Source: http://www.techlawjournal.com/alert/2007/05/07.asp
Timestamp: 2019-04-20 08:28:02+00:00

Document:
TLJ Daily E-Mail Alert No. 1,576, May 7, 2007.
May 7, 2007, Alert No. 1,576.
5/4. The U.S. Court of Appeals (9thCir) issued its en banc opinion [28 pages in PDF] in Odom v. Microsoft, reversing the judgment of the District Court and remanding.
The Court of Appeals held that a complaint that alleges violation of the federal civil RICO statute based upon the factual allegations that that two companies conspired through a marketing agreement to fraudulently charge for services not ordered by customers survives a motion to dismiss for failure to state a claim.
The plaintiff, James Odom, alleged in his complaint that Microsoft and Best Buy entered into a marketing agreement under which Best Buy would market Microsoft's MSN internet access service. When customers bought certain products at a Best Buy store by credit or debit card, Best Buy would forward their purchase and credit card information to Microsoft. Microsoft would provide them a limited time free MSN internet access account, and thereafter charge the customers' accounts for monthly internet access service, without the customers' knowledge or consent.
Odom alleged that this violated the Racketeer Influenced and Corrupt Organizations Act (RICO), at 18 U.S.C. §§ 1962(c) and (d), and wire fraud (with RICO as the predicate offense) in violation of 18 U.S.C. § 1343. The RICO provides a civil cause of action, with treble damages.
The District Court dismissed for failure to state a claim pursuant to Rule 12(b)(6), Federal Rules of Civil Procedure. It held that Odom had failed to allege associated-in-fact enterprise within the meaning of the RICO under Rule 12(b)(6), and that he failed to plead wire fraud with particularity under Rule 9(b).
Section 1962(c) provides that "It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt."
The Court of Appeals reviewed Supreme Court precedent and concluded that it "should not read the statutory terms of RICO narrowly".
It held that "associated-in-fact enterprise under RICO does not require any particular organizational structure, separate or otherwise."
It concluded that "To establish the existence of such an enterprise, a plaintiff must provide both ``evidence of an ongoing organization, formal or informal,´´ and ``evidence that the various associates function as a continuing unit.´´", citing the Supreme Court's opinion in United States v. Turkette, 452 U.S. 576 (1981). It further concluded that Odom complaint satisfied this test.
The Congress originally enacted the RICO to give federal prosecutors another tool for prosecuting criminal mobsters. The Court of Appeals noted that its "broad definition of an associated-in-fact enterprise would produce undesirably expansive RICO liability", but concluded that it was bound by prior Supreme Court cases.
The Court of Appeals also held that Odom alleged wire fraud with sufficient particularity to satisfy Rule 9(b). It then remanded to the District Court for further proceedings consistent with this opinion.
The fifteen member en banc panel was unanimous as to the decision to reverse. However, there were several concurring opinions. Several Judges would have reversed on grounds other than interpretation of the RICO. Two Judges found "outlandish" the interpretation that the conduct in case could arise to the level of a RICO violation, but voted for reversal because of Supreme Court precedent.
This case is James Odom v. Microsoft Corporation and Best Buy, Co., U.S. Court of Appeals for the 9th Circuit, App. Ct. No. 04-35468, an appeal from the U.S. District Court for the Western District of Washington, D.C. No. CV-03-02976-MJP.
4/30. The Supreme Court of the US (SCUS) issued its unanimous opinion [31 pages in PDF] in KSR International v. Teleflex, a case regarding patent obviousness. The SCUS reversed the January 6, 2005, opinion [15 pages in PDF] of the U.S. Court of Appeals (FedCir) and remanded.
Section 103 provides that one cannot obtain a patent on an invention that is "obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains". This opinion rejects the Federal Circuit's application of its TSM test for obviousness. This opinion will make it easier for patent examiners and federal judges to reject applications and patents on grounds of obviousness.
This is a patent dispute involving adjustable floor pedals. The Court of Appeals merely issued a non-precedential opinion. However, the subject of obviousness is pertinent to technology related patents.
