Source: https://www.mwe.com/en/thought-leadership/publications/2008/04/ip-update-vol-11-no-4-april-2008
Timestamp: 2018-08-16 14:14:32
Document Index: 429111330

Matched Legal Cases: ['§ 271', '§ 271', '§10', '§9', '§10', '§ 285', '§ 112', '§ 112', '§ 112', '§ 112', '§ 112', '§112', '§112', '§112', '§ 261', '§ 261', '§ 261', '§ 271', '§ 271', '§271', '§271', '§ 271', '§ 355', '§ 271', '§ 355', '§ 271', '§ 355', '§ 355', '§ 271', '§1125', '§ 1117']

IP Update, Vol. 11, No. 4, April 2008 | Publications | Thought Leadership | McDermott Will and Emery
IP Update, Vol. 11, No. 4, April 2008
Supreme Court / Arbitration Awards - Federal Arbitration Act: Contract Cannot Expand Scope of Judicial Review
Patents / Claim Construction - All Disputed Claim Terms Must Be Construed
Patents / Claim Construction - Disavowed Claim Scope During Prosecution Gone for Good
Patents / Classes of Subject Matter - Patent Claims May (Sort of) Mix Classes of Subject Matter—But Who Cares?
Patents / Obviousness - Presumption of Validity Zapped by Prior Art Commercial Product
Patents / Declaratory Judgment Jurisdiction - Declaratory Judgment Jurisdiction Despite Covenant Not to Sue
Patents / Means Plus Function - Corresponding Structure Must Be an Algorithm, Not Just a Computer
Patents / Standing - Heir’s Right to a Patent Not a Question of Federal Law
Patents / § 271(e)(1) Safe Harbor - Safe Harbor Applies to ITC Action Based on Foreign Practice of Patent Process
(Web Only) Patents / Validity/ Hatch-Waxman Act - District Court Did Not Err in Resetting Effective Date of ANDA Under 35 U.S.C. § 271
Software / Litigation - An Untimely Notice of Appeal Dooms Appellate Jurisdiction
Patents / Software in UK - English High Court Clarifies Patentability Test for Software Inventions
Trademarks / Misappropriation Use - Use, Not Conception, Governs Priority of Trademark Rights
Trademarks / Infringement - Mischaracterization of Relationship Violates Trademark Rights
(Web Only) Trademarks / Infringement - Bad Faith Increases Damage Award for Infringement
(Web Only) Internet Law / Free Speech—Case Update - Ninth Circuit Rejects Petition for Rehearing En Banc, Upholding Its Decision that Vote-Swapping Websites Cannot be Prosecuted Under Vote-Buying Statutes
Patents - PTO Final Rules Permanently Enjoined
Legislative Update / Patent Reform - “Just a Handful of Words” Places Patent Reform Act on Indefinite Hold
Supreme Court / Arbitration Awards
Federal Arbitration Act: Contract Cannot Expand Scope of Judicial Review Contact Paul Devinsky
A recent Supreme Court decision limiting the grounds available for modifying or vacating an arbitrator’s award under the Federal Arbitration Act (FAA) may give pause to parties contemplating arbitration. The FAA provides for expedited judicial consideration of an arbitration award when a party moves for an order confirming, vacating or modifying the award. But this streamlined treatment comes at a cost. In a 6-3 decision, the Supreme Court resolved a split among the Courts of Appeal in holding that the grounds for judicial review of arbitration awards under the FAA are limited to those stated in §§10-11 of the FAA and cannot be expanded by contract. Hall Street Assoc. LLC v. Mattel, Inc., Case No. 06-989 (Supr. Ct., Mar. 25, 2008) (Souter, J.; Stevens, J.: Kennedy, J.; and Beyer, J., dissenting).
In Hall Street the parties proposed to arbitrate landlord Hall Street’s claim for indemnification of the costs of cleaning pollutants from a site leased by Mattel. The parties’ arbitration agreement, approved by the district court, required the court to vacate, modify or correct any award if the arbitrator’s conclusions of law were erroneous. Vacatur or modification for legal error is not among the statutory grounds specified in the FAA. The Supreme Court granted certiorari to consider whether the FAA’s statutory grounds are exclusive or whether parties may, by agreement, expand the scope of judicial review of arbitration awards.
The Court held that §9 of the FAA is unequivocal in requiring courts to grant confirmation of arbitration awards in all cases, except when one of the specific exceptions listed in §§10 or 11 applies. The Court characterized these exceptions, which include, inter alia, corruption, fraud and misconduct, as “egregious departures from the parties’ agreed-upon arbitration,” thus rejecting Hall Street’s argument that arbitrating parties can agree to expand the scope of judicial review. According to the Court, the limited review provided for in the FAA “maintain[s] arbitration’s essential virtue of resolving disputes straightaway.” A more expansive review of arbitration awards would open the door to full-bore legal and evidentiary appeals, rendering “informal arbitration merely a prelude to a more cumbersome and time-consuming judicial review process” and “bring[ing] arbitration theory to grief in post-arbitration process.”
The Court noted the parties’ disparate forecasts of the results of its decision: one side claiming that parties will flee from arbitration if expanded review is not available; the other foreseeing flight from the courts if it is. Regardless of whether its decision is “more of a threat to the popularity of the arbitrators or to that of courts,” the Court concluded that the language of the FAA did not permit expansion of the grounds under which a party could seek review by a court. The Court noted, however, that the FAA is not the only road open to a party disputing an arbitrator’s determination; other avenues, such as state statutory or common law, may provide a different scope of review for arbitration awards.
All Disputed Claim Terms Must Be Construed
In a rare reversal of the patent-savvy Judge Ward of the U.S. District Court for the Eastern District of Texas, the U.S. Court of Appeals for the Federal Circuit vacated a jury verdict of infringement and vacated a permanent injunction finding that it was legal error for the district court not to construe a disputed but “well understood” claim term and to instruct the jury on the doctrine of equivalents in a case in which the only claim term for which the doctrine of equivalents was argued was added by amendment for purposes of patentability. O2 Micro Int’l Ltd.v. Beyond Innovation Tech. Co., et al, Case No. 07-1302 (Fed. Cir., April 3, 2008) (Prost, J.).
O2 Micro brought an infringement action alleging that BiTEK’s inverter controllers infringed several claims of O2 Micro’s patents pertaining to switches for controlling the amount of power (load) on DC to AC converter circuits. During prosecution, the examiner rejected the claims of one of the asserted patents as obvious over the prior art. In response, O2 Micro added a limitation to each of the independent claims reciting that drive circuitry caused the switches to power their loads “only if” a feedback signal was above a predetermined threshold. Following the amendment, the examiner allowed the claims.
