Written Description Requirement Did Not Require Patentee To Recite Known Gene Sequences Used In Vaccine

Case: Falkner et al. v. Stephen Inglis et al., (Fed Cir. No. 05-1324, 5/26/06)

The One Sentence Summary: In an appeal from a decision of the Board of Patent Appeals and Interferences in an interference involving a patent application and an issued patent covering a mutant poxvirus vaccine, the Federal Circuit held that (1) the absence of examples involving poxviruses in the specification did not render the written description inadequate; (2) the written description standard may be met even where actual reduction to practice of an invention is absent; and (3) there is no per se rule that an adequate written description of an invention that involves a biological macromolecule must contain a recitation of known structure.


What They Were Fighting About: Falkner held U.S. Patent No. 5,770,212 ("the Falkner '212 patent"). Inglis filed U.S. patent application no. 08/459,040 ("the Inglis '040 application"). The subject of both the patent and the application was a safer poxvirus vaccine.

An interference proceeding resulted in the Board of Patent Appeals and Interferences invalidating several claims of the Falkner '212 patent, and holding that several claims in the Inglis '040 application were valid. (An interference is a proceeding used to determine priority when an applicant and a patentee are claiming the same patentable subject matter and their filing dates are so close together that there is a reasonable possibility that the first to file is not the first inventor). In the interference, both inventors sought the benefit of earlier-filed applications to establish dates of constructive reduction to practice. (Priority in an interference goes to the first to invent, but a rebuttable presumption exists that the inventors made their inventions in the chronological order of their effective filing dates, namely that the senior party invented first). The Board accorded the Inglis '040 application the benefit of several earlier-filed applications, dating back to September 25, 1990, and the Falkner '212 patent the benefit of earlier filed applications dating back to April 29, 1994, thus resulting in several of the claims in the Falkner patent being invalidated.

On appeal, Falkner argued that the Board's decision invalidating its claims was incorrect because the specifications from Inglis's earlier applications did not adequately describe and enable the poxvirus, and thus Inglis was not entitled to priority. The Federal Circuit rejected Falkner's contentions and affirmed the decision of the Board.

Federal Circuit Holdings:

• Written description is a question of fact, judged from the perspective of one of ordinary skill in the art as of the relevant filing date, and enablement is a questions of law involving underlying factual inquiries.
• The Federal Circuit applies the standards of the Administrative Procedure Act ("APA") in reviewing decisions of the Board. It will set aside actions of the Board if they are arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law, and it sets aside factual findings that are unsupported by substantial evidence (that evidence which a reasonable person might accept as adequate to support a conclusion). The Federal Circuit reviews questions of law de novo.
• The adequacy of the disclosure is judged from the perspective of one of ordinary skill in the art.
• The Board's legal conclusion of enablement, in light of its underlying findings of fact, was not incorrect, despite the fact that the Inglis '040 application provided a detailed example of an embodiment that comprised not a poxvirus, but a herpesvirus, including the identity of the deleted essential gene sequence. There was extensive disclosure of the selction of an essential gene, its deletion or inactivation, and the production of a mutated virus with the deleted or inactivated gene, albeit for herpesvirus. However, the differences between the herpesviruses and poxviruses were well known, and this would have aided the person of ordinary skill in the art in her application of the lessons of the herpesvirus example in the construction of poxvirus vaccines.
• The absence of examples involving poxviruses in the Inglis applications did not render the written description inadequate. A claim will not be invalidated simply because the embodiments of the specification do not contain examples explicitly covering the full scope of the claim language. It is unnecessary to spell out every detail of the invention in the specification; only enough must be included to convince a person of sill in the art that the inventor possessed the invention and to enable such a person to make and use the invention without undue experimentation.
• The fact that Inglis had not actually produced a poxvirus vaccine was not necessary to meet the written description requirement. That requirement implements the principle that a patent must describe the technology that is sought to be patented and serves both to satisfy the inventor's obligation to disclose the technological knowledge upon which the patent is based, and to demonstrate that the patentee was in possession of the invention that is claimed. However, constructive reduction to practice is an established method of disclosure. Although actual reduction to practice ordinarily provides the best evidence that an invention is complete, it does not follow that proof of reduction to practice is necessary in every case.
• The Inglis specifications adequately described the poxvirus invention, despite not describing the "essential regions" of the poxvirus genome. Existing literature references at the time of the Inglis applications described the DNA sequence of the poxvirus genome and the locations of the essential regions. It is binding precedent of the Federal Circuit that whenever a claim limitation is directed to a macromolecular sequence, the specification need not always recite the gene or sequence. A requirement that patentees recite known DNA structures, if such a requirement existed, would serve no goal of the written description requirement. It would neither enforce the quid pro quo between the patentee and the public by forcing the disclosure of new information, nor would it be necessary to demonstrate to a person of ordinary skill in the art that the patentee was in possession of the claimed invention. Where accessible literature sources clearly provided, as of the relevant date, genes and their nucleotide sequences (here "essential genes"), satisfaction of the written description requirement does not require either the recitation or incorporation by reference of such genes and sequences.
  
  

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Copyright Protection For Fashion Designs is Under Consideration by Congress

On June 8, 2006, the House of Representatives' IP Subcommittee will hold a hearing on H.R. 5055, the "Design Piracy Prohibition Act." As proposed, HR 5055 would amend Chapter 13 of the Copyright Act to provide copyright protection for fashion designs -- currently unprotected under existing law.

Companies in the apparel and fashion industry should pay close attention to the progression of HR 5055. If enacted, HR 5055 would significantly affect the ability of designers to protect their designs as well as emulate the designs of others.

Summary of the Design Piracy Prohibition Act (HR 5055): Under current law, there is no copyright protection for fashion designs because clothing is considered a "useful article" rather than a work of art subject to copyright protection. Accordingly, it is legal for one designer to copy another's designs and sell the copied clothing so long as the designer does not attach a fake label to the garment.

