I was recently interviewed by Levick Strategic Communication in Washington, DC about general patent litigation issues and the current state of patent litigation for businesses. Here is the link to the Bulletproof Blog at Levick Strategic Communications in Washington DC. http://www.bulletproofblog.com/
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.
Pittsburgh should be a magnet for patent filings given the Federal Local Patent Rules which were promulgated at the request of the Western District Federal bench. These rules give litigants a decent potential for a fairly quick ride through the docket and the judges here are comfortable in presiding over patent litigation and using these rules. Nonetheless, 2010 saw no growth in the number of patent filings in the Western District Court. There were 18 patent cases filed in 2010 and this is right in the range of the number of cases filed in recent years. We seem stuck in the range of 18 – 20 cases per year. There were a few false marking cases filed and some of the 18 cases were disposed of quickly through withdrawal or early settlement. Lucky for someone on those cases that went away quickly. In the days ahead, we will report more on cases filed here in Pittsburgh.
In United States of America ex rel. FLFMC, LLC v. T.F.H. Publications, Inc., No. 2:10cv437, 2010 U.S. Dist. LEXIS 111434 (W.D. Pa. Oct. 20, 2010) (opinion by J. Cercone), the court granted Defendant’s motion and transferred a false patent marking lawsuit to the Defendant’s home forum of New Jersey. Plaintiff had alleged that Defendant marked a Frisbee® Flying Disc with expired patent numbers in violation of 35 U.S.C. § 292.
Plaintiff, a Pennsylvania limited liability company with its principal place of business in Pennsylvania, was formed in 2010 for the sole purpose of filing false patent marking lawsuits. It did not manufacture or produce anything. Defendant, a Delaware corporation located in New Jersey, was founded over fifty years ago and manufactured and sold a wide range of pet products.
The court applied Third Circuit law to Defendant’s motion to transfer under 28 U.S.C. § 1404(a). The court considered a number of factors in its analysis, including the convenience of the parties and witnesses, the interests of justice, and a variety of public and private factors. The court found that the public factors, such as the interests of Pennsylvania and New Jersey, the ability to enforce a judgment, court congestion, local policies, and familiarity with the law were balanced and did not weigh in favor of either party. In contrast, the court found that the private factors weighed in favor of transfer because all of the evidence and witnesses were located in New Jersey.
The court gave relatively little weight to Plaintiff’s choice of forum because this was a qui tam action, and therefore, the U.S. government was the real party in interest. The court also found that the convenience of the parties and witnesses favored Defendant’s choice of forum. All of the relevant witnesses were likely located in New Jersey, as were all of the relevant business records. In contrast, Plaintiff, who was only in the business of filing false marking lawsuits, had no witnesses or documents of note in Pennsylvania. Moreover, the court gave little weight to Plaintiff’s argument that it would be more of a burden for it to litigate in New Jersey, reasoning that litigation was what this company was formed to do. Finding that the private interests favored transfer and the public interests did not favor either side, the court granted Defendant’s motion and transferred the action to New Jersey.
Thus, in this case, the court gave little deference to a plaintiff’s choice of forum when that plaintiff was recently formed solely for the purpose of taking advantage of the Federal Circuit’s recent decisions regarding false marking. When no witnesses or documents were located in the chosen forum, and the only connection to the forum is the location of the plaintiff, the court found little reason not to transfer the action.
In Hollander v. Ortho-McNeil-Janssen Pharmaceuticals, Inc., No. 2:10-cv-00836-RB, 2010 U.S. Dist. LEXIS 113005 (E.D. Pa. Oct. 21, 2010) (opinion by J. Buckwalter), Plaintiff sued Defendant for falsely marking 39 prescription drug products with expired patent numbers. Judge Buckwalter denied Defendant’s motion challenging Plaintiff’s standing to bring suit, but granted defendant’s motion to dismiss for failure to meet the heightened pleading standards of Fed. R. Civ. P. 9(b).
Defendant initially challenged Plaintiff’s standing to bring suit, arguing that Plaintiff suffered no concrete injury himself. Citing the recent Federal Circuit decision in Stauffer v. Brooks Brothers, Nos. CIV.A 2009-1428, 2009-1430, 2009-1453, 2010 U.S. App. LEXIS 18144, 2010 WL 3397419 (Fed. Cir. Aug. 31, 2010), the court rejected Defendant’s argument. The Federal Circuit held in Stauffer that any person has standing to bring claims under 35 U.S.C. § 292, because this is a qui tam statute, and the plaintiff acts as the assignee of the government.
Moving to Defendant’s Rule 9(b) challenge, the court stated that under 35 U.S.C. § 292, a plaintiff must show “(1) a marking importing that the article is patented (2) falsely affixed to (3) an unpatented article (4) with the intent to deceive the public.” Courts in the Third Circuit have found that intent to deceive element of § 292 claims must meet the heightened pleading standard of Rule 9(b).
