Intellectual Property Archives - Page 33 of 58

Apple Inc. v. Rensselaer Polytechnic Institute and Dynamic Advances, LLC, Decision Denying Institution

Takeaway: A voluntary dismissal of a litigation without prejudice will not nullify service of a complaint for purposes of 35 U.S.C. § 315(b) if that litigation is immediately continued in a consolidated case.

In its Decision, the Board denied institution of the Inter Partes Review as time-barred under 35 U.S.C. § 315(b) because it was not filed within the statutory period of 35 U.S.C. § 315(b). The date of service of two different complaints was an issue of primary focus by the Board.

In a first patent litigation, Patent Owner (Dynamic Advances) filed a complaint on October 19, 2012. Dynamic Advances, LLC v. Apple Inc., No. 1:12-cv-01579-DNH-CFH (N.D.N.Y.)(Dynamic I). The complaint for the first litigation was served on Petitioner (Apple) on October 23, 2012. In a second patent litigation, Rensselaer Polytechnic Institute and Dynamic Advances jointly filed a complaint on June 3, 2013. Rensselaer Polytechnic Inst. & Dynamic Advances, LLC v. Apple Inc., No. 1:13-cv-00633-DNH-DEP (N.D.N.Y.)(Dynamic II). The complaint for the second litigation was served on Petitioner (Apple) on June 6, 2013.

The Petition in the instant proceeding was filed on January 3, 2014. Thus, the service date of October 23, 2012 for the first litigation (Dynamic I) was more than 12 months prior to the filing of the Petition, whereas the service date of June 6, 2013 for the second litigation (Dynamic II) was less than 12 months prior to the filing date of the Petition. The Board found that service of the first complaint on October 23, 2012, rather than service of the second complaint on June 6, 2013, controlled for purposes of determining whether the requested inter partes review was time-barred under 35 U.S.C. § 315(b). Because the service date of October 23, 2012 for the first litigation (Dynamic I) was more than 12 months prior to the filing of the Petition, the Board found that the Petition was not filed within the statutory period of 35 U.S.C. § 315(b).

The Board’s rationale in reaching this conclusion related to the fact that on July 22, 2013, the court ordered consolidation of Dynamic I and Dynamic II under Fed. R. Civ. P. 42. In doing so, the court ordered that pursuant to a joint stipulation of the parties, Dynamic I was “dismissed without prejudice and the parties would proceed to litigate their claims and defenses in [Dynamic II].”

Petitioner argued that under the decision in Macauto U.S.A. v. BOS GmbH & KG, IPR2012-0004 (“holding that a voluntary dismissal without prejudice nullified service of the complaint for purposes of 35 U.S.C. § 315(b)”), service of the first complaint on October 23, 2012 was not effective. According to Petitioner, as in Macauto, the facts of the present case have the effect of leaving the parties as if the first action had never been brought.

The Board disagreed, finding that “Dynamic I cannot be treated as if that case had never been filed under the rationale of Macauto.” Instead, the Board found that it was “persuaded that the circumstances in the instant case weigh in favor of close scrutiny of the effect of the dismissal of Dynamic I, because that cause of action, although dismissed, was continued immediately in Dynamic II.”

This proceeding was the third time that Petitioner had petitioned for inter partes review against the ‘798 patent. In IPR2014-00077, institution was denied. IPR2014-00320 was filed concurrently with the petition for this proceeding.

Apple Inc. v. Rensselaer Polytechnic Institute and Dynamic Advances, LLC,IPR2014-00319
Paper 12: Decision Denying Institution of Inter Partes Review
Dated: June 12, 2014
Patent 7,177,798 B2
Before: Josiah C. Cocks, Bryan F. Moore, and Miriam L. Quinn
Written by: Moore
Related proceedings: IPR2014-00077; IPR2014-00320; Dynamic Advances, LLC v. Apple Inc., No. 1:12-cv-01579-DNH-CFH (N.D.N.Y.); Rensselaer Polytechnic Inst. & Dynamic Advances, LLC v. Apple Inc., No. 1:13-cv-00633-DNH-DEP (N.D.N.Y.)

Article By:

Christopher Bruenjes

Of:

Drinker Biddle & Reath LLP

Federal Circuit Issues Decision Affirming Obviousness of a Molecule Patent Claim

On June 12, 2014, the US Court of Appeals for the Federal Circuit issued a precedential opinion affirming the obviousness of a patent claim directed to a drug molecule. Bristol-Myers Squibb Co. v. Teva Pharms. USA, Inc., ___ F.3d ___ (2014). This is an example of the Federal Circuit holding a molecule patent invalid for obviousness.

The Federal Circuit upheld US District Court for the District of Delaware Magistrate Judge Christopher Burke’s opinion that held claim 8 of U.S. Patent No. 5,206,244 invalid in light of a structurally similar molecule. Claim 8 covers the entecavir molecule, which is the active ingredient in BMS’ Baraclude® tablets, which are designed to treat hepatitis B virus (HBV) infection. Teva successfully argued that one of ordinary skill in the art seeking to make an anti-HBV drug in October 1990 would have selected a prior art compound called 2′-CDG as a “lead compound” and would have modified it by adding a methylene (i.e. carbon-carbon double bond) group as indicated in the diagram to the right, below.

