IP Happenings – June 2016

19.07.2016

By Lawrence Hoffman, U.S. Patent Attorney

U.S. Patent Law

In 1972, the U.S. Supreme Court, in Deepsouth Packing Co., Inc. v. Laitram Corp. [1], ruled that, under the law as it then existed, Deepsouth did not infringe Laitram’s patents by manufacturing the components of a machine in the U.S. and selling the unassembled components to foreign buyers for assembly and use the assembled machines abroad.

In 1984 Congress responded by enacting 35 U.S.C. 271 (f) which reversed the Supreme Court ruling. Sub-part (1) reads:

Whoever without authority supplies or causes to be supplied 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 outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

This seems pretty clear, as patent statutes go, but look what happened in Life Technologies Corp. v. Promega Corp. Promega owns or is the exclusive licensee of five patents on genetic testing. LifeTech manufactures genetic test kits using the Promega technology under a non-exclusive license covering “forensics and human identity applications”. The kits include five elements. LifeTech manufactures one of the elements (Taq polymerase enzyme, the major component of the kit) in the U.S. and sends it to its manufacturing facility in the UK for assembly with the rest of the components. Contrary to the license limitation, LifeTech sells its kits to law enforcement agencies for forensic identification but also to clinical and research institutions for use in analyzing cancer cells.

In Promega’s infringement action a jury awarded Promega $52 million. The district court, however, ruled that Promega had not adequately proved its damages. The U.S. Court of Appeals for the Federal Circuit (CAFC) invalidated four of the patents but held that §271(f) applied to the unlicensed sales with respect to the other one. On this issue, the CAFC first had to determine that §271(f)(1) covers a situation where the same party exports and assembles abroad and not just one in which there is an unrelated party that the alleged infringer “actively induces” to combine the components.  The court ruled that both situations are covered.

The CAFC also had to decide if “a single component supplied from the United States, no matter how important or central to the invention, can be a substantial portion of the components of a patented invention.” Again, the court said yes.

On June 27, 2016 the Supreme Court agreed to review the case to decide if supplying a single component of a multi-component invention from the United States is an infringing act under 35 U.S.C.  271(f) (1).

Other News in Brief

On 14 June, the CAFC decided In re Kayyali[2], an appeal from affirmation by the Patent Trial and Appeal Board (PTAB) of a final rejection based on obviousness. The invention was a method for performing sleep testing in a patient’s home by collecting patient data and transmitting the data in real time for monitoring and analysis by a sleep-trained technician.

The principal reference disclosed a similar system, but instead of transmitting the collected data for analysis, it included software that automatically generated a report.        The secondary reference related to management and analysis of electronic medical records. According to the reference, a patient received a smart drive that contained test results and other information which could be uploaded to the patient’s home computer for interaction with previously stored data and then transmitted for study by health care professionals.

On appeal to the CAFC, the applicant argued that there was no motivation to combine the two references and that the principal reference teaches away from the modification because it disparages the use of a sleep-trained individual to analyze the collected data. The court disagreed, saying:

At most, those suggestions indicate some advantages for computer analysis that may make such analysis preferable in many circumstances. That is not enough to teach skilled artisans away from the alternative… [of technician analysis][3].

The next day, the CAFC decided Allied Erecting And Dismantling Co., Inc., v. Genesis Attachments, Llc[4] in which it affirmed a decision of the PTAB holding the claims at issue were obvious over the combined teachings of two references. The patentee argued that to incorporate the feature of the secondary reference into the principal reference would have required a massive, nonobvious reconstruction of the device that not only changes its principle of operation, but renders the device inoperable as a result.”

It looks like this very commonly made argument is headed for the recycle bin. The CAFC rejected the idea entirely, saying “it is not necessary that [the references] be physically combinable to support a finding of obviousness, but whether the claimed invention is rendered obvious by the teachings of the prior art as a whole”[5].

The patentee also argued that the primary reference taught away from combining it with the secondary reference, because “the teachings of [the secondary reference] would encourage a person having ordinary skill in the art to do exactly what [the primary reference] says they should not do. To this didn’t impress the court either. It responded that the feature of the secondary reference that the primary reference criticized was not the one relied on by PTAB in its decision.