Plaintiff relied on boilerplate allegations based “on information and belief” that Defendant knowingly violated § 292(a) by falsely marking its products with expired patent numbers with the intent to deceive the public. Plaintiff supported this allegation by claiming that Defendant was a “highly sophisticated business entity” with “extensive experience with the application for, procurement of, and publication of its patents.” The court found these allegations insufficient under Rule 9(b) because Plaintiff offered no factual support for his allegations that Defendant knew it had falsely marked its product or that it intended to deceive the public. Thus, In Hollander, the court rejected boilerplate, conclusory allegations of fraud and intent, finding that Rule 9(b) requires specific allegations of at least some facts to support an inference of fraudulent intent.
In Hollander v. Etymotic Research, Inc., No. 10-526, 2010 U.S. Dist. LEXIS 116619 (E.D. Pa. Nov. 1, 2010) (opinion by J. Tucker), Plaintiff sued Defendant for falsely marking certain earphones and earplugs that it sold with expired patent numbers, allegedly in violation of 35 U.S.C. § 292. The court denied Defendant’s motion to dismiss Plaintiff’s amended complaint.
Defendant marked its products with a series of patent numbers, including three patents that expired before 2008. On most of Defendant’s products, it used the following language: “[X products] are covered by one or more of the following U.S. patents: [#A, #B, #C, #D] and other patents pending.” Plaintiff alleged that this marking violated 35 U.S.C. § 292 because three of the patents had expired and that the false marking was done with the intent to deceive the public.
The main issue in this case was whether Plaintiff sufficiently pleaded Defendant’s intent to deceive under Fed. R. Civ. P. 9(b). A claim for false marking under 35 U.S.C. § 292 requires that plaintiff prove that defendant falsely marked an item with the intent to deceive the public. The court previously concluded that Plaintiff had to meet the requirements of Rule 9(b) when pleading the intent deceive and dismissed Plaintiff’s complaint for failure to do so. Plaintiff amended his complaint to add specific allegations of intent, which Defendant again challenged with a motion to dismiss.
Plaintiff’s amended complaint added allegations that Defendant received copies of the patents after they issued, which gave notice of the expiration date; reviewed its patent portfolio in order to timely pay the 4, 8, and 12 year maintenance fees on these patents; and marked new products with patent numbers after they expired. Plaintiff argued that together these showed that Defendant was aware of when the patents expired and consciously chose to mark new products with these expired patent numbers.
Defendant argued that these allegations did not meet the Rule 9(b) standard because they showed at most that it failed to remove the markings when the new products were introduced. Defendant also argued that the conditional language (“are covered by one or more of the following U.S. patents”) used on the products indicated that it had no intent to deceive.
Quoting Clontech Laboratories, Inc. v. Invitrogen Corp., 406 F.3d 1347, 1352 (Fed. Cir. 2005), the court stated that “the fact of misrepresentation coupled with proof that the party making it had knowledge of its falsity is enough to warrant drawing the inference that there was a fraudulent intent.” The court rejected Defendant’s arguments and found that the alleged facts were sufficient to meet the heightened Rule 9(b) pleading standard. The allegations supported a reasonable inference that Defendant knew the patents had expired and chose to falsely mark its products with an intent to deceive the public. With respect to the conditional language, the court found that the language could have the opposite effect suggested by Defendant—namely, that the public could be deceived into believing that all of the patents applied to the products.
In addition to challenging the amended complaint under Rule 9(b), Defendant argued that the marking of its products was not literally false because the markings on the product only claimed that the products were “covered by one or more of the [listed patents],” and the products were covered by at least one of the unexpired patents. The court first considered whether the marking of an expired patent fell within the prohibitions of the statute. Citing the recent decision in Pequignot v. Solo Cup Co., 608 F.3d 1356 (Fed. Cir. 2010), the court concluded it did, noting that “articles marked with expired patent numbers are falsely marked.” The court then looked to the Clontech decision and concluded a product must be covered by at least one claim of every patent listed in order to be properly marked—“[o]ne valid patent listed among several expired patents is not suffice to have this court hold that the markings were not false under the meaning of § 292.”
In this case, the court addressed what specificity is needed under Rule 9(b) to allege the intent to deceive the public. The tipping point for the court appeared to be when Defendant marked a new product with an expired patent number. Given the allegations that Defendant was aware of when the patent expired by virtue of having monitored the patent sufficiently to timely pay the maintenance fees, the court found that the allegations were sufficient to plead intent. In addition, the court found that using conditional language to mark a patent is not sufficient to shield a defendant from liability under 35 U.S.C. § 292. A defendant can potentially be liable for false marking unless the product is covered by at least one claim of every patent listed.
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Contact our Pittsburgh Intellectual Property, Data Security, Trade Secret, DTSA and Technology Attorneys at Houston Harbaugh, P.C. through IP and Litigation Sections Chair Henry M. Sneath at 412-288-4013 or firstname.lastname@example.org. While focusing first on health care and prevention issues for family, friends and employees, we are also beginning to examine the overall Covid Law related issues in business litigation, contract force majeure, trusts and estates litigation and insurance coverage issues that will naturally follow the economic disruption of the Covid-19 pandemic.
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