Except for two circumstances in which the accused switches continued to power their loads even after the feedback signal was below the predetermined threshold, defendants conceded that BiTEK’s controllers generally practiced the asserted patents. Thus, defendants’ non-infringement position hinged on the accused products not satisfying the “only if” limitation.
During Markman proceedings, defendants argued that the claim term “only if” should be construed by the court and proposed a construction consistent with its non-infringement position. O2 Micro argued that no construction was necessary because the phrase “only if” consisted of “two simple plain English words.” The district court recognized that the parties disputed whether the term allowed for an exception, but declined to construe the term “only if” because it had a “well-understood definition.” During trial, all parties, including O2 Micro, submitted evidence relating to the meaning of the claim term “only if.” O2 Micro additionally argued for infringement of the “only if” limitation under the doctrine of equivalents. At the conclusion of trial, the district court read jury instructions that included an explanation that a claim limitation may be satisfied under the doctrine of equivalents. The jury found infringement of all the asserted claims of the patents at issue. The defendants appealed, arguing it was legal error not to construe “only if” and to instruct the jury on the doctrine of equivalents.
The Federal Circuit agreed that it was legal error for the district court not to construe “only if”: “[w]hen the parties raise an actual dispute regarding the proper scope of [] claims, the court, not the jury, must resolve that dispute.” The Court further explained, “[a] determination that a claim term ‘need no construction’ or has the ‘plain and ordinary meaning’ may be inadequate when a term has more than one ‘ordinary’ meaning or when reliance on a term’s ‘ordinary’ meaning does not resolve the parties’ dispute…[T]he district court failed to resolve the parties’ dispute because the parties disputed not the meaning of the words themselves, but the scope that should be encompassed by this claim language.” While recognizing that it was not the district court’s duty to construe every limitation present in a patent’s asserted claims, the Federal Circuit held that when the parties present a fundamental dispute as to the scope of a claim term, the district court should resolve it.
Further, the Federal Circuit found that it was legal error for the district court to instruct the jury on infringement under the doctrine of equivalents. The Court found that the amendment adding “only if” to the claims was made for purposes of patentability and that the presumption of surrender under Festo had not been rebutted. The Court reasoned that “only if” was not merely tangential to the amended limitation because the objectively apparent reason for the amendment was to require the feedback circuit to be operational “only if said feedback signal is above a predetermined threshold.” Thus, the Court concluded that the doctrine of equivalents instruction was in error because prosecution history estoppel prevented equivalents for that particular claim limitation.
Disavowed Claim Scope During Prosecution Gone for Good
Interpreting a claim preamble and related statements made during prosecution, the U.S. Court of Appeals for the Federal Circuit affirmed a district court’s summary judgment that the defendants did not infringe a patent directed to a portable microprocessor system. Computer Docking Station Corp. v. Dell, Inc., Case Nos. 07-1169, -1316 (Fed. Cir., March 21, 2008) (Rader, J.)
Computer Docking Station (CDS), a subsidiary of patent company Acacia Research, filed suit against computer companies Dell, Gateway, Toshiba America and Toshiba America Information Systems in the U.S. District Court for the Western District of Wisconsin for infringement of U.S. Patent No. 5,187,645 (the ’645 patent). The ’645 patent is directed to a portable microprocessor system for business applications. The system includes the ability to connect peripheral devices—such as a keyboard, mouse or monitor—through either individual connectors for each device or through a docking connector. The specification of the ’645 patent adds that a keyboard and visual display are “options available with the system,” explaining that they may be coupled to the system using individual connectors and thumbscrews. At issue in the case was the claim terms “portable computer,” “portable computer microprocessing system” and a “single connector for making all connections from the microprocessor to said specific computer peripheral devices.”
In response to a rejection during prosecution, CDS made statements distinguishing its invention from a laptop computer with a built-in monitor and keyboard. After reviewing the prosecution history, the district court construed the preamble claim terms “portable computer” and “portable computer microprocessing system” to be limiting and to exclude computers with built-in displays or keyboards. The district court determined that CDS had disavowed an interpretation of “portable computer” that would encompass a computer with a built-in display or keyboard. The district court also denied the defendants’ motion for attorneys’ fees and costs under 35 U.S.C. § 285.
On appeal, the Federal Circuit affirmed the district court’s decision, holding that a patentee may limit the meaning of a claim term by making a clear and unmistakable disavowal of scope during prosecution. The Court also noted that the specification of the ’645 patent does not provide an express definition of “portable computer” that would override or make the distinctions in the prosecution history ambiguous. The Court explained that although the terms “portable computer” and “portable computer microprocessing system” are only used in the preambles of the claims, the terms clearly recite a necessary and defining aspect of the invention and as a result, limit the scope of the asserted claims.
Finally, in response to the defendants’ motion for attorneys’ fees and costs, the Federal Circuit affirmed the district court’s finding that this case is not exceptional. The Federal Circuit held that CDS’s disavowal of laptops did not seem self-evident at the beginning of the claim construction analysis and CDS had put forth sufficient effort to evaluate the likelihood of success on its patent claims.
Patents / Classes of Subject Matter
Patent Claims May (Sort of) Mix Classes of Subject Matter—But Who Cares?
In a case in which the U.S. Court of Appeals for the Federal Circuit found patent claims in issue to not be fatally indefinite (for mixing statutory classes of subject matter), the patent owner (Acacia) nevertheless walked away with nothing. Microprocessor Enhancement Corp. v. Texas Instruments Inc. and Intel Corp., Case Nos. 07-1249, -1286 (Fed. Cir., April 1, 2008) (Gajarsa, J.).
The patent in issue is directed to computer processor architecture and methods for increasing microprocessor efficiency. To execute an instruction, a microprocessor must perform a sequential series of five tasks, each in a fixed time interval defined by a clock cycle. In basic computer architectures the entire microprocessor is devoted to the sequential performance of these steps, such that a complete instruction is written to memory at a rate of one instruction per five clock cycles. Conventional pipelined processors are more efficient; one instruction is completed and one instruction is fetched on every clock cycle . However, when a program requires nonlinear instructions that result in “dependencies” among the individual instructions of an instruction set, conditional instructions must be issued so that subsequent instructions may be fetched and executed out of sequence. Such conditional instructions modify the architecture of a pipelined processor by introducing a new segment called the conditional execution decision logic.
According to the patent, rather than control the issuance of a conditional instruction, the instruction is moved into a functional unit that controls whether the results of a conditional instruction that has been executed will be written to memory. This results in fewer “holes” the pipeline.