Specific Features of the Design Prohibiion Act Proposed by HR 5055:

• HR 5055 would extend 3 years of copyright protection for fashion designs -- thereby filling a gap in the law that prevents IP protection for most fashion designs.
• The bill would amend 17 USC Section 1301 to include a definition of "fashion design" as "the appearance as a whole of an article of apparel, including its ornamentation."
• The term "apparel" is later defined in HR 5055 as "an article of men's, women's, or children's clothing, including undergarments, outerwear, gloves, footwear, and headgear; handbags, purses, tote bags, belts, and eyeglass frames.
• The bill does not address whether certain fashion accessories (such as IPOD arm pouches) would be considered "apparel".
• HR 5055 would provide 3 years of copyright protection for registered fashion designs.
• It would also establish damages for infringing on fashion designs as the greater of either $250,000 or $5 per copy.
• The bill would not provide protection for apparel designs that are made public more than 3 months prior to the filing of the registration application.

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In Order to Enforce Trademark Rights, Ownership Interests Must be Shown With Strong Evidence

Case: Department of Parks and Recreation for the State of California v. Bazaar Del Mundo, Inc. (9th Cir. 2006)

The One Sentence Summary: Because the State of California (plaintiff and appellee) had failed to show sufficient evidence of ownership of two trademarks, the Ninth Circuit affirmed the decision of the district court denying the State's motion for preliminary injunction to enjoin defendant Bazaar del Mundo from using the registered trademarks (i.e., Casa de Bandini and Casa de Pico) in the operation of restaurants located outside the boundaries of the oldtown San Diego Historic Park region.


What They Were Fighting About: Whether the District Court erred in denying the State of California's motion for preliminary injunction to prevent defendant appellant Bazaar Del Mundo (BDM) -- a former leasee of state historical property in San Diego -- from using the restaurant names Casa de Bandini and Casa de Pico outside of oldtown San Diego, even though BDM registered the marks in 1985 without protest from the State.

Ninth Circuit Holdings:

• The district court's ruling was affirmed. The State's request for a preliminary injunction was properly denied by the district court because the State failed to present evidence that it used the marks (a) in commerce in 1969 and/or (b) continuously after 1969. The state also failed to identify the existence of any contractual agreement between the parties' acknowledging the state's ownership in the marks at issue (i.e., "Casa de Bandini" and "Casa de Pico"). These names were based upon historical figures (Pio Pico last Mexican Governor of California; and Jon Juan Bandini an important business man in the San Diego region that immigrated to California).
• The state claimed that the names were used as marks during a historical festival in 1969 and pointed to brochures where the names were referenced, however there was no evidence that the names were used in commerce or in connection with the State's recreational or tourism services.
• The state claimed that in connection with 1969 festival, it printed brochures referencing the names of Pico and Bandini. Yet, the Ninth Circuit noted that there was no evidence presented concerning the number of brochures printed and the extent of the distribution.
• Even if the 1969 use by the State could have been considered a use in commerce, the State's failure to use the name thereafter in commerce would allow BDM (even if it was the junior user) to have priority. This is based upon BDM's continuous use of the marks from 1971 (for Pico) and 1980s (for Bandini).
• Even if there had been a use in commerce, the State failed to show secondary meaning had been acquired in the sames Casa de Bandini and Casa de Pico such that they were synoymous with the State's recreational or tourist services (e.g., there was no evidence presented concerning the duration of use in connection with tourist services, or the extent of advertising used to promote the State's tourist services using the marks, and no consumer survey was presented).
• The State failed to show that ownership rights were created by the contractual agreement (called "Concession Agreement") that was entered into between BDM and the State which was a leasing agreement that allowed BDM to operate a Mexican style shopping arcade and two restaurants (with the names Casa de Bandini and Casa de Pico) on the premises owned by the State. There was no discussion of trademark rights or licenses in the Concession Agreement that was extended from 1971-2001.
• For the same reasons, no implied trademark license existed. Moreover, the parties' subsequent conduct (after the Concession Agreement was executed in 1971, and extended until 2001) belied any argument that the parties' intended to create an implied license.
• First, BDM registered the marks with the USPTO in 1985 without protest or opposition from the State.
• Second, the State revised the standard contract in June 2001 (when it sent same out for public bid) and included express provisions regarding IP rights that were not previously included in BDM's Concession Agreements. BDM strenously objected to the new proposed IP provision when it responded to the RFP in December 2001.
• The Ninth Circuit did not reach the likelihood of confusion factors set forth in Sleekraft, on the ground that the State had failed to show likelihood of success on the merits based upon the lack of evidence of prior use and ownership of the mark.
  
  

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Grateful Dead Posters Transformed By Timeline Into Fair Use

Case: Bill Graham Archives v. Dorling Kindersley Limited et al., Case No. 05-2514-cv (2d Cir. 5/9/06)

The One Sentence Summary: Fair use exception to copyright infringement applied to a historical work that included small reproductions of copyrighted works.


What They Were Fighting About: Defendant published a coffee table book telling the history of the Grateful Dead musical group, including 7 images on posters and tickets copyrighted by plaintiff.

Federal Circuit Holdings:

• Fair use doctrine is a statutory exception to copyright infringement. Section 107 of the Copyright Act permits the unauthorized use or reproduction of copyrighted work if it is "for purposes such as criticism, comment, news reporting, teaching . . ., scholarship, or research."
• The application of the fair use doctrine involves a case-by-case determination using four non-exclusive factors provided by Section 107: 1) the purpose and character of the use; 2) the nature of the copyrighted work; 3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; 4) the effect of the use upon the potential market for or value of the copyrighted work.
• Affirms the district court's conclusion that the balance of the fair use factors weighed in favor of defendant.
• Defendant's purpose in using the copyrighted images in its Grateful Dead biography to represent historic events was plainly different from the artistic and promotional purpose of the original tickets and posters. This conclusion was strengthened by the fact that defendant significantly reduced the size of the reproduced images to the minimum necessary to permit readers to recognize the historical significance of the image without offering more than a glimpse of their expressive value.
• Defendant's layout minimized the expressive value of the reproduced images and ensured that the images were employed only to enrich the presentation of the history, not to exploit copyrighted artwork for commercial gain.
• The 7 copyrighted images constituted an inconsequential portion of the 480-page book and no image took up more than 1/8 of a page or was given more prominence than any other image on the page.
• Although the book was commercial in nature, it did not exploit the use of the copyrighted images for commercial gain. Significantly, the images were not used in advertising or for promotional purposes.
• Although the images were creative works within the core of copyright protection, defendant used the images for the transformative purpose of enhancing historical information.
• Although the images were produced in their entirety, the images were substantially reduced and intermingled with text and original graphic art.
• The parties agreed that the use did not impact plaintiff's primary market for the sale of its poster images. The Court refused to find a harm to plaintiff's license market merely because defendant did not pay a fee for licensing the images.
  
