JOLT Digest

Federal Circuit Clarifies Patent Obviousness after KSR
By Debbie Rosenbaum — Edited by Stephanie Weiner
Eisai Co. v. Dr. Reddy’s Laboratories, Ltd.
Federal Circuit, July 21, 2008, No. 2007-1397
Slip Opinion

On July 21, the Federal Circuit affirmed the United States District Court for the Southern District of New York’s ruling in favor of plaintiff Eisai Co., holding that the patent-in-suit, U.S. Patent No. 5,045,552, was non-obvious and was not obtained through inequitable conduct.

This case illustrates the Federal Circuit’s current test for chemical obviousness since the Supreme Court rejected the Federal Circuit’s application of the “teaching, suggestion, or motivation test” for obviousness in KSR Int’l Co. v. Teleflex Inc., 127 S. Ct. 1727 (2007) as too rigid, mandating a more flexible approach that takes ordinary creativity and skill into account. A brief background on KSR can be found at Patent Docs.

Kevin E. Noonan at Patent Docs welcomes the decision.

The Patent Hawk characterizes the court’s opinion as positing a “problem-reasoning-predictability” test for chemical obviousness.

Aaron F. Barkoff at Seeking Alpha makes the observation that patents on chemical compounds are holding up well even after KSR.

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Federal Circuit Affirms Award of Attorney Fees for Inequitable Conduct and Litigation Misconduct
By Christina Hayes — Edited by Stephanie Weiner

Nilssen v. Osram Sylvania, Inc.
Federal Circuit, June 17, 2008, No. 2007-1198
Slip Opinion

The Federal Circuit affirmed the judgment of the U.S. District Court for the Northern District of Illinois granting a motion for attorney fees to Osram Sylvania, Inc. and Osram Sylvania Products, Inc. (collectively, “Osram”) due to the inequitable conduct and litigation misconduct of the appellants pursuant to 35 U.S.C. § 285. Section 285 of the Patent Act authorizes the award of attorney fees to the prevailing party in “exceptional cases.”

The Federal Circuit held that the district court did not clearly err in finding that the case was “exceptional” and that it was within its discretion to award attorney fees to Osram. Appellants argued that Nilssen’s inequitable conduct was “benign” and their litigation misconduct amounted to instances of “harmless oversight” and “permissibly rough litigation tactics.” The Federal Circuit refused to distinguish the inherent contradictory notion of benign inequitable conduct and further noted that the argument ultimately “amount[ed] to little more than an impermissible attempt to reargue the merits of [the district court's] holding.” With respect to the litigation misconduct, the court noted that “it ill behooves an appellate court to overrule a trial judge concerning litigation misconduct when the litigation occurred in front of the trial judge, not the appellate court,” concluding that the district court had sufficient evidence to have concluded that trial misconduct occurred.

Appellants further argued that a finding of inequitable conduct was insufficient to constitute an exceptional case. The court agreed that while there was no per se rule of exceptionality in cases involving inequitable conduct, its precedent provided wide discretion to district courts to award fees in inequitable conduct cases.

Dennis Crouch of Patently-O points out that there was no “individual smoking gun” here and agrees with the appellants’ argument that their actions were reasonable given that Osram was represented by Kirkland & Ellis, “well known for its relentless bull dog litigation style.”
The Patent Hawk also provides an overview of the case.
Filewrapper features an overview as well, complete with a timeline of the case.

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Supreme Court Reinvigorates Patent Exhaustion
By Andrew Ungberg — Edited by Joshua Gruenspecht

Quanta Computers, Inc. v. LG Electronics, Inc.
Supreme Court of the United States, June 9, 2008, No. 2006-937
Slip Opinion

The Supreme Court reversed the Federal Circuit, which had held that patent holders could seek infringement damages from subsequent purchasers further “downstream” provided that the initial transfer had imposed some type of restriction on the initial purchaser. The Federal Circuit’s ruling, had it been upheld, would have effectively extinguished the doctrine of patent exhaustion and allowed patent holders the ability to control the use of their patents far beyond traditional limits.

Justice Thomas delivered the unanimous decision, holding that the 155-year-old doctrine of patent exhaustion limits the patentee’s power to dictate the terms of use through the first level of sales only. In an opinion steeped in tradition, the Court held that the reasoning of United States v. Univis Lens Co. 316 U.S. 241 (1942) controlled the case. The Univis Court held that a patentee’s rights were extinguished because the finished product (cut eyeglass lenses) embodied essential features of the patented product (unfinished eyeglass lens blanks). While this has long been the standard for process patents, the Court for the first time here extended that same logic to method patents. The Court also stated that a use “substantially embodying” the patent, rather than fully practicing it, was sufficient to exhaust the patent-holder’s rights.

Overviews of the case are available at Patently-O, the SCOTUS Blog and Law.com.

The full transcript of the oral argument is available here.

