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.

 

Aftermath

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.

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)

Federal Circuit Finds Prior Use By Another Invalidates Patent

In Teva Pharmaceutical Industries Ltd. v. AstraZeneca Pharmaceuticals LP, 100 U.S.P.Q.2d 1852 (Fed. Cir. 2011), Teva Pharmaceutical Industries Ltd. (“Teva”) appealed the District Court for the Eastern District of Pennsylvania’s grant of summary judgment in favor of AstraZeneca Pharmaceuticals LP (“AstraZeneca”).  The district court’s decision invalidated four asserted claims of Teva’s U.S. Patent No. RE39,502 (“‘502 patent”) based on AstraZeneca’s prior invention of the subject matter claimed therein.

Teva’s ‘502 patent is directed to formulations of statins, which are a class of compounds useful in the treatment of dyslipidemia, or high blood pressure.  Statins are inherently unstable and so must be manufactured in stabilized formulations; Teva’s patent is directed to formulations that are stabilized by an amido-group containing polymeric compound (“AGCP compound”).

In October 2008, Teva sued AstraZeneca for infringement of the ‘502 patent based on AstraZeneca’s manufacture and sale of its Crestor drug, which is also a stabilized statin formulation for the treatment of dyslipidemia.  AstraZeneca designed this drug with a non-AGCP compound as a stabilizer; however, the drug also contains crospovidone, an AGCP compound, which was included as a disintegrant as AstraZeneca did not understand it to have a stabilizing effect at the time.

AstraZeneca moved for summary judgment of invalidity under 35 U.S.C. § 102(g)(2), alleging that it conceived and reduced Crestor to practice prior to Teva’s first conception of the claimed subject matter.  AstraZeneca showed that it manufactured large batches of its formulation containing the same ingredients in the same amounts as its commercial drug prior to Teva’s date of conception and reduction to practice.  The district court held that AstraZeneca was not required to have “an appreciation of the stabilizing effect of crospovidone,” it only needed an “appreciation of the stabilization of its overall pharmaceutical composition that contained crospovidone.”  As such, the district court granted AstraZeneca’s motion and held the asserted claims invalid. Teva appealed to the Federal Circuit.

On appeal, the Federal Circuit held that the district court correctly concluded that AstraZeneca’s earlier development of Crestor satisfied the requirements for prior invention under 35 U.S.C. § 102(g)(2) and therefore affirmed.  The court determined that as a matter of law, AstraZeneca did not have to understand that crospovidone acted as a stabilizer in its drug prior to Teva’s conception.

35 U.S.C. § 102(g)(2) provides that:

A person shall be entitled to a patent unless … before such person’s invention thereof, the invention was made in this country by another inventor who had not abandoned, suppressed, or concealed it. In determining priority of invention under this subsection, there shall be considered not only the respective dates of conception and reduction to practice of the invention, but also the reasonable diligence of one who was first to conceive and last to reduce to practice, from a time prior to conception by the other.

The court discussed three previous cases,[1] explaining that they stand for the following: (1) “[t]o establish prior invention, the party asserting it must prove that it appreciated what it had made;” (2) “[t]he prior inventor does not need to know everything about how or why its invention worked;” and (3) “[n]or must [the prior inventor] conceive of its invention using the same words as the patentee would later use to claim it.”

The court noted that AstraZeneca had to appreciate that its drug was stable and what the components were, which AstraZeneca undisputedly did.  However, the court held that AstraZeneca did not have to appreciate which component of the drug was responsible for the stabilization, as that would require AstraZeneca to have first conceived of its drug in the same words that Teva chose to use to claim it.  The invention is not the language of the claim but the subject matter thereby defined.  AstraZeneca knew what it had made, even if it did not know precisely the cause of the stability.

Teva argued that the district court implicitly adopted a broadened claim construction, but the Federal Circuit disagreed.  The court noted that there was no instant dispute over the scope of the asserted claims because AstraZeneca made a limited concession of infringement for the purpose of advancing its summary judgment motion.  Thus, Teva essentially was arguing that AstraZeneca needed to understand its invention in the same terms used in Teva’s asserted claims, which as discussed above, is without merit.  For the same reason, the court declined to resolve how, if at all, the doctrine of inherency applies to priority under § 102(g), because this case did not involve a factual dispute over whether the prior art included a certain claim limitation (expressly or inherently).  Finally, the court held that AstraZeneca did not suppress or conceal its understanding that crospovidone was a stabilizer in its drug formulation, again because AstraZeneca was not required to appreciate the stabilizing effect of crospovidone.

