intellectual property: advanced topics for businesses in a changing legal landscape

Intellectual Property: Advanced Topics for Businesses in a Changing Legal Landscape

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The “Patent Troll” Debate

Austen Zuege

June 13, 2014

Overview• What is a “patent troll”?• Patenting & litigation trends• State & federal action• Deceptive practices lawsuits• Example C&D Letters• Practical advice for dealing with “patent

trolls” (or how to become one)

Who Are “Patent Trolls”?• Once called “patent sharks”

• A problem for ≥ 100 years• Widely decried following the civil war

• Peter Detkin (Intel) coined “troll” term in 1999

• Mostly used in computer & Internet contexts

• But no universally accepted definition of “troll”

• Non-practicing entity (NPE)?• Patent monetization entity (PME)?

• and…the patent laws permit these things

Some “Patent Troll” Definitions• Peter Detkin

• “somebody who tries to make a lot of money off a patent that they are not practicing and have no intention of practicing and in most cases never practiced.”

• Fmr. Chief Judge Rader, Ass. of University Tech. Managers (AUTM) 2013• “A patent troll is anybody who asserts a patent far beyond the value of its

contribution to the art. That means that any institution can be a troll.”

• Fmr. Chief Judge Rader, et al., New York Times Op-Ed• “trolls…make money by threatening companies with expensive lawsuits and

then using that cudgel, rather than the merits of a case, to extract a financial settlement.”

• Dennis Crouch, Patently-O Blog:• “The patent troll does not research or develop the technology or any products

related to its patent. Rather, the patent troll waits for others to independently develop the patented technology into useful products and to create a market for those products. Once the newcomers are locked-into the new technology, the patent troll seeks rents either through licensing or litigation.”

• Gene Quinn, IPWatchdog Blog:• “the term patent troll seems to be more in the eye of the beholder than anything

else. So a patent troll is whoever is suing you because you must be correct and some evil wrong-doer is holding you hostage. Never mind that you are actually infringing and you are the real wrong-doer (i.e., tortfeasor). So the term ‘patent troll’ is much like the term ‘communist’ during the McCarthy era.”

Economic Power (Simplification)

Commercial Advantage/Trusts

Gov. Regs./Tax

Labor

IP (Patents)

Famous (Alleged) Sharks/Trolls

• Eli Whitney• Thomas Sayles• Thomas A. Edison• Charles Goodyear• Elias Howe, Jr.• George Selden• Jerome Lemelson• Bob Kearns

The Selden Saga

Reproduced in Robert H. Resis, “History of the Patent Troll and Lessons Learned,” ABA Intellectual Property Litigation, Vol. 17, No. 2 (Winter 2006)

Selden: “Patent, No. 549,160…controls

broadly all gasoline automobiles which

are accepted as commercially

practical.”

Ford: “The Selden patent is not a broad one, and if it was, it is anticipated. It does

not cover a practicable machine…”

Patent Troll Threats• Old demand letter to GE:

• “The letter writer said that it only costs a thousand dollars to get somebody killed and he had the thousand dollars. General Electric had to fight a suit in patent court to prove his patent . . . was different from my patent. I never met the inventor . . . but those who did meet him said that he was a simple, mild-mannered man.”

Common “Troll” Tactics• “Umbrella” patents - vague and abstract

• Adding trivial “computer” or “Internet” recitation to commonplace (abstract) methods

• Functional or result-based claiming• Extensive continuation practice• “Gresham’s law” for patent examination

• “Extortionate” licensing demands• Based on cost of litigation defense, not “invention”

• Use of shell companies• Plaintiff-friendly litigation venues

• “Gresham’s law” for patent enforcement

Recent Trends• More “software” and “business method”

patents• “Troll” litigation concentrated in those

areas

Software Patenting Rising

Patent Litigation Increasing

Software Patent Litigation

PME Litigation

Patent Litigation Trends• Three key factors (GAO):

1. “unclear and overly broad patents”

2. “potential for disproportionately large damage awards”

3. “increasing recognition that patents are a valuable asset”

Why Reform?“The great evil of our society now is this undue and unsound desire, which amounts to a mania among the people, to grow sudden-ly rich without work. I think that the pres-ent patent law as it is administered—not in the law itself, but as it is administered—tends to create that appetite, and foster that gambling spirit.”

Antebellum Patent Reform: 1878

• Farmers (The Grange):• Wanted “innocent purchaser” defense (no

strict liability)• Radical patent reform – curtail patent rights

• “Liberals” (Railroads):• Wanted “balance” between inventors &

innovators• Allow more monetary benefits to

implementers of technology (i.e., them!)

• Opposition (political machines):• Obstruct everything – status quo

Judicial Efforts• Mayo v. Prometheus, 566 U.S. ___ (2012):

• “enormous potential for rent seeking” under patent-eligibility analysis (citing Landes & Posner)

• “Economic rent”: excess of price over “real cost”

• unearned income.• an economic “tollbooth” or “free lunch”

• CLS Bank ?? (awaiting decision) • F.R. CIV. P. revisions

• Discovery limits (proportionality)• Eliminate forms (Form 18 – patent

complaint)

Administrative Efforts• White House

• USPTO to train examiners on functional claiming

• Web site information

• USPTO• Ownership disclosure proposal

• On penalty of abandonment!

Federal Bills• Innovation Act/Goodlatte Bill (H.R. 3309) (passed House in Dec. 2013;

at Senate)• Senate counterpart: Patent Transparency and Improvement Act (S. 1720)

(introduced Nov. 2013; to committee in Dec. 2013)

• Other Patent Bills:• Transparency in Assertion of Patents Act (S. 2049) (to Senate Commerce

Committee 2/2014)• Patent Litigation and Innovation Act (H.R. 2639) (to House subcommittee

9/13/2013)• Patent Abuse Reduction Act (S. 1013) (to Senate Judiciary Committee

12/17/2013)• Patent Litigation Integrity Act (S. 1612) (to Senate Judiciary Committee

12/17/2013)• Patent Quality Improvement Act (S. 866) (o Senate Judiciary Committee

5/6/2013)• Stopping the Offensive Use of Patents Act (H.R. 2766) (to House subcommittee

7/22/2013)• Demand Letter Transparency Act (H.R. 3540) (to House subcommittee

1/9/2014)• End Anonymous Patents Act (H.R. 2024) (to House subcommittee 6/14/2013)• Saving High-Tech Innovation from Egregious Legal Disputes (SHIELD) Act

(H.R. 845) (to House subcommittee 4/8/2013)• Trade Protection Not Troll Protection Act (H.R. 4763) (introduced May 29,

2014)

State Laws• Fourteen states have enacted anti-trolling legislation:

• Alabama, Georgia, Idaho, Louisiana, Maine, Maryland, Oregon, South Dakota, Tennessee, Utah, Vermont, Virginia and Wisconsin

• Three bills passed and await governor signature:• Illinois, Missouri and New Hampshire

• Bills in three states have passed only one house:• Connecticut, Kentucky, and North Carolina

• Bills in five more states awaiting votes:• Kansas, New Jersey, Ohio, Pennsylvania, and South Carolina

• Bills died in three more states:• Mississippi, Nebraska and Rhode Island

List current as of June 6, 2014

Vermont Law (9 V.S.A. Ch. 120)

• Non-binding bad faith factors (9 V.S.A. §4197):

• Demand letter lacks (and not provided on request):

• Patent number• Name and address of owner/assignee• Factual allegations specific to areas covered by claims

• Unreasonably short response period• License offer “not based on a reasonable estimate

of the value of the license.”• Meritless• Deceptive• Previous suits lacked info above or found

meritless

• Allows equitable relief, fees & damages

Addressing Litigation Trends?

• Three key factors (GAO), again:

1. “unclear and overly broad patents”

2. “potential for disproportionately large damage awards” (+ litigation expense)

3. “increasing recognition that patents are a valuable asset”

Comparing Top Proposals

Reform Today 1878

Fee-Shifting

Discovery limits

Pleading/disclosure +

Damages ~N/A

Presumption of validity

No deception

Continuation limits ~N/A

Working requirement

User liability ~ ~

“Bad patents” ~

Deceptive Practices Lawsuits

• MPHJ Tech. Invs., LLC v. FTC (W.D. TX)• FTC – deceptive representations in patent

demand letters. 15 U.S.C. §45(a)• MPHJ (plaint.) – barred by Noerr-Pennington

doctrine

• Vermont v. MPHJ Tech. Invs., LLC (Vt./D.Vt)

• Vt. AG – unfair trade practices under 9 V.S.A. §2453(a)

• MPHJ – tried to remove to federal court, but remanded

Example Cease & Desist Scenario

Dear Ms. Infringer:

I represent ABC Company. We desire to license U.S. Patent No X,XXX,XXX to you, on similar terms to those already agreed to by your competitors.

In order to avoid litigation over this matter, please respond by tomorrow.

Sincerely, John Q. Troll

Example C&D Scenario #2

Dear Ms. Infringer: I represent ABC Company, the exclusive licensee of U.S. Patent No X,XXX,XXX, currently assigned to Acme Corp. Your WIDGET product (Model ABC) literally infringes claims 1-5 of the patent. We are willing, however, to license the patent at a 0.05% royalty per product.

