Inter Partes Reexaminations Look and Feel Like “Contested Cases.”

If Cordis Corp. has its way, non-party discovery by subpoena will be permitted in an inter partes patent reexamination, potentially expanding the scope and complexity of presenting such reexaminations in the Patent Office.  In a brief  (PDF) filed May 4, 2012, Cordis argues to the federal Circuit that inter partes reexaminations are “contested cases” within the meaning of 35 U.S.C. § 24, which would make such reexaminations eligible for use of the subpoena power of federal courts.

The USPTO refused Cordis’s request to serve subpoenas, holding that discovery is not allowed in inter partes reexamination.  The opposing party, Abbott Laboratories, also filed a motion to quash in federal district court, and the district court agreed, quashing the subpoenas.  Cordis’s appeal brief to the Federal Circuit relies upon due process concerns, administrative law, and the power of the agency to hold and decide “contested cases.”

The use of subpoena power dates back at least to the 1861 Patent Act, which authorized the district court to subpoena witnesses “in any contested case pending in the Patent Office.”  Historically, the “contested case” under Section 24 referred to an interference proceeding in the USPTO that was declared and conducted under 35 U.S.C. § 135.  Other contested cases have included patent extension proceedings, disciplinary proceedings, and trademark cancellation and opposition proceedings.  Cordis’s arguments regarding inter partes reexamination would extend the definition of “contested cases” for which subpoena power exists.

If Cordis is successful in obtaining the right to issue subpoenas in inter partes reexaminations, it will add another strategic consideration for competitors who want to challenge pending or issued patents.  The new inter partes review procedure (which will replace inter partes reexamination on September 16, 2012) and the new post-grant review option under the AIA both have provisions (35 U.S.C. §§ 316 and 326) authorizing some limited fact discovery.  Under this new authority from Congress, the USPTO Director is charged with making regulations that, among other things, permit depositions and prescribe sanctions for discovery abuse.

These new USPTO proceedings appear to have the same kind of “contested case” characteristics as interferences.  Since they envision the use of limited discovery, it would follow that they also warrant, or require, use of the federal courts’ subpoena power.

Categories: Breaking Down the AIA, The AIA at the USPTO

Federal Circuit Interprets Pre-AIA Joinder Cases for Consistency and Fairness

In a May 4, 2012, panel order deciding a writ of mandamus, the Federal Circuit Court of Appeals has addressed the question of the AIA’s effect on joinder for cases already pending as of the new law’s September 16, 2011, effective date.  See In Re EMC Corp. (PDF), Misc. Docket No. 100 (Fed. Cir. May 4, 2012) (Dyk, J.).  The Federal Circuit recognized that the new 35 U.S.C. § 299 could not be applied retroactively.  But the Federal Circuit pointed out that district courts have “considerable discretion” in how they apply relevant factors regarding both joinder of defendants in a single action under Fed. R. Civ. P. 20(a)(2) and separate or consolidated trials under Fed. R. Civ. P. 42.  Id. at 16.  And the Federal Circuit also emphasized that it is an abuse of that discretion to permit joinder “unless there is an actual link between the facts underlying each claim of infringement, independently developed products using differently sourced parts are not part of the same transaction, even if they are otherwise coincidentally identical.”  Id. at 15.

The Federal Circuit went on to identify various factors that district courts can consider in cases filed before the AIA for determining whether the same “product or process” is involved and whether the joinder test is satisfied.  These include the following:  ”whether the alleged acts of infringement occurred during the same time period, the existence of some relationship among the defendants, the use of identically sourced components, licensing or technology agreements between the defendants, overlap of the products’ or processes’ development and manufacture, and whether the case involves a claim for lost profits.” Id. at 16.

In a curious, final footnote, Judge Dyk disclaimed whether the “sameness test” applied in the decision  would be the prevailing test under the new joinder provision codified in 35 U.S.C. ¶ 299.  “We need not decide whether the sameness test in the new legislation is identical to the sameness test we adopt here for cases not covered by the new legislation.”  Id. at 16 n.4.   The implication seems clear: without explicitly giving Section 299 retroactive effect, the Federal Circuit has signaled that for cases filed before or after the new statute, courts will be given considerable discretion to find error in the joinder of numerous defendants merely based on accused infringement of the same patent.