  

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Claim Differentiation Did Not Expand Scope of Claims Beyond the Description in the Specification

Case: Inpro II Licensing, S.A.R.L. v. T-Mobile USA, Inc., Research in Motion Limited and Research in Motion Corporation, No. 05-1233 (Fed Cir. 5/11/06)

The One Sentence Summary: Rejecting claim differentiation arguments by the patentee, the panel affirmed the district court's claim construction and non-infringement rulings and held that the term "host interface" in claims for a personal digital assistant (PDA) was limited to a direct parallel bus connection in light of specification and prosecution history references to the importance of a direct parallel bus connection.


What They Were Fighting About: The district court for the United States District of Delaware granted judgment of non-infringement of U.S. Patent No. 6,523,079 which claimed an invention of an improved PDA that could be directly connected to a host interface of a host computer. The district court held after a Markman hearing that the term "host interface" required a parallel bus connection, and the parties agreed that this claim construction required a finding of non-infringement. Inpro appealed.

Federal Circuit Holdings:

• Inpro, the patentee, argued that the term "host interface" must include connections other than direct parallel bus connections because certain unasserted claims included limitations of "direct" or "parallel bus" while the claims at issue did not include these words. The panel rejected this claim differentiation argument.
• The panel noted that the doctrine of claim differentiation presumes that different claims are of different scope, but describing claim elements in different words does not invariably mean that the claims are of different scope, citing Tandon Corp. v. United States International Trade Comm'n, 831 F.2d 1017, 1023-24 (Fed. Cir. 1987). As T-Mobile argued, the words "parallel bus interface" in the other claims were always accompanied by additional limiting words such as "PCMCIA parallel bus interface."
• The specification supported the limitation of the term host interface to direct parallel bus connections. The background of the invention disparaged serial connections, emphasizing the benefits of parallel bus connections. The specification was clearly limited to parallel bus connections, and the claims could not be read more broadly.
• The prosecution history of related patent applications supported the district court's claim construction.
• The district court did not err in refusing to admit expert testimony on claim construction.
• In concurring opinion, Judge Newman argued that the panel should not have stopped after construction of only the claims that allowed a finding of non-infringement, and instead should have decided the construction of the other disputed claims that were construed by the district court.
  
  

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Focusing Infringement Analysis For Means Plus Function Claims

Case: Applied Medical Resources Corp. v. U.S. Surgical Corp., No. 05-1314 (Fed. Cir. 5/15/06)

The One Sentence Summary: Grant of summary judgment of non-infringement vacated, with the Federal Circuit finding a triable issue whether U.S. Surgical's trocar device infringed the means plus function claim covering Applied's device, and holding that the district court had improperly read additional limitations into the claim.


What They Were Fighting About: Where the court had adopted Applied's broad claim construction, the issue was whether the structures used in competing trocar products (devices used to keep gas used to inflate the abdomen during surgery from escaping through the surgical opening) performed the same functions in substantially the same way, though mechanically there were differences, precluding summary judgment for defendant for infringement of plaintiff's means plus function patent claim.

Federal Circuit Holdings:

• The Federal Circuit found it error to import unclaimed functions into a means-plus-function claim limitation -- an error that can occur during claim construction if the claimed function is defined to require more than actually claimed, or during infringement analysis if the court improperly determines the way in which the disclosed structure performs the previously-defined function.
  
• Here, the Federal Circuit held that the district court committed the second type of error, improperly including the way in which the structure in Applied's device performed the claimed "supporting" function under its adopted construction of the function. As claimed, the structure was only required to hold the valve portions defining the orifice within the housing; but the district court improperly read into this two other requirements -- that they hold the valve portions in a desired circular configuration, and that it isolate them from outer portions intended to deform.
  
• The Federal Circuit also found error in the district court's analysis of how the structures perform the claimed "permit to float" function. Having adopted Applied's claim construction, which required that the supporting means be movable, and the movement permit the valve portions to freely move from the axis, the district court improperly imported additional, unclaimed functions.
  
• The court further disagreed with the district court's rejection of a declaration by Applied's expert, which the district court had found conclusory and lacking particularized testimony and linking argument necessary to establish equivalence. The expert had described how the way that the accused device performed the supporting function was equivalent to that claimed by Applied.
  
• The Federal Circuit further observed that particularized testimony and linking argument, which the district court had found lacking in the expert's declaration, was actually only required in applying the "function, way, result" test in the context of proving infringement of a claim under the doctrine of equivalents; moreover, it concluded the expert's declaration met that heightened standard, because the declaration construed the function, states that it was performed by the accused devices, discusses the "way" in which the embodiment and accused device perform the function, and presents data regarding the "result" of the operation of each; linking argument was supplied in the brief.
  
• In his declaration, Applied's expert had also opined that one of ordinary skill in the art would not have focused on features U.S. Surgical argued differentiated its device from Applied's, and the Federal Circuit, in light of the district court's broad construction of the required functions (the district court had adopted Applied's definition), held that a reasonable jury could find the two structures equivalent.
  
• In dissent, Circuit Judge Dyk contended the decision expanded the scope of 112(6) claims contrary to precedent by failing to enforce the requirement that the patentee show that the accused device perform the required function in substantially the same "way" as the patented device. Reasoning that a means plus function claim covers only the corresponding structure described in the specifications and equivalents thereof, and under 112(6) equivalence results from an insubstantial change which adds nothing of significance to the structure, the patent owner, to establish that there was nothing substantially different, must prove the accused and claimed structures perform the claimed function in substantially the same way (with the same result). Here, he found the devices performed the "support" and "float" functions in substantially different ways. For example, here, the accused device achieved off-axis movement without deformation of the valve, whereas in the claimed device, the inner portion remained undeformed, but the outer portion deformed.
  
• Judge Dyk also reasoned that the district court had not improperly redefined the function -- it merely concluded the devices performed the function in different ways, and analyzing the "way" a function is performed necessarily requires use of language not contained in the claim itself. Judge Dyk contrasted this case with several in which the court had used language outside the claim to describe differences in the way devices performed claimed functions, to support his conclusion that the district court had not erred.
  
