Top 10 IP Decisions of 2010

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

2010 gave us a number of important decisions in the intellectual property field. The Bilksi decision regarding the patentability of business methods was eagerly awaited from the Supreme Court. In addition, the Federal Circuit issued a number of key decisions involving false marking, the written description requirement, patent misuse, and patent term extensions.

Bilksi v. Kappos—130 S.Ct. 3218 (2010)

Bilski was one of the most anticipated cases of the year. The Supreme Court considered whether business method patents are patentable subject matter under the Patent Act. As the Court is want to do, it did not substantially clarify the standards. Nonetheless, three key points emerged from this decision.

1.  Business method patents are not per se unpatentable subject matter, although they still might be (or should be) difficult to get.

2.  The Federal Circuit’s machine or transformation test for patentability under § 101 is not the sole test, although it is still a very useful clue for determining whether a process meets the requirements of § 101. Few processes that do not meet this test would be patentable.

3.  The three previous exceptions to the broad standards of patentability under § 101 still exist—laws of nature, physical phenomena, and abstract ideas are not patentable.

American Needle, Inc. v. National Football League—130 S.Ct. 2201 (2010)

American Needle was a non-exclusive National Football League Properties (NFLP) licensee for certain apparel that bore NFL team insignias. In December 2000, the NFL decided to only grant exclusive licenses, and American Needle did not receive one. American Needle sued, claiming that the NFL’s licensing practices violated § 1 of the Sherman Antitrust Act. The Seventh Circuit found no violation, but the Supreme Court reversed.

While not a purely IP case, this case is at the intersection of IP and antitrust laws. The NFL claimed that the NFLP was a joint venture that was formed to develop, license, and market NFL IP rights. Section 1 of the Sherman Act prohibits concerted action that restrains trade. The key inquiry in this case was whether the NFL acts as a single decisionmaker in the IP licensing arena or whether the NFLP brings together independent decisionmakers. The Court concluded that while the NFL may in some areas act like a single decisionmaker (for scheduling, rules, etc.), in the IP arena each team is pursuing its own interests and directly competing against the other teams. Thus, the decision by the NFLP to issue exclusive licenses was concerted action that deprived the marketplace of independent action by each team and thus could state a claim for a violation of § 1 of the Sherman Act. The Court noted that a joint venture could be governed by antitrust laws in some aspects of its business, while not in others. The Court remanded to the lower courts to address the substance of the claims.

Reed Elsevier, Inc. v. Muchnick—130 S.Ct. 1237 (2010)

Muchnick was part of a class of authors who sued several online databases and publishers for copyright infringement. The class consisted of individuals who had registered and not registered their copyrights with the PTO in accordance with § 411(a). The parties reached a class settlement, which the district court approved over the objections of a number of authors, including Muchnick. Muchnick appealed and the Court of Appeals sua sponte asked the parties to brief whether § 411(a) deprived the federal courts of subject-matter jurisdiction. All parties agreed there was jurisdiction, but the Second Circuit found there was not. The parties appealed to the Supreme Court, and the Court reversed, concluding that § 411(a) was not jurisdictional.

This is a bit of an academic decision. It merely finds that the requirement under § 411(a) that an author register his or her mark before filing suit in not a jurisdictional requirement. The Court only determined that the district court has jurisdiction over the matter. It refused to decide the merits of the settlement agreement, whether § 411(a) is a mandatory precondition to filing suit, or whether courts can sua sponte dismiss an action if they learn that the copyright infringement claims involve unregistered works.

Pequingot v. Solo Cup Co.—608 F.3d 1356 (Fed. Cir. 2010)

Pequingot is one of a number of patent marking trolls that filed suit against companies for marking products with expired patent numbers. His case is one of the earlier ones and is one of many that the Federal Circuit has ruled on in the last two years. Solo Cup was marking its plastic cups with expired numbers. It realized this and sought counsel to determine what to do. Counsel initially thought it was not an issue, but later decided that it was wrong to continue marking the products with expired numbers. In light of the cost of replacing molds, counsel thought it was okay to wait until the molds needed to be replaced to take the expired numbers off. He also recommended that Solo Cup not do anything else to unintentionally suggest that the products were covered by expired patents. The district court granted summary judgment for Solo Cup, finding no intent to deceive. The Federal Circuit affirmed.

