1. Hot Topics in Intellectual Property 2010: Patent Law Stephen D. MilbrathAllen, Dyer, Doppelt, Milbrath & Gilchrist, P.A.

2. Is the clear and convincing evidence standard subject to attack in the Supreme Court? Z4 Text, Inc. v. Microsoft Corp., 507 F.3d 1340 (Fed. Cir. 2007): Microsoft applied for a writ of certiorari to test this question, but settled before the Supreme Court acted on the cert application. KSR Int.’l Co. v. Teleflex, Inc., 500 U.S. 398, 426 (2007): The presumption of validity is “much diminished” when the PTO has not considered the most pertinent prior art. 35 U.S.C. §282 does not require the clear and convincing evidence standard; it only requires that the patent be presumed valid. In analogous circumstances under the APA, appellate courts do not accord substantial deference to an agency finding where the agency has filed to consider an important question.

3. The De Novo Review Issue Resurfaces Trading Technologies Int’l, Inc. v. Espeed, Inc., 2010 U.S. App. LEXIS 3914 (Fed Cir. Feb. 25, 2010) Two patents directed to an electronic exchange for trading commodities required the district court to construe the claim term “static,” as in the limitation “static display of prices.”The district court’s Markman order made express “factual” findings about the meaning of “static” to one of ordinary skill in the field of invention.

4. Judge Rader: claim construction rulings do not involve “a purely legal matter.” The CFAC “must confront findings by the trial court,” Id., at * 18. Thus the recurring question: whether the district court’s findings were entitled to deference on review—an argument rejected by Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448 (Fed. Cir. 1998) (en banc). As if inviting review by the Supreme Court, Judge Rader stated: Despite the Supreme Court’s emphasis on the trial court’s central role for claim construction, including the evaluation of expert testimony, this court may not give any deference to the trial court’s factual decisions underlying its claim construction. This court’s prior en banc decision requires a review . . . without the slightest iota of deference.Id., at * 19 (emphasis added).

5. A concurring opinion by district judge Ron Clark, sitting by designation, notes the policy arguments for abandoning the de novo standard of review. These exchanges suggest that some CAFC judges continue to support the view that fact-finding by the district court in the context of Markman hearings should be accorded deference. This may create the potential for review of this issue in the Supreme Court, something that has thus far eluded many

6. “Claim Construction” After Egyptian Goddess (Richardson v. Stanley Works, Inc., 2010 U.S. App. LEXIS 4895 (Fed. Cir. March 9, 2010) This case involved a design patent for Richardson’s “stepclaw” tool,” a hammer with a stud climbing tool and a crowbar, which was asserted against the Stanley “fubar” tool, the subject of Stanley’s design patent. Here are the two designs:

7. Richardson v. Stanley Works Stepclaw (‘167 Patent) Fubar Design (‘101 Patent)

8. Richardson v. Stanley Works Stepclaw (‘167 Patent) Fuber Design (‘101 Patent)

9. At the trial the district court engaged in a “claim construction” phase in which the court distinguished the “functional aspects” of the Richardson’s design from the ornamental aspects. The court then went to hold that the overall visual effect of the Fubar tool was not substantially similar to that of the Stepclaw design. On appeal, Richardson argued that the court erred by separating the functional and ornamental features of the patent. Although the CAFC had adopted this approach in Oddzon Prods., Inc. v. Just Toys, Inc., 122 F.3d 1396, 1405 (Fed. Cir. 1997), Richardson argued that Egyptian Goddess mandates a different result. The court rejected this approach, noting:

10. 1. Such a “claim construction” process is often necessary to assist the fact-finder, since only the ornamental aspect is protected by the design patent. 2. It is improper to include the utilitarian elements in evaluating the scope of the design patent claim: “Richardson’s argument that the court erred in separating out functional features of his design essentially is an argument for a claim scope that includes the utilitarian elements of his multi-functional tool. We agree with the district court that it would indeed be improper to allow Richardson to do so.” Id., at * 8.

11. 3. The ordinary observer test applies even where the patented design incorporates functional elements. The patentee must prove that an ordinary observer, familiar with the prior art designs, would be deceived into believing that the accused product is the same as the patent design. Id., at * 11. So where there are a lot of functional elements, the patentee must prove that the deception which is required “arises as a result of the similarities in the overall design, not of similarities in ornamental features in isolation.” Id., at * 12.

12. Ariad Pharmaceuticals, Inc. v. Eli Lilly and Company Case No. 2008-1248 (Fed. Cir. Mar. 22, 2010) (En banc) “The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention.”

13. Ariad Pharmaceuticals, Inc. v. Eli Lilly and Company (Continued) “Lilly disagrees, arguing that § 112, first paragraph, contains three separate requirements. Specifically, Lilly parses the statute as follows: (1) “The specification shall contain a written description of the invention, and”

14. (2) “The specification shall contain a written description . . . of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and” (3) “The specification . . . shall set forth the best mode contemplated by the inventor of carrying out the invention.”

15. “We. . . read the statute to give effect to its language to that the specification ‘shall contain a written description of the invention’ and hold that section 112, first paragraph, contains two separate description requirements: a ‘written description of the invention’ and [ii] of the manner and process of making and using [the invention]’

17. Test for Possession of Invention It requires an “objective inquiry into the four corners of the specification from the perspective of one of ordinary skill It must describe the invention to be understandable to the skilled artisan And it must show that the inventor actually invented the claimed invention Having the records to prove invention will not suffice

18. How much knowledge of a patent is enough for a finding of inducement of infringement? Prior case: DSU Med Corp. v. JMS Co., 471 F.3d 1293, 1304 (Fed. Cir. 2006) (en banc): If you plead inducement of infringement you must prove the infringer “knew of the patent” SEB S.A. v. Montgomery Ward & Co., 594 F.3d 1360 (Fed. Circ. 2010): deliberate indifference as to whether the patent exists or not is enough to support a finding of infringement by inducement under 35 U.S.C. §1271(a) Deliberate indifference is at least disregarding a known risk of a protective patent. The court speculated that a patentee may need only show constructive knowledge with evidence of disregard for clear patent markings.