Categories: Breaking Down the AIA, Non-Practicing Entities, Patent Enforcement and Litigation, Recent Decisions

Despite AIA, Accused Infringers May Have Their Actions Consolidated for Pretrial

On September 16, 2011, the AIA enacted a joinder provision providing that “accused infringers may not be joined in one action . . . or have their actions consolidated for trial, based solely on allegations that they each have infringed the patent or patents in suit.” 35 U.S.C. § 299(b). Now it is clear, based on a decision by the United States Judicial Panel on Multidistrict Litigation (the “Panel”), that accused infringers may nonetheless have their actions consolidated for pretrial, based solely on allegations that they each have infringed the patent or patents in suit.

On May 2, 2012, the Panel issued a transfer order rejecting the argument that the AIA’s joinder provision limited the Panel’s authority under 28 U.S.C. § 1407to transfer actions from multiple districts to a single district “for coordinated or consolidated pretrial proceedings.” The Panel reasoned that the AIA’s joinder provision (35 U.S.C. § 299) is expressly directed to joinder or consolidation for trial, whereas Section 1407 is expressly directed to transfer for pretrial proceedings. Id. at 2-3. Further, the plain language of the AIA is not ambiguous and does not implicate Section 1407. Id. at 3. Thus, the Panel held “that, by its terms, this statute [the America Invents Act, 35 U.S.C. § 299] does not affect our ability to transfer this litigation for coordinated or consolidated pretrial proceedings pursuant to 28 U.S.C. § 1407.” Id.

The Panel noted that the defendants opposing transfer predicted that the Panel’s decision “will lead to a flood of MDL patent filings by non-practicing entities seeking to execute an ‘end run’ around the AIA’s new joinder requirements.” Id. Indeed, as noted in an earlier post, the AIA’s joinder provision was intended to raise the litigation costs of non-practicing entities in an effort to reduce litigation by such entities. Cf. H.R. Rep. No. 112-98, pt. 1, at 54 (pdf) (“The Act also addresses problems occasioned by the joinder of defendants (sometimes numbering in the dozens) who have tenuous connections to the underlying disputes in patent infringement suits.”). The Panel rejected this assertion and reasoned that transfer under Section 1407 is not automatic and will depend on the particular facts at hand. Then, with respect to the case before the Panel, the Panel concluded that, on balance, transfer would promote “the convenience of the parties and witnesses” and “the just and efficient conduct of the litigation”: 

“[W]hile the facts surrounding infringement in this litigation may vary from defendant to defendant, the actions will share substantial background questions of fact concerning the numerous anticipated arguments regarding the validity and enforceability of the [patent-in-suit] and implicating factual issues concerning such matters as the technology underlying the patent, prior art, priority . . . and/or claim construction. Further, centralization offers substantial savings in terms of judicial economy by having a single judge become acquainted with the complex patented technology and construing the patent in a consistent fashion (as opposed to having six judges separately decide such issues).

 Id. at 4.

Query whether this reasoning would apply equally to the consolidation of multi-defendant infringement actions for trial as well, if such consolidation were not now prohibited by the AIA.

Categories: Non-Practicing Entities, Patent Enforcement and Litigation, Recent Decisions

Implementing the Supplemental Examination Provisions of the AIA

Recently, several attorneys at Schwegman, Lundberg and Woessner submitted comments to the PTO regarding the the implementation of the Supplemental Examination process under the America Invents Act:

I. CHANGES TO IMPLEMENT SUPPLEMENTAL EXAMINATION FED. REG. 77(18): 3666–81 (JAN. 25, 2012).

1. We agree with proposed rule § 1.601 that only the patent owner, and not a licensee, may request a supplemental examination.

