Non-practicing entities (NPEs) are once again thrust into the Section 337 spotlight by way of the “domestic industry” requirement. Back in 2007, InterDigital LLC filed a complaint at the United States International Trade Commission (“the Commission”), with the intention of blocking Nokia’s import of mobile devices into the United States. InterDigital alleged that Nokia’s mobile devices infringed its U.S. patents relating to power control and high-speed data transmission in 3G wireless technologies. The Commission sided with Nokia and found no infringement. However, Nokia’s favorable decision turned sour when it was reversed by the Court of Appeals for the Federal Circuit (“the Federal Circuit”). Nokia responded by petitioning the Federal Circuit for an en banc rehearing of the case. In its petition, Nokia focused specifically on the question of whether InterDigital’s patent licensing activities satisfied the “domestic industry” requirement. Recently the Federal Circuit, sitting en banc, denied Nokia’s petition for rehearing. The Federal Circuit decision is nevertheless interesting for its treatment of Section 337’s “domestic industry” requirement as it is applied to NPEs.
Under 19 U.S.C. §1337(a)(2), relief at the Commission is predicated on the existence or establishment of an industry in the United States “relating to the articles protected by the patent.” This is commonly known as the “domestic industry” requirement. In turn, section 1337(a)(3) provides that an industry is considered to exist if there is in the United States, “with respect to the articles protected by the patent,” significant investment in plant or equipment, significant employment of labor or capital, or “substantial investment in [the patent’s] exploitation, including engineering, research and development, or licensing” (emphasis added).
Todd Dickinson (right) escorts Judge Newman off stage after receiving the AIPLA Excellence Award.
On Friday, October 26, 2012, at the Gala dinner event at the Annual Meeting of the American Intellectual Property Law Association (AIPLA), Judge Pauline Newman of the United States Court of Appeals for the Federal Circuit received the 2012 AIPLA Excellence Award.
The Program for the event explained that the Excellence Award was presented to Judge Newman “in recognition of extraordinary leadership and service to the Intellectual Property Community, which is representative of a distinguished career marked by intellect, integrity, and an unwavering commitment to the administration of justice.”
The AIPLA has honored a number of excellent and worthy winners in the past including Chief Judge Howard T. Markey, Chief Judge Paul Michel, Judge Rich and Donald Dunner to name but a few. Judge Pauline Newman is now a recipient of this top industry recognition, and if you ask me she is deserving of being on the Mount Rushmore of this exclusive club.
Litigation involving incorrect claims of small entity status is very rare. In the 1998 case of DH Technology, Inc. v. Synergystex International, Inc., the small entity issue fee was paid for the asserted patent, even though it was later discovered that the patentee had over 500 employees (i.e., was now a “large entity”) at the time this issue fee was paid. Even so, the Federal Circuit overturned a district court ruling that the asserted patent had lapsed and was therefore unenforceable because the patentee had “incorrectly paid the small entity issue fee and because the statutorily-permitted time for correcting the error had passed.” Instead, the Federal Circuit held that 37 CFR § 1.28(c) (allowing an erroneous claim of small entity status and the erroneous payment of the small entity issue fee to be excused by paying the deficiency owed) controlled so that the patentee could still rectify this error (and underpayment of the issue fee), even though well outside the 1 year and 3 month “after the date of the notice of allowance” period specified in 37 CFR § 1.317(c) for correcting a good-faith error in claiming small entity status, as well as making up the deficiency for incorrectly paying the small entity issue fee.
DH Technology is the “easy case” where small entity status is lost due to a change in size of the patentee. But small entity status under 37 CFR §§ 1.27(a)(1) (person) or 1.27(a)(2) (small business concern) may also be lost if the rights in the invention are assigned, granted, conveyed, or licensed (or are subject to an obligation under contract or law to assign, grant, convey, or license, any rights in the invention) to someone other than a small entity (e.g., an entity having more than 500 employees). That was the situation in the recent case of Outside The Box Innovations. L.L.C. v. Travel Caddy, Inc. where an agreement between the patentee (Travel Caddy) and its distributor/seller (The Rooster Group, a large entity of greater than 500 employees) of the patented tool cases was deemed by the district court to contain a patent license clause for the purposes of 37 CFR § 1.27(a)(2). Even worse, the district court held that Travel Caddy had “committed inequitable conduct by claiming small entity status and paying reduced PTO fees, and that this conduct rendered both the ‘992 and ‘104 patents permanently unenforceable.”
Some have said is seems bizarre that the panel decision in Mirror Worlds did not mention or cite Akamai, and while that is perhaps a fair point at first glance, the cases are quite different. It seems to me that people are putting to much emphasis and question where it doesn’t belong. At the end of the day in Mirror Worlds the panel simply agreed with the district court that the plaintiff did not offer evidence sufficient to allow a reasonably jury to find in their favor. While a passing reference to Akamai might have been nice, it seems to me as if it was hardly required given the procedurally dispositive issues associated with a JMOL due to failure to offer required proof. See Apple Operating System Does Not Infringe.
Did Chief Judge Rader mean to create a more strict disclosure requirement to support negative limitations in patent claims?
Last week the Federal Circuit decided the case of Santarus, Inc. v. Par Pharmaceutical, Inc., which dealt with whether a drug covered by an Abbreviated New Drug Application (ANDA) infringed the patents owned by that patent owner relative to the proton pump inhibitors (PPI) product omeprazole. The big issue in the case is what might at first glance seem to be a rather innocuous statement relative to the support necessary in a patent specification for a negative claim limitation. But after reading the Newman dissent (which joins in the other aspects of the Court’s decision) it starts to become clear that this could be a much larger issue of significant consequence.
