The Forest Group v. Bon Tool Company

35 U.S.C. § 292 prohibits falsely marking a product with a patent number or “patent pending.” It allows anyone to sue to enforce this provision and split the fine with the U.S. The maximum fine is “not more than $ 500 for every such offense.”

At issue in FOREST GROUP V. BON TOOL was whether that maximum fine applied on a per “decision to mark” basis or on a per article basis. The Federal Circuit concluded that it “requires courts to impose penalties for false marking on a per article basis.” (p. 14.) This of course has the potential to result in substantial penalties, and to provide an incentive for “the possible rise of ‘marking trolls’ who bring litigation purely for personal gain.” (p. 12.) However, the court also noted that the $500 figure was a maximum and so “[i]n the case of inexpensive mass-produced articles, a court has the discretion to determine that a fraction of a penny per article is a proper penalty.” (p. 13.) Moreover, the statute explicitly allows for such suits and the court mentioned several policy reasons for discouraging improper marking:

• Acts of false marking deter innovation and stifle competition in the marketplace.
  
• False marks may also deter scientific research when an inventor sees a mark and decides to forego continued research to avoid possible infringement.
  
• False marking can also cause unnecessary investment in design around or costs incurred to analyze the validity or enforceability of a patent whose number has been marked upon a product with which a competitor would like to compete. (p. 11.)

Because “[t]hese injuries occur each time an article is falsely marked,” the court determined the penalty should be applied per product in the marketplace and qui tam suits should not be discouraged.

The take away: Double check your products to make sure they aren't being marked with expired patents.

For a discussion on standing, see STAUFFER V. BROOKS BROTHERS, INC.

i4i v. Microsoft

This case involved an invention for editing custom XML, a markup language, in which the “improvement stems from storing a document’s content and metacodes separately.” The jury found claims infringed and not invalid and awarded $200 million. The district court added $40 million in enhanced damages plus a permanent injunction going forward. Below are excerpts concerning some of issues considered.

Claim Construction

“Because the claims themselves do not use the word ‘file’ and the specification discloses embodiments where the storage format is not a file, we conclude that ‘distinct’ does not require storage in separate files.” “In evaluating whether a patentee has disavowed claim scope, context matters.” “The statements Microsoft now plucks from the prosecution history do not ‘clear[ly] and unmistakabl[y] disavow’ storage means that are not files.” (p. 9.)

“[N]ot every benefit flowing from an invention is a claim limitation.” (p. 10)

Permissive Language Alert. “The specification’s permissive language, ‘could be edited,’ ‘can be created,’ and ‘ability to work,’ does not clearly disclaim systems lacking these benefits.” (p. 11.) As such, there were “no statements that unequivocally narrow the claims.” (p. 11.)



Review of Obviousness Limited Without a JMOL. “The extent to which we may review the jury’s implicit factual findings depends on whether a pre-verdict JMOL was filed on obviousness. In this case, Microsoft has waived its right to challenge the factual findings underlying the jury’s implicit obviousness verdict because it did not file a pre-verdict JMOL on obviousness for [certain prior art] references. … [A] party must file a pre-verdict JMOL motion on all theories, and with respect to all prior art references, that it wishes to challenge with a post-verdict JMOL. Microsoft’s pre-verdict JMOL on anticipation … was insufficient to preserve its right to post-verdict JMOL on a different theory (obviousness), or on different prior art …. Accordingly, we do not consider whether the evidence presented at trial was legally sufficient to support the jury’s verdict. Our review is limited to determining whether the district court’s legal conclusion of nonobviousness was correct, based on the presumed factual findings.” (p. 14.)

Corroboration. “[W]e hold that corroboration was not required in this instance, where the testimony was offered in response to a claim of anticipation and pertained to whether the prior art practiced the claimed invention.” (p. 18.) The court was distinguishing the corroboration requirement that applies when “any witness whose testimony alone is asserted to invalidate a patent.” (p. 18.)

Contributory Infringement. “In assessing whether an asserted noninfringing use was ‘substantial,’ the jury was allowed to consider not only the use’s frequency, but also the use’s practicality, the invention’s intended purpose, and the intended market.” (p. 25.)

