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Posts Tagged ‘U.S. Supreme Court’

Liability For Inducing Patent Infringement Arises Only With Proof Of Direct Infringement

Friday, June 20th, 2014

The U.S. Supreme Court held in Limelight Networks Inc. v. Akamai Technologies Inc., Case No. 12-786 (June 2, 2014) (available here) that a defendant can only be held liable for inducing infringement of a patent under 35 U. S. C. §271(b) when another is found to have directly infringed the patent under §271(a) or any other statutory provision.  The Court left open the issue of divided infringement, when one party does some steps in a method patent claim and another party does other steps in the claim, but it did comment on divided infringement ruling in Muniauction, Inc. v. Thomson Corp., 532 F. 3d 1318 (2008).

The facts highlight the patent inducement issue addressed by the Court.  Massachusetts Institute of Technology (MIT) owns the Patent No. 6,108,703 (’703 patent) for a method of delivering electronic data using a “content delivery network,” or “CDN.” Akamai Technologies, Inc., is MIT’s exclusive licensee. Akamai maintains a system of geographically distributed servers. Akamai’s customers are “content providers” who need to serve-up large files, such as video and music files, to end-users.  Under contract, Akamai delivers web site content to individual Internet users. The ‘703 patent claims require that files on Akamai’s servers be tagged, stored and accessed by Internet users. By aggregating the data demands of multiple content providers with differing peak usage patterns and serving that content from multiple servers in multiple locations, as well as by delivering content from servers located in the same geographic area as the users who are attempting to access it, Akamai is able to increase the speed with which Internet users access the content of its customers’ web sites.

Limelight Networks, Inc., also operates a CDN and carries out several of the steps claimed in the ‘703 patent. But instead of tagging those components of its customers’ web sites that it intends to store on Limelight servers (a step included in the ‘703 patent), Limelight requires its customers to do their own tagging. Akamai claims that Limelight “provides instructions and offers technical assistance” to its customers regarding how to tag, 629 F. 3d 1311, 1321 (CA Fed. 2010).  “[T]he record is undisputed that Limelight does not tag the components to be stored on its servers.”

In 2008, the Federal Circuit decided Muniauction, Inc. v. Thomson Corp., 532 F. 3d 1318 (2008) wherein the court rejected a claim that the defendant’s method, involving bidding on financial instruments using a computer system, directly infringed the plaintiff’s patent. The defendant performed some of the steps of the patented method, and its customers, to whom the defendant gave access to its system along with instructions on the use of the system, performed the remaining steps.

The Federal Circuit court held that the defendant in Muniauction was not liable for direct infringement because Muniauction did not exercise control or direction over its customers’ performance of those steps of the patent that the defendant itself did not perform.

Although the jury found that Limelight infringed the ‘703 patent, the trial court granted Limelight’s motion for judgment as a matter of law (JMOL) based upon the Muniauction decision.  An initial Federal Circuit decision  affirmed the JMOL, explaining that a defendant that does not itself undertake all of a patent’s steps can be liable for direct infringement only “when there is an agency relationship between the parties who perform the method steps or when one party is contractually obligated to the other to perform the steps.” 629 F. 3d, at 1320.  A subsequent en banc review by the Federal Circuit reversed the JMOL because the evidence could support Akamai’s case on a theory of induced infringement.   The en banc court did not revisit the issue of divided infringement.

Per the Supreme Court, “Our case law leaves no doubt that inducement liability may arise ‘if, but only if, [there is] … direct infringement.’ Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U. S 336, 341 (1961).” opn. pg. 5.

“A method patent claims a number of steps; under this Court’s case law, the patent is not infringed unless all the steps are carried out. See, e.g., Aro, supra, at 344 (a ‘patent covers only the totality of the elements in the claim and . . . no element, separately viewed, is within the grant’). This principle follows ineluctably from what a patent is: the conferral of rights in a particular claimed set of elements. ‘Each element contained in a patent claim is deemed material to defining the scope of the patented invention,’ Warner-Jenkinson Co. v. Hilton Davis Chemical Co., 520 U. S. 17, 29 (1997), and a patentee’s rights extend only to the claimed combination of elements, and no further.” opn. pg. 5.

