Center for Advanced Study & Research on Intellectual Property

 

CASRIP Newsletter - Spring 2009, Volume 16, Issue 2

2008 Patent Case Law Review

by Toshiko Takenaka[*]

Supreme Court

Patent Exhaustion

Quanta Computer, Inc. v. LG Elecs., Inc., 128 S. Ct. 2109, 170 L. Ed. 2d 996, 86 U.S.P.Q.2d 1673 (U.S. 2008)

Background

Patentee, LG Electronics, Inc.(“LGE”), owned a portfolio of computer technology patents, including the three patents at issue: a patent directing a computer chip (“Component Patent”), another patent directing a method using the chip (“Method Patent”), and a third patent directing to a system incorporating the chip (“System Patent”). LGE and Intel (who is not a part of the case) entered into a cross-license agreement (“License Agreement”) permitting Intel to make, sell, offer to sell, etc of microprocessors and chips (“Intel Products”) implementing LGE patents including the three patents at issue. Although the License Agreement included some limitations preventing a grant of an explicit or implicit license to a third party with respect to combination products of the licensed products, it expressly said that it did not intend to alter the rule of patent exhaustion. In a separate agreement (“Master Agreement”) Intel agreed to give written notice to its customers about its license with LGE, not giving any license to combination products incorporating its licensed products. The Master Agreement made it clear that its breach would not have any affect on the License Agreement.

According to the Agreements, Intel Products were sold with a written notice of the effect of the license. Despite the notice, Quanta and other computer manufacturers (collectively “Quanta”) purchased Intel Products and manufactured computer systems by combining Intel Products with non-Intel components in a way to practice the Method Patent. LGE sued Quanta for infringement of the Method and System Patents. Quanta argued that the sales of the chip covered by the Component Patent exhausted both Method and System Patents.

The District Court agreed with Quanta and found exhaustion of the System Patent although the Intel Products did not fully practice the System Patent because the Intel Products had no reasonable non-infringing use. However, it refused to apply the exhaustion doctrine to the Method Patent.

The Federal Circuit agreed with the district court in refusing to find exhaustion of the Method Patent, but reversed the non-infringement finding of the System Patent because it found that the sale of Intel Products was conditional in limiting the license for use of the products only in combination with Intel components.

Issue

  1. Whether the patent exhaustion doctrine applies to method patents?
  2. Whether the sales of Intel Products to Quanta were conditional?
  3. Whether a sale of a product exhausts a patent even though the product does not fully practice the Patents at issue?

Held

  1. Yes.
  2. No.
  3. Yes, if the product sufficiently embodies the patent such that its only and intended use is to be finished under the terms of the patent. Such product sufficiently embodies the patent if it embodies essential features of the patented invention.

The Supreme Court reviewed its own precedents and explained the application of the exhaustion doctrine as follows:

Exhaustion: Traditional Rule

The right to vend is exhausted by a single, unconditional sale, the article sold being thereby carried outside the monopoly of the patent law and rendered free of every restriction which the vendor may attempt to put upon it.”

Exhaustion: New Rule

When the item sufficiently embodies the patent—even if it does not completely practice the patent—such that its only and intended use is to be finished under the patent's terms.”

“The relevant consideration is whether the Intel Products that�partially practice a patent—by, for example, embodying its essential features—exhaust that patent.”

Extent of embodying the patented invention

“The authorized sale of an article which is capable of use only in practicing the patent is a relinquishment of the patent monopoly with respect to the article sold.”

“Like the Univis lens blanks, the Intel Products constitute a material part of the patented invention and all but completely practice the patent. Here, as in Univis, the incomplete article substantially embodies the patent because the only step necessary to practice the patent is the application of common processes or the addition of standard parts. Everything inventive about each patent is embodied in the Intel Products.”

Questions Remained

What are “essential elements”?

Is no non-infringing use necessary?

Is a restriction on the sale of a patented product enforceable?

U.S. Court of Appeals for the Federal Circuit

Patent Exhaustion

Excelstor Tech., Inc. v. Papst Licensing GmbH & Co. KG, 541 F.3d 1373, 88 U.S.P.Q.2d 1060 (Fed. Cir. 2008)

Background

Patentee, Papst, entered into a license agreement with Excelstor for making patented hard disk drives (“Patented Products”) with a payment of royalties. Excelstor found out that its customer, Hitachi, had a license from Patentee and was paying royalties for the Patented Products. Excelstor sued Patentee in the U.S. District Court for the Northern District of Illinois. Among the claims asserted by Excelstor was a request for a declaratory judgment that Papst had violated the patent exhaustion doctrine by collecting two royalties on the same product. The district court dismissed Excelstor’s complaint for lack of subject matter jurisdiction.

The Federal Circuit agreed with the district court and found no federal subject matter jurisdiction because patent exhaustion is a defense, not a claim. It explained the nature of the exhaustion doctrine as follows:

Held: No subject matter jurisdiction.

Excerpts from Opinion

Federal Question Jurisdiction

§ 1338 jurisdiction extends to any case in which a well-pleaded complaint establishes either (1) federal patent law creates the cause of action or (2) the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal patent law, in that patent law is a necessary element of one of the well-pleaded claims. Christianson v. Colt Industries Operating Corp., 486 U.S. 800, 108 S. Ct. 2166, 100 L. Ed. 2d 811 (2005)

Patent Exhaustion

“Patent exhaustion is a defense to patent infringement, not a cause of action.”

There is no federal cause of action for collecting royalties twice on the same goods. Patent exhaustion prohibits patentees from enforcing patent rights in certain circumstances, but it does not forbid multiple licenses on a single product or even multiple royalties. Papst's alleged collection of two sets of royalties in this case may, eventually, prove to have been prohibited by the terms of the individual license agreements, or such a collection scheme may prove to have been fraudulent, but patent law is not a necessary element of such determinations”.

Patent Eligible Subject Matter

In re Bilski, 545 F.3d 943, 2008 U.S. App. LEXIS 22479, (Fed. Cir. 2008) – en banc

Background:

The Federal Circuit reviewed en banc an appeal from the final decision of the USPTO Board of Patent Appeals and Interferences (“Board”) sustaining the rejection of an application filed by Bilski and his co-inventor (collectively “Bilski”). A representation of eleven claims included in the Bilski application reads:

A method for managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price comprising the steps of:

(a)initiating a series of transactions between said commodity provider and consumers of said commodity wherein said consumers purchase said commodity at a fixed rate based upon historical averages, said fixed rate corresponding to a risk position of said consumer;
(b)identifying market participants for said commodity having a counter-risk position to said consumers; and
(c)initiating a series of transactions between said commodity provider and said market participants at a second fixed rate such that said series of market participant transactions balances the risk position of said series of consumer transactions

In essence, the claim is for a method of hedging risk in the field of commodities trading, but is not limited to transactions involving actual commodities. The disclosure of the specification supports the transactions to include options such as rights to purchase or sell the commodity at a particular price within a particular time frame.