In order to avoid litigation over this matter, please respond within one month.

Sincerely, John Q. Plaintiff

Patent Troll Defensive Tactics

• Pre-Suit:

• Indemnity, indemnity, indemnity!• Draft vendor agreements with indemnity from IP

infringement

• Clearance/monitoring (freedom to operate)• Due diligence in M&A

• Anti-Patent pools• Sharing/pooling information to document prior art• Defensive publication

Patent Troll Defensive Tactics

• Post-Suit/Post-C&D Letter

• Declaratory judgment?• “Don’t mess with Texas”

• Leverage efforts of other defendants

• Consider USPTO post-grant proceeding

• Minimize cost of defense

Common Questions• Can I get attorney’s fees?

• Maybe…• Highmark, Inc. v. Allcare Health Mgmt. Sys.• Octane Fitness LLC v. Icon Health & Fitness, Inc.

• How is this even patentable?• UPSTO AIA- proceedings - $$$

• When can we get summary judgment?• After claim construction, except in E.D. TX

• Can I transfer venue?• Good luck!

Conclusion

Industry-University Research Collaborations

Kendra L. Hogan, MS, JD

Richelle A. Martin, JD

Office of Industrial Partnerships

University of Wisconsin-Madison

Overview

• Background

• Issues in university-industry relationships

• Intellectual property considerations

• New developments in academic IP licensing

Introduction

UW-Madison Office of Industrial Partnerships

• Created in May 2012• Central point of contact for UW researchers,

industry partners, Wisconsin Alumni Research Foundation (WARF)

• Institutional review, negotiation and signature of agreements

IntroductionType Description

Confidentiality Exchange of non-public and/or proprietary information.

Material Transfers (incoming and outgoing)

Receipt or provision of tangible materials for use in research or service.

Fee for Service University provides services to industry at cost.

Sponsored Research Pursuing research of mutual interest to develop new knowledge.

Background: Why do companies and universities collaborate?

• Cost savings• Outsourcing R&D• Leveraging other sources of funding

• Mutual benefits of access• Expertise• Equipment• Background IP• Preferred IP licensing position• Student Recruitment

Key Differences:Business v. Academia

• Distinct interests and focuses• Competitive advantage v. sharing knowledge

• Public v. private entities

• Conflicts of interest

• Legal or policy limitations• Public record requests

• Securities reporting requirements

Common issues in university-industry relationships

Issue Industry Universities

Mission and focus • Business• Profits• Market-share• Competitive-

advantage

• Academia• Discovery and dissemination of

knowledge• Education

Governance • Shareholders/owners• Private interests

• Some public, some private• Board of Regents/Trustees

Common issues in university-industry relationships

Issue Industry Universities

Conflicts of Interest

• Reporting requirements

• Unbiased sources

• No preferential treatment• Disclosure of

ownership/leadership

Legal • Financial reporting• Regulatory agencies

• Public record requests• Budget limitations• Sovereign immunity

Contract ProvisionsTerms Industry UniversitiesConfidentiality • All information provided to university is

confidential• All data/results confidential to create

competitive advantage• Perpetual obligation

• Marking requirement• Dissemination of knowledge for

public good, public records laws• Time limited obligation• Protecting research

Data/Result Ownership

• Industry owns for future use and competitive advantage

• University owns to allow line of research to continue

Publication • Prohibit publication• Editing rights to publications

• Allow sponsor review of publications

Publicity • May desire University endorsement• Use of comparison data/results• Classified relationship

• Works with variety of sponsors in a field, remain neutral

Contract ProvisionsTerms Industry Universities

Warranties • Industry-standard performance

• Fitness for a particular purpose

• Non-infringement

• Not a commercial provider

• Activities are by nature experimental

Intellectual Property

• Assignment/exclusivity• Royalty-free• Commercial use• Sublicensable

• Compliance with law and /or funding agreement

• Preserving right to continue line of research

• Public benefit

Intellectual PropertyRights Considerations

Bayh-Dole obligations (35 U.S.C. § 200-212, implemented by 37 C.F.R. 401)

• utilize inventions

• maximize small organization participation in R&D

• promote collaboration

• promote free competition and enterprise


Bayh-Dole obligations (35 U.S.C. § 200-212, implemented by 37 C.F.R. 401)

• promote commercialization and public availability of inventions

• protect against nonuse or unreasonable use of inventions

• minimize administrative cost


• Cal Tech• Cornell • Harvard• MIT• Stanford• University of CA• UIC

• UIUC• University of WA • WARF• Yale • Assoc. of American Med.

Colleges

Nine Points Memo

List of signatories available AUTM website: http://www.autm.net/source/NinePoints/ninepoints_endorsemen

t.cfm


• Point 1: Reservation of rights

• Point 2: License terms encourage development

• Point 5: Ensure broad access to research tools

Nine Points Memo


• Institutional IP ownership policies• Institutional ownership• Inventor ownership• Assignment

• Institutional resources• Tech transfer office staff/expertise• Quantity/type of inventions created on campus• Value IP brings into the institution

• Direct Revenue• Potential future funding

IP Licensing Models

• Typical Process• Research agreement T&C• IP disclosure• Equity review• Tech transfer license negotiations

• Case-by-case analysis• Sources of funding• Background IP• Other agreements

IP Licensing Terminology

• NERF (Non-Exclusive, Royalty Free)

• Foreground/Background IP

• Fully Paid-Up

• Blocking IP

The Evolving Sponsored Research Climate

Facilitate university-industry partnerships• Reduce negotiation time

• Minimize company risk and cost

• Add certainty

• Decrease administrative costs

• Increase researcher involvement

• Reduce number of contracts required

New Developments in IP Licensing

University of Arizona – “The Arizona Choice”

Four options offered to sponsors:

1. Non-exclusive, royalty free license

2. Exclusive license, up-front payment

3. Exclusive license, royalty-bearing

4. Assignment


University of Minnesota – “Minnesota Innovation Partnership”/“Minnesota Method”

• For New IP• Option A: Exclusive sub-licensable license

• Option B: Negotiation after IP Development

• For Existing IP: Try and Buy• Try: Trial period with single fee

• Buy: Published royalty rates with buy-out option


Pennsylvania State’s general approach

• Industry sponsored research only

• Sponsor ownership of generated IP

• Reservation of non-commercial research and educational use

• “Bonanza clause”

For more information

University of Arizona• http://techtransfer.arizona.edu/arizona-choice

University of Minnesota• http://www.research.umn.edu/techcomm/

industry-sponsor.html

Pennsylvania State • http://www.research.psu.edu/offices/otm

Questions and Considerations

• Licensing models are new/untested

• A few possible scenarios• No IP is created

• Sponsor uninterested in exclusively licensed IP

• IP’s value lower or higher than anticipated

• Background IP already exclusively licensed

• Restricted use of IP-related data or know-how in future sponsored research

Thank YouUniversity of Wisconsin-MadisonOffice of Industrial Partnerships

http://grad.wisc.edu/projectagreementsip/oip/

Kendra L. Hogan, MS, JD

[email protected]

608-890-4709

Richelle A. Martin, [email protected]

608-890-4708




mailto:[email protected]




Alice in Supreme Court

Wonderland

David Fairbairn

Alice Corp. v. CLS

Argued before US Supreme Court

March 31, 2014

IssueWhether claims to computer-implemented inventions – including claims to systems and machines, processes, and items of manufacture – are directed to patent-eligible subject matter within the meaning of 35 U.S.C. § 101 as interpreted by the Supreme Court?

Elements of High Drama• Patentability of Software – 35 U.S.C. §

101• Patentability of Business Methods• Patent owner is an NPE and PAE

Elements of High Drama• District Court – All claims invalid• CAFC – Panel reverses in 2 to 1 decision• Chaotic en banc decision of CAFC

• 7 opinions from 10 judges• 5 found all claims unpatentable• 2 found method and media claims

unpatentable but system claims patentable• 3 found all claims patentable

Elements of High Drama• 39 Amicus briefs

• Former CAFC Chief Judge Paul Michel• AIPLA• IEEE-USA• IBM• Microsoft• Checkpoint Software• Google• US Solicitor General for USPTO• ACLU

Statutory Requirements for Patentablity

• 35 U.S.C. § 101 – useful, eligible subject matter

• 35 U.S.C. § 102 – novel • 35 U.S.C. § 103 – nonobvious • 35 U.S.C. § 112 – claims, written

description

35 U.S.C. § 101• “Whoever invents or discovers any new

and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”

Supreme Court exceptions to § 101

• Laws of nature• Physical phenomena• Abstract ideas

Diamond v. Diehr, 450 U.S. 175 (1981).

Bilski v. Kappos, 130 S.Ct. 3218 (2010).

Mayo Collaborative Serv. v. Prometheus Labs., Inc., 132 S.Ct. 1289 (2012).

