Virginia IP Law

Summary Judgment Awarded in First EDVA Trademark Decision Since Rosetta Stone

Dabney Carr — Tue, 15 May 2012 16:54:46 -0500

The Fourth Circuit’s recent decision in Rosetta Stone v. Google, 2012 U.S. App. LEXIS 7082 (4^th Cir. April 9, 2012), discussed here, has apparently not chilled the EDVA’s willingness to grant summary judgment in trademark actions. While acknowledging Rosetta Stone’s holding that determining a likelihood of confusion is an inherently factual inquiry, Judge Brinkema of the EDVA did not hesitate to find a lack of a likelihood of confusion and grant summary judgment in a recent case. Wag’N Enters., LLC v. United Animal Nations, Case No. 1:11CV955, 2012 U.S. Dist. LEXIS 65366 (May 9, 2012), found here.

In Rosetta Stone, the Fourth Circuit reversed a decision by Judge Lee of the EDVA granting summary judgment to Google in a trademark infringement action by Rosetta Stone based on Google’s AdWords program. In particular, the Fourth Circuit criticized Judge Lee’s finding, at the summary judgment stage, that Rosetta Stone had failed to introduce evidence of a likelihood of confusion.

In Wag’N Enterprises, the plaintiff claimed infringement of its registered service mark, “Wag”N Rover Respond’R” and its unregistered shortened form of that mark, “Rover Respond’R” by defendant’s use of the term “RedRover Responders” for its volunteer pet rescue program.

Judge Brinkema’s detailed decision turned on her assessment of the likelihood of confusion based on the factors set forth in Pizzeria Uno Corp. v. Temple, 747 F.2d 1522, 1527 (4^th Cir. 1984). Judge Brinkema’s findings on each of those factors were as follows:

The plaintiff’s marks were overall very weak marks because they were merely suggestive marks and had little commercial strength.
There was no dispute of material fact that the parties' marks were not similar. The marks shared no identical component words, the marks were not confusingly similar in meaning, and the use of the two marks were very dissimilar when used in logo form.
Plaintiff presented no evidence of actual confusion and declined to present any survey evidence of confusion, which “severely undercuts” plaintiff’s case.
Plaintiff had made no showing of bad faith or intent to induce confusion.
The general type of goods and services provided by the parties were related to some degree, but the actual products and services identified by the parties’ marks were quite different.
Any overlap in the parties’ facilities and overlap of advertising did not preclude summary judgment.

Judge Brinkema’s ruling is not surprising, given the weakness of the plaintiff’s evidence. The decision, however, reaffirms that even after Rosetta Stone, summary judgment remains available for accused trademark infringers, especially where a plaintiff fails to develop evidence of actual confusion or present survey evidence as a substitute for proof of actual confusion.

May IP ABA Roundtable Lunch - May 18th

Robert Angle — Mon, 14 May 2012 09:51:11 -0500

On April 9, 2012, the Fourth Circuit handed down its decision Rosetta Stone v. Google, clarifying the legal standard to be applied in a trademark infringement claims based on the purchase and use of another’s trademark as a keyword to trigger sponsored link advertising on search engine websites. In this ABA Roundtable Luncheon, we will review Rosetta Stone and discuss its expected impact on keyword advertising specifically and on trademark law in general.

Please join us on May 18th, 2012 at the Richmond Troutman Sanders office for a free luncheon to discuss the Rosetta Stone v. Google decision. CLE currently pending.

To RSVP or for more information, please click here or contact Natalie Toalson.

Federal Circuit Reverses E.D. Texas' Refusal to Sever Patent Infringement Claims Against Multiple Defendants

Dabney Carr — Fri, 04 May 2012 14:09:03 -0500

Today, the Federal Circuit once again granted a mandamus petition to reverse a decision from the Eastern District of Texas – this time reversing the refusal to sever patent infringement claims against multiple unrelated defendants. In re EMC Corp., Decho Corp. and Iomega Corp., Misc. Dkt. No. 100 (Fed. Cir. May 4, 2012) (found here). Coincidentally, the Federal Circuit also appears to endorse the recent decision by the Joint Panel on Multidistrict Litigation (which we blogged about here) consolidating patent claims against multiple defendants in an MDL proceeding.

As was common prior to the passage of the America Invents Act (AIA), the plaintiff, Oasis Research, joined multiple unrelated defendants in one patent infringement suit. The only connection between the defendants was that they were all alleged to offer online backup and storage for computer users, and they were all alleged to infringe the same four patents. Eight of the eighteen defendants moved to sever the claims against them and transfer those claims to other venues.

The District Court denied the motions to sever, holding that there were common questions of claim validity, claim construction and the scope of the four patents and finding that the claims arose out of the same transaction, occurrence or series of transactions or occurrences because the accused services “were not dramatically different.”

The Federal Circuit held that the District Court had applied the wrong standard and remanded the case for consideration of the motion to sever under the proper standard.

