Inventor’s Purchase Order to Supplier May Place Invention On Sale
August 15, 2013
| Intellectual Property News
The patent statutes provide that an invention cannot be patented when the inventor has placed the invention on sale more than a year before the filing date of the patent application. The so-called “on-sale bar” is clearly applicable when an inventor manufactures an item and sells it directly to others, but its application is less obvious when the inventor does not make or sell the item, and instead buys a quantity of it from a supplier. In a recent decision, the court held that the invention is on sale—and the patent will be barred—in such cases.
The on-sale bar applies when two conditions are satisfied before the “critical date,” which is typically one year before the patent application filing date: (1) the claimed invention must be the subject of a commercial offer for sale; and (2) the invention must be ready for patenting. An invention is on sale when there is an offer to sell that is sufficiently definite that another party could make a binding contract by simple acceptance. An invention is “ready for patenting” when prior to the critical date: (1) the invention is reduced to practice; or (2) the invention is depicted in drawings or described in writings of sufficient nature to enable a person of ordinary skill in the art to practice the invention.
In Hamilton Beach Brands, Inc. v. Sunbeam Products, the Federal Circuit Court of Appeals confirmed that there is no “supplier exception” to the on-sale bar. Hamilton Beach had issued a purchase order to a supplier for a specific quantity (in this case, 2000 units) of slow cookers in a document that included price, part number, quantity, and delivery dates. Because the communication was one that could be simply accepted, it was sufficient to place the invention on sale even though it was a sale to the inventor rather than from the inventor.
The court left open the possibility that a lesser quantity might not trigger the on-sale bar, particularly where the nature of the purchase is a genuine experimental use rather than a commercial transaction. Nonetheless, it would be prudent to assume that a purchase from a manufacturer will trigger the on-sale bar, and therefore to file patent applications quickly enough thereafter to avoid the bar.
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.
First to File, Other Patent Rules Effective March 16
February 28, 2013
| Intellectual Property News
The fist-inventor-to-file provision of the America Invents Act takes effect on March 16, 2013. After a long history of granting patents to the first applicant to invent an invention, the new law will now award a patent to the first applicant to file an application for the invention. Under the old system, an applicant faced with a rejection based on prior art could submit proof in the form of contemporaneous notes or the like to establish a date of invention earlier than that of the prior art reference. Because the system was focused on the first to invent, retaining good notes, prototypes, or other proof of the invention date was important. Under the new system, the invention date will no longer matter for priority purposes. Instead, the importance of the filing date makes it crucial to file an application at the earliest stage possible.
There are many additional changes that accompany the migration to the first-to-file system, and surely too many to address fully in this account. As such, this report will highlight some of the more notable provisions of the new law.
The new law also brings changes to the definitions of prior art and activities that will prevent an applicant from getting a patent. Under the old law, an applicant was barred from a patent if the invention was on sale more than a year before the patent application date. Judicial interpretations of the prior law concluded that almost any sale was a barring event, even if it was under a nondisclosure agreement and even if the buyer could not decipher the inventive subject matter. As one example, the use of a trade secret method to produce a product that is sold would place the method on sale even if the method was actually completely unknown to the public. The Patent Office’s current interpretation of the new law is that such private processes are not commercial uses available to the public. Consequently, it appears permissible to seek patent applications for such processes even if they have been used for many years—assuming, of course, that there is no other prior art lurking, and no other applicants who file applications first. Note that this interpretation is somewhat preliminary; although the Patent Office has adopted it for the purpose of evaluating patentability, the courts may disagree. Accordingly, there is risk in assuming that a privately conducted method, or a sale under an NDA, will not be a commercial event triggering the on-sale bar to patentability.
Another change relates to the treatment of public disclosures that might bar patentability. Under the first-to-invent system, an applicant could defeat a publication showing that a third party had developed the same invention by submitting proof that the patent applicant invented the invention before the third party. Under the new first-to-file rule this is no longer allowable: if the same invention is available to the public, through a published document or otherwise, before the date of the application then the applicant will not be entitled to a patent. The key exception to this rule relates to public disclosures made by the applicant or derived from the applicant, which are not prior art against the applicant so long as the application is filed within one year of the disclosure. The Patent Office seems to intend to treat this exception very narrowly, and under its current examination guidelines the disclosure may still qualify as prior art unless it is essentially a verbatim copy of the patent applicant’s own work. If the public disclosure is a variation of the applicant’s work then it may be treated as prior art, thereby barring the patent from issuing. Given the risks involved in such publications, the best course is to file an application before any public disclosures.
The first-to-file rules do not apply retroactively, and therefore do not apply to any applications filed prior to March 16, 2013. Likewise, the old rules related to prior art, commercialization, and public disclosures will still apply to such applications. Because the old rules may be preferable, most applicants will be better off if they file applications prior to March 16. For applications filed on or after that date, the applicability of either the new or old rules depends on the nature of the application. A request for continued examination for an application filed before March 16, 2013, as well as the filing of a national stage application for a pre-March 16, 2013 PCT application, will not subject the application to the new first-to-file rules even if the RCE or national stage application is filed after March 16.
For applications filed on or after March 16, 2013, the application will be treated under the new first-to-file rules if the application contains even a single claim that has an effective filing date of March 16 or later. Thus, all new applications with no priority claims to prior-filed applications will be treated under the new rules. Likewise, any continuation in part application that includes one or more claims that rely on subject matter submitted after March 16, 2013 will also be treated under the new rules. Once such a claim is submitted in an application it is processed under the new rules for all time, even if the triggering claim is later canceled.
The Patent Office is also raising its fees, effective March 19, 2013. While the Patent Office routinely raises its fees at least annually, in this case the increases are hefty. For example, a utility patent application previously required a small entity filing fee of $533 under the old rules, but will cost $730 under the new rules. For large entities, these basic filing fees increase from $1260 to $1600. A further change creates a new “micro entity” for filing purposes, with a micro entity being small entities with four or fewer prior patent applications, a gross income that does not exceed three times the national median household income, and has not granted rights in the invention to an entity with an income greater than three times the national median. For a micro entity, the basic filing fee is $400.
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
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.