No more bright lines: Supreme Court overturns test for willful patent infringement

In a consolidated decision involving two new cases, the U.S. Supreme Court continued its trend of shunning bright-line rules in patent infringement cases. The cases overturned the “objective recklessness” test that the Federal Circuit established in 2007 as a threshold criterion for finding that an accused infringer willfully infringed a patent.

In Halo Electronics, Inc. v. Pulse Electronics Inc. (consolidated with Stryker Corp. v. Zimmer Corp.) the Court held that Section 284 of the Patent Act gives district courts the discretion to determine whether to award enhanced damages against those guilty of patent infringement, and if so how much. The Court expressed concern that the “objective recklessness” test made it too easy for bad-faith infringers to avoid enhanced damages by simply presenting a reasonable defense to infringement at trial — even if the defense was unsuccessful and the infringer did not act on the basis of that defense. Instead, the Court said that in the context of willfulness, the proper rule is that “culpability is generally measured against the knowledge of the actor at the time of the challenged conduct.”

However, the Court cautioned that district court discretion is not without limits:  “Awards of enhanced damages under the Patent Act … are not to be meted out in a typical infringement case, but instead are designed as a ‘punitive’ or ‘vindictive’ sanction for egregious infringement behavior” and “are generally reserved for egregious cases of culpable behavior.”

Because of this, the Court’s decision may not significantly alter the situations when damages are actually awarded for patent infringement, nor is the decision likely to have much effect on the amounts awarded. However, the decision will likely to make it easier for patent holders to bring patent infringement claims and avoid having those claims cut off in a summary judgment ruling. In addition, the decisions will ensure that truly bad-faith infringers don’t use a bright-line rule such as objective recklessness as a shield to avoid enhanced damages.

European Unitary Patents and Possible Brexit

In recent weeks I’ve had several clients ask me whether they should alter their European filing strategies in view of a potential split between the UK and the European Union. Julia D’Arcy of Harrison IP has been instrumental in helping several of these clients understand the issues involved with a potential “Brexit.” In this guest post, Julia writes:

On June 23, 2016 there will be a referendum to determine whether Britain will leave the European Union (Brexit). The polls are close although most suggest that the UK will vote to stay in the EU. In any case, Britain leaving the EU would have no impact on obtaining Patents through the European Patent Office (EPO). A European Patent Application is governed by the European Patent Convention (EPC), and membership of the EPC is separate to membership of the EU. Indeed, the EPC currently includes a number of states which are not members of the EU, for instance, Switzerland.

It is likely that the European Unitary Patent will finally come into effect in the first half of 2017. A European Patent proprietor will then have the option of validating their European Patent in each territory of interest (as in the current system), or allowing their European Patent to become a Unitary Patent covering all states party to the Unitary Patent Convention. A Unitary Patent (UP) differs from the current European Patent (EP) system as it will have unitary effect for all countries of the EU (with the exception of Spain and Croatia). If Britain votes to leave the EU, a UP will not be effective for Britain, and separate validation of a European Patent into Britain will be required.

If a European Patent proprietor decides to allow their European Patent to become a Unitary Patent, the proprietor will be granted a single Patent that is effective for the whole of the EU (with the exception of Spain and Croatia), as opposed to the bundle of national Patents that are currently awarded. There are pros and cons to this new system. Validity and infringement of a UP will be decided by the Unified Patent Court (UPC) which is in the process of being established. Decisions by the UPC will have a pan-European effect and the Court will have the power to issue pan-European injunctions. This means that UPs are subject to central revocation. Some Patentees are reluctant to allow Patent protection for the whole of the EU to be invalidated with a decision of an untested Court.

If the proprietor validates in each European state of interest, he will have the option of opting out of the jurisdiction of the Unified Patent Court for an initial interim period of at least seven years. This opt out will not be available if proceedings have already been commenced before the UPC. After this interim period, the UPC will have exclusive jurisdiction for any European Patents unless already opted out, as well as for UPs which are incapable of being opted out at any stage.

A single annual renewal fee will become due for a UP as opposed to the multiple renewal fees which will become due if the proprietor validates in each European state of interest. This means that the administration of a UP will be simpler and cheaper where multiple European countries are of interest. However, the proprietor will not have the option of reducing coverage, and the associated cost of renewal payments during the life of a UP.

