Posts in Courts

Mark Towle owns Gotham Garage, which manufactures and sells replicas of automobiles featured in famous motion pictures and television programs. Gotham Garage specifically sold fully constructed cars as well as kits which allow customers to modify their car to look like the Batmobile, and advertised its replicas as “Batmobiles” while marketing its business via the domain name batmobilereplicas.com. In May 2011, DC Comics filed suit against Towle for copyright infringement, trademark infringement and unfair competition arising out of Towle’s marketing and sale of Batmobile replicas. Towle countered that the Batmobile – at least as it appeared in the famous 1966 television series and the 1989 motion picture, the main inspirations for Gotham Garage’s designs – was not subject to copyright protection.

The Federal Circuit disagreed, holding that “record evidence establishe[d] a genuine dispute over whether a person of ordinary skill would have been motivated to add a vent to Hoang’s disinfecting cap.” The Court also held that “the tradeoff between the desire to retain cleaning agent and the patents’ disclosure regarding drying is a factual matter left to the factfinder.”

What may be less well known is that Octane was not itself a “patent troll” case. Rather, Octane involved another kind of abusive patent litigation; namely, a large company asserting a patent it pulled “off the shelf” against a small start-up competitor. While patent trolls gain economic advantage through economies of scale, large companies have economic advantages over smaller competitors by virtue of their size and resources, and can similarly abuse the system. They can use the high cost to defend patent litigation as a competitive weapon, either to force the smaller competitor to exit the market, discontinue a product line, or pay an unwarranted royalty (thereby hindering the competitor in the marketplace). On remand, the District Court in the Octane case recognized just this sort of economic coercion, and found the case exceptional warranting a fee award. And last week, the District Court awarded almost $2 million in fees and costs to Octane, the prevailing accused infringer.

The patent system our government has created over the last decade incentivizes stealing patent rights rather than engaging in an arm length negotiation. This is antithetical to basic, fundamental principles embedded throughout American law. The laws in the United States are supposed to be certain, stable and understandable. By minimizing externalities and keeping transaction costs low bargaining of rights will ensue, which will lead to an efficient outcome. Obstacles to bargaining and/or poorly defined property rights lead to an inefficient marketplace. To fix the patent system we must return to certainty and strong patent rights, which will push actors into arm-length negotiations rather than into costly patent litigation.

The panel decision in this case reads recent Supreme Court precedent to create an existential threat to patent protection for an array of meritorious inventions. It avowedly holds that “groundbreaking” new diagnostic methods that make a significant contribution to the medical field” are ineligible for a patent whenever they (1) incorporate the discovery of a natural phenomenon, and (2) the techniques involved in putting that discovery to its first practical use were individually known beforehand. In other words, the person who first discovers a natural phenomenon can never obtain a patent on any practical application of that new knowledge, however surprising or revolutionary the results, unless the steps she teaches to use it are independently novel. As the example of this case vividly shows, that cannot be correct.

The Federal Circuit held that the Board correctly placed the burden on Dynamic to prove that Raymond was entitled to the filing date of its provisional application under § 119(e)(1). As the petitioner, Dynamic had the ultimate burden of persuasion to prove unpatentability by a preponderance of the evidence. As for the burden of production, Dynamic satisfied its initial burden by arguing that the claims were anticipated by Raymond under § 102(e)(2). However, this burden then shifted back to Dynamic when the patent owner provided evidence that the claimed invention was reduced to practice before Raymond’s filing date. The burden was then on Dynamic to prove that Raymond was entitled to an earlier effective date.

While Dome’s argument against obviousness based on Tanaka teaching away was plausible, it was not sufficient to overcome the district court’s factual findings that a person of ordinary skill would have been motivated to combine the identified prior art to arrive at the claimed invention. Accordingly, the Federal Circuit affirmed.

