Chicago IP Attorney & Lawyer : R. David Donoghue : Chicago IP Litigation Blog

Yesterday, the Federal Circuit handed down its anticipated en banc decision in Therasense, Inc. v. Becton, Dickinson & Co., increasing the standards for inequitable conduct.  The 6-5 majority held that: 

1. an omitted reference is material only if the claim or patent would not have issued, but for omission of the reference;
    
2. specific intent to deceive must be shown by clear and convincing evidence;
    
3. courts can no longer employ a "sliding scale" of intent and materiality, both must be showng by clear and convincing evidence; and
    
4. courts should apply equity to ensure that the remedy is not based upon conduct "immaterial to the issuance of the patent." 

Patent Docs has an excellent explanation of the opinion and the case background.  And there is plenty of commentary about the opinion (see links below).  My initial reaction was that the heightened standards will not actually reduce the number of inequitable conduct claims that are filed, although it may reduce the number of inequitable conduct findings. 

So, while the overall outcomes may change, the general cost and complexity of patent litigation will likely remain the same.  But when I said as much on Twitter (@rdd), I got an interesting reaction from what appears to be an anonymous patent lawyer.  This anonymous person suggested that the heightened standard would actually embolden inventors and patent prosecutors to omit references and hide information from the Patent Office because they are now less likely to be charged with inequitable conduct.  My inclination is to dismiss this theory based upon my operating presumption that most patent prosecutors, and most inventors, are, or at least intend to, zealously advocate for their clients, or themselves, within the Patent Office's rules and the relevant ethics standards.  Of course, I have seen exceptions, and they can be severe.  But my experience is that those are the exceptions, not the rule.  I am curious to hear what others think about this.  Am I wrong?

Here is a round up of some of the blog posts about the decision:

• Peter Zura's 271 Patent Blog "rejoices" that the heightened standards give prosecutors added protection;
   
• Life Sciences Law;
   
• Orange Book Blog;
   
• Patently-O ;
   
• PharmaPatents; and
   
• PLI Blog.

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Trading Techs. Int’l, Inc. v. eSpeed, Inc., Case Nos. 2008-1392,-1393 & -1922, Slip Op. (Fed. Cir. Feb. 25, 2010) (Rader, J.) (Clark, J. concurring).

Writing for a panel including Judge Lourie and Eastern District of Texas District Judge Clark, Judge Rader affirmed each of the challenged decisions from Judge Moran’s jury trial in this patent litigation involving futures trading software.

For much more on this case, click here to read numerous posts in the Blog’s archives analyzing Judge Moran’s opinions and various aspects of the jury trial. Judge Moran construed the claims of the patents-in-suit, ruled upon several summary judgment motions and presided over the jury trial. The jury found that defendants’ (collectively “eSpeed”) Future View software willfully infringed the patents and that the patents were valid, awarding plaintiff Trading Technologies (“TT”) $3.5M. Judge Moran remitted the damages overall to approximately $2.5M.

Claim Construction

The most interesting aspect of the decision is the discussion of the de novo review of claim construction decisions. Judge Rader spent two and a half pages explaining the fact-law dichotomy of claim construction and concluded that claim construction required resolution of evidentiary and factual issues before construing the disputed terms:

In sum, claim construction involves many technical, scientific, and timing issues that require full examination of the evidence and factual resolution of any disputes before setting the meaning of the disputed terms.

And District Judge Clark wrote a concurring opinion solely to argue against de novo review:

[de novo review] may result in the unintended consequences of discouraging settlement, encouraging appeals, and, in some cases, multiplying the proceedings.

After a de novo review of his decisions, the Court upheld Judge Moran’s constructions. “Static display of prices” meant "a display of prices comprising price levels that do not change positions unless a manual re-centering command is received." And a “static condition” meant that “the price axis never changes positions unless by manual re-centering or re-positioning.” While Judge Moran’s constructions may have appeared narrower than the patent intended initially, they were supported by both the intrinsic and extrinsic evidence. Because eSpeed’s Dual Dynamic and eSpeedmeter systems had mandatory re-centering features, they did not literally infringe.

Doctrine of Equivalents

The court upheld Judge Moran's ruling that the doctrine of equivalents did not apply to the static elements in the claim. Even if the accused products only re-centered once or twice a day, allowing that re-centering to be captured by the doctrine of equivalents would vitiate the claims. Furthermore, prosecution history estoppel also barred equivalents. The patentee differentiated his invention by explaining that its "price axis do[es] not move."

Willfulness

The Court upheld Judge Moran's ruling overturning the jury's willfulness finding. eSpeed's prompt redesign efforts and immediate removal of infringing products were not objectively reckless. And TT offered no evidence that eSpeed sold Future Views during the contested period.

Indefiniteness

The Court held that "single action of a user input device" was not indefinite. Judge Moran correctly construed the term as requiring "an action by a user within a short period." One of ordinary skill in the art could distinguish between single and multiple actions, even when a "single action" was a double-click.

Priority Date

The Court held that there was an issue of material fact regarding the priority date warranting a jury trial. The Court upheld the use of patent law experts, and found a sufficient basis for the jury's priority decision:

Considering the undisputed knowledge of those skilled in the art, disclosure of a species in this case provides sufficient written description support for a later filed claim directed to a very similar and understandable genus. Accordingly, the patents-in-suit are entitled to claim priority to the provisional application.

Inequitable Conduct

The Court upheld Judge Moran's ruling that failure to disclose certain software to the PTO was not inequitable conduct. The software was not material because the software's use after the priority date would not have impacted the examiner's analysis. And confidential use of the software for personal purposes was experimental. 

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President Obama announced a couple of nominations this week impacting the Northern District of Illinois and the national patent bar.

First, President Obama appointed WilmerHale partner Edward DuMont to the Federal Circuit.  DuMont clerked for the Seventh Circuit's Judge Posner and was an Assistant to the Solicitor General where he briefed and argued Supreme Court cases.  DuMont currently has an appellate practice with a considerable focus on patent and intellectual property issues (click here for DuMont's firm bio).  DuMont also spent a year working for a law firm in Bangkok, Thailand.  DuMont's Supreme Court and varied appellate experience make him a very interesting choice to take Judge Michel's place on the Federal Circuit bench.

Second, President Obama has nominated the Northern District's Deputy U.S. Marshall Senior Inspector Darryl McPherson to become the Northern District's next U.S. Marshall.  McPherson has served as a Deputy U.S. Marshall since 1999 and won a Special Recognition award for his service as lead Deputy Marshall for Judge Lefkow. 

Both nomination must be confirmed by a vote of the U.S. Senate. 

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ImageCube LLC v. The Boeing Co., No. 04 C 7587, Slip Op. ( N.D. Ill. Jan. 22, 2010) (Dow, J.).

Judge Dow entered a final judgment as to defendant Boeing in this patent case and stayed the remaining claims pending a Federal Circuit appeal of the claim construction and summary judgment of Boeing's final judgment. The parties all agreed that the Court's claim construction and partial summary judgment ended the case as to Boeing. What was left of the case was the remaining defendants' affirmative defenses and noninfringement, invalidity and unenforceability counterclaims. "Mere defenses" are not sufficient to avoid a Fed. R. Civ. P. 54(b) final judgment. Once one defense is decided for defendant, additional defenses need not necessarily be considered. And the remaining counterclaims would all benefit, should they be tried upon remand, from the Federal Circuit's claim construction decision. An immediate appeal might also hasten resolution of the entire case. Plaintiff acknowledged that it was unlikely to pursue its claims if the Federal Circuit upheld the Court's claim construction.

Finally, the Court noted that defendants, over plaintiff's objections, sought and got the schedule they wanted addressing limited issues before full discovery. Defendants cannot, therefore, "complain too loudly" about seeking more definitive resolution of limited issues before turning to the remainder of the case.

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Rosenthal Collins Group, LLC v. Trading Techs. Int'l., Inc., No. 05 C 4088, Slip Op. (N.D. Ill. Sept. 18, 2009) (Dow, J.). 

Judge Dow denied the parties' cross-motions for summary judgment in this patent dispute regarding software for electronic futures trading using a static price axis.* Although the other related cases are stayed pending an appeal of the related eSpeed case to the Federal Circuit, declaratory judgment defendant Trading Technologies ("TT") sought and Judge Moran agreed to allow this case to proceed based upon TT's agreement that declaratory judgment plaintiff Rosenthal Collins Group ("RCG") infringed even under the Court's allegedly narrow construction of a "common static price axis" and "static display of prices." TT sought to broaden the constructions on appeal. The parties agreed on how the accused Onyx software operated. The price axis was generally dynamic. But if a user pointed a cursor in the window containing the axis, the axis became static until the cursor was removed or after thirty seconds, whichever came first. TT identified this as Onyx's order entry mode. And because Onyx has a static axis in order entry mode, TT argued that Onyx infringed based upon the order entry mode, even if it did not infringe in other modes. RCG argued that Onyx only had a single mode, and because the price axis was not consistently static, without manual recentering, there was no infringement. The Court held that whether Onyx operated in three modes and, therefore, infringed, or operated in a single mode and, therefore, did not was a question of fact. The case, therefore, was not appropriate for summary judgment.

The Court also stayed the case pending appeal of the eSpeed case, except for TT's motion for default and sanctions. 

*  Click here for much more on this case and its related cases in the Blog's archives.

