2009 Patent Case Law (July - December) and Its Implications for In-House Counsel. Steve Gardner Kilpatrick Stockton LLP

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1 2009 Patent Case Law (July - December) and Its Implications for In-House Counsel Steve Gardner Kilpatrick Stockton LLP February 2010

2 About the Speaker Steve Gardner is the co-chair of Kilpatrick Stockton s patent litigation group, which has been recognized as one of the top patent litigation groups in the country. Steve maintains an active practice in patent litigation, due diligence, counseling, and prosecution strategy and management. He has represented companies in patent suits in federal courts in Colorado, Delaware, the District of Columbia, Florida, Georgia, Illinois, Louisiana, Missouri, North Carolina, Ohio, Oklahoma, and Texas, including multiple cases in the Eastern District of Texas. Steve received a BS and MS from the University of North Carolina at Charlotte. He received a JD, with honors, from the Wake Forest University School of Law, where he was editor-in-chief of the law review. He clerked for the Hon. Frank W. Bullock, Jr., Chief Judge, US District Court for the Middle District of North Carolina, , and the Hon. Alvin A. Schall, US Court of Appeals for the Federal Circuit, For several years, Steve has been elected to Business North Carolina magazine s Legal Elite List as one of the top patent attorneys in North Carolina based on a survey of all members of the North Carolina bar. He is listed in the 2009 edition of The Best Lawyers in America for intellectual property law. He currently serves as editor-in-chief of the American Bar Association s Intellectual Property Litigation newsletter. 2

3 About Kilpatrick Stockton s Patent Practice (1 of 2) 23 IP attorneys in the 2009 Best Lawyers in America -- the most of any firm. Recent intellectual property engagements include: Defending Google Inc. in the Southern District of New York in two suits alleging that its Google Print Library Project infringes copyright laws; and Defending Red Hat, Inc. in the Eastern District of Texas in a patent infringement suit involving open-source software. The patent litigation team includes 40+ attorneys concentrating in patent litigation. 50+ attorneys are registered to practice before the USPTO. Scientific and engineering degrees in virtually every discipline 11 IP attorneys hold a Ph.D. in their field; 17 hold masters degrees. Former engineers, scientists, patent examiners, and law clerks to federal judges Obtained over 1600 United States patents for our clients in the past 5 years 3

4 About Kilpatrick Stockton s Patent Practice (2 of 2) Clients described the team as being rigorously professional in its conduct of complex cases. Kilpatrick Stockton has an outstanding practice with great lawyers from top to bottom. Chambers USA. Represented clients in patent suits in the district courts of more than 25 states and the US Court of Appeals for the Federal Circuit. IP Law and Business ranked Kilpatrick Stockton in the top law firms in its annual national patent litigation surveys over the past several years. Managing Intellectual Property ranked Kilpatrick Stockton in the top 10 of law firms in North America in patent litigation. Managing Intellectual Property ranked Kilpatrick Stockton as having the top patent prosecution practice in the southeast and one of the top 8 in the country in its 2008 survey We handled over 150 patent infringement suits over the last 5 years. 4

5 Pleading Inequitable Conduct FRCP 9(b) requires pleading the specific who, what, when, where, and how What does Rule 9(b) of the Federal Rules of Civil Procedure require for a defendant to plead inequitable conduct? [T]o plead the circumstances of inequitable conduct with the requisite particularity under Rule 9(b), the pleading must identify the specific who, what, when, where, and how of the material misrepresentation or omission committed before the PTO. Moreover, although knowledge and intent may be averred generally, a pleading of inequitable conduct under Rule 9(b) must include sufficient allegations of underlying facts from which a court may reasonably infer that a specific individual (1) knew of the withheld material information or of the falsity of the material misrepresentation, and (2) withheld or misrepresented this information with a specific intent to deceive the PTO. (Exergen). 5

6 Pleading Inequitable Conduct Merely alleging conduct by the attorneys (without naming them) does not satisfy Rule 9(b) Does a pleading that asserts that the attorneys are the ones who committed inequitable conduct sufficiently plead who to satisfy Rule 9(b)? No (Exergen). [T]he pleading refers generally to Exergen, its agents and/or attorneys, but fails to name the specific individual associated with the filing or prosecution of the application issuing as the [patent at issue] who both knew of the material information and deliberately withheld or misrepresented it. The pleading thus fails to identify the who of the material omissions and misrepresentation. 6

