Important U.S. Patent Decisions From 2009

Alan D. Smith~ Fish & Richardson P.C.

(617) 521-7818 Telephonesmith@fr.com email

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Court of Appeals for the Federal Circuit

Exclusive Appellate Jurisdiction In Patent Cases– U.S. District Courts – PTO’s Board Of Patent Appeals

Currently 11 Judges– Chief Judge Paul Michel

Makes Most Of The Patent Laws Recently, U.S. Supreme Court Getting Involved

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The nominees are…Exergen v. Wal-Mart575 F.3d 1312 (Fed. Cir. 2009)

Lucent v. Microsoft580 F.3d 1301 (Fed. Cir. 2009)

Cornell v. HP609 F.Supp.2d 279 (N.D.N.Y. Mar. 30, 2009)

i4i v. Microsoft2009 WL 4911950 (Fed. Cir. 2009)

HP v. Acceleron587 F.3d 1358 (Fed. Cir. 2009)

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The nominees are…TS Tech 2009 Progeny

TS Tech – 551 F.3d 1315 (Fed. Cir. 2008)Genentech – 566 F.3d 1338 (Fed. Cir. 2009)Hoffmann-La Roche – 587 F.3d 1333 (Fed. Cir. 2009)Nintendo – 2009 WL 4842589 (Fed. Cir. 2009)Volkswagen – 566 F.3d 1349 (Fed. Cir. 2009)

Abbott v. Sandoz566 F.3d 1282 (Fed. Cir. 2009)

In re Bilski545 F.3d 943 (Fed. Cir. 2008)

Prometheus v. Mayo581 F.3d 1336 (Fed. Cir. 2009)

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Inequitable Conduct Allegations In Litigation

Out Of Control??

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Exergen v. Wal-Mart

Duty Of Disclosure To Patent OfficeInequitable Conduct– Material Misrepresentation Or Omission– Intent to Deceive

Plead With Particularity Under Fed.R.Civ.P. 9(b)Common Defense And/Or Counterclaim By Defendants– Adds significant cost, risk, hostility

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Inequitable Conduct With Specificity

Specific Who, What, When, Where and How– Name The Specific Actor (e.g., inventor, prosecuting

attorney)– Specific Claim Limitations– Specific Misrepresentations Or Omitted References

Sufficient Allegations To Reasonably Infer Knowledge And IntentShould Significantly Reduce Inequitable Conduct Allegations

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Damages

Should Royalties Be Based On Entire Product Sold??

Should Lawsuits Focus On Downstream Customers??

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Lucent v. Microsoft

$358M Jury Award Against Microsoft Overturned– “Date-Picker” Feature In Outlook

“Reasonable Royalty”Lucent Relied On Entire Market Value RuleCAFC: Lucent’s Evidence Had Little Connection With The Claim Scope

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Lucent’s Damages Theory

Revenue $8 Billion8% Royalty On RevenueRequested $561.9 MillionJury Awarded Approximately 5.5% On All Revenue

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Lucent v. MicrosoftEntire Market Value Must Make Sense– “For The Entire Market Value Rule To Apply, The

Patentee Must Prove That “The Patent-related Feature Is The ‘Basis For Customer Demand’””

No Evidence That Anyone Bought Outlook Because It Had Date-Picker– Date-Picker Tool In Outlook Is Very Small Component

Of Outlook– Vast Majority Of Outlook Features Do Not Infringe– Email v. Date-Picker Tool

Lucent Did Not Satisfy Burden Of Proving Applicability Of Entire Market Value Rule

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Cornell v. HP

Federal Circuit Judge Rader Sitting By Designation– Northern District Of New York

Jury Awarded $184 Million– .8% Royalty On CPU Bricks

Award Slashed To $53 Million– Royalty Based on Hypothetical Value Of Processors

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Cornell v. HPPatent Relates To Small Part Of MicroprocessorHP Sold Servers And Workstations– Microprocessors Part Of CPU Module, Which Is Part Of

Brick

Rader: Entire Market Value Rule Requires Patented Feature To Be The Basis Of Customer DemandRader: Cornell Expert Could Not Show Patented Component Drove Demand For Servers, Workstations, Bricks

