Trial Court Claim Interpretation Given No Deference On Appeal

March 2, 2014 | Intellectual Property News
In a recent decision, the Federal Circuit Court of Appeals reconfirmed that decisions of a trial court interpreting the meaning of terms used in patent claims are not given deference on appeal. Instead, the court of appeals reviews patent claim interpretations de novo, and need not give the trial court decisions any weight. In Markman v. Westview Instruments, Inc., 517 U.S. 370 (1976), the Supreme Court held that patent claim instruction must be performed as a matter of law by judges, not as a matter of fact by juries. Since that time, trial courts have commonly conducted separate claim construction procedures to interpret any disputed terms used in patent claims in order to instruct the jury as to such meanings rather than allowing the juries to interpret the language themselves. This process has created distinct roles in which judges interpret patents while juries decide whether patents have been infringed. Because the matter of patent interpretation has been deemed a question of law, rather than fact, there is no discretion, no weighing of facts, and no reason for a trial court judge to have a better vantage point than an appellate court judge. As a result, the Federal Circuit Court of Appeals has consistently held that it must review trial court decisions that interpret patent claims as a matter of law, without giving the trial court judge any deference. In LIghting Ballast Control LLC v. Philips Electronics North America Corp., Lighting Ballast argued that the court of appeals should afford some deference to the district court’s interpretations. In particular, it argued that interpretation of documents such as patents is fundamentally factual in nature, and that merely stating that the issue is “an issue of law” does not alter the reality that there are factual aspects in every exercise of claim construction. After all, claim construction is frequently performed by evaluating expert testimony and a variety of documentary forms of evidence, and this analysis shares much in common with evaluating questions of fact. Even if it is property characterized as a question of law, there are sound reasons to give deference to the trial court. Numerous amici submitted briefs taking sides that either aligned with Lighting Ballast, argued that appeals should continue to be a matter of de novo review, or urged a hybrid approach in which underlying factual issues would be given deference but ultimate conclusions would be treated as a question of law. In a divided opinion, the majority primarily expressed a concern for stare decisis, pointing out that in the fifteen years since its holding in Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448 (Fed. Cir. 1998) (en banc), the review of claim construction on a de novo basis has created a significant body of precedent. As far as the majority could discern, there was no argument of public policy, no changed circumstance, and no problem in the ability to apply the current approach. In addition, there was no showing that the Cybor approach was inconsistent with any law or precedent, or that affording greater deference would produce any greater public or private benefit. Without any grave necessity or special justification, the majority of the en banc court could not justify departing from the current approach. A key argument in favor of greater deference to the trial court is that deference would create greater certainty and thereby also reduce the likelihood of an appeal in the first place. The majority argued that this proposition is unsupported, and that the available data seems to indicate that the percentage of cases that are appealed has been declining. Regardless of whether the standard of review affects the number of cases that are appealed, the lack of deference does make it more likely that an appellant can gain a reversal of the claim construction ruling.

Court of Appeals to Address Standard of Review for Claim Interpretation

March 18, 2013 | Intellectual Property News
For nearly twenty years, the federal courts have addressed the interpretation of the claims in a patent as a question of law, rather than a question of fact. This standard has meant that the court of appeals owed no deference to the findings of the trial courts on matters of claim interpretation, and the lack of deference is widely believed to contribute to an inordinately high reversal rate on appeal. Now the Federal Circuit has decided to take a closer look at whether it should give deference to the lower court rulings. In Lightning Ballast v. Philips Electronics, the Federal Circuit has asked the parties to submit briefing specifically directed to the question of whether the court should abandon the prior practice of affording no deference to claim construction rulings. It further invites input regarding the particular aspects, if any, of a lower court ruling that should be given deference. The court has also decided to consider the matter en banc, rather than in a panel. Additional briefing from nonparties are likely to be submitted, and the court expressly invited an amicus brief from the USPTO.

