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

I have several smaller IP-related items today, none of which warranted a single post:

• The Wall Street Journal reported last Friday that the Patent Reform Act (S. 1145) will likely not reach the Senate floor -- click here for the story.  It was widely reported throughout the first quarter that the bill was expected to be brought to the full Senate by March or April of this year.  The WSJ reported that the Act's move out of the Judiciary Committee stalled because of a stalemate over the Act's controversial damages provision.
  
• Virtually Blind hosts a Blawg Review #156 focused on, no surprise, all thinks virtual and Second Life.
  
• The John Marshall Law School is hosting a free presentation by Southern Methodist University Law School Professor Shubha Ghosh tited IP as CP:  Competition Policy Norms in Intellectual Property Law.  Click here for registration information.
  
• The final edition of the 2008 Chicago IP Colloquium is this afternoon from 4:10 - 5:50 pm.  The presentation will be by Professor Mark McKenna of the Saint Louis University School of Law about his paper Testing Modern Trademark Law's Theory of Harm.  It looks like it will be another excellent IP discussion.
  
• The Lewis & Clark Law School has a new podcast up with Chicago-Kent College of Law's Associate Dean and Director of the Program in Intellectual Property Law Graeme B. Dinwoodie. Professor Dinwoodie speaks about developing trademark defenses.

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As I posted yesterday afternoon, the jury came back for Trading Technologies ("TT").  The jury found that eSpeed willfully infringed TT's patents for a six month period in 2004, found the patents valid and awarded $3.5M in damages.  The parties have not completed their bench trial on inequitable conduct.  So, the Court may still hold the patents invalid based upon inequitable conduct, which would render the $3.5M damages award moot.  But unless and until that happens, the award stands and has the potential to be as much as trebled based upon the willfulness finding. 

There has been some press coverage already.  Here is some of the best:

• Crain's Chicago Business
  
• Wall Street Journal (subscription required)
  
• Ad Hoc News
  
• CNN Money (AP story)
  
• Futures Magazine
  
• Reuters

You can read much more about this case and its related cases in the Blog's archives by clicking here.

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Eolas Techs. Inc. v. Microsoft Corp., No. 99 C 626 (N.D. Ill.) (Pallmeyer, J.).

Speculation regarding Judge Pallmeyer's delay of the Eolas v. Microsoft trial is over.  Eolas announced that it settled with Microsoft in a letter to shareholders (available from theSeattle Post-Intelligencer).  No details of the settlement were available, but Eolas told its shareholders to expect a dividend from the settlement of up to $60-$72 per share.  Here is more coverage of the settlement:*

• Vnunet.com
  
• Todd Bishop's Microsoft Blog -- discussing the letter to Eolas shareholders.
  
• Wall Street Journal (subscription required)
  
• Patent Prospector

*  As I have explained in previous posts, I will not comment on any news from this case because of my family's connection to it, but feel free to discuss the case in the comments.

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The Wall Street Journal reported yesterday (subscription required) that patent reform is stalled. I blogged last month – Can Patent Reform Cross the Finish Line? – that it appeared that the patent reform efforts in this Congress were in trouble because the reform proponents were not maintaining a unified position. The WSJ’s article suggests that my analysis was correct, although the WSJ focuses on a new critic of the reform legislation – the AFL-CIO. The AFL-CIO argues that the Patent Reform Act of 2007* will cost America, and specifically the AFL-CIO’s members, high tech manufacturing and production jobs. The union is concerned that patent reform would weaken the U.S. patent system, thereby causing high tech manufacturers to send their manufacturing and production work overseas where they will receive relatively stronger patent protection. It is an interesting view on the reform issue that, judging from other blog posts, most people in the IP community had not considered: FileWrapper.

* For more analysis of the Patent Reform Act of 2007 check out the Blog’s archives or the Maryland IP Law Blog’s excellent five part series on the Act: 1, 2, 3, 4 and 5.

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Intel's General Counsel, Bruce Sewell, had an interesting commentary piece in yesterday's Wall Street Journal:  Patent Nonsense (because it is from the Op/Ed pages, I do not think a subscription is required).  On the day that the Senate Judiciary Committee renewed its consideration of the Patent Reform Act of 2007, Sewell makes many of the arguments that led to the changes proposed by the Act.  Sewell argues that the number of patent law suits is increasing, damages awards are rising (he states that there have been at least four settlements or judgments in excess of $500M in the last five years) and the more and more "questionable, loosely defined patents" are being issued.  Sewell's remedies to these problems include:

• limiting damages to the patented component not the entire product (i.e., a patentee's damages should be based on its patented engine component, not the entire car);
  
• strong post-grant PTO review;
  
• strengthening of venue requirements so that suits must be brought in a forum with an actual connection to the alleged infringement; and
  
• requiring a showing of actual bad faith for a willfulness finding.

