IP Law Alert : Intellectual Property Lawyers & Attorneys : Gibbons Law Firm : Copyrights, Patent Infringement, Unfair Competition

A Message from the Chair, David E. De Lorenzi:

"Congress Needs to Act" is the first article published by Judge Paul R. Michel since his retirement from the Federal Circuit, where he served as the Chief Judge. Judge Michel's below speech was given on July 21, 2010, at the Global Intellectual Property Center of the U.S. Chamber of Commerce, providing commentary on the current state of the nation's patent system and how the system can be improved to bolster US economic growth.

Judge Michel will be a featured speaker on these same topics in October at the Gibbons Institute/NJIPLA Fall program in Newark, New Jersey. More details on the October program will be posted next month.

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When the United States Court of Appeals for the Federal Circuit decided Bon Tool, it unwittingly triggered an avalanche of litigation against major corporations brought under 35 U.S.C. § 292, the false marking statute. The opinion resolved a split of authority regarding whether a manufacturer of a product could be subjected to a fine based on each article that had been falsely marked, or each decision to mark the article. Combined with the fact that the qui tam nature of the false marking statute obviated the need to establish traditional Article III standing, a new breed of patent trolls sprung into existence seemingly overnight, dedicated to the task of tracking down mis-marked products, and seeking to share half of a maximum $500 per falsely marked item bounty. The economic appeal in bringing such suits is obvious. A major manufacturer could potentially produce millions of falsely marked articles. Even if a court decided not to assess the full $500 penalty (which it has discretion to do), a successful plaintiff could still stand to reap a sizeable award based on the sheer number of falsely marked articles injected into the stream of commerce. Since that time, several cases have been decided that have helped to provide guidance to litigants on both sides of this rapidly evolving area of law.

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The Gibbons Institute of Law, Science & Technology hosted a webinar on July 1 to discuss the U.S. Supreme Court decision in Bilski v. Kappos that addressed the limitations on the patentability of business methods. More than 50 people listened to this webinar, which featured Erik Lillquist, Senior Associate Dean and Professor of Law, Seton Hall University School of Law; Robert E. Rudnick, Director, Intellectual Property, Gibbons P.C., and David W. Opderbeck, Associate Professor of Law and Director, Gibbons Institute of Law, Science & Technology, Seton Hall University School of Law.

The panelists reviewed, analyzed and discussed the implications of this decision with regard to patent protection in those industries employing business method and related software patents. Of particular interest to industry professionals and patent practitioners, Robert Rudnick provided a helpful list of best practices and tips for obtaining corresponding patent protection and enforcement in view of this important Supreme Court decision.

The webinar has been archived online and can be accessed by clicking here.

Robert E. Rudnick is a Director in the Gibbons Intellectual Property Department.

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On June 28, 2010, the Supreme Court handed down a highly anticipated decision affirming the Federal Circuit in Bilski v. Kappos. At issue in Bilski was the patentability of a claimed business method or process for hedging against the risk of price changes in an energy market. The Court unanimously affirmed the Federal Circuit’s decision to reject Bilski’s process claims as being unpatentable, but split in its opinion as to the grounds for rejecting the claims.

The majority opinion of the Court was delivered by Justice Kennedy, joined in full by Chief Justice Roberts, Justices Thomas and Alito, and joined in part by Justice Scalia. The Court held that the “machine-or-transformation” test applied by the Federal Circuit to reject Bilski’s business method claims is not the sole test to be considered in determining whether a claimed process is a “patent-eligible” process. In particular the Court stated that the test may be insufficient for determining the patentability of inventions concerning emerging technologies including, for example, software, advanced diagnostic medicine techniques, and inventions based on linear programming, data compression and the manipulation of digital signals.

The Court rejected the outright exclusion of process claims directed to so-called “business methods,” finding that the scope of such an exclusion was unclear and that Congress’ “prior use” defense to the infringement of business method claims as expressed in 35 U.S.C. §§ 273 (a)(3), (b)(1) would be meaningless if such claims were fully excluded from consideration as patent-eligible inventions.

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On April 2, 2010, the USPTO issued a press release and published in the Federal Register a request for comment on a proposed change that would effectively give applicants a 12-month extension to the current provisional application period. Under the current rules, an applicant must file a nonprovisional application within 12-months after the filing of a provisional application pursuant to 35 U.S.C. § 119(e) and must thereafter complete any missing parts to that application within a time period of up to a maximum of seven months.