“Assuming without deciding that the Federal Circuit’s holding in Muniauction is correct, there has simply been no infringement of the method in which respondents have staked out an interest, because the performance of all the patent’s steps is not attributable to any one person. And, as both the Federal Circuit and respondents admit, where there has been no direct infringement, there can be no inducement of infringement under §271(b).”  opn. pg. 6.

“In both Deepsouth Packing Co. v. Laitram Corp., 406 U. S. 518 (1972), and this case, the conduct that the defendant induced or contributed to would have been infringing if committed in altered circumstances: in Deepsouth if the machines had been assembled in the United States, see id., at 526, and in this case if performance of all of the claimed steps had been attributable to the same person.” opn. pg. 7.

“Muniauction (which, again, we assume to be correct) instructs that a method patent is not directly infringed and the patentee’s interest is thus not violated-unless a single actor can be held responsible for the performance of all steps of the patent. Because Limelight did not undertake all steps of the ‘703 patent and cannot otherwise be held responsible for all those steps, respondents’ rights have not been violated.”  opn. pg. 8.

“Finally, respondents, like the Federal Circuit, criticize our interpretation of §271(b) as permitting a would-be infringer to evade liability by dividing performance of a method patent’s steps with another whom the defendant neither directs nor controls. We acknowledge this concern. Any such anomaly, however, would result from the Federal Circuit’s interpretation of §271(a) in Muniauction. A desire to avoid Muniauction’s natural consequences does not justify fundamentally altering the rules of inducement liability.”  opn. pg. 10.

Supreme Court Lowers Bar For Prevailing Party In Patent Litigation To Collect Attorneys Fees

Tuesday, June 17th, 2014

The U.S. Supreme Court, in Octane Fitness LLC. v. Icon Health & Fitness Inc., case no. 12-1184 (Apr. 29, 2014) (available here), overturned a decade of Federal Circuit law by redefining when a case is exceptional under the Patent Act.  A prevailing party in patent litigation may obtain its attorneys fees if the “case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.”  opn. pg. 7-8.

“Section 285 of the Patent Act authorizes a district court award attorney’s fees in patent litigation. It provides, in its entirety, that ‘[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.’ 35 U.S.C. §285. In Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F. 3d 1378, 1381 (2005), the United States Court of Appeals for the Federal Circuit held that ‘[a] case may be deemed exceptional’ under §285 only in two limited circumstances: ‘’when there has been some material inappropriate conduct,’ or when the litigation is both ‘’brought in subjective bad faith’ and ‘objectively baseless.’”   opn. pg. 1.

The trial court and later the Federal Circuit Court had determined that the accused infringer Octane, who won the infringement action below, could not show that (i) ICON’s patent infringement claim was objectively baseless or (ii) ICON had brought the action in subjective bad faith.

The Supreme Court found that the Federal Circuit had “abandoned” the “holistic, equitable approach” when it issued its Brooks Furniture decision.  In Brooks, the trial courts were to find material inappropriate conduct such as willful infringement, fraud or inequitable conduct.

The Supreme Court held “that an ‘exceptional’ case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.”  opn. pg. 7-8.

As for the Federal Circuit’s concepts that exceptional case findings be based upon litigation which is objectively baseless and brought in subjective bad faith, the Supreme Court pointed to Noxell Corp. v. Firehouse No. 1 Bar -B-Que Restaurant, 771 F.2d 521 (CADC 1985).  In Noxell, the appeals court stated “we think it fair to assume that Congress did not intend rigidly to limit recovery of fees by a [Lanham Act] defendant to the rare case in which a court finds that the plaintiff ‘acted in bad faith, vexatiously, wantonly, or for oppressive reasons’ …. Something less than ‘bad faith,’ we believe, suffices to mark a case as ‘exceptional”‘.