Sewell also argues that the allegedly increasing number of "questionable, loosely defined patents" chills research and development in technology areas covered by the patents.  But I am not sure this argument is correct.  In my experience, a patentee, assignee or exclusive licensee with a broad patent tends to assert its patent when the technology is developed and a large chunk of the research investments have already been made.  That is the point when the alleged infringers have developed a market and, therefore, potential damages.  So, while I am all in favor of careful examination by the PTO (as are most people involved in this debate, I think), I am not sure that the problem with the broad, questionable patents is that they chill research and development investment.

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Wednesday, the Senate held its first hearings regarding the Patent Reform Act.  Both the main stream media and the legal blogs are busy handicapping the battle over the legislation and the Act's chances of success.  Here are some of the highlights:

The WSJ Law Blog handicaps the big players in Patent Reform's Battle Royale

The WSJ print edition featured the Senate hearings in a page-one story (subscription required).

FileWrapper provides a nice summary of each witness's positions.

The New York Times also ran a Business section story.

Patent Prospector takes a very strong position: 

The thankful result of today's Senate hearing is watching the Patent Reform Act of 2007 appear the statutory tub of lard that it is.

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The Wall Street Journal print edition had an interesting article about a new trend in defending lawsuits that focused on an IP dispute -- A Growing Dispute:  Fertilizer Start-Up Uses Web as Defense (subscription required).  The article discusses TerraCycle Inc.'s use of a website (www.suedbyscotts.com) to bolster its defense of a lawsuit Scotts Miracle-Gro Co. filed against TerraCycle alleging trade dress infringement and false advertising.*  According to the article, TerraCycle has not raised much money from its online solicitation for defense fund donations.  But during the first four weeks of its online defense, TerraCycle's sales jumped 122%, as opposed to 31% during the same period last year.  TerraCycle also saw a corresponding spike in visits to its primary website.  The WSJ Law Blog picked up on the story and developed it further, identifying several other defendants that have used websites as an aspect of their defense strategies, including Vonage's site (www.freetocompete.com) developed in connection with its prominent patent dispute.

It appears that defending cases on the internet is a growing trend.  I doubt it will benefit defendants within the confines of the courtroom or the legal proceedings generally.  Perhaps bringing details of the suit into the public eye will help identify additional prior art or apply pressure from interest groups like consumers or shareholders to get plaintiffs to change tactics.  But it seems to me that the biggest benefit of these sites may commercial, they make news and drive additional traffic to the defendant's primary site.

* You can read more about the Scotts Miracle-Gro v. TerraCycle dispute at the Seattle Trademark Lawyer.

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The big news in patent law this week is the Supreme Court oral argument in Microsoft v. AT&T.  Microsoft exports software from the United States to various countries.  The software code alone cannot infringe AT&T's patents until it is combined with the hardware, which only occurs after the software has left the United States.  So, exporting the software is not an act of infringement.  The issue, therefore, is whether, pursuant to 35 U.S.C. Section 271(f), exporting the software constitutes:

suppl[y] . . . from the United States . . . [of] all or a substantial portion of the components of a patented invention . . . in such manner as to actively induce the combination of such components outside of the United States,” as well as the “suppl[y] . . . from the United States [of] any component of a patented invention that is especially made or especially adapted for use in the invention.

For more on the issues, you can find the briefs at Patently-O. 

The case has received substantial media attention both because it was granted cert and because the case could have effects far beyond the international exportation of software.  The oral arguments were interesting (transcript here) and both the main stream media and blogs are frantically reading the tea leaves.

My favorite oral argument quotes both came from Justice Scalia:

JUSTICE SCALIA:  Mr. Olson, before you get into the merits I have a question, a preliminary question. I understand from AT&T's brief that there has been a stipulation entered into between the parties after the judgment below which preserved Microsoft's right to appeal and prescribed different dollar amounts that Microsoft must pay AT&T depending on the outcome of the appeal. Does that raise any, any muteness problem? Can you sort of wager on the outcome of an appeal that way?

                                                               * * *

JUSTICE SCALIA:  I hope we can continue calling it the golden disk. It has a certain Scheherazade quality that really adds a lot of interest to this case.

(Laughter.)

For more on the oral arguments and analysis of the case generally, check out:

Patently-O -- Discussion of the oral argument and quotes from the transcript.

The BLT (Blog of the Legal Times)* -- Coverage of Solicitor General Ted Olson accidentally referring to Justice Stevens (a former Chicagoan) as Justice Scalia and Chief Justice Roberts recusing himself based upon his stock holdings. 

The WSJ Law Blog -- Focusing on Justice Breyer's statement to AT&T:  "I don’t see how to decide for you.”

The WSJ print story (subscription required) -- A broader overview of the story, including a discussion of the fact that the Supreme Court has never held that software is patentable.

271 Patent Blog -- Focusing on the "metaphysical" aspects of the case with extensive quotes from the oral argument.

IP Kat -- A pre-argument case detailing the parties' arguments.

*  This is a new blog that is well worth checking out and adding to your RSS feeds.

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