Lead Compound

Relying on testimony from both parties’ experts and prior art publications, the Federal Circuit saw no error in the district court’s finding that 2′-CDG was a proper lead compound. There was sufficient evidence that one of ordinary skill would have studied carbocyclic nucleosides generally, and 2′-CDG specifically, as antiviral drugs, especially because BMS’ expert admitted that “medicinal chemists . . . were actually treating and using 2′-CDG as a lead compound” in the search for new antivirals. Slip. Op. at 9-10. BMS argued that 2′-CDG would not be a lead compound because it was discovered to be toxic after the filing date of the patent. Id. at 10. The Federal Circuit (and the district court) rejected BMS’ argument because in October 1990 (i.e. the date of the proper inquiry), “2′-CDG was not yet known to have high toxicity” and BMS’ expert agreed that researchers thought 2′-CDG was a promising compound at that time. Id. at 10.

Motivation to Modify

The Federal Circuit also found that the record amply supported the district court’s conclusion on motivation to modify 2′-CDG to make the patented compound, entecavir. Slip Op. at 11-14. For example, both parties’ experts agreed that chemists were making changes on the carbocyclic ring in the prior art, and Teva’s expert stated that such changes resulted in greater activity than changes elsewhere on the molecule. Id. at 12. Unrefuted expert testimony also explained that the modification would take place at the 2′ or 5′ position on the carbocyclic ring because small changes could easily be made only at these positions. Id. at 12. The experts also agreed that the skilled artisan would focus on the smallest elements for the substitution, and BMS’ expert stated that he would “rule out everything but the carbon.” Id.The Federal Circuit found no clear error in the district court’s finding that the modification required was a minor one based on the testimony of both parties’ experts and a prior art article teaching improved antiviral activity by addition of a methylene group to a carbocyclic nucleoside. Id. at 12-13.

Reasonable Expectation of Success

Based on the prior art and the structural similarity of 2′-CDG and entecavir, the Federal Circuit found no error in the district court’s finding of “reasonable expectation of success.” Id. at 14. In doing so, the Federal Circuit rejected a bright-line rule regarding reasonable expectation of success in new chemical entities proposed by BMS. Specifically, BMS had argued that the existence of unexpected properties forecloses a finding of a reasonable expectation of success. Id. at 14. Citing its en banc In re Dillon decision, the Federal Circuit held that “unexpected results do not per se defeat, or prevent, the finding that a modification to a lead compound will yield expected, beneficial properties.” Id. at 15. Instead, the court found that unexpected results should be analyzed as secondary considerations of nonobviousness. Id.

Secondary Considerations

The Federal Circuit found no reversible errors in the district court’s analysis of secondary considerations of nonobviousness.^[1]The Federal Circuit was deferential to the lower court’s factual findings regarding evidence of secondary considerations, including unexpected results. Id. at 18. The district court found that the results regarding entecavir’s high potency and large therapeutic window were not entirely unexpected because it was known in the prior art that 2′-CDG was effective against HBV and had a good therapeutic window. Id. They were differences of degree, not kind. Id. While the district court credited entecavir’s high barrier to resistance as an unexpected property, the three properties taken together were not sufficient to support nonobviousness. Id. at 17-18.

Article By:

Robert B. Breisblatt

Christopher B. Ferenc

Jeffrey A. Finn

Samson Helfgott

Martin S. Masar III, PhD

Hassan Abbas Shakir

Of:

Katten Muchin Rosenman LLP

^{_{[1] The Federal Circuit found that the district court made two legal errors (albeit harmless ones) in assessing unexpected results because it: (1) compared entecavir to another HBV drug on the market and not the closest prior art, 2′-CDG, and (2) looked at what the inventor knew, not a person of ordinary skill in the art. Id. at 18-19. The Federal Circuit also found no error in the lower court’s findings on commercial success and long-felt need. Id. at 19.}}

U.S. Supreme Court Makes It Easier To Avoid Method Patents Requiring Multiple Actors

On June 2, 2014, the United States Supreme Court unanimously held that a defendant was not liable for inducing infringement of a patented method where there is no direct infringement because the method steps are “divided” between the defendant and its customers. See Limelight Networks, Inc. v. Akamai Technologies, Inc., No. 12–786. The Court was reviewing a 6-5 en banc decision from the Court of Appeals for the Federal Circuit that held a party might be liable for inducing infringement under 35 USC 271(b) where a defendant carried out some steps and encouraged others (such as its customers) to carry out the remaining steps. In other words, the performance of the method steps was divided between a party and its customers, so the party could be liable for inducing the performance of the remaining steps it did not perform itself. The Supreme Court reversed and remanded the judgment against Limelight, reasoning that there could be no liability for inducing infringement if no party directly infringed.

The Supreme Court relied on a prior decision by the Federal Circuit that there is no direct infringement of a method claim unless a single party performs every step of a claimed method or exercises “control or direction” over the entire process such that every step is attributable to that party. See Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318, 1329 (Fed. Cir. 2013). Muniauction held that there was no direct infringement of a patented method when its distinct steps were performed by “mere arms-length cooperation” between parties. In Limelight, the Supreme Court “assumed” that Muniauction’s holding was correct but observed that the Federal Circuit could revisit it when the Limelight decision was remanded.

Both Limelight and Muniauction involved client-server scenarios for web-based businesses and cloud-based application services, but this decision has broad implications across a variety of fields, such as personalized or precision medicine. For example, a patented method directed to diagnosing and treating a disease would not be infringed where a laboratory provides the diagnosis and the treating physician does not exercise “control or direction” over the steps performed by the laboratory.