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Here are a few stories you do not want to miss:

• The Wisconsin Law Journal has an article based upon a Northern District of Illinois case in which a summary judgment decision hinged upon a failure to substantively answer one of the other party's Local Rule 56.1 statements of material fact.  In that case, a procedural objection was made, but no substantive answer was given.  So, when the objection was denied, the fact was deemed admitted.  This is a point I have made often:  follow Local Rule 56.1 closely and carefully.
   
• The Blog of the Legal Times reported that in a recent interview the Federal Circuit's Chief Judge Michel suggested that the next nominees to the Federal Circuit should have the following backgrounds:  a patent-experienced district judge; a trial lawyer with patent experience; or a chief corporate lawyer with patent experience.

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Brinks Hofer's Robyn Bowland is the winner of the 2008 George Hutchinson Writing Competition, Hutchinson was the first Federal Circuit Chief Clerk. The competition honors an excellent articls or paper from a law student. Bowland's article -- Distress Signals: Considering the Patentability of Signals in Light of Nuijten considered whether electromagnetic signals were patentable focusing on In re Nuijten.  It is expected to be published later this month in the Federal Circuit Bar Journal.   It is great to see another strong writer joining the Chicago IP bar.

*  Hat tip to the Chicago Lawyer for identifying this story -- click here to read the Chicago Lawyer story.

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Making good on his promise to turn his IP Colloquium into National Public Radio for IP law, Doug Lichtman's newest offering is an extended interview with Federal Circuit Chief Judge Michel.  Click here to listen to Licthman's interview, you can even apply for New York or California CLE credit after listening.  Here are some of Judge Michel's more interesting observations:

• Petitions for rehearing are too often "shallow and weak."
   
• Votes denying en banc rehearings are often close, making the poor petitions for rehearing especially surprising and disappointing. 
   
• Parties interested in supporting cases with amicus briefs should consider filing briefs supporting rehearing petitions.  An amicus brief that was both well researched and well written could play an important role in strengthening a case's en banc potential and tipping close votes for rehearing. 
   
• In re Bilski did not answer all of the 101 questions because not all of the questions were raised in the case or ripe for consideration.  It will take a series of 101 cases to flesh out the post-Bilski state of the law.
   
• Judge Michel is hopeful that the new patent jury instructions -- click here to read the Blog's post about them -- will help bring some clarity and continuity to, among other things, damages and obviousness instructions, although at the time of the interview it appeared that he had not seen the instructions yet.
   
• The Doctrine of Equivalents has almost "dried up."

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At the request of Federal Circuit Chief Judge Michel, an all-star panel was established to create a comprehensive set of model patent jury instructions -- click here to download them.  The panel included patent litigation heavy weights like Don Dunner and federal judges -- Judges Ward (E.D. Texas) and Whyte (N.D. Cal.).  The Federal Circuit has not officially endorsed the jury instructions, but they are very comprehensive and deal with just about every recent case law development.  In particular, they provide an excellent glossary of patent terms for the jury (something that should be in every set of patent jury instructions, but often is not) and they provide two KSR obviousness instructions, one for if the jury is making the final determination and one if the judge does (the panel could not come to a consensus on what the correct reading of the law was). 

The one instruction I had hoped to see that was missing was an instruction for awarding royalties on post-verdict sales -- see the MTTLR Blog on the issue here or read commentary on Judge Clark's plan to submit post-verdict damages to the jury here at Michael Smith's E.D. Texas blog.  If anyone has seen an instruction for post-verdict damages, send it to me and I will post it for all to consider.

You can also read more about patent jury instructions in the Blog's archives -- click here for the Seventh Circuit's model patent jury instructions and here for a list of jury instructions Northern District judges have offered as precedent in IP cases.

Hat tip to Dennis Crouch for linking to the new model jury instructions here at Patently-O.

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I published an article  in the most recent edition of the John Marshall Review of Intellectual Property Law surveying the application of the Twombly "plausibility" pleading standard, in place of the former any set of facts regime, to patent cases -- The Uneven Application of Twombly in Patent Cases: An Argument for Leveling the Playing Field (click here to read it).  I found that district courts have largely followed the Federal Circuit's one case addressing Twombly, which unfortunately involved a pro se plaintiff, and held that Twombly did not change the pleading standards for patent plaintiffs.  But despite that ruling, many district courts are requiring that patent defendants plead affirmative defenses and, in some cases, counterclaims to the higher plausibility standard.  This creates a harmful dichotomy which can be remedied in two ways:  1) as some courts already do, use strict Local Patent Rules to require early disclosures of plaintiff's claims followed in short order by defendant's defenses; or 2) as at least the Western District of Wisconsin already does, require patent plaintiffs to identify the asserted claims and the accused products.  Either or both level the playing field for the parties and come at little cost to plaintiffs who already have a Fed. R. Civ. P. 11 pre-suit investigation requirement.

In addition to my article, there are several excellent pieces in Volume 8, Issue 1 of Review of Intellectual Property Law, including:

• European IP attorney Paul Cole provides a Eurpoean view of the KSR obviousness standard -- click here to read the article;
   
• Timothy Trainer looks at inconsistent international application of TRIPS and discusses what can be done to better protect intellectual property worldwide -- click here to read the article.
   
• Lawrence Ebert (of IPBiz fame) draws lessons from the patenting and licensing of the transistor -- click here to read the article;
   

• Vangelis Economou argues that a covenant not to sue should not destroy a court's declaratory judgment jurisdiction over a patent defendant's invalidity and inequitable conduct counterclaims and that the Federal Circuit should overturn its Super Sack decision -- click here to read the article;
   
• Nicholas Dernick looked at sovereign immunity -- click here to read the comment;
   
• Graham Liccardi considered the Computer Fraud & Abuse Act as a vehicle for getting federal jurisdiction of trade secret disputes -- click here to read the comment; and
   
• Mark Petrolis argued that fair use should not be an absolute defense to a moral rights violation -- click here to read the comment.

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In re Bilski, __ F.3d __ (Fed. Cir. 2008) (en banc).*

Chief Judge Michel, writing for a nine judge majority, affirmed the Board of Patent Appeals and Interferences' finding that Bilski's invention -- a commodities trading method for hedging risks -- did not meet the 35 U.S.C. § 101 patentable subject matter requirement.  The Federal Circuit held that State Street's "useful, concrete, and tangible result" test was insufficient to determine patentability -- disagreements have already started regarding whether State Street was narrowed or overturned.  The Federal Circuit held that the Supreme Court's "machine-or-transformation" test was the only test for determining patentability:

A claimed process is surely patent-eligible under § 101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.

I found Judge Dyk's concurrence tracing the history of the "machine-or-transformation" test back to the Patent Act of 1793 especially interesting:

In fact, the unpatentability of processes not involving manufactures, machines, or compositions of matter has been firmly embedded in the statute since the time of the Patent Act of 1793, ch. 11, 1 Stat. 318 (1793).

As with any major appellate decision, we will need eighteen to twenty four months of district court and Federal Circuit decisions to flesh out and fully understand Bilski's implications.  While we argue those cases and await the decisions, there will be plenty of law review and blog analysis.  Here are some of the first (I will update with additional posts as they come):**

• 271 Patent Blog (glad to see Peter Zura back in the blogosphere);
   
• IP ADR Blog;
  
  
• Likelihood of Confusion;
  
  
• Patent Baristas;
   
• Patently-O (with Crouch's usual, in-depth analysis);
   
• The University of Chicago Law Faculty Blog (Randy Picker has an exceptionally detailed take on the opinion); and
   
• WSJ Law Blog (saying experts are torn as to whether Bilski will make it to the Supreme Court).

*  Click here for the opinion.

**  I have updated the list of Bilski blog posts with some new ones.

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Baxter Int’l, Inc. v. Fresenius Med. Care Holdings, Inc., No. 08 C 2389, Slip Op. (N.D. Ill. Sep. 25, 2008) (Ashman, Mag. J.)

Judge Ashman granted defendants Fresenius’s motion for a stay pending the Federal Circuit appeal of an earlier case between the parties involving related, but not the same, hemodialysis patents. But the Court denied a stay pending an ex parte reexam of plaintiff’s related patents (the same as in the Federal Circuit appeal) and an inter partes reexam of the patents in suit. The reexam of the related patents had only uncertain and limited benefits to the Northern District. Because the patents under reexam were not the patents in suit, there could be no issue preclusion.  And any potential streamlining of the case the reexam might achieve was outweighed by the reexam’s potential for extreme delay.

The reexam of the patents in suit was filed, as was the stay motion, early in the case. And the inter partes nature of the proceeding guaranteed that it would streamline the case. But the potential benefits were outweighed by the likelihood for extreme delay. The court cited statistics showing that the average inter partes reexam lasts 6.5 years and that they can last as long as ten years. Finally, the Court noted that in the ten year history of inter partes reexam, no case had progressed through every possible level of examination and appeal.

Finally, the Court held that a stay pending the Federal Circuit’s decision on appeal would benefit the case. The Federal Circuit was reviewing a claim term used in the patents in suit. And the Federal Circuit was reviewing obviousness and validity, both issues that could shape this case. And the Federal Circuit decision was expected within months, in early 2009. So, the delay did not outweigh the benefits. 

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Baldwin Graphic Sys., Inc. v. Siebert, Inc., No. 03 C 7718, 2008 WL 4083145 (N.D. Ill. Aug. 27, 2008) (Moran, Sen. J.)*

Judge Moran granted defendant’s summary judgment of invalidity as to plaintiff’s patented technology for cleaning printing press components. The Court previously granted defendants summary judgment of noninfringement on a reissued patent and the patent at issue in this opinion, but the Federal Circuit reversed as to the patent at issue after revising the Court’s claim construction – click here for more on this case in the Blog’s archives.

