September 27, 2007 by thomason.

My Oct. 11 `06 post overstated the utility of Rule 11 to excise cases that plead infringement like a mass tort by a class of internet merchants.  It was overstated, as a presently available remedy, because now the CAFC has reversed the R. 11 sanctions assessed in Eon-Net L.P. v. Flagstar Bank.  This non-precedential opinion instructs that a Rule 11 determination cannot be made about infringement allegations until after the Court performs a Markman analysis.

The Rule 11 remedy against mildly-researched infringement claims by patent trolls should be even more available after the Supreme’s ruling in Twombly.  The CAFC panel in Eon-Net noted that the District Judge found that “Eon-Net failed to present facts demonstrating infringement, identify [Flagstar] products that might infringe…, ‘proffer …’ or apply its [claims] construction to” allegedly infringing products.  Those shortcomings might have passed muster under the former “any set of facts” pleading standard, but not the present Twombly standard of alleging facts sufficient to make the case “plausible” and not “speculative.”

How then to rid the docket of thinly-pleaded claims, with generalized allegations of infringement, against no identified structure or product?  The CAFC was comfortable in taking away Rule 11 as a tool to triage trolls from the truly-infringed.  “[W]here a district court construes a patent without following the necessary steps, we should remand for …the district court …[to] follow the appropriate steps.”

The CAFC panel left undisturbed the finding of no pre-filing claims construction by Eon-Net, which had not “reasonably evaluated the `687 patent’s claims.”  It remanded for the district judge to do the claim construction, which the plaintiff essentially never did.  Only after a Court has construed the claims, can it adjudge the inadequacy of the plaintiff’s pre-filing read of those claims.  That mandate seems illogical, as though a Court is obligated to evaulate what evidence a plaintiff would need before ruling that suit was filed before the plaintiff had the evidence it needed.

Of course, the Eon-Net ruling is “nonprecedential.”  If, however, there is no CAFC precedent on how Rule 11 imposes a pre-filing obligation to perform a claims interpretation and apply it to specific subject matter, then a nonprecedential ruling has to be treated as near-gospel on the subject.

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September 26, 2007 by thomason.

Yesterday, a KC jury hit Vonage with a $69.5M judgment for infringing Sprint’s patents.  That was on top of a $58M award to Verizon for infringement by Vonage.  Today, the CAFC tossed the $58M award, but on grounds that will result in reinstatement of a fairly large chunk of that award.

Talk about ‘good-news, bad-news.’  Also, will Wall Street find reason to retake equity positions in Vonage, which stock price has been hammered down to SCO levels?  Only a CPA, a patent attorney, and a market analyst, each have at least an ordinary level of skill in their art would be enabled to assess that investment decision.

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September 25, 2007 by thomason.

As if the Supremes hadn’t heard enough patent cases to span a lifetime tenure, now, cert was granted to review Quanta v. LG.  The petitioned argued that the CAFC has been making law rather than following Supreme Court precedent.

More to come on this, but this September my bets are against patentees in the CAFC, and against the CAFC in cases reviewed by the Supremes.

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September 20, 2007 by thomason.

If I were a betting man, then virtually all of the CAFC rulings in Sept. indicate that it’s wise to bet against the patentee.  The patentee - the one who spent the R&D and market-entry money, took loans, diluted the stock, paid for the patent prosecution, etc. - him, bet against him being rewarded in the CAFC.  Consider all the rulings in Sept. 2007 on infringement and validity, as reported by the CAFC.

Patentee wins in Forest v. IVAX - validity affirmed.

Patentee loses in:
Data Encryption - noninfringement affirmed
Toshiba v. Juniper - noninfringement affirmed
Automotive Tech - invalidity and noninfringement affirmed
Gillespie v. DYWIDAG - reversed infringement ruling
Aventis v. Lupin - reversed infringment and validity ruling
L.B. Plastics - noninfringement affirmed
Arminak - noninfringement affirmed
Acco v. ABA Locks - reversed infringment ruling
Daiichi Sankyo v. Apotex - reversed: patent invalid
Adenta v. Orthoarm - invalidity affirmed
MEMC v. Mitsubishi - noninfringement affirmed
BMC v. Paymentech - noninfringement affirmed

Sure, that survey/snapshot is unscientific support for most any broad conclusions.  But geez! 12 to 1!  Who’d take those odds?  When asked, before any patent application has been filed, ‘if I get a patent, what are my chances of keeping competitors from copying it?’  To give answers, like “50-50″ or “patents are presumed valid by law” or that ‘Congress set up a special court for patent cases that assures patentees don’t get home-towned,’ may be to fail to disclose material information to a person seeking worthwhile advice from someone skilled in patent law.  At least tell them that their odds can’t be any worse that patentees whose appeals were decided by the CAFC in September.  New crop of law clerks?

