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Medical Device Maker Awarded $248.7 Million In Patent Case


Aug
01

A U.S. district court in Michigan recently ruled that Zimmer Inc. must pay Stryker Corp. over $248 million for willful infringement of multiple patents covering wound debridement technology, following a ruling by the U.S. Supreme Court. The litigation dated back to December 2010, when a lawsuit filed by Stryker claimed rival Zimmer’s Pulsavac Plus device for cleaning wounds during orthopedic surgical procedures infringed three of Stryker’s patents for a surgical cleaning wand.  In 2013, a federal jury awarded Stryker $70 million in damages plus royalties, after which the presiding U.S. district court judge ruled the infringement was willful and awarded enhanced treble damages and reasonable attorneys’ fees.

On appeal to the U.S. Court of Appeals for the Federal Circuit, the nation’s only appellate-level court with jurisdiction to hear patent cases, the Federal Circuit upheld the U.S. district court’s finding that Stryker’s patents were valid and infringed by Zimmer. However, the Federal Circuit determined Zimmer’s infringement was not willful and thus overturned the enhanced damages award and attorneys’ fees.  Under the governing two-prong test set forth in In re Seagate Technology, LLC, a patentee could only be awarded enhanced damages for willful infringement if it proved by clear and convincing evidence that: (1) the infringer acted with “objective recklessness;” and (2) the infringer acted with “subjective knowledge” of wrongdoing.

Stryker appealed to the U.S. Supreme Court. The Supreme Court agreed to hear the case in tandem with Halo Electronics, Inc. v. Pulse Electronics, Inc., wherein the Court expressly rejected the Federal Circuit’s two-prong test as “unduly rigid.”  The Supreme Court in Halo explained that the Federal Circuit’s test allowed some of the worst patent infringers to evade liability through the ingenuity of their attorneys, and therefore redefined the standard with a renewed emphasis on an infringer’s subjective, pre-litigation knowledge.  The Supreme Court also lowered the burden of proof from clear and convincing evidence to a preponderance of the evidence and increased the district court’s discretion to decide when to award enhanced damages, noting it should “be reserved for egregious cases typified by willful misconduct.”  The Federal Circuit remanded the case back to the U.S. district court to apply the Supreme Court’s new enhanced damages standard.

On remand, the U.S. district court judge ruled that Zimmer must pay over $248 million for willfully infringing Stryker’s patents, reaffirming the court’s earlier decision awarding enhanced treble damages on the 2013 jury verdict. The court found that “Zimmer’s conduct was more egregious than most, and Zimmer is precisely the type of egregious infringer the Supreme Court had in mind when it relaxed the… standard to provide district courts with the freedom to exercise their discretion to enhance damages in cases of willful infringement.”  Remarkably, the court noted that while the jury’s original $70 million verdict “may sound large in the abstract, but in context may not be enough, without enhancement, to deter infringing conduct” after finding Zimmer had sales of $7.7 billion in 2016.  The case is Stryker Corp. v. Zimmer Inc., Case No. 1:10-cv-01223, in the U.S. District Court for the Western District of Michigan and the patents-in-issue are U.S. Patent Nos. 6,022,329; 6,179,807; and 7,144,383.

Post-Halo decisions such as Stryker Corp. v. Zimmer Inc. highlight the importance of conducting timely, competent analysis of a patent to help avoid enhanced damages for willful infringement.  For instance, conducting a freedom-to-operate or validity opinion before a product goes into production may demonstrate good faith and impact the opinion’s usefulness as a defense against willful infringement claims.  The competence and qualifications of the person reviewing patents at issue also factor into a court’s consideration of enhanced damages, wherein courts have held that the opinions of people without expertise in reading patent claims are not a good faith belief in non-infringement.  Thus, it is important to speak with a patent professional at the onset to investigate the merit of any patent infringement concerns to help avoid enhanced damages for willful infringement in the future.

  • Luke C. Holst is a registered patent attorney with experience in both patent prosecution and patent litigation.  Holst is a former Patent Examiner in the Biomedical Device Technology Center at the U.S. Patent and Trademark Office; Law Clerk to the Honorable Mark W. Bennett at the U.S. District Court for the Northern District of Iowa; and Legislative Counsel at the U.S. Capitol to an Iowa Congressman on the U.S. House of Representatives Committee on the Judiciary.  At McGrath North, Holst works on patent issues, other intellectual property matters, and litigation.
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Manufacturer Not Liable Of Patent Infringement For Constructing One Component In U.S. And Remaining Components Abroad


Feb
28

On February 22, 2017, the United States Supreme Court addressed whether a manufacturer—who shipped a single component of a multicomponent invention outside the U.S. for assembly abroad—could be held liable for patent infringement under 35 U.S.C. § 271(f)(1) of the Patent Act. In Life Techs. Corp. v. Promega Corp., the Supreme Court chose quantity over quality and held that the supply of a single component cannot constitute a “substantial portion” of an multicomponent invention to trigger patent infringement liability.  No. 14-1538, 2017 WL 685531 (U.S. Feb. 22, 2017).

