New England Biz Law Update
With 2011 just ended, what better time to review the top 10 intellectual property cases and matters of the year? Drum roll, please.
1. On Sept. 16, President Obama signed into law patent reform measures after six years of congressional patent reform failure. Will the new “first-to-file” system really make a difference? Will the Patent Office really be able to keep the user fees it generates in order to hire more examiners, shorten patent pendency and improve patent quality? Only time will tell. Will there be unintended consequences? Probably.
2. Patents suddenly became obscenely expensive in 2011. Nortel’s patent portfolio was purchased for $4.5 billion by a consortium including Apple and Microsoft. Not to be outdone, Google later paid $12.5 billion for Motorola’s patents. Now Kodak wants to sell its patents. Let the patent arms race begin.
3. The value of all patents probably increased slightly in 2011 when the Federal Circuit raised the bar for all attempts at invalidating a patent on the grounds of “inequitable conduct.” The idea is that if a patent infringement defendant finds relevant “prior art” information that the plaintiff patent owner knew about but didn’t cite to the Patent Office, then the defendant can assert the patent is invalid.
According to one study, in 80 percent of all patent infringement cases, the defendant accuses the patent owner of inequitable conduct. Over time, the Federal Circuit developed a sliding scale analysis regarding inequitable conduct. If highly material information was withheld from the Patent Office, proof that the patent owner intended to withhold the information was not really needed; intent to deceive the Patent Office could be inferred. Conversely, if there was proof the patent owner intended to withhold certain information, the information didn’t have to be all that material.
In Therasense v. Becton, Dickinson & Co. (en banc), the Federal Circuit found that a withheld reference, in order to be material and thus support a charge of inequitable conduct, must invalidate the patent. Moreover, even if the information withheld turns out to be highly material, the accused patent violator must also prove the reference was knowingly and deliberately withheld. And, the patentee does not even have to provide an explanation for the missing information.
4. It was a good year for biotech patentees. In the so-called Myriad decision (Association for Molecular Pathology v. U.S. Patent and Trademark Office), the Federal Circuit largely overturned a District Court decision holding isolated DNA not patent eligible. In Mayo v. Prometheus, the Federal Circuit reversed a District Court decision holding a medical diagnosis method not patent eligible. We’ll see if the good times last. The U.S. Supreme Court heard arguments in the Mayo case on Dec. 7 and will likely review the Myriad decision in 2012.
5. Some cases never seem to end. In 2009, music downloader Joel Tenebaum got hit for $22,500 per song, for a total copyright infringement award of $675,000. In 2010, U.S. District Court Judge Nancy Gertner in Boston reduced the award, based on due process considerations, to $2,250 per song, for a total award of $67,500. But then, last September, the 1st Circuit overturned that determination and held judicial restraint prevents federal courts from reaching constitutional questions (like due process) when not absolutely necessary:
“It was not necessary for the district court to reach the constitutional question of whether the jury’s award of $22,500.00 per infringement was so excessive as to violate due process. If the district court had ordered remittitur, there would have been a number of possible outcomes that would have eliminated the constitutional due process issue altogether, or at the very least materially reshaped that issue.”
The clash between the copyright laws and the Constitution isn’t over, however. A District Court in Minnesota last year also reduced a jury award of $80,000 per song to $2,250.
6. The U.S. Supreme Court decided patent precedent is not to be changed just because Microsoft wants it to be. After losing a $250 million patent infringement judgment in Microsoft Corp v. i4i Limited Partnership, Microsoft petitioned to have the court rule that proof of patent invalidity need not be by clear and convincing evidence in cases in which the evidence of invalidity was not reviewed earlier by the Patent Office. Patents are presumed by law to be valid, held the Supreme Court, and in all instances are only invalid if clear and convincing evidence says so.
7. You can infringe a patent a couple different ways. One is by inducing someone else to sell your product that infringes a patent. For regular old patent infringement, it doesn’t matter whether or not a defendant knows about the patent. Knowledge only counts for damages, not liability. But for inducement, do you need to know about the patent you are inducing someone else to infringe? Yes, held the Supreme Court in Global Tech Appliances, Inc. v. SEB, S.A. But, if you deliberately keep the patent hidden from view, you could still be liable for inducement.
8. The Economic Espionage Act, basically a federal trade secret law, has been in place since 1996 but is rarely used. It’s beginning to be used more now. One example: In October, Chinese national John Huang working at Dow and Cargill pleaded guilty to disclosing the companies’ secrets.
9. In 1998, Boston’s State Street case “opened the flood gates” of business method patents. In 2010, the U.S. Supreme Court’s Bilski case cast doubt on the viability of business method patents. In 2011, business method patents lived on.
Consider the Court of Appeals for the Federal Circuit’s case of Ultramercial v. Hulu, concerning a business method patent wherein advertising is used as a form of currency. According to the patent, a consumer sees a song, movie or book on the Internet and, in return for viewing an advertisement, gets the song, movie or book for free. The kicker is the advertiser pays the content provider. Patentable, held the Federal Circuit in a decision that also provides a roadmap for how to draft winning business method patent applications.
10. The trademark case of In Re Eagle Crest, Inc. is of note because it might just signal the beginning of the end for “protecting” slogans using trademark law. Trademarks and service marks are supposed to be for non-descriptive names of products and services. Early on, slogans (“Be Happy!”) were not registerable, held the Trademark Office, because they were not associated with a product or service.
Enterprising individuals (and their trademark attorneys) then presented the slogans on clothing, such as T-shirts or hats, and argued the product was the clothing. Sometimes it worked. The 2011 Eagle Crest case sought to register “once a marine, always a marine” in connection with clothing, but the Trademark Trial and Appeal Board refused registration on the grounds that the slogan was an informational message rather than a source indicator of the clothing products.
Kirk Teska is the managing partner of Iandiorio, Teska & Coleman in Waltham, Mass. He is an adjunct professor at Suffolk University Law School and the author of “Patent Savvy for Managers” (NOLO) and “Patent Project Management” (ASME Press).