Until Muniauction is further defined, the Court has returned the law to its state prior to the Federal Circuit’s Akamai holding, where liability turned on whether a single infringer exhibited sufficient “control or direction” over steps performed by others; if not, no one is liable for patent infringement. For would-be infringers, this potentially provides a useful defense. For patent applicants, it is a reminder to draft method claims in a manner such that all actions can be taken by a single entity.

Article By:

Michael B. Harlin

James P. Muraff

Kevin A. O’Connor Ph.D.

Mike R. Turner

Of:

Neal, Gerber & Eisenberg LLP

Supreme Court Nixes "Amorphous" Federal Circuit Indefiniteness Standard

The U.S. Supreme Court yesterday reversed long-standing Federal Circuit precedent, replacing the test used to determine whether a patent is indefinite with a new reasonable certainty standard (NAUTILUS, INC. v. BIOSIG INSTRUMENTS, INC., No. 13–369 (S. Ct. June 2, 2014).

The new reasonable certainty test raises the bar on the “clarity and precision” with whichpatents must be written. As a consequence, the burden on accused infringers attempting to invalidate patents based on ambiguous language is lowered. This new standard will prove especially helpful in the ongoing battle against patent trolls, who often wield portfolios of ambiguous or overly broad patents in an attempt to extract licensing fees. Tech companies, including Google, Inc. and Amazon.com, Inc., which are frequent targets of patent trolls, urged the Supreme Court to adopt the “reasonable certainty” standard.

The new standard will also require more precision in drafting and prosecuting patent applications. Exactly how precise language will need to be remains to be seen, but the Court explained that the old standard incentivized patent applicants and practitioners to “inject ambiguity” into their claims. The new standard was established, in part, to eliminate this incentive. The Court commented that patent practitioners are in the best position to resolve ambiguity in patent claims. In light of the Supreme Court’s admonition, patent applicants and practitioners seeking broad coverage of their inventions should use language no broader than necessary to adequately cover their inventions.

The Supreme Court’s decision stemmed from a dispute between Biosig Instruments and Nautilus, Inc. Biosig sued Nautilus for infringement of a patented heart monitor for exercise machines, which registered electrical waves to estimate a user’s heart rate. Nautilus convinced the trial court that Biosig’s patent was invalid as indefinite. Applying its “insolubly ambiguous” test, the Federal Circuit found the patent valid. Biosig sought review by the Supreme Court.

Justice Ginsberg delivered the opinion for a unanimous Court. As embodied in the Patent Act, a patent must include “one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant claims as his invention.”

This notice requirement is satisfied, the Court held, where the claims of the patent, read in light of the specification and prosecution history, informs with reasonable certainty those skilled in the art about the scope of the invention. Like any property right, the boundaries of the patent monopoly should be clear. The failure to afford the public clear notice of what is claimed, “thereby appris[ing] the public of what is still open to them,” chills innovation by creating a risk of infringement in “zones of uncertainty.”

The High Court remanded the case with instructions that the Federal Circuit should no longer employ the “insolubly ambiguous” or “amenable to construction” tests of patent claim indefiniteness under 35 USC § 112, ¶ 2. These words can “leave courts and the patent bar at sea without a reliable compass.” While noting that the Supreme Court does not “micromanage the Federal Circuit’s particular word choice” in applying patent-law doctrines, Justice Ginsberg wrote, “we must ensure that the Federal Circuit’s test is at least ‘probative of the essential inquiry.’”

The Federal Circuit test, according to the High Court, “invoked a standard more amorphous than the statutory definiteness requirement allows.” In addition to breeding lower court confusion, the discredited “insolubly ambiguous” standard tolerated “some ambiguous claims but not others….” The Court’s new reasonable certainty standard requires more definite claim language.

Article By:

Of:

Misrepresentation of Source Claims Re: Foreign Trademark Registration

Owners of marks that are well- known outside the United States may find that an American company has attempted to take advantage of the renown of the foreign mark by obtaining a trade mark registration for such mark in the United States. While Article 6(bis) of the Paris Convention provides the owner of a famous foreign trade mark with a basis for asserting and sustaining a claim of priority in the US over a US registrant, this provision does not provide a basis for cancelling a US registration absent use of the mark in the US.

In April, however, the US Patent and Trademark Office’s Trademark Trial and Appeal Board (TTAB) issued a precedential decision which extends the ability of the owner of a mark that is famous internationally but not used in the US to enforce rights in their marks. In Bayer Consumer Care AG v Belmora LLC, the TTAB granted Bayer’s petition to cancel Belmora’s Registration for the Flanax mark based upon a misrepresen- tation of source in accordance with Section 14(3) of the Trademark Act even though Bayer was not using, nor had any intention to use, the Flanax mark in the US.

The evidence in Bayer showed that Bayer’s Mexican affiliate had been dis- tributing a naproxen sodium-based analgesic under the Flanax mark in Mexico since 1976 and that Flanax is the top selling pain reliever in Mexico. However, Bayer does not use the Flanax mark in the US and, instead, markets its naproxen sodium-based analgesic in the US under the Aleve mark.

The respondent, Belmora, adopted the Flanax mark in connection with a naproxen sodium-based analgesic that it sold and marketed towards the Hispanic community. The evidence fur- ther established that the initial packag- ing used by Belmora copied the logo and colour scheme used by Bayer for its Flanax product in Mexico and repeat- edly invoked the reputation of Bayer’s Flanax mark when marketing its prod- ucts in the US.

