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January 1, 2008

On the Docket in 2008

After proving themselves randomly competent at best in 2007, the high courts will continue to define patent law as Congress dickers with wrong-headed "reform." Here are 2008 high court patent cases that may demonstrate that clown time is not over on the bench.

Quanta Computer v. LG Electronics

The issue is patent exhaustion; specifically, whether a patent holder has the right to restrict downstream usage of licensed technology.

LG bought a Wang patent portfolio for ICs, which it licensed to Intel. But the contract expressly required Intel's chip purchasers to acquire their own licenses.

In LG's suit against computer parts maker Quanta, the district court considered the claims exhausted by the Intel license and chip manufacture. But the CAFC disagreed, because the sale had been conditional.

An 1873 ruling (Adams v. Burke, 84 U.S. (17 Wall.) 453) stated that "an unconditional sale of a patented device exhausts the patentee's right to control the purchaser’s use of the device thereafter." More recent case law, Mallinckrodt, Inc. v. Medipart, Inc., 976 F.2d 700 (Fed.Cir.1992) stated that the "exhaustion doctrine, however, does not apply to an expressly conditional sale or license…[V]iolation of valid conditions entitles the patentee to a remedy for either patent infringement or breach of contract."

The LGE-Intel license expressly disclaims granting a license allowing computer system manufacturers to combine Intel’s licensed parts with other non-Intel components. Moreover, this conditional agreement required Intel to notify its customers of the limited scope of the license, which it did. Although Intel was free to sell its microprocessors and chipsets, those sales were conditional, and Intel’s customers were expressly prohibited from infringing LGE’s combination patents. Cf. N.Y. U.C.C. Law § 2-202 (allowing contracts to be supplemented by consistent additional terms unless the writing is intended to be complete and exclusive). The “exhaustion doctrine . . . does not apply to an expressly conditional sale or license,” B. Braun Med. Inc., 124 F.3d at 1426, so LGE’s rights in asserting infringement of its system claims were not exhausted.

Further, the appeals court distinguished between system and method claims with regard to exhaustion.

 [E]ven if the exhaustion doctrine were applicable to method claims, it would not apply here because there was no unconditional sale. However, the sale of a device does not exhaust a patentee’s rights in its method claims.

In essence, the CAFC considered contract law, when a contract such as this exists, to trump patent law.

But the U.S. government has weighed in supporting patent exhaustion with first sale; the nut of the argument that federal patent law trumps state contract law. And LG has received next to no support in amicus briefs.

Oral arguments before the Supreme Court are scheduled for January 16, with a decision expected in the March to May timeframe, but not later than June.

The anti-patent mood and simplistic pro-business stance that SCOTUS has demonstrated augers ill that well established case law will withstand Supreme Court bludgeoning.

Another patent exhaustion case waiting in the wings of Quanta is McFarling v. Monsanto. McFarling grew second generation seeds of a patented Monsanto variety. The CAFC considered the new seeds, naturally produced, infringing copies.

Triantafyllos Tafas & GlaxoSmithKline (GSK) v. USPTO

Two heroes of patent prosecutors nationwide against an amok patent office. Universally despised rules limiting examination and imposing new burdens on patent applicants stalled pending a CAFC hearing.

The PTO cannot bypass the political process by promulgating rules when Congress has not given the rulemaking authority to the PTO.

The issue boils down to whether the rules are merely procedural, or substantive. The PTO has authority to make procedural changes, but cannot alter the rules of the prosecution game substantially. Not, at least, until Congress fouls up and passes legislation that's been ripening for three years now.

But the backlash to the PTO's caprice may have an impact on pending legislation, which to date has empowered the agency to do as it pleases. The patent office continuation limits, which self-admittedly affects less than 3% of applications, has been likened to "trying to kill flies with a sledgehammer."

Dell v. Lucent

The issue is whether failure to obtain a written clearing opinion is a sign of willful infringement. The CAFC Seagate ruling raised the bar, that willful infringement required objective evidence of recklessness, that an accused demonstrably should have known better.

