Amster Rothstein & Ebenstein, LLP - Intellectual Property Law

In The Press:
Amster, Rothstein & Ebenstein LLP is pleased to announced that partners Daniel Ebenstein, Anthony F. Lo Cicero and Charles R. Macedo have been named IP Stars by Managing IP for 2013

Wed, 15 May 2013 00:00:00 -0500

Click here to view the listing in the Managing Intellectual Property IP Handbook.

ARE Patent Law Alert:
Unanimous U.S. Supreme Court Decision on Patent Exhaustion Upholds Patentee’s Rights in Case Regarding Patented Self-Replicating Technologies

Wed, 15 May 2013 00:00:00 -0500

On May 13, 2013, the Supreme Court of the United States issued a unanimous decision in Bowman v. Monsanto Co., No. 11-796, holding that the doctrine of patent exhaustion does not permit a farmer to reproduce patented seeds by planting and harvesting them without the patent holder’s permission. The Court, in an opinion written by Justice Kagan, upheld a lower court award of damages to Monsanto in the first Supreme Court ruling concerning the proper application of the patent exhaustion doctrine to self-replicating technologies. Although the ruling was expressly limited to the factual situation before the Court, the opinion suggests the Court might rule similarly in other cases where the patented item’s self-replication is within the purchaser’s control.

Factual Background

This case specifically concerns Monsanto’s Roundup Ready soybean seeds, which are genetically engineered to be resistant to its Roundup brand of herbicide. Monsanto sells the seeds subject to a licensing agreement that permits farmers to plant the purchased seeds only once. However, rather than buy seeds directly from Monsanto each time he planted a crop, Indiana farmer Vernon Bowman replanted seeds harvested from previous crops of Monsanto Roundup Ready seeds. These seeds retained their genetically-engineered herbicide resistance. When Monsanto sued Bowman for patent infringement, Bowman raised the defense of patent exhaustion.

The Exhaustion Doctrine

Patent exhaustion gives a purchaser or subsequent owner of a patented item the right to use or resell that item without having to pay the patentee anything more for that right. In other words, the initial authorized sale of a patented item terminates all patent rights in that item. Bowman raised the broader question of how to apply the doctrine of patent exhaustion when the patented item is self-replicating. Here, the patented seeds that grow into plants that generate more patented seeds.

Analysis

A unanimous Supreme Court held that the patent exhaustion doctrine applies only to the particular item sold, here, the first crop. By replanting Monsanto’s patented seeds, Bowman “made” additional copies of Monsanto’s patented invention, i.e., the subsequent crops. The Patent Law provides that “making” a patented invention is an act of infringement. Here, the new seeds that are made as a result of Bowman’s acts are the new act of infringement. Moreover, the Court held, these second-generation replicated copies of Monsanto’s seeds themselves were never sold to Bowman, and thus fell outside the doctrine of patent exhaustion.

Bowman is remarkable for the brevity and clarity with which these potentially complex issues were analyzed. Although the decision is limited to the facts of the case, it suggests that the doctrine of patent exhaustion does not allow consumers the right to make new patented products even when the product lends itself to replication, so long as the product’s self-replication is within the consumer’s control. This ruling will therefore be studied not just by manufacturers of genetically modified seeds, but also by creators of vaccines, medical research products and other self-replicating technologies who may wish to retain the ability to restrict a consumer’s use of their patented products even after they have been sold.

We will continue to monitor and report on patent exhaustion cases, and encourage you to review the publications and events page of our firm website for more information. Also, please feel free to contact one of our firm’s attorneys to learn more.

*Charles R. Macedo is the author of The Corporate Insider’s Guide to U.S. Patent Practice, published by Oxford University Press in 2009, and is a Partner at Amster, Rothstein & Ebenstein LLP. David P. Goldberg is an Associate at Amster, Rothstein & Ebenstein LLP. Their practice specializes in intellectual property issues including litigating patent, trademark and other intellectual property disputes. They may be reached at cmacedo@arelaw.com and dgoldberg@arelaw.com.

CLS Bank Ruling Provides No Guidance On Patent Eligibility

Mon, 13 May 2013 00:00:00 -0500

Law360, New York (May 13, 2013, 11:50 AM ET) On May 10, 2013, the U.S. Court of Appeals for the Federal Circuit released its highly anticipated decision in CLS Bank International v. Alice Corp. Pty. Ltd., No. 2011-1301 (Fed. Cir. May 10, 2013) (“CLS III”), concerning the patent eligibility of computer implemented claims under 35 U.S.C. § 101. Although the court, considering the case en banc, did agree that the computer implemented claims-at-issue were not patent-eligible, the court’s rationale, presented in six separate opinion with additional reflections by Chief Judge Randall Rader, was divided. Unfortunately, this decision provides patent practitioners with no definitive guidance as to how to apply a Section 101 analysis to computer implemented claims.

Procedural Background

This case relates to the method and systems claims of four patents owned by Alice Corporation concerning a computerized trading platform that conducts financial transactions where a trusted third party settles obligations between a first and second party so as to avoid the risk that the first or second party will fail to fulfill its financial obligations.

The case began in 2007, when CLS Bank International filed suit seeking declaratory judgment of noninfringement, invalidity and unenforceability of Alice’s patents. Alice, in its turn, countersued CLS, alleging infringement. Two years later, following discovery, CLS filed a motion for summary judgment arguing that it could not possibly infringe Alice’s patents since those patents were not patent-eligible under 35 U.S.C. § 101. The U.S. District Court for the District of Columbia granted CLS’ motion in 2011, finding that Alice’s patent claims-at-issue were “directed to an abstract idea of employing an intermediary to facilitate simultaneous exchange of obligations in order to minimize risk.” CLS Bank Int’l v. Alice Corp. Pty. Ltd., 768 F. Supp. 2d 221, 243 (D.D.C. 2011) (“CLS I”).

Alice appealed to the U.S. Court of Appeals for the Federal Circuit. On July 9, 2012, a split panel of the Federal Circuit reversed the district court’s decision holding these claims to be patent-ineligible and held that the claims at issue covered patent-eligible subject matter. The majority decision, written by Judge Richard Linn and joined by Judge Kathleen O’Malley, found that the claims were not drawn to mere “abstract ideas” but rather were directed to “practical applications of invention.” CLS Bank Int’l v. Alice Corp. Pty. Ltd., 685 F.3d 1341, 1343 (Fed. Cir. 2012) (“CLS II”). Judge Sharon Prost, however, authored a vigorous dissent claiming “precedent and common sense counsel that the asserted patent claims are abstract ideas repackaged as methods and systems.” Id. at 1356.

On Oct. 9, 2012, the Federal Circuit granted CLS’s petition for rehearing the case en banc, and vacated the July 9, 2012 panel opinion. In its en banc order, the Federal Circuit asked the parties to file new briefs addressing the following two questions:

a. What test should the court adopt to determine whether a computer-implemented invention is a patent ineligible “abstract idea”; and when, if ever, does the presence of a computer in a claim lend patent eligibility to an otherwise patent-ineligible idea?

b. In assessing patent eligibility under 35 U.S.C. § 101 of a computer-implemented invention, should it matter whether the invention is claimed as a method, system, or storage medium; and should such claims at times be considered equivalent for § 101 purposes?

CLS Bank Int’l v. Alice Corp. Pty. Ltd., 484 F. App’x 559, 559-60 (Fed. Cir. 2012) (per curiam).

The current decision represents the Federal Circuit’s failed attempt to address these issues in a conclusive manner. See CLS III, Newman Concurrence-in-Part at 2.

The Current Decisions

In a per curiam opinion, the Federal Circuit found that Alice’s claims were not patent eligible under 35 U.S.C. § 101. However, the reasoning behind that decision is spelled out in five other separate opinions as well as in additional reflections by Chief Judge Rader.

The Lourie Concurrence

Judge Alan Lourie filed the primary concurring opinion, in which Judges Timothy Dyk, Prost, Jimmie Reyna and Evan Wallach joined. After a review of key Section 101 precedents since Gottschalk v. Benson, 409 U.S. 63 (1972), the opinion lays out “An Integrated Approach to § 101.” CLS III, Lourie Concurrence at 15-23. This approach involves the familiar steps of first determining whether the claimed invention fits within one of the four statutory classes set out in Section 101 (i.e., processes, machines, manufactures and compositions of matter) and then, if so, determining whether the claimed invention is directed to one of the three judicial exceptions to patent-eligible subject matter (i.e., laws of nature, natural phenomena or abstract ideas). Id. at 18.

If a claim potentially falls within an exception by, for example, claiming an abstract idea, then that idea would need to be “unambiguously identified” for analysis to proceed further. Id. “With the pertinent abstract idea identified,” the opinion continues, “the balance of the claim can be evaluated to determine whether it contains additional substantive limitations [i.e., inventive concepts] that narrow, confine, or otherwise tie down the claim so that, in practical terms, it does not cover the full abstract idea itself.” Id. at 18-19. So long as the claim does not cover the full idea, it is patent-eligible.

Applying this analytical plan, the opinion determines that the abstract idea at issue is “reducing settlement risk by facilitating a trade through third-party intermediation” and that “[n]one of th[e] limitations adds anything of substance to the claim.” Id. at 25-26. Because there was nothing added to this abstract idea, he then concluded that all the claims — whether directed to computer implemented methods, computer media or computer systems — were not patent-eligible.

The Rader Concurrence-in-Part, Moore Dissent-in-Part and Linn Dissent

Chief Judge Rader and Judges Linn, Moore and O’Malley wrote an opinion concurring-in-part and dissenting-in-part, finding Alice’s systems claim to be patent-eligible. Their analysis, as opposed to the analysis laid out in Judge Lourie’s opinion, starts from the premise that any requirement for “inventiveness” beyond Sections 102 and 103 is inconsistent with the Patent Act, notes that claims must be analyzed as a whole with courts considering the actual language of the claim, and concludes that a “court cannot go hunting for abstractions by ignoring the concrete, palpable, tangible limitations of the invention the patentee actually claims.” CLS III, Rader Concurrence-in-Part and Dissent-in-Part at 13.