  

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Installation Of Software Without Sufficient Number Of Licenses, Even Where Software Use Was Limited, Constituted Copyright Infringement

Case: Wall Data Inc. v. Los Angeles County Sheriff's Dep't, No. 03-56559 (9th Cir. 5/17/06)

The One Sentence Summary: The 9th Circuit affirmed a jury award of $210,000 in damages, $516,271 in attorneys' fees and approximately $38,000 in costs for the unauthorized installation of software when installations had been made to more than the authorized numbers of user computers despite limitation of the number of concurrent users through a password access system.

What They Were Fighting About: A software developer sold products that enabled one type of operating system to obtain data from another. The Los Angeles County Sheriff’s Department purchased 3,663 licenses to use the developer's software, yet installed the software on over 6,000 computers. The Sheriff’s Department did, however, configure a password-based security system limiting access to the software in conformance with the number of licenses purchased. The software company filed suit for copyright infringement for “over-installation” of its software, claiming violation of its licensing terms.

Ninth Circuit Holdings:

• The software was a copyrightable work under the 1976 Copyright Act.
• The Sheriff's Department was not entitled to a "fair use" defense under the four factors developed under 17 USC 107. First, the use was commercial, as it was "made to save the expense of purchasing authorized copies." Second, the copyrighted work was sufficiently creative, because it represented a "substantial investment of time and labor" on the part of the developer. Third, the use of the work was extensive and substantial, as it was copied wholesale when it was installed on unauthorized computers. And fourth, the use would have a threatening effect on the potential market for a copyrighted work, as "unrestricted and widespread conduct of the sort engaged in by [the sheriff's department] would . . . lead to over-use of the software."
• Similarly, the Sheriff's Department was not saved by the "essential step" defense. "The essential step defense attempts to strike a balance between the interests of software users and software developers . . . . [17 USC] Section 117 by its own terms, applies only to the owner of a copy of the computer program . . . . [The owner may] make another copy. . . if the copy is created as an essential step in the utilization of the computer program in connection with the computer, and is used in no other manner." The court held that the Sheriff's Department was a licensee, not an owner of a copy of the software, and consequently could not invoke the essential step defense. Moreover, even if the Sheriff's Department were the owner of a copy of the software, the court held that its placement of the software on computers through imaging, instead of one computer at a time, was not an essential step but a matter of convenience.
• The jury award was affirmed.
  
  

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Federal Judicial Center Video on the Workings of the Patent Office May Bias Juries to Favor Patent Holders

A video from the Federal Judicial Center web site entitled "Introduction to the Patent System" is often used in patent trials in lieu of experts to explain the workings of the Patent Office to juries. According to an article by Heather Mewes and Darren Donnelly in the May 17, 2006 San Francisco Daily Journal entitled "Video Explaining Patent Office to Jury is Flawed but Helpful" (link not available), the video is subject to criticism that it favors patentees.

The article notes that the narrative in the video is relatively balanced, but that the imagery of the video portrays the Patent Office favorably. For example, the video shows hard working patent examiners carefully studying claims, while spending little time showing large piles of files in a backlog. Moreover, the explanation of patents is accompanied by images of the U.S. Constitution and famous inventions. The imbalance in imagery may favor plaintiffs in infringement cases, particularly because judges will often bar defendants from offering expert testimony about the operations of the PTO.

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Evidence From Which Jury Could Conclude Patent For Canoe-Manufacturing Technique Was Invalid Warranted Reversal Of District Court's Order

Case: Old Town Canoe Company v. Confluence Holdings Corp. (Fed. Cir. Case No. 05-1123, - 1148, 5/9/06)
The One Sentence Summary: The Federal Circuit affirmed the District Court's grant of judgment as a matter of law of non-infringement of a patent for a method of making multilayered plastic laminate boat hulls by rotational molding, but reversed the District Court's grant of judgment as a matter of law for the patent holder on the issue of invalidity where disputed fact questions existed concerning whether practitioners in the art would be motivated to combine two prior-art sources, whether practitioners in the art could practice the invention without excessive experimentation, and whether the patentee described the best mode of carrying out the invention.

What They Were Fighting About: Old Town and Confluence Holdings both manufacture layered polyethylene canoes. Old Town owns a patent (the '963 patent) relating to a method of releasing successive charges of plastic particulate in a heated mold during the canoe-hull manufacturing process. Each charge of plastic particulate melts and flows together to form a cross-linked plastic layer. A successive charge is not released into the mold until the layer formed by the prior charge has reached an appropriate state of completion. The invention recognizes that coalescence of the particulate material will continue to completion even after the mold is removed from the oven if the mold doors are kept closed to retain the residual heat of the mold, thereby reducing oven time and cost.
Old Town sued Confluence, alleging infringement of the '963 patent, and Confluence filed a counterclaim seeking a declaratory judgment that the patent was invalid and unenforceable. The parties asked the district court to construe the claim limitation of opening the mold assembly "after coalescence of the third charge is completed." The district court conducted a Markman hearing and concluded that "coalescence" is not "completed" merely when a layer formed, but rather when the polyethylene particles had melted into a smooth layer with a minimum of bubbles (known as the "optimum" curing stage). Thus, the claim limitation requires that the mold assembly be opened only after the third charge of particles has cured to the optimal stage where a smooth layer with minimum bubbles has been created.

After 5 days of a jury trial, the parties filed cross-motions for judgment as a matter of law. Confluence moved for judgment as a matter of law that it did not infringe Old Town's '963 patent. Old Town moved for judgment as a matter of law that the '963 patent was not invalid. The district court ruled from the bench that Confluence's canoes do not infringe Old Town's '963 patent because the plastic laminate layer in Confluence's canoes have bubbles and have not reached the "optimum cure" stage required by the patent's limitation of opening the mold after coalescence was complete. The district court also ruled that, as a matter of law, there was insufficient evidence that the patent was invalid to sustain a jury verdict of invalidity. Both parties appealed.
Federal Circuit Holdings:

