Patent Defenses and Remedies

1. Patent Defenses and Remedies Intro to IP – Prof Merges 2.2.12

4. Defenses • Research Use • Inequitable Conduct • Patent Exhaustion

5. Remedies in patent infringement cases • Injunctions (eBay) • Damages

6. Kingsdown Med. v. Hollister • Note the remedy or effect of a finding of inequitable conduct: patent is UNENFORCEABLE

7. Rationale • Examiners are busy; patentee benefits greatly from examiner oversight • Place strong penalty on patent applicant for nondisclosure or misrepresentation in patent prosecution

8. A Potent Defense • Made more attractive when other defenses fail, when patent damages are very high

9. Prosecution history, p. 348 • All these complex interchanges are grist for the mill under inequitable conduct • All amendments, communications with PTO can and will be scrutinized

10. What was the mistake here? • The applicant said, incorrectly, that claim 43 corresponded to allowed claim 50 in another (now issued) application • Claim 43 was in fact broader than the allowed claim 50

11. Standard for Inequitable Conduct “Inequitable conduct resides in failure to disclose material information, or submission of false material information, with an intent to deceive . . . .” -- p. 349

12. Materiality and Intent • Materiality: relevance, importance (established here) • Intent: not established here

13. Intent Legal Standard? unknowing deliberate lack of due care reckless accidental

14. [T]here is nothing improper, illegal or inequitable in filing a patent application for the purpose of obtaining a right to exclude a known competitor’s product from the market; nor is it in any manner improper to amend or insert claims intended to cover a competitor’s product the applicant’s attorney has learned about during the prosecution of a patent application. – p. 350

15. Therasense v. Becton, Dickinson • 649 F.3d 1276 • Fed. Cir. 2011 • En Banc

16. Therasense - holding A misrepresentation or omission by a patent applicant that amounts to gross negligence or negligence under a ‘‘should have known’’ standard does not satisfy the inequitable conduct intent requirement—a finding that ran counter to a number of prior Federal Circuit cases.

17. Therasense (cont’d) The two requirements of intent and materiality must be independently satisfied, a holding which has the important effect of placing evidence of intent at the center of inequitable conduct analysis. And the specific intent to deceive must be the single most reasonable inference able to be drawn from the evidence of the applicant’s behavior.

18. • Examples : •failure to disclose prior art •failure to disclose rejection of claims •misleading partial translation •characterizing prophetic examples as real experiments US Patent Claims Information Disclosure Statement •false claim of small entity status Term: 20 years from filing •failure to disclose all true inventors Inequitable Conduct • materiality • Inequitable conduct • intent • Duty of Candor

19. Patent Exhaustion • To exhaust: to run out of, use up • What is “used up”? The “power” of a patent • When is it used up? When an item covered by the patent is sold on the market

20. Quanta v. LG Electronics • Schwartz patent (purchased by LG from Wang Computer) • Asserted against Quanta by LG • LG defended on grounds of exhaustion

23. LG Electronics (Patent Owner) Intel (Licensee) Computer Cos.

24. LG Electronics (Patentee) Master License (required non-coverage notice to Intel Customers) Intel (Licensee) Specific product license (no customer restrictions)

25. Intel (Licensee) LG’s right to Sue? Computer Cos.

26. LG Electronics (Patentee) Intel End Users

27. Intel (Licensee) + License? End Users

28. LG Sued End Users – Bizcom, Quanta, etc. • End Users defended by claiming that they were protected against suit by virtue of the LG-Intel license agreement, and Intel’s sale of chips to them

29. District Court • LG argued that end users were not protected by exhaustion, since the chips sold by Intel did not completely embody any claims in the asserted patents • District Court disagreed: held, sales of chips by Intel exhausted LG’s rights vis-à-vis end users

30. Federal Circuit • Partial reversal • No exhaustion: LG did not license Intel to authorize end-users to combine Intel products with non-Intel products

31. Quanta Computer, Inc. v. LG Electronics, Inc. • 128 S.Ct. 2109 (2008) • Held: licensee's sale of component computer parts that substantially embodied method patents held by patentee was “authorized” by patent holder, and had effect of exhausting patent holder's patents.

