Patent Owners Beware: Preliminary Response in Inter Partes Review Takes On New Significance

 

 

 

 

 

By Robert Asher and Emmanuel Filandrianos. Members of our Patent Practice Group

Inter partes review (“IPR”) has become the forum of choice for challenging the validity of a patent. Introduced in 2012 as part of the America Invents Act, it is a relatively new proceeding in the U.S. Patent and Trademark Office conducted by a panel of judges from the Patent Trial and Appeal Board (the “Board”). IPRs begin with a petitioner requesting that the IPR be instituted. Within three months of the request, the patent owner may choose to file a preliminary response arguing that the IPR should not be instituted.

If the Board is persuaded that the petitioner has not demonstrated a reasonable likelihood that it will prevail in its challenge of at least one claim, the IPR will be denied. Conversely, the Board may institute the IPR if it determines that the petitioner has a reasonable likelihood of invalidating at least one claim. If the IPR is instituted, the patent owner must respond with a “patent owner response” within three months of the institution date. The petitioner then gets a chance to file a “reply to the patent owner response.” The parties may also have an opportunity for oral argument thereafter. The entire procedure will be concluded with a final written decision from the Board within one year of the institution of the IPR.

Before May 2, 2016, the Board’s regulations provided an unfair advantage to petitioners at the pre-institution stage. Specifically, petitioners could have an expert in the field provide expert testimony in support of the petition, whereas patent owners were not allowed to use their own expert to support arguments made in the preliminary response. This oddity in the law allowed petitioners to rely on an expert to advance their claim-construction theory, while patent owners could only rely on attorney argument. The rules have since changed to allow patent owners as well to submit expert testimony in the preliminary response.

Even with this change, patent owners remain at a disadvantage in the pre-institution phase because of time constraints. Petitioners usually have months, even up to a year, after being sued for infringement to file their petition. Patent owners, by contrast, have only three months to provide their preliminary response. While petitioners have ample time to find an expert and put together the petition, patent owners have to find a suitable expert and prepare the preliminary response in a matter of months. More...

U.S. Supreme Court Eases Standards for Obtaining Enhanced Patent Damages for Willful Infringement

By Alexandra Cavazos, Ph. D.. A member of our Litigation Practice Group

The Patent Act permits a court to award damages to a successful plaintiff in an amount up to three times the actual damages suffered plus the plaintiff’s attorneys’ fees.  These “enhanced damages” under Section 284 of the Act have been part of U.S. patent law since its inception, but the standard for awarding them has shifted over time.  Enhanced damages were originally mandatory, but Congress later ordained a discretionary award in the belief that a defendant who acted out of ignorance of the law or with a good faith belief that no infringement was occurring should not punished in the same manner as a “wanton and malicious pirate.”

In re Seagate Technology, LLC  (2007) announced the Federal Circuit’s strict two-prong test for patentees seeking enhanced damages.  The first prong required the patentee to “show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.”  If the infringer made a reasonable invalidity or non-infringement argument during the litigation, the patentee could not meet this “objective” prong.  If the objective prong was met, the second Seagate prong required the patentee to show (also by clear and convincing evidence) that the risk of infringement “was either known or so obvious that it should have been known to the accused infringer.”

In 2015, the Supreme Court agreed to hear two cases—Halo Electronics, Inc. v. Pulse Electronics, Inc. and Stryker Corp. v. Zimmer Inc.—in order to decide if the Seagate test was consistent with the language of § 284. Earlier this month, the court disapproved the Seagate approach, giving renewed leverage to patentees who sue for infringement. (More...)

Assignor Estoppel May Apply to A Competitor That Never Owned (Or Assigned) the Patent

By Dorothy Wu Chiang. A member of our Patent Practice Group

 

 

 

When companies hire top talent away from competitors, they may very well also acquire patent exposure along with their new personnel through the doctrine of assignor estoppel. A recent decision in the Federal Circuit, MAG Aerospace Industries, Inc. v. B/E Aerospace, Inc., demonstrates how broadly assignor estoppel may be applied. In general, assignor estoppel prevents a company that sells a patent from challenging its validity in later litigation. However, under MAG, a company that never owned the patent may also be barred if it has hired an inventor named in the patent.

MAG Aerospace sued B/E Aerospace for infringement of three patents that named one of B/E’s leaders as an inventor. In this case, the inventor conceived of the patents well before joining B/E and had never worked for MAG; he invented the technology during his time at Evac International Oy, which later transferred the patents to MAG.

B/E defended the infringement claim in part by asserting that the patents were invalid.  The district court granted MAG summary judgment on that question, ruling that the doctrine of assignor estoppel prevented B/E from challenging the validity of the patents.

