Supreme Court Rules Patent Holders Have Burden of Proof in Licensing Cases

The US Supreme Court has ruled that patent owners have the burden of proof when a patent licensee sues seeking a ruling that the patent is invalid and has not been infringed.

In the case of Medtronic Inc. v. Boston Scientific Corp. et al., Medtronic had licensed defibrillator patents from Boston Scientific Corp.  Boston Scientific had previously licensed the same patents from Mirowski Family Ventures LLC. 

Medtronic sought a declaratory judgment that its new products were not covered by some of the Mirowski patents.  The terms of the license prohibited Mirowski from filing patent infringement counterclaims against Medtronic.

A lower court found that Mirowski had the burden of proving that Medtronic’s new products were covered by the Mirowski patents and also found that Mirowski had failed to meet that burden. 

The Federal Circuit (which specializes in patent cases) vacated that ruling and held Medtronic had the burden of showing that it did not infringe. 

The Supreme Court disagreed with the Federal Circuit, holding that the burden of proof of infringement still falls on the patent holder, even if the patent holder can’t bring an infringement claim against the licensee.

According to the opinion by Justice Stephen Breyer,

In our view, the burden of persuasion is with the patentee, just as it would be had the patentee brought an infringement suit. Simple legal logic, resting upon settled case law, strongly supports our conclusion.

Justice Breyer noted that, since patents can be complicated, the patent owner is in a better position than the alleged infringer to specify why and how a product infringes:

Until he does so, however, the alleged infringer may have to work in the dark, seeking, in his declaratory judgment complaint, to negate every conceivable infringement theory.

The case will now go back to the federal district court for further proceedings, including a determination on the infringement issue.

Stay up-to-date on the latest Intellectual Property Law news from Sheldon Mak & Anderson.

US Supreme Court to Rule on Attorneys’ Fees in Patent Cases

In the case of Highmark Inc. v. Allcare Health Management Sys., the US Supreme Court is scheduled to rule on whether a district court’s finding that patent infringement litigation was objectively baseless, and thus supported an award of attorneys’ fees to the defendant, is best decided by a trial court judge.

Allcare is the owner of US Patent No. 5,301,105, which is directed to “managed health care systems” used by organizations such as insurance companies to interact with health care providers.

In 2001, Allcare hired a market research firm to interview managed care companies such as Highmark.  Highmark’s answers suggested to Allcare that it might be infringing the ‘105 patent.  Allcare contacted Highmark and encouraged it to consider taking a license to the patent.

Highmark argued that it did not infringe the patent because, in Highmark’s view, the patent’s claims did not cover Highmark’s system.  Highmark also argued that the patent was unenforceable due to Allcare’s inequitable conduct.

When the parties we unable to negotiate an agreement, Highmark sued Allcare for patent infringement.

A special master found that there was no infringement as a matter of law and recommended that summary judgment of non-infringement be granted.  The district court then dismissed the case.  Allcare appealed, and the Federal Circuit affirmed the summary judgment.

While the appeal on the merits was pending, Highmark moved for an “exceptional-case” finding and Rule 11 sanctions against Allcare.  Highmark called Allcare a “troll” who “sells no products” and “offers no services” but tries to make money by licensing its patent or threatening litigation.

In 2010, the district court awarded Highmark $4,694,740 in attorneys’ fees and $209,626 in costs based on a finding that the dispute was an “exceptional case.”

Allcare appealed, and the Federal Circuit reviewed the district court’s grounds for its exceptional-case determination de novo.  The circuit court deferred to the district court, finding that it “did not clearly err in concluding that Allcare’s…allegations were brought in subjective bad faith.”

Stay up-to-date on the latest Intellectual Property Law news from Sheldon Mak & Anderson.

Supreme Court to Rule on “Divided” Patent Infringement

The US Supreme Court has agreed resolve a dispute between Limelight Networks Inc. and Akamai Technologies over a patent for delivering Internet content.

Akamai holds a patent for a method to redirect Internet content when demand is high.  The company claims that defendant Limelight performs all but one step described in the patent and then induces its customers to perform the last step.

The US Court of Appeals for the Federal Circuit, which focuses on patent cases, ruled in 2012 that Limelight could be sued for inducing patent infringement.  The court overruled earlier decisions that induced infringement required a showing that a single entity performed all the steps constituting infringement of a method claim – the so-called “single entity rule.”

The court said that the “bizarre result” of the single entity rule was that a party inducing infringement could avoid liability by performing some of the claimed method steps itself.  The court found that it was sufficient if the inducer caused, urged, encouraged, or aided the infringing conduct of others.