Professor Mark R. Patterson of Fordham University authored an article last November advocating a broad overruling of the Federal Circuit decision on Patently-O, which outlined the negative implications of allowing the lower court’s decision to stand.

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Federal Circuit Clarifies Recovery for Lost Profits, Non-Exclusive Licensees: Parent Company Denied Recovery for Lost Profits of Subsidiary
By Jeff Gritton — Edited by Joshua Gruenspecht

Mars, Inc. v. Coin Acceptors, Inc.
Federal Circuit, June 2, 2008, No. 2007-1409
Slip Opinion

The Federal Circuit affirmed in part and vacated in part the District Court of New Jersey and remanded for recalculation of damages in a patent infringement suit.

The court affirmed the district court’s holding precluding Mars Inc. (“Mars”) from recovering damages on a lost profits theory, holding that Mars could not recover for its wholly owned subsidiary’s lost profits. The court stopped short of answering the question of whether a parent company could ever recover for its subsidiary’s lost profits, limiting its holding to the facts of the case at issue.

The court also affirmed the district court’s judgment denying Mars’s motion to amend its complaint to add its subsidiary Mars Electronics International (“MEI”) as a co-plaintiff in its action against Coin Acceptors, Inc. (“CoinCo”) for infringements occurring before 1996, agreeing with the lower court that MEI lacked constitutional standing as a non-exclusive licensee.

The Federal Circuit vacated the lower court’s conclusion that Mars had standing to recover damages for the period between 1996 and 2003. Because Mars had assign its title to the patent to MEI in 1996, it lacked standing for that period of time.

Finally, the court affirmed the district court’s assessment of a reasonable royalty rate for the calculation of damages related to the infringement. Because Mars’s lack of standing for the period from 1996 to 2003 changed the royalty base, the court remanded for recalculation of damages for the period prior to 1996.

The Patent Hawk provides a “sassy” take.

Dennis Crouch of Patently-O and Barry Barnett of Blawgletter also provide coverage of the opinion.

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Federal Circuit Holds that Automatic Assignment of Employee Rights May Foreclose Certain Defenses

By Sarah Sorscher — Edited by David Lawson

DDB Technologies, L.L.C. v. Major League Baseball Advanced Media, L.P.
Federal Circuit, February 13, 2008, No. 2007-1211
Slip Opinion

On February 13, the Federal Circuit affirmed in part, vacated in part and remanded for further discovery a decision of the District Court for the Western District of Texas related to employee assignment of patent rights.

The court affirmed the district court’s holding that appellant DDB Technologies could not assert statute of limitations and equitable defenses against patent claims by Schlumberger Technology Corporation — a former employer of DDB’s co-founder, inventor David Barstow — because Barstow’s employment agreement with the company automatically assigned the patent rights in question to Schlumberger, and Texas law foreclosed those defenses for automatically assigned patent rights.

The Federal Circuit vacated the district court’s dismissal for lack of jurisdiction (and resulting denial of jurisdictional discovery). The district court held that DDB failed to join either Schlumberger or Major League Baseball Advanced Media (MLB), which it held were both necessary parties because they were co-owners of the patents. While holding that DDB was not yet entitled to a jury trial on the merits, because the facts of the case were insufficiently intertwined with the jurisdictional issue, the Federal Circuit remanded for further discovery on the jurisdictional question alone.

Dennis Crouch of Patently-O sees the decision as a major victory for employers, and warns employees to explicitly protect their rights.
Gary Odom at Patent Prospector dissects the opinion, also seeing severe dangers ahead for inventive employees.

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Federal Circuit Upholds Damages Award Against Echostar

By Andrew Ungberg — Edited by Wen Bu

TiVo, Inc. v. EchoStar Commc’n Corp.
Federal Circuit, January 31, 2008, No. 2006-1574
Slip Opinion

The U.S. Court of Appeals for the Federal Circuit upheld in part and reversed in part an Eastern District of Texas jury verdict finding that EchoStar’s DVR machines infringed hardware and software claims of TiVo’s patent.

Writing for a unanimous panel, Judge Bryson found that EchoStar’s devices infringed TiVo’s software claims, but not the hardware claims. The court noted that the trial jury did not award separate damages for each kind of infringement and found the software infringement sufficient to support the entire damages award. Finally, the stay of the trial court’s permanent injunction against EchoStar that the Federal Circuit issued pending appeal will dissolve once the judgment becomes final.

Dennis Crouch of Patently-O adds commentary, including EchoStar’s reaction to the verdict.

Christopher S. Rugaber of the Associated Press examines the business consequences for TiVo.

Bloomberg provides further reporting on the decision.

