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

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"American economic security is threatened in a way Congress has failed to recognize. Our biggest challenge is stemming the outflow of jobs, talent, technology and manufacturing. All four losses drain away national economic power. All result from the same cause: chronic under-financing of our innovation infrastructure. Although invisible, it is our nation’s greatest asset. Strengthening it can assure our prosperity and restore our technological leadership. We urgently need to increase invention and make new products that Americans and others will need, want and buy. To increase innovation, however, we must increase investment.

And it is needed immediately because we are already losing our international lead in technology and our global competitiveness. In a recent study, the United States came in dead last of the 40 top technology countries in the world in strengthening its innovation infrastructure over the last decade. Foreign inventive activity has surged to the point where filings in the United States Patent and Trademark Office by foreign entities now equal filings by Americans. Filings in the Chinese patent office by Chinese companies show exponential advances in twelve out of twelve top technologies.

Public finance for increased investment in innovation, however, is not available. It has been exhausted by the cost of two, concurrent and continuing wars and a decade of fiscal mismanagement, saddling us with a huge annual debt payments and recent annual budget deficits of many hundreds of billions of dollars, and this year of $1.5 Trillion. In this recession when tax revenues are down, obtaining even a modest increase in public R&D funding will be difficult, if not impossible. Actually, the challenge will be to avoid cuts in government R&D funding. The Administration recently instructed all agencies except the Defense Department to plan for a 5% reduction. At best, agency budgets will be frozen. Anyway, private investment has always supported much R&D by research-based companies, universities, and other innovators. Only increased private finance, then, can fund the needed increase in research and development. But how do we incentivize increased private investment in innovation? The answer is simple: strengthen the intellectual property systems – patents, trademarks, trade secrets, copyright, but especially patents. What we most need is faster, sounder patent grants, plus swifter, stronger, subtler court enforcement. After all, no one can be expected to invest without confidence in a return. Patents, and the protection of investment they afford, provide the only incentives strong enough to cause a big enough increase in private investment in innovation.

A primary engine of American recovery and resurgence therefore will have to be an improved patent system. Without that, both short-term recovery and long-term prosperity will be stunted. By “system”, I mean primarily the Patent and Trademark Office and the Federal courts, which, along with the International Trade Commission, afford the only mechanisms to enforce patent rights.

Using patents to spur both economic and technological advances is hardly a new idea. They have been a primary engine of economic growth and technological progress since 1790 when the First Congress passed the first Patent Act. Unlike today’s Congress, the founders knew patents promote national prosperity, economic growth, and technological progress. Patents have promoted repeated surges of technological advance, the most recent in the information technology revolution of the 1990’s. Notice that this was the last time our country had a balanced budget. And now, bio-tech shows promise of another surge.

Note, too, that if we strengthen the patent system, the job creation needed if our country is to rehire the 15 million unemployed workers, half from the recent recession, and add 13 million new jobs by 2018 to absorb a growing labor force will naturally follow. So will migrations of the technologically talented. If more R&D is done here, they will come here and stay, at least if we fix our broken visa system. Otherwise, foreign talent studying at our research universities will all return home. Our own leading technologists will also go elsewhere, just as is now happening with U.S. companies such as Intel and Applied Materials. Both will soon open large research laboratories headed by their top American researchers, not in California but in China.

A few commentators, despite all evidence, still assume the nation could afford a large increase in public R&D funding. Others assume that even though public revenue is unavailable, the needed R&D can be funded by company revenues. But that is not realistic. Most innovative companies are new and small. Many do not yet make profitable products. Some do not yet sell any products. Yet the majority of new technologies and 75% of new jobs are now being created by small, young, companies. Therefore, the firms with the least revenue to support their R&D are those most needing and deserving private investment. Biotech start-ups are only one example. Without it, many of them will die. With it, medical science, public health and national wealth will surge. Besides, 2/3 of the economic growth and ¾ of the new jobs since WWII came from innovation, and technology-related jobs pay 2.5 time average salaries.

Well, what is wrong with the present patent system? First, and foremost: delay -- health and welfare-diminishing, wealth-reducing, job- destroying, technology-impeding delay. In some technologies it now takes, at least, 4-6 years even to get a patent. The product life-cycle is often shorter than that. For all technologies the average wait is three years. That is two times longer than in 1990. Too long! And it is going up. Even worse, because nearly all applications must by law be published at 18 months, foreign competitors can pirate inventions for years before the patents issue, for until then patent owners have no rights against infringements whether produced here or imported. No wonder foreign competitors minutely monitor the PTO website! The story is told that thousands of Chinese engineers sit at computers reading U.S. patent applications rather than doing research in labs.

Why such extensive delay? Because for two decades the patent office has been grossly underfunded. And it is still losing ground. It operates entirely on user fees paid by applicants and patent owners -- fees that were set by Congress six years ago -- at levels that do not support necessary operations. The PTO lacks sufficient numbers of examiners, especially experienced examiners, and modern computer systems. Imagine, the government’s own technology agency using decades-old computer technology! These are the principal reasons delays are so long.