Court of Appeals Urges Professionalism in Persuasion

January 25, 2013 | Intellectual Property News
In a recent decision, the Federal Circuit Court of Appeals criticized the parties involved for the use of excessive hyperbole in their written submissions to the court, urging instead that counsel should offer a straightforward recital of the facts without the use of such shrill language. Clients sometimes believe that their attorneys should be “aggressive” to win, but this recent decision proves yet again that sound legal skills coupled with professional behavior trumps aggressive tactics and harsh language every time. The particular case is Nissim Corp. v. Clearplay, which in itself is a fairly routine patent infringement case related to the use of an invention that can skip over or filter out unwanted content when playing DVD movies. In the course of addressing an appeal involving questions of infringement, the court addressed the behavior of the litigants and the role it played in the case, stating: “The excessive hyperbole in the briefs makes them difficult to take seriously and unpleasant to read, and strips both parties of their credibility. Nissim characterizes ClearPlay’s arguments as ‘moan[ing],’ ‘excuse[s],’ and ‘absurd’; it describes one of ClearPlay’s communications with the special master as ‘bias-inducing screed.’ ClearPlay’s briefs are no better; disparaging Nissim’s suit as ‘unnecessarily time-consuming and expensive,’ ‘ill-conceived,’ ‘wast[ing] the time and resources of ClearPlay and the [c]ourt,’ and a ‘massive waste of judicial time and resources,’ and referring to Nissim’s arguments as ‘inexplicable,’ ‘strange,’ and ‘baffling.’ The record reveals the parties’ behavior in the district court proceedings to be even worse. The parties would be well-advised to take the advice of Justice Scalia and Bryan Garner: ‘Cultivate a tone of civility, showing that you are not blinded by passion. . . . A straightforward recital of the facts will arouse whatever animosity the appellate court is capable of entertaining, without detracting from the appearance of calm and equanimity that you want to project.’ Antonin Scalia & Bryan A. Garner, Making Your Case: The Art of Persuading Judges 34-35 (2008). The parties’ poor judgment extends beyond their choice of words. For example, Nissim stated that ‘the district court stuck Nissim with ClearPlay’s trivial gesture’ and that the court’s decision ‘mock[ed] justice.’ These statements were at best unprofessional. See ABA Model Rules of Professional Conduct Rules 3.5, 8.4(d). ClearPlay’s statements throughout its brief that Nissim had requested only prospective relief were obvious misrepresentations that cannot easily be explained away as mistakes. See id. Rule 3.3(a).” There is surely room for attorneys to convey a sense of importance when advancing their clients’ positions, but the art of persuasion stops short of hyperbole and belittling the opposing party. In this insightful decision, judges make it quite clear that such aggressive tactics are not only unprofessional, but ineffective and counterproductive as well.

Federal Circuit Invalidates Soverain eCommerce Patents

January 24, 2013 | Intellectual Property News
In a decision this week, the Federal Circuit Court of Appeals invalidated a group of patents held by Soverain Software LLC and asserted against many companies for practicing electronic commerce, including use of a shopping cart model for sales transactions. Soverain Software sued many online retailers for infringement of several patents that include claims for use of an online shopping cart sales system and related electronic commerce methods. Most of the defendants settled the litigation by purchasing a license under the patents, but Newegg declined and elected to defend itself in court instead. A key part of Newegg’s defense was that the patents were invalid in view of earlier electronic buying systems such as the CompuServe Mall. At trial, the district court decided that Newegg had not presented enough evidence to show that the patents were invalid. In fact, the district court concluded that Newegg’s case was so lacking that it did not allow the jury to even consider the question. On appeal, the Federal Circuit disagreed. After a thorough review of the evidence, the Court of Appeals ruled that the Soverain patents were invalid because they were obvious in view of the prior art, including the CompuServe Mall references. In most cases, when a court of appeals reverses a district court decision it will remand the case to the trial court to reconsider the matter in view of the errors found on appeal. In this case, however, the court noted that because the district court ruled on obviousness as a question of law, the court of appeals could also reach its own ruling as a matter of law, without remanding it to the district court for further review. The decision is available at Soverain

Court of Appeals Upholds Amendment to False Marking Statute

January 9, 2013 | Intellectual Property News
In the America Invents Act, Congress amended the false marking statute to remove the “qui tam” provision allowing any member of the public to file a complaint based on false patent marking. In a recent ruling, the court of appeals held that the amendment was constitutional. The false marking statue generally provides that products bearing patent numbers must do so properly. If a person marks a product with an erroneous patent number with an intent to deceive the public through the incorrect marking, that person (or company) can be liable for damages. An unusual aspect of the statute is that it includes a “qui tam” provision allowing members of the public at large to file such lawsuits, even if they have no connection with the product and suffered no injury. For decades this provision was seldom used because the remedy was understood to be trivial. But after a key court decision allowing for the possibility of large monetary awards to plaintiffs filing such cases, a cottage industry was born. Almost overnight, hundreds of cases were filed by plaintiffs asserting false marking and hoping to recover large damages as a result. In the America Invents Act, Congress amended the false marking statute to require a plaintiff to show a competitive injury in order to recover damages. This amendment would allow a competitor in the same industry to file a false marking lawsuit, but makes it virtually impossible for a random individual to file such a lawsuit, as had been the case previously. In addition, the amendment to the law was written to affect current lawsuits, already filed. As a result, many cases were immediately and summarily dismissed. Some of those plaintiffs challenged the new law as being unconstitutional by violating due process or amounting to a taking without compensation. In Brooks v. Dunlop Mfg., Inc., the Federal Circuit Court of Appeals held that the statute was proper, and was not unconstitutional even though it had retroactive effect.