Significance to Prior Users

While the American Invents Act in 35 U.S.C. § 273(a) allows the “new” defense when the infringing subject matter is “a process, or consisting of a machine, manufacture, or composition of matter used in a manufacturing or other commercial process” and where the defendant was “acting in good faith” and “commercially used” the subject matter in the United States, the defense itself has been in existence under existing law, albeit under different labels.  As pointed out in “Review of the Effects of the Leahy-Smith America Invents Act on Third Party Participation Applicants“, prior users could use portions of 35 U.S.C. §102(b) to i   The use must also be internal 35 U.S.C.  §102(g) as was done in Teva.  In contrast, under the 35 U.S.C. § 273(a) defense, a similar showing is required, but there will be an additional hurdle in that the use or commercial transfer, and have been ongoing for at least 1 year before the effective filing date or the disclosure date of new 35 U.S.C. § 102(b).   Therefore, while it likely inadvertent, it appears that the American Invents Act actually narrowed the prior user defense as compared to existing law.


[1] Invitrogen Corp. v. Clontech Labs., Inc., 429 F.3d 1052 (Fed. Cir. 2005); Mycogen Plant Sci. v. Monsanto Co., 243 F.3d 1316, 1332 (Fed. Cir. 2001); Dow Chemical Co. v. Astro-Valcour, Inc., 267 F.3d 1334 (Fed. Cir. 2001).

Introducing Stein McEwen LLP Fall 2012 IP Training Program October 1-19, 2012

 Stein McEwen LLP is pleased to announce that it will be hosting an intellectual property training program from October 1-12 with an add-on session from October 15-19, 2012 in Washington DC.

 The purpose of the Stein McEwen LLP Fall 2012 IP Training Seminar is to provide an overview of U.S. Intellectual Property Law, including patents, trademarks, copyrights, and trade secrets. The lectures will cover fundamentals of patent procurement, with optional sessions extending to the scopes of trademarks and copyrights, IP licensing, and IP litigation. A series of lectures will be presented by Stein McEwen LLP attorneys regarding these subjects, including workshops for the participants to receive hands-on experience.  These workshops will include activities such as reviewing disclosures of an invention and drafting sample claims to cover the subject matter of the invention. Tours of the U.S. Patent and Trademark Office, the U.S. Court of Appeals for the Federal Circuit, and a U.S. District Court will allow the participants an opportunity to understand the complexities of these agencies and courts.  At the U.S. Court of Appeals for the Federal Circuit, the participants will likely have an opportunity to observe a portion of a hearing involving patents. The IP Training Seminar is intended to provide a broad-based understanding of U.S. Intellectual Property Law, with a strong emphasis on patents. The already-implemented and still-to-take-effect provisions of the Smith-Leahy America Invents Act (AIA) will be woven throughout the syllabus.

 

Who Should Attend?

In-house staff members of corporate IP departments, patent attorneys, staff members of overseas law firms, inventors, and members of academia who deal in some aspect of IP.

Basic understanding of patent law for at least one country is recommended. No formal registration of any country’s patent office is required.

More information can be found at www.smiplaw.com/seminar_ipt.cfm.

If you have any questions, please contact Sarah Brogi at sbrogi@smiplaw.com or SM2012training@smiplaw.com.

Federal Circuit Overturns District Court’s Claim Construction in Markem-Imaje Corp. v. Zipher Ltd.

.By Zi Wang

In Markem-Imaje Corp. v. Zipher Ltd., 657 F.3d 1293 (Fed. Cir. 2011), the Federal Circuit per curiam majority overturned the district court’s claim construction and summary judgment of noninfringement.

