Monthly Archives: August 2012

Jury Finds in Favor of Apple and Against Samsung

By:Joe Carnicella, intellectual property attorney at Picadio Sneath Miller & Norton, P.C.

On Friday, August 24, a nine member jury entered a verdict in favor of Apple and awarded almost $1.05 billion in damages.  Apple filed suit against one of its largest competitors, Samsung Electronics, in April 2011, and alleged that Samsung’s Galaxy line of smartphones and tablets infringed seven of Apple’s patents covering the iPhone and iPod products.  In turn, Samsung countersued alleging that Apple infringed Samsung’s patents covering various wireless software components of its products.  After more than a year of highly contentious litigation and following a trial that began at the end of July and lasted the better part of August, the jury deliberated for less than three days before delivering the verdict in favor of Apple.

Prior to trial, Apple received a significant e-discovery victory when the court sanctioned Samsung for its failure to preserve emails after Samsung should have anticipated the lawsuit by Apple.  The court determined that Samsung had a duty to preserve evidence as of August 23, 2010, and while Samsung issued a litigation hold and provided instructions detailing how to save emails using its email system, Samsung failed to disable the auto-delete function of its email system, which automatically deleted all emails every two weeks in Samsung’s Korean offices.  The court ordered that, as part of the sanctions, the jury would be allowed to draw an adverse inference against Samsung and that the jury would be told to presume that relevant evidence was destroyed and that the lost evidence was favorable to Apple.

The court also entered pretrial preliminary injunctions against Samsung barring the sale of the Galaxy Nexus phone and the Galaxy Tab 10.1 in the United States.  Moreover, the court delivered various ruling for and against both parties on various in limine motions.  One ruling against Samsung appeared to be very significant: Samsung took issue with the court’s ruling that, because Samsung failed to disclose in time contentions that Samsung’s designs were in development before the iPhone, Samsung was precluded from using slides containing images of the Samsung designs.  This particular issue surfaced again during the afternoon while opening statements were being made when a press release issued saying that “the excluded evidence would have established beyond doubt that Samsung did not copy the iPhone design” and that “fundamental fairness requires that the jury decide the case based on all the evidence.”  Counsel for Apple raised this issue with the judge claiming that the release was an attempt to influence the jurors.  The court ordered that counsel for Samsung disclose who authorized the release and also required that one of the lead attorneys, John Quinn, file an affidavit about his involvement in the release.  Quinn complied with the court’s order and disclosed that Samsung did not issue the press release but was responding to press inquiries about the issue.  Quinn acknowledged that he authorized the press statement but declared that the purpose was not to influence the jury.  Apple filed a motion for sanctions, which was ultimately denied by the court; however, the judge indicated that the issue may be investigated further following trial.

Apple established at trial its theory that Samsung had ripped off the unique design features of the iPad and iPhone and infringed certain utility patents.  Apple focused on comparisons between Samsung’s phones from 2006 to its newer smartphones from 2010.  Also, Apple relied on internal documents from Samsung comparing Samsung’s products with the iPhone hardware.  Apple called one of its design veterans as its first witness, who described how Apple’s design team discussed most of their work at the kitchen table and how they were constantly questioning one another as designs were suggested and developed until they agreed on a final product.  Apple also called a former employee who designed icons for the original Macintosh computers to opine on the confusion with the icons and layouts on screens of various Samsung phones.  Furthermore, Apple relied on a marketing expert who opined that people don’t associate Samsung touchphones as groundbreaking technology and based such an opinion in part on Samsung internal documents that described the iPhone as a competitive threat.  Moreover, Apple called its patent portfolio director who described the company’s licensing strategy and stated that he could count on one hand the number of instances wherein Apple entered into a license for a company to use its design patents.

On the other hand, Samsung maintained the position that Apple had no right to claim a monopoly on certain design features that were not revolutionary.  Samsung’s theory to demonstrate non-infringement was to get the jury to focus on the specific legal requirements relating to each of Apple’s patents.  Samsung called one its designers who testified that she did not rely on Apple designs to create icons for the Galaxy smartphone lines.  Samsung also went on the offensive by attempting to prove that Apple’s products use certain Samsung features for mobile devices, such as the process for emailing photos and the technology relating to easily finding photos in an album.  Samsung called an expert who testified that the iPhone and iPad violated three of Samsung’s patents.  Moreover, Samsung attempted to demonstrate that Apple’s patents were invalid due to developments in technology that existed before Apple claimed to have invented such technology.

