In re Bilski – The Pendulum Swings

November 2, 2008

Those who take an interest in patents — inventors, litigants, lawyers, judges, pundits, trolls, and on and on — have been waiting with bated breath for the CAFC’s decision in In re Bilski. Is it a game changer for much-maligned “business method” patents? How far does it go in narrowing the patentability of business method processes? How will the courts apply it? How does it affect pending or contemplated cases? Is the Supreme Court likely to accept an appeal? It seems that almost every patent lawyer in the country feels compelled to write about this decision. Tens of thousands of words will be written. Indeed, I would swear that some lawyers pulled all-nighters on Thursday night so they would be the first to write about this case by Friday morning, and get a jump on the competition. To sort through the noise, my recommendation is that you go to the Patently-O blog. Start here, then search Patently-O for “Bilski”. I’m confident that this blog will collect most of the commentary on this case you are likely to need. See also: The Most Anticipated Patent Case Ever

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EdTX Judge Says: Litigate Future Royalties as Part of Trial

September 4, 2008

We’ve been following the lower courts’ interpretation and application of eBay v. MercExchange since the case was decided by the Supreme Court in May 2006. In eBay the Court held that post-judgment injunctions were not “automatic” for successful patent plaintiffs, but rather that the trial court had to apply the traditional equitable test to determine whether an injunction or ongoing royalties were the appropriate remedy. In June I gave a presentation at Massachusetts Continuing Legal Education on developments in this area in the two years since the decision. (Warning – the Powerpoint won’t make a lot of sense without the voice-over, but it gives some idea of the landscape). As I discussed then, a constellation of issues was forming around the question of how to assess future royalties if it is determined that this was the appropriate remedy after final judgment. By then, of course, the jury has gone home. Was it up to the judge to determine the royalty? Would there be a new trial (jury or otherwise) on this issue alone? Would the pre-judgment royalty be used for future royalties (as some courts have done)? Not surprisingly, a U.S. District Judge in the Eastern District of Texas has taken the first real “shot” at this issue. In early August Federal District Court Judge Clark issued an order in several cases, advising the parties that he expected the issue…

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Quick Hits – Antitrust

July 14, 2008

The Federal Trade Commission has asked for en banc review of the D. C. Circuit’s decision in the FTC’s Rambus proceeding. I expect this case to be appealed to the Supreme Court, and given the Court’s propensity to accept antitrust cases over the last several years and the importance of this case, the case stands a better-than-average chance of being accepted for review by the Court. Of course better-than-average is still difficult, so the FTC shouldn’t get its printing presses warmed up quite yet. * * * The Supreme Court granted review of the Ninth Circuit’s decision in Pacific Bell v. Linkline, and will hear and decide the case next term. The issue in this case, as described in the Pacific Bell’s petition to the Supreme Court, is – Whether a plaintiff states a claim under Section 2 of the Sherman Act by alleging that the defendant – a vertically integrated retail competitor with an alleged monopoly at the wholesale level but no antitrust duty to provide the wholesale input to competitors – engaged in a “price squeeze” by leaving insufficient margin between wholesale and retail prices to allow the plaintiff to compete. The Ninth Circuit held that there was an antitrust duty, and Pacific Bell is appealing that ruling. The SCOTUS blog page for this case is here. * * * I strongly recommend that patent and antitrust attorneys…

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Quant Computer v. LG Electronics – the Supreme Court Rules on "Patent Exhaustion"

June 10, 2008

Yesterday’s decision in Quanta Computer, Inc. v. LG Electronics, Inc. is linked below (via, which I am becoming quite enamored of as a place in the “cloud” to hold and link to documents or embed them in a web site or blog). This is a very technical case, and probably is of little interest to non-patent/licensing-professionals. The holding is as follows: The authorized sale of an article that substantially emboides a patent exhausts the patent holder’s rights and prevetns the patent holder from invoking patent law to control postsale use of the article. Layman’s translation: once you license a patent to someone, your rights in the patented product or method are “exhausted.” You are not entitled to demand a patent royalty from subsequent purchasers “downstream” from your customer. This is analogous to the “first sale” doctrine in copyright law. In both cases (patent and copyright) the exception is that you are able to restrict downstream uses by contract with your purchaser or licensee. However, negotiating contract rights that limit downstream use of a patented product or method is much more difficult than relying upon the operation of law; hence, the issue presented in this case. The Supreme Court held that its ruling applied to “method patents” as well as utility patents. And, the exhaustion doctrine extends to include the sale of products that that do not fully practice the…

