Transcript What’s with the method Claims?

Current Topics in U.S. Patent Law
2006
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1. Is the U.S. Supreme Court
rewriting Patent Law
2. AT&T v. Microsoft and
35 U.S.C. Section 271(f)
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1. THE U.S. SUPREME COURT
IS MOVING
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Is the Supreme Court Changing
United States Patent Rights?
Are patent rights
– Only “To promote the progress of science and
useful arts”
– Not to promote the accumulation of wealth?
• Too many patents?
• Too many bad patents?
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• Patent Trolls?
Illinois Tool Works v. Independent Ink,
126 S.Ct. 1281
(March 1, 2006)
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Illinois Tool Works v. Independent Ink
• Minor case
– But shows interest
• Overturned prior precedent that market power
arises from the mere ownership of patent rights
• plaintiffs alleging a patent tying violation must
now prove that defendant has market power in
the patented tying product
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Merck KGaA v. Integra Lifesciences I, Ltd.,
545 U.S. 193
(June 13, 2005)
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Merck KGaA v. Integra Lifesciences
• U.S. law, unlike Europe, has no “experimental
exception”
• Statutory exception, §271(e)(1) for drug
development
• Court expanded freedom to operate under
§271(e)(1)
• Scientific testing is a process of "trial and
error"
• A pro-development, but anti-property right
policy
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eBay Inc. v. MercExchange, L.L.C.,
126 S.Ct. 1837
(May 15, 2006)
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eBay v. MercExchange con’t
CASE HISTORY:
Trial (District) Court determined that eBay infringed
MercExchange patent, and awarded damages of
$25.5 million to MercExchange,
But Court denied injunctive relief.
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eBay v. MercExchange con’t
CASE HISTORY:
The Federal Circuit Court of Appeals reversed the District
Court’s denial of a permanent injunction because:
– The general rule was that a permanent injunction would
issue once infringement and validity had been adjudged
• the right to exclude under a patent “is but the
essence of the concept of property.”
– Only in rare instances was injunctive relief denied
• E.g. to protect public interest
• “general concern regarding business-method patents
… is not the type of important public need that
justifies the unusual step of denying injunctive relief.”
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eBay v. MercExchange con’t
LEGAL CONTEXT:
A Patentee’s right to exclude other is established by
the United States Constitution:
“The Congress shall have power . . . To promote
the progress of science and useful arts, by
securing for limited times to authors and inventors
the exclusive right to their respective writings and
discoveries.”
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eBay v. MercExchange con’t
LEGAL CONTEXT:
However, patent statutes vest the district courts with
discretion:
35 USC § 283:
“The several courts having jurisdiction of cases
under this title may grant injunctions in accordance
with the principles of equity to prevent the violation
of any right secured by patent, on such terms as the
court deems reasonable.”
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eBay v. MercExchange con’t
The Supreme Court Unanimous Opinion:
District Court’s may not depart from the traditional
four-factor test required to issue equitable remedies
such as injunctions.
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eBay v. MercExchange con’t
The Supreme Court Unanimous Opinion:
All patentees seeking injunction must demonstrate:
– irreparable injury to patentee
– money damages inadequate to compensate
patentee
– balance of hardships favors patentee
– public interest favors patentee
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eBay v. MercExchange con’t
The Supreme Court Unanimous Opinion:
Both Appellate and District Courts misapplied the fourfactors test for injunctive relief:
– The Federal Circuit’s general/categorical rule in
favor of patent injunctions absent special
circumstances was too broad.
– The District court’s categorical denial of injunction
relief to patentees not in the market was too narrow
and failed to address the equities of non-market
participants such as “university researchers” or
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“self-made inventors”.
eBay v. MercExchange con’t
General Comments
Decision is viewed as surprising and
problematic for various reasons:
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•
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Overturned generally-accepted view
Sparse analysis
Left more questions than it resolved
Left law to be developed by trial and error in lower
courts
• Mixed signals from the Justices
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eBay v. MercExchange con’t
General Comments con’t.
The concurring opinions appear to diverge on how
the courts should apply prior precedent in patent
injunction cases to the consideration of patent
injunctions going forward
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eBay v. MercExchange con’t
• Roberts Concurrence
Joined by Scalia and Ginsburg.
– Since the 19th century, courts have granted
injunctive relief in the vast majority of cases.
– Courts should not apply four factor test “on an
entirely clean slate.”
– “When it comes to discerning and applying
those standards, in this area as others, ‘a page
of history is worth a volume of logic.’”
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eBay v. MercExchange con’t
• Kennedy Concurrence
Joined by Stevens, Souter and Breyer
– “The letter of the historical practice… is most
helpful and instructive when the circumstances of
a case bear substantial parallels to litigation the
courts have confronted before.”
– “The nature of the patent being enforced and the
economic function of the patent holder present
considerations quite unlike earlier cases.”
– “An industry has developed in which firms use
patents not as a basis for producing and selling
goods but, instead, primarily for obtaining
licensing fees.”