The examiner rejected all claims because the claimed method was not implemented on a specific apparatus and thus was not within the technological arts. The Board sustained the rejection because the method was not only implemented on a specific apparatus but also did not involve a transformation of physical matter from one state to another.

Issue: Whether the Bilski claims are directed to a fundamental principle (such as an abstract idea) or a mental process?

Held: Yes. Not all claims meet the machine-or-transformation test.

Machine-or-Transformation Test

The Federal Circuit rejected all claims for lack of patent eligible subject matter, applying the machine-or-transformation test, which was explained by the court as follows:

“A claimed process is surely patent-eligible under § 101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing” because “a claimed process involving a fundamental principle that uses a particular machine or apparatus would not pre-empt uses of the principle that do not also use the specified machine or apparatus in the manner claimed. And a claimed process that transforms a particular article to a specified different state or thing by applying a fundamental principle would not pre-empt the use of the principle to transform any other article, to transform the same article but in a manner not covered by the claim, or to do anything other than transform the specified article.”

First, the use of a specific machine or transformation of an article must impose meaningful limits on the claim's scope to impart patent-eligibility. Second, the involvement of the machine or transformation in the claimed process must not merely be insignificant extra-solution activity.”

NecessaryTransformation: “A claimed process is patent-eligible if it transforms an article into a different state or thing. This transformation must be central to the purpose of the claimed process. But the main aspect of the transformation test that requires clarification here is what sorts of things constitute "articles" such that their transformation is sufficient to impart patent-eligibility under § 101.”

“The transformation of that raw data into a particular visual depiction of a physical object on a display was sufficient to render that more narrowly-claimed process patent-eligible. We further note for clarity that the electronic transformation of the data itself into a visual depiction in Abele was sufficient; the claim was not required to involve any transformation of the underlying physical object that the data represented.”

“We further note for clarity that the electronic transformation of the data itself into a visual depiction in Abele was sufficient; the claim was not required to involve any transformation of the underlying physical object that the data represented.”

“Claim 1 does not involve the transformation of any physical object or substance, or an electronic signal representative of any physical object or substance.”

Past Tests Reviewed and Rejected

The Federal Circuit reviewed and rejected tests used by the court and those proposed by amici but rejected the argument to adopt any other than the machine-or-transformation test.

Point of Novelty Test: “Whether a claimed process is novel or non-obvious is irrelevant to the § 101 analysis. …it is inappropriate to determine the patent-eligibility of a claim as a whole based on whether selected limitations constitute patent-eligible subject matter. After all, even though a fundamental principle itself is not patent-eligible, processes incorporating a fundamental principle may be patent-eligible. Thus, it is irrelevant that any individual step or limitation of such processes by itself would be unpatentable under § 101.”

Freeman-Walter-Abele Test: “This test (FWA test), in its final form, had two steps: (1) determining whether the claim recites an "algorithm" within the meaning of Benson, then (2) determining whether that algorithm is "applied in any manner to physical elements or process steps." In light of the present opinion, we conclude that the Freeman-Walter-Abele test is inadequate.”

Practical Utility Test: “While looking for ‘a useful, concrete and tangible result’ may in many instances provide useful indications of whether a claim is drawn to a fundamental principle or a practical application of such a principle, that inquiry is insufficient to determine whether a claim is patent-eligible under § 101. And it was certainly never intended to supplant the Supreme Court's test. Therefore, we also conclude that the "useful, concrete and tangible result" inquiry is inadequate and reaffirm that the machine-or-transformation test outlined by the Supreme Court is the proper test to apply.”

Technological Arts Test: “We decline to adopt the Technological Arts test and continue to rely on the machine-or-transformation test as articulated by the Supreme Court” because “we perceive that the contours of such a test, however, would be unclear because the meanings of the terms "technological arts" and "technology" are both ambiguous and ever-changing.”

Physical Steps Test: “In Cominskey, we did not apply “a new § 101 test that bars any claim reciting a mental process that lacks significant "physical steps. …In AT&T, we rejected a "physical limitations" test and noted that "the mere fact that a claimed invention involves inputting numbers, calculating numbers, outputting numbers, and storing numbers, in and of itself, would not render it nonstatutory subject matter. …The proper inquiry under § 101 is not whether the process claim recites sufficient "physical steps," but rather whether the claim meets the machine-or-transformation test. As a result, even a claim that recites "physical steps" but neither recites a particular machine or apparatus, nor transforms any article into a different state or thing, is not drawn to patent-eligible subject matter. Conversely, a claim that purportedly lacks any "physical steps" but is still tied to a machine or achieves an eligible transformation passes muster under § 101. "

In re Comiskey, 2009 U.S. App. LEXIS 400 (Fed. Cir. Jan. 13, 2009)

A Federal Circuit three-judge panel affirmed the USPTO’s rejection of claims directed to a mandatory arbitration method. Although the USPTO rejected all claims for obviousness and did not address patent eligibility issues, the panel found the patent ineligible with respect to claims that do not recite any specific machine. Regarding claims reciting a machine, the panel remanded the case for a nonobviousness determination, suggesting a test similar to the point of novelty test in focusing only on the patent-eligible features of the invention in an obviousness assessment, stating:

“The routine addition of modern electronics to an otherwise unpatentable invention typically creates a prima facie case of obviousness. Moreover, there is no pertinent evidence of secondary considerations because the only evidence offered is of long-felt need for the unpatentable mental process itself, not long-felt need for the combination of the mental process and a modern communication device or computer.”

After the Bilski decision was issued, the Federal Circuit agreed to review the original Comiskey decision en banc in light of Bilski.�� However the en banc rehearing was limited for the purpose of authorizing the original panel to rewrite the original opinion.� Three judges dissented from the majority’s decision denying en banc review of the entire case.� The original opinion was vacated and the case was returned to the original panel.� The panel maintained the conclusion of patent ineligibility with respect to claims which do not recite a machine.� However, the court removed the part of the opinion reviewing machine-tied claims for nonobviousness, in striking down the confusing comments of mixing patent eligibility and novelty questions.