• The Federal Circuit reviews a grant of judgment as a matter of law de novo, reapplying the district court's standard anew, and drawing all reasonable inferences from the evidence most favorably to the non-movant. A motion for judgment as a matter of law is properly granted only if no reasonable juror could find in the non-movant's favor.
• The district court correctly granted judgment as a matter of law of noninfringement where there was no testimony contradicting the conclusion that none of the accused structures reached the optimum curing stage required by the claim limitation in the '963 patent. Thus, no reasonable juror could find that the particulate used in Confluence's canoes reached optimum coalescence, as required by the asserted claims.
• Prosecution history estoppel precluded Old Town from asserting infringement of the '963 patent under the doctrine of equivalents where Confluence manufactured the accused product using a process in which coalescence of the plastic particles had not come to completion. Old Town added the claim limitation that coalescence comes to completion in response to a rejection by the examiner. Thus a presumption arose (which Old Town failed to rebut) that Old Town surrendered the territory between the original claims and the amended claims, and had disclaimed methods in which coalescence of the inner layer did not reach a point of completion.
• The Federal Circuit rejected Old Town's contention that the district court erred in its construction of the limitation "after coalescence of the third charge is completed." The district court properly referred to dictionary definitions of "coalesce" and "completion." The district court's use of a dictionary did not improperly attempt to find meaning in the abstract divorced from the content of the intrinsic record. Rather, the district court properly used the dictionary definitions as a starting point in its analysis, which centered around the intrinsic record. The prosecution history supported the conclusion that completion of coalescence means progress of coalescence to the optimum state as opposed to being brought to a halt at an arbitrary point by operator intervention.
• There was clear and convincing evidence that two prior-art references taught every element of the asserted claims. Confluence provided evidence that the motivation to combine the two references would have been inherent in rotational molding techniques known at the time and in the nature of the problem to be solved when it showed that single-layer molding techniques are essentially the same as multi-layer techniques and that single-layer techniques may be used in the construction of multi-layer products. When viewed in the light most favorable to the non-movant on the question of invalidity, Confluence, (Old Town had moved for judgment as a matter of law that the patents were not invalid) a reasonable juror could find support for Confluence's argument that the '963 patent would have been an obvious improvement over the prior art.
• Enablement is a matter of law that the Federal Circuit reviews without deference; however, the Federal Circuit reviews the factual underpinnings of enablement to determine whether there was sufficient evidence to support a verdict by a jury. Confluence introduced clear and convincing evidence that, in attempting to practice the invention disclosed in the '963 patent, persons of ordinary skill in the art would have to develop time and temperature parameters through repeated experimental attempts to practice the invention, and that Confluence's expert was not able to carry out the entire process as set forth in the '963 patent. When viewed in a light most favorable to Confluence, this evidence could support Confluence's claim of invalidity, and thus the district court improperly granted judgment as a matter of law that the patent was not invalid for lack of enablement.
• Confluence introduced evidence that, at the time of filing the patent application, the inventor had a preferred way of using the invention that included optimal timing periods for coalescence and cooling, and a way to construct cooling doors to permit opening the mold for cooling without disassembly. While, subject matter that is not part of the invention that is claimed need not be included in the specification and thus is not subject to the best mode requirement, the court did not need to decide whether the cooling doors are part of the invention, since Confluence produced clear and convincing evidence that Old Town documented a preferred mode describing timing parameters and that Old Town did not disclose the document to the Patent and Trademark Office. A reasonable juror could find that the specification's failure to disclose the timing parameters was a failure to disclose the best mode, and the district court erred in granting Old Town judgment as a matter of law.
• The failure to disclose the best mode is inherently material, and reaches the minimum level of materiality necessary for a finding of inequitable conduct. However, Confluence pointed to no evidence of intent to deceive the PTO. Materiality does not presume intent, which is a separate and essential component of inequitable conduct. Since Confluence did little more than urge the court to draw an inference of intent to deceive, Confluence did not fulfill its burden of establishing on appeal that the district court abused its discretion in finding no inequitable conduct. The district court's judgment as a matter of law of no inequitable conduct was proper and should be affirmed.
• In dissent, Judge Mayer agreed that Confluence did not infringe the '963 patent, but argued that the Federal Circuit should not have reached the merits of the cross-appeal on the invalidity question since there was no longer an actual controversy supporting jurisdiction over the invalidity and unenforceability counterclaims once the Federal Circuit affirmed the district court's judgment of non-infringement. The jurisdictional prerequisite for maintaining a declaratory relief action is that there be an actual controversy at all stages of the proceeding. Critical to this inquiry is whether or not the declaratory judgment plaintiff has a reasonable apprehension that it will face an infringement suit. In view of Confluence's request for vacatur if the Federal Circuit affirmed the non-infringement judgment, the only appropriate course of action would have been to vacate the trial court's judgment on invalidity and unenforceability and remand with directions to dismiss.
  
  

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eBay Supreme Court decision: Injunctions in Patent Cases Should Not Be Automatic

Case: eBay, Inc. v. Mercexchange LLC, No. 05-130 (U.S. Supreme Court 5/15/06)

In a unanimous opinion written by Justice Thomas, the Supreme Court held that permanent injunctions in patent cases should be issued according to the four-part equitable test governing all injunctions. That test requires a plaintiff to demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law are inadequate to compensate for that injury; (3) that considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. In the case before the Court, the district court had denied an injunction because the invention was not marketed by the plaintiff, holding that this prevented a finding of irreparable harm. The Federal Circuit reversed, holding that as a "general rule", injunctions should issue in patent cases. The Supreme Court's opinion criticized both of these approaches as too categorical, emphasizing that all four factors of the traditional equitable test should be considered.


The Court's opinion is at least a partial win for Silicon Valley electronic and software companies that had argued against automatic injunctions, citing the abuses of "patent trolls" and the poor quality of technology and business method patents issued by the Patent Office. The decision will be a disappointment to pharmaceutical companies and small inventors who had argued for the need for an automatic injunction to enforce their patents.

However, there is no certainty how the decision will be interpreted going forward and whether it will mean that patent injunctions will become much more rare. Although the decision was unanimous, two concurring opinions by Chief Justice Roberts and Justice Kennedy reveal differing views within the Court on how injunctions should be considered in future cases. The concurring opinion by Chief Justice Roberts, joined by Justices Scalia and Ginsburg, noted that history should guide future courts in considering injunctions, and that injunctions have been issued in the vast majority of patent cases due to the difficulty of enforcing a right to exclude with money damages.

In contrast, Justice Kennedy's concurring opinion, joined by Justices Stevens, Souter and Breyer, counsels for granting fewer injunctions. The Kennedy opinion emphasizes that history may not be a reliable guide to the granting of injunctions in future cases because of modern developments such as patent licensing companies seeking exorbitant fees, patents that cover only a small aspect of an accused product, and business method patents that are potentially vague and of suspect validity.