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eBay v. MercExchange con’t
What Happens Next
• In cases that do not settle, additional litigation
• Legal framework to apply equity will need to be
developed, first at District Courts, then shaped by
Federal Circuit.
• Forum shopping for injunction seekers if Federal
Circuit is slow to correct differing approaches by
District Courts
• Potentially reduce fear of patent trolls, but
• Unlikely to reduce actual litigation, and could
potentially increase
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eBay v. MercExchange con’t
Effect on European Companies
May reduce value of US patents for any European
company without a licensee or operations in, and
who does not import products into, the United
States.
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eBay v. MercExchange con’t
Effect on European Companies
Holders of U.S. patents outside the U.S. should
consider:
– Placing patents in the name of a subsidiary or
related entity active in U.S. market relevant to
the patent.
– Granting an exclusive license to such entity
– Assigning patent to an unrelated U.S. entity
active in market, with grant back of an
exclusive license.
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Laboratory Corp. v. Metabolite Labs
Review Summarily Vacated
June 22, 2006
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Lab Corp. v. Metabolite Labs
• Claim: “A method for detecting a deficiency of cobalamin
or folate in warm-blooded animals comprising the steps
of: assaying a body fluid for an elevated level of total
homocysteine; and correlating an elevated level of total
homocysteine in said body fluid with a deficiency of
cobalamin or folate.”
– Decision below, 370 F.3d 1354 (Fed. Cir. 2004), Lab
Corp. was found to be liable for inducing infringement
of the method claims by advertising its tests and
providing doctors with the test results
• Supreme Court agreed to review
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Supreme Court Question
• Requested the government’s view to the question:
“Respondent's patent claims a method for detecting a
form of vitamin B deficiency, which focuses upon a
correlation in the human body between elevated levels
of certain amino acids and deficient levels of vitamin
B. The method consists of the following: First,
measure the level of the relevant amino acids using
any device, whether the device is, or is not, patented;
second, notice whether the amino acid level is
elevated and, if so, conclude that a vitamin B
deficiency exists.
Is the patent invalid because one cannot patent laws of
nature, natural phenomena, and abstract ideas?”
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Then . . .
• 17 amicus briefs
• Oral arguments on March 21, 2006
• On June 22, 2006, the Supreme Court issued its
decision
• Petition for review was improperly granted
• Decision below stands
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Lesson from Court’s Request and
Subsequent Dismissal
• Court accepted review because concern that Federal
Circuit over-extended patentable matter
• The facts apparently were not satisfactory for decision
• Court will take another case
• Scope of patentable subject matter under U.S. law
remains uncertain
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KSR Intern. Co. v. Teleflex Inc
Petition for Review granted 26 June 2006
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Issue Presented by KSR v. Teleflex
– May an invention be held to be obvious if there is no
“teaching, suggestion, or motivation that would have
led a person of ordinary skill in the art to combine the
relevant prior art teachings in the manner claimed.”
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KSR v. Teleflex
• Large number of amicus briefs being filed
• Many consider that Supreme Court accepted
case to rewrite or restate obviousness (“lack of
inventive step”) standard
• Obviousness is currently very weak defense,
due in part to the “motivation” requirement
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MedImmune v. Genentech
Oral Argument: 4 October 2006
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Question before the Supreme Court
“[Must] a patent licensee … refuse to pay
royalties and commit material breach of the
license agreement before suing to declare
the patent invalid, unenforceable or not
infringed?”
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U.S. Government Position
[The Court’s] limitation on the availability of declaratory relief
cannot be squared with this Court’s cases or with the
congressional purposes underlying the Act. . . . A
declaratory judgment plaintiff need not run the risks entailed
in actually violating the law in order to make out an “actual
controversy.” . . . Yet the [Court insists that] a patent
licensee . . . commit a material breach of its license
agreement in order to create an “actual controversy.” That
result is contrary to the congressional purposes behind the
Act, which was adopted to free parties of the requirement
that they act at their peril on their own interpretation of their
rights before being able to obtain a judicial construction of
those rights.
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Ramifications of Potential Decision
• Court may hold that patent licensee may maintain
license while suing to declare the patent invalid or
not infringed
• Licensee is in situation of “tails I win, heads you lose
• Question whether “no-challenge” clauses will be
enforceable
• Consequences so negative that Congress might
have to ultimately legislate, but years of problems
ahead
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Effect on European Companies
• European licensors run risk of declaratory
judgment lawsuits on the “home turf” of U.S.
licensee
• Particular danger where some judges tend to
favor local companies against European
interests
• European licensors may be particularly hurt by
dual effect of possible loss of injunction right
while facing suits to challenge licensed patents
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General Conclusions
• Large scale dissatisfaction with current state of
U.S. Patent Law
• Series of legislations introduced to improve
– Substantive
• First-to-file, not first-to-invent
– Procedure
• Post-filing opposition
– Litigation
• Shifting legal fees to loser
• U.S. Supreme Court has heard complaints and
is legislating corrections
• “Stay tuned”
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2. AT&T v. Microsoft
(cert pending)
and
35 U.S.C. § 271(f)
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How did § 271(f) become law?
