Second Circuit Holds Supplying Software For Pop Up Ads Was Not "Use" Under The Lanham Act

Supplying software which causes “pop up” ads to appear contemporaneously with a competitor’s website did not constitute “use” of a service mark within the meaning of the Lanham Act, 15 USC § 1127, according to a Second Circuit Court of Appeals decision issued this week, 1-800 Contacts, Inc. v. WhenU.com, Inc., Docket No. 04-0026-cv (2nd Cir. 6/27/05). The Second Circuit decision is consistent with two district court holdings involving WhenU.com: Wells Fargo v. WhenU.com, 293 F.Supp.2d 734 (E.D. Mich. 2003), and U-Haul Int'l v. WhenU.com, 279 F.Supp.2d 723 (E.D. Va. 2003). The court summarized its ruling as follows:

"We hold that, as a matter of law, WhenU does not “use” 1-800’s trademarks within the meaning of the Lanham Act, 15 U.S.C. § 1127, when it (1) includes 1-800’s website address, which is almost identical to 1-800’s trademark, in an unpublished directory of terms that trigger delivery of WhenU’s contextually relevant advertising to [computer users]; or (2) causes separate, branded pop-up ads to appear on a [computer user’s] computer screen either above, below, or along the bottom edge of the 1-800 website window. Accordingly, we reverse the district court’s entry of a preliminary injunction and remand with instructions to (1) dismiss with prejudice 1-800’s trademark infringement claims against WhenU, and (2) proceed with 1-800’s remaining claims."

Defendant’s “pop up” software delivered context-specific advertisements to a computer user’s desktop when certain search terms, listed in Defendant’s unpublished directory, were entered by the computer user. Defendant listed Plaintiff’s URL in its directory as one of the search terms. Plaintiff alleged that its URL “www.1800contacts.com” substantially incorporated its service mark, 1-800Contacts™, and was listed in Defendant’s directory without authorization. Plaintiff also argued that its competitors’ “pop up” ads created a likelihood of confusion as to source when the ads appeared over Plaintiff’s website.

The district court agreed, issuing a preliminary injunction against Defendant.

The Second Circuit reversed and remanded the case, holding that the neither the Defendant’s listing of Plaintiff’s website on its directory, nor the software triggering the “pop up” advertisements constituted a “use” of Plaintiff’s mark within the meaning of the Lanham Act because:

• There was a critical difference between using Plaintiff's web site address which incorporated its mark, and using its mark. The court stated:

  "The district court found that the differences between 1- 800’s trademarks and the website address utilized by WhenU were insignificant because they were limited to the addition of the “www.” and “.com” and the omission of the hyphen and a space. ... We conclude that, to the contrary, the differences between the marks are quite significant because they transform 1-800’s trademark -- which is entitled to protection under the Lanham Act -- into a word combination that functions more or less like a public key to 1-800’s website."

• Defendant’s directory was not reproduced or displayed to computer users, and was inaccessible to the general public, including Defendant’s client-advertisers. Thus, the use of the directory was internal to the company, which, the Court stated, is “analogous to a [sic] individual’s private thoughts about a trademark.”
• Plaintiff’s competitors could not choose that their ads be linked to Plaintiff’s URL, rather, they purchased a link to a generic categorization, such as “eye care” or “contacts.”
• Defendant’s directory was for a “pure machine-linking function” only.
• The “pop up” ads did not display Plaintiff’s trademark at all.
• The district court improperly enjoined When-U for capitalizing on the goodwill and profit built up by plaintiff.

  "Absent improper use of 1-800’s trademark, however, such conduct does not violate the Lanham Act. See TrafFix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23, 29 (2001); Kellogg Co. v. Nat’l Biscuit Co., 305 U.S. 111, 122 (1938) (holding that Kellogg’s sharing in the goodwill of the unprotected “Shredded Wheat” market was “not unfair”); see also William P. Kratzke, Normative Economic Analysis of Trademark Law, 21 Memphis St. U. L. Rev. 199, 223 (1991) (criticizing importation into trademark law of “unjust enrichment” and “free riding” theories based on a trademark holder’s goodwill). Indeed, it is routine for vendors to seek specific “product placement” in retail stores precisely to capitalize on their competitors’ name recognition. For example, a drug store typically places its own store-brand generic products next to the trademarked products they emulate in order to induce a customer who has specifically sought out the trademarked product to consider the store’s less-expensive alternative. WhenU employs this same marketing strategy by informing [computer users] who have sought out a specific trademarked product about available coupons, discounts, or alternative products that may be of interest to them."

• The Court refused to entertain the argument that there was a likelihood of confusion when the ads appeared over the Plaintiff’s website because the Plaintiff did not show that the threshold issue of “use” was met.

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Second Circuit Finds No Infringement By Bacardi Against Senior Regional User

Case: Star Industries, Inc. v. Bacardi & Company Ltd., 2005 U.S. App. LEXIS 11967 (2nd. Cir. 6/22/05).

The One Sentence Summary: On June 22, 2005, the Second Circuit affirmed the decision of the district court holding that there was no likelihood of confusion between the labels for Bacardi’s orange flavored rum, launched in 2000; and the design of a regional vodka manufacturer (Star Industries), for orange flavored vodka launched in 1996.

Second Circuit Holdings: Star did not apply for a trademark in the design of its stylized “O” until the commencement of litigation, and the PTO did not register the mark until after the district court’s order was entered. The district court refused to reconsider its decision or modify its findings of fact, and Star appealed. The Second Circuit disagreed with the district court’s finding that Star’s “O” design was not distinctive. Instead, the Second Circuit held that Star’s stylized design letter “O” (connoting orange-flavor) was a protectable mark because it was inherently distinctive, albeit a very “thin”/ weak mark. The Second Circuit also affirmed the district court’s finding that there was no likelihood of confusion using the eight factor test as follows:

1. The Suggestive Design Mark Was Not Strong: The Court held that the mark was suggestive, but weak.

2. Similarity of the Design Marks Used on Both Labels Was Tempered By Distinctive Label Designs: The Second Circuit held that the similarity of the “O” design was tempered by the fact that the design was presented on very different labels. The Bacardi label displayed the “O” against a clear background whereas Star’s “O” was displayed alongside a number of other elements. Moreover, the labels each contained the name of the brand logo, i.e., Bacardi and Star’s Georgi label respectively so there was less likelihood that consumers would be confused.

3. The Products Were in Close Proximity and Competitive: Even though one of the defendants, Anheuser-Bush’s malt liquor product was sold only in grocery stores (and not liquor stores) pursuant to New York state law, and the Bacardi rum products were often sold in different sections of liquor stores than Star’s Georgi Vodka products, the Second circuit determined that the products were still in close proximity and competitive because the alcoholic beverages were designed to “appeal to the same consumers”. The court also held that the geographic locations of the grocery stores and liquor stores were relatively close.

