, 2006) (per curiam) (Newman, J.; dissenting).
Nautilus appealed from the district court’s judgment in favor of ICON’s counterclaim for non-infringement, and ICON filed a cross-appeal seeking conditional review of certain unappealed terms in the district court’s claim construction decision in the event of a reversal of the judgment. Nautilus moved to dismiss the cross-appeal.
The Federal Circuit dismissed the cross-appeal, holding it improper. Finding ICON’s cross-appeal identical to the cross-appeal it dismissed in Bailey v. Dart Container Corp., the Court applied the principles of that case and explained that an appellee can present all arguments supported by the record and advanced in the trial court in support of the judgment, even those particular arguments that were rejected or ignored by the trial court. Thus, an appellee may make arguments regarding claim construction that would result in affirmation of the judgment of non-infringement. The Court noted that allowing a cross-appeal in such a case unnecessarily expands the amount of briefing that is otherwise allowed and gives the appellee an unfair opportunity to file the final brief and have the final oral argument, which is contrary to established rules.
In dissent, Judge Newman explained the issues of ICON’s cross-appeal related to claim terms whose construction was not relied on in the appealed judgment, yet these terms would become the law of the case if the Court should reverse or vacate the judgment and remand for trial. Judge Newman stated ICON’s cross-appeal comports with the ruling in Bailey that states a cross-appeal is unnecessary unless it seeks to enlarge or lessen rights under the judgment on appeal. Accordingly, Judge Newman pointed out that a conditional cross-appeal would avoid a trial on remand proceeding on a potentially incorrect claim construction.
A Bankrupt Party Can Be Hauled into Court for Acts of Patent Infringement Committed After the Bankruptcy Discharge
By Karen Laub
The U.S. Court of Appeals for the Federal Circuit reversed the district court’s decision, holding that a bankrupt party is liable for acts of patent infringement that occur after the bankruptcy discharge. Hazelquist v. Guchi Moochie Tackle Co., Case No. 05-1446 (Fed. Cir. Feb. 9, 2006) (Clevenger, J.).
Hazelquist sued Guchi Moochie (a corporation) and Yamaguchi (Guchi Moochie’s sole owner) for patent infringement. After the district court granted Hazelquist’s motion for default against Guchi Moochie, Yamaguchi filed for Chapter 7 bankruptcy, and the patent infringement proceeding was stayed pursuant to 11 U.S.C. § 362. Despite its earlier entry of default, the district court denied a motion for default judgment against Guchi Moochi and noted that although Guchi Moochie had not declared bankruptcy, a judgment against Guchi Moochie would be in substance a judgment against Yamaguchi.
After Yamaguchi obtained a bankruptcy discharge, he continued to sell allegedly infringing products. The district court nevertheless dismissed Hazelquist’s patent claims, stating that under 11 U.S.C. § 524(a) “a debtor’s liabilities in bankruptcy ‘operates … against the commencement or continuation of an action … to collect, recover or offset any such debt as a personal liability of the debtor.’” Hazelquist appealed.
The Federal Circuit reversed and held that while a discharge in bankruptcy releases a debtor from all debts incurred before the date of discharge, it does not release the debtor from any debt incurred, or a cause of action arising, after the date of bankruptcy discharge. Each of Yamaguchi’s infringing activities post-bankruptcy gave rise to a cause of action. Accordingly, the Court concluded that Hazelquist had a cause of action, or multiple causes of action, that arose after the bankruptcy discharge, and Yamaguchi was not immune from suit.
Patents / Prevailing Party Cost Award
Applying First Circuit Law, Federal Circuit Holds Expense of Fancy Graphics and Deposition Extras Not Recoverable Under Rule 54
By Andrew D. Mickelsen
The U.S. Circuit Court of Appeals for the Federal Circuit has clarified the scope of 28 U.S.C. § 1920 concerning costs available to the prevailing party under Federal Rule of Civil Procedure 54(d)(1). Summit Technology, Inc. v. Nidek Co., Case No. 05-1292 (Fed. Cir. Jan. 26, 2006) (Bryson, J.).
After prevailing in a patent infringement suit, Nidek was initially awarded costs in the amount of $257,660.13. Following an appeal by both parties and a subsequent remand by the Federal Circuit, the district court increased the award to $388,230.83. Summit appealed portions of the revised award related to the preparation of trial exhibits, photocopy expenses and deposition transcript expenses.