The Patents• U.S. Pat. No. 5,970,479• U.S. Pat. No. 6,134,536• U.S. Pat. No. 6,912,510• U.S. Pat. No. 7,725,375

U.S. Pat. No. 7,725,375

System Claims• Claim 26 of ‘375 patent

Method Claims• Claim 33 of ‘479 patent

The Invention• A system and method to reduce

settlement risk in financial transactions involving currencies and financial instruments

The Invention• A central computer:

• Creates “shadow accounts” for each party – independent of parties’ bank accounts

• Credits and debits the shadow accounts as transactions occur – in real time

• Rejects transactions if shadow accounts would go negative

• Issues irrevocable payment instruction to banks at a fixed time (end of day)

District Court Proceedings• The district court held every asserted

claim invalid as directed to ineligible subject matter

• The “heart of these claims” was: “the fundamental idea of employing a neutral intermediary to ensure that parties to an exchange can honor a proposed transaction, to consummate the exchange simultaneously to minimize the risk that one party does not gain the fruits of the exchange, and then irrevocably to direct the parties, or their value holders, to adjust their accounts or records to reflect the concluded transaction.”

Proceedings Before the Federal Circuit Panel

• A panel of the Federal Circuit reversed, in an opinion by Judge Linn joined by Judge O’Malley

• The court held, in light of the specific claim limitations in Alice’s patents, that the claims covered “the practical application of a business concept in a specified way”

Proceedings Before The En Banc Federal Circuit

• A multi-step test from five judges:• (1) Determine whether the claimed invention “fits

within one of the four statutory classes”• (2) Ask “whether the claim” at issue “raises § 101

abstractness concerns at all”• (3) Look past the claim’s language “to identify and

define whatever fundamental concept appears wrapped up in the claim”

• (4) Look to the “balance of the claim” to determine whether it contains “additional substantive limitations that narrow, confine, or otherwise tie down the claim so that, in practical terms, it does not cover the full abstract idea itself”

Proceedings Before The En Banc Federal Circuit

• The plurality found the claims were drawn to “the abstract idea of reducing settlement risk by effecting trades through a third-party intermediary (here, the supervisory institution) empowered to verify that both parties can fulfill their obligations before allowing the exchange”

• The claim limitations, including the computer-implementation requirements, were considered insufficient to render those claims eligible

Solicitor General’s Position

• Software that improves the functioning of computer technology (or other technology) is patent eligible

• An abstract concept is a claim that is not directed to a concrete innovation in technology, science, or the industrial arts

IBM’s Position• The substantial uncertainty regarding

patent eligibility of computer-implemented inventions endangers a critical part of US economy and threatens innovation

• The Abstract Idea doctrine is unworkable in computer-implemented invention context

• The fractured opinion from the CAFC demonstrates the problem with the doctrine

IBM’s Position• Public key cryptography and GPS

location• U.S. Pat. No. 4,200,770 and U.S. Pat. No.

5,572,218

• Concerns about abstract ideas would be better addressed by 35 U.S.C. § 103

Wisdom from the Past• Diamond v. Diehr, 450 U.S. 175 (1981).

• (1) The claim “must be considered as a whole.”

• (2) “It is inappropriate to dissect the claims into old and new elements and then to ignore the presence of the old elements in the analysis.”

• (3) “The ‘novelty’ of any element or steps in a process, or even the process itself, is of no relevance in determining whether the subject matter of a claim falls within the § 101 categories of possibly patentable subject matter.”

O’Reilly v. Morse, 56 U.S. (15 How.) 62 (1853).

• Samuel F. B. Morse


• Claim 3

• Claim 5


• Claim 8

ABC v. Aereo –Rebroadcast TV and the Transmit Clause

Rick Nelson

ABC v. Aereo - Background

• Alleged copyright infringement• Re-transmission of network TV over the

Internet to paid subscribers

• Plaintiffs• ABC, Disney, CBS, NBC, Universal,

Telemundo, …• Claim public performance – Infringement • Seeking injunction

• Defendant• Aereo, Inc.• Claims private performances – No

Infringement


• Aereo’s service• Internet-based recording and re-

transmission of local TV network channels• Antenna, DVR, Slingbox technology• Located at Aereo facility• Thousands of small antennas assigned to

individual subscribers


Aereo


• U.S. District Court for S.D. New York• Found for Aereo – private performances –

injunction denied

• Second Circuit• Affirmed – private performances – no

injunction

• U.S. Supreme Court• Held oral arguments in April, 2014

Primer on Copyrights• Origin in the Constitution

• Art. 1, Sec. 8, Cl. 8• “To promote the Progress of Science and useful

Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries”

• Codified in Title 17 of the US Code

Exclusive Rights• Allows owner the right to exclude others

from:• Reproducing the work• Making derivative works• Distributing the works to the public• Performing the works publicly• Displaying the works publicly

ABC v. Aereo - History

Broadcasting Company (ABC)

Advertising

ABC v. Aereo - History


Advertising

Rebroadcast License

Cable Company

Public Performance• Rebroadcast = Public Performance

• Infringement of exclusive right to publicly perform

• Why?• 17 U.S.C. §101 - Definitions• To perform or display a work “publicly”

means• (1) to perform or display it at a place open to

the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered; or

Public Performance• To perform or display a work “publicly”

means• (2) to transmit or otherwise communicate a

performance or display of the work to a place specified by clause (1) or to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.

Statutory License – Cable System

• 17 U.S.C. §111• 17 U.S.C. §111(c) – Secondary Transmissions

by Cable Systems• 17 U.S.C. §111(d) – Statutory License for

Secondary Transmissions by Cable Systems• 17 U.S.C. §111(e) – Nonsimultaneous

Secondary Transmissions by Cable Systems

• Statutory License • Paid by Cable Systems to Department of

Treasury by way of Register of Copyrights• Distributed to copyright holders

Aereo Re-Transmit Configuration


Advertising

No License Aereo

Aereo Arguments– Private• Aereo Arguments

• Thousands of private performances

• To perform or display a work “publicly” means• (2) to transmit or otherwise communicate a

performance or display of the work to a place specified by clause (1) or to the public ….

• “The work” transmitted by Aereo is private to each subscriber

• Providing an equipment rental service

• Same as user having an antenna and DVR at home

ABC Arguments – Public• ABC Arguments

• Cumulative effect is that of a public performance

• Public performance that emanates from the original broadcast signal

• No technological use for the multiple antennas except to circumvent the copyright laws

• Infringement

District Court Decision• U.S. District Court S.D. of New York

• No preliminary injunction

• Relied primarily on 2nd Circuit Decision Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121 (2008) (“Cablevision”)

• Remote Storage DVR allowed users to play back subscriber-unique copies using a remotely located DVR

Cablevision• To determine if a performance is public

• Examine who precisely is capable of receiving a particular transmission of a performance

• Capable of receiving refers not to the performance of the underlying work, but to the transmission itself

• Potential audience is individual subscriber, so transmission is not public

District Court Decision Cont…

• U.S. District Court S.D. of New York

• Cablevision applicable and controlling

• Potential audience of each Aereo transmission is only a single subscriber

• Not public transmissions

Second Circuit Decision• Second Circuit

• Affirmed – no preliminary injunction

• Four-part holding:• (1) Consider the potential audience of the

individual transmission:• If capable of being received by public = public

performance• If potential audience is only one subscriber =

private

• (2) No aggregation:• Private transmissions should not be aggregated

Second Circuit Decision• Second Circuit

• Four-part holding:• …• (3) Exception to the no-aggregation rule:

• When private transmissions are generated from the same copy of the work, they should be aggregated

• If the aggregated transmissions from a single copy enable the public to view that copy – Public Performance

• (4) Any factor that limits the potential audience of a transmission is relevant to the Transmit Clause analysis

U.S. Supreme Court• Held oral arguments in April, 2014• Concerns:

• Stifling innovation of “cloud computing” technologies

• Cloud locker storage (e.g., Dropbox)

• Sweeping definitions• Unintended public performers

U.S. Supreme Court• Concerns

• What does Aereo do if they are publicly performing?

• “Cable System”?• Access to statutory licenses?• Individual negotiated licenses with copyright

holders?

• Possible outcomes• Interpretation of “transmit,” or “to the

public”• Narrow interpretation?• Invitation for Congressional clarification?

Panel: Post Grant Proceedings

Larrin Bergman, Moderator

Carolyn Eckart

IP ATTORNEY AT ST. JUDE MEDICAL

Alana Bergman

ASSOCIATE GENERAL COUNSEL IN IP AT COVIDIEN

Andrew DeMaster

IP COUNSEL AT VALSPAR

IP Leadership in Innovation

& Business Strategy

Jason R. CampbellIn-house Counsel, Manager of Global IP Strategy

Sekisui Chemical Co., Ltd. (Japan, U.S., Europe)

Overview1. PART I - SUCCESSFUL INNOVATION MANAGEMENT

A) Integration of Key Information and Company Functions

B) Key Roles of Business & Technical Departments, & Heightened Role of IP Counsel

2. PART II – IP LEADERSHIP IN INNOVATION STRATEGYA) Best Practices & Concrete Examples Using IP

Analysis

PART ISUCCESSFUL INNOVATION

MANAGEMENT

A) Integration of Key Information and Company Functions

B) Key Roles of Business & Technical Departments, & Heightened Role of IP Counsel

Background - Innovation DefinedInnovation is the process of creating better solutions that meet new

requirements, unclear needs, or existing market needs, and is accomplished through more effective products and services

The right mind-set for healthy competition in an industry (Michael Porter, Harvard Business School)

“Be the Best” mentality “Be Unique” mentality

Be number 1 Earn higher returns

Focus on market share Focus on profits

Serve “best” customer with “best” product

Meet diverse needs of target customers

Compete by imitation Compete by innovation

= ZERO SUM (a race no one wins)

= POSITIVE SUM (multiple winners possible)

A) Successful Innovation Requires Full Integration of all Key Information & Company Functions

COMPANY

Business

R&DLegal / IP

MARKET

OPPORTUNITIES

PRODUCTS& SERVICES

COMPETITORSPRODUCTS& SERVICES

Value-added products or “me too” products? How to market?