Damages: Review Limited Because Microsoft Did Not File Pre-Verdict JMOL. “Although Microsoft now objects to the size of the damages award, we cannot reach that question because Microsoft did not file a pre-verdict JMOL on damages.” (p. 36.) The court would not consider whether the damages award was excessive because “Microsoft waived its ability to have us decide that question by failing to file a pre-verdict JMOL on damages. Fed. R. Civ. P. 50(a), (b).” (p. 36-37.) “Instead of the more searching review permitted under Rule 50(b), we are constrained to review the verdict under the much narrower standard applied to denials of new trial motions. This standard is highly deferential: we may set aside a damages award and remand for a new trial only upon a clear showing of excessiveness. To be excessive, the award must exceed the maximum amount calculable from the evidence.” (p. 37.) Since it didn’t, the award was affirmed, though the court suggested it might have reached a different result under the other standard of review, sufficiency of the evidence.

Permanent Injunction

Past Harm Is Relevant to Irreparable Harm. “Although injunctions are tools for prospective relief designed to alleviate future harm, by its terms the first eBay factor looks, in part, at what has already occurred.” (p. 43)

Remedies at Law. “Difficulty in estimating monetary damages is evidence that remedies at law are inadequate.” (p. 44.) Microsoft took a large percent of the market and i4i had to change its business model.

Public Interest Satisfied by Narrow Scope. “The scope of this injunction is narrow, however. It applies only to users who purchase or license Word after the date the injunction takes effect. Users who purchase or license Word before the injunction’s effective date may continue using Word’s custom XML editor, and receiving technical support.” (p. 42.) “The injunction’s narrow scope substantially mitigates the negative effects on the public, practically and economically. By excluding users who purchased or licensed infringing Word products before the injunction’s effective date, the injunction greatly minimizes adverse effects on the public.” (p. 45.)

Date Injunction Begins. The court changed the effective date of the injunction based on the evidence presented to the district court. But since this change was applied to the district court’s order, the end result is that the injunction will take effect in a few weeks of this decision.

IN RE NINTENDO

Groundhog Writ. The Federal Circuit has granted a petition for a writ of mandamus, ordering a case to be transferred out of the Eastern District of Texas to another venue after the district court had denied a motion to transfer. “The writ of mandamus is available in extraordinary situations to correct a clear abuse of discretion or usurpation of judicial power.” (p. 3.) However, it has been used rather frequently recently to get cases out of the Eastern District of Texas. As in the other recent transfer cases, there was no real connection between the case and Texas. Further, the Federal Circuit noted that the district court gave too much emphasis on the plaintiff’s choice of venue and not enough emphasis on local interest and on the location of sources of proof and witnesses.

Automated Merchandising Systems v. Crane

This non-precedential decision discusses the standards for preliminary injunctions, in particular the requirements for showing irreparable harm, avoiding a finding of likelihood of success by making a case for invalidity, and the implications of a reexamination proceeding for seeking a preliminary injunction.

1. Irreparable Harm

The court discussed what is required to demonstrate irreparable harm, which is harm that cannot be compensated via monetary damages. Evidence of lost sales, by itself, is presumed to be compensable by monetary damages and thus does not provide evidence of irreparable harm. The court stated that, in light of eBay, the “burden is now on the patentee to demonstrate that its potential losses cannot be compensated by monetary damages.” (p. 6.) Loss of market share must be shown to be non-compensable by monetary damages. Similarly, price erosion “might support a finding of irreparable harm sufficient to warrant a preliminary injunction” if it could be shown that prices could fall enough to drive the plaintiff out of the market. (p. 7.)

2. Likelihood of Success

The district court improperly shifted the burden from the plaintiff (to show a likelihood of success) to the defendant (to show that the plaintiff is unlikely to success on the merits.) The defendant’s argument against a preliminary injunction was based on an invalidity claim. The court acknowledged that “it may be difficult to determine precisely how much of an invalidity case Crane needs to present at this preliminary stage” because it does in fact have the “burden at trial of proving invalidity by clear and convincing evidence.” (p. 8.) Nonetheless, the district court did not sufficiently analyze the defendant’s invalidity argument, and so the Federal Circuit could not agree with its conclusion.