Nidek submitted costs for the preparation of trial exhibits, which included computer animations, graphics and slides. Applying the law of the regional circuit (here the U.S. Court of Appeals for the First Circuit), the Court rejected Nidek’s contention that these costs are allowable if the exhibits are shown to provide “real assistance to the court.” Instead, the Court held that the First Circuit would define the term “exemplification” as used in § 1920 to mean “an official transcript of a public record, authenticated as a true copy for use as evidence.” This definition, together with the Court’s conclusion that the exhibits in question were essentially explanatory, led the Federal Circuit to hold that the fees for preparation of the trial exhibits were not taxable as costs.
In reviewing the photocopy expenses, the Court looked for proof that “the costs were reasonably necessary to the maintenance of the action.” The Court stopped short of requiring a page-by-page accounting and accepted an accounting method that reduced expenses by 50 percent to account for unnecessary copies. However, the Court either reduced or vacated those portions of the award that relied on different accounting methods and were not supported by reasonable proof that they reflected copies necessary to the litigation.
Under First Circuit law, the Court stated that deposition expenses are taxable to the losing party if the “depositions are either introduced in evidence or used at trial.” However, the Court indicated that certain convenience services, such as expedited transcripts and video services, are not taxable costs.
Patents / Attorney-Client Privilege
District Court Finds Benrishi-Client Privilege Applicable as a Matter of Comity
By Joshua M. Nelson
In a decision highlighting ongoing concerns regarding the state of privilege law in patent prosecution, the U.S. District Court for the Southern District of New York affirmed the decision of a magistrate judge that documents reflecting legal advice provided by Japanese benrishi and requests for such advice were protected by attorney-client privilege. Eisai Ltd. v. Dr. Reddy's Laboratories, Case No. 03-9053 (S.D.N.Y. Dec. 21, 2005) (Lynch, J.).
Japanese benrishi (弁理士) are quasi-legal professionals similar in status to U.S. patent agents, albeit with slightly greater authority: benrishi are permitted to represent clients in certain administrative proceedings and out-of-court negotiations. In the underlying district court patent infringement case, the plaintiffs withheld certain documents reflecting communications with their benrishi, citing the attorney-client privilege. A magistrate judge hearing the motion to compel ruled the privilege applied to documents reflecting legal advice provided by a benrishi as well as to requests for such advice. The district court affirmed and held the application of privilege was required as a matter of comity with Japanese law.
The court reasoned that where a communication with a foreign patent agent involves a foreign patent application, the law of that foreign country should be considered to determine whether a privilege comparable to the U.S. attorney-client privilege is provided. The parties did not dispute that Japanese law extends an absolute privilege to documents created by benrishi and provides that a benrishi may refuse to testify to confidential matters learned in the course of his or her professional duties. The defendants argued the benrishi-client privilege afforded by Japanese law was not truly comparable with the U.S. attorney-client privilege, which does not cover communications containing only technical details and, in some jurisdictions, does not even cover U.S. patent agents. The court rejected these arguments as “red herrings,” holding that total congruence between the Japanese law of privilege and that of the U.S. was not required (noting that such congruence does not exist even among the various states and federal circuits).
Rather, the court held the proper analysis was whether Japanese law would provide a privilege “comparable” to the attorney-client privilege in the United States. The court was notably vague in defining by what metric this comparability was to be determined, indicating in a footnote that benrishi-client communications were comparable “in a general sense,” and the comparability requirement might enjoy more application where a foreign law extended a privilege to communications that “bore no resemblance to the sorts of communication” protected by Anglo-American privileges.
Practice Note
Although client communications with Japanese benrishi enjoy a privilege broader in scope than that enjoyed by similar communications to a U.S. patent attorney or patent agent, the footnote mentioned above (in the Eisai decision) illustrates the state of affairs of privilege law as applied to patent prosecution in the United States. The Federal Circuit’s decision in In re Spalding Sports Worldwide partially cleared the mine field of contradictory privilege tests for U.S. patent prosecutor communications, rejecting the “mere conduit” theory and extending privilege to invention disclosure documents submitted to an attorney for the purposes of securing legal opinion, services or assistance. Unfortunately, Spalding left unresolved the division of authority regarding evidentiary privilege as applicable to patent agents or to patent attorneys when the communications in question disclose solely technical details. Until these issues are settled in the Federal Circuit, we are likely to see many more cases like Eisai in which the district courts continue to apply a patchwork of privilege laws that are not easily reconciled.
To maximize the likelihood that a communication between an inventor and a U.S. patent agent or attorney will be accorded privilege status, clients and practitioners should be advised to include a statement that their communications are for the purpose of securing legal opinions, services or assistance.