Relevant Law

35 U.S.C. § 271(f) of the Patent Act was enacted by Congress to plug a loophole in the enforceability of patent rights by reaching components that are manufactured in the U.S. but assembled overseas. §271(f)(1) states:

 (1)   Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

Thus, a manufacturer may be liable for patent infringement under §271(f)(1) for shipping from the U.S. “all or a substantial portion” of the components of a patented invention when those components are assembled abroad. Notably, the Patent Act did not define the phrase “substantial portion” as used in the context of §271(f)(1).

Background

In Life Techs. Corp., Promega was the exclusive licensee to a patent claiming a toolkit for genetic testing.  The toolkit was utilized by law enforcement agencies for forensic identification, in addition to clinical and research institutions.  Promega sublicensed the toolkit patent to Life Technologies for the worldwide manufacture and sale of the toolkit in limited law enforcement fields of use.  Life Technologies manufactured one component—of the five component toolkit—in the United States.  That single component was then shipped to Life Technologies’ facility in the United Kingdom where it was combined with the remaining four components of the toolkit.  When Life Technologies began selling these kits outside of the licensed fields of use, Promega sued for patent infringement under § 271(f)(1).

The jury returned a willful infringement verdict of $52 million in favor of Promega. The district court, however, granted Life Technologies’ motion for judgment as a matter of law finding that §271(f)(1)’s reference to a “substantial portion of the components” did not embrace the supply of a single component.  The U.S. Court of Appeals for the Federal Circuit reversed and reinstated the jury’s verdict.  The Federal Circuit noted that the dictionary definition of “substantial” included “important” or “essential.”  Thus, in light of expert testimony that the component manufactured in the U.S. was a “major” component of the toolkit, the Federal Circuit concluded the “substantial component” requirement of §271(f)(1) was satisfied.

U.S. Supreme Court

On appeal, the essential question before the Supreme Court was whether a “substantial portion” under §271(f)(1) referred to either a quantitative or qualitative measurement. Because the Patent Act did not define the phrase “substantial portion,” the Court turned toward its ordinary meaning.  The Court found that, as did the Federal Circuit, “substantial” may refer to either quality or quantity.  The Court noted, however, that context was key and the disputed term’s neighbors were the first clue to its quantitative meaning.  In particular, the Court found that both “all” and “portion” conveyed a quantitative connotation, while a qualitative interpretation would have rendered the modifier “of the components” unnecessary.  Rejecting Promega’s proposal for a “case specific approach” that applied either a qualitative or quantitative test, the Court concluded that this would simply complicate matters for the factfinder.  Thus, the Court held that the phrase “substantial portion” has a quantitative, not qualitative, meaning under §271(f)(1).  The Court then expressly rejected the notion that a single component of a multicomponent patented invention would ever trigger liability under §271(f)(1).  Nevertheless, the Court failed to reveal a magic number of components that would constitute “a substantial portion” under §271(f)(1).  As Justices Alito and Thomas succinctly stated in their concurrence in part and in judgment, “today’s opinion establishes that more than one component is necessary, but does not address how much more.”

Practical Effects

The Supreme Court’s decision will likely spur further patent litigation, as questions remain over how many and what components may constitute “a substantial portion” to trigger §271(f)(1) liability. Thus, manufacturers and patent owners alike should speak with their patent attorney to determine whether a patent infringement suit can be avoided—or should be brought—if components of a multicomponent patented invention are built in the U.S.  Patent applicants with the United States Patent and Trademark Office should also speak with their patent attorney about crafting multiple claim limitations that are more likely to be satisfied by potential infringers.  For more information, please see: Life Techs. Corp. v. Promega Corp., No. 14-1538, 2017 WL 685531 (U.S. Feb. 22, 2017).