This case attracted consideration outside attention. The Supreme Court received over three dozen amicus curiae briefs on the merits. Many were submitted by technology companies (including Cisco, Intel, IBM, Qualcomm, and Time Warner, IAC/Interactive, and Viacom) and groups that are active on technology related issues (including the Business Software Alliance, Progress and Freedom Foundation, Computer and Communications Industry Association, American Intellectual Property Law Association, and Intellectual Property Owners Association).
35 U.S.C. § 103 addresses "Conditions for patentability; non-obvious subject matter". Subsection (a) references obviousness. It provides that "A patent may not be obtained though the invention is not identically disclosed or described as set forth in section 102 of this title, if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains. Patentability shall not be negatived by the manner in which the invention was made."
Proceedings Below. The plaintiffs below are Teleflex International and Technology Holding Company. Teleflex is the assignee of U.S. Patent No. 6,237,565 B1, titled "adjustable pedal assembly with electronic throttle control". It pertains to things on the floor of a car that are used to control gas, breaking, and the clutch.
The plaintiffs filed a complaint in U.S. District Court (EDMich) against KSR International alleging infringement of this patent. The District Court granted summary judgment to KSR. It held that the sole claim of the patent at issue in the case is invalid for obviousness. That opinion is reported at 298 F. Supp. 2d 581.
Teleflex appealed. The U.S. Court of Appeals (FedCir) issued its non-precedential opinion [PDF] vacating the judgment and remanding.
The Federal Circuit continued that "Our case law makes clear that the best defense against the subtle but powerful attraction of a hindsight-based obviousness analysis is rigorous application of the requirement for a showing of the teaching or motivation to combine prior art references."
It concluded that "we have consistently held that a person of ordinary skill in the art must not only have had some motivation to combine the prior art teachings, but some motivation to combine the prior art teachings in the particular manner claimed."
The Federal Circuit's approach or test is also know by an acronym, TSM.
Supreme Court. Justice Kennedy wrote the unanimous opinion of the SCUS.
The Supreme Court last examined Section 103 in its 1966 opinion in Graham v. John Deere Co., 383 U.S. 1.
The Supreme Court began by "rejecting the rigid approach of the Court of Appeals. Throughout this Court's engagement with the question of obviousness, our cases have set forth an expansive and flexible approach inconsistent with the way the Court of Appeals applied its TSM test here."
The Supreme Court reviewed, and offered this summation of, its last half Century of precedent: "When a work is available in one field of endeavor, design incentives and other market forces can prompt variations of it, either in the same field or a different one. If a person of ordinary skill can implement a predictable variation, §103 likely bars its patentability. For the same reason, if a technique has been used to improve one device, and a person of ordinary skill in the art would recognize that it would improve similar devices in the same way, using the technique is obvious unless its actual application is beyond his or her skill."
Although, the Court conceded that "Following these principles may be more difficult in other cases than it is here because the claimed subject matter may involve more than the simple substitution of one known element for another or the mere application of a known technique to a piece of prior art ready for the improvement. Often, it will be necessary for a court to look to interrelated teachings of multiple patents; the effects of demands known to the design community or present in the marketplace; and the background knowledge possessed by a person having ordinary skill in the art, all in order to determine whether there was an apparent reason to combine the known elements in the fashion claimed by the patent at issue."
The Supreme Court wrote that the Federal Circuit's TSM test "captured a helpful insight", but as it is applied by the Federal Circuit is incompatible with Supreme Court precedent.
It elaborated that "The obviousness analysis cannot be confined by a formalistic conception of the words teaching, suggestion, and motivation, or by overemphasis on the importance of published articles and the explicit content of issued patents. The diversity of inventive pursuits and of modern technology counsels against limiting the analysis in this way. In many fields it may be that there is little discussion of obvious techniques or combinations, and it often may be the case that market demand, rather than scientific literature, will drive design trends. Granting patent protection to advances that would occur in the ordinary course without real innovation retards progress and may, in the case of patents combining previously known elements, deprive prior inventions of their value or utility."