Classen Immunotherapies, Inc. v. Biogen IDEC, 2008 U.S. App. LEXIS 25661 (Fed. Cir. Dec. 19, 2008) – Nonprecedential Opinion

Classen owns four patents which in essence direct to a mechanism for evaluating the safety of vaccine administration schedules by comparing or identifying the adverse events associated with various vaccine schedules. A representative of the claims in these patents read:

A method of determining whether an immunization schedule affects the incidence or severity of a chronic immune-mediated disorder in a treatment group of mammals, relative to a control group of mammals, which comprises immunizing mammals in the treatment group of mammals with one or more doses of one or more immunogens, according to said immunization schedule, and comparing the incidence, prevalence, frequency or severity of said chronic immune-mediated disorder or the level of a marker of such a disorder, in the treatment group, with that in the control group

Classen alleged that Biogen et. al. (“Defendants”) infringed the patents by 1) examining the correlation between vaccination schedules and the risk of developing chronic immune mediated disorders; and 2) by using the results of that study to develop vaccination protocols. The district court found all patents invalid for lack of patent eligible subject matter because the claims of these patents are directed to a natural phenomenon discovered by the inventor, namely the correlation between vaccination schedules and the incidence of immune mediated disorders. Summary judgment in favor for Defendants was entered.

In a nonprecedential opinion, the Federal Circuit affirmed the summary judgment. The brief opinion includes only a conclusion that the claims of the patents at issue are invalid under the machine-or-transformation test in Bilski because they were neither "tied to a particular machine or apparatus" nor did they "transform a particular article into a different state or thing."

Nonobviousness (Impact of KSR)

In re Translogic Tech., Inc., 504 F.3d 1249, 84 U.S.P.Q.2d 1929 (Fed. Cir. 2007)

Marginalizing Impact – Combination Inventions

Restating the KSR rule: “The Supreme Court observed that this court had also ‘elaborated a broader conception of the TSM test than was applied in [KSR].’ Id. at 1743. Specifically the Court referred to Dystar Textilfarben GmbH & Co. v. C.H. Patrick Co., wherein this court noted: ‘Our suggestion test is in actuality quite flexible and not only permits, but requires, consideration of common knowledge and common sense.’ 464 F.3d 1356, 1367 (Fed. Cir. 2006) (emphasis original). The Court suggested that this formulation would be more consistent with the Supreme Court's restatement of the TSM test. KSR Int'l Co., 127 S. Ct. at 1739. In any event, as the Supreme Court suggests, a flexible approach to the TSM test prevents hindsight and focuses on evidence before the time of invention, see, e.g., In re Rouffet, 149 F.3d 1350, 1357 (Fed. Cir. 1998), without unduly constraining the breadth of knowledge available to one of ordinary skill in the art during the obviousness analysis.”

More Stringent View?

Reviewing Its Own Errors made in KSR: “This passage overlooks the fundamental proposition that obvious variants of prior art references are themselves part of the public domain. .. In the context of KSR, the Asano teachings and its obvious variants were relevant prior art, even if that patent did address a different problem (the constant ratio problem).”

“An obviousness analysis need not seek out precise teachings directed to the specific subject matter of the challenged claim, for a court can take account of the inferences and creative steps that a person of ordinary skill in the art would employ.”

Takeda Chem. Indus. v. Alphapharm Pty., Ltd., 492 F.3d 1350, 83 U.S.P.Q.2d 1169 (Fed. Cir. 2007)

Marginalizing Impact – Chemical Inventions

Restating KSR Rule: “While the KSR Court rejected a rigid application of the teaching, suggestion, or motivation ("TSM") test in an obviousness inquiry, the Court acknowledged the importance of identifying "a reason that would have prompted a person of ordinary skill in the relevant field to combine the elements in the way the claimed new invention does" in an obviousness determination. KSR, 127 S. Ct. at 1731. Moreover, the Court indicated that there is "no necessary inconsistency between the idea underlying the TSM test and the Graham analysis." Id. As long as the test is not applied as a "rigid and mandatory" formula, that test can provide "helpful insight" to an obviousness inquiry. Id. Thus, in cases involving new chemical compounds, it remains necessary to identify some reason that would have led a chemist to modify a known compound in a particular manner to establish prima facie obviousness of a new claimed compound.”

Impact on Combination Inventions

Nature of Problem

Commonwealth Sci. & Indus. Research Organisation v. Buffalo Tech. (USA), Inc., 542 F.3d 1363, (Fed. Cir. 2008) - Bryson

CSIRO sued Buffalo for infringement of a patent (“Patent”) directing to a transceiver design for the wireless transmission of data over a local area network ("LAN"). The District Court of Eastern District of Texas found the patent valid and infringed. One of the claims found to be infringed reads:

  • A transceiver for operation in a confined multipath transmission environment, said transceiver comprising antenna means coupled to transmission signal processing means and to reception signal processing means, said transmission signal processing means in turn coupled to an input data channel, said transceiver being operable to transmit and receive data at radio frequencies, said transmission signal processing means comprising modulation means for modulating input data of said input data channel into a plurality of sub-channels comprised of a sequence of data symbols such that the period of a subchannel symbol is longer than a predetermined period representative of the time delay of significant ones of non-direct transmission paths, means to apply data reliability enhancement to said data passed to said modulation means and means, interposed between said data reliability enhancement means and said modulation means, for interleaving blocks of said data.

The Federal Circuit reversed the nonobviousness ruling of the district court’s summary judgment which was issued before KSR, finding a disputed issue of material fact as to whether the prior art references that were before the district court were combinable in a manner that would have rendered the asserted claims of the Patent obvious, stating as follows:

“The KSR case involved the same kind of problem that is presented here-the question of obviousness as applied to an invention that consists of a combination of elements, all of which are found in prior art references. In that setting, the Court stated, a ‘combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results.’’… (Following text cites Supreme Court’s criticism of the Federal Circuit’s nonobviousness analysis in KSR)

In light of the analytical framework set forth by the Supreme Court in KSR, the district court's analysis of the summary judgment dispute was flawed. As noted, the trial court found and CSIRO's expert acknowledged that Rault teaches all of the limitations of the independent claims except for use in an indoor environment. Moreover, Buffalo points out that Rault and Wilkinson both address the multipath problem, and that Wilkinson and Fattouche address solutions to that problem in an indoor environment. … “

CSIRO argued that Buffalo’s expert did not provide sufficient specific evidence as to the source of TSM. The Federal Circuit found the argument was based on a highly factual issue involving a question on the scope and content of the prior art and the differences between the claims at issue and the prior art, and thus concluded that the case could not be resolved on summary judgment.

“CSIRO's argument also fails to take sufficient account of the Supreme Court's ruling in KSR that any need or problem known in the field of endeavor at the time of invention and addressed by the patent can provide a reason for combining the elements in the manner claimed." Buffalo introduced evidence that all of the references on which it relied were directed to solving the same problem--the multipath problem for wireless communication using radio frequencies. It also offered evidence that a person of ordinary skill in the art, seeking to solve that well-known problem, would be motivated to look to references of the sort that Buffalo cited to the district court, including Rault, Wilkinson, and Fattouche.”

