Review of Case Law and Legislative Developments in Patents

1. Fordham IP Law Institute 19th Annual Conference Review of Case Law and Legislative Developments in Patents Dimitrios T. Drivas 28 April 2011

2. Trends: 2011 • Congress: Patent reform gets closer? • Supreme Court: Continued interest in patent cases • Federal Circuit: En banc review to address significant issues

3. Legislative Activity: Patent ReformAmerica Invents Act – Patent Reform Act of 2011 • Differs from previous attempts at legislative reform since litigation related provisions are largely absent • Senate passes S.23 (by 95-5 vote) on March 8, 2011 • First-to-File system • Narrow Grace period for inventor related disclosures • Derivation action when PTO issues two patents that claim same invention • Post-Grant Review: 9-month window to petition that claim is “more likely than not” unpatentable. No prior user rights • Inter-partes review: threshold is “reasonable likelihood” that petitioner would prevail • Pre-issuance submission of relevant prior art by third parties • PTO has authority to set its own funding • Failure to obtain advice of counsel is not evidence of willful infringement • Prohibits failure to develop best mode as grounds for invalidity

4. Legislative Activity: Patent ReformAmerica Invents Act – Patent Reform Act of 2011(continued…) • House introduces H.R. 1249 on March 30, 2011, with some differences • Judiciary Committee votes 32-3 in favor of amended bill on April 14 • Amended HR 1249 differs from Senate Bill S.23 primarily in details of post-grant opposition system and prior use defense • 35 U.S.C. § 273 defense of prior commercial use not limited to method claims • Best mode requirement reinstated (but not available as a defense) • Supplemental Examination – not available where fraud on patent office was committed • Re-exam procedure for business method patents • PTO fee setting authority sunsets in 6 years • False marking litigation 3-year safe harbor after patent expires

5. America Invents Act – Grace Period • Narrower than previous proposed patent reform legislation • § 102 “(b) Exceptions • “(1) DISCLOSURES MADE 1 YEAR OR LESS BEFORE THE EFFECTIVE FILING DATE OF THE CLAIMED INVENTION. A disclosure made 1 year or less before the effective filing date of a claimed invention shall not be prior art to the claimed invention under subsection (a)(1) if • “(A) the disclosure was made by the inventor or joint inventor or by another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor; or • “(B) the subject matter disclosed had, before such disclosure, been publicly disclosed by the inventor or a joint inventor or another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor.

6. Supreme Court: Patentable Subject Matter • Bilski et al. v. Kappos, 130 S.Ct. 3218 (2010) • Supreme Court (5-4 decision): • Claimed process: method of hedging risks in commodities trading • Court’s precedent provides three exceptions to § 101’s broad principles: “laws of nature, physical phenomenon and abstract ideas • Business methods not per se unpatentable • Machine or transformation not the exclusive test for patentability

7. Supreme Court: Invalidity, Burden of Proof • Microsoft Corp. v.i4i Limited Partnership, Supreme Court No. 10-290 (Chief Justice Roberts, recused) • Oral argument April 18, 2011: Question Presented: The Patent Act provides that "[a] patent shall be presumed valid" and that "[t]he burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity." 35 U.S.C. § 282. The Federal Circuit held below that Microsoft was required to prove its defense of invalidity under 35 U.S.C. § l02(b) by "clear and convincing evidence," even though the prior art on which the invalidity defense rests was not considered by the Patent and Trademark Office prior to the issuance of the asserted patent. The question presented is: Whether the court of appeals erred in holding that Microsoft's invalidity defense must be proved by clear and convincing evidence.

