Key Recent US Supreme Court and Federal Circuit Court ... · PDF file–Intervention: No statutory right ... 1952 statute was an effort to codify existing law. ... Without direct...

Key Recent US Supreme Court and

Federal Circuit Court Decisions

That Impact Patent Law

June 22, 2011

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Panelists

Monty Agarwal Robert P. Taylor Beth H. Parker Michael A. Berta

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Update: False Patent Marking

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Monty Agarwal

35 U.S.C. § 292

a) Whoever marks upon, or affixes to, or uses in advertising in

connection with any unpatented article, the word ―patent‖ or

any word or number importing that the same is patented, for

the purpose of deceiving the public . . . [s]hall be fined not

more than US$500 for every such offense.

b) Any person may sue for the penalty—one‐half shall go to

the United States.

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Opening the Floodgates

Forest Group, Inc. v. Bon Tool Co., 590 F.3d 1295

(Fed. Cir. 2009)

Fined not more than US$500 for every such offense

Every such offense now means ―each article‖ as

opposed to ―continuous production‖ that could

include entire product line.

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Challenge To Standing To Sue

Stauffer v. Brooks Bros., 619 F.3d 1321 (Fed. Cir. 2010)

– Any person may sue for the penalty?

– Any person can ―stand in the government’s stead, as assignees

of the government’s own claims.‖

– There is no requirement for standing under Rule that the

individual qui tam plaintiff has, itself, suffered injury from the

alleged false marking.

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Heightened Pleading Requirement

In re BP Lubricants, Misc. No. 960, slip op. at 2, (Fed.

Cir. Mar. 15, 2011).

– For the purpose of deceiving the public

– Federal Rule 9(b)’s particularity requirement applies

– Insufficient when complaint only asserts conclusory allegations

that a defendant is a ―sophisticated company‖ and ―knew or

should have known‖ that the patent expired

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Challenge To Constitutionality

Unique Product Solutions v. Hy Grade Valve, Inc.

(D. Ohio, Feb. 2011).

– One‐half shall go to the United States

– The Take Care Clause: President ―shall take Care that the Laws

be faithfully executed.‖ U.S. Const. art. II, § 3.

– Danger of this uncontrolled privatization of law enforcement

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Challenge to Constitutionality

Any private entity can file in the name of the United States

– Filing: No approval or notice to government

– Litigation: No control or oversight

– Intervention: No statutory right to intervene

– Participation: No right to limit plaintiff

– Dismissal: No right for government to dismiss

– Settle: Plaintiff can settle without involvement or approval

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Legislative Reform

Senate: S.23 – Passed on March 8, 2011

– United States may sue or any person competitively injured

– The amendments shall apply to all cases, without exception,

pending on or after the date of the enactment of this Act

House: HR 1249 – Debate Begins

– Adds three-year safe harbor for expired patents

– Allows ―expired‖ to be added or posted on the internet

Proving Invalidity of Issued Patents

Affirmation of the “clear and convincing”

evidentiary standard

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Robert P. Taylor

Microsoft v. i4i, US Supreme Court

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i4i patent covers a method for editing XML documents.

Microsoft offered evidence that the patented process was sold by

plaintiff more than one year prior to filing.

Jury apparently did not believe Microsoft’s evidence.

Microsoft argued that jury should have been instructed to use

preponderance of evidence standard.

– Prior art presented to jury was different from prior art presented to the

Patent Office.

– Prior art based on ―on sale‖ doctrine could not have been located by the

examiner.

Based on long line of Federal Circuit precedent, trial court refused

and Federal Circuit affirmed.

History of Clear and Convincing Standard

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Most early cases held that more than a simple

―preponderance of evidence‖ is needed.

Radio Engineering Corp. v. Radio Engineering

Laboratories, 293 U.S. 1 (1934) (―there is a presumption

of validity … not to be overthrown except by clear and

cogent evidence.‖)

35 U.S.C. § 282 – patents are presumed valid.

Federal Circuit held very early that ―clear and

convincing‖ evidence was needed to overcome

presumption.

Supreme Court Affirmed

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Presumption of validity statute is silent about

evidentiary standard.

1952 statute was an effort to codify existing law.

Federal Circuit standard has been in place for many

years with no Congressional intervention.

Courts should exercise caution before disrupting settled

property rights.

Cumbersome to use separate standards of proof for

different types of evidence in same trial.

It is normally impossible to know with certainty the prior

art actually considered by examiner.