“Even before KSR, this court had made clear that the motivation to combine particular references could be found in the nature of the problem to be solved. (Federal Circuit cites pre-KSR cases including Cross Medical Products v. Medtronic Sofamor Danek, Inc., 424 F.3d 1293 (Fed. Cir. 2005) where the court found a motivation from the nature of the problem to be solved by the invention). … As in Cross Medical, the problems addressed by the references are sufficiently similar to the problem presented by high-speed indoor wireless LANs that there is a factual question whether a person of skill in the art would have looked to the teaching of those references in seeking to solve the multipath problem for a wireless indoor LAN.”

Decreased Significance of Secondary Consideration

Agrizap, Inc. v. Woodstream Corp., 520 F.3d 1337, 6471, 86 U.S.P.Q.2d 1110 (Fed. Cir. 2008)

Sundance, Inc. v. Demonte Fabricating Ltd.,(Fed. Cir. Dec. 24, 2008)

Secondary considerations of nonobviousness--considered here by the district court--simply cannot overcome this strong prima facie case of obviousness.”

Teach Away – Clear Criticism, Skepticism Necessary?

Ricoh Co., Ltd. v. Quanta Computer Inc., (Fed. Cir. Dec. 23, 2008)

m>'A reference may be said to teach away when a person of ordinary skill, upon reading the reference, would be discouraged from following the path set out in the reference, or would be led in a direction divergent from the path that was taken by the applicant.'" …

Here, EP '272 teaches that the recrystallization upper-limit linear speed is a physical characteristic of the particular phase change media--i.e., optical discs having a specific composition--disclosed therein. EP '272 p.6 ll.7-9 (stating that the "'recrystallization upper-limit linear speed' of the recording layer of the optical recording medium is a novel value for characterizing the recording medium, which was discovered by the inventors of the present invention"). This physical characteristic establishes an upper limit to the speed at which the phase change material of the optical disc can be recrystallized. EP '272 p.6 ll.3-4 (defining recrystallization upper-limit linear speed as "an upper limit linear speed of a light beam which scans the recording layer at which the recording layer can be recrystallized after being fused with the application of the light beam thereto, and then cooled and recrystallized"). In contrast, the asserted method claims of the '109 patent are write strategies comprising a specified sequence of laser pulses, not limited to use on a particular phase change medium. Ricoh offers no explanation as to why EP '272's teaching of a particular type of medium limited to use below 5.0 m/s would criticize, discredit, or otherwise discourage a person of ordinary skill from using the write strategy of EP '272 at speeds beyond 5.6 m/s (the upper limit claimed by EP '272) when writing to optical media not limited to use below a speed of 5.0 m/s.”

Impact on Chemical Inventions

Obvious-To-Try v. Unexpected Result

Sanofi-Synthelabo v. Apotex, Inc., 2008 U.S. App. LEXIS 24991 (Fed. Cir. Dec. 12, 2008)

In a suit based on 35 USC §271(e), Apotex challenged the validity of a patent (“Patent”) held by Sanofi (“Patentee”). The Patent was directed to dextrorotatory isomer of the chemical compound described in the following representative claim:

  • Hydrogen sulfate of thedextro-rotatory isomer of methyl alpha-5(4,5,6,7-tetrahydro(3,2-c)thienopyridyl)(2-chlorophenyl)-acetate substantially separated from the levo-rotatory isomer.

The claimed compound are derivatives, enantiomers, of a compound which was disclosed in Sanofi’s early patent. The drug covered by the early patent was approved by the FDA as an anti-thrombotic agent with a warning of possible adverse effects. Thus, Safoni continued to search for a product without the adverse effects by synthesizing and evaluating hundreds of derivatives. After lengthy experimentations, a Safoni researcher separated the claimed enantiomers, which have “the rare characteristic of ‘absolute stereoselectivity:’ the claimed compound provided all of the favorable antiplatelet activity but with no significant neurotoxicity, while the levorotatory enantiomers, produced no antiplatelet activity but virtually all of the neurotoxicity.” The experts for both sides agreed that while it was generally known that enantiomers can exhibit different biological activity, this degree and kind of stereoselectivity is rare, and could not have been predicted.

Apotex advanced “obvious to try” argument by citing Pfizer, Inc. v. Apotex, Inc., 480 F.3d 1348, 1360 (Fed. Cir. 2007) and argued that a person originally skilled in the field would have been able to separate the claimed enantiomer by using known procedures and evaluating them through routine testing.

Relying on both parties’ expert testimonies supporting unexpected properties, the Federal Circuit rejected Apotex’s argument. The Federal Circuit also rejected Apotex’s view that the separation is a routine procedure by commenting “only with hindsight knowledge that the dextrorotatory enantiomer has highly desirable properties, can Apotex argue that it would have been obvious to select this particular racemate and undertake its arduous separation.” The court also agreed with the district court in distinguishing this case from Pfizer because the prior art taught away from the use of the acid selected by the inventor with an enantiomer, instead of narrowing down the possible salts.

Moreover, Apotex cited KSR that the "combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results." It described the patented invention merely separating the enantiomers and determining their properties, and that the properties were predictably those of the racemate, allocated between the enantiomers. In response, Sanofi distinguished this case from KSR, pointing out that the claimed compound is not a "combination of familiar elements" as in the KSR mechanical device made by combining known components to produce a combination having the properties of the known components. Without characterizing the invention as a combination invention or not, the Federal Circuit rejected Apotex’s argument because of the unpredictable result from the separation of enantiomers.

Abbott Labs. v. Sandoz, Inc., 544 F.3d 1341, (Fed. Cir. 2008)

The Federal Circuit relied on the evidence of an unpredictable property in the claimed compound and affirmed the district court’s ruling of nonobviousness in favor for the patentee, stating as follows:

“We agree that the obviousness of selection of components, when there is no prediction in the prior art as to the results obtainable from a selected component, differs from the issue in KSR, where the Court provided guidance that ‘a court must ask whether the improvement is more than the predictable use of prior art elements according to their established functions.’127 S. Ct. at 1740. The Court explained the conditions in which ‘obvious to trymay negate patentability, depending on the relation of the prior art teaching to the later-developed technology. The Court explained that when the problem is known, the possible approaches to solving the problem are known and finite, and the solution is predictable through use of a known option, then the pursuit of the known option may be obvious even absent a "teaching, suggestion, or motivation" concerning that option. Then, "if this leads to the anticipated success, it is likely the product not of innovation but of ordinary skill and common sense."

The evaluation of the choices made by a skilled scientist, when such choices lead to the desired result, is a challenge to judicial understanding of how technical advance is achieved in the particular field of science or technology. Such understanding is critical to judicial implementation of the national policy embodied in the patent statute. In Publication of Tomlinson, 363 F.2d 928, 53 C.C.P.A. 1421 (CCPA 1966) our predecessor court discussed the role of ‘obvious to try’ in scientific and technologic research and in patentability:

Slight reflection suggests, we think, that there is usually an element of "obviousness to try" in any research endeavor, that is not undertaken with complete blindness but rather with some semblance of a chance of success, and that patentability determinations based on that as the test would not only be contrary to statute but result in a marked deterioration of the entire patent system as an incentive to invest in those efforts and attempts which go by the name of "research."