The latest proposed revision to the missing part practice would now give applicants an additional 12-month period under which to complete this application. Even with the new proposed revision, a nonprovisional application must still be filed within the first 12-month period following the filing of a provisional application and have a properly executed oath or declaration along with at least one claim. Applicants, however, will now be given up to a year rather than seven months to complete the nonprovisional application by payment of the required search fee and a nominal late payment surcharge. It should be noted that this change would not affect foreign filings, which must still be filed within 12 months after the filing date of a provisional application in accordance with the Paris Convention for the Protection of Industrial Property. Also, by exploiting the delayed payment, an applicant foregoes his right to opt not to have the patent application published at 18 months from the provisional patent application filing date.

The USPTO believes that by providing this additional time, applicants may now “ascertain the value of their inventions, thereby helping applicants decide whether to incur the additional costs associated with pursuing patent rights.” While initially expending only a relatively low cost to file the application, the applicant may now take the additional 12-month period to focus their time and efforts on commercialization. Additionally, the USPTO explained that, under the current statutory scheme, applicants routinely file several nonprovisional applications, which are dependant on various provisional applications. By providing an additional 12-month period, the USPTO believes that this will “help applicants focus on their most important applications and conserve USPTO resources.”

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Recently certain members of the patent law bar have expressed surprise that the Federal Circuit has used the written description requirements of 35 U.S.C. §112, first paragraph to invalidate patents such as the University of California’s patent directed to insulin in Regents of the University of California v. Eli Lilly & Co., and Genentech’s patent directed to production of human growth hormone in Genentech, Inc. v. Novo Nordisk A/S. This issue has come to the forefront again in Ariad’s pending per curiam appeal from the Federal Circuit decision in Ariad Pharms., Inc. v. Eli Lilly & Co., vacated and rehearing en banc granted. Oral argument in the case was held on December 7, 2009. In the case under appeal, the Ariad patent was held not to meet the written description requirements of 35 U.S.C. §112, first paragraph.

The surprise of the patent bar to the Federal Circuit’s use of this written description requirement and the dual nature of this requirement to invalidate patents reminds me of the exclamation of the police chief in the movie Casablanca, upon being handed his winnings from roulette, “I’m shocked, shocked to find that gambling is going on here.” Written description and the dual requirements of 35 U.S.C. § 112 first paragraph for written description have been the bulwark of United States prosecution, especially interference practice for at least 35 years.

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Several bills are currently pending in Congress establishing expedited marketing approval pathways for biosimilar drugs. The proposed pathways are analogous to the pathway for small molecule chemical drugs established by the passage of the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Act. The Hatch-Waxman Act includes a data exclusivity provision whereby the FDA is prohibited from approving a competitor’s drug application relying on the innovator’s data for a statutory period of time. Recent debates concerning the biosimilar bills have focused on the data exclusivity period. These debates highlight the differences between biological drugs and small molecule chemical drugs and why a longer exclusivity period may be necessary to fill the “patent protection gap.”

Debate on Data Exclusivity Period

Under the Hatch-Waxman Act, a five-year exclusivity period is permitted for a new chemical entity. A three-year exclusivity period is permitted for new clinical investigations of small molecule drugs and other exclusivity periods are granted as incentives to develop drugs for children or small patient populations. With regard to biosimilars, proposals on data exclusivity terms have ranged from no exclusivity period to over 12 years. House bill H.R. 1427 sponsored by Representative Henry Waxman provides for five years of exclusivity while H.R. 1548 sponsored by Representative Anna Eshoo provides for an exclusivity period of up to 14.5 years. An FTC report questions whether any data exclusivity period is necessary, suggesting that existing patent protection and market-based pricing would offer sufficient incentive for biological drug development. The Biotechnology Industry Organization (BIO) counters that the FTC’s report failed to account for the advantage given to follow-on companies who rely on the innovator’s development and research work. In addition, BIO also notes that reliance on patent protection for biological drugs may be inadequate since the biosimilar regulatory approval pathway creates a “patent protection gap.”

Patent Protection Gap

According to BIO, a “patent protection gap” exists because a biosimilar drug is not required to be the “same” as the innovator drug. Representative Waxman’s bill requires only that the biologically similar drug have “no clinically meaningful differences between the biological product and the referenced product would be expected in terms of the safety, purity and potency if treatment were to be initiated with the biological product instead of the referenced product.” In other words, if the biosimilar drug is shown to have no “clinically meaningful difference” when compared to the innovator drug, it can theoretically gain approval even though the biosimilar drug may be different in structure, administration, or mechanism of action.