3. Preliminary Injunctions and Stays Due to Reexamination

The court explained that, in almost all circumstances, it would be improper to both grant a preliminary injunction and a stay pending reexamination. “[T]he district court ordinarily should not grant both a preliminary injunction and a stay. This is because a stay pending reexamination is appropriate only if there is a substantial issue of patentability raised in the reexamination proceeding, while the injunction against the accused infringer is appropriate only if there is no substantial issue of patentability. Because it logically seems that there cannot simultaneously be a substantial issue of patentability and no substantial issue of patentability, stays pending reexamination are typically inappropriate in cases in which preliminary injunctions are appropriate.” (p. 10.)

Intellectual Science v. Sony Electronics

The issue on appeal was whether the patentee had provided sufficient evidence through its expert’s declaration to survive summary judgment of non-infringement. The patent was directed toward an “apparatus for reading optical discs in a computer that reduces the role of magnetic disk drives.” The defendants moved for summary judgment (before claim construction) based on the insufficiency of the patentee’s evidence for infringement. In particular, there was no evidence in the record pointing to specific structures in the accused devices that met the claimed “data transmission means.” Therefore, summary judgment of non-infringement was affirmed.

After reviewing the expert declaration, the court found that “it does not sufficiently identify the structural elements of the claimed ‘data transmitting means.’” (p. 8.) The expert declaration also failed to explain how one of skill in the art would recognize how the cited components were infringing. (p. 10.) To present a triable issue of fact on infringement, the patentee must provide at least a “clear identification of the claimed structure or its equivalent in the accused devices.” (p. 14.)

The court included additional statements about the sufficiency of expert opinions in the infringement context: “An expert’s unsupported conclusion on the ultimate issue of infringement will not alone create a genuine issue of material fact.” (p. 8.) “To satisfy the summary judgment standard, a patentee’s expert must set forth the factual foundation for his infringement opinion in sufficient detail for the court to be certain that features of the accused product would support a finding of infringement….” (p. 7-8.)

Source Search Technologies v. LendingTree

Obviousness. The claims at issue in this case involved “a computerized procurement service for matching potential buyers with potential vendors over a network.” One limitation, as construed, required that the system return from potential sellers “quotes” that included “price and other terms of a particular transaction in sufficient detail to constitute an offer capable of acceptance.” (p. 12.) Because there were at least factual issues about whether the prior art disclosed the use of such “quotes,” the district court’s grant of summary judgment of obviousness was vacated.

Infringement. The district court had also found that the accused system infringed. This finding was also vacated for a related reason—there were fact issues regarding whether the accused system returned “quotes” as construed (capable of acceptance) from potential buyers. (p. 19.)

Collateral estoppel. The patentee contended that the defendant should not be able to argue that its “quotes” were non-infringing based on positions it had taken in another litigation. The court agreed with the district court that collateral estoppel was not appropriate because the prior issue involved “an unrelated patent, with different asserted claims, and dissimilar claim constructions.” (p. 17.)

Indefiniteness. The defendant also argued that the claims were indefinite because a person of skill could not differentiate between the claimed “standard” and unclaimed non-standard goods and services. While noting that completely subjective claim terms were improper, the court rejected this argument, finding that a person of skill could determine what was standard once a market was chosen. “To hold otherwise would require the patent to list every possible good or service. This court does not load the indefiniteness requirement with this unreasonable baggage. Although at times difficult to determine the bounds of a “standard” product or service, a person having ordinary skill in the art will possess an understanding of the system that will supply an objective definition to the various markets and applications of the system.” (p. 21.)

Tyco Healthcare v. Ethicon Endo-Surgery

The district court dismissed without prejudice this patent infringement case because the plaintiff failed to prove it had ownership of the patents and therefore standing to sue. The defendant cross-appealed, contending that the dismissal should have been without prejudice. The Federal Circuit affirmed.

The standing issue turned on a contractual provision in an agreement that assigned certain patents to the plaintiff, but excluded patents that were “related to pending litigation.” Because the plaintiff failed to provide evidence regarding any pending litigation, it failed to meet its burden regarding standing.

On the with/without prejudice issue, the court noted that dismissal for lack of standing is “ordinarily” without prejudice and found no abuse of discretion by the district court. It is also worth noting that this issue was not raised until trial, and the court noted that the work done for the case could be used in a subsequent proceeding.

