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Managing IP In Light of Changing US Patent Law
1. for by Ian Liu, Ph.D. Finnegan, Henderson, Farabow, Garrett & Dunner, LLP Managing IP in Light of Changing U.S. Patent Law 1
2. Disclaimer These materials are public information and have been prepared solely for educational purposes to contribute to the understanding of American intellectual property law. These materials reflect only the personal views of the author and are not individualized legal advice. It is understood that each case is fact-specific, and that the appropriate solution in any case will vary. Therefore, these materials may or may not be relevant to any particular situation. Thus, the author and Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P. cannot be bound either philosophically or as representatives of their various present and future clients to the comments expressed in these materials. The presentation of these materials does not establish any form of attorney-client relationship with the author or Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P. While every attempt was made to insure that these materials are accurate, errors or omissions may be contained therein, for which any liability is disclaimed. 2
3. Outline 3 Strategic IP management U.S. patent law is changing “Our competitor is developing a new product, what do we do?”
4. Strategic IP Management “Value” is the focus of a strategic IP management “Value” can take many forms – cash, market exclusivity, basis for cross-licensing or joint venture, etc. “Strategic” because it relates to improving the value through the effective use of IP Strategic IP management includes four aspects: 4
5. Strategic IP Management Creating IP value Innovations Generating patents, trademarks, copyrights, and trade secret Maximizing IP value Aligning your IP portfolio with business objectives Creates obstacles for your competitors Global protection Assessing IP value and risks Avoid infringement of third party rights by perform due diligence Buying and selling 5
6. Strategic IP Management Realizing IP value Enforcement Litigation Alternative dispute resolution Business arrangements Licensing Acquisitions Financing Donation (tax?) Other defensive approach - cross licensing 6
7. U.S. Patent Law is Changing Congress working on 2009 Patent Law Reform: H.R.1260 (John Conyers, Jr. (D-Mich.) along with four co-sponsors) S.515 (Patrick Leahy (D-Vt.) and six co-sponsors) Supreme Court taking active role: KSR v. Teleflex (9-0, 2007) Microsoft v. AT&T (7-1, 2007) MedImmune v. Genentech (8-1, 2007) eBay v. MercExchange (9-0, 2006) Bilski v. Kappos (oral argument: November 9, 2009; Michael Jakes for petitioner) Federal Circuit also addressing various aspects of patent law. 7
8. It all starts with an email . . . Sent: Fri, November 6, 2009 4:33:07 PM Subject: Competitor’s new product. Hi John, We just found out that our competitor is working on a new product (see attached), which it plans to launch it next year. I know that you guys were working on this technology a few years ago and you are pretty savvy about filing patents to cover our technology. Do we have some patents on this? Any idea on what we should do? Thanks. Have a great weekend. Jane _ 8
9. I do have the patent . . . Yes Have patent? Licensing Litigation 9
10. I do have the patent . . . Have patent? Yes Licensing Litigation 10
11. Realizing IP value by licensing . . . but Licensing: royalty Before MedImmune: a patent licensee cannot challenge a licensed patent because the license agreement “obliterate[s] any reasonable apprehension” that the licensee will be sued for infringement. Gen-Probe Inc. v. Vysis, Inc. (Fed. Cir. 2004). MedImmune: A licensee is not required to terminate or materially breach its license agreement in order to bring a suit challenging validity or infringement under a licensed patent. MedImmune v. Genentech (S. Ct. 2007). 11
12. Realizing IP value by licensing . . . but Licensing: negotiation Old Test: Federal Circuit applied “reasonable apprehension of suit” test and typically required explicit threat of suit or breakdown in negotiations. New Test: Jurisdiction will exist when: a patentee asserts rights under a patent based on certain identified ongoing or planned activity of another party; and other party contends that it has the right to engage in the accused activity without a license. SanDisk v. STMicroelectronics (Fed. Cir. 2007) 12
13. Realizing IP value by licensing . . . but Licensing Licensees More likely to license first and challenge second Licensors Higher royalties Up-front payments License agreement Termination clause Forum selection clause Pre-suit notification Differing royalty rates 13
14. I do have the patent . . . Have patent? Yes Licensing Litigation 14
15. Realizing IP value by litigation . . . but Litigation: permanent injunction Before eBay: Permanent injunction automatically granted (unless denial is necessary to protect public interest) eBay: injunction granted only after consideration of traditional four-factor test for issuance of injunction Irreparable harm to patent owner Remedies at law (damage) are inadequate to compensate for injury Balancing hardships favors an injunction Public interest (health and safety) do not preclude injunction eBay v. MercExchange (S. Ct. 2006) 15