The significance of this trial must be underscored.  As a threshold matter, the trial may serve as a precursor to Apple’s global patent war against Google, which was an “extra” in this litigation because Samsung’s smartphones run on Google’s Android operating system.  As a reminder, Steve Jobs vowed that he is “willing to go thermonuclear war on this.”  Also, this trial served as a gateway that uncovered some of Apple’s secret world.  Apple moved to keep under seal many documents and trial exhibits that contained competitively sensitive information, such as financial data and proprietary market research including customer surveys.  The court granted some of the motions that related to production capacity, source code and licensing agreements; however, the court denied most of the motions regarding financial data and marketing.  The court rationalized the decisions by explaining that “because Apple updates its product lines relatively frequently, it is not obvious that historical profit, profit margin, cost, or unit sales data for past products would provide competitors with an advantage over future products.”  The court determined that there was a strong interest in making the data public due to the total amount of damages on the line.

What’s next?  The jury’s verdict was favorable to Apple in every way but one: the jury decided that the Samsung Galaxy Tab 10.1 did not infringe Apple’s patent covering design elements on the iPad.  This decision by the jury was contrary to a decision made by the court prior to trial.  As mentioned above, the court entered a preliminary injunction barring Samsung from selling the Galaxy Tab 10.1 in the United States.  Following the verdict, Samsung filed a motion requesting that the court dissolve the preliminary injunction order on the grounds that there is no proper basis for maintaining the injunction based on the jury’s verdict.  However, because the jury also decided that the Galaxy Tab 10.1 infringed some of Apple’s software patents, the issue may be more complicated.  Moreover, the court is within its rights to overrule the jury’s decision and issue a ruling that the Galaxy Tab 10.1 does, in fact, infringe Apple’s design patent.  Also, the jury found that Samsung willfully infringed the patents, and thus, the court must decide how much to increase the damages award, which could be up to three times.  Finally, and perhaps most importantly, the question remains whether the court will issue a permanent injunction against Samsung, and if so, what would be the extent of the injunction, i.e. would an injunction cover only those products identified by Apple in this lawsuit or any/all current and future similar products.

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Patent or Trade Secret — Which One to Choose?

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

There was an interesting article on CNBC yesterday that highlights a popular misconception people have regarding how to protect their ideas and innovations. While people often think of using patents to protect their ideas, the law provides a number of different mechanisms (such as trade secrets) that can often be far more useful and valuable than patents. The article highlights how some of the most valuable intellectual property in the world, such as the Dr. Pepper formula, KFC’s “Secret Recipe of 11 Herbs and Spices,” and the formula for WD-40, is not patented, but is instead protected as a trade secret.

Both patents and trade secrets provide important protections for an individual’s or company’s innovations, but they protect them in very different ways. Patents generally entitle an inventor to the exclusive right to make, use, and sell the invention described in the claims of the patent for a 20-year period from the date the patent application is filed. As part of the quid pro quo for obtaining this government-sanctioned exclusive right, the inventor must describe how to make or use his or her invention in sufficient detail that a person in that field would be able to make or use the invention without significant difficulties. Once that 20-year period expires, anyone is free to use that invention.

Trade secrets, on the other hand, potentially can last forever and the law will prevent others from improperly taking or using the invention, as long as the individual or company takes sufficient steps to keep the invention secret. Thus, a former employee who happens to know the secret will not be allowed to make the product in competition with the inventor, or a competing company cannot use industrial espionage to steal the secret. The law does not prevent another from using the secret if the person independently and lawfully discovers the same invention on his or her own, though. It only protects the inventor from others who have improperly discovered or used the secret.

From these brief descriptions, it is clear that patents better protect some kinds of inventions, while keeping the invention a trade secret may better protect others. For instance, it may make more sense to consider patenting the invention when the innovative aspect of an invention is readily seen simply by looking at a product (such as with a paper clip or a pop-top soda can).  The law will protect the inventor from anyone else making or selling the same invention for 20 years, even if that other inventor independently came up with the same idea. Trade secret protection is likely of little to no value in this case, because once the invention is sold, everyone knows what the invention actually is.

