Patent and Trademark Office Publishes Final Rules for Derivation Proceedings

By Charles Pierce

On September 10, The Patent and Trademark Office published finals rules designed to ensure that a person applying for a patent is the true inventor through a new trial proceeding, the derivation proceeding.  An applicant who is not first to file (the petitioner) will be able to petition for a derivation proceeding and attempt to show that  another applicant’s (the respondent) claimed invention was derived from the petitioner’s invention.  Derivation proceedings will take place before the Patent Trial and Appeal Board.

The petition must show by substantial evidence that the petitioner’s application has at least one claim which is the same or substantially similar to the respondent’s claimed invention and demonstrate that the respondent’s claimed invention was derived from the petitioner’s invention.  The petitioner must also show, for each of his claims, why the respondent’s claimed invention is substantially similar, and identify how the claim should be construed.[1]  Such a petition must be filed within one year of the publication of the petitioner’s relevant claims.[2]

These new rules will be codified in 37 C.F.R. Part 42, Subpart E, and will take effect on March 16, 2013.  The full text of the rules along with the PTO’s responses to comments may be found at or 77 Fed. Reg. 56067 (Sept. 11, 2012).

[1] Changes to Implement Derivation Proceedings, 77 Fed. Reg. 56067, 56091 (Sept. 11, 2012) (to be codified at 47 C.F.R. Part 42).
[2] Id.

In re Hyon: Substantial Evidence Standard Helps Preserve Finding of Obviousness

By Chris Reaves

A recent appeal of a lengthy prosecution ended last week, when the Federal Circuit in In re Hyon, 102 USPQ2d 1889 (Fed. Cir. 2012) upheld the Board of Patent Appeals and Interferences (BPAI) findings that a person of ordinary skill would have reason to combine two references to create the invention at issue.  The Board’s decision, though possibly “flawed,” could not be found unreasonable under the applicable standard of review, emphasizing the challenge that patent prosecutors face in overcoming a factual finding.


The applicants, Suong-Hyu Hyon and Masanori Oka, were granted U.S. Patent No. 6,168,626 on a specific type of “Ultra High Molecular Weight Polyethylene” (abbreviated throughout the patent and the opinion as “UHMWPE”), and on the method for creating these material.  The inventors intended the material to be used for artificial joints although the claims were not limited to this embodiment.  The patent had only eleven claims, with limitations such as thickness of the UHMWPE and orientation of the crystal planes within.

Deciding these limitations were unnecessary, the applicants filed a reissue application (No. 10/643,674) within the two-year window, cancelling the original claims and adding several dozen new claims.  These new claims generally consisted of a method of four steps:

(a) crosslinking an ultra high molecular weight polyethylene block having a molecular weight not less than 5 million by irradiating the block with a high energy radiation at a level of at least 1 MR;

(b) heating said crosslinked block up to a compression deformable temperature below the melting point of the UHMWPE;

(c) subjecting said heated block to pressure; and then

(d) cooling said block.

(All claims to the UHMWPE material itself were eventually cancelled voluntarily.)

The examiner rejected all the reissue claims as obvious over two prior art patents, “Zachariades” and “Kitamaru” (Patent Nos. 5,030,402 and 3,886,056, respectively).  As the applicants acknowledged, Zachariades contained all the steps of the applicants’ claims, but in a different order – irradiation occurred after cooling.  (The exact radiation levels and molecular weights also varied, but not to a degree that the examiner thought relevant, and the applicants did not address this difference before either the Board or the Federal Circuit.)  Kitamaru, meanwhile, used a somewhat different method to prepare UHMWPE for use in films and sheets, but it began the process with an irradiation step.  The examiner found that it would be obvious to take the teaching of Kitamaru, to begin with the irradiation crosslinking, and apply it to Zachariades.

The applicants appealed to the Board of Patent Appeals and Interferences, arguing that there was no motivation to combine the references.  The Board, however, affirmed the rejection, and the applicants appealed again to the Federal Circuit.

Ruling: Board Had Substantial Evidence to Support Finding

The majority opinion, written by Judge Bryson and joined by District Judge Jeremy Fogel (N.D. Cal., sitting by designation), opened by recalling that “existence of a reason for a person of ordinary skill to combine references” is a factual finding, reviewed under the “substantial evidence” standard.

Examining the applicants’ arguments, the majority first rejected the suggestion that the prior art came from “fundamentally different material technologies.”  Both patents spoke to the preparation of UHMWPE products, and although each focused on different embodiments, “[n]either reference limits the structure of the UHMWPE product that can be made”.

The majority also found arguments that Zachariades taught against irradiating before molding, or that the examiner and Board had cherry-picked one aspect of Kitamaru to combine with Zachariades, unconvincing.  Although its claims were limited to irradiating after molding, nowhere had Zachariades stated that the opposite was unfeasible or inadvisable.  More importantly, Kitamaru had emphasized that irradiation before molding was the key to creating desired improvements in UHMWPE, namely “a higher melting or softening point, improved transparency, and excellent dimensional stability.”  Therefore, the suggestion to select that element from the reference was in the reference itself.

Judge Newman, in dissent, found it telling that Kitamaru predated Zachariades (indeed, the former issued over a decade before the latter was filed).  It was therefore “noteworthy that Zachariades, seeking mechanical strength and dimensional stability, did not follow the known Kitamaru processing sequence, but instead crosslinked the polyethylene after deformation”.  Newman found this sufficient to show that a person of ordinary skill would not find the results of the combination predictable; had it been obvious to combine, Zachariades would have already done it in his own patent.  The Board, she concluded, had engaged in impermissible hindsight analysis, “reasoning backward from” the patent at issue to see what Zachariades himself had not.