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Rambus Court: "Price Raising Deception" Not Competitive Harm

May 22, 2008

The “Rambus litigation” in all its many permutations — Justice Department investigation, FTC proceedings and multiple civil cases — has been documented and commented upon widely. For a recap see Andy Updegrove’s article here. At the heart of the legal controversy is the allegation that during the 1990s Rambus, the owner of key DRAM patents or pending patents that solved the CPU-memory chip “bottleneck” problem, failed to disclose these patents to JEDEC, an important standards-setting organization (“SSO”) to which Rambus belonged. JEDEC, uninformed of the existence of these patents, incorporated the Rambus technology in its standards, which were then widely adopted in the memory chip market. Because Rambus withheld disclosure of its patents, JEDEC did not have the opportunity to exercise either of the two options open to it when a member disclosed proprietary technology: either choose another technology or negotiate industry-wide favorable licensing terms as a condition of adoption of the standard (so-called “reasonable and non-discriminatory” license fees, or”RAND” royalties). RAND royalties are negotiated and agreed-upon ex ante, that is, before the technology owner’s IP is adopted, and therefore before the technology owner acquires market power by reason of the adoption. By the time Rambus announced its patents and began demanding royalties (and filing patent infringement suits against companies that refused to pay royalties), Rambus had achieved a technical “lock-in” that made it difficult for the memory chip industry…

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A Postcript on EDtTx

May 6, 2008

A postcript on my last posting regarding the so-called “rocket docket” in the Eastern District of Texas. Our firm is counsel for a client in a patent suit filed in Marshall, Texas (the very heart of darkness for patent defendants, some would say) on November 2, 2007. To date (more than six months later), the Court has yet to schedule the initial case management conference which, under the local patent rules, is the “kick off” event for patent cases in EDtTx. To date, there has been almost no activity in the case apart from the filing of answers and a motion to dismiss (not yet acted on) by one of the defendants.

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Popping A Bubble in Texas

May 6, 2008

“a renegade jurisdiction” Justice Antonin Scalia, referring to Marshall, Texas, during oral argument in eBay v. Mercexchange ______________________ There are all kinds of bubbles – stocks, commodities, housing, tulip bulbs, and even litigation. The Eastern District of Texas (EDtTx) has been the scene of a patent law bubble for the last seven years. However, like all bubbles, it can’t last forever, and it’s only a matter of time before this one pops. The patent litigation history of EDtTx and the causa sine qua non of its popularity in with the plaintiff’s patent bar, Judge T. John Ward, are described in detail is an excellent article in the March issue of the American Lawyer. The article, titled “Taming Texas” and written by Nate Raymond, describes how Judge Ward nurtured the patent practice in Texas with a “rocket docket” and the support of pro-plaintiff jurors who are strongly partial to the protection of property rights. Among the highlights of the story: As of 2007, there had not been a defense win in a patent infringement case the district in three years. From 2001 to mid-2006 plaintiffs had won 90% of the district’s patent trials. The flood of patent cases in EDtTx has created an economic boom in the services industries (hotels, restaurants), and of course in the legal profession. Many lawyers who formerly focused on “PI” (personal injury) now focus on “IP”…

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Patent Reexamination Used to Stall Patent Enforcement

April 25, 2008

Here’s a link to an interesting article in the May 5, 2008 issue of Forbes, that highlights the use of anonymous, ex parte requests for reexamination of issued patents to the Patent Office. The result of a reexamination is to stall enforcement of the patent. The article highlights the plight of Anthony Brown, a lawyer who purchased the patent for compression of an electronic file for transmission over a communications line (think JPEG, this ubiquitous). Before Brown purchased this patent it had laid dormant (the fate of the vast majority of issued patents). After Brown purchased the patent and began a licensing/enforcement program – “A petition filed in 2000 by parties unknown asked the U.S. Patent & Trademark Office to reexamine whether the processes the patent described were novel enough to deserve a patent. The feds agreed to the review, a common practice if the questions raised seem substantial. The catch is that during the review the holder of the patent can’t demand licensing fees, and the patent’s life doesn’t get extended accordingly. The reexam of the JPEG patent lasted seven years” After the patent survived that challenge, Brown hit his next roadblock – “But last year saw yet another anonymous challenge. This one was filed by Chicago patent attorney Vernon Francissen, who declines to identify his client. Francissen suggested the JPEG patent’s current version had slipped through an overburdened…