For other June decisions that demonstrate the point, see Genzyme v. Biomarin[6] (PTAB in an inter partes review (IPR) could rely on art not cited in the decision to institute the IPR); Graftech v. Laird[7], (evidence of commercial success must relate to the claimed invention and not to allegedly similar devices embodying the technology of the claimed invention; In re Zhang[8] (while a reference may indicate that a particular combination is undesirable for its own purposes, the reference can nevertheless teach that combination if it remains suitable for the claimed invention).

An article entitled Patent Litigation In China: Protecting Rights Or The Local Economy?[9] convincingly demonstrates that the common Western perception of the Chinese patent system as acting primarily to facilitate local protectionism rather than innovation is a myth. The article presents credible statistics showing that patent holders have rates of success and appeal very similar to those in U.S. patent suits and that foreign companies appear in Chinese patent suits  most often as patent enforcers, not as accused infringers, and that they appear roughly as often as Chinese patentees.

Brexit

The news from Europe is all about UK’s vote on 23 June to exit the EU. Volumes have already been written about the implications of Brexit, with most predicting doom and gloom[10].

There have also been several commentaries on the effect Brexit will have on intellectual property. There seems to be general agreement that getting a European Patent won’t be affected because the European Patent Convention which governs procedures and availability of a European Patent is separate from the EU[11]. Likewise, international trademark registrations under the Madrid Protocol won’t be affected since these are administered by the World Intellectual Property Organization and both the UK and the EU are Contracting Parties.

Brexit will, however, have a significant effect on patents in at least two areas. The first relates to the so-called “patent package” adopted by the EU countries and the European Parliament in 2012. This consists of two regulations under which there will be established a EU Unitary Patent (UP) and Unified Patent Court (UPC). The implementation system contemplates that the UPC and the UP will come into effect when the UPC is ratified by 13 countries, including France, Germany, and the UK.

No one really doubts that the member countries will benefit from simplified procedures, reduced costs and a court system having both special expertise in patent matters and, when fully implemented, exclusive jurisdiction over present EU patents and applications having both unitary and non-unitary effect, but as of last month, only 10 states have ratified have ratified the UPC Regulation, including only Germany of the three mandatory ones.

While it was hoped that the UPC and the UP would be operational by the beginning of next year, that is no longer likely. Unless the UK ratifies the UPC Regulation, and the framework is changed to permit its participation when it exits the EC, there will need to be extensive unwinding since the UK has been a major participant in all the work that has taken place on both the UPC and the UP to date. Even if the UK does ratify the UPC Regulation, and the other required ratifications take place, negotiation of the UK’s terms of participation will likely be protracted and complex. Moreover, negations on any aspect of withdrawal won’t begin until the two-year exit clock is started by the UK formally gives notice that it intends to withdraw. Nor are there likely to be any changes during the two-years following notification.

In theory, the UK could ratify now and if France and one other state do so as well, the new system could go into effect before the UK exits, there is still the need to amend the framework to allow participation by a non-EU member. This is not a foregone conclusion; given the UK’s major place in the many aspects of the EU, I have even seen the worry expressed that without the UK, the UPC and UP will never materialize.

The second major effect is likely to be in international design registration. Since the EU is, and the UK is not, a member of the Hague System. However, this will be easy to remedy if it the UK accedes to the Hague treaty, and in my opinion, likely to happen.

 

[1] 406 U.S. 518 (1972)

[2] Slip Opinion at http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/16-1081.Opinion.6-10-2016.1.PDF

[3] Id, at page 8

[4] Slip Opinion at http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/15-1533.Opinion.6-13-2016.1.PDF (precedential)

[5] Id. at page 14 (internal citations omitted).

[6] Slip Opinion at http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/15-1720.Opinion.6-10-2016.1.PDF

[7] Slip Opinion at http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/15-1796.Opinion.6-15-2016.1.PDF

[8] Slip Opinion at http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/15-1995.Opinion.6-15-2016.1.PDF

[9] 18 Vanderbilt J. Ent. & Tech. L (Santa Clara University School of Law Faculty Publication at http://digitalcommons.law.scu.edu/cgi/viewcontent.cgi?article=1920&context=facpubs)

[10] A sample of these in the UK newspaper, The Independent, may be found at http://www.independent.co.uk/topic/brexit

[11] See, for example, Geoff Melnick’s comments in our 26 June Newsletter, http://www.ipatent.co.il/brexit-the-consequences-for-your-ip/.

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