On the other hand, inventions such as the Dr. Pepper formula are not easy to determine, even when you have a can of Dr. Pepper in your hands. The precise ingredients and the process by which they are blended are not apparent. This kind of invention lends itself to being kept as a trade secret because the invention is not easily reversed engineered. If Dr. Pepper had chosen the patent route instead, it would only have had an exclusive right to make and sell the soda only for 20 years, after which everyone could make exactly the same product. By protecting it as a trade secret, it potentially can keep its invention a secret forever.

One of the keys with trade secrets is that the inventor must take reasonable and active steps to keep the invention secret. As the article mentions, many of these companies restrict knowledge of the complete formulas or processes to only a handful of individuals and take steps make sure that the products are manufactured in such a way that no one can determine what the recipes are. If an inventor does not take steps to keep his or her invention secret, the law will not do it for him or her.

Obviously, both patent and trade secret law are far more complex than what is discussed here. However, the basic principles are useful to understand so that the right questions can be asked and the right strategies considered when deciding how to protect your secrets and inventions.

The Dangers of Misleading Press Releases

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

When a patent holder sues a potential infringer, the question often comes up about what the patent holder can publicly say about the lawsuit, either to its customers or in press releases. A recent blog post by Scott Daniels in the Reexamination Alert Blog and cross-posted at IPWatchdog shows the problems one company found itself in when it issued press releases that the other side felt went too far.

Background

TASER International (which makes numerous products, such as the famous TASER stun gun) sued Stinger Systems for infringing some of TASER’s patents and for false advertising. While the false advertising claims were resolved by a joint stipulation, the court ultimately found that Stinger infringed one of TASER’s patents.

In response, Stinger filed its own lawsuit against TASER the week before TASER issued its quarterly earnings report, claiming that TASER engaged in false advertising, unfair competition, and injurious falsehood arising out of a study by the National Institute of Justice (“NIJ”) that TASER circulated. Stinger waited until the day of the earnings report to announce the lawsuit in a press release, but never actually served TASER. Later, Stinger voluntarily dismissed the lawsuit after receiving an order to show cause.

Contending that the press release and lawsuit were shams designed to harm TASER’s stock and business, TASER brought another lawsuit against Stinger—Taser International, Inc. v. Stinger Systems, Case No. 2:09-cv-289, in the United States District Court for the District of Nevada—alleging a number of claims, including violations of the Lanham Act. Judge Miranda Du issued an opinion on August 3, 2012 deciding the parties’ partial summary judgment motions on the Lanham Act claims (among other things).

In it, the Court refused to grant summary judgment in favor of Stinger on the claims related to Stinger’s press releases. The Court found that TASER had presented sufficient evidence that the allegations that the press releases were false and misleading could go to the jury.

In particular, the Court noted four issues of fact that prevented granting Stinger’s motion. First, Stinger claimed in its press release that it had served TASER with the lawsuit when it had not. Second, the press release did not adequately explain what the NIJ is and what its report contained. Third, there was evidence that suggested that Stinger “wanted to pursue misleading press releases as an avenue for devaluing TASER.” And, fourth, there were telephone recordings suggesting that the litigation was designed to be vexatious and to drive down TASER’s stock.

Take Aways

While this case is more extreme that most cases, it still serves as an important reminder that the filing of a lawsuit does not give a party a license to say anything it wants. Press releases need to foremost be truthful and provide sufficient context for the statements contained in them, especially those statements that might be viewed as impugning another.

As this case shows, courts will look sometimes look behind the statements to the motivations of the speakers in determining whether the statements are actionable or were intended to mislead others.

As tempting and satisfying as it may be to issue strong press releases, companies and individuals need to take care that the press releases do not themselves become the subject of additional litigation or distract from the legitimate claims an individual is trying to make.

Full Scope Enablement — Magsil Corp. v. Hitachi Global Storage Techs., Inc.

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

An often-overlooked aspect of patent drafting is the requirement under 35 U.S.C. § 112, ¶ 1 that the entire scope of the claims must be enabled by the disclosures in the specification. As can be seen from the Federal Circuit’s recent decision in Magsil Corp. v. Hitachi Global Storage Technologies, Inc., Case No. 2011-1221, the failure to fully enable a claim can have grave consequences.