Patents / Practitioner Registration
USPTO Limited Recognition Regulation for Aliens Upheld
By Cameron K. Weiffenbach
The U.S. Court of Appeals for the Federal Circuit held that the U.S. Patent and Trademark Office (USPTO) decision granting only limited recognition to Lacavera, a non-immigrant alien, was not arbitrary and capricious. Lacavera v. Dudas, Case No. 05-1204 (Fed. Cir. Feb. 6, 2006) (Mayer, J.).
Lacavera is a Canadian citizen who held an H-1B visa, which restricted her employment in the United States. Her visa listed her employment activity as preparing and prosecuting patent applications for Google. In 2002, Lacavera passed the USPTO registration examination and was granted limited recognition by the USPTO pursuant to regulation 37 C.F.R. § 10.9 [now 37 C.F.R. 11.9(b)]. Lacavera challenged the USPTO decision asserting she should receive the same full recognition as U.S. practitioners.
The Federal Circuit held the USPTO decision granting limited recognition was a reasonable interpretation of the regulation. Lacavera’s visa restrictions on employment were inconsistent with full recognition since she could not prepare and prosecute patent applications for any entity other than Google without prior approval by U.S. immigration authorities. The regulation did not exceed the statutory authority proscribed in 35 U.S.C. § 2(b)(2)(D) because the statute gave broad authority for the USPTO to determine if applicants for registration possessed the “necessary qualifications” to render “valuable service” to patent applicants. According to the Court, the USPTO’s interpretation of this statute through the regulation was reasonable. Lacavera asserted the USPTO decision denied her due process, but the Court found she had offered “no evidence that she was treated unequally as compared to other aliens with visa restrictions.”
Practice Note
A Canadian patent agent who is a Canadian citizen, registered with the Canadian Patent Office (CPO) and employed in Canada can become registered as a U.S. patent agent and practice directly before the USPTO. Agents must merely apply to the USPTO and show that they possesses good moral character and repute. As opposed to the requirement for U.S. citizens, the Canadian practitioner is not required to take and pass the U.S. registration examination. On the other hand, a U.S. citizen who is registered to practice before the USPTO can be recognized by the CPO by merely signing up, but the U.S. practitioner cannot practice directly before the CPO. The U.S. practitioner must go through a registered Canadian patent agent to practice before the CPO.
However, if a Canadian practitioner registered before the USPTO enters the United States through a visa for gainful employment, the Canadian practitioner is no longer considered USPTO registered. He or she is then required, just as any other non-immigrant alien who enters the United States on a restricted visa, to make application for registration and take and pass the USPTO registration examination.
Maytag Misses the Mark in Trademark Suit Against Smaller Senior User
By Natalie A. Ward
The U.S. Court of Appeals for the First Circuit affirmed Maytag’s liability for infringing Attrezzi LLC plaintiff’s kitchenware ATTREZZI mark by its use of the mark “Jenn Air Attrezzi” for a line small kitchen appliances. Attrezzi, LLC, v. Maytag Corp., Case Nos. 05-2098, -2181 (1st Cir. Jan. 27, 2006) (Boudin, C.J.).
In June 2002 Jennifer Slade launched Attrezzi LLC, which included a Portsmouth, New Hampshire retail store specializing in fine kitchen products and services and an internet-based mail-order business. In November 2003 Slade obtained a New Hampshire trademark registration for Attrezzi, which is an Italian word for “tools.”
In March 2003 Maytag, a famous appliance manufacturer, filed an intent-to-use trademark application for the ATTREZZI mark with the U.S. Patent and Trademark Office (USPTO) for small electric kitchen appliances. Although Maytag discovered Attrezzi LLC’s senior use of the ATTREZZI mark, which its in-house counsel initially warned might be “a problem,” Maytag began to promote its new appliances as the “Jenn-Air Attrezzi” line in April 2003.
Following the USPTO’s approval and public notice of Maytag’s application, Attrezzi LLC notified Maytag of its objection, filed a use-based service mark application with the USPTO for its use of ATTREZZI, opposed Maytag’s application before the USPTO, and finally filed suit in the U.S. District Court for the District of New Hampshire in October 2003. The suit charged Maytag with unfair competition under the Lanham Act and under New Hampshire’s trademark infringement, unfair competition and trademark dilution statutes.
A jury found that Maytag had willfully infringed Attrezzi LLC’s mark through its “deliberate indifference,” causing damages of $5,400, a figure derived from the cost of Attrezzi LLC’s USPTO opposition against Maytag’s application. Following post-trial proceedings, the district court granted a permanent injunction against Maytag’s use of the ATTREZZI mark subject to a twelve-month stay for Maytag to sell off the respective stock, double damages totaling $10,800 and attorneys’ fees. Maytag appealed the judgment to the First Circuit, and Attrezzi cross-appealed the twelve-month sell-off period as well as the omission of attorney travel and computer research costs from its cost-and-fees award.