• Shrimp and need to “devein”
• Laitram Corp. invents machine and patents
• Competitor Deepsouth Packing patent counsel finds a
loophole
• Manufacture machines in U.S. in three parts; ship for
assembly and sale
• In Deepsouth Packing Co. v. Laitram Corp., 406 U.S.
518 (1972) Court says no infringement
• Congress tries to close the loophole by 35 U.S.C. §
271(f):
• (f)(1) Whoever… supplies…from the United
States…components of a patented invention…shall be
liable as an infringer.
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Fall and Rise of § 271(f)
• statute languishes, because U.S.
manufacturing is being off-shored
• Software now makes § 271(f) critical
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What can be exported under §271(f)?
• 271(f) provides:
– (1) Whoever without authority supplies or causes to
be supplied in or from the United States all or a
substantial portion of the components of a patented
invention, where such components are uncombined in
whole or in part, in such manner as to actively induce
the combination of such components outside of the
United States in a manner that would infringe the
patent if such combination occurred within the United
States, shall be liable as an infringer.
– (2) [exporting any “especially made” component
knowing that it will be combined]
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What can be exported under §271(f)?
• Standard Havens Products, Inc. v. Gencor Industries,
Inc., 953 F.3d 1360 (Fed. Cir. 1991)
– § 271(f) does not apply to process claims
– Patent claimed a method of producing asphalt.
Defendant sold a plant to a Canadian customer who
assembled it and made asphalt outside of the United
States. None of the asphalt was shipped back into the
United States.
– “we do not find the provisions of 35 U.S.C.§ 271(f)
(1988) implicated”—even though the plant was
specifically designed for the patented process.
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What can be exported under § 271(f)?
•
NTP v. RIM, 418 F.3d 1282 (Fed. Cir. 2005)
– Export of information not infringing
– “[I]t is difficult to conceive of how one might supply or
cause to be supplied … the steps of a patented
method in the sense contemplated by the phrase
‘components of a patented invention’ in § 271(f).” 418
F.3d at 1322.
– “Because the “transmission of information,” like the
“production of information,” does not entail the
manufacturing of a physical product, section 271(g)
does not apply to the asserted method claims in this
case any more than it did in Bayer.”
– What is information? How different is it from
“computer program product”?
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Bayer--Importation under § 271(g)?
35 U.S.C. § 271(g) provides:
Whoever without authority imports into the United States
… a product which is made by a process patented in the
United States shall be liable as an infringer…. A product
which is made by a patented process will, for purposes
of this title, not be considered to be so made after — (1)
it is materially changed by subsequent processes; or (2)
it becomes a trivial and nonessential component of
another product.
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What can be imported under § 271(g)?
• Bayer v. Housey Pharms., 340 F.3d 1367 (Fed. Cir. 2003)
– Patent to a process of screening for a drug
• Nothing in the patent about the drug itself
– Bayer did the screening in Europe and imported the
data
– Section 271(g) limited to articles “manufactured”
abroad; data not “product made”
• Relied heavily on dictionaries in interpreting statutory
languages
– “a person possessing the allegedly infringing
information could…possibly infringe by merely entering
the country.”
– Again, what is information? How different is it from
“computer program product”?
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What is Affected Under §271(f)?
• Eolas v. MSFT, 399 F.3d 1325 (Fed. Cir. 2005)
– Claims to Web browsing method, and “computer program
product.”
• What makes the product claims (computer readable
medium) patentable?
– Exported “golden master disk,” itself not a physical part of
infringing product.
– CAFC held: “computer readable program code” is a
component of the claimed invention and that an exact
duplicate of the software code on the golden master disks
is incorporated as an operating element in an infringing
device
– How about the fact that only one copy of the “product”
was exported?
– cert. denied
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What can be exported under § 271(f)?
• Union Carbide Chemicals v. Shell Oil
– Exported unpatented catalysts for use in process
patented in the U.S., are found to be infringing and
should be included in damage calculations
• Citing Eolas, and distinguished NTP v. RIM (where
infringement was unquestionable under § 271(a))
• Remember Standard Havens?
– petition for en banc hearing denied, with three judges
dissenting
• Information product claims appear to have more
protection than “tangible products”?
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The new developing § 271(f) law
• Component can be anything that is, in some broad sense,
“part” of an invention
• A component need not be physical
• A component need not be a claim element
• The component supplied need not be a part of the product
manufactured overseas
• Sufficient if the component is somehow used to make the
overseas product
• The “idea” for an invention is a “part” of the invention and
therefore within the expanded definition of component
• The actual mode of transmission or “supply” is irrelevant
• For purposes of 271(f), the copying of a “component”
overseas is equal to the supply of the component from the
United States
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Effect on European Companies
• Creates disincentive for European companies in emerging
technology areas to base their development operations in
the U.S.
• Could lead to multiple recoveries for the same
infringement
• Should lead to renewed or revised audits of licensing
obligations
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Thank You!
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