Lastly, the Supreme Court lowered the evidentiary standard to find exceptional case.  “[W]e reject the Federal Circuit’s requirement that patent litigants establish their entitlement to fees under §285 by ‘clear and convincing evidence,’ Brooks Furniture, 393 F. 3d, at 1382.  Section 285 demands a simple discretionary inquiry; it imposes no specific evidentiary burden, much less such a high one.”

As a practice note, counsel for patent owners and accused infringers should be wary of the new, lower standard for attorneys fees.

DNA Not Patentable Subject Matter – Synthetically Created DNA (cDNA) Is A Patentable Subject

Tuesday, June 25th, 2013

The U.S. Supreme Court, in a critical ruling, held that the naturally occurring segments of deoxyribonucleic acid (DNA) in the human body (and presumably in other living organisms) is not patent eligible subject matter under 35 U. S. C. §101 by virtue of its isolation from the rest of the human genome. However, synthetically created DNA known as complementary DNA (cDNA), which contains the same protein-coding information found in a segment of natural DNA but omits portions within the DNA segment that do not code for proteins is patent eligible subject matter. Assoc. for Molecular Pathology v. Myriad Genetics, Inc., Case No. 12-398 (S. Ct. June 13, 2013) (available here).  “[W]e hold that a naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated, but that cDNA is patent eligible because it is not naturally occurring.”

Myriad discovered the precise location and sequence of what are now known as the BRCAI and BRCA2 genes which can be used to predict a certain type of breast cancer in women.  Myriad identified the exact location of the BRCA1 and BRCA2 genes on chromosomes 17 and 13. Chromosome 17 has approximately 80 million nucleotides, and chromosome 13 has approximately 114 million.  Within those chromosomes, the BRCA1 and BRCA2 genes are each about 80,000 nucleotides long. If just exons are counted, the BRCA1 gene is only about 5,500 nucleotides long; for the BRCA2 gene, that number is about 10,200.

Myriad obtained a patent on the BRCAI and BRCA2 genes and built a lucrative and, to some, a controversial business testing for these genes.  Isolation is necessary to conduct such genetic testing, and Myriad was not the only entity to offer BRCA testing after it discovered the genes.

“We have ‘long held that this provision contains an important implicit exception [:] Laws of nature, natural phenomena, and abstract ideas are not patentable.’ Mayo, 566 U. S., at _ (slip op., at 1).   Rather, ‘they are the basic tools of scientific and technological work’ that lie beyond the domain of patent protection.” Id., at _ (slip op., at 2).

“As we have recognized before, patent protection strikes a delicate balance between creating ‘incentives that lead to creation, invention, and discovery’ and ‘imped[ing] the flow of information that might permit, indeed spur, invention.’” Id., at _ (slip op., at 23).  “Instead, Myriad’s principal contribution was uncovering the precise location and genetic sequence of the BRCA1 and BRCA2 genes within chromosomes 17 and 13. The question is whether this renders the genes patentable.”

“In this case, by contrast, Myriad did not create anything. To be sure, it found an important and useful gene, but separating that gene from its surrounding genetic material is not an act of invention.”

“Myriad found the location of the BRCA1 and BRCA2 genes, but that discovery, by itself, does not render the BRCA genes ‘new … composition[s] of matter,’ §101, that are patent eligible.”  Myriad explained that the location of the gene was unknown until Myriad found it among the approximately eight million nucleotide pairs contained in a subpart of chromosome 17.

“As already explained, creation of a cDNA sequence from mRNA results in an exons-only molecule that is not naturally occurring.”  Therefore, cDNA is patentable since it is created by man.