Under 35 U.S.C. § 271(b), “[w]hoever actively induces infringement of a patent shall be liable as an infringer.”

The court held that Limelight could be liable for inducing patent infringement if the patent holder could show that:

Limelight knew of Akamai’s patent, (2) it performed all but one of the steps of the method claimed in the patent, (3) it induced the content providers to perform the final step of the claimed method, and (4) the content providers in fact performed that final step.

Google, Cisco, Oracle, and others are supporting Limelight, saying that products like smartphones “can be used in an almost infinite combination of ways by other companies and consumers.”

The US Solicitor General urged the Supreme Court to take the case, “to avert a significant expansion of the scope of inducement liability (and a corresponding increase in burdensome litigation).”

Stay up-to-date on the latest Intellectual Property Law news from Sheldon Mak & Anderson.

US Supreme Court to Determine Whether Federal Circuit’s “Exceptional” Test is Improper in Patent Cases

In the case of Octane Fitness, LLC v. Icon Health and Fitness, Inc., the US Supreme Court is scheduled to determine whether the Federal Circuit’s two-part standard for finding an “exceptional case” for awarding attorneys’ fees improperly appropriates a district court’s discretion.

The case involves Icon, a manufacturer and seller of exercise equipment which owns US Patent No. 6,019,710 for an “Exercise Device with Elliptical Movement.”

Icon sued Octane, a start-up exercise equipment company that made elliptical exercise equipment.  Octane claimed that its machines were based on licensed patents that pre-dated the ‘710 patent and that its linkage system was nothing like the one described in the ‘710 patent.

In its petition for certiorari to the Supreme Court, Octane claimed that Icon “recognized Octane’s success and hatched a plan to extort royalties out of Octane with a weak patent case,” using an “old patent…that was sitting on the shelf.”

Octane spent $1.3 million defending itself against Icon’s patent infringement lawsuit and prevailed at summary judgment.  However, the district court did not award Octane attorneys’ fees, finding that under the Federal Circuit’s two-part test the case was not “objectively baseless” or brought in “subjective bad faith.”

Although in US courts the parties generally bear their own legal fees, the Patent Act provides for the award of attorneys’ fees to the prevailing party in “exceptional cases.”  This provision is intended as a deterrent to “improper bringing of clearly unwarranted suits” for patent infringement.

The Federal Circuit affirmed the summary judgment for Octane and also affirmed the district court’s decision on fees.

Octane argued in its petition that the “exceptional-case” standard applied by the Federal Circuit was “inexplicably and unfairly” high and almost impossible for a defendant in a patent infringement case to meet.

Stay up-to-date on the latest Intellectual Property Law news from Sheldon Mak & Anderson.

Supreme Court Hears Arguments on Attorney’s Fees in Patent Cases

The Justices of the US Supreme Court challenged both sides during arguments about attorney’s fees in patent cases.

As we previously reported, the Supreme Court is hearing two cases this session that relate to attorney’s fees in patent cases:  Highmark Inc. v. Allcare Health Management Systems Inc. and Octane Fitness LLC v. Icon Health & Fitness Inc.

One case deals with the legal standards trial courts should apply in awarding attorney’s fees in patent cases, and the other case deals with whether a trial court’s award of fees should be entitled to deference on appeal.

Under existing law, attorney’s fees are normally paid by the party that incurred them.  One party can only be ordered to pay the other’s attorney’s fees in “exceptional” patent cases.

An “exceptional” case is defined as one that is objectively baseless and was brought in subjective bad faith.

During oral argument in the Octane case, Justice Stephen Breyer said that the existing standard might be too difficult to meet.  Justice Elena Kagen agreed.

Justice Breyer suggested that although the US Patent Office had issued many bad patents, the presumed validity of a patent made it hard to show that an infringement case was objectively baseless.

Although he did not use the term “patent troll,” Breyer described a scenario in which a patent owner asserted a patent with “very abstract language” against many defendants, hoping to encourage settlements and avoid the costs of litigation.

He said it was not clear that the plaintiff’s case in such a situation would be objectively baseless.

Octane’s attorney suggested that instead of applying the “objectively baseless” standard courts should shift fees if a case is “unreasonably weak.”

Justice Antonin Scalia took issue with that proposed standard, saying “You’ve got to give me something tighter than that.”

During oral argument on the Highmark case, Justice Samuel Alito said that many federal judges may not have the expertise to determine whether fees should be awarded in an “exceptional” patent case. 

“Exceptional compared to what?” he said.