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EDTex Giveth, CAFC Taketh Away

April 23, 2008

One of the largest jury verdicts in the notoriously plaintiff- friendly Federal District Court for the Eastern District of Texas was the June 2006 $79 million jury award, enhanced for wilfulnes by $25 million by U.S. District Judge Ron Clark in the case of Finisar Corporation v. DirectTV. (Note: Texas judges often have nicknames as their legal first names. It’s a Texas thing. If he were Massachusetts bred, he’d be Ronald Harrison Clark, III). In addition to this award, the judge refused Finisar a permanent injunction (applying the USSC eBay decision), but ordered DirectTV to pay a compulsory license of $1.60/set-top box until expiration of Finsar’s patent. This judgment is no more. On April 18th the Court of Appeals for the Federal Circuit held that Judge Clark had misconstrued the term “downloading into a memory storage device.” You would think that such a simple term would be easy to construe, but apparently that wasn’t the case in Beaumont, Texas. Result: infringement verdict of over $104 million (not including interest) vacated, case remanded for a new trial. In addition to correcting the district court on the construction of the “memory storage” term, the Federal Circuit held that one of Finisar’s patent claims had been anticipated by prior art, and therefore was invalid. Moreover, the Federal Circuit ordered the district court to reconsider its holding of non-obviousness with respect to the surviving…

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"A Million Here, A Million There, and Pretty Soon …." Judge Harrington Awards $10 Million in Attorney's Fees in Medtronic Patent Litigation

February 26, 2008

The Patent Statute states: The court in exceptional cases may award reasonable attorney fees to the prevailing party. 35 U.S.C. 285. While finding no “willfulness” in the underlying infringment, Judge Harrington has imposed attorney’s fees of $10 million based on Medtronic’s trial conduct in the long-running Medtronic/Depuy Spine patent infringement litigation. Specifically, Judge Harrington concluded that Medtronic’s lawyers attempted to “mislead and confuse the jury in a manner inconsistent with the patent claim construction required by a decision of the Court of Appeals for the Federal Circuit (linked to above). Judge Harrington imposed this sanction under the patent statute and the court’s inherent power. However, context is everything. Believe it or not, this amount represents only 15% of plainitiff’s attorney’s fees during one phase the case (do the math – (15%x = $10 million)). And, the liability judgement against Medtronics was $226 million. But, still, $10 million isn’t chump change, even to Medtronics. Can you spell a-p-p-e-a-l? In fact, the whole kit and caboodle (judgment, attorney’s fees, and more), has been appealed. Click here to read Judge Harrington’s decision.

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It's Difficult to Get a Preliminary Injunction in a Patent Infringement Case (understatement)

February 20, 2008

When you can prove that you likely are the victim of copyright or trademark infringement, or trade secret misappropriation, you have a good shot at getting a preliminary injunction (if you can afford the bond). That’s because there is a legal “presumption” of irreparable harm associated with these types of IP claims. Prove likelihood of success and you are well on your way to the promised land of “irreparable harm.” But, this is not true in patent cases. It’s quite difficult to get a preliminary injunction in a patent infringement case. Its always been hard, and its getting harder. After all, in 2006 the Supreme Court issued a ruling the result of which is that injunctions are far from a sure thing, even if you win a patent infringement case on the full merits (for example, after trial). eBay v. MercExchange [link]. Many courts (although not the Federal Circuit Court of Appeals, which holds almost all of the big mojo when it comes to patent matters, trumpted only by SCOTUS), has not explicitly held that MercExchange applies to preliminary injunctions, but it would be illogical to conclude the holding in that case does not apply in the context of preliminary injunctions, and a number of district courts have so held. Printguard, Inc. recently discovered how hard it is to get a preliminary injunction in a patent infringement case in a…

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So, What Does Chief Justice Roberts "Really" Think of the U.S. Patent Office?

January 18, 2008

Question by C. J. Roberts at oral argument in Quanta v. LG, earlier this week: 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. (Transcript, p. 49, January 16, 2008). The issue in Quanta is whether the licensed sale of components used in a patented invention exhausts the patent owner’s patent rights. The comment by Chief Justice Roberts was a reference to the Supreme Court’s decision in KSR Int’l v. Teleflex, Inc., which has been widely understood to have made it more difficult to obtain new patents and defend existing patents. The Patent Office has been widely criticized for issuing unworthy patents. Do you think anyone there is paying attention?

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