Analysis: Don’t Directly Challenge a “Reason to Combine” Finding

The majority emphasizes the standard of review in its decision.  “Substantial evidence,” a standard used in review of factual findings by both juries and quasi-judicial agency decisions, requires deference to the Board’s decision unless it was without “such relevant evidence as a reasonable mind might accept as adequate to support [the] conclusion” (Universal Camera Corp. v. NLRB, 340 U.S. 474).  In other words, unless no reasonable fact-finder could come to the same conclusion given the same evidence, the appellate court will affirm.

Given this emphasis, the standard was likely what tipped the court.  The applicants may have presented a sufficiently convincing case under a preponderance standard, but could not show that the Board’s decision was “unreasonable.”  (Notably, the dissent did not mention the standard of review once, merely calling the Board’s reasoning “flawed”.)

The substantial evidence standard reminds prosecutors that the Board hearing is the stage to win questions of obviousness.  A Circuit panel with a clear focus on this standard is highly unlikely to overturn such a finding, so prosecutors should treat the Board as their only chance.  Should that fail, however, a prosecutor can also focus more energy on the meaning of claims, both prior art and present, which are reviewed de novo.  Finally, although expensive, a § 145 civil action can reset the entire record and remove all deference (see the recent Kappos v. Hyatt, 132 S.Ct. 1690), should the applicant be in true need of a do-over.

The opinion is available at:

Oral arguments may be heard at: (NOTE: the Federal Circuit’s oral argument database has been inconsistently accessible as of this article’s posting)

Federal Circuit Reaffirmed Lead Compound Analysis for Evaluating Obviousness of a New Chemical Compound

James Jang

In Otsuka Pharmaceutical Co. v. Sandoz, Inc., 678 F.3d 1280 (Fed. Cir. 2012), the Federal Circuit affirmed the decision of the district court that the patent was not obvious based on prior art evidence, nor the asserted claims were invalid for nonstatutory double patenting.

The Defendants are drug manufacturers who submitted ADNA filings to the Food and Drug Administration (FDA) for an approval to manufacture, use, or sale of generic aripiprazole products. Otsuka Pharmaceutical Corporation brought action against the drug manufacturers for infringement of patent on the compound claimed in Patent No. 5,006,528, aripiprazole, an atypical antipsychotic compound approved by the FDA for the treatment of schizophrenia. The Defendants counterclaimed that the patent was invalid for obviousness and nonstatutory double patenting. The Federal Circuit analyzed three ‘lead compounds’ asserted by the Defendants, unsubstituted butoxy compound, 2,3-dichloro propoxy compound, and OPC-4392 compound. A ‘lead compound’ means “a compound in the prior art that would be most promising to modify in order to improve upon its … activity and obtain a compound with better activity.” Takeda Chem. Indus., Ltd. v. Alphapharm Pty., Ltd., 492 F.d 1350, 1357 (Fed. Cir. 2007). The patents which disclosed the lead compounds, unsubstituted butoxy and 2,3-dichloro propoxy, also disclosed numerous examples of agents useful for the central nervous system, including an antischizophrenia agent.

In its ruling, the Federal Circuit reaffirmed the lead compound analysis, employed in Takeda Chemical Industries and Eisai Co. v. Dr. Reddy’s Labs, 533 F.3d 1354 (Fed. Cir. 2008) for evaluating obviousness of a new chemical compound, which were the first two lead compound cases decided post-KSR. The Federal Circuit explained that the lead compound analysis consists of a two-part inquiry:

First, the court determines whether a chemist of ordinary skill would have selected the asserted prior art compounds as lead compounds, or starting points, for further development efforts . . . . The second inquiry in the analysis is whether the prior art would have supplied one of ordinary skill in the art with a reason or motivation to modify a lead compound to make the claimed compound with a reasonable expectation of success.

The Federal Circuit also noted that for the lead compound selection, mere structural similarity between a prior art compound and the claimed compound is not enough, but it should be guided by the compound’s “pertinent properties.”

Applying this approach, the Federal Circuit rejected the Defendant’s argument that the lead compound analysis applied by the district court was a “rigid” obviousness analysis precluded by KSR because the court assumed that only the most obvious choice could serve as a lead. The Federal Circuit found that after evaluating all of the potential choices available to one of ordinary skill the district court correctly determined that the compounds asserted by the Defendants, unsubstituted butoxy, 2,3-dichloro propoxy, and OPC-4392, would not have been selected as lead compounds. Furthermore, focusing on the pertinent property of the new compound, rather than the structural similarity, Federal Circuit found that two other compounds — clozapine and risperidone — were viable lead compounds because these were the only capable antipsychotic compounds at the time of the invention. The Federal Circuit concluded that the Defendants failed to prove that the patent would have been obvious under 35 U.S.C. § 103.

The ruling in Otsuka Pharmaceutical Co. might be seen as the Federal Circuit’s return to the “rigid” motivation rules precluded by KSR.1 However, It appears that the Federal Circuit attempted to avoid this concern by addressing that to keep with the “flexible” nature of the obviousness inquiry, “the reason or motivation for modifying a lead compound may come from any number of sources and need not necessarily be explicit in the prior art.” This is consistent with the rulings in the previous chemical compound cases after KSR, such as Eisai Co. v. Dr. Reddy’s Labs, where Judge Rader found that the decision in KSR for flexibility would not preclude the Federal Circuit from assessing motivation in the case. Thus, the post-KSR chemical compound cases may imply that the flexible motivation test is still viable.2

“Laundry List” of potential effects is not sufficient to prove the obviousness

The Federal Circuit also rejected the Defendants’ argument that the three lead compounds asserted by the Defendants were known to have antipsychotic activity so that the claimed compound, aripiprazole, would have been obvious to one of ordinary skill. The Federal Circuit found that the patents’ “laundry list” of the potential central nervous system controlling effects, would not have informed one of ordinary skill in the art that the three compounds would have antipsychotic activity.