It added that "The flaws in the analysis of the Court of Appeals relate for the most part to the court’s narrow conception of the obviousness inquiry reflected in its application of the TSM test. In determining whether the subject matter of a patent claim is obvious, neither the particular motivation nor the avowed purpose of the patentee controls. What matters is the objective reach of the claim. If the claim extends to what is obvious, it is invalid under §103."
The Supreme Court then applied these principles to the claimed invention in this case, and found it obvious. Hence, it reversed the judgment of the Court of Appeals.
Reaction. The Computer and Communications Industry Association (CCIA) filed an amicus curiae brief [PDF] on the merits urging reversal. After the ruling, Ed Black, head of the CCIA, stated in a release that "We are encouraged by the Court’s efforts to clamp down on obvious patents ... This is the Court's second unanimous decision in recent months that tries to rein in runaway patents. It reaffirms what we have always said: the patent system's purpose is to promote innovation, not patents. Real patent reform is still needed to reduce the vast number of junk patents."
Robert Holleyman, head of the Business Software Alliance (BSA), stated in a release that "The ruling in the KSR case will improve patent quality by enabling examiners and the courts to deny patents to questionable applications. "
He added that the the decision in this case and in Microsoft v. AT&T do not diminish "the need for Congress to act quickly to modernize our existing law. We strongly urge Congress to adopt The Patent Reform Act of 2007, introduced a few weeks ago in the US House of Representatives and the US Senate."
Solveig Singleton, of the Progress and Freedom Foundation (PFF), wrote in a release that "A more narrow opinion that still addresses the substantive issue of obviousness is hard to imagine. There was little guidance from the Court on the systemic issues raised by amici and the parties, such as evidentiary standards, presumptions of validity, how or why to improve the examiner’s and the courts' access to the opinions of ``persons of ordinary skill in the art,´´ and so on." See also, amicus curiae brief [25 pages in PDF] of the PFF urging reversal.
See also, amicus curiae brief of the Office of the Solicitor General, on the merits, urging reversal.
This case is KSR International Co. v. Teleflex, Inc., et al., Supreme Court of the U.S., Sup. Ct. No. 04-1350, a petition for writ of certiorari to the U.S. Court of Appeals for the Federal Circuit, App. Ct. No. 04-1152. The Court of Appeals heard an appeal from the U.S. District Court for the Eastern District of Michigan, D.C. No. 02-74586.
See also, Supreme Court docket and transcript [75 pages in PDF] of November 28, 2007, oral argument.
See also, story titled "Supreme Court Grants Cert in Patent Obviousness Case" in TLJ Daily E-Mail Alert No. 1,399, July 26, 2006, and story title "Supreme Court Requests Brief From Solicitor General in Patent Obviousness Case" in TLJ Daily E-Mail Alert No. 1,227, October 5, 2005.
4/30. The Supreme Court of the U.S. issued its opinion [30 pages in PDF] in Microsoft v. AT&T [PDF], a patent infringement case involving interpretation of 35 U. S. C. § 271(f)(1). The Supreme Court held that Microsoft is not liable for violation of Section 271(f)(1), and reversed judgment of the Court of Appeals.
Background. The Supreme Court wrote in its opinion that "Windows is designed, authored, and tested at Microsoft's Redmond, Washington, headquarters. Microsoft sells Windows to end users and computer manufacturers, both foreign and domestic. Purchasing manufacturers install the software onto the computers they sell. Microsoft sends to each of the foreign manufacturers a master version of Windows, either on a disk or via encrypted electronic transmission. The manufacturer uses the master version to generate copies. Those copies, not the master sent by Microsoft, are installed on the foreign manufacturer's computers. Once assembly is complete, the foreign-made computers are sold to users abroad."
AT&T is the assignee of U.S. Patent Number Reissue 32,580, titled "Digital Speech Coder", which is a reissue of U.S. Patent Number 4,472,832.
The Supreme Court wrote that this '580 patent "is for an apparatus ... capable of digitally encoding and compressing recorded speech." It continued that Windows "contains software that enables a computer to process speech in the manner claimed by the ’580 patent.
