Upcoming IP Seminar in Norwalk, CT

I will be hosting a seminar at The Brewhouse Restaurant - 13 Marshall Street, Norwalk, CT, Thursday, February 2, 2012, 6:00 PM – 7:30 PM

The program is entitled:

12 for 2012: 12 Things Every Business Needs To Know About IP This Year -

12 key factors to consider in your IP strategy for 2012. Summarized in 12 slides within 48 minutes, with a 12 minute Q&A.

Complimentary cocktails and hors d'oeuvres.

Topics will include:

The impact of the America Invents Act on IP Strategy;

The advantages and disadvantages of IP licenses and sales;

How to adapt to 2011 case law hostile to rights owners;

The powerful branding trick used by the world’s most successful brand owners;

The real reason copyright registration is important; and

What to expect now that SOPA is dead.

If you are interested, please register at :www.foxrothschild.com/events/eventDetail.aspx

I look forward to seeing everyone there.

 

 

WE HAVE AN INJUNCTION, WHY CAN'T WE GET CONTEMPT?

It is not always the case that once a court issues an injunction prohibiting further patent infringement , any further infringement will be punishable by contempt. That is often a disappointment for patent owners, but the recent Federal Circuit en banc opinion in Tivo v. Echostar explains how this can occur.

A two part inquiry is required to determine whether the enjoined party may be found in contempt. The first question is whether there are “colorable differences” between the enjoined product and the re-designed product. The crucial question for determining whether there are colorable differences is: what are the differences between the features relied on to determine infringement and the modified features? If the differences are “colorable” or “significant” there can be no contempt, even if the re-design still infringes the patent. If, on the other hand, any differences are not colorable, the court must then determine whether the re-design infringes the patent. The enjoined party should be held in contempt only if the differences are non-colorable and the re-design infringes.

On a motion for contempt, the patentee bears the burden of proving both the absence of colorable differences and the continuing infringement by clear and convincing evidence. It is no defense, however, that the enjoined party did not intend to violate the injunction, although the court may in its discretion consider diligence and good-faith efforts for purposes of mitigating the punishment.

The Court rejected Echostar’s argument that it should not be held in contempt because the injunction was vague and overbroad. The Court emphasized that the time to challenge the clarity of the injunction is when it issues; a party cannot act first and then complain about ambiguity or breadth when it is caught.
 

IP Counsel Must Communicate With Marketing and Manufacturing Personnel

A recent decision from the Federal Circuit underscores the need for IP counsel to communicate with the company’s manufacturing and marketing staff. IP counsel, and company management, should be aware of the importance of marking patented products properly. Generally, it takes little prodding or persuasion to insure that patented products are identified with the patent number; everyone involved can easily see value in that, not only in terms of preserving the right to seek damages, but in terms of intimidating competitors and impressing consumers.

But what about when the patent expires? We all know we should not be marking our product in a way that is deceptive, but it typically doesn’t seem so urgent to adjust molds, presses or packaging to delete the patent information. So what if we make a few runs marked with the expired patent?

Forest Group Inc. v. Bon Tool Co., 590 F.3d 1295 (Fed. Cir. 2009) cautions that we should be more diligent. In that case, the Federal Circuit held that the penalty for intentional false marking, up to $500, applies on a per product basis, as opposed to a per run basis. So if you are making widgets and run a single post-patent production of 100,000, your potential exposure is $50,000,000.

Bear in mind that imposition of false marking penalties requires actual intent to deceive, so demonstrably honest mistakes should not result in punishment.  Also, courts have discretion to determine the amount of the per product penalty, so an award could be significantly less than $500 per. The Federal Circuit itself suggested in the Forest Group case that in cases involving large runs of inexpensive products, the penalty could be limited to fractions of a penny per article. And, in the Pequignot v. Solo Cup case, although the court held that marking with an expired patent constituted false marking subject to penalty, the court ultimately exonerated the defendant, holding that a patent owner that used production machinery that was expensive to re-tool and, for that reason and in consultation with patent counsel, did not change its markings until it changed its machinery, was not liable for intentional false marking on runs it made post-patent term but pre-purchase of new machinery.