Accordingly, the key to the inquiry into Alice’s claims is “whether the claims tie the otherwise abstract idea to a specific way of doing something with a computer, or a specific computer for doing something: if so, they likely will be patent eligible, unlike claims directed to nothing more than the idea of doing that thing on a computer. While no particular type of limitation is necessary, meaningful limitations may include the computer being part of the solution, being integral to the performance of the method, or containing an improvement in computer technology.” Id. at 21.

An analysis of Alice’s system claim, they opine, reveals that “the claimed data processing system is limited to an implementation of the invention that includes at least four separate structural components” and that “at least thirty-two figures . . . provide detailed algorithms for the software with which this hardware is to be programmed.” Id. at 31. Moreover, “someone can use an escrow arrangement in many other applications, without computer systems, and even with computers but in other ways without infringing the claims.” Id. at 35. Finally, “these limitations are not stated at a high level of generality.” Id. at 37. They therefore conclude that the “‘abstract idea’ present here is not disembodied at all, but is instead integrated into a system utilizing machines,” and would find Alice’s systems claim patent-eligible. Id. at 38. (Judge Moore reiterated this conclusion in a separate dissent-in-part. CLS III, Moore Dissent-in-Part at 1-3.)

On the other hand, Chief Judge Rader and Judge Moore find that while Alice’s method claims “do not simply state ‘use an escrow,’” they “add nothing beyond the well-known procedures used in the concept of an escrow.” Id. at 40-41. Therefore, they join the majority in finding the method claims to be patent-ineligible under Section 101.

Judges Linn and O’Malley, who wrote a separate dissent on this point, find that the record reflects that Alice’s method claims must be computer implemented by using specified “shadow credit records” and “shadow debit records.” Therefore, the specific functionality found by Chief Judge Rader and Judges Linn, Moore and O’Malley regarding the systems claims applies just as much to the method claims that must utilize that computer implementation. CLS III, Linn Dissent at 7-8. Stating that “all asserted claims must rise or fall together, because they all contain the same computer-based limitations,” Judges Linn and O’Malley would find all of the Alice claims patent-eligible. Id. at 10-11.

The Newman Concurrence-in-Part

Disappointed at the court’s impasse, Judge Pauline Newman wrote a separate opinion concurring-in-part and dissenting-in-part to clarify “a misunderstanding of patent policy” that is the root of the problem. CLS III, Newman Concurrence-in-Part at 3. The debate regarding the application of judicial exceptions to patent-eligible subject matter under Section 101 reflects the anxiety that overbroad patents will preclude scientific inquiry and technological innovation. “Judicial clarification,” the opinion explains, “is urgently needed to restore the understanding that patented knowledge is not barred from investigation and research.” Id.

Criticizing the narrowing of the experimental use defense, the opinion finds that if there were “clarification of the right to experiment with the information disclosed in patents, it would no longer be necessary to resort to the gambit of treating such information as an ‘abstraction’ in order to liberate the subject matter for experimentation.” Id. at 5-10. Judge Newman then proposes abandoning all judicial exceptions to patent-eligible subject matter. Id. at 11-13. Accordingly, because Alice’s claims all fit within the four statutory classes set out in Section 101, Judge Newman would find them all patent-eligible. Id. at 14.

Practical Significance

This decision spotlights the Federal Circuit’s serious divisions on Section 101 analysis. In the face of these divisions, decisions by Federal Circuit panels as to patent eligibility of specific claims under 35 U.S.C. § 101 will continue to be inconsistent. That the Federal Circuit is unable to resolve these issues, which are of great importance to our country’s business community and computer industry, suggests that the U.S. Supreme Court will need to weigh in on these issues in the near future.

--By Charles R. Macedo and David P. Goldberg, Amster Rothstein & Ebenstein LLP

Charles Macedo is the author of "The Corporate Insider’s Guide to U.S. Patent Practice," published by Oxford University Press in 2009, and is a partner at Amster Rothstein & Ebenstein in New York. David Goldberg is an associate at the firm.

Macedo was principal counsel on the amicus brief submitted by the New York Intellectual Property Law Association, along with partners Anthony F. Lo Cicero and Michael J. Kasdan from Amster Rothstein & Ebenstein.

The opinions expressed are those of the authors and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

ARE Patent Law Alert:
Federal Circuit Splits on Section 101 Analysis and Finds Computer Implemented Claims to be Patent-Ineligible

Sat, 11 May 2013 00:00:00 -0500

On May 10, 2013, the U.S. Court of Appeals for the Federal Circuit released its highly anticipated decision in CLS Bank International v. Alice Corp. Pty. Ltd., No. 2011-1301 (“CLS III”), concerning the patent eligibility of computer implemented claims under 35 U.S.C. § 101. Although the court, considering the case en banc, did agree that the computer implemented claims-at-issue were not patent-eligible, the court’s rationale, presented in six separate opinion with additional reflections by Chief Judge Rader, was divided. Unfortunately, this decision provides patent practitioners with no definitive guidance as to how to apply a Section 101 analysis to computer implemented claims.

This case relates to the method and systems claims of four patents owned by Alice Corporation concerning a computerized trading platform. In 2007, CLS Bank International filed suit seeking declaratory judgment of non-infringement, invalidity and unenforceability of Alice’s patents. Alice, in its turn, countersued CLS. Four years later, the U.S. District Court for the District of Columbia granted CLS’s motion for summary judgment, finding the claims-at-issue patent-ineligible under Section 101. 768 F. Supp. 2d 221.

Alice appealed to the U.S. Court of Appeals for the Federal Circuit, where a split judicial panel reversed the District Court decision. 685 F.3d 1341. However, shortly thereafter, the Federal Circuit granted CLS’s petition for rehearing the case en banc, and vacated the July 9, 2012 panel decision. 484 F. App’x 559.

In the current per curiam opinion, the Federal Circuit found that Alice’s claims were not patent eligible under Section 101. However, the reasoning behind that decision is spelled out in five other separate opinions, as well as in additional reflections by Chief Judge Rader.

Judges Lourie, Dyk, Prost, Reyna and Wallach opined that in cases where a claim is potentially directed to one of the three judicial exceptions to patent-eligible subject matter (i.e., laws of nature, natural phenomena or abstract ideas), courts should proceed by first clarifying the specific nature of the exception at issue (e.g., the abstract idea of escrow) and then evaluating the claim “to determine whether it contains additional substantive limitations that narrow, confine, or otherwise tie down the claim so that, in practical terms, it does not cover the full abstract idea itself.” So long as the claim does not cover the full idea, it is patent-eligible. Applying this analytical scheme, these judges determined that all the Alice claims-at-issue—whether directed to computer implemented methods, computer media or computer systems—were not patent-eligible.

Chief Judge Rader and Judges Linn, Moore and O’Malley wrote an opinion criticizing this manner of proceeding as being inconsistent with the Patent Act. “A court cannot go hunting for abstractions by ignoring the concrete, palpable, tangible limitations of the invention the patentee actually claims.” Accordingly, the key question should be “whether the claims tie the otherwise abstract idea to a specific way of doing something with a computer, or a specific computer for doing something: if so, they likely will be patent eligible.” Because Alice’s system claim “is limited to an implementation of the invention that includes at least four separate structural components” running “detailed algorithms,” they conclude that the “‘abstract idea’ present here is not disembodied at all, but is instead integrated into a system utilizing machines,” and find Alice’s systems claim patent-eligible.

Judges Linn and O’Malley go even further. Stating that “all asserted claims must rise or fall together, because they all contain the same computer-based limitations,” they find all of the Alice claims patent-eligible.

Disappointed at the court’s impasse, Judge Newman explained separately that the debate on Section 101 reflects the anxiety that overbroad patents will preclude scientific inquiry and technological innovation. If there were “clarification of the right to experiment with the information disclosed in patents, it would no longer be necessary to resort to the gambit of treating such information as an ‘abstraction’ in order to liberate the subject matter for experimentation.” Accordingly, Judge Newman proposes abandoning all judicial exceptions to patent-eligible subject matter, and determines all of Alice’s claims to be patent-eligible.

This decision spotlights the Federal Circuit’s serious divisions on Section 101 analysis. In the face of these divisions, decisions by Federal Circuit panels as to patent-eligibility of specific claims under 35 U.S.C. § 101 will continue to be inconsistent. That the Federal Circuit is unable to resolve these issues, which are of great importance to our country’s business community and computer industry, suggests that the U.S. Supreme Court will need to weigh in on them in the near future.

We will continue to monitor and report on Section 101 cases, and encourage you to review the publications page of our firm website (www.arelaw.com) for more information. Please also feel free to contact one of our firm’s attorneys to learn more.

*Charles R. Macedo is the author of The Corporate Insider’s Guide to U.S. Patent Practice, published by Oxford University Press in 2009, and is a Partner at Amster, Rothstein & Ebenstein LLP. He was principal counsel on the Amicus Brief submitted by the New York Intellectual Property Law Association, along with partners Anthony F. Lo Cicero and Michael J. Kasdan from the firm. David P. Goldberg is an Associate at Amster, Rothstein & Ebenstein LLP. Their practice specializes in intellectual property issues, including litigating patent, trademark and other intellectual property disputes. They may be reached at cmacedo@arelaw.com and dgoldberg@arelaw.com.

ESI (Electronically Stored Information) Discovery Guidelines

Fri, 19 Apr 2013 00:00:00 -0500

Click here to read the article.

Intellectual property for startups

Fri, 12 Apr 2013 00:00:00 -0500

The early stages of a new business can be a whirlwind. Building the team, structuring the company, attracting investment and developing the product, key partnerships, sales channels and marketing plans are typically all-consuming tasks for the founders. Amid all this essential activity, intellectual property (IP) sometimes takes a back seat.