Court Clarifies Liability for Induced Infringement

September 11, 2012 | Intellectual Property News
The Court of Appeals for the Federal Circuit recently addressed whether a party may be liable for patent infringement when two different parties combine to perform the acts necessary for patent infringement, but where neither party separately performs all of the steps required to infringe a patent. As the Court explained, the problem of divided infringement most commonly occurs with respect to method patents in which the claims of the patents require the performance of several distinct steps in order to infringe. In such cases, parties may arrange their activities such that each of them performs one or more of the patented steps, but neither of them individually performs all of the required steps. The court had previously interpreted the patent statute to mean that unless an accused infringer either performs all of the steps by itself, or directs or controls the actions of the parties performing the steps, there would be no infringement even if all of the requirements of the patent had been met. In reaching this decision, the Court evaluated two different patents in two different lawsuits that were consolidated for appeal. In one case the patent related to a method for delivery of web content over the internet; in the other case it related to a method of electronic communications between healthcare providers and their patients. In both instances, the patent owner alleged that the defendants may not have performed all the steps of the patent, but induced others to perform steps such that the combination resulted in infringement. According to the patent statutes, one who actively induces infringement of a patent is liable as an infringer. In general, “active inducement” would include actions to advise, encourage, or cause others to engage in the infringing conduct. Importantly, the law requires proof that the accused inducer acted with knowledge that the induced acts constitute patent infringement. This is a key difference between induced infringement and direct infringement in that one may directly infringe a patent even without prior knowledge of the patent. This knowledge and intent requirement means that one should not be liable for inducing infringement merely by performing a step in a patent that is combined with steps performed by others to unwittingly infringe a patent. Prior to this decision, induced infringement required proof of an underlying direct infringement, which had to be committed by a single entity. As such, one could only be liable for inducing infringement by urging or advising another party to commit the act of infringement, and further where that other party performed all of the acts necessary to constitute infringement. This previous understanding of the law was sufficiently resolved that the Court was closely divided in making its ruling, with six judges voting with the majority and five judges dissenting. The Court specifically limited its decision to the question of induced infringement, rather than the question of direct infringement, although the distinction may ultimately make no difference. The ultimate ruling of the Court is that all of the steps of a patent must be performed to find induced infringement, but that it is not necessary to prove that all of the steps were committed by a single entity.  Consequently, a party is liable for induced infringement if it is proven that it knew about the patent and induced another to perform at least a part of the requirements of the patent, so long as all of the patented steps are performed by some combination of the parties together. Read the full decision, Akamai Tech. v. Limelight Networks, at Opinion

Court Approves e-book Antitrust Settlement

September 7, 2012 | Intellectual Property News
The Southern District of New York has approved a settlement among electronic book publishers and distributors to resolve an antitrust dispute that may result in lower e-book prices. The Justice Department filed the case earlier this year, complaining that several book publishers had colluded with Apple to inflate the price of electronic books. Before the introduction of the Apple iPad, Amazon typically priced its electronic books at $9.99 each. The Justice Department alleged that publishers approached Apple and Amazon in an effort to find a way to raise prices, ultimately reaching deals with Apple calling for “agency pricing” in which the publishing agencies, rather than Apple, set the retail pricing. Amazon later allowed publishers to set pricing as well, resulting in prices that were generally $2 or $3 higher than the prior $9.99 prices. In the settlement, the accused book publishers must allow e-book sellers such as Amazon and others to set their own prices and may not enter into contracts restricting retailers from setting prices on their own. For the next five years, the publishers may not enter into contracts that prevent publishers from selling to retailers who sell at lower prices. The agreement is expected to result in more competition and lower prices for e-books. As an aside, and a bit of levity in the proceedings, licensing attorney Bob Kohn filed an amicus brief in the form of a comic strip after being told that his amicus brief must be limited to five pages.  Read the full brief at the link here. Comic Brief