2. 37 CFR § 1.501 states, “At any time during the period of enforceability of a patent, any person may cite, to the Office in writing, prior art consisting of patents or printed publications.” Proposed rule § 1.601(c) states, “Any party other than the patent owner (i.e., any third party) is prohibited from filing papers or otherwise participating in any manner in a supplemental examination proceeding” The rules should make clear whether prior art submitted by a third party during a supplemental examination will be held in abeyance or returned. Rule § 1.620(b) states that action on any petition or other paper filed in the supplemental examination until after the proceeding is concluded. The Office should consider revising this to state that any petition filed “during” supplemental reexamination to include other third-party papers.

3. The rules should clarify that supplemental examination is only available during a patent’s period of enforceability.

4. Rule § 1.605 defines an “item of information” as “a document submitted as part of the request.” The rules should clarify whether using the same document as a §§ 102 and 103 reference constitutes one or two items.

5. The fee of $16,120 for ex parte reexamination is too high. The fee was calculated based on the size of an average ex parte request, which typically involves hundreds of pages more than what is currently being proposed under the rules. Further, post-grant proceedings are supposed to be an alternative to litigation. Increasing the cost by 500% will have a twofold effect: first, it will create more litigation as ex parte reexams are being utilized as a means to thwart litigation for unreasonable licensing requests. Second the fees will force companies into licenses they would not normally take rather than bearing the time and cost of a reexam. Further, the reexam process is a correction process for the PTO; therefor the third party requester should not bear the complete cost of the correction process.

6. The rules should require the patent owner to make a statement about why an item is not material. This is similar to reissue where the patent owner must identify an error in the patent.

7. The rules should make clear that supplemental examination certificates will only apply to litigations filed after the filing date of the request for supplemental examination.

8. Supplemental examination should still be available after a litigation is filed, but should not apply to litigations filed before the supplemental examination is filed. See 35 USC § 257(2)(B).

9. Supplemental examination should be made public, just as patent owner requests for reexamination and reissues are public.

10. Rule 1.610(b)(11) requires a summary of the relevant portions of the submitted document. The Office should consider loosening the requirement to avoid creating additional opportunities for allegations of inequitable conduct. For example, the Office could simply require a summary of the item, and later identification of the relevant portion.

11. The Office should consider providing examples of situations in which the Office will forward evidence of fraud to the attorney general. This can provide clarity to patent owners afraid to file for supplemental examination when fraud might be implicated.

II. CONCLUSION

In closing, Schwegman appreciates the opportunity to comment on the proposed rules. If you have any questions on our comments or would wish for us to further explain any of our comments, please feel free to contact me. Either I or another member of the Schwegman’s leadership will respond to any inquiry.

Categories: Breaking Down the AIA, Future Reforms, Patent Prosecution, The AIA at the USPTO

Size Matters under the America Invents Act

For many years now, ‘small entities’ (typically, solo inventors and other qualifying small businesses) have enjoyed a 50% discount in patent office fees relative to those fees paid by larger corporations.  With the advent of the America Invents Act, those applicants meeting the definition of a ‘micro-entity’ can look forward to yet a further reduction in fees:  a reduction of 75% will apply to certain USPTO fees.

In general terms, a small entity has fewer than 500 employees and is under no obligation to convey any rights in the invention to a non-small entity.  A micro-entity, on the other hand, is likely to be an individual inventor or a start-up company meeting certain patent application experience and gross income requirements, or other entity having a relationship with a qualifying Institution of Higher Learning (think university).  Large entity fees are paid by businesses not eligible for treatment as either a small entity or as a micro-entity.

Naturally, those qualifying for the lowest pricing structure will gladly welcome this provision of the Act.  In contrast, large entities troubled by continued USPTO fee diversion may view this provision with disdain.

The patent office relies on applicants to determine the proper entity size.  And for the moment (at least for now), and under the fee setting provisions of the Act, the patent office is open to receiving your suggestions and ideas as to fee amounts.

