Alleged License For Animal Crackers Packaging Too Indefinite For Enforcement

Case: Liberto v. D.F. Stauffer Biscuit Co., No. 04-50308 (5th Cir. 2/21/06)

The One Sentence Summary: Injunction based on alleged breach of trademark licensing agreement vacated, where the underlying agreement was indefinite, and infringement issues had not been adjudicated.

What They Were Fighting About: Both parties had registered trademarks for red and yellow striped animal crackers packaging. Liberto claimed Stauffer's mark infringed its own, earlier mark, and further claimed Stauffer owed it royalties pursuant to a settlement agreement between the parties, that had resolved earlier litigation. The district court granted injunctive relief against Stauffer, enjoining it from using the red and yellow striped packaging, for failing to pay those royalties. Stauffer appealed.

Fifth Circuit Holdings:

• The Fifth Circuit vacated the injunction, finding the settlement agreement too indefinite to serve as a trademark licensing agreement. Among the facts relied on was the absence of a duration or time of performance, and the use of the future tense in the agreement (e.g., "Plaintiff will grant Defendant an exclusive license").
  
• At most, the settlement agreement could be seen as an agreement to allow Stauffer to use Liberto's mark, which allowed Stauffer to retain the right to use its own red and yellow striped animal cracker packaging.
  
• The Fifth Circuit further found that Stauffer did not ratify the agreement by making an initial royalty payment, because the agreement was simply too indefinite; at most the royalty payment was another non-binding promise.
  
• The Fifth Circuit also found that the underlying substantive dispute between the parties had not been resolved in the earlier litigation, because the judgment issued there did not address whether there had been trademark infringement. Thus, that judgment had no res judicata effect as to the parties' dispute.
  
• Stauffer was also not judicially estopped from defending against Liberto's claim of infringement, based on its having filed an Advisory stating that it did not oppose a motion to enter the settlement agreement as final judgment in the prior litigation. That settlement only obligated the parties to negotiate further, and it did not conflict with Stauffer's infringement defense.
  
• Because a finding of infringement is required for injunctive relief to issue under the Lanham Act, and here no such finding had been made, the district court was found to have abused its discretion in granting an injunction, and its ruling was vacated and remanded.
  
  
  

Click here to read more.

Earlier Patent on Paxil Anticipated Product by Process Claims for Making Paxil

Case: Smithkline Beecham Corp. v. Apotex Corp., No. 04-1522 (Fed Cir. 2/24/06)


The One Sentence Summary: A product by process claim for the drug paroxetine (marketed as Paxil) was invalid as anticipated in light of an earlier patent on the product itself, and the argument that the new product was different was waived on appeal by burying the argument in a footnote.


What They Were Fighting About: The district court held that patentee's claim for a product by process for the drug Paxil was anticipated by the patentee's earlier patent on paroxetine.

Federal Circuit Holdings:

• The court noted an unresolved issue about whether process steps are limitations, but held the present case did not require resolution of the issue.
• The earlier patent on the product paroxetine anticipated later claims for making the product by a different process.
• Appellant waived its argument that the district court erred in deciding that the new product was the same as the old product by burying the argument in a footnote.
  
  

Click here to read more.

Combination of Visual Elements from Prior Art Does Not Create New Point of Novelty for Design Patent

Case: Lawman Armor Corp. v. Winner Int'l, LLC, No. 05-1253 (Fed Cir. 2/22/06)

The Two Sentence Summary: The district court properly granted summary judgment of non-infringement on a claim for infringement of a design patent on an automobile steering wheel lock where various items of prior art disclosed each of the asserted points of novelty of the design. A point of novelty to avoid summary judgment cannot be created by the combination of design elements already in the prior art.


What They Were Fighting About: The district court granted summary judgment of non-infringement of a design patent after accepting defendant's argument that each of the eight asserted design elements (e.g. ridges) were present in the prior art.