The claims in issue were directed to a method of executing instructions but also included limitations directed to a pipelined processor and to a pipelined processor limited by functional language directed to execution of instructions. The district court concluded that the independent claims were “invalid for indefiniteness on the grounds that both claims impermissibly mix two distinct classes of patentable subject matter [i.e., the structure of a pipeline processor and a method of executing instructions in a pipelined processor] and that the claims were insolubly ambiguous for requiring that a single word be [‘condition mode’] interpreted differently in different portions of a single claim.” The plantiiff appealed.
The Federal Circuit concluded that neither claim impermissibly mixed classes of subject matter, noting that “[a] single patent may include claims directed to one or more of the classes of patentable subject matter, but no single claim may cover more than one subject matter class.” Stripped of its claim verbiage, the Court found that the method claim presented the following format:
A method of executing instructions in a pipelined processor comprising:
[structural limitations of the pipelined processor];
Although the Federal Circuit agreed that the “seeming preamble within a preamble structure is unconventional,” the court hinted at its classical roots, noting that “the effect [of this structure] on the definiteness of [the] claim … lacks the conclusiveness with which King Claudius’s guilt is established by his reaction to Hamlet’s play within a play.” Rather, the Court found that the claim simply recited “the physical structures of a system in which the claimed method is practiced,” but did not “lack clarity as to when the mixed subject matter claim[ed] would be infringed.” Here the Court noted direct infringement was “clearly limited to practicing the claimed method in a pipelined processor possessing the requisite structure.” (Emphasis in original.)
Similarly, the Court noted that the apparatus claim was not indefinite or using functional language, noting that such language may be employed to limit the claims even without using the means-plus-function format. Thus, the Court concluded that the apparatus claim was “clearly limited to a pipelined processor possessing the recited structure and capable of performing the recited functions.” (Emphasis in original.)
Finally, the Federal Circuit concluded that the use of the claim term “condition code” was not insolubly ambiguous, even though it had a different meaning depending on the context in which it is used. Here, since use of the term had an antecedent basis within each claim, the Court reasoned that the term need not have the same meaning in both claims (i.e., since the term was not used consistently, it need not be interpreted consistently).
Even though the claims survived the § 112 attack, unfortunately for Microprocessor Enhancement Corp. the Federal Circuit (looking to the prosecution history to limit the meaning and scope of the term “pipeline stage”) affirmed the district court’s summary judgment grant of non-infringement, finding that the district court correctly construed the term “pipeline stage” to have a temporal meaning not met by the accused processors.
Presumption of Validity Zapped by Prior Art Commercial Product
By Krista Vink Venegas, Ph.D.,
The U.S. Court of Appeals for the Federal Circuit reversed a district court’s denial of Woodstream’s judgment as a matter of law (JMOL) of obviousness of Agrizap’s patent to electronic rodent killing devices. The Court’s ruling was noteworthy given Agrizap’s patent issued over the very same invalidating prior art and Agrizap submitted substantial evidence at trial of secondary considerations of non-obviousness that did not save the patent from extermination. Agrizap Inc. v. Woodstream Corp., Case Nos. 07-1415, -1421 (Fed. Cir., March 28, 2008) (Moore, J.).
Agrizap sued Woodstream in the U.S. District Court for the Eastern District of Pennsylvania, alleging, in part, that Woodstream’s Electronic Mouse and Rat Trap products infringed its ’636 patent. Woodstream alleged that the ’636 patent was unenforceable and invalid on several grounds, including obviousness in view of the combination of three prior art patents that were before the U.S. Patent and Trademark Office (USPTO) during the prosecution of the ’636 patent. The jury found that Woodstream infringed and did not find the ’636 patent invalid. The district court overturned the jury verdict finding that Woodstream did not infringe, but also denied Woodstream’s JMOL of the ’636 patent invalidity.
On appeal, the Federal Circuit held that the jury could not have had a legally sufficient basis to find against Woodstream on obviousness. During prosecution, the primary prior art reference was Agrizap’s own ’091 patent, which disclosed all but one of the elements of the ’636 patent. The ’091 patent disclosed a mechanical switch, whereas the ’636 patent claimed a resistive switch that senses the rodent within the trap. The secondary references disclosed resistance sensing electrodes. Agrizap dodged the ’091 patent as prior art during prosecution by adding a common inventor to the pending application.
However, Agrizap could not circumvent the public disclosure of a commercial embodiment of the ’091 patent (Gopher Zapper) more than a year before the ’636 patent filing date. The Gopher Zapper also disclosed all elements of the ’636 patent claims except the resistive switch. In combination with the same secondary references, the Court found the substitution of a mechanical switch for a resistive one a combination of familiar elements leading to predictable results, citing to KSR.
The Court noted that it found itself in the curious position of reviewing the same prior art that the USPTO relied upon to reject the asserted claims. While a presumption of validity usually arises where prior art was already considered and overcome at the USPTO, the Court did not find the granting of the ’636 patent over the ’091 patent dispositive. Nor did the Court find Agrizap’s evidence of commercial success based copying by Woodstream and long-felt need for electronic traps presented to the jury sufficient to overcome its obviousness determination, as was the case in Leapfrog Int’l.
Declaratory Judgment Jurisdiction Despite Covenant Not to Sue
Holding that jurisdiction existed under MedImmune’s “all the circumstances” test, the U.S. Court of Appeals for the Federal Circuit recently reversed a lower court’s finding of no jurisdiction in a Hatch-Waxman declaratory judgment action in which the pharmaceutical patentee had provided the Abbreviated New Drug Application (ANDA) filer a covenant not to sue for the patent-in-suit. Caraco Pharm. Labs., LTD. v. Forest Labs., Inc., Case No. 07-1404 (Fed. Cir., April 1, 2008) (Gajarsa, J.; Friedman, J. dissenting).
As part of obtaining Food and Drug Administration (FDA) approval for its anti-depression drug Lexapro®, Forest listed U.S. Patent Nos. Re. 34,712 and 6,916,941 in the FDA’s Orange Book. After Caraco filed its May 2006 ANDA for generic Lexapro®, which included Paragraph IV certifications for both patents, Forest responded by suing Caraco for infringement of only the ’712 patent. Caraco separately filed a declaratory judgment (DJ) action for non-infringement, but not invalidity, of the ’941 patent.
For Caraco to receive FDA approval for its ANDA, the 180-day exclusivity period belonging to the first ANDA filer, Ivax Pharmaceuticals, must first be triggered by either Ivax’s first commercial marketing or a court decision holding the listed patents invalid or not infringed. Ivax’s ANDA was previously found to infringe the ’712 patent, which was also upheld as valid by the Federal Circuit.