Categories: Breaking Down the AIA, Patent Prosecution, The AIA at the USPTO

Section 11: “Fees for patent services – Micro-entity”

Most applicants and patentees will find Section 11 of the America Invents Act (AIA) unpalatable for the across-the-board 15% increase in patent-related fees, but one group will benefit from this section.  Section 11(g) of the AIA adds a “micro-entity” status as a third option to the already available “large entity” and “small entity” options for determining fee amounts.   Although small entities receive a 50% discount on many patent-related fees, the AIA introduces a 75% discount for qualifying micro-entities on fees for filing, searching, examining, issuing, appealing, and maintaining patent applications and patents.

The AIA defines a micro-entity as an independent inventor with a gross income of less than 3 times the national median household income in the previous calendar year, and who has previously filed no more than four non-provisional patent applications, excluding applications that are obligated to be assigned to a non-qualifying employer.  The AIA also defines a micro-entity to include an inventor whose primary source of income is from employment at an Institution of Higher Learning, or who is under an obligation to assign the invention to such an Institution.

Before paying discounted fees, practitioners should ascertain whether their client’s micro-entity status has changed because of an increase in income or an increase in the number of patent filings for the applicant.  While this provision was due to be effective upon enactment, the patent office has indicated that these micro-entity fee reductions will not be available until the patent office develops regulations to identify exactly which fees will be eligible for the reduction.

Categories: Breaking Down the AIA, Patent Prosecution

Section 19: Jurisdiction and Procedural Matters

Section 19 of the Leahy-Smith America Invents Act affects or clarifies the jurisdiction of patent cases.  This section applies to any action commenced on or after the date of enactment of the Act.

Section 19 amends statutes concerning the jurisdiction of state court and the Federal Circuit.  The new language in 28 U.S.C. § 1338(a) clarifies that “[n]o State court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents, plant variety protection or copyrights.”  Likewise, this section clarifies the statute regarding the jurisdiction of the Federal Circuit, 28 U.S.C. § 1295(a)(1), regarding the exclusive jurisdiction of the Federal Circuit over appeals of cases involving patent and plant variety protection.

Section 19 also adds a new section addressing the removal of cases involving patents or plant variety protection.  See 28 U.S.C. § 1454.  Under this new section, a patent or plant variety protection case may be removed under the criteria set out in § 1446, with the additions that (1) the case may be removed by any party and (2) the time limitations imposed by §1446(b) “may be extended for good cause shown.”  28 U.S.C. § 1454(b).

The portion of Section 19 that will be most interesting to watch play out is 19(d), which is codified at 35 U.S.C. § 299.  This section was purportedly created to limit the activities of non-practicing entities who, prior to the enactment of the AIA, commonly sued multiple defendants in one cause of action.  Section 19 now limits the joinder of defendants accused of patent infringement to only those circumstances where:

(1)  the infringement claims arise out of the same set of occurrences; and

(2)  there are questions of fact common to all defendants.

The language added by Section 19 clearly states that an allegation by itself that each defendant has infringed the patent or patents in suit is insufficient for joinder.  35 U.S.C. § 299(b).   A defendant, however, may waive the limits imposed by this section.  § 299(c). 

Categories: Breaking Down the AIA, Patent Enforcement and Litigation, Uncategorized

Whither “Best Mode” in Sections 119(e) and 120?

We all know that Congress created an anomaly in the AIA by, on the one hand, leaving in the “best mode” requirement of 35 U.S.C. Sec. §112, Par. 1, and yet, on the other, by affirmatively removing from future enforcement actions the affirmative defense of invalidity based on lack of a such a best mode disclosure.  AIA Section 15(a).  So, is disclosure of best mode still a requirement of the USPTO, or not?

From a review of the conforming amendments that accompany the AIA’s Section 15(a), one could argue that to the extent the “best mode” disclosure remains a requirement of patentability, it is a narrowly confined one.  In section 15(b), the AIA sets forth two “conforming” amendments by which traditional statutory language of other sections of the Patent Act is changed from “the first paragraph of section 112″  to read “section 112(a) (other than the requirement to disclose the best mode).” AIA, Section 15(b).