Federal Circuit Holdings:

• Plaintiff incorrectly argued that the prior art needs to have a suggestion to combine visual elements. This may be relevant to obviousness, but not to infringement.
• In comparing a design patent claim to the accused design to determine infringement, a court must apply "two distinct tests, both of which must be satisfied in order to find infringement: (a) the ‘ordinary observer’ test, and (b) the ‘point of novelty’ test." Contessa Food Prods., Inc. v. Conagra, Inc., 282 F.3d 1370, 1377 (Fed. Cir. 2002). See Unidynamics Corp. v. Automatic Prods. Int’l, Ltd., 157 F.3d 1311, 1323 (Fed. Cir. 1998). The "ordinary observer" test requires comparison of the two designs from the viewpoint of the ordinary observer to "determine whether the patented design as a whole is substantially the same as the accused design." Tropicana Prods., Inc. v. Land O’ Lakes, Inc., 286 F. Supp. 2d 343, 345 (D. Del. 2003) (citing Braun Inc. v. Dynamics Corp. of Am., 975 F.2d 815, 820 (Fed. Cir. 1992)). Under the "point of novelty" test, a court must determine whether "the accused device . . . appropriate[s] the novelty in the patented device which distinguishes it from the prior art." Litton Sys., Inc. v. Whirlpool Corp., 728 F.2d 1423, 1444 (Fed. Cir. 1984), (quoting Sears, Roebuck & Co. v. Talge, 140 F.2d 395, 396 (8th Cir. 1944)). See generally Bernhardt, L.L.C. v. Collezione Europa USA, Inc., 386 F.3d 1371, 1384 (Fed. Cir. 2004) (discussing the required showing for the "point of novelty" test).
• The court correctly granted summary judgment of non-infringement. Combination of existing elements from the prior art does not create a point of novelty.
  
  

Click here to read more.

The Ordinary Meaning of "Adjustable" Was Too Broad When Specification and Common Sense Required Narrower Construction

Case: Curtiss-Wright Flow Control Corp. v. Velan, Inc., No. 05-1373 (Fed Cir. 2/15/06)

The One Sentence Summary: In granting a preliminary injunction, the district court construed the term "adjustable" too broadly by relying too much on the ordinary meaning without reference to the narrower context of the term in the specification, and by misapplying the doctrine of claim differentiation - the district court's broad interpretation of "adjustable" was limitless because nearly everything is adjustable in some sense.


What They Were Fighting About: The district court granted patentee's preliminary injunction request, holding that refinery coke head valves that could be replaced were "adjustable" in the meaning of the patent.

Federal Circuit Holdings:

• In giving a broad construction to the word "adjustable," the district court improperly relied upon the ordinary meaning without reference to the context of the word in the specification. In the specification, the term "adjustable" was used to mean adjustable during operation and without removal of the coke head.
• The broad meaning of adjustable adopted by the district court is so broad as to be meaningless - every mechanical thing is adjustable in some sense.
• The district court misapplied the doctrine of claim differentiation in construing the claim.
• Claim differentiation in the most specific sense refers to the presumption that an independent claim should not be construed as requiring a limitation added by a dependent claim. Claim differentiation is also used more generally as the presumption that every claim in the patent has a different scope. In this latter sense, it is a guide, not a rigid rule. A patentee may use different language in different independent claims to define the same subject matter.
  
  

Click here to read more.

Counsel's Incompetent Non-Infringement Opinion Can Be Evidence of Willful Infringement

Case: Golden Blount, Inc. v. Robert H. Peterson Co., No. 04-1609, 05-1141, 05-1202 (Fed Cir. 2/15/06)

The One Sentence Summary: The Federal Circuit panel affirmed the district court’s finding of willful infringement and attorneys’ fees, holding that the Knorr-Bremse decision did not preclude the district court from finding that non-infringement opinions of counsel were incompetent and were evidence of willful infringement.

What They Were Fighting About: After a remand from a prior Federal Circuit decision, the district court initially ruled that there was no infringement of plaintiff’s patent for fireplace burners. The district court then reconsidered its decision, and held that defendant had willfully infringed the patent.

Federal Circuit Holdings:

• The district court had the ability to reconsider its initial ruling of non-infringement, and issue new findings under Fed. R. Civ. Proc. 52.


• The district court did not err in finding that defendant directly and contributorily infringed claims for raised primary burners by assembling burners itself and by providing instructions to customers that instructed how to assemble the burners into an infringing configuration.


• Defendant failed in proving that its product had a substantial non-infringing use that would have avoided a finding of contributory infringement.