7 Pleading Inequitable Conduct Rule 9(b) requires identifying relevant claim limitations and where the material information is found in the prior art references Does a pleading that fails to identify which claims and which limitations in those claims the withheld references are relevant to, and where in those references the material information is found, sufficiently identify the what and where of the material omissions, as required by Rule 9(b)? No (Exergen). The court cited as follows: See Eli Lilly & Co., (Fed. Cir. 1997) ( Information is material if a reasonable examiner would have considered it important to the patentability of a claim. (emphasis added)); 37 C.F.R. 1.56(a) ( The duty to disclose information exists with respect to each pending claim until the claim is cancelled or withdrawn from consideration, or the application becomes abandoned. (emphasis added)). 7

8 Pleading Inequitable Conduct FRCP 9(b) requires identifying which claim limitations are absent from the information of record Does a pleading that merely states that the withheld references are material and not cumulative to the information already of record meet the requirement to explain why the withheld information is material and not cumulative, and how an examiner would have used this information in assessing the patentability of the claims? No (Exergen). Allegations identifying the particular claim limitations, or combination of claim limitations that are supposedly absent from the information of record... are necessary to explain both why the withheld information is material and not cumulative, and how an examiner would have used this information in assessing the patentability of the claims. 8

9 False Marking Intent to Deceive requires lack of reasonable belief that articles were properly marked Must a plaintiff asserting false marking under 292 prove that the company marked as patented an unpatented article with the intent to deceive the public, including a showing that the company did not have a reasonable belief that the articles were properly marked? Yes, such an intent showing is required (Forest Group). Intent to deceive is a state of mind arising when a party acts with sufficient knowledge that what it is saying is not so and consequently that the recipient of its saying will be misled into thinking that the statement is true. (citation omitted). A party asserting false marking must show by a preponderance of the evidence that the accused party did not have a reasonable belief that the articles were properly marked. 9

10 False Marking Statutory fine to be assessed on a per article basis Is the up-to-$500 fine provided by 292 (a) a one-time fine for continuously false marking of multiple articles that are the same, (b) a time-based-fine approach (e.g., per week of false marking), or (c) a per-article fine? (c), per article (Forest Group). We hold that the plain language of 35 U.S.C. 292 requires courts to impose penalties for false marking on a per article basis. The court noted that marking trolls are a possibility, but also noted that the statute explicitly permits such qui tam actions. 10

11 False Marking Courts have discretion to apply a range of penalties up to $500 Must a court impose a fine of $500 per article for violation of 292? No, the court can award up to $500 (Forest Group). The statute provides a fine of not more than $500 for every such offense. 35 U.S.C. 292(a) (emphasis added). By allowing a range of penalties, the statute provides district courts the discretion to strike a balance between encouraging enforcement of an important public policy and imposing disproportionately large penalties for small, inexpensive items produced in large quantities. In the case of inexpensive mass-produced articles, a court has the discretion to determine that a fraction of a penny per article is a proper penalty. 11

12 Damages Price of similar product, profit margin of infringer, 25% rule, and survey data are permissible bases for expert opinion on damages If a damages expert bases his or her opinion on (a) the retail price of a similar product at the time of the hypothetical negotiation; (b) the infringer s profit margin for the accused product multiplied by the cited retail price; (c) calculating 25% of this profit (as a rule of thumb ); (d) a survey to determine what percentage of users use the infringing feature; and (e) analysis of the Georgia-Pacific factors, can a jury rely on the expert s analysis and opinion under Rule 702 of the Federal Rules of Evidence? Yes (i4i). Under Rule 702, the question is whether the expert relied on facts sufficiently related to the disputed issue.... We conclude that [the expert] based his calculations on facts meeting these minimum standards of relevance and reliability. Questions about what facts are most relevant or reliable to calculating a reasonable royalty are for the jury. The jury was entitled to hear the expert testimony and decide for itself what to accept or reject.... [V]igorous cross-examination, presentation of contrary evidence, and careful instruction on the burden of proof are the traditional and appropriate means of attacking shaky but admissible evidence. Microsoft had these opportunities, and ably availed itself of them. Microsoft presented expert testimony and attacked the benchmark, survey, and calculation's reasonableness on cross-examination. 12