8. Microsoft Corp. v.i4i Limited Partnership (continued…) • Microsoft appealing $290 million infringement verdict from E.D. Texas, aff’d 589 F.3d 831 (Fed. Cir. Dec. 22, 2009) • Amicus briefs: 20 support Microsoft (including generic pharma); DOJ, BIO, IPO support i4i • Microsoft: 35 U.S.C. § 282 “presumption of validity” does not specify heightened (clear and convincing) standard for proving invalidity, particularly for “new” prior art – merely shifts the burden of proof to challenger; no justification for departing from default preponderance standard • i4i: § 282 codified prior Supreme Court decisions stating that presumption of validity imposed heightened standard; CAFC has consistently applied (and Congress has acquiesced to) heightened standard; burden of proof can be met more easily with “new” evidence; lower standard marginalizes PTO

9. Supreme Court: Inducing Infringement • Global-Tech Appliances, Inc. v. SEB S.A., Supreme Court No. 10-6 • Oral Argument: February 23, 2011 Question Presented: Whether the legal standard for the state of mind element of a claim for actively inducing infringement under 35 U.S.C. § 271(b) is “deliberate indifference” to a known risk that an infringement may occur, as the Court of Appeals for the Federal Circuit held, or “purposeful, culpable expression and conduct” to encourage an infringement, as this Court taught in MGM Studios, Inc. v. Grokster, Ltd., 545 U.S. 913, 937 (2005).

10. Global-Tech Appliances, Inc. v. SEB S.A. (continued…) • Federal Circuit (594 F.3d 1360): “deliberate indifference of known risk” that patent exists – actual knowledge not required • Petitioner: 271(b) requires inducing the acts that constitute infringement and knowledge that such acts would infringe patent (purposeful conduct; requires actual knowledge of patent) • Respondent: “willful blindness” to patent as an alternative to actual knowledge – consistent with Federal Circuit standard

11. Supreme Court: Bayh-Dole Rights • Board of Trustees of the Leland Stanford Junior University v. Roche, Supreme Court No. 09-1159 • Oral Argument Feb. 28, 2011 Question Presented: Whether a federal contractor university’s statutory right under the Bayh-Dole Act, 35 U.S.C. § § 200-212, in inventions arising from federally funded research can be terminated unilaterally by an individual inventor through a separate agreement purporting to assign the inventor’s rights to a third party. • Do university ownership rights in federally funded inventions trump a third party’s contractual rights to the invention, under 35 U.S.C. §§ 200-212 (Bayh-Dole Act)? • Fed. Cir. (583 F.3d 832): • Bayh-Dole does not automatically void prior contractual transfers of rights • Roche not liable for infringement because it held ownership rights based on assignment (“I will assign” to Stanford vs. “I hereby assign” to Roche)

12. Patent Cases – Pet. for Cert. Filed 2011 • Eli Lilly and Co. v. Sun Pharm. Industries, Ltd., S. Ct. Case No. 10-972 • Cert. filed Jan. 28, 2011 • Question Presented: Whether the Federal Circuit improperly transformed the doctrine of “double patenting,” in conflict with a “vast body of precedent” cited by four dissenting judges, by creating a new bright line rule that invalidates a subsequent patent on a nonobvious, newly discovered use of a basic invention solely because it was disclosed, but not claimed, in the final text of the earlier basic patent. • Applera Corp. v. Enzo Biochem, Inc., S. Ct. Case No. 10-426 • Cert. filed Sept. 23, 2010 • Acting Solicitor General invited to file brief on Dec. 13, 2010 • Question Presented: Whether the Federal Circuit’s standard for indefiniteness is consistent with the language of § 112. • Caraco Pharm. Labs., Ltd. v. Novo Nordisk, S. Ct. Case No. 10-844 • Cert. filed Dec. 23, 2010 • Acting Solicitor General invited to file brief on March 28, 2011 • Question Presented: Whether the counterclaim provision in 21 U.S.C § 355(j)(5)(C)(ii)(I) applies where (1) there is an approved method of using the drug that the patent does not claim, and (2) the brand submits patent information to the FDA that misstates the patent’s scope, requiring correction. • Prometheus Labs., Inc. v. Mayo Collaborative Services, 628 F.3d 1347 (Fed. Cir. Dec. 17, 2010) • Cert. petition filed March 2011 • Hyatt v. Kappos, 625 F.3d 1320 (Fed. Cir. Nov. 8, 2010) • Cert. petition filed April 2011