Belmora attacked Bayer’s standing to bring the cancellation proceedings, arguing that Bayer does not own a US registration for the Flanax mark, has not used the Flanax mark in the US and had no plans to use the mark in the US. The TTAB rejected these arguments, stating that “if respondent is using the FLANAX mark in the US to misrepre- sent to US consumers the source of respondent’s products as petitioner’s Mexican products, it is petitioner who loses the ability to control its reputation and thus suffers damage”. Integral to this analysis was the TTAB’s finding that given the size of the Mexican pop- ulation in the US, the “reputation of the Mexican FLANAX mark does not stop at the Mexican border”.

Having held that Bayer had standing to pursue the cancellation, the TTAB turned to its analysis of Section 14(3) which provides that a party may cancel a registration for a mark if the mark “is being used by, or with the permission of, the respondent so as to misrepresent the source of the goods or services on or in connection with which the mark is used”. In doing so, the TTAB held that the evidence established blatant misuse of the Flanax mark by Belmora in a manner calculated to trade on the goodwill and reputation of Bayer. Therefore, the TTAB ordered the can- cellation of Belmora’s Registration for the mark Flanax.

Although typically the ability to claim rights in a trade mark in the US requires that the mark actually be in use in the US, the TTAB’s decision in Bayer indicates that there may be an alternate basis that can be pursued when a foreign trade mark owner that does not use its mark in the US seeks to assert rights in its mark. On the other hand, the standard to satisfy a claim of misrepresentation of source is fairly dif- ficult, as it requires that the petitioner show that the respondent took steps to deliberately pass off its goods as those of petitioner. Therefore, a successful claim of misrepresentation of source will be very fact dependent.

Article By:

Karen Artz Ash

Bret J. Danow

Of:

Katten Muchin Rosenman LLP

Can the Town Make Me Change My Sign?

A business’ signage can be one of the most distinctive characteristics of its brand and one of its most important assets. This is especially true when the sign display’s the business’ federally registered trademark and color is a feature of the mark. But what happens when that brand runs afoul of state and local laws?

It is common place for commercial real estate development plans to impose requirements on the characteristics of the signs that tenants may display in the development. Sometimes, those requirements impose restrictions on the colors that such signs may display. For owners of federally registered trademarks where color is claimed as a feature of the mark, the last thing they want is to have to change the color of their sign.

For example, imagine telling McDonalds that its famous golden and red sign must be displayed in other colors, say, like this:

For most consumers, I suspect this sounds ridiculous. But that is exactly the obstacle that federal brand owners must overcome when faced with local zoning restrictions on color.

Fortunately, the federal trademark law provides some relief. Or does it? The Lanham Act expressly provides that federal law preempts state law by providing (in part):

No State or other jurisdiction of the United States or any political subdivision or any agency thereof may require alteration of a registered mark …. (15 USCA §1121(B))

While this may seem pretty clear on its face, courts are split as to whether towns can lawfully impose color restrictions on signs displaying a federally registered trademark.

Two courts in the 9th Circuit (including the 9th Circuit Court of Appeals) have shot down Tempe, Arizona’s attempts to impose such color restrictions under this section of the Lanham Act. Blockbuster Videos, Inc. v. City of Tempe, 141 F.3d 1295 (1998); Desert Subway, Inc. v. City of Tempe, 322 F. Supp.2d 1036 (2003). Conversely, two courts in the 2d Circuit (including the 2d Circuit Court of Appeals) have upheld town zoning boards’ imposition of signage color restrictions as superior to the rights of federally registered trademark holders. Payless Shoesource, Inc. v. Town of Penfield, NY, 934 F. Supp. 540 (1996); Lisa’s Party City, Inc. v. Town of Henrietta, 185 F.3d 12 (1999).

According to the 9th Circuit courts, from looking at the legislative history, it is clear that while local governments can prohibit the display of outdoor signs altogether, there is nothing to suggest that local zoning ordinances may require alteration of trademarks. Looking at the identical legislative history and, in some cases, quoting from the same testimony, the 2d Circuit courts agreed that the law would allow local zoning ordinances to prohibit outdoor signs altogether or even materially restrict their size. However, the 2d Circuit found that the statute was intended to prohibit state-mandated changes in the trademark itself since the brand owner would be free to use the unaltered mark in every other aspect of its business.

So who is right?

Like any other situation where courts are split geographically, they both are. Until the Supreme Court takes up the issue, local ordinances in the 2d Circuit are free to place restrictions on colors used in trademarks displayed on signs, whereas in the 9th Circuit (especially, Tempe, Arizona), local ordinances may not. For those of us in other circuits, the moral of the story for brand owners is to be mindful of local zoning restrictions before committing to a store location. Real estate developers should also be mindful of signage restrictions included in their plans when seeking local approvals.

Article By:

Kurt E. Anderson

Of:

Giordano, Halleran & Ciesla, P.C.