Three relevant types of intellectual property that startups should understand are:

Patents
Trademarks
Copyrights

Click here to read the article at Ernst & Young.

US jury properly relied upon second considerations of non-obviousness to overcome prima facie obviousness

Thu, 04 Apr 2013 00:00:00 -0500

Transocean Offshore Deepwater Drilling, Inc v Maersk Drilling USA, Inc, No 2011-1555, 2012 US App LEXIS 23486 (Fed Cir 15 November 2012) (‘Transocean IV’)

Abstract

The US Court of Appeals for the Federal Circuit in addressing the role of secondary considerations of non-obviousness and the weight to be accorded to them found no error in the jury's reliance on overwhelming evidence of secondary considerations of non-obviousness to conclude that a prima facie case of obviousness was overcome, thus saving the patent claim from invalidation.

Legal context

One of the most difficult questions in patent law is determining whether a patent claim is obvious. The extended saga in Transocean Offshore Deepwater Drilling, Inc v Maersk Drilling USA, Inc demonstrates just how difficult this determination can be. For the second time in the Transocean lawsuit, the US Court of Appeals for the Federal Circuit has addressed the role of secondary considerations of non-obviousness and the weight to be accorded to them. This time, the court found no error in the jury's reliance on overwhelming evidence of secondary considerations of non-obviousness to conclude that a prima facie case of obviousness was overcome, thus saving the patent claim from invalidation.

Facts

The Transocean patents relate to offshore drilling techniques. In particular, the process of seafloor drilling requires that a drill be lowered to the seafloor, along with casings to line the wall of the drilled hole and a blowout preventer, which, among other things, functions as a fail-safe device to prevent the ejection of fluid from the well. These components are lowered on a series of pipe sections known as a drill string, which must be assembled and disassembled to lower each component. Conventional rigs use a single advancing station for handling the drill string such that only one component is lowered at a time. The Transocean patents disclose a ‘dual-activity’ drilling rig having a single derrick with two advancing stations that enable faster lowering of components to the seafloor. Each of the two stations can assemble drill strings, improving efficiency, and drill strings can be transferred between the two stations.

In the initial proceedings, the district court relied upon two prior art references to establish a prima facie case of obviousness: Transocean Offshore Deepwater Drilling, Inc v Maersk Contrs USA Inc, No H-07-2392, 2009 US Dist LEXIS 130590, at *5–6 (SD Tex 28 July 2009) (‘Transocean I’). The first reference discloses a rig with a single derrick and two advancing stations, each of which can lower pipe sections to the seafloor. Although that reference does not teach the limitation of transferring drill strings between the two stations, this limitation is taught by the second reference. The district court found that there was a motivation to combine the teachings of the two references, as the prior art indicated an industry trend towards automation and efficiency. Based on the foregoing, the district court granted summary judgment that the claims were obvious.

On appeal, the Federal Circuit agreed that the combination of references established a prima facie case of obviousness and acknowledged that there was a motivation to combine the references, but it nonetheless found that summary judgment was inappropriate because the district court failed to consider the patentee's objective evidence of non-obviousness, stating that ‘a district court must always consider any objective evidence of non-obviousness presented in a case’. The case was remanded to the district court for further proceedings.

On remand, despite the finding of the Court of Appeals, the jury revisited the prima facie case of obviousness and found that the defendant failed to prove that the claims were obvious. The jury specifically found that the prior art did not disclose every element of the claims and that several objective factors supported the non-obviousness of the claimed invention: Transocean Offshore Deepwater Drilling, Inc v Maersk Contrs USA, Inc, No H-07-2392, 2011 US Dist LEXIS 70774, at *6 (SD Tex 30 June 2011) (‘Transocean III’); see also Transocean IV, 2012 US App. LEXIS 23486, at *5–6.

On motion from defendant Maersk, however, the district court granted Judgment as a Matter of Law (JMOL), holding that the asserted claims were obvious, not enabled, and not infringed. See Transocean IV, at *6.

Transocean again appealed to the Federal Circuit.

Analysis

In Transocean IV, the court began its analysis by noting that it was improper to present to the jury the question of whether the prior art established a prima facie case of obviousness, since the court had already decided that issue in Transocean II. However, the Federal Circuit held that the district court did not err by allowing the jury to weigh the strength of the prima facie case together with the objective indicia of non-obviousness since ‘evidence of secondary considerations may often be the most probative and cogent evidence in the record. It may often establish that an invention appearing to have been obvious in light of the prior art was not:’ ‘citing Stratoflex, Inc v Aeroquip Corp, 713 F 2d 1530, 1538 (Fed Cir 1983). The Federal Circuit therefore instructed that ‘objective evidence must be “considered as part of all the evidence”’.

The court then reviewed the record pertaining to the secondary indicia of non-obviousness to determine whether the jury's findings on secondary indicia were supported by substantial evidence. The Federal Circuit found support with respect to the indicia as follows:

Commercial success

The patentee must show both commercial success and a nexus ‘between that success and the merits of the claimed invention’, citing Iron Grip Barbell Co v USA Sports, Inc, 392 F 3d 1317, 1324 (Fed Cir 2004). Here, Transocean demonstrated that its dual-activity rig fetched a higher market premium than the single-activity rigs, as seen from contracts for each type of rig. The court found that customer demand for the dual-activity rig also supported a finding of commercial success with a nexus to the dual-activity features.
Industry praise and unexpected results

Showing industry praise, Transocean cited reports from competitors and articles in trade publications, which recognized the efficiency savings of 20–40 per cent of its dual-activity rig and hailed it as ‘critical to [the] future’. Unexpected results were demonstrated by evidence showing doubt in the industry as to whether the technology would cut costs, leading to a study, which concluded that savings in cost and efficiency could actually be greater than Transocean claimed. Unexpected results are less likely to have been obvious to a person of skill in the art.
Copying

Testimony showed that Maersk knew about the Transocean technology when building its accused rig. Transocean also identified a Maersk document that stated the need to incorporate the efficiency improvements of Transocean's dual-activity rigs. That document ties Maersk's copying to the inventive dual-activity features, thus establishing the required nexus to the claimed invention.
Industry scepticism

Testimony described how ‘industry experts and Transocean's customers were skeptical of the claimed dual-activity feature due to fears of clashing’, a situation where the two drill strings, which extend down toward the seafloor, can collide. Although other evidence indicated that there was no basis for such fears, the Federal Circuit nonetheless concluded that ‘[a] reasonable jury could accept Transocean's evidence of skepticism’. Industry scepticism over whether the claimed invention would even work properly lends support to a finding that the invention was not obvious to a person skilled in the art of drill rigs.
Licensing

Transocean provided evidence that others in the industry had licensed its technology. Maersk argued that those licences were only attributable to the threat of litigation and thus did not reflect the technology's value. Transocean countered that the licences exceeded litigation costs, which would only make sense if the technology has independent value. Transocean also showed that companies not threatened by litigation obtained licences. The Federal Circuit found this evidence sufficient for a reasonable jury to find that the licences reflect the value of the technology.
Long-felt but unsolved need

The Federal Circuit concluded that Transocean provided sufficient evidence that its dual-activity drilling satisfied a long-felt need, namely, for more efficient deepwater drilling. Failed efforts to increase efficiency by building the drill string at a separate location from the well being drilled indicated an unsolved need. Testimony about deepwater drilling since the 1970s also indicated that the need was long-felt.

In sum, Transocean IV recognized that the extensive evidence presented concerning objective indicia of non-obviousness make this case ‘precisely the sort of case where the objective evidence “establish[es] that an invention appearing to have been obvious in light of the prior art was not”’, citing Stratoflex, 713 F 2d at 1538. Accordingly, the Federal Circuit reversed the district court's grant of JMOL of obviousness, thus reinstating the jury verdict that the patents are not obvious.

Practical significance

Since the Supreme Court addressed obviousness in KSR Int'l Co v Teleflex, Inc, 550 US 398 (2007), calling for a more flexible inquiry, the Federal Circuit has noted that secondary indicia nonetheless must be considered as part of the obviousness determination. In many instances, the Federal Circuit has discounted such evidence as insufficient to overcome a prima facie case of obviousness (see eg Ball Aerosol & Specialty Container, Inc v Limited Brands, Inc, 555 F 3d 984, 994 (Fed Cir 2009); Boston Scientific Scimed, Inc v Cordis Corp, No 2008-1073, 2009 US App LEXIS 588, at *25–26 (Fed Cir 15 Jan 2009); Sundance Inc v Demonte Fabricating, Ltd, 550 F 3d 1356, 1368 (Fed Cir 2008)). The Transocean saga, however, illustrates a case where a strong evidentiary showing on secondary indicia of non-obviousness was sufficient to overcome a prima facie case of obviousness.

Footnotes

Charles Macedo and Michael J. Kasdan are partners, and Richard P. Zemsky is an associate at Amster, Rothstein & Ebenstein LLP. Their practice specializes in intellectual property issues including litigating patent, trademark and other intellectual property disputes. They may be reached at cmacedo@arelaw.com, mkasdan@arelaw.com and rzemsky@arelaw.com.

Mr. Macedo is also the author of The Corporate Insider's Guide to US Patent Practice, published by Oxford University Press in 2009.

In The Press:
Thompson Reuters Cites Partner Charles Macedo

Mon, 01 Apr 2013 00:00:00 -0500

Thompson Reuters Cites Partner Charles Macedo
New Patent Disclosure Rules Require Education And A Watchful Eye

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In The Press:
Conference Addresses Current Issues For Corporate IP Counsel

Thu, 28 Mar 2013 00:00:00 -0500

IPWatch reports on presentations by partners Charles R. Macedo and Michael J. Kasdan at the World Congress Corporate IP Counsel Forum in New York City.