13 Damages Survey evidence regarding customers is admissible to prove damages under an indirect infringement theory Can a patent holder prove the amount of damage caused by indirect infringement by surveying a defendant s customers regarding their use of the infringing feature and submitting the survey into evidence? Yes (i4i). We do not agree with Microsoft that the danger of unfair prejudice substantially outweighed the survey's probative value, so as to warrant exclusion under Rule 403. Both of i4i s experts... opined that the survey dramatically underestimated the amount of infringing use. Given the survey's conservative assumptions, the district court did not abuse its discretion in admitting the survey. [T]he survey was properly admitted over Microsoft's hearsay objection under Federal Rule of Evidence 703, since the survey was used to estimate the amount of infringing use, a key number in i4i s damage calculation. Given the survey's importance, evidence about its methodology and findings could certainly help the jury evaluate the expert testimony. The testimony of... the expert who helped design the survey... sufficed to show that the survey was compiled in accordance with acceptable survey methods. For these reasons, the district court did not abuse its discretion in admitting the survey. 13

14 Damages A jury is not required to provide a precise royalty amount; an approximation may be sufficient If a jury s reasonable royalty determination is an approximation of the royalty amount that a hypothetical negotiation at the time the infringement began would have determined, rather than one that is more precise, can the determination be upheld? Yes (Lucent). [A] reasonable royalty analysis necessarily involves an element of approximation and uncertainty. (quoting Unisplay). 14

15 Damages The patent-related feature must be the basis for customer demand in order for the entire market value rule to apply For the entire market value rule to apply, must the patentee prove that the patent-related feature is the basis for customer demand for the non-patented products? Yes (Lucent). The first flaw with any application of the entire market value rule in the present case is the lack of evidence demonstrating the patented method of the [asserted] patent as the basis or even a substantial basis of the consumer demand for [Microsoft] Outlook [(the accused product)]. 15

16 Damages It is not improper to use the market value of the entire software package as a royalty base when there is no established market value for the infringing component If there is no established market value for the infringing component of a software package, is it wrong to use the market value of the entire software package as the royalty base? No (Lucent). There is nothing inherently wrong with using the market value of the entire product, 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. 16

17 Injunctions Courts may consider past harm in determining whether to grant a permanent injunction In considering whether to grant a permanent injunction, is it proper for the district court to consider past harm (as opposed to only the situation at the time of the infringement verdict)? Yes, it is proper to consider evidence of past harm (i4i). Past harm to a patentee's market share, revenues, and brand recognition is relevant for determining whether the patentee has suffered an irreparable injury.... [T]he district court properly considered strong circumstantial evidence that Microsoft s infringement rendered i4i s product obsolete for much of the custom XML market, causing i4i to lose market share and change its business strategy to survive. i4i was not required to prove that its specific customers stopped using i4i s products because they switched to the infringing Word products. [I]t was not an abuse for the district court to find that Microsoft's infringement irreparably injured i4i.... The court concluded that i4i was irreparably injured by Microsoft's infringement, based on its factual findings that Microsoft and i4i were direct competitors in the custom XML market, and that i4i lost market share as a result of the infringing Word products. 17

18 Patentable Subject Matter Step of administering a drug to a human can meet the transformation branch of Bilski Does the administering step in the following claim include a transformation as required by the transformation branch of the Bilski test? A method of optimizing therapeutic efficacy for treatment of an immune-mediated gastrointestinal disorder, comprising: (a) administering a drug providing 6-thioguanine to a subject having said immunemediated gastrointestinal disorder; and (b) determining the level of 6-thioguanine in said subject having said immune-mediated gastrointestinal disorder, wherein the level of 6-thioguanine less than about 230 pmol per 8x10 8 red blood cells indicates a need to increase the amount of said drug subsequently administered to said subject. Yes (Prometheus). The transformation is of the human body following administration of a drug and the various chemical and physical changes of the drug's metabolites that enable their concentrations to be determined. The claims are in effect claims to methods of treatment, which are always transformative when a defined group of drugs is administered to the body to ameliorate the effects of an undesired condition. 18