These conforming amendments in Section 15(b) of the AIA suggest that the only time that “best mode” matters is when an original application is filed without including a known best mode.  Thereafter, if the application issues as a U.S. patent, a defendant charged with infringement cannot rely on absence of a best mode disclosure as a defense to validity (except possibly in egregious cases creating inequitable conduct).  Likewise, even an otherwise nonconforming patent application — one that lacks the traditional best mode disclosure – can still be a sufficient disclosure for supporting a later continuing application under Sections 119(e) and 120.  According to the new provisions of the AIA, a best mode disclosure can be missing from an original application (Section 111(a)), or a provisional application (Section 111(b)), or an international application designating the U.S. (Section 363), and still be adequate to support the priority of later-filed applications based on such earlier types of applications. 

The “best mode” cannot help a later target of infringement claims after issuance, and it is now apparently a non-issue for later-filed applications.  Why didn’t Congress just write it out of Section 112 while they were at it?

Categories: Breaking Down the AIA, Patent Enforcement and Litigation, Patent Prosecution

A Decision Sustaining State Law Claims Based on False Marking Looks to the AIA’s Legislative History

A recent federal district court decision held that state law claims based on false marking were not preempted by the AIA in Ponani Sukumar & Southern California Stroke Rehabilitation Associates, Inc. v. Nautilus, Inc., 11-CV-218 (W.D. Va. Dec. 19, 2011). (PDF) Other courts addressing the AIA’s false marking provisions have rejected constitutional challenges to the retroactive application of these provisions, as discussed in previous posts (here and here). In this latest decision, however, the court denied a motion to dismiss the plaintiff’s three state law claims—false advertising in violation ofCalifornia law, unfair competition in violation of California law, and unfair competition in violation ofWashington law—based on the defendant’s contention that these claims were preempted by federal law.

The plaintiffs in the Sukumar case had originally asserted only one claim for false marking, pursuant to 35 U.S.C. § 292. Then, shortly after the enactment of the AIA, in September, 2011, the plaintiffs filed an amended complaint to explicitly allege that they had suffered a “competitive injury” as a result of Nautilus’s alleged false marking, as now required by the AIA. The original complaint had already alleged that the plaintiffs suffered “competitive injury,” but the amended complaint explicitly referenced the new requirement in 35 U.S.C. § 292 in the false marking claim for relief. The amended complaint also added the three state law claims that Nautilus later moved to dismiss.

In the opinion denying Nautilus’s motion to dismiss, the court rejected the argument that these state law claims were preempted by federal patent law. First, the court held that there is no express preemption by the AIA or the Patent Act. Next, the court rejected the argument that the AIA demonstrates the intent of Congress to occupy the field of false marking law. The court noted that Senator Leahy, one of the AIA’s co-sponsors, said the AIA had three goals: (1) to improve the patent application process; (2) to improve the quality of issued patents; and (3) to provide more certainty in patent litigation. (Opinion at 11.) But the court emphasized that “[a] review of the floor debates reveals that the first-to-file system was the most significant reform ushered in by the America Invents Act.” (Opinion at 11.) Thus, the court concluded that there was “no evidence that Congress sought to use the law to impose upon the traditional authority of the states to regulate areas of consumer protection.” (Opinion at 12.) Finally, the court found there was no conflict between federal false marking law and the state law claims based on false marking, as long as the state law claims alleged bad faith, which they did. (Opinion at 18.)

It will be interesting to see how the AIA’s legislative history is used in future cases and whether other courts will agree that changing to a first-to-file system is the most significant change made by the AIA.

Categories: Patent Enforcement and Litigation, Recent Decisions

Section 5: The Expanded “Prior User Rights” Defense

The expanded coverage of the “prior commercial use” defense set forth in Section 5 of the AIA, codified at 35 U.S.C. § 273, is one of the curious aspects of the new legislation.  On one hand, Congress has decided to expand the so-called “prior user rights” defense beyond business methods to cover numerous types of patented inventions (“a process, or …machine, manufacture, or composition of matter used in a manufacturing or other commercial process”).  But this defense, first introduced in the 1999 American Inventor’s Protection Act, may well see even less use under the AIA revisions than the use it enjoyed in the previous 12 years.  There are several reasons that defendants cannot, or choose not to, present the defense.  Each can be likened to successive hurdles of a steeplechase course.