Justice Ruth Bader Ginsburg said that deferring to district courts could result in an inconsistent application of the law, with a “risk of large disparities from district judge to district judge.”

An attorney for Allcare argued that the Federal Circuit (which was created to hear patent cases) was best suited to review fee awards.

However, Chief Justice John Roberts challenged that assumption, saying, “The Federal Circuit was established to bring about uniformity in patent law, but they seem to have a great deal of disagreement among themselves.”

Stay up-to-date on the latest Intellectual Property Law news from Sheldon Mak & Anderson.

Adidas Claims Under Armour Infringed Fitness Patents

Adidas AG has sued Under Armour Inc. in Delaware federal court, claiming that Under Armour infringed 10 Adidas patents for a “location aware” fitness training system.

The patents at issue were issued between 2007 and 2013 and include one for a “method of monitoring an individual’s performance during a physical activity with a portable performance monitoring device,” using GPS and “systems and methods for a portable electronic journal.”

Adidas products using the patented technology let users monitor their heart rates, calculate the number of calories they have burned, and collect other data via their smartphones.

The Adidas suit targets the Armour39 exercise monitoring system, which uses sensors, a chest strap, and mobile apps to track athletic performance metrics.

The suit also names as a defendant MapMyFitness Inc., a subsidiary Under Armour acquired in 2013.

MapMyFitness makes mobile apps including MapMyRide, MapMyRun, and MapMyHike, which all use GPS technology.

Adidas says that Under Armour’s director of innovation and research was previously a senior innovation engineering manager for Adidas.

Adidas is seeking damages for infringement based on a reasonable royalty rate, plus treble damages for willful infringement.

Adidas was itself sued in 2013 by a company called SportBrain, which alleged that Adidas violated its 2008 patent for “integrating personal data capturing functionality into a portable computing device and a wireless communication device.”

SportBrain also sued Nike for patent infringement involving the Nike FuelBand, a bracelet that measures calories burned by the wearer all during the day, and also brought suit against California-based FitBit Inc.

Because of the risk of expensive patent infringement litigation, companies seeking to produce new products often obtain “freedom to operate” (FTO) opinions from patent attorneys.

An FTO opinion can help a company determine whether a proposed new product can be marketed without infringing third party patent rights, on a country-by-country basis.

Stay up-to-date on the latest Intellectual Property Law news from Sheldon Mak & Anderson.

AT&T Appeals to Federal Circuit after Patent Lawyers Blow Deadline

After its patent law firm missed a deadline for challenging a $40 million patent infringement verdict against it, AT&T has asked the Federal Circuit for more time to appeal.

On February 6, US District Judge Orlando Garcia denied a motion by AT&T seeking an extension of time to appeal a March, 2013 verdict that it infringed patents owned by Two-Way Media LLC.

The patents at issue include a “Multicasting method and apparatus” and relate to technology for live-streaming audio and video over the Internet.

A Texas jury found that AT&T and its subsidiaries infringed seven claims of two of the patents and that AT&T had failed to prove that the patents were invalid.

The deadline to appeal the jury verdict passed in December.  AT&T claimed that docket notices emailed from the court did not make it clear that all post-trial motions had been resolved by November, which started the clock ticking on the 30-day period for filing an appeal.

AT&T said that its attorneys only realized in January that the motions had been resolved when one of them happened to actually read the orders while looking for something else.

Judge Garcia did not consider that a good enough reason to grant an extension, saying that it was “very troublesome” that none of AT&T’s 18 patent attorneys at two law firms “bothered to read the orders issued by the court, check the docket for activity, or check on the status of the case” – especially given how much money was involved.

AT&T has agreed to post a $40 million bond while it appeals the decision prohibiting it from appealing the verdict.

Stay up-to-date on the latest Intellectual Property Law news from Sheldon Mak & Anderson.

 

Life is a (Global Patent Prosecution) Highway

Thirteen countries have signed an agreement that provides patent applicants with an opportunity to request accelerated examination – and, potentially, early patent grants – in the signatory states.

For several years, the US Patent and Trademark Office (USPTO) and patent offices in a number of other countries have participated in bilateral pilot programs called the Patent Prosecution Highway (PPH).  This allowed a patent applicant receiving a ruling from the patent office in one country to request fast track treatment of the corresponding application in the other country.

The program was later expanded to include applications filed under the Patent Cooperation Treaty (PCT).  The PCT, signed in 1970, provides a unified procedure for filing patent applications in member countries.

Starting January 6, 2014, the old PPH program has been replaced by a new Global Patent Prosecution Highway (GPPH) program.