On the other hand, there are reports of emergence of a new type of patent troll, who seeks out products marked with expired patents and then sues to collect half the penalty (the other half goes to the government). That raises the level of risk for owners of expired patents. It is possible the Federal Circuit could disagree with the Virginia court’s analysis and apply a less lenient standard to patent owners that mark with expired patents. Moreover, subsequent case law could condemn the advice Solo received from its patent counsel, removing reliance on counsel’s advice as a justification for less than prompt re-marking.

Rather than putting your company at the mercy of an opportunistic plaintiff and ultimately a court, if your patent expires, the safest course may be to change your markings immediately. If that is impossible or highly impractical, one would be wise to document the reasons and weigh carefully the potential litigation costs against the re-tooling costs.
 

Revisiting In Re Kubin

In early 2009 the Court of Appeals for the Federal Circuit ("Federal Circuit") published their decision in In re Kubin, which at the time garnered much interest from patent practitioners, especially those working in the field of biotechnology. The initial buzz in the biotech community centered around what effectively amounted to the court's evisceration of their earlier 1995 decision in In re Deuel, where they reversed the Board of Patent Appeals and Interferences ("Board"), based in part on the notion that a known protein does not necessarily render obvious the cloning of a gene encoding that protein.

Despite being presented, some 14 years later, with a similar fact pattern as Deuel, why was the Board inclined to reject the Kubin claims as obvious? No doubt the Board was emboldened on several fronts by the 2007 decision Supreme Court ruling in KSR Int'l Co. v. Teleflex, Inc..

  • In KSR, after reiterating their long standing Graham v. John Deere factors required for engaging in a § 103(a) obviousness analysis, the Supreme Court admonished the Federal Circuit's penchant for imparting rigid (and arguably 'patentee friendly') analysis to determine patentability under § 103(a), making clear that "if a person of ordinary skill can implement a predictable variation, § 103(a) likely bars its patentability" and more so if such variation or improvement represents no more than "the predictable use of prior art elements according to their established functions," enunciating that an analysis of obviousness should not be confined to a rigid test, but instead a flexible one.
  • And the Court specifically cited Deuel to exemplify this unacceptable reliance on a 'rigid' adherence that a claimed invention is not obvious just because it may have been 'obvious to try.'

The Federal Circuit's response in a post-KSR environment was to step away from the rigidity of an obviousness analysis in Deuel in regard to biotechnology-related subject matter, and instead revisit and adapt the analytical style from their 1988 pre-Deuel decision in In re O'Farrell, which also presented an obviousness issue involving biotechnology-related subject matter. The Kubin court embraced O'Farrell as meshing with the Supreme Court edict to move away from an inflexible, formulistic analysis of § 103(a) issues. Kubin now "resurrects this court's own wisdom in O'Farrell, which predates the Deuel decision by some seven years." Stating that an obvious invention would by nature be 'obvious to try,' but the more important question to the O'Farrell court being "when is an invention that was obvious to try nonetheless nonobvious?" Two such scenarios were forwarded:

  • when a multitude of choices are available to the inventor and the prior art gives no indication as to which parameters are critical for success (referred to in Kubin as a "metaphorical darts at a board" scenario); and,
  • an area of "new technology" or a "general approach" in a promising field, with only general guidance from the prior art as how to proceed

While the latter seems tailor-made for biotechnology patent issues, it is the former approach (or rather the inverse) which the Kubin court found amenable to the issue at hand. The Federal Circuit, in affirming the Board's rejection of the Kubin claims as obvious, confirmed (i) the existence of an enabling technology within the prior at to generate the claimed subject matter, (ii) a suggestion to modify the prior art (i.e., an impetus to work from the prior art protein to the claimed isolated nucleic acid molecule), and (iii) evidence that such a modification would be successful. And such success not requiring "absolute predictability of success," but only a "reasonable expectation of success" in obtaining the claimed subject matter.

Was invoking O'Farrell in response to the Supreme Court's admonishment of a rigid §103(a) analysis limited to the facts of Kubin? Or possibly relegated, albeit not purposefully, to analysis of obviousness issues relating solely to biotechnology? Only time will tell. But early returns suggest that an O'Farrell revival of sorts is catching on, both within the Federal Circuit and the district courts.