4. Because The Products Were Competitive, The “Bridging the Gap” Inquiry Was Irrelevant: The court held that a senior user might “bridge the gap” by developing a product for sale in the market of the alleged infringer’s product, however this prong of the confusion test was not a factor because of the court’s finding that the products were already in competitive proximity.

5. There Was Insufficient Evidence of Actual Customer Confusion Because Star Did not Introduce a Consumer Survey, and the Defendants Did: The Second Circuit found little evidence of customer confusion where Star’s evidence was based upon four witnesses (none of which were actually customers of Star or Bacardi), and no consumer survey, and the defendants, Bacardi and Anheuser-Bush submitted separate surveys showing no confusion. The Court noted that Star’s failure to present its own consumer survey “weighs against” a finding of consumer confusion. This finding underscores the importance of presenting a consumer survey as a plaintiff in trademark infringement cases in the absence of evidence of actual customer confusion.

6. No Evidence That the Imitative Mark Was Adopted in Bad Faith: The Court held that there was no evidence that Bacardi and Anheuser-Bush’s “O” design was adopted in bad faith where: (a) Bacardi’s counsel conducted a trademark search and no mark was found; (b) Bacardi hired a third party design firm; and (c) the design firm testified that it was unaware of Star’s “O” design. There was evidence in the record that Bacardi’s northeast regional vice presidents had been exposed to Star’s “O” design, however in light of the other evidence, the Second Circuit did not find this fact to be dispositive of bad faith. In footnote 3 the court noted its heavy reliance on the trademark search that was conducted. In rejecting Star’s authority that the search was inadequate, the Second Circuit stated that Star’s authority from the Third Circuit was “at odds with this circuit’s precedents, which preclude finding bad faith on the basis of an inadequate trademark search...”The court also noted the “implausibility of the notion that a premier international rum manufacturer [i.e., Bacardi and Anheuser-Bush] would seek to conflate its products with those of a regional discount vodka manufacturer.”

7. Respective Quality of the Products: Despite its finding of “implausibility” referenced above, the Second Circuit held that there was insufficient evidence to determine the quality of products, therefore this prong was not a factor in its analysis.

8. The Sophistication of Consumers Was Presumed Where the Products Had a Significant Price Differential: The Court relied upon the fact that Star’s product cost approximately $12 per liter and Bacardi’s product was $24 per liter. Under these circumstances, the Court reasoned that “Consumers may be expected to educate themselves sufficiently to recognize the respective brand names, to understand the respective stature of the two companies, and thus to understand how fanciful the notion is that Bacardi would seek the benefit of Star’s reputation and good will...”

On balance the Second Circuit concluded there was no likelihood of confusion because 5 factors favored defendants Bacardi and Anheuser-Bush, two factors were neutral, and only one slightly favored Star.

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Napster Investors Still Pursued by Recording Industry

With today's Supreme Court revival of the Grokster case against Grokster and StreamCast, it is interesting to note that the recording industry continues to pursue investors in the Napster case. This month, a Northern District Judge denied investors' motions for summary judgment on claims of secondary copyright infringement. In re Napster, Inc. Copyright Litigation, No. C MDL-00-1369 MHP (N.D. Cal. 6/1/05).



District Court of California Holdings:

• As held in its earlier ruling on defendants' motion to dismiss, plaintiffs' allegations that the investors (a media conglomerate and a private equity partnership) exercised essentially full operational control over Napster state claims for contributory and vicarious copyright infringement.
• Even in the absence of an employment relationship, vicarious copyright liability can arise where one has the right and ability to supervise the infringing activity and has a direct financial interest in such activities.
• The elements of contributory infringement are: 1) direct infringement by a third party, 2) actual or constructive knowledge, and 3) a material contribution to the infringing activities.
• Plaintiffs provided sufficient evidence that the uploading and downloading of copies of copyrighted songs by Napster users constituted direct infringement by Napster. The court rejected defendants' arguments that there was not enough evidence to prove that plaintiffs' specific copyrighted works were in fact uploaded or downloaded, citing the evidence showing that almost 15 billion files were downloaded in less than a year and that at least some of those files contained plaintiffs' copyrighted works.
• Plaintiffs could not establish direct infringement by Napster based on the mere fact that the names of copyrighted musical compositions and sound recordings appeared in Napster's index of available files. The ART Act (Artists' Rights and Theft Prevention Act of 2005) did not amend the Copyright Act to include a distribution right broad enough to include making a work available without proof of actual distribution.

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Grokster: Active Steps to Encourage Copyright Infringement Can Create Liability

Secondary liability for copyright infringement can arise from "active steps taken to encourage direct infringement, such as advertising an infringing use or instructing how to engage in an infringing use," according to the Supreme Court's decision today in Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., No. 04-480 (U.S. Supreme Court, 6/27/05). In ruling against Grokster and StreamCast, the Grokster Court took care to draw a line between "legitimate commerce" and "innovation having a lawful promise" on the one hand, and active inducement of illegal conduct as shown by "purposeful, culpable expression and conduct" on the other hand.

The opinion attempts to give guidance to technology businesses as to how to avoid copyright liability. For example, the opinion states that mere knowledge of potential or actual infringing uses would not be enough to subject a distributor to liability. Similarly, offering technical support or product updates would not be enough to create liability. However, the Court found that there was sufficient evidence for a trial on whether Grokster and StreamCast had intended to promote the illegal uses of their technology by advertising to former Napster users, and by advising users how to find and use copyrighted content.

Sony "Substantial Noninfringing Uses" Test Clarified: The Court held that the Ninth Circuit erred in reading the "substantial noninfringing uses" test of Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417 (1984) too broadly. Sony involved imputing illegal intent when a technology is good for nothing else other than infringement, and decided the doctrine was inapplicable on the facts in Sony because the VCR technology had "substantial noninfringing uses". However, the Court held that the Sony rule does not limit liability when there is other evidence of intent to induce infringement.

Court Adopts Inducement Doctrine From Patent Law: The Court looked to patent law and adopted the inducement rule:

"For the same reasons that Sony took the staple-article doctrine of patent law as a model for its copyright safe harbor rule, the inducement rule, too, is a sensible one for copyright. We adopt it here, holding that one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties."

Evidence of Intent to Induce Infringement: The Court held that there was sufficient evidence that both Grokster and StreamCast had intended to promote the use of their services to infringe copyright such that MGM could take its claims to trial. The Court noted that:

• Both services promoted themselves as the alternative to Napster as that service was about to be shut down due to copyright litigation;
• Grokster promoted itself on search engines by turning up in searches for Napster;
• Both companies responded affirmatively to requests for help in locating and playing copyrighted materials;
• Streamcast's internal emails show that it intended to capture Napster users. These messages were evidence that Streamcast intended to promote infringing uses.