Nonstatutory Double Patenting

The double patenting doctrine is a judicially created doctrine “precluding one person from obtaining more than one valid patent for either (a) the ‘same invention,’ or (b) an ‘obvious’ modification of the same invention.” In re Longi, 759 F.2d 887, 892. The latter is referred to as the obviousness-type double patenting. The Federal Circuit differentiated obviousness-type double patenting from obviousness under § 103 by addressing that when examining the obviousness-type double patenting in chemical compound cases, the earlier-filed application need not qualify as prior art and “the issue is not whether a skilled artisan would have selected the earlier compound as a lead compound.” However, the Federal circuit rejected the Defendants’ argument that the double patenting never requires identifying the motivation to modify the earlier claimed compound. The Federal Circuit noted that the identification of the reason for modification is an essential part of the question whether the two claimed compounds are “patentably distinct” in the obviousness-type double patenting analysis.

In concluding that the asserted claims were not invalid for obviousness-type double patenting, the Federal Circuit also noted that predictability is an important element to consider in the obviousness analysis. The Federal Circuit held that given the high degree of unpredictability in antipsychotic drug discovery at the time of the invention, “the prior art would not have provided a skilled artisan with a reason to make the necessary structural changes.”

1. Mark D. Janisal, Tuning the Obviousness Inquiry After KSR, 7 Wash. J. L. Tech. & Arts 335 at 344-45 (2012), available at

2. Id. at 342-44.

The “Apple v. Samsung” Global Patent Battles Continue

Meera El-Farhan


What started a year ago, with Apple filing suit in the U.S. District Court for the Northern District of California against Samsung Electronics Co., has now expanded to more than 50 patent war lawsuits across four continents and at least eight countries. Throughout this escalating legal global battle, with billions of dollars at stake, the smartphone and tablet powerhouses continue, however, to be dependent business partners, and Samsung remains Apple’s largest semiconductor component supplier for iOS devices (a deal worth $8 billion). [1]

In its initial 38-page complaint, Apple claimed unfair competition, trademark infringements, and patent infringements; whereby, Apple alleged Samsung’s smartphones and Galaxy Tab 10.1 “slavishly” copied the iPhone and iPad designs. Samsung responded to Apple’s design patent and trade dress infringement claims by filing cross-claims. Samsung sought revocation of the patent claims and further alleged that the iPhone and iPad infringed on Samsung’s technology patents (including wireless data communication technology). Additionally, Samsung filed suit in South Korean, Japanese, and German courts.

On December 2, 2011, the district court denied Apple’s motion for preliminary injunction for the following devices:

(1) Samsung Galaxy S 4G and Infuse 4G smartphones for allegedly infringing on U.S. Des. Patent No. 618, 677 (“the D’677 patent”), U.S. Des. Patent No. 593,087 (the D’087 patent”), and (3) U.S. Patent No. 7, 469,381 (the ‘381 patent).

(2) Samsung Galaxy Tab 10.1 tablet computer for allegedly infringing on U.S. Des. Patent No. 504,889 (the D’889 patent”), and U.S. Patent No. 7469,381 (the ‘381 patent).

(3) Samsung 4G LTE smartphone for allegedly infringing on U.S. Patent No. 7,469,381 (the ‘381 patent”)[2]

The federal circuit affirmed the court’s order in part, but remanded for further proceeding with respect to the D’889 Patent. [3]  On June 26, 2012, the district court found the balance of hardship for the D’889 patent to tip in Apple’s favor.[4] The court acknowledged that “although Samsung will necessarily be harmed by being forced to withdraw its product from the market before the merits can be determined after full trial, the harm faced by Apple absent an injunction on the Galaxy Tab 10.1 is greater.”[5]  The court further found the design to be an important driver for sales; thus the injunction was not based on “one aspect of the overall product.”[6] However, as a condition of the injunction, the court ordered Apple to secure a $2.6 billion bond to repay Samsung for any damages in the event the injunction is found to have been issued wrongfully.[7]

With the trial starting on July 30, 2012, Apple demanding $2.5 billion in damages in addition to an injunction barring the sale of any infringing Samsung devices, in addition to the U.S. large electronic consumer market, the two electronic giants face high stakes in the trial’s outcome.

Germany: a preliminary injunction in August of 2011 was ordered by a German court to ban the sales of Galaxy 10.1 Tab in all the European Union except for the Netherlands. A week later, the ban was scaled back to Germany, and the 10.1 tab was returned to the EU shelves. Samsung sidestepped the injunction by introducing a Galaxy Tab 10.1N model for Germany. Apple contested the new design immediately. Although Apple lost twice on appeal for banning the sale of the 10.1 Tab, the German court in July, 2012 ruled in favor of Apple by banning the sale of Galaxy Tab 7.7 in Europe.

Australia: the battle extended to an Australian Federal Court in October, 2011. Apple sought, and was granted, an interlocutory injunction restraining Samsung from releasing the 10.1 Tab. Although the Australian Court granted Apple an interlocutory injunction, Samsung won on appeal. Apple continued to file for an appeal to the High Court.  The High Court, in refusing a special leave, allowed Samsung to sell the 10.1 just in time for  Christmas season. Samsung counter-sued Apple in April, 2012. The federal court began its hearing in late July, 2012.

Other Countries: The UK court ruled in favor of Samsung by finding Tablets 10.1, 8.9, and 7.7 did not infringe upon the alleged Apple patent.  Samsung and Apple continue to battle in patent-related lawsuits in Japanese, Korean, and European courts.



The multi-billion dollar patent warfare is likely to reshape legal and production strategies for both parties. Unfortunately, in the expanding smartphone market, price effects on consumer electronics are too uncertain to predict for now; however, the outcome of lawsuit battle will draw the line between competition and protection of intellectual property in the smartphone industry.