19 Patentable Subject Matter Step of determining the level of a drug in a subject can meet the transformation branch of Bilski Does the determining step in the following claim include a transformation as required by the transformation-branch of the Bilski test? A method of optimizing therapeutic efficacy for treatment of an immune-mediated gastrointestinal disorder, comprising: (b) determining the level of 6-thioguanine in said subject having said immunemediated gastrointestinal disorder, wherein the level of 6-thioguanine less than about 230 pmol per 8x10 8 red blood cells indicates a need to increase the amount of said drug subsequently administered to said subject. Yes (Prometheus). [T]he determining step is transformative and central to the claimed methods. Determining the levels of 6-TG in a subject necessarily involves a transformation, for those levels cannot be determined by mere inspection. Some form of manipulation, such as the high pressure liquid chromatography method specified in several of the asserted dependent claims or other modification of the substances to be measured, is necessary to extract the metabolites from a bodily sample and determine their concentration. As stated by [patentee s] expert, at the end of the process, the human blood sample is no longer human blood; human tissue is no longer human tissue. That is clearly a transformation. 19

20 Patentable Subject Matter The presence of mental steps does not by itself render a claim invalid Does the presence of mental steps (like the wherein clause in the previously referenced claim) render a claim invalid? No, not generally (Prometheus). A subsequent mental step does not, by itself, negate the transformative nature of prior steps. Thus, when viewed in the proper context, the final step of providing a warning based on the results of the prior steps does not detract from the patentability of Prometheus's claimed methods as a whole. The data that the administering and determining steps provide for use in the mental steps is obtained by steps well within the realm of patentable subject matter. The addition of the mental steps to the claimed methods thus does not remove the prior two steps from that realm. 20

21 Patentable Subject Matter The presence of correlations does not by itself render a claim invalid Is the following claim invalid under Section 101 for including correlation steps? A method of optimizing therapeutic efficacy for treatment of an immune-mediated gastrointestinal disorder, comprising: wherein the level of 6-thioguanine less than about 230 pmol per 8x10 8 red blood cells indicates a need to increase the amount of said drug subsequently administered to said subject and wherein the level of 6-thioguanine greater than about 400 pmol per 8x10 8 red blood cells indicates a need to decrease the amount of said drug subsequently administered to said subject. No (Prometheus). [T]he district court erred in finding that the claims wholly preempt use of correlations between metabolite levels and efficacy or toxicity.... [T]he claims are to transformative methods of treatment, not correlations. The claims cover a particular application of natural processes to treat various diseases, but transformative steps utilizing natural processes are not unpatentable subject matter. [B]ecause the claims meet the machine-or-transformation test, they do not preempt a fundamental principle. [(citing Bilski)] The inventive nature of the claimed methods stems not from preemption of all use of these natural processes, but from the application of a natural phenomenon in a series of transformative steps comprising particular methods of treatment. 21

22 Enablement / Written Description en banc rehearing granted to address whether 112(1) contains a written description requirement separate from the enablement requirement The court vacated its earlier decision in Ariad (in which a panel found claims invalid for lack of written description), granting en banc rehearing to address two questions: 1. Whether 35 U.S.C. 112, paragraph 1, contains a written description requirement separate from an enablement requirement? 2. If a separate written description requirement is set forth in the statute, what is the scope and purpose of the requirement? The court heard oral arguments on December 7,

23 Utility Animal and in vitro tests can be sufficient to show utility for a pharmaceutical compound for use in humans Can a claim to a pharmaceutical compound for use in humans be shown to have utility by disclosure in the application that shows successful test results from animal tests or in vitro experiments? Yes, it has long been so held (In re 318 Patent Infringement Litigation). In this case, however, neither in vitro test results nor animal test results involving the use of galantamine to treat Alzheimer's-like conditions were provided. The results from the 318 patent s proposed animal tests of galantamine for treating symptoms of Alzheimer's disease were not available at the time of the application.... And the prior art testing disclosed in the application did not show utility of that which is claimed. 23

24 Utility / Enablement An application must establish utility in order to satisfy the enablement requirement Must a patent application establish utility of the claim invention in order to satisfy the enablement requirement? Yes (In re 318 Patent Infringement Litigation). The court quoted Process Control (1999): If a patent claim fails to meet the utility requirement because it is not useful or operative, then it also fails to meet the how-to-use aspect of the enablement requirement. 24

25 Indefiniteness Means-plus-function claim is indefinite when structure not described in specification, even if one of skill in the art could devise such a structure based on the description In evaluating a means-plus-function claim limitation, if a person of ordinary skill in the art would be able to devise a structure to perform the claimed function by the description in the specification, but no specific structure is described, does the claim and specification satisfy the requirements of Section 112, second and sixth paragraphs? No (Blackboard). A patentee cannot avoid providing specificity as to structure simply because someone of ordinary skill in the art would be able to devise a means to perform the claimed function. To allow that form of claiming under section 112, paragraph 6, would allow the patentee to claim all possible means of achieving a function. 25

