Monthly Archives: May 2011

Federal Circuit Grants En Banc Rehearing in McKesson to Decide Joint Infringement Standard

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C.

Yesterday, in McKesson Technologies Inc. v. Epic Systems Corp. (No. 2010-1291), the Federal Circuit granted McKesson’s petition for a rehearing en banc regarding the standards for joint infringement of a patent. This order comes just a little over a month after the Court granted a similar petition for a rehearing en banc in Akamai Technologies, Inc. v. Limelight Networks, Inc. (No. 2009-1372), which we discussed in an earlier post.

The Federal Circuit has apparently taken a special interest in the appropriate standards for imposing liability for joint infringement of a patent. Yesterday’s order expands the scope of the previous order and seeks briefing on two new issues:

  1. “If separate entities each perform separate steps of a method claim, under what circumstances, if any, would either entity or any third party be liable for inducing infringement or for contributory infringement? See Fromson v. Advance Offset Plate, Inc., 720 F.2d 1565 (Fed. Cir. 1983).”
  2. “Does the nature of the relationship between the relevant actors—e.g., service provider/user; doctor/patient—affect the question of direct or indirect infringement liability?”

The first question is almost identical to that posed in Akamai, but it phrases the question in terms of inducing infringement or contributory infringement, whereas the one posed in Akamai was directed to direct infringement. By doing so, the Federal Circuit will be addressing all potential forms of joint infringement of method claims. The second question expands the scope to address the question of the relationship between the parties, which was central to the Akamai panel’s determination that joint infringement requires some form of an agency relationship.

The underlying case

McKesson owns a patent directed to a method of communication between healthcare providers and patients that involves personalized web pages. Epic is a software company that developed a web-based software package that it licenses to healthcare providers to allow patients to view their medical records, scheduling information, and treatment plans.

The parties agreed that no single party performed every step of the allegedly infringed method claim, rather, the patients performed some steps and the medical provider performed others. Nonetheless, McKesson argued that Epic was liable under an induced infringement theory, which requires a direct infringer. McKesson argued that Epic’s customers (the doctors/healthcare providers) controlled or directed their patients to perform the missing steps in the claim, so that Epic directly infringed under a joint infringement theory.

Recognizing that there was no agency relationship between doctors and their patients, McKesson argued that the special nature of the doctor/patient relationship should also be sufficient to support joint infringement. The Court disagreed, finding no agency relationship or other contractual relationship under the standards discussed in Akamai. The Court then affirmed the district court’s grant of summary judgment for Epic.

Federal Circuit Dramatically Overhauls Inequitable Conduct Defense in En Banc Therasense Decision

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C.

The Federal Circuit yesterday issued its en banc decision in Therasense, Inc. v. Becton, Dickinson & Co. that significantly changes the law of inequitable conduct. The 6-1-4 decision (written by Judge Rader, with a concurrence in part by Judge O’Malley and a dissent by Judge Bryson) creates bright-line rules for establishing the defense of inequitable that appear, as a practical matter, to almost eliminate this defense except in the most egregious (and likely difficult to prove) cases. In addition, under the Court’s decision, proving invalidity may be a precursor to a finding of inequitable conduct, thereby rendering this defense somewhat redundant. Below is a summary of the key points of the decision, along with a discussion of the consequences going forward.

The Defense of Inequitable Conduct

An accused infringer raising the defense of inequitable conduct must prove by clear and convincing evidence that the patentee misrepresented or omitted material information with the specific intent to deceive the PTO.

The Intent Element

To prevail on this defense, the accused infringer must prove that the patentee acted with the specific intent to deceive the PTO. Gross negligence or negligence are not sufficient. And, in the case of non-disclosure, the accused infringer must prove by clear and convincing evidence that the patentee made a deliberate decision to withhold a known material reference—that is, he knew of the reference, knew it was material, and deliberately decided to withhold it.

Intent and materiality are separate requirements. There is no “sliding scale,” and courts cannot infer intent solely from materiality. Therefore, proving that a patentee knew of a reference, should have known of its materiality, and decided not to submit it to the PTO does not prove specific intent to deceive.

Intent can be inferred from indirect and circumstantial evidence, but the specific intent to deceive must be the “single most reasonable inference able to be drawn from the evidence.”

The patentee need not offer any good faith explanation for its conduct until the accused infringer proves a threshold level of intent to deceive by clear and convincing evidence.

The Materiality Element

The Court rejected the standard of materiality defined in PTO Rule 1.56. Instead, it adopted a “but-for” materiality test.

“But-for” materiality must be shown by clear and convincing evidence, so an accused infringer must show that the PTO would not have allowed a claim if it had been aware of the undisclosed art. However, in making this determination, the court is to employ the PTO’s standard of patentability, not the judicial standard. Therefore, the court should apply the preponderance of the evidence standard used by the PTO and give claims their broadest reasonable construction. This creates a potential situation where a claim might not be invalid under an anticipation/obviousness defense at trial, but still could have been rejected by the PTO during prosecution.

“But-for” materiality is not required for affirmative acts of egregious misconduct, such as submitting false affidavits. However, the nondisclosure of prior art and the failure to mention prior art in an affidavit are not egregious misconduct. This type of misconduct still requires “but-for” materiality.

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Social Media and IP Protection

by: Joseph R. Carnicella, intellectual property attorney with Picadio Sneath Miller & Norton, P.C.

You may have seen the photograph of the space shuttle Endeavour taken by Stefanie Gordon from her airplane seat.  Well, Ms. Gordon never quite realized exactly what was to come with a simple tweet.  MSN posted a very interesting article this morning exploring the intricacies of copyright protection afforded to those who capture and share fortuitous famous photographs instantly with the public through social media.

