Intellectual Property Directions

In the World Series, errors can hurt you; at the PTO, apparently, errors don’t count, at least so it seems from a recent court decision. In the case, a patent applicant was able to resurrect its application from abandonment even though the governing statute appeared to prohibit it. When an alleged infringer claimed the patent was invalid because of this improper revival the court said “improper revival…may not be raised as a defense in an action involving the validity or infringement of a patent.” Thus, the patentee got to keep the benefit of the PTO procedural error.

In this particular case, Aristocrat Technologies Australia  (ATA) missed its national filing fee deadline here in the US. Although deemed abandoned by statute, Aristocrat convinced the PTO to revive the application, saying the missed payment was “unintentional”. The statute only allows revival if the missed payment was “unavoidable”. Aristocrat later sued International Game Technologies (ITG) for infringement.

ITG successfully defended itself in district court on the basis that the application had been improperly revived from abandonment. However, on appeal to the Federal Circuit (CAFC), ATA won a reversal.

The CAFC ruled that such a procedural error at the PTO was not one of the statutory grounds for an infringement defense and to allow such a defense would open a floodgate of infringers fine-tooth-combing through PTO actions that have nothing to do with the merits of the case, looking for non-substantive errors on which to get off the infringement hook.

The CAFC pointed out that this ruling was not in contradiction to a 1995 ruling [Quantum Corp. v. Rodime, PLC] that also involved a PTO error, where it said that the statutory list of defenses was non-exclusive. The difference between that ruling (where they declared the patent invalid) and this one (where they said the patent was still valid) is the nature of the PTO errors.

In this case, Aristocrat got no benefit from missing the payment date but in Quantum the patentee was improperly allowed to broaden the scope of its claims during reexamination. Had the patent not been declared invalid, other patentees might try to broaden their claims during reexamination on the off chance the PTO would err again. Clearly broadening a patent’s claims is a substantive error.

The message from the Court to alleged infringers is that nobody likes a tattle tale. PTO errors that don’t affect the substance of your infringement will not be listened to. Only point out PTO errors that effect the substance of the case.

So, like the customer who gets to keep the little extra change a clerk hands him, Aristocrat got to keep its patent because the PTO didn’t catch their own error in time.

One of the biggest knocks on the the patent system is that it has evolved into a system that inhibits innovation rather than fostering it as the Constitution intended. Consider the dual edge sword of performing a prior art search. If you don’t do one, you may invest in developing a product only to be shut down when it infringes someone’s patent; if you do one, find a potentially applicable patent but proceed anyway, you could be found liable for treble damages for willful infringement. A formal opinion from a patent attorney was almost a mandatory “insurance” policy against these treble damages.

I recently attended an “Executive Briefing” at the local office of Foley & Lardner on the topic of last year’s Seagate decision - a decision that seems to have brought some relief to companies building products similar to a patented product.

Before Seagate it seemed the only way to prove that you were not acting with disregard for others’ rights was to pay significant sums of money to a patent attorney to get a thick document telling you why you likely would not be infringing. That was a document you could point to as proof you fulfilled your “duty of care.” For a small company you might be kissing your year’s profit goodbye.

In the Seagate decision, the rules changed. Now there is a two-step test.

Step 1: the patentee (not the infringer) must show that you acted despite an “objectively high likelihood” that you were infringing a valid patent. If you and your attorney can point to reasonably plausible defenses then there is no “objectively high likelihood” and you’re off the hook for willfulness.

Step 2: the patentee (again, not the infringer) must demonstrate that the objectively high risk was obvious to or demonstrably known by the infringer.

So what does that mean to most of us? Although not yet tested in the courts it would appear to me that a heart-to-heart discussion with your attorney about any potentially blocking patents you turn up would allow you to determine if there are “reasonable”, “plausible” or “non-frivolous” arguments to support non-infringement or invalidity. That discussion is likely to cost less than the opinions of pre-Seagate. Of course, discuss this strategy with your attorney.

What’s your opinion on opinions?

After working hard to get your trade show booth ready, walking into the show and seeing a competitor displaying an infringing (in your opinion) product must be enough to make your blood boil. For Theresa Miale it was just too much to contain so she confronted her competitor, the Campbell Pet Company (CPC). Now she finds she has to defend her patent on their home turf, at additional cost and inconvenience.