After holding that each element of the claims were taught by various pieces of prior art, the Court considered whether the art could be combined pursuant to the Supreme Court’s KSR standard. The Court held that the creation of strict new industry standards and a finite number of solutions that met the standards created jurisdiction for combining the prior art references:

The introduction of strict regulations regarding the use of high VOC solvents was an outside impetus to begin using low VOC solvents to clean presses. By plaintiff’s own admission, the existing spray bar/dry roll systems worked poorly with low VOC solvents. Therefore, a problem needed to be solved. The mechanics of printing press design led to a finite number of solutions. The pieces for the ultimately embraced solution were all present in the prior art, and it was only a matter of time before they were put together in the manner described in the asserted claims of the ‘976 patent. We find this to be true, particularly in light of KSR’s instruction that “Common sense teaches … that familiar items may have obvious uses beyond their primary purposes, and in many cases a person or ordinary skill will be able to fit the teachings of multiple patents together like pieces of a puzzle.” KSR, 127 S.Ct. at 1742. See also, Muniauction, Inc. v. Thomson Corp., ___ F.3d ___, 2008 WL 2717689, at *6-*10 (Fed. Cir. July 14, 2008); Leapfrog Enterprises, Inc. v. Fisher-Price, Inc., 485 F.3d 1157, 1160-63 (Fed. Cir. 2007).

(parentheticals omitted).

The Court also found the patent invalid because “reduced air content” was indefinite. The patent did not teach how or when to measure the air content reduction. Because three different experts could start the calculation from three different baselines and get three different, but equally correct results, the term was indefinite.

*  Click here for more on this case in the Blog's archives.

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John Marshall's Summer 2008 edition of its Review of Intellectual Property Law is on bookshelves everywhere, plus it is online (click here for the table of contents of the current edition with links to pdfs of each article).  Some of the highlights in:

• The text of Chief Judge Michel's address to the Federal Circuit Judicial Conference in which he discussed the state of the Circuit and asked Congress to add a fourth law clerk for each appellate judge to speed the Federal Circuit's output;
   
• An article by R. Mark Halligan arguing for the addition of a trade secret misappropriation cause of action to be added to the Economic Espionage Act of 1996; and
   
• Hal Wegner's discussion of the impact of the Supreme Court's patent exhaustion decision in Quanta v. LG; and
   
• Daniel Sullivan's student arguing that an Article I patent tribunal should be created and that patents should know longer be subject to trial by jury.

Whether you agree or disagree with the authors, this edition has some provocative arguments.

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On Tuesday, September 16 the John Marshall Law School is putting on an impressive conference looking at the legacy of the Federal Circuit's Chief Judge Markey.  For those that never had the opportunity to know or experience Judge Markey, here is part of Judge Michel's tribute to Judge Markey in the Legal Times after he passed in 2006:

Leadership for Howard Markey began with setting a vigorous example. He simply heard more appeals, wrote more opinions, gave more speeches, drafted more articles, taught more law school classes, and judged more moot courts than any other member of the court. And he did so despite all his administrative duties. Meanwhile, he chaired both the board of directors of the American Inns of Court and the Committee on Codes of Conduct of the Judicial Conference of the United States. He traveled constantly and sat with every regional circuit court, the first and only judge to do so.
 

Despite a life in overdrive, he was the happiest and funniest man I ever met, routinely reeling off five or six successive jokes without pausing to recollect, or even to breathe. Family members report that he had a perfect memory, an asset especially helpful to a tireless storyteller, which he was.

(Click here for a link to the article and more on Judge Markey). If Judge Michel's description of Markey is not enough to get you to the event, Supreme Court Justice Antonin Scalia will be giving the keynote address.  I have had the privilege of hearing Justice Scalia speak a couple of times.  He is an excellent speaker and should not be missed. 

Click here for John Marshall's conference brochure and here for Patent Docs' description of the event, they are a seminar sponsor.  The registration deadline is this Friday, September 12.  I hope to see you there.

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Last week’s Olympic edition Blawg Review focused on the medals. Building on that, this week I discuss the elements of a world record swim. If you were watching last week, instead of blogging, you saw 20 of them in the Olympic pool; seven by Mr. Phelps.

Practice

Nothing is more critical than preparation. A big part of preparation is tightening your stroke and cutting out unnecessary motion. Reese Morrison, at the Law Department Management blog, discusses blunt suggestions for trimming legal bills.

Endless hours in the pool alone are not enough, you need a good coach. Business development coach Cordell Parvin provides an excellent three part series at his Law Consulting Blog – one, two, and three – on persistence, an important element of any Olympic training program. In an Olympic caliber display of persistence, Drug & Device Law had an exhaustive post discussing and classifying each medical device preemption case since the landmark Supreme Court decision in Riegel v. Medtronic, Inc., 128 S. Ct. 999 (2008).

You also need a support network to help you get through all of the pool time. Bruce Allen, at Marketing Catalyst, teaches us how to avoid the cocktail conversation you cannot escape from at a networking event. At Copyblogger, John Morrow explains that content is no longer king in the blogosphere, you need friends. And he teaches you how to get them. At BlawgIT, Brett Trout – who is a fighter, not a swimmer – has an interesting post about how to work together as a community to thwart webjackings (the hijacking of a website). And Mediation Channel’s Diane Levin discusses the social side of blogging, and reading blogs.

Of course, if you do not have time to practice you will never set the record. So, you need a job, or at least some cash. On that note, Harmful Error posts the great news that loan forgiveness programs were expanded this week for legal aid lawyers, state prosecutors and public defenders. 

The Suit

The clothes make the man (or the woman). This year the go-to duds were Speedo’s LZR suits. Patent Librarian Michael White tells us that, no surprise, Speedo patented the LZR. IPKat expands on swimming patents, providing a broader view of Olympics-related patents.

Genes

As a guy who swam for a lot of years and practiced hard throughout, I can tell you not everyone has what it takes to set world records. The closest I came was getting beat by an Olympian and world record holder. Of course, you might be less impressed by my loss if you knew that at the time his Olympic medals were four or five decades old, and I was 19. At Idealawg, Stephanie West Allen discusses the traits that make entrepreneurs entrepreneurial.

                                                                     Mental Focus

One of the big stories on Phelps this week was how he thinks of nothing but not losing during a race. At Litigation & Trial, Maxwell Kennerly tells us that you have to know when you are sweating the details more than your client would want by over emphasizing proof-reading. Of course, even Kennerly agrees that some details matter. 

                                                                  Knowing the Rules 

You have to know the rules. Turn wrong or break the rules for your stroke and beating a record by ten seconds will not matter. At the Legal Juice, John Mesirow reports that kids at the Lake County Florida library are allowed to rent R-rated movies because they believe it is an unconstitutional delegation of authority for the Motion Picture Association of America’s guidelines for determining obscenity. I am sure kids from all over that area are flocking to the Lake County library because the rules are on their side, at least for now.

Filewrapper reports on a Federal Circuit decision holding that copyright infringement, and not just breach of contract, when the terms of an open source license governing the copyrighted material are breached. For more on this major decision in the IP world, check out: BLT; Law Pundit; and Patently-O.

Seattle Trademark Lawyer Mike Graham shows the consequences of not following the rules using two Western District of Washington opinions.

Ethan Lieb, guest blogging at Freakonomics, argues that we need to change the rules requiring unanimous juries. And the WSJ Law Blog discusses a judge and a juror who clashed over jury nullification.

The Start

A bad start is hard to recover from, especially when you are chasing the fastest time ever. Evan Schaeffer shows how to open well at trial at the Illinois Trial Practice Weblog, and he links to Trial Theatre’s opening statement quiz.

Turns

Coming off the wall in a turn is the fastest a swimmer goes during a race. So, you need good turns. IntLawGrrls discuss how to turn around the conflict between Georgia and Russia (sorry the turns section was tough).

Legal Literacy discusses Whole Foods’ turned around (or recalled) beef and looks behind the scenes at how it happened and Whole Foods’ impressively quick response.

The Finish

Do you do an extra stroke or do you glide in hard? Always a tough question, but the .01 seconds the decision costs you can mean the race and the record.

At his E.D. Texas Weblog, Michael Smith reports that while the E.D. Texas started out as a rocket docket, particularly for patents, it has now slowed down and let many other districts catch it with a time to trial of 24 – 30 months.

The Law and Magic Blog reminds us that we cannot always win, and that trying to rig the system to guarantee wins – he is talking about the stock market, but it holds true for the pool – is dangerous work.

At the IP ADR Blog, Victoria Pynchon praises several Perkins Coie attorneys who went the distance for their pro bono clients at Gitmo and earned the clients’ respect for providing them an able defense.

** Images provided via a Creative Commons license by A. Dawson or Andre from Flicker. **

Next week's Blawg Review will be at fellow LexBlog site, the Texas Appellate Law Blog.

Blawg Review has information about next week's host, and instructions on how to get your blawg posts reviewed in upcoming issues.

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Managing Intellectual Property published its annual list of the fifty most powerful people in the international IP community (hat tip to Patent Docs for pointing it out).  Click here for the list (subscription or two week free trial sign up required).  There were two honorees with Chicago connections:

• Rhonda Steele (#8) -- Steele is both the president of INTA and Asia-Pacific marketing properties manager for Mars.  While Steele does not necessarily work in Chicago or on Chicago-specific IP, Mars makes Fun Size versions of its 3 Musketeers, Snickers and Milky Way candy bars in Chicago.
  