AT&T filed a complaint in 2001 in U.S. District Court (SDNY) against Microsoft alleging infringement of this '580 patent for domestic and foreign installations of Windows.
However, the matter in this proceeding is the use of the master disks and electronic transmissions that Microsoft dispatched to foreign manufacturers.
The District Court held that Microsoft is liable for infringement. The U.S. Court of Appeals (FedCir) affirmed in a divided opinion [pages in DPF] issued on July 13, 2005. This opinion is also reported at 414 F. 3d 1366.
Section 271(f). Section 271 pertains to infringement of patents. For example, Subsection 271(a) provides in part that "whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent."
That is, this section does not have extraterritorial reach. It does not apply to things made and sold in another country.
However, Subsection 271(f)(1), which is at issue in this case, provides that "Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer."
Supreme Court Holding. The Supreme Court summed up the pertinent facts as follows: "AT&T holds a patent on an apparatus for digitally encoding and compressing recorded speech. Microsoft's Windows operating system, it is conceded, has the potential to infringe AT&T’s patent, because Windows incorporates software code that, when installed, enables a computer to process speech in the manner claimed by that patent. It bears emphasis, however, that uninstalled Windows software does not infringe AT&T’s patent any more than a computer standing alone does; instead, the patent is infringed only when a computer is loaded with Windows and is thereby rendered capable of performing as the patented speech processor."
The Supreme Court wrote that the question presented is, "Does Microsoft’s liability extend to computers made in another country when loaded with Windows software copied abroad from a master disk or electronic transmission dispatched by Microsoft from the United States?"
It held that Microsoft is not liable. It reasoned that "The master disk or electronic transmission Microsoft sends from the United States is never installed on any of the foreign-made computers in question. Instead, copies made abroad are used for installation. Because Microsoft does not export from the United States the copies actually installed, it does not ``suppl[y] ... from the United States´´ ``components´´ of the relevant computers, and therefore is not liable under §271(f) as currently written.
Hence, it reversed the judgment of the Court of Appeals.
Reaction. After the Supreme Court issued its opinion, Robert Holleyman, head of the Business Software Alliance (BSA), stated in a release that this decision "will re-establish incentives for software companies to conduct research and development in the US." He also said that this ruling, and the ruling in KSR v. Teleflex, "will go a long way in enhancing future innovation and productivity". Microsoft is a member of the BSA.
Microsoft's General Counsel, Brad Smith, stated in a release that this "decision is important for the entire information technology industry, adding clarity and balance to our patent system. This decision promotes a global patent system that works. The ruling ensures that U.S. courts, like courts elsewhere, can respect the patent laws of other countries, helping promote cooperation among patent systems worldwide."
He added that this decision "has implications for many of our other patent cases. In particular, we believe the damage awards against Microsoft in both the Alcatel-Lucent and Eolas cases will be revisited in light of this ruling, and we welcome this result."
This case is Microsoft Corporation v. AT&T Corp., Supreme Court of the U.S., Sup. Ct. No. 05–1056, a petition for writ of certiorari to the U.S. Court of Appeals for the Federal Circuit, App. Ct. No. 04-1285. The Court of Appeals heard an appeal from the U.S. District Court for the Southern District of New York, D.C. No. 01-CV-4872.
See also, Supreme Court docket, and transcript [65 pages in PDF] of February 21, 2007, oral argument.
The House will meet at 12:30 PM for morning hour, and at 2:00 PM for legislative business. The House will consider numerous non-technology related items under suspension of the rules. Votes will be postponed until 6:30 PM. See, House Majority Leader Hoyer's weekly calendar [PDF].
The Senate will meet at 2:15 PM for morning business. At 4:00 PM it will resume consideration of of S 1082, the Food and Drug Administration authorization bill.
2:00 PM. The U.S. Court of Appeals (FedCir) will hear oral argument in Ethos Technologies v. RealNetworks, a patent infringement case involving music download technology, in which the District Court entered judgment of non-infringement. This case is App. Ct. No. 2006-1552, an appeal from the U.S. District Court for the District of Massachusetts. Location: Courtroom 201, 717 Madison Place, NW.