  • Bayer Schering Pharma AG v. Barr Labs, Inc. - The Federal Circuit affirming a district court holding that claims of U.S. Patent No. 6,787,531 are invalid under § 103(a), as "the invention would be obvious to try." A KSR/O'Farrell/Kubin triumvirate is invoked to hold that a claim to an oral contraceptive composition which comprises a micronized drospirenone-based combination product was obvious. As in Kubin, the Federal Circuit agreed with the district courts analysis that a finite number of possibilities were available to the inventor, with a reasonable expectation of succeeding in the generating the claimed invention.
  • P&G v. Teva Pharms. USA, Inc. - The Federal Circuit affirming a district court holding that claims to U.S. Patent No. 5,583,122, which recite the bisphosphonate compound risedronate, the active ingredient of an osteoporosis drug, nonobvious over a prior art patent disclosing an earlier bisphosphonate compound useful in treating osteoporosis. The Federal Circuit, with the KSR directive in hand, addressed the logic of the district court by applying their own precedent to determine whether a structural similarity existed between the prior art compound and the patented compound. In doing so, the Federal Circuit rounded out this analysis by again invoking the KSR/O'Farrell/Kubin logic, finally holding that "there is not credible evidence that the structural modification was routine." In other words, as per O'Farrell, numerous choices for structural modification were available, and the prior art gave no indication as to which modifications were critical for success (i.e., the "metaphorical darts at a board" scenario).

And several district court cases are incorporating this line of reasoning into their § 103(a) analysis as well, such as Johnson & Johnson Vision Care, Inc. v. CIBA Vision Care Corp. and Seiko Epson Corp. v. Coretronic Corp. Like it or not, the 'obvious to try' standard, ala O'Farrell, looks to be back in vogue. Patent practitioners should carefully consider these post-KSR ramifications when drafting or prosecuting patent applications in the USPTO, whether based in the biotechnology arts or not. Strategies should be considered early on in the process to best head off or rebut exposure to a possible claim rejection under §103(a) as tailored from the Kubin holding.

Exergen and Bose: The Federal Circuit Revisits Fraud

The United States Court of Appeals for the Federal Circuit (“Federal Circuit”) recently published two opinions, a first enunciating a heightened standard for pleading inequitable conduct in a patent case under Rule 9(b) of the Federal Rules of Civil Procedure (“Rule 9(b)”); and a second clarifying the test for determining whether an applicant of a trademark application or registration renewal has committed fraud on the U.S. Patent & Trademark Office (“PTO”). In Exergen v. Wal-Mart Stores, Inc., et. al., despite the Federal Circuit’s reversal concerning both the validity of one Exergen patent and alleged infringement of two other patents by defendants, the court nonetheless proceeded to address the remaining inequitable conduct issue. The court took the opportunity to clarify and heighten at least the initial burden on an accused infringer attempting to allege patentee inequitable conduct. First noting that determination of an adequate pleading under Rule 9(b) alleging inequitable conduct in a patent case poses a question for Federal Circuit law, the court took the lead from the Seventh Circuit Court of Appeals, holding that there are two distinct requirements for pleading inequitable conduct under Rule 9(b); a factual requirement and a scienter requirement:

(i) factual requirement - the pleading party must first identify, with specificity, the who, what, when, where, and how the material misrepresentation or omission was committed; and,

(ii) scienter requirement - the pleading party must show sufficient facts from which a court can reasonably infer knowledge of the withheld material and a specific intent to deceive the PTO.

Specific intent, the court went on to say, must include a plausible suggestion of a “‘deliberate decision to withhold a known material reference’ or to make a knowingly false misrepresentation.” While acknowledging that scienter may be averred to generally using knowledge and belief type pleadings, the Court stressed that the pleading must nevertheless set forth specific facts upon which a belief is reasonably based. Thus, the Exergen court states that mere knowledge of the existence of a material prior art reference and the patentee’s failure to disclose that reference during prosecution falls below the threshold level for pleading inequitable conduct under Rule 9(b).