• Jim Malackowski (#34) -- Malackowski is a founder of Chicago-based Ocean Tomo, as well as its president and CEO.  Among other things, Ocean Tomo is well known for its patent auctions (at leas the last several of which have each totalled more than $10M in sales), IP valuation services and damages expert work.

These IP luminaries share the honor with Second Life avatars (#1), the PTO's Director John Dudas (#4), the Federal Circuit's Judge Michel (#9), Harry Potter (#14),and  blogger and Google copyright counsel William Patry, of the Patry Copyright Blog.

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The Supreme Court concluded its latest review of the patent laws Monday when Justice Thomas delivered the Court's succinct, unanimous decision in Quanta v. LG.  Client obligations this week prevent me from providing a detailed analysis today.  But, no surprise, there is plenty of commentary out there already.  For more about decision, check out:

• 271 Patent Blog

• Agricultural Law

• FileWrapper

• IP Thinktank

• Patent Docs
  

• Patently-O

• WSJ Law Blog

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Trading Techs. Int’l, Inc. v. eSpeed, Inc., No. 2008-1392 & 1393 (Fed. Cir.).*

As Judge Moran predicted, the parties have appealed this case to the Federal Circuit.* The parties’ appeals were consolidated, leaving a single appeal with a substantial number of issues. The great, new Patent Appeal Tracer* reported that plaintiff Trading Technologies (“TT”) is appealing at least the following decisions (click here to read Tracer’s post on the cross-appeals):

Claim constructions, specifically constructions of "static price axis" and "order entry region"  (click here and here and here for the Blog’s posts regarding claim construction opinions);

• Summary judgment of noninfringement of most of defendant eSpeed’s software packages, including the following titles: Dual Dynamic, eSpeedometer, and modified eSpeedometer programs (click here for the Blog’s post regarding this opinion);
  
• Partial summary judgment for TT regarding prior use (click here for the Blog’s post regarding this opinion); and
  
• Judgment as a matter of law overturning the jury’s willfulness finding (click here for the Blog’s post regarding this opinion).

And eSpeed is appealing, at least, the following decisions:

• The permanent injunction regarding certain of eSpeed’s software packages (click here for the Blog’s post regarding the Court’s permanent injunction).

* Thanks to Patent Tracer for linking to the Blog’s TT v. eSpeed coverage. Click here to read much more about this case in the Blog’s archives.

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Card Activation Techs., Inc. v. Barnes & Noble, Inc., No. 07 C 1230, Slip Op. (N.D. Ill. Mar. 18, 2008) (Gottschall, J.).

Judge Gottschall denied defendants' motion for summary judgment of invalidity. Each of plaintiff's independent claims – covering a counter-top terminal for processing debit card payments – included a “telecommunications means” limitation. The parties agreed that “telecommunications means” was a means plus function limitation. Defendants argued that the “telecommunications means” was indefinite because the patent's specification did not recite any corresponding telecommunications structure, such as a modem. The Court held that the specification did not disclose any specific telecommunications structure. But the Court held that no structure was required, where one of ordinary skill in the art would know what the structure was based upon the specification, citing Aristocrat Tech. Australia PTY LTD v. Multimedia Games, Inc., __ F.3d __, 2008 WL 484449 (Fed. Cir. Feb. 22, 2008). Relying upon plaintiff's expert, the Court held that based upon the specification, one of ordinary skill in the art would understand telecommunications means to be a modem.

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Brian Higgins's Maryland IP Law Blog post about the progeny of In re Seagate, 497 F.3d 1360 (Fed. Cir. 2007), inspired me to do follow up posts identifying Northern District cases discussing recent major IP decisions -- click here for my post on injunctions after eBay Inc. v. MercExchange, L.L.C., 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006).  There have been a number of obviousness decisions in the Northern District since KSR Int’l Co. v. Teleflex Inc., __ U.S. __, 127 S.Ct. 1727 (2007).  Here they are:*

• Abbott Labs. v. Sandoz, Inc., No. 05 C 5373, 2007 WL 1549498 (N.D. Ill. May 24, 2007) (Coar, J.). -- Holding that the Court's pre-KSR analysis need not be reconsidered in light of KSR because an element was missing from the prior art, regardless of what standard was used.
  
• Herman Miller, Inc. v. Teknion Corp., No. 05 C 2761, 2007 WL 2230042 (N.D. Ill. Jul. 30, 2007) (Gettleman, J.). -- Noting that, in light of KSR, plaintiff issued a statement of non-liability and certain patents were removed from the suit.
  

• Lexion Medical, LLC v. Northgate Techs., Inc., No. 04 C 5705, Slip Op. (N.D. Ill. Jun. 8, 2007). -- Holding that the pre-KSR jury's decision would not have changed if given a KSR obviousness instruction.

These opinions suggest that KSR is not changing obviousness law in the Northern District much.  I suspect that is not true.  Once we have a larger sample of cases, including more where the initial analysis was not done pre-KSR, we will see more patents held invalid based upon obviousness.

*  A brief note on methodology:  this was not a thorough study and does not include cases that granted or denied injunctions without discussion.  For a more complete list of post-KSR decisions nationwide, go to the Fire of Genius.

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Black & Decker, Inc. v. Robert Bosch Tool Corp., No. 2007-1243, 1244, Slip Op. (Fed. Cir. Jan. 7, 2008).*

The Federal Circuit affirmed the Northern District jury’s obviousness verdict, and Judge St. Eve’s denial of defendant’s inequitable conduct claim. But the Federal Circuit reversed the Northern District’s construction of “power conversion circuit” and remanded for further proceedings and, perhaps, a new trial.** The Federal Circuit held that the Northern District relied largely upon claim differentiation for its construction and, in the process, gave the patent scope beyond the disclosed invention.

The Federal Circuit held that the Northern District’s pre-KSR obviousness jury instruction was not reversible because defendants identified no evidence in the record that supported an obviousness finding even under the broader KSR standard.

* Click here for extensive coverage of this case in the Blog’s archives.

**  The Court scheduled a status conference early next week.  We may learn at that conference whether a new trial is being scheduled or whether summary judgment will be briefed or a settlement conference scheduled first.

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Chamberlain Group, Inc. v. Johnson Controls Interiors LLC, No. 2007-1314-1467, Slip Op. (Fed. Cir. Feb. 19, 2008).

The Federal Circuit reversed Judge Moran’s construction of “binary code” and, therefore, reversed the limited preliminary injunction entered by the Northern District - click here and here for the Blog’s posts regarding the injunction. The Northern District construed “binary code” as a code represented by two values, but not necessarily a binary number – click here and here for the Blog’s posts regarding the Northern District’s claim and construction opinions. The Federal Circuit praised the Northern District’s claim construction analysis, but reversed the construction:

The district court commendably strove to follow this court’s rules for claim construction. See Phillips, 415 F.3d at 1318-19. In this regard, the trial court weighed the intrinsic evidence along with the extrinsic evidence and properly sought to avoid importing a limitation from the specification into the claims. See id. Nonetheless, this court discerns that the ‘544 patent specification gives particular limiting meanings to the language in the claims.

The Federal Circuit held that “binary code” required a binary (or base two) number. Otherwise, any values would meet the limitation because all values, whether in base two, three, the more standard ten or any other, are represented by computers using two values – 1 and 0. Because the revised claim construction called into question the Northern District’s likelihood of success analysis, the Federal Circuit reversed the preliminary injunction.

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Brian Higgins at the Maryland IP Law Blog posted an analysis of significant willfulness decisions post-In re Seagate, 497 F.3d 1360 (Fed. Cir. 2007) -- click here for the post and click here for a subsequent post discussing Se-Kure Controls, Inc. v. Diam USA, Inc., No. 06 C 4857, 2008 WL 169029 (N.D. Ill. Jan. 17, 2008) (Cox, Mag. J.).  Of the eleven decisions Higgins identified, three were Northern District decisions and one was a Federal Circuit decision analyzing a Northern District case.  Here are my posts on the Northern District decisions:

• Abbott Labs. v. Sandoz, Inc., No. 05 C 5373, 2007 WL 4287503 (N.D. Ill. Dec. 4, 2007) (Coar, J.).
  
• Se-Kure Controls, Inc v. Diam USA, Inc.
  
• Trading Techs. Int’l, Inc. v. eSpeed, Inc., No. 04 C 5312, Slip Op. (N.D. Ill. Jan. 3, 2007) (Moran, Sen. J.).
  

As you can infer from the relatively small number of cases identified by Higgins, there remains a lot of law to be written about Seagate before the standard is well settled.  I suspect that within 18-24 months there will be a relatively large body of law, including numerous Federal Circuit decisions exploring the new standard's outlines.  Until then, patent litigants will face a degree of uncertainty regarding willfulness.  Of course, defendants will generally be glad to have some uncertainty in exchange for plaintiffs's higher willfulness hurdle.

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Emergis Techs., Inc. v. PNM Resources & Otter Tail Corporation, Nos. 2007-1247 & 1252, Slip Op. (Fed. Cir. Jan. 31, 2008) (Moran, Sen. Jr.).*

Judge Moran, sitting by designation, authored the Federal Circuit’s decision reversing in part the District of New Mexico’s and the District of Minnesota’s claim constructions and upholding the Court’s findings of noninfringement. The Court held that payments that went “directly” from customer to invoicer were correctly construed as requiring no third party involvement. But the Court held that based on the specification, “customer invoice account number” was an invoice number as opposed to a more generic customer number. The Court upheld the non-infringement decision because the accrued systems either used third parties to process payments or did not use an invoice number.