• Defendant’s defense that it did not intend to induce infringement because it had opinions of counsel opining non-infringement was unavailing. The only intent that was necessary was to intend to cause acts that constitute infringement, and this was met by the provision of the instructions to customers.


• The district court did not err in finding willfulness based in part upon defendant’s reliance upon three oral opinions of counsel which were rendered based upon incomplete information. The first opinion was rendered without review of the prosecution history and without review of the accused product.


• There continues to be an affirmative duty to avoid infringement of the known patent rights of others.


• After Knorr-Bremse, the failure to produced an opinion of counsel does not allow an inference of willfulness. However, once privilege is waived, the patentee can challenge the competence of the opinion as evidence of willfulness.


• The district court properly found that sales of the defendants’ products would have been made by patentee but for the infringement. Damages were properly based upon sale of the entire package assembly usually sold together.


• Units that were returned by customers and never assembled into an infringing configuration should not have been part of the damages calculation.


• The panel affirmed the award of attorneys’ fees against defendant.

Click here to read more.

Google Image Search Thumbnails Are Enjoined by Los Angeles District Court Judge - They Are Commercial and Not a Fair Use Under Copyright Law

Case: Perfect 10 v. Google, Case No. CV 04-9484 AHM (C.D. Cal. 2/21/06)

The One Sentence Summary: Judge Matz of the Central District of California granted a motion for preliminary injunction against Google, holding that it is likely that Google directly infringed the copyrights of plaintiff Perfect 10 in its copyrighted adult photographs by displaying thumbnails of those images, and that Google's use was likely not a fair use because its thumbnails were accompanied by advertisements and the thumbnails could be downloaded and affect the market for Perfect 10's works.



District Court Holdings:

• The court applied the server test instead of the incorporation test, holding that Google's use of frames and in-line links did not constitute a display for purposes of Perfect 10's direct copyright infringement claim.
• Google did "display" copyrighted images by displaying a grid of thumbnails stored on its servers, and therefore directly infringed Perfect 10's copyright.
• On the first factor of the fair use test, commercial use, Google's use was commercial because Google's AdSense program derived revenue from clicks on advertisements appearing next to the thumbnail images.
• Google's display of thumbnails was highly transformative in that Google organizes the images for search. However, it was also consumptive because mobile phone users can download the thumbnails and thereby avoid paying Perfect 10 for downloads.
• The nature of the copyrighted work was creative, and this factor weighed slightly for Perfect 10.
• As to the amount and substantiality of the work copied, Google took no more than necessary to provide its search features.
• Google harmed the potential market for Perfect 10's images by substituting for downloads.
• Google is not likely to prevail in its fair use defense "despite the enormous public benefit that search engines such as Google provide."
• Local browser caches did not provide a basis for liability because it is a fair use.
• Google did not materially contribute to possible direct infringement by users, distinguishing the Napster case.
• Google is likely to prevail on vicarious liability because it does not have the right and ability to control infringement by third party sites.
  
  

Click here to read more.

Architectural Firm Entitled to Preliminary Injunction To Stop Unauthorized Use of Copyrighted Plans that Exceeded the Scope of License

Case: LGS Architects, Inc. v. Concordia Homes of Nevada, No. 04-16677 (9th Cir. 1/11/06).

The One Sentence Summary: An architectural firm was entitled to preliminary injunctive relief because it was likely to succeed on the merits of its copyright infringement action where its client used its copyrighted architectural plans on projects that fell outside of the parties' licensing agreement.

What They Were Fighting About: LGS Architects, Inc. ("LGS") and Concordia Homes of Nevada ("Concordia") had entered into a licensing agreement that authorized Concordia to use two of LGS's architectural plans to construct the Arbor Glen I community, a master-planned community of eighty houses in northwestern Las Vegas. Without obtaining LGS's consent, Concordia used the same architectural plans to construct a neighboring development, the Arbor Glen II. LGS sued Concordia in the United States District Court for the District of Nevada alleging copyright infringement and breach of contract and moved for a preliminary injunction to prohibit Concordia from using the disputed plans and for an order requiring Concordia to return the plans. The district court summarily denied LGS's request for a preliminary injunction and LGS appealed.