RIS

K

Unique or well-known? How discovered and acted on?

Properly identified, evaluated, and handled?

CO

MP Effective strategies to

compete?

Part of innovation and business strategy creation?

Informed decisions based on all relevant info?

Full awareness of state of the art?

Growing, shrinking, saturated?

MARKETCOMPANY

A) Innovation Management – Need for Integration

Example of Passive, Non-integrated Innovation Practice:

Business

R&D

Legal / IP

OPPORTUNITIESUnmet Needs

Unsolved ProblemsUnrecognized Value

Future TrendsConsumer Preferences

COMPETITORS

Technologies, R&D Investments, Strengths/Weaknesses

Innovation Projects

Patents, Prior Art

Patents

NEW PRODUCTS & SERVICES

Inventions

A) Innovation Management – Need for IntegrationDisadvantages of Passive, Non-integrated Innovation Practice

(IP taking the back seat):1) IP counsel has a passive position, little influence on structuring

innovation to maximize IP protection and minimize legal risk2) IP strategy is afterthought rather than main consideration of

whether to invest in project3) Decisions made by business with insufficient understanding of

state of competitor technology, future tech trends, active markets, patent risks, state of prior art (all can be analyzed by IP professional)

4) Insufficient prior art awareness among R&D staff results in non-strategic innovation and wasted resources “reinventing the wheel”

5) Inventions evaluated independently and filed piecemeal rather than as part of an overall IP protection plan, or in relation to understanding of competitor IP portfolios and future technology trends

COMPANY MARKET

A) Innovation Management – Need for Integration

Example of Active, Integrated Innovation Practice:

BusinessOPPORTUNITIES

Unmet NeedsUnsolved ProblemsUnrecognized Value

Future TrendsConsumer Preferences

COMPETITORS

Technologies, R&D Investments, Strengths/Weaknesses, IP Portfolio

NEW PRODUCTS & SERVICES

Legal / IP R&D

Strategic Innovation, Protection& Competition Strategies

SYNERGY

A) Innovation Management – INTERNAL Integration

The Starship Enterprise

Captain Kirk

Mr. Spock - Advisor

Engineer Scotty

Fire all torpedoes then

engage warp speed overdrive

on my command!

I would advise you to seriously consider the risks of this maneuver considering all relevant

circumstances.

Captain, she can’t take no more! The

thrusters are damaged and we

don’t have the capacity in our

warp core!

COMPANY

Business

R&DLegal / IP

Think Star Trek… “to boldly go where no man has gone before”

Reaching the Best Decision:Need Teamwork, Communication, Defined Roles & Expertise

A) Innovation Management – EXTERNAL Integration

EXPLORED MARKET TERRITORIES

Mapping & Analyzing the Target Territories to Identify Risks and Understand Competitor Technology & Activities Competitors

“Cling-ons”

qaStaH nuq!(Deploy the mines!)

PATENT

PATENT PATENTPATENT

NEW FRONTIERS Opportunities to explore and protect

PATENT

PATENT

Enemy Strategy:

-Mimicking (counterfeit)-Spies (know-how theft)-Weapons (patents)-Technologies (alien)

FREEDOM TO OPERATE (FTO) ANALYSIS

PUBLIC DISCLOSURE OF COMPETITOR

TECHNOLOGY!

A) Innovation Management – Integration in Practice

• Integration of Company Functions & Key Information to Drive Successful InnovationI. Internal

1. Organization: integrated decision making process among Business, Legal, R&D. Legal/IP cannot take the back seat

2. Structural: introduce formal systems and procedures for driving innovation, including ideation & stage-gate

II. External1. Organization: tie technical service team, sales

personnel and others into ideation and knowledge capture process, engage in collaborative innovation

2. Structural: formal systems, procedures and expertise for feeding key market data to decision makers (IP counsel can play a key role!)

B) Innovation Management – Key Roles

A) Business /Executives1. Must be willing to understand basic principles of

intellectual asset management and hold legal counsel accountable for value of IP activities

2. Must promote a culture of IP awareness at company and recognize importance of legal strategy in innovation

B) R&D / Technical Team1. Must be held accountable for understanding state of

prior art and competitor activities, and innovating based upon that knowledge

2. Must be willing to understand basics of patents and actively participate in ideation process with goal of creating business-contributing, protectable inventions

B) Innovation Management – Key Roles

C. Legal / IP Counsel1. “Traditional” Role – Legal Work:

a. Invention review, patent filings & prosecutionb. Patent searches for FTO / clearancec. Invalidity/Non-infringement Opinionsd. IP-related agreements & negotiationse. Support of IP litigation, enforcement & defense

2. “Heightened” Role – Business acumen:a. Strong influence on structuring new innovation

projectsb. Intellectual asset management skills and deep

understanding of market from an IP perspective to create strategic protection and risk management strategies

B) “Heightened” Role of IP Counsel in Innovation

How to Start Earning Your Spot on the Ship’s Bridge1) Don’t be afraid to talk honestly about the real value of a

patent portfolio, and the value you bring to the company2) Learn the language of business and develop a realistic

understanding of how your IP practice fits into the business strategy

3) Work towards becoming a good Intellectual Asset Manager, not just a good Intellectual Property Attorney

4) Be able to leverage competitor patent information in a way that influences business & R&D decisions

5) Create techniques to evaluate and monitor the worth of the IP portfolio, and to measure the success or failure of your activities

INTELLECTUAL CAPITAL

STRUCTURAL CAPITAL

COMPLIMENTARY ASSETS

B) Intellectual Capital, Assets, and Property

HUMAN CAPITAL(skill, experience, problem solving ability, creativity, motivation, will)

INTELLECTUAL ASSETS

Recorded Ideas,Inventive Concepts,

Know-how

INTELLECTUAL PROPERTYPatent,

Trade Secret, Copyright, TM

Supportive infrastructure, databases, processes

MANUFACTURING

DISTRIBUTION

MARKETING / BRAND

PROFIT REALIZATION$$$

B) The Intellectual Asset Mindset

Shift Focus from “Patents” to Intellectual AssetsPatent Management Intellectual Asset Management

Can we patent it? Can we protect it? (contracts, defensive publications, trade secrets, brand strategy, in-house education)

Prior art search for each invention to assess novelty, non-obviousness

Patent landscape analysis for each project to assess overall protection strategy, and how each invention relates

How many patents do we have? What is the actual value of the IP portfolio to our business?

Judge each patent individually Judge each patent in relation to corresponding product, revenue, portfolio, and competitor activities

Patent infringement search to assess risk of new product development (FTO)

Competitive intelligence to understand competitor investments, future trends, litigation history, etc.

PART II

IP LEADERSHIP IN INNOVATION STRATEGY

Best Practices and Concrete Examples Using IP Analysis

Innovation Best Practices – Feasibility Study

Each Project Requires Systematic Consideration Of: 1) Market Feasibility

A) What is the state the relevant market? What is our entry strategy?

B) Who are the key players and what is our projected share or revenue?

2) Technical FeasibilityA) How can we realize the technology with minimal investment?B) What is our manufacturing capability and projected costs?

3) Legal FeasibilityA) What legal risks exist and how can we resolve them?B) How can we protect our technology & investment?

IP ANALYSIS TOUCHES UPON ALL THREE OF THESE CONSIDERATIONS AND CAN PROVIDE VALUABLE INSIGHTS TO LEAD BUSINESS DECISION MAKING!

Innovation Best Practices – 1) Market Study

• IP Perspective:A) Based on patenting activity in relevant market, can

identify:a. Key players, emerging and fading playersb. Emerging and fading marketsc. Geographical focusd. Potential partners and competitorse. Current R&D activity levels, etc

B) GOAL: build awareness of business managers regarding competitor focus, strengths/weaknesses, market trends, risks and opportunities to structure a winning innovation strategy


R (36)H (35)P (22)U (10)M (3)

Scattered Players – K (6)

P (28)R (23)H (8)M (5)U (3)

C (6)K (3)H (3)U (2)P (1)

WIDGET – Patent Filing Trend & Companies

US (352)Europe (307)Japan (245)Germany (215)Australia (206)Canada (204)

MAJOR MARKETS

Spain (156) Great Britain (151)Austria (151)China (112)Brazil (96)Mexico (81)

*by total # patents (not family count)

MAJOR PLAYERSP

R

H

CU

K

M

0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.0014.20

11.73

11.11

0.62

3.70

1.85

1.85

3.09

1.85

0.00

1.85

1.23

0.62

1.23

3.09

3.09

1.23

1.85

12.70

14.29

4.76

1.59

0.00

0.00

0.00

0.00

0.00

0.00

3.17

4.76

0.00

0.00

1.59

1.59

1.59

0.00

Pending % Active %

COM

PAN

IES

P

RHC

BS

M

N

D

NO PENDING PATENTS = LIT-TLE OR NO INNOVATION

COMPANY H:MANY ACTIVE PATENTS, BUT

DECREASING INNOVATION

COMPANY S:FEW ACTIVE PATENTS, BUT RAMPING

UP R&D/INNOVATION?