Supreme Court Makes Landmark Rulings on Attorney Fees in Patent Cases

On April 29th, the U.S. Supreme Court made it much easier to recover attorney fees in patent lawsuits, issuing two unanimous landmark decisions overruling Federal Circuit precedent. The statute at issue, 35 U.S.C. §285, allows for the court to award reasonable attorney fees to the prevailing party in “exceptional cases.” Since its decision in Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F. 3d 1378, 1381 (2005), the Federal Circuit has held that exceptional cases are those cases which are proven by clear and convincing evidence to be both “objectively baseless” and “brought in subjective bad faith.” Also, in the past several years, the Federal Circuit has reviewed the objectively baseless element of its test for exceptional cases de novo without deference to the district courts. Today’s decisions have rejected all these principles. In doing so, the two decisions continue the Supreme Court’s series of cases overturning Federal Circuit principles in patent cases that may be viewed as at odds with principles applied in analogous circumstances in non-patent cases. These decisions also undoubtedly will compel litigants to re-consider their exposure to fee awards and how to approach requests for fee awards.

In Octane Fitness LLC v. Icon Health & Fitness Inc., case number 12-1184, the Court overruled Federal Circuit precedent that “[a] case may be deemed exceptional” under §285 only in two limited circumstances: “when there has been some material inappropriate conduct,” or when the litigation is both “brought in subjective bad faith” and “objectively baseless.” Brooks Furniture Mfg., Inc., v. Dutailier Int’l, Inc., 393 F. 3d 1378, 1381 (2005). The Supreme Court pointed out that, in the five decades following the adoption of §285, both before and after the creation of the Federal Circuit, the courts had applied the statute “in a discretionary manner, assessing various factors to determine whether a given case was sufficiently “exceptional” to warrant a fee award.” It found that since the Brooks Furniture case in 2005, the Federal Circuit “abandoned that holistic, equitable approach in favor of a more rigid and mechanical formulation.” Continuing its tradition of mining copyright cases for analogous principles (and mining patent cases similarly in copyright cases), the Supreme Court pointed to its decision in Fogerty v. Fantasy, Inc., 510 U.S. 517, 114 S.Ct. 1023 (1994) and to dictionary definitions of the word “exceptional,” the Supreme Court held that:

an “exceptional” case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated. District courts may determine whether a case is “exceptional” in the case-by-case exercise of their discretion, considering the totality of the circumstances. As in the comparable context of the Copyright Act, “[t]here is no precise rule or formula for making these determinations,’ but instead equitable discretion should be exercised ‘in light of the considerations we have identified.” (quoting Fogerty).

The Supreme Court also rejected the “clear and convincing” evidentiary hurdle established by the Federal Circuit to recovering fees under §285. In doing so, the Court stated:

We have not interpreted comparable fee-shifting statutes to require proof of entitlement to fees by clear and convincing evidence.…And nothing in § 285 justifies such a high standard of proof. Section 285 demands a simple discretionary inquiry; it imposes no specific evidentiary burden, much less such a high one. Indeed, patent-infringement litigation has always been governed by a preponderance of the evidence standard….

In the companion case of Highmark Inc. v. Allcare Health Management Systems Inc., case number 12-1163, the Court also dealt with attorney fees under 35 U.S.C. §285. Again, the Court rejected Federal Circuit precedent and held that decisions to award attorneys’ fees are not reviewed de novo by the Federal Circuit. In doing so, the Court stated “that an appellate court should apply an abuse-of-discretion standard in reviewing all aspects of a district court’s §285 determination.” Here again, the Supreme Court pointed to principles that other non-patent cases had applied in similar situations:

Traditionally, decisions on “questions of law” are “reviewable de novo,” decisions on “questions of fact” are “reviewable for clear error,” and decisions on “matters of discretion” are “reviewable for abuse of discretion.” Pierce v. Underwood, 487 U.S. 552, 558, 108 S.Ct. 2541, 101 L.Ed.2d 490 (1988). For reasons we explain inOctane, the determination whether a case is “exceptional” under § 285 is a matter of discretion. And as in our prior cases involving similar determinations, the exceptional-case determination is to be reviewed only for abuse of discretion…As in Pierce, the text of the statute “emphasizes the fact that the determination is for the district court,” which “suggests some deference to the district court upon appeal,”….As in Pierce, “as a matter of the sound administration of justice,” the district court “is better positioned” to decide whether a case is exceptional…because it lives with the case over a prolonged period of time. And as in Pierce, the question is “multifarious and novel,” not susceptible to “useful generalization” of the sort that de novo review provides, and “likely to profit from the experience that an abuse-of-discretion rule will permit to develop.

Over the past several years, the Supreme Court has overturned Federal Circuit precedent that applied idiosyncratic rules in patent cases when other non-patent cases dealing with similar matters have generally applied other rules. These two cases continue in the same vein, sending a clear message that patent cases are not so exceptional, at least as to common procedural matters, as to warrant special rules.

It is uncertain what impact these decisions will have on the number of patent cases being brought or on the types of patent cases brought. It is also uncertain how many more cases will be the subject of attorney fee awards. Nonetheless, today’s decisions should provide district court judges with confidence that fees awarded in the proper circumstances will be upheld on appeal.

It also remains to be seen what impact these decisions will have on legislation aimed squarely at non-practicing entities (“NPEs”) that is currently making its way through Congress. The Innovation Act, which has been passed by the House, specifically provides for fee shifting through which a court may force the losing party to pay the winning party’s attorney’s fees and/or costs. Such a change would represent a fundamental shift in the U.S. litigation principle that each side ordinarily pays its own fees and costs. Perhaps the Senate, which is debating a reduced version of the Innovation Act, will consider the Supreme Court’s decisions as sufficiently empowering the district courts to address abusive patent-litigation practices and will drop fee shifting from the Innovation Act. Click here for more information about the Innovation Act.