19. Does Section 271(f) encompass method patents? 35 U.S.C. §271(f)(1): Whoever without authority “supplies ... from the United States all or a substantial portion of the components of a patented invention where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside the United States in a manner that would infringe ... shall be liable as an infringer” Microsoft Corp. v. AT&T Corp., 550 U.S. 437, 452 n.13 (2000):Reserved judgment on whether an intangible method could be considered a patented “invention” under §271(f) Cardiac Pacemakers v. St. Jude Med., Inc., 576 F.3d 1348, 1359 (Fed. Cir. 2009) (en banc in part): Method claims, the components of which are necessary steps in a process, do not qualify as a patented “invention” under Section 271(f).

20. New life for false marking claims? Forest Group, Inc. v. Bon Tool Co., 590 F.3d 1295 (Fed. Cir. 2009): Congress intended to permit a fine for each article falsely marked, because each time a party falsely marks an article with the requisite intent to deceive, a separate offense occurs. Congress expressly authorized qui tam actions to enforce the statutes. Therefore concerns about a new “cottage industry” of false marking litigation by “marking trolls” are misplaced. District Courts have discretion to award only a small fine per article for mass produced items in order to avoid disproportionate penalties. Stauffer v. Brooks Brothers, 615 F. Supp. 2d 248 (S.D. N.Y. 2009), Fed. Circuit Appeal No. 2009-1428: Plaintiff must allege actual injury to competition or some other circumstance showing standing. The opinion seeks to create an “antitrust injury”, construction of the statute.

21. The Demise of the Point of Novelty Test for Anticipation in Design Cases In International Seaway Trading Corp. v. Walgreens Corp., 589 F.3d 1233 (Fed. Cir. 2009), a panel opinion, the court discarded the point of novelty test for the issue of anticipation, thus bringing the test into synch with the test of infringement adopted in Egyptian Goddess. The district court had refused to compare the insoles of the patented design with the insoles of the alleged anticipatory design. The Federal Circuit rejected this approach because the trier of fact is required to consider the features of the patented anticipatory designs visible at any time in their “normal use lifetime”, including at the point of sale – where the insoles would be visible. Dissenting opinion by Judge Clevenger: majority opinion unwisely carved out of the overall design only the insoles.

22. International Seaway Trading Corporation v. Walgreens Corporation, et al.Case No. 2009-1237 (Fed. Cir. Dec. 17, 2009) Figure 2 in the ‘263 Patent Figure 1 in the ‘789 Patent

23. International Seaway Trading Corporation v. Walgreens Corporation, et al.Case No. 2009-1237 (Fed. Cir. Dec. 17, 2009) Figure 6 in ‘789 Patent Figure 6 in ‘263 Patent

24. New rigor for patent damages? Lucent Technologies, Inc. v. Gateway, Inc., 580 F.3d 1301 (Fed. Cir. 2009): Court overturned a jury verdict of $357 M in royalty damages for the infringement of a patent directed to a method of entering information into fields on a computer screen without using the keyboard, by using predefined tools. The infringement involved a “date picker” tool that was only a small feature in the Microsoft calendar software. Lucent’s expert on the hypothetical negotiation of a reasonable royalty had been allowed to opine that in a lump sum approach, the jury was free to speculate about the extent of future use of the licensed invention. Lucent had submitted no evidence upon which the jury could conclude that Microsoft and Lucent, during this hypothetical negotiation, would have estimated that the patented date picker feature would have been so “frequently used or valued as to command a lump sum payment that amounts to approximately 80 percent of the sales price of Outlook.” 580 F.3d at 1327.

25. Lucent Technologies, Inc. v. Gateway, Inc. (continued) Key holding: the connection between the license agreement used by the expert and the hypothetical agreement: the agreements must be proven to be comparable to the hypothetical agreement and to the ultimate award. The entire market value approach: the patentee must show that the patented feature is the basis for consumer demand. On the other hand, the entire market approach would have been less problematic had the rate been less: there is nothing inherently wrong with the using the market value approach, especially when there is no established market value for the infringing component or feature, so long as the multiplier accounts for the proportion of the base represented by the infringing component or feature. 580 F.3d at 1339.

26. I4I Limited Partnership and Infrastructures for Information, Inc. v. Microsoft Corporation2010 U.S. App. LEXIS 5010 (Fed. Cir. March 10, 2010)(Corrected Opinion) Excessive Royalty Damages? 141’s Expert: started with Xmetal, a high-end product, as benchmark: $499 per unit which Microsoft had carefully studied To get a “baseline royalty”: multiplied Xmetal price of $499 times Microsoft’s profit margin (76%) and then applied the “25% rule” to this number, assuming inventor keeps 25% of the profits from any infringing sales. This resulted in royalty rate of $96. He then adjusted this “baseline” by the Georgia Pacific factors, increasing the rate to $98, which was multiplied by the assumed number of infringing business units

27. The Use of a Survey A survey expert: surveyed U.S. Companies with 40 substantive questions to arrive at the conclusion of 1.9% as the companies that used the patent in an infringing manner Damages expert : 1.9% x number of copies of Word sold during the period of infringement =2.1 million x $98=$205,800 Microsoft’s usual license fee for other patents: $1. to 1.5 million

28. QUESTIONS?