K

XY

STRONGPOSITION


WIDGET – Pending vs. Active Patents (% of total market)

VOT

Q

FW


WIDGET – Patent Numbers per Application Area per Company

COMPANY P COMPANY S

COMPANY H

COMPANY R

EXAMPLE CONCLUSIONS:1) MOST POPULAR USE OF WIDGET IS IN

AUTOMOBILES 2) COMPANY “S” FOCUSING ON

ELECTRONICS APPLICATIONS3) FIBER APPLICATIONS NOT POPULAR –

HARD TO INNOVATE? UNRECOGNIZED POTENTIAL?

4) NO DOMINANT COMPETITION IN HOME APPLIANCES, etc.

Innovation Best Practices – 2) Technical Study

2) Technical Feasibility - IP Perspective:A) Based on disclosure of patents, can understand:

1. Problems-solutions identified by competitors2. Common and potential manufacturing techniques,

parameters, raw materials3. Potential new uses for existing technology4. Ways to improve upon competitor technology

B) GOAL: extract useful technical information to build awareness of R&D members regarding state of the art, leads naturally to:

1. Reduction in duplicative efforts, and focus on unique, value-added development

2. Avoidance of patent risks


WIDGET – Patent Numbers per Problem Area per Company

COMPANY P

COMPANY S

COMPANY H

COMPANY R

EXAMPLE CONCLUSIONS:1) IF I WANT TO SOLVE POOR INSULATION

PROPERTIES, POOR ACOUSTIC PROPERTIES, LOOK AT COMPANY R’s PATENTS

2) COMPANY P UNIQUELY RECOGNIZING POOR WIDGET DENSITY AS A PROBLEM (Should we also consider?)

3) ALL COMPANIES RECOGNIZING ENVIRONMENTAL POLLUTION CONCERN, ABOUT SAME ACTIVITY

4) LOOK TO COMPANY R FOR KNOW-HOW IN EXPENSIVE MANUFACTURING ISSUE? ETC.


WIDGET – Patent Numbers per Raw Materials per Company

COMPANY P

COMPANY S

COMPANY H

COMPANY R

EXAMPLE CONCLUSIONS:1) COMPANY S UNIQUELY ADDING

OIL TO THEIR WIDGET COMPOSITIONS?

2) ALL COMPANIES USING INORGANIC MATERIALS, BUT ORGANIC MATERIALS MORE COMMON, & COMPANY H DOMINANT IN KNOW-HOW?

3) WAX ADDED BY COMPANY R, BUT INSIGNIFICANT ACTIVITY? ETC.


WIDGET – White Space Matrix (Raw Material vs. Application Area)

ORGANIC

INORGANIC

WAX

CARBON BLACK

NATURAL

OIL

OTHERS

WHITE SPACE(NO PATENTS EXIST FOR

COMBINATION, LOW RISK, POTENTIAL TO PATENT, OR

HIGH TECH/MARKET HURDLE?)

HOT AREA (LOTS OF PRE-EXISTING PATENTS, GOOD TECH

FEASIBILITY, BUT HIGH RISK TO ENTER, & TOUGH

COMPETITION?

NOTE:• CAN DO WHITE SPACE MATRIX WITH

ALMOST ANY COMBINATION OF FACTORS (problem-solution, solution-application, assignee-application, etc)

• GAIN USEFUL TECHNICAL INSIGHTS, AS WELL AS UNDERSTAND POTENTIAL MARKET TRENDS AND LEGAL RISKS

• CAN DRILL DOWN TO SEE RELEVANT PATENTS EFFICIENTLY

Innovation Best Practices – 3) Legal Study

3) Legal Feasibility – IP Perspective:A) RISK:

A) What IP-related legal risks exist and how can we resolve?

B) PROTECTION/COMPETITION:A) How can we protect our technology &

investment?B) How can we exclude our competitors from the

market, or prevent them from obtaining valuable know-how?

THE IP ANALYSES SHOWN IN THE PREVIOUS SLIDES CAN BE USED TO ASSESS BOTH RISK & PROTECTION

Innovation Best Practices – 3) Legal StudyA) LEGAL RISK ASSESSMENT, REDUCTION, RESOLUTION (Finding the dangers,

avoiding them, or removing them)1. WHEN? First stages of project, and again pre-launch of product (at least)2. GOALS:

a. Assess Risk: Searching for and identifying blocking patents, and analysis of possible infringement of patent by our technology

b. Reduce Risk: Bypassing/avoiding dangerous patent rights, or evaluating the invalidity of the patent

c. Resolve/Remove Risk Getting permission from the patent holder, or attacking the patent rights

3. TOOLS/METHODS:a. Assess Risk: Review of relevant patents from Landscape search (pre-

study phase), or perform a more targeted independent patent search (pre-product launch)

b. Reduce Risk: Design product around patent rights, and/or obtain expert opinion of legal counsel regarding invalidity of patent

c. Resolve/Remove Risk: Get a patent license, or pursue legal options at Patent Office or Court for invalidating patent

Innovation Best Practices – 3) Legal StudyB) LEGAL PROTECTION ASSESSMENT (can we protect the new frontiers?)

1. WHEN? First stages of project, and again pre-launch of product (at least).2. GOALS:

a. Can we legally protect our technology from competitors and possibly exclude them from the market?

3. TOOLS/METHODS: (think beyond patents! Intellectual Asset Management)a. Contractual:

i. Non-disclosure / Confidentiality Agreements to prevent loss of valuable know-how to competitors (extremely important)

b. Trade Secretsi. Identification of trade secrets and establishment of formal procedures

for heightened protection of valuable know-howc. Patents

i. Filing and receiving patents on valuable inventive technologies, and excluding competitor activities through patent enforcement

d. Brand Managementa. Establishing and building brands for key products to heighten customer

awareness of product source and differentiate us from competitors

SUMMARY / FINAL REMARKS

I. Real innovation is hard and has a low success rate1. Understand the need for integration of internal/external

information and related company functions2. Understand key roles of Business, R&D, and Legal

Departments, and ways they can synergize3. Expect more from your IP counsel (heightened role in

market analysis and shaping innovation strategy)4. Thinks in terms of Intellectual Asset Management5. Utilize public patent information to your advantage for

Market, Technical, and Legal Feasibility studies

II. Consider use of outside consultants to assist with mining and analysis of patents & obtaining key market/technical information

NAUTILUS v. BIOSIG INSTRUMENTS – THE NEW

STANDARD FOR DEFINITENESS

Alan Koenck

THE DEFINITENESS REQUIREMENT

• 35 U.S.C. 112(b) (previously 35 U.S.C. 112, second paragraph)

• The specification shall conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the inventor or a joint inventor regards as the invention

• Federal Circuit case law• Datamize v. Plumtree Software, 417 F.3d

1342 (Fed. Cir. 2005)• A claim is indefinite only when it is “not amenable

to construction” or “insolubly ambiguous.”

NAUTILUS V. BIOSIG - BACKGROUND

• U.S. Patent No. 5,337,753• Heart rate monitor for use with exercise

equipment, provided by electrodes on handrails


• The invention in the Biosig patent dealt with cancellation of body signals generated by skeletal muscles (EMG signals) so that body signals related to heartbeat (ECG signals) could be more accurately detected.

• In order to receive any signals, an electrode pair (that is, a pair of eletrodes spaced apart from one another) needs to be in contact with each hand of the user


• Claim 1 recites a heart rate monitor that includes a cylindrical bar having, on each half of the bar, a live electrode and a common electrode “mounted…in a spaced relationship with each other.”

• Other elements of claim 1 required that the hands of the user contact the live and common electrodes on each half of the bar, and that equal EMG signals be detected on the two sides/hands

• Definiteness of the phrase “spaced relationship” was challenged by Nautilus

NAUTILUS V. BIOSIG - HISTORY

• Reexamination of the Biosig patent was undertaken (litigation was dismissed without prejudice awaiting the outcome)

• All claims were confirmed as allowable; declaration evidence from the inventor indicated that a person skilled in the art could configured the detecting electrodes based on the patent’s teachings “to produce equal EMG [signals] from the left and right hands.”

• Spacing, shape, size and materials were not standardized for all machines, but could be determined via a “trial and error process.”