Having already enjoined Ivax’s market entry until the 2012 expiration of the ’712 patent, Forest further attempted to prevent Caraco from gaining approval by eliminating the possibility of any court decision on the merits regarding the ’941 patent by granting Caraco an irrevocable covenant not to sue for the ’941 patent. Applying the now overruled “reasonable apprehension of suit” test, the district court dismissed Caraco’s case as moot.
Citing to its earlier post-MedImmune decision in Teva v. Novartis (See IP Update, Vol. 10, No. 4), the Federal Circuit held that the controversy between Caraco and Forest resulted from Forest’s attempts to block the FDA from approving Caraco’s ANDA, preventing Caraco’s entry into the market. According to the court, because the dispute was “not premised only upon a threat of an infringement suit,” Forest’s covenant not to sue did not divest the district court of Article III jurisdiction.
In dissent, Judge Friedman, who concurred in Teva v. Novartis, disagreed that declaratory judgment jurisdiction existed because Caraco’s ability to gain FDA approval was contingent upon events that would not be resolved by the DJ action. For one, Caraco still has the hurdle of prevailing in its co-pending infringement suit for the ’712 patent, which is directed toward the escitalopram compound.
Patents / Means Plus Function
Addressing the issue of when a “means-plus-function” claim element (in the context of a computer operated invention) suffers from 35 U.S.C. § 112, ¶ 2 indefiniteness due to the absence of clearly defined corresponding structure, a panel of the U.S. Court of Appeals for the Federal Circuit affirmed a lower court’s decision on summary judgment finding all of the claims of the subject patent invalid for indefiniteness. Aristocrat Technologies Australia PTY Ltd. v. International Game Technology , Case No. 07-1419 (Fed. Cir., March 28, 2008) (Bryson, J.).
The decision arose out of Aristocrat’s appeal of a decision, on summary judgment, that held Aristocrat’s patent claim (that included a § 112, ¶ 6 claim element, i.e., “control means”) invalid for indefiniteness under § 112, ¶ 2. The court stated that in the case of a means-plus-function claim “in which the disclosed structure is a computer or microprocessor programmed to carry out an algorithm, a corresponding structure must be a specific algorithm disclosed in the specification.” Aristocrat appealed.
The patent claimed an improved gaming machine of the type prevalent in casinos. The patent disclosed that the claimed functions could be readily implemented by a non-inventive worker in the art on a microprocessor-based gaming machine by appropriate programming. As there was no evidence to contradict the finding that a skilled artisan could easily program an existing gaming machine to implement the claimed functions, Aristocrat argued that this disclosure complied with § 112, ¶ 2.
The panel disagreed, noting that to avoid purely functional claiming, “the structure disclosed in the specification [must] be more than simply a general purpose computer or microprocessor,” since such disclosure would not limit the scope of the claim to the “corresponding structure, material or acts” as required by §112, ¶ 6. The panel further concluded that while “the sufficiency of the disclosure of algorithmic structure must be judged in the light of what one of ordinary skill in the art would understand the disclosure to impart,” enablement was not the issue where disclosure of §112, ¶ 6 corresponding structure is concerned. Rather, according to Judge Bryson, the issue is whether sufficient structure is disclosed to limit the means plus function claim element to a particular structure and its equivalents. Relying on the Court’s ruling in WMS Gaming, the panel thus adopted a bright-line test that requires, at the pain of invalidity for indefiniteness, disclosure of a specific algorithm in a patent where the claimed §112, ¶ 6 functions are performed by a microprocessor/computer.
Disclosure Note: McDermott represented Aristocrat in the reported case.
The U.S. Court of Appeals for the Federal Circuit distinguishing its recent announcement that federal law controls standing determinations in patent cases (see IP Update, Vol. 11, No. 3) held that Japanese intestacy law controlled the issue of whether title to a U.S. patent had transferred to an heir. Akira Akazawa v. Link New Technology International, Inc., Case No. 07-1184 (Fed. Cir., March 31, 2008) (Archer, J.).
The only named inventor of the patent in question, Yasumasa Akazawa, passed away in Japan without preparing a will. Yasumasa was survived by his wife and two daughters. Yasumasa’s wife received the daughters’ interests in the patent via an “Inheritance Agreement.” Yasumasa’s wife then executed an assignment transferring all rights in the patent to Akira Akazawa (Akira).
Akira later filed suit against Link alleging infringement of Akazawa’s patent. Link moved for and was granted summary judgment on standing on the basis that Akira did not have standing to file the infringement suit. The district court, focusing on the language of 35 U.S.C. § 261 requiring a writing in order to assign ownership of a patent, concluded that “when Yasumasa died, title to the … patent was held by his estate until properly assigned in writing by the legal representative of the estate.” Thus, without a written assignment from the estate, there could be no valid subsequent transfer. Akira appealed.
Link maintained its position that 35 U.S.C. § 261 requires a writing in order for there to be a proper assignment between two entities, even upon death of the inventor, intestate succession notwithstanding. In Link’s view, Akira does not own the patent because there was never a writing transferring the patent from the estate of Yasumasa to his family. Akira argued that under Japanese intestacy law, any property owned by Yasumasa transferred immediately to his heirs. In other words, the “estate” never possessed title to the patent because the transfer to Yasumasa’s family occurred automatically at the time of his passing.
The Federal Circuit concluded that the district court’s focus solely on § 261 was erroneous. The Court stated that there is nothing that in 35 U.S.C. limits the transfer of patents to assignments. As a result, although all assignments must be in writing, a writing may not always be required to transfer title.
Also of interest is the Court’s statement that it was established precedent that state law, not federal law, typically governs patent ownership. The Court saw no reason that Japanese law should not control ownership of the patent in this case. The Court remanded and instructed the district court to determine whether the patent was transferred to Yasumasa’s estate or immediately to his heirs.
Practice Note: In terms of conflicts of laws, the Federal Circuit appears to view a transfer by intestacy differently from a transfer by assignment in an employment agreement. Just last month, in DDB Technologies v. MLB Advanced Media, the Court announced that federal law preempts state law for employment contracts that include rights to patents. In DDB Technologies, the Court stated that “[a]lthough state law governs the interpretation of contracts generally, the question of whether a patent assignment clause creates an automatic assignment or merely an obligation to assign is intimately bound up with the question of standing in patent cases” and therefore is “a matter of federal law.” In light of these developments, the age-old adage remains true: get it in writing.
