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March 7, 2009

Already Stewed

Serial patent infringers banded together years ago in a determined siege to bribe Congress to pass new legislation. Consider that the courts have been patents' pressure cooker in recent years, and those effects need a longer view before jumping into the deep end with more radical changes. The Innovation Alliance has compiled a helpful synopsis of rulings by the high courts since 2006, when the courts started reacting to political pressure from the well-heeled infringers being impinged upon.

The Summary from the Innovation Alliance -

U.S. Supreme Court And Federal Circuit Patent Cases (2006-Present): Judicial Patent Reform At Work

When patent legislation was first introduced in 2005, advocates argued that the patent system was out of balance, with lax standards that yielded weak or overly broad patents and harsh remedies that gave so-called patent speculators too much bargaining power. Since that time, a series of U.S. Supreme Court and Federal Circuit decisions have unquestionably shifted the balance of power between patent holders and users, tightening standards of patentability and narrowing patent rights and remedies. The Innovation Alliance1 urges Congress and the Administration to consider carefully the impact of these decisions before rushing to enact patent legislation that may further weaken our knowledge-based economy.

As reflected in the attached summary of judicial patent decisions, it is now more difficult for innovators to obtain and enforce patent rights (particularly in the case of software and business method inventions), and even after winning at trial, to secure injunctive relief and increased damages for willful infringement. At the same time, recent Supreme Court and Federal Circuit decisions have considerably improved the litigation landscape for patent users. Not only is it easier for patent users to defend against infringement claims and remedies, users are better able to avoid venue in the Eastern District of Texas and other districts that lack a meaningful connection to the case.

These judicial decisions have addressed virtually all of the substantive issues that originally prompted calls for patent legislation, including remedies, venue and patentability standards. When viewed as a whole, these decisions represent the most comprehensive package of court-made patent reforms in decades, eliminating the need for sweeping legislative changes.

In the wake of judicial patent reform, it would be a mistake to adopt radical changes to damages rules or impose a quasi-judicial system of post-grant opposition. These proposals, which were first introduced before the recent wave of judicial patent cases, were always of questionable justification and merit; but in today's economic environment they are clearly unnecessary and imprudent. Legislation of this type would discourage investment in innovative technologies and inflict serious collateral damage on the many thousands of legitimate patentees that drive job growth in today's economy. Further changes to our patent system should, instead, aim to heighten the fairness, predictability and efficiency of patent rules and procedures for all stakeholders. To that end, our innovation economy would be best served by measures designed to improve the quality, efficiency and procedural predictability of USPTO examination. We encourage Congress and the Administration to shift its collective focus to constructive reforms of this type.

Case Issue/Holding Who Benefits -
Patent Owners or Users?
Supreme Court Decisions
eBay Inc. v. MercExchange LLC, 547 U.S. 388 (2006) (reversing Federal Circuit)

 

Permanent injunctions: Rejected "categorical rules" favoring or disfavoring permanent injunctive relief following a nonappealable judgment of infringement. In all cases, courts must retain equitable discretion to consider the merits of a request for permanent injunctive relief based on the traditional "four factor" test. Users: Lower courts have interpreted eBay as eliminating the presumption of irreparable harm that historically followed a nonappealable judgment that a patent is not invalid, enforceable and infringed. Moreover, some courts have refused to grant injunctive relief (whether permanent or preliminary) unless the patent owner manufactures a product, and the alleged infringer is a competitor. As a result, despite the Supreme Court's clear rejection of categorical rules, such a rule has emerged in certain courts disfavoring injunctions for broad categories of non-manufacturing patent holders. This trend also threatens to increase significantly the prevalence of court-imposed compulsory licenses.
KSR v. Teleflex, 550 U.S. 398 (2007) (reversing Federal Circuit)

Obviousness: Rejected, in part, the Federal Circuit's "TSM test," which conditioned obviousness on a specific finding of some motivation, teaching or suggestion to combine prior art teachings, in the particular manner claimed. The Supreme Court left intact the TSM test as a general standard for evaluating obviousness but held that TSM is not the exclusive test for establishing obviousness. Instead, the Court endorsed a flexible and expansive approach to the obviousness inquiry in lieu of any rigid or narrow formula. By making it easier to establish obviousness, KSR makes it more difficult to obtain patent protection in the first instance, and tougher to defend against invalidity challenges post-issuance. Users: By making it easier to establish obviousness, KSR makes it more difficult to obtain patent protection in the first instance, and tougher to defend against invalidity challenges post-issuance.
MedImmune v. Genentech, 549 U.S. 118 (2007) (reversing Federal Circuit)