Defendant Lucent wants its failure to get a clearing opinion unmentioned to a jury, while Dell wants the fact cited in assessing damages.

The 2004 en banc decision in Knorr-Bremse AG found that a judge cannot automatically infer that lack of opinion counsel means willful infringement.

Chances are the court will continue its crusade against willful infringement without a smoking gun, and treat the mention of lack of clearing opinion as prejudicial, not evidential.

Trial is scheduled for mid-January.

Egyptian Goddess v. Swisa

Last year's 2-1 CAFC dumb fumble with design patents, just making it up new rules, gets an en banc rehearing.

Last episode, ignoring presumption of validity, a slim majority decided that design novelty must be pointed out by the patentee. In a footnote, the majority pointed out that "the point of novelty should be determined by comparing the claimed design to the prior art and not to the accused design." A new test was fashioned, that a combination of prior art elements must be a "non-trivial advance" to be considered a point of novelty. While DYK in dissent tore apart the logic of the new position, most damning was the observation that "the majority’s test is devoid of support in the case law."

De novo out the wazoo, the new appeal court rules came about even though neither party had challenged the district court's claim construction. The debacle decision has been vacated.

Design patents are increasingly resorted to for protection. Ford got the ITC to ban Taiwanese imported fenders and grills on infringed design patents.

James Burdett of Venable observed, "If design patents are used to foreclose competition on the most mundane of inventions like a nail buffer, what does the court do with the more important inventions? I think the Federal Circuit will provide more guidance and impose a Markman claim construction in this case."

In re Kubin

Last year's PTO precedential brand on biotech obviousness, where everything is obvious to try, and "a single, obvious species within a claimed genus renders the claimed genus unpatentable under § 103", heads the to CAFC.

Hal Wegner on the Kubin case:

Kubin is highly significant in two critical areas of biotechnology patent law. The opinion –

(a) repudiates Deuel, keyed to language taken from the Supreme Court KSR decision as well as the Federal Circuit Kahn opinion that preceded KSR; and

(b) adopts the controversial Enzo line of “written description” biotechnology case law as the position of the PTO Board (p. 15).

Sang Su Lee II, Fed. Cir. 2007-119

One of the longest running ex parte appeals makes a second stop at the CAFC. Round one vacated the BPAI for failing to specify the motivation for a combination obviousness finding.

Albeit lip-servicing that "there must be some articulated reasoning with some rational underpinning to support the legal conclusion of obviousness," KSR sucked the oxygen out of the CAFC's longstanding teaching-suggestion-motivation (TSM) test, and Lee's claimed invention now looks like a ghost ship sailing into oblivion.

In re Barnett, Fed. Cir. 2007-1047

Internet coupon distribution claims drowned in obviousness by the BPAI, heads to the CAFC. Argument expected in early 2008. At issue is the propriety of determining the obviousness of one claim element, namely, the use of the Internet, before comparing the prior art references to the claimed invention as a whole. To the appeals court, given current obviousness sentiment in light of KSR, it may smell like obviousness a la §101 - computer/Internet processing not patentable over similar known methods though different means (in this case, broadcast TV). This is practically a setup for greasing the slippery slope of obviousness for business methods.

In re Ferguson, Fed. Cir. 2007-1232

Ferguson goes to a method of marketing a patent. A fully bloated BPAI found the claims an abstract idea, not patentable under 35 U.S.C. §101. Oral arguments were heard December 5th.

In re Bilski, Fed. Cir. 2007-1130

A Comiskey (mental processes) §101 rerun, awaiting decision; arguments held last October. The PTO in Bilski had cited Ferguson.

Posted by Patent Hawk at January 1, 2008 4:59 PM | Case Law


Does anyone know how I can locate the
Sang Su Lee II case? I am doing research and am unable to find it.

I would really appreciate any help. Thank you very much.

Polina Goldenberg, Esq.

Posted by: Polina at January 4, 2008 3:09 PM