Encyclopaedia Britannica v. Alpine Electronics

This non-precedential opinion discusses the standards for the specificity of disclosure for functions carried out on computers. The court stated that, for means-plus-function claims, simply disclosing a general computer was not sufficient. The “corresponding structure for such claims is the algorithm disclosed in the specification. …If the algorithm is not adequately disclosed in the specification, the claim is invalid for indefiniteness.” (p. 6.)

The patentee made three arguments that were all rejected. First, it argued that the specification implicitly discloses a class of algorithms corresponding to the recited function to a person of skill in the art. This was rejected because it the “understanding of one of skill in the art does not relieve the patentee of the duty to disclose sufficient structure to support means-plus-
function claim terms.” (p. 7-8 (citing Lucent Techs., Inc. v. Gateway, Inc., 543 F.3d 710, 719 (Fed. Cir. 2008).)

Second, it argued that the specification discloses a one-step algorithm for the recited function. This was rejected because the “purported ‘one-step’ algorithm … is not an algorithm at all. Rather, it is simply a recitation of the claimed function.” (p. 9.)

And finally, it argued that it “need not disclose an algorithm where the computer function being performed is well known.” This was rejected because, regardless of the simplicity of the algorithm, “when a means-plus-function limitation is a computer programmed with software to carry out the claimed function, a recitation of the corresponding algorithm is required to provide sufficient disclosure of structure under § 112 ¶ 6 to avoid indefiniteness under § 112 ¶ 2.” (p. 10.)

Hewlett-Packard v. Acceleron

The Federal Circuit reversed a dismissal for lack of declaratory judgment jurisdiction. This was a typical letter writing dance case, but the court recognized that its decision represented a shift from past cases, and also that declaratory judgment cases can be tricky. “[T]here is no bright-line rule for distinguishing those cases that satisfy the actual case-or-controversy requirement from those that do not. Our decision in this case undoubtedly marks a shift from past declaratory judgment cases.” (p. 9.)

The opinion included excerpts from the exchanged letters, which showed both parties were quite cognizant of the declaratory judgment issue. While noting that “MedImmune may have lowered the bar for determining declaratory judgment jurisdiction in all patent cases,” it made clear that more is required than just any communication regarding a patent: “a communication from a patent owner to another party, merely identifying its patent and the other party’s product line, without more, cannot establish adverse legal interests between the parties, let alone the existence of a ‘definite and concrete’ dispute. More is required to establish declaratory judgment jurisdiction.” (p. 5.)

With no history of litigation, the determining factor here appeared to revolve in large part around the patent owner’s status as a patent holding company. Relevant facts included that “the receipt of such correspondence from a non-competitor patent holding company . . . may invoke a different reaction than would a meet-and-discuss inquiry by a competitor, presumably with intellectual property of its own to place on the bargaining table. Under the totality of the circumstances, therefore, it was not unreasonable for HP to interpret Acceleron’s letters as implicitly asserting its rights under the [] patent.” In addition, the court “observe[d] that Acceleron is solely a licensing entity, and without enforcement it receives no benefits from its patents….” (p. 8.)

Other factors that played a role were that the patent owner asserted the patent as “relevant” to a specific product line, imposed a short deadline for a response, insisted the other party not file suit, and refused a standstill agreement. (p. 7.) The court also noted that “it is the objective words and actions of the patentee that are controlling,” not its actual state of mind. (p. 7.)

Ultimax Cement v. CTS Cement

This case involves patents for rapid-hardening, high-strength cement. A few of the issues are discussed below.

Claim Construction
The Federal Circuit reversed the district court’s claim construction of “soluble CaSO4 anhydride” in part because it relied too heavily on a single dictionary definition divorced from the context of the claims and the specification. “[T]he [district] court erroneously relied on expert testimony and a single dictionary definition to the exclusion of other dictionary definitions and, most importantly, the context in which the term was used within the claim and the specification.” (p. 9.) The issue was whether “soluble CaSO4 anhydride” meant “a compound formed from an acid by removal of water” as the district court held or meant “soluble anhydrous calcium sulfate.” Because there was ambiguity in the dictionary definitions regarding what anhydride could mean, “the context must define what compound has had water removed. Here it is calcium sulfate, not an acid.” (p. 10.)