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Inherent Anticipation of Patent Claims Found By Federal Circuit in Overturning Infringement Judgment

Case: Prima Tek II v. Polypap, No. 04-1411, 04-1421 (Fed. Cir. 6/22/05).

The One Sentence Summary: The panel found anticipation of a flower holding device patent as a matter of law and reversed the district court's judgment of patent validity and infringement.

Federal Circuit Holdings:

• Invalid patents impose costs on competitors, and the patent system depends upon the PTO to screen invalid patents.
• "When construing claims, we look first 'to the words of the claims themselves . . . to define the scope of the patented invention.' Vitronics Corp. v. Conceptronic, Inc., 90 F.3d 1576, 1582 (Fed. Cir. 1996). '[W]ords in a claim are generally given their ordinary and customary meaning' unless some 'special definition of the term is clearly stated in the patent specification or file history.' Id. We may consult with dictionaries 'in determining the ordinary and customary meanings of claim terms.' Tex. Digital Sys., Inc. v. Telegenix, Inc., 308 F.3d 1193, 1202 (Fed. Cir. 2002)." Slip Opinion at 7.
• The district court erred in limiting the claim to require a predetermined shape for the flower holder by importing limitations from the specification's preferred embodiment. "[L]imitations cannot be imported from the specification into the claims. E.g., Comark Communications, Inc. v. Harris Corp., 156 F.3d 1182, 1186 (Fed. Cir. 1998). '[T]he claims of the patent will not be read restrictively unless the patentee has demonstrated a clear intention to limit the claim scope using words or expressions of manifest exclusion or restriction.' Liebel-Flarsheim Co. v. Medrad, Inc., 358 F.3d 898, 906 (Fed. Cir. 2004) (internal quotations and citation omitted)." Slip Opinion at 8-9.
• The prior art reference inherently anticipated the claimed invention. "'[A] prior art reference may anticipate when the claim limitation or limitations not expressly found in that reference are nonetheless inherent in it." MEHL/Biophile Int’l Corp. v. Milgraum, 192 F.3d 1362, 1365 (Fed. Cir. 1999). Inherent anticipation does not require an appreciation of the inherent limitation by those of skill in the art before the critical date of the patents in issue. Schering Corp. v. Geneva Pharms., Inc., 339 F.3d 1373, 1377 (Fed. Cir. 2003)." The crimping limitation of the claimed invention was disclosed by a figure in the prior art showing that crimping occurred.

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Declaration Admitting Inventor Lied Is Insufficient To Invalidate Patent On Defendant's Motion for Summary Judgment

Case: Checkpoint Systems, Inc. v. All-Tag Security S.A. et al., (Fed. Cir. June 20, 2005)

The One Sentence Summary: The Federal Circuit held that declarations by co-inventors admitting they lied to the PTO in a patent application about inventorship created a disputed issue of material fact which precluded summary judgment for the defendant, since they conflicted with the statements the declarants made under oath in connection with the patent application.

What They Were Fighting About: Checkpoint and All-Tag are competitors in the business of manufacturing and selling disposable, deactivatable resonance labels for the retail industry. A resonance label is a device that is attached to merchandise in department stores and other outlets in order to prevent theft of the merchandise. Checkpoint acquired the patent in dispute when it purchased a firm which had, in turn, acquired the patent application when it bought a third firm. Checkpoint sued All-Tag for infringing Checkpoint's patent which claimed a resonance label and a method of making it.

The United States application for the patent listed a single inventor, Paul R. Jorgenson. He also declared in the application that he qualified as an independent inventor for purposes of paying reduced fees. Jorgenson assigned his interest in the patent application to a company named Durgo. Two men associated with Durgo, Franz Pichl and Lukas Geiges also filed declarations with the PTO in connection with prosecution of the patent application in which they identified Jorgensen as the inventor.

Checkpoint sued All-Tag for patent infringement after Checkpoint acquired the patent through its purchase of the company that had bought Durgo.

All-Tag moved for summary judgment on the ground that the patent was invalid since it incorrectly listed Jorgenson as the sole inventor. In support of its motion, All-Tag proffered declarations from Jorgenson, Pichl, and Geiges which stated that the resonance label that was the subject of the patent was based on the concepts developed by all three men. Geiges's declaration also stated that the men intentionally omitted Mr. Pichl's name on the patent application filed in the United States because of Pichl's and Geiges's competitive relationship with Checkpoint at the time, and that they were concerned that Checkpoint might try and claim ownership in the technology based on Pichl's company's supply agreement with Checkpoint.

The district court granted the defendants' motion for summary judgment, reasoning that the three men's declarations were undisputed evidence that they were co-inventors. The Federal Circuit reversed.

Federal Circuit Holdings:

• The declarations were not undisputed evidence. They raised a disputed issue of material fact whether Jorgenson was the sole inventor which precluded summary judgment since they conflicted with the three men's earlier statements made under oath in connection with the patent application. "The unresolved question is whether Jorgenson, Pichl, and Geiges lied to the PTO in 1988 or whether they are lying to the courts now."

• The Federal Circuit declined to apply the "corroboration rule" in the first instance, and left it for the district court to apply the rule to the facts of the case. A defendant who claims a patent is invalid through failure to join an inventor on the application must prove the nonjoinder of an actual inventor by clear and convincing evidence. The "corroboration rule" states that uncorroborated testimonial evidence of an inventor absent other evidence is insufficient to invalidate a patent, and additional evidence such as physical, documentary, circumstantial evidence, or reliable testimony from individuals other than the alleged inventor or an interested party is needed.

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Proposed Patent Act of 2005 - ABA Intellectual Property Law Section Recommendations

At today's meeting of the American Bar Association Section of Intellectual Property Law in San Francisco, a panel discussed the Section's recommendations on proposed changes to the patent law. The IPL Section recently issued a white paper including the ABA Section's recommendations. The white paper is a good introduction to many of the issues pending before Congress in the Proposed Patent Act of 2005 (H.R. 2795), and includes recommendations for a first to file inventor system and creating a post-grant opposition process.

