November 29, 2006 by thomason.

Yesterday afternoon’s oral arguments to the Supreme Court in the KSR obviousness case, and last night’s Jimi Hendrix birthday tribute concert at B.B. King’s Blues Bar had some similarities.  Both stages featured celebrated personalities, in costume, who recited and even re-invented written passages which were well-known and long-honored by their audiences.  The main difference, other than the cover charge, was that the groups on the stage at B.B. King’s have intimate knowledge about all elements that each audience came to hear.

What was the smartest, deepest, most-informed line of questioning from anyone on the bench yesterday?  It’s a tie for last.  The colloquy at oral arguments in Hilton-Davis (the non-exclusive test for equivalence), Festo (the flexible bar of prosecution estoppel), and now, in KSR, are reminiscent of one arguing a complex case to a district judge who never has had a similar case.  Sure, he’s beefed up on the topic, but it’s like the Judge has all the parts of the applicable law laid on shelves around him, and still, it’s not obvious to him how to combine their teachings.

The noted points were the Justices’ repeated inquiry about the “motivation” prong, and random comments about how the Federal Circuit has ‘dressed up’ the TSM standards since KSR was granted cert.  Are those at the heart of the matter?  The questions about what “motivation” means, and to whom, struck discordant notes.  May I quote a pre-KSR decision, Ruiz v. A.B. Chance.  “While this court indeed warns against employing hindsight, its counsel is just that - a warning. That warning does not provide a rule of law that an express, written motivation to combine must appear in prior art references before a finding of obviousness.”  The motivation is “to combine” different elements or teachings in the relevant art, and that standard is addressed to a “person having ordinary skill in the art.”  J Breyer, you knew that.

Last, style points.  The Asst. Solicitor didn’t add much.  J Kennedy got him to concede that “teaching suggestion and motivation are valid means of proving obviousness,” and the CJ brought forth that the U.S. has not “suggested an innovation test.”  J Souter asked why to change a rule, and by doing so, launch “100,000 cases” against issued patents “tomorrow morning.”  The Solicitor said, in effect, because it’s just the right thing to do.  Mr. Dabney was willing to let ambiguously worded questions by some Justices do most of his work.  The rest of his argument was against the status quo, rather than offering a clear path forward, other than, well what Sakraida and Deere say, ya`know.  Mr. Goldstein was superlative.  As fast a stones were shoveled into his fox-hole, he dug straight out and re-secured his perimeter.  His responsiveness, and expressions of intellect and clear purpose, outdid all at the bench and bar.

In the end, though, the outcome in KSR is predictably like the broadening done in Hilton-Davis and Festo.  The strict test will be supplanted by a more flexible standard for proving obviousness.  Did J Thomas ever comment?

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November 28, 2006 by thomason.

Yes, today marks the 64^th birthday of the late Jimi Hendrix.  Is there any better way to close off a day at the Supreme Court hearing on the KSR v. Teleflex obviousness case, than to Metroliner to Manhattan for tonite’s tribute concert at B.B. King’s.

Let’s mark the birthday too with a note about USDJ Kaplan’s recent decision in Experience Hendrix v. Chalpin, over the auction at Ocean Tomo of the masters of the Hendrix discography.  I recall generally, but not the specific figure of, the balance that Jimi had in his bank account on the date of his death.  In the Hendrix memorabilia, once displayed at the R&R Hall of Fame, was that bank statement, and his closing balance was something on the order of $1200.  Whatever that sum, it is miniscule compared to what others have earned from Hendrix’ body of work.

The case against Chalpin arose from a 1965 “one-page recording agreement,” and a 1973 consent decree in the High Court of London, by which certain “master recordings” were to be surrendered to the Hendrix estate, along with a large royalty payment.  The decree became a domesticated judgment in New York Supreme, but the royalty never could be collected. 

When Ocean Tomo offered the works for auction, Experience Hendrix sued and sought a TRO and order of attachment.  The auction proceeded, and someone bid $15M for one of the three lots offered. 

Judge Kaplan’s decision contains many stinging passages, aimed at one who sounds like the stereotype shady “agent” for entertainers.  In his dealings with other performers, Mr. “Chalpin used shell companies in the past to avoid payment obligations.  Chalpin’s testimony about a “great many … matters was vague, punctuated by protestations of lack of memory, and internally inconsistent.”  His sworn “testimony does not inspire confidence” and the Court found that Chalpin had “deliberately and knowingly testified evasively in order to conceal the truth.”   It thus was no surprise that an attachment and injunction were ordered.  In all, the case and its participants reprised their homage to the ring cycle of money corrupting art, until the artist is left with none.  Only the artist’s songs remain uncorrupted.