  • Luke C. Holst is a registered patent attorney with experience in both patent prosecution and patent litigation. Holst is a former Patent Examiner at the U.S. Patent and Trademark Office; Law Clerk to the Honorable Mark W. Bennett at the U.S. District Court for the Northern District of Iowa; and Legislative Counsel at the U.S. Capitol to an Iowa Congressman on the U.S. House of Representatives Committee on the Judiciary. At McGrath North, Holst works on patent issues, other intellectual property matters, and litigation.
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U.S. Supreme Court Opens A Can Of Worms With Design Patent Decision


Jan
06

PatentPatent protection is available for a “new, original and ornamental design for an article of manufacture,” commonly known as a design patent. 35 U.S.C. § 171(a).  Design patent infringement cases before the United States Supreme Court are exceedingly rare.  In fact, the last time the Supreme Court tackled a design patent case, President Grover Cleveland became the first—and only—president to wed in the White House, Apache leader Geronimo surrendered, and the Statute of Liberty was dedicated in New York Harbor.  The year was 1886 and the Court had before it the notable Dobson cases, involving the infringement of a patented design for a carpet. See Dobson v. Harford Carpet Co., 114 U.S. 439, 5 S.Ct. 945, 29 L.Ed. 177 (1885); Dobson v. Dornan, 118 U.S. 10, 17, 6 S.Ct. 946, 30 L.Ed. 63 (1886).  In accordance with patent laws at the time, a plaintiff was required to show what profits or damages were attributable to the use of the infringing design, as opposed to the value of the underlying article of manufacture.  This “apportionment” rule made it difficult for a design patent owner to recover more than a nominal sum from an infringer.  This was exemplified in the Court’s decision—finding patent infringement—but awarding damages of only six cents.

In response to the Dobson cases, Congress passed the Patent Act of 1887 which removed the need to apportion damages and provided that the infringer of a design patent should be liable for “the total profit made by [the infringer] from the manufacture or sale… of the article or articles to which the design, or colorable imitation thereof, has been applied.”  The Patent Act of 1887 was subsequently codified as 35 U.S.C. §289.66 in the Patent Act of 1952, which remains in force to this day.  The codified language reads, in relevant part:

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

Thus, infringers of a design patent must turn over the “total profit” made from the sale of an “article of manufacture” that uses the protected design.

Over a century after the Dobson cases, the United States Supreme Court has again tackled the issue of damages in a design patent infringement case.  In Samsung Elecs. Co. v. Apple, Inc., Case No. 15-777, 137 S. Ct. 429, 196 L. Ed. 2d 363 (Dec. 6, 2016), Apple sued Samsung alleging, among other things, that various Samsung smartphones had infringed Apple’s design patents directed to individual smartphone components (e.g., front face, bezel and display screen).  The U.S. Court of Appeals for the Federal Circuit affirmed the district court’s findings of design patent infringement, including a damages award totaling $399 million which equaled Samsung’s total profit made from sales of the infringing smartphones.  In reaching its decision, the Federal Circuit rejected Samsung’s arguments that damages should be limited to profits from the infringing components of the smartphone, rather than the entire smartphone itself.  The Federal Circuit held that such apportionment was prohibited by Congress under § 289 and that the phrase “article of manufacture” must always be the end product sold to the consumer.  In a unanimous ruling handed down in December 2016, the Supreme Court overruled the Federal Circuit’s decision and tossed out the $399 million award.

Penning the opinion for the Supreme Court, Justice Sotomayor explained that the Federal Circuit’s interpretation of “article of manufacture”—to cover only an end product sold to consumers—“gives too narrow a meaning to the phrase.” Instead, the Court found that for purposes of calculating damages for design patent infringement, the phrase encompasses “both a product sold to a consumer and a component of that product.”  The Court noted that this interpretation is consistent with 35 U.S.C. §§ 101 and 171(a), which cover patents extending to components of multicomponent products.  The Court failed to mention, however, how this reading squares with the Dobson cases and the legislative intent of Congress in passing the Patent Act of 1887.

In addressing the scope of the phrase “article of manufacture,” the Supreme Court set forth a new two-step inquiry: (1) identify the “article of manufacture” to which the patented design has been applied; and (2) calculate the infringer’s total profit resulting from that article of manufacture. The Court declined to set out a test for identifying the relevant article of manufacture at the first step of the § 289 damages inquiry, stating that it was not adequately briefed by the parties to make such a determination.  Thus, the question remains for lower courts to interpret, including how a fact-finder is supposed to determine the amount of profit attributable to a specific component of a multi-component product.  For these reasons, the Court’s opinion unfortunately creates ambiguity for the future of design patents and opens up the proverbial can of worms for design patent owners who are now left with a complicated damages inquiry.  Patent applicants will therefore need to work closely with their patent attorneys to broadly define the “article of manufacture” during patent prosecution to ensure maximum damages awards in potential future litigation.  For more information, please see: Samsung Elecs. Co. v. Apple, Inc., Case No. 15-777, 137 S. Ct. 429, 196 L. Ed. 2d 363 (Dec. 6, 2016).