The countries that will initially participate are:

• The US
• Australia
• Canada
• Denmark
• Finland
• Iceland
• Japan
• Korea
• Norway
• Portugal
• Russia
• Spain
• The United Kingdom

Patent applicants receiving a ruling from any member patent office that at least one claim of a patent application is allowable can request that one or more of the other member patent offices accelerate the review of the corresponding patent application.

Applicants will be able to use a single form and follow a common set of guidelines for all the patent offices.

The GPPH pilot program can save money and time for patent applicants seeking international protection for their inventions.  It can be especially valuable in rapidly evolving technology fields where it’s important to gain a commercial advantage by filing patents as early as possible.

Stay up-to-date on the latest Intellectual Property Law news from Sheldon Mak & Anderson.

Jury Finds that Google’s Patent License Protects Its Customers

A federal jury in Texas has found that Google’s license with a patent owner prohibits that patent owner from suing Google’s customers for infringement of the licensed patents.

Beneficial Innovations Inc., a Las Vegas-based non-practicing entity (NPE), had sued Google and other defendants in 2007 and 2009 alleging infringement of Beneficial’s patents for online advertising.

One of the patents, filed in 2000 and issued in 2009, is for

A networked system … for presenting advertising during on-line interactions between a user and a service of a network (e.g., the Internet…). Advertisements (ads) are presented to a networked user unrequestedly during user interactions with the service. The user can activate the ads (via hyperlinks) for receiving additional advertising. …

In 2010, Google and Beneficial entered into a license for the two patents at issue.  Google and its YouTube subsidiary were then dismissed from the patent infringement case.

The license agreement covered Google’s customers, but “only to the extent” that the customers’ activities would constitute direct or indirect infringement by Google but for the license.

However, less than a year after the settlement Beneficial sued a number of companies, including five Google customers, for infringement of the same patents.

The Google-Beneficial patent license had left open the issue of whether Google’s customers’ specific activities were covered by the license.

Google intervened in the suit against its customers, claiming that it violated the licensing agreement.  However, the Google-Beneficial patent license was unclear on whether it covered the specific activities challenged by Beneficial in the latest suit.  This was the question the jury decided in Google’s favor.

Google sought only nominal damages in the amount of one dollar, as it was primarily interested in relieving its customers of the burden of the lawsuit.

Although the case had a positive outcome for Google, it is possible that it could have been avoided with a more carefully drafted license agreement that spelled out the full range of potential uses by Google customers.

Stay up-to-date on the latest Intellectual Property Law news from Sheldon Mak & Anderson.

 

Fair Use of Copyrighted Articles in Patent Applications?

Several recent federal court decisions involved an unusual convergence between two forms of intellectual property:  patents and copyrights.

At issue was whether it was a violation of copyright law to include copies of scholarly articles with patent applications.

The plaintiffs in the cases were the American Institute of Physics and two publishers of scientific journals:  John Wiley & Sons and Blackwell Publishing.

The defendants were patent law firms that prosecute applications before the US Patent and Trademark Office (USPTO) and foreign patent offices.

The patent lawyers had submitted copies of articles published by the plaintiffs as evidence of “prior art” in connection with patent applications.  The lawyers had also distributed copies of the articles to their clients and to other patent attorneys working on domestic or foreign applications.

In the Minnesota federal court case of American Institute of Physics and John Wiley & Sons, Inc. v. Schwegman, Lundberg & Woessner, P.A., a patent law firm had downloaded 18 of the defendants’ articles — mostly from the USPTO’s website.  The firm also placed copies of the articles on its intranet site.

The plaintiffs asserted that this copying constituted copyright infringement.

The judge disagreed, and granted summary judgment for the defendants.

In similar cases from Texas and Illinois, the plaintiffs complained that the patent lawyers not only engaged in unauthorized copying but also directly profited from their copyright violations by charging clients for the copies.

The court in the Texas case granted summary judgment for the defendants;   the Illinois case has not yet been decided.

A fourth case in Kansas was dismissed after the defendant obtained a license to use the copyrighted works.

In all of these cases, the defendants invoked the “fair use” doctrine.  Under US copyright law, certain acts that would otherwise constitute infringement are considered “fair use.”  Examples of fair use include “criticism, comment, news reporting, teaching[,] or research.”

The defendants argued that their copying was essential to the prosecution of patent applications, which includes the obligation to disclose “prior art.” In addition, the defendants argued that their use of the copies did not affect the market for the plaintiffs’ articles.

The plaintiffs have announced their intention to appeal the decisions against them.

Stay up-to-date on the latest Intellectual Property Law news from Sheldon Mak & Anderson.