Patents / § 271(e)(1) Safe Harbor
By Rachel Repka
The U.S. Court of Appeals for the Federal Circuit affirmed the International Trade Commission’s (ITC) ruling that the safe harbor statute applies in proceedings under the Tariff Act relating to process patents, as well as product patents, for imported products that are used for the exempt purposes of § 271(e)(1). The Court, however, reversed the ITC’s dismissal for lack of jurisdiction to investigate and remedy issues of infringement and injury. Amgen, Inc. v. Int’l Trade Commission, Case No. 07-1014 (Fed. Cir., March 19, 2008) (Newman J.; Linn, J., dissenting-in-part).
Amgen filed a complaint with the ITC, charging Roche with violation of Section 337 by importing certain recombinant human erythropoietin (EPO) and derivatives thereof and claiming that such importation of EPO and the process by which it was produced in Europe infringed claims in six Amgen patents. Roche moved for summary determination of noninfringement, arguing that the imported EPO is exempt from infringement under the §271(e)(1) safe harbor statute because the imported EPO was used only for the statutorily exempt purpose of developing and submitting information for federal regulatory approval of drugs. The ITC granted Roche’s motion, holding that all of Roche’s activities were within the safe harbor exemption, including the foreign production of the imported product.
On appeal, the Federal Circuit first addressed whether the safe harbor statute applies in proceedings under the Tariff Act relating to process patents. The Court concluded in the affirmative, reasoning that congressional policy set forth in section 271(g) and the Supreme Court’s decisions intended the exemption to extend to “all uses of patented inventions that are reasonably related to the development and submission of any information under the FDCA.” The Court further stressed that congressional purpose and its application “weigh heavily against selectively withholding the §271(e)(1) exemption depending on whether the infringement action is in the district court or the International Trade Commission.” Next, the Court held that not all infringing activities conducted during the period before regulatory approval are automatically exempted under the safe harbor statute. Uses of infringing product unrelated to obtaining Food and Drug Administration approval are not shielded by the exemption. Citing Merck KgaA v. Integra Lifesciences I, Ltd., the Court noted that “‘[e]ach of the accused activities must be evaluated separately to determine whether the exemption applies.’”
Finally, the Court rejected the ITC’s holding that “Roche’s announced imminent FDA approval of the imported EPO, and imminent end of the safe harbor, do not suffice to establish Commission jurisdiction to determine the facts of infringement unless actual sale or contract for sale is also shown.” The Court noted that both the Federal Circuit and ITC’s prior rulings have provided that, when it has been established that infringing acts are reasonably likely to occur, the ITC’s obligation and authority are invoked.
Practice Note: The decision further supports that Section 271(e)(1) can often involve complex factual issues that are not ripe for early determination without factual development. The decision also clarifies that the ITC may be an appropriate forum for obtaining an adjudication prior to the product actually being imported in the United States when it has been shown that infringing activities are reasonably likely to occur.
Patents / Validity/ Hatch-Waxman Act
District Court Did Not Err in Resetting Effective Date of ANDA Under 35 U.S.C. § 271
The U.S. Court of Appeals for the Federal Circuit affirmed a district court’s grant of summary judgment, finding that the lower court correctly ruled on the issues of claim construction, inequitable conduct, obviousness and enablement. The Court also held that the district court was not limited by the provisions of 21 U.S.C. § 355 in resetting the effective date of Mylan’s Abbreviated New Drug Application (ANDA) under 35 U.S.C. § 271(e)(4)(A). Ortho-McNeil Pharmaceutical, Inc. v. Mylan Laboratories, Inc., Case No. 07-1223, (Fed. Cir., March 31, 2008) (Rader, J.).
Mylan Laboratories filed an ANDA with the Food and Drug Administration (FDA) under the Hatch-Waxman Act 21, U.S.C. § 355, and asserted Ortho-McNeil’s patent was invalid or not infringed. In response, Ortho-McNeil brought suit for infringement of Topiramate, an anticonvulsant compound covered by the patent at issue. On the issue of claim construction, Mylan asserted that the district court had improperly construed claim 1, arguing that the claim, properly construed, would not cover topiramate. The Court stated that several intrinsic and extrinsic factors supported the trial court’s claim construction and that under Mylan’s interpretation, the claim would improperly render several dependent claims meaningless.
On the issue of inequitable conduct, Mylan asserted that Ortho-McNeil had failed to disclose study results involving certain prior art compounds during prosecution. Mylan asserted that Ortho-McNeil’s statements to the U.S. Patent and Trademark Office (USPTO) were inconsistent with in-house study results that showed that the prior art compounds possessed anticonvulsant activity. The Court disagreed, holding that the statements had not mischaracterized the utility of the reference compounds, but had merely acted to disclose them.
Based on testimony of its expert witness, Mylan also argued that claim 1 of Ortho-McNeil’s patent was obvious in light of the prior art. The Court disagreed, holding that because topiramate is a synthetic intermediate, the skilled artisan would have to have some reason, among several unpredictable alternatives, to pursue the exact route that produced topiramate in the first place. The Court further cited objective criteria, including unexpected results and commercial success, which precluded a finding of obviousness.
On the issue of enablement, Mylan argued that the term “anticonvulsively effective” was unclear and that its determination would require undue experimentation. Again, the Court disagreed, finding that the specification sufficiently taught a human dose range that was effective in treating seizures. The Court also held that clinical trials conducted to determine an anticonvulsively effective dose would not amount to undue experimentation.
Finally, Mylan appealed the district court’s decision to reset the effective date for approval of its ANDA to a date no earlier than the date of patent expiration, pursuant to 35 U.S.C. § 271(e)(4)(A). Mylan argued that under Hatch-Waxman, 21 U.S.C. § 355(j)(5)(B)(iii), there were only two instances in which approval of an ANDA could be delayed, neither of which applied in the case. The Court disagreed, holding that § 355 did not preclude the district court from resetting the effective date under other statutory provisions including § 271.
Software / Litigation
An Untimely Notice of Appeal Dooms Appellate Jurisdiction
Addressing the issue of appellate jurisdiction, the U.S. Court of Appeals for the Seventh Circuit held that an untimely filed corrected appeal does not provide a basis for appellate jurisdiction. Nocula v. UGS Corp., 2008 U.S. App. LEXIS 6082 (7th Cir., March 24, 2008) (Sykes, J.).