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September 19, 2007 by thomason.

Several mysteries were exposed by the movie Borat.  Non-actors were so mystified by the actor playing Borat, that they freely acted foolishly in what they believed was a documentary.  Borat learned that Pamela Anderson had shared her mysteries, such that his desire for her to be his bride was negated (those who love can be the last to know what isn’t a mystery to everyone else).  All these, and other mysteries, were evaluated by USDJ W. Allen Pepper, Jr., (N.D. Miss.) in dismissing some of the damage claims pleaded by Ellen Johnson, who appears in the scene at the Pentecostal church where Borat acts like he is having a religious conversion (to assuage his despair over Pamela being inutile as a proper bride).

The opening analysis reflects on the new standard for Rule 12(b)(6) motions, which require factual allegations adequate to present a claim that is not speculative.  It moves from that threshold, noting that accompanying the briefs were tracts from the “World Christian Encyclopedia,” a copy of “Clearance and Copyright: Everything the Independent Filmmaker Needs to Know” and a DVD of the movie Borat.

The decision winnows the claims down to misuse of plaintiff’s likeness for commercial gain without her permission.  It was sort of clear that no model release was signed by plaintiff, or that one valid only in Kazahkstan was obtained.  The “defendants did not obtain the plaintiff’s explicit permission to be featured in any other film except a religious documentary that would be shown in a foreign country.”

Apparently the book “Everything An Independent Filmmaker Needs to Know” needs some revisions in the chapter on model releases, to cover non-documentary, non-religious, films to be commercially exploited in the U.S., as construed under the common law of Mississippi.  In the section of the opinion on commercial misuse of likeness, the mystery of who that guy is, whose picture is an frame when you buy it.  It’s Harbin, from the case of Harbin v. Jennings, where ”Harbin, a High School student sued a photographer and a picture frame company [over] use of Harbin’s photograph in thousands of picture frames to be widely distributed and displayed in numerous retail establishments.”  That guy - but, I digress.  

Based on that precedent, Judge Pepper declined to dismiss Johnson’s claim that her likeness was misappropriated for commercial use without her permission.  He did dismiss her “intrusion upon seclusion” claim, despite its iambic octameter.  Not much was stated about the claim of gross negligence, and so, that claim stayed in the case too.  Will that end with the instruction: “Members of the jury, if you find that Borat was ‘gross’ and that the described scenes (as viewed consistent with standards of decency prevailing in Mississippi) were emblematic of ‘negligence,’ then you will check the ‘gross!!!’ box on the verdict form provided.”

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September 13, 2007 by thomason.

Others can comment on the prosecution side of the patent reform debate.  Developments in patent litigation, which the recently-passed House bill 1908 may provoke, are more in my field of interest.  Specific attention was given to the amended provisions on venue, interlocutory appeals, and inequitable conduct.

The bill would extensively amend 28 U.S.C. 1400(b), so that venue for patent cases could be only those locales with “substantial” connections to the parties, events, or operations.   One can try to predict how courts might apply the “substantial” standards in the amended provision.  Venue would be proper if the defendant has its “principal place of business or is incorporated” there; or, if there, the defendant “committed a substantial portion” of the infringing acts “and has” a business located in that venue that “constitutes a substantial portion of defendant’s operations.”  A patent plaintiff is supposed to sue in a venue where it does “substantial” R&D or manufacturing “related to the patent” in suit.  Courts have applied a substantial presence standard to personal jurisidiction questions, but not to patent venue issues.  About the only place in the present statute that uses similar language is 35 U.S.C. 271(f) as to supplying a “substantial portion of the components” of a patented combination.  It thus is unknown what makes activity “substantial” enough to secure venue. 