The patent system is failing primarily because the patent office is failing. In a single, blunt word, the patent office has become dysfunctional. Applications have tripled, and the PTO simply cannot keep up. Over 735,000 applications sit unread in a warehouse in Alexandria, Virginia. Note that the warehoused applications equate to almost two years worth of filings. Although some 490,000 applications are being examined, their progress is far too slow. And every year another 460,000 more are filed. Of the 1.2 million applications currently awaiting final disposition, only about 350,000 complete the examination process each year. So the backlog, already intolerable, is actually growing by 110,000 applications per year. It is now four times the backlog of 1990.

There are too few examiners – mostly young engineers and scientists -- and too few with experience. Nearly one third of the examiner workforce has been at the PTO for less than 3 years. But it takes at least 3 years for new examiners to become both competent and efficient. Faulty decisions by inexperienced examiners, like delay itself, harm the system and therefore innovation; such examiners allow patent claims they should reject, blocking innovation, and reject ones they should allow, causing further unnecessary delays and costs for Board appeals. And the lack of quality assurance undermines the presumption of patent validity provided by law and also the credibility of patents in the eyes of the media, academia and the Congress.

The trial courts too are hobbled. Most lack sufficient numbers of judges to expeditiously enforce good patents and invalidate bad ones. Almost 100 judicial vacancies remain unfilled, the highest vacancy rate in the history of the country. Most of these have gone unfilled for many, many months, and some for years. That means the courts are normally 12% understaffed. And almost 100 additional district and circuit judgeships are desperately needed but have yet to be authorized by Congress despite repeated requests by the Judiciary for two decades. So, the courts struggle with almost 200 too few judges because of two decades of Congressional neglect, just like the Congressional neglect of the patent office.

The result of course is long litigation delays that diminish the value of patents and add uncertainty that impedes invention and economic growth. Most patent infringement cases now take 3-5 years to verdict, with each appeal adding at least another year. Like patent examinations, litigations are simply too slow both for the pace of technological advances and for domestic and global markets. Delay must be cut at least in half, and soon. Because of delays caused by chronic underfunding of the Judiciary, innovation incentives are shrinking just when the nation needs them to be growing.

The gears of our patent system seem seized up. Ironically, Congressional inaction is discouraging private action. Obviously we need to strengthen and speed up both examinations and litigations, but only public funds can jump start the process. How so? Although PTO operations should remain financed by user fees, it needs an emergency transfusion of public money to overcome its warehouse backlog of 735,000 and equip it to keep up with the annual influx of 460,000 new applications. It needs thousands of additional examiners and salary increases to retain experienced, quality examiners. Most of all, it needs new computer systems and new space to house the existing workforce, as well as new hires. At present, two thousand of the six thousand examiners work at home, as the PTO lacks sufficient workspace for one-third of its workforce. Thus, even if Congress finally raises the fees, which it should, resolving the current crisis still requires a large infusion of public money. That is because much of the fee revenue arrives only years after the patents issue as maintenance fees. But money is needed now. Deferral will have corrosive consequences that cannot be undone. Therefore, I suggest the following emergency steps:

First, a one-time capital investment in the PTO of one billion dollars. It could be spent over the next several fiscal years, but it should be authorized and appropriated promptly. That should be enough to replace the IT systems, which the Director correctly calls “moribund,” and secure work space for the examiners. It probably could also pay for new hires to beat down the backlog.

Second, the Congress must guarantee by law that the PTO can spend an amount equal to the user fees paid by patent applicants and holders. Between 1992 and 2010, Congress diverted $759 million in fees paid to the PTO by patent holders and applicants and directed them instead to other governmental activity. In this year alone, Congress will siphon off an estimated $230 million in PTO user-paid fees. Essentially, PTO users have unwittingly been paying an additional tax subsidizing governmental expenditures that have nothing to do with PTO functions. Permanently ending this Congressional practice, called “fee diversion”, is a necessary precondition to reviving the PTO. If Congress continues spending user fees for other purposes, raising fee levels will have little effect.

But there is a Catch-22. If public R&D funding is already “maxed out” and other public funding otherwise already committed, then how could Congress find a billion dollars for the PTO? Well, when Congress wishes, it freely spends many billions of dollars, such as the $700 billion it provided to Wall St. I suggest only $1 billion, once. Just $1 billion, spread over several years, but provided soon.

Is my suggestion realistic? Yes, if Congress were to follow proper priorities. This public investment is absolutely necessary to our country’s short-term and long-term prosperity.

Well, would such capital investment fix everything that is wrong with the patent office? Maybe not everything, but certainly all the big problems. And, without it, other reforms will surely not suffice. Although other remedial steps are also necessary, most have already been started, at least on a pilot basis, by the new Director, David Kappos. But without an immediate, large, one-time dose of public funding, even his very sound leadership initiatives cannot produce the needed results and do so fast enough. In fact, despite his initiatives, the examiner corps is still shrinking, losing 500 examiners in the last several years. A net loss is again predicted for this year. So just when the patent office needs more examiners, it has fewer.

