Tag Archives: Federal Circuit

Are Human Genes Patentable?–Supreme Court to Decide in Association for Molecular Pathology v. Myriad Genetics

Posted on December 14, 2012 by | 3 comments

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

On November 30, 2012, the United States Supreme Court granted certiorari in Association for Molecular Pathology v. Myriad Genetics (No. 12-398) to decide whether human genes are patentable. The case arises out of a declaratory judgment action brought by various researchers and institutions that certain claims in patents held by Myriad Genetics relating to isolated genes associated with a predisposition to breast and ovarian cancer are invalid because the subject matter of the patents is not eligible to be patented under 35 U.S.C. § 101.

SupremeCourtImage_1What Subject Matter Can Be Patented?

The Patent Act provides that “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor . . . .” 35 U.S.C. § 101.

While this statement and scope is broad, it is not unlimited. The Supreme Court has held, most recently in Mayo Collaborative Services v. Prometheus, Inc., 132 S. Ct. 1289 (2012), that laws of nature, natural phenomena, and abstract ideas are not eligible to be patented, as are mental processes and products of nature.

The question in this case is whether human genes fall within the scope of Section 101, or whether they are natural phenomena that are ineligible to be patented.

Split Decision at the Federal Circuit

In deciding this issue, the Federal Circuit panel (comprised of Circuit Judges Lourie, Moore, and Bryson) each wrote separate opinions endorsing different rules to decide this issue. Judge Lourie (writing for the majority) found that human genes are patentable, reasoning that the isolated DNA molecules at issue in the claims of the patents are not found in that form in nature. Because they are different from natural materials and isolated through the product of human ingenuity, they are eligible to be patented.

Judge Moore agreed that the claims are patent eligible, but for a different reason. She noted that human genes have been patented for years and are specifically allowed by the US Patent Office. She also noted that if she was writing on a blank slate, she might reach a different conclusion.

Finally, Judge Bryson dissented, finding the claims were not patent eligible. He found that the isolated genes performed the same function as they do inside the full DNA sequence. Thus, there was no transformation, and the genes are nothing more than an extraction of a naturally-occurring phenomena.

The researchers and institutions petitioned the Supreme Court for a writ of certorari, which the Supreme Court granted on the limited question of “Are human genes patentable?”

Numerous Amici Have Weighed in

Given the importance of this issue, both to researchers and pharmaceutical companies, a number of parties have weighed in with the Supreme Court, urging that the standard for patent eligibility for human genes be clarified. Their briefs can be read here.

It will be interesting to follow this case and its briefing in the coming months to see how the Supreme Court decides this issue or whether it leaves it to Congress to decide.

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Method to Estimate Risk of Fetal Down’s Syndrome Not Patent-Eligible Subject Matter

Posted on November 26, 2012 by | Comments Off on Method to Estimate Risk of Fetal Down’s Syndrome Not Patent-Eligible Subject Matter

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

On November 20, 2012, the Federal Circuit held that a method to assess the risk of fetal Down’s syndrome is not patent-eligible subject matter pursuant to 35 U.S.C. 101.  In PerkinElmer Inc. v. Intema Ltd., a unanimous panel considered the issue of patentability under section 101 and concluded that Intema’s screening patent, U.S. Patent No. 6,573,103 (“the ‘103 patent”), was not drawn to patent-eligible subject matter.

According to 35 U.S. C. 101, “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor . . . .”  The U.S. Supreme Court has held that section 101, while broad in nature, is subject to certain limitations, and laws of nature, natural phenomena, and abstract ideas are not patentable.  Mayo Collaborative Servs. v. Prometheus Labs, Inc., 132 S. Ct. 1289, 1293 (2012).  For example, mental processes and products of nature are not patent-eligible subject matter.  For a process claim to cover a patentable application of, for example, a natural law, it must contain other elements or a combination of elements sufficient to ensure that the patent in practice amounts to significantly more than a ptent upon the natural law itself.