The court clearly noted that even when a party successfully pleads inequitable conduct by the patentee under Rule 9(b), that “to prevail on the merits, the accused infringer must prove both materiality and intent by clear and convincing evidence.” (citing Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1365 (Fed. Cir. 2008)). Thus, the Exergen court does not distinguish Star, but instead inserts a early, clear, and substantial hurdle to an accused infringer alleging inequitable conduct by requiring a substantial depth of factual knowledge regarding patentee conduct in order to reach through to the scienter requirement to provide an adequate pleading under Rule 9(b); a depth of ‘knowledge’ which in most cases will not be available to the accused infringer during the initial stages of litigation. While scienter has always been an element to inequitable conduct, the logical effect of the Exergen holding may be to curb accused infringers from generically including an inequitable conduct defense at the pleading stage. As suggested by Judge Pauline Newman in her dissent in McKesson Information Solutions v. Bridge Medical, litigation tends to distort the complex procedures of patent prosecution. Judge Newman argued that this distortion should be reduced by requiring a clear showing of deceptive intent on the part of the patentee. While McKesson directly addressed the merits of an inequitable conduct allegation during the trial phase, this concept, through Exergen, now seems to be in play at the early pleading stage through application of a strict factual requirement supporting an inference of the patentee’s specific intent to commit fraud on the PTO. Thus, for all intent and purpose, the Exergen holding may stem early accusations of inequitable conduct, at least leaving any such action to flow from information obtained during discovery in the form of a later amended pleading under Rule 15(a)(2).

The Federal Circuit again addressed the issue of fraud on the PTO in In re Bose, Appeal No. 2008-1448 (Fed. Cir., Aug. 31, 2009) (“Bose”). Bose initiated an opposition against the HEXWAVE trademark application, with Hexwave, Inc. filing a counterclaim for cancellation of Bose’s WAVE trademark, asserting that the Bose committed fraud on the PTO by submitting their Section 8/9 renewal application, a renewal application where Bose stated that the WAVE mark was still being ‘used in commerce’ on various products, including audio tape recorders and players. The Trademark Trial and Appeal Board (“Board”) determined that the tape recorder and players were no longer being manufactured and sold by Bose, but instead were presently subjected only to warranty-based repairs. The Bose General Counsel who signed the Section 8/9 affidavit testified to his believe that such activity constituted use in commerce, as required for renewal of a trademark registration. The Board disagreed, ruling that Bose committed fraud on the PTO, cancelling the WAVE registration in its entirety. Bose appealed. The Federal Circuit reversed, and methodically reviewed their own precedent on trademark fraud cases as well as their predecessor court, the Court of Customs and Patent Appeals, noting “[f]raud in procuring a trademark registration or renewal occurs when an applicant knowingly makes false, material representations of fact in connection with his application.” (quoting from Torres v. Cantine Torresella S.r.l., 808 F.2d 46, 48 (Fed. Cir. 1986)). And subsequently honing in on the intent of the applicant, based on the knowledge of the applicant; noting the prohibition of applicants “making knowingly inaccurate or knowingly misleading statements.” (quoting from Bart Schwartz Int’l Textiles, Ltd. V. Fed. Trade Comm’n, 289 F.2d 665, 669 (CCPA 1961), with emphasis provided in Bose). And so again, similar to Exergen, a showing of fraud under the Lanham Act requires a showing of a misrepresentation of a material fact, and that such misrepresentation was made knowingly by the applicant.

With this review in hand, the Bose court quickly zeroed in on an earlier Board decision in Medinol v. Neuro Vasx, Inc., 67 USPQ2d 1205 (T.T.A.B. 2003), where the Board held that a trademark applicant commits fraud when a representation of fact has been made to support an application, and that the applicant knows or should know that such a representation was false or misleading. The court took express exception with the Board, stating that the linking of subjective intent to the concept of “should have known” effectively, and erroneously, equates the fraud standard in trademark law to a simple negligence standard.