The Cost of IP Justice – Can Small Businesses Afford it?

Posted By: Henry M. Sneath, principal shareholder and IP Group Chair at Pittsburgh Litigation and Patent Prosecution boutique Picadio, Sneath Miller & Norton, P.C. (hsneath@psmn.com or 412-288-4013)

The Patent Reform Act of 2011 portends yet another problem for small business folks trying to develop technology, and more importantly trying to enforce it. We have written about the pending legislation in prior posts. If it passes the US Congress, and if the “first to file” patent rule is therefore adopted by the USPTO as the law, patents will go to those with superior resources, in-house legal departments and the wherewithal to file patents on a moment’s notice. Gone will be the rule that “invention” is the starting point. It will be the result of a race to the PTO.

This is only part of the current IP problem for small businesses however, and the bigger problem is litigation cost. Small businesses simply cannot afford to bring or defend intellectual property lawsuits. If they are the plaintiff, it is likely that they have been given advice by counsel on the anticipated expense of patent or trademark enforcement litigation. Legal fee costs, expert witness costs, deposition costs, demonstrative evidence for trial costs and lost opportunity time for employees can add up quickly and it is important for the client and counsel to set a budget and to discuss each phase of the litigation with a projection of costs. Sadly this cost discussion is often ignored and we have received calls from potential clients who have exhausted their litigation budgets and who are nowhere near a settlement or trial. Frustrated they seek new counsel, but often new counsel is hampered by the inability to properly fund the ongoing litigation.

More difficult perhaps is the plight of the small business (or individual) defendant in an IP suit. These litigants are often ill-prepared for the costs and rigor of defending litigation in Federal Court. Having never been sued before, but having read about the high cost of lawsuits, they frequently seek legal counsel with the plea: “Can we end this quickly as I can’t afford to be in a lawsuit?” When Plaintiff is seeking to shut down production and sale of the new defendant’s chief product line, the answer to this question may not be easy. I tell them sure – we can end it early – all you need to do is stop making  the product that is your main source of revenue, agree never to make it again, pay the plaintiff money for their alleged damages and pay all of their legal fees. These legal fees are generally not insignificant and may have been generated by one or more large law firms at enormous billing rates.

The client, who may even have solid defenses, is then faced with a difficult choice between: 1) Ignore the defenses and cave in quickly with all of the resultant cost and loss of income; 2) Engage in some litigation to try to establish some leverage for a favorable settlement or 3) Take the chance that expensive litigation will, over time, allow a favorable result and perhaps even an award of attorney’s fees to repay the defendant for the litigation cost. It is option 2 which poses the problem of delicate balancing by lawyer and client. How much litigation and cost is enough to create favorable settlement leverage? The client needs to balance the revenue/profit of the allegedly offending product or mark, against the phased cost of litigation.  We can project that phase one (investigation, pleadings, Federal Rule initial disclosures, status conference before the court etc) might cost “x” dollars. The client can decide whether that cost is appropriate against the revenue stream attributable to the product or mark, and determine when to make the settlement move. There is never, of course, any guarantee that the settlement option will work and therein lies the balancing act problem. The client may get stuck in long litigation and need to simply fight its way out. Good communication between lawyer and client is critical to making these decisions.

Boutique Law Firms and NPE Multi-Party Lawsuits

By: Henry M. Sneath, principal shareholder and IP Litigation Group Chair at Pittsburgh litigation boutique Picadio, Sneath Miller & Norton, P.C. (hsneath@psmn.com)

Here is an interesting post from Law.Com, an ALM company, about the thriving business of NPE suits, usually filed against multiple defendants, and the ability of those defendants to turn to patent and IP litigation boutiques for representation. Please visit the Law.Com site for more details.

Update: What You Need to Know About PDF/A ECF Filings in Federal Court

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C.

As discussed in an earlier post on this blog, the federal courts will be requiring all electronic filers to move to the PDF/A standard for ECF filings. The Western District of Pennsylvania announced that it is beginning its transition to this format now, and all filings starting on January 1, 2012 must be in the PDF/A standard (link to Court’s PDF announcement).

The PDF/A format should be a longer lasting file format that will allow attorneys and the public to access these records well into the future. The PDF/A standard requires that the files be self-contained and not refer to use any information outside of the file itself. So, all the fonts and other information will be embedded inside the file. There are two types of PDF/A formats—the PDF/A-1a and PDF/A-1b formats. The “a” format requires strict tagging of information, while the “b” format is less stringent. As a practical matter, one will likely need the original source file (for example, the original Microsoft Word file) to create a PDF/A-1a file. This will make it more difficult to convert standard PDF files into PDF/A-1a files. On the other hand, because the PDF/A-1b format is more forgiving, and it should be possible to convert standard PDF files into this format. It appears that the federal courts will accept either PDF/A format.

There are a variety of websites offering advice and tutorials to help ease the transition to the PDF/A format. The Adobe Acrobat for Legal Professionals website recently posted a tutorial on using the save as feature in Acrobat 9 and X to create or convert files into the PDF/A format. It also hosted a webcast on the topic that can be viewed here.

For additional information:

  • Federal Court FAQ regarding PDF/A change
  • past Adobe Acrobat for Legal Professionals blog posts on this topic 1, 2, 3, 4
  • ISO 19005-1:2005 FAQ describing the standard (downloads FAQ)
  • PDF/A compliance organization FAQ