Id. at 931. The Court in KSR did not create a presumption that all experimentation in fields where there is already a background of useful knowledge is ‘obvious to try,’ without considering the nature of the science or technology. The methodology of science and the advance of technology are founded on the investigator's educated application of what is known, to intelligent exploration of what is not known. Each case must be decided in its particular context, including the characteristics of the science or technology, its state of advance, the nature of the known choices, the specificity or generality of the prior art, and the predictability of results in the area of interest. ”

Inequitable Conduct

Expansion of Scope of Disclosure Duty

Monsanto Co. v. Bayer Bioscience N.V., 514 F.3d 1229, (Fed. Cir. 2008)

Patentee (Bayer) failed to disclose a hand written internal memo which related to one of the references that were disclosed to the USPTO. The reference was an abstract of a poster presentation at a science meeting. A researcher (Mariani) at Bayer attended the meeting and took a memo from the poster which included much more information than the abstract. She circulated the memo among researchers including the German in-house counsel (Meulemanns) who handled the prosecution. However, the in-house counsel made comments on the patented invention, contradicting the information in the internal memo. The district court found that the information in the note was highly material to the patentability of the patent at issue and that Bayer intended to deceive the USPTO.

Circumstantial Evidence for Deceptive Intent

To prove intent, ‘the involved conduct, viewed in light of all the evidence, including evidence of good faith, must indicate sufficient culpability to require a finding of intent to deceive.’ Direct evidence of intent to deceive is not necessary, but may be inferred from the surrounding circumstances. We have held that absent a credible reason for withholding the information, "[i]ntent may be inferred where a patent applicant knew, or should have known, that withheld information would be material to the PTO's consideration of the patent application."

“Absent a credible reason for Meulemanns to have not understood the content of Mariani's notes after having discussed them with Mariani, the district court did not clearly err in inferring the requisite intent. Intent is easily inferred when, as here, an applicant makes arguments to the PTO that it knows, or obviously should have known, are false in light of information not before the examiner, and the applicant knowingly withholds that additional information.”

Aventis Pharma S.A. v. Amphastar Pharms., Inc., 525 F.3d 1334, 87 U.S.P.Q.2d 1110 (Fed. Cir. 2008)

Aventis owns U.S. Patent No. 5,389,618 (“the ‘618 patent”) and the reissue patent, U.S. Patent No. RE 38,743 (“the ‘743 patent”), for a composition of low molecular weight heparinic polysaccharides to prevent and treat thromboses. The original claim for the ‘618 patent was rejected under 35 U.S.C. §§ 102(b)/103 for prior art references, including European Patent 40,144 (“EP ‘144”). Aventis amended the claim and refuted the anticipation rejection, under 35 U.S.C. § 102(b), by distinguishing differences in the physical properties of the claimed compound and EP ‘144. Relying on differences in physical properties between the claimed compound and EP ‘144, Aventis provided plasma half-life data obtained from Dr. Uzan, a non-inventor, to demonstrate that the half life of the patented compound at 40mg was longer when compared to the EP ‘144 compound. Aventis refuted the obviousness rejection, under 35 U.S.C. § 103, asserting the properties of the claimed compound were not exhibited by the EP ‘144 compound and, therefore, EP ‘144 would not suggest to one of skill in the art the properties of the claimed compound. The examiner was unconvinced with this argument and rejected the claims again. To enhance its argument, Dr. Uzan submitted tables of raw data of the plasma half-life of the claimed compound and EP ‘144. However, the comparison was made with different dosages between the submitted table and EP ‘144 but Aventis failed to disclose to the examiner the different dosages. The district court found the patents unenforceable for Aventis’s inequitable conduct in failing to disclose that the comparison of half-life values was made at different doses of the claimed compound and the EP ‘144 compound.

On appeal, the Federal Circuit affirmed the summary judgment by finding no error in the district courts ruling on the materiality of the dosage because comparing half-life values is material and Aventis’s intent to deceive USPTO by failing to disclose the dosage. Dissenting from the majority, Judge Rader criticized the recent trend to focus on the materiality of information withheld from examination to infer a separate required element of deceptive intent.

From Judge Rader’s Dissenting Opinion

“More recently, however, the judicial process has too often emphasized materiality almost to the exclusion of any analysis of the lofty intent requirement for inequitable conduct. Merging intent and materiality at levels far below the Kingsdown rule has revived the inequitable conduct tactic. For example, in Nilssen v. Osram Sylvania, Inc., 504 F.3d 1223 (Fed. Cir. 2007), one of the reasons this court upheld a judgment of unenforceability for an exaggerated claim of small entity status. Nilssen entered into agreements with Philips Electronics North America Corp. ("Philips") to license the patents in suit. Id. at 1227-28. Because Phillips had more than 500 employees, the district court found that Nilssen had made several improper small entity maintenance fee payments to the USPTO. Id. at 1228. This court affirmed, stating: "[w]e therefore affirm the district court's decision finding that all of the �patents in suit are unenforceable due to inequitable conduct in improperly claiming small entity status." Id. at 1233. In General Electro. Music Corp. v. Samick Music Corp., 19 F.3d 1405 (Fed. Cir. 1994), this court upheld unenforceability under circumstances that are even harder to reconcile with the en banc Kingsdown rule. The mistake in that case involved a petition to make special. Id. at 1407.”

“Even a cursory review of example 6 shows no dosage indications. The Debrie LMWH in subsection 1 indicates two dosages. Dosage is an element in subsections 2 and 4 as well. Thus, the absence of a dosage in subsection 3 is blatantly obvious. Surely if Dr. Uzan had intended to deceive the USPTO, he would not have made this omission so conspicuous. Moreover, I find it difficult to fathom that a scientist of Dr. Uzan's caliber and reputation would engage in such deception. As the district court points out, Dr. Uzan has had a magnificent fifty year career with Aventis,� has published over 350 scientific articles and has received numerous prestigious awards including the Galien Research Prize, France's highest award for drug discovery. This world-class scientist would hardly risk his reputation and tarnish his brilliant career for a single example in the prosecution of a patent for an invention in which he was not even involved.”