“The angels will spread their wings, spread their wings
Good and evil lay side by side while electric love penetrates the sky.” 
RIP- Jimi Hendrix

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November 21, 2006 by thomason.

My plan is for some leftover turkey and dressing, but no gels such as mayo, to be packed when traveling to D.C. for next Tuesday’s oral argument in KSR v. Teleflex.  Predicting what bit of patent lore or precedent that Roberts’ Robed Reviewers may seize upon is mysterious and nonobvious.  The game though comes down to some fundamentals.

Is all progeny of Graham v. Deere wrong, since it fails to follow Sakraida?

What is favored, the predictability of the TSM standard, or the ability to reach invalidity at the summary judgment stage?

Should §103(a) be interpreted with a view to whether a patent is obvious based on the skill level in the art, or obvious because the prior art presages the invention?

Even if the Engelgau patent has an invalid claim, does this case provide an appropriate vehicle to reconfigure 40 years of obviousness precedent?

The reply brief of KSR stridently challenges anything inapposite to its reading of Sakraida and Black Rock.  The Petitioner too argues against the clear and convincing burden on the party asserting obviousness, and argues against some Graham v. Deere inquiries being considered “factual” matters, in the context of summary judgment practice.  I find it had to believe that this Court will toss those foundational aspects of the law, even if it were to rule that the TSM test is not essential to an obviousness declaration.

Another argument in Petitioner’s Reply, which is novel but dubious, is that “skill” should be the ultimate test of obviousness.  KSR urges that the “degree of skill needed to solve an objectively defined problem, not the absence of motivation [to combine]” should be dispositive. If so, then every case turns on who can win on the “level of skill” issue.  The infringer wants a high level, since such a person would have skill enough to combine known elements.  Can “invention” be equated simply to “skill”?  If so, then persons, who lack the education or experience, indeed, persons with little skill in the art, would make inventions that smarter, wiser, more educated persons would declare “obvious.”  Adopting Petitioner’s ‘objective skill’ test would mean that only persons of high skill could invent non-obvious subject matter; even then, persons of higher skill could argue it was obvious.

The TSM test is workable, predictable, and grounded on at least 40 years of precedent.  Everything else that has been proposed in the briefs would be unworkable, and would tend to promote unpredictability in patent prosecution and in validity litigation.

Now, I need to pack - is gravy a liquid or a gel?

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November 21, 2006 by thomason.

Defendant in CCA Global v. Carpetmax Flooring Center (W.D. KY) must wonder where he can catch a break.  First, he buys a business with an ongoing, undisclosed infringement, and as a result, personally liability is imposed.  Then, his counsel misses the notice of appeal deadline, and the district court finds no “excusable” neglect.  And your clients thought they were having a tough quarter.
Paul Fuller believed Ken Crandall’s statement that he had a CarpetMax franchise license for part of Southern Indiana.  Together they formed a corporation, KP Investments, which operated a CarpetMax store in that locale, which Fuller ran day-to-day.  Turned out that Crandall was not a licensee, and the use of the CarpetMax trademark was unauthorized.  Once this became known, Fuller changed the store name, and bought out Crandall.  Still, the owner of the trademark sued for infringement.  Fuller relied on the defense that every businessperson thinks they have - - no liability because the infringing actions were done by the corporation.  CCA pressed for personal liability against Fuller, and won.  The Court ruled that whether Fuller “knew the use of the mark was unauthorized is of no import.”  His day-to-day operation of the CarpetMax store “were not simply actions of a corporate officer.”  Thus, Fuller was held personally liable for trademark infringement.

Then, due “to a misunderstanding between Defendants’ trial counsel and Defendants’ newly assigned appellate counsel” about the deadline for appealing, the 30-days passed without a notice being filed.  On their motion to extend under F.R. App. Proc. 4(a), the District Court refused to exercise its discretion to extend.  It found that the failure to file the notice of appeal was “undoubtedly the result of ‘inadvertence’ and/or ‘mistake’.”  Even so, that neglect was not “excusable” since it was due to an “understandable” mistake in calculating the due date, and an “understandable miscommunication” between trial and appellate counsel.  If such neglect were “excusable,” then the Court said every act of neglect would be too.

One wonders why counsel so often wait until the due date to file.  It is easier to withdraw a notice of appeal than it is to get one filed out of time.  Sure, there is gamesmanship in waiting to see if the other side will appeal, especially in patent cases with counterclaims.  Still, the worst outcome of that ‘game’ is less painful than that of forfeiting the right to appeal.