Mitch Nocula is the sole shareholder of two corporations: P.Z. Alucon Sp. z o o (Alucon), which manufactures tools and dies, and Tooling Systems International Corp. (TSI), which solicits orders for the manufacture of tools and dies. Alucon is a primary supplier for UGS Corporation (UGS). Nocula “teamed up with” Charles Hahs Jr. (former owner of Electrode, a Florida corporation) and began using computer-aided-design for their tools and dies. Later, Nocula and Hahs implemented a virtual shop at Alucon. UGS Poland filed a criminal complaint in Poland against Alucon and Hahs for illegally using UGS software. Polish police seized Alucon’s computers and essentially stopped its operation. UGS Poland won a civil judgment against Alucon but lost its criminal case. The Alucon computers “disappeared” according to UGS Poland and UGS.
Nocula and TSI filed a diversity suit in Illinois federal court. The court held that “any claim based on UGS Poland’s … civil judgment in Poland is barred by the act of state doctrine … [as any claim from this action] would require [the federal court] to reverse the Polish court’s decision.” Accordingly, the district court granted UGS’s motion to dismiss the case.
Nocula, acting pro se, then filed a timely notice of appeal in his own name. The notice of appeal had defects that were cured in a later filed Corrected Notice of Appeal. However, the second notice was untimely.
Citing Rule 3(c)(1) of the Federal Rules of Appellate Procedure, the Seventh Circuit reviewed the district court’s dismissal de novo noting that “[a] notice of appeal must (1) specify the party or parties taking the appeal by naming each one in the citation or body of the notice; (2) designate the judgment from which the appeal originates; and (3) name the court to which the appeal is taken.”
The original (timely filed) notice did not name TSI as a party to the appeal and, as the Court observed, Nocula, as a shareholder, did not have standing to sue to enforce the rights of the corporation. Although there are exceptions by which a shareholder has standing, such as in cases in which corporate management has refused to pursue some action for reasons unrelated to good-faith business judgment, when the shareholder has suffered direct harm or where there is a special contractual duty, in the present case, none of those exceptions were found to exist. Hence, the Seventh Circuit dismissed the present action for lack of appellate jurisdiction.
Patents / Software in UK
By Justin Hill, Ph.D.
The English High Court, acting as appellate court for decisions from the UK Intellectual Property Office (UKIPO), handed down an important and timely decision clarifying the much-debated test for patentability of computer-implemented inventions and particularly the analysis of when a software invention provides a technical contribution. Symbian Ltd v. Comptroller General of Patents [2008] EWHC 518 (Pat), (English High Court, March 18, 2008).
In Europe software innovations have been excluded from patentability to the extent the claims are found to relate to program code per se. Software inventions have been found to be patentable only when the claims define a “relevant technical contribution,” which is something more than merely loading the program onto the computer to run it. The UKIPO has adopted a rather strict approach to software inventions, issuing a raft of decisions refusing claims defining inventions in software on the basis they lack the required technical contribution. Late in 2006, in the case of Aerotel v. Macrossan, the English Court of Appeal endorsed a four-step analysis to determine whether software-related subject matter was claimed as patentable subject matter: properly construe the claim; identify the contribution of the invention; ask whether the invention falls solely with in one of the types of excluded subject matter; and insure the contribution is technical in nature. A software claim was only patentable (in terms of subject matter) if it passed all four steps of the analysis.
The claims under consideration in this case were to a method of accessing data in a computer. Specifically, the inventors had made the operating system of a cellular telephone more stable by providing a new software interface with more reliable mapping between the operating system files, which need to be updated from time to time, and the applications that call them. The UKIPO Hearing Officer agreed with the examiner’s refusal of the application on the ground that the only “contribution” made by the claimed invention was to insert yet more code into an already existing computer program; this was excluded from patentable subject matter because it did not meet the technical contribution requirement. The applicant appealed.
On appeal, the judge indicated that the four-part analysis was not intended to be a departure from the main principles set out in earlier cases from the Court of Appeal and commented that there were real dangers in placing too much emphasis on the second step of the analysis. In this case, the Court found that UKIPO had defined the contribution of the invention too narrowly (i.e., as nothing more than inserting one piece of software into another), and clarified that the contribution of an invention should include consideration of the how the invention actually works to solve a problem or provide an advantage. In this case, the Court found that such consideration requires the improvement in reliability of the operating system to be taken into account as relevant to the technical contribution and allowed the appeal.
Practice Note: The author understands that the UKIPO intend to appeal this High Court Decision. As it now stands, this case brings the UK practice a step closer to the current EPO practice; in that providing program code leading to performance improvements within a computer is acknowledged as the type of technical contribution that supports patentability. However, the judge warned against assuming all computer-implemented inventions made such contributions, particularly if software merely concerns the processing of data and does not fix some technical shortcoming in the computer. This decision follows on the heels of another recent case (Astron Clinica; see IP Update, Vol. 11, No .2) that confirmed patent claim formats directed to computer code are allowable in the UK, whether recorded on a carrier or not. In any event, this decision allows a patent claim concerning part of the operating system of a computer and provides a useful lesson in how to apply the current test for patentability of commuter implemented inventions.
Trademarks / Misappropriation Use
Use, Not Conception, Governs Priority of Trademark Rights
The U.S. Court of Appeals for the Second Circuit affirmed the district court’s grant of summary judgment in favor of the plaintiff and dismissal of the trademark infringement and misappropriation counterclaims asserted by defendant. American Express Co. v. Stephen G. Goetz and Gardner Design Group, LLC, Case No. 06-2184 (2nd Cir., Feb. 4, 2008) (per curiam).
Goetz, while working at a design company, formulated an idea to enable credit card customers to personalize a card by choosing a photograph to be printed on the card’s face. In proposing this idea to potential clients, Goetz prominently displayed the slogan “MY LIFE, MY CARD.” In July of 2004, Goetz sent this proposal to American Express, as well as to other credit card companies. In September of 2004, he registered the domain name www.mylife-mycard.com, created an internet-based demonstration of his card personalization concept and filed a trademark application with the U.S. Patent and Trademark Office (USPTO) for the “MY LIFE, MY CARD” mark. Around this very time, American Express hired an advertising agency that proposed the “MY LIFE. MY CARD” idea as the linchpin of a new campaign. In August of 2004, American Express registered a similar domain name and filed an intent-to-use application with the USPTO. Goetz demanded that the company cease and desist using the slogan, claiming that he created the slogan. American Express responded by initiating an action in district court for declaratory judgment that it had not misappropriated the slogan and that defendant Goetz lacked a viable infringement claim.
In granting American Express’ motion for summary judgment, the district court held that Goetz had no valid protectible senior trademark rights in the expression “My Life, My Card” noting that Goetz did not contest American Express’ claim that it independently conceived of the slogan. Goetz appealed.