Reexamination

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Arguably, preponderance of the evidence standard

applies in reexamination proceedings.

Both ex parte and inter partes reexaminations are

available to both the patent owner and a challenger.

Reexaminations are often quicker than litigation,

though not always.

Courts have wide discretion as to stays of litigation

pending reexamination.

There are statutory limits on grounds for reexamination.

Many Forms of Prior Art Are Affected

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Dates of publications often are not clear.

Actual date of publications may not be the date shown

on the face of prior art reference.

Precise structure of products offered for sale in prior time

can be difficult to prove.

Precise point at which something has gone ―on sale‖

may be very unclear.

Pfaff requires that an invention be ―ready for patenting‖

before it can satisfy §102(b).

Conception, as proof of date of invention, must be

corroborated by tangible evidence.

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Therasense v. Becton Dickinson

The new standard of proof for inequitable conduct

and the future of unenforceability claims

Michael A. Berta

Overview

Therasense—Case Background

The Federal Circuit’s Holding on Inequitable Conduct

Looking to the Future

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Therasense – Relevant Facts

EPO prosecution of original Abbott patent—Abbott

asserts arguments about scope of patent

Later, in the PTO, where the EPO Abbott patent was

cited as prior art to a new US Abbott patent, Abbott

made inconsistent statements about the scope of

the EPO patent

US counsel reviewed and consciously decided not

to disclose EPO material to PTO

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Therasense – Relevant Procedural History

N.D. Cal. bench trial (Alsup) found for defendant on

non-infringement, invalidity and unenforceability

Fed. Cir. panel affirmed (Dyk), but with a vigorous

dissent on the issue of unenforceability (Linn)

On May 25, 2011 Fed. Cir. remanded on

unenforceability decision en banc in a 6-1-4 split

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The Therasense Standard for Inequitable Conduct

Intent and materiality are separate requirements

– Use of a ―sliding scale‖ is impermissible

– May not infer intent solely from materiality

Materiality

– Requires ―but-for materiality‖ or ―affirmative

egregious misconduct‖

Intent

– Intent to deceive must be ―the single most reasonable inference‖

– Knowledge of art and failure to disclose (alone) cannot support a

finding of deceptive intent

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Inequitable Conduct: Intent Under Therasense

Therasense confirms the prevailing trend in the Federal

Circuit on intent

– Requires evidence of specific intent (―knowing and deliberate‖)

– Makes clear that withholding of material art does not lead to an

―inference‖ of intent

– Relieves pressure to provide explanation of withholding

– Removes sliding scale shortcut

Clarifications on intent standard widely accepted

– Dissent in agreement; most of amici as well

– En banc nature of change should make a difference in frequency

of inequitable conduct cases going to trial

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Inequitable Conduct: Materiality Under Therasense

Majority standard is ―But-for +‖– But-for standard

– ―plus‖ acknowledges Supreme Court precedent by creating exception for ―affirmative egregious misconduct‖ such as false affidavits

– Standard raised to address proliferation of inequitable conduct charges

Minority position – Critical of but-for standard as inconsistent with precedent

– Advocates use of PTO Rule 56

Concurrence– But-for, plus false representations, plus offensive behavior

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Looking to the Future of Inequitable Conduct

Inequitable Conduct charges in Litigation– Changes to materiality standard may not solve the problem

presented regarding proliferation of inequitable conduct charges (but see Exergen)

– Clear articulation of intent standard and elimination of sliding scale should make a difference on summary judgment resolution of claims

– Scope of remedy changes (whole patent versus particular claims)

Patent prosecution practice– PTO rule changes?

– In the absence of harmonization, will this make a difference?

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Must the party who “actively induces infringement of

a patent” under 35 U.S.C. § 271(b) know that the

induced acts constitute patent infringement?

Beth H. Parker

Global-Tech Appliances, Inc. v. SEB S.A.,

US Supreme Court (May 31, 2011)