26 Direct Infringement Circumstantial evidence may be sufficient to prove direct infringement by customers If the manufacturer / seller of a product designs a product to practice the claimed invention and instructs its customers to use the product in an infringing way, can a jury find that a customer directly infringes even if the patentee did not present direct evidence of the customer s infringement? Yes, the jury can find direct infringement by the customer in light of such circumstantial evidence (Lucent). [T]he jury reviewed evidence relating to the extensive sales of Microsoft products and the dissemination of instruction manuals for the products. The jury also heard corresponding testimony from Lucent's infringement expert. The circumstantial documentary evidence, supplementing the experts testimony, was just barely sufficient to permit the jury to find direct infringement by a preponderance of the evidence. As in [Moleculon (1986)], the jury in the present case could have reasonably concluded that, sometime during the relevant period from 2003 to 2006, more likely than not one person somewhere in the United States had performed the claimed method using the Microsoft products. 26

27 Infringement (method claims) Sale of a product may not be sufficient to prove infringement of a method claim Does the sale of a product infringe a method claim if use of the product necessarily involves carrying out all steps of the method claim? No (Cardiac Pacemakers). The law is unequivocal that the sale of equipment to perform a process is not a sale of the process. Therefore, Cardiac can only receive infringement damages on those devices that actually performed the patented method during the relevant infringement period. (citation omitted). The holding in Stryker is distinguishable from this case. In Stryker, the patentee was seeking lost profits on an apparatus claim. We held, based on the particular facts of that case, that the patentee was entitled to profits on the sale of all devices, with or without the required distal sleeve because the sale of the device robbed the patentee of the opportunity to make the sale. This was true because the sleeve, while not included in every sale, was available to the surgeon during surgery.... In the present case Cardiac is not seeking lost profits on an apparatus and therefore cannot rely on the reasoning in Stryker. Here, Cardiac seeks royalties on its patented method. 27

28 Infringement under 271(f) Section 271(f) does not apply to method claims Section 271(f)(1) provides that one who supplies... in or 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 shall be liable as an infringer. Section 101 defines invention to include any new and useful process, machine, manufacture or composition of matter... Does Section 271(f) apply to method claims? No (Cardiac Pacemakers, en banc). Section 271(f) does not apply to method patents. We therefore overrule, to the extent that it conflicts with our holding today, our decision in Union Carbide Chemicals & Plastics Technology Corp. (2005), as well as any implication in Eolas or other decisions that Section 271(f) applies to method patents. Cardiac alleges that St. Jude's shipment of a device that is capable of performing the method is sufficient to fall within the scope of Section 271(f). Although the ICD that St. Jude produces can be used to perform the steps of the method, as we have demonstrated, Section 271(f) does not apply to method or process patents. 28

29 Survey Evidence of Infringement A survey showing that some customers use an accused product in an infringing manner may be evidence of direct infringement Can a double-blind survey of blender users that involves watching and recording their actions constitute evidence of direct infringement by the blender manufacturer s customers? Yes (Vita-Mix). The patentee s expert, Dr. Traylor, conducted a doubleblind survey of blender users, and testified that during his survey he observed a certain percentage of users insert the stir stick into the pitcher but not stir it. [The patentee] offered this testimony as evidence that some of [the defendant]'s customers use the accused products in an infringing manner. The Federal Circuit found that the district court erred in striking the report. The court found that the report could be used in supporting a circumstantial case for direct infringement and found that the district court incorrectly granted summary judgment of non-infringement. 29

30 Venue It is not proper to maintain venue in a district with almost no connection to the underlying facts, and the majority of witnesses live outside the district Is it proper to maintain venue in a district (Eastern District of Texas) that has almost no connection to the facts underlying the case and the vast majority of witnesses reside outside of Texas on the basis that the location of witnesses are scattered across the country and the case is essentially a decentralized case? No, not generally (Hoffman-La Roche). The Federal Circuit found the following reasoning by the district court insufficient: The district court stated that this was a decentralized case given the various locations of the potential witnesses and that transfer would merely shift inconveniences from [one set of witnesses to another]. The district court further stated that transfer was unnecessary because only four nonparty witnesses resided in or near the transferee venue, which the district court did not find to be a substantial number of witnesses. Regarding the ability to secure attendance of witnesses, the district court explained that transfer was not favored because it could subpoena Dr. Chang, who resides in Texas, to attend a trial. Next, regarding the sources of proof factor, the court found that transfer was not favored because the sources of proof were spread around the country and Novartis had transferred 75,000 pages of documents in electronic format to the district. Finally, the district court stated that neither venue had a localized interest in this matter. 30