“Most important, Dr. Uzan himself revealed the error. This candor is inconsistent with deceptive intent. He submitted all of the underlying data to the patent office with his second declaration on June 9, 1994. Thus, unlike the situation in Kingsdown, Dr. Uzan corrected the mistake before it resulted in an issued patent. In Dr. Uzan's second declaration, he clearly articulated that the half-life data showed superior properties of the Debrie LMWH over the prior art Mardiguian LMWH. Still, with all information before the USPTO, the examiner allowed the patent. Lastly, in early 2003, before filing its infringement suit, Aventis �filed a reissue application for the '618 patent. The patent reissued on June 14, 2005 with all of the original independent claims, but without example 6. The half-life data were apparently not even necessary for patentability. The USPTO determined that the Debrie LMWH was inventive over the prior art Mardiguian LMWH without relying on the controversial half-life data from example 6.”

“The USPTO granted the reissue a day before the district court judge granted Teva and Amphastar's summary judgment motion that the '618 patent was unenforceable. Aventis did not have the opportunity to make this argument to the trial judge. This record does not prevent this court, however, from considering all this information in evaluating the inequitable conduct finding. Thus, both materiality and intent seem suspect on this record. In sum, read in the context of Kingsdown, I would reverse the district court's determination of inequitable conduct. “

Claim Construction (Impact of Phllips)

Netcraft Corp. v. Ebay, Inc., 2008 U.S. App. LEXIS 25031 (Fed. Cir. Dec. 9, 2008)

Netcract sued eBay and Paypal for infringement of its two patents directed to an internet billing method. A representative claim of the patents reads:

An Internet billing method for a plurality of customers and a plurality of vendors of products or services for transactions over�the Internet between a purchasing customer of the plurality of customers and a selling vendor of the plurality of vendors, wherein, for each purchase transaction, a transaction amount is charged to the purchasing customer, and an amount is remitted to the selling vendor, comprising the steps by a third party of:

a) establishing a billing agreement with the purchasing customer, and a remitting agreement with the selling vendor, to bill the purchasing customer, and to remit to the selling vendor, for products and services purchased over the Internet by the purchasing customer from the selling vendor;
b) providing a communications link through equipment of the third party between the purchasing customer and the selling vendor through which the purchasing customer obtains information from the selling vendor with respect to a purchase of a product or service by the purchasing customer from the selling vendor;
c) obtaining at least one billing authorization for the purchase;
d) charging the transaction amount to the purchasing customer in accordance with the billing agreement; and
e) remitting an amount related to the purchase to the selling vendor in accordance with the remitting agreement.

Parties disputed if the claim requires providing customers with internet access. Because there was no dispute that defendants’ method does not provide customers with internet access; the defendants’ method does not infringe the patent if the claim is not construed to include the internet access limitations. The district court found such requirement inherent in the claims in light of the specification and entered summary judgment of non-infringement. The Federal Circuit affirmed the judgment and found no error in the district court’s claim interpretation, stating as follows:

“The asserted claims themselves do not expressly indicate whether "providing a communications link through equipment of the third party" requires that the third party provide internet access. Indeed, the term "communications link" is never used in the parent '221 Patent or the common specification of the asserted patents. While the lay meaning of "communications link" standing alone may be broader than "internet access," we are not construing this term standing alone…. In order to properly determine the ordinary meaning of the entire phrase at issue in this case, we must consider the claim terms in light of the entire patent. As explained further below, based on a reading of the common specification in its entirety, along with the cited prosecution history, we conclude that the claim limitation "providing a communications link through equipment of the third party" requires providing customers with internet access.”

“We agree with Netcraft that use of the phrase "the present invention" does not ‘automatically’ limit the meaning of claim terms in all circumstances, and that such language must be read in the context of the entire specification and prosecution history. See Rambus Inc. v. Infineon Techs. AG, 318 F.3d 1081, 1094 (Fed. Cir. 2003). For the reasons below, however, we agree with the district court that the common specification's repeated use of the phrase ‘the present invention’ describes the invention as a whole, see Claim Construction Order at 6, and, as will be discussed further below, that the prosecution history does not warrant a contrary result.”

“There is no language in the specification, much less express language, indicating that the words "Customer Connects to Internet" used in Fig. 3, step 22, were meant to disclose an alternative embodiment not requiring that the third party provide internet access to customers. In fact, there are other differences between Figs. 2 and 3, including steps 11 and 21 respectively, which more clearly differentiate the two methods. Additionally, we note that the specification appears to describe the methods shown in Figs. 2 and 3 in context of the system illustrated in Fig. 1. See '739 Patent col.5 ll.58-66. In that context, while the specification indicates that certain vendors may access the internet directly using their own equipment, the only way for customers to access the internet is through the equipment of the provider. Accordingly, we reject Netcraft's arguments that the specification includes additional embodiments that do not involve the provision of internet access to customers by the third party.”

“As the district court observed, however, in several locations the specification contemplates the possibility that other companies, including cable television and telephone companies, will provide customers with internet access. Claim Construction Order at *7-8 (citing '739 Patent col.1 ll.29-30, col.2 ll.64-65). Additionally, as the district court noted, the following portion of the Summary of the Invention distinguishes "existing" internet access providers from other entities who may also provide internet access: "The main object of the present invention is to create a new business opportunity for telephone companies, cable television companies, existing Internet access providers, and companies offering financial services . . . ." Id. at *8-9 (quoting '739 Patent col.1 ll.61-64). We agree with the district court that this passage suggests that the "new business opportunity" for companies, including financial services companies, involves the provision of internet access. 1 Id. at *9. Thus, we are not persuaded by Netcraft's claim differentiation arguments.”

Voda v. Cordis Corp., 536 F.3d 1311, 87 U.S.P.Q.2d 1742 (Fed. Cir. 2008)

Dr. Voda developed a technology for inserting cardiac guide catheters and obtained three patents for the technology. He sued Cordis for infringement of the patents in the U.S. District Court for the Western District of Oklahoma. The district agreed with the jury that the patents were valid and infringed by Cordis catheters. On appeal, Cordis challenged the district court’s claim construction of the term “along a line” claimed in one of the three patents at issue. To avoid infringement, Cordis redesigned the catheter to replace its straight contact portion with a curved portion. A representative of the challenged claims reads:

A method for advancing a catheter through the aorta and into a coronary ostium, the aorta having an arch and an inner wall opposite the ostium, comprising the steps of:providing a catheter including an elongate catheter body having a proximal end and a distal end and having a central lumen from the proximal end to the distal end adapted to slidably receive a therapeutic catheter, the catheter body including a tip at the distal end of the catheter body adapted to removably lodge in the coronary artery ostium;advancing the catheter body distal end through the aortic arch; andengaging the aorta inner wall with a portion of the catheter body such that when the distal end of the catheter is positioned in the ostium, the catheter body engages the opposite wall of the aorta along a line having a length of about 1.5 cm or greater.