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University of California Eager to Transfer IP to Businesses

The University of California campuses are eager to license their technology to commercial ventures that will exploit the inventions. That was the message delivered by speakers from Lawrence Livermore National Laboratory and UC Davis at an IP breakfast meeting hosted by Swissnex and the French American Chamber of Commerce of San Francisco.

The UC speakers, Roger Werne of Lawrence Livermore and Todd Stultz of UC Davis, told attendees that UC actively seeks licensees for its technologies, but that it was good for licensees to know some of what to expect in dealing with UC, including the following tips:

• In deals with LLNL, preference is given to technology transfers with companies based in the United States, or with companies that will benefit the United States, for example, by committing to U.S. manufacturing.
• Preference is given to established companies that can show a business plan that will likely succeed in deploying the technology.
• Licensees can expect to pay up front at least some amount for the license, but deals can be structured to help cash poor startups by accepting equity or through other means.
• For technology that is the subject of a patent application, UC will retain the right to control the application, but licensees can expect to pay for the patent application process.
• The University of California is decentralizing its licensing process, allowing each campus to pursue its own licenses.
• Potential licensees should not be too impatient because the process moves slowly as overworked IP officers at the campuses work through large backlogs of pending cases.
  

Catherine C. Maresh, senior patent counsel at Medtronic, also spoke on the panel, discussing the proposed rule changes at the patent office and the likely effect on biotechnology and medical device companies. Maresh described the rule changes as ill-suited for solving the backlog and patent quality problems that motivated the changes. She advised that companies consult a "good patent attorney" soon about the rules and the changes in patent strategy that they will require.

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California Office of Intellectual Property Would Be Created by Pending Bill

A bill pending before the California Legislature, AB 2721, would create an "Office of Intellectual Property" to pursue licensing revenue for the state of California.


The Legislative Counsel's Digest summarizes AB 2721 as follows:

AB 2721, as introduced, Mullin Office of Intellectual Property.
Existing law permits various state agencies to enter into
contracts and agreements, create liabilities, and develop, own, and
control the use of intellectual property developed by the state.
This bill would establish the Office of Intellectual Property in
the Department of General Services. The office would be responsible
for tracking intellectual property generated by state employees and
by state funded research, monitor how the intellectual property is
used, review royalty revenue collection and management reports,
develop a database to track intellectual property, establish and
update guidelines for use by state agencies in administering their
intellectual property, develop an outreach campaign informing state
agencies of their rights and abilities concerning intellectual
property, and develop sample invention assignment agreements and
sample language for licenses or terms-of-use agreements for use by
state agencies. The bill would define terms that apply to the
function of the office, and would make findings and declarations
regarding intellectual property.
This bill would require that intellectual property policies,
established on and after January 1, 2008, meet certain requirements
regarding rights and uses of the research or invention and any
royalties derived therefrom. It would also require the office to
submit a list of all funds where royalties are deposited to the
Controller, and would require the Controller to submit an annual
report to the office of all specified accounts.

An article by Kevin Livingston in the May 8, 2006 San Francisco Daily Journal includes an interview with the bill's sponsor, Gene Mullin, in which Mullin argues for the need to track California's IP systematically.

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Trademark, False Advertising and Interference Claims from Unauthorized Sales of Tanning Products Lead to Damages and Injunction

Case: Australian Gold, Inc., ETS v. Hatfield, No. 03-6218 (10th Cir. 2/7/06)

The One Sentence Summary: The Tenth Circuit panel affirmed a jury verdict awarding over $5 million in compensatory and punitive damages and an injunction against defendants who made unauthorized sales of plaintiff's tanning products.


What They Were Fighting About: Defendants sold plaintiff's tanning products over the Internet in violation of plaintiff's restrictive marketing policies. Plaintiffs sued defendants for trademark infringement, false advertising and tortious interference with plaintiff's distribution contracts.

Tenth Circuit Holdings:

• The court had diversity subject matter jurisdiction. The citizenship of Doe defendants did not matter to the diversity determination.
• Applying Oklahoma law, the panel held that the district court's denial of defendant's motion for judgment as a matter of law on the claim for tortious interference with contract was correct because there was substantial evidence supporting plaintiff.
• The distribution agreements between the supplier of Australian Gold and its distributors that required sales at minimum prices and under specific restrictions were not illegal under section 1 of the Sherman Act, 15 U.S.C. § 1. A manufacturer can set prices independently, and the distributor can decide whether to acquiesce or not.
• There was evidence that defendants acted with malice in interfering with plaintiff's contractual relations. Defendants knew of plaintiff's policies restricting Internet sales, yet they circumvented the policies using false names and untrue statements.
• There was evidence supporting the jury's determination of damages resulting from the intereference. The defendants undercut plaintiff's policies with distributors, and plaintiff's costs for enforcing its policies were mitigation costs.
  
  

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Cheap Trick and Allman Brothers Target Sony in Class Action Claiming Underpayment for Musical Downloads

The bands Cheap Trick and the Allman Brothers have sued Sony in federal court in New York City claiming that Sony has cheated them out of royalties on music downloads.
The class action complaint filed on April 27, 2006 in the United States District Court for the Southern District of New York alleges that Sony has improperly accounted for music downloads. For example, the complaint alleges that Sony improperly deducts costs for "container charges" even though digital downloads require no packages.

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Unauthorized Compilation of Infringed Works Constitutes Multiple Acts of Infringement

Case: WB Music Corp. v. RTV Communication Group, Inc., CaseNo. 04-3890 (Fed. Cir. 04/19/06)

The One Sentence Summary: For purposes of statutory damages under 17 U.S.C. § 504(c), a compilation created without authorization from the owners of the separate, infringed copyrights in its constituent parts is not "one work."


What They Were Fighting About: Plaintiff music publishers sued the makers and distributors of CDs containing songs that infringed their copyrights.

Federal Circuit Holdings:

• Reverses the district court's holding that only one statutory damage award applied to each of the defendant's CD products, regardless of how many infringing songs each CD contained.
• 17 U.S.C. § 504(c) limits statutory damages with respect to any "one work" and provides that "all the parts of a compilation or derivative work consitute one work."
• However, because there was no evidence that the compilation of the separately copyrighted works was authorized by the copyright owners, defendants' infringement of 13 copyrights by copying 13 songs onto 7 distinct CD products warrants 13 statutory damage awards, not 7.
  
