IP Happenings – October 2016

21.11.2016

By Lawrence Hoffman –   J.D. B.S.E.E. and Comp. Sc., U.S. Patent Attorney

U.S. SUPREME COURT PREVIEW

The 2016 Term of the SCOTUS is under way and there are already several interesting IP cases on the docket.

The Smartphone War:

One case of particular interest because of the large (almost $400 million) damage award involves another battle in the smartphone wars between Apple and Samsung.

Apple sued Samsung in 2011 for infringement of three utility patents and three design patents that cover features of Apple’s smartphones, and for trade dress dilution. In a first trial in 2012, the jury returned a verdict Apple’s favor and awarded over $1 billion in damages. In response to a first post-trial motion by Samsung, the district court upheld the jury’s infringement, dilution, and validity findings, but ordered a partial retrial on part of the damage award. The jury in the partial retrial awarded Apple $290,456,793, which the district court upheld in response to a second post-trial motion by Samsung and Samsung filed an appeal.

In its decision, the CAFC reversed the award on trade dress dilution on the ground that the purported trade dress features were functional rather than ornamental, and affirmed on all the other issues. Last March, the Supreme Court granted Samsung’s petition for review (Certiorari or cert. for short) of the CAFC decision, the first design patent reviewed by the Court since 1894. The single question to be considered is when “a design patent [that] is applied to only a component of a product, should an award of infringer’s profits be limited to those profits attributable to the component?”

Section 289 of the Patent Act defines the measure of damages of design patent infringement. This reads:

Whoever during the term of a patent for a design, without license of the owner, (1) applies the patented design, or any colorable imitation thereof, to any article of manufacture for the purpose of sale, or (2) sells or exposes for sale any article of manufacture to which such design or colorable imitation has been applied shall be liable to the owner to the extent of his total profit, but not less than $250, recoverable in any United States district court having jurisdiction of the parties.

Oral argument took place on 11 October. Reports from those present suggest that the court was skeptical that damages should be based on profit attributed to the device as a whole rather than having profit apportioned to reflect the part attributed to infringed design. The main issues confronting the Court  appeared to be how to define article of manufacture for purposes of Section 289 and how to provide a workable test by the jury could measure damages “without reaching an absurd result” as several Justices described it.

No observer has suggested that the Court is likely to affirm the CAFC decision. We will just have to wait to see what happens.

Is Section 2(a) of the Trademark Act Unconstitutional?

Factually, the most interesting IP case accepted for review so far is probably Lee v. Tam. Simon Shiao Tam is the leader of an all-Asian band who tried to register THE SLANTS as a service mark. Registration was refused under Section 2(a) and the Trademark Trial and Appeal Board affirmed. Tam appealed and the CAFC reversed, holding Section 2(a) to be an unconstitutional government regulation of expression based on content. The patent office filed a Petition for Certiorari of the CAFC’s decision to the Supreme Court.

Section 2(a) of the Lanham Act provides that a trademark is not registrable if it:

[c]onsists of or comprises immoral, deceptive, or scandalous matter; or matter which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt or disrepute.

In its opinion, the CAFC observed that Congress’s purpose in enacting the Lanham Act was to advance the two related goals of trademark law. First, the purpose of the Lanham Act is to protect the public so it may be confident that, in purchasing a product bearing a particular trade-mark which it favorably knows, it will get the product which it asks for and wants to get.  Second, the Lanham Act ensures that a markholder can protect “his investment from . . . misappropriation by pirates and cheats.

The court further pointed out Section 2(a) contains proscriptions against deceptive speech, for example, the prohibition against registration of deceptive marks or marks falsely suggesting a connection with a person or institution and that these further the purposes of the Lanham Act. However, the ban on registering marks based on the expressive nature of the content, such as the ban registration of disparaging marks cannot be justified on the basis that they further the Lanham Act’s purpose in preventing consumers from being deceived or are likely to cause consumer confusion, and do not protect the markholder’s investment in his mark. In its decision, therefore, the court rejected the government’s argument that a registration is government speech and held Section 2(a) to be unconstitutional under the First Amendment to the extent that it prohibits registration of allegedly disparaging marks.

Lee is not the only Section 2(a) disparagement case in progress. In Pro-Football, Inc. v. Blackhorse, a group of Native Americans petitioned the Trademark Office to cancel four registrations of the Mark WASHINGTON REDSKINS owned by Pro-Football, Inc. (PFI) as the name of the Washington football team. In 2014, the registrations were canceled and the decision was affirmed b the Trademark Trial and Appeal Board (TTAB). PFI appealed to the U.S. District Court for the Eastern District of Virginia arguing that that Section 2(a) violates the First Amendment, that § 2(a) is unconstitutionally vague, and that the government’s nearly 50-year delay between the first registration and the cancellation violates procedural due process.

The District Court affirmed the cancellations, rejecting PFI’s arguments, largely on the basis that a registration is government speech and PFI appealed to the Circuit Court of Appeals for the Fourth Circuit.