Ninth Circuit Holdings:

• After rejecting Concordia's argument that the interlocutory appeal was moot because it would not make future use of the disputed plans, the Court turned to the merits of LGS's request for a preliminary injunction.
• Rule 52(a) of the Federal Rules of Civil Procedure requires that a district court set forth findings of facts and conclusions of law supporting an order denying a preliminary injunction. Although the district court's only explanation for its denial of the preliminary injunction was the statement that it did not consider LGS to have a likelihood of success, the Court agreed with the parties that this deficiency did not make remand necessary. The Court observed LGS's entitlement to a preliminary injunction depended upon the legal interpretation of the parties' licensing agreement, rather than upon disputed factual issues.
• Preliminary injunctive relief is available to a party if it can show either: (1) a combination of probable success on the merits and the possibility of irreparable harm; or (2) that serious questions are raised and the balance of hardships tip in its favor. The Court explained that in a copyright infringement action, however, "a showing of a reasonable likelihood of success on the merits raises a presumption of irreparable harm." Therefore, a copyright holder seeking a preliminary injunction is not required to make an "independent demonstration of irreparable harm" and only needs to show a reasonable likelihood of success on its copyright infringement claim.
• When a licensee exceeds the scope of the license granted by the copyright holder, the licensee is liable for copyright infringement. Because it was undisputed that LGS owned the copyright in the architectural plans, LGS needed only to establish that Concordia exceeded the scope of the license to make the required showing of likelihood of success on the merits.
• The license agreement granted Concordia the right to use the architectural plans to construct the eighty homes in the Arbor Glen I community. The license explicitly provided that any other use of the plans was prohibited unless express written authorization was obtained from LGS. In addition, such authorization was conditioned on the payment of a reuse fee. Concordia's unauthorized use of the plans to construct Arbor Glen II exceeded the scope of the license and therefore the Court found that LGS was likely to succeed on the merits of its copyright infringement claim.
• On that basis, the Court held that LGS was entitled to a preliminary injunction prohibiting Concordia from reproducing, distributing, publicly displaying, or creating derivative works based upon LGS's architectural plans.
• Because of the early stage of the proceedings, however, the Court ruled that LGS was not entitled to a mandatory injunction required Concordia to return the plans noting that a mandatory injunction goes well beyond simply maintaining the status quo and is generally disfavored.

Click here to read more.

In Inequitable Conduct Dispute, Materiality of Undisclosed Prior Art Presented Factual Questions Inappropriate for Summary Judgment

Case: Digital Control Inc. v. Charles Machine Works, No. 05-1128 (Fed. Cir. 2/8/06)

The One Sentence Summary: The panel reversed and remanded a ruling of patent invalidity due to inequitable conduct where the trial court improperly granted summary judgment on materiality of prior art which was not disclosed to the PTO.


What They Were Fighting About: Plaintiff claimed that its patents on locating devices for underground digging tools were infringed. The trial court granted in part defendant's motion for summary judgment on patent invalidity due to inequitable conduct, holding that there was no issue of material fact that patentee's submission of a misleading declaration and failure to disclose prior art was material. The trial court then invalidated the patent after a bench trial, finding that patentee had intended to deceive the PTO.

Federal Circuit Holdings:

• Inequitable conduct can be determined on a motion for summary judgment, but it is rare. For example, summary judgment may be granted where only specious or conclusory declarations are submitted in opposition to the motion.
• The 1992 amendment of the PTO's Rule 56 regarding the duty to disclose did not change the standard for determining materiality. There is no single test for materiality, and the panel discussed four different formulations used in cases. The earlier standard of whether a reasonable examiner would have considered prior art important is the broadest statement of the duty, and continues to be applicable.
• When undisclosed prior art satisfies more stringent tests for materiality, e.g., it would have caused the PTO to withhold approval for the claim, a lesser showing of facts allowing inference of intent to deceive is allowed.
• The trial court properly granted summary judgment of materiality as to a misleading declaration of reduction to practice submitted by patentee. The true information would have been important to a reasonable examiner, and there was no need to show that it would have rendered the invention unpatentable. Affirmative misstatements are more likely to be material.
• The trial court erred in finding that patentee made a material non-disclosure by failing to disclose a prior art patent. There were disputed factual questions as to whether the patent was cumulative of other prior art cited, and as to the scope, content and teachings of the prior art.
• The trial court's finding of invalidity after a bench trial on intent to deceive must be reversed and reconsidered because the trial court relied on its summary judgment rulings of materiality, one of which was now reversed.
  