* Click here for the opinion.  And thanks to Dennis Crouch of Patently-O for pointing out this decision.

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The blogs are full of commentary about yesterday's Supreme Court patent exhaustion argument.  But no one is declaring a winner.  Instead, like my earlier post, people are focusing on trends in the Justices questions.  Here are some of the best commentaries:

• Amster, Rothstein & Ebenstein has a guest post all over the blogs -- read it at Patently-O, 271 Patent Blog, and Philip Brooks' Patent Infringement Updates.
  
• Anticipate This!
  
• I/P Updates -- quoting Chief Judge Roberts:  "We've had experience with the Patent Office where it tends to grant patents a lot more liberally than we would enforce under the patent law."  Ouch.
• ScotusWiki -- This is a companion to the well-known SCOTUSblog (which does not have any commentary about the argument posted yet).  ScotusWiki does not provide any commentary, but it is a great resource for information about this case, and any other Supreme Court case.
  
• Troll Tracker -- predicting a 5-4 or 6-3 reversal of the Federal Circuit (although only "leaning" that way and only predicting a "slight" reversal) and, similar to my post, picking up on Justice Breyer's cycling theme, but without professing a love for the sport.

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Quanta Computer, Inc. v. LG Elecs., Inc., No. 06-937 (Jan. 16, 2008).

The Supreme Court heard argument yesterday regarding the bounds of patent exhaustion, as explained in my previous posts on the case -- click here to read them.  The transcript was posted late yesterday and is an interesting read, although not one of the Supreme Court’s most entertaining arguments.  I was thrilled to see Justice Breyer use a cycling hypothetical (regular readers will remember that I am a huge fan of cycling). Justice Breyer, apparently not 100% at ease with chipsets, used the hypothetical of selling patented bicycle pedals either as part of a bicycle or to be used with a bicycle. Here are Justice Breyer’s hypos and a few of the responses from G. Carter Phillips, arguing on behalf of LG:

JUSTICE BREYER: But you couldn't put in --you are authorized to sell the bicycle pedals that I have patented only if you impose a restriction that will tell the bicycle user that he must send me a check for $15 in addition to whatever he pays you. That sounds unlawful under contract law.

* * *

JUSTICE BREYER: Well, there's a reason, I guess, that would be so. Imagine that I want to buy some bicycle pedals, so I go to the bicycle shop. These are fabulous pedals. The inventor has licensed somebody to make them, and he sold them to the shop, make and sell them. He sold them to the shop. I go buy the pedals. I put it in my bicycle. I start pedaling down the road.

Now, we don't want 19 patent inspectors chasing me or all of the other companies and there are many doctrines in the law designed to stop that. One is the equitable servitudes on chattel. Another is the exhaustion of a patent. And now you talk about implied license.

I would say, why does it make that much difference? What we're talking about here is whether after those pedals are sold to me under an agreement that the patent -- you know, you have a right to sell them to me -- why can't I look at this as saying that patent is exhausted, the patent on the pedals and the patent for those bicycles insofar as that patent for the bicycles says I have a patent on inserting the pedal into a bicycle.

Call it exhaustion, call it implied license. Who cares?

MR. PHILLIPS: I don't have any problem with your hypothetical because it's not this case. Your hypothetical deals with the situation of what would have happened if you had bought the chip. Would we be in a position to say, even though you bought the chip, we nevertheless want to retain some right to come out -- to come after you claiming we still have a patent in that chip? And the answer is no. We exhausted -- that was exhausted by the sale of the chip.

The question is if you buy a pedal, can you then take that pedal that was designed for a bicycle, put it into a Stair Master --

* * *

JUSTICE BREYER: All right, now if it should be protected -- and here I'm not sure I'm understanding it, so correct me. Let's suppose we have this contract. So everything is identical except we've got my bicycle example in here because I'm more comfortable with that. I know how to ride a bicycle and I don't know how to work the chips. So what I do --

MR. PHILLIPS: Me too.

JUSTICE BREYER: But you see the analogy I'm making.

MR. PHILLIPS: Right.

JUSTICE BREYER: So what I do I go to the shop and I buy this, this mechanism with the pedals on it, and then I insert it in my bicycle. Now, actually I need help in doing that, but I do it. Okay. Now I start pedaling off, and now what is it for all these things here that would stop that original inventor from catching me and hauling me into court, and say, what you've done, Breyer, is you've put my -- my mechanism here in this bicycle and I happen to have a patent on the system. And now you start talking to me about, well, the patent was exhausted on the bicycle --

MR. PHILLIPS: Pedal.

JUSTICE BREYER: -- pedals, but not on the system.

MR. PHILLIPS: Right.

JUSTICE BREYER: And you agree that shouldn't happen.

MR. PHILLIPS: Right.

JUSTICE BREYER: But if I follow you and I write an opinion just for you, what stops it from happening?

MR. PHILLIPS: Well, in that -- in that particular context, in the absence of relatively clear notice, I think it would be quite reasonable to potentially find that there was an implied license to use it under those circumstances.

* * *

JUSTICE BREYER: Then explain -- now this you might know because it's just following up on what Justice Souter said better than I did. I think from these briefs I've gotten the impression that at least some people think that where you invent a component, say, like the bicycle pedals, and it really has only one use, which is to go into a bicycle, it's the easiest thing in the world to get a patent not just on that component but to also get a patent on the system, which is called handlebars, body, and pedals.

And since that's just a drafting question, all that we would do by finding in your favor is to destroy the exhaustion doctrine, because all that would happen, if it hasn't happened already, is these brilliant patent lawyers, and they don't even -- they can be great patent lawyers, not just fine lawyers, and just draft it the way I said and that's the end of the exhaustion doctrine. And that's why it is preferable to say it is exhausted. What is exhausted? One, the patent on this component and, two, the patent on any system involving this component where that system is the only reasonable use of the component, rather than using the terminology "implied license."

Now, I think that's an argument that's being made in some of these briefs, and if so I'd like to you reply.

MR. PHILLIPS: Well, I think that clearly understates the role of the PTO in granting a separate patent. I mean, this is not -- these are not things you pick up at the corner drugstore. You have to justify them. And if you look at Section 282, "a patent shall be presumed valid," each claim shall be presumed valid independently of the validity of other claims. And there's an independence that's embedded in this entire scheme. If it's true that the PTO has in fact granted patent rights on something that's fundamentally not different from the other -- from some other patent, the solution to that is a validity challenge. And candidly, I think that's exactly what all of those arguments are

CHIEF JUSTICE ROBERTS: Well, then --

MR. PHILLIPS: -- is patent validity challenges.

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Tomorrow, the Supreme Court hears arguments in Quanta Computer Inc. v. LG Electronics Inc., 06-937 -- click here for a collection of the many briefs filed in the case at Patently-O.  The Court will be deciding whether parties can contract around patent exhaustion.  The patent exhaustion doctrine, also known as the first sale doctrine, holds that a royalty can only be charged once per product.  Once one link in the supply chain has paid a royalty for a patented product, or a key component, the patent is exhausted and no other link in the chain must pay a royalty for the same patent.  LG Electronics attempted to contract around patent exhaustion.

LG Electronics owned a group of patents claiming microprocessors used in personal computers.  They licensed the patents to Intel, but expressly excluded from the license any Intel customer that combined a licensed Intel microprocessor with non-Intel components.  As part of the license, Intel sent letters to its customers warning of this license exclusion.  LG Electronics sued Intel's post-license customers that were allegedly combining the licensed Intel chips with non-Intel products.   

The district court held that Intel's license exhausted LG Electronics' downstream patent royalty rights.  But the Federal Circuit reversed, holding that when parties expressly restrict a license a court should infer that the parties also negotiated a more limited royalty to reflect the limited rights given in the license.  As a result, patent exhaustion should not apply to restricted licenses.  Quanta argues that the Federal Circuit's decision contradicts a long history of both Federal Circuit and Supreme Court precedent requiring that patent licenses cannot be restricted to one link in the supply chain.

This is another case that has major implications for the business of patent law.  If the Supreme Court overturns the Federal Circuit it could dramatically change the model of many patent licensing programs.  I will keep you posted both on what occurs during the argument and the Court's ultimate decision.

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Trading Techs. Int’l, Inc. v. eSpeed, Inc., No. 04 C 5312, Slip Op. (N.D. Ill. Jan. 3, 2007) (Moran, Sen. J.).*

Judge Moran granted defendants’ (collectively “eSpeed”) motion for judgment as a matter of law that their infringement was no willful. The Court instructed the jury using the objective recklessness standard from In re Seagate Techs., LLC, 497 F.3d 1360 (Fed. Cir. 2007), but when the Court reviewed the totality of the circumstances it found no support for the willfulness verdict and, more specifically that plaintiff Trading Technologies (“TT”) had not met its burden of proving that there was an objectively high likelihood of infringement when eSpeed sold its infringing product, Futures View. When eSpeed launched Futures View, TT’s patent had not issued. And while eSpeed was aware of the application, knowledge of an application does not prove willfulness. Furthermore, TT produced no evidence of post-issuance willfulness. TT submitted two internal eSpeed emails, but both were sent before TT’s patent issued and the emails only suggested that eSpeed should mimic certain features of the TT software. And upon learning of TT’s issued patent, eSpeed immediately began a redesign of Futures View, resulting in new software products that the Court granted summary judgment of noninfringement. As a result of the redesign, the infringing Futures View was only on the market for five months after TT’s patent issued. 

