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

AIA Provisions Effective September 16, 2012

September 6, 2012 | Intellectual Property News
Certain aspects of the America Invents Act are effective beginning September 16, 2012. The key provisions include: Best Mode. The failure to disclose the best mode will no longer be a basis, in patent validity or infringement proceedings, on which any claim of a patent may be canceled or held invalid or otherwise unenforceable. Technically, however, the best mode still must be disclosed in the application. Derivation Proceedings. In a derivation proceeding an applicant for patent files a petition stating with particularity the basis for finding that an inventor named in an earlier application derived the claimed invention from the petitioner. The petition must be filed within 1 year of the date of the first publication of a claim to an invention that is the same or substantially the same as the earlier application’s claim to the invention. Inter Partes Reexamination. This process is no longer available after September 16, 2012. Inter Partes Review. A party may seek an Inter Partes Review of a patent within 9 months of issuance (or reissuance), or by the date of termination of a post grant review. The “inter partes” nature of the process means that the requester and the patent owner both participate in the process, and both can submit arguments related to patent validity. The review is limited to questions of novelty and obviousness, and carries a hefty fee of $27,200 in order to challenge up to 20 claims. The request must demonstrate a reasonable likelihood that the claims are invalid. During the proceedings, the parties may submit evidence and engage in limited discovery. Post Grant Review. A post grant review is a request that the patent office reconsider the validity of the patent; unlike the inter partes review, the requesting party does not participate after making the request. This request must be made within 9 months after the patent grant (or reissue), and can be based on grounds of novelty, obviousness, written description, enablement, and indefiniteness. As with all of the new review processes, it is expensive: $35,800 to review up to 20 claims. Prioritized Examination. A patent applicant can request expedited review of the application in which the Patent Office seeks to complete the process within one year. This request currently costs $4,800 for a large entity, and is limited to 10,000 such requests at the USPTO per year. Inventor’s Declaration. The declaration is still required, but is trimmed down. Under the new rule, the inventor is no longer required to (i) state that he/she is the first inventor of the claimed invention; (ii) state that the application filing is made without deceptive intent; or (iii) provide his/her country of citizenship. In addition, the declaration can be filed much later (up to a point just prior to a notice of allowance, though late charges still apply), and the declaration language can be contained in the assignment. Business Method Patent Challenge. For a limited time through September 16, 2020, business method patents may be challenged in a special form of review that will be substantially the same as the post grant review process but which allows the submission of a wider array of evidence. Preissuance Submissions. Anyone may submit prior art of interest to the patent office that may affect the patentability of an application, so long as it is submitted by the required deadlines, which generally extend until six months after publication, the issuance of a notice of allowance, or an office action rejecting the claims. Supplemental Examination. A patent owner may request supplemental examination to reconsider or correct aspects of the patent. The scope is much the same as a post grant review, and a key difference is that this is requested by the patent owner rather than a third party.  The patent office will consider up to 12 items of information, which are not limited to patents and printed publications. The filing fee is again quite large:  $21,260 for a large entity, though $16,120 of that is refundable if a substantial new question of patentability is found not to exist.

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.

Federal Circuit to Reconsider Internet Process Patents

May 25, 2012 | Intellectual Property News
On May 21, 2012, the Supreme Court ordered the Federal Circuit to reconsider a decision related to a method for allowing Internet users to view copyrighted material for free in exchange for watching advertisements. At stake is whether a process of this sort can be patented at all, even if it is new and not obvious in view of the prior art. The invention was approved by the USPTO, resulting in US patent 7,346,545 owned by Ultramercial. In general, the claims of the patent relate to a method in which a user accesses a website and requests to see certain content, but is only allowed to view the content for free after agreeing to view a sponsored message. There are certain additional technicalities related to tracking the activities in a log and offering items for payment. Ultimately the issue seems to be whether these additional technicalities are important enough to result in a specific application of the general principle, or are so superficial that the patent encompasses the entirety of the general principle. After the validity of the patent was challenged, the Federal Circuit Court of Appeals believed the invention was patent-eligible because the claims were drawn to specific applications of business principles, using computer hardware tp do it. If they had been drawn to more abstract principles then the court perhaps would have invalidated the patent. But the Supreme Court has recently been scrutinizing patents with claims that are arguably drawn to abstract principles and laws of nature. Generalized notions such as “buy low, sell high” or “watch for free if you will watch an advertisement” are too abstract to be patented; it is only when they are applied to a more specific environment, with particularized implementation details, that the Supreme Court considers them to be patentable. The Supreme Court had recently reached that conclusion in Mayo v. Prometheus, a case involving a patent characterized as administering a drug in an amount high enough to be effective but low enough to avoid side effects. That general notion was also considered to be a law of nature, without sufficient additional details accompanying the principle within the patent to be able to characterize the patent as a specific application rather than an effort to monopolize the law of nature. In view of the Mayo decision, the Federal Circuit has been tasked with revisiting the patentability of the Internet patent in WildTangent v. Ultramercial. Considering the treatment in Mayo, the message to the Federal Circuit may be to perform an exacting and skeptical review of Internet patents that seek broad applications of generalized principles.