Among other things, the Federal Circuit ruled:

Federal Circuit law applies to motions to sever in patent cases because joinder is based on an analysis of the accused acts of infringement.
Joinder does not require joint liability, and independent actors may be joined if their actions are part of the same transaction, occurrence or series of transactions or occurrences.
The existence of a single common question of law or fact alone is insufficient, and so “the mere fact that infringement of the same claims of the same patent is alleged does not support joinder.”
Independent defendants may be joined when there is a “logical relationship” between the separate causes of action.
The “logical relationship” test is satisfied if there is substantial evidentiary overlap in the facts giving rise to the cause of action against each defendant, i.e. the allegedly infringing acts against separate defendants “must share an aggregate of operative facts.”
The District Court’s “not dramatically different” standard “seems to require little more than the existence of some similarity in the allegedly infringing products or processes, similarity which would exist simply because the same patent claims are alleged to be infringed.”
“[J]oinder is not appropriate where different products or processes are involved. Joinder of independent defendants is only appropriate where the accused products or processes are the same in respects relevant to the patent.”
“To be part of the ‘same transaction’ requires shared, overlapping facts that give rise to each cause of action, and not just distinct albeit coincidentally identical, facts. The sameness of the accused products is not enough …”
“Unless there is an actual link between the facts underlying the claim of infringement, independently developed products using differently sourced parts are not part of the same transaction, even if they are otherwise coincidentally identical.”
Other pertinent considerations are (1) whether the alleged acts of infringement occurred in the same time period; (2) the existence of some relationship among the defendants; (3) the use of identically sourced components; (4) licensing or technology agreement between the defendants; (5) overlap of the products’ or processes’ development and manufacture; and (6) whether there is a claim for lost profits.
Even if a plaintiff’s claims arise of the same transaction and there are common questions of law and fact, a district court can still refuse joinder, such as if a large number of defendants in a complex patent case may prove unwieldy.

There are two other interesting aspects to this decision: First, the limitations on joinder in the AIA did not apply because the Complaint was filed before the AIA was enacted. While the decision applies to a shrinking number of cases, the Federal Circuit’s analysis will likely still be relevant to future efforts to circumvent the AIA’s limitations on joinder.

Finally, the Federal Circuit seemed to endorse the recent decision by the Joint Panel on Multidistrict Litigation we recently addressed here, holding that “[c]ommon pretrial issues of claim construction and patent invalidity may also be adjudicated together through the multidistrict litigation procedures of 28 U.S.C. § 1407.” Thus, the limitations on joinder in the AIA may become something of a dead letter only eight months after their enactment. Plaintiff patentees can file separate suits in multiple jurisdictions and then request that all of the suits be consolidated in an MDL in a favorable venue -- accomplishing the same result as before the AIA, with just a few additional procedural hurdles.

Bear Creek Sidesteps AIA through MDL

Robert Angle — Thu, 03 May 2012 14:29:33 -0500

As a follow up to our earlier post on this case (found here), Bear Creek successfully convinced a MDL panel to grant its motion to subject the fourteen actions it filed in three districts (Virginia, Delaware, Pennsylvania) to consolidation under 28 U.S.C. § 1407. In granting the motion, the MDL rejected the defendants' arguments that such consolidation was precluded by the America Invents Act's limitation on joinder of multiple defendants in a single action "based solely on allegations that they each have infringed the patent or patents in suit." 35 U.S.C. § 299(b). The MDL panel explained that:

Transfer under Section 1407 does not transmute all transferred actions into a single action,thereby joining all defendants. Instead, the separate nature of actions transferred to an MDL is preserved throughout each action’s pendency whether the actions proceed in a coordinated or consolidated manner.... In contrast to Section 1407's express focus on transfer for pretrial proceedings, the second portion of Section 299(b) focuses on consolidation for trial. There is no overlap between these concepts or these statutes.

Id. at 2-3 (a copy of that decision, as posted by PatentlyO, can be found here). The MDL panel concluded that "[t]he plain meaning of the AIA’s joinder provision simply does not implicate Section 1407 transfer." Accordingly, the MDL panel held that the District of Delaware is an appropriate transferee district for pretrial proceedings and that all pretrial matters should be heard by Judge Gregory M. Sleet.

The MDL Panel's decision may have wide-ranging impact and opens a window where the AIA appears to close the door. With the availability of MDL consolidation, plaintiffs are (again) able to pull multiple defendants into a single action for pretrial proceedings. However, given the multiple steps required for plaintiffs to take advantage of this procedure and the lack of consolidation for trial, many plaintiffs may conclude that the price of admission is too high and the resulting benefits to low to warrant pursuing MDL. Of course, only time will tell....

TS Announces New California IP Blog

Robert Angle — Tue, 01 May 2012 08:22:08 -0500

Our colleagues in California, headed by IP pro Matt Murphey, have launched a California-centric IP Blog. The announcement is set forth below and the blog itself is found http://www.californiaintellectualpropertylaw.com/. We will follow them with interest.

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Matthew D. Murphey
Editor
Intellectual Property
Troutman Sanders LLP
949.622.2756
Email

Blog Email
ipinfo@troutmansanders.com

Announcing the California Intellectual Property Law Blog

The Orange County office of Troutman Sanders is pleased to announce the launch of its California Intellectual Property Law Blog providing commentary and analysis of recent IP developments affecting California and West Coast businesses. The blog is designed to inform and promote discussions surrounding the latest legal changes or decisions involving copyrights, trademarks, trade secrets and patents.

“The California Intellectual Property Law Blog demonstrates our commitment to provide beneficial engagement and news on key IP strategies and developments,” said Partner Matthew Murphey. “Businesses need to be promptly informed and have a platform to discuss these topics that directly affect how they protect their IP rights.”

The West Coast and California, in particular, are business hubs for electronics, biotechnology and manufacturing industries. These companies are often the subject of ongoing intellectual property issues. The California Intellectual Property Law Blog is designed to help businesses navigate the complex and ever changing laws regarding products, services and technologies protectable under international, federal, state or local intellectual property laws.