Article By:

Jeff C. Dodd

Gregory L. Porter

Sean S. Wooden

Of:

Andrews Kurth

Microsoft-Nokia: China’s MOFCOM Quietly Slips Into the Debate about Injunctive Relief for FRAND (Fair, Reasonable and Nondiscriminatory)-Encumbered SEPs (Standard Essential Patents)

This past November and December, the US Federal Trade Commission (“FTC”) andEuropean Commission (“EC”) cleared Microsoft Corporation’s (“Microsoft”) acquisition of the bulk of the devices and services business of Nokia Corporation of Finland (“Nokia”) without any conditions. In contrast, on April 8, 2014, the Chinese Ministry of Commerce (“MOFCOM”) approved the acquisition subject to conditions that include an intellectual property issue that is still to be resolved in the US, EU and other countries: whether holders of standard essential patents (“SEPs”) who make licensing commitments under fair, reasonable and nondiscriminatory (“FRAND”) terms should be barred from seeking injunctive relief against alleged infringers of their patents. MOFCOM’s conditional approval is not controversial for this specific transaction, but raises the question of how MOFCOM’s treatment of this issue will be interpreted in future merger reviews and whether this will affect investigations related to anticompetitive conduct.

Microsoft develops, produces, licenses, and sells computer software, such as its computer operating system and PC-based productivity software, and consumer electronics. Microsoft owns both standard essential patents (“SEPs”) and non-SEPs for Android (smartphone operating system). In general, the SEPs are important in terms of implementing certain telecommunication standards, such as 2G, 3G and 4G, in smartphones. The target, the devices and services business of Nokia, includes a design team and business units for devices such as mobile phones and smart devices, production facilities, related sales and marketing activities and support functions, as well as design rights related to the devices produced by the devices and services business. Excluded from this acquisition are Nokia’s reserves of SEPs related to telecom and smartphones (the MOFCOM decision does not specify what these SEPs are for).

MOFCOM determined that Microsoft’s acquisition of Nokia’s design and services business had the effect of eliminating or restricting competition in China’s smartphone market both in terms of what Microsoft could do as a result of the acquisition and in terms of what Nokia could do with the assets that were not part of the acquisition. MOFCOM conditioned its approval of the acquisition on Microsoft’s and Nokia’s compliance with the following conditions (an unofficial translation of the MOFCOM decision can be found here).

MICROSOFT must:

1. (a) With regard to SEPs, continue to adhere to the existing FRAND terms of the standard setting organizations (SSOs).

(b) Refrain from seeking injunctions for infringement of such SEPs against smartphones produced by Chinese producers.

(c) Refrain from demanding cross-licenses when licensing such SEPs except for any patents that the licensees have in the same industry.

(d) Only transfer such SEPs to a third party who agrees to comply with the above limitations. Any potential licensee with Microsoft-related SEPs should also be bound by the same principles.

2. (a) With regard to non-SEPs, continue to offer, at consistent or discounted rates, non-exclusive licenses of its non-SEPs to domestic Chinese smartphone producers

(b) For the next five years, not transfer its SEPs listed in attachment 1 or 2 (Attachment 1 lists Microsoft patents that were reviewed by MOFCOM, Attachment 2 lists Microsoft patents related to Android) to other parties. After this five-year period, Microsoft will transfer these SEPs only to those who agree to be bound by conditions imposed on Microsoft.

MOFCOM is entitled to inspect Microsoft’s compliance with the above conditions and Microsoft is obligated to report its compliance 45 days after the end of each calendar year.

NOKIA must:

Make sure its commitments to license its SEPs continue to comply with the existing FRAND terms of the SSOs.
Refrain from seeking injunctive relief against licensees of SEPs that are subject to FRAND except in the case where a licensee has breached the FRAND terms.
Agree to define licensor or licensee “good faith” as a matter of each party’s willingness to resolve FRAND terms-related disputes through arbitration and to be bound by the arbitration decision.
Agree that licensees are not obligated to accept any license not complying with FRAND terms by Nokia.
Transfer SEPs only to those who agree to be bound by the FRAND terms applicable to those SEPs.
Not change its valuation standards for FRAND licenses.

MOFCOM is entitled to inspect Nokia’s compliance with the above conditions and Nokia is obligated to report its compliance 45 days after the end of each calendar year.

Neither the FTC nor the EC speculated on the likely post-merger licensing conduct of the merged entity or the portion of Nokia that was excluded from the acquisition with respect to SEPs and non-SEPs. The EC noted that concerns related to the licensing of Nokia’s patent portfolio that was not part of the acquisition were beyond the scope of its review, but that it will monitor Nokia’s post-merger licensing practices.

MOFCOM, in contrast, without providing any basis for its conclusion other than speculation on the companies’ motives, stated that:

(a) Microsoft “could” exclude and impede competition in China’s smartphone market based on its patents for Android: “Microsoft has the motive to raise royalty fees”—MOFCOM provides no basis for this conclusion other than the observation that, before the acquisition, Microsoft was not a player in the smartphone market. Now, with the SEPs and non-SEPs related to the Android system, it has the potential for excluding and restricting competition in the smartphone market because the Android smartphone has an 80% share of the China market.