TT also argued that eSpeed’s failure to make noninfringement arguments in preliminary injunction proceedings showed willfulness. But the Court held that eSpeed denied infringement in its answer and that there was no need to argue noninfringement of Future View in preliminary injunction proceedings because eSpeed was not selling Future View. There was no danger of an injunction over a product eSpeed was not selling. 

Finally, TT argued that eSpeed’s creation of a $4M escrow account related to potential infringement of the TT patent when it purchased defendant Ecco was proof of willfulness. The Court, however, held that the escrow account was merely assignment of risk in a business deal. When eSpeed purchased Ecco, TT had already sued eSpeed and to the extent that there was any risk that Ecco products could infringe the TT patent, the escrow account was not an admission, but a “shrewd business practice.”

Expect to see more on TT v. eSpeed this week. The Court has issued its first few post-trial opinions and I am sure others are on their way before this case heads, presumably, to the Federal Circuit.

*  Click here to read much more about this case in the Blog’s archives and click here for a copy of this opinion.

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Abbott Labs. v. Sandoz, Inc., No. 05 C 5373, 2007 WL 4287503 (N.D. Ill. Dec. 4, 2007) (Coar, J.).*

Judge Coar granted defendant Sandoz’s Fed. R. Civ. P. 12(b)(6) motion to dismiss or in the alternative Fed. R. Civ. P. 12(c) motion for judgment on the pleadings, dismissing plaintiff Abbott’s willfulness claims Abbott alleged that Sandoz willfully infringed Abbott’s patent related to an extended release antibiotic (clarithromycin, an erythromycin derivative which Abbott markets as Biaxin XL). At the time Sandoz entered the market with its generic version of Biaxin XL, the Federal Circuit had issued an opinion based upon an interlocutory appeal of a temporary restraining order, which included statements that Abbott’s patent was susceptible to invalidity and unenforceability argument. The Court held that Sandoz’s reliance on that opinion, regardless of the limited record it was based upon or its non-final nature was objectively reasonable, well above the In re Seagate objective recklessness standard.

* Click here for more on this case and related cases.

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The Chicago Tribune has had a few IP-related articles this week. First, the Tribune reported – click here for the story -- that the House is about to take up a bill that would allow an abbreviated approval process for generic versions of biotech drugs, commonly known as biosimilars or biogenerics, similar to abbreviated new drug applications. The Senate Health, Education, Labor and Pensions Committee approved a similar bill in June, called the Biologics Price Competition and Innovation Act of 2007.

Second, the Tribune reported – click here for the story – about a new book, "The Telephone Gambit: Chasing Alexander Graham Bell's Secret," by Seth Shulman -- which argues that Alexander Graham Bell, one of America’s most famous patentees, stole his most famous invention, the telephone, from his rival Elisha Gray. And Shulman argues that he was aided by attorneys and a corrupt patent examiner.  The book is due out January 7. It looks like it could be an interesting read.

Third, the Tribune reported – click here for the story -- that the Federal Circuit reversed in part the Western District of Wisconsin’s April 2007 decision which held that Google’s AutoLink and AdSense feature did not infringe HyperPhrase’s patents. The Court upheld Judge Shabaz’s decision that AdSense did not infringe the patents and remanded the case for further proceedings regarding whether the AutoLink feature infringed two of the patents in suit. Click here for a copy of the Federal Circuit decision.

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There is a debate brewing in the patent litigation community over the correct scope of a state institution's waiver of 11th Amendment immunity when that institution asserts its patents. In Florida Prepaid Postsecondary Ed. Expense Bd. v. College Savings Bank, 527 U.S. 627 (1999), the Supreme Court held that state institutions were immune from patent infringement suits. Of course, if a state institution asserts a patent claim against a party, immunity is generally waived as to that party for counterclaims. But the Federal Circuit recently held in BPMC v. California Dept. of Health (Fed. Cir. 2007), that when the California Department of Health (“Cal. DoH”) intervened as a plaintiff in a patent suit (which is considered a waiver of immunity), it is only a waiver as to that suit. So, when the original suit was dismissed because of improper venue, the waiver was rescinded. As a result, the defendant in the first case, BPMC, could not bring a declaratory judgment suit that mirrored the original suit because of the Cal. DoH’s 11th Amendment immunity. 

The Federal Circuit’s decision has ignited substantial controversy (click here for the WSJ Law Blog’s article on the subject and click here for IP Biz’s responsive blog post) and some are predicting that this will be the next patent case that the Supreme Court takes on cert. It is an interesting issue, but not one that we see often in the Northern District, which caused me to investigate whether Chicago-area colleges are prolific patentees. None makes the top ten, like my alma mater the University of Michigan – Go Blue! But there is some substantial patenting going on at Chicago-area universities. The following chart show the number of patents assigned to the identified universities or their related entities between 1969 and 2005:

As you can see from the chart, this issue has significant consequences for Chicago-area schools. I will keep you posted as the case develops.

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Yesterday, I blogged briefly about the Eastern District of Virginia's injunction preventing the PTO's new continuation rules from taking effect today, November 1st.  But the Court's order was not available yet.  The order has been issued -- click here for a copy -- and it is very interesting.  The Court held that plaintiff GSK had shown a likelihood of success on the merits regarding several issues:

• That limiting the number of continuations a party can file violates 35 U.S.C. Section 120, which states that later filed applications have the same effect as their parent applications.
  
• That the new rules are impermissably retroactive because the limits on numbers of claims and continuations will change the terms of the bargain struck between inventors currently prosecuting their applications and the PTO when those inventors filed their applications, prior to the new rules going into effect.
  
• That the requirements for Examination Support Documents ("ESD") are impermissably vague because they do not sufficiently define the paramters of the search required.

The Court also held that GSK would be irreparably harmed by implementation of the rules because GSK has about 2,000 pending applications and GSK's rights in each of those applications would be materially altered by the new rules. 

[Updated with more links after the jump.]

The balance of hardships weighed in GSK's favor.  The PTO's losses were sunk costs -- updating computer systems and training staff.  But if the PTO wins the suit and later implements the continuation rules, the new computer systems and the employee training will still be valuable.  On the other hand, the entry of the continuations rules will materially limit GSK's rights in its 2,000 pending patent applications.

Finally, the public interest is in maintaining the status quo, rather than allowing the implementation of a new set of rules which could be reversed by the Court in a matter of months.

For more on the preliminary injunction and thoughts about whether the PTO will file an emergency appeal with the Federal Circuit, check out:

• Patently-O
  
• FileWrapper
  
• 271 Patent Blog
  
• WSJ Law Blog
  
• Patent Practice Center Patent Blog
  
• Patent Baristas
  
• Patent Docs and here
  
• Patent Prospector
  
• PHOSITA
  
• Washington State Patent Law Blog

I will continue to update this post with coverage of the injunction and any appeals throughout the day.

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Abbott Labs v. Baxter Healthcare Corp., No. 04 C 0836, 2007 WL 2875503 (N.D. Ill. Sep. 28, 2004) (Guzman, J.).

Judge Guzman granted plaintiff Abbott Laboratories’ (“Abbott”) Fed. R. Civ. P. 15(a) motion to amend its Complaint dismissing claims regarding its U.S. Patent No. 6,444,859 (the “’859 patent”). After the Federal Circuit held the parent of the ‘859 patent invalid, Abbott Labs v. Baxter Pharm. Prods., 471 F.3d 1363 (Fed. Cir. 2006), Abbott gave defendant Baxter Healthcare (“Baxter”) a covenant not to sue Baxter on the ‘859 patent (“Covenant”). Abbott, therefore, sought leave to dismiss its claims regarding the ‘859 patent. But Baxter argued that the claims should not be dismissed because the Covenant excluded any reissue or reexamination of the ‘859 patent, thereby creating an actual controversy. The Court held that Abbott’s potential suit based upon its potential reissue or reexam of the ‘859 patent did not create a current controversy. The Court, therefore, allowed Abbott to amend its Complaint dismissing claims regarding the ‘859 patent. 

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Trading Techs. Int’l, Inc. v. eSpeed, Inc., No. 04C 5312, Slip Op. (N.D. Ill. Sep. 25, 2007) (Moran, Sen. J.). 

Judge Moran denied plaintiff Trading Technologies’ (“TT”) supplemental summary judgment motion. The Court previously denied the original motions regarding the priority dates of the patents in suit.* In that opinion, the Court held that whether the patents could claim priority from their provisional application was a question of fact for the jury. The issue was whether disclosing the species of a single mouse click in the provisional application was sufficient support for the genus – a single action by the user – claimed in the patents in suit.

TT argued that eSpeed’s expert’s statement that the art – software engineering and user interface design – was predictable, was sufficient to take the patents out of the In re Curtis, 354 F.3d 1347 (Fed. Cir. 2004), exception (unpredictability of a species prevents support of a genus). The Court agreed that the factual issue was predictability of the art. But the Court held that eSpeed’s expert’s statement did not resolve the dispute. A generally predictable art does not mean that one of ordinary skill would understand the patentee’s description of the particular species (one-click) was necessarily in possession of the genus (one action). So the issue went to the jury.

As of this post, the jury still has this case.  I will let you know as soon as I learn the jury's verdict.  For more on this case and Trading Technologies' related cases click here for the Blog's archives.  And keep watching the Blog, while the jury deliberates and the parties try inequitable conduct to Judge Moran this week, I will continue catching up with some prior opinions from the case.