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In the Press:
Why So Many Patent Filings Were Filed In The US On Or Before 15 March 2013

Wed, 27 Mar 2013 00:00:00 -0500

Why So Many Patent Filings Were Filed In The US On Or Before 15 March 2013

Attorney Charles Macedo addresses the question: Why did so many patent applicants rush to file patent applications before the America Invents Act (AIA) law changes went into effect – and what might happen if they didn’t?

Click here to read the article.

ARE Copyright Law Alert:
Supreme Court Reverses Second Circuit, Holds “First Sale” Doctrine Applies To Copies Of Copyrighted Works Made Abroad

Tue, 19 Mar 2013 00:00:00 -0500

(March 19, 2013) On March 19, 2013, the Supreme Court released an important copyright law decision in Kirtsaeng v. John Wiley & Sons, Inc., No. 11-697, 568 U.S. __ (2013) (“Kirtsaeng”), concerning the applicability of the “first sale” doctrine to copies of copyrighted works lawfully made abroad.

In a 6-3 decision authored by Justice Breyer, the Supreme Court reversed the decision of the United States Court of Appeals for the Second Circuit and held that “the ‘first sale’ doctrine applies to copies of a copyrighted work lawfully made abroad.” In other words, once a work is manufactured under the authority of the copyright owner, they lose the right to control further distribution of that authorized copy, even if the copy is manufactured outside of the United States.

In Kirtsaeng, book publisher and copyright holder John Wiley & Sons, through its foreign subsidiary, publishes and sells English-language academic textbooks abroad. Each copy of its foreign version of a textbook contains language specifying that the copy may only be sold in a specific foreign country or geographic area and may not be exported out of these countries. Kirtsaeng, a Thai citizen who was attending undergraduate and graduate school in the United States, had friends and family in Thailand purchase copies of foreign editions of English-language textbooks at lower prices than the books were sold in the United States. Kirtsaeng’s family would mail the textbooks to him and he would re-sell them in the United States for a higher price. Wiley sued Kirtsaeng for copyright infringement arguing that Kirtsaeng’s unauthorized importation of textbooks was in violation of Sections 106 and 602 of the Copyright Act.

Under Section 106 of the Copyright Act, copyright owners have the exclusive right “to distribute copies . . . of the copyrighted work to the public by sale or other transfer of ownership.” 17 U.S.C. § 106(3). However, this right is limited by Section 109 of the Copyright Act known as the “first sale” doctrine which states:

[n]otwithstanding the provisions of section 106(3), the owner of a particular copy or phonorecord lawfully made under this title . . . is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.

Thus, the “first sale” doctrine is an exception to a copyright owner’s exclusive right to distribute its work. Further, Section 602(a)(1) of the Copyright Act states that:

[i]mportation into the United States, without the authority of the owner of copyright under this title, of copies or phonorecords of a work that have been acquired outside the United States is an infringement of the exclusive right to distribute copies or phonorecords under section 106, actionable under section 501.

Ultimately, the Supreme Court had to decide whether the “lawfully made under this title” language in Section 109 geographically restricts the scope of the “first sale” doctrine especially when considering Section 602. Specifically, Justice Breyer asked “whether the ‘first sale” doctrine applies to protect a buyer or other lawful owner of a copy (of a copyrighted work) lawfully manufactured abroad. Can that buyer bring that copy into the United States (and sell it or give it away) without obtaining permission to do so from the copyright owner?” Kirtsaeng at 3.

The Supreme Court answered its question with a yes. The Court held that “lawfully made under this title” “means made ‘in accordance with’ or ‘in compliance with’ the Copyright Act” and says nothing about geography. Kirtsaeng at 8-9. The Supreme Court held that “the nongeographical reading is simple, it promotes a traditional copyright objective (combatting piracy), and it makes word-by-word linguistic sense.” Id. at 9. In reaching its decision, the Court considered the importance of the “first sale” doctrine for “book-sellers, libraries, museums, and retailers, who have long relied on its protection,” and found that placing a geographical limitation on the “first sale” doctrine would result in serious problems for such entities. Id. at 23-24.

Amicus briefs for the parties addressed various policy ramifications -- for example, supporters of the book publisher argued that the decision will cause them to avoid sales of books to foreign customers at prices they may possibly be able to afford, thus hindering the free flow of information. Opponents of the publishers argued that the ruling will harm the U.S. economy by providing an incentive for copyright owners (including brand owners with copyrighted elements to their goods) to move their manufacturing overseas, and will create risk and uncertainty for the important industries of library lending, used bookstores, and even the retail sale of admittedly authentic goods at discount.

It is expected that this decision may lead to a renewed effort for Congress to revisit these and related policy considerations. Further, while on its face the decision is limited to copyright law, it may influence determinations of the first sale doctrine as applied to patent law.

As it stands, it appears that U.S. copyright owners have lost an important tool in controlling the flow of their goods. However, under certain circumstances, other avenues remain intact, for example the right under trademark and unfair competition law to prevent the importation of certain gray market goods which are materially different from the U.S. versions. Further, other substantive laws (e.g., contract law) in the foreign jurisdiction should also be considered for those who want to prevent importation or those wanting to import copyrighted goods legally purchased abroad. Thus, one take-away is the importance of considering global sales and marketing strategies before foreign goods are manufactured and sold. Interestingly, the Supreme Court’s opinion in Kirtsaeng should effectively overrule the Ninth Circuit’s opinion in Costco Wholesale Corp. v. Omega, SA, 541 F.3d 982 (9th Cir. 2008), where the Ninth Circuit held that the “first sale” doctrine does not apply to foreign-made copies of copyrighted works unless an authorized sale had already been made in the United States. The Supreme Court had granted certiorari in Costco, but in a split 4-4 decision (Justice Kagan had recused herself) it ultimately upheld the Ninth Circuit’s ruling. Thus, the Ninth Circuit’s key holding in Costco is effectively overruled.

If you would like further information or have questions regarding this decision, please do not hesitate to contact us.

*Joseph Casino, Chester Rothstein and Michael J. Kasdan are partners and Jessica Capasso and Hajime Sakai are associates at Amster, Rothstein & Ebenstein LLP. Their practice specializes in intellectual property issues. They may be reached at jcasino@arelaw.com, crothstein@arelaw.com, mkasdan@arelaw.com, jcapasso@arelaw.com and hsakai@arelaw.com.

Brief for Amicus Curiae New York Intellectual Property Law Association in Association for Molecular Pathology v. Myriad Genetics, Inc. (U.S. Mar. 14, 2013)

Fri, 15 Mar 2013 00:00:00 -0500

Click to download PDF: "Brief for Amicus Curiae New York Intellectual Property Law Association in Association for Molecular Pathology v. Myriad Genetics, Inc. (U.S. Mar. 14, 2013)"

The authors gratefully acknowledge the assistance of David P. Goldberg in the preparation of this brief.

In The Press:
LexisNexis features the input of Partner Charles Macedo on the benefits of pro bono work.

Wed, 20 Feb 2013 00:00:00 -0600

LexisNexis features the input of Partner Charles Macedo on the benefits of pro bono work.

“The expertise and goodwill I developed with such projects then translated into getting other bigger projects for both nonprofit and for-profit organizations. So pursuing something that was important to me personally helped develop my professional career.”

Click here to read the article.

In The Press:
WTR turns to Max Vern for input on Cracker Barrel trademark conflict

Tue, 12 Feb 2013 00:00:00 -0600

WTR turns to Max Vern for input on Cracker Barrel trademark conflict.

Max Vern, senior counsel at Amster Rothstein & Ebenstein, advises that brand owners considering extensions should undertake requisite due diligence and err on the side of caution to avoid encroaching on another earlier brand that – like Kraft’s Cracker Barrel – appears to enjoy significant goodwill due to extensive use and strong marketplace positioning. “The fact that Kraft ‘tolerated’ CBOCS’ restaurant chain activities in connection with certain food items in a limited format would not create an estoppel for Kraft compelling them to acquiesce to expansion of [CBOCS’] range of goods,” he says...

Click here to read the article.

In The Press:
Fed. Circ. Order May Lead To Speedier Transfer Rulings

Tue, 05 Feb 2013 00:00:00 -0600

IPLaw 360 turns to partner Charles R. Macedo for input on Federal Circuit Order.

The ruling "teaches that while the judicial economy factor is not a trump card that will necessarily avoid transfer, it can be a factor that a court may rely on when deciding against transferring a case," said Charles R. Macedo, partner at Amster Rothstein & Ebenstein LLP.

"However, when assessing the judicial economy factor, courts must consider the anticipated judicial economy at the time the lawsuit is filed, rather than based on post-filing events," he added.

In addition, Macedo said, the ruling "demonstrates that it is not per se improper to sever improperly joined cases, but still consolidate them for pretrial purposes," a strategy that judges use quite often.

Click here to read the article.

In the Press:
LexisNexis Interviews Partner Charles R. Macedo

Wed, 30 Jan 2013 00:00:00 -0600

A Path to Partner — An Interview on Patents, Research, Business Development and Passion with Charles Macedo

Click here to read the article.

ARE Patent Law Alert:
Federal Circuit Denies Writ of Mandamus To Compel Transfer in EMC's Latest Petition For Writ

Tue, 29 Jan 2013 00:00:00 -0600

On January 29, 2013, the U.S. Court of Appeals for the Federal Circuit (“Federal Circuit”) addressed a second petition for writ of mandamus from a denial of a motion to transfer by the Eastern District of Texas in a patent infringement action brought by Oasis Research, LLC against various defendants. Unlike the first decision, which had granted the defendants’ petition for writ, the Federal Circuit denied the current petition. Compare In re EMC Corp., 677 F.3d 1351 (Fed. Cir. 2012) (“EMC I”) (granting petition for writ of mandamus), with In re EMC Corp., No. Misc. No. 13-142, 2013 U.S. App. LEXIS 1985 (Fed. Cir. January 29, 2013) (nonprecedential order) (“EMC II”) (denying petition for writ of mandamus).

EMC I and EMC II provide useful guidance on transfer motions.