The ‘103 patent disclosed specific screening methods, which used markers from both the first and second trimesters of pregnancy, to estimate the risk of fetal Down’s syndrome.  The Federal Circuit relied on two decisions to support its ruling that such methods do not cover patent-eligible subject matter.  In Mayo Collaborative Services, the U.S. Supreme Court held that two patents on a diagnostic test used to treat autoimmune diseases were invalid because patents based on the use of a natural law must also contain an inventive concept.  In Association for Molecular Pathology v. Myriad Genetics Inc., the Federal Circuit held that isolated human genes are patent-eligible but method claims for comparing or analyzing DNA sequences are not patent-eligible because the process claims were drawn to abstract mental processes.  With respect to PerkinElmer, the Federal Circuit noted that the ‘103 patent did not require any action besides comparing data with known statistical information.  Also, the court concluded that the relationship between screening marker levels and the risk of fetal Down’s syndrome related to a law of nature claim.  According to the Federal Circuit, because the asserted claims recite an ineligible mental step and natural law, and no aspect of the method converts these ineligible concepts into patent applications of those concepts, the claims cannot stand.

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Hor v. Chu–Laches and Correcting Inventorship

Posted on November 16, 2012 by | Comments Off on Hor v. Chu–Laches and Correcting Inventorship

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

This week, the Federal Circuit issued an opinion clarifying the time in which an individual who believes he or she is a co-inventor of an invention (but is not listed as an inventor) must act in order to correct the inventorship of a patent or patent application. Under 35 U.S.C. § 256, the Patent Office or the courts may correct any errors in the naming of the inventors in an issued patent. In Hor v. Chu, No. 2011-1540, the Federal Circuit determined that an individual who believes himself or herself to be an omitted inventor has six years from the date the patent issues to attempt to correct the inventorship, or the presumption of laches will apply. This is true even if the individual knows of the inventorship problem before the patent issues.

The patents at issue in this case involved high temperature superconductors and had a rather long history. The applications were filed in 1987 and 1989 by a professor from the University of Houston (Chu), but the patents did not issue until 2006 and 2010, respectively, due to a lengthy interference proceeding. A graduate student (Hor) and another scientist (Meng) who worked in Chu’s lab contended that they were co-inventors of the two patents. The patents listed Chu as the sole inventor, though. The trial court found that both Hor and Meng were aware (or should have been aware) that Chu applied for the patents without listing their names no later than the early 1990s. Hor did not file suit until 2008, and Meng did not move to intervene until 2010, however. Chu moved for summary judgment, arguing that Hor and Meng’s claims were barred by laches, which is a doctrine that can bar a claim if a plaintiff delays filing suit for more than six years after the claim accrues. Based on the trial court’s determination that Hor and Meng knew of the inventorship issue in the 1990s, the trial court found that their suit was barred by the doctrine of laches.

The Federal Circuit reversed, finding that the statute (35 U.S.C.§ 256) is quite clear that claim to correct inventorship requires that the patent issue first. Therefore, neither Hor nor Meng could have brought the § 256 claim until after the patents issued. Because laches cannot bar a claim before it accrues, the Federal Circuit held that Hor and Meng’s knowledge in the early 1990s could not bar their § 256 claims. Instead, the laches clock can only start on the day the patents issued. Because Hor and Meng filed suit within six years of these dates, the Federal Circuit held that the trial court erred in granting summary judgment on the basis of laches:

[T]he laches period for a § 256 correction of inventorship claim begins to run when “the omitted inventor knew or should have known of the issuance of the patent,” regardless of whether the omitted inventor knew or should have known of the omitted inventorship while the patent application was pending before the PTO.

While recognizing that this holding could create incentives for omitted inventors to wait to challenge their omission, the Federal Circuit felt it was bound by the statutory language and the case law regarding laches. In addition, the Federal Circuit noted that a different holding could create unnecessary work, given that claims are often narrowed or dropped during prosecution and who should be an inventor may not be clear until the patent actually issues.

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

Posted on August 15, 2012 by | Comments Off on 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.

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

Posted on August 14, 2012 by | Comments Off on 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.