Laches
“An infringer does not escape liability merely by infringing in secret.” (p. 15.) Therefore, summary judgment of laches was not appropriate even though the accused product was available for 12 years because the patentee could not adequately test it until discovery. While 12 years is a long time, when “a claim limitation whose presence is undetectable in a finished product, it is reasonable that [patentee] might not have known or been able to find out whether [a product] infringed.” (p. 15.) Thus, there were genuine issues of fact, including whether the patentee had fulfilled its duty by hiring a private investigator.

Indefiniteness
“Merely claiming broadly does not render a claim insolubly ambiguous, nor does it prevent the public from understanding the scope of the patent.” (p. 19.) Thus, the fact that one formula in the claims may have covered 5000 variations did not render them indefinite because a person could fairly easily determine whether a given compound fell within the literal scope of the claims.

Correction of Typo
The district court refused to correct a typo (insertion of a comma) because, although the error was apparent to one of skill in the art, it was not “clear on the face of the patent.” The Federal Circuit clarified that such corrections can be made “if the correction is not subject to reasonable debate to one of ordinary skill in the art, namely, through claim language and the specification, and the prosecution history does not suggest a different interpretation, then a court can correct an obvious typographical error.” (p. 21.)

Perfect Web v. Infousa

Asserted claims for a patent for “managing bulk e-mail distribution to groups of targeted consumers” were found to be obvious on summary judgment and the Federal Circuit affirmed (and did not address an alternative holding that the claims were directed to unpatentable subject matter under section 101.) The claims involved sending e-mail messages in bunches and continuing to send new batches out until a certain number of messages were successfully received. The parties agreed that the first three steps of the four step method were known, so the issue was whether the fourth step—repeating the first three until a quota was met—would have been obvious.

An initial issue, which the court discussed at some length, was what kind of evidence was required for “common sense.” Relying on KSR, it found that the common sense available need not be shown in a reference or through expert testimony: “We therefore hold that while an analysis of obviousness always depends on evidence that supports the required Graham factual findings, it also may include recourse to logic, judgment, and common sense available to the person of ordinary skill that do not necessarily require explication in any reference or expert opinion.” (p. 9.) However, for summary judgment, “to invoke ‘common sense’ or any other basis for extrapolating from prior art to a conclusion of obviousness, a district court must articulate its reasoning with sufficient clarity for review.” (p. 10.)

Applying this standard to the case at hand, the court found that the district court adequately explained its reasoning in concluding that common sense would have rendered the claims obvious. It found that the “last step, and the claim as a whole, simply recites repetition of a known procedure until success is achieved.” (p. 10.) Further, because of the nature of the claims, “[n]o expert opinion is required to appreciate the potential value to persons of such skill in this art of repeating [the first three] steps.” (p. 10.)

The patentee’s argument that the patent met a long-felt need were rejected, in part because it “provided no evidence to explain how long this need was felt, or when the problem first arose.” (p. 15.)

The court also found that the claimed solution would have been obvious to try because the evidence showed that there were “at most a few potential solutions for this problem at the time” of the invention. (p. 12.)

In Re Hoffmann-La Roche Inc.

The Federal Circuit has once again granted a petition for writ of mandamus and directed a district court (in the Eastern District of Texas) to transfer a patent case to another district. The court had taken basically the same action in similar circumstances recently in both In re Genentech, Inc., 566 F.3d 1338 (Fed. Cir. 2009) and In re TS Tech USA Corp., 551 .3d 1315, 1322 (Fed. Cir. 2008).

Novartis, a California company, brought a patent infringement suit against defendants with facilities primarily in North Carolina (where the accused product was developed). They moved to transfer the case to the Eastern District of North Carolina and the motion was denied. The Federal Circuit found that there was a “there is a stark contrast in relevance, convenience, and fairness between the two venues” and concluded that the district court’s denial was an abuse of discretion under 5th Circuit law. (p. 5.) Applying these factors, the court found that there was virtually no connection to the Eastern District of Texas. It gave no weight to a “tactic” in which documents related to the patent were transferred to plaintiff’s counsel in Texas. (p. 5-6.)

The court found that “the Eastern District of North Carolina’s local interest in this case remains strong because the cause of action calls into question the work and reputation of several individuals residing in or near that district and who presumably conduct business in that community” and that this interest is “self-evident.” (p. 5, 6.) In contrast, the court again noted that “the sale of an accused product offered nationwide does not give rise to a substantial interest in any single venue.” (p. 8.)