The appeal came to the Federal Circuit from the judgment of the United States District Court for the District of Delaware. The plaintiff, Santarus, Inc., is the exclusive licensee of patents on specified formulations of benzimidazole PPI – a class of chemical compounds that inhibit gastric acid secretion and help prevent and treat stomach acid-related diseases and disorders. The patents are for the inventions of Dr. Jeffrey Phillips, and are assigned to the University of Missouri. Santarus provides the PPI product omeprazole in the formulations covered by the Phillips patents, with the brand name Zegerid®.
Although Judge Newman’s dissenting opinion came next in the en banc decision, I’m going to discuss Judge Linn’s dissenting opinion first. That Judge Linn was the author of this dissenting opinion is unsurprising, given that he had authored the now overruled BMC Resources opinion, as well as the panel opinion in McKesson Technologies. What is somewhat surprising is the strident tone that Judge Linn used to characterize the per curiam majority opinion: “this court assumes the mantle of policy maker.” Not satisfied with applying that moniker alone, Judge Linn also accused the per curiam majority of “effectively rewrite[ing]” 35 U.S.C § 271(a) and 35 U.S.C § 271(b). (In that regard, I think Judge Linn’s accusation goes a bit overboard).
In challenging the correctness of the per curiam majority ruling, Judge Linn’s dissenting opinion makes four points. Point No. 1 is that the per curiam majority’s approach “is contrary to both the Patent Act and the Supreme Court’s longstanding precedent that “if there is no direct infringement of a patent there can be no contributory infringement,” citing Aro Manufacturing and Deepsouth Packing, as well as the Federal Circuit’s Joy Technologies. But as discussed above, none these cases specifically holds that direct infringement of the claimed method for the purposes of liability for indirect infringement requires that all steps of the claimed method must be performed by a single actor. Judge Linn’s further assertion that, in enacting 35 U.S.C §§ 271(e)(2), (f), and (g), “Congress did not give the courts blanket authority to take it upon themselves to make further policy choices or to define ‘infringement’” still doesn’t address why direct infringement for the purposes of indirect infringement liability requires all infringing acts to be performed by a single actor. (As I discuss below, enactment of 35 U.S.C §§ 271 (f) and (g) also reflects Congress’ intent to close “loopholes” in the primary infringement statute, 35 U.S.C §§ 271 (a)). Judge Linn also makes the comment that Congress “removed joint-actor patent infringement liability from the discretion of the courts” in 1952, but cites to absolutely no legislative history to support this comment.
Five years ago today, on Monday, August 20, 2007, while many of us were otherwise preoccupied with the impending doom of the claims and continuations rules promulgated by the Patent Office, the United States Court of Appeals for the Federal Circuit unceremoniously changed the law as it applies to the awarding of willful damages. Sitting en banc in In re Seagate Technology, LLC, the majority of the Court determined that the negligence standard for determining whether to award enhanced damages for willful infringement is not the appropriate standard, but rather that a reckless standard should be and now is the law of the land.
Curiously, the Federal Circuit announced this significant change to the law relating to willfulness in a case that related to a discovery dispute. Seagate Technology, LLC petitioned the Federal Circuit for a writ of mandamus directing the United States District Court for the Southern District of New York to vacate Orders compelling disclosure of materials and testimony that Seagate claimed was covered by the attorney-client privilege and work product protection. The Court, per Judge Mayer, would say that this case requires confrontation “the willfulness scheme and its functional relationship to the attorney-client privilege and work product protection.”
The Board recognized multiple characteristics that differentiate the claimed invention in the “674 patent from the prior art combination of Song and Handong. Among these, the Board specifically determined that the claimed invention possessed a “supporting arm” and that the safety wheels of a resultant combination of Song and Handong would be raised off the ground, unlike what is depicted in the ‘674 patent and recited in the claims. Still, the panel determined that the claims were invalid. How is it possible to find an invention obvious when not all of the elements are within the prior art? This is unfortunately a disturbing trend that has been brought about by a misreading of KSR.
On Friday, July 6, 2012, the United States Court of Appeals for the Federal Circuit issued a decision in General Electric Co. v. ITC. The Federal Circuit, per Judge Newman with Chief Judge Rader and Judge Linn, did not give GE a total victory, but victory enough over Mitsubishi. The Federal Circuit affirmed in part and reversed in part the original decision of the ITC, and remanded the case for further proceedings consistent with the decision.
GE appealed the decision of the United States International Trade Commission, which held that certain variable speed wind turbines imported by Mitsubishi Heavy Industries, Ltd. and Mitsubishi Power Systems Americas, Inc. (together “Mitsubishi”) did not violate section 337 of the Tariff Act, 19 U.S.C. §1337. The patents at issue were U.S. Patent No. 7,321,221, U.S. Patent No. 5,083,039 and U.S. Patent No. 6,921,985. On February 1, 2011, the ’039 patent expired, and the Federal Circuit dismissed that portion of the appeal as moot, vacating the Commission’s rulings relative to the ’039 patent. The appeal continued relating to the ‘221 patent and the ‘985 patent, which were the subject of this latest Federal Circuit decision.
Last week the United States Court of Appeals for the Federal Circuit issued a curious decision in Ergo Licensing, LLC v. CareFusion 303, Inc. This decision should send chills down the spine of everyone who has patents in the software space, and needs to be carefully considered by all those who draft patent applications in the software space. The panel was made up of Judges Newman, Linn and Moore. The opinion was delivered by Judge Moore, and a dissent filed by Judge Newman.
Judge Newman explained in dissent that the way in which the Ergo patent was drafted was similar to the way that thousands of similar patents are drafted and that this decision upsets the overwhelming weight of Federal Circuit precedent on the issue. Judge Newman is correct. Whether this becomes one of those decisions that is an aberration of is something to be afraid of remains to be seen, but moving forward your software patent applications should become far more detailed in an effort to deal with this case.