  • Luke C. Holst is a registered patent attorney with experience in both patent prosecution and patent litigation. Holst is a former Patent Examiner at the U.S. Patent and Trademark Office; Law Clerk to the Honorable Mark W. Bennett at the U.S. District Court for the Northern District of Iowa; and Legislative Counsel at the U.S. Capitol to an Iowa Congressman on the U.S. House of Representatives Committee on the Judiciary. At McGrath North, Holst works on patent issues, other intellectual property matters, and litigation.

 

 

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FAA Issues Landmark Rules Authorizing Drones For Commercial Use


Jun
22

drone postOn June 21, 2016, the Federal Aviation Administration (FAA) finalized its long-awaited rules authorizing the commercial use of small unmanned aircraft systems (UAS or “drones”). The new rules take effect in August and will allow drones to be flown commercially to benefit a host of industries such as agriculture, construction, real-estate photography, power and utilities, media coverage and emergency response.  The rules are estimated to “generate more than $82 billion for the U.S. economy and create more than 100,000 new jobs over the course of the next 10 years.”  Press Release, Federal Aviation Administration, DOT and FAA Finalize Rules for Small Unmanned Aircraft Systems (June 21, 2016) (available at https://www.faa.gov/news/press_releases/news_story.cfm?newsid=20515).

Key aspects of the rules include:

  • Maximum drone speed, 100 mph;
  • Maximum drone weight, 55 lbs.;
  • Maximum drone altitude, 400 ft.;
  • Drone must remain in the line of sight of the operator at all times during flight;
  • Operations are allowed during daylight and during twilight if the drone has anti-collision lights;
  • Flights are not permitted within five miles of an airport without obtaining FAA approval;
  • Pilot must be at least 16 years old;
  • A single pilot may not operate more than one drone at one time;
  • Flights are prohibited over any persons not directly participating in the operation, under a covered structure or inside a covered stationary vehicle;
  • Pilot must pass an aeronautical knowledge test at an FAA-approved knowledge testing center for a remote pilot certificate and pass a background check by the Transportation Security Administration.

In the months ahead, the FAA will offer an online process to waive some restrictions if an operator can prove the proposed flight will be conducted safely. Although the new rules do not deal with privacy issues, the FAA has encouraged all operators to check local and state laws before gathering information using sensors, video and photography technology.  For more information on drones and registration with the FAA, see http://knowbeforeyoufly.org/.

  • Luke C. Holst is a registered patent attorney with experience in both patent prosecution and patent litigation. Holst is a former Patent Examiner at the U.S. Patent and Trademark Office; Law Clerk to the Honorable Mark W. Bennett at the U.S. District Court for the Northern District of Iowa; and Legislative Counsel at the U.S. Capitol to an Iowa Congressman on the U.S. House of Representatives Committee on the Judiciary. At McGrath North, Holst works on patent issues, other intellectual property matters, and litigation.

 

 

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Who Owns Farm Data?


Apr
11

farm dataAs farmers gear up for planting season, a common question asked is who owns farm data generated by agriculture technology providers (“ATP”)? The answer isn’t as simple as it should seem.

Farm data is generally defined as data collected and analyzed from sensors and software on planters, combines, sprayers and other farm implements. Farm data can be used to help farmers improve efficiency, reduce inputs, know when to irrigate, produce better yields and ultimately make higher profits. However, farmers have concerns over how their agricultural data may be used, shared and sold which may lead to adverse economic or commercial consequences for the farmer. For example, will farm data be accessible to government agencies like the Environmental Protection Agency, used by Wall Street traders to speculate or manipulate the commodities market or leveraged by seed and chemical companies? The issue is further exasperated when multiple parties are involved. For instance:

    • Does a landowner own farm data generated on their land or the tenant?
    • Does a co-op that applies the fertilizer and/or pesticide own the farm data or the farmer who pays for the application?
    • Does the owner of the precision ag hardware that collects the data own the farm data or the farmer on whose land the equipment is used?

In light of these questions and concerns, the American Farm Bureau Federation led a consortium of thirty-five farm and commodity groups to set forth “Privacy and Security Principles for Farm Data.” The principles state with regard to farm data ownership:

Ownership: We believe farmers own information generated on their farming operations. However, it is the responsibility of the farmer to agree upon data use and sharing with the other stakeholders with an economic interest, such as the tenant, landowner, cooperative, owner of the precision agriculture system hardware, and/or ATP etc. The farmer contracting with the ATP is responsible for ensuring that only the data they own or have permission to use is included in the account with the ATP.