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Rogers v. Tristar Products–Federal Circuit Dismisses Pending Patent False Marking Appeal

Posted on June 7, 2012 by | 1 comment

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

When President Obama signed the Leahy-Smith America Invents Act, H.R. 1249, 112th Cong. (1st Sess. 2011), the patent false marking claims that had become so popular were essentially eliminated. Whereas before anyone could bring such a claim, regardless of whether they had actually suffered any injury, now only those who have “suffered a competitive injury” as a result of a violation of the marking statute have standing to sue. (See 35 U.S.C. § 292). The America Invents Act not only prohibits persons who have not suffered a competitive injury from suing in the future, it also divests the standing of plaintiffs in pending false marking cases from continuing to pursue those claims.

In Rogers v. Tristar Products, Inc., 2011-1494, -1495, the Federal Circuit had to decide if that divestment included cases on appeal, as well as cases current pending in district courts. After considering the clear language in the newly amended 35 U.S.C. § 292—“The amendments made by this subsection shall apply to all cases, without exception, that are pending on, or commenced on or after, the date of the enactment of this Act”—the Federal Circuit determined that all cases must be dismissed, regardless of where they were pending or what procedural posture they may be in, unless the plaintiff could demonstrate that it had suffered a competitive injury.

The Federal Circuit rejected plaintiff’s assertion that he had a property right in maintaining such a claim or that the retroactive elimination of his claim violated the Due Process Clause. The Court found that Congress had a legitimate justification for eliminating these types of claims and rationally made the requirements retroactive.

The America Invents Act has effectively eliminated the nascent cottage industry of individuals suing companies for leaving expired patent numbers on its products. Companies no longer need to fear that they will be sued in such circumstances by individuals who likely have never used the products in question. Despite this, companies still need to be concerned about monitoring their products to make sure that they are appropriately marked. In the high stakes of patent litigation, defendants are still likely to look at whether they can bring false marking counterclaims if they are sued. As a competitor, it will be far easier (although by no means certain) to establish a competitive injury.

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Federal Circuit Finds License Negotiations Discoverable

Posted on April 10, 2012 by | Comments Off on Federal Circuit Finds License Negotiations Discoverable

By: Joseph R. Carnicella, IP Associate with Picadio Sneath Miller & Norton, P.C.

In In Re MSTG, Inc., Misc. Doc. No. 996, 2012 U.S. App. LEXIS 7092 (Fed. Cir. April 9, 2012), the Federal Circuit found that license negotiations between a patent holder and its licensees relating to reasonable royalties and damages are not protected by a settlement negotiation privilege.

MSTG sued various cell phone service providers claiming infringement of two patents.  MSTG eventually settled with all but one of the defendants (AT&T), wherein most defendants entered into settlement agreements and were granted licenses under the patents-in-suit and other patents owned by MSTG.  MSTG also licensed the patents-in-suit to a technology consortium around the same time period.

As part of the litigation, the amount of a reasonable royalty was a primary issue to the extent AT&T was found to infringe the patents-in-suit.  AT&T sought discovery into the negotiations of the settlement agreements and argued that such information was relevant in calculating a reasonable royalty.  MSTG’s damages expert offered an opinion relating to a reasonable royalty based on comparable licenses, industry survey results, and other published rates for similar technology.  The expert reviewed but discounted the pertinent license agreements on the grounds that the royalty rates were “litigation related compromises” and not comparable to a hypothetical negotiation between MSTG and AT&T.  AT&T then moved to compel the license agreements reviewed by the expert as well as the underlying negotiations.  The magistrate judge determined that the negotiation documents could disclose reasons why the parties reached the royalty agreements, which could provide guidance on whether such licenses could be considered in a calculation of a reasonable royalty between MSTG and AT&T.  The district court denied MSTG’s objections and agreed with the magistrate judge.

MSTG petitioned the Federal Circuit for a writ of mandamus, and the district court’s discovery order was temporarily stayed pending review.  MSTG asserted that, under Rule 501 of the Federal Rules of Evidence, the Federal Circuit should create a new privilege in patent cases that would prevent discovery of litigation settlement negotiations related to reasonable royalties and damages.  The Federal Circuit analyzed the relevant rules of procedure, rules of evidence and case law and concluded that settlement negotiations related to reasonable royalties and damage calculations are not protected by a settlement negotiation privilege.  Also, MSTG asserted that the district court abused its discretion by ordering the production of negotiation documents underlying the settlement agreements.  The Federal Circuit agreed with AT&T that, because the expert offered opinions that went beyond the four corners of the settlement agreements, MSTG could not deny discovery of that same information to AT&T.  The Federal Circuit did not address whether such settlement negotiation materials would be admissible in front of a jury.