A. EMC Round I

The underlying patent infringement action was commenced on August 30, 2010, by the patent holder Oasis Research, LLC (“Oasis”), against eighteen unrelated defendants before the American Invents Act (see 35 U.S.C. § 299) changed the joinder rules associated with patent actions in September 2011. See Oasis Research LLC v. Adrive, LLC et al., No. 4-10-cv-00435, ECF No. 1, Complaint (E.D. Tex. filed August 30, 2010). On May 23, 2011, Magistrate Judge Mazzant issued a series of Report and Recommendations denying various defendants’ motions to dismiss and/or transfer the case. (ECF Nos. 200-204). On July 25, 2011, the district court adopted the Magistrate Judge’s Report and Recommendations. (ECF Nos. 242-246).

A number of defendants jointly filed a petition for writ of mandamus seeking to compel the district court to sever and transfer the underlying case from the Federal Circuit. EMC I, 677 F.3d at 1353. The defendants-petitioners argued that they shared nothing in common, other than being accused of infringing the same patents. The district court denied the defendants’ requests because, under Fed. R. Civ. P. 20, the accused services and products were not “dramatically different.” Oasis Research LLC v. Adrive, LLC et al., 2011 U.S. Dist. LEXIS 80623 at *9-10 (E.D. Tex. 2011). Thereafter, the Federal Circuit granted the writ and directed the district court to apply the correct test for joinder under Fed. R. Civ. P. 20. EMC I, 677 F.3d at 1360. Significantly, the Federal Circuit concluded that “independently developed products using differently sourced parts are not part of the same transaction, even if they are otherwise coincidentally identical.” Id. at 1359. At the time, EMC I was heralded as the end of the traditional multi-defendant patent infringement cases against unrelated entities. See, e.g., Charles R. Macedo, Michael J. Kasdan and David A. Boag, AIA’s Impact on Multidefendant Patent Litigation: Part I, Law 360 (Oct. 19, 2012).

B. EMC Round II

On remand, the district court severed the cases and again denied the defendants’ motion for transfer, ruling that the defendants had failed to show that the transferee venues were more convenient based on the location of witnesses and proof. See e.g., Oasis Research, LLC v. EMC Corp., 2012 U.S. Dist. LEXIS 118000 at *18 (E.D. Tex. Aug. 21, 2012). The district court also found that judicial economy weighed heavily against transfer, because another court “would have to spend significant resources to familiarize itself with the patents, prosecution history, claim construction, and other issues in th[e] case.” Id. at *17.

On the second petition for writ of mandamus, the Federal Circuit found that the defendants did not satisfy the highly deferential standard of whether the denial of transfer was such a “clear abuse of discretion” that refusing to transfer would produce a “patently erroneous result.” EMC II, 2013 U.S. App. LEXIS 1985 at *5.

In denying the petition, the Court provided the following significant guidance to district courts addressing transfer motions:

With respect to “judicial economy,” the Federal Circuit rejected the defendants’ position that judicial economy cannot be used as a factor to decide against transferring a case. Instead, the Court recognized that while judicial economy is not a trump card to avoid transfer, it can be a factor to consider to decide against transferring a case. However, the Court must consider the judicial economy that would be anticipated at the time a lawsuit is filed, not based on post-filing events. Id. at *7-8.
While the Federal Circuit did not grant the petition for writ based on the late timing by the District Court in addressing defendants’ renewed motion, the Court nonetheless made it clear, that transfer motions should be taken up early in a case and not deferred. Id. at *5-6.
The Federal Circuit also implicitly recognized that that it is not per se improper to sever improperly joined cases, and that a court may still consolidate them for pre-trial purposes. Id. at *3. This procedure, which is used quite often, is consistent with Section 299 of the new Patent Law under the AIA. Indeed, just days after EMC II issued, cases in the Eastern District of Texas issued similar consolidation orders. See, e.g., Clear With Computers, LLC v. Hyundai Motor America, Inc., No. 6-12-cv-00077 (E.D. Tex. January 31, 2013); TQP Development, LLC v. Wells Fargo & Company, No. 2-12-cv-00061 (E.D. Tex. February 2, 2013)

Conclusion

As noted above, both EMC I and EMC II provide useful guidance to litigants on when transfer motions should be granted, denied and subject to mandamus. We will continue to monitor this important area of law. Please feel free to contact us to learn more about this decision and its impact on U.S. Patent Law.

* Charles R. Macedo is a Partner and Amit R. Parikh is an associate at Amster, Rothstein & Ebenstein LLP. Their practice specializes in intellectual property issues including prosecuting and litigating patent, trademark and other intellectual property disputes. They may be reached at cmacedo@arelaw.com and aparikh@arelaw.com.

Isolated human genes and related therapeutic treatment methods held patent-eligible

Thu, 24 Jan 2013 00:00:00 -0600

Ass’n for Molecular Pathology v US Patent & Trademark Office, 689 F 3d 1303, Fed Cir (‘Myriad IV’), 16 August 2012

Patents on isolated genes are big business. In the past three decades, the United States Patent and Trademark Office (USPTO) has issued over 2500 patents claiming isolated DNA, and 40000 DNA-related patents in nonnative form, for genes in the human genome. Thus in 2010, when a US district court judge found claims to isolated DNA and related method claims patent-ineligible, the industry was shocked and mobilized to respond: see Ass’n for Molecular Pathology v US Patent & Trademark Office, 702 F Supp 2d 181, 220–37 (SDNY 2010) (‘Myriad I’). At first, on appeal, the majority of a three-judge panel of the US Court of Appeals for the Federal Circuit reversed the district court decision and found all of the composition claims, as well as one method claim directed to screening potential cancer therapies based upon changes in the growth rates of transformed cells, patent-eligible: Ass’n for Molecular Pathology v US Patent & Trademark Office, 653 F 3d 1329 (Fed Cir 2011) (‘Myriad II’). This result was shortlived: the US Supreme Court, in Mayo Collaborative Services v Prometheus Laboratories, Inc, 132 S Ct 1289 (2012) (‘Mayo’), granted certiorari, vacated Myriad II and remanded for further consideration in view of Mayo. Ass’n for Molecular Pathology v Myriad Genetics, Inc, 132 S Ct 1794 (2012) (‘Myriad III’). This past August, in Myriad IV, the Federal Circuit, on remand, quickly set a new briefing schedule to address the impact of Mayo on its prior Myriad II decision, held oral argument, and then the same panellists reissued a substantively similar decision. While each of the panellists considered Mayo, it had little impact on their ultimate conclusions as to whether isolated DNA claims and related method claims were patent-eligible.

Legal context

Under the Patent Act, ‘[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title’ (35 USC §101). Relying upon Congressional intent and a long history of judicial construction, the Supreme Court has made clear that the statutory categories of patent-eligible subject matter, ie processes, machines, manufactures and compositions of matter, are to be broadly construed to include ‘anything under the sun that is made by man’: see eg Diamond v Chakrabarty, 447 US 303, 308 (1980).

However, the US Supreme Court has also ‘undoubtedly recognized limits to §101 and every discovery is not embraced within the statutory terms’. Laws of nature, natural phenomena, and abstract ideas are excluded from patent protection: Diamond v Diehr, 450 US 175, 185 (1981).

In the wake of Chakrabarty, which recognized that ‘a live, human-made micro-organism’ is patentable subject matter, the US Patent and Trademark Office (USPTO) issued a large number of patents relating to DNA molecules for almost thirty years. It is estimated that there are 40000 US patents broadly related to human genes (Eric J Rogers, Can You Patent Genes? Yes and No, 93 J Pat & Trademark Off Soc’y 19, 40 (2010)). This genetic material has been found to be patentable, partly because isolated DNA is not found in nature. Rather, isolated DNA is the product of the chemical manipulation of genes, ie the excision, splicing or alteration of selected portions of natural genetic material. Therefore, isolated DNA has been considered patent-eligible under US law as a composition of matter. While the patenting of genetic material has been legally long settled, it has remained politically controversial, particularly in view of Myriad I.

In 2009, a number of medical associations, doctors and patients challenged the patent eligibility of claims in seven patents held in part by Myriad Genetics and the University of Utah Research Foundation (‘Myriad’). In a surprising decision, at the trial court level on summary judgment, Judge Sweet found all of the claims to be patent-ineligible: Myriad I, 702 F Supp 2d at 220–37.

On appeal, a split three-judge panel of the Federal Circuit in Myriad II reversed in part, finding all of the composition claims, as well as one method claim directed to screening potential cancer therapies based upon changes in the growth rates of transformed cells, to be patent-eligible: Myriad II, 653 F 3d at 1329. Each US Circuit Judge on the panel, Judges Lourie, Bryson and Moore, penned their own opinions.

Thereafter, a petition for certiorari was filed with the US Supreme Court, taking issue with Myriad II’s holding of patent-eligibility. While that petition was pending, the US Supreme Court took up the issue of patent eligibility and issued its seminal decision in Mayo. In Mayo, the court invalidated certain blood testing method claims directed towards diagnosing and treating a disease under 35 USC §101 for claiming patent-ineligible ‘laws of nature’. In response to the petition on Myriad II, the US Supreme Court issued a summary order granting certiorari, vacating Myriad II and remanding the case to the Federal Circuit to be reconsidered in light of Mayo: Myriad III, 132 S Ct 1794 (2012). On remand, the Federal Circuit quickly issued an order calling for a briefing schedule on the impact of Mayo on its prior panel decision regarding the patent-eligibility of certain claims, held a prompt oral argument, and, in August 2012, issued Myriad IV.