Ms. Miale’s problems started  when she participated in the trade show component of a Seattle convention of veterinarians, demonstrating and selling her pet stretcher products, used for transporting injured pets. At the show she observed the products of CPC and felt they infringed one or both of her US patents. Not content to simply gather data on CPC’s products and ask her attorney to send an appropriate warning letter, Ms Miale (and her mother!) apparently

…confronted several of Campbell’s employees who were attending the convention and accused them of infringing the Miale patents. According to the Campbell employees, Ms. Miale said that she had contacted her patent attorney and threatened Campbell with patent litigation, stating that patent attorneys and litigation were expensive. The Campbell employees further alleged that the convention manager told them that Ms. Miale and her mother had asked that the Campbell display be removed from the convention because it infringed Ms. Miale’s patents, but that the convention manager had declined to do so on the ground that she was not qualified to evaluate a claim of patent infringement. The Campbell employees also alleged that a customer informed them that Ms. Miale and her mother were “bad mouthing” Campbell and its products to Campbell’s customers, and referred to Campbell as “copiers of their patent.”

After the trade show, Ty-Lift (Ms. Miale’s California based company) sent a letter to CPC claiming infringement, to which CPC responded by filing the for the “standard” declaratory judgement of non-infringement and and invalidity in its home court, the Western District of Washington. Needless to say, Ty-Lift moved to dismiss CPC’s suit on the basis that the Washington court did not have jurisdiction over a California entity that did very little business in Washington.

To make a long story short, Ty-Lift would have prevailed and been able to defend its IP rights in California had only Ms. Miale been able to let the legal system take its normal course. As the Court of Appeals for the Federal Circuit said:

“[p]rinciples of fair play and substantial justice afford a patentee sufficient latitude to inform others of its patent rights without subjecting itself to jurisdiction in a foreign forum.” and that “the sending of an infringement letter, without more, is insufficient to satisfy the requirements of due process when exercising jurisdiction over an out-of-state patentee.”

But instead, perhaps spurred on by an overly protective mother hen,

… Ms. Miale’s actions [were] more than attempts to inform Campbell of suspected infringement. … Ms. Miale attempted to have Campbell’s allegedly infringing products removed from the convention and … told Campbell’s customers that Campbell’s products were infringing. Of critical importance to the issue of personal jurisdiction, Ms. Miale’s attempts at “extra-judicial patent enforcement” were targeted at Campbell’s business activities in Washington… Those efforts go beyond simply informing the accused infringer of the patentee’s allegations of infringement.

So, before you try to do your own “extra-judicial patent enforcement” you’d best pick up your cell and phone home, or at least phone your patent attorney and ask him or her to handle the matter for you.

If you are like me and maybe 28, 999,999 other US sports fans, you probably were watching the men’s marathon the other night from Beijing. Through the miracle of HDTV you could see the look of exhaustion on the faces of all but the very top finishers. Like most of the runners, patents get exhausted too.

Just as a runner’s legs get exhausted when their owner tries to push them too far, so too a patent is exhausted when the owner tries to claim rights beyond the first sale of the patented invention. In a June 2008 decision, the Supreme Court extended this concept even further, explicitly extending it to methods claims as well as apparatus claims.

The basic concept of patent exhaustion is straight forward; if you, the patent owner, authorize the sale of a product incorporating your patented invention, you no longer have control of the further use or sale of that product. While there are complicating details, the logic of the doctrine is clear; once you’ve gain the benefit of your patent “monopoly” by selling the patented product you’re not allowed to double-dip by, for example, collecting another royalty when your customer resells your product as part of his product.

The particular case involved LG Electronics patents that had been licensed to Intel, who in turn made chipsets that were sold to Quanta Computer. LG had stipulated in its license to Intel that the chipsets were NOT to be combined with non-Intel parts and required Intel to inform chipset buyers of that requirement, which they did. However, LG did not require Intel to explicitly license each purchase with that restriction.

When Quanta combined the Intel chipsets with non-Intel parts, LG sued Quanta. The case progressed through both district court and the CAFC, ending up in the Supreme Court. That Court decided that, by virtue of its license to Intel, LG had authorized the sale of the chipsets to Quanta and that the principle of patent exhaustion applied to both the apparatus and the methods claims in LG’s patents. That the lower courts had felt the principle did NOT apply to the methods claims is hard to understand; however, the Supreme Court has now said explicitly that it does apply.

So if your goal is to have your patent go the extra mile for you, you will have to write explicit licenses to cover your expectations covering the secondary sales and uses of your patent, both apparatus claims and method claims.