Federal Circuit Rules Settlement Agreements Not Privileged

June 1, 2012 | Intellectual Property News
In many cases, litigation plaintiffs seek to enter into settlements with other parties, often assuming that those agreements can be maintained in confidence and not disclosed to subsequent defendants during the course of a litigation. The Federal Circuit has recently held that this is not the case. In an appeal involving MSTG, Inc. in a case against AT&T, MSTG had sued a group of defendants. MSTG settled with all of them other than AT&T, and during the lawsuit AT&T asked for copies of the settlement agreements. In part, AT&T took the position that the agreements and underlying negotiations could establish that they are relevant to the amount of a “reasonable royalty” that might be applied as a measure of damages in the ongoing dispute between AT&T and MSTG. When MSTG refused to produce those agreements and communications, AT&T asked the court to order MSTG to produce them, and the court granted that order. MSTG appealed to the Federal Circuit, seeking an order of mandamus directing that the settlement documents need not be produced to AT&T. The Federal Circuit first considered whether there should be a “settlement negotiation privilege,” which would be a new privilege not previously recognized other than in the Sixth Circuit. Second, it considered whether it would be sufficient to produce only the settlement agreements themselves, without the underlying communications leading to the final agreements. Ultimately, the court concluded that there is no settlement privilege, and that both the agreements and the related negotiation documents are discoverable.

BLG Prevails in Trade Dress and Patent Dispute

July 23, 2010 | Intellectual Property News
BLG, now Lowe Graham Jones, achieved a victory on summary judgment for its client Star Asia USA in a lawsuit filed by Great Neck Saw Manufacturers. In the lawsuit, Great Neck asserted that Star Asia’s folding utility knives sold under the Titan trademark infringed trade dress and patent rights held by Great Neck, in accordance with folding knives sold by Great Neck under the Sheffield, Craftsman, and Husky brands. The lawsuit was complicated at least in part because Great Neck asserted so many claims against Star Asia. First, Great Neck alleged that Star Asia infringed a utility patent for a folding utility knife that uses a replaceable razor blade. The court agreed with Star Asia that the accused knives were made differently, without infringing the patent. Second, Great Neck claimed that the Star Asia knife infringed seven different Great Neck design patents. Star Asia was able to establish that there were numerous design attributes in the accused knife that differed from each of the asserted patents, making infringement impossible for Great Neck to prove at trial. Following the recent Supreme Court decision in Egyptian Goddess, the court held that the ordinary purchaser of the knives, giving the degree of attention such a purchaser usually gives, and recognizing the context of the prior art, would not be deceived into thinking that the Star Asia knives are the same as the designs of the Great Neck design patents. Finally, Great Neck alleged that the Star Asia knife infringed its trade dress. The court agreed with Star Asia that the design of the knife was functional, not aesthetic, and therefore not entitled to trade dress protection at all. Having dismissed all of Great Neck’s claims, the court dismissed the action in favor of Star Asia.

BLG prevails in Eighth Circuit appeal; contract ruled to require arbitration of patent claims

August 27, 2009 | Intellectual Property News
BLG attorneys achieved an order requiring a plaintiff in a patent infringement action to assert its claims in arbitration against BLG client Costco. In this action, filed in federal court in St. Louis, the plaintiff asserted claims for design patent infringement and trade dress infringement. We argued that because the plaintiff was a former vendor and had signed a vendor agreement requiring arbitration of all disputes, this particular dispute related to the sale of an item previously purchased from the vendor was one that must be resolved in arbitration. Though the district court disagreed, the Eighth Circuit Court of Appeals reversed that decision and ordered arbitration. In an unusual twist, the district court initially sent the appeal to the Federal Circuit rather than the Eighth Circuit, even though the notice of appeal specified the Eighth Circuit. That mishap resulted in an evaluation by both Circuits regarding which was the proper forum to resolve arbitration issues relating to patent infringement causes of action. Currently, there is a split of authority regarding whether the Federal Circuit or the Regional Circuits have jurisdiction in such cases. The Federal Circuit ultimately decided that it lacked authority to decide the question in the first place because the notice of appeal directed the matter to the Eighth Circuit, which therefore had jurisdiction to address the issue in the first instance. The Eighth Circuit concluded that it had jurisdiction over appeals related to orders compelling arbitration, even in patent cases.