Assignor estoppel applies if a named inventor on a patent is “in privity” with the company being sued. In Shamrock Technologies, Inc. v. Medical Sterilization, Inc. (1990), the Federal Circuit held that the doctrine requires a court to consider a number of factors when determining whether this relationship exists, including:

• The inventor’s leadership role at the new employer;
• The inventor’s ownership stake in the defendant company/new employer;
• Whether the accused company changed course from manufacturing non-infringing goods to allegedly infringing activity after the inventor was hired;
• The inventor’s role in the allegedly infringing activities;
• Whether the inventor was hired to start the allegedly infringing operations;
• Whether the decision to manufacture the allegedly infringing product was made partly by the inventor;
• Whether the accused company began manufacturing the allegedly infringing product shortly after hiring the inventor; and
• Whether the inventor was in charge of the allegedly infringing operation.

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The Federal Circuit Helps Software Developers Overcome Patent-Eligibility Rejections under Alice

By Bruce Sunstein. A member of our Patent Practice Group

 

The Federal Circuit’s recent decision in Microsoft v. Enfish has given software developers a new tool—valuable at least sometimes—to resist Alice rejections of patent applications for computer-related inventions.

Under Alice Corp. v. CLS Bank (2014),  the Supreme Court expanded on its finding of “implicit exceptions” to the patent laws, holding that patent claims too closely related to a law of nature, natural phenomenon, or abstract idea are ineligible for patenting, despite the broad scope of section 101, the provision that defines eligible subject matter. The stated justification is that such patent claims would preempt the law of nature, natural phenomenon or abstract idea—the patent-ineligible concept—to which they relate and hinder scientific and technical advancement.

Alice prescribes a two-step test for determining whether patent claims are invalid. Under the first step, one determines whether the patent claims are directed to the patent-ineligible concept, namely a law of nature, natural phenomenon or abstract idea. If the claims are deemed directed to the patent-ineligible concept, then, under the second step, one considers the elements of each claim, both individually and as an ordered combination, to determine whether the claim has elements beyond the ineligible concept that would transform the nature of the claim into a patent-eligible application.  Although, as we discussed here and here, the reasoning behind the Alice decision is flawed, it remains the law of the land.

The two-step test of Alice has led to an epidemic of instances in which courts have invalidated patents for computer-related inventions and the Patent and Trademark Office has similarly rejected applications for such inventions.

In Enfish, the Federal Circuit considered a novel database structure that enables the user to organize data that, in conventional formats, would occupy numbers of tables.  The new database structure permits the user to organize the data in a single self-referential table. The Federal Circuit held this structure to be patent-eligible. Remarkably, Enfish is only the second instance in which the Federal Circuit has found software patent claims to be patent-eligible since the Supreme Court’s 2014 decision in Alice. (The first time was in DDR Holdings, discussed here.)

Enfish held the patent claims eligible on the ground that they were not “directed to” an abstract idea. In other words, the claims survived the first step of the two-step Alice test, and therefore the second step did not have to be applied. (MORE)

A User’s Guide to the EU-US Privacy Shield

By Thomas Carey. Chair of our Business Practice Group

US companies that rely on seamless receipt of personal data from EU businesses watched in horror as the EU-US Safe Harbor Program was blown up by the EU Court of Justice.

Officials on both sides of the Atlantic have rushed to fill the void.  What emerged, the EU-US Privacy Shield, is a stronger, more demanding set of rules that US companies may follow to avoid enforcement actions from the EU’s data protection authorities (DPAs).

Before it becomes operative, the Privacy Shield must clear a gantlet of regulatory processes that includes review by the EU DPA (which wrapped up on April 13, 2016), the consent of the EU Parliament, and adoption by the European Commission.  This process may be completed as early as June 2016.

The Privacy Shield has vociferous critics in both the US and Europe who remain mistrustful of US intelligence services and their propensity for snooping. On April 13, 2016, this criticism was echoed by the DPAs, who opined that the Privacy Shield is “not acceptable” because it permits mass surveillance of Europeans.   But because several governments have invested substantial resources in the development of the Privacy Shield, it is advisable for US businesses that receive personal data from the EU to seriously consider participating in the program and to plan now for that participation.

The Privacy Shield, like the Safe Harbor program, involves self-certification by companies seeking its protection.   It also is based upon the principles agreed by the EU countries in 1995 (the Privacy Principles):

• Notice to the individuals whose data is being transmitted
• Choice affording the individual the opportunity to opt out
• Security based upon reasonable and appropriate measures to protect the data
• Data integrity – the data must be accurate, complete and current
• Limited purpose – the company must state the purposes of the data collection and abide by its stated purposes (or get fresh consent for an expanded purpose)
• Access– individuals must have the right to obtain the data kept about them within a reasonable period of time
• Accountability for further transfers of data to subcontractors, etc.
• Recourse for individuals whose data has been misused.