Deadline to submit applications to the Federal Communications Commission (FCC) to participate in its rural health care pilot subsidy program. See, FCC Public Notice [PDF] (DA 07-1188).
Deadlines to submit comments to the Office of the U.S. Trade Representative (OUSTR) regarding its complaint filed with the World Trade Organization (WTO) regarding the People's Republic of China's (PRC) failure to fulfill its treaty obligations regarding the protection of intellectual property rights. See, notice in the Federal Register, April 23, 2007, Vol. 72, No. 77, at Pages 20144-20146, and notice in the Federal Register, April 23, 2007, Vol. 72, No. 77, at Pages 20143-20144.
The House will meet at 10:30 AM for morning hour, and at 12:00 NOON for legislative business. The House will consider numerous non-technology related items. See, House Majority Leader Hoyer's weekly calendar [PDF].
9:00 AM - 1:00 PM. The Federal Trade Commission (FTC) and the Department of Justice’s (DOJ) Antitrust Division will hold another of their long running series of workshops on single firm conduct and Section 2 of the Sherman Act. The FTC and DOJ also announced that this is the last panel. The speakers will be Susan Creighton (Wilson Sonsini), Jeffrey Eisenach (Chairman of Criterion Economics), Douglas Melamed (Wilmer Hale), Timothy Muris (George Mason University and O'Melveny & Myers), Robert Pitofsky (Georgetown University Law Center and Arnold & Porter), James Rill (Howrey), Rick Rule (Cadwalader Wickersham & Taft), Gregory Sidak (Georgetown University Law Center). See, FTC notice. Location: FTC HQ, Room 432, 600 New Jersey Ave., NW.
Bruce Schneier (BT Counterpane), and Janice Kephart (9/11 Security Solutions). Press contact: Tracy Schmaler at 202-224-2154 or Tracy_Schmaler at judiciary dot senate dot gov. See, notice. Location: Room 226, Dirksen Building.
10:00 AM. The Senate Commerce Committee (SCC) will meet in executive session. See, notice. Location Room 253, Russell Building.
3:00 PM. The House Rules Committee will meet to adopt a rule for consideration of HR 1684, the "Department of Homeland Security Authorization Act for Fiscal Year 2008". Location: Room H-313, Capitol Building.
9:30 AM. The House Commerce Committee's (HCC) Subcommittee on Commerce, Trade, and Consumer Protection, the House Ways and Means Committee's (HWMC) Subcommittee on Trade, and the House Financial Services Committee's (HFSC) Subcommittee on Domestic and International Monetary Policy, Trade, and Technology will hold a joint hearing titled "Currency Manipulation and Its Effects on U.S. Business and Workers". See, HWMC notice and HFSC notice. Location: Room 1100, Longworth Building.
10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Verve v. Hypercom, a patent infringement case involving electronic payments systems technology. Verve alleged infringement of U.S. Patent No. 4,562,341. Hypercom prevailed below. This case is App. Ct. No. 2006-1469, an appeal from the U.S. District Court for the District of Arizona, D.C. No. 05-CV-0365-PHX-FJM. Location: Courtroom 201, 717 Madison Place, NW.
10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in AllVoice Computing v. Nuance Communications, a patent infringement case involving speech recognition technology, in which the District Court granted judgment of invalidity. This case is App. Ct. No. 2006-1440, an appeal from the U.S. District Court for the Southern District of Texas. Location: Courtroom 203, 717 Madison Place, NW.
10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in All Computers v. Intel, a patent infringement case involving microprocessor technology, in which the District Court granted summary judgment for Intel. This case is App. Ct. No. 2007-1016, an appeal from the U.S. District Court for the Eastern District of Virginia. Location: Courtroom 203, 717 Madison Place, NW.