The existing competences of the EPO will remain unchanged, with the opposition period remaining intact. Decisions by the EPO are valid throughout the territory where the European Patent is valid and may thus encompass 38 countries. Furthermore, countries may still grant their own national Patents independently of the European Patent Office.

Once the UP comes into effect, European Patent attorneys based in the UK will continue to be permitted to prosecute European Patents covering all designations (including Unitary Patents). There is a possibility that the Unitary Patent Convention (UPC) will not go ahead if the UK votes to leave the EU as its economic value would be greatly diminished – the UK is the second largest economy within the EU. However, in my view this is unlikely and the UPC will probably nonetheless proceed.

Julia D'ArcyJulia D’Arcy is a Chartered and European Patent Attorney focusing on he protection of inventions in the chemical, pharmaceutical and medical sectors. Julia’s fields of expertise include biomaterials; polymer sciences; medical devices ranging from contact lenses to stents and grafts; methods to assist in the diagnosis and treatment of a variety of medical conditions; drug delivery systems; ionic liquids and materials including diamond, paper and glass technology.

Do your employee/contractor non-disclosure agreements comply with new DTSA notice requirements?

Magnifying glassHave you updated your company’s form employee and independent contractor non-disclosure agreements lately? Do they comply with the notice requirements relating to “whistleblowers” that took effect May 11, 2016 under a new federal law? If your answer is “no” or “I don’t know”, read on.

The new Defend Trade Secrets Act helps U.S. businesses protect their trade secrets by asking federal courts to order seizure of property necessary to prevent dissemination of the trade secrets. It also permits businesses to seek injunctions and damages in federal court for trade secret misappropriation.

The DTSA also provides some immunity for whistleblowers who use trade secrets by stating that:

An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that (a) is made (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

and

An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.

The immunity section of the DTSA is especially important for employers because it requires employers to provide with notice of the DTSA’s immunity clauses “in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.” The Act defines “employee” to include both actual employees and independent contractors. If an employer does not comply with the notice requirement, the employer’s ability to recover damages against that employee in a federal action for theft or other misappropriation of trade secrets will be limited.

Employers can comply with the notice requirement by updating their form employee and independent contractor agreements to include either the notice requirement or a cross-reference to a policy document (such as an employee handbook) that states the employer’s reporting policy for a suspected violation of law.

For additional information about the DTSA, including the law’s seizure and damages provisions, see this previous IP Spotlight post.

[Image copyright:  bacho12345]

IP3: Industry Patent Purchase Program allows patent owners to offer patents to leading global companies

A new website will give patent holders a limited-time opportunity to offer their patents for sale to some of the world’s largest companies.  According to a press release from Allied Security Trust (AST):

IP3 creates a patent marketplace that brings together a pool of significant money from [participating] companies … to purchase patents in a format that allows sellers to set their own price for their patent assets and reduces the time and complexity usually associated with patent transactions.  IP3 builds on the success of Google’s innovative 2015 Patent Purchase Promotion (PPP), and seeks to attract the submission of high quality patents from patent owners across a wide array of industries during a limited time period.

Participating companies include Google, Facebook, IBM, Microsoft, Adobe, SAP, Ford, Honda , Hyundai, Kia Motors, Verizon,  Cisco, Arris, leading cable service providers, and others. Technologies that the group is particularly interested in include enterprise software, communications, networking, semiconductors, content delivery and cloud computing.

The IP3 portal (ip3ast.com) will be open from May 25, 2016 to June 8, 2016. AST expects that all transactions will be completed by the end of September 2016.

Examiner Ninja website offers free insight into USPTO Patent Examiner data

A new website offers a useful — and free — tool to help patent applicants and their attorneys make data-driven decisions about patent prosecution strategy. The Examiner Ninja website publishes allowance rates, interview effectiveness data, and appeal records for USPTO Patent Examiners in a searchable form. This data can be very useful for applicants and their attorneys who are trying to decide whether an interview, amendment, or appeal may be the best open when responding to a particular Examiner’s rejection.

The data for individual Examiners currently spans an Examiner’s entire USPTO career, while art unit and overall statistics cover the last 15 years. The website plans to roll out additional search and filtering capabilities in the near future.