Markem-Imaje Corp. sued Zipher Ltd. and Videojet Technologies, Inc. (together “Zipher”), requesting a declaratory judgment that Zipher’s ‘572 patent is not infringed by Markem.  The ‘572 patent is directed to a heat transfer printing apparatus that provides increased control over the acceleration, deceleration, speed, and positional accuracy of the printing operation.  In transfer printers in general, the ink ribbon is wound on two spools, one spool for supplying the ribbon for positioning on the substrate, and the other spool for taking up the ribbon after use.  Maintaining correct ribbon tension is essential for proper functioning of the printer.  The patent specification explains the problems with the mechanism that has been used to provide ribbon tension in prior art printers.  It then distinguishes the prior apparatus from what the ‘572 patent calls the “push-pull” mechanism of the ‘572 apparatus, and claims that this new mechanism solves various problems encountered with prior devices.  The “push-pull” mechanism is implemented using microcontroller-controlled stepper motors.

Claim 1, the broadest claim of the ‘572 patent, is directed to a tape drive that corrects tension divergences from the predetermined limit in this manner:

A tape drive comprising:

two motors, at least one of which is a stepper motor;

two tape spool supports on which spools of tape are mounted, each spool being driveable by a respective one of said motors;

a controller adapted to control energization of said two motors such that tape is transported in at least one direction between spools of tape mounted on the spool supports;

wherein the controller energizes both said motors to drive the spools in a tape transport direction, and

said controller calculates a length of tape to be added to or subtracted from tape extending between said spools in order to maintain tension in said tape between predetermined limit values and controls said motors to drive the spools to add or subtract the calculated length of tape to or from the tape extending between said spools.

The district court construed “driveable” and “drive” to mean “rotateable” and “rotate”, rejecting Zipher’s broader construction.  The district court reasoned that although the ordinary meaning of “drive” can be broad enough to encompass not only the rotation of the spools but also application of a holding torque that prevents the spool from rotating and that references to driving the spools in the specification could accommodate either construction, giving “drive” a meaning broader than “rotation” would be contradictory to the meaning of “drive” in the tape transport clause, which states that “the controller energizes both said motors to drive the spools in a tape transport direction.”  Moreover, according to the district court, because the claim clause “controls said motors to drive the spools” already used the word “control,” the patentee could not have intended “control” and “drive” to mean the same thing.  The district court also pointed to a few places in the specification that use the word “drive” narrowly.  The district court further construed the use of the plural word “spools” in the claim clause “to drive the spools to add or subtract the calculated length of tape” to mean that both spools must rotate to add or subtract a single calculated length of tape.

Because only a single spool is rotated to achieve each tension adjustment in Markem’s accused devices, the district court readily found noninfringement.  Zipher then appealed the district court’s claim construction and summary judgment to the Federal Circuit.

On appeal, Zipher argued that “drive”, similar to “control”, has the inclusive meaning of not only rotate but also “hold steady in a commanded position.”  Markem, on the other hand, relied on Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc) for its position.  Phillips court stated that “claim terms are normally used consistently throughout the patent,” and that “a claim term should be construed consistently with its appearance in other places in the same claim or in other claims of the same patent.”  The Federal Circuit majority sided with Zipher, holding that “drive” need not be narrowly construed merely because a broader construction would make it similar to the word “control” that is also used in the claim.  The majority also stated that nothing in the specification or the overall invention as presented in the claim and as argued to the patent examiner requires the narrow construction.

In addition to the district court’s construction of “drive the spools”, Zipher also appealed its construction that the claims require “some method of deriving a tension measurement.”  The district court opined that “without having a reasonable estimate of the current tape tension, it is not possible to identify whether the tension is approaching or exceeding the limit values.”  Zipher argued that since the claim does not recite measuring tension, the district court’s construction would import a limitation into the claims from the specification and violate the mandate of Rambus Inc. v. Infineon Tech. AG, 318 F.3d 1081 (Fed. Cir. 2003) that “the claims need not recite every component necessary to enable operation of a working device.”  The majority again agreed with Zipher and drew an analogy with a car engine: “a claim to an engine providing motive power to a car should not be construed to incorporate a limitation for an exhaust pipe, though an engine may not function without one.”

Judge Newman dissented in part. She disagreed with the majority’s reliance on the “mandate” of Rambus.  According to Newman, the panel majority ignored “the paramount importance of the specification in claim construction.”  Citing a series of cases to support her position, Newman stated that she would hold that “while the invention is flexible as to how tension is measured, and permits measurement through indirect methods, some method of measurement is contemplated and required.”