• Lawsuit was brought again in U.S. District Court – Southern District of New York

• Markman hearing to construe patent claims• Nautilus sought to limit “spaced

relationship” to a spacing greater than an electrode width

• Construction by district court simply required a defined relationship between the live electrode and the common electrode on each side of the cylindrical bar


• Nautilus moved for summary judgment of invalidity of claim 1 for indefiniteness, arguing that the term “spaced relationship” as construed was indefinite

• District Court granted the motion, found the term indefinite, stating that the claim terms did not tell the court or anyone what precisely the space should be or even supply any parameters for determining the appropriate spacing.


• Federal Circuit – reversed the summary judgment of indefiniteness and remanded.

• Majority opinion – considering the intrinsic evidence (claim language, specification, prosecution history), inherent parameters of the claimed apparatus provide understanding of the meaning of the terms

• Spaced enough to avoid electrical merging• Touching two distinct points of a hand• Spacing adjusted to equalize EMG signals


• Supreme Court granted certiorari• Issue – whether the Federal Circuit’s

standard of determining indefiniteness (the claim is “not amenable to construction” or is “insoluble ambiguous”) is correct.

• In the prior CAFC Datamize v. Plumtree Software case, the court also suggested that an objective standard for ascertaining the meaning of the claims must be provided (claim term was “aesthetically pleasing”)

NAUTILUS V. BIOSIG - HOLDING

A patent is invalid for indefiniteness if its claims, read in light of the patent’s specification and prosecution history, fail to inform, with reasonable certainty, those skilled in the art about the scope of the invention.

NAUTILUS V. BIOSIG - HOLDING

• No decision on the facts of the case was provided by the Supreme Court

• The case was instead remanded to the Federal Circuit to apply the new standard for indefiniteness

NAUTILUS V. BIOSIG - ANALYSIS

• Presumption of validity• Construction vs. invalidity for

indefiniteness• Public notice function of patent claims• How definiteness fits in with patentable

subject matter (35 U.S.C. 101) and novelty/obviousness (35 U.S.C. 102 and 103)

• The “two plausible constructions” problem


• Example claim language from CAFC decisions

• “linkage groups … not interfering substantially with … hybridization” – found definite due to guidelines and examples in specification and prosecution history

• “fine granules having an average particle diameter of 400 µm or less” – found definite, despite no clear definition of how to measure diameter and multiple different techniques being available


• Means plus function example (software)• “means for providing access to said file of

said financial accounting computer for said first entity and/or agents of said first entity so that said first entity and/or said agent can perform one or more activities selected from the group consisting of entering, deleting, reviewing, adjusting and processing said data inputs” – found indefinite, due to the specification lacking a disclosure of the algorithm for performing the claimed function


• USPTO vs. Federal Court indefiniteness• USPTO does not have to use the CAFC

“insolubly ambiguous” standard – In re Packard, Fed. Cir. 2014

• USPTO examines whether a claim sets out and circumscribes a particular subject matter with a reasonable degree of clarity and particularity

• Means plus function claims – special case for indefiniteness

NAUTILUS v. BIOSIG INSTRUMENTS – THE NEW

STANDARD FOR DEFINITENESS

THANK YOU!

Alan Koenck

Exceptional Cases After Highmark &

Octane Fitness

Matt DeRuyter

Roadmap• Fee-shifting: American Rule to 35 U.S.C.

§285• Brooks Furniture Mfg., Inc. v. Dutailier

Int’l, Inc.• Octane Fitness, LLC v. ICON Health &

Fitness, Inc.• Highmark Inc. v. Allcare Health Mgmt.

Sys., Inc.• Supreme Court decisions• Hypothetical discussion

Some Fee-shifting History• “American Rule”• 1946: a discretionary fee-shifting

provision was added to the Patent Act• A court “may in its discretion award

reasonable attorney’s fees to the prevailing party upon entry of judgment in any patent case”. (35 U.S.C. §70)

• 1952: Congress amended the fee-shifting statute to what we see today

• “The court in exceptional cases may award reasonable attorney fees to the prevailing party.”

Statistics• 2005-2012

• Attorneys fees to patentee • 206 cases• 52% success rate

• Attorneys fees to accused infringer • 249 cases• 43% success rate

Data from http://www.patstats.org/

Brooks Furniture v. Dutailier

• Dutailier• Owned U.S. D417,983• Sent cease and desist letter to Brooks

• Alleged infringement of the ‘983 patent

• Brooks Furniture• Sought declaratory judgment• Alleged the action was exceptional

• 35 U.S.C. §285• 15 U.S.C. §1117• Tennessee law

Some Additional Background

• Dutailier• Delaware suit• Investigation prior to cease and desist letter

• Analysis by marketing staff and designers• Infringement opinions by U.S. and Canadian

patent attorneys• Evaluation by two independent experts

• Cease and desist letter terms• No interest in granting Brooks Furniture a

license• Prior conduct

District Court• Granted summary judgment of

noninfringement• Granted Brooks’ request for attorney

fees• Attorney fees warranted under either the

Patent or Lanham Acts or pursuant to state consumer protection law

• Dutailier’s activity not adequate to establish good faith belief that Brooks Furniture was infringing

Federal Circuit• Exceptional case (Category 1)

• Material inappropriate conduct related to litigation

• Willful infringement• Fraud or inequitable conduct in procuring the

patent• Misconduct during litigation• Vexatious or unjustified litigation• Conduct that violates FRCP 11 or like infractions

Additional Exceptionality• Exceptional case (Category 2)

• Absent misconduct in litigation or securing of patent, sanctions may be imposed against the patentee only if

• The litigation is brought in subjective bad faith AND

• The litigation is objectively baseless

More From the Federal Circuit

• Subjective bad faith• Objectively baseless• Improper conduct and characterization

of the case as exceptional must be established by clear and convincing evidence

• Decision to award attorney fees is within the district court’s discretion

CAFC Decision• Disagreed with the district court’s view

that opinions of counsel and experts were inadequate and their conclusions unreasonable

• Infringement is difficult to determine• “A patentee’s ultimately incorrect view of how a

court will find does not of itself establish bad faith.”

• No clear and convincing evidence of bad faith by Dutailier in bringing suit against Brooks

• Reversed/vacated

Highmark v. Allcare• Allcare

• Owned U.S. 5,301,105

• Highmark sought declaratory judgment

• Western District of Pennsylvania

• Case transferred• Northern District of Texas

District Court• Allcare counterclaimed for infringement

• Claims 52, 53 and 102

• Special master appointed to resolve claim construction

• Highmark moved for summary judgment of noninfringement

• Judgment of noninfringement entered

More District Court• Allcare appealed judgment of

noninfringement• Highmark moved for an exceptional case

finding under §285• District court found the case to be

exceptional• Allcare’s attorneys violated FRCP 11• Allcare engaged in litigation misconduct• Awarded Highmark

• $4,694,000 (attorneys’ fees) • $209,600 (expenses) • $375,400 (sanctions)

CAFC• Discussed the test laid out in Brooks

Furniture• Suit brought in subjective bad faith• Litigation is objectively baseless

• Objective/subjective standard applied on a claim by claim basis

• Applies to both patentees and alleged infringers

• iLOR, LLC v. Google, Inc. (Fed. Cir. 2011)

Subjective Prong• Presumption that an assertion of

infringement of a duly granted patent is made in good faith

• Bad faith established with clear and convincing evidence

• CAFC reviews factual findings as to subjective bad faith for clear error

Objective Prong• Question of law based on underlying

mixed questions of law and fact• Determination must be made by court

(not the jury)• CAFC reviews determination of objective

reasonableness without deference since it is a question of law

• Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc. (Fed. Cir. 2012)

Majority Decision• Claim 102

• Allcare’s infringement claims were objectively unreasonable

• District court did not clearly err in concluding allegations were brought in subjective bad faith

• Claim 52• Agreed with the district court as to

noninfringement• Allcare’s claim construction not objectively

baseless• “[S]imply being wrong about claim construction

should not subject a party to sanctions where the construction is not objectively baseless.”

More Decision• Litigation misconduct

• None of the actions sufficient to make the case exceptional

• Frivolous arguments• Shifting claim construction• Misrepresentations regarding venue transfer

motion

Judge Mayer• Dissenting-in-part

• CAFC erred with respect to deference owed the district court

• In finding an exceptional case, reasonableness is a finding of fact that may be set aside only for clear error

• “Infatuation” with de novo review• “Appellate overreaching”

• No basis for overturning the district court’s determination

• Would affirm the district court’s award in its entirety

• Aside: Allcare’s claims invalid under 35 U.S.C. §101

ICON v. Octane Fitness• ICON

• Owned U.S. 6,019,710• Brought suit against Octane

Fitness

• District Court• Summary judgment of

noninfringement• Octane Fitness moved to

make the case exceptional under §285

• District court denied motion

District Court• Neither Brooks Furniture prong met

• Objectively baseless: a party’s assertions are “so unreasonable that no reasonable litigant could believe [they] would succeed” (iLor, LLC v. Google, Inc. (Fed. Cir. 2011))

• Bring suit in (subjective) bad faith: “the plaintiff’s case must have no objective foundation, and the plaintiff must actually know this” (iLor)

Appeal• Both parties appeal

• ICON: summary judgment• Octane Fitness: denial of motion to make

case exceptional• Argued that the district court applied an overly

restrictive standard in refusing to find the case exceptional

• ICON’s claim construction positions “unreasonable”

CAFC• No literal infringement• No infringement under doctrine of

equivalents• District court did not err in denying

Octane Fitness’s motion to find the case exceptional

• Octane Fitness sought to lower the standard for exceptionality to “objectively unreasonable”

• No reason to revisit the “settled standard” for exceptionality

Recap• Highmark

• District court found the unsuccessful case brought by the patentee case to be exceptional

• CAFC affirmed in part and reversed in part

• Octane Fitness• Both the district court and the CAFC found

the unsuccessful case brought by the patentee to be not exceptional

U.S. Supreme Court• Octane Fitness: 9-0*• Highmark: 9-0• “The Brooks Furniture framework is

unduly rigid and impermissibly encumbers the statutory grant of discretion to district courts.”