The recommendations in the white paper include:

1. Adopt the first-inventor-to-file principle as part of U.S. patent law. This would harmonize U.S. patent law with international patent law.
2. Define prior art through "best practices", including removing secret prior art as a basis for barring a patent (e.g., a secret sale of the technology would not create an on-sale bar).
3. Repeal the “best mode” requirement, relying instead on the requirements for a complete written description and sufficient enabling details to permit the full scope of the claimed invention to be readily carried out.
4. Reduce litigation costs by limiting claims of inequitable conduct. Do so by barring any pleading of the “inequitable conduct” defense unless the court has found at least one patent claim is not valid, and the invalidated claim would not have issued “but for” misconduct.
5. Expand the enforcement of the “duty of candor and good faith” by permitting a court to refer issues of possible misconduct to the PTO for evaluation, investigation and sanction.
6. Eliminate as unnecessary in the context of a codified “duty of candor” all the “deceptive intent” provisions in the patent laws relating to inventorship changes, foreign filing licenses reissue applications, and enforcement of partially valid patents which merit repeal in light of the complete codification of inequitable conduct issues.
7. Publish all applications for patent at 18-months following the earliest filing or priority date for which an applicant seeks the benefit. Presently, an applicant can opt out of publication of the application if there will be no applications for patents on the invention outside the United States. (The adoption of a first-to-file inventor system would make this provision less objectionable because an inventor need not worry about someone reading an application, filing a patent application for the invention, and then arguing first invention.)
8. Open a limited window for post-grant opposition of an issued patent. Suggested procedures include a window of 9 months from issuance, allowing documents and declarations as evidence, opening all grounds of invalidity (including the on-sale bar because secret prior art would be removed as grounds for invalidity as stated above), limiting discovery to cross examination of declarants, using a preponderance of evidence standard, decision by a panel of three administrative patent judges, and the use of a full inter partes procedure.
9. Authorize pre-grant submissions of prior art by third parties.
10. Remove the retroactivity restrictions on inter partes reexamination and remove the estoppel provision for inter partes reexamination as it applies to issues that “could have been raised.”
11. Limit the ability to obtain enhanced damages for willful infringement of a patent. A patentee should be required to point to evidence of improper conduct, such as intentional copying of an invention known to be patented or failure to exercise due care after receiving a notice threatening suit for infringement that set out with particularity the manner in which each infringed claim related to the infringer’s activities.
12. Eliminate the potential for abuse of the patent laws arising from the unlimited right to file continuing applications for patent. The United States Patent and Trademark Office would be charged with promulgating regulations, after a public notice and hearing, to preserve the right of the inventor to file continuing applications for patent that are legitimately needed to afford the inventor a full and fair opportunity to protect any invention disclosed in the patent application, while eliminating any continuation application abuse.
13. Expand the rights of prior inventors as part of the move to a first-inventor-to-file system.
14. Clarify the application of the “entire market value” rule when this principle is used to determine a reasonable royalty as the basis for the patent owner’s compensatory damages.
15. Permit the filing of applications for patent by the assignee of the inventor.

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Federal Circuit Holds That 'Optionally Includes' Anticipates 'Expressly Excludes'

Case: Upsher-Smith Laboratories, Inc. v. Pamlab, L.L.C., No. 04-1405 (Fed. Cir. 6/17/05).

The One Sentence Summary: The Federal Circuit affirmed summary judmgent holding claims for the composition of a vitamin supplement invalid, and therefore not infringed, because the claims, which stated a requirement that the composition be "essentially free of antioxidants," were anticipated and obvious in light of an earlier European Application that "optionally includes" antioxidants.

Federal Circuit Holdings:

• The prior art both taught vitamin compositions that included adding other vitamins and antioxidants for additional health benefits, and recognized that several substances known to be antioxidants were known to destroy certain vitamins.
• The prior art did not teach that it was the antioxidizing properties of those substances that was responsible for the destruction. This recognition, stated as an express exclusion of antioxidants, was admittedly the only distinction between the claims at issue and the prior art.
• An earlier European Application taught compositions both with and without antioxidants.
• Applying the axiom that "a product which would literally infringe if later in time anticipates if earlier," the Federal Circuit found that the European Application anticipated the claims, because compositions made without antioxidants according to the European Application would infringe claims that expressly excluded antioxidants.
• The court was not swayed by the argument that the European Application teaches away from the claim, because a reference is no less anticipatory if, after disclosing the invention, it disparages it.
• Similarly, the argument that the European Application teaches a "genus" that could not anticipate the claimed "species" compositions failed, because the claimed compositions were equally broad as those taught by the European Application.
• In short, the court affirmed that the claims were both anticipated and obvious, recognizing that despite the significance of the inventor's discovery, it did not entitle him to "withdraw some vitamin compositions from the public domain by explaining or purporting to claim the scientific underpinnings of their operation."

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Supreme Court to Decide if Antitrust Presumption of Market Power Due to a Patent Rests on "wobbly, moth-eaten foundations"

The Supreme Court announced today that it would review the Federal Circuit's decision in Independent Ink, Inc. v. Illinois Tool Works, Inc., et al. , No. 041196p - (Fed. Cir. 1/25/05), a decision holding that a patent creates a presumption of market power for a tying case. In Independent Ink, the Federal Circuit rejected numerous arguments that there should be no presumption of market power, observing that it was up to the Supreme Court to change the rule:

The fundamental error in all of defendants’ arguments is that they ignore the fact that it is the duty of a court of appeals to follow the precedents of the Supreme Court until the Court itself chooses to expressly overrule them. This message has been conveyed repeatedly by the Court. The Court’s "decisions remain binding precedent until [it] see[s] fit to reconsider them, regardless of whether subsequent cases have raised doubts about their continuing vitality." Hohn v. United States, 524 U.S. 236, 252-53 (1998). "If a precedent of th[e] Court has direct application in a case, yet appears to rest on reasons rejected in some other line of decisions, the Court of Appeals should follow the case which directly controls, leaving to th[e] Court the prerogative of overruling its own decisions." Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 484 (1989). Even where a Supreme Court precedent contains many "infirmities" and rests upon "wobbly, moth-eaten foundations," it remains the "Court's prerogative alone to overrule one of its precedents." State Oil Co. v. Khan, 522 U.S. 3, 20 (1997). None of the authorities that defendants present, whether it be the language of Walker Process, the concurrence in Jefferson Parish, or the dissent from denial of certiorari in Data General, constituted an express overruling of International Salt or Loew’s. We conclude that the Supreme Court has held that there is a presumption of market power in patent tying cases, and we are obliged to follow the Supreme Court’s direction in this respect. The time may have come to abandon the doctrine, but it is up to the Congress or the Supreme Court to make this judgment.

More detail from the Chicago Tribune can be found here.

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Patent Claim Invalid Due to Indefiniteness When a "Means Plus Function" Claim Had No Corresponding Structure in Specification

Case: Default Proof Credit Card Sys. v. Home Depot, No. 05-1069 (Fed. Cir. 6/16/05).

The One Sentence Summary: A "means plus function" claim was indefinite when the patent had no structure corresponding to a claim for "means for dispensing at least one debit card."