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November 16, 2006 by thomason.

Perhaps the CAFC read my 10/24 blawg post, which complained that they gave an unprecedential burial to their affirmance of a summary judgment based on the preclusive effect of the Local Patent Rules in the N.D. California.  To redress my complaint, another CAFC panel issued O2 Micro Int’l Ltd. V. Monolithic Power Sys., Inc., which gives precedential weight to a summary judgment ruling, which refused to consider “supplemental” expert opinions presented after the deadlines in those Local Rules.  It too holds that interpretation of Local Patent Rules is governed by Federal Circuit principles, not those of the regional 9th Circuit.

These cases may embolden district judges to be tough on late-offered expert opinions, be those titled “supplemental” or “revised” or “rebuttal” etc.  How often in patent cases does one side hand-deliver such a report to its opponent’s hotel ‘war-room’ just nights before the expert testifies?  One side always has the argument that the late report is barred by the Case Management Order or the rules, but how often is it wholly precluded?  The belief was that judges prefer to let it in, instead of barring it and seeing that become ground for a successful appeal.  This O2 Micro case, as well as the unreported SafeClick case, give firmer ground to believe that preclusion of late reports will be upheld by the CAFC.

I did feel some “objective” regret, viz. unrelated to these specific cases, because in both the patentee loses on infringement, and loses the argument that late-disclosed facts warranted revision to its infringement theories.  It is not uncommon for a patentee to be denied full access to the accused infringing product or process, or at least delayed until at or near the time for serving its infringement contentions and claim chart.  The accused will set up obstacles about confidentiality, may refuse to produce “all” models and limit production only to embodiments that the patentee can identify in its request for production.  The defendant often is not deposed until after that delayed production about the potentially infringing items.  Und so weiter.

The strategic concerns for the patentee are that committing to one theory of claims interpretation and infringement too soon is likely to provoke a later wholesale revision of those theories; waiting up to the CMO deadlines before committing leaves the patentee’s discovery unfocused and may enable the infringer to establish its “theme” of the case first; and further waiting, until after full disclosure about the accused infringement, may result in preclusion of a later-developed theory.

One thought is to ask that the CMO not preclude revision of the infringement contentions made “thirty days after the Markman” ruling, which should cause no prejudice, and even to ask for a right to amend “ten days after the opponent’s Rule 30(b)(6)” deponent testifies about the accused infringement.

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November 14, 2006 by thomason.

Perhaps someone could indexed the performance and portrayal of lawyers on TV shows weekly.  There is similar index for how vile each week of TV was, compared to other weeks and years.

Last night’s episode of Studio 60, which continued a story from last week, portrayed a California attorney trying to represent a cast member in a small town in Nevada.  The attorney makes many missteps, and his crim pro I arguments are contrived or scenes a faire from lawyer shows.  Then, as the cast member is about to face judgment, a studio executive shouts “I too am a lawyer,” tries to intervene, and is cuffed and charged with contempt.  Then, when the cast member asks about the attorney they had brought to represent him, the executive shouts “he’s a copyright attorney.”  And the accused says, ‘oh, good!’

On the index (yet to be named or compiled) this episode portrays lawyers, and copyright lawyers in a bad (but not necessarily, false) light, and so, brings poor repute to the IP bar.  What’s next, Shatner in women’s skivvies on “Boston Legal”?

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November 10, 2006 by thomason.

By now, surely you’ve read that “patent troll” has no accepted and ordinary meaning (what to do, request a Markman hearing?).  Most of the attributes are defined perjoratively, but each new case or ruling reasks if those perjoratives apply.

A recent jury verdict, of not infringed, invalid and unenforceable, was noted in Barry Fiala, Inc. v. Stored Value Sys., Inc., Civ. 02-2248 (W.D. Tenn).  Some of the ‘tips from the trenches’ were that it might take 4 years of litigation and 15 days of trial to determine whether a cardboard “panel” for holding a gift card infringes a valid patent, or not.  Fiala has a series of these suits, several in Tennessee and others in Minnesota, which accuse distributors of gift cards of infringing his `029 patent that claims a card holder “having an outer perimeter” and methods “to activate” the gift card while it is “secured” in that packaging.  It compares to the cardboard hang-tag that the clerk bends back, exposing the magnetic strip, when your calling card or -tunes card is activated.