Octane Fitness Holding• “[A]n ‘exceptional’ case is simply one

that stands out from others with respect to the substantive strength of a party’s litigating position…or the unreasonable manner in which the case was litigated.”

• District courts may determine whether a case is “exceptional” on a case-by-case basis at their discretion, “considering the totality of the circumstances”.

Brooks Furniture Overturned

• Brooks Furniture “superimposes an inflexible framework onto statutory text that is inherently flexible”

• Too restrictive in defining the two categories of cases in which fee awards are allowed

• So “demanding that it would appear to render §285 largely superfluous”

• Proof by clear and convincing evidence is not justified by §285, which imposes no specific evidentiary burden

Highmark• Restated Octane Fitness holding• An appellate court should review all

aspects of a district court’s exceptional-case determination for abuse of discretion

Summary of Opinions• Octane Fitness

• Judgment of CAFC reversed• Remanded for further proceedings

• Highmark• Judgment of CAFC vacated• Remanded for further proceedings

Why these cases matter• The determination of an “exceptional”

case is a little less predictable• Potentially easier for a case to be

considered exceptional• More discretion given to the District

Court• Harder to reverse on appeal

Hypotheticals• Inappropriate conduct during litigation• Patentee is an NPE• One party is significantly larger than the

other• Patentee doesn’t do enough pre-suit due

diligence• Patentee seeks claim construction

inconsistent with prosecution history• One party takes ridiculous claim

construction positions

More Hypotheticals• Patentee refuses to license• Award of attorneys fees will effectively

force a party to close its doors• One party is “unreasonable” in its

unwillingness to settle

A Study in Sherlock

Grant M. McNeilly

Introduction• Sir Arthur Conan Doyle and the Sherlock

Holmes stories• Copyrights in the Sherlock Holmes

stories• Copyright lawsuit - Klinger v. Conan

Doyle Estate• Seventh Circuit appeal• Trademark issues• Summary points

Sir Arthur Conan Doyle• Born May 22, 1859 in Scotland• Became a doctor in 1880• First published in 1886• Knighted in 1902• Last published in 1929• Died July 7, 1930

Canon of Sherlock Holmes• Collection of novels and short stories

(“the Canon”)• First publication: A Study in Scarlet

(1887)• Last publication: The Case-Book of

Sherlock Holmes (1927)• Numerous derivative works in many

different forms by many different authors

Copyrights – Exclusive Rights

• Origin in the Constitution• Art. 1, Sec. 8, Cl. 8• “To promote the Progress of Science and useful Arts,

by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”

• Copyright Act – Title 17 of the U.S. Code• Allow owner to exclude others from:

• Reproducing the work• Making derivative works• Distribute the works publicly• Perform the works publicly• Display the works publicly

Copyrightable Material• In general – 8 types, including:

• Literary works• Dramatic works• Motion pictures and other audiovisual works

• Common copyrightable Sherlock Holmes works:

• The Canon• Derivative works

• Holmes and Watson as characters

Copyright Duration• Duration depends on a number of factors

• If/when published• By/for whom• If/when renewed• If/how marked

• With respect to Sherlock Holmes• Pre-1923 works• The Case-Book of Sherlock Holmes (1927)

Derivative Works• Types

• Adaptations• New editions

• Characteristics of a derivative work• Based on a previous work• Include “increments of expression” that are original

• Rights from making a derivative work – 17 U.S.C. §103(b)

• Limited to the incremental additions to the original work

• Derivative work copyright is independent of the copyright of the original work

Leslie S. Klinger• Born May 2, 1946 in Chicago, IL

• Became a lawyer in 1971

• Practices tax, estate planning, and business law in Los Angeles, CA

• Author and editor of Sherlock Holmes and Dracula literary analysis and fiction

• Co-editor of A Study in Sherlock (2011) and In the Company of Sherlock Holmes: Stories Inspired by the Holmes Canon, to be released November 15, 2014

Klinger v. Conan Doyle (K v. CD)

• Klinger v. Conan Doyle Estate, Ltd. (1:13-CV-1226)

• Unites States District Court, N.D. Illinois, Eastern Division

• Filed February 14, 2013• Opinion published December 23, 2013

• Action for declaratory judgment filed by Leslie Klinger

• Federal question jurisdiction (Copyright Act)

• Defendant is Conan Doyle Estate, Ltd. (“Conan Doyle”)

• Question – Are certain story elements of the Canon still protected under copyright?

K v. CD – History• Suit is in anticipation of publishing a

new book• $5000 licensing fee paid for previous book• New license insisted upon• Threats to distribution of new book

• Procedural History• Klinger seeks declaratory judgment on

Sherlock Holmes copyrights• Default judgment entered for failure to

respond• Injunctive relief requested and motion for

summary judgment filed

K v. CD – Issues and Arguments

• Framed by Klinger – story elements• Pre-1923 elements (public domain)• Post-1923 elements (copyrighted?)

• Framed by Conan Doyle – Holmes and Watson as developing, complex characters

• Consequences of the arguments• Klinger – delineation of public domain and

copyrighted story elements• Conan Doyle – characters are still

copyrighted

K v. CD – Analysis• Pre-1923 story elements

• Pre-1923 works are undisputedly in the public domain

• Holmes and Watson character development cannot extend the expired copyrights

• Holding (I): Pre-1923 story elements are in the public domain

• Post-1923 story elements• The Case-Book of Sherlock Holmes is a derivative

work of A Study in Scarlet• Post-1923 story elements are “increments of

expression”• Holding (II): Post-1923 story elements are still

copyrighted

• Request for injunction denied

K v. CD – Appeal• Leslie Klinger v. Conan Doyle Estate, Ltd. (No.

14-1128)• Unites States Court of Appeals for the

Seventh Circuit• Filed January 21, 2014• Oral Arguments held May 22, 2014 before

Judges Posner, Manion, and Flaum

• Issues discussed in the oral argument• Actual case or controversy• What can be used from the public domain

works• Previous license secured by Klinger• “Fog of uncertainty” of Conan Doyle

copyrights

Trademark Issues• Conan Doyle trademarks

• Word marks: “Sherlock Holmes”• Detective-based fiction• Audiovisual performances• Merchandise

• Design mark

• Conan Doyle has stated that, “any uses of ‘Sherlock Holmes’ as a trademark in the literary or entertainment fields would need to be licensed.”

Trademark Analysis• Dastar Corp. v. Twentieth Century Fox

Film Corp. et al. (539 U.S. 23 (2003))• Facts

• Dwight Eisenhower wrote a book Crusade in Europe• Fox made a TV series Crusade in Europe based on the

book and footage• TV show copyright lapsed in 1977• Dastar used clips to make World War II Campaigns in

Europe• Fox sued for trademark infringement (reverse

passing off)

Trademark Analysis – cont.

• Holding of Dastar• Trademark rights are trumped by expiration of

copyright• Alternative would allow for perpetual copyrights (and

patents)

• Conan Doyle trademarks• Dastar controls marks used with detective-

based written works• But merchandising a major motion picture

could be problematic

Summary Points• Copyrights cannot be indefinitely

extended• If you write Sherlock Holmes fan fiction:

• Do not include any story elements originating post-1923, explicitly including:

• Dr. Watson’s second wife• Dr. Watson’s athletic background• Holmes’ retirement from his detective

agency• Can use any of the public domain story

elements

• Sherlock Holmes merchandise may still be protected under trademark

Limelight Networks v. Akamai Technologies –

Supreme Court Review of Divided Infringement

Scott Krueger

Facts

• Internet was slooooow - Boo!• The problem:

• MIT Professors wanted to “speed up” the internet

• Founded Akamai Technologies

1. URL (uspto.gov) Domain Name Server (DNS)

2. IP Address70.42.251.42

3. Request

4. HTML Content

Content Provider Site

FactsSolution

Ghost Servers

Akamai’s Patent19. A content delivery service, comprising: • replicating a set of page objects across a wide area network of content

servers managed by a domain other than a content provider domain; [Limelight]

• for a given page normally served from the content provider domain, tagging the embedded objects of the page so that requests for the page objects resolve to the domain instead of the content provider domain; [Limelight’s customers]

• responsive to a request for the given page received at the content provider domain, serving the given page from the content provider domain; and [Limelight]

• serving at least one embedded object of the given page from a given content server in the domain instead of from the content provider domain. [Limelight]

District Court and Federal Circuit

• Jury awarded $40 million to Akamai for infringement by Limelight.