What They Were Fighting About: The Federal Circuit panel affirmed the district court's grant of summary judgment of invalidity on a patent claim for dispensing prepaid debit cards.

Federal Circuit Holdings:

• "'A determination of claim indefiniteness is a legal conclusion that is drawn from the court’s performance of its duty as the construer of patent claims.' Atmel Corp. v. Information Storage Devices, 198 F.3d 1374, 1378 (Fed. Cir. 1999) (citing Personalized Media Communications, LLC v. Int’l Trade Comm’n, 161 F.3d 696, 705 (Fed. Cir. 1998)). Indefiniteness, therefore, like claim construction, is a question of law that we review de novo. Id.'" Slip Opinion at 10.
• "The requirement that the claims "particularly point[] out and distinctly claim[]" the invention is met when a person experienced in the field of the invention would understand the scope of the subject matter that is patented when reading the claim in conjunction with the rest of the specification. S3 Inc. v. nVIDIA Corp., 259 F.3d 1364, 1367 (Fed. Cir. 2001) ." Slip Opinion at 10.
• "[I]f one employs means-plus-function language in a claim, one must set forth in the specification an adequate disclosure showing what is meant by that language. If an applicant fails to set forth an adequate disclosure, the applicant has in effect failed to particularly point out and distinctly claim the invention as required by the second paragraph of section 112." In re Donaldson Co., 16 F.3d 1189, 1195 (Fed. Cir. 1994) (en banc). "The specification must be read as a whole to determine the structure capable of performing the claimed function." Budde v. Harley-Davidson, Inc., 250 F.3d 1369, 1379 (Fed. Cir. 2001). A structure disclosed in the specification qualifies as "corresponding" structure only if the specification or prosecution history clearly links or associates that structure to the function recited in the claim. B. Braun Med. v. Abbott Labs., 124 F.3d 1419, 1424 (Fed. Cir. 1997). This duty to link or associate structure to function is the quid pro quo for the convenience of employing § 112, ¶ 6. See O.I. Corp. v. Tekmar Co., 115 F.3d 1576, 1583 (Fed. Cir. 1997). "Fulfillment of the § 112, ¶ 6 trade-off cannot be satisfied when there is a total omission of structure." Atmel, 198 F.3d at 1382. While corresponding structure need not include all things necessary to enable the claimed invention to work, it must include all structure that actually performs the recited function. See Cardiac Pacemakers, Inc. v. St. Jude Med., Inc., 296 F.3d 1106, 1119 (Fed. Cir. 2002) ." Slip Opinion at 10-11.
• "[A] human being cannot constitute a "means," see In re Prater, 415 F.2d 1393, 1398 (CCPA 1969)." Plaintiff's arguments that a human can be part of the structure begs "the question of what structure the human being operates to perform the function of distributing the prepaid debit cards." Slip Opinion at 15.
• The Point of Sale terminal cited by plaintiff was not sufficient structure to render the claim definite.
• Conclusory expert testimony offered by plaintiff as to the structure disclosed in the specification was properly rejected. "In sum, while it is true that the patentee need not disclose details of structures well known in the art, see Atmel, 259 F.3d at 1371, the specification must nonetheless disclose some structure. Stated differently, the testimony of one of ordinary skill in the art cannot supplant the total absence of structure from the specification. Because the specification of the ’182 patent discloses no structure corresponding to the claimed function of the "means for dispensing," Default Proof cannot use the declaration of its expert to rewrite the patent’s specification." Slip Opinion at 19.
• Because defendants did not challenge the district court's holding that other patent claims were valid, the panel refused to consider those claims. "Because the defendants do not appeal the district court’s holding that dependent claims 2 through 7 are not invalid, we leave that portion of the judgment undisturbed. See United States v. Am. Ry. Express Co., 265 U.S. 425, 435 (1924) (“the appellee may not attack the decree with a view either to enlarging his own rights thereunder or of lessening the rights of his adversary” without bringing a cross-appeal)." Slip Opinion at 20.
  
  

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Obviousness of Claimed Invention Found as a Matter of Law

Case: Princeton Biochemicals, Inc. v. Beckman Coulter, Inc. (Fed. Cir., No. 04-1493, 6/9/05).

The One Sentence Summary: A claimed invention was obvious as a matter of law when all the elements of the claimed invention existed in the prior art, there was motivation to combine the elements, and the references were appropriate prior art in the field or a related field.

What They Were Fighting About: The Federal Circuit panel affirmed a district court ruling setting aside a jury verdict for plaintiff Princeton Biochemicals, Inc. against Defendant Beckman-Coulter on patent infringment claims regarding a capillary electrophoresis device. After a jury verdict in favor of plaintiff, the district court granted defendant's motion for judgment as a matter of law (JMOL), finding that the claimed invention was obvious. The Federal Circuit panel affirmed.

Federal Circuit Holdings:

• "The legal conclusion, that a claim is obvious within § 103(a), depends on at least four underlying factual issues: (1) the scope and content of the prior art; (2) differences between the prior art and the claims at issue; (3) the level of ordinary skill in the pertinent art; and (4) evaluation of any relevant secondary considerations. See Graham v. John Deere Co. of Kansas City, 383 U.S. 1, 17 (1966). " Slip opinion at 7.
• "As this court outlined in Ruiz v. A.B. Chance Co., 357 F.3d 1270, 1275 (Fed. Cir. 2004), in making the assessment of differences between the prior art and the claimed subject matter, section 103 specifically requires consideration of the claimed invention "as a whole." Inventions typically are new combinations of existing principles or features. Envtl. Designs, Ltd. v. Union Oil Co., 713 F.2d 693, 698 (Fed. Cir. 1983) (noting that "virtually all [inventions] are combinations of old elements"). The "as a whole" instruction in title 35 prevents evaluation of the invention part by part. Ruiz, 357 F.3d at 1275. Without this important requirement, an obviousness assessment might successfully break an invention into its component parts, then find a prior art reference corresponding to each component." Slip opinion at 8.
• "This “as a whole” assessment of the invention requires a showing that an artisan of ordinary skill in the art at the time of invention, confronted by the same problems as the inventor and with no knowledge of the claimed invention, would have selected the various elements from the prior art and combined them in the claimed manner. Id. In other words, section 103 requires some suggestion or motivation, before the invention itself, to make the new combination. See In re Rouffet, 149 F.3d 1350, 1355-56 (Fed. Cir. 1998)." Slip opinion at 9.
• "[S]imply identifying all of the elements in a claim in the prior art does not render a claim obvious. Ruiz, 357 F.3d at 1275. Instead section 103 requires some suggestion or motivation in the prior art to make the new combination. Rouffet, 149 F.3d at 1355-56. A suggestion or motivation to modify prior art teachings may appear in the content of the public prior art, in the nature of the problem addressed by the invention, or even in the knowledge of one of ordinary skill in the art. SIBIA Neurosciences, Inc. v. Cadus Pharm. Corp., 225 F.3d 1349, 1356 (Fed. Cir. 2000)." Slip Opinion at 10.
• An expert's testimony can establish motivation to combine prior art when it provides "detailed analysis of the prior art and the reasons that one of ordinary skill would possess knowledge and motivation to combine these simple elements. " Slip opinion at 11.
• The nature of the problem can also supply the motivation to combine prior art references. Slip opinion at 12-13.
• The prior art references were appropriate prior art in the field or a related field. "A reference is appropriate prior art if within the field of the inventor’s endeavor. Bausch & Lomb, Inc. v. Barnes-Hind/Hydrocurve, Inc., 796 F.2d 443, 449 (Fed. Cir. 1986). Alternatively, a reference qualifies as prior art if "reasonably pertinent to the particular problem with which the inventor was involved.” Id. “A reference is reasonably pertinent if, even though it may be in a different field of endeavor, it is one which, because of the matter with which it deals, logically would have commended itself to an inventor’s attention in considering his problem.” In re GPAC Inc., 57 F.3d 1573, 1578 (Fed. Cir. 1995) (quotations and citations omitted). If a reference’s disclosure relates to the same problem as the claimed invention, “that fact supports use of that reference in an obviousness rejection.” In re Clay, 966 F.2d 656, 659 (Fed. Cir. 1992)." Slip opinion at 12.