A prohibition in the venue provision of the bill would ensure that no party shall “manufacture venue.”  Another implies that, even if there was a last-minute run to file cases before the statute became effective,  cases filed after 7SEP07 “shall be transferred” to a venue meeting the statute’s new precepts of “substantial” nexus.  In my mind’s eye are ‘available to sublet’ signs in Marshall, TX.

A provision would amend 28 U.S.C. 1292 to allow interlocutory claim construction rulings to be appealed, if the district court allows that in its “discretion.”  A district court may grant leave for an interlocutory appeal, but that does not ‘manufacture’ appellate jurisdiction, and the CAFC is not required to review the ruling.  Anyway, Markman is so nineties,  now everyone plays the new KSR game.

Inequitable conduct gets some needed specificity in the as-passed version of H.R. 1908.  The threshold standard of materiality is art that supports a “prima facie finding of unpatentability,” which is “not cumulative” to art “of record.”  {Quare: can art be both cumulative and indicative of unpatenability?}.  The bill promotes employment of former examiners, who now can work as experts on whether “a reasonable examiner would have made” that “finding of unpatentability.”  Q: Were you formerly a patent examiner? A: Yes.  Q: Were you reasonable? A: Yes.  To Bench: I move to have him accepted as a prima facie expert.

The second test of “materiality” is withheld information that “refutes or is inconsistent” with arguments for patentability.  One unclear aspect is that the withheld information be “otherwise material.”  If that means material enough to support a finding of unpatentability, then less material art being withheld may be “inconsistent” with an argument, but not to the point of being inequitable conduct.

Some study will be needed to divine the two burdens of proof.  The “defense” must be “established by clear and convincing evidence,” but the materiality standard, i.e., the prima facie proof of unpatentability, needs only “a preponderance of the evidence.”  Also, prima facie was a term chosen advisedly, since when evaluating it, “rebuttal evidence shall not be considered.” 

The reforms on the intent element are that “specific facts beyond materiality …must be proven” to establish intent, such as, “circumstances that indicate conscious or deliberate behavior” to mislead or deceive.  In recent CAFC caselaw only a few cases had evidence, apart from materiality, that would prove “conscious or deliberate” misconduct.  Moreover, it’s expensive to discover this evidence.   No express burden is set out for proving “intent” to “mislead or deceive the examiner,” but again, “Circumstantial evidence may be used” to prove intent.

The bill does not expressly allocate the issues are those for a jury or for a judge to decide, but apparently, the jury could decide all the issues, and leave to the court to “balance the equities to determine which” remedy to impose.  Moving the ‘balancing’ away from the evaluation of materiality and intent, and over to the selection of remedy is an excellent reform.  The present “sliding scale” applied to materiality and intent is hopelessly vague, maleable, and effectively unreviewable.

In addition to the former examiner full-employment provision, the bill includes another aspect to grow domestic service industries.  It enables the USPTO to require by regulation that applicants “submit a search report.”  That prior art search “must be performed by …individuals who are United States citizens or by a commercial entity that …employs United States citizens to perform such searches.”

The bill is a good start to reforming and standardizing these litigated issues.

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September 7, 2007 by thomason.

The morning started off with a read of the non-precedential CAFC ruling in Data Encryption v. Microsoft & Dell.  The best part was that it’s non-precedential, for as such, it does not add to the murky matter of ‘apparent’ disavowal of claim scope.

One claim at issue recited no limitation on “maintaining” data in encrypted, or in unencryted format, in a buffer.  The CAFC agreed that “it is true that claim 5 makes no mention of how data is maintained in” the buffer.  Even so, by definitional fiat, the “maintaining” element was added to claim 5, then defined so narrowly that the claim was not infringed.  It’s not what you said, it how you didn’t say it.

The claim scope was disavowed by a sentence, taken IMO out of context, from the specification.  There described was ”all” data in the buffer being “maintained” in encrypted form.  From that, a disavowal was imposed as to systems where data in the buffer is unencrypted.  Thus, the defendants did not infringe.