The website is offered by Justin Roettger, a web developer and attorney in California who gathers the information from several public websites and makes it available in an easy-to-use format.

 

Federal Circuit finds two patents directed to specific database structures eligible for patenting, not abstract ideas

A new Federal Circuit decision gives software patent applicants some insight into when software can be patent-eligible. In Enfish LLC v. Microsoft Corporation (Fed. Cir. May 12, 2016), the court reversed a district court’s ineligibility determination for two patents directed to database structures.  In the decision, the Federal Circuit stated: “We do not read [the Supreme Court decision in] Alice [Corporation Pty Ltd. v. CLS Bank Int’l] to broadly hold that all improvements in computer-related technology are inherently abstract…. Nor do we think that claims directed to software, as opposed to hardware, are inherently abstract and therefore only properly analyzed at the second step of the Alice analysis.”

With this in mind, the Federal Circuit directed that “the first step in the Alice inquiry in this case asks whether the focus of the claims is on the specific asserted improvement in computer capabilities ([such as a] self-referential table for a computer database) or, instead, on a process that qualifies as an ‘abstract idea’ for which computers are invoked merely as a tool.”

The patents at issue were US patents 6,151,604 and 6,163,775.  A representative claim (claim 17 of the ‘604 patent) contained the following limitations:

17. A data storage and retrieval system for a computer memory, comprising:
means for configuring said memory according to a logical table, said logical table including:
a plurality of logical rows, each said logical row including an object identification number (OID) to identify each said logical row, each said logical row corresponding to a record of information;
a plurality of logical columns intersecting said plurality of logical rows to define a plurality of logical cells, each said logical column including an OID to identify each said logical column; and
means for indexing data stored in said table.

Because the claim involved a specific structure of a logical table in a database, and were “not simply directed to any form of storing tabular data, but instead are directed to a self-referential table for a computer database,” the court found that the claims were directed to an improvement in the functioning of a computer.

[A summary of all of post-Alice Federal Circuit, U.S. District Court, and Patent Trial and Appeals Board decisions that found computer-related patent claims to be patent-eligible is available at this post on IP Spotlight.]

Supreme Court to address two intellectual property issues in fall 2016

The U.S. Supreme Court recently agreed to review two cases that involve important IP questions in the Court’s fall 2016 session. One case will consider whether to modify or do away with the long-standing defense of laches in patent infringement cases. The other case will address the extent to which apparel can be protected by copyright.

The doctrine of laches is a defense to patent infringement that protects accused infringers if (1) the patent holder unreasonably delayed in filing the infringement lawsuit, and (2) the accused infringer was materially prejudiced by the delay. If a patentee delays bringing suit for more than six years after the date the patentee knew or should have known of the alleged infringer’s activity, laches may be presumed. In SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, et al. (Fed. Cir. Sept. 18, 2015), the accused infringer argued that a 2014 Supreme Court decision that abolished laches as a defense in copyright cases should also apply to patent cases. The Federal Circuit disagreed and held that the defense of laches is still available in patent infringement cases. The Supreme Court will now resolve this dispute and determine whether the reasoning of its previous decision under copyright law equally applies to patents.

In the second case, the Court will address the extent to which copyright law covers apparel designs. In Varsity Brands Inc. v. Star Athletica, LLC (Sixth Cir. 2015), the U.S. Court of Appeals for the Sixth Circuit ruled that several copyright registrations on cheerleader uniform designs were valid. The designs included various stripes and chevrons, and the Sixth Circuit rejected an argument that those designs were functional and found that the designs were “’pictorial, graphic, or sculptural works’ and not uncopyrightable ‘useful articles.’” The Supreme Court will now address the question: “What is the appropriate test to determine when a feature of a useful article is protectable under § 101 of the Copyright Act?”

However, the Supreme Court also denied petitions in several other IP-related cases. Notably, so far the Court has denied at least seven petitions asking for clarity of the boundaries of patent-eligibility in view of the Court’s previous decisions in Alice Corp. v. CLS Bank Int’l and Mayo Collaborative Services v. Prometheus Laboratories, Inc..  Each of those decisions addressed the scope of Section 101 of the Patent Act, and each decision has resulted in confusion and inconsistency in lower court decisions and USPTO actions that have attempted to apply those decision.