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Proposed Patent Act of 2005 Gathering Momentum in Congress

The proposed Patent Act of 2005 continues to move through Congress and is gathering momentum. At the Advanced Patent Litigation Seminar hosted by the AIPLA (American Intellectual Property Law Association) last week in San Francisco, AIPLA president William Rooklidge urged attendees to pay attention to the bill and comment on its provisions.

Rooklidge said that the original patent reform proposal from AIPLA had sought to improve patent quality and reduce patent litigation costs. However, many provisions have been added to the proposed legislation that Rooklidge characterized as weakening the rights of patentees. The bill is scheduled for a mark-up this month, and Rooklidge advised that this may be the best time to influence Congress on the legislation.

A good collection of links to testimony on the proposed legislation can be found on AIPLA's site here.

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Federal Patent Law Preempts Unjust Enrichment Claim for Allegedly Stolen Invention

Case: Ultra-Precision Mfg. Ltd. v. Ford Motor Company, No. 04-1329 (Fed. Cir. 6/15/05).

The One Sentence Summary: A state law unjust enrichment claim by alleged co-inventors of a patented invention was preempted by federal patent law, and the district court's factual findings that the plaintiffs were not co-inventors was upheld.


Federal Circuit Rulings:

• The preemption defense was not waived despite Ford's failure to plead it as an affirmative defense - the district court had discretion to allow the defense because it was raised before the pretrial order. Slip opinion at 12.
• Plaintiff's state law unjust enrichment claim was properly dismissed as preempted under federal patent law when plaintiffs sought to recover for defendants' alleged use of "a concept that Plaintiff admits was not patented and that was publicly disclosed in Plaintiff's ... patents." Slip opinion at 10, citing Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141 (1989).
• The Federal Circuit panel distinguished earlier cases finding no preemption where the plaintiffs had sought damages other than those allowed by patent law. For example, in Univ. Colorado v. American Cyanamid,342 F.3d 1298 (Fed. Cir. 2003), the plaintiffs sought to recover the incremental benefit that the defendants had gained by breaching a confidentiality agreement and obtaining a patent for plaintiff's idea. Here, plaintiffs were not seeking any incremental benefit, so patent law preempted the claim. Slip opinion at 19.
• The panel upheld the district court's factual findings that plaintiffs were not co-inventors of the key inventive concepts of defendant's invention. Slip opinion at 23-24.
  

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Supreme Court Passes on "Pass the Mic", Allowing 9th Circuit Copyright Ruling to Stand

On June 13, 2005, the United States Supreme Court declined review of a Ninth Circuit opinion affirming the dismissal of a copyright infringement case involving the Beastie Boy's sampling of a three-note segment of jazz composition. The Ninth Circuit's opinion is at Newton v. Diamond, (9th Cir. No. CV-00-04909).

9th Circuit Holdings:

• Because the Beastie Boys obtained a license to sample the sound recording of the composition, but not to use the underlying composition, the inquiry was confined to whether the unauthorized use of the composition alone was substantial enough to support an infringement claim.
• The Beastie Boys' use of of the three-note segment of the composition was a de minimis use and thus not actionable, even though the sample is repeated throughout the song "Pass the Mic" as a background element.
• Because plaintiff conceded that the original composition and "Pass the Mic" are substantially dissimilar in concept and feel, defendants are entitled to summary judgment because an average audience would not recognize the appropriation.
• Judge Graber dissented on the ground that an average audience might be able to recognize the appropriation of the segment of the composition.
  
  

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Supreme Court: Clinical Research Exemption Protects The Hunt For Drugs From Patent Infringement Claims

Case: Merck KGaA, v. Integra Lifesciences I, Ltd. (U.S. S.Ct. Case No. 03-1237 June 13, 2005)

The One Sentence Summary: The Supreme Court held that the experimental use exception to patent infringement in 35 U.S.C. Section 271(e)(1) allows scientists to use patented compounds in preclinical studies as long as there is a reasonable basis for believing that the patented compound may work, through a particular biological process, to produce a particular physiological effect, and the scientist uses the compound in research that, if successful, would be appropriate to include in a submission to the Food and Drug Administration.

What They Were Fighting About: Integra held five patents related to a tripeptide sequence known as "RGD peptide" which promotes cell adhesion. Merck sponsored research at the Scripps Research Institute concerning angiogenesis, the process by which new blood vessels sprout from existing vessels. The process plays a critical role in may diseases, including solid tumor cancers, diabetic retinopathy, and rheumatoid arthritis. The scientists discovered that it was possible to inhibit angiogenesis, first by using a monoclonal antibody, and later using an RGD peptide protected by Lifesciences' patents. Merck sponsored additional research aimed at developing angiogenesis inhibitors which would culminate with the submission of an investigational new drug application to the Food and Drug Administration. The scientists used the patented RGD peptides as controls against which to measure the efficacy of the new compounds the scientists were researching.