Matt Murphey, a litigation and trial attorney with more than 12 years experience handling intellectual property and commercial litigation matters, will contribute regular posts, discussion items and news updates

Troutman Sanders’ Intellectual Property Practice Group offers legal services in areas of patent, copyright, trademark, trade secret, outsourcing, computer, technology, software, restrictive covenant and franchise law.

© TROUTMAN SANDERS LLP. ADVERTISING MATERIAL. These materials are to inform you of developments that may affect your business and are not to be considered legal advice, nor do they create a lawyer-client relationship. Information on previous case results does not guarantee a similar future result. Follow Troutman Sanders on Twitter.

District Judge O'Grady Dismisses Fraud, Interference and Antitrust Claims in Patent Suit

Dabney Carr — Thu, 26 Apr 2012 16:36:00 -0500

Erick Cherdak brought claims for patent infringement, patent interference under 35 U.S.C. 291 and antitrust violations against several defendants, including Apple and Nike, based on his patent for an “Athletic Shoe with Timing Device.” On motions to dismiss, Judge Liam O’Grady of the Eastern District of Virginia dismissed all the claims except the patent infringement claims. Cherdak v. Vock, et al., Case No. 1:11CV1311, 2012 U.S. Dist. LEXIS 57511 (Apr. 23, 2012) (found here).

A summary of Judge O’Grady’s rulings follows:

Fraud and Inequitable Conduct

Cherdak alleged fraud and inequitable conduct based on alleged misstatements and omissions made regarding his patent during prosecution of one of the defendant’s patents. The Cherdak patent, however, was before the PTO during the prosecution of the defendant’s patents. The allegations of misstatements, Judge Grady ruled, amounted to nothing more than permissible attorney argument advocating the attorney’s interpretation of its claims and the teachings of the prior art. While not a groundbreaking ruling, Judge O’Grady’s decision will be helpful precedent to parties fighting inequitable conduct claims.

Interference

25 U.S.C. 291 permits relief to the owner of an interfering patent against another by civil action. A predicate to such a claim, however, is the existence of an interference-in-fact, which requires a showing that each of the inventions at issue is invalidating prior art to the other. Again, Judge O’Grady ruled, the Cherdak patent was before the PTO during prosecution, and the examiner considered the precise claims that Cherdak challenged but ultimately allowed the patent to issue. Judge O’Grady agreed with the PTO, and dismissed the interference claims. Judge O’Grady is probably correct that the PTO got it right, but its questionable whether it was appropriate to make that determination on a motion to dismiss.

Declaratory Judgment

Cherdak also sought a declaratory judgment that the defendants’ patents were invalid, but there was no evidence that any of the defendants were interested in enforcing their patents against Cherdak. Without any affirmative enforcement-related activity, there was no declaratory judgment jurisdiction. Again, this is not a groundbreaking ruling but may prove helpful to parties contesting declaratory judgment jurisdiction.

Antitrust Violations

Cherdak alleged a Walker Process claim and an illegal tying claim against Nike and Apple. Under Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172 (1965), the enforcement of the patent procured by fraud, may violate § 2 of the Sherman Act. Not only had Cherdak failed to adequately plead fraud, but he alleged injury to his patent rights. The antitrust laws, Judge O’Grady held, “are directed to protecting market competition, not at protecting the inherent monopoly power and benefits provided under intellectual property laws.”

Finally, Cherdak’s illegal tying claim failed because a person buying Nike’s shoes need not buy Apple’s sports pack. While Apple contended that its products worked best with Nike’s shoes, customers were not precluded from purchasing other shoes to use with Apple’s products.

Supreme Court One Step Closer to Question of Whether a Defendant in a Trademark Case can Still Challenge the Mark's Validity after the Plaintiff Agrees to a Covenant Not to Sue

Megan Rahman — Wed, 18 Apr 2012 14:47:42 -0500

The Supreme Court has asked Nike to respond to a cert petition which addresses whether a federal district court is divested of jurisdiction once a defendant in a trademark case promises not to assert its mark against the plaintiff's then-existing commercial activities. On appeal from the Second Circuit, the case arises from Nike's lawsuit against YUMS LLC in 2009 for trademark infringement, unfair competition, and dilution under both federal and New York state law. Nike alleged that the design of YUMS' sneakers infringed on the design of Nike's Air Force 1 shoe. YUMS counterclaimed seeking to cancel Nike's registration pursuant to 15 U.S.C. § 1119. Prior to any decision on the merits, Nike gave YUMS a covenant-not-to-sue, which stated that YUMS' actions no longer infringed or diluted Nike's trademark. While Nike dismissed its case, YUMS wanted to maintain its counterclaim, arguing that Nike's mark continued to improperly chill its innovative marketing efforts. The district court dismissed YUMS' case, however, finding that the covenant not to sue left no ongoing case or controversy to allow it to continue to assert its jurisdiction. The Second Circuit affirmed, holding that 15 U.S.C. § 1119 does not provide federal courts with an independent basis for jurisdiction absent an actual case or controversy between the parties.

YUMS' petition argues that the Second Circuit's ruling allows litigants to avoid unexpected resistance by delivering a covenant not to sue and evading any test of the validity of the asserted registration. In early March, Nike had waived it right to file a response to the petition. Nike has until May 4 to respond to the petition.