[2] Apple, Inc. v. Samsung Electronics Co., Ltd., 11-CV-01846-LHK, 2011 WL 7036077 (N.D. Cal. Dec. 2, 2011) aff’d in part, vacated in part, remanded, 678 F.3d 1314 (Fed. Cir. 2012)

[3]Apple, Inc. v. Samsung Electronics Co., Ltd., 678 F.3d 1314 (Fed. Cir. 2012)

[4] Apple, Inc. v. Samsung Electronics Co., Ltd., 11-CV-01846-LHK, 2012 WL 2401680 (N.D. Cal. June 26, 2012)

[5] Id.

[6] Id.

[7] Id.

Bear Declines Invitation to Oust MDL from Patent Infringement Realm

By Kyle Meziere

Recently, the Judicial Panel on Multidistrict Litigation (JPML) addressed the contention that the America Invents Act precludes multidistrict litigation (MDL) centralization for patent infringement proceedings. The current legality of MDL centralization was questioned due to an arguable conflict with 35 U.S.C. §299, which was enacted by the America Invents Act. The statute prohibits the alleged infringers, in most patent infringement cases, from being joined in one action. 35 U.S.C.S. §299 (§299). Since the 1960’s, pretrial proceedings for cases involving infringement of the same patent have commonly been centralized into one district under the authority of 28 U.S.C. §1407 (§1407). This has been a way for parties to conserve their resources. It also results in more consistency within a set of closely related cases. In the wake of §299’s implementation, the question of how §299 affects the availability of MDL centralization in patent infringement cases was raised.

In May, the JPML granted a motion by Bear Creek Technologies to centralize fourteen separate actions to one district. In re Bear Creek Technologies, Inc., MDL 2344, 2012 U.S. Dist. LEXIS 60884 (J.P.M.L. May 2, 2012). In the process, the panel addressed the issue of whether §299 modified §1407. The motion stemmed from a group of cases involving alleged infringements upon Bear Creek’s patent for a “[s]ystem for interconnecting standard telephony communications equipment to internet protocol networks.” At the time of the motion, there were fourteen allegedly infringing entities, including Vonage Holdings Corporation.

The legal issue was whether §299 modifies §1407. §1407 in the pertinent part states:

When civil actions involving one or more common questions of fact are pending in different districts, such actions may be transferred to any district for coordinated or consolidated pretrial proceedings. Such transfers shall be made by the judicial panel . . . upon its determination that transfers for such proceedings will be for the convenience of parties and witnesses and will promote the just and efficient conduct of such actions.

28 U.S.C.S. §1407 (2012).

The statute requires the cases to be remanded back to their respective districts no later than the conclusion of the pre-trial proceedings. Section 1407 was enacted in 1968 and has been applied to several dozen patent infringement cases since.

Vonage opposed centralization of the cases. It argued §299 prohibits centralization of cases which are related merely by the parties’ alleged infringement upon the same patent. Vonage cited specifically to the portion of §299 that reads: “accused infringers may not be joined in one action as defendants or counterclaim defendants, or have their actions consolidated for trial, based solely on allegations that they each have infringed the [same] patent . . . .” 35 U.S.C.S. §299 (2012). The JPML rejected this argument. The panel found the following arguments more persuasive. First, §299 does not manifest an intent to modify §1407, which had commonly been applied to patent infringement cases for 40 years at the time congress enacted §299. Secondly, §299 addresses only trial phase proceedings expressly.  Section 1407 applies to pretrial proceedings and requires cases to be remanded back to their respective districts before the trial phase begins. Thirdly, the JPML emphasized that their role is limited to centralizing the cases to one district; the district judge determines if the pretrial proceedings are to be consolidated. Accordingly, the panel found there was no conflict between the two statutes.

One month later, the JPML reaffirmed its Bear Creek holding in Maxim. In re Maxim Integrated Products, Inc., MDL No. 2354, 2012 U.S. Dist. LEXIS 79496 (J.P.M.L. June 8, 2012). All of the suits Maxim sought to centralize involved infringement on various patents related to the secure transfer of data. The court reiterated that §1407 still allowed centralization of pre-trial proceedings for patent infringement cases. However, the parties opposed to centralization further argued that §299’s practical guarantee of separate trial proceedings should factor into the JPML’s judgment of whether centralization would further the goals of efficiency and justice. The panel found this argument to be sound, but not determinative.  The panel found that the cases’ similarities and the prospective efficiency of centralization overcame any inefficiency that resulted from the cases having to be remanded to their respective districts for trial. The court also noted that §299 may affect how the transferee judge deals with the cases. In particular, §299 may cause the transferee judge to remand the cases to their respective jurisdictions earlier than he may have before §299 was passed.

The effects of §299 on how the JPML gauges the appropriateness of MDL centralization for a particular set of cases and the statute’s effects on the decisions of the transferee judges remains to be seen. More importantly, however, MDL centralization remains available for dealing with patent infringement cases.

Fourth Circuit Remands Rosetta Stone Ltd. v. Google Inc. 2010 Ruling

By Virginia Dudley

On April 9, 2012, the U.S. Court of Appeals for the Fourth Circuit revived the trademark infringement case Rosetta Stone Ltd. v. Google Inc., 730 F. Supp. 2d 531 (E.D. Va. 2010). The Fourth Circuit overturned the summary judgment granted in favor of Google by the U.S. District Court for the Eastern District of Virginia.

The Rosetta Stone case stemmed from Google’s sale of marks as AdWords. Adwords are Google’s online advertizing tool that allows a sponsor to “purchase” keywords that prompt the appearance of the sponsor’s advertisement when the keyword is entered as a search item. Rosetta Stone, a language-learning software company, was established in 1992 and began advertizing in connection with Google’s website in 2002.

Rosetta Stone initially accused Google of trademark infringement as a result of the website’s use of their mark in AdWords. In terms of this appeal, the Fourth Circuit re-addressed the possible elements of confusion, application of the functionality doctrine, dilution claims, and Google’s knowledge of infringement formerly discussed in favor of Google by the district court.