In affirming, the Second Circuit held that Goetz never used the slogan as a trademark and emphasized the difference between copyright rights (which protect an expression, such as a musical composition itself) and trademark rights (which protect, for instance the title of the composition so as to identify the song in the marketplace). The court noted that a mark or slogan that performs a source-identifying function in one set of hands may constitute the creative work itself in another. This would be true, for instance, in the case of Goetz or an advertising agency—the slogan is the agency’s creative work but may become a source identifier when used by the client. As discussed by the court, the Trademark Trial and Appeal Board has long recognized that slogans cannot be registered by marks by an advertising agency, even if they would be subject to registration by the end user. The Second Circuit also rejected Goetz’s analogous use argument, i.e., that his use was analogous to trademark use, holding that to qualify for analogous use rights, the use must be open and notorious and of such a nature and extent that the mark becomes popularized in the public mind so as to identify the marked goods with the mark’s adopter. The court rejected this argument in view of Goetz’s complete failure to actually use the mark in commerce.
Mischaracterization of Relationship Violates Trademark Rights
Addressing issues of trademark infringement, the U.S. Court of Appeals for the Fifth Circuit affirmed the U.S. District Court for the Western District of Texas’ grant of an injunction in favor of a restaurant franchisor under the Lanham Act. Schlotzsky’s Ltd. v. Sterling Purchasing and Nat’l Dist. Co., Inc., 2008 U.S. App. LEXIS 4801 (5th Cir., March 5, 2008) (Southwick, J.).
Plaintiff Schlotzsky’s entered an agreement for defendant Sterling Purchasing and Nat’l Dist. Co., Inc. (“Sterling”) to act as a “non-exclusive supply chain manager” for the plaintiff’s national chain of delis. Sterling began to hold itself out as the exclusive representative for purchasing and distribution of all goods and services with the Schlotzsky’s system. The relationship between Schlotzsky’s and Sterling was eventually terminated. Schlotzsky sought injunctive relief under the Lanham Act, even though Sterling had not misused Schlotzsky’s trademarks, it had instead mischaracterized itself as the exclusive representative of Schlotzsky in various dealings with third parties.
The Fifth Circuit found that Sterling’s representation that it was the exclusive distributor violated Section 43(a) of the Lanham Act because it was deceptive as to the “affiliation, connection, or association” between Schlotzsky’s and Sterling. See 15 U.S.C. §1125(a)(1). The court found that the congressional purpose for the Lanham Act was to provide remedies for unfair and misleading use of trademarks, which extends beyond mere trademark protection. So even though Sterling did not use Schlotzsky’s trademark, Sterling violated Schlotzsky’s trademark rights with its mischaracterization of its relationship with Schlotzsky’s.
The Fifth Circuit cited Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003), as support, where the Supreme Court stated that Section 43(a) of the Lanham Act is broader than just “trademark protection,” as it prohibits actions that deceive consumers and impair a producer’s goodwill. The Fifth Circuit then cited to various other cases where 43(a) was applied to situations in which a registered trademark was not involved.
Holding also that the remedial provision of the Lanham Act is broad, the Fifth Circuit also held that the injury requirement under Section 43(a) of the Act can be satisfied even though a party fails to establish a specific amount of actual loss. Since the mischaracterizations were done to maximize Sterling’s income at the expense of Schlotzsky’s, it was likely that the violations damaged Schlotzsky’s. The court thus held that the district court properly granted Schlotzsky’s injunctive relief.
Practice Note: This decision points out that trademark rights can extend past the actual use of a trademark in situations in which an infringer has used the goodwill or reputation of a trademark holder without actually using the mark. Companies should be aware that their trademark rights under Section 43(a) are intended to prevent any deception or mischaracterization of their businesses, not just their trademarks.
Bad Faith Increases Damage Award for Infringement
The U.S. Court of Appeals for the Fifth Circuit affirmed a finding of infringement by the U.S. District Court for the Southern District of Texas that defendant’s “Girl Design” was confusingly similar to plaintiff’s trademark. American Rice, Inc. v. Producers Rice Mill, Inc., 2008 U.S. App. LEXIS 3817 (5th Cir., Feb. 22, 2008) (Davis, J.).
Plaintiff American Rice, Inc. (ARI) had sold rice in Saudi Arabia under the “Abu Bint” brand name for 35 years, using a “girl design” that is well-known in Saudi Arabia. The plaintiff had a valid trademark registration for the “girl design.” Defendant Producers Rice Mill, Inc. (PRMI) also sold rice in Saudi Arabia for the past 20 years, using a “girl with a hat design.” PRMI did not have any trademark registrations for the “girl with a hat design.” ARI sought injunctive relief, which the Southern District of Texas granted.
The Fifth Circuit affirmed, finding that the mark was strong and fanciful because the image of a girl icon being used to sell rice is not intrinsic to rice as a product. Even if not fanciful, there was strong evidence of secondary meaning based on the well-known association of the girl icon with the “Abu Bint” brand. The court also found that the designs were similar, the products were similar (both were on bags of rice), and the court further found an inference of bad faith since the defendant at all times knew of the Abu Bint brand. Furthermore, the court found that the PRMI only used the girl icon on bags of rice sold in Saudi Arabia and not in other countries, thus further supporting PRMI’s bad faith intent to benefit from the goodwill associated with ARI’s brand.
In response, PRMI argued that laches prevented ARI from pursuing this action 20 years after it started selling rice with the girl icon. The Fifth Circuit found no laches here since, although the defendant had sold rice in Saudi Arabia since 1985, the evidence did not support that plaintiff knew about the product until 2005. The court thus affirmed the injunctive relief granted by the district court.
In calculating the defendant’s profits due to ARI under the Lanham Act, 15 U.S.C. § 1117(a), the court determined that the bad faith intent of defendant warranted such an award and that injunctive relief was insufficient to remedy the misuse. The court awarded over $1.2 million in damages to ARI, even though PRMI claimed it was a cooperative whose profits, once disbursed to members, were minimal.
Practice Note: Bad faith in trademark infringement actions is often a strong factor that goes not only to infringement but also to damages. If a defendant trades off a plaintiff’s goodwill, the plaintiff is entitled to all of the defendant’s profits.
Internet Law / Free Speech—Case Update
Ninth Circuit Rejects Petition for Rehearing En Banc, Upholding Its Decision that Vote-Swapping Websites Cannot be Prosecuted Under Vote-Buying Statutes
The U.S. Court of Appeals for the Ninth Circuit denied a petition for rehearing en banc in a case involving the tension between free speech and vote-swapping websites. Porter v. Bowen, Case No. 06-55517 (9th Cir., March 13, 2008) (en banc) (Kleinfeld, J., O’Scannlain, J.; Bea, J., dissenting).
