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

Yesterday’s decision in Quanta Computer, Inc. v. LG Electronics, Inc. is linked below (via scribd.com, 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 invention when the products include essential features of the patent and the “reasonable and intended use” of the product is to practice to patent.

For a more detailed treatment of this case, see this discussion at the Patent Prospector.

Read this document on Scribd: Quanta Computer v LG (patent exhaustion)

The Agony of Inadvertant Disclosure

Sometimes being a lawyer is like being an airline pilot – hundreds of hours of tedium, interrupted by moments of sheer panic.

In the case of lawyers, the panic can hit from a number of sources: a missed court filing date or statute of limitations, the discovery during trial that your client has failed to produce key documents during discovery, the failure to discover a controlling legal precedent, the realization that a client has lied to you, or “inadvertant disclosure.”

To lawyers, the term “inadvertant disclosure” means that during discovery documents protected by attorney-client privilege or work-product immunity have been produced to the other side, by mistake. You (the disclosing attorney) usually learn of this when the opposing lawyer calls you up to gloat (under the guise of politely informing you of the incident, which is required under the ethical rules). It’s enough to ruin any lawyers day: you demand (or beg for) the return of the documents; the opposing lawyer refuses; you file a motion with the court asking for an order that the documents be returned to you (after that embarrassing call to your client); the other side opposes your motion; and finally, the judge writes a decision ruling one way or the other on your request for return, but in either case informing the world of what a sloppy or incompetent lawyer you were to have produced the documents in the first place.

Of course, a whole body of case law has emerged establishing legal tests for whether documents should be returned in these situations. To make things worse, different courts around the nation have created different tests. To make matter much worse ESI (electronically stored information) has made the whole process far more complicated than in the “old days,” when lawyers or paralegals could simply look through hard copy before production, and be reasonably confident they had caught any privileged documents.

The risks and technical issues associated with privilege review of ESI are illustrated by a May 29, 2008 decision by a judge in the Federal District Court for the District of Maryland. In this case, Victor Stanley, Inc. v. Creative Pipe, Inc., a large quantity of ESI was produced by the defendant. The defendant tried to weed out privileged documents by using a “key word” search. For example, the names of the defendant’s attorneys were searched, in the hope that all communications with defendant’s counsel would be located and the items removed.

In this case the keyword search method failed, and the judge ruled that keyword searching for privileged and work-product documents was not
sufficient to avoid a “waiver.” The decision (linked below via scribd.com) is quite detailed, and provides a good analysis of the risks associated with inadvertent production of ESI based on a keyword search failure.

Of course, there is a potential solution to this problem that ESI savvy lawyers tend to use: in the protective order filed with the Court early in the case (or separately if there is no protective order), include a “clawback” provision that provides that if either side engages in inadvertent production, the waiver doctrine will not apply and the documents will be returned. Especially at the beginning of a case, when the risk of inadvertent production may be viewed as equal by both sides, the lawyers on each side may conclude that it’s in their best interests to agree to clawback.

Here is a sample “clawback” provision:

1. Inadvertent or Unintentional Production

(a) The inadvertent or unintentional production of Discovery Materials without a confidentiality designation shall not be deemed a waiver in whole or in part of a party’s claim of confidential treatment under the terms of this Order. Any document that initially is produced without bearing a confidentiality designation may later be so designated, with respect to future disclosure by the Producing Party, and the receiving party shall make all reasonable efforts to retrieve all copies, if any, of such document disclosed to persons other than those authorized in Sections 6 through 8 hereof and to prevent further use or disclosure of confidential information contained therein by such persons.

(b) If information subject to a claim of attorney-client privilege, attorney work product or any other legal privilege protecting information from discovery is inadvertently produced to a party or parties, such production shall in no way prejudice or otherwise constitute a waiver of, or estoppel as to, any claim of privilege, work product or other ground for withholding production to which the producing party or other person otherwise would be entitled. If a claim of inadvertent production is made pursuant to this Section, with respect to information then in the custody of another party, such party promptly shall return to the claiming party or person that material and all copies or reproductions thereof as to which the claim of inadvertent production has been made, shall destroy all notes or other work product reflecting the contents of such material, and shall delete such material from any litigation-support or other database. The provisions of this Section shall not be deemed to prevent any party from seeking an order compelling production of any document or information, including documents or information contained in documents that are returned as a result of a claim of inadvertent production.

Link to the case: Victor Stanley, Inc. v. Creative Pipe, Inc.

Yoko Ono, Ben Stein and Copyright Fair Use

Here is a copy (below) of the June 2, 2008 decision of Judge Sidley Stein in the Southern District of New York, holding that a 15 second snippet of the Lennon song “Imagine,” within the feature length movie “Expelled“, is “fair use” under U.S. copyright law. In other words, the film makers did not infringe Yoko Ono’s copyright rights. “Expelled” is a documentary that deals with “intelligent design” (vs. Darwinism, Creationism, ect.), and is narrated by Ben Stein of Ferris Buehler fame (presumably no relation to Judge Stein, but bad luck of the draw for Yoko Ono nevertheless).

The “fair use” doctrine is an exception to the legal rights of U.S.copyright owners. It permits the use and publication, without permission, of parts of the work for purposes of “criticism, comment, news reporting, teaching … scholarship, or research.” A large body of judge-made law has built up interpreting and applying this doctrine.

The court’s ruling on fair use is no surprise, and applies “black-letter” fair use law to undisputed facts. Any outcome other than a ruling in favor of fair use would have been a surprise. For more on fair use click here.

Read this doc on Scribd: Lennon v Premise Media

Are Judges Intuitive or Analytical? Ruminations on the Cognitive Style of Judges

The best aspect of law school is the subordination of math. Anon

_________________________

Are judges good at math? Foolish question, of course. Since many lawyers have a math phobia, it follows that many judges would, as well.

Nevertheless, a group of academics gave a three-question quiz to a group of several hundred trial judges. The purpose of the quiz was to determine whether the judges’ style of cognitive reflection, as a group, was “intuitive” (i.e., bad) or “analytical (i.e. “good”) decision makers.

Here are the three questions. Each one is designed to have you “jump” to a quick, intuitive wrong answer, whereas analytical reflection will lead to the non-obvious right answer.

(1) A bat and a ball cost $1.10 in total. The bat costs $1.00 more than the ball. How much does the ball cost? _____cents

(2) If it takes 5 machines 5 minutes to make 5 widgets, how long would it take 100 machines to make 100 widgets? _____minutes

(3) In a lake, there is a patch of lily pads. Every day, the patch doubles in size. If it takes 48 days for the patch to cover the entire lake, how long would it take for the patch to cover half of the lake? _____days.

Not surprisingly, the judges failed miserably. 31% got all three questions wrong, and only 15% got all three right. Yes, for the most part lawyers and judges are bad at math. Does that mean they are intuitive and not analytical? I don’t think so. Ask the question in the wrong language, and you are sure to get the wrong answer. I think judges and lawyers are particularly good at an (arguably) more complex, but certainly different, kind of analytical thinking that may not carry over into straight logic or mathematics.

Here is a link to a download site for the study: Blinking on the Bench: How Judges Decide Cases

Oh, and if you’ve taken the test yourself, click here to see how you did. If you’re a lawyer and you can’t figure out how these answers are correct (and your “intuitive” answers were wrong), you should be very glad that you went to law school.