Rosetta Stone Opinion Clarifies Standard for Trademark Infringement Claim in Keyword Advertising Context

Robert Angle — Tue, 17 Apr 2012 16:34:34 -0500

In a recent client advisory, our colleagues Mark VanderBroek and Mike Hobbs discuss the Fourth Circuit's decision Rosetta Stone v. Google that can be found here and is reprinted below. A copy of the decision can be found here.

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In Rosetta Stone v. Google, the U.S. Court of Appeals for the Fourth Circuit recently clarified the legal standard to be applied in a trademark infringement claim based on purchase and use of another’s trademark as a keyword to trigger sponsored link advertising on search engine websites. The Court held that the likelihood of confusion analysis in these cases is governed by traditional trademark legal standards, rather than by specialized standards adopted by the district court, which, among other things, had held that use of a trademark as an advertising keyword was protected by the “functionality doctrine.”

This precedent will apply to trademark infringement claims filed against a competitor who purchases a plaintiff’s trademark as a keyword to trigger sponsored advertising links, as well as to claims against a search engine provider.

Rosetta Stone’s lawsuit alleged claims of direct, contributory and vicarious trademark infringement, complaining that Google permitted sponsors to purchase the Rosetta Stone trademark as a keyword to trigger the appearance of the sponsor’s advertisement and link when the keyword was entered as a search term. The district court granted summary judgment to Google, concluding that: (1) there was no evidence to support a likelihood of confusion of consumers, in part because the search engine provider was not attempting to pass off its goods or services as Rosetta Stone’s; and (2) that the use of marks as search engine advertising keywords was protected by a functionality defense, because the keywords served an indexing function in pulling up sponsored advertising links.

The Fourth Circuit disagreed with these conclusions. It explained that trademark law protects against likelihood of confusion of consumers as to the source or sponsorship of goods or services, and held that the evidence created disputed questions of fact to be tried on whether there was a likelihood of confusion. This evidence included: (1) actual consumer confusion caused by use of the Rosetta Stone marks in the text of sponsored advertising links (which caused at least some consumers to purchase counterfeit Rosetta Stone software); and (2) survey evidence reflecting a 17% confusion rate. The court also held that the functionality defense applied only if the trademark consists of functional features of a plaintiff’s product or packaging, and not based on the manner in which a defendant uses a mark.

Accordingly, the Court reversed summary judgment on the direct and contributory infringement claims and remanded to the district court for further proceedings. (The Court affirmed summary judgment on the vicarious infringement claim.)

Take-Away Points

The Fourth Circuit’s opinion clarifies that trademark infringement analysis in a keyword advertising context will follow traditional trademark standards applicable to likelihood of confusion, rather than specialized standards. These standards will apply not only for trademark claims filed against search engine providers, but also for the more common situation in which these claims are filed against a competitor who purchases a plaintiff’s trademark as a keyword from the search engine provider and uses them to trigger sponsored advertising links.

Proving likelihood of confusion in these cases is a fact-specific inquiry, which will require evidence (survey or otherwise) suggesting that consumers are likely to be confused by the manner in which a trademark is used as a keyword to trigger advertising links and/or in the text of the links themselves.

Federal Circuit Orders Production of License Negotiation Documents in Patent Litigation

Dabney Carr — Mon, 09 Apr 2012 14:21:20 -0500

A patentee's settlement negotiations with other parties can be very important information to an accused infringer, and plaintiff-patentees will typically fight to avoid disclosure of those negotiations. In a ruling of first impression earlier today, the Federal Circuit granted a victory to accused infringers in this area, rejecting any “settlement negotiation privilege” protecting such negotiations from discovery. In re MSTG, Inc., Misc. Docket No. 996 (Fed. Cir. April 9, 2012) (found here).

MTSG sued multiple cell phone providers for infringement of patents covering 3G mobile technology. MTSG ultimately settled with all the defendants except AT&T. During discovery, MTSG produced all of the licenses and settlement agreements it reached with the other defendants but refused to produce documents related to the negotiations leading to those agreements.

The magistrate judge initially denied AT&T’s motion to compel production of the negotiation documents on the grounds that AT&T had not shown that the negotiations were relevant. Shortly thereafter, MTSG’s damages expert issued a report in which he considered, but rejected, the royalty rates in the settlement agreements because they were litigation related companies. The court found "no showing that the expert had access to the negotiation documents."

AT&T renewed its motion to compel, arguing that the negotiations leading to the license could undermine the expert’s opinion. The magistrate agreed, ruling that “the negotiations could shed light on why the parties reached their royalty agreements and could provide guidance on whether some or all of the licenses could be considered a basis for calculating a reasonable royalty.”

After the District Court affirmed the magistrate’s ruling, MTSG filed a petition for mandamus asking the Federal Circuit “to invoke [Fed. R. Evid. 501] to fashion a new privilege in patent cases that would prevent discovery of litigation settlement negotiations related to reasonable royalties and damages.”

The Federal Circuit flatly declined the invitation, finding that “[a]dopting a settlement privilege would require us to go further than Congress thought necessary to promote the public good of settlement.” Other tools, such as Rule 26, already existed to provide any necessary protections for settlement discussions.