The jury found that the scientists' experimentation infringed Lifescience's patents on RGD peptides, and on appeal, the Federal Circuit affirmed, reasoning that the Food and Drug Administration has no interest in the hunt for drugs that may or may not later undergo clinical testing for Food and Drug Administration approval. Thus, the experimentation that Merck sponsored did not fall within the language of the experimental use exemption of 35 U.S.C. Section 271(e)(1), which provides that:

"It shall not be an act of infringement to make, use, offer to sell, or sell within the United States or import into the United States a patented invention (other than a new animal drug or veterinary biological product (as those terms are used in the Federal Food, Drug, and Cosmetic Act and the Act of March 4, 1913) ...) solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs ... ."

The Supreme Court reversed.

Supreme Court Rulings:

• 35 U.S.C. Section 271(e)(1)'s exemption from infringement extends to all uses of patented inventions that are reasonably related to the development and submission of any information under the Federal Food, Drug and Cosmetic Act of 1938.
• 35 U.S.C. Section 271(e)(1) protects more than experimentation solely concerning the safety of drugs in humans. The Court rejected Integra's argument that preclinical studies related to a drug's efficacy, mechanism of action, pharmacokinetics, and pharmacology were not reasonably included in an investigational drug application or a new drug application.
• The Supreme Court reasoned that the Food and Drug Administration "does not evaluate the safety of proposed clinical experiments in a vacuum; rather, as the statute and regulations reflect, it asks whether the proposed clinical trial poses an unreasonable risk." The assessment involves a comparison of the risks and the benefits associated with the proposed clinical trials. Thus preclinical studies can be relevant to providing Food and Drug Administration investigators evaluating a proposal for clinical trials with information sufficient to allow them to make their own "unbiased risk-benefit assessment of the appropriateness of the proposed trial." Such information necessarily includes preclinical studies of a drug's efficacy in achieving particular results.

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Common Melodic Pattern and Title Lyric in Song Not Enough To Show Substantial Similarity And Support Copyright Infringement Claim

Case: Johnson v. Gordon, Case No. 04-2475 (1st Cir. 2005).

The One Sentence Summary: The First Circuit held that there was no copyright infringement of a song where the only similarity to the alleged infringing song was a very common melodic pattern that lacked originality and where title and lyrics captured only a common sentiment expressed in common verbiage.

What They Were Arguing About: The copyright owner of a song titled “You’re the One (For Me)” (plaintiff) contended that he provided his song to a music distributor (and others) who in turn reworked his song to produce “You’re the One” recorded by the singing trio Sisters With Voices (SWV). The song recorded by SWV became a hit and plaintiff sued claiming that SWV’s “You’re the One” infringed on his copyright. The plaintiff alleged that the similarity of the songs was apparent from a melody supporting a lyrical phrase common to both songs, a two-bar harmonic progression, a certain three-bar melody, and the use of the phrase “you’re the one for me” in the title and lyrics of each song.

First Circuit Ruling: The First Circuit affirmed summary judgment in favor of defendants, finding that the plaintiff failed to demonstrate that the hit song “You’re the One” infringed the copyright of any protected elements of his song.

• To establish copyright infringement under the Copyright Act, two elements must be proven: (1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original. The plaintiff bears the burden of proof as to both elements.



• A plaintiff asserting a copyright in the work must show that the work, viewed as a whole, is original and that the applicable statutory requirements for issuance of a valid copyright are satisfied. A certificate of copyright constitutes prima facie evidence of ownership and originality and operates to shift the burden to the defendant to show some infirmity in the claimed copyright.
  
  
• Copying does not necessarily constitute copyright infringement. To prove wrongful copying, a plaintiff must show that copying actually occurred and that the copyright was so considerable that it rendered the infringing and copyrighted works substantially similar.
  
  
• Summary judgment on the similarity issue is appropriate only when a factfinder is compelled to conclude that no substantial similarity exists between the copyrighted work and the allegedly infringing work. However, originality remains key to the similarity analysis because copyright protection for a musical work extends only to original expressions of ideas – not to the ideas themselves or banal (common) expressions of them.
  
  
• The issue at the “epicenter of this appeal” was whether the defendants had copied copyrightable elements of plaintiff’s “You’re the One (For Me)” to create the SWV hit “You’re the one.” Because there was no dispute about plaintiff’s ownership of a valid copyright for “You’re the one (for me),” the Court launched directly to the question of whether the plaintiff had made a factual showing sufficient to establish a genuine issue as to the elements required to prove actionable copying.
  
  
• As evidence that defendants unlawfully copied parts of his song, the plaintiff pointed to a melody supporting a lyrical phrase common to both songs, a two-bar harmonic progression, a certain three-bar melody, and the use of the phrase “you’re the one for me” in the title and lyrics of each song. The Court rejected plaintiff’s use of “a complicated mélange of techniques” to show that the melody supporting the lyric “you’re the one for me” in the hit song constituted a melodic variation of the melody in plaintiff’s song. The Court observed that the “herculean effort” undertaken by plaintiff’s expert to assimilate the two melodies made “manifest the absence of any meaningful degree of similarity.” Similar attempts to show that the alleged infringing song contained a harmonic expression copied from plaintiff’s song were also rejected.
  
  
• In addition, the Court found that the melodic and harmonic expressions that plaintiff claimed were copied in the alleged infringing song were of a common nature that lacked the requisite originality for copyright protection. Even the shared lyric “you’re the one for me” (the one undeniable similarity between the songs) did not aid plaintiff’s attempt to establish actionable copying – the lyric was found to be very common (i.e. unoriginal) and “too trite to warrant copyright protection.”
  
  
• Discerning no similarities upon which plaintiff could garner support for a claim of actual copying, the First Circuit concluded that plaintiff’s claim of copyright infringement failed as a matter of law.

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Expert Opinion Regarding Patent Was Properly Excluded When Not Disclosed in Expert Report

Case: Air Turbine Technology v. Atlas Copco (Fed. Cir. No. 04-1387, 6/7/05).

The One-Sentence-Summary: The Federal Circuit panel affirmed summary judgment rulings on Lanham Act false advertising and breach of contract claims and a jury verdict of non-infringement against a plaintiff in a patent infringment case.

Federal Circuit Holdings:

• The district court properly granted summary judgment against the plaintiff on its Lanham Act false advertising claims. Plaintiff ATT had argued that defendant Atlas has sold deficient turbine grinders that caused customers to "stop buying all governed turbine grinders, irrespective of the product's origin." The Federal Circuit panel agreed with the district court that there was no evidence linking this alleged destruction of the market to false advertising.
• The panel affirmed the grant of summary judgment against plaintiff's breach of contract claim, agreeing with the district court's construction of the contract as preventing use of the plaintiff's patented technology, and also agreeing that no use was shown.
• Applying 11th Circuit law, the panel affirmed the exclusion of plaintiff's expert's testimony for failure to disclose the expert's opinion in an expert report as required by Rule 26 of the Federal Rules of Civil Procedure.
• The panel affirmed the district court's exclusion of testimony by the co-inventor regarding the operation of the accused product. The district court properly excluded this testimony because the witness was a lay witness not qualified to provide expert testimony about the accused product.
• The district court did not abuse its discretion in refusing plaintiff's late request to order the appearance of Swedish witnesses via teleconference rather than by reading of their deposition transcripts.