Cordis argued that the term “along a line” requires that the contact portion of the catheter be straight in its rest state because straight is inherent in the word “line.” The Federal Circuit disagreed and construed the term to describe the position of the catheter as it is being used in the human body rather than the shape of the catheter because other claims which were not asserted by Voda require the contact position of the catheter be a substantially straight leg. Cordis also tried to limit the scope of the term in light of the specification. It relied on the part of the written description describing the contact position of the catheter of the present invention as a straight portion. Cordis also pointed out that the written description did not teach any embodiment using a curved portion to engage the wall. The Federal Circuit rejected these arguments, stating:

“We do not agree with Cordis that the written description provides "a clear disavowal of claim scope," Teleflex, 299 F.3d at 1325. Although the written description often discusses providing a straight portion . . . that contacts the aortic wall," e.g. '213 patent col.7 ll.55-58 (emphasis added), the specification also discusses the contact portion without requiring that it be straight in its rest state. For example, the specification provides that:

The primary feature of the superior (i.e., better) orientation of the guide catheters of the present invention is that, when disposed in the aortic complex, a contact portion of the guide catheter is established in a substantially contiguous manner against the aortic wall for a substantial length (at least about 1.5 centimeters).

213 patent col.8 ll.53-58 (emphasis added). Other portions of the written description also discuss the contact portion without requiring that it be straight in its rest state. See, e.g., '213 patent col.7 ll.49-52 ("The factors determining the support provided by the guide catheter include . . . a large supportive segment of the guide catheter that rests against the wall of the ascending aorta to increase stability of the guide catheter within the aortic complex." (emphasis added)); '213 patent col.8 ll.6-12 ("The guide catheter has a distal end portion such that with the distal tip of the distal end portion . . . fully disposed within the cardiovascular systems[], a portion of the distal end portion contacts and rests against and is substantially contiguous with a wall of the ascending aorta . . . ." (emphasis added)).Accordingly, the written description of the '213 patent does not clearly limit the scope of claims 1 through 3 to methods in which the contact portion of the catheter is straight in its rest state.”

Inducement-Opinion of Counsel

Broadcom Corp. v. Qualcomm, Inc., 543 F.3d 683, 88 U.S.P.Q.2d 1641 (Fed. Cir. 2008)

Broadcom owns patents directing to a technology used in mobile radio devices and sued Qualcomm for patent infringement in U.S. District Court for the Central District of California. The jury found that Qualcomm directly infringed and induced infringement. It further found that the infringement was engaged willfully and awarded enhanced damages. After the court denied Qualcomm’s post trial motions, the en banc Federal Circuit released Seagate. Thus, the court vacated the willfulness verdict and directed Broadcom to file an election indicating whether it wished to accept the liability and damages verdict or proceed to a new trial on all issues including willfulness. Broadcom elected to accept liability and damages verdicts. Qualcomm appealed the jury verdicts.

The Federal Circuit rejected Qualcomm’s argument that the district court’s jury instruction was improper in allowing the jury to consider failure to obtain an opinion of counsel to show the specific intent to cause direct infringement, which is necessary to find inducement in light of Seagate which removed the affirmative duty to seek an opinion of counsel. The Federal Circuit disagreed and explained the impact of Seagate on the intent requirement for inducement as follows:

“Although Qualcomm is correct that there is no affirmative duty to seek opinion of counsel regarding infringement, and that it is improper to allow an ‘adverse inference or evidentiary presumption that such an opinion would have been unfavorable,’ Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH, 383 F.3d 1337 at 1346, it is incorrect in arguing that Seagate altered the state of mind requirement for inducement. Our en banc holding in DSU remains the relevant authority on that point. Despite Qualcomm�'s assertion that the intent standard for inducement is higher than that for willful infringement, a lack of culpability for willful infringement does not compel a finding of non-infringement under an inducement theory. Qualcomm's argument reflects a misunderstanding of our holding in DSU.”“While inducement ‘requires more than just intent to cause the acts that produce direct infringement,’ and also requires ‘that the alleged infringer knowingly induced infringement and possessed specific intent to encourage another's infringement,’ DSU, 471 F.3d at 1306, this intent may be established through circumstantial evidence, see Id. Moreover, ‘[t]he requisite intent to induce infringement may be inferred from all of the circumstances.’ Water Techs. Corp. v. Calco, Ltd., 850 F.2d 660, 669 (Fed. Cir. 1988). Additionally, we noted in DSU that this intent may be established where an alleged infringer who ‘knew or should have known his actions would induce actual infringements,’ is shown to have induced infringing acts through his actions. 471 F.3d at 1306 (emphasis added) (adopting the same two-part test articulated in Manville, 917 F.2d at 553). That is, the ‘affirmative intent to cause direct infringement,’ id., required by DSU may be shown--just as the jury was instructed in DSU itself--by establishing first that the defendant ‘intended to cause the acts that constitute the direct infringement,’ and second that the defendant ‘kn[ew] or should have known [that] its action would cause the direct infringement,’ DSU, 471 F.3d at 1305. Because opinion-of-counsel evidence, along with other factors, may reflect whether the accused infringer ‘knew or should have known’ that its actions would cause another to directly infringe, we hold that such evidence remains relevant to the second prong of the intent analysis. Moreover, we disagree with Qualcomm's argument and further hold that the failure to procure such an opinion may be probative of intent in this context. It would be manifestly unfair to allow opinion-of-counsel evidence to serve an exculpatory function, as was the case in DSU itself, see 471 F.3d at 1307, and yet not permit patentees to identify failures to procure such advice as circumstantial evidence of intent to infringe.”

271(e) Safe Harbor (Impact of Merck)

Proveris Sci. Corp. v. Innovasystems, Inc., 536 F.3d 1256, 87 U.S.P.Q.2d 1602 (Fed. Cir. 2008)

Proveris owns a patent directing to aerosol sprays commonly used in various drug delivery devices, such as nasal spray pumps and inhalers. Innova makes and sells a similar spray device (Optical Spray Analyzer “OSC”), which is used for delivering nasal spray drugs. Although the OSC itself is not subject to FDA approval process, Innova alleged that the use of the OSC is covered by the 35 USC § 271(e) safe harbor provision because the OSC was used exclusively in applications for FDA approval. The Federal Circuit disagreed with Innova. It extensively cited the Supreme Court’s discussions in policies underlying the Hatch Waxman Act in Eli Lilly & Co. v. Medtronic, Inc., 496 U.S. 661, 669, 110 S. Ct. 2683, 110 L. Ed. 2d 605 (1990) and concluded that the scope of the safe harbor should be limited to the drug, device, etc. which itself is subjected to the FDA approval.

Policies under Hatch-Waxman Act

“Congress enacted the Hatch-Waxman Act in order to eliminate two unintended distortions of the effective patent term resulting from the premarket approval required for certain products by the FDCA.”