When the USPTO requested review of the CAFC decision in Tam by the Supreme Court, PFI petitioned the Supreme Court to hear its case together with Tam if the Court granted review in Tam even though PFI’s appeal to the Fourth Circuit had not yet been decided. On 3 October, PFI’s petition was denied, possibly (and correctly) because it’s the facts in the two cases are not the same but its decision in Tam will likely determine the outcome of PFI irrespective of the Fourth Circuit’s decision.

Other Cases Accepted for Review:

In addition to The Samsung and Tam cases, petitions for review have been granted in two other cases, Life Tech v. Promega and SCA Hygiene v. First Quality Baby Products. In Life Tech, the issue before the Court involves interpretation of Section 271(f)(1) of the Patent Act which 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.

The issue before the Court is lf export of one component can legally constitute the “substantial portion of the components” required by statute for infringement liability.  In the case, the component (Taq) is a commodity but is also an admitted critical aspect of the invention. The case is set for argument on Tuesday, December 6, 2016.

In the SCA case, argued on 1 November, the question before the Court is whether the equitable defense of laches applies in patent cases. As described in the CAFC’s opinion:

Laches is an equitable defense to patent infringement that may arise only when an accused infringer proves by a preponderance of evidence that a patentee (1) unreasonably and inexcusably delayed filing an infringement suit (2) to the material prejudice of the accused infringer. If these prerequisite elements are present, a court must then balance all pertinent facts and equities, including the length of delay, the seriousness of prejudice, the reasonableness of excuses, and the defendant’s conduct or culpability” before granting relief. When found, laches bars retrospective relief for damages accrued prior to filing suit but does not bar prospective relief. (Internal quotes and citations omitted.)

The suit was filed six years and nine months after SCA sent a letter to First Quality charging that the patent in suit was being infringed. First Quality’s motion for summary judgment was granted and affirmed by the CAFC. To this observer, it does not appear that either of the requirements stated by the court was met, but the court seemed more interested in affirming the applicability of laches in patent cases rather than carefully considering the facts.

The case is follow-on to the Supreme Court’s 2014 holding in Petrella v. MGM that laches does not apply in copyright cases.  In its decision in SCA, the Federal Circuit distinguished Petrella both on statutory and policy grounds.

Petitions Pending:

There are presently about 30 pending petitions for Certiorari awaiting decision. Of these, at least eight relate to practice under the inter partes review and post grant review provisions of the America Invents Act and  three involve patent eligibility. Interestingly, of the cases on which petitions for cert. have been granted, none involve patent eligibility.

ARE ELECTION OUTCOME PREDICTIONS JUNK SCIENCE?

Before you say this article is about October not about November 8, let me say this section is from the better late than never department. I just posted an article (here) crystal balling President-Elect Trump’s IP reform agenda, the bottom line of which is that it seems none of the experts has much useful to say.

Indeed, given how many pollsters and statisticians are now scrambling to explain why they were wrong about the election itself, it’s hard not to wonder if polling is just junk science and if it is useful at all.

But one observer got it right months ago, and his perceptiveness needs to be acknowledged.

In a post of 11 January 2016 by Florian Mueller in Foss Patents, Mueller essentially predicted Trump’s nomination and election and urged stakeholders in patent reform to prepare. He even urged them to vote for Mr. Trump!

Now I don’t know if Mr. Mueller voted for Mr. Trump, but I do know he is an ardent believer in a strong patent system and in political incorrectness as an engine for energizing change.

Mueller says:

Political correctness has terrible effects because it prevents politicians, the media and the general public from discussing the real issues without mincing words, and when you can’t even talk about the real issues, you’re very, very unlikely to identify and implement solutions.

How refreshing!

The real point of Mueller’s post seems to be that what the stakeholders do to present their position effectively to Congress may be more important than what the president believes. Like the predictions of a Clinton victory, predictions as to Mr. Trump’s IP agenda may not be worth the bother.

Still, what’s most important about Mueller’s article is not that he was right, but his strategy suggestions for reform-minded advocates to follow to help them persuade Congress (and the public) that IP reform needs to go high on the to-do list.

Briefly, Mueller’s strategy, and this observer’s take on it:

Be bolder and louder: The importance of reform must be burned into the minds of the denizens of Capitol Hill so you must make yourself heard over the clamor of the special-interest lobbyists. You have been passive too long. You need to ask for fundamental changes, not incremental fixes, especially in patent policy.

Emphasize the Importance of an Effective Patent Policy to the  National Interest:

Tell your Story in Terms of Main Street vs. Special Interests: This is what Mr. Trump did right from the beginning and energized and appealed to voters. This approach will help transform patent policy from an abstraction into something concrete.

Differentiate Between Fields of Technology: To really fix the system, Mueller believes it must account for differences between an industry like pharma and the information and communications technology industry where innovation is incremental.

Stress the Needs of Legitimate Innovators: Advocate fairly protecting their needs as well as those of the financially strong.

Political Correctness is Counterproductive: The opposite worked for Trump. Other advocates of change should try it too.

The full article is available here. The reader is invited to read and consider its full message.