(b) Nokia “could abuse its reserve of patent licenses” (“the acquisition enhances Nokia’s motive to rely on profits from patent licensing”)—MOFCOM provides no basis for this conclusion. MOFCOM states: “As Nokia will basically exit from downstream market of devices and services, Nokia will not have to obtain cross-licenses for its smartphone business after the acquisition, so its motivation to maintain a low level royalty fee in the smartphone industry will go down. Such lack of need will enhance Nokia’s motive to rely on profits from patent licensing.”

As in the Google-Motorola deal in 2012, this time both the FTC and the EC took a “wait and see” approach: they will continue to monitor Microsoft’s and Nokia’s post-merger conduct. MOFCOM took its analysis a step further. MOFCOM wanted in black and white Microsoft’s and Nokia’s confirmations of what they are obligated to do under the FRAND terms of the standard setting organizations. MOFCOM also wanted Microsoft to confirm that it would not seek an injunction against Chinese companies; such policy is actually already in Microsoft’s website statement of February 8, 2012, where, in reference to essential patents that are offered under FRAND terms, Microsoft announced that it would not seek an injunction against any firm on the basis of a SEP.

MOFCOM, without any discussion but merely by imposing a condition that the SEP holders, Microsoft and Nokia are barred from seeking injunctive relief against alleged patent infringers, has opened the door for debate in China. The issue of whether a FRAND commitment precludes a patent owner from seeking injunctive relief is still being debated in the US, EU and other jurisdictions. In July, 2013, the FTC lifted the ban against injunctions for FRAND patents in the Google-Motorola Mobility case. In August, 2013, the US Trade Representative wrote a letter to the US International Trade Commission (“ITC”) stating that it opposed the injunction order of the ITC but included in a footnote when injunctions would be appropriate, including but not limited to when the “putative licensee is unable or refuses to take a FRAND license and is acting outside the scope of the patent holder’s commitment to license on FRAND terms…if a putative licensee is not subject to the jurisdiction of a court that could award damage.” The bottom line was that public interest considerations must be part of the determination whether or not to grant injunctive relief. The EC’s stance is reflected in the Google/Motorola merger review decision of February, 2012—that competition may be threatened if SEP holders threaten injunctive relief.

MOFCOM’s approach may well have been influenced by Chinese domestic competitors raising concerns about the merger; in the media it has been reported that ZTE and Huawei, among others, raised concerns. Of course, this is part of the merger review process, so it is not unusual for competitors to influence proceedings, but one must not forget that MOFCOM appears to wear two hats: supporting China’s industrial policy and antitrust enforcer. Furthermore, perhaps MOFCOM required these confirmations because it would be more difficult for the enforcement agencies, the National Development and Reform Commission (“NDRC”) and the State Administration of Industry and Commerce (“SAIC”), to monitor the companies’ actions in the future.

The relevance of this decision is the following:

MOFCOM applies the antitrust laws as a regulator: rather than waiting to see how the parties behave, it micro-manages their conduct (Microsoft and Nokia are already bound by FRAND terms that can include voluntary limitations on seeking injunctive relief).
How will SAIC use the condition regarding the ban on injunctive relief in abuse of dominance investigations? Will the condition imposed by MOFCOM be interpreted as the definitive government position even though MOFCOM did not address this issue in its analysis? If so, then there is the potential that a holder of an SEP may be accused of violating Chinese antitrust law if it seeks injunctive relief against an alleged infringer because it is allegedly abusing its dominant position (assuming that this holder is found to have a dominant position in the relevant market).
Will SAIC include a ban on injunctive relief related to FRAND-encumbered SEPs in its final rules concerning intellectual property rights and the enforcement of Chinese antitrust law?
It may be prudent for holders of SEPs to review their FRAND commitments.
Potential patent infringers might want to check if there are FRAND commitments that would protect them.

This acquisition shows once more that for offshore acquisitions, which have been cleared by other jurisdictions, Chinese antitrust clearance is not to be taken for granted. This time China has quietly stepped into the debate over injunctive relief for FRAND-encumbered SEPs.

Article By:

Yasue (Becky) Nao Koblitz

Of:

Sheppard, Mullin, Richter & Hampton LLP

Only one week until the Trademark Infringement & Litigation Summit – April 28-29, San Francisco

The National Law Review is pleased to bring you information about the upcoming Trademark Infringement & Litigation Summit hosted by IQPC.

When

Monday April 28 & Tuesday April 29, 2014

Where

San Francisco, California, USA

Trademark law may not be changing, but its application certainly has and will continue to do so. Brands are increasingly global, which opens up new possibilities for companies… but also new trademark issues and potential pitfalls. The online experience adds to this global focus and changes the interaction between brands and consumers dramatically.

IQPC’s Trademark Infringement & Litigation Summit will address the topics that you grapple with on a daily basis, including:

How business and infringement concerns guide strategic registration and vigilance
Methods of enforcing your mark, including a “soft approach,” ICANN dispute resolution, cancellation and opposition
Litigation and enforcement management
Evolving company domain name strategy

Perhaps the biggest benefit of attending, however, is the practical, frank conversation about the legal and business choices involved in protecting and maintaining your brand. Attend the Trademark Infringement & Litigation Summit to work through these issues with your colleagues.

Do not miss your opportunity to network and engage with top in-house and outside counsel working in the area. Register today!

NOTE: IQPC plans on making CLE credits available for the state of California (number of credits pending). In addition, IQPC processes requests for CLE Credits in other states, subject to the rules, regulations and restrictions dictated by each individual state. For any questions pertaining to CLE Credits please contact: amanda.nasner@iqpc.com.

