Case Briefs on Patent Law

Yin Huang

November 27, 2010

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0.1 eBay Inc. v. MercExchange, L.L.C.

126 S.Ct. 1837 (2006)

0.1.1 Overview

The Supreme Court applied the traditional four-factor test in determiningwhether to issue an injunction as a remedy for patent infringement. TheCourt held that lower courts should neither grant nor deny injunctions as amatter of course.

0.1.2 Facts

MercExchange, L.L.C. held a patent that covered auction websites of the kindoperated by eBay Inc. MercExchange attempted to license its technology toeBay, but the parties ultimately failed to reach an agreement. MercExchangethen sued to enjoin eBay from operating its auction websites.

0.1.3 Issue

What test should courts apply in deciding whether to issue an injunction asa remedy for patent infringement?

0.1.4 Holding

Courts should apply the traditional four-factor test in deciding whether toissue an injunction as a remedy for patent infringement. A plaintiff seeking aninjunction must demonstrate (1) that it has suffered an irreparable injury;(2) that remedies available at law are inadequate to compensate for thatinjury; (3) that, considering the balance of hardships between the plaintiffand defendant, a remedy in equity is warranted; and (4) that the publicinterest would be not be disserved by a public injunction.

0.1.5 Reasoning

Justice Thomas delivered the opinion of the Court. Although thePatent Act grants patentees “the right to exclude others from making, using,offering for sale, or selling” their patented inventions, these protections do notimply that courts should depart from the traditional test for the appropriate-ness of injunctive relief. The District Court should not have declined to issue

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an injunction on the ground that MercExchange intended to license its tech-nology rather than to develop its own auction websites. A patentee’s decisionto avoid the financial hurdles of marketing a product should not weaken theexclusionary rights arising from the patent. The Court of Appeals shouldnot have taken the equally unsupported position that injunctions should begranted as a matter of course.

Justice Roberts, with whom Justice Scalia and Justice Ginsburgjoin, concurring. Courts frequently grant injunctions in patent litigationbecause the traditional test frequently shows that injunctive relief is theappropriate remedy. Because patents fundamentally grant a right to exclude,courts can best protect this right by issuing injunctions.

Justice Kennedy, with whom Justice Stevens, Justice Souter, andJustice Breyer join, concurring. Courts should consider the modernrealities of patent law in applying the traditional test for injunctive relief.Courts should consider that a patentee may use the possibility of an injunc-tion to extract exorbitant concessions from businesses.

0.2 Diamond v. Chakrabarty

0.2.1 Overview

The Supreme Court held that an organism engineered to have characteristicsnot found in nature could be patent-eligible.

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0.2.2 Facts

0.2.3 Issue

0.2.4 Holding

0.2.5 Reasoning

1 Trade Secret

1.1 E. I. du Pont de Nemours & Company, Inc. v.Christopher

451 F.2d 1012 (5th Cir. 1970)

1.1.1 Overview

The Fifth Circuit held that aerial photography can sometimes be an impropermeans of appropriating a trade secret.

1.1.2 Facts

E. I. du Pont de Nemours & Company (“DuPont”) was constructing a plantwhose purpose was to produce methanol using a process that DuPont hadnewly discovered. During construction, portions of the plant’s interior wereexposed. According to DuPont, aerial photographs of the partially com-pleted plant could allow a sufficiently skilled individual to deduce DuPont’snew method of methanol production from the plant’s configuration. AfterRolfe and Gary Christopher took aerial photographs of the plant on behalfof an undisclosed third party, DuPont sued on the ground that they had mis-appropriated DuPont’s trade secrets. The Christophers argued that aerialphotography of the incomplete plant could not support a claim for misap-propriation of trade secrets.

1.1.3 Issue

May aerial photography of a partially completed chemical plant support aclaim for misappropriation of trade secrets?

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1.1.4 Holding

Aerial photography of a partially completed chemical plant may support aclaim for misappropriation of trade secrets.

1.1.5 Reasoning

Goldberg, Circuit Judge: In general, the misappropriation of a tradesecret occurs whenever one arrives at the discovery of another without in-dependently undertaking the efforts necessary for the discoverer to uncoverthe secret. The Restatement of Torts summarizes this rule by stating thatone is liable for infringing a trade secret when “he discovered the secret byimproper means.” The applicable case law contains rules to the same effect.Although a breach of confidence or some other deceptive act often accom-panies the misappropriation of a trade secret, nothing in the legal doctrinestates that such acts must occur before liability can exist.

Although one is entitled to observe a competitor’s operations and evento reverse-engineer a competitor’s product, one may not obtain a trade se-cret by circumventing the competitor’s reasonable precautions against thedivulgement of that trade secret. The Christophers violated this rule byemploying the special means of overflying DuPont’s plant in order to takephotographs that would show that plant’s configuration. DuPont could nothave guarded against such photography except by the impractical defense ofbuilding a roof over the partially completed plant. Therefore, DuPont hasadvanced a cognizable claim for misappropriation of a trade secret.