Some would argue that the innovation of the encoded gift card should not be burdened with infringement suits over the cardboard hang-tag used to merchandise it.  For that, or other reasons, a jury in Tennessee gave a verdict against Fiala.   The docket in that court shows that several other suits were filed, then sat for 90 to 180 days, and then were dismissed, which suggests that Fiala got settlement value for his patent.  Defendant Stored Value Systems chose to litigate, and won at trial.  One assumes that the hang-tag, fold-back, etc., packaging is essential to the business of both parties, and so, defending the suit and the validity of the patent was necessary.  Even so, it took years, over 400 docket entries, and a long trial.  Was this a troll case?  If it’s what you patented and sell, then who can blame you for litigating it.

Before issuing the next, unqualified, freedom-to-practice letter, it is fair to ask the client, “what packaging or distribution means will be used to market this unique invention,” and to ask those around you, “did we search that art?” 

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November 1, 2006 by thomason.

“In the spirit of the end of the year (and the slow down … work), we want to remind[] you of the … document retention policy . . . “  That quote comes from the 2nd Circuit’s ruling in U.S.A. v. Quattrone, where they recite the direction to CSFB staff about the retention/destruction of records.  After reading the decision that chastises the VC firm, Hummer Winblad, for an ambiguous direction to delete e-mails, comparisions between that and the directives in the Quattrone and Arthur Andersen cases are apparent.

Judge Patel, in another In re Napster, C-MDL-00-1369 (N.D. Cal. 10/25/2006), C-MDL-00-1369 (N.D. Cal. 10/25/2006) ruling, finds that “Hummer deleted e-mails which it had a duty to preserve and produce.”  Sanctions of an adverse inference instruction, some preclusion, and attorneys fees were imposed.  In this case, as well as the criminal actions against Quattrone and Andersen, the intent of the directive, or reminder about policy, was ambiguous.  The demonstrable result of the notice, though, clearly was deletion of discoverable information.

When an “email to nine Hummer employees” comes from “Hummer officer Ann Winblad” about a present need to “reinforce compliance” with document retention policy, then that is more compelling than an e-mail received from some IT-meister resident at the server farm.  When that intro about employee “compliance” is followed with five bullet points containing the verbiage “do not retain” and “to delete,” then again, it is fairly compelling to the “employees” who get it.  It seems that the employees do ‘get it’?

In the Quattrone case, the reminder was of the five categories of documents in a proper CFSB file, and that for “greater compliance with these policies, no file categories other than those [five] may be created .”  Just so the employees ‘get it’, the reminder instructed, “what does this mean? “Generally speaking, if it Is not (i) - (v), it should not be left in the file.”  One read is, that what “is not” among the five, is contraband, so disappear it.  The Winblad ’reminder’ largely conforms to the missive quoted in the Quattrone case.  If anything, Winblad added the line “it is your responsibility to delete your handled e-mails immediately.” Capece?

Much of what Judge Patel heard argued about was over any indicia of intent, or of innocence, to be gleaned from the reminder & directive.  That, of course, is at the heart of the Quattrone and Andersen cases.  With both criminal and civil sanctions, there is the SNAFU defense or dodge, or as Judge Patel posed it, is this a ”willful deception or simple incompetence.”  Hummer contended that non-production of Winblad’s “reminder” e-mail (not the e-mails deleted as a result) was due to “inadvertence,” or a “mistake” about that e-mail being privileged.  The objective facts were that the firm lacked a clear plan to preserve and avoid deletion, and that, if Hummer thought it to be privileged, why was it left off the privilege log. 

One overriding issue is the “duty” to preserve, which attaches when litigation is known or expected.  On that point, Hummer Winblad was late being added to the Napster cases, and the first case was dismissed.  Thus, the duty was on-again-off-again, arguably.  That reminds one of the fire-line set out in the Arthur Andersen ‘reminder’ message, “[I]f its destroyed in the course of [the] normal policy and litigation is filed the next day, thats great. . . . [W]eve followed our own policy, and whatever there was that might have been of interest to somebody is gone and irretrievable.”  374 F. 3d 281, 286 (CA5 2004).”

This decision is another where, one wonders whether, the cover-up caused more harm than the deletions.  Judge Patel concludes that it was “not shown that Hummer acted willfully in destroying its e-mails, and there is evidence that the actual number of e-mails lost is small.”  The opinion ends with an award of counsel fees, with a reminder to plaintiff’s counsel that the amount sought must be “reasonable {italicized by Judge} in light of the degree of Hummer’s culpability.”

E-discovery is expensive, as is paying lots of associate time to log and review files then for partners to oversee that review.  It doesn’t make much sense to secret, or worse to destroy e-mails that are not that harmful.  When those worms crawl out of the apple, then it becomes the cover-up that poisons the entire barrel.

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