The case involved read-write sensors for computer hard disk drive storage systems. The inventors claimed a method of manufacturing a tri-layer junction and the junction itself. Information is stored by varying the magnetization of an electrode on the hard disk. In one orientation, the resistance is higher than the other, which can be measured to determine whether the electrode is in a “0” or “1” state. At issue was the phrase “causes a change in the resistance by at least 10% at room temperature.” Past inventions were unable to achieve this large of a change, peaking at only 2.7%.

The problem for the patentee was the open-ended language of “at least 10%,” which the Court noted could include changes from 10% to infinity. The specification only described how to achieve changes between 10.0–11.8%, and was silent on how to achieve changes larger than that. The district court granted summary judgment for the defendant, finding that the claims were not enabled and therefore invalid, and the Federal Circuit affirmed.

The Federal Circuit reviewed the history of the full scope enablement requirement, which serves two purposes—(1) to ensure that the patentee adequately discloses the claimed invention and (2) to prevent claims that are broader than what is disclosed. The Court noted that “a patentee chooses broad claim language at the peril of losing any claim that cannot be enabled across its full scope of coverage.” Therefore, in order to meet the enablement requirement, “[t]he specification must contain sufficient disclosure to enable an ordinary skilled artisan to make and use the entire scope of the claimed invention at the time of filing” without undue experimentation.

In this case, the Court found that the claim was invalid because the specification did not enable the full scope of the claims. There was nothing in the specification that described how to achieve changes of the magnitude encompassed by the open-ended claim. In fact, the inventor testified that even he did not know how to create changes greater than 20%. Because “[t]he ‘922 patent specification only enables an ordinarily skilled artisan to achieve a small subset of the claimed range,” the Federal Circuit affirmed the district court’s summary judgment of invalidity.

This case provides an important practice pointer when drafting claims. While one is generally interested in drafting broad claims, it is important that the specification fully supports the range of the claims; otherwise, the entire claim might be invalid. This further suggests that drafters consider using dependent claims to narrow ranges or using so-called “picture” claims, which are more tightly focused on any embodiments known to the inventors at the time of the application.

In re Walter F. Beineke — The Mighty Oak That Couldn’t Be Patented

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

While most people are familiar with patents for inventions, many do not realize that an individual can obtain a patent on new kinds of plants. In In re Walter F. Beineke, the Federal Circuit had to address what kinds of plants (in this case, trees) are eligible for patent protection. In a unanimous decision authored by Circuit Judge Dyk, the Court concluded that the applicant (Walter Beineke) was not entitled to a patent for white oak trees he discovered.

Beineke, a Professor Emeritus of Forestry and Natural Resources at Purdue University, discovered two large, hundred-year-old white oak trees in another’s front yard that appeared to display superior genetic traits than those of other white oaks (excellent timber quality and a strong central stem tendency). Beineke planted acorns from each of the trees and confirmed the superior traits of the trees. After years of studying these trees, he applied for plant patents on both trees.

The United States Patent and Trademark Office rejected his applications, finding that the trees were found in an uncultivated state, which was affirmed by the Board of Patent Appeals and Interferences, finding that there was no evidence that the trees had been planted by a person. Beineke appealed, and the Federal Circuit affirmed the rejections, although for a slightly different reason.

The case centered around the proper interpretation of 35 U.S.C. § 161, which allows the Patent Office to issue plant patents to anyone who:

invents or discovers and asexually reproduces any distinct and new variety of plant, including cultivated sports, mutants, hybrids, and newly found seedlings, other than a tuber propagated plant or a plant found in an uncultivated state . . . .

The question was what level of human involvement is necessary to obtain a plant patent. Beineke argued that no human involvement is necessary, while the Patent Office argued that humans must play some role in the creation of the plant.

The Federal Circuit traced the history of the Patent Act, starting with the 1930 Act, which allowed plant patents.  The Court noted that the statute and the courts applying it recognized that plant patents could not be granted for simply discovering a plant. There had to be some “exercise of the inventive faculty.”

In short, the provisions of the original 1930 Act, incorporated in the present plant patent statute, provided patent protection to only those plants (e.g., sports, mutants, and hybrids) that were created as a result of plant breeding or other agricultural and horticultural efforts and that were created by the inventor, that is, the one applying for the patent.