*  To read about the original summary judgment motions click here or for a copy of this opinion click here.

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Many -- myself included -- thought the Supreme Court may have had its fill of patent law.  But yesterday, the Supreme Court granted cert in  Quanta Computer Inc. v. LG Electronics Inc., 06-937, to consider whether parties can contract around patent exhaustion.  The patent exhaustion doctrine, also known as the first sale doctrine, holds that a royalty can only be charged once per product.  Once one link in the supply chain has paid a royalty for a patented product, or a key component, the patent is exhausted and no other link in the chain must pay a royalty for the same patent.  LG Electronics attempted to contract around patent exhaustion.

LG Electronics owned a group of patents claiming microprocessors used in personal computers.  They licensed the patents to Intel, but expressly excluded from the license any Intel customer that combined a licensed Intel microprocessor with non-Intel components.  As part of the license, Intel sent letters to its customers warning of this license exclusion.  LG Electronics sued Intel's post-license customers that were allegedly combining the licensed Intel chips with non-Intel products.   

The district court held that Intel's license exhausted LG Electronics' downstream patent royalty rights.  But the Federal Circuit reversed, holding that when parties expressly restrict a license a court should infer that the parties also negotiated a more limited royalty to reflect the limited rights given in the license.  As a result, patent exhaustion should not apply to restricted licenses.  Quanta argues that the Federal Circuit's decision contradicts a long history of both Federal Circuit and Supreme Court precedent requiring that patent licenses cannot be restricted to one link in the supply chain.

This is another case that has major implications for the business of patent law.  If the Supreme Court overturns the Federal Circuit it could dramatically change the model of many patent licensing programs.

For more about the Supreme Court's decision to grant cert, check out:

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Arminak & Assocs., Inc. v. Saint-Gobain Calmar, Inc., No. 06-1561, Slip Op. (Fed. Cir. Sept. 12, 2007) (Holderman, C.J., sitting by designation.).*

On behalf of Chief Judge Michel and Judge Gajarsa, the Northern District’s Chief Judge Holderman affirmed C.D. California’s holding that declaratory judgment plaintiffs’ (“Arminak”) “AA Trigger” shroud design for a spray bottle did not infringe declaratory judgment defendant’s (“Calmar”) design patents covering certain design elements of shrouds. The main issue, and one of first impression, was whether the “ordinary observer” for purposes of design patent infringement should be the end-user/purchaser of spray bottles or the industrial purchaser that buys triggers or shrouds for assembly into a finished spray bottle product. The district court held that the ordinary observer was the industrial purchaser and the evidence clearly established that industrial purchasers would not be confused by similarities between Arminak’s and Calmar’s patented shrouds. Calmar argued, however, that the Supreme Court in Gorham Mfg. Co. v. White, 81 U.S. 511 (1871), expressly excluded experts from being ordinary observers and that, therefore, retail purchasers had to be the ordinary observer. But the Federal Circuit noted that did not sell shrouds or fully assembled spray bottles including their respective shrouds to retail purchasers. The parties sell shrouds to industrial purchasers. Industrial purchasers, therefore, are the appropriate population of ordinary observers. The ordinary observer is:

A person who is either a purchaser or, or sufficiently interested in, the item that displays the patented designs and who has the capability of making a reasonably discerning decision when observing the accused item’s design whether the accused item is substantially the same as the item claimed in the design patent.

* This is not an appeal from the Northern District, but I am covering it because Chief Judge Holderman authored the Opinion. Thanks to Dennis Crouch at Patently-O for bringing the case to my attention.

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Tomorrow, Wednesday, September 18, from 3:00 - 4:00 PM, the Chicago-Kent College of Law is hosting its fourth annual Federal Circuit Roundtable.  The Roundtable, composed of former Federal Circuit law clerks, will address the topic, "MedImmune and SanDisk:  Seeking a License Without Getting a Lawsuit."  The scheduled participants are:

• Laura L. Donoghue, Sidley Austin;
  
• Lisa A. Schneider, Sidley Austin;
  
• Jonathan R. Spivey, Foley & Lardner, 
  
• Meredith Martin Addy, Brinks Hofer Gilson & Lione;
  
• Laura A. Lydigsen, Brinks Hofer Gilson & Lione;
  
• Leonard D. Conapinski, McDermott Will & Emory;
  
• Sasha D. Mayergoyz, Latham & Watkins;
  
• David C. McKone, Latham & Watkins;
  
• Michael R. Weiner, Marshall, Gerstein & Borun; and
  
• Michelle Armond, Marshall, Gerstein & Borun. 

The Roundtable will be moderated by Chicago-Kent Professor Timothy R. Holbrook. 

I will not be able to attend this year's event because I am teaching an IP course at Loyola on Wednesday afternoons, but I can vouch for the program.  It is an hour of excellent insight from former Federal Circuit clerks.  Also, in the interest of full disclosure, my wife (Laura Donoghue) is a roundtable participant.  So, I am biased, but it is still an excellent program.

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Trading Techs. Int'l., Inc. v. eSpeed, Inc., No 04 C 5312, Slip Op. (N.D. Ill. Aug. 27, 2007) (Moran, Sen. J.).*

Judge Moran denied plaintiff Trading Technologies’ (“TT”) motions to reconsider the Court’s grant of summary judgment of noninfringement regarding defendant eSpeed’s software utilizing automatic and drift recentering of a price axis (discussed here). This opinion is most notable for the Court’s blunt footnote acknowledging that this case will be appealed to the Federal Circuit and that, therefore, the Court believes that “speedy resolution” is in all parties’ best interests:

We recognize that TT may have a valid argument [that an amendment during prosecution did not narrow the claims] and note that this was a close call. We also recognize that our decision may have been influenced by the impending trial and our disinclination to reopen a significant issue for debate. We have previously noted that this case is certain to find itself in front of the Federal Circuit for ultimate resolution and acknowledge our place as a “way station” to the Court of Appeals. Therefore, we are further convinced that speedy resolution of all issues before this court is in everyone’s best interest. . . .

Certainly other courts have thought along these lines, but few voice these opinions. 

The Court denied TT’s motions, noting that while they may have come close to rehashing TT’s original arguments, they also more fully developed the arguments. First, the Court held that its narrow constructions of “common static price axis” and “static display of prices” (discussed here and here) were warranted by the intrinsic evidence. Because the Court relied upon the intrinsic evidence, it was not swayed by TT’s arguments that claims issued to TT in foreign jurisdictions (extrinsic evidence) required a broader definition. The Court also rejected similar arguments based upon a patent being prosecuted in the PTO on behalf of eSpeed, which was also extrinsic evidence.

Trial is set to start in this case the week of September 10. Between now and then expect to see several more opinions in this case and its related cases (there are two weighty summary judgment opinions still in my queue, as well as several other smaller opinions and orders). Additionally, I have some other obligations that week, but am planning to blog some of the trial. Stay tuned.

*You can download this opinion here and you can read much more about this case and related cases in the Blog's archives.

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In re AD-II Eng’ing., Inc., Misc. Docket No. 07-852, Slip Op. (Fed. Cir. May 29, 2007).*

The Federal Circuit also held that it would be inappropriate for it to enter judgment that SRAM’s originally asserted claim was invalid based upon a third reexamination of SRAM’s patent. AD-II had not made a showing that it could not get the relief requested from the Northern District Court or through an appeal of any decision by the Northern District Court. The extraordinary step of mandamus was, therefore, not proper.

*  Because the Federal Circuit's opinion is not published, you can read it here.

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In yesterday's edition, the Chicago Tribune published a commentary on the Patent Reform Act of 2007 by Cummins-Allison Corp.'s Chairman William J. Jones -- Cummins-Allison is based in Mt. Prospect, Illinois and develops and distributes coin and currency handling/counting machines.  Jones has strong feelings about the Act and offers some unique opinions.  First, he is against "harmonizing" US law with international patent laws, arguing that the European and Japanese systems are "parochial."  He also makes the, in my experience unfair although widely held, argument that the Chinese system "specializes in intellectual property theft."  I believe if you look at recent Chinese cases or the experts on Chinese IP law -- like the excellent IP Dragon -- you will see that China has become increasingly willing to protect the intellectual property of foreign entities, as long as the entities have invested in the necessary Chinese patents, trademarks, etc.

Jones notes that at the recent Congressional hearings, no manufacturing firms testified, despite some interesting statistics:

U.S. manufacturers undertake 60 to 70 percent of the nation's research and development and hold 60 percent of its patents.

                                                                   * * *

. . . .  Roughly one-third of all patent applications are made by independent inventors, small manufacturers, universities and non-profit research groups. Their efforts are crucial for leading-edge scientific advances, and their views should be heard.

Jones is against the proposed post-grant review process because he believes it will diminish the value of patents by making their strength very uncertain.  He also suggests that instead of giving an "overburdened" PTO broad, new rule-making powers, Congress should fully fund the PTO so that it can hire and retain a high quality staff of sufficient size to expedite the prosecution of patent applications.  Finally, Jones points to what he believes is the diverse opposition to the Act, which he argues warrants taking the time for additional, robust debate.

Jones has some very strong views, not all of which I agree with.  But I do not see how additional debate and discussion could harm the Act at this point.  There are some strong dissenting voices, the Federal Circuit's Judge Michel for example.