This is the third time in 2011 that the Federal Circuit has been divided and reached contradictory decisions on the issue as to how to reconcile claim language with the description in the specification.  The other two cases are Arlington Industries Inc. v. Bridgeport Fittings Inc.,632 F.3d 1246 (Fed. Cir. 2011), and Retractable Technologies Inc. v. Becton, Dickinson & Co., 653 F.3d 1296 (Fed. Cir. 2011).  J. Lourie and CJ. Rader were on opposite sides of the issue in these two cases, each in turn penning the majority opinion in one and the dissenting opinion in the other.  The Federal Circuit rejected the opportunity to rehear Retractable en banc in Retractable Technologies Inc. v. Becton Dickinson & Co., 659 F.3d 1369 (Fed. Cir. 2011), before it was presented with the same problem in the present case.

Take-away points:  Patent prosecutors should use the same word in a consistent manner throughout the whole application to avoid ambiguity.  What’s more, contrary to good general practice in writing, it is probably preferable to stick with the same word when expressing the same idea in patent applications.

Right Decision; Wrong Reason — The Prometheus Patents Seem to Satisfy § 101

By Robert Lower

The Supreme Court handed down its decision in Mayo v. Prometheus Laboratories March 20, 2012, holding U.S. Patent Nos. 6,355,623 and 6,680,302 invalid for failure to satisfy 35 U.S.C. § 101. Prometheus is the exclusive licensee to these patents, which boil down to a process for calculating a dosing regimen for a drug that threads the needle between an inefficacy and overdose, based on the level of metabolites in patients’ blood. The court referenced the first claim of the ‘623 patent in reaching its opinion:

We claim:

1. A method of optimizing therapeutic efficacy for treatment of an immune-mediated gastrointestinal disorder, comprising:

(a) administering a drug providing 6-thioguanine to a subject having said immune-mediated gastrointestinal disorder; and

(b) determining the level of 6-thioguanine in said subject having said immune-mediated gastrointestinal disorder, wherein the level of 6-thioguanine less than about 230 pmol per 8 x 108 red blood cells indicates a need to increase the amount of said drug subsequently administered to said subject and

wherein the level of 6-thioguanine greater than about 400 pmol per 8 x 108 red blood cells indicates a need to decrease the amount of said drug subsequently administered to said subject.

The U.S. Patent and Trademark Office argued the process satisfies the § 101 threshold requirement for patentability, and urged the court to turn to other sections of the patent act to screen the patents in issue. Nonetheless, the court struck the patents for failure to satisfy § 101, which reads:

“Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” 35 U.S.C. § 101

If stripping Prometheus of these patents is good, it must follow that preventing issuance of others like it in the first place would be better. § 101 is not the best way to accomplish this goal.

So why did the court rule on § 101? Mayo pushed it. Why did Mayo push it? Along with seeking invalidation of these patents, Mayo probably argued § 101 hoping for a blanket ruling that medical treatments cannot be patented, perhaps to protect Mayo’s business interests  (Mayo sought to sell a competing test). While this ruling does not establish a blanket bar against patentability of medical treatments, it certainly does not provide clarity as to what is patentable in the medical arena. It’s not clear why the court ran with Mayo’s § 101 argument instead of looking to other reasons for invalidly.

Had the court invalidated these patents as obvious and/or non-novel under 102 and 103, they could have prevented more patents of this type in the future, without leaving inventors scratching their heads wondering if they should simply direct their talent away from medicine, and towards inventive categories for which the law is predictable.

Under this ruling, claims like the Prometheus process claims could seemingly be reframed as an apparatus, such as a test kit to fall outside the scope of the court’s ruling.

Fortune Apple falls on the head of Proview— Proview Shenzhen sees a new way to get out of its debt

By Evelyn Li

Apple’s successful marketing on its product “iPad” may be facing a big loss in China when a court in China rejected its claim on ownership of the iPad trademark in the country. The court ruled for its rival Proview Technology (Shenzhen) Company Ltd. (Proview Shenzhen), a struggling company that registered trademarks for the name IPAD in mainland China long before Apple conceived its smash hit tablet computer.

Following the court’s decision, Proview Shenzhen has sought to halt sales of Apple’s iPad in two Chinese cities. A court in Shanghai refused its request on preliminary injunction on “all sales of ‘iPad’ by Apple Computer Trading (Shanghai) Company Ltd.” due to “the uncertainty of the decision which will be made by the High People’s Court of Guangdong on trademark ownership over ‘iPad’.” Although Apple was able to stop the preliminary injunction, the appeal to the High People’s Court of Guangdong does not look optimistic.