2:00 - 4:00 PM. The Copyright Office (CO) and the U.S. Patent and Trademark Office (USPTO) will hold a "public roundtable discussion concerning the work at the World Intellectual Property Organization (WIPO) in the Standing Committee on Copyright and Related Rights (SCCR) on a proposed Treaty on the Protection of the Rights of Broadcasting Organizations". The CO and USPTO add that "The deadline for receipt of requests to observe or participate in the roundtable is 5:00 p.m. on Friday, May 4, 2007." See, notice in the Federal Register, April 12, 2007, Vol. 72, No. 70, at Pages 18493-18494. See also, WIPO's March 8, 2007, paper [MS Word] titled "Draft Non-paper on the WIPO Treaty on the Protection of Broadcasting Organizations", which includes draft treaty language. Location: Mumford Room, 6th floor, Madison Building, Library of Congress, 101 Independence Ave., SE.
2:00 PM. The House Rules Committee will meet to adopt a rule for consideration of HR 2082, the intelligence authorization bill. Location: Room H-313, Capitol Building.
The House will meet at 9:00 AM and recess immediately for the Former Members' Association annual meeting. It will meet again at 10:00 AM for legislative business. The House may consider HR 1684, the "Department of Homeland Security Authorization Act for Fiscal Year 2008", subject to a rule, and HR 2082, the intelligence authorization bill, subject to a rule. See, House Majority Leader Hoyer's weekly calendar [PDF].
8:00 AM - 5:30 PM. The Information Technology Association of America (ITAA) will host a conference titled "The New New Internet: IPv6 conference". See, notice. For more information, contact Trey Hodgkins at thodgkins at itaa dot org. Location: Hyatt Regency, Arllington, VA.
9:30 AM. The House Commerce Committee's (HCC) Subcommittee on Telecommunications and the Internet will hold a hearing titled "Digital Future of the United States: Part V: The Future of Video". Location: Room 2123, Rayburn Building.
9:30 AM. The House Judiciary Committee (HJC) will hold a hearing titled "Oversight Hearing on the Department of Justice". See, notice. Location: Room 2141, Rayburn Building.
11:00 - 11:30 AM. The U.S. Chamber of Commerce will host an event titled "Intellectual Property Enforcement: An Update from the Administration". The speaker will be Carlos Gutierrez, Secretary of Commerce. For more information, please contact Katie Wilson at 202-463-5500 or email ncfevents at uschamber dot com. See, notice and registration page. Location: U.S. Chamber, 1615 H St., NW.
5/4. Kenneth Melson was named Director of the Department of Justice's (DOJ) Executive Office for United States Attorneys (EOUSA), effective on May 14, 2007. He has worked for the DOJ since 1983. He replaces Michael Battle.
5/3. The Senate Judiciary Committee (SJC) approved the nomination of Debra Ann Livingston to be a Judge of the U.S. Court of Appeals for the Second Circuit. See, Congressional Record, May 3, 2007, at Page S5531.
5/3. The Senate Judiciary Committee (SJC) approved the nomination of Richard Sullivan to be a Judge of the U.S. District Court for the Southern District of New York. See, Congressional Record, May 3, 2007, at Page S5531.
5/3. The Senate Judiciary Committee (SJC) approved the nomination of Joseph Van Bokkelen to be a Judge of the U.S. District Court for the Northern District of Indiana. See, Congressional Record, May 3, 2007, at Page S5531.
4/25. The Senate Judiciary Committee (SJC) approved the nomination of Frederick Kapala to be a Judge of the U.S. District Court for the Northern District of Illinois.
4/25. The Senate Judiciary Committee (SJC) approved the nomination of Benjamin Hale Settle to be a Judge of the U.S. District Court for the Western District of Washington.
4/26. The U.S. Court of Appeals (10thCir) issued its opinion [PDF] in Klesch & Company v. Liberty Media, disputes regarding agreements to purchase regional cable infrastructure in Germany from Deutsche Telekom. The Court of Appeals affirmed the District Court's judgment for Liberty Media. This case is Klesch & Company Limited v. Liberty Media Corporation, John C. Malone, and Robert R. Bennett, U.S. Court of Appeals for the 10th Circuit, App. Ct. No. 05-1206, an appeal from the U.S. District Court for the District of Colorado, D.C. No. 01-D-1456 (CBS).

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