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On a related note, Chief Judge Michel of the Federal Circuit has written a letter (following up an earlier, broader letter and his Congressional testimony, discussed at Patently-O) strenuously arguing that the Act's damage apportionment sections are impractical and that Congress should either retain the current damages law which has undergone "decades of refinement" and is "highly stable and well understood by litigators as well as judges."  Here is some discussion of Judge Michel's letter:

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Abbott Labs. v. Sandoz, Inc., No. 05 C 5373, 2007 WL 1549498 (N.D. Ill. May 24, 2007) (Coar, J.).

Judge Coar denied defendant Sandoz, Inc.'s ("Sandoz") motion to stay the Court's preliminary injunction pending appeal to the Federal Circuit pursuant to Fed. R. Civ. P. 62(c).  The Court previously granted plaintiff Abbott's motion for a preliminary injunction (you can read more about that decision and related cases in the Blog's archives).  The PI enjoined defendant Sandoz from selling a generic version of Abbott's patented extended release antibiotic (clarithromycin, an erythromycin derivative which Abbott markets as Biaxin XL).  Sandoz argued that the PI should be stayed pending appeal because of conflicting Federal Circuit law regarding the Court's claim construction and because of the Supreme Court's KSR decision. 

First, Sandoz argued that two different Federal Circuit panels had issued differing rulings construing the claims at issue.  Judge Coar rejected this argument because the construction relied upon in the PI ruling was the Federal Circuit's second, broader claim construction.  The Court explained that the "only rational assumption" was that the second panel was aware of the constructions in the first, but relied upon something different in the record or identified a fact missed by the first panel.  Further, the Court predicted that the Federal Circuit would not retreat from its second opinion to its first, prior opinion.

Second, the Court held that the KSR decision did not change its analysis of Sandoz's likelihood of success on its obviousness argument.  The Court provided a detailed explanation of KSR and its reasoning, but differentiated the current case because the Court held that one of the limitations in the Abbott claims did not exist in Sandoz's cited combination of prior art references.  Because the references did not disclose one of the elements of the claims, whether or not the Court used a strict application of the Federal Circuit's teaching, suggestion or motivation test did not change the outcome of its analysis.  Both the Federal Circuit's and the Supreme Court's standards required that all elements be disclosed by the combined prior art references.

Finally, the Court held that Sandoz had not provided sufficient evidence that it would be irreparably harmed.  Sandoz argued that if it could not enter the market at the same time as other generics, which are not subject to PI's, pharmacists would be reluctant to later restock their shelves with Sandoz's generic version of the drug.  But the Court reasoned that the lure of generics is their prices, not their brand recognition, so Sandoz should have no trouble re-entering the market at a later date should it prevail.

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Leapfrog Enterprises, Inc. v. Fisher-Price, Inc., No. 06-1402, Slip Op. (Fed. Cir. May 9, 2007).

The Federal Circuit issued its first opinion analyzing an obviousness determination based upon the Supreme Court decision in KSR v. Teleflex, 550 U.S. __, 2007 WL 1237837 (2007).  The Court affirmed the district court's holding that the claim was invalid based upon obviousness and explained that obviousness is not determined by "a rigid formula disassociated from the consideration of the facts of a case."  You can download a copy of the Federal Circuit's decision here.

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Chamberlain Group, Inc. v. Lear Corp., No. 05 C 3449, 2007 WL 1238908 (N.D. Ill. Apr. 25, 2007) (Moran, J.).

Judge Moran denied defendant Lear's motion to stay the Court's preliminary injunction pending appeal to the Federal Circuit,* but did allow third party General Motors ("GM") to intervene of right and modified the PI to limit harm to defendant and GM.  In a March 30, 2007 opinion and order, the Court granted plaintiffs' motion for a preliminary injunction, preventing defendant from marketing and selling its garage door opener transmitters based upon the Court's prior claim constructions (these opinions are available in the Blog's archives).  The Court held that Lear could not show a likelihood of success on the merits, in part because the Court's "Markman decision and subsequent reconsideration dealt an enormous blow to [Lear's] case."  The Court acknowledged that while plaintiff would suffer irreparable harm without the PI, both Lear and GM could suffer irreparable harm because of the PI.  In order to resolve the irreparable harm issue, the Court revised the PI to exempt Lear's sales to GM.  Because GM was Lear's only client and because the exemption allowed GM to continue sourcing Lear's product  the revised PI would remove harm to GM and substantially reduce Lear's harm.  While Lear would not be able to add new customers, it would not have to idle its related workers and factories because Lear would not lose any customers.  Because the removal of GM sales from the PI substantially limits Lear's potential harm, the Court denied Lear's motion, supported by GM, to increase the bond from $10,000,000 to $50,000,000.

While GM was not a party to the suit, the Court, in a footnote, allowed GM to intervene of right pursuant to Fed. R. Civ. P. 24(a)(2) for the limited purposes of arguing for an exemption from the PI or a stay of it and to seek a higher injunction bond. 

*  Lear has already appealed the PI and the claim construction decision.

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Abbott Labs. v. Sandoz, Inc., No. 05 C 5373, 2006 WL 1141635 (N.D. Ill. Apr. 16, 2007) (Coar, J.).

Judge Coar granted plaintiff Abbott's motion for a preliminary injunction, after having previously denied it a TRO.*  The PI enjoined defendant Sandoz from selling a generic version of Abbott's patented extended release antibiotic (clarithromycin, an erythromycin derivative which Abbott markets as Biaxin XL).  The Court held that Sandoz had shown a substantial likelihood of materiality and Abbott's intent to deceive the PTO  based upon Abbott's failure to disclose certain taste perversion data during prosecution.  But because Abbott abandoned the claims to which the taste perversion data was relevant of its own accord, the Court did not find the patent preliminarily unenforceable.  The Court explained its reasoning as follows:

Redemption is one of the core principles of the American ethos.  Thus in addition to being contrary to the spirit of Scribbs, Kimberly-Clark and the Code of Federal Regulation, it seems wholly inequitable to hold a patent to be invalid for fraudulent conduct in the prosecution of a claim that was withdrawn before actual prosecution had even begun.

The Court then made detailed, initial claim construction rulings and, based upon them, found a substantial likelihood of infringement.  The Court also considered Sandoz's invalidity arguments, but held that Sandoz had not proved a likelihood of success regarding its invalidity arguments.  The Court also held that the balance of hardships tipped in Abbott's favor because allowing Sandoz's generic product to remain in the market would necessarily take market share from Abbott.

In addition to its preliminary injunction stopping future product sales, the Court also required that Sandoz recall all of its existing product, so long as an adequate bond was set.

*  You can read more about the Federal Circuit decision in which the Federal Circuit overturned the Court's grant of a PI in a related case in the Blog's archives.  You can also read another take on this case at the Orange Book Blog.

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Abbott Labs. v. Sandoz, Inc., No. 05 C 5373, 2006 WL 3718025 (N.D. Ill. Dec. 15, 2006) (Coar, J.).

Judge Coar denied plaintiff's, Abbott Laboratories ("Abbott"), motion for a temporary restraining order ("TRO") to prevent defendant, Sandoz, Inc. ("Sandoz"), from selling a generic version of Abbott's patented extended release antibiotic (clarithromycin, an erythromycin derivative which Abbott markets as Biaxin XL).  The Court had entered a TRO and, ultimately, a preliminary injunction preventing another party, Teva Pharmaceuticals ("Teva"), from selling a generic version of plaintiff's patented extended release antibiotic, but the Federal Circuit vacated the preliminary injunction.  The Federal Circuit held that Teva raised a substantial question as to the validity of the claims at issue, sufficient to call Abbott's likelihood of success on the merits into question. 

In the instant case, Sandoz argued that the Federal Circuit's prior ruling that there was a question regarding the validity of the claims-at-issue precluded any preliminary injunctive relief.  The Court held that rulings on preliminary relief have no preclusive effect because they are made on an incomplete record, "inherently tentative" and based upon only "an estimate of the likelihood of success."  Despite that ruling, however, the Court noted that "the practical effect of [the Federal Circuit's] holding still militates towards the denial of the TRO in the instant case."  The Court refused to reach a holding inconsistent with the Federal Circuit's without a "substantial showing" on a more complete record.  So, although the Court denied the TRO, it appears to have kept an open mind about a preliminary injunction based upon a more complete record.

*For another take on this case, check out the Orange Book Blog.

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Following up on my post yesterday, The Chicago Daily Law Bulletin has published this story regarding today's Supreme Court argument in KSR International Co. v. Teleflex Inc.  The argument centered around whether the Federal Circuit's obviousness test should be revised (more on the KSR case from Patently-O here and here).  Of course, Justices often play devil's advocate in oral arguments, so it is dangerous to presume outcomes based upon oral argument, but it looks like it was good legal theater. 

Here are a few of the most interesting comments as reported in the Chicago Daily Law Bulletin piece:

Justice Scalia "derided the test as 'gobbledygook.'''

Chief Justice Roberts:  called the current test "a confusing 'layer of Federal Circuit jargon [that is] worse than meaningless.'''

Just Souter wondered whether overturning the current obviousness test would generate a flood of law suits.

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I worked with Jim while I was at Kirkland & Ellis and can say that, in addition to having extensive intellectual property litigation and mediation experience, he is an excellent person and will do a tremendous job running the Federal Circuit's mediation program.  Congratulations to Jim on this exciting opportunity and to the Federal Circuit for making such an astute appointment.  Also, a practice tip for anyone in mediation with Jim:  be prepared, Jim is extremely hard working and sharp and, I suspect, he will hold counsel in his mediations to the same high standards he sets for himself.

Thanks to Dennis Crouch at Patently-O for the heads up to Jim's appointment.

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