  

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Postal Service Ordered to Pay PayMaster For Use Of Patented Money Order Forms

Case: Paymaster Technologies, Inc. v. United States, Case No. 05-5025, -5029 (Fed. Cir. 5/4/06)

The One Sentence Summary: The United States Postal Service (USPS) infringed Paymaster's patent for money order form sets.


What They Were Fighting About: The government claimed that its money order form sets did not infringe Paymaster's patent because the invention should be limited to include only form sets that contain multiple sheets and ink that permeates through the back surface of the top sheet.

Federal Circuit Holdings:

One claim disclosed a "form set . . . comprising . . . at least one negotiable instrument sheet." Other claims disclosed form sets that specifically contained additional sheets. Applying conventional claim construction of "comprising," the former claim described a set of forms that may include only one negotiable instrument sheet, so long as it included another form. While the preferred embodiment of the invention described a form set with multiple sheets, the invention was not limited to the preferred embodiment.

The claim limitation to ink that "permeates through the sheet from said printed front surface to said back surface" did not require ink permeation through the back surface. Constructing the limitation as requiring only penetration of the ink to the back surface, not through the sheet, was supported by language that referred to the ink going "through the sheet" not "through the back of the sheet." That construction was also supported by the disclosure in the written description that the ink permeates from the upper sheet to (not through) the lower surface of the top sheet and the dictionary definition of "to" as meaning "as far as" as opposed to "through."

The royalty base should not include money orders that did not infringe due to imperfect production of the accused forms.

Affirms royalty rate of 3.5%. The USPS' purchase of 1.5 billion money order forms indicated commercial success even though the evidence regarding profitability was mixed.

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Personal Jurisdiction Established by Solicitations Accompanying Patent Demand Letters

Case: Breckenridge Pharmaceutical, Inc. v. Metabolite Laboratories, Inc. and Pamlab, L.L.C. No. 05-1221, -1428 (Fed. Cir. April 7, 2006)

The One Sentence Summary: The exercise of personal jursidiction over the patent holder and its exclusive licensee by a District Court in Florida comported with due process where the exclusive licensee promoted, advertised, and sold products covered by the patent in Florida; the patent holder and exclusive licensee cooperated in sending cease and desist letters to others in Florida; and the exclusive license agreement (1) granted the licensee the right to sue for patent infringement with the holder's written consent, (2) required the holder and licensee to cooperate reasonably in any enforcement action, and (3) required the patent holder to provide consultation to the exclusive licensee in the science, medicine, and marketing of the vitamins covered by the patent.

What They Were Fighting About: Defendant Metabolite holds patents for a method of controlling elevated serum metabolite levels. Co-defendant PamLab manufactures and distributes a prescription-only vitamin product containing a specific formulation of folic acid used in controling elevated serum metabolite levels, and was the exclusive licensee of the Metabolite patents. Plaintiff Breckenridge is a generic drug company headquartered in Florida that manufactures a similar formulation of folic acid which it sells to large pharmacies and retailers, including Walgreens, Eckerd, and Rite Aid, as a substitute for PamLab's folic acid formulation.

Metabolite and PamLab sued Breckenride in the United States District Court for the District of Colorado alleging that Breckenridge had infringed the Metabolite patents by offering to sell Breckenridge's generic folic acid formulation to drug wholesalers and retailers as a generic equivalent to PamLab's formulation. The district court denied Metabolite and PamLab's motion for a temporary restraining order, and they voluntarily dismissed the suit. Several weeks after dismissing the Colorado litigation, Matabolite and PamLab cooperated in sending between 10 and 20 letters to vitamin distributors and retailers informing them of the patents and PamLab's exclusive license, and enclosing PamLab's promotional materials. The Federal Circuit characterized these as cease and desist letters. Three of the letters were sent to customers of Breckenridge in Florida.

Breckenridge then filed suit against Metabolite and PamLab in the United States District Court for the Southern District of Florida, seeking a declaratory judgment of non-infringement and alleging state law claims of tortious interference with contract and unfair competition. The District Court granted Metabolite's motion to dismiss for lack of personal jurisdiction, and then granted summary judgment to PamLab under Federal Rule of Civil Procedure 19 on the ground that Metabolite was a necessary party that could not be joined for lack of personal jurisdiction. Breckenridge appealed.

Federal Circuit Holdings:

• Florida's long-arm statute authorized personal jursidiction over Metabolite because the cease and desist letters had language that could be interpreted as a solicitation, and thus the defendants' actions subjected them to personal jurisdiction under Fla. Stat. Section 48.193(f) which authorizes personal jursdiction over a defendant engaged in solicitation or service activities within the state. However, Section 48.193(b) authorizing personal jurisdiction over defendants who commit tortious conduct in the state could not be a basis for personal jurisdiction because the cease and desist letters may have qualified as protected communications under federal patent laws which preempt state laws imposing tort liability for a patentholder's good faith conduct in communications asserting infringement of its patent and warning about potential litigation.
• The question of whether the exercise of personal jurisdiction over Metabolite with respect to the claims for a declaratory judgment of noninfringement comported with due process was "intimately related to patent law" and thus governed by Federal Circuit law regarding due process.
• Federal Circuit law regarding due process also applied to the question of personal jurisdiction on the non-patent claims against Metabolite of tortious interference because resolution of the patent infringement issue would be a significant factor in determining liability under the non-patent claims. The claims for tortious interference with contract would only be viable if Breckenridge Labs prevailed on the question of whether it infringed the Metabolite patents. If Breckenridge did, in fact infringe the patents, the cease and desist letters could not constitute tortious interference.
• The exercise of personal jurisdiction over a defendant does not comport with principles of fair play and substantial justice where the defendant's only activities in the forum state involve unsuccessful attempts to license the patent there (e.g., sending cease and desist letters), or where the defendant has successfully licensed the patent and the license agreement itself does not create "continuing obligations" in the forum state other than the mere payment of royalties.
• By contrast, the exercise of personal jurisdiction over Metabolite in Florida comported with principles of fair play and substantial justice since the license agreement between Metabolite and PamLab granted PamLab the right to sue for patent infringement with Metabolite's written consent, and required Metabolite to cooperate in the defense of the suit. Thus the exclusive license created continuing obligations of Metabolite in Florida where PamLab sold product.
• Metabolite had not provided a compelling case that the exercise of jurisdiction by a court in Florida would offend principles of fair play and substantial justice because three of the five factors used in evaluating the question (the burden on the defendant, the forum state's interest in adjuidicating the dispute, the plaintiff's interest in obtaining convenient and effective relief) did not favor another forum; the fourth factor (the interstate judicial system's interest in obtaining the most efficient resolution of convtroversies) tipped only slightly towards Metabolite, and the fifth factor (the shared interest of the several states in furthering fundamenta substantive social policies) played little role in this patent dispute.
• In light of the reversal of the District Court's ruling that Metabolite was not subject to personal jurisdiction, it was error to grant PamLab's summary judgment motion which had been premised on the argument that Metabolite was a necessary party over whom the Florida District Court could not obtain personal jurisdiction.
  