Companies seeking the benefit of the Privacy Shield will have to publicly declare their commitment to the Privacy Principles, publicly disclose a privacy policy consistent with those principles and fully implement it.  Adherence to the Privacy Principles may be limited (a) to the extent necessary to meet national security, public interest, or law enforcement requirements; (b) to the extent that statute, regulation, or case law creates conflicting obligations or (c) to the extent expressly permitted by the EU members state affected by the data transfer.

Participants in the Privacy Shield program will be required to verify their compliance with their privacy commitments. This may be done through self-assessment or outside compliance reviews.  Under the self-assessment approach, the verification must indicate that:

• The published privacy policy is accurate, comprehensive, prominently displayed, completely implemented and accessible;
• The privacy policy conforms to the Privacy Shield Principles;
• Individuals are informed of any in-house arrangements for handling complaints and of the independent mechanisms through which they may pursue complaints;
• The company has in place procedures for training employees in the implementation of its privacy policy, and disciplining them for failure to follow it; and
• It has in place internal procedures for periodically conducting objective reviews of compliance with the above. (MORE)

Goodbye OHIM, Hello EUIPO− −Changes to Trademark Law in Europe

By Steven Abreu. A member of our Trademark Practice Group

On March 23, 2016, the European Union’s trademark authority, known as the Office of Harmonization in the Internal Market (OHIM), changed its name to the European Union Intellectual Property Office (EUIPO). This change was just one of several made in an effort to modernize the trademark protection scheme in the EU. While we practice directly in front of the US Trademark Office, many of our clients also choose to protect their brands overseas by participating in Europe’s trademark registration process. As a result, we have been actively discussing the changes with our European associates in order to make sure that our filing and opposition strategy remains current.

Here are seven things to know about the new regulations now in effect:

• In addition to the change of the name of the office, the name of the resulting registration, previously known as a Community Trademark (CTM), has changed to a European Union Trademark (EUTM).
• Because of the name changes to the office and the registration, the European authorities have been warning their customers to expect a spike in the activity of scammers and unofficial publication services that may seek to take advantage of the confusion that the name change may create.
• Previously an application could be filed in the European Union in one, two or three international trademark classes for the same filing fee, namely, 1,050 euros. The fact that three classes could be included in the application for the same price as one class led many applicants to file in three classes of goods and services even if the mark was being used in only one or two classes. This was especially true of European-based applicants. Now  a base application in one class costs 900 euros and each additional class 150 euros. We believe the price changes will lead to fewer applications in three classes when only one class is truly of interest.
• Trademark registrations in Europe are vulnerable to cancellation on the basis of non-use after a five-year grace period expires. Under the prior regulations the five-year clock began at the date of the registration. Under the new regulations it starts ticking from the earliest priority date in the application (either the filing date or the date of any priority claim).
• Requirements for the description of goods and services in Europe are far more lax than the USPTO’s requirement of specificity and definiteness. In Europe some applicants employed a filing strategy that used class subheadings as a shorthand to designate any and all goods or services falling under that subheading. By using all the subheadings, applicants believed that they could cover the entire class. However, a recent European decision in the IP Translator case put a stop to that practice and held that subheadings covered only the goods which were logically described in the heading itself. The new regulations provide applicants who used the subheading strategy a six-month window in which to name the specific goods they wish to protect under each subheading. Since we have routinely advised against this strategy, this change should not affect our clients’ rights. (MORE)

How Should the PTO Interpret Patent Claims? The Federal Circuit Weighs In, Yet Again

By Bruce Sunstein. A member of our Patent Practice Group

 

The claims of a patent determine its power. Unlicensed activities that fall within the scope of a patent’s claims can be subject to royalties or an injunction, but when claims cover subject matter deemed to be within the prior art, the claims can be invalidated.

How a claim is interpreted can often make the difference between whether it is so narrow that it is not infringed, or broad enough to cover a third party’s activity (so as to give the patent owner damages or an injunction or both) or so broad that it covers prior art (so as to be invalid).

For the patent owner, the claims of an ideal patent are a little like the porridge of Goldilocks and the Three Bears. They should be in the middle between too much and too little—but in this case, we are talking about breadth of claims instead of the temperature of porridge. Ideally for the patent owner, the claims are broad enough to cover any product or method that may be used by a competitor, but narrow enough to avoid covering prior art that would invalidate the claims.

How a patent claim is interpreted, of course, depends on the words used in the claim. But the interpretation of a claim also depends on where the claim is being interpreted. If a claim is interpreted by a court, one set of rules comes into play, but if by the Patent and Trademark Office (the “PTO”), another set of rules comes into play.

The dissimilar impact wrought by these two sets of rules was highlighted in a February 22, 2016 decision by the Federal Circuit Court of Appeals, PPC Broadband, Inc. v. Corning Optical Communications RF, LLC . The case involved appeals from a number of PTO proceedings, called IPRs (Inter Partes Reviews), in which claims of two patents owned by PPC Broadband were attacked by Corning Optical and invalidated on the basis that they covered subject matter in the prior art. (MORE)