One bromide commonly recommended to treat disavowal, or its symptoms, was to add “in the preferred embodiment” to every statement in the specification that containing a limiting term, such as all, or every, or always, or only.  Turns out, that remedy has a limitation similar to sunscreen - if you miss a place, that’s where you get burned.  In the 200 or so words that precede the disavowal sentence in the Data Encryption patent, there is repeated use of “in the preferred embodiment.”  The disavowing sentence was “All data subject to encryption by operation of the present invention is maintained in an encrypted state in the buffer pool.”  Within a dozen or so sentences preceding that, the specification states:

“In accordance with the preferred embodiment of the present invention, data is encrypted in individual blocks corresponding to the smallest buffered block size.

“In the preferred embodiment, as is typical of standard Unix operating system variants, the minimum buffered block size is 256 bytes.

“The actual data value being written is utilized, in the preferred embodiment of the present invention, as…
In accordance with the preferred embodiment of the present invention the unencrypted and encrypted blocks 82 and 88 are one and the same.”

One wonders whether the claim construction inquiry is “informed by” references from the specification, or are express elements instantiated by examples gleaned therefrom.  The implied disclaimer rule works likes the small-print terms on the back of a triplicate carbon form contract, which rear up with ugliness later.

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September 5, 2007 by thomason.

A blawg entry, which originated as wry plan to turn the KSR v. Teleflex decision into a game structured around the notion of six degrees of separation, turned more thoughtful once my wry mind opened to the matter of how inventions originate from among those “having ordinary skill in the art.”

In the game scenario, participants would start with a patented invention, then deconstruct it, like a house of cards, into its elements, which were well-known.  If that could be done in six or less steps, then a point was awarded.  The fabulous board game so envisioned was tossed aside, once thought was given to the forms and flow of inventive development. 

At the ends of the spectrum are well-populated R&D staffs, and one nutty dude in his garage.  But both of those norms imply working alone, in secret from competitors or from all others.  One notion of obviousness is that an idea or element from a related field of art would have been obvious to combine with prior art within the skilled persons’ field.  It’s that notion of borrowing that may earmark what is invention and what is obvious. 

Those more skilled than I have studied in detail how similar, but unrelated artisans pass ideas around, which leads to one or more of them achieving an innovation.    Uzzi and Spiro, Collaboration and creativity: The small world problem, 111 Amer. J. Sociol. 447 (2005) analyzed collaboration among creators of past Broadway musicals.  
That study provoked a recent study of how companies, indirectly linked in a network of strategic alliance relationships with only a few degrees of separation, are more innovative.  Profs. Schilling (NYU) and Phelps (U. Wash), Interfirm Collaboration Networks: The Impact of Large-Scale Network Structure on Firm Innovation, MANAGEMENT SCIENCE, Vol. 53, No. 7, July 2007, pp. 1113-1126.  
It concludes that firms more connected to others are more creative, which influences the number of patented inventions they obtain.  Phelps and Schilling conclude that  “companies that network and form strategic alliances are more creative and develop more patented inventions than those that don’t.”  Their study revolves around “clustering,” and “reach” as factors derived from “publicly reported contractual alliances.”  “The structure of alliance networks influences their potential for knowledge creation,” and so, patent output. 
Clustering is a measure of redundant paths between companies that represents their level of cooperation, and pathways for information to be passed along quickly and accurately.  Reach represents the likelihood, speed, and integrity of knowledge transfer between clustered companies.  The profs’ abstract for their study notes that “firms embedded in alliance networks that exhibit both high clustering and high reach (short average path lengths to a wide range of firms) will have greater innovative output than firms in networks that do not exhibit these characteristics.”

Once they had computed and assessed their longitudinal study of the patent performance of 1,106 firms in 11 industry-level alliance networks, the “results indicated support for [their] argument: the combination of clustering and reach was associated with significantly higher firm patenting.”  Much of what these Professors set out was way over my understanding of statistical relationships and analysis, but I accept the premise, and so accept the research that underlies their conclusions. 

Trouble is, that proof of collaboration, or more pointedly of cross-pollination, may prove the sort of obviousness, or the lack of inventive separation, that the KSR decision set forth as among the reasons to deny patents to what were believed to be inventions.  The decision does draw doubt toward the professors’ validation of their “dependent variable: patents” based on earlier research that “Patents provide a measure of novel inventions that is externally validated through the patent examination process.”

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