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Federal Circuit Confirms That Abstract Mental Processes Are Not Patentable — CyberSource Corp. v. Retail Decisions, Inc.

Posted on August 19, 2011 by | Comments Off on Federal Circuit Confirms That Abstract Mental Processes Are Not Patentable — CyberSource Corp. v. Retail Decisions, Inc.

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

What constitutes patentable subject matter under 35 U.S.C. § 101 has been a topic of keen interest, especially since the Supreme Court issued its decision in Bilski v. Kappos, 130 S. Ct. 3218 (2010) that rejected the Federal Circuit’s machine-or-transformation test. On Tuesday, the Federal Circuit further clarified what can be patented, affirming a rejection under § 101 of a claim for detecting fraud in credit card transactions over the internet. Written by Judge Dyk, the unanimous decision in CyberSource Corp. v. Retail Decisions, Inc. (Case No. 2009-1358) found that claims involving mental processes that can performed by the human mind are not patent eligible.

The Underlying Claims

Two claims were at issue in CyberSource. They both involved a method for detecting fraud in credit card transactions over the internet by looking at the customer’s IP address. The claims were very broad with no specific algorithms for identifying fraud claimed.

The first was a method claim with no linkage to any physical structures:

3. A method for verifying the validity of a credit card transaction over the Internet comprising the steps of:

obtaining information about other transactions that have utilized an Internet address that is identified with the [ ] credit card transaction;

constructing a map of credit card numbers based upon the other transactions and;

utilizing the map of credit card numbers to determine if the credit card transaction is valid.

The second was a “Beauregard claim,” which is a claim to a computer readable medium containing programing instructions regarding a particular process:

2. A computer readable medium containing program instructionsfor detecting fraud in a credit card transaction between a consumer and a merchant over the Internet, wherein execution of the program instructions by one or more processors of a computer system causes the one or more processors to carry out the steps of:

obtaining credit card information relating to the transactions from the consumer; and

verifying the credit card information based upon values of plurality of parameters, in combination with information that identifies the consumer, and that may provide an indication whether the credit card transaction is fraudulent,

wherein each value among the plurality of parameters is weighted in the verifying step according to an importance, as determined by the merchant, of that value to the credit card transaction, so as to provide the merchant with a quantifiable indication of whether the credit card transaction is fraudulent,

wherein execution of the program instructions by one or more processors of a computer system causes that one or more processors to carry out the further steps of;

[a] obtaining information about other transactions that have utilized an Internet address that is identified with the credit card transaction;

[b] constructing a map of credit card numbers based upon the other transactions; and

[c] utilizing the map of credit card numbers to determine if the credit card transaction is valid.

Claim 3 Is an Unpatentable Abstract Mental Process

The Federal Circuit found that the method of claim 3 was nothing more than an abstract mental process. While the Supreme Court in Bilski rejected the machine-or-transformation test as the sole test of patentability under § 101, the Federal Circuit began its analysis there. It found that the claim recited no machines and did not perform any transformations. Following Bilski, it considered whether the claim was nonetheless patent eligible. It concluded that it was not because the claim recites a mental process, which is unpatentable under the Supreme Court’s decision in Gottschalk v. Benson, 409 U.S. 63, 67 (1972). Here, all of the steps of claim 3 could be performed by the human mind using a pen and paper. The Court suggested that if claim 3 had recited a more complex algorithm that could not have been performed easily using pen and paper, the result may have been different.

Thus, claim 3’s steps can all be performed in the human mind. Such a method that can be performed by human thought alone is merely an abstract idea and is not patent-eligible under § 101. Methods which can be performed entirely in the human mind are unpatentable not because there is anything wrong with claiming mental method steps as part of a process containing non-mental steps, but rather because computational methods which can be performed entirely in the human mind are the types of methods that embody the “basic tools of scientific and technological work” that are free to all men and reserved exclusively to none.

