Patent Reexamination Produces Extra-Innings Win in Seesaw Infringement Battle

By Meredith Ainbinder. A member of our Litigation Practice Group

This past July, the Federal Circuit delivered a ruling that has defendants in patent infringement lawsuits, business executives and attorneys exploring new ways to wield patent reexaminations as a weapon in hotly contested patent fights.

 

Baxter and Fresenius have been engaged in years of tough competition and a long, tortuous litigation concerning hemodialysis machines. Their lawsuit came to a surprising close when the Federal Circuit determined that a late-in-the-game invalidation of Baxter’s patent claims in the PTO stripped Baxter of a string of wins in the litigation.

While reexamination itself has long been an arrow in the quiver of a company accused of patent infringement in district court, it was previously thought that a reexamination proceeding would affect an ongoing lawsuit only if the trial judge stayed the matter pending the PTO’s determination or if the reexamination was completed before rulings issued on infringement and validity.

In Fresenius v. Baxter, both the district court and the Federal Circuit had already ruled that Fresenius infringed Baxter’s valid patent, but the question of a proper damages award was still the subject of ongoing appeals. For that reason, the Federal Circuit held that the matter had not been finally decided. It thus took into consideration the PTO’s belated invalidation of the patent claims and dismissed the lawsuit.

For Baxter and Fresenius, the devil was in the details. The lawsuit was filed in 2003. In 2007, the district court determined that certain Baxter patents were valid and infringed by Fresenius. The case went up on appeal. In 2009, the Federal Circuit affirmed the district court’s ruling on validity of one patent, but reversed on two others. The Federal Circuit then remanded the case to the district court to reconsider remedies in light of the changed ruling on the patents actually infringed. (more)

Fresh Guidance for Owners of Standard-Essential Patents: Reasonable Royalties Can Be Expected; So Can Penalties if You Overreach

By Thomas Carey. Chair of our Business Practice Group

 

Until recently, thousands of companies had agreed to license their standards-essential patents (SEPs) on fair, reasonable and non-discriminatory (FRAND) terms in the course of participating in standard-setting organizations (SSOs), even though they were uncertain as to how or whether those commitments could be enforced or interpreted. A recent flurry of activity has brought the meaning and enforceability of FRAND commitments into sharp focus.

The Cellphone Wars
The most exceptional event was the August 3, 2013 decision by the US Trade Representative to overturn an exclusion order issued by the US International Trade Commission (ITC), the first such reversal of the ITC in over 25 years^[1]. The ITC order would have prevented Apple from bringing certain of its products into the United States because they infringed a Samsung patent essential to the 3G wireless communications standard.

Samsung had participated in the development of that standard. In doing so, it had committed to make its SEPs available on FRAND terms. The Apple products in question adhered to the applicable standard and, according to the ITC, used the Samsung technology. Although Samsung had offered a license to Apple over the course of prolonged negotiations, Samsung was persistent in asking for a license back of certain Apple patents that were not SEPs and not subject to FRAND commitments.

Before the ITC rendered its decision, the Department of Justice and the US Patent and Trademark Office issued a joint statement supporting a theory that we have reported as gaining traction worldwide: that injunctive relief should not be available to remedy infringement of patents that are the subject of FRAND commitments. This theory is based on the doctrine that injunctive relief is available only where monetary damages is not an adequate remedy; by agreeing to license on FRAND terms, the patent holder has conceded that it would be adequately compensated for a license if a reasonable royalty were paid.

An ITC exclusion order is comparable to an injunction in that it prevents the importation, and thus the sale, of the infringing product. Many observers felt that the ITC should have denied Samsung its requested relief on this basis.

The ITC rejected this argument. Furthermore, it complained that the parties had not adequately briefed the question in the initial ITC proceedings before the administrative law judge, and therefore it was not in a good position to rule on whether the Samsung patent really was essential to the 3G standard, how important it was to the standard, and what precisely the FRAND obligations were.

One of the ITC’s commissioners argued in dissent that Samsung had violated its FRAND obligations by consistently tying its license offers to Apple to a cross-license of non-SEP patents. While the dissenter did not accept the notion that the ITC could never exclude the importation of products on the basis of infringement of FRAND-burdened SEPs, he felt that no exclusion order should be granted because of Samsung’s failure to offer FRAND terms and the relative unimportance of its patent to the 3G standard.