Declaratory judgment suits by licensees: Held that a licensee need not terminate or breach a patent license agreement before it can bring suit to obtain a declaratory judgment that the patent is invalid, unenforceable or not infringed. The Court rejected Federal Circuit precedent that a patent licensee in good standing cannot seek a DJ without first repudiating its license agreement. Users: By facilitating declaratory judgment suits by licensed patent users, MedImmune permits licensees to "pay and sue". As a result, this case could undermine the enforceability of license agreements and encourage litigation.
Microsoft v. AT&T, 550 U.S. 437 (2007) (reversing Federal Circuit)

Extraterritorial enforcement of U.S. patents: Held that a master software disk that is exported and then used by foreign computer manufacturers to install software at the point of assembly is not a component within the meaning of Section 271(f) of the Patent Act. Section 271(f) allows the holder of a U.S. patent to block the export from the United States of components that can be assembled abroad to produce an infringing product, even though the patent is not enforceable in the place where that assembly takes place. Users: By narrowing the scope of Section 271(f), the Supreme Court's decision will make it harder for U.S. patent holders to prevent infringing uses abroad without a global portfolio of foreign patent rights.
Quanta Computer v. LG Electronics (2008) (reversing Federal Circuit)

Scope of patent exhaustion defense: Held that the patent exhaustion defense applies (i) to patented method claims, and (ii) when the authorized/licensed sale of a product substantially embodies a patented invention. Users: By eliminating important exceptions to the patent exhaustion defense, Quanta potentially limits a patentee's ability to enforce its rights against downstream users.
Federal Circuit Decisions
In re Seagate Technology, 497 F.3d 1360 (Fed. Cir. 2007) Willfulness standard: Abandoned long-standing Federal Circuit precedent imposing an affirmative duty of care on accused infringers, and held that willful infringement requires at least a showing of objective recklessness. Users: Seagate heightens the standard for proving willful infringement and eliminates any affirmative obligation to obtain an opinion of counsel.
In re Bilski, 88 USPQ2d 1385 (Fed. Cir. 2008)

Subject matter eligibility of software/business methods: Narrowed the scope of patent-eligible software/business method patents under Section 101 to methods that are either tied to a particular machine or apparatus or that transform a particular article into a different state or thing (the "machine or transformation test"). Bilski will make it more difficult to obtain patents for such methods and tougher to defend method patents against invalidity challenges and, in the process, drag in non-software/business method inventions including pharmaceutical and biotechnology patents. Users: By narrowing the scope of patent-eligible software/business methods, Bilski will make it more difficult to obtain patents for such methods and tougher to defend method patents against invalidity challenges.
In re TS Tech, Misc. No. 888 (Fed. Cir. 2008)

Venue: Ordered transfer of venue from the Eastern District of Texas to the Southern District of Ohio. The fact that vehicles containing the allegedly infringing article are sold in the Eastern District of Texas does not provide a meaningful connection with the venue since such vehicles are sold throughout the United States. Product sales are often the sole basis for asserting venue in this district. Users: TS Tech will facilitate transfer of venue in infringement actions that lack any meaningful connection to the Eastern District of Texas (or other disputed venues), other than evidence of national product sales. Since product sales are often the sole basis for asserting venue in the Texas rocket docket, the case may also discourage plaintiffs from filing suit in this district.

Read the full report.

Posted by Patent Hawk at March 7, 2009 8:15 PM | The Patent System

Comments

Patents can generally only be enforced through civil lawsuits (for example, for a U.S. patent, by an action for patent infringement in a United States federal court), although some countries (such as France and Austria) have criminal penalties for wanton infringement.Typically, the patent owner will seek monetary compensation for past infringement, and will seek an injunction prohibiting the defendant from engaging in future acts of infringement. To prove infringement, the patent owner must establish that the accused infringer practices all the requirements of at least one of the claims of the patent.

Posted by: Business inventions at January 28, 2010 1:04 AM