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The Federal Circuit’s recent decision in Therasense, Inc. v. Becton, Dickinson & Co., No. 2008-1511 (Fed. Cir. Jan. 25, 2010) held that applicant’s statements made in proceedings before foreign patent offices may be required disclosures in prosecution before the USPTO (“PTO”), particularly when those statements directly contradict other statements made during prosecution. From the court’s holding: “An applicant’s earlier statements about prior art, especially one’s own prior art, are material to the PTO when those statements directly contradict the applicant’s position regarding that prior art in the PTO.”

The Therasense case involved U.S. Pat. No. 5,820,551, for a strip electrode used to measure the level of glucose in blood. The ‘551 patent is related to an earlier U.S. patent and its European counterpart. The statement “Optionally, but preferably when being used on live blood, a protective membrane surrounds both the enzyme and the mediator layers, permeable to water and glucose molecules” appeared in the specifications of all three patents.

In 1993, the European patent was revoked in an opposition proceeding based on a German reference. In a successful appeal to withdraw the revocation, the patentee distinguished the patented invention’s “optionally, but preferably” membrane requirement from the German reference, which required a membrane.

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Judge Young recently wrote a colorful and entertaining decision addressing a “disconnect between the Federal Rules of Evidence and the substantive doctrines of patent law [that] seems to have gone totally unremarked both by the patent bar and evidence scholars.” In the end, Judge Young ruled that the patent laws on obviousness trump the Federal Rules of Evidence. NewRiver, Inc. v. Newkirk Products, Inc., C.A. No. 06-12146-WGY, Memorandum & Order (D. Mass. Dec. 16, 2009).

Plaintiff NewRiver brought a patent infringement action against the defendant Newkirk. After trial, the jury returned a verdict finding that Newkirk infringed claims 9-11 but that certain claims of the patent in suit, including the infringed claims 9-11, were invalid as obvious. The parties then filed various post trial motions including two filed by NewRiver: (1) a motion for judgment as matter of law that claims 9-11 are valid and not obvious; and (2) a motion for a new trial.

The Court reviewed the sufficiency of the evidence regarding the invalidity of claims 9-11, and found that evidence “sparse.” Indeed, the only evidence of invalidity of claims 9-11 consisted of the defendant’s expert reading the claim into evidence and concluding that the claims would have been obvious to a person skilled in the art. The expert did not identify any prior art, did not show where the limitations of the claims were in the prior art, or how the combined prior art references made the claims obvious. NewRiver did not object, and the issue of invalidity of claims 9-11 went to the jury with the only evidence being the expert’s unsupported opinion.

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Some courts, whether by local patent rule or by individual order, are restricting the number of patent claim terms they are willing to construe. For example, the Northern District of California’s Local Patent Rule 4-1(b) directs parties to “jointly identify the 10 terms likely to be most significant to resolving the parties’ dispute, including those terms for which construction may be case or claim dispositive.” Other courts, such as the District of Massachusetts, have memorialized a suggestion that “no more than ten (10) terms per patent be identified as requiring construction.” See Appendix to D. Mass. Local Rule 16.6, section (B)(4)(d).

In jurisdictions with local patent rules but without specific rules limiting the number of terms that the court will construe, some judges are going beyond the local rules to impose such limits. For example, Judge Clark of the Eastern District of Texas has required parties to identify “no more than ten (10) disputed claim terms for construction,” in order to “secure the just, speedy and inexpensive determination” of the case. Hearing Components, Inc. v. Shure, Inc., Civ. No. 9:07-104, 2008 WL 2485426, at *1 (E.D. Tex. June 13, 2008). There, the parties had originally submitted about twenty terms for construction.

In other jurisdictions without specific local patent rules, some judges have likewise imposed limits on the number of terms they will construe. For example, Judge Sleet of the District of Delaware struck a joint claim construction chart that contained competing constructions for thirty-one claim terms or phrases spanning four patents. See Grape Technology Group, Inc. and KGB, Inc. v. Jingle Networks, Inc., Civ. No. 08-408 (D. Del.), Docket Entry 35 (Order dated Oct. 20, 2009). There, the Court ordered the parties to file an amended claim construction chart within five days, limited to ten disputed terms per patent-in-suit.