In August 2010, the district court rejected Rosetta Stone’s claim of an element of confusion caused by Google’s use of their mark by considering 3 out of 9 “likelihood-of-confusion” factors: (1) Google’s intent, (2) actual confusion, and (3) sophistication of the consuming public. The district court dismissed confusion claims against Google by ruling that Google did not intend to create confusion and that high consumer sophistication could be determined based on the nature and price of the product alone.

Conversely, the Fourth Circuit called for greater proper analysis of possible evidence of confusion and found a genuine issue of fact in terms of the previously discussed three factors of confusion. In particular, the Fourth Circuit reasoned that Google’s shifting trademark policies from the year 2004 on, as well as Rosetta Stone’s evidence of 123 complaints from those who had purchased knockoff software believing it to be legitimate, could reveal that Google had an intent to confuse. Also, the presence of confusion was further suggested by the difficulty Google’s own witnesses experienced in distinguishing between authentic and counterfeited Rosetta Stone advertisements on the search engine’s site.

Secondly, the district court held that the use of Rosetta Stone marks as keywords was protected by the functionality doctrine. The court found that Google’s use of Rosetta Stone’s trademarks as keywords was functional in that the keywords have “an essential indexing function because they enable Google to readily identify in its databases relevant information in response to a web user’s query.”[1] Trademark law’s functionality doctrine states, “a product feature is functional if it is essential to the use or purpose of the article or if it affects the cost or quality of the article.” The district court claimed that Google’s AdWords were also protected under the Lanham Act, which states that a party cannot receive exclusive rights over solely functional features. 15 U.S.C. § 1114(a).

This past April, the Fourth Circuit stated that the district court did not consider whether the mark was functional in the way Rosetta Stone used the mark. Instead, the appellate court affirmed that the District Court focused solely on how Rosetta Stone’s mark made Google’s product more useful. The Fourth Circuit asserted that the functionality doctrine had been incorrectly applied to the case. In general, the Fourth Circuit emphasized that the words “Rosetta Stone” are not necessary to the function of the language-learning software, thus establishing the mark’s non-functional nature.

As for dilution claims against Google, the district court denied the presence of dilution in Google’s use of the mark. The district court also applied the fair use argument, which is present in the federal statute dealing with dilution 15 U.S.C. §1125 (c) (3) (a). The district court confirmed that Google did not use Rosetta Stone’s mark to identify its services. Moreover, the possibility of dilution of the mark was also disregarded by the district court as a result of the increase in public awareness of Rosetta Stone’s mark following its appearance in Google’s AdWords.

The Fourth Circuit, on the other hand, found evidence of dilution and stated that the notion of good faith arises in regards to the fair use inquiry mentioned by the district court.

Lastly, the Fourth Circuit addressed the extent of Google’s knowledge of infringement. In 2010, the district court referenced the Second Circuit ruling in Tiffany v. eBay 600 F.3d 93 (2d Cir. 2010)to claim that generalized knowledge of infringement makes Google less liable. The district court also ruled that Google would not be liable unless Rosetta Stone could provide concrete evidence that the search engine was aware that an act of infringement was occurring.

However, the Fourth Circuit held that the district court’s decision was gathered in an inappropriate and untimely manner. As with many of the other aspects addressed in this case, the appellate court supported Rosetta Stone and called for further analysis on Google’s knowledge of infringement in its use of the words “Rosetta Stone.”

Such recall of a former trademark infringement case also occurred on April 5, 2012 when the U.S. Court of Appeals for the Second Circuit heard Viacom International Inc. v. YouTube Inc., No. 10-3270 (2d Cir. April 5, 2012). Similar to Rosetta Stone Ltd. v. Google Inc., the Appellate Court pushed for greater analysis of trademark infringement claims against Google because they found the trial court to have been too swift in their decision making.

In sum, in focusing on the factors of confusion, mark functionality, dilution, and Google’s knowledge, the Fourth Circuit remanded the summary judgment granted by the U.S. District Court for the Eastern District of Virginia in favor of Google. [1]

[1] Rosetta Stone Ltd. v. Google Inc. Court of Appeals, Fourth Circuit 2012. available at,9&as_vis=1

Per se legal? The Eleventh Circuit Rejects FTC’s “Unlikely to Prevail” Antitrust Challenge to “Reverse Payment” Patent Settlements

By Meera El-Farhan

In F.T.C. v. Watson Pharmaceuticals, Inc., 677 F.3d 1298 (11th Cir. 2012) the U.S. Court of Appeals for the Eleventh Circuit rejected the Federal Trade Commission’s (“FTC”) antitrust challenge to “reverse payment” patent settlements. Under the terms of the “reverse payment” (or “pay-for-delay”) agreement, the patent owner of AndroGel, Solvay Pharmaceuticals, Inc. (“Solvay”), agreed to make over $20 million annual payments to the generic challengers Watson Pharmaceuticals, Inc., Par Pharmaceuticals, Inc., and Paddock Laboratories, Inc. In return, the generic challengers agreed to stay out of the market until 2015, unless another generic version was to enter the market before then.


The FTC brought suit against all parties to the agreement. The FTC challenged the “pay-for-delay” settlement on the basis of unfair restraint of trade (the settlement allegedly being an “unlawful agreement not to compete,” in violation of section 5(a) of the Federal Trade Commission Act[1] (“FTCA”)). The FTC argued that such monopolies allow both generic and patent holding pharmaceuticals to make more profits at the expense of consumer welfare (increasing drug costs by an estimated amount of $3.5 billion per year). On appeal, the FTC argued, among other things, that Solvay’s ‘894 patent [2] was “unlikely to prevail.” According to the FTC, because the patent was unlikely to bar Watson and Par, and Paddock’s generic drug from entering the market the settlement was an unlawful restraint on competition.