On August 3, 2013, the US Trade Representative, with the backing of the White House, reversed this ITC’s exclusion order. The Trade Representative’s decision gave the ITC two succinct instructions in handling similar cases in the future. It directed the ITC:

1. To consider whether exclusion orders of products infringing FRAND-burdened patents is an appropriate remedy at the outset of the proceeding, rather than at the end; and
2. To require the parties to develop the factual record relating to the FRAND issue in the initial ITC administrative proceeding.

(More)

New Obstacles Are Raised to Protecting Computer-Related Inventions

By Bruce Sunstein. A member of our Patent Practice Group

 

Recent court decisions make it more challenging to protect computer-related inventions with patents. On September 5, in the case of Accenture v. Guidewire,^[1] the Federal Circuit issued a split decision holding that a computer-related invention was not eligible to be patented.

At issue in Accenture was the validity of an already issued patent having claims directed to a system, and to a method, for generating tasks to be performed in an insurance organization. The system claims required an “insurance transaction database,” a “task library database,” a “client component,” and a “server component.” These items, which have sub-items that also appear in the claim, cooperate with each other to generate the tasks to be performed.

The patent also included a method claim that recited steps in a computer environment involving an event processor that interacts with an insurance transaction database, a task assistant, and a storing step.

In the past, this kind of structural detail in a computer-implemented system claim and a computer-implemented method claim would be sufficient to support a determination that the subject matter would be eligible for a patent, and, indeed, a patent with such claims was issued by the Patent and Trademark Office. Illustrating the structural detail in the system claim, the last subparagraph of the claim reads this way:

. . . wherein the event processor is triggered by application events associated with a change in the information, and sends an event trigger to the task engine; wherein in response to the event trigger, the task engine identifies rules in the task library database associated with the event and applies the information to the identified rules to determine the tasks to be completed, and populates on a task assistant the determined tasks to be completed, wherein the task assistant transmits the determined tasks to the client component.

 

Accenture put considerable additional detail into its patent, which has 15 figures, and occupies 110 columns of print. The patent is loaded with examples, including numerous excerpts of actual programming code, showing how Object Oriented Programming structures implement the invention.

Yet the Federal Circuit held that the subject matter defined by the system claims is not patent-eligible, relying on the court’s own non-precedential opinion in CLS Bank Int’l v. Alice Corp., decided in May 2013 .^[2] The plurality opinion in Alice Corp. in turn relied principally on the Supreme Court’s 2012 decision in Mayo Collaborative Servs. v. Prometheus Labs., Inc.^[3]

Determining that subject matter defined by a patent claim is eligible for a patent does not mean that the owner of such a patent claim deserves a patent, because the patent law also requires that the subject matter must be new and must not have been obvious to a person of ordinary skill in the field of the invention. These last two requirements correspond to sections 102 and 103 of the patent law.^{[4]
(More...)}

^[1]Accenture v. Guidewire, No. 2011-1486 (Fed. Cir. 9/5/13)(slip opinion).

^[2] Accenture v. Guidewire, slip opinion, page 8 et seq., citing CLS Bank Int’l v. Alice Corp., 717 F.3d 1269 (Fed. Cir. 2013) (en banc). Accenture had not appealed invalidation of the method claims.

^[3] Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2013), cited in CLS Bank Int’l v. Alice Corp., 717 F.3d 1269 at 1279.

^[4] 35 U.S.C. §§ 102 and 103.

Trademark Selection Guidelines

Choosing a Trademark. The choice of a trademark can be critical to the ability to protect one’s rights in a mark. A weak mark may not serve as a good identifier of source. A strong mark, which becomes identified in the mind of the consumer with a particular product or service—e.g., LEXUS® for luxury cars or AT&T® for long distance telephone services—makes possible more effective protection of rights. Thus, it is easier for the owner of a strong mark to preclude third parties from adopting similar marks than it is for those with weak marks. By helping our clients identify and select strong marks, we assist them in developing trademark portfolios that become valuable business assets.

It is natural for the owner of a trademark to want to choose a mark that tells consumers something about its products. Unfortunately, this understandable tendency can sometimes come into conflict with certain principles of trademark law. In the United States, as well as in most other jurisdictions, only “distinctive” terms may be protected as trademarks. Terms that are considered “merely descriptive” or generic are generally not able to function as trademarks and will not be protected.