The Court then considered what effect, if any, the 1954 amendments had on the Plant Patent Act. One of the primary purposes of the amendments was to overrule a prior court decision and allow plant patents for newly found seedlings that were the result of human activity.

Taking all of this together, the Court found that Beineke was not entitled to a plant patent on either white oak tree. The Court concluded that Beineke discovered the white oaks by chance and that he could not demonstrate that the trees were the result of his (or anyone else’s) creative efforts. Given that the trees were over 100 years old when Beineke found them, they were also not “newly found seedlings” within the scope of the 1954 amendments.

Having made these determinations, the Court declined to address what is meant by “found in an uncultivated state” for purposes of § 161, leaving that question for another day and another case.

Federal Court Orders Defendants to Add Metadata to Privilege Log

by: Kelly A. Williams, a partner at Picadio Sneath Miller & Norton, P.C.

Parties to litigation are used to providing privilege logs (a list of documents not produced in discovery on the grounds that the documents contain privileged information) with such information as author, recipient, date, description of the document and the privilege being asserted.  Now that electronic documents are becoming the “norm,” the courts may begin requiring more information about these documents.  Once such case is Favors v. Cuomo, a redistricting case in filed in the Eastern District of New York.  In this case, the court ordered defendants to supplement their privilege log to include “addressee(s), copyee(s), blind copyee(s), date, time, subject line, file name, file format, and a description of any attachments.”  Favors v. Cuomo, 11-CV-5632, 2012 U.S. Dist. LEXIS 113076, *116 (E.D.N.Y. Aug. 10, 2012) (U.S. Mag. J. Roanne L. Mann).  The rationale for this ruling was that this type of information is easily and readily accessible given the metadata available for electronic documents.  Id.  However, the court did add that merely listing the subject line, file name or document title would be insufficient as it would result in “vague, confusing, or conclusory descriptions.”  Id. at *117 n.36.  Thus, this type of information would have to be revised to provide a sufficient description of the document.

PATENT TROLLS: $29 Billion Cost!

by: Henry M. Sneath, a shareholder at Picadio Sneath Miller & Norton, P.C.

Our friends at Thompson and Knight have provided the latest on the cost to businesses and society of Patent Troll litigation. The costs remain staggering.  We share their article with you and commend you to its reading. Thanks to author R. David Donoghue. See link below: http://www.retailpatentlitigation.com/2012/08/07/trolls-cost-society-29-billion-with-a-b-in-2011/#page=1

Western Pennsylvania Patent Lawsuit Filings Increase in 2012

by: Henry M. Sneath, a shareholder at Picadio Sneath Miller & Norton, P.C.

The USDC for the Western District of Pennsylvania enacted local patent rules in 2005. The court has also been designated as one of a number of courts in the country that are part of a Pilot Program where patent filings will be monitored and wherein participating courts will establish certain practices for the administration of Patent cases. While patent filings have been rather flat in the Pa. Western District in the last few years, the number has skyrocketed in 2012. There were 11 Patent cases filed in 2011, but this year, through July, there have already been 28 filings, or more properly, 11 actual filings and 17 transfers of cases from the Eastern District of Texas, or which relate to those transferred cases.

These latter 17 cases have related to the same or similar patents held by a company called Maxim Integrated Products, which is suing numerous big name companies, and which is being sued in declaratory judgment actions by many other big name companies. Many of their suits were filed, not surprisingly in Texas Eastern, but were transferred to Pa. Western.

Declaratory Judgment actions followed and have been filed here by other companies whom Maxim allegedly threatened with suit. The patent (s) at issue relate to the transfer of “cash” between secure devices (eg: mobile to mobile). The Summary of the Invention in this ‘510 patent is set forth as:

“The present invention is an apparatus, system and method for communicating a cash equivalent electronically to and from a portable module. The portable module can be used as a cash equivalent when buying products and services in the market place. The present invention comprises a portable module that can communicate to a secure module via a microprocessor based device. The portable module can be carried by a consumer, filled with electronic money at an add-money station, and be debited by a merchant when a product or service is purchased by the consumer. As a result of a purchase, the merchant’s cash drawer will indicate an increase in cash value.”

We will follow these cases and report more in the future.