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.

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.

Supreme Court Upholds Patentability of Software and Business Methods

June 28, 2010 | Intellectual Property News
In Bilski v. Kappos, an inventor had filed a patent application for a process of buying a commodity at a low price under a periodic contract and selling it at a higher price. Setting aside the question of whether the claimed invention was even remotely new, the Patent Office rejected it because it was not “patent eligible subject matter.” According to the patent office the applicant claimed an invention so broadly that it was an abstract idea of hedging rather than a particular invention for carrying out the idea. Notably, it was a pure process that made no mention of a computer or any other physical objects that would be used to perform the process. The patent statutes expressly provide that methods, or processes, are patentable. 35 U.S.C. § 101 provides: “Inventions patentable. Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” The statute further defines four categories of patent-eligible subject matter: processes, machines, manufactures, and compositions of matter. With regard to computer software, patents are typically written as “process” or “methods” for performing a series of steps that correspond to a computer algorithm. Thus, the issue of patent-eligible subject matter generally involves what the term “process” in § 101 means, and how to determine whether a given claim is a “new and useful process.” The term “process” could be construed quite broadly. In 1952, at the time Congress amended § 101 to include “process,” the ordinary meaning of the term was: “[a] procedure . . . [a] series of actions, motions, or operations definitely conducing to an end, whether voluntary or involuntary.” WEBSTER’S NEW INTERNATIONAL DICTIONARY OF THE ENGLISH LANGUAGE 1972 (2d ed. 1952). Likely all process claims in issued patents or pending applications would meet this definition of “process.” But the Supreme Court has held that the meaning of “process” as used in § 101 is narrower than its ordinary meaning. See Flook, 437 U.S. at 588-89 (“The holding [in Benson] forecloses a purely literal reading of § 101.”). Specifically, the Court has held that a claim is not a patent-eligible “process” if it claims “laws of nature, natural phenomena, [or] abstract ideas.” Diamond v. Diehr, 450 U.S. 175, 185, 101 S. Ct. 1048, 67 L. Ed. 2d 155 (1981) (citing Flook, 437 U.S. at 589, and Gottschalk v. Benson, 409 U.S. 63, 67, 93 S. Ct. 253, 34 L. Ed. 2d 273 (1972)). Such fundamental principles are “part of the storehouse of knowledge of all men . . . free to all men and reserved exclusively to none.” Funk Bros. Seed Co. v. Kalo Inoculant Co., 333 U.S. 127, 130, 68 S. Ct. 440, 92 L. Ed. 588, 1948 Dec. Comm’r Pat. 671 (1948); see also Le Roy v. Tatham, 55 U.S. (14 How.) 156, 175, 14 L. Ed. 367 (1852) (“A principle, in the abstract, is a fundamental truth; an original cause; a motive; these cannot be patented, as no one can claim in either of them an exclusive right.”). “Phenomena of nature, though just discovered, mental processes, and abstract intellectual concepts are not patentable, as they are the basic tools of scientific and technological work.” Benson, 409 U.S. at 67; see also Comiskey, 499 F.3d at 1378-79 (holding that “mental processes,” “processes of human thinking,” and “systems that depend for their operation on human intelligence alone” are not patent-eligible subject matter under Benson). It has been difficult to reconcile the line of authority articulating when processes are patentable and when they are not. Regardless of whether cases are consistent on their facts, the Supreme Court has enunciated a test to determine whether a process claim is tailored narrowly enough to encompass only a particular application of a fundamental principle rather than to pre-empt the principle itself. A claimed process is surely patent-eligible under § 101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing. See Benson, 409 U.S. at 70 (“Transformation and reduction of an article ‘to a different state or thing’ is the clue to the patentability of a process claim that does not include particular machines.”); Diehr, 450 U.S. at 192 (holding that use of mathematical formula in process “transforming or reducing an article to a different state or thing” constitutes patent-eligible subject matter); see also Flook, 437 U.S. at 589 n.9 (“An argument can be made [that the Supreme] Court has only recognized a process as within the statutory definition when it either was tied to a particular apparatus or operated to change materials to a ‘different state or thing’”); Cochrane v. Deener, 94 U.S. 780, 788, 24 L. Ed. 139, 1877 Dec. Comm’r Pat. 242 (1876) (“A process is . . . an act, or a series of acts, performed upon the subject-matter to be transformed and reduced to a different state or thing.”). A claimed process involving a fundamental principle that uses a particular machine or apparatus would not pre-empt uses of the principle that do not also use the specified machine or apparatus in the manner claimed. And a claimed process that transforms a particular article to a specified different state or thing by applying a fundamental principle would not pre-empt the use of the principle to transform any other article, to transform the same article but in a manner not covered by the claim, or to do anything other than transform the specified article. In general, this enunciation is referred to as the “machine or transformation test.” Though articulated by the Supreme Court, it was not necessarily advanced as being exclusive. In Benson, 409 U.S. at 71, the Court held: “It is argued that a process patent must either be tied to a particular machine or apparatus or must operate to change articles or materials to a ‘different state or thing.’ We do not hold that no process patent could ever qualify if it did not meet the requirements of our prior precedents.” One alternate test was whether the claimed process produced a useful, concrete, and tangible result. In its review of the Bilski rejection, the Court of Appeals for the Federal Circuit (one level below the Supreme Court) revisited the “useful, concrete, and tangible result” language associated with State Street, 149 F.3d at 1373 (“Today, we hold that the transformation of data, representing discrete dollar amounts, by a machine through a series of mathematical calculations into a final share price, constitutes a [patent-eligible invention] because it produces ‘a useful, concrete and tangible result’ . . . .”); see also Alappat, 33 F.3d at 1544 (“This is not a disembodied mathematical concept which may be characterized as an ‘abstract idea,’ but rather a specific machine to produce a useful, concrete, and tangible result.”); AT&T, 172 F.3d at 1357 (“Because the claimed process applies the Boolean principle to produce a useful, concrete, tangible result without pre-empting other uses of the mathematical principle, on its face the claimed process comfortably falls within the scope of § 101.”). The basis for this language in State Street and Alappat was that the Supreme Court has explained that “certain types of mathematical subject matter, standing alone, represent nothing more than abstract ideas until reduced to some type of practical application.” Alappat, 33 F.3d at 1543; see also State St., 149 F.3d at 1373. To be sure, a process tied to a particular machine, or transforming or reducing a particular article into a different state or thing, will generally produce a “concrete” and “tangible” result as those terms were used in our prior decisions. But while looking for “a useful, concrete and tangible result” may in many instances provide useful indications of whether a claim is drawn to a fundamental principle or a practical application of such a principle, Bilski held that inquiry to be insufficient to determine whether a claim is patent-eligible under § 101. And it was certainly never intended to supplant the Supreme Court’s test. Therefore, the court also concluded that the “useful, concrete and tangible result” inquiry is inadequate and reaffirmed that the machine-or-transformation test outlined by the Supreme Court is the proper test to apply. Some amici to Bilski urged a “technological arts” test, but that test was rejected as being too vague, at least in part because the contours of what would be deemed technology is ever-changing. Similarly, the CAFC rejected specific exclusions such as business method exclusions, reasoning that every application should be evaluated the same way. Accordingly, business methods and software would remain patentable so long as it meets the machine or transformation test. Further, the articulation of physical steps in the process is not determinative. Rather, the issue remains whether there is a machine or transformation required by the claimed invention. In its review of the case, the Supreme Court disagreed with the Federal Circuit Court of Appeals regarding the “machine or transformation” test. Instead, the Court concluded that it was sufficient to state that abstract ideas and mathematical formulas per se are not patentable, but particular applications of such concepts would be patentable even if not tied to a machine or transformation. The decision leaves open the possibility that the courts will further refine the tests for patentability of processes, including software and business methods. At the same time, it should be viewed as an endorsement of the general proposition that software and business methods remain patentable, and that the Supreme Court is unlikely to issue any decisions changing that status any time soon.