Claim 2 Is Also an Unpatentable Abstract Mental Process

Claim 2 required a slightly different analysis. It basically recited the same method as in claim 3, but it tied it to a computer readable medium. The question was whether tying it to this structure created a machine that was patent eligible under § 101. The Federal Circuit concluded that it was not sufficient because the underlying invention was the method, not a manufacture for storing computer-readable information. To be patent eligible, the machine “must impose meaningful limits on the claim’s scope,” so the “the incidental use of a computer to perform the mental process of claim 3 does not impose a sufficiently meaningful limit on the claim’s scope.” Thus, claim 2 (like claim 3) was not patent eligible under § 101.

The Federal Circuit Is Looking Carefully at Software/Method Claims

Inventors seeking to patent computer software or method claims should consider this decision carefully. If the claims simply recite steps that a human could perform with pen and paper, there is a real chance that the claim might not be eligible for patenting. Merely adding a limitation requiring a computer to perform the steps may not be sufficient to overcome this problem. Courts can look behind the words of the claim to determine what the underlying invention is and whether the use of a computer is meaningful. As always, careful claim drafting is very important if an inventor wants to obtain and enforce his or her patent.

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Fixing Obvious Drafting Errors During Litigation — The CBT Flint Partners, LLC v. Return Path, Inc. Decision

Posted on August 18, 2011 by | Comments Off on Fixing Obvious Drafting Errors During Litigation — The CBT Flint Partners, LLC v. Return Path, Inc. Decision

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

In the CBT Flint Partners, LLC v. Return Path, Inc. decision last week (No. 2010-1202, -1203), the Federal Circuit considered when a court can rewrite a claim during litigation to fix mistakes in drafting. The Court concluded that a district court has the authority to rewrite claims to correct obvious errors even if there are multiple ways to “fix” the claim, as long as all the possible solutions leave the claim with the same scope and meaning.

The Claim at Issue

The patent at issue in CBT Flint involved an e-mail spam filtering system. One of the claim limitations required a computer to detect and analyze an e-mail. The patent drafters forgot the word “and” between these words, which led to problems. The claim at issue (with the problematic term highlighted) read:

13. An apparatus for determining whether a sending party sending an electronic mail communication directed to an intended receiving party is an authorized sending party, the apparatus comprising:

a computer in communication with a network, the computer being programmed to detect analyze the electronic mail communication sent by the sending party to determine whether or not the sending party is an authorized sending party or an unauthorized sending party, and wherein authorized sending parties are parties for whom an agreement to pay an advertising fee in return for allowing an electronic mail communication sent by the sending party to be forwarded over the network to an electronic mail address associated with the in-tended receiving party has been made.

The district court determined that there were three possible ways to fix this problem—(1) remove the word “detect”; (2) remove the word “analyze”; or (3) add the word “and” between the words “detect” and “analyze.” Because it felt that it was debatable which solution should be used, it concluded it lacked the authority to rewrite the claim. Thus, it found the claim indefinite under 35 U.S.C. § 112, ¶ 2 and granted summary judgment in favor of the defendant. The Federal Circuit reversed.

Case Law History for Rewriting Claims

The Federal Circuit noted that courts have long had the power to fix obvious drafting mistakes, citing to the Supreme Court’s decision in I.T.S. Rubber Co. v. Essex Rubber Co., 272 U.S. 429, 442 (1926). The Court further noted that it held in Novo Industries L.P. v. Micro Molds Corp., 350 F.3d 1348, 1357 (Fed. Cir. 2003) that“[a] district court can correct a patent only if (1) the correction is not subject to reasonable debate based on consideration of the claim language and the specification and (2) the prosecution history does not suggest a different interpretation of the claims.”

The Court determined that the district court erred because the three alternative solutions it was considering were not meaningfully different when viewed from the perspective of one skilled in the art. The concepts of “detecting” and “analyzing” were implicit in the rest of the claim, even if one of these terms was explicitly deleted. Thus, the scope and meaning of the claim were the same regardless of which solution the district court could have adopted. In these situations, the district court does have the authority to fix this kind of obvious mistake.