Available at http://www.fb.org/issues/bigdata/privacysecurityprinciplesfarmdata.html.

It must be noted that the “Privacy and Security Principles for Farm Data” aren’t binding and there are no federal laws directly regulating the storage use or transfer of agricultural data. However, the takeaway is that farmers, landlords, co-ops and agriculture technology providers need to make sure their contract or lease is explicit to who owns farm data. When drafting such contracts, important questions to keep in mind include: (1) Does the contract describe what type of data is being collected; (2) Is control of farm data addressed; and (3) Does the contract state whether the farm data may be accessed, sold or shared with others? Farmers, landlords, co-ops and agriculture technology providers therefore need to take the time to carefully draft and understand contractual language before they sign to ensure farm data ownership issues are clear.

  • Luke C. Holst is a registered patent attorney with over twenty years of experience in the agriculture industry as part owner-operator of a family farm in Northwest Iowa. Holst is a former Patent Examiner at the U.S. Patent and Trademark Office; Law Clerk to the Honorable Mark W. Bennett at the U.S. District Court for the Northern District of Iowa; and Legislative Counsel to Congressman Steve King at the U.S. Capitol. At McGrath North, Holst works on patent and trademark issues, including intellectual property litigation.
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The FAA’s Proposed Regulations on Drones and their Impact on Agriculture


Feb
26

droneAmidst falling farm prices and lower income, the agriculture industry is turning towards an emerging technology in an attempt to deploy resources more efficiently and increase profit margins. Drones, also called Unmanned Aerial Vehicles (“UAV”) or Unmanned Aerial Systems (“UAS”), offer a futuristic approach to farm management that provide many benefits over traditional methods.  Under the traditional approach, crop scouters would periodically inspect fields along their perimeter to judge crop conditions.  Because farms typically encompass hundreds or thousands of acres, the interior of the field was often left unchecked during the growing season.  Today, farmers may utilize UAVs equipped with high definition cameras to obtain complete aerial views of their fields and monitor crop conditions in real-time.  Thus, farmers may quickly and efficiently respond to circumstances affecting crop health, poor drainage, and areas requiring replant to boost yields.  As technology evolves, UAVs are also coming equipped with infrared cameras and advanced sensors that allow farmers to check for signs of crop disease, recognize nutrient deficiencies, assess drought conditions, identify weed hot-spots, apply pesticides, irrigate on an as-needed basis, and predict harvest yields.  The livestock sector has further taken note of this cutting edge technology, wherein a leader in the cattle feeding industry recently filed a patent application with the United States Patent and Trademark Office for incorporating UAVs into livestock feeding operations.  For all of these significant reasons, the Association for Unmanned Vehicle Systems International has predicted that the agriculture industry will capture up to 80% of the commercial drone market.

Unfortunately, flying drones for commercial use is currently prohibited in the United States, absent express permission from the Federal Aviation Administration (“FAA”). According to the FAA, commercial use may be considered using a UAV to take photographs/videos for compensation and/or sale to another individual.  Commercial use may also include a farmer using a UAV to take photographs of his/her fields for decision-making purposes (e.g., identifying target areas requiring replant, fertilizer application, irrigation, etc.).  In 2015, the FAA released proposed rules for the commercial use of drones.  Key aspects include:

  • Maximum drone speed, 100 mph;
  • Maximum drone weight, 55 lbs.;
  • Maximum drone altitude, 500 ft.;
  • Drone must remain in the line of sight of the operator at all times during flight;
  • Operator must conduct flights during daylight hours only;
  • Operator must be at least 17 years old;
  • Operator must pass an “aeronautical knowledge test” every 24 months; and
  • Operator must obtain an Unmanned Aircraft Operator Certificate.

The FAA has predicted that the proposed rules will be finalized as early as June 2016. Therefore, UAVs may soon be flown commercially to benefit the agriculture industry, in addition to a host of other industries such as real-estate photography, media coverage, and law enforcement.  In the meantime, UAVs may still be operated for hobby or recreational purposes (e.g., taking photographs for your own personal use) after being registered online with the FAA.  For more information on UAVs and registration with the FAA, see http://knowbeforeyoufly.org/.