1.2 Learning Curve Toys, Inc. v. PlayWood Toys, Inc.

342 F.3d 714 (7th Cir. 2003)

1.2.1 Overview

The Seventh Circuit held that the copying of a simple toy design disclosedunder a confidentiality agreement may support liability for misappropriationof a trade secret.

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1.2.2 Facts

PlayWood Toys was an upstart company whose business consisted of sellingwooden toy trains. When PlayWood displayed its toy trains at the New YorkToy Fair, Learning Curve Toys expressed interest in arranging for PlayWoodto manufacture Learning Curve’s line of toy trains. During subsequent nego-tiations, Learning Curve disclosed to PlayWood that it was facing difficultiesin differentiating the wooden tracks for its toy trains from its competitors’tracks. PlayWood responded by proposing a wooden track carved with par-allel grooves, which would cause toy trains to make a “clickety-clack” soundas they rolled along the track. To illustrate its idea, PlayWood machined amodel segment of the track during the meeting. After orally agreeing notto disclose the substance of the negotiations, Learning Curve representativestook possession of the prototype track.

The negotiations between PlayWood and Learning Curve were ultimatelyunfruitful. Upon discovering that Learning Curve was producing the “Click-ety Clack Track,” PlayWood sued for misappropriation of a trade secret.The trial court granted judgment as a matter of law to Learning Curve onthe ground that PlayWood had not established a material issue of fact as towhether its prototype track was a trade secret.

1.2.3 Issue

Did PlayWood establish a material issue of fact as to whether its prototypetrack was a trade secret?

1.2.4 Holding

PlayWood established a material issue of fact as to whether its prototypetrack was a track secret.

1.2.5 Reasoning

Ripple, Circuit Judge.

1.3 CMBB, LLC v. Lockwood Manufacturing, Inc.

628 F.Supp.2d 881 (N.D.Ill. 2009)

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1.3.1 Overview

The court held that an unprotected customer list is not a trade secret.

1.3.2 Facts

Shortly before Chicago Metallic went out of business, it sold to CMBB a listof its customers. During the transaction, Chicago Metallic did not indicateto CMBB that the list was a considered a trade secret, nor did CMBB re-quest that Chicago Metallic ensure the list’s secrecy by destroying all extracopies. CMBB subsequently came believe that a former employee of ChicagoMetallic disclosed a copy of the list to Lockwood Manufacturing. CMBBsued Lockwood on the ground that Lockwood had misappropriated a tradesecret.

1.3.3 Issue

Is an unprotected customer list a trade secret?

1.3.4 Holding

An unprotected customer list is not a trade secret.

1.3.5 Reasoning

Milton I. Shadur, Senior District Judge. CMBB has not shown thatChicago Metallic treated the customer list as a trade secret. When ChicagoMetallic was still in business, it placed no restrictions on what employeescould do with the list. When the list was sold to CMBB, Chicago Metallicdid not indicate that the list was a trade secret, nor did CMBB ask ChicagoMetallic to take any steps to prevent the disclosure of the list to other parties.In all, the reasonable protections that would normally protect a trade secretwere entirely absent.

1.4 Bonito Boats, Inc. v. Thunder Craft Boats, Inc.

109 S.Ct. 971 (1989)

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1.4.1 Overview

The Supreme Court invalidated a Florida statute prohibiting the duplicationof non-patented boat hulls. The Court found that the statute contravenedfederal patent law.

1.4.2 Facts

Bonito Boats used “direct molding” to produce the hulls of its recreationalboats. In direct molding, the manufacturer first constructs a wooden modelof the hull to be produced. The manufacturer then sprays a layer of fiberglassonto the model. When the fiberglass hardens, it forms a mold from whichproduction hulls can be made.

Bonito used direct molding to produce its Model 5VBR recreational boat.The boat had been on the market for six years when Florida enacted astatute making it “unlawful for any person to use the direct molding processto duplicate for the purpose of sale [any boat hull].” Bonito subsequentlysued Thunder Craft Boats for violating the statute by duplicating the Model5VBR hull.

1.4.3 Issue

Does federal patent law preempt and thereby invalidate the Florida statute?

1.4.4 Holding

Federal patent law preempts and thereby invalidates the Florida statute.

1.4.5 Reasoning

Justice O’Connor delivered the opinion of the Court. The Floridastatute contravenes federal patent law by providing inventors with protec-tions that run counter to congressional intent.

1.5 Laboratory Corp. of America v. Metabolite Labs,Inc.

126 S.Ct. 2921 (2006)

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1.5.1 Overview

Three Supreme Court justices disapproved a patent covering

1.5.2 Facts

1.5.3 Issue

1.5.4 Holding

1.5.5 Reasoning

1.6 Sample

1.6.1 Overview

1.6.2 Facts

1.6.3 Issue

1.6.4 Holding

1.6.5 Reasoning

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