It is clear that the Federal Circuit is not going to eliminate this cause of action, although they are not totally unsympathetic to companies, especially in expired patent cases. This decision makes clear that:

1.  The marking of a product with an expired patent falls within the false marking statute. Such a product is “unpatented” with respect to that patent once the patent expires.

2.  The public policy considerations place the costs and burdens with the manufacturer, rather than the public, to determine whether the patents are valid and enforceable.

3.  The Clontech presumption of intent to deceive when a manufacturer makes an untrue statement and knows it is untrue is rebuttable—“mere knowledge that a marking is false is insufficient to prove intent if Solo can prove that it did not consciously desire the result that the public be deceived.”

4.  The presumption of intent to deceive is weaker in expired patent cases.

5.  The bar for proving deceptive intent is particularly high because of the criminal nature of this statute, but the burden of proof is preponderance of the evidence.

6.  Good faith reliance of advice of counsel can negate the inference of a purpose to deceive the public.

Stauffer v. Brooks Brothers, Inc.—619 F.3d 1321 (Fed. Cir. 2010)

This is another false patent marking case. In it, Stauffer sued Brooks Brothers for marking its bowties with expired patent numbers. The US Government moved to intervene, which the district court denied. The district court also dismissed the action for lack of standing, because it found that Stauffer suffered no legal injury to himself. The Federal Circuit reversed, finding that anyone has standing to sue because this was a qui tam action and the government was injured by virtue of having its laws broken.

This case really clears up the standing issue, which some district courts used to dismiss these false marking cases. That approach is no longer viable after this case. Some of the key points from this case are:

1.  The false marking statute—35 U.S.C. § 292(b)—is a qui tam provision.

2.  A qui tam plaintiff can derive its standing from the United States’ implicit partial assignment of its damages claim.

3.  Section 292 defines an injury in fact to the United States, so a violation of that statute inherently is an injury to the United States, which the plaintiff can derivatively assert to establish standing.

4.  The Federal Circuit refused to decide whether an assignment to a qui tam plaintiff of the false marking claim without the government retaining any control over the litigation violates the “take Care” clause of Article II, § 3 of the Constitution—the parties did not raise or argue that issue (an amicus did).

5.  The Federal Circuit also signaled that the intent to deceive element must be pleaded under Rule 9(b), but did not directly hold this.

6.  The Government should have been allowed to intervene under Rule 24(a)(2) because the Government would be barred under res judicata if Stauffer lost.

Ariad Pharmaceuticals, Inc. v. Eli Lilly and Co.—598 F.3d 1336 (Fed Cir. 2010) (en banc)

This case confirmed that there is a written description requirement separate from the enablement requirement under § 112, 1st ¶ . The Federal Circuit reversed the district court’s denial of JMOL and found the claims invalid for failing to satisfy the separate written description requirement.

This is an important case that will affect the drafting of patents. In particular, this case will be important in the chemical and biological fields, where the claims are often directed to broad, generic classes of compounds. This opinion makes clear that patentees will have to identify specific compounds within those generic classes in order to satisfy the written description requirement. It will not be enough to simply rewrite the claim language in the specification.

The key points from this case are:

1.  Section 112, 1st ¶ has two separate requirements (1) written description of the invention and (2) written description of the manner and process of making and using the invention.

2.  If the invention is not described in the specification, the claim fails, regardless if one of ordinary skill in the art could make or use the invention.

3.  An adequate written description of a claimed genus requires more than a generic statement of an invention’s boundaries, instead it requires disclosure of either a representative number of species or structural features common to the genus such that one of skill in the art can “visualize or recognize” the members of the genus.

4.  Rewriting the claims in the specification adds nothing to the question of whether the written description requirement is met.

5.  The test for whether a patentee meets the written description requirement is “whether the disclosure of the application relied upon reasonably conveys to those skilled in the art that the inventor had possession of the claimed subject matter as of the filing date.”

6.  This is a question of fact.

7.  The level of detail required to satisfy the written description requirement will vary depending on the nature and scope of the claims and the complexity and predictability of the technology.