This is a really important question both with respect to biologics and other interventions and also as the Federal Circuit does work with the Supreme Court’s body of precedents. We have basically two principle points. One is that in our view the Federal Circuit has to do a better job rationalizing and reconciling two different sets of precedent. One is the set of modern cases and the second is an older case that the modern cases embrace, Diamond vs. Diehr, which as we understand it adopts exactly the opposite rule from the Federal Circuit in this case, which is that the combination is what has to be new not the individual processes. And then second we believe that we have a case that fits squarely within what the Supreme Court intended to remain patent eligible after those more modern cases. So we filed an en banc petition and we thought that there would be amicus support for sure. But what we didn’t expect, to be honest, was the outpouring of interest and support that we received.

Since the preferred embodiment did not have patentable characteristics that are distinct from other disclosed embodiments, the Court held that “the patentee [was] entitled to claim scope commensurate with the invention that [was] described in the specification.” The Court also held that the doctrine of claim differentiation was applicable here, since the “two severable score lines” limitation only appeared in a dependent claim but not in any independent claims. In other words, the presence of the “two severable score lines” limitation in a dependent claim gave rise to a presumption that such a limitation was not present in the independent claim.

As the amici correctly argue, the panel’s decision striking down Sequenom’s noninvasive prenatal test strikes at the very heart of the patent system. Revolutionary diagnostic testing methods that cost tens of millions of dollars to produce should be the flagship of the modern patent system. But the panel’s misapplication of Mayo calls into doubt many meritorious inventions that benefit us all. Moreover, the panel’s reasoning simply cannot be squared with several innovations that the Supreme Court has historically upheld as proper statutory subject matter. Hopefully the entire Federal Circuit will agree to take up this important case so that vital innovations such as Sequenom’s patented method continue to be produced.

The Federal Circuit held that the structure and language of §122(a) indicate that Congress intended the exceptions to confidentiality to be narrow and reviewable. §122(a) contains two portions: a mandatory clause follows by two exceptions. The word ‘shall’ in the first portion of the provision made it mandatory for the PTO to maintain the confidentiality of patent applications. In addition, the word ‘necessary’ in the first exception indicated a narrow exception and afforded the agency no discretion. In light of this, coupled with the language of the second exception, the Court concluded that the PTO’s determination of “special circumstances” in the second exception is reviewable.

Applying KSR, the Federal Circuit concluded that combining elements from the cited prior art would have yielded a predictable result, namely the system fan would activate periodically following the end of a heating or cooling cycle as claimed in the ‘017 patent. The Court further found motivation or rationale for combining the references in the nature of the problem addressed. The Federal Circuit also rejected ABT’s arguments regarding the objective evidence of nonobviousness, namely commercial success and long felt need.

The Federal Circuit explained that evidence of third-party use bears on the strength or weakness of an opposer’s mark. In this case, which arose as an appeal from the TTAB, the evidence demonstrated“ubiquitous use of paw prints on clothing as source identifiers. According to the Federal Circuit, given the widespread use of paw prints, consumers would know to look for additional indicia of origin rather than just the paw designs. The evidence, therefore, demonstrated that consumers are not as likely confused by different, albeit similar looking, paw prints.

The United States District Court for the Southern District of Indiana ruled in favor of Eli Lilly (NASDAQ: LLY), issuing a final judgment in the Hatch-Waxman infringement litigation relating to U.S. Patent No. 7,772,209. This matter arose as the result of the defendants’ filing of Abbreviated New Drug Applications (ANDAs) with the Food and Drug Administration (FDA). The ‘209 patent, covering a method of use, protects the co-administration of pemetrexed disodium with two nutrients – folic acid and vitamin B12, which protects against the side effects of the drug Alimta®. The district court found direct infringement by administering physicians under § 271(a), and thus inducement of infringement by Defendants under § 271(b).

Reversing the panel en banc, the Federal Circuit found that the ITC does have jurisdiction to issue an exclusion order predicated on induced infringement. Under Chevron step two, the Court deemed that the ITC’s interpretation of Section 337 was reasonable because it was “consistent with the statutory text, policy, and legislative history of Section 337,” as “Section 337 contemplates that infringement may occur after importation.” Further, the panel’s interpretation of Section 337 would unnecessarily “eliminate relief for the unfair trade act and induced infringement” by allowing foreign entities “to circumvent Section 337 by importing articles in a state requiring post-importation combination or modification before direct infringement could be shown.”