Facts

The district court action and decision

In 2009, a number of medical associations, doctors and patients, represented by the American Civil Liberties Union and the Public Patent Foundation, challenged the patent eligibility under 35 USC §101 of fifteen claims from seven patents held in part by Myriad. These patents—US Patents Nos 5,747,282 (‘the ’282 patent’); 5,837,492; 5,693,473; 5,709,999 (‘the ’999 patent); 5,710,001 (‘the ’001 patent’); 5,753,441; and 6,033,857— relate to the diagnosis and treatment of cancer in human beings. They include three types of challenged claims:

composition claims directed to isolated DNA molecules (eg the ’282 patent, claim 1);
method claims directed to identifying cancer-predisposing mutations by analysing or comparing a patient’s DNA sequence to a normal sequence (eg the ’001 patent, claim 1); and
a method claim directed to screening potential cancer therapies based upon changes in the growth rates of transformed cells (eg the ’282 patent, claim 20).

On summary judgment at the trial court level, Judge Robert Sweet of the US District Court for the Southern District of New York held that all fifteen claims at issue were drawn to non-patentable subject matter and were therefore invalid under 35 USC §101: Myriad I, 702 F Supp 2d at 220–37.

The first category of claims, the composition claims, relate to two specific isolated human genes, BRCA1 and BRCA2, and various mutations in those genes associated with breast and ovarian cancer. Claim 1 of the ’282 patent is a representative composition claim:

An isolated DNA coding for a BRCA1 polypeptide, said polypeptide having the amino acid sequence set forth in SEQ ID NO:2.

Myriad I

The second category of claims, including all but one of the method claims at issue, are directed to identifying cancer-predisposing mutations by analysing or comparing a patient’s DNA sequence to a normal sequence. Claim 1 of the ’001 patent is representative of these method claims:

A method for screening a tumor sample from a human subject for a somatic alteration in a BRCA1 gene in said tumor which comprises. . . comparing a first sequence selected from the group consisting of a BRCA1 gene from said tumor sample, BRCA1 RNA from said tumor sample and BRCA1 cDNA made from mRNA from said tumor sample with a second sequence selected from the group consisting of BRCA1 gene from a nontumor sample of said subject, BRCA1 RNA from said nontumor sample and BRCA1 cDNA made from mRNA from said nontumor sample, wherein a difference in the sequence of the BRCA1 gene, BRCA1 RNA or BRCA1 cDNA from said tumor sample from the sequence of the BRCA1 gene, BRCA1 RNA or BRCA1 cDNA from said nontumor sample indicates a somatic alteration in the BRCA1 gene in said tumor sample.

Myriad I

The last method claim at issue involves a method of screening potential cancer therapies. Claim 20 of the ’282 patent reads:

A method for screening potential cancer therapeutics which comprises: growing a transformed eukaryotic host cell containing an altered BRCA1 gene causing cancer in the presence of a compound suspected of being a cancer therapeutic, growing said transformed eukaryotic host cell in the absence of said compound, determining the rate of growth of said host cell in the presence of said compound and the rate of growth of said host cell in the absence of said compound and comparing the growth rate of said host cells, wherein a slower rate of growth of said host cell in the presence of said compound is indicative of a cancer therapeutic.

Myriad I

The appeal and first Federal Circuit panel decisions

Myriad appealed the district court’s decision to the Federal Circuit.

In July 2011, in a split decision, a three judge panel of the Federal Circuit reversed in part, finding the composition claims at issue to be patent-eligible, but agreeing that the method claims relating to analysing or comparing certain DNA sequences were patent-ineligible on the ground that they claim only abstract mental processes: Myriad II, 653 F 3d at 1333–34. Judge Lourie wrote for the majority.

As to the method claim relating to screening cancer therapies based upon changes in cell growth rates, the Federal Circuit found this claim to be patent-eligible, because in addition to the comparing and analysing steps, it also recited the steps of growing transformed cells and determining those growth rates. The Federal Circuit concluded that these steps were transformative, not merely preparatory, and that therefore this claim was patent-eligible.

In a separate opinion Judge Moore, in Myriad II, concurred in part with Judge Lourie’s majority opinion. First, she joined the majority opinion with respect to standing and the patentability of the method claims at issue. However, since she believed that claims directed to isolated DNA sequences presented a different set of issues, she joined the majority with respect to claims to isolated cDNA sequences and concurred in the judgment with respect to the remaining sequences, for which she offered her separate reasoning.

In another separate opinion, Judge Bryson concurred in part and dissented in part. More particularly, he concurred with the portions of this court’s judgment that were directed to the patentability of the cDNA claims and the patentability of the method claims. However, he dissented from the court’s holding that Myriad’s BRCA gene claims, and its claims to gene fragments, were patent-eligible. In particular, Judge Bryson explained (at 1373):

In my view, those claims are not directed to patentable subject matter, and if sustained the court’s decision will likely have broad consequences, such as preempting methods for whole genome sequencing, even though Myriad’s contribution to the field is not remotely consonant with such effects.

The Supreme Court GVR

Shortly thereafter, the Supreme Court granted certiorari, vacated Myriad II and remanded the case to the Federal Circuit to be reconsidered in light of its recent decision in i, which related to patent-eligibility. In Mayo, the Supreme Court had invalidated certain blood testing method claims directed towards diagnosing and treating a disease for claiming unpatentable laws of nature.

Analysis

In their decisions on remand, the three judges of the same panel at the Federal Circuit largely followed their prior opinions in Myriad II, with Judge Lourie for the majority noting that ‘[t]he principal claims of the patents before us . . . relate to isolated DNA molecules’ and that ‘Mayo does not control the question of patent-eligibility of such claims:’ Myriad IV, 689 F 3d at 1325. The Federal Circuit panel decisions was unanimous with respect to the method claims. However, there were differences of opinion between the judges as to the patent-eligibility of the composition claims. Each member of the panel again wrote a separate opinion.

Judge Lourie’s majority decision

In the majority opinion, written by Judge Lourie, the court framed the legal issue on the patent eligibility of the composite claims as whether and to what degree isolated DNA molecules fall within the exception for products of nature.

Judge Lourie found useful guidance from the two leading US Supreme Court decisions on the natural phenomena exception to patent eligibility: Chakrabarty (holding a man-made microorganism patent eligible, even though it was ‘alive’) and Funk Brothers Seed Co v Kalo Inoculant Co, 333 US 127 (1948) (finding a mix on natural occurring bacteria not patent-eligible).

In Funk Brothers, the US Supreme Court found a mix of nitrogen-fixing bacterial cultures that inoculated a broader range of leguminous plants than single-species cultures to be patent-ineligible: since no species acquired a different property or use, applying the newly discovered bacterial compatibility to create a mixed culture merely amounted to merely taking advantage of the ‘work of nature’, and was not a patent-eligible advance.

By contrast, in the later Chakrabarty decision, the US Supreme Court addressed found a man-made microorganism designed to break down crude oil was a patenteligible ‘composition of matter’. Although the microorganisms were genetically engineered with various naturally occurring DNA plasmids, the court found them to be patent-eligible because they were ‘not . . . a hitherto unknown natural phenomenon, but . . . a nonnaturally occurring . . . composition of matter—a product of human ingenuity “having a distinctive name, character [and] use”’: 447 US at, 309–10.

From his analysis of Chakrabarty and Funk Brothers, Judge Lourie divined that one way to distinguish ‘between products of nature and human-made invention for purposes of § 101 turns on a change in the claimed composition’s identity compared with what exists in nature’: Myriad IV, 689 F 3d at 1327–28.

With respect to the Myriad isolated DNA claim, Judge Lourie reasoned the isolated DNA in the composition claims was a ‘free-standing portion of a larger, natural DNA molecule’ that has been chemically severed and manipulated:

BRCA1 and BRCA2 in their isolated states are different molecules from DNA that exists in the body; isolated DNA results from human intervention to cleave or synthesize a discrete portion of a native chromosomal DNA, imparting on that isolated DNA a distinctive chemical identity as compared to native DNA. Thus the challenged claims were drawn to patent-eligible subject matter, because the claims cover molecules that are markedly different—have a distinctive chemical structure and identity—from those found in nature. Judge Lourie rejected the plaintiffs’ contention that the native and isolated DNA molecules were the same because they contained the same nucleotide sequence, holding:

[T]he patent-eligibility of an isolated DNA is not negated because it has similar informational properties to a different, more complex natural material. The claimed isolated DNA molecules are distinct from their natural existence as portions of larger entities, and their informational content is irrelevant to that fact.

Since the claimed isolated DNA molecules did not fall within the ‘product of nature’ exception, the claims were patent-eligible.

Significantly, Judge Lourie declined the invitation to make patent policy noting that ‘[w]hether its unusual status as a chemical entity that conveys genetic information warrants singular treatment under the patent laws . . . is a policy question that we are not entitled to address’ ibid, 1330.

Turning to the method claims directed to identifying cancer-predisposing mutations by analysing or comparing a patient’s DNA sequence to a normal sequence, the majority once again found, as it had in Myriad II, these claims to be patent-ineligible because they included no transformative steps and were directed to abstract mental processes. As stated, these claims:

[R]ecite[] nothing more than the abstract mental steps necessary to compare two different nucleotide sequences . . . Although the application of a formula or abstract idea in a process may describe patent-eligible subject matter, Myriad’s claims do not apply the step of comparing two nucleotide sequences in a process. Rather, the step of comparing two DNA sequences is the entire process that is claimed (ibid, 1334–35, citation omitted).

Accordingly, these claims were found to be indistinguishable from the claims struck down by the Supreme Court in Mayo, and thus patent-ineligible under 35 USC §101. Finally, however, claim 20 of the ’282 patent, the method claim directed to screening potential cancer therapies based upon changes in the growth rates of transformed cells, was found to be patent-eligible. Myriad II had previously come to the same conclusion based on the fact that the claim required certain transformative steps. This analysis was revisited in light of Mayo, which held that certain transformative steps are not necessarily sufficient under § 101 if the recited steps only relied on natural laws.