8.  Examples or actual reduction to practice is not required.

9.  There may be little actual difference between describing an invention and enabling one to make and use it.

10.  The written description requirement is determined as of the filing date.

Princo Corp. v. International Trade Commission—616 F.3d 1318 (Fed. Cir. 2010) (en banc)

This case addressed the scope of the patent misuse doctrine, which allows an infringer to escape judgment if the patentee misuses the patent at issue. The case involved the standards for computer CDs (the CD-R and CD-RW formats, or “Orange Book” standard). Sony and Philips jointly pooled some patents and offered an Orange Book license to anyone who wanted to use this technology. The license included essential and nonessential patents. Previously, Sony and Philips had competing ideas for how to implement the standard. They settled on the Philips approach and abandoned Sony’s idea. The patent for Sony’s idea (the Lagadec patent) was included in the Orange Book license, even though it wasn’t necessary to make a functional CD-R/RW device.

Princo was a licensee to the Orange Book collection of licenses. It soon stopped paying license fees, and Philips filed a complaint with the ITC. In defense, Princo argued that the bundling of the Sony patent license was a misuse of the Philips patent because it forced them to license a patent that wasn’t needed. The ITC disagreed and the Federal Circuit affirmed.

The Federal Circuit reaffirmed the judicially-created doctrine of patent misuse and described its contours. The key parts of this decision are:

1.  The basic rule of patent misuse is that a patentee may not use a patent to acquire a monopoly not embraced by the patent.

2.  Examples of patent misuse are:

a.  requiring license fees beyond the life of the patent

b.  tying arrangements—forcing a customer to buy a non-patented good as a condition of buying a patented product or licensing the patent

3.  There was no patent misuse in this case because the crux of the alleged anticompetitive activity was Sony’s failure to pursue its own patent in the marketplace, not the decision of what patents to bundle with the Orange Book license—and, there is no patent misuse if the misconduct does not arise from the patent in suit.

4.  In addition, the Court found no anticompetitive behavior, because the Sony technology was technically and economically unfeasible.

Hyatt v. Kappos—625 F.3d 1320 (Fed. Cir. 2010) (en banc)

This is another somewhat technical, although potentially important decision, from the Federal Circuit. When an applicant loses at the PTO and the PTO denies his application, the applicant can appeal directly to the Federal Circuit or can go to the district court. The question in this case is if the applicant goes to district court, can he introduce new evidence not presented to the PTO, or is he bound by the record (like on appeal)? The Federal Circuit concluded that the applicant can introduce new evidence.

The key points from this decision:

1.  35 U.S.C. § 145 provides that an applicant can file an action in the district court to challenge a PTO decision—this is not an appeal.

2.  In such a district court action, the parties are only limited by the Federal Rules of Evidence and Civil Procedure as to what evidence can be introduced.

3.  A district court is entitled in its discretion, however, to give less weight to evidence that was not presented to the PTO.

4.  If the parties introduce no new evidence, the district court is to apply the Administrative Procedure Act’s substantial evidence standard.

5.  While the parties may introduce new evidence, they cannot raise new issues that were not raised at the PTO.

In re Zimmer Holdings, Inc.—609 F.3d 1378 (Fed. Cir. 2010)

The Eastern District of Texas has become the “go-to” court for many patent plaintiffs. In this decision, and a number of others issued in 2010, the Federal Circuit is signaling that it will closely look at the propriety of allowing cases like these that have very few ties to Texas to proceed in this court. Because the plaintiff had no real ties to Texas, other than moving its files to its attorney’s offices there before the litigation commenced, the Court granted defendants’ petition for a writ of mandamus and ordered the court to transfer the case to the Northern District of Indiana.

Wyeth v. Kappos—591 F.3d 1364 (Fed. Cir. 2010)

In this decision, Wyeth challenged the USPTO’s calculation of the patent term extension under 35 U.S.C. § 154(b) due to delays caused by the USPTO. When the term of a patent changed from 17 years after issuance to 20 years after filing in 1994, delays caused by the USPTO could significantly affect the effective lifetime of a patent. In response, the American Inventors Protection Act guaranteed patentees that any delays during prosecution due to the USPTO would be added to the 20-year lifetime.

Under the statute, there are three distinct types of delays that can result in an extension of the patent term. In Wyeth, the question addressed by the Federal Circuit was how the USPTO was interpreting the statute and the effect of overlapping delays. The Court concluded that the USPTO had misapplied the statute and incorrectly calculated patent term extensions, which had the effect of inappropriately reducing the lifetime of a number of patents.