MTSG’s decision to petition for mandamus reminds us of the old saying that “you should be careful what you ask for because you just might get it.” MTSG traded an adverse decision by one court in a single discovery dispute into a precedential ruling that could lead to wide-ranging discovery in all patent litigation. While the court reserved “for another day the issue of what limits can appropriately be placed on discovery of settlement negotiations,” the MTSG ruling should be an effective tool for patent defendants to obtain a significant amount of information about settlement negotiations that could be very helpful in rebutting claims for high reasonable royalty rates.

Federal Circuit Reverses Denial of Stay of Sunset Royalties in ActiveVideo Case

Dabney Carr — Tue, 03 Apr 2012 12:59:34 -0500

As we predicted here, the Federal Circuit has reversed Judge Jackson’s refusal to stay Verizon’s payment of sunset royalties during Verizon’s appeal of the $115 million jury award in favor of ActiveVideo. ActiveVideo Networks, Inc. v. Verizon Comm’s., Inc., et al., Case No. 2:10CV248 (Fed. Cir. April 2, 2012) (found here).

Rule 62(d) entitles a party to a stay of a money judgment upon posting of a supersedeas bond, but Judge Jackson concluded that the sunset royalties were a condition of the temporary stay and not an award of damages subject to Rule 62(d).

The Federal Circuit rejected this reasoning outright, holding “That characterization of the monetary award for the sunset period does not render Rule 62(d) inapplicable.” “The form of the order to pay money does not matter; what matters is ‘whether the judgment involved is monetary or nonmonetary.’” That the payment of sunset royalties was a precondition for temporarily staying the injunction did not matter. The royalty payments were still monetary relief subject to Rule 62(d).

In its ruling, the Federal Circuit distinguished the Fourth Circuit’s decision in Solis v. Malkani, 638 F.3d 269, 275 (4^th Cir. 2011). In Solis, which the Federal Circuit characterized as an “unusual case,” the District Court required the defendants to pay a fiduciary to run a pension plan during the pendency of an appeal. The Fourth Circuit held that the posting of a supersedeas bond would not stay the requirement to pay the fiduciary because the payment requirement was part of an “affirmative injunction” to ensure continued operation of the pension plan. In ActiveVideo, by contrast, the royalty payments were a form of damages, designed to compensate a prevailing party, and so were a “more traditional assessment of monetary relief” within the scope of Rule 62(d).

The Federal Circuit’s ruling may not be the end of the story. In his original opinion, Judge Jackson noted that if courts were required to stay sunset royalties upon payment of a bond, “it is likely that no court would ever grant sunset royalties.” The Federal Circuit’s decision may cause Judge Jackson to reconsider whether to temporarily stay his injunction pending Verizon’s appeal of the jury verdict.

VBA IP Section Newsletter (Vol. 1, Issue No. 1)

Robert Angle — Sat, 31 Mar 2012 08:08:31 -0500

The Intellectual Property and Information Technology Law Section of the Virginia Bar Association recently published its first newsletter. That newsletter can be found here.

Prometheus: Patent-Eligibility Revisited

Robert Angle — Sat, 31 Mar 2012 07:56:38 -0500

In a recent client advisory, our colleagues Dan Ladow and George Snyder discuss the Supreme Court's decision Mayo Collaborative Services v. Prometheus Laboratories, Inc. that can be found here and is reprinted below.

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The Supreme Court’s recent holding in Mayo Collaborative Services v. Prometheus Laboratories, Inc., invalidating patent claims involving a “law of nature” not eligible for patent protection, may signal a course change in its jurisprudence on patent eligibility issues. Clearly, there has been a shift away from the “machine or transformation” formulation (a process is patent-eligible if tied to a particular machine or apparatus, or transformative of a particular article into a different thing or state), which was ostensibly recognized as a “safe harbor” in Bilski v. Kappos. Eclipsing that formulation is a more basic test – i.e., whether there are elements in the claim beyond the “law of nature” that themselves are sufficiently innovative to qualify for patent consideration.

Prometheus is directed to a detailed exploration of where the dividing line lies between patent-eligible and patent-ineligible subject matter in the life sciences field. In the Court’s own words:

The case before us . . . concerns patent claims covering processes that help doctors who use thiopurine drugs to treat patients with autoimmune diseases determine whether a given dosage level is too low or too high. The claims purport to apply natural laws describing the relationships between the concentration in the blood of certain thiopurine metabolites and the likelihood that the drug dosage will be ineffective or induce harmful side-effects. We must determine whether the claimed processes have transformed these unpatentable natural laws.

The facts of Prometheus were fairly straightforward. The patent claims in issue boiled down to three steps, namely, (i) administering a thiopurine drug to a human that causes the production of certain metabolites in the blood stream, (ii) determining the concentration of those metabolites in the blood stream, and (iii) in effect, taking note of whether the metabolite concentration “indicates a need to increase [or decrease] the amount of said drug subsequently administered”. The Court started from the premise that “While it takes a human action (the administration of a thiopurine drug) to trigger a manifestation of this relation to a particular person, the relation itself exists in principle apart from any human action . . . [and] is a consequence of the ways in which thiopurine compounds are metabolized by the body – entirely natural processes.” In that light, the Court identified the key to deciding if subject matter is patent-eligible as being:

whether … the patent claims add enough to their statements of the correlations to allow the processes they describe to qualify as patent-eligible processes that apply natural laws [presumably treating the administering step as part and parcel of the manifest natural law and not an application of it].