OTHER OCTOBER HAPPENINGS:

U.S. Court of Appeals for the Federal Citcuit:

Here’s a quick look at some of the things the CAFC had to say in October.

In GE Lighting Solutions, Llc, vs. Lights Of America, Inc. et al. (non- precedential), the trial court held that the term “elongated” in one of the patents in suit, and the verb phrase “to heat sink” in another patent to render that claims indefinite. The CAFC agreed as to the first, but not the second.

As to the term “elongated”, the CAFC found nothing in the application or the prosecution history that limited or quantified the extent of elongation required. In fact, the term does not even appear in the specification. Therefore, the claim failed to would “inform, with reasonable certainty, those skilled in the art about the scope of the invention” as required by the Supreme Court in 2014 in Nautilus, Inc. v. Biosig Instruments, Inc.

In contrast, while the CAFC accepted the lower court’s construction of the term “heat sink” as having its conventional meaning, and construed the verb phrase to mean “to receive and dissipate heat from”, CAFC found that the application and the prosecution history demonstrated “that any amount of heat transfer is sufficient” to provide heat sinking and thus provided sufficient quantification.

Although the decision is non-presidential, it is a good reminder not to use relative terms in the claims that are not quantified or limited in the specification.

Synopsys, Inc. v. Mentor Graphics Corporation and Fairwarning IP, Llc v. Iatric Systems, Inc. these patent eligibility decisions both affirm lower court findings of invalidity in software cases. There’s nothing really new here. The CAFC is still struggling to find some objective way to perform the Alice test. Having read the two cases, this observer still sees the CAFC still deciding the cases intuitively, and then trying to explain its gut feeling rather than applying legal standards.

Finally, a cautionary tale: if you think about prosecuting your own application for a patent or trademark, banish the thought from your mind. Yes, hiring an attorney can be costly, but if you can’t afford to do so, you should find someone to help you financially if you want to commercialize your idea. Even pro se prosecution of a trademark application can be tricky and there is even less of justification for trying to do this yourself since you are likely to be using your trademark in some kind of business and the cost of an attorney is a reasonable business expense.

If you have any doubts, read the decision in In Re: Prema Jyothi Light, which should convince you. You can attribute Ms. Light’s initial decision to go it alone to inexperience, but to continue in the face of the problems it caused can only be described as bad judgment.

Canada:

Gene Quinn is the resident curmudgeon of the IP blogosphere and ardent advocate of a strong patent system as a driver of innovation and investment. From his IP Watchdog blog comes an interesting articl that describes a study prepared for Innovative Medicines Canada by Charles River Associates which describes itself as “a leading global consulting firm offering economic, financial, and strategic expertise to major law firms, corporations, accounting firms, and governments around the world.”

The report, published in October 2016 is entitled The Impact Of IP And The Promise Doctrine On Pharmaceutical R&D Activity In Canada.  The report examines the effects of a particularly pernicious distortion of the utility requirement for patentability, particularly in respect to pharmaceutical patents that seems to be unique to Canada’s patent law.  Further, the study demonstrates convincingly that application of the promise doctrine is perceived by the Canadian pharmaceutical industry as significantly inhibiting pharmaceutical innovation and R&D investment in Canada.

Broadly stated, a “mere scintilla” of utility is all that needs to be asserted to meet Canada’s utility requirement. However, since 2005, courts have applied the promise doctrine to invalidate at least 28 pharmaceutical patents based either solely or partially on lack of utility.

Basically, the promise doctrine states that a patent may be declared invalid for lack of utility if it is construed by a court to have explicitly described a particular utility, and the evidence presented at trial does not demonstrate the promised utility or that the promise was sufficiently supported in the application by a “sound prediction” of that utility as of the date of filing. Absent such support, a patent is invalid for lack of utility, even if the invention is useful either to a different degree than “promised” or for some other purpose.

The report does not analyze the case law but focuses instead on industry surveys.  Looking at recent case law, the picture is not quite as bad as the report makes it seem. Recent cases from the Court of Appeals note that the patent does not need to include a promise of a specific utility and if it does not, the “mere scintilla” standard applies. However, if a promise is found, it is construed strictly.

The validity of the promise doctrine is being vigorously contested. The Supreme Court of Canada now has before it two cases involving the promise doctrine and there is currently pending a challenge under NAFTA that the promise doctrine imposes a requirement that is invalid under the IP provisions of the NAFTA treaty.

Irrespective of the outcome of the pending challenges, it is clear that care must be taken to assert a very minimum degree of utility. For example, if your test data is restricted to laboratory or animal test data, assert only the observed effect. Don’t assert utility in treating human disease.

BREXIT AND THE  UNIFIED PATENT SYSTEM:

According to a recent unsolicited memo submitted to the Government, Britian could need six more months even to settle on a negotiating plan and would require hiring an additional 30,000 civil servants. It is also reported that the Government is actively seeking to hire lawyers with trade negotiation experience, and that there are not too many around.

As to the UK’s future relationship to the Unified Patent System or even the fate of the system altogether, nothing much is being said.

 

 

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