Court of Appeals Reins in False Marking Litigation

June 10, 2010 | Intellectual Property News
For more than a century, the patent statutes have made it illegal to include a patent number on a product that is not actually covered by the patent. 28 U.S.C. 292 provides that the use of a patent number, or the words “patented” or something similar, on a product or in advertising for the product, is illegal if it is done with an intent to deceive the public into thinking that the product is patented when it actually is not. The same restriction applies to the use of terms such as “patent applied for” or “patent pending.” The false marking statute of Section 292 has been largely ignored because of its weak remedies. The statute provides for a fine of not more than $500 for every offense of false marking. Although there have been very few court decisions applying the statute, most of the courts that had encountered it had concluded that the $500 cap was the maximum remedy no matter how many units had been sold with the erroneous patent number. Even a continuous and ongoing campaign to falsely mark products for years would merit no more than a $500 fine. But on December 28, 2009, the Federal Circuit Court of Appeals held that the $500 total cap should not be applied in this fashion. Instead, the penalty applies to each unit of a product that is sold with the false marking. Here’s a link to the decision: http://www.cafc.uscourts.gov/opinions/09-1044.pdf. In the wake of this precedential interpretation of the false marking statute, a cottage industry of lawsuits has sprung up, with potential plaintiffs scrutinizing patent numbers appearing on products in the hope of finding an error that might support a lawsuit. Notably, a false marking lawsuit can be filed by literally anyone, and a plaintiff need not be a competitor or someone who was actually harmed by the marking. In a few high profile cases, the number of units sold is great and the potential damages are astronomical. In one recent case involving lids made by the Solo Cup Company, the case alleged that 21 billion lids were sold with expired patent numbers on them. If the court were to award $500 per lid, the damages would be enormous. While a maximum of $500 per unit seems unlikely in most cases, even a penny per infraction can be huge if the volumes are high enough. In a June 10, 2010 decision, the Federal Circuit ruled that even though the damages may be calculated per unit, a plaintiff in a false marking lawsuit must prove that the false marking ws done with an “intent to deceive the public” in order to receive the damages. Merely placing an incorrect patent number is not enough to trigger damages under this statute without proof that the inaccurate patent marking was done with an intent to deceive. In the Solo decision, the court also noted that intent to deceive the public may not necessarily exist even if the company marking the products knew that the patent marking was incorrect. Read the full decision at http://www.cafc.uscourts.gov/opinions/09-1547.pdf. While each case is unique, and the best practice is to only mark products with patent numbers that are applicable to the product, merely marking a product with a false number does not trigger damages for false marking.