In August 2007, the Ninth Circuit held that California’s former secretary of state improperly threatened criminal prosecution against two vote-swapping websites operating during the Bush-Gore 2000 presidential election. In its holding, the Ninth Circuit found that the websites’ vote-swapping mechanisms, along with the communication and vote swaps they enabled, were constitutionally protected speech. Further, the Court determined that the secretary of state’s threatened criminal prosecution was an unlawful burden because it was not sufficiently tailored to the advancement of the state of California’s legitimate interests.
When the Court was presented with a petition for rehearing en banc, the matter failed to receive a majority of the votes of the non-recused active judges. Judge Kleinfeld, joined by Judge O’Scannlain and Bea dissented from the denial. “This case is about whether the First Amendment protects from prosecution people who buy votes,” Judge Kleinfeld stated, “Instead of cash, or beer and cigars, the buyers offered promises.” Judge Kleinfeld explained that he dissented from the panel opinion because vote buying is not protected by the First Amendment and vote swap agreements constitute vote buying. Thus, he reasoned, vote-swapping agreements are not protected by the First Amendment.
Judge Kleinfeld found that the websites’ intentions to swap votes in efforts to avoid the election of the voters’ least-preferred candidate had no merit. “Our Constitution requires that electoral votes be cast state-by-state, not that the President be elected by plurality or majority of the nationwide popular vote,” Judge Kleinfeld stated, “Whether the electoral college and winner-take-all casting of electoral votes is a good idea has no bearing on the law. Article II, section 1, and the Twelfth Amendment are the Constitution we have. State-by-state voting is the system for which they provide.” As such, Judge Kleinfeld determined, “[t]he First Amendment does not prevent state prosecution of those who subvert it by making arrangements effectively to cast votes in other states.”
Practice Note: The Court’s rejection of the petition will likely encourage the creation of many similar websites during the 2008 presidential election.
PTO Final Rules Permanently Enjoined
In a ruling welcomed by many applicants and patent prosecutors, the U.S. District Court in Alexandria, Virginia has declared “null and void” a group of “Final Rules” proposed last year by the U.S. Patent and Trademark Office (USPTO). The rules would have restricted patent applicants’ ability to file continuing applications and imposed a burdensome requirement for explanation of prior art on many applicants. Granting motions for summary judgment by plaintiffs Glaxo SmithKline (GSK) and Triantafyllos Tafas, the April 1, 2008 order by Court held that the proposed rules were “not in accordance with law” and “in excess of statutory jurisdiction [and] authority.” Triantafyllos Tafas v. Dudas; Smithkline Beecham Corp. v. Dudas, Case Nos. 1:07cv846; 1:07cv1008 (E.D.Va, April 1, 2008)(Cacheris, Dist. J.).
The Court explained that the rules “are substantive in nature and exceed the scope of the PTO’s rulemaking authority under 35 U.S.C. 2(b)(2).” The Court cited Federal Circuit case law in concluding that the PTO’s authority to engage in rule-making was limited to procedural matters, noting that since 2005, “Congress has debated and considered whether it should grant the USPTO substantive rulemaking authority but has declined to do so.”
The “5/25” rule would have limited the number of claims that could be filed without a detailed discussion of prior art. In finding that rule substantive, the Court relied on the express language of Section 112 and case law precedent that an inventor “has the right to ... express the same invention in more than one claim.” The Court concluded that the PTO’s requirement for an Examination Support Document (ESD) in applications that exceeded the “5/25” rule would change existing law and alter the rights of applicants by shifting the examination burden away from the USPTO and to applicants. The Court pointed out that Federal Circuit case law imposes no duty on applicants to conduct a prior art search. Concluding that the proposed restriction on continuing applications was also substantive, the Court again concluded that imposing a limit on continuing applications is a matter of policy for Congress. With regard to the proposed limitation on a single Request for Continued Examination (RCE) in an application family, the Court found this rule contrary to the “plain language of the statute” as well as the USPTO’s own statements when the RCE provisions were enacted in 2000.
Practice Note: The USPTO has 60 days to file an appeal of the decision, which would be headed to the Federal Circuit.
“Just a Handful of Words” Places Patent Reform Act on Indefinite Hold
Hopes for a Senate floor debate over the Patent Reform Act of 2007 (S.1145) were shattered in April when Senate negotiations over the language of key provisions collapsed, removing the bill from the floor schedule indefinitely. Senate Judiciary Committee Chairman Patrick Leahy (D-VT), one of the Act’s sponsors, intended to introduce a revised version of the bill to the Judiciary Committee during the second week of April. Leahy’s plan failed when he could not reach agreement on several provisions with Arlen Specter (R-PA). Without Specter’s support, Leahy is unlikely to win passage of the bill. “We are not going to do a patent bill now,” said Senate Majority Leader Harry Reid (D-NV).
On April 9, 2008, Specter issued a press release stating that he could not support the bill as currently written. “The principal sticking point,” said Specter, “is the issue of how to assess damages in patent infringement lawsuits.” Specter said that the legislators thought they had reached agreement, “but the language continued to shift, so we do not yet have a deal on the package.” The bill’s proposal towards apportionment of damages has provoked intense debate between lawmakers as well as interested companies and patent attorneys.
Leahy responded to Specter with disappointment on April 10, complaining that “just a handful of words have stalled the Senate’s debate on this important patent legislation.” “We have been working on these reforms for years,” Leahy declared, “[t]housands of hours have been spent in negotiations to address the concerns of 100 Senators, hundreds of Representatives, and dozens of stakeholders.” Using the past tense that seemingly signals the end of his effort, Leahy declared, “[t]his was a missed opportunity.”
Other prominent figures shared Senator Specter’s criticism of the current bill. Paul Michel, Chief Judge of the U.S. Court of Appeals for the Federal Circuit, has been a vocal critic. Speaking in a session for patent lawyers at the ABA’s annual Intellectual Property Law Conference on April 10, Judge Michel explained that he was baffled about Congress’ desire to change the method by which patent damages are currently calculated. The issue is “greatly misunderstood,” said Michel, because the reality is that judges hearing patent cases routinely take into account the value of individual patents when instructing juries and in overturning excessive damage awards granted by juries. With respect to the rest of the bill, Michel stated that he would prefer that Congress avoid any reform that affects the judicial process until the judiciary has an opportunity to make its own changes. “Congress ought to wait and see if ultimately the judgments are good enough,” Michael said, “I would not say that Congress should never act on courthouse problems, but it could wait.”