Click here to read more.

Oxycontin Do-Over: Implying the Existence of Non-Existent Clinical Data Was Material Non-Disclosure, But May Not Establish Intent to Deceive the PTO

Case: Purdue Pharma L.P. v. Endo Pharmaceuticals, Inc., No. 04-1189, -1347, -1357 (Fed. Cir. 2/1/06)

The Two Sentence Summary: After a rehearing, the panel vacated its earlier decision (see blog posting here), and held that Purdue withheld material information from the PTO by implying the existence of clinical data supporting its claim, but that the intent to deceive prong of the inequitable conduct analysis should be reconsidered by the trial court because the failure to disclose was not highly material. The panel also found that the trial court erred in limiting the claims by importing a dosage limitation from the prosecution history.


What They Were Fighting About: After a bench trial, the trial court invalidated Purdue's patent for Oxycontin, finding that Purdue committed inequitable conduct by implying that it had clinical data supporting its discovery of a four-fold dosage range for oxycodone. The trial court also held that if the claims were valid, the generic product manufactured by defendant Endo infringed. In a June 2005 decision, the panel had affirmed the trial court's finding of invalidity due to inequitable conduct.

Federal Circuit Holdings:

• The panel summarized the law regarding inequitable conduct as follows: "Applicants for patents have a duty to prosecute patents in the PTO with candor and good faith, including a duty to disclose information known to the applicants to be material to patentability. 37 C.F.R. § 1.56(a) (2004); see also Molins PLC v. Textron, Inc., 48 F.3d 1172, 1178 (Fed. Cir. 1995). A breach of this duty may constitute inequitable conduct, which can arise from an affirmative misrepresentation of a material fact, failure to disclose material information, or submission of false material information, coupled with an intent to deceive or mislead the PTO. Molins, 48 F.3d at 1178. A party asserting that a patent is unenforceable due to inequitable conduct must prove materiality and intent by clear and convincing evidence. Kingsdown Med. Consultants, Ltd. v. Hollister, Inc., 863 F.2d 867, 872 (Fed. Cir. 1988). Once threshold findings of materiality and intent are established, the trial court must weigh them to determine whether the equities warrant a conclusion that inequitable conduct occurred. Molins, 48 F.3d at 1178. This requires a careful balancing: when the misrepresentation or withheld information is highly material, a lesser quantum of proof is needed to establish the requisite intent. See N.V. Akzo v. E.I. DuPont de Nemours, 810 F.2d 1148, 1153 (Fed. Cir. 1987). In contrast, the less material the information, the greater the proof must be. See id."
• The trial court's factual findings regarding inequitable conduct are reviewed with deference.
• Because the patents at issue were pending on or filed after the March 16, 1992 amendment of PTO Rule 56 regarding materiality, the post-amendment version of the rule governs (although the amendment did not constitute a significant substantive change to the pre-1992 standard). Under Rule 56, information is material to patentability if: [I]t is not cumulative to information already of record or being made of record in the application, and (1) It establishes, by itself or in combination with other information, a prima facie case of unpatentability of a claim; or (2) It refutes, or is inconsistent with, a position the applicant takes in: (i) Opposing an argument of unpatentability relied on by the Office, or (ii) Asserting an argument of patentability. 37 C.F.R. § 1.56(b) (2004).
• The trial court's finding that Purdue failed to disclose material information was not clearly erroneous. Purdue's representations to the PTO allowed a clear inference that it had clinical proof of an improved dosage range when in fact Purdue did not have supporting clinical data but only an inventor's "insight." An express misrepresentation by Purdue was not necessary to a finding of failure to disclose.
• It was not necessary to show that the examiner relied upon Purdue's claims of an improved dosage range. Purdue's claim of a discovery of an improved dosage range was central to its claims of patentability and to oppose the examiner's arguments of unpatentability.
• Even if the dosage range was not a limitation of the patent claims, the information would be material because the trial court made an express finding, and materiality is not limited to matters reflected in the claims of a patent.