The crucial inquiry therefore was whether, beyond just a statement of natural law, a patent claim also includes one or more additional steps that are themselves innovative. Put another way, the Court asked whether apart from the “natural law” in question the additional step or steps recited in the claim, viewed either individually or collectively, were anything more than “purely conventional or obvious.” Because it found that “the three steps simply tell doctors to gather data from which they may draw an inference in light of the correlations,” the Court concluded:

[T]he claims inform a relevant audience about certain laws of nature; any additional steps consist of well-understood, routine, conventional activity already engaged in by the scientific community; and those steps, when viewed as a whole, add nothing significant beyond the sum of their parts taken separately.

Thus, the claims were deemed invalid. Pursuant to this holding, the perceived “safe harbor” provision of Bilski – the idea that a patentee’s conforming to the so-called “machine or transformation” formulation confers patent-eligibility on a claimed invention – was vitiated or at least subordinated:

[I]n stating that the “machine-or-transformation” test is an “important and useful clue” to patentability, we have neither said nor implied that the test trumps the “law of nature” exclusion.

And indeed, in Prometheus the Court specifically held that the patents in suit were invalid without regard to whether they satisfied the machine-or-transformation test. Rather, the “bottom line” was:

A process that focuses upon the use of a natural law must also contain other elements or a combination of elements, sometimes referred to as an “inventive concept,” sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the natural law itself.

That this implicates notions of novelty and nonobviousness is irrelevant. The Court ruled that other sections of the Patent Statute – e.g., Sections 102, 103 and 112 – do not reliably disqualify natural law from patentability, such that Section 101 is the best choice even if the analysis overlaps other Sections of the Statute

Take-Away Points

Ultimately, whether the invention at issue is a diagnostics or other life sciences development, or a software-based business method, the only sure path to patent-eligibility is to incorporate one or more elements (steps) in addition to a recitation of the involved “natural law.” These elements or steps must be significant and, individually or in some combination, neither conventional nor routine, but novel and nonobvious. The “machine-or-transformation” standard, seemingly endorsed in Bilski, is not a panacea after all.

Federal Circuit Reaffirms Low Bar for Declaratory Judgment Jurisdiction

Dabney Carr — Thu, 29 Mar 2012 15:00:58 -0500

Since MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007), the Federal Circuit has consistently found that almost any assertion of patent rights, no matter how vague, would likely create declaratory judgment jurisdiction. In a precedential opinion earlier this week, 3M Co. v. Avery Dennison Corp., No. 2011-1339 (Fed. Cir. March 26, 2012) (found here), the Court reaffirmed that the mere mention of the word “infringe” is enough to create jurisdiction.

3M involved two companies who were direct competitors. In 2008, Avery sought reissuance of two patents, the “Heenan patents,” allegedly to better position itself for litigation. In 2009, Avery’s Chief IP Counsel called 3M’s Chief IP Counsel and stated that a particular 3M product “may infringe” the Heenan patents and that “licenses are available.” Two days later, 3M’s counsel called back to reject the offer of a license. Avery’s counsel responded that it had analyzed 3M’s product and that it “would send claim charts.” More than a year later, 3M filed an action for a declaratory judgment of noninfringement, invalidity and intervening rights relating to the Heenan patents.

The District Court dismissed the action for lack of subject matter jurisdiction, but the Federal Circuit reversed, holding that Avery’s counsel’s statements, if true, were enough to trigger declaratory judgment jurisdiction under MedImmune. Among the Federal Circuit key conclusions were the following:

Avery’s counsel use of the phrase “may infringe” instead of “does infringe” was immaterial in light of the offer to license the Heenan patents, the representation that Avery had analyzed 3M’s product and the statement that claim charts would be forthcoming;
It was significant that Avery, rather than 3M, initiated the communications and asserted its patent rights “without provocation;:
That Avery did not impose a deadline for 3M to respond did not weigh against a finding of a case or controversy;
The parties’ prior litigious conduct was equivocal on the issue of jurisdiction because it had long since been settled and involved different products and patents;
Avery’s decision to initiate reissue proceedings would not weigh strongly in finding a case or controversy;
3M’s one-year delay in filing suit did not weigh against a finding of subject matter jurisdiction because the relevant circumstances surrounding the assertion of patent rights had not changed;
Avery’s refusal of 3M’s demand for a covenant not to sue was relevant, but not dispositive. The refusal to give a covenant not to sue, at the very least, did not lessen the existing controversy.

The 3M decision makes clear, if it wasn’t already, that the bar for declaratory judgment jurisdiction is quite low. Virtually any communication by a patentee to a potential infringer about a specific accused product that references infringement or licensing, it appears, will be enough to create jurisdiction.

The AIA and the Eastern District of Virginia - An Update

Dabney Carr — Wed, 28 Mar 2012 16:04:40 -0500

Since six months has passed since its enactment, we thought we'd check to see whether the AIA provisions moving venue for civil actions appealing various decisions of the PTO, BPAI and TTAB from the District Court in Washington, D.C. to the Eastern District of Virginia has affected the number of case filings in the EDVA.

The answer is not so much. Nine AIA appeals have been filed in the EDVA since the enactment of the AIA (all in the Alexandria Division). All nine of those AIA appeals have been appeals of patent term adjustments under 35 USC 154(b)(4)(A). As of yet, no litigants have chosen the EDVA over the Federal Circuit to appeal BPAI decisions on patent rejections under 35 USC 145 or interferences under 25 USC 146. Thus, at this point, the EDVA’s expanded jurisdiction has had minimal impact on the EDVA docket.