Patent for innovative ―cool touch‖ deep fryer designed by SEB

Pentalpha purchased SEB fryer in Hong Kong and copied it

Pentalpha retained attorney to conduct right-to-use study

Did not tell attorney it had copied SEB’s design

Attorney issued right-to-use opinion

Pentalpha sold fryers in US cheaper than SEB’s fryers

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Lower Court Proceedings

SEB sued Sunbeam, who was selling Pentalpha fryers

in US

Sunbeam notified Pentalpha of suit, who kept selling

fryers to other distributors

SEB sued Pentalpha for direct infringement and active

inducement

– Jury found for SEB on both grounds

– Also willfulness

Post trial motions: Pentalpha argued no knowledge of

SEB’s patent until notified of Sunbeam suit

– District court rejected argument

– Federal Circuit affirmed 28

Huge amici interest

– 9 amici for petitioner, including many preeminent tech

companies, law and business professors, trade associations

– 3 amici for neither party, including IPO, MPAA, RIAA and

Federal Circuit Bar Association

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US Supreme Court

Inducement: Level of intent unclear

Patent Act §271 (b): ―Whoever actively induces

infringement of a patent shall be liable as an infringer‖

– Some intent is required

– Unclear: What level?

• Deliberate indifference

• Purposeful, culpable expression and conduct to encourage

infringement

– § 271(b) ambiguous

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Adopts same standard as US Supreme Court previously

adopted for:

– § 271(c) liability for contributory infringement Aro II (1964)

– For contributory copyright infringement Grokster (2005)

§ 271(b) conduct requires knowledge that the induced acts

constitute patent infringement

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Inducement: Actual knowledge required

Reasoning:

– Contributory infringement requires knowledge of existence of

patent that is infringed.

– Induced infringement, pre-1952 codification, was not separate

theory of indirect liability.

– Therefore, induced infringement requires knowledge that the

induced acts constitute patent infringement.

Rejects test of deliberate indifference to a known risk

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Inducement: Actual knowledge required

Yet affirms judgment of liability under doctrine of

willful blindness

– Criminal law concept

– Cannot deliberately shield oneself from clear evidence of critical

facts that are strongly suggested by circumstances

– Patent law: Actively encourages others to violate patent rights

and take deliberate steps to remain ignorant of those rights

despite high probability that they exist and are being infringed

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Inducement: Willful Blindness

Willful Blindness

Two requirements for willful blindness:

1. Defendant must subjectively believe that there is

a high probability that a fact exists.

2. Defendant must take deliberate actions to avoid

learning of that fact.

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Willful Blindness

Surpasses negligence and recklessness

– Negligence: Should have known of a similar risk but, in fact,

did not

– Reckless: Merely knows of substantial and unjustified risk

of wrongdoing

– Willful blindness: Takes deliberate actions to avoid

confirming a high probability of wrongdoing; can almost

be said that defendant actually knew

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Application here – Finding of willful blindness

– SEB’s fryer was innovative product, had growing sales

– Pentalpha did market research

– Pentalpha copied SEB’s fryer

– Pentalpha’s president had his own patents, knew overseas

products often did not include patent markings

– Chose not to tell attorney that fryer was knock off

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Willful Blindness

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Joint/Divided Infringement

When multiple actors combine

to carry out steps of a patent

Robert P. Taylor

Federal Circuit grants en banc review in two

cases of divided infringement

Akamai v. Limelight

McKesson Technologies v. Epic Systems

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Joint Infringement of Method Claims

Is Liability Based on Section

271(a), (b), (c) or None of the Above?

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When Multiple Entities Combine to Infringe

Individual entities combine to practice some but not all the

elements of a method claim.

All of the claims are implicated by the work of multiple entities.

Akamai v. Limelight – no liability.

– Rationale: undermines Section 271(b) and (c) to allow.

– Single entity must practice all the claims.

McKesson v. Epic Systems – no liability.

– No direct infringement.

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Sections 271(a), (b) and (c) not a perfect fit

Is there direct infringement? Without direct infringement, can there

be indirect?

Joint tortfeasor liability is normally vicarious – agency theory, joint

conduct

Need limits – no actual direct infringement by either party.

Without direct infringement – not inducement or contributory

Process portion of 271(c) assumes sale of material

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En banc Briefing

Outcomes in Akamai and McKesson not good

Law developed in BMC and Miniauction

BMC – one entity must ―direct or control‖

Akamai – must be agency or contract

Unclear where court will end up – is there an ambit of common

law infringement outside 271?

Many amici

Stay tuned . . . . . .

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Contact Us:

Monty Agarwal

Partner

San Francisco

tel: +1 415.356.3042

[email protected]

Robert P. Taylor

Senior Counsel

San Francisco

tel: +1 415.356.3084

[email protected]

Beth H. Parker

Partner

San Francisco

tel: +1 415.356.3051

[email protected]

Michael A. Berta

Partner

San Francisco

tel: +1 415.356.3079

[email protected]

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