Supreme Court Extends Reach Of The First Sale Doctrine Under The Copyright Act

Wednesday, March 20th, 2013

The U.S. Supreme Court held that the first sale doctrine under the Copyright Act extends to goods lawfully manufactured abroad and purchased in the United States.  Kirtsaeng v. John Wiley & Sons, Inc., Case No. 11-697 (U.S. March 19, 2013) (available here).  John Wiley & Sons, Inc. (“Wiley”) publishes academic textbooks and often assigns its rights to publish, print, and sell foreign editions of the books to its wholly owned foreign subsidiary (“Wiley Asia”).  Wiley Asia’s books have a warning on them that they are not to be brought into the United States without permission.  Supap Kirtsaeng moved from Thailand to the United States to study mathematics, and purchased English textbooks in Thailand for a lower price than their U.S. counterparts.  Kirtsaeng then sold the books and kept the profits.  Wiley sued, claiming the unauthorized importation and resale of the textbooks was infringing Wiley’s right to distribute under § 106(3) of the Copyright Act and infringed on § 602’s import prohibition.  17 U.S.C.  §§ 106(3), 602.  Kirtsaeng’s defense was that his actions were protected by the “first sale” doctrine under § 109 of the Copyright Act.  The lower court rejected his defense, stating that the first sale doctrine does not apply to goods produced abroad.  At the jury trial, Kirtsaeng was found have willfully infringed on Wiley’s U.S. copyrights.  The appellate court affirmed, finding that §109(a)’s “lawfully made under this title” language implied that the first sale doctrine did not apply to copies of U.S. copyrighted works manufactured abroad.  The Supreme Court reversed, holding that the first sale doctrine applies to copies of a copyrighted work lawfully made abroad.

§ 106 of the Copyright Act lays out the exclusive rights a copyright owner has over the copyrighted work, including the exclusive right to distribute copies to the public.  17 U. S. C. §106(3).  The Copyright Act places limitations on these exclusive rights.  The statutory “first sale” doctrine provides: “Notwithstanding the provisions of section 106(3) [for exclusive distribution rights], the owner of a particular copy or phonorecord lawfully made under this title . . . is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.”  17 U. S. C. §109(a).  This means that once a copyright owner lawfully sells a copy of the copyrighted work, the purchaser of that copy, and subsequent owners, can dispose of that copy as they wish.  However, §602(a)(1) states that unauthorized importation into the U.S. of copies of a work that were acquired outside of the U.S. is an infringement of the copyright owner’s exclusive right to distribute.  Thus, §602 refers directly to §106(3).  In an older Supreme Court case, the Court held that §602(a)(1)’s reference to §106(3)’s exclusive distribution right incorporates the limitations of §106(3), including the first sale doctrine of §109.  Quality King Distributors, Inc. v. L’anza Research Int’l, Inc., 523 U. S. 135, 145 (1998).  However, the L’anza decision considered a copy that was manufactured in the U.S. and purchased abroad.

The issue before the Supreme Court was whether the first sale doctrine protects a buyer of a copyrighted work lawfully manufactured abroad (whether § 109’s “lawfully made under this title” language creates a geographic limitation on the first sale doctrine).  The Court determined that it did.  “[A] nongeographical interpretation provides each word of the five-word phrase with a distinct purpose. The first two words of the phrase, ‘lawfully made,’ suggest an effort to distinguish those copies that were made lawfully from those that were not, and the last three words, ‘under this title,’ set forth the standard of ‘lawful[ness].’ Thus, the nongeographical reading is simple, it promotes a traditional copyright objective (combatting piracy), and it makes word-by-word linguistic sense.”  Wiley, Slip Op. P. 9.  To support its conclusion, the Court compared § 109(a)’s present language of  “lawfully made under this title” with its predecessor’s  “lawfully obtained” language.  Neither language mentions geography, and Congress had other reasons for editing the language text.

The Court did concede that a non-geographical interpretation would make it nearly impossible for copyright holders to divide foreign and domestic markets.  However, the Court did not see how this theory helped Wiley’s case because nothing in the Copyright Act suggests that a copyright holder is entitled to such a right.  “To the contrary, Congress enacted a copyright law that (through the ‘first sale’ doctrine) limits copyright holders’ ability to divide domestic markets. And that limitation is consistent with antitrust laws that ordinarily forbid market divisions.”  Wiley, Slip Op. P. 32.  As a result, the Court reversed, finding that the first sale doctrine extends to copies of copyrighted materials lawfully manufactured abroad.