America Invents Act Signed by Obama

September 16, 2011 | Intellectual Property News
The key features of the Leahy-Smith America Invents Act (H.R. 1249) are summarized below. Note that the law is very detailed and technical, with a variety of exceptions and specific dates of implementation. The application of the following rules to any particular situation may vary. Likewise, the bill is unusually lengthy and therefore the summary below hits only the high points. In many cases the new provisions below do not take effect until a year after the law is signed. First to File. After decades of debate, the law finally changes the U.S. patent priority system from one based on “first to invent” to one based on “first to file.” Prior to the new law, if two applicants sought patents for the same invention the patent would be awarded to the inventor who could prove to be the first to have invented it. Under the new law, the patent is awarded to the inventor who files the application first, regardless of whether another person invented it earlier. This change brings with it a modification in the way prior art is applied. Currently an inventor is allowed to “swear behind” certain prior art by establishing a date of invention earlier than the date of the prior art reference. Under the new version of the law, all publications and events occurring before the filing date is prior art. The sole exception is for the inventor’s own disclosures (or those derived from the inventor) that occurred less than one year from the filing date. This provision applies to applications filed eighteen months after enactment of the law. Defense based on prior commercial use. Under prior law, it was a defense to a business method patent to assert prior use of the patented method. The new law extends this defense to all patents, such that proof that a patented method was in use before the filing date of the patent application will constitute a defense to a charge of infringement. This provision applies to any patent issued on or after the date of enactment of the law. Reexamination. The law retains inter partes and ex parte reexamination procedures while adding mechanisms for preissuance submissions by third parties. Fees. The USPTO is given authority to adjust its fees, and the result is that fees will go up. One fee increase takes effect quickly: within ten days of passage, the law imposes a 15 percent surcharge on most patent application fees. This rule takes effect within ten days of enactment. Marking. Patent marking may be made “virtually” by providing a citation to a website on which patent information can be found. False marking litigation should substantially end as it is limited to complaints by those who can demonstrate a competitive injury as a result of the violation. No longer will lawyers be able to file a random lawsuit complaining about errors and other minor marking problems. This provision is effective upon enactment. Advice of counsel. The failure of an infringer to obtain advice of counsel may not be used to prove that an accused infringer willfully infringed a patent. This applies in all lawsuits filed on or after the date of enactment. Multiple defendant litigation. Plaintiffs will not be allowed to file a lawsuit against multiple unrelated defendants claiming patent infringement. Multiple defendants will only be allowed in a single lawsuit if they acted together to commit a common act of infringement. Inventor declarations. New provisions make it easier for a company to file an application on its own behalf and to proceed with an application when the individual inventor is uncooperative or cannot be reached to sign the declaration. Read the full text of the law here: http://www.govtrack.us/congress/billtext.xpd?bill=h112-1249

Senate passes patent reform bill

March 8, 2011 | Intellectual Property News
The Senate has passed a patent reform bill that would incorporate several significant changes including a first-to-file system, enlarged post-grant patent review procedures, and many others. Although the bill still faces challenges before being enacted into law, the Senate’s approval in a vote of 95 in favor and 5 opposed suggests a strong likelihood that much of this bill will ultimately be enacted. Among the more significant features are: First to file. The bill would end the long history in the United States of granting patents to the first to invent, rather than the first to file a patent application. Most other countries around the world follow a system in which patents are awarded to the first inventor to file a patent application even if another patent applicant could prove to have conceived it first. Grace period. Current law also allows inventors a one-year grace period between the time of any public disclosures of the invention and the date of the patent application. Under this grace period, public disclosures by anyone—whether by the inventor or any third party—do not work against the inventor as long as the inventor conceived of the invention before the public disclosures and the patent application is filed within a year of the disclosures. The patent reform bill would modify this grace period such that the inventor’s own disclosures do not bar patentability, but the application would not get the benefit of a grace period with respect to third party disclosures. False marking. The bill seeks to reduce the flood of false marking litigation by eliminating a provision allowing any member of the public to file such a lawsuit. Instead, only those who can prove to have suffered a competitive injury could assert a false marking claim. Willful infringement. Recent Federal Circuit Court of Appeals decisions have held that an infringer is liable for enhanced damages and attorneys’ fees if it was aware of the patent and was objectively reckless in proceeding with the infringing activity. The bill essentially codifies this prior law, adding that it must be shown by clear and convincing evidence and that close cases should be resolved against a finding of willfulness. Post grant review. The bill includes new provisions for “post-grant review” of patents, allowing the public additional mechanisms to challenge the propriety of the granting of a patent.