PTO Litigation Center Report – April 11, 2014

Listed below are all new filings before PTAB of requests for inter partes review (IPR) and covered business methods review (CBM). Also listed are any newly-posted requests for ex parte reexamination at the USPTO. This listing is current as of 9:45 AM on Friday, April 11, 2014.

New IPR Requests

Trial Number – IPR2014-00604
Filing Date – 4/10/2014
Patent # – 6,896,775
Title – HIGH-POWER PULSED MAGNETICALLY ENHANCED PLASMA PROCESSING
Assignee – ZOND, INC.
Petitioner – THE GILLETTE COMPANY
Status – Pending
Tech Center – 1700

Trial Number – IPR2014-00605
Filing Date – 4/10/2014
Patent # – 7,348,723
Title – EMISSION DEVICE, SURFACE LIGHT SOURCE DEVICE, DISPLAY AND LIGHT FLUX CONTROL MEMBER
Assignee – ENPLAS CORPORATION
Petitioner – Seoul Semiconductor Co., Ltd.
Status – Pending
Tech Center – 2800

Trial Number – IPR2014-00606
Filing Date – 4/10/2014
Patent # – 6,833,404
Title – HOT MELTS UTILIZING A HIGH GLASS TRANSITION TEMPERATURE SUBSTANTIALLY ALIPHATIC TACKIFYING RESIN
Assignee – H.B. FULLER COMPANY
Petitioner – HENKEL CORPORATION
Status – Pending
Tech Center – 1700

Trial Number – IPR2014-00607
Filing Date – 4/10/2014
Patent # – 7,870,249
Title – NETWORKED SYSTEM FOR INTERACTIVE COMMUNICATION AND REMOTE MONITORING OF INDIVIDUALS
Assignee – ROBERT BOSCH HEALTHCARE SYSTEMS, INC.
Petitioner – Medtronic, Inc.
Status – Pending
Tech Center – 2400

Trial Number – IPR2014-00610
Filing Date – 4/10/2014
Patent # – 7,490,151
Title – ESTABLISHMENT OF A SECURE COMMUNICATION LINK BASED ON A DOMAIN NAME SERVICE (DNS) REQUEST
Assignee – VIRNETX INC.
Petitioner – Microsoft Corporation
Status – Pending
Tech Center – 2100

New CBM Review Requests

Trial Number – CBM2014-00115
Filing Date – 4/10/2014
Patent # – 7,970,674
Title – AUTOMATICALLY DETERMINING A CURRENT VALUE FOR A REAL ESTATE PROPERTY, SUCH AS A HOME, THAT IS TAILORED TO INPUT FROM A HUMAN USER, SUCH AS ITS OWNER
Assignee – ZILLOW, INC.
Petitioner – TRULIA, INC.
Status – Pending
Tech Center – 3600

Newly-Posted Reexam Requests

Control # – 90/013,207
Date – 4/10/2014
Patent # – 7,489,423
Inventor – Nachman, Marvin J. et al.
Assignee – INFINITY COMPUTER PRODUCTS, INC.
Title – INTERFACE CIRCUIT FOR UTILIZING A FACSIMILE MACHINE COUPLED TO A PC AS A SCANNER OR PRINTER
Co-pending Litigation – Infinity Computer Products, Inc. v. Toshiba America Business Solutions, Inc., No. 2:12-cv-06796-LDD (E.D. Pa.) and 11 other litigations.

Control # – 90/013,208
Date – 4/10/2014
Patent # – 6,894,811
Inventor – Nachman, Bruce G. et al.
Assignee – INFINITY COMPUTER PRODUCTS, INC.
Title – INTERFACE CIRCUIT FOR UTILIZING A FACSIMILE COUPLED TO A PC AS A SCANNER OR PRINTER
Co-pending Litigation – Infinity Computer Products, Inc. v. Toshiba America Business Solutions, Inc., No. 2:12-cv-06796-LDD (E.D. Pa.) and 11 other litigations.

Control # – 90/013,209
Date – 4/10/2014
Patent # – 8,040,574
Inventor – Nachman, Bruce G. et al.
Assignee – INFINITY COMPUTER PRODUCTS, INC.
Title – INTERFACE CIRCUIT FOR UTILIZING A FACSIMILE MACHINE TO A PC AS A SCANNER OR PRINTER
Co-pending Litigation – Infinity Computer Products, Inc. v. Toshiba America Business Solutions, Inc., No. 2:12-cv-06796-LDD (E.D. Pa.) and 11 other litigations.

Control # – 90/013,210
Date – 4/10/2014
Patent # – 8,294,915
Inventor – Nachman, Bruce G. et al.
Assignee – INFINITY COMPUTER PRODUCTS, INC.
Title – INTERFACE CIRCUIT FOR UTILIZING A FACSIMILE MACHINE COUPLED TO A PC AS A SCANNER OR PRINTER
Co-pending Litigation – Infinity Computer Products, Inc. v. Toshiba America Business Solutions, Inc., No. 2:12-cv-06796-LDD (E.D. Pa.) and 11 other litigations.

Article By:

PTO Litigation Center

Of:

Sterne, Kessler, Goldstein & Fox P.L.L.C.

Category: Intellectual Property

Apple Inc. v. Rensselaer Polytechnic Institute and Dynamic Advances, LLC, Decision Denying Institution

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