The line between an imaginative mark that cleverly suggests the nature of the products for which it is used and a mark that is “merely descriptive” of those products can be quite fine. Case law in the United States describes a spectrum of types of marks: fanciful, arbitrary, suggestive, descriptive and generic.

The “Strength” of a Mark. The strongest marks are those that are considered fanciful. A fanciful mark is one that has been made up or invented by its owner. Fanciful marks are either previously unknown words, or archaic or obsolete terms that are no longer commonly known. Non-word marks (letters, numbers, designs and pictures) may also be considered fanciful. Examples of fanciful marks are EXXON®, KODAK®, and XEROX®.

Arbitrary marks are the next on the spectrum of trademark strength. An arbitrary mark is one that may have a commonly known meaning, but the meaning is unrelated to the products for which the mark is used. Examples of arbitrary marks are APPLE® (for computers), DELPHI™ (for computer software), and RADIUS™ (for a restaurant). (More)

Licensing and Strategic Partnering

Companies have different strengths. The company with creative, technically trained executives may turn out marvelous products that they have little idea how to market, while other companies may be marketing whizzes with little product flow. Out of this may be born licensing or strategic partnering transactions.

Licensing
Licensing may involve patents, trademarks, copyrights (including copyrights in software), or trade secrets and know-how. Different legal doctrines and issues will arise in each of these types of transactions. The primary business issues that need to be resolved may include:

1. Is the license exclusive or non-exclusive?
2. What is the royalty rate? Are there any lump-sum license fees? Are they to be credited against future royalties?
3. What is the duration of the license?
4. For what field of use is the license being granted?
5. What territory is covered?
6. Who is responsible for warranty coverage and customer support?
7. Who is responsible for enforcing any intellectual property rights that may be involved?
8. Are there any performance targets, such as sales volumes, that the licensee must achieve to keep its license rights alive?

Strategic Partnering
Strategic partnering refers to special business relationships that, while close, are in fact something less than a true partnership. They typically involve one company assisting another in making sales to the first company’s customers. These relationships often involve the payment of sales commissions, and require particular attention to issues of quality control and customer support and maintenance. Since both companies will be selling to the same customers as a team, each company has an interest in how well the other satisfies the customer. (More)

Copyright Flowchart

We have prepared a flowchart setting forth some general guidelines regarding the duration of United States federal statutory copyright. There are a number of exceptions to these guidelines. In most cases, these exceptions may involve expiration prior to the theoretical date indicated. However, in some cases, copyright protection may continue past the indicated date. In addition, some remnants of state common law copyright protection continue to exist, and may provide protection even when federal copyright does not. See, e.g., Capitol Records, Inc. v. Naxos of Am., Inc., 4 N.Y.3d 540 (2005) (holding that New York state common law copyright protects sound recordings made before 1972 until February 15, 2067).

View the flowchart.

Comparison of Types of Intellectual Property

What are the types of intellectual property, and what are the differences among them? We try to answer these questions succinctly, based on current U.S. law. The classic IP types are copyrights, patents, trademarks, and trade secrets.

Copyrights

Copyright law protects original works of authorship, such as books, films, music, but many other things as well. Copyright law protects only the original expression set forth in those works, however, and not the underlying ideas, procedures, processes, systems, methods of operation, concepts, principles, and discoveries themselves. In other words, copyright protects how something is expressed, not what is expressed.

In the United States, federal copyright law protects a wide range of works, including literary works; musical works and lyrics; dramatic works; pantomimes and choreographic works; pictorial, graphic, and sculptural works; motion pictures and other audiovisual works; sound recordings; and architectural works, and computer programs. Federal copyright law is set forth in Title 17 of the U.S. Code.

Under current U.S. law, a copyright begins on the date that a work is created and lasts until 70 years after its author’s death. If the author is anonymous or pseudonymous, or if the work is made for hire, the copyright term is 95 years from the date of publication or 120 years from the date of creation, whichever expires first.

The copyright in a work is separate from the work itself and, in the absence of an agreement to the contrary, the copyright is not transferred when the work itself is sold or given away. Thus, an artist who creates a painting and sells it to a collector has not given up the copyright in the work and may prevent the collector from making and selling posters or postcards of the painting. Although the collector does not own the copyright in the work, he or she does have the right to display and sell the work itself. (More)