Practice Pointers and Takeaways From This Case

While this case suggests that courts are willing to bail out patentees and fix mistakes in claims during litigation, patentees should not rely on courts fixing their problems for them. In this particular case, the Federal Circuit found that the three possible solutions were all functionally identical. That will not always be the case, and, it is far more likely it will not be the case.

Obviously, the best practice is not to make mistakes in the first place, but that is often easier said than done. Patentees should be especially vigilant about reviewing the claims during prosecution to make sure that there are no mistakes. In addition, patentees should make sure to review the final, published version from the Patent Office, as mistakes sometimes do happen in the printing process. If a mistake happens after issuance, there are mechanisms to correct a patent (e.g., a certificate of correction). Finally, if a patentee is going to sue on a patent, it is especially important to review the patent again to make sure there are no mistakes. Don’t count on the court to bail you out!

The other takeaway from this case from the defense viewpoint is that courts may be more reluctant to find claims indefinite for obvious mistakes or typographic errors. Significant errors are still likely to doom patent claims, but it is not prudent to count on minor errors sinking them, too.

The bottom line with minor mistakes is that neither side should be confident in how a court will react. It may fix them, but it may not. And how a court will act likely depends on some very specific facts.

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Federal Circuit Sanctions Non-Practicing Entity for Baseless Lawsuit — Eon-Net LP v. Flagstar Bancorp

Posted on August 2, 2011 by | Comments Off on Federal Circuit Sanctions Non-Practicing Entity for Baseless Lawsuit — Eon-Net LP v. Flagstar Bancorp

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

Non-practicing entities (NPEs) are often criticized for bringing meritless lawsuits against companies with the sole intention of forcing settlements by offering amounts far less than the cost of litigation. Even though the claims may be baseless or tenuous at best, the cost of fighting often far outweighs the settlement demands. Faced with paying a relatively small amount to assure the case goes away versus paying substantially more to defeat the claim through litigation, companies will often acquiesce to the settlement demands even if they feel that they have not infringed a valid patent.

On Friday, the Federal Circuit issued a decision in Eon-Net LP v. Flagstar Bancorp, (No. 09-1308) reminding defendants that there are other options for defendants facing frivolous lawsuits. The Court in a unanimous decision affirmed a district court’s decision to award over $600,000 in attorney fees and sanctions under 35 U.S.C. § 285 and Rule 11 against an NPE for filing a frivolous patent infringement lawsuit. The Federal Circuit panel consisted of Judges Lourie, Mayer, and O’Malley.

Eon-Net LP—Non-Practicing Entity

Eon-Net LP (and its related companies) are NPEs that have filed over a hundred lawsuits against a variety of different defendants. They typically offer to settle cases for $25,000–$75,000, based on the amount of the defendant’s sales, which are amounts far lower than the potential damages or the litigation costs. This is the typical non-practicing entity

35 U.S.C. § 285 and Attorney Fees in Exceptional Cases

A district court has the discretion under § 285 to award attorney fees to the prevailing party in a patent infringement lawsuit if it determines the case is “exceptional.” The Federal Circuit, while indicating that it will review these determinations, also indicated that it will not lightly disturb a court’s finding because of the court’s lengthy and personal experience with the case, the parties, and the attorneys.

The Federal Circuit mentioned a variety of actions by a losing party that can make a case exceptional—(1) litigation misconduct, (2) unprofessional behavior, (3) misconduct in getting the patent at issue, and (4) bringing an objectively baseless litigation in bad faith. The Court found that Eon-Net’s litigation misconduct and filing of a baseless infringement action in bad faith made the case exceptional.

The Eon-Net case is pretty much a checklist for what not to do in filing a lawsuit. First, Eon-Net intentionally destroyed potentially relevant documents prior to filing suit. Next, it failed to participate in the litigation process in good faith by not offering constructions for any of the disputed claim terms, lodging incomplete and misleading evidence with the court, and submitting contradictory declarations. In short, “[t]he district court also found that [Eon-Net’s principal] displayed a ‘lack of regard for the judicial system’ and that Eon-Net and [its principal] had a ‘cavalier attitude’ towards the ‘patent litigation process as a whole.’” Taken together, the Federal Circuit found this behavior unprofessional.