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What do adjustable bow ties have in common with disposable coffee cup lids? Not much, other than the fact that they have recently been at the center of false patent marking suits brought against major corporations not by competitors, but consumers. In each case, a consumer noticed that markings on certain products referred to patents which had long since expired.

While most ordinary consumers would not attribute much significance to such a finding, these were no ordinary consumers. They were patent attorneys who, by virtue of their profession, were familiar with the false marking statute of the Patent Act. So when Matthew Pequignot sat down to his morning coffee and noticed that the lid of his cup was marked with an expired patent, he proceeded to file Pequignot v. Solo Cup Company. And when Raymond Stauffer noticed that his Brooks Brothers adjustlox bow-tie was affixed with an expired patent number, he initiated Stauffer v. Brooks Brothers, Inc.

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Is an end coming for reverse payment settlements of Hatch-Waxman litigations?

The FTC, like Wile E. Coyote chasing The Road Runner, has been doggedly challenging settlements between brand name pharmaceutical companies and generics to resolve Hatch-Waxman litigations. Reverse payments settlements, which the FTC calls “pay-for-delay” deals, where Hatch-Waxman litigations are settled by the brand name drug company’s payment to the generics to stay off the market, have been the main target of the FTC since the late 1990’s. The FTC’s position is that reverse payments impermissibly thwart less expensive generic drugs from timely reaching consumers. While there is a circuit court split on the issue, the recent trend of courts, including the Federal Circuit, has been that reverse payments are acceptable because they are “within the exclusionary zone of the patent and thus [cannot] be redressed by federal antitrust law.” In re Ciprofloxacin (“Cipro”) Hydrochloride Antitrust Litig., 544 F.3d 1323, 1327 (Fed. Cir. 2008), cert. denied 129 S. Ct. 2828 (2009).

The Supreme Court has yet refused to weight in on reverse payments, denying certiorari this past summer despite the FTC’s, and, more recently, the DOJ’s entreaties to take up the issue in the Cipro case. Previously, the DOJ had remained on the sidelines in reverse payment fights, but under the Obama administration’s guidance, the DOJ is now advocating that reverse payments be prohibited. The DOJ’s position on the issue has struck the path for the new kid on the block in the war on reverse payments: Congress.

In Cipro, DOJ’s briefing to the Supreme Court advocated a presumption shift: that a prima facie antitrust claim for reverse payments could be established by showing only that the settlement was a result of consideration provided to the generic by the branded patentee, accompanied by the generic withdrawal of its challenge. The prima facie case could then, however, be rebutted upon a showing that reverse settlement did not unreasonably restrain competition.

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During a recent AIPLA-sponsored discussion at the USPTO, patent practitioners met with heads of various Technology Centers to discuss USPTO caseloads and recent events. One of the more interesting topics was the increasing number of disclosures from applicants in light of McKesson and more recent inequitable conduct cases and measures that may be taken by the USPTO and practitioners in response.

In McKesson Information Solutions, Inc. v. Bridge Medical, Inc., 2006-1517 (Fed. Cir. 2006) the Court of Appeals for the Federal Circuit affirmed a district court’s finding of inequitable conduct for failure to disclose materials to the USPTO in violation of an applicant’s duty of disclosure under 37 C.F.R. 1.56. In that case, the patent attorney handled two similar, yet unrelated, pending patent applications before the USPTO and did not disclose in connection with one patent application certain documents, such as an office action and a prior art reference, cited in the other similar patent application.

In view of McKesson, patent practitioners may give additional consideration to disclosing office actions and references between related patent applications as well as office actions and references found in unrelated, yet similar patent applications. As the number of related applications and similar patent applications grows, the disclosure process may become more challenging due to the number of documents to cite and the timing of disclosure. For example, if, after a patent application has been allowed, an office action appears in a related or similar patent application, then the applicant may file an Information Disclosure Statement (IDS) disclosing the office action and along with a mandatory and costly payment for a Request for Continued Examination (RCE) to reopen prosecution of the allowed patent application so that the Examiner may review the office action and references cited therein.

During the discussion at the USPTO, the participants considered options such as a special “After-allowance RCE” of reduced price that would pay for the Examiner to review references disclosed by the applicant in the situation described above. Also of note was a suggestion that a feature be implemented within the USPTO’s electronic database that would allow applicants to link applications to allow office actions and references to be automatically disclosed between applications. This issue is on the USPTO’s radar, so stay tuned for developments.


Frank A. Bruno is a Director in the Gibbons Intellectual Property Department.

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