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UK Patents Court Holds Software Patents May Be Enforceable

By Sarah Sorscher — Edited by Wen Bu

In re Astron Clinica, High Court of Justice, Chancery Division, Patents Court (EWHC (Pat)), January 25, 2008, Case No. CH/2007/APP/0466
Opinion

On January 25, the United Kingdom High Court ruled that the U.K. Intellectual Property Office (IPO) cannot categorically reject patent claims for computer programs under Section 1(2) of the Patents Act of 1977 (designed to implement Article 52 of the European Patent Convention), which prohibits “programs for computers” from being considered inventions for the purposes of patenting. Noting the “apparent illogicality of allowing claims to a suitably programmed computer and to the method performed by the computer so programmed but not to the program itself,” Justice Kitchin, writing for the court, held that computer programs themselves (as recorded on suitable storage media) may be patentable if the program makes a conventional computer deliver a new technical effect.

The WLR Daily offers a synopsis of the decision.
David Pearce of IPKat expressed surprise at the decision in light of the strong language that had been used in the earlier U.K. Court of Appeal ruling in Aerotel/Macrossan and noted that this decision, if left intact, amounts to “falling into line with the EPO.”
Andres Guadamuz criticizes both this decision and the earlier EPO decisions for changing the meaning of an otherwise clear treaty provision.
The Register’s Kelly Fiveash takes a more positive view, commenting that the ruling “could open up the playing field for small UK businesses looking for a leg-up.”
Finally, Emma Barraclough of Managing Intellectual Property predicts that the ruling might reverse the trend of UK companies applying for patents through the EPO instead of directly through the UKIPO.

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Federal Circuit Holds Patent Unenforceable Following Patentee’s Failure to Disclose Material Notes

By Michelle Yang — Edited by Wen Bu

Monsanto Corp. v. Bayer Bioscience N.V.
Federal Circuit, January 25, 2008, No. 2007-1109
Slip Opinion

On January 25, the Federal Circuit affirmed the District Court for the Eastern District of Missouri’s holdings: 1) that Bayer’s patent for certain chimeric genes was unenforceable for inequitable conduct, and 2) that the district court had jurisdiction to declare three related patents unenforceable.

The Federal Circuit held that Bayer’s patent was unenforceable for inequitable conduct. Judge Gajarsa’s opinion held that Bayer breached its duty of candor and good faith to the United States Patent and Trademark Office in failing to disclose its employee’s notes on another researcher’s poster at a scientific conference.

The court also upheld the district court’s jurisdiction over three other patents relating to the chimeric genes, holding that the district court still retained jurisdiction because of Monsanto’s request for attorney fees, despite Bayer’s motion to dismiss the claims on the other patents and subsequent signing of a covenant not to sue Monsanto for infringement of those patents.

Dennis Crouch of Patently-O summarizes the opinion.
Lawrence B. Ebert of IPBiz mentions some interesting aspects of the case’s procedural history.
Stephen Albainy-Jenei of Patent Baristas warns that “note-taking can come back to bite your patent.”

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Federal Circuit Decides to Rehear Important Design Patent Case En Banc

By Andrew Ungberg - Edited by Wen Bu

Egyptian Goddess, Inc., v. Swisa, Inc.
Federal Circuit, November 26, 2007, No. 2006-1562
Order

On August 29, a panel of the Federal Circuit affirmed the District Court for the Northern District of Texas’s grant of summary judgment for Swisa, Inc, on the grounds that no jury could reasonably find Swisa’s nail-buffer infringed Egyptian’s design patent. Writing for the panel, Judge Moore held “for a combination of individually known design elements to constitute a point of novelty, the combination must be a non-trivial advance over the prior art.” He reasoned that because Egyptian’s design combined elements in a trivial way, the product failed the “points of novelty” test.

On November 26, the Federal Circuit issued an order vacating the panel’s decision and agreed to re-hear the appeal en banc. The order directs the parties to address three specific questions in the rehearing, concerning the “points of novelty” test and claim construction with respect to design patents. Those questions are elaborated after the jump.

Dennis Crouch of Patently-O believes the order signals that the court will review established design patent law, which both Crouch and John L. Welch of TTAblog find muddled and confusing.
MVS FileWrapper has posted a summary of the August 29 panel decision.

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Federal Circuit Clarifies Rule on Completeness of Patents in a Sequence

By Sarah Sorscher — Edited by Johnathan Jenkins

Zenon Environmental, Inc. v. United States Filter Corp.
Federal Circuit, November 7, 2007, No. 2006-1266
Slip Opinion

On November 7, the Federal Circuit reversed the District Court of the Southern District of California, which had found Zenon’s patent for a water filtration device not invalid by reason of anticipation in a bench trial.

The Federal Circuit held that, because an intervening patent failed to contain an essential element of the patent at issue, the patent at issue was indeed invalid by reason of anticipation. At issue was the correct application of 35 U.S.C. § 120, which entitles an inventor to maintain the benefit of the filing date of the earliest patent in a sequence, provided subsequent patents remain linked to that first patent by an unbroken chain of disclosures.

Dennis Crouch of Patently-O provides further details on the holding.
PLI’s Gene Quinn takes issue with the court’s decision to resolve the case as a matter of law.

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