First, the consequence of giving access to proof for a qualifying “prior use” is difficult for most defendants, who prefer to keep their non-public activities to themselves.  If the “prior commercial use” is one that would not qualify as Section 102 or 103 prior art, it is probably because the defendant has kept it to itself for competitive reasons for a long time.  

Second, the AIA maintains the burden of pleading and proof on the defendant by clear and convincing evidence.  This burden-shifting is not an attractive proposition for a defendant. 

Third, under the AIA amendments, there remains a large impediment to erroneous reliance on the “prior commercial use” defense.  If this defense is pleaded without a reasonable basis, and the defendant is found to infringe some aspect of the patent, the case shall be declared an exceptional one for purposes of awarding the patent holder its attorneys’ fees.  This seems to take away the broad discretion federal courts otherwise enjoy in deciding whether a case is “exceptional” based on a totality of circumstances under 35 U.S.C. § 285. 

Fourth, because of the potential that this defense may later boomerang, defendants may get accused of having “no reasonable basis” unless they can produce a separate opinion of counsel to meet the “reasonable basis to plead” standard set forth in 35 U.S.C. § 273(f).  

Fifth, the defense remains limited in many other ways: it is not a continuing license under all claims of the patent and is determined claim by claim; if the prior use is not continuous during the infringement period, there can be a limitation based on abandonment; and the defense only benefits the defendant personally and cannot be transferred except in limited circumstances. 

Sixth, the amendments to Section 273 only apply to patents issued on or after the effective date of the AIA –September 16, 2011. 

Relying on the “prior commercial use” defense, even under the expanded AIA provisions, continues to present both evidentiary burdens and potential limitations and penalties that may be too high for most defendants to leap.

Categories: Breaking Down the AIA, Patent Enforcement and Litigation

Clearly Noncompetitive False Marking Claims Dismissed and Constitutional Challenges Rejected Again

Another federal district court has rejected constitutional challenges to the AIA’s retroactive false marking provisions in Kenneth Brooks v. Dunlop Manufacturing Inc., 10-CV-04341 (N.D. Cal. Dec. 9, 2011). (PDF) Like the district court decision discussed in a previous post, Seirus Innovative Accessories, Inc. v. Cabela’s, Inc., 09-CV-102 (S.D. Cal. Oct. 19 2011), the decision in Brooks v. Dunlop held that the retroactive application of the AIA to pending lawsuits does not violate either the Takings or Due Process Clause of the United States Constitution.

Unlike in the Seirus case, however, the plaintiff in the Brooks case was an individual without even an arguable competitive relationship with the defendant, such that there might be a “competitive injury,” as now required by the AIA. And, in its opinion, the district court emphasized the AIA’s purpose to eliminate the “cottage industry” of false marking litigation that developed after the Federal Circuit’s decision in Forest Group, Inc. v. Bon Tool Co., 590 F.3d 1295, 1303 (Fed. Cir. 2009) (dismissing concerns about creating “‘a new cottage industry’ of false marking litigation” by interpreting the false marking statute as providing for a $500 fine per infringing item).

Categories: Patent Enforcement and Litigation, Recent Decisions

Marine Polymer: Judges Can Make New Law, Too

In September, 2011, ten days after the AIA went into effect, Marine Polymer Technologies, Inc. v. Hemcon, Inc. (pdf)  was decided by the Federal Circuit.  In this divided-panel decision (Judge Lourie dissented), we are reminded that in addition to Congress’ recent substantial changes to the patent statutes the courts can also create new law — and new uncertainties regarding enforcement of patent rights.  Marine Polymer stands for the proposition that, as a matter of federal common law, a patentee who makes disclaiming statements about claim scope during a re-examination is subject to the defense of intervening rights (35 U.S.C. § 252) even where no “amended or new claims” were added and, in fact, not a single word of the original claim changed during re-examination.  The Federal Circuit reached a different conclusion about the meaning of the word “biocompatible” than either the district court or the PTO had reached.  According to the majority in Marine Polymer, so long as there is an arguably “substantial” difference in claim scope that results from the re-examination, any federal court can then find, based on patentee’s arguments made during the reexamination, that the scope of a litigated patent was substantively changed, entitling an accused infringer to absolute intervening rights.