Supreme Court to Review Induced Infringement

November 2, 2010 | Intellectual Property News
After many years of confusion, the Supreme Court has agreed to review a lawsuit addressing the standard of intent required for inducement of infringement. This pivotal case may resolve once and for all whether a party must intend to infringe a patent in order to be liable, or whether it is sufficient to be aware of the possibility of infringement by third parties. Under Section 271 of the patent statutes, one who “actively induces” infringement by others is liable for infringement. Most commonly, this statute is asserted when a patent requires a product to be used in a particular way. In that situation, the manufacturer may not be liable for direct infringement because the manufacturer does not use the product at all. If the packaging describes a particular way of using the product, or perhaps if there is really only one principal way of using it, then the manufacturer or seller may be liable for inducing infringement once the customers buy the product and use it as directed. According to court decisions to date, the party accused of inducing infringement must either have knowledge of the patent or the specific intent to induce infringement. These are certainly two very different standards. If knowledge of the patent is sufficient then the seller may be liable for infringement even if there is no actual knowledge that anyone actually used the product in an infringing manner, and perhaps without the intent that any buyers would actually use the product in an infringing way. Under the second standard, by contrast, the seller would escape liability even if it knew about the patent as long as it did not specifically intend to encourage infringement by others. The specific case under review is SEB S.A. v. Montgomery Ward & Co., Inc., 594 F.3d 1360 (Fed. Cir. 2010). In this case, Pentalpha reverse-engineered SEB’s patented cooker and began selling a competing product. Pentalpha obtained an opinion from its attorneys who believed that the product did not infringe any patents, but Pentalpha did not tell its attorneys that the product copied another product already on the market. The opinion was therefore considered to be suspect because the attorneys did not look for patents belonging to the company that manufactured the copied product. The Federal Circuit Court of Appeals believed that Pentalpha deliberately ignored the possibility that SEB had a patent covering its product. The language of the decision makes it unclear whether such “deliberate indifference” is sufficient for inducement or whether “specific intent” is required. The Supreme Court agreed to review the case in order to specifically address whether deliberate indifference of a known risk is sufficient or whether inducement of infringement requires purposeful, culpable expression and conduct to encourage the infringement by others.

Resale of Software Not Insulated By First Sale Doctrine

September 10, 2010 | Intellectual Property News
In a closely-watched case, the Ninth Circuit Court of Appeals has ruled that the resale of software may not be insulated by the first sale doctrine. The case involved the sale of AutoCAD software that was originally sold by Autodesk, Inc. to one of its direct customers. That customer sold fourteen used copies of AutoCAD to Timothy Vernor, who then resold them on eBay. The court considered whether the Autodesk customer had rights sufficient to allow it to resell the programs to Vernor, and therefore whether Vernor could legally resell them on eBay. As a general rule, most intellectual property rights are governed by a “first sale” defense. Once the owner of a copyrighted work sells it to another person or company, that person or company becomes the owner of the work and is free to resell it to others. The original owner has no right to pursue any subsequent downstream buyers because the original owner passed all rights in the work to the first buyer. The federal copyright laws codified the first sale doctrine with a provision stating that the owner of a particular copy of a copyrighted work can sell or dispose of the copy without first obtaining the original author’s permission. Vernor argued that his sale of the fourteen copies of AutoCAD was protected by the first sale doctrine, arguing that once Autodesk sold them to its initial customer Autodesk had no remaining rights that could prevent subsequent sales of the software. The district court agreed with Vernor, but the Ninth Circuit Court of Appeals disagreed and reversed the decision. According to the Ninth Circuit, Autodesk licensed its AutoCAD software and did not originally sell it. The software was distributed with a license that expressly restricted the ability to transfer or resell it. Because the original customer was a licensee, not an owner, the first sale doctrine did not apply. Vernor could not legally buy the software from the first customer, and therefore Vernor did not own the software. The result for Vernor—and for his customers who bought the fourteen copies on eBay—was that the use and sale of the used AutoCAD software infringed Autodesk’s copyrights in the software. This decision by the Ninth Circuit is not necessarily consistent with decisions from other federal courts of appeal. As such, the law remains unsettled and the issue may continue to the Supreme Court. It is also a decision that is primarily concerned with software because software, unlike most other goods, is commonly distributed under a license. Nonetheless, it allows original sellers of goods to take advantage of the possible use of a license to distribute their goods, and requires resellers of used goods to pay close attention to whether the goods were originally sold or licensed. Read the full Ninth Circuit decision at http://www.ca9.uscourts.gov/datastore/opinions/2010/09/10/09-35969.pdf.