One big problem for Apple on its appeal is the proof of existence of a valid contract between Proview Shenzhen and Apple’s shell company IP Application Development in Britain on the transfer of the ownership on “iPad” trademark in mainland China. Apple believed that a 2006 agreement between Apple and Proview Electronics Company Ltd. (Proview Taipei) to sell Apple the “global trademark” for the iPad name for around $54,000 includes mainland China. Proview Shenzhen claimed that it was not involved in such negotiation.

Based on the facts presented by Proview Shenzhen, it arguably holds the “iPad” trademark registration on record with State Trademark Office in mainland China since 2001. Therefore, the inference would be that Apple was not careful enough to follow up on the procedural requirements after signing the contract with Proview Taipei to make sure that Proview Shenzhen transferred its ownership on two registrations. It is possible that the lawyers of Apple did not understand very well while dealing with Proview Taipei that the two companies are treated as two different entities under the Contract law of mainland China, even though both companies are subsidiaries of a parent company, Proview International Holdings Ltd. Or it is also possible as Proview Shenzhen claimed that Apple’s counsel was confused about the authorities of certain employees from Proview Shenzhen during the communication through e-mails. According to the evidence admitted by the Chinese court on contract for sales of ownership on ten registered “iPad” trademarks, Proview Taipei only had ownership on eight of those registrations in a number of countries not including mainland China. And Proview Shenzhen was most likely the owner of the other two registrations in mainland China. Therefore, without Proview Shenzhen’s consent and signature, Proview Taipei could not transfer the two trademark registrations.

Moreover, under Article 39 of the Trademark Law of China, where a registered trademark is assigned, “the assignor and assignee shall conclude a contract for the assignment, and jointly file an application with the trademark Office.” Also under that statute, “The assignment of a registered trademark shall be published after it has been approved, and the assignee enjoys the exclusive right to use the trademark from the date of publication.” Therefore, even if Apple could prove on appeal that the contract of all ten trademark registrations on the “iPad” from Proview Taipei had Proview Shenzhen’s official consent and signature, Apple would still need to show that it has fulfilled those procedural requirements under the Trademark Law of China before it started selling iPads in mainland China.

It should be noted that assignment contracts of trademark ownership are characterized as “consensual contract” instead of “real contract” in mainland China. More specifically, under Article 44 of the Contract Law of China a lawfully formed contract usually becomes effective upon its formation. However, “Where effectiveness of a contract is subject to any procedure such as approval or registration, etc. as required by a relevant law or administrative regulation,” such provision applies. Thus even if Apple could prove that a contract was formed between Apple and Proview Shenzhen, Proview Shenzhen could still claim that the contract has not become “effective” under the Trademark Law of China and therefore could still be terminated by the parties under certain circumstances.

Many believed that Apple would settle the case with Proview Shenzhen, and Proview Shenzhen has stated many times that it is willing to settle with Apple on the case. However, Apple also worries that doing so would likely encourage more frivolous lawsuits from companies like Proview Shenzhen. Whatever Apple decides, the litigation situation does not look good. If the High People’s Court in Guangdong rules for Proview Shenzhen on Apple’s appeal, under the The Regulation for the Implementation of the Trademark Law of the People’s Republic of China, Apple will be liable for “the infringements on registered trademark rights,” and be fined “no more than three times of the amount of profit made on such illegal business.” In addition to that, Proview has asked for damages on lost profits and attorneys’ fees.

There are cases and opinions from the Supreme People’s Court of China and some Provincial High People’s courts establishing relevant principles in deciding on trademark infringement cases. Those principles suggest that courts should rarely support claims of damage on unused registered trademarks. Also, on deciding issue of damage on such cases, instead of calculating the unjust enrichment of the infringer, courts should only look to actual loss of trademark holders who are able to prove the amount of damage. In addition those opinions also suggested a requirement for trademark owners to provide evidence on use of the trademark within three years of their infringement lawsuit. Therefore if Proview has not been using the trademark in fact in the course of commerce, its chance of getting a huge amount of damage from Apple is very little on the appeal.