Why is this judge-made doctrine relevant to the AIA?  In addition to existing re-exam and reissue paths, the new Part III of Title 35 creating the right of “post-grant review” (35 U.S.C.  §§ 321-326) will create yet another avenue by which district court judges and Federal Circuit panels can find that the scope of an issued patent claim has “changed” substantively, even if none of the words in the originally-issued claim have.

Categories: Patent Enforcement and Litigation, Recent Decisions

Challenges to Multi-Defendant Lawsuits Based on the AIA’s Joinder Provision

Effective immediately upon its enactment on September 16, 2011, the AIA limited when a plaintiff may sue multiple defendants for patent infringement in one lawsuit. A claim must relate to or arise out of the “same transaction, occurrence, or series of transactions or occurrences relating to the making, using, importing into the United States, offering for sale, or selling of the same accused product or process.” 35 U.S.C. § 299(a). The AIA expressly provides that joinder is improper if the only justification is alleged infringement of the same patent. 35 U.S.C. § 299(b).

It is generally understood that the AIA’s joinder provision was intended to raise the litigation costs of non-practicing entities in an effort to reduce litigation by such entities. Cf. H.R. Rep. No. 112-98, pt. 1, at 54 (pdf) (“The Act also addresses problems occasioned by the joinder of defendants (sometimes numbering in the dozens) who have tenuous connections to the underlying disputes in patent infringement suits.”). The practical effects and legal boundaries of the AIA’s joinder provision remain to be seen and developed. (More on this later.) But defendants have already begun challenging complaints filed before the AIA was enacted based on the provision.

Most recently, on December 7, 2011, Judge Stark of the United States District Court for the District of Delaware rejected a motion to reconsider a prior order permitting the addition of defendants to a pending patent case.  (Softview LLC v. Apple Inc. & AT&T Mobility, 10-CV-389.) (pdf) The court rejected the claim that the AIA constituted an intervening change in controlling law because, as the defendants conceded, the joinder provision applies “to any civil action commenced on or after the date of enactment of this Act.” 35 U.S.C. §  299(e). The court’s prior order permitting joinder had been issued on September 30, 2011—a few weeks after the AIA was enacted—but the AIA was not addressed in that order and apparently was not raised by the parties prior to the motion to reconsider. (The motion to add defendants was brought on April 22, 2011, and all briefing in support and opposition was completed in May, 2011, well before the enactment of the AIA.)

Previously, in another case, Judge Folsom of the United States District Court for the Eastern District of Texas denied various motions to sever and transfer and also rejected a challenge to the complaint based on alleged improper joinder under the AIA on October 19, 2011. (Ganas v. Sabre Holdings Corp. et al., 10-CV-00320.) (pdf) The complaint in this case had been filed in August 2010, and the court noted in its decision that “the joinder provision is not retroactive.”

Now, litigants are trying again to gain some traction from the joinder provision in another case commenced before the enactment of the AIA and pending before Judge Folsom in the Eastern District of Texas. (Variant Holdings v. Hilton Hotels Holdings et al., 11-CV-00427.) (pdf) On November 29, 2011, five related defendants brought a motion seeking dismissal of the complaint against them because the allegations are allegedly insufficient under Rule 8 of the Federal Rules of Civil Procedure based on the recent Iqbal and Twombly Supreme Court decisions. (According to the motion, the complaint fails to specifically plead details about defendants, fails to identify accused products, and fails to allege infringing acts.) Further, because this so-called “rush to the courthouse” lawsuit was filed against 53 defendants on September 15, 2011, the motion contends that the complaint should be dismissed and that plaintiffs must then comply with 35 U.S.C. § 299. Stay tuned.