Judge Lourie in Myriad IV again concluded that this method claim was patent-eligible, because it recites a screening method based on the use of transformed, nonnaturally occurring cells, and therefore the claim ‘includes more than the abstract mental step of looking at two numbers and “comparing” two host cells’ growth rates’. Significantly, he found that once it has been determined that a new composition of matter is patent-eligible, ‘applying various known types of procedures to it is not merely applying conventional steps to a law of nature’: ibid, 1336 (emphasis added). Thus, the fact ‘that the claim also includes the steps of determining the cells’ growth rates and comparing growth rates does not change the fact that the claim is based on a man-made, non-naturally occurring transformed cell—patent-eligible subject matter’. In other words, Mayo’s analysis regarding ‘applying various known type of procedure’ does not apply because modified DNA is not a product of nature.

Judge Moore’s concurring opinion

Judge Moore concurred in part with the majority opinion’s conclusion that the composition claim was patent eligible, but wrote separately to express different reasoning and some more specific concerns regarding claims to longer strands of isolated DNA.

Judge Moore’s particular concern was not directed towards claims covering the shorter and more obviously manipulated DNA molecules (cDNA): ‘It is not the chemical change alone, but that change combined with the different and beneficial utility [as diagnostic tools] that leads me to conclude that small isolated DNA fragments are patentable subject matter.’ However, ‘the longer strands of isolated DNA . . . which include most or all of the gene present a more difficult case’ because the longer strands of isolated DNA ‘do . . . not clearly have a new utility and appear[] to simply serve the same ends devised by nature.’

Despite this concern, Judge Moore nevertheless held the ‘long strand’ composition claims were patent-eligible based on the traditionally expansive scope of patentable subject matter, the PTO’s long-standing policy of allowing patents on isolated DNA, and the settled expectations of the biotech industry.

Judge Bryson’s dissent

Judge Bryson, on the other hand, penned a heated dissent regarding the patent-eligibility of Myriad’s composition claims. Framing the question as ‘whether the process of isolating genetic material from a human DNA molecule makes the isolated genetic material a patentable invention’, he concluded that it did not.

Reasoning that ‘[t]he only material change made to those [isolated] genes from their natural state is the change that is necessarily incidental to the extraction of the genes from the environment in which they are found in nature’, Judge Bryson concluded this meant they ‘fall clearly on the “unpatentable” side of the line the [Supreme] Court drew in Chakrabarty’.

He further explained that even if the isolated DNA molecules had a different use from their natural one, they would not be patent-eligible since the key to their utility is that ‘each gene must function in the same manner in the laboratory as it does in the human body . . . The naturally occurring genetic material thus has not been altered in a way that would matter . . . : ibid, 1350, 1354.

He concluded by criticizing the majority and concurring opinions for their reliance on USPTO policy, since that office has no law-making power, and on the settled expectations of the biotech industry, since there was no collective right to adverse possession to intellectual property.

Practical significance

Myriad IV reveals an effort by the panellists to diminish the impact of Mayo on the Federal Circuit’s patent-eligibility analysis. By reaching the same conclusions on remand in Myriad IV that the panellists had previously reached in Myriad II, with only minor changes in the reasoning, it seems that the Supreme Court’s mandate to reconsider its prior rulings in light of Mayo had little impact.

Given the history of this case and the on-going consideration of patent-eligibility by the courts, it is doubtful that Myriad IV will be the last word on patent-eligibility of isolated DNA, or even the Myriad claims.

Charles Macedo and Michael J. Kasdan are partners and David P. Goldberg is an associate at Amster, Rothstein & Ebenstein LLP. Their practice specializes in intellectual property issues including litigating patent, trademark and other intellectual property disputes. They may be reached at cmacedo@arelaw.com, mkasdan@arelaw.com, and dgoldberg@arelaw.com.

Induced infringement of method claims where no single party performs all of the claimed steps

Thu, 24 Jan 2013 00:00:00 -0600

Akamai Technologies, Inc, et al v Limelight Networks, Inc, and McKesson Technologies, Inc v Epic Systems Corp, 692 F 3d 1301 (Fed Cir 2012) (en banc), 31 August 2012

The Federal Circuit sitting en banc, found that a party may be liable for induced infringement of a method claim, even where no single party performs all of the claimed steps.

Legal context

In order to infringe a method claim directly, all the steps of the claimed method must be performed: 35 USC §271(a). A party may also be liable for infringement as an inducer if that entity induces another to perform all the elements of a claim: 35 USC §271(b). A party may only be liable for induced infringement if there is a direct infringement: Aro Mfg Co v Convertible Top Replacement Co, 365 US 336, 341 (1961).

The typical scenario of induced infringement involves a defendant who induces a single entity to commit all the steps in a claimed method. However, in a series of cases over the past decade, the Federal Circuit was presented with a scenario not squarely addressed by the statutes mentioned above. In particular, the Federal Circuit was asked to decide whether a defendant may be liable for induced infringement under circumstances where no single entity performs all steps in the claimed method but where all steps in a claimed method are practised by more than one entity. This scenario is commonly referred to as ‘divided infringement’.

In addressing this issue, the Federal Circuit set forth conflicting analyses in multiple cases. For example, in Fromson, the Federal Circuit suggested that a manufacturer could be liable for contributory infringement where it performs some steps of a method and its customers perform the remainder of the steps: Fromson v Advance Offset Plate, Inc, 720 F 2d 1565, 1567–68 (Fed Cir 1983).

In contrast, more recently, the Federal Circuit in BMC and Muniauction took a different position by holding that in cases of divided infringement, a single entity (or agents of a single entity acting under its ‘direction or control’) must perform all the steps of a method claim in order for there to be direct or indirect infringement: BMC Res, Inc v Paymentech, LP, 498 F 3d 1373, 1382 (Fed Cir 2007); Muniauction, Inc v Thomson Corp, 532 F 3d 1318, 1329 (Fed Cir 2008). This proposition is commonly referred to as the ‘single entity rule’.

Further muddying the waters, the Federal Circuit also set forth a different standard for addressing the divided infringement issue in the context of system claims. In particular, the Federal Circuit held in Centillion that an entity can infringe a system claim even if it did not control all elements of the system, since an entity ‘uses’ a system under s 271(a) if it ‘puts the system as a whole into service, i.e., controls the system and obtains benefit from it’: Centillion Data Sys, LLC v Qwest Commc’ns Int’l, 631 F 3d 1279, 1285 (Fed Cir 2011).

Facts

Akamai/McKesson is a consolidated appeal of two cases, Akamai Techs, Inc v Limelight Networks, Inc and McKesson Info Solutions LLC v Epic Sys Corp.

In Akamai, Akamai Technologies owned a patent covering a process for efficient delivery of web content: Akamai Techs, Inc v Limelight Networks, Inc, 614 F Supp 2d 90, 97 (D Mass 2009) (‘Akamai I’). The patent claimed a method of replicating and placing some of a content provider’s information on a set of servers and modifying the content provider’s web pages to retrieve content from those servers. The defendant, Limelight Networks, maintained a similar content delivery system that placed some of a content provider’s information on its servers. However, Limelight did not modify the content provider’s web pages itself, but provided instructions to its customers containing the steps needed to achieve that modification. The district court relied on BMC to hold that Limelight did not infringe Akamai’s patents because Limelight’s customers performed one of the steps in the claimed process, rather than Limelight itself. On appeal, a three judge panel at the Federal Circuit held that Limelight did not infringe Akamai’s patent because ‘Limelight did not perform all of the steps of the asserted method claims, and the record contains no basis on which to attribute to Limelight the actions of its customers who carried out the other steps’: Akamai Techs, Inc v Limelight Networks, Inc, 629 F 3d 1311, 1314 (Fed Cir 2010) (‘Akamai II’).

Similarly, in McKesson, McKesson Information Solutions owned a patent regarding a method of electronic communication between healthcare providers and their patients: McKesson Info Solutions LLC v Epic Sys Corp, 2009 US Dist LEXIS 88158 at *4 (ND Ga 2009) (‘McKesson I’). The defendant, Epic Systems licensed its software to healthcare providers that permitted the providers to communicate electronically with patients. While Epic did not perform any of the steps in the patented method, those steps were performed by the healthcare providers and their patients. The district court used the same logic to grant summary judgment of non-infringement since healthcare providers and patients performed the steps in the patented method, rather than Epic itself. On appeal, a three judge panel of the Federal Circuit held that Epic did not induce infringement because a single party did not perform all steps of the patent and Epic did not exercise ‘control or direction’ over its customers such that the customers’ actions would be attributable to Epic: McKesson Techs Inc v Epic Sys Corp, 2011 US App LEXIS 7531, at *7 (Fed Cir 2011) (‘McKesson II’). In a concurring and dissenting opinion submitted with the case, two judges on the panel questioned the current line of authority on divided infringement issues.

After the Federal Circuit agreed to review these decisions en banc, both decisions were vacated and consolidated for en banc review.

Analysis

The Federal Circuit sought full briefing on the following questions:

If separate entities each perform separate steps of a method claim, under what circumstances would that claim be directly infringed and to what extent would each of the parties be liable?
If separate entities each perform separate steps of a method claim, under what circumstances, if any, would either entity or any third party be liable for inducing infringement or for contributory infringement?
Does the nature of the relationship between the relevant actors—eg service provider/user; doctor/patient— affect the question of direct or indirect infringement liability?

Akamai Techs, Inc v Limelight Networks, Inc, 419 Fed App’x 989 (Fed Cir 2011) (en banc); McKesson Techs Inc v Epic Sys Corp, 463 Fed App’x 906, 907 (Fed Cir 2011) (en banc).

In a split decision (6-1-4) that demonstrates a sharp divide among the court on this issue, the en banc panel of the Federal Circuit rejected the current trend in the law and held that there can be induced infringement of a method claim when multiple entities perform all the steps of the method. While reiterating that there can be no induced infringement without each step of the claim being performed, the majority of the Federal Circuit overruled its precedent in BMC.

The majority limited its holding to finding that it is possible to induce infringement of a method claim in circumstances where separate entities perform all the steps of the method. In reaching its decision, Akami/McKesson did not reach the first or third questions above, nor did it address the issue of whether and under what circumstances multiple parties can be liable for direct infringement under § 271(a).