The following are a few take-away points to be gleaned from the matter:

First, to confirm trademark ownership in China, businesses must look to the official Gazette of the State Trademark Office of China. Counsels must make sure the procedure for transfer of trademark ownership required by the Office has been satisfied. Otherwise the transfer is not complete and the earlier owner still holds the trademark as its own.

Second, the authority of employees from Proview Shenzhen who communicated through e-mails with Apple during the contract negotiation with Proview Taipei was one of the focuses on the appeal. Apple brought up this issue first in the trial court to help its argument on formation of the contract. There, Apple claimed “apparent agency” during the negotiation process. However, on the appeal level Apple changed its theory to “undisclosed principal”.

First of all, those two theories are contradictory to each other under the Contract Law of China. And it is unclear whether Apple was being a bit careless on its arguments for the trial level, or Apple did it on purpose for strategic reasons. Secondly, Apple should have been more careful in checking the authority of those employees they were negotiating with through e-mails. It should have been aware that the signing party on the contract was only “Proview Taipei”, and should have asked for clarifications from Proview Taipei on its authority to transfer the two registered trademark rights in mainland China. Apple tried “group transactions” theory to try to convince the court on the appeal that the deal it made with Proview Taipei includes all of the ten trademarks because both Proview Taipei and Proview Shenzhen are subsidiaries of the same parent company. But, such theory does not exist under Chinese law. Even if applying the concept here, Apple mostly likely would still need to show every party’s consent and signature in the “group” for the transfer.

Although Apple tried to bring Article 402 of the Contract Law of China to help establishing the applicability of “undisclosed principal” theory, it is highly likely that the court will deny the argument for more evidence is needed to prove Proview Taipei acted as an agent for Proview Shenzhen during the contract negotiation. (Article 402 states “Where the agent, acting within the scope of authority granted by the principal, entered into a contract in its own name with a third person who was aware of the agency relationship between the principal and agent, the contract is directly binding upon the principal and such third person, except where there is conclusive evidence establishing that the contract is only binding upon the agent and such third person.”)

Third, it is wise for Apple to move timely in stopping the preliminary injunction Proview Shenzhen sought in the Shanghai Court after Apple lost its first case on the trial level. Otherwise, when provincial administrations for industry and commerce take actions under the courts’ decisions, Apple’s loss could be much greater than it would have imagined.

By Margaret M. …

Aside

By Margaret M. Welsh

 

As many are aware, the wind energy production tax credit which is set to expire at the end of this year was not extended in the payroll tax legislation as many renewable enthusiasts had hoped.  The renewable energy production tax credit was originally enacted by the Energy Policy Act of 1992 and has been extended over the years.  The production tax credit generally provides a per-kilowatt hour tax credit for electricity generated by qualified energy resources.  Qualified energy resources now include wind, closed-loop biomass, open-loop biomass, geothermal, landfill gas, municipal solid waste, some hydroelectric, and larger-scale marine and hydrokinetic power. 

 

The credit for all the qualified energy sources listed above expires in 2013, except for wind energy which expires at the end of this year.  Currently, the wind energy production tax credit provides a 2.2 cents/kilowatt-hour tax credit for electricity generated from utility-scale wind turbines.  This credit has been instrumental in lowering the cost of electricity rates generated from wind resources in the United States.  The American Wind Energy Association (“AWEA”) reports that the credit has helped reduce electricity rates and lowered the cost of wind power by ninety percent.  Since wind energy sites take a considerable amount of time to develop and construct, there are already negative impacts of the tax credit’s impending expiration date.    

 

AWEA is optimistic that bipartisan action can help to extend the tax credit.  Currently, there are several bipartisan actions to watch.  Last November,  House Representative Reichert (R-WA) along with Representative Blumenauer (D-OR) introduced a bill, H.R. 3307 American Renewable Energy Production Tax Credit Extension Act of 2011, proposing an extension of the tax credit until January 1, 2017 for qualified energy sources.  Currently this bill has seventy-two cosponsors and has received broad industry endorsement.  