31 Declaratory Judgment Communication to accused infringer identifying a patent and a company s product line is not sufficient to establish declaratory judgment jurisdiction. Is a communication from a patent owner to a company that identifies a patent and the company s product line sufficient for the company to establish declaratory judgment jurisdiction? No, not without more (Hewlett-Packard). [A] communication from a patent owner to another party, merely identifying its patent and the other party's product line, without more, cannot establish adverse legal interests between the parties, let alone the existence of a definite and concrete dispute. More is required to establish declaratory judgment jurisdiction. 31

32 Declaratory Judgment Jurisdiction may exist if patent owner twice contacts alleged infringer, impliedly asserts its patent rights, and the alleged infringer disagrees Does declaratory judgment jurisdiction exist if a patent holding company directly contacts the accused infringer twice, makes an implied assertion of its rights under a patent against a product of the accused infringer, and the accused infringer disagreed? Yes, at least in this case (Hewlett-Packard). Acceleron took the affirmative step of twice contacting HP directly, making an implied assertion of its rights under the 021 patent against HP's Blade Server products, and HP disagreed. Therefore, we hold that there is declaratory judgment jurisdiction arising from a definite and concrete dispute between HP and Acceleron, parties having adverse legal interests. Important factors included: the holding company imposed short deadlines for responses, insisted that the other company not file suit, and refused to enter a stand-still agreement. HP apparently did not express its disagreement to the holding company before filing the declaratory judgment action. 32

33 Standing If a patent owner purports to exclusive[ly] license the patent but retains the ability to join and control enforcement actions, the owner must be named as a co-plaintiff If the patent owner provides an exclusive license to a licensee but the agreement provides that the owner can (1) choose to assert the patent if the licensee does not, (2) join enforcement actions by the licensee and jointly control the enforcement, and (3) other control-retention provisions, does the licensee have standing to assert the patent without naming the owner as co-plaintiff? No (Asymmetrx). [A]n assignment by the patent owner of the whole of a patent, an undivided part or share of the patent right, or all rights in a specified part of the United States gave an assignee the right to bring an infringement action in his own name. Any assignment or transfer, short of one of these, is a mere license, giving the licensee no title in the patent, and no right to sue at law in his own name for an infringement. The court held that the exclusive license here was short of one of these. 33

34 Obviousness A court can find a claim obvious without citing specific evidence or expert opinion Can a district court find a claim obvious in light of common sense without citing supporting evidence or an expert opinion of record? Yes, as long as the court articulates its reasoning with sufficient clarity for review (Perfect Web). In reviewing a patent related to methods of bulk ing, the Federal Circuit held that while an analysis of obviousness always depends on evidence that supports the required Graham factual findings, it also may include recourse to logic, judgment, and common sense available to the person of ordinary skill that do not necessarily require explication in any reference or expert opinion. We reiterate that, on summary judgment, to invoke common sense or any other basis for extrapolating from prior art to a conclusion of obviousness, a district court must articulate its reasoning with sufficient clarity for review. Moreover, the Federal Circuit noted that the parties agreed that ordinary skill in the relevant art required only a high school education and limited marketing and computer experience. No expert opinion is required to appreciate the potential value to persons of such skill in this art of repeating steps (A)-(C). 34

35 Claim Construction The term animal can read on humans Does the claim term animal read on a human? It can, yes (Martek). The court explained that the specification stated as follows: The term animal means any organism belonging to the kingdom Animalia. The court noted that definitions provided in the specification normally control. The court explained that because it is undisputed that humans are members of the kingdom Animalia, it was error for the district court to limit the claim term animal to exclude humans. This case was heard by a 5-judge panel and Judge Lourie, joined by Judge Rader, dissented on this issue ( This case illustrates the unusual situation in which a purported definition of a claim term in the written description is totally negated by the remainder of the text of the patent. Martek's attempt at lexicography does not conform to the way in which it otherwise describes its invention. ). 35