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Narrower Definition Used in Patent Specification Chosen Over Broader Dictionary Definition of "Interrupt"

Case: Boss Control, Inc. v. Bombadier Inc., No. 04-1437, -1438, -1471 (Fed. Cir. 6/8/05)

The One Sentence Summary: The Federal Circuit held that the inventor's definition of "interrupt" prevailed over the accustomed use of the term in deciding that a patent for a security device for snowmobiles and personal watercraft was not infringed.

Federal Circuit Rulings: The Federal Circuit affirmed a grant of summary judgment, finding no infringement of Boss Control's patent for a security power interrupt apparatus.

• At issue was the meaning of the term "interrupt" in claim language providing that the "controller is operative to interrupt power to the load responsive to said code-providing device being operatively disconnected from said controller."
• Plaintiff Boss argued that "interrupt" should be given its ordinary and accustomed meaning of "to break off" or "to shut or cut off." Defendant Bombadier contended the inventors had specially defined the term so that it did not involve simple "on-off" control of electrical power.
• As a result of using the definition in the specification, the claims were construed more narrowly, even though the language of the claims, read in isolation, might be construed broadly enough to encompass the feature in question in the defendant's device.
• The Federal Circuit affirmed the finding that there had been no literal infringement, and no infringement under the doctrine of equivalents (the latter theory was found waived because Boss omitted it from the complaint and spent one sentence on it in briefing).
• To resolve the question, the Federal Circuit first looked to the patent itself, and in particular the specification to determine whether the patentee had chosen to be his own lexicographer, recognizing that it the specification resolved the question, it was improper to look to extrinsic evidence.
• There, the background of the invention did give a special definition of "interrupt," distinguishing between simple "on-off" interruption and interruption that occurred in two stages. The preferred embodiments were consistent with the two stage definition of "interrupt." Based on this, the court concluded a special definition of "interrupt" was appropriate.

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Patent Invalid Where Applicant Implied It Had Empirical Data That It Did Not Have

Case: Purdue Pharma L.P. et al. v. Endo Pharmaceuticals, Inc. et al., Case No. 04-1189, -1347, & 1357, (Fed. Cir. June 7, 2005)

The One Sentence Summary: The Federal Circuit held that the patentee committed inequitable conduct where he misled the patent office by implying during prosecution that he had experimental data supporting the key feature he used to distinguish the patents at issue over the prior art, when in fact, the distinguishing feature was based on the inventor's insight and not on clinical trials.

What They Were Arguing About: Purdue held patents on a controlled release oxycodone medication for the treatment of moderate to severe pain. Endo filed an application with the FDA for approval of a generic version of the drug. Purdue sued Endo for patent infringement. During an 11 day trial, Endo put on evidence that Purdue committed inequitable conduct before the Patent and Trademark Office when it repeatedly argued that it had "surprisingly discovered" that the controlled release formulation of its drug controlled pain over a substantially narrower range of dosing than other opium-derived pain relievers. In fact, the "discovery" was nothing more than the inventor's "insight," in which, based upon his knowledge of the pharmacological properties of opium-derived pain relievers, he "envisioned" a controlled release product that would control pain over a small dosage range. Purdue had no clinical data supporting its "discovery."

Federal Circuit Rulings: The Federal Circuit affirmed the district court's finding that the patents were invalid because of Purdue's inequitable conduct before the PTO.

• The Federal Circuit reviews a district court's factual findings regarding materiality and intent to deceive for clear error, and will not disturb them on appeal unless the court has a "definite and firm conviction that a mistake has been made."
  
• The Federal Circuit refers to the standard for "materiality" set forth in PTO Rule 56, and looks to the version of the rule that was in place when the patents were pending.
  
• Purdue's misrepresentations were material because the lack of scientific proof that the drug worked over a reduced range of dosage was inconsistent with the inventor's representations to the PTO that he had "discovered" that OxyCodone acceptably controlled pain over a reduced dosage range.
  
• Although a patent application for a pharmaceutical discovery does not need to be supported by clinical results, see 35 U.S.C. Section 103(a) ("Patentability shall not be negatived by the manner in which the invention was made"), Purdue's repeated representations to the PTO that it had made a "surprising medical discovery" without disclosing the lack of clinical trials and that the alleged "discovery" under these circumstances was based on insight and was without an empirical basis, was a material misrepresentation.
  
• Even if the examiner did not necessarily rely on the applicant's misrepresentation, that would not be inconsistent with a finding of materiality.
  
• Intent to deceive or mislead the PTO need not be proven by direct evidence. The court can draw an inference of intent to deceive from the circumstantial evidence. Although a court must weigh all evidence, including evidence of good faith, "a patentee facing a high level of materiality and clear proof that it knew or should have known of that materiality, can expect to find it difficult to establish subjective good faith sufficient to prevent the drawing of an inference of intent to mislead. The district court did not err in drawing an inference from Purdue's statements and the context in which they were made. Purdue's carefully chosen language suggested that it had obtained clinical results, and that suggestion was left unclarified by any disclosure that discovery of the narrow dosage range for OxyCodone was based on insight."

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Despite Hobson's Choice Facing Patent Licensee, No Declaratory Judgment Jurisdiction Exists When License Has Not Been Breached

Case: Medimmune, Inc. v. Centocor, Inc., No. 04-1499 (Fed. Cir. 6/1/05).

The One Sentence Summary: There was no jurisdiction over a patent invalidity declaratory judgment action by a patent licensee which had been timely paying royalties on a patent license, despite the licensee's argument that it faced a "Hobson's choice" of paying license fees or being sued.

Federal Circuit Rulings: The Federal Circuit affirmed the dismissal of Medimmune's declaratory judgment action seeking a declaration of patent invalidity.

• Gen-Probe, Inc. v. Vysis, Inc., 359 F.3d 1376 (Fed. Cir. 2004) is controlling. A licensee who is timely paying royalties and adhering to the license agreement is not in "reasonable apprehension" of a suit by the patentee as required by the Declaratory Judgment Act,
  28 U.S.C. § 2201(a).
• The panel declined Medimmune's urging to overrule Gen-Probe or to urge en banc review.
• The panel distinguished prior Federal Circuit decisions finding jurisdiction where patentee had quit paying royalties on the license or had sued for an injunction preventing cancellation of the license while seeking to pay the license fees pendente lite.

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