 

Another option to extend the production tax credit was introduced on February 15, 2012 by Senator Bennet (D-CO)  and co-sponsored by Senator Moran (R-KS) as an amendment to the Senate’s transportation bill to reauthorize federal aid for highway safety and construction programs (S. 1813).  The amendment seeks to extend only the wind energy production tax credit by one year to align with the expiration dates for the other qualified energy sources.  Further on February 24, 2012, AWEA reported that numerous U.S. Representatives and Senators signed a letter to the Leadership of the House and Senate calling for a production tax credit extension for wind energy as soon as possible.  The leaders urged that an extension is needed to provide stability for the wind industry and to help the wind industry gradually move to a market-based system. 

 

AWEA stresses that the wind energy tax credit should be extended in the first quarter of 2012 to avoid delaying wind energy projects.  Thus, the bipartisan efforts might already be too late for a few wind energy projects, but could provide measurable stability for the other qualified renewable energy sources from either a broad-based renewable energy tax credit extension or from a lesson learned that earlier action may be needed.

The all new iPad – Brought to you by Proview?

By Dan McPheeters

An interesting trademark dispute has heated up recently, as tech juggernaut Apple, Inc. faces the risk of losing a key brand identifier associated with one of its top products to Proview Technology Shenzhen, a company based in Shenzhen, China. The facts of the case are quite interesting: Proview registered a trademark for the term “iPad” in 2001, nine years before the release of Apple’s digital tablet. In 2009, a Taiwanese affiliate of Proview sold the trademark rights to a U.K. company called IP Application Development Limited for 35,000 British pounds; IP Application Development later resold the rights to Apple for 10 British pounds. As one might surmise, it was later revealed that IP Application Development Limited was controlled by Apple. When Apple applied to Chinese authorities to transfer the rights on the mainland in 2010 in advance of the release of the iPad, but this request was denied by China’s trademark authorities.  Apple and Proview are currently locked in a suit and counter-suit that is scheduled to be heard on February 22nd.

From a purely P.R. perspective, this is a set-back for the image of rights protection and general business and legal practices in China. Reviewing the facts, Apple (through its affiliate IP Application Development Limited) must have been convinced that it was acquiring both the Chinese and Taiwanese rights from Proview Taiwan – indeed, Apple’s counter-suit asserts as much. Thus, it would appear that one of the following might be true: Apple’s lawyers botched the purchase, particularly the due diligence concerning the authority of Proview Taiwan viz. the rights to the mark; Proview Taiwan negotiated in extremely bad faith and were bailed out by the Court, who took a narrow view of Proview Taiwan’s authority and who happens to be located in Proview Shenzhen’s backyard; the Court itself gamed the system to protect a local company that was reportedly experiencing serious financial problems; or some combination of the above.

Then there is the timing of Proview’s registration of the mark in the first place, made in 2001 – right around the time of the release of Apple’s iPod. Proview’s registration included the lower-case “i” followed by an upper-case “P”; a quick search at the USPTO reveals that Apple has used this distinctive format since at least the release of the iMac in 1998. This could certainly be a coincidence, but the danger to Apple’s brand value is very real nonetheless – Apple faces an administrative fine of $38 million, and Proview has reportedly asked for $1.6 billion in damages.

If this story has one takeaway, it is to highlight the distinctions between the U.S. and Chinese trademark registration regimes. That one of the two largest companies in the world can be tripped up over a key brand identifier shows just how careful counsel must be in planning business operations in China and elsewhere. A key lesson was handed down by the Shenzhen Court’s decision on Apple’s counter-suit, namely that there will be very little room to assert a claim for ownership over a mark when the mark has been modified in any way, no matter how distinct the brand identifier or how closely the modification resembles the original. Counsel should ensure they have up to date procedural information on the relevant trademark registration administrator, especially filing procedures and timelines, as well as a thorough understanding of the key elements of their mark to ensure brand identifiers are protected in their entirety. Finally, counsel must be doubly sure to know not only who they are dealing with in a particular transaction, but who they are NOT dealing with. A thorough understanding of the jurisdiction’s laws on representations and warranties, and independent research on the parties to the transaction is essential.

Sun Tzu began his famous treatise “The Art of War” by discussing the critical role played by one’s surroundings and environment, and the importance of understanding them as a means to success. In doing business overseas, those surroundings are distinct cultural, business, and legal norms, and the environment is a self-sufficient set of laws and customs with which the business, products, and brand identifiers must comply. The key to ensuring that a company’s expansion abroad is a successful one can hinge entirely on its understanding and management of these factors.