  • Luke C. Holst is a registered patent attorney with over twenty years of experience in the agriculture industry as part owner-operator of a family farm in Northwest Iowa. Holst is a former Patent Examiner at the U.S. Patent and Trademark Office; Law Clerk to the Honorable Mark W. Bennett at the U.S. District Court for the Northern District of Iowa; and Legislative Counsel at the U.S. Capitol to an Iowa Congressman on the U.S. House of Representatives Committee on the Judiciary. At McGrath North, Holst works on patent and trademark issues, including intellectual property litigation.
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Should You Fight a Patent Infringement Demand Letter or Ignore it?


Dec
02

cease and desistRecently in The Wall Street Journal, Colleen Chien—an associate professor at Santa Clara University School of Law—suggests that the best way to respond to a cease and desist letter alleging patent infringement “may be to take a deep breath—and then do… nothing.”  Ms. Chien clarifies that “[t]his means… looking at the claim, determining that a license isn’t needed—and then filing the letter away, rather than responding.”  According to Ms. Chien, patent infringement demand letters often originate from so-called “patent trolls” on fishing expeditions looking for a quick settlement.  A “patent troll” is a pejorative term for a non-practicing entity that earns the majority of its revenue from the licensing or enforcement of its patents.  The Wall Street Journal article found patent trolls brought the majority of patent cases in the U.S. between January-June of 2015 and half the time targeted companies making less than $100 million.  Patent trolls also embark on campaigns that target entire industries for their use of another’s technology, such as Wi-Fi.  In these cases, a company’s contract with its technology provider might provide for patent infringement indemnification.  Ms. Chien recommends that “[a] company that keeps cool and does nothing is more likely to fly below the radar.”

On the other hand, The Wall Street Journal article cautions that there are times when doing nothing simply “won’t work.”  For instance, a larger competitor might file a patent infringement lawsuit against a startup to disrupt their business or squash the competition.  Other times, patent holders may be seeking high damage awards from a jury and are therefore more willing to pursue a patent infringement claim.  Indeed, The Wall Street Journal article points out that “any company that’s worth investing in will likely eventually appear on the radar of a patent troll.”  Ms. Chien recognizes that in these circumstances such attacks “aren’t likely to go away if ignored.”  Unless addressed quickly, a legitimate patent infringement claim could result in a finding of willful patent infringement and an award of treble damages.  Thus, it is important to speak with a patent professional at the onset of receiving a cease and desist letter to investigate the merit of any patent infringement allegation, determine the validity of the patent and recommend an appropriate response, whether it be a design-around, obtaining a license, or simply filing the letter away and resolving the threat by “doing nothing.”  See Colleen Chien, The Best Way to Fight a Patent Demand May Be to Do Nothing, The Wall Street Journal, November 23, 2015 at R5, available at http://www.wsj.com/articles/the-best-way-to-fight-a-patent-demand-may-be-to-do-nothing-1448248065.

  • Luke C. Holst is a registered patent attorney with experience in both patent prosecution and patent litigation. Holst is a former Patent Examiner at the U.S. Patent and Trademark Office; Law Clerk to the Honorable Mark W. Bennett at the U.S. District Court for the Northern District of Iowa; and Legislative Counsel at the U.S. Capitol to an Iowa Congressman on the U.S. House of Representatives Committee on the Judiciary. At McGrath North, Holst works on patent issues, other intellectual property matters, and litigation.
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The PATENT Act (S. 1137)


Jun
26

patent law

On June 4, 2015, the U.S. Senate Judiciary Committee overwhelming passed the Protecting American Talent and Entrepreneurship Act, or the PATENT Act (S. 1137), by a vote of 16-4.  Introduced by Senator Charles Grassley (R-IA), the PATENT Act is designed to curb abusive patent litigation by so-called patent trolls while moderating some of the more contentious provisions of parallel legislation in the U.S. House of Representatives, the Innovation Act (H.R. 9).  Many universities, biotech, and pharmaceutical industries that initially opposed the Innovation Act have since recognized the PATENT Act is a step in the right direction.  Like the Innovation Act, the PATENT Act:

  • Regulates “cease-and-desist” letters by requiring the allegedly infringed patent to be identified with at least one claim;
  • Makes broad dissemination of “bad faith” demand letters a violation of Section 5 of the Federal Trade Commission Act;
  • Includes heightened pleading standards, requiring a patent holder to plead the asserted patent claims and explain how the accused product or process infringes each element of the asserted patent claims;
  • Requires patent holders to disclose to the court and adverse parties the identity of parent entities, assignees, and entities with the right to sublicense or enforce the patents in suit; and
  • Requires courts to stay discovery until the resolution of pending motions to dismiss, transfer venue, or sever accused infringers.