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Injunctions

$240 Million Damages

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i4i v. Microsoft

$240M Award Against MicrosoftPermanent Injunction– Microsoft Word XML Editor Enjoined– i4i No Longer Practicing Patent

Irreparable Harm – i4i XML Product Obsolete

Money Damages Inadequate– Loss Of Market Share, Brand Recognition, Goodwill

“Minimal” Adverse Effects On Public– Excludes Pre-January 11, 2010 Sales

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i4i v. Microsoft

Microsoft Did Not File A Pre-Verdict JMOL On DamagesCAFC Could Not Decide Whether There Was A Sufficient Evidentiary Basis For Jury Damages Award“Had Microsoft Filed A Pre-Verdict JMOL, It Is True The Outcome Might Have Been Different”– Lucent And i4i Cases Different Procedurally

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Venue

At The Mercy Of Trolls??

Can You Transfer Out Of EDTex??

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HP v. Acceleron

Right To File A Declaratory Judgment Action

Supreme Court In Medimmune v. Genentech (2007)– Establish Controversy Between The Parties – No More Magic Words– Objective Test

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Lower DJ Threshold Against Trolls?

Patent Trolls (Non-Practicing Entities)Acceleron (troll) Wrote HP Twice

– Identified Patent– Specific HP Blade Server Products – No Infringement Charge– Imposed Two-Week Response Period– Requested HP “Not File Suit”

Implicit Assertion Of Patent RightsWithout Enforcement, Trolls Get No Benefit From PatentsLetters From Competitors

– “Invoke A Different Reaction”

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TS Tech And 2009 Progeny

Eastern District Of Texas– No Tech Industry– Yet, Huge Patent Docket– Considered Plaintiff-Friendly

Motions To Transfer Venue – Were Unsuccessful– Evidence Not Located In EDTX– No Witnesses– No Incorporation– No Offices

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TS Tech And 2009 ProgenyClear Abuse Of Discretion By EDTX Courts– 100-Mile Rule – EDTX’s So-Called “Central Proximity” Not A Factor– “A Fiction … To Manipulate The Propriety Of Venue”

Genentech (5/2009) – Transfer To N.D.Cal.Hoffman-La Roche (12/2009) – To E.D.N.C.Nintendo (12/2009) – To W.D.Was.

Volkswagen (5/2009) – Mandamus Denied– Judicial Economy – Multiple EDTX Cases With Same Patents

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Product By Process Claims

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Abbott v. Sandoz

Product-By-Process Claims– When Products Cannot Be Fully Described By Their Structure– Unknown Composition Or Structure– Common In Life Sciences Arts

Is The Product Defined By The Process?Product-By-Process Claims Must Perform The Process

– Product Made By Recited Y Process – Liable– Product Made By Different Z Process – Not Liable

Narrows Usefulness Of Product-By-Process Claims

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Are Business Methods And Software Patentable??

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Patent-Eligible Subject Matter

35 U.S.C. § 101– Whoever invents or discovers any new and useful

process, machine, manufacture, or composition of matter . . . may obtain a patent therefor, subject to the conditions and requirements of this title.

Intended to cover “[A]nything under the sun that is made by man.”(Committee Reports, 1952 Patent Act.)

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In re BilskiBernard L. Bilski Filed A Patent Application Claiming A Method Of Hedging Risk In Energy Commodity TradingFederal Circuit: Not Patentable Subject MatterA Claim Must Satisfy The “Machine-or-transformation” Test To Be Patent-eligible– It Must Be Directed To A Machine, Or– It Must Transform An Article Into A “Different State Or

Thing”

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Bilski v. Kappos

Supreme Court heard appeal on November 9– Case Now Called Bilski v. Kappos

Eighty-One Amicus Curiae Briefs FiledThe Issue: When Can Business Methods Be Patented?Arenas Potentially Affected By Decision: Software Innovations, Financial Services Methods, Diagnostic Tests, Any Process– Significant Problems With Invalid Patents

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Patent-Eligible Or Not?