Federal Courts Have No Exclusive Jurisdiction Over Patent Malpractice Claims

Thursday, March 7th, 2013

The United States Supreme Court has ruled that state courts, not federal courts, have subject matter jurisdiction over legal malpractice claims arising under federal patent law.  Gunn v. Minton, Case No. 11-1118 (U.S. February 20, 2013) (Minton) (available here).  Vernon Minton created a computer program in the early 1990s to facilitate securities trading known as the Texas Computer Exchange Network (TEXCEN).  Minton hired Jerry Gunn as a patent attorney for a federal patent infringement suit regarding the patented TEXCEN program. However, Minton’s patent was found to be invalid because Minton had leased his interactive securities trading system to a third party in 1995, more than a year before applying for the patent. See U.S.C. § 120.  Minton appealed, arguing that the lease was part of ongoing testing, and therefore was experimental use to the § 102 sale bar.  The appeal was denied.  Minton sued Gunn for legal malpractice, arguing that if the experimental use argument had been raised earlier, then Minton’s patent would not have been invalidated.  At the malpractice trial, the Texas trial court sided with Gunn.  Minton appealed, arguing that federal district courts have exclusive jurisdiction over federal patent infringement malpractice claims under 28 U.S.C. §1338(a) (federal courts have exclusive jurisdiction over cases “arising under any Act of Congress relating to patents”), and that the trial court did not have jurisdiction to hear the case.  The Texas Court of Appeals rejected Minton’s argument, the Texas Supreme Court reversed, but the U.S. Supreme Court determined that 28 U.S.C. §1338(a) did not deprive state courts of subject matter jurisdiction over Minton’s malpractice claim.

Congress gave federal courts exclusive jurisdiction over patent-specific cases, stating that “[n]o State court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents.”  28 U.S.C. §1338(a).  The U.S. Supreme Court had to determine whether Minton’s claim of malpractice arose under any Act of Congress relating to patents.  There are two ways that a case can arise under federal law: (1) when federal law creates the cause of action asserted in the case, or (2) when a state claim raises a federal issue that is actually disputed, substantial, and capable of being resolved in federal court without disrupting the federal-state court balance approved by Congress.  Minton, Slip Op. Pp. 8-9.  Minton’s patent infringement claim arose under federal law because it was authorized under 35 U. S. C. §§271, 281.  However, Minton’s malpractice claim is under state law.  Therefore, the U.S. Supreme Court had to analyze whether the malpractice claim fit the second scenario of how a case arises under federal law.

Under Texas malpractice laws, Minton had to prove, among other things, that Gunn’s failure to raise the experimental use argument earlier in the case was the proximate cause of Minton’s loss in his patent infringement case.  This requires Minton to show that he would have prevailed in his federal patent infringement claim only if Gunn had made the experimental use argument.  Under patent law, experimental use is an exception to the § 102 one-year on sale bar.  As such, the U.S. Supreme Court determined that Minton’s malpractice claim raises a disputed federal issue: whether the experimental use argument would have saved Minton’s patent.  However, the U.S. Supreme Court found that the federal issue in Minton’s malpractice claim was not substantial when looking at the entire federal system.  Minton, Slip Op. Pp. 10-11.

“Here, the federal issue carries no such significance.  Because of the backward-looking nature of a legal malpractice claim, the question is posed in a merely hypothetical sense: If Minton’s lawyers had raised a timely experimental- use argument, would the result in the patent infringement proceeding have been different? No matter how the state courts resolve that hypothetical ‘case within a case,’ it will not change the real-world result of the prior federal patent litigation. Minton’s patent will remain invalid.”  Minton, Slip Op. Pp. 12-13.

The U.S. Supreme Court continued, “[a]s for more novel questions of patent law that may arise for the first time in a state court ‘case within a case,’ they will at some point be decided by a federal court in the context of an actual patent case, with review in the Federal Circuit. If the question arises frequently, it will soon be resolved within the federal system, laying to rest any contrary state court precedent; if it does not arise frequently, it is unlikely to implicate substantial federal interests.”  Minton, Slip Op. P. 13.