The First Circuit first noted that in the absence of claims for lost profits or damage to goodwill, a jury trial at the district court level was apposite because the plaintiff simply sought to recover the costs of its USPTO trademark opposition, which was not an unreasonable pursuit. Although the court noted the case at bar was "not a clear cut case as to confusion,” the Court upheld the jury finding of the likelihood of reverse confusion because Maytag‘s use of “Jenn-Air Attrezzi” could saturate the market, thereby potentially overwhelming the plaintiff and eroding the value of its trademark, corporate identity, and control of its good will and reputation. Most significantly, the court rejected Maytag’s argument that the Lanham Act’s limitation of attorneys’ fees to exceptional cases and discretionary enhanced damages pre-empted New Hampshire’s liberal, plaintiff-friendly statute that awarded attorneys’ fees to plaintiffs as a matter of course and enhanced damages automatically for willful or knowing violations. The court reasoned the Lanham Act “primarily provides a federal forum for what is in substance a traditional common law claim” and does not generally preclude state unfair competition statutes, including those which may substantively favor plaintiffs.
In response to Attrezzi LLC’s cross appeal, the court found the district court appropriately exercised its discretion to allow Maytag twelve months to sell off infringing “Jenn-Air Attrezzi” merchandise, especially when such additional competitive use of the mark would not appreciably increase the damage or risk of harm. The court redirected Attrezzi LLC’s claim concerning the omission of attorney travel and research costs to the district court for consideration under New Hampshire law.
Practice Note
It is important, especially for outside counsel, to carefully evaluate the potential threat posed by senior users and other infringement complaints. Failure to carefully investigate in either scenario may cause the client to suffer from unnecessary business and legal costs.
Civil Procedure / Personal Jurisdiction
Ninth Circuit Holds Yahoo! Can Invoke Jurisdiction over French Defendants Based on “Effects Test”
By Minn Chung
In a recent en banc opinion, the U.S. Court of Appeals for the Ninth Circuit upheld the district court’s exercise of personal jurisdiction over two French organizations on the basis of their attempt to enforce a French court’s order directed to a California-based operator of an internet website. Yahoo! Inc. v. La Ligue Contre le Racisme et l’Antisemitisme, Case No. 01-17424 (9th Cir. Jan. 12, 2006) (en banc) (Fletcher, J.).
This is the most recent in a series of cases to address the complex issues of cross-border conflict of laws and jurisdiction brought about by the global reach of the internet. In April 2000, French organizations La Ligue Contre le Racisme et l’Antisemitisme (LICRA) and L’Union des Etudiants Juifs de France (UEJF) filed suit against Yahoo! in the French court (the Tribunal de Grande Instance de Paris). These organizations claimed the sale of Nazi-related goods through Yahoo!'s auction site—accessible in France—violated French law. The French court agreed and issued an order directing Yahoo! to block French users from accessing its website. Since Yahoo!’s web servers are located in California, the blocking measures would have to be implemented in California. In response, Yahoo! filed a complaint in the U.S. District Court for the Northern District of California seeking a declaratory judgment that the French court's orders were not recognizable or enforceable in the United States. The French defendants moved to dismiss on the basis that the district court lacked personal jurisdiction over them.
The district court held the exercise of personal jurisdiction over LICRA and UEJF was proper under the “effects test” of Calder v. Jones. The court found the French organizations’ attempts to modify the operation of Yahoo!’s California-based web servers were “(1) intentional actions (2) expressly aimed at the forum state (3) causing harm, the brunt of which is suffered—and which the defendant knows is likely to be suffered—in the forum state.” The district court also found the dispute was ripe, abstention was unnecessary and the French orders were not enforceable in the United States because such enforcement would violate the First Amendment. LICRA and UEJF appealed only the personal jurisdiction, ripeness and abstention holdings.
A three-judge panel of the Ninth Circuit reversed in a split decision. The majority held that personal jurisdiction was improper because the “effects test” required the defendants’ actions to be wrongful conduct, and LICRA’s and UEJF’s litigation efforts against Yahoo! did not qualify.
A majority of the en banc court of the Ninth Circuit would have upheld jurisdiction on the grounds that Calder does not require that jurisdictionally relevant effects are caused by wrongful acts. Nevertheless, the case was dismissed on the votes of three judges in the majority who found the suit was unripe (combined with three dissenting judges who would dismiss the suit for lack of personal jurisdiction).