The Eleventh Circuit rejected the “more likely than not” standard contended for by FTC. The court held the “unlikely to prevail” standard to be insufficient to state a claim; thus, a patent did not thereby exceed its “exclusionary potential.” The court adhered to the test set-forth by its precedent: “absent sham litigation or fraud in obtaining the patent, a reverse payment settlement is immune from antitrust attack so long as its anticompetitive effects fall within the scope of the exclusionary potential of the patent.”[3]

Although critics of the court’s decision argue such a test makes reverse payments “per se lawful” due to resulting difficulty in challenging reverse payment agreements, the Eleventh Circuit proffered convincing arguments for rejecting the FTC’s challenge. Among other things, the court argued FTC’s “predict-the-likely-outcome-that-never-came” approach would not only impose a retrospective burden on parties and courts (even if the burden of proof fell on the plaintiff), but also, such a test would not align with the strong public policy favoring settlements.

The court noted that parties settle patent litigations to “cap the cost” of litigation and avoid the “all or nothing” outcomes from courts. Settlements are one option for parties who “might not want to play the odds for the same reason that one likely to survive a game of Russian roulette might not want to take a turn.” The Eleventh Circuit further explained that the costly and tedious process of developing new drugs should also be supported by strong public policy favoring settlements over costly litigation. The court, with reference to the maxim “More Money, More Problems,” sided with pharmaceutical companies’ incentive to recoup costs of research and development. The court proffered additional reasons such as the exclusive appellate jurisdiction of the U.S. Court of Appeals for the Federal Circuit over patent cases and the court’s lack of expertise to rule on the patent.

The heart of resolving such cases, as noted by the Eleventh Court, is in striking the balance between antitrust law interests (promoting competition) and intellectual property law interests (allowing temporary monopolies to provide innovators with incentives to create). Antitrust laws aim to protect consumers from artificially high prices, maximize efficiency of the market, and also promote improvement of products through competition. On the other hand, granting patents ensures parties have the incentive to innovate in the first place. Although one can easily recognize the tensions between antitrust law and intellectual property law, one must also recognize the common goal: promoting innovation for a better future.

However, there is no consensus over resolving this tension yet. In the Sixth Circuit and the District of Columbia Circuit, reverse payment agreements are per se unlawful under the Sherman Act.[4] However, the Second Circuit, like the Eleventh Circuit, refused to assess the ex post validity of the patent at trial, but instead the court held that the question is whether “the exclusionary effects of the agreement exceed the scope of the patent’s protection.”[5] In devising a test that can better serve both interests, per se rules are unlikely to accommodate such a goal. However, with a growing circuit split among federal courts, in addition to a silent United States Supreme Court (as it passed the opportunity to articulate a unifying a standard at this point in time), the FTC will have many more opportunities to argue for, perhaps better, multi-factored tests.

[1] 15 U.S.C. §45(a)(1) (2006).

[2] U.S. Patent No. 6,503,894 (filed Aug. 30, 2000) (issued Jan. 7, 2003).

[3] F.T.C. v. Watson Pharmaceuticals, Inc., 677 F.3d 1298, 1312 (11th Cir. 2012)

[4] See In re Cardizem CD Antitrust Litig., 332 F.3d 896 (6th Cir. 2003); see also Andrx Pharmaceuticals, Inc. v. Biovail Corp. Int’l, 256 F.3d 799 (D.C. Cir. 2001)

[5] In re Tamoxifen Citrate Antitrust Litig., 466 F.3d 187, 213 (2d Cir. 2006)

The “America Invents Act” to Improve and Harmonize the U.S. Patent Filing System

By Kyle Meziere

On March 16, 2013, the United States will transition from a “first to invent” patent system to a “first inventor to file” system under the Leahy-Smith America Invents Act (AIA).[i] The AIA is an effort to both reform the U.S. patent system and harmonize the U.S. system with foreign systems. Most notably, the AIA changes an underlying principle of how the U.S. patent filing system functions. It implements the basic “first to file” principle, but maintains some features that are characteristic of “first to invent” systems.

Presently, the U.S. system for identifying who has a right to a patent differs substantially from most international systems. Currently, U.S.C. §102 governs the U.S. system according to a “first to invent” principle.[ii] When two parties contest the right to a particular valid claim, the U.S. system awards the patent to the first applicant to reduce the invention to practice, either actually or constructively. Also, the system allows the inventor a one year grace period in which to file after the subject matter of a prospective patent has been publicly disclosed.

Most foreign jurisdictions utilize some variation of a “first to file” system. If two parties apply for the same valid patent claim, then the party who files for a patent first has the superior right.

The European Patent Convention (EPC) is one example of a “first to file” based patent regime. [iii] In general, the first person to file for a patent within the EPC system has a right superior to all others to the claim. Another characteristic of the EPC is its strict public disclosure rule. The European system bars patenting subject matter that has been publicly disclosed. Exceptions exist only for disclosures made as a result of an abuse of a special relationship with the applicant or for disclosures made at specific international conventions.  As a result, under the EPC there are a lot more scenarios where nobody has a valid claim.

Other foreign jurisdictions use a “first to file” system that incorporates a broader grace period for inventors to file after subject matter has become publicly available. The Japanese patent system offers a six month filing grace period to inventors who publish an article on their work, or who present at an approved exhibition or academic meeting. [iv] The six month grace period is also available for inventors whose material is made public against their will.

The AIA system combines elements characteristic of “first to file” systems with elements typical of “first to invent” systems. Like the EPC, the AIA will generally grant the patent to the first party who files. Like the current U.S. system, it allows a broad one year grace period for public disclosures made by the applicant. The AIA synthesizes particular “file to file” and “first to invent” characteristics, resulting in a system closer the international norm.