The U.S. Supreme Court rejected Minton’s argument that his malpractice claim belonged in federal court because “the possibility that a state court will incorrectly resolve a state claim is not, by itself, enough to trigger the federal courts’ exclusive patent jurisdiction, even if the potential error finds its root in a misunderstanding of patent law.”  Minton, Slip Op. P. 15.  “We have no reason to suppose that Congress—in establishing exclusive federal jurisdiction over patent cases—meant to bar from state courts state legal malpractice claims simply because they require resolution of a hypothetical patent issue.”  Id.

The U.S. Supreme Court concluded that, although the Texas state court would have to answer a question of federal patent law for Minton’s malpractice claim, this answer will not having any lasting effect on future patent claims.

Nike’s Covenant Not To Sue Destroys Declaratory Judgment Counterclaim

Tuesday, January 22nd, 2013

The U.S. Supreme Court has held that defendant’s claim of trademark invalidity of Nike’s registered AIR FORCE 1 sneakers was moot due to Nike’s covenant not to sue defendant Already with respect to Already’s existing footwear and any “colorable imitations” in the future.  Already, LLC d/b/a Yums v. Nike, Inc., Case No. 11-982 (January 9, 2013) (available here).   Nike filed suit against Already for Already’s sneaker designs “Soulja Boys.”  You can see a side-by-side comparison of the two products in the PDF (Already v. Nike-pictures).

Already filed a counterclaim, alleging that Nike’s trademark for AIR FORCE 1 was invalid and seeking a declaratory judgment that the mark was invalid under federal or New York State law.

Eight months after initiating the lawsuit, Nike sent Already a “Covenant Not to Sue,” which stated that Nike would not sue Already or any of its affiliates for any trademark or unfair competition claim based upon Already’s existing designs or future designs that are “colorable imitations” of Already’s current product line.  Nike then moved to dismiss its claims, thereby conforming with the covenant, and moved to dismiss Already’s counterclaim.  The District Court dismissed Already’s counterclaim, and the Second Circuit affirmed on appeal.

A case is moot when the issue in dispute is “no longer embedded in any actual controversy about the plaintiff’s particular legal rights.”  Alvarez v. Smith, 58 U.S. 87, 92 (2009).  In examining Nike’s covenant not to sue, the Supreme Court noted that the simple act of ending the unlawful conduct is not enough to moot a case.  Instead, the Court applied the voluntary cessation test, in which Nike had the burden of showing that “it is absolutely clear the allegedly wrongful behavior could not reasonably be expected to recur.”  Friends of the Earth, Inc. V. Laidlaw Environmental Services (TOC), Inc., 528 U.S. 167, 190 (2000).

With these standards in mind, the Supreme Court examined Nike’s covenant not to sue to assess whether Nike would have a potential claim of trademark or unfair competition against Already in the future.  The Supreme Court quoted the covenant:

“[Nike] unconditionally and irrevocably covenants to refrain from making any claim(s) or demand(s)… against Already or any of its… related business entities… [including] distributors… and employees of such entities and all customers… on account of any possible cause of action based on or involving trademark infringement, unfair competition, or dilution, under state or federal law… relating to the NIKE Mark based on the appearance of any of Already’s current and/or previous footwear product designs, and any colorable imitations thereof, regardless of whether that footwear is produced… or otherwise used in commerce before or after the Effective Date of this Covenant.”  Slip Opinion p. 6.

In applying the voluntary cessation test, the Supreme Court found that Nike’s covenant was unconditional and irrevocable, partially because Already had failed to provide any proof of any current or future shoe design that would violate Nike’s trademark and also fall outside of the covenant.  “If such a shoe exists… [i]t sits as far as we can tell, on a shelf between Dorothy’s ruby slippers and Perseus’s winged sandals.”  Already, at 7.

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