The major difference between the U.S. Senate’s PATENT Act and the U.S. House of Representative’s Innovation Act, is that the Senate language doesn’t presume attorneys’ fees will be awarded to a prevailing party in a patent infringement action. Opponents of the Innovation Act were concerned that a default, attorneys’ fee-shifting burden to the losing party would likely favor wealthy parties while discouraging small businesses and inventors from pursuing legitimate patent infringement claims. Thus, the PATENT Act allows a court to award attorneys’ fees if it determines the losing party’s conduct was “not objectively reasonable,” wherein the prevailing party bears the burden of proof. While the Senate compromise may allay some concerns for a legislative fix to abusive patent litigation, Senator Grassley has acknowledged there remain a few outstanding issues and that he “look[s] forward to continuing the debate on the Senate floor.”

◊   Luke C. Holst is a registered patent attorney with experience in both patent prosecution and patent litigation. Holst is a former Patent Examiner at the U.S. Patent and Trademark Office; Law Clerk to the Honorable Mark W. Bennett at the U.S. District Court for the Northern District of Iowa; and Legislative Counsel at the U.S. Capitol to an Iowa Congressman on the U.S. House of Representatives Committee on the Judiciary. At McGrath North, Holst works on patent issues, other intellectual property matters, and litigation.

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“Patent Trolls” In The United States Supreme Court


Jun
16

Patent

On May 26, 2015, a United States Supreme Court Justice used the derogatory term “patent troll” for the first time in the United States Supreme Court’s recorded history.  In Commil USA, LLC v. Cisco Systems, Inc., 135 S. Ct. 1920, 1932 (May 26, 2015) the Court was asked to decide whether a company’s good faith belief that a patent was invalid could be a legitimate defense to patent infringement, specifically induced infringement.  The case involved a patent held by Commil USA, an accused patent troll, for improving the implementation of a wireless network over a large area.  A “patent troll” is a pejorative term for a non-practicing entity (“NPE”) that earns the majority of its revenue from the licensing or enforcement of its patents.  Commil USA sued Cisco Systems for patent infringement based on Cisco System’s use of similar technology, and inducing its customers to also infringe.  In defense, Cisco Systems admitted that it knew about Commil USA’s patent and that it’s use of Commil USA’s patented technology could constitute infringement.  Nevertheless, Cisco Systems argued that it shouldn’t be liable for patent infringement because it believed, in good faith, that Commil USA’s patent was invalid.  The Court was encouraged to allow a belief-of-invalidity defense in order to combat “abusive patent assertion” by the so-called patent troll Commil USA.

In a 6-2 decision, the Court ruled against Cisco System, holding accused patent infringers can’t evade claims of “induced infringement” by arguing they had a “good faith belief” the patent was invalid.  Notably, the Court recognized patents have a statutory presumption of validity.  Thus, Cisco System’s mere belief that it was acceptable to infringe Commil USA’s patent simply because the patent was no good, undermined the statutory presumption of validity.  The Court’s decision ultimately took away a powerful defense for accused patent infringers.

While the Court’s decision was significant in itself, Justice Antonin Scalia’s strongly worded dissent was further noteworthy.  Disagreeing with the majority, Justice Scalia argued it was “impossible” for anyone to induce infringement if they believed the patent was invalid in the first place.  Justice Scalia claimed the majority’s decision had ultimately “increase[d] the in terrorem power of patent trolls”—the first time the contentious term had ever been used in a United States Supreme Court opinion.  Thus, Justice Scalia’s reaction to the majority’s decision in Commil USA, LLC v. Cisco Systems, Inc. indicates the debate over how to combat abusive patent litigation is far from over.

  • Luke C. Holst is a registered patent attorney with experience in both patent prosecution and patent litigation. Holst is a former Patent Examiner at the U.S. Patent and Trademark Office; Law Clerk to the Honorable Mark W. Bennett at the U.S. District Court for the Northern District of Iowa; and Legislative Counsel at the U.S. Capitol to an Iowa Congressman on the U.S. House of Representatives Committee on the Judiciary. At McGrath North, Holst works on patent issues, other intellectual property matters, and litigation.
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Update On Patent Trolling Legislation In The 114th Congress


Feb
27

patent

H.R. 3309, “The Innovation Act”

On December 5, 2013, the U.S. House of Representatives passed H.R. 3309, the “Innovation Act,” to address the growing problem of abusive patent litigation by so-called patent trolls.  A “patent troll” is a pejorative term for a non-practicing entity that earns the majority of its revenue from the licensing or enforcement of its patents.  Key provisions of H.R. 3309 contained heightened pleading standards; required patent plaintiffs to name anyone who had a financial interest in the patent being litigated; required courts to delay the discovery process until after claim construction was determined; created a voluntary process for small businesses to postpone patent lawsuits while their larger sellers defended similar patent lawsuits against the same plaintiff; and allowed a manufacturer to intervene in a lawsuit against its customers, with the action stayed for the customer if both the customer and manufacturer agreed.  The centerpiece of the legislation was a controversial fee-shifting provision that required courts (with some exceptions) to award prevailing parties reasonable attorneys’ fees and other expenses when parties brought frivolous lawsuits or claims that had no reasonable basis in law or fact.