Although the AIA results in greater harmony amongst the world’s patenting systems, there will still be some dissidence. The differences between the EPC strict novelty standard and the exceptions to the novelty requirement in the AIA could potentially cause the AIA system to function starkly different than the EPC system.[v] For example, an inventor who independently invents second and files second could win the patent. This would result if he publishes before the first inventor files or publishes. Typically, this result could not occur under either the current U.S. or European systems. Ostensibly, it could occur under the Japanese system due to its broader scope of exceptions to what qualifies as prior art. Also worth noting is that the EPC does not distinguish between disclosures made by the applicant and ones made by a third party. The AIA, like the Japanese system, allows mostly only disclosures made by the applicant to qualify for the grace period.

The drafters of the AIA desired to both harmonize the U.S. system with foreign systems and improve its functionality and efficiency.[vi] The legislature endeavored to accomplish this by taking the best elements of the “first to invent” and “first to file” systems and combining them.[vii]   The legislator utilized what they deemed to be the best elements of each filing system while managing to move the U.S. system closer to an international norm. The largest remaining difference, which could seriously affect how the different systems behave, is the length and scope of the respective grace periods.

[i] Leahy-Smith America Invents Act of 2011, Pub. L. No. 112-29, 125 Stat. 285 (amendment effective 18 months after enactment date).

[ii]35 U.S.C.S §102 (2010), amended by Pub. L. No. 112-29, 125 Stat. 285 (2011).

[iii] European Patent Convention art. 55, Oct. 5, 1973, 1065 U.N.T.S. 254 as revised Dec. 13, 2007, available at

[iv] Tokkyo Ho [Japanese Patent Law], Law No. 121 of 1959, arts. 29-30 (Japan).

[v] Brad Pedersen and Justin Woo, The Matrix for Changing First-to-Invent: an Experimental Investigation into Proposed Changes in U.S. Patent Law, 1 Cybaris An Intell. Prop. L. Rev. 1, 5 (2010).

[vi]  H.R. Rep. No. 112-98, pt. 1, at 39-40 (2011).

[vii] Id. at 42.

ICANN’s New gTLD: Dot.Protect.Your.Trademark

By Meera El-Farhan

The Internet Corporation for Assigned Names and Numbers’ (ICANN) leap into the new generic Top-Level Domains (gTLDs) will introduce one of the largest unprecedented Internet developments. ICANN’s introduction of the New gTLDs is aimed to promote competition, add consumer choice, increase market differentiation and enhance the diversity pool of geographical and service providers.[1] The New gTLD program allows any private or public entity worldwide to apply for any custom-made gTLDs (example: .com or .yournewdomainname). Furthermore, gTLD strings will be capable of incorporating characters from other languages such as Mandarin Chinese.

Although many corporations and other organizations publicly announced their application to certain gTLDs -Google announcing its application to .google, .docs, .youtube, and .lol- ICANN has postponed sharing applicants’ information until “Reveal Day” (June 13, 2012). On Reveal Day ICANN will publicly post all TLD character strings entities have applied for; thus, triggering the processes of trademark “protection” mechanisms.


The new gTLD is designed to virtually introduce an unlimited number of namespaces. Qualifying for a new gTLD requires an applicant to meet a fairly limited but stringent number of requirements. Once the applicant satisfies the financial requirements, such as the $185,000 fee, the applicant may apply to two types of gTLDs:

  1. Community-based: whereby the applicant must demonstrate its association and representation of a recognizable and defined community.


  1. Standard: applications that do not qualify for community-based usually fall under the standard category.

Additionally, as part of the application process, ICANN will conduct background screening to ensure an applicant passes specific criteria for criminal history and general business diligence.

Furthermore, to be mindful of potential trademark protection challenges, ICANN incorporated mechanisms within the gTLD system itself to ensure legal rights are protected. Prior to the introduction of the new gTLD, previous gTLD expansions allowed ICANN to better-prepare for the coming trademark challenges. Nevertheless, the appropriate balance between protecting trademark owners and other interests cannot be perfected. To assist ICANN with the coming new gTLD, the World Intellectual Property Organization identified the need for “preventative mechanisms;” prior solutions rather than post-remedies. To create such “preventative mechanisms,” ICANN formed the Implementation Recommendations Team (IRT), a team consisting of a diverse group of trademark experts. IRT’s recommendations formed the basis for trademark protections. IRT sought to provide a “tapestry of globally effective-solutions to some of the major overarching issues of trademark protection in connection with the introduction of new gTLDs.”[2] Additionally, many parties in the trademark community also had an influential impact on increasing the protection mechanisms for the new system.


Strategies for Trademark Protection

Although many individuals argue that ICANN’s trademark protection mechanisms tip in favor of trademark owners, such assertions do not translate into guaranteed trademark protections. Private and public entities must remain on the lookout to ensure that their trademark rights are not infringed. Accordingly, there are three approaches a trademark owner may take.

First, participating in ICANN’s processes. ICANN outlined the following three main protection processes within the application to provide various forums for interested groups to discuss, object, or resolve trademark protection issues: (1) Application Comment Process, (2) Program Feedback, and (3) Objection Period.  Trademark owners will likely find the Objection Period to be the most relevant to protecting their trademark rights. According to ICANN, grounds for filing an objection include (1) String Confusion Objections: objecting to strings likely to result in user confusion, (2) Legal Rights Objection: objecting to strings infringing on existing legal rights, (3) Public Interest Objection: objecting to strings contrary to international legal norms of morality and public order, (4) Community Objection: a significant portion of the community which the gTLD string is targeted at objecting to the gTLD. [3] Note that an objector does not need to be an applicant.