The Federal Circuit also affirmed the finding that Eon-Net filed a baseless lawsuit in bad faith. The written description in the patent clearly refuted Eon-Net’s need construction to find infringement, which it should have known before filing suit.

In finding that Eon-Net filed suit for an improper purpose, the Federal Circuit looked beyond the litigation before it and to Eon-Net’s history of filing what it considered to be “extortionate” lawsuits with settlement demands far lower that the litigation costs. “The record supports the district court’s finding that Eon-Net acted in bad faith by exploiting the high cost to defend complex litigation to extract a nuisance value settlement from Flagstar.” On its face, the Court’s analysis brings into question the entire business model for many NPEs.

In addition, the Court was troubled by the disproportionate and asymmetric discovery costs often present in cases like these. NPEs will often have little, if any, relevant documents or personnel to depose. In contrast, defendants may have enormous amounts of potentially relevant documents and witnesses. Because discovery costs are generally borne by the producing party, an NPE can force a defendant to expend hundreds of thousands or millions of dollars during discovery—costs that it will never have to bear because of the dearth of information it has.

Finally, the Court was troubled by the fact that NPEs are rarely put at risk in these kinds of lawsuits. They do not typically sell any products, so there is no chance of a patent infringement, unfair competition, or antitrust counterclaim. The only risk is the loss of the patent itself, which is typically only one of a number of licensing revenue sources. There is no chance that they will face increased competition from a competitor if they lose.

Taken together, the Federal Circuit had no problem with the finding that Eon-Net filed a baseless lawsuit in bad faith for an improper purpose sufficient to warrant a finding that this was an exceptional case.

Rule 11 Sanctions

In addition to awarding attorney fees, the Federal Circuit also affirmed the district court’s imposition of Rule 11 sanctions because Eon-Net and its attorneys failed to perform a reasonable pre-suit investigation. While Eon-Net’s counsel did examine Flagstar’s website before filing suit, they did not perform an objective evaluation of the claim terms when assessing infringement.

What Can We Learn From This Decision?

This decision is really a slap in the face to NPEs and indicates that the Federal Circuit does not take kindly to litigants filing baseless claims to extort settlements from defendants. While this decision serves as a warning to NPEs and their attorneys, it also serves as a cautionary tale for other litigants.

First, the decision emphasizes the need to conduct a proper pre-filing investigation, which should include a claim-by-claim analysis of infringement and the potential construction of any key claim terms. Depending on the nature of the allegedly infringing product, this analysis may be difficult. For example, if claim limitations are not observable from inspecting the product (such as limitations contained in source code), the attorneys will need to make educated assumptions about how the allegedly infringing product works and be ready to defend the legitimacy of those assumptions, if necessary.

Second, plaintiffs need to be aware that the obligation to preserve potentially relevant evidence begins before they file the lawsuit. Intentionally destroying documents before filing a lawsuit can have serious consequences, and if a company had a standard document destruction policy, it must determine if that policy needs to be suspended before (not after) filing suit.

Third, litigants need to take the litigation seriously and respect the process, even if it feels cumbersome or annoying at times. Flippant comments, like those made by Eon-Net’s principal, can come back to haunt a losing party. Ignoring the process or filing half-hearted papers can cause serious problems.

Finally, this case is a real indictment of the standard NPE business model of making extremely low settlement offers to entice defendants to not fight the lawsuit. Many NPEs use this business model with lawsuits of questionable merit knowing that defendants will be reluctant to fight the lawsuit given the prospective costs. This decision may serve as a wake-up call for NPEs and their attorneys to be more careful in what suits they file.  Given that Eon-Net only makes between $25,000–$75,000 per settlement, a $600,000 fee award against it likely is a substantial hit to its business. In addition, this decision will haunt Eon-Net in all future proceedings and likely lead to more awards against it if it continues to bring these kinds of meritless lawsuits.

This decision shows that fighting the fight can sometimes be worth the battle and help to deter other NPEs from coming after a company. Unfortunately, it is still likely a losing proposition for the defendants. Even in this best-case scenario, they are generally only compensated for their litigation costs, not all of the other costs of being a defendant (such as lost employee time, opportunity losses, and the damage to their image by being involved in a lawsuit). There is no windfall for defendants in these circumstances.

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