Supporters of H.R. 3309 praised its passage as instituting important patent reforms made necessary after passage of the “America Invents Act” (P.L. 112-29).  Proponents included the technology sector and notable internet companies such as Google, Microsoft, Amazon, and Apple.  H.R. 3309 was also favored by brick-and-mortar industries such as restaurants, retailers, realtors, hotels, casinos, airlines, and the auto industry.

On the other side, opponents of H.R. 3309 were concerned that the fee-shifting provision would likely favor wealthy parties while discouraging small businesses from pursuing legitimate patent infringement claims.  Opponents included the biotechnology and pharmaceutical industries, the Intellectual Property Owners’ Association, patent attorneys, and even universities – which warned that the legislation would harm their patent-licensing revenues.

H.R. 3309 passed with bipartisan support in the U.S. House of Representatives by an overwhelming margin of 325-91 votes, however, its companion bill failed to clear the U.S. Senate.  Problems originated in the Senate when Judiciary Committee Chairman Patrick Leahy, D-Vt., attempted to create his own bill that removed the contentious fee-shifting language from H.R. 3309.  After votes on the Senate counterpart bill stalled repeatedly, Senator Leahy withdrew the bill from the Senate Judiciary Committee’s agenda last May.

H.R. 9, Reintroduction of “The Innovation Act”

In the wake of the 2014 midterm elections, Republicans vowed to take up patent trolling legislation early in 2015.  On February 5, 2015, House Judiciary Committee Chairman Bob Goodlatte, R-Va., reintroduced the “Innovation Act” (H.R. 9) with 20 co-sponsors including eleven Democrats and nine Republicans.  The bill is identical to H.R. 3309, and its reintroduction was immediately hailed by the Information Technology Industry Council, the Computer & Communications Association, the National Association of Broadcasters, and the National Cable & Telecommunications Association.  On the other hand, a host of 250 companies, startups, universities and innovators—including Qualcomm Technologies, Merck & Co. and Monsanto—objected to the bill and cautioned Congress about overcorrecting a patent system that was overhauled by the 2011 “America Invents Act” and reined in by recent United States Supreme Court decisions.

In light of these concerns, the U.S. House of Representatives Subcommittee on Courts, Intellectual Property, and the Internet held a hearing on February 11th, 2015 examining the effect of the U.S. Supreme Court’s decisions on patent trolling and the continued need for patent litigation reform.  During the hearing, Congressman Darrell Issa, R-Ca. – who leads the subcommittee and himself owns dozens of patents – concluded that any changes to H.R. 9 will be “minor” and must increase the vote count.  In the Senate, Senator Charles Grassley, R-Ia., replaced Leahy as Chairman of the Committee on the Judiciary.  Senator Grassley has signaled his intention to make patent reform a priority and believes patent reform can be accomplished early in the first session of the 114th Congress.  This appears to be one issue the new Republican Congress and the White House will agree on in 2015, as the White House has signaled universal support for legislation curbing abusive patent litigation.

What does this mean for you

If you are a patent owner, speak with a registered patent attorney about how H.R. 9 may impact your patent rights.  Continue to monitor this legislation as it makes its way through the U.S. House of Representatives Committee on the Judiciary and voice any concerns you may have over the fee-shifting provision to your local Congressman and Senators.  Alternatively, if you have received a cease and desist letter from a patent troll alleging patent infringement, speak with a registered patent attorney about the legitimacy of these claims and the measured response you should take.

  • Luke C. Holst is a registered patent attorney with experience in both patent prosecution and patent litigation in a variety of technology areas including agriculture, medical devices, mechanical, computer, pharmaceutical, chemical, biotech, and life sciences. Holst is a former Patent Examiner at the U.S. Patent and Trademark Office; law clerk to the Honorable Mark W. Bennett at the U.S. District Court for the Northern District of Iowa; and Legislative Counsel at the U.S. Capitol to an Iowa Congressman on the U.S. House of Representatives Committee on the Judiciary. At McGrath North, Holst works on patent issues, other intellectual property matters, and litigation.
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