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Ongoing business relationship is not sufficient to validate a non-compete agreement under California law

Case: Kelton v. Stravinski, Case No. F047031 (Cal. App. 4/20/06)

The One Sentence Summary: An ongoing business relationship is not sufficient to validate a non-compete agreement that is void under Business and Professions Code section 16600.

What They Were Fighting About: Partners in a venture formed for the purpose of developing industrial warehouses agreed not to compete. When the defendant partner later entered into deals to develop warehouses, the plaintiff claimed one-half interests in each of those deals. The defendant was awarded summary judgment because all of plaintiffs claims arose from the parties’ non-compete agreement, which was void as a matter of law. Plaintiff appealed, asserting that the parties’ on-going business relationship validated the non-compete agreement.

Federal Circuit Holdings:

• The parties’ non-compete agreement did not concern the sale of goodwill in a company or the dissolution of a partnership, and so was void under Business and Professions Code section 16600.
• The plaintiff’s reliance on franchisee cases to argue that an on-going business relationship could validate a non-compete agreement was misplaced because the parties’ agreement exhibited none of the elements of control seen in a franchise agreement.
• There were no grounds for equitable enforcement of the non-compete agreement, because the defendant’s acts were not particularly morally reprehensible and the plaintiff had suffered no great loss.
• In an unpublished section of the decision, the court also rejected the plaintiff’s amended claims arising from what boiled down to asserted oral promises not to compete that were void for the same reasons the written non-compete agreement was void.
  
  

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Manufacturer Must Show Substantially All of Its Sales Affected by Foreign Importation of Its Products

Case: Bourdeau Bros. Inc. , Sunova Implement Co., and OK Enterprises v. International Trade Commission and Deere & Company (Fed. Cir. 3/30/06 )

The One Sentence Summary: To prevent importation in the United States of products manufactured by an American company for sale in Europe, the manufacturer must show that all or substantially all of its product sales in the US were different from those in Europe.

What They Were Fighting About: Deere & Company manufactures forage harvester vehicles (used to harvest crops) that are sold in the United States and Europe. On January 8, 2003, Deere filed a complaint with the US International Trade Commission (ITC) alleging violations of 19 USC § 1337 (Section 1337). Section 1337 grants the ITC the power to prevent the importation of goods that, if sold in the U.S., would violate one of the provisions of the Lanham Act. Section 1337 states prohibits “[t]he importation in the United States, the sale for importation, or the sale within the United States after importation by the owner, importer or consignee, of articles that infringe a valid and enforceable United States trademark registered under the Trademark Act of 1946.” Section 1337(a)(1)(c). Many of the goods that are forbidden from importation under section 1337 are “gray market goods” i.e., products that were “produced by the owner of the United States trademark or with its consent, but not authorized for sale in the United States.”

Deere alleged that Appellants Bourdeau Bros., Inc. and Sunova Implement Co. were importing into the United States used European forage harvesters that were materially different from Deere’s forage harvester authorized for sale in the United States, thereby infringing on Deere’s US trademarks. The appellants responded to Deere's complaint by claiming that Deere had authorized the sale of its European harvesters in the U.S. and therefore, Deere failed to establish its prima facie case -- i.e., the existence of a material difference between the accused products and those authorized for sale in the US. Appellants also raised these arguments in the form of affirmative defenses to the complaint for estoppel and unclean hands. The Administrative law judge rejected the affirmative defense raised by Appellants but failed to consider Appellant's separate claim that Deere had failed to establish a prima facie case for Section 1337 violation. The ALJ did not determine whether Deere had established that sales of European harvesters in the US by its approved dealers were unauthorized, or that the sales were so small that substantially all of Deere's sales were of North American forage harvesters. The ALJ nonetheless found that Deere’s U.S. trademarks were infringed by the importation of the European harvesters. The ITC affirmed. The Federal Circuit reversed and remanded.

Federal Circuit Holdings:

• “[T]he importation and sale of a trademarked good of domestic manufacture, produced solely for sale abroad and not authorized by the owner of the trademark for sale in the United States, may violate section 1337 if the imported good is materially different from all or substantially all of those goods bearing the same trademark that are authorized for sale in the United States.”
• The ALJ properly determined that there were material differences between the European and American harvesters that a consumer would likely consider significant (e.g., safety features; lighting functions, warning labels, andhitch mechanisms).
• The ALJ erred in not ruling separately upon Appellants’ claim that Deere failed to establish a prima facie case based upon Deere's alleged authorization of European product sales in the U.S. by its approved dealers. If Appellants' allegations are true not all -- or substantially all -- of Deere's sales were accompanied by the asserted material differences, and its Section 1337 claim cannot prevail.
• The burden is on the manufacturer (Deere) to establish that all or substantially all of the sales were materially different from the alleged gray market goods.
• "To establish that all or substantially all of the authorized sales in the United States were of North American forage harvesters, the ITC must presume that sales by authorized dealers were in fact authorized by Deere. Deere may rebut this presumption but it bears the burden of proving that sales of European forage harvesters in the U.S. by Deere’s authorized dealers were unauthorized sales."
• "Even if Deere cannot establish that the European sales were unauthorized, it might still prevail if it can establish that the number of European forage harvester sales in the US was so small that substantially all of Deere's sales in the United States were of North American forage harvesters such that substantially all of the authorized sales were of goods bearing the asserted material differences."

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