13. Federal Circuit: Selected En Banc Cases • Hyatt v. Kappos, 625 F.3d 1320 (Fed. Cir. Nov. 8, 2010) • En banc decision: new evidence may be submitted by applicant in district court action pursuant to 35 U.S.C. § 145 • TiVo Inc. v. EchoStar Corp. et al. (Fed. Cir. April 20, 2011) • En banc decision: standard for contempt of permanent injunction is whether newly accused product is not more than colorably different from prior infringing product • Therasense v. Becton Dickinson & Co., Fed. Cir. No. 2008-1511 • Standard for determining inequitable conduct (materiality and intent) • Oral argument November 2010; decision pending • Akamai Technologies, Inc. v. Limelight Networks, Inc., Fed. Cir. No. 2009-1372 • En banc rehearing granted April 20, 2011 • Issue: if separate entities each perform separate steps of a method claim, under what circumstances would that claim be directly infringed and to what extent would each of the parties be liable?

14. Federal Circuit: Admissibility of New Evidence in § 145 Civil Actions • Hyatt v. Kappos, 625 F.3d 1320 (Fed. Cir. Nov. 8, 2010) • 35 U.S.C. § 145: “An applicant dissatisfied with the decision of the [BPAI]…may…have remedy by civil action against the Director in the United States District Court for the District of Columbia” • 6-2-1 en banc decision: applicant may introduce new evidence in district court action under § 145 – “no limitation”; reviewed de novo • Hyatt Declaration in district court – identified support in specification for claim limitations previously rejected by PTO and BPAI for lack of written description • Certiorari petition filed April 2011

15. Federal Circuit: Contempt Proceedings Post Injunction • TiVo Inc. v. EchoStar Corp. et al., Case No. 2009-1374 (Fed. Cir. April 20, 2011) • Permanent injunction issued against EchoStar after infringement verdict • EchoStar came out with a modified product • TiVo filed contempt action; district court ruled in favor of TiVo • CAFC en banc provides new guidance: • Lack of intent to violate injunction will not avoid contempt proceeding • Test for contempt proceeding: Whether newly accused product is not more than colorably different from adjudged infringing product – focus on differences between the features previously found to infringe and modified features of new product. If the differences are significant no contempt proceeding • Do the differences raise “a fair ground of doubt as to the wrongfulness of defendant’s conduct?” • Overruled two step inquiry of KSM, 776 F.2d 1522 (1985)

16. Federal Circuit: Inequitable Conduct • Therasense v. Becton Dickinson & Co., Fed. Cir. No. 2008-1511 • Panel decision affirming trial court finding of inequitable conduct, 593 F.3D 1289 (Fed. Cir. 2010) vacated • Failure to disclose statements made to EPO inconsistent with statements made to USPTO • En Banc Oral argument November 2010 • En Banc Order raised 10 questions for briefing relating to materiality – intent balancing • (Therasense) “But-for” standard, (i.e., fraudulent act caused the patent grant) • (PTO and Bayer) broader standard – Rule 56(b)(1) prima facie case of unpatentability or refutes or is inconsistent with position taken • Parties agree specific intent to deceive is the standard – gross negligence insufficient (Kingsdown) • 34 amici curiae • Awaiting decision

17. Federal Circuit: Divided Infringement Defense • No direct infringement of a claim if one or more of the claimed steps or system elements is performed by or used by another party. • Akamai Techs Inc. v. Limelight Nets Inc., Fed. Cir., No. 2009-1372, en banc rehearing granted April 20, 2011, vacated 629 F.3d 311 (Fed. Cir. 2010) a strict agency relationship or contractual obligation requiring performance of the missing steps by another party is necessary to find direct infringement. • Centillion Data Sys. LLC v. Qwest Comms., Int’l Inc., 631 F.3d 1279 (Fed. Cir. 2011) a single defendant must use all of the claimed system elements, or compel their use by others through a contractual obligation or agency relationship • McKesson Technologies Inc. v. Epic Systems Corp, Fed. Cir., No. 2010-1291 April 12, 2011 claim is directly infringed only if one party exercises control over the entire process such that every step is attributable to the controlling party Akamai Rehearing order: If separate entities each perform separate steps of a method claim, under what circumstances would that claim be directly infringed and to what extent would each of the parties be liable?