False patent marking requires greater attention

February 5, 2010 | Intellectual Property News
For more than a century, the patent statutes have made it illegal to include a patent number on a product that is not actually covered by the patent. 28 U.S.C. 292 provides that the use of a patent number, or the words “patented” or something similar, on a product or in advertising for the product, is illegal if it is done with an intent to deceive the public into thinking that the product is patented when it actually is not. The same restriction applies to the use of terms such as “patent applied for” or “patent pending.” The false marking statute of Section 292 has been largely ignored because of its weak remedies. The statute provides for a fine of not more than $500 for every offense of false marking. Although there have been very few court decisions applying the statute, most of the courts that had encountered it had concluded that the $500 cap was the maximum remedy no matter how many units had been sold with the erroneous patent number. Even a continuous and ongoing campaign to falsely mark products for years would merit no more than a $500 fine. That is, until recently. On December 28, 2009, the Federal Circuit Court of Appeals held that the $500 total cap should not be applied in this fashion. Instead, the penalty applies to each unit of a product that is sold with the false marking. Here’s a link to the decision: http://www.cafc.uscourts.gov/opinions/09-1044.pdf. In the wake of this precedential interpretation of the false marking statute, a cottage industry of lawsuits has sprung up, with potential plaintiffs scrutinizing patent numbers appearing on products in the hope of finding an error that might support a lawsuit. Notably, a false marking lawsuit can be filed by literally anyone, and a plaintiff need not be a competitor or someone who was actually harmed by the marking. In a few high profile cases, the number of units sold is great and the potential damages are astronomical. In one recent case involving lids made by the Solo Cup Company, the case alleged that 21 billion lids were sold with expired patent numbers on them. If the court were to award $500 per lid, the damages would be enormous. While a maximum of $500 per unit seems unlikely in most cases, even a penny per infraction can be huge if the volumes are high enough. Although patent numbers should always be applied carefully, in this current environment it’s wise to be especially accurate. Congress is evaluating new legislation that might cap the damages award and stem the tide of false marking litigation, but for now the use of patent numbers on products and in advertising should be carefully scrutinized to ensure the numbers are accurate and the patents are still valid and enforceable.

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.

BLG obtains preliminary injunction against trademark and domain name infringement

August 20, 2009 | Intellectual Property News
BLG attorneys obtained a preliminary injunction leading to an eventual stipulated judgment in favor of our client Suarez Corporation Industries against Earthwise Technologies and Earthwise Innovations. This action involved trademark infringement and breach of contract claims in which former distributors of products originating with our client continued to use infringing trademarks and Internet domain names. The stipulated judgment included a monetary payment in favor of our client, entered as a judgment in the Western District of Washington.

BLG wins summary judgment finding trade dress to be functional in slurry pump case

August 15, 2009 | Intellectual Property News
BLG attorney Larry Graham teamed up with Beresford Booth in defending their client Atlas Equipment Company against charges that their slurry pumps infringed a trade dress owned by Weir Slurry Group and Weir Minerals. This complicated case involved gathering evidence and testimony from witnesses in China, Australia, and across the United States in order to evaluate several additional complicated claims related to breach of contract and palming off. Ultimately, BLG’s client Atlas prevailed on a motion for summary judgment prior to trial by proving that the alleged trade dress was functional rather than serving to identify Weir as the source of the pump. As the federal court for the Western District of Washington observed, it would create a case of first impression to hold that a non-functional trade dress can be comprised of a collection of individually functional elements.