32. Supreme Court: Holdings • Method claims are subject to exhaustion • Embodiments substantially containing claimed technology exhaust a patent • Sales in this case were “authorized sales” under the licensing arrangement in this case: so patents were exhausted

33. Supreme Court: Holdings Most wide-ranging aspect of holding: Sales in this case were “authorized sales” under the licensing arrangement in this case: so patents were exhausted

34. Third holding: important for future cases • We can learn from the LG – Intel – End User arrangement

35. Basic exhaustion principles • “Exhaustion is triggered only by a saleauthorized by the patent holder.” • > 128 S.Ct. 2109, 2121

36. Two elements here • [1] SALE only • > Licensing is outside this holding • > Creative licensing arrangements are still permissible

37. [2] Authorized by the patent holder • > Principles of implied licensing come into play

38. LG Electronics (Patentee) Master License (required non-coeverage notice to Intel Customers) Intel (Licensee) Specific product license (no customer restrictions)

39. No restriction on customers’ use of patented technology “[T]he provision requiring notice to Quanta appeared only in the Master Agreement, and LGE does not suggest that a breach of that agreement would constitute a breach of the License Agreement. Hence, Intel's authority to sell its products embodying the LGE Patents was not conditioned on the notice or on Quanta's decision to abide by LGE's directions in that notice.”-- 128 S.Ct. 2109, 2121-2122

40. Quanta strongly suggests that effective restrictions/not-ice in license agreement might bind downstream users Patentee Licensee End users

41. LG Electronics (Patentee) Specific product license WITH requirement to restrict customers; to give notice of no license Intel (Licensee)

42. Remedies in licensing agreement “We note that the authorized nature of the sale to Quanta does not necessarily limit LGE's other contract rights. LGE's complaint does not include a breach-of-contract claim, and we express no opinion on whether contract damages might be available even though exhaustion operates to eliminate patent damages.” – 128 S.Ct. at 2122

43. Important issues post-Quanta Patentee • Contractual remedies for Licensee’s breach of license, including unauthorized infringement by Licensee’s customers Licensee End users

44. Remedies Prospective Effect Final injunction issues Issuance Preliminary injunction hearing Complaint filed in District Court Damages assessed for this period if marking (or actual notice)

45. 35 USC § 283. Injunctive relief. The several courts having jurisdiction of cases under this title may grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent, on such terms as the court deems reasonable.

47. MercExchange, L.L.C., holds a number of patents, including a business method patent for an electronic market designed to facilitate the sale of goods between private individuals by establishing a central authority to promote trust among participants. See U.S. Patent No. 5,845,265.

48. United States Patent 5,845,265 Woolston December 1, 1998 “Consignment nodes” Abstract A method and apparatus for creating a computerized market for used and collectible goods by use of a plurality of low cost posting terminals and a market maker computer in a legal framework that establishes a bailee relationship and consignment contract with a purchaser of a good . . . in an electronic market for used goods while assuring the safe and trusted physical possession of a good with a vetted bailee. Inventors: Woolston; Thomas G. (Arlington, VA) Assignee:MercExchange, L.L.C. (Alexandria, VA) Filed: November 7, 1995

49. “Substantial evidence was adduced at trial showing that the plaintiff does not practice its inventions and exists merely to license its patented technology to others. Indeed, the plaintiff has made numerous comments to the media before, during, and after this trial indicating that it did not seek to enjoin eBay but rather sought appropriate damages for the infringement.” -- 275 F.Supp.2d 695, at 712

50. Supreme Court • Reversed Federal Circuit • Rejected “automatic rule” • Reimposed historical standard