A recent article on 2011 Trends in Patent Case Filings written by Jim Pistorino of Perkins Coie and Susan Crane also tangentially discussed the impact of the AIA on EDVA patent litigation. That article found that the EDVA was among the top 10 jurisdictions for patent case filings in 2011 up to the passage of the AIA in September but fell out of the top 10 in post-AIA filings and in 2011 case filings overall.

Pistorino and Crane concluded that since the passage of the AIA, there had been a tremendous surge in patent case filings in the District of Delaware. Because the article only included cases filed through December 31, however, it does not include any impact from the Federal Circuit’s December 2 mandamus decision in In re: Link_A_Media. As we discussed here, that decision may make the EDVA a more attractive jurisdiction for patent infringement plaintiffs seeking an East Coast forum.

Troutman Sanders to Sponsor Free Patent Powerhouse Event on March 27th

Matthew Osborne — Fri, 23 Mar 2012 09:44:03 -0500

On Tuesday, March 27th, Troutman Sanders, MeadWestvaco, and the Greater Richmond Chamber will be offering local entrepreneurs the opportunity to receive free pro bono advice concerning the protection of their intellectual property. Attorneys and entrepreneurs from around the city will gather to discuss when and how innovators should seek to protect their valuable ideas.

Panelists for this event include:

Jeff Rock
Co-Founder, Mobelux
Heather Loftus
Co-Founder, Plan G
Mike Bucci
President, K & M of VA Inc.
Neil Cohen
Chief Intellectual Property Counsel, MWV
Robert Angle
Intellectual Property Partner, Troutman Sanders LLP
Dabney Carr, IV
Intellectual Property Partner, Troutman Sanders LLP

This event will begin at 5:30pm. It is free to the public with advance registration. For more information and to register, please click here or contact Chrystal Neal at chrystal.neal@grcc.com.

Bankrupt Patentee Loses Standing to Pursue Infringement Action

Dabney Carr — Mon, 12 Mar 2012 14:59:34 -0500

A recent decision by Judge Spencer in the Eastern District of Virginia points out that patentees which file for bankruptcy during the pendency of an action must act promptly to preserve standing. Qimonda AG v. LSI Corp., Case No. 3:08CV 735, 2012 U.S. Dist. LEXIS 30559 (E.D.Va. March 7, 2012) (Spencer, J.) (found here).

German semiconductor manufacturer Qimonda AG filed a patent infringement suit against LSI Corporation in November, 2008. While the case was stayed pending a § 337 action before the ITC, Qimonda filed insolvency proceedings in Germany. Qimonda’s German insolvency administrator, Michael Jaffe’ filed a petition for recognition of a foreign proceeding, and the EDVA bankruptcy court recognized him as the sole and exclusive representative of Qimonda in the U.S. in 2009. The ITC action subsequently concluded, and the stay of the infringement action was lifted on November 1, 2011.

Once the stay was lifted, LSI moved to dismiss the case for lack of standing. In granting the motion, Judge Spencer ruled:

Where a party claims that the Court loses jurisdiction during the pendency of an action, the issue is not one of standing, which is determined at the outset of a case, but is rather an issue of mootness. "The requisite personal interest that must exist at the commencement of the litigation (standing) must continue through its existence (mootness).”
Properly characterized, LSI’s motion was one of mootness, i.e., when Jaffe’ was appointed insolvency administrator, Qimonda lost standing to sue and the case became moot.
The opening of Qimonda’s insolvency proceedings had the effect of transferring all substantial rights from Qimonda to its insolvency administrator, Jaffe’. There was no dispute that Jaffe’ possessed both the right to sue on the patents and the right to exclude others from practicing the patented invention, and so Qimonda no longer had a legally cognizable interest in the outcome.
Qimonda could not join Jaffe’ as the real party in interest under Fed. R. Civ. P. 17(a)(3) because Rule 17(a) governs substitution of a proper plaintiff at the commencement of the lawsuit.
While Fed. R. Civ. P. 25(c) allowed substitution of Jaffe', he would only step into Qimonda’s shoes, and at the time of the motion, Qimonda lacked standing to sue.

Ultimately, the situation may just present a timing issue. Judge Spencer noted that the Federal Circuit has held that a temporary loss of standing can be cured if the jurisdictional challenge occurs after the party holding all substantial rights has been joined. Thus, Judge Spencer implies that if Qimonda had simply acted quickly and added Jaffe’ as a plaintiff before LSI moved to dismiss, Jaffe could have been substituted as the plaintiff and the case would have continued.

Moreover, LSI gained only a temporary victory. After LSI moved to dismiss, Jaffe’ filed a separate action against LSI and several other defendants, which is now pending.

Western District of Virginia Court Transfers Venue of Patent Suit Brought by a Virginia Company

Dabney Carr — Thu, 01 Mar 2012 11:11:17 -0500

A Virginia-based patentee which chooses to bring suit in Virginia federal court can typically defeat a challenge to venue under 28 U.S.C. § 1404. The deference to a home-state plaintiff’s choice of forum, however, is not absolute, and Judge Moon’s recent decision in Schrader-Bridgeport Int’l., Inc. v. Continental Automotive Sys. US, Inc., 2012 U.S. Dist. LEXIS 18607 (W.D.Va. Feb. 15, 2012) (found here), illustrates when a home plaintiff’s choice of forum may be overcome.