36 Reduction to Practice An abandoned patent application is not sufficient by itself to corroborate testimony of reduction to practice Is an abandoned patent application describing an invention sufficient to corroborate testimony that an alleged prior inventor reduced the described invention to practice by the time the abandoned application was filed (thus supporting a 102(g) prior invention)? No (Martek). [A]n abandoned patent application is evidence of conception, it is insufficient to corroborate testimony that an alleged prior inventor reduced the invention to practice. The court explained that the application can be relevant to the inquiry, but additional or other evidence is needed to corroborate reduction to practice. 36

37 Patent Ownership Foreclosure on a security interest in a patent is sufficient to transfer ownership Pursuant to statute, assignment of a patent must be in writing. Can patent ownership be transferred from one entity to another without such a written assignment via foreclosure on a security interest secured by the patent? Yes (Sky Technologies). [T]ransfer of patent ownership by operation of law is permissible without a writing.... [I]f assignment is the method of transfer of patent ownership, it must be done in writing, pursuant to 261. However, assignment is not the only method by which to transfer patent ownership. As noted below, foreclosure under state law may transfer patent ownership. Thus, the plaintiff had standing. 37

38 License Agreements Hereafter clause generally includes subsidiaries acquired or created after execution of agreement Are subsidiaries that are acquired or that come into existence after the date of a license agreement included within the license if the agreement defines Subsidiary as a business organization as to which the party now or hereafter has more than a fifty percent (50%) ownership interest? Yes, generally (Imation). A general dictionary defines hereafter to mean after this in sequence or in time or in some future time or state. Had the parties chosen to limit a Subsidiary to those in existence at the time of execution, the parties could have omitted or hereafter in favor of now or they could have simply listed the relevant subsidiaries then in existence. The use of hereafter thus compels the conclusion that Subsidiary includes entities in which the parties did not own 50% at the time of execution but in which they later acquired at least a 50% ownership interest at some point following the Agreement's effective date. 38

39 Patent Reform Proposed legislation moves the U.S. to a first-to-file system and includes other changes, such as to damages and venue rules What provisions are in the proposed Patent Reform legislation? damages (apportionment; specific contribution over the prior art ) post-grant review (cancellation-type proceedings) first-to-file system changes to patent venue statute expand evidence available in reexamination (allow public use and on sale evidence) 39

40 Patent Reform Proposed legislation is still pending What is the status of Patent Reform legislation? The House and Senate bills entitled Patent Reform Act of 2009 (S. 515 / S. 610 / H.R. 1260) are pending. These bills are very similar to the Reform Acts of 05 and 07. On May 12, 2009, the Senate Judiciary Committee reported its version of the bill out of committee (Report ). The House Judiciary Committee held a hearing on its version of the bill on April 30,

41 ANDA Legislation Senate Bill would render reverse payment and pay for delay unlawful in ANDA suits What is the status of pending ANDA legislation? An Amendment to the Clayton Antitrust Act is pending in the Senate. The Amendment renders it unlawful... for any person, in connection with the sale of a drug product, to directly or indirectly be a party to any agreement resolving or settling a patent infringement claim in which-- (1) an ANDA filer receives anything of value; and (2) the ANDA filer agrees not to research, develop, manufacture, market, or sell the ANDA product for any period of time. On October 15, 2009, the Senate Judiciary Committee approved the Amendment The Amendment is opposed by branded and generic pharmaceutical makers, and is supported by the Obama administration, FTC, DOJ, and EU antitrust regulators. 41

42 Additional material is available to you: (1) A list of citations for the cases mentioned in this presentation, along with the topic(s) addressed and a rating of the general importance for each case; (2) The long version of this presentation discussing cases from 2009 (110 slides) including topics and cases not addressed here; (3) The long version of a presentation discussing cases from all of 2008 (128+ slides); and (4) The long version of a presentation discussing cases from all of 2007 (125+ slides). If you would like to receive any of these, please send an to me at SGardner@KilpatrickStockton.com indicating which one(s) you would like to receive. 42

43 QUESTIONS? Send to Steve Gardner at If our time expires before we reach your question or if you have questions after the presentation, we will respond to you by as soon as possible. 43

44 THANK YOU Feedback and Suggestions Welcome 44