18. Federal Circuit: Patentable Subject Matter post-Bilski • Prometheus Laboratories, Inc. v. Mayo Collaborative Services, 581 F.3d 1336 (Fed. Cir. 2009), vacated, 130 S.Ct. 3543 (2010), remanded to 628 F.3d 1347 (Fed. Cir. 2010), S. Ct. Case No. 10-1150 • Claimed methods comprise administering a drug and determining metabolite levels in a subject in order to assess drug dosage • September 2009 CAFC decision: methods of treatment are transformative (Bilskitest) when a drug is administered to ameliorate an undesired condition • Supreme Court remanded to Federal Circuit following Bilski, June 2010 • CAFC again reverses district court – method is “transformative” (not just “data-gathering”) – Bilski does not invalidate machine-or-transformation test • Cert. petition filed March 17, 2011 (response due May 20) • Question Presented: Whether 35 U.S.C. § 101 is satisfied by a patent claim that covers observed correlations between blood test results and patient health, so that the claim effectively preempts all uses of the naturally occurring correlations, simply because well known methods used to administer prescription drugs and test blood may involve “transformations” of body chemistry.

19. Federal Circuit: Genes / Isolated DNA as Patentable Subject Matter • Association for Molecular Pathology, et al. v. USPTO, et al., Fed. Cir. No. 2010-1406 (S.D.N.Y., Sweet, DJ. April 5, 2010) • Oral argument April 4, 2011 • Judicially created products of nature exception • District court: “isolated DNA” containing gene sequences found in nature, and methods of comparing the sequences, are unpatentable subject matter under 35 U.S.C. § 101 • Claimed comparisons of DNA sequences to identify specific mutations are abstract mental processes and constitute unpatentable subject matter under § 101 (does not meet the Bilskimachine or transformation test) • Panel considers Myriad’s plaintiffs lack of standing argument – lack of justifiable controversy may not reach the merits • DOJ amicus brief – isolated DNA not patent eligible, but DNA molecules engineered by humans are (e.g. cDNAs)

20. Federal Circuit: “Reasonable Royalty” Damages Determinations • Uniloc v. Microsoft, Nos. 2010-1035, 2010-1055,2011 WL 9738 (Fed. Cir. Jan. 4, 2011) • 35 U.S.C. § 284: “Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement but in no event less than a reasonable royalty ….” • Federal Circuit decision directly addressed the 25% rule of thumb, a rule it had “passively tolerated” in prior cases. • CAFC: 25 Percent Rule is “a fundamentally flawed tool for determining a baseline royalty rate in a hypothetical negotiation.” Abstract theory not tied to particular facts. • Evidence relying on the 25 percent rule of thumb is inadmissible under Daubert and the Federal Rules of Evidence because it “fails to tie a reasonable royalty base to the facts of the case at issue.”

21. Other Issues: False Patent Marking – 35 U.S.C. § 292 • Forest Group Inc. v. Bon Tool Co., 590 F.3d 1295 (Fed. Cir. Dec. 28, 2009) • § 292 allows penalty of up to $500 for each article falsely marked as patented; permits qui tam actions. • Pequignot v. Solo Cup, (Fed. Cir. June 10, 2010) • 21 billion cup lids had patent markings to expired patents. • CAFC: marking with expired patents counts as false marking, but must prove intent to deceive (not just mere knowledge of false statement). • In re BP Lubricants, (Fed. Cir. March 15, 2011) • Heightened pleading requirement of FRCP 9(b) applies to § 292 claims. • Allegations that “sophisticated” company “knew or should have known” patent expired are insufficient.

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