16. Realizing IP value by litigation . . . but Litigation: permanent injunction post eBay* * as the end of November 2008 16
17. Realizing IP value by litigation . . . but Litigation (licensing) after eBay eBay shifts balance of power in litigation Successful patent owner no longer gets automatic permanent injunction after finding of infringement Court must apply traditional four-factor test eBay shifts balance of power in licensing Particularly for non-practicing patent owners May decrease incentive to license 17
18. Realizing IP value by litigation . . . but Litigation: treble damages & costs “In either event the court may increase the damages up to three times the amount found or assessed.” 35 U.S.C. § 284 “It is well-settled that enhancement of damages must be premised on willful infringement or bad faith.” Beatrice Foods Co. v. New England Printing & Lithographing Co., 923 F.2d 1576 (Fed. Cir. 1991) 18
19. Realizing IP value by litigation . . . but Litigation: willful infringement Old Standard: “Where . . . a potential infringer has actual notice of another’s patent rights, he has an affirmative duty to exercise due care to determine whether or not he is infringing. Such an affirmative duty includes, inter alia, the duty to seek and obtain competent legal advice from counsel before the initiation of any possible infringing activity.” Underwater Devices Inc. v. Morrison-Knudsen Co., 717 F.2d 1380 (Fed. Cir. 1983) 19
20. Realizing IP value by litigation . . . but Litigation: willful infringement New Standard: “[W]e overrule the standard set out in Underwater Devices and hold that proof of willful infringement permitting enhanced damages requires at least a showing of objective recklessness. Because we abandon the affirmative duty of due care, we also reemphasize that there is no affirmative obligation to obtain opinion of counsel.” In re Seagate, 497 F.3d 1360 (Fed. Cir. 2007) 20
21. Realizing IP value by litigation . . . but Two-part test for objective recklessness Patentee must show that: Infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent The objectively defined risk was either known or so obvious that it should have been known to the accused infringer No affirmative duty to seek out opinion of counsel 21
22. I do have the patent . . . But is my patent still good? 22 Have patent? Yes Licensing Litigation
23. . . . in light of KSR? KSR Int’l Co. v. Teleflex Inc., (S. Ct. 2007) Electronic automobile pedal Fed. Cir. reversed finding of invalidity for obviousness under §103 Facts in dispute regarding motivation to combine (i.e., lower court did not apply “TSM” test correctly) 23
24. . . . in light of KSR? TSM: required “teaching-suggestion-motivation” to modify what was known (“prior art”) to make claimed invention. KSR: the Supreme Court removed “TSM” as the sole test, and criticized “rigid” and “formalistic” way the test was applied in the Federal Circuit. 24
25. . . . in light of KSR? 25 Old law: person skilled in the art is not creative “is also presumed to be one who thinks along the line of conventional wisdom in the art and is not one who undertakes to innovate, whether by patient, and often expensive, systematic research or by extraordinary insights . . .” Standard Oil Co. v. American Cyanamid Co., 774 F.2d 448, 454 (Fed. Cir. 1985). New law: person skilled in the art is creative “The person of ordinary skill in the art has creativity, and uses common sense, . . . . A demonstration of an express teaching, suggestion or motivation is not required to show obviousness…. A person of ordinary skill is also a person of ordinary creativity, not an automaton.” KSR.
26. . . . in light of KSR? “The combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results.” “If a person of ordinary skill can implement a predictable variation, §103 likely bars its patentability.” TSM. KSR 26
27. . . . in light of KSR? “When there is a design need or market pressure to solve a problem and there are a finite number of identified, predictable solutions, a person of ordinary skill has good reason to pursue the known options within his or her technical grasp. If this leads to the anticipated success, it is likely the product not of innovation but of ordinary skill and common sense.” KSR 27
28. . . . in light of KSR? Raising the bar More difficult to obtain certain patents Easier to invalidate certain patents KSR is retroactive Fed. Cir.: 36 cases as of March 2009 Electrical/Mechanical Chemical/biopharma 28
29. What do we do? Review those patents Before enforcement, and consider: Everything looks good? Support for non-obviousness based under KSR Clean up Reexamination Reissue Continuing application Yes Good patent? ? Clean up Have patent? Yes Litigation Licensing 29
30. What do we do? Yes Good patent? ? Clean up Have patent? Yes Litigation Licensing 30