Second, utilizing the mechanisms ICANN will facilitate once the new gTLD program is operating:

  1. 1.      Trademark Clearinghouse: this repository organization accepts, authenticates, stores and pertains rights of trademark holders. Trademark holders are advised to register their trademarks to increase trademark protections. Additionally, the Clearinghouse will serve as an information bank enabling trademark owners to have access to a wide-variety of gTLD information.
  1. 2.      Uniform Dispute Resolution Policy (UDRP): UDRP is limited to clear cases of “bad-faith, abusive registration and use of some domain names.”[4] UDRP, being an out-of-court mechanism, applies to all gTLDs. Successful claims enable the transfer of the infringing domain name to the complainant’s control.
  1. 3.      Uniform Rapid Suspension system (URS): URS is also limited to clear cases of trademark infringements. Remedies under the URS are limited to temporary suspension of a domain name for the duration of the registration period.  Additionally, a successful complainant has the option of paying for one additional year at commercial rates.

Third, additional steps a trademark owner is recommended to take are: (1) applying for a second-level domain within a new gTLD registry, and (2) monitoring Reveal Day’s published gTLD strings to object to those in conflict with the entity’s trademarks.

Future Considerations and Challenges

Introducing the new gTLD will create a multitude of global challenges thus affecting organizations of all sizes. Entities are advised to avoid the wait-and-see strategy. Instead, entities should reassess risks associated with their trademarks continuously. Although the new gTLD’s risks might not be fully understood today, organizations are advised to plan, discuss, and carefully evaluate the implications of the new gTLDs as it unfolds itself worldwide.


Supreme Court Unanimously Rules for Generic Manufacturers in Improper Patent Listing Case

By Charles Pierce

In Caraco Pharmaceutical Laboratories, Ltd. v. Novo Nordisk A/S, 566 U.S. ___ (2012), the Supreme Court unanimously clarified the prerequisites of 21 U.S.C. §355(j)(5)(C)(ii)(I) counterclaims seeking to correct or delete patent information that a name-brand pharmaceuticals manufacturer submits to the FDA.

Repaglinide is a drug that has been approved by the FDA for the treatment of diabetes.  The FDA approved three methods: repaglinide alone, repaglinide in combination with metformin, and repaglinide in combination with thiazolidinediones.  The compound was covered by the ‘035 patent that Novo had owned, but the patent had expired in 2009.  Novo currently owns the ‘358 patent, a method-of-use patent which claims “a method for treating [diabetes by] administering . . . repaglinide in combination with metformin.”

Generic drug makers, rather than submit a new drug application (NDA), may submit an abbreviated new drug application (ANDA) that piggy back on the brand’s NDA.  Following the expiration of the ‘035 patent, Caraco filed such an ANDA seeking permission to market a generic version of repaglinide alone and repaglinide in combination with thiazolidinediones for the treatment of diabetes.  Before the FDA granted approval, Novo changed its use code for the ‘358 patent to cover all methods of using repaglinidine.  Caraco then filed a certification stating that the ‘358 patent would not be infringed, and Novo treated this as an act of infringement and sued.  Caraco filed a counterclaim under § 355.

21 U.S.C. §355(j)(5)(C)(ii)(I) states that when sued for infringement, an ANDA applicant may:

“Assert a counterclaim seeking an order requiring the [brand] to correct or delete the patent information submitted by the [brand] under subsection (b) or (c) [of §355] on the ground that the patent does not claim either –

(aa) the drug for which the [brand’s NDA] was approved; or

(bb) an approved method of using the drug.”

The parties disagreed on the meaning of the phrase “on the ground that the patent does not claim . . .  an approved method of using the drug.”  Novo argued that this should mean that the only time a counterclaim is allowed is when the patent does not claim any approved method of using the drug.  Caraco argued that instead, a counterclaim was allowed when the ANDA applicant applies for a method of using the drug not covered by the patent.  The Supreme Court agreed with Caraco.

The Supreme Court first examined the statutory context and noted that the statute contemplates that a single patented use should not prevent an ANDA from being approved.  By Novo’s reading, a patent claiming a single method of use would be sufficient to deny both FDA approval and a cause of action to ANDA applicants seeking to market the drug for unrelated uses.  Finding this result to be contrary to the statutory intention, the Court ruled for Caraco’s interpretation.

Novo also argued that Caraco’s counterclaim should fail because use codes are not patent information submitted under subsections (b) or (c) for the purposes of the statute.  The Supreme Court again disagreed with Novo.  First, the Court ruled that a use code does qualify as patent information because it describes the method of use claimed in a patent.  Use codes are required under 21 CFR §314.53 and when issuing §314.53, the FDA noted that its authority stemmed from 21 U.S.C. §355.  Because of this, the Court then decided that subsections (b) or (c), which require an NDA applicant to submit the patent number and expiration date of any patent claiming the drug or its method of use, cover use codes.  The Supreme Court also noted that if a counterclaim in such a case was not allowed, than the term “correct” in “assert a counterclaim seeking an order requiring the [brand] to correct or delete the patent information” would be read out of §355(j)(5)(C)(ii)(I).  Thus, the Court ruled that use codes are patent information submitted under subsections (b) or (c).

Finally, the Court rejected Novo’s legislative history arguments.  Novo first argued that Caraco’s interpretation of §355 would resurrect a scheme rejected by Congress.  A 2002 bill had sought to require brands to file patent information, and allow generic companies to bring actions to correct such information.  The bill failed, but the Supreme Court here declined to view the failure as a Congressional rejection of the requirement, noting that bills may be proposed and rejected for any number of reasons.

The Supreme Court then rejected Novo’s final argument – that the counterclaim was established only in response to the Federal Circuit’s decision in Mylan Pharmaceuticals, Inc. v. Thompson, 267 F. 3d 1323 (Fed. Cir. 2001).  In Mylan, the Federal Circuit had decided that no action to delist an improperly listed patent from the Orange Book was available.  The Court noted that even assuming that Congress was responding to Mylan, the situation presented in this case was similar to that in Mylan: an unrelated drug patent blocked FDA approval for a generic manufacturer.  The Supreme Court unanimously ruled for Caraco, deciding that a cause of action exists for generic manufacturers when the brand lists a method-of-use patent that does not cover a method of use for which the generic manufacturer seeks FDA approval.