In Schrader-Bridgeport, Judge Moon cited the following factors that weighed against the plaintiff’s choice of forum:

One of the plaintiffs, Schrader-Bridgeport, was located in Altavista and sold a product covered by the patent-in-suit, but the owner of the patent was a sister company, Schrader Electronics, which was based in Michigan;
The patent-in-suit listed six inventors, all of whom lived in Michigan;
The lawyer who prosecuted the patent lived in Michigan;
The original assignee of the patent was located in Michigan;
The accused infringer conducted its research, development and testing for the accused product in Michigan;
While the accused infringer had facilities in Virginia , none of those facilities had any connection to the accused product.

Citing Eastern District of Virginia authority, Judge Moon emphasized that the level of deference to a plaintiff’s home forum varies with the significance of the contacts between the venue and the underlying cause of action – not the contacts between the venue and the plaintiff.

Thus, Judge Moon focused on the location of the defendant's allegedly – discounting factors such as harm caused to the Virginia plaintiff and the Virginia plaintiff’s status as the licensee of the patent-in-suit.

Because several other factors – such as the presence of the patent owner and non-party witnesses in Michigan – also favored transfer, it is difficult to tell how significant the location of infringing activities played in Judge Moon’s decision. His focus on infringing activities rather than the location of the plaintiff, however, provides out-of-state defendants with a powerful argument when seeking to overcome a Virginia plaintiff’s choice of forum.

Non-Government Entities Sending Fake USPTO Notices Directly to Trademark and Patent Holders

Matthew Osborne — Tue, 28 Feb 2012 13:52:49 -0500

Over the past few weeks, we've noticed a spike in the number of non-government solicitations sent directly to United States trademark and patent holders. These notices appear to be sent from the U.S. Patent and Trademark Office but, instead, come directly from for-profit businesses attempting to confuse intellectual property owners with documents appearing official and requesting payment to a non-USPTO address.

Specifically, these third-party solicitations come from businesses that resemble the name of the United States Patent and Trademark Office, such as the "United States Trademark Registration Office," and solicit the provision of services which may duplicate efforts already undertaken by a patent or trademark owner. Some entities simply offer the service of "recording" the owner's interest in a third-party registry, which is unnecessary for the maintenance of any rights. Patent and trademark owners are encouraged to consult an attorney before making any payments based on solicitations received in the mail.

Western District of Virginia Court Grants Partial Summary Judgment on False Patent Marking and Consumer Law Claims

Dabney Carr — Tue, 14 Feb 2012 21:21:44 -0500

Last week, Judge Turk in the Western District of Virginia granted a plaintiff summary judgment on several elements of his false marking claims as well as on elements of his state law claims of false advertising and consumer protection act violations but held that whether the defendant acted with the intent to deceive was an issue for the jury at trial. Sukumar v. Nautilus, Inc., Case No. 7:11CV00218, 2012 U.S. Dist. LEXIS 16506 (W.D.Va. Feb. 10, 2012) (Turk, J.) (found here).

Sukumar designed several custom exercise machines for medical rehabilitation of the elderly and planned to build the machines himself, but feared that he might violate several patents listed on similar machines sold by Nautilus. In the end, he paid Nautilus $150,000 to manufacture customized equipment and claimed that Nautilus’ patent marking prevented him from designing and building his own customized machines.

Sukumar’s case was stayed pending Congress’ consideration of the America Invents Act (AIA). After passage of the AIA, Sukumar amended his Complaint to assert competitive injury and to add state law false advertising and consumer protection act claims.

Sukumar moved for partial summary judgment on its false patent marking claim and on its claims of violations of California’s false advertising law and Washington’s consumer protection act. Judge Turk denied summary judgment on any claim, but, interestingly, entered summary judgment on individual elements of each of the claims.

False Marking

Nautilus admitted it had mismarked all the machines, and Judge Turk found that it was patently obvious that none of the patents listed on any of the equipment covered the machines. Sukumar claimed that the blatant extent of mismarking combined with Nautilus’ knowledge of the mismarking established the necessary intent to deceive.
Judge Turk held, however, that whether Nautilus “evinced a conscious desire that the public be deceived” was a genuine issue of fact for trial.

California False Advertising Claim

Judge Turk granted summary judgment that Nautilus publicly disseminated untrue or misleading statements, but as with the false marking claim, refused summary judgment on whether Nautilus knew or should have known the statements were untrue.

Washington Consumer Protection Act Claim

Again, Judge Turk entered summary judgment that Nautilus’ false marking was misleading. Unlike the other claims, no intent to deceive was required, but whether Nautilus’ false marking had the “capacity to deceive a substantial portion of the public” was a fact issue.

Judge Turk’s decision illustrates the difficulty proving intent to deceive. Even though Nautilus blatantly mismarked its products and admitted that it had falsely marked its product, Sukumar could not show any direct evidence of deceptive intent. Such evidence is rare, forcing false marking plaintiffs to prove their cases at trial through circumstantial and other indirect evidence. What is more, in most cases, defendants will, as Nautilus did, claim that its mismarking was more a case of inadvertence than intentional deceptive conduct. Trial is set for November 5 to November 9, 2012.

Bear Creek -- Hearing on MDL Motion

Robert Angle — Mon, 13 Feb 2012 18:09:01 -0500

Earlier today, the Panel on Multidistrict Litigation issued an Order setting Bear Creek's motion to consolidate its various patent cases (as reported previously here) for March 29, 2012, in San Diego. A copy of that Order can be found here.