The Bose court, in similar fashion to Exergen (with Chief Judge Michel sitting on both panels) expressly stated that “[s]ubjective intent to deceive, however, difficult it may be to prove, is an indispensable element in the analysis” of fraud in procuring or retaining a trademark registration. While the court acknowledged that intent to deceive the PTO in these situations can be “inferred from indirect and circumstantial evidence,” nonetheless “such evidence must still be clear and convincing, and inferences drawn from lesser evidence cannot satisfy the deceptive intent requirement.” (citing Star at 1366).

The Exergen and Star decisions show the Federal Circuit’s desire to briefly and succinctly define and/or clarify the parameters required to support a showing inequitable conduct or fraud on the PTO. These decisions effectively signal that any such allegation must be supported by a stable of facts showing that the accused party understood that questionable actions amounted to deceitful activity in their dealings with the PTO.

Bilski Decision Could Have Serious Consequences for Software Patents

The current case of Bilski v. Doll, U.S., No. 08-964, cert. granted 6/1/09, pending before the Supreme Court, may have broad implications for software patents. While not directly dealing with software, the Bilski patent application deals with a process that some are calling too “abstract” to be patentable. The Bilski invention involves a method of managing risk in a commodities market. The steps of the process do not necessarily require software, a computer, or any other physical implementation, but are merely a series of steps leading to the desired result.

How might this impact software? When the Bilski case was heard by the Court of Appeals for the Federal Circuit, a test that is now commonly referred to as the “machine or transformation” test for patentability was resurrected from a previous U.S. Supreme Court patent case, Diamond v. Diehr, 450 U.S. 175 (1981),  See In re Bilski, 545 F.3d 943, 961-62 (Fed. Cir. 2008) (en banc). This test says that, to be patentable, a process must either be tied to a particular machine or must transform an article to a different state or thing. The Bilski process was deemed to be patent ineligible because it was not tied to a particular machine, nor did it transform matter in any way.

Now, the Patent Office and the courts are using Bilski to invalidate software patents that appear to be “tied to a particular machine,” namely, a computer. It has been a common practice to tie software process steps to a computer to render them patentable, especially since the Federal Circuit’s decision in State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), which involved utilizing software to perform a calculation on a computer. The patentability of Bilski was argued to the Patent Office based on State Street, but the argument was rejected because the State Street process was performed using a machine (the computer), but the Bilski process required no computer.

However, the Patent Office’s Board of Patent Appeals and Interferences has upheld rejections of applications that specifically recite a processor for computer-implemented processes that may not necessarily be considered “business methods.”  For instance, the case of Ex parte Cornea-Hasegan, 89 USPQ2d 1557 (B.P.A.I. Jan. 13, 2009), decided earlier this year, recites steps performed by a processor. Nevertheless, the Board upheld the rejection based on Bilski, stating that “the recitation of a processor in itself . . . does not tie the process steps to a particular machine. In other words, the recitation of a processor does not limit the process steps to any specific machine or apparatus [and] fails to impose any meaningful limits on the claim’s scope. The recitation of a processor performing various functions is nothing more than a general purpose computer that has been programmed in an unspecified manner to implement the functional steps recited in the claims.” Id. at 1560.

This is scary stuff for software developers who have applied for patents and spent thousands on patent preparation and processing fees, not to mention those already having issued software patents who are afraid to litigate them for fear of invalidation. However, there have also been cases where the Patent Office has reversed rejections of similar claims, so there is a definite lack of consistency, at least at the Patent Office.

Where is the Supreme Court likely to lead us? Bilski is a big wake-up call to practitioners who should have realized that State Street never opened the floodgates to patenting processes that apply abstract principles even if a tangible result is obtained through the implementation of the principle. We can expect the Supreme Court to delineate how tangible that result must be for a process to adequately limit a claim that embodies an abstract principle to qualify as patent-eligible subject matter by not pre-empting the principle per se. The key to drafting a claim to a machine-based process that will survive future challenges is keeping in mind that the claim must not pre-empt a basic principle. In the interim there are still plenty of opportunities left on the table by the Federal Circuit to obtain business method patents, provided the applications and claims are carefully crafted to carve out a specific application of a basic principle without pre-empting the entire principle.