Categories: Non-Practicing Entities, Patent Enforcement and Litigation, Recent Decisions

Competitive False Marking Claims Dismissed Under the AIA

A federal judge in California recently rejected a constitutional challenge to the AIA’s retroactive false marking provisions in Seirus Innovative Accessories, Inc. v. Cabela’s, Inc., Case No. 09-CV-102 (S.D. Cal. Oct. 19 2011). Specifically, the court found that the retroactive application of the AIA to pending lawsuits did not violate the Takings or Due Process Clause of the United States Constitution. The court also ruled that Cabela’s, which had been sued by Seirus for patent infringement, did not establish that it “has suffered a competitive injury,” as now required under the AIA for a false marking civil claim for damages.  Thus, the court granted summary judgment to Seirus on Cabela’s false marking counterclaim.

The case is interesting because it—unlike the type of qui tam false marking suits that the AIA’s reforms were targeting and that district courts have begun dismissing —involves parties engaged in at least some level of competition. Cabela’s is a retailer of hunting, fishing, camping, and outdoor gear and uses the tagline “Experience the World’s Foremost Outfitter”®.  Seirus designs “ski and snowboarding essentials” that can be purchased at various approved retailers, not including Cabela’s.  Seirus uses the taglines, “Innovation on the Mountain since 1979,” and “Patented Designs – Premium Materials – Quality Construction.”  The three patents Seirus asserted against Cabela’s cover ski masks and related cold weather gear.

Nonetheless, the court held Cabela’s failed to offer evidence that it suffered a competitive injury resulting in damages. The AIA does not define “competitive injury,” so the court in the Seirus case referenced a Supreme Court decision addressing price discrimination under the Robinson-Patman act (Volvo Trucks N. Am., Inc. v. Reeder-Simco GMC, Inc., 546 U.S. 164, 176 (2006)). The court also found that “Cabela’s has failed to demonstrate that its [sic] in a competitive relationship with Seirus” because Seirus sells its products to distributors and retailers whereas Cabela’s is a retailer and that Cabela’s had previously conceded that it “is not in competition with Seirus.” Although the AIA now clearly requires “a competitive injury” for a false marking civil action, it is not clear that being in a “competitive relationship” or “in competition” should be required for a false marking claim. Further, while Cabela’s failed to set forth sufficient facts to show a competitive injury in this case, other companies that are not direct competitors, like Cabela’s and Seirus, may be able to do so in the future.

Categories: Breaking Down the AIA, Recent Decisions, The Impact on Innovation

Will first-to-file reform litigation?

One of the central reforms of the AIA is changing the United States patent system from a “first-to-invent” system to a “first-to-file” system, once the relevant provisions go into effect (on March 16, 2013). In principle, a “first-to-file” system would mean that, as between two claims of ownership to the same invention, the inventor who files a patent application first rather than the inventor who invents the invention first would be entitled to a patent on the invention. But it’s not quite that simple under the AIA.

Instead, when the new system kicks in, the AIA offers multiple ways to establish priority. For example, priority is given to the inventor who first files a patent application or first discloses the invention to the public, so long as that inventor then files a patent application within a year of disclosure. In addition, the AIA provides that disclosures by others are not prior art to a claimed invention if the inventor had disclosed his invention before those disclosures.

What will this mean down the road in litigation challenging the validity of patents issued under the new system? First, in their efforts to invalidate asserted patents, litigants will likely dispute the meaning of “disclosure” in Section 102(b), including whether the term is limited to publication or includes public use and sale. Second, litigants will seek discovery on the nature and timing of possible disclosures that may constitute either the patentee’s own “public disclosure” or the challenger’s invalidating prior art:

• printed publications,
• patents,
• patent applications,
• public use,
• offers for sale,
• sales, and
• any other instances of the invention being available to the public.

This probably sounds familiar. That is because the precise contours of priority disputes, especially what counts as relevant prior art, have been changed by the AIA, but the type and amount of fact discovery that will be sought with respect to these issues during litigation is likely to be similar to what is routinely sought now in litigation involving patents issued under the current system. In short, the old Section 102 will be replaced with new nomenclature (pdf), but many of the same discovery fights will persist during the course of litigants’ efforts to find prior art to invalidate patents issued under the new system.

Categories: Breaking Down the AIA, Patent Enforcement and Litigation