• The dosage range information withheld by Purdue was not mere advocacy of advantages of the invention. Rather, Purdue consistently and repeatedly used the dosage range to distinguish prior art.
• A discovery can be based on insight rather than clinical evidence, but that did not excuse Purdue for implying, if not suggesting, that clinical evidence existed when it did not.
• Purdue's failure was not highly material. An affirmative misrepresentation would have been more material.
• The panel summarized the law regarding intent to deceive as follows: "Direct evidence of intent to deceive or mislead the PTO is “‘rarely available but may be inferred from clear and convincing evidence of the surrounding circumstances.’” Baxter Int’l, Inc. v. McGaw, Inc., 149 F.3d 1321, 1329 (Fed. Cir. 1998) (quoting LaBounty Mfg., Inc. v. USITC, 958 F.2d 1066, 1076 (Fed. Cir. 1992)). Intent to deceive, however, cannot be “inferred solely from the fact that information was not disclosed; there must be a factual basis for a finding of deceptive intent.” Hebert v. Lisle Corp, 99 F.3d 1109, 1116 (Fed. Cir. 1996). When determining whether intent has been shown, a court must weigh all evidence, including evidence of good faith. Baxter, 149 F.3d at 1330. This court has held that “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.” Critikon, Inc. v. Becton Dickinson Vascular Access, Inc., 120 F.3d 1253, 1257 (Fed. Cir. 1997). Nevertheless, it is important to remember that “‘materiality does not presume intent, which is a separate and essential component of inequitable conduct.’” Allen Eng’g Corp. v. Bartell Indus., Inc., 299 F.3d 1336, 1352 (Fed. Cir. 2002) (quoting Allen Organ Co. v. Kimball Int’l, Inc., 839 F.2d 1556, 1567 (Fed. Cir. 1988))."
• The trial court erred in analyzing intent. First, it gave too much weight to internal Purdue documents regarding the difficulty of proving to the FDA that its dosage range was the most efficient. The FDA approval was subject to a different standard than the patentability issues, so the FDA documents were only marginally related.
• The trial court improperly found that Purdue failed to disclose highly material information. Thus, there was less basis for the trial court to infer intent to deceive because the information withheld was less material.
• The panel remanded for the trial court to reconsider its inequitable conduct finding in light of the decision.
• The panel upheld the trial court's finding of infringement by Endo's product.
• The trial court held that the claims required acceptable pain control for 90% of patients over a four-fold dosage range because the invention itself required this rather than any express claim limitation. This finding was in error.
• The panel considered whether the term "controlled release" was limited to a four-fold dosage range. The term was not limited by the claims or the specification. However, the panel noted that the claim could be limted by the prosecution history: "Next we look to the prosecution history to determine whether it contains statements that narrow the scope of the claims. Id. at 1317. Under the doctrine of prosecution disclaimer, a patentee may limit the meaning of a claim term by making a clear and unmistakable disavowal of scope during prosecution. See Seachange Int’l, Inc. v. C-COR Inc., 413 F.3d 1361, 1372-73 (Fed. Cir. 2005); Omega Eng’g, Inc. v. Raytek Corp., 334 F.3d 1314, 1323-26 (Fed. Cir. 2003). This may occur, for example, when the patentee explicitly characterizes an aspect of his invention in a specific manner to overcome prior art. See Microsoft Corp. v. Multi-Tech Sys., Inc., 357 F.3d 1340, 1349 (Fed. Cir. 2004) (interpreting “sending,” “transmitting,” and “receiving” limitations as requiring direct transmission over telephone line when patentee stated that invention transmits over a standard telephone line, thus disclaiming transmission over a packet-switched network)."
• The trial court erred in finding that "during prosecution Purdue deliberately and clearly relinquished, disclaimed and surrendered" scope of its claims. Although Purdue relied on the four-fold dosage range to distinguish its formulations from prior art, it did not describe the range as a necessary feature of the claimed formulations, but rather as a property of or result of administering the dosage. The claim language contained no limitations, and importing extraneous limitations from the prosecution history was improper.
  
  

Click here to read more.