A Method Of Hedging Risk In Which An Intermediary Sells Commodities At A First Fixed Price And Buys Commodities At A Second Fixed Price.

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Justice Scalia“[T]he Term Useful Arts . . . Meant, Originally, And Still Means Manufacturing Arts, Arts Dealing With Workmen, With --You Know, Inventors, Like Lorenzo Jones, Not -- Not Somebody Who Writes A Book On How To Win Friends And Influence People.”

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Justice SotomayorSo How Do We Limit It To Something That Is Reasonable? Meaning, If We Don't Limit It To Inventions Or To Technology, As Some Amici Have, Or To Some Tie Or Tether, Borrowing The Solicitor General's Phraseology, To The Sciences, To The Useful Arts, Then Why Not Patent The Method Of Speed Dating?

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Justice Kennedy“[The Diehr Case Involved] Something That You Could Touch, That You Could See, That Looked Like A Machine, The Substance Was Different Before The Process And After The Process. And -- And None Of That's Applicable Here.”

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Justice Breyer“I Have A Great, Wonderful, Really Original Method Of Teaching Antitrust Law, And It Kept 80 Percent Of The Students Awake. They Learned Things . . . . It Was Fabulous. And I Could Probably Have Reduced It To A Set Of Steps And Other Teachers Could Have Followed It. That You Are Going To Say Is Patentable, Too?”

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Justice Stevens

But Is It Correct That There's None --None Of Our Cases Have Ever Approved A Rule Such As You Advocate?

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Justice Roberts“[T]he Physical Step That Your Process Involves Is Picking -- Picking Up The Phone And Calling People On Both Sides Of The Transaction.”

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Justice Alito“[N]ear The End Of Your Brief You Argue That . . . The Patent Here . . . Is Unpatentable On The Independent Ground That It Would Preempt The Abstract Idea Of Hedging . . . Consumption Risk. . . . [I]f You Are Right About That, Is This A Good Case For Us To Get Into The -- Into The Very Broad Issue That Petitioner Has Raised?”

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Justice Ginsburg“[I]f You Read Judge Mayer's Opinion, It Has A Simplicity To It. It Says, If It's Technology, Then Its Within The Realm Of Patent, And If It's Not Technology, It Isn't . . . .”

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Predictions for Business MethodsBilski’s Claims Will Not SurviveSupreme Court Seems Inclined To Limit The Ability To Patent “Inventions” That Are IntangibleBusiness Methods That Do Not Satisfy The Machine-or-transformation Test Are Not Patentable

– Problem With “Machine” Prong

Using Old Machines To Perform Business Method Not Enough

– Using Computer To Perform Calculations– Using Telephone To Call People

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Is A Medical Treatment Method Patentable Subject Matter??

Or Unpatentable Algorithm??

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Prometheus v. MayoManaging Intellectual Property Named This One Of The Top Ten IP Trials Of 2009Fish & Richardson Represented Mayo In District Court And At The Federal CircuitPetition To Supreme Court Being Held Pending Bilski Decision

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Prometheus v. MayoDistrict Court Held Claim Not Patentable Subject Matter (§101)– Claims Only Cover Natural Phenomenon

Claim (paraphrased): Method Of optimizing Efficiency Of Treatment– (a) Administering A Drug To A Subject– (B) Determining The Level Of The Drug In The Subject

• Wherein The Level Of The Drug Less Than X Indicates A Need To Increase The Drug

• Wherein The Level Of The Drug Greater Than Y Indicates A Need To Decrease The Drug

CAFC Applied In re Bilski (Federal Circuit)“Machine Or Transformation Test”– Typically, Software And Business Methods

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Human Body Can Transform

Method Of Treatment– “Administering” A Drug– “Determining” Effects Of The Drug

Treating The Human Body Requires Transformation Of Drug In The BodySatisfies MOT Test From BilskiNatural Phenomena?– All Transformations In Body Are Based On Natural

Principles

Important U.S. Patent Decisions From 2009

Alan D. Smith~ Fish & Richardson P.C.

(617) 521-7818 Telephonesmith@fr.com email