• At the same time, Fed. Cir. decided Muniauction, requiring a single actor to perform all steps of a method claim to infringe.

• District Court set aside jury verdict and granted Limelight its motion for judgment as a matter of law.

• Federal Circuit affirmed the District Court’s ruling

• Federal Circuit granted rehearing En Banc

Pre-En Banc Theories of Infringement - Direct

• 35 U.S.C. § 271(a) Except as otherwise provided in this title, whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.

• Single Entity Rule: Requires a single actor to perform ALL steps/elements of the claim.

• UNLESS … an agency-like relationship exists between multiple participants.

Pre-En Banc Theories of Infringement - Indirect

• 35 U.S.C. §271(b) - Whoever actively induces infringement of a patent shall be liable as an infringer.

• Direct infringement under 271(a) is a predicate to a finding of induced infringement. BMC Resources v. Paymentech, LP (Fed. Cir. 2007)

• Accused infringer must have “knowledge” of the patent.

• No direct infringement because there is no single actor, therefore no finding of indirect (induced) infringement is possible.

Odd Result• Better for Limelight to perform at least

ONE of the claimed steps, than to perform NONE of the claimed steps.

Fed. Cir. En Banc Decision in Akamai

• Overruled the Fed. Cir’s 2007 decision in BMC Res. v. Paymentech• Held: Induced infringement does not require a single

actor perform each step.

• Remanded, providing that Limelight could liable for Induced Infringement under 271(b) if:

• (1) Limelight knew of Akamai's patent, • (2) it performed all but one of the steps of the method claimed in

the patent,• (3) it induced the content providers to perform the final step of the

claimed method, and • (4) the content providers in fact performed that final step.

En Banc Decision in Akamai

• Dissent by Judge Newman • Agreed that inducement should not be

predicated on direct infringement by a single actor;

• Argued that a single-actor rule should not be required for direct infringement either.

• Dissent by Judges Linn, Dyk, Prost, and O’Malley

• Would have affirmed the “single-actor” rule of BMC.

Direct vs. Indirect Infringement after Fed. Cir. En Banc Ruling

• Direct Infringement• Remained unchanged.• Strict Liability.• Joint Infringement available

if an agency relationship exists between the parties.

• Indirect Infringement

• Scope of induced infringement widened.

• No longer requires direct infringement as a predicate (no single actor rule).

• Still requires knowledge of a patent and intent to infringe.

• No agency relationship required, but the inducer must cause, urge, encourage or aid the infringing conduct.

Supreme Court• Whether the Federal Circuit erred in

holding that a defendant may be held liable for inducing patent infringement under 35 U.S.C. § 271(b) even though no one has committed direct infringement under Section 271(a).

Oral Argument• Argued April 30th• Petitioners – Limelight and Solicitor General

• Must have direct infringement to have induced infringement

• Should not expand 271(b). Need clarity with respect to 271(a)

• Respondents – Akamai • There is infringement here, whether you affirm the

Fed. Cir., or find infringement under 271(a)

• Should we even be deciding this under 271(b)?• Court concerned that a decision on 271(b) would be

“nullified” by a ruling on 271(a) by the Fed. Cir. on remand.

Decision• Decided June 2nd• Fed. Cir. Reversed

• 271(b) requires a direct infringement under 271(a)

• Fed. Cir., under Muniauction, requires actor to perform all, or exercise control or direction over all, steps of a method claim for direct infringement under 271(a).

• Supreme Court declined to address the Muniauction decision.

Drafting Tips• Draft single-actor claims!!• Draft claims from the perspective of

different participants to a method.• E-commerce transaction involvs a user, a

merchant and a bank• Draft one set of claims that only requires

participation from the user, another that only requires participation from a merchant, and another that only requires participation from a bank.

• Make use of apparatus and system claims.

Medtronic, Inc. v. Mirowski Family Ventures, LLC

571 U.S. ___, No. 12-1128 (U.S. January 22, 2014)

Erik Wright

Burden of Proof• "The burden is always on the patentee to

show infringement." • Under Sea Indus., Inc. v. DacorCorp., 833

F.2d 1551, 1557 (Fed.Cir.1987).

• "Neither [the patentee's] burden to prove infringement nor [the accused infringer's] burden to prove invalidity … ever shifts to the other party… .”

• Technology Licensing Corp. v. Videotek, Inc., 545 F.3d 1316, 1327 (Fed.Cir.2008)

• This law has not changed

Facts I - Parties

DJ Plaintiff• Medtronic, Inc.

• Minnesota Corporation based in and around the Twin Cities

• Manufactures pacemakers

DJ Co-Defendants• Mirowski Family Ventures LLC

• Maryland LLC• Assignee of RE 38,119 and RE 39,897

(US 4,928,688)

• Guidant Corporation• Indiana Corporation based in Carmel, IN• Exclusive licensee of reissue patents

• Boston Scientific• Delaware Corporation based in Natick,

MA• Manufactures pacemakers, owns

Guidant

Facts II - Timeline• 1991 – Medtronic and Guidant enter into

sublicense (“Lilly”) Agreement• 2003 – Medtronic begins paying royalties

into escrow, challenges validity and enforceability of ‘119 patent.

• 2006 –License Tolling Agreement• 2007 – Medtronic brings a DJ action in

U.S. District Court for the District of Delaware, pursuant to License Tolling Agreement

District Court 777 F.Supp.2d 750 (D. Del)

• Medtronic, Inc. v. Boston Scientific Corp. • Complaint filed December 17, 2007; decided

March 30, 2011• Defendants asserted that, as plaintiff, Medtronic

carried the burden of persuasion regarding noninfringement.

• Holding: “As the parties asserting infringement, defendants bear the burden of proof by a preponderance of the evidence.”

• Citing Under Sea Indus and Technology Licensing Corp.

Federal Circuit I695 F.3d 1266, 104 U.S.P.Q.2d 1323 (Fed. Cir. 2012)

• Medtronic, Inc. v. Boston Scientific Corp. • Appealed by Mirowski Family Ventures;

decided September 18, 2012

• In general, the burden of proof doesn’t shift for Declaratory Judgment actions.

• “The substantive burden of proof normally does not shift simply because the party seeking relief is a counterclaiming defendant in a declaratory judgment action.” (Id. at 1327)

BUT…

Federal Circuit II695 F.3d 1266, 104 U.S.P.Q.2d 1323 (Fed. Cir. 2012)

• Special Exception:• “[W]hen an infringement counterclaim by a

patentee is foreclosed by the continued existence of a license, a licensee seeking a declaratory judgment of noninfringement and of no consequent liability under the license bears the burden of persuasion.”

• In short: the existence of ongoing license agreements shifts the burden of proof to the DJ plaintiff.

• Result: District Court decision vacated and remanded

Federal Circuit III - Illustration695 F.3d 1266, 104 U.S.P.Q.2d 1323 (Fed. Cir. 2012)

Accused Infringer

PatentHolder

“Traditional” DJ action

Infringement Counterclaim

Licensee PatentHolder

Medtronic-style DJ action

Infringement Counterclaim

(foreclosed by license)

Supreme Court I - Holding517 U.S. __, Docket No. 12-1128

• Medtronic, Inc. v. Mirowski Family Venture, LLC

• Cert. granted May 20, 2013; decided January 22, 2014.

• Holding: “[W]hen a licensee seeks a declaratory judgment against a patentee to establish that there is no infringement, the burden of proving infringement remains with the patentee.”

• No special exception for ongoing licenses.

Supreme Court II - Rationale517 U.S. __, Docket No. 12-1128

• Legal: 1. The operation of the Declaratory Judgment act

is purely procedural.

AND

2. The burden of proof is a substantive.

∴3. Declaratory Judgment cannot shift the burden

of proof, which remains with the patent holder.

Supreme Court III - Rationale517 U.S. __, Docket No. 12-1128

• Policy: • Avoid post-litigation uncertainty that could arise

in cases with murky facts.• Alleged infringer and patent holder might each

lose on DJ and infringement actions, respectively, leaving the state of infringement unclear.

• Avoid imposing undue burdens on DJ actions in particular, and on patent challenges in general.

• “Licensees may often be the only individuals with enough economic incentive to litigate questions of a patent’s scope.”

Broader Context• The Supreme Court strongly disfavors

placing special burdens on licensees who wish to challenge the patents they license.

• MedImmune, Inc. v. Genentech, Inc. – 549 U.S. 118 (2007): licensees need not breach license agreements before challenging a licensed patent.

• Medtronic v. Mirowski: the Burden of Proof in DJ actions by licensees is the same as in other patent cases. Patent holders have the burden of proving that their patents are infringed.

Takeaway• If you are a licensee, you can challenge

licensed patents under the default rules for Burden of Proof.

• If you are a licensor, your options for blunting challenges by licensees are limited:

• Explicit contractual shifting of burden of proof?

• Probably not, but not addressed in Medtronic

• Plan for litigation:• Careful prosecution• Contract for disclosure by licensee

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