Judge Newman authored a dissenting opinion criticizing the majority for finding that there could be induced infringement without resolving the circumstances under which method steps of a claim performed by multiple parties could result in direct infringement. Judge Linn, in a separate dissenting opinion joined by three other judges, argued that neither direct nor indirect infringement can occur when more than one entity performs the steps of a method.

Each of the Federal Circuit’s opinions is discussed in turn.

The majority per curiam opinion

The majority per curiam opinion began by distinguishing the special nature of a patent directed toward a process or method from a patent directed toward a product. The majority explained that with a product, ‘direct infringement is always present, because the entity that installs the final part and thereby completes the claimed invention is a direct infringer’. However, in process patents ‘parties . . . can often arrange to share performance of the claimed steps . . . ’. The majority found that this presents a complication for proving direct infringement by a single party. Nonetheless, the majority declined to reach the question of whether a single entity must perform all the steps in a claimed method for direct infringement because the cases were resolved under the doctrine of induced infringement.

Next, the majority criticized the single actor rule of BMC for improperly concluding that ‘not only must the inducement give rise to direct infringement, but in addition the direct infringement must be committed by a single actor’. The majority reasoned that: Requiring proof that there has been direct infringement as a predicate for induced infringement is not the same as requiring proof that a single party would be liable as a direct infringer. If a party has knowingly induced others to commit the acts necessary to infringe the plaintiff ’s patent and those others commit those acts, there is no reason to immunize the inducer from liability for indirect infringement simply because the parties have structured their conduct so that no single defendant has committed all the acts necessary to give rise to liability for direct infringement.

Moreover, since the impact on the patent owner is identical, the majority found it ‘bizarre’ that the law would treat differently a party who knowingly induced others to engage in acts that collectively practise a claimed method and a party who knowingly induced a single party to practise the same process.

The majority, relying upon the statutory text, explained that: [n]othing in the text indicates that the term ‘infringement’ in Section 271(b) is limited to ‘infringement’ by a single entity. Rather, ‘infringement’ in this context appears to refer most naturally to the acts necessary to infringe a patent, not to whether those acts are performed by one entity or several.

Likewise, the majority found that neither §§ 271(e)(2) nor (f) limit the term ‘infringement’ to occur by a single entity.

The majority also found support in the legislative history of the 1952 Patent Act. Specifically, the majority relied on statements made by Judge Giles Rich, one of the principal drafters of the statute, who said that ‘he saw no anomaly in finding liability for indirect infringement when there was “obvious infringement of the patent” even though there was “no direct infringer of the patent”’.

Looking outside of patent law, one who induces, aids or abets criminal activity is liable regardless of whether the intermediary is criminally responsible for its own conduct. Likewise, the Second Restatement of Torts provides that ‘a person is liable for tortious conduct if he “orders or induces the conduct, if he knows or should know of circumstances that would make the conduct tortious if it were his own.” That basis for liability is “independent of the existence of liability” based “on the ground that [the defendant] was principal or master”.’

The majority further surveyed the Supreme Court case law and found that, although a finding of direct infringement was a prerequisite for a finding of induced infringement, none of those cases held that all the steps in the patented process had to be performed by the same entity. Instead, the majority found that the case law emphasized ‘that what was induced was the fact of infringement, not liability for direct infringement by a single actor’ (emphasis added).

Finally, the majority took issue with Judge Linn’s charge, in his dissent, that the majority decision made a ‘sweeping change to the nation’s patent policy’: it was the BMC case that changed the pre-existing regime. The majority’s position did not change the law because it was rooted in the text of § 271, criminal and tort principals and legislative history.

Judge Linn’s dissent

Judge Linn, joined by three other judges, argued in favour of the single actor rule, ie that if there is no direct infringement of a patent by a single entity, there should be no indirect infringement. Direct infringement under § 271(a) defines ‘infringement’ and induced infringement under § 271(b) used that same definition of ‘infringement’. Judge Linn also disagreed with the majority’s reasoning that § 271(a) did not define ‘infringement’ because of how that term was used in §§ 271 (e)(2), (f) and (g). In contrast, he found those sections of the statute undercut the majority’s position: ‘[W]hen Congress intended to cover acts not encompassed within the traditional definition of infringement, it knew how to create an alternate definition thereof’. ‘[I]f there is no direct infringement of a patent, there can be no contributory infringement.’

Judge Linn added that, due to the strict liability nature of direct infringement, ‘this court has limited direct infringement liability “to those who practise each and every element of the claimed invention,” i.e., the “single entity rule”’. He then cited the BMC line of cases for the proposition that ‘where the actions of one party can be legally imputed to another such that a single entity can be said to have performed each and every element of the claim, that single entity is liable as a direct infringer’.

Judge Newman’s dissent

Judge Newman opened her dissent by taking issue with the ‘single-entity rule’ supported by Judge Linn and BMC, expressing concern over the situation where two entities enter into an arm’s length transaction to split the performance of the steps in a claimed method. Since this may be done for the purpose of avoiding direct infringement, she criticized this rule because it ‘leaves a meritorious patentee without redress’.

To address that problem, Judge Newman proposed a rule that ‘[d]irect infringement may be by more than one entity.’ In support of this conclusion, she analysed § 271(a) which states ‘whoever . . . uses . . . any patented invention . . . infringes the patent’: 35 USC §271(a) (emphasis added) and found that, since the word ‘whoever’ can embrace both the singular and the plural, the statute by its terms did not limit direct infringement to a single actor.

Judge Newman took issue with the majority for not recognizing that multiple actors could directly infringe a claim, and instead adopting an ‘Inducement-Only Rule’. Finally, she questioned the impact of the majority’s decision on remedies. For instance, would an injunction against an inducer extend to enjoin the direct infringers? Judge Newman also argued that the allocation of remedies is a case specific determination and that damages ought to be determined in relation to a party’s culpability, asserting that allocating remedies under the majority’s approach would be problematic because only the inducer would be liable, not the direct infringers.

Practical significance

For the past decade, a trend in the patent law had developed making it more difficult to prove that someone induced multiple actors to infringe a method claim. In Akamai/McKesson that trend was reversed, and the majority recognized that someone could be liable for inducing patent infringement of a method claim, even when more than one actor is involved, as long as each of the steps of the claim are performed. It remains to be seen how courts will apply the new tests for inducing infringement, and if similar changes will be applied in the future with respect to direct infringement and contributory infringement involving multiple actors.

Charles Macedo, Michael J. Kasdan are partners and Amit R. Parikh is an associate at Amster, Rothstein & Ebenstein LLP. Their practice specializes in intellectual property issues including litigating patent, trademark and other intellectual property disputes. They may be reached at cmacedo@arelaw.com, mkasdan@arelaw.com, and aparikh@arelaw.co.

ARE Patent Law Alert:
Federal Circuit Strengthens the Ability of Non-Practicing Entities to Assert Infringement In The International Trade Commission

Tue, 15 Jan 2013 00:00:00 -0600

The Federal Circuit’s January 10, 2013 decision in InterDigital Communications, LLC v. International Trade Commission, 2010-1093 (Fed. Cir. Jan. 10, 2013) (“InterDigital”) has strengthened the ability of non-practicing entities (“NPEs”) to satisfy the domestic industry requirement based solely on their licensing activities and thereby maintain a Section 337 Investigation in the International Trade Commission (“ITC”).

To prevail in an ITC Section 337 Investigation for patent infringement, a Complainant must establish that a domestic industry exists (or is in the process of being established) for “articles protected by the patent,” and that this industry is being harmed by the alleged infringement. One way to establish the existence of this domestic industry in the patented article is to show that there has been “substantial investment in its exploitation, including engineering, research and development, or licensing.” (11 U.S.C.§1337(a)(2) and 1337(a)(3)).

In InterDigital, a Federal Circuit panel consisting of Judges Mayer, Bryson and Newman addressed the question of whether InterDigital’s substantial investment in exploiting its intellectual property was “with respect to the articles protected by the patent,” when neither InterDigital nor any of its licensees manufactured such articles.

The panel majority (Judges Mayer and Bryson) concluded that neither the Complainant nor any other domestic party actually needed to manufacture a product covered by the patent to satisfy the domestic industry requirement,. The majority based its decision on the legislative history of the 1988 amendment to Section 337, which permitted a Complainant to rely on its licensing activities, per se, to establish a domestic industry. The majority concluded that it was the clear intent of Congress that so long as there was substantial investment that exploited the patent either through engineering, research and development or licensing, the Complainant need not show that it or any other domestic party manufactures a product covered by that patent to establish that a domestic industry existed.

Judge Newman issued a very lengthy dissenting opinion, which also relied heavily on the legislative history of the 1988 amendment. In contrast to the majority, Judge Newman argued that the purpose of the 1988 “licensing” amendment was not to protect the importation of products made in foreign countries, but rather to protect domestic industries who were manufacturing patented products, by providing non-manufacturing licensors to such industries, such as universities, with the ability to avail themselves of the ITC’s remedies.

The Supreme Court’s decision in eBay (eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006)), has made it very difficult for NPEs to obtain injunctive relief, because they are not competitors who can show irreparable harm based on the activities of the accused infringer. Since that time, the ITC has become an increasingly attractive alternative forum for asserting patent infringement, since an NPE Complainant in the ITC does not have to show irreparable harm in order to obtain an exclusion order. The InterDigital decision strengthens the ability of NPEs to use the exclusionary powers of the ITC, since it does not set a high burden for NPEs to meet the “domestic industry” requirement through licensing activities alone.

We will continue to monitor this important area of law. Please feel free to contact us to learn more about this decision and its impact on U.S. patent law.

Abraham Kasdan and Michael J. Kasdan are partners at Amster, Rothstein & Ebenstein LLP. Their practice specializes in intellectual property issues including litigating patent, trademark and other intellectual property disputes. They may be reached atakasdan@arelaw.com and mkasdan@arelaw.com.

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