“The first distortion was the reduction of effective patent life caused by FDA premarket approval. Because patent applications were filed early in the regulatory process, but market entry was delayed pending regulatory review, the early years of the patent term were spent obtaining premarket approval for the patented invention rather than generating profits. …The second distortion was the de facto extension of effective patent life at the end of the patent term, which also resulted from FDA premarket approval requirements. Prior to the Hatch-Waxman Act, competitors' activities involving a patented invention during the patent term constituted an act of infringement, even if undertaken for the sole purpose of obtaining FDA regulatory approval. Because such activities could not begin until patent expiration, patent owners enjoyed a de facto patent term extension while competitors spent time following patent expiration obtaining FDA premarket approval necessary for market entry. “The first provision, section 156, sought to eliminate de facto patent term reduction by providing patent term extension for those patents claiming a "product" subject to regulatory delays caused by the FDA premarket approval process…. The second provision, section 271(e)(1), sought to eliminate de facto patent term extension. It sought to do so by providing a safe harbor that immunized competitors from infringement on account of making, using, offering to sell, or selling within the United States or importing into the United States a "patented invention . . . solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs or veterinary biological products." 35 U.S.C. § 271(e)(1). The basic idea behind this provision was to allow competitors to begin the regulatory approval process while the patent was still in force, followed by market entry immediately upon patent expiration.

Interpretation of Section 271(e) in Light of Policies

“We think the Supreme Court's approach in Eli Lilly is instructive. In Eli Lilly, the Court examined the language of section 271(e)(1) in light of the overall statutory structure and underlying policy considerations leading to the enactment of the Hatch-Waxman Act. In that regard, as seen, sections 156 and 271(e)(1) were enacted in order to eliminate two unintended distortions of the effective patent term resulting from premarket approval required of certain products pursuant to the FDCA. In Eli Lilly, the Supreme Court explained that the first distortion was the reduction of effective patent life caused by the FDA premarket approval process, while the second distortion was the de facto extension of effective patent life at the end of the patent term - also caused by the FDA premarket approval process. 496 U.S. at 669-70. The first distortion adversely affected patentees; the second distortion adversely affected those seeking FDA approval in order to enter the market to compete with patentees. It is the second distortion that is relevant to this case.”

“As far as the second distortion is concerned, Innova's OSA device is not subject to FDA premarket approval. Rather, FDA premarket approval is required only in the case of the aerosol drug delivery product whose spray plume characteristics the OSA measures. In short, Innova is not a party seeking FDA approval for a product in order to enter the market to compete with patentees. Because the OSA device is not subject to FDA premarket approval, and therefore faces no regulatory barriers to market entry upon patent expiration, Innova is not a party who, prior to enactment of the Hatch-Waxman Act, could be said to have been adversely affected by the second distortion. For this reason, we do not think Congress could have intended that the safe harbor of section 271(e)(1) apply to it. Put another way, insofar as its OSA device is concerned, Innova is not within the category of entities for whom the safe harbor provision was designed to provide relief. We thus agree with the district court that Innova is not entitled to the benefit of the section 271(e)(1) safe harbor.”“At the same time, just as Innova is not a party who, prior to enactment of the Hatch-Waxman Act, could be said to have been adversely affected by the second distortion discussed by the Supreme Court in Eli Lilly, so too Proveris is not a party who, prior to enactment of the Act, could be said to have been adversely affected by the first distortion. That is because Proveris is not a patentee who would have been faced with a reduction of effective patent life caused by the FDA approval process, the reason being that the invention claimed in the '400 patent is not subject to the premarket approval required by the FDCA. We think this is significant because, as noted above, in Eli Lilly the Court spoke of its interpreting the phrase "patented invention" in section 271(e)(1) to include all products listed in section 156(f) as producing a "perfect 'product' fit" between the two provisions. 496 U.S. at 672. The result we reach today achieves the same kind of fit, or symmetry. Because Proveris's patented product is not subject to a required FDCA approval process, it is not eligible for the benefit of the patent term extension afforded by 35 U.S.C. § 156(f). At the same time, because Innova's OSA device also is not subject to a required FDCA approval process, it does not need the safe harbor protection afforded by 35 U.S.C. § 271(e)(1).”

Equitable Defense: Waiver and Industry Standard

Qualcomm Inc. v. Broadcom Corp., 548 F.3d 1004, (Fed. Cir. 2008)

Qualcomm sued Broadcom for infringement of its patents directing to a video compression technology in U.S. District Court for the Southern District of California. The technology relates to a standard (H.264) adopted by the Joint Video Team (“JVT”), an international standard setting organization for video compression technologies. Although Qualcomm participated in the JVT before the adoption of the H.264 standard, it did not disclose the patents covering the related technology. The district court found Qualcomm’s patents unenforceable because it waived its claim of infringement when it violated its duty to disclose the patents under the JVT’s policies.

The Federal Circuit agreed with the district court that Qualcomm had a duty to disclose the asserted patents. It found not only that the written policies impose such duty, but also that the JVT participants understood the polices as imposing such a duty even assuming that the duty is not unambiguously clear from the written policies. Regarding the scope of the duty, it upheld the district court’s “reasonably might be necessary” standard to cover patents. Since a reasonable competitor would not expect to practice the adopted standard without license under the asserted patents, the court found that the patents are within the scope.

The Federal Circuit upheld the district court’s application of the waiver doctrine as a consequence of a failure to disclose the asserted patents, stating:

“In light of the record in this case in its entirety, it would be improper to allow Qualcomm �to rely on the effect of its misconduct to shield it from the application of the equitable defense of implied waiver.”

“In sum, we agree with the district court that, "[a] duty to speak can arise from a group relationship in which the working policy of disclosure of related intellectual property rights ('IPR') is treated by the group as a whole as imposing an obligation to disclose information in order to support and advance the purposes of the group." Not only did the district court find that Qualcomm was silent in the face of a disclosure duty in the SSO context, it also found clear and convincing evidence that Qualcomm had knowledge, prior to the adoption of the H.264 standard in May 2003, that the JVT participants understood the policies as imposing a disclosure duty, that the asserted patents "reasonably might be necessary" to practice the H.264 standard, and that Qualcomm �intentionally organized a plan to shield said patents from consideration by the JVT, planning to demand license fees from those seeking to produce H.264-compliant products. Then, after participating in the JVT and shielding the asserted patents from consideration during development of the H.264 standard, Qualcomm filed a patent infringement lawsuit against Broadcom, alleging infringement primarily, if not solely, based on Broadcom's H.264 compliance. In these circumstances, we conclude that it was within the district court's authority, sitting as a court of equity, to determine that Qualcomm's misconduct falls within the doctrine of waiver.”

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Endnotes

  • [*] Takanaka is a professor at the University of Washington School of Law and the Director of CASRIP.

Last updated 4/27/2012