In his recent testimony before a House Appropriations Subcommittee, Director Kappos admitted that it will take many years to achieve timely examinations even if in the next two fiscal years Congress allows him to hire 1,000 new examiners per year. But since each year 500 leave, the total gain would only be 1,000, not 2,000. A much larger increase in examiners is needed to eliminate the backlog of 735,000 warehoused applications and assure timely examination of 460,000 new applications. My estimate is 3,000 additional examiners are needed if the PTO is to examine all incoming applications within one year.

What else? First, let the PTO open satellite offices in places like Detroit, and Houston, and hire unemployed engineers, patent agents and patent attorneys who are already experienced IP professionals. They can be productive immediately, unlike new graduates who need years of training. But again, Congressional authorization is probably needed. Under current law, most employees must work at the PTO campus in Alexandria, Virginia, or at home with regular reporting in person if living over 50 miles away.

Second, pay examiners better. Congress also controls the pay structure for examiners. But the gap between the examiner pay schedule and the General Schedule for non-technical civil servants is shrinking. Industry, I am sure, would willingly pay higher fees to enable the PTO to pay more competitive salaries to retain skilled examiners. Congress should raise these fees and pay levels.

What about ending the delays in court? In addition to promptly filling nearly 100 vacancies and Congress adding the nearly 100 judgeships long requested, what else could be done?

First, more frequent use of expert special masters to do claim construction and magistrate judges to police discovery would help. Second, discovery should be narrowed. If discovery were limited largely to evidence that can actually be used at trial, much delay as well as excess cost could be avoided. Staging discovery by issue also looks promising. But both require closer judicial supervision which in turn requires more magistrate and district judges.

The bottom line is this: unless Congress invests more in the America patent system, private investors will not. We must encourage investors to boost their investments in order to surge American R&D. The PTO and the courts both need more money, more space and more adjudicators. Congress must “prime the pump”. Only then can private investment take over. This is the only practical way to increase innovation and restore our nation’s competitive advantage. This strategy could restore us as the technology leader of the world, increase private and public revenues and stock values, raise our standard of living and create millions of new, high-paying jobs. With so clear and compelling a strategy, Congress need not hesitate to act.

But because members don’t understand that patents increase prosperity, they must first hear from you, from private sector leaders in law, business, media, and academia. The question is: Will you advocate these reforms to Congress?"

David E. De Lorenzi is Chair of the Gibbons Intellectual Property Department.

Pequignot v. Solo Cup Revisited

On June 10, 2010, the Federal Circuit decided Pequignot v. Solo Cup Company, largely affirming the holding of Judge Leonie Brinkema of the United States District Court for the Eastern District of Virginia. Defendant Solo Cup had prevailed at the district court when Judge Brinkema held that Pequignot failed to establish that Solo Cup had acted with deceptive intent with respect to its falsely marked products. The decision clarified several key points.

First, the Federal Circuit confirmed that an article that was covered by an expired patent is the same as an unpatented article. This determination is important, because it satisfies the first prong of the false marking statute, which requires the marking of an unpatented article by the defendant.

Second, the court addressed burden shifting with respect to establishing deceptive intent to deceive the public, which is the second prong of the false marking statute. The court noted that “the combination of a false statement and knowledge that the statement was false creates a rebuttable presumption of intent to deceive the public, rather than irrebuttably proving such intent.” According to the court, not only may defendants rebut this presumption, but “the bar for proving deceptive intent here is particularly high, given that the false marking statute is a criminal one . . .” The court held that the standard of proof of intent for false marking is a “preponderance of the evidence.” Interestingly, the court also held that in regard to false marking related to expired patents, the “presumption of intent is weaker.” A defendant may not defeat an inference of an intent to deceive with “blind assertions of good faith.” The court confirmed that Solo had successfully rebutted the presumption when it provided evidence that it had relied on advice of counsel, and had carried out a plan to replace molds with unmarked ones as they wore out over time. When Pequignot was unable to raise a genuine issue of material fact showing otherwise, the case was decided in Solo’s favor.

Last, some practitioners had hoped that the Federal Circuit would use the Pequignot decision to revisit the “per article” standard of fines determined in the Bon Tool case. However, the Court threw cold water on such hopes, finding that because the other issues were case dispositive, a determination relating to the assessment of damages was rendered moot, vacating Judge Brinkema’s holding to the contrary at the district court level.

Developments Since Pequignot

Two recent cases have been decided in the district courts of Texas and Florida that address the level of specificity required by a plaintiff when pleading a false marking cause of action. In Patent Compliance Group, Inc. v. Interdesign, Inc., the defendant sought dismissal of the case based partly on a failure to state a claim upon which relief may be based and for failure to plead its false marking claim with requisite specificity under Fed. R. Civ. P. 9(b). In its complaint, plaintiff alleged that the defendant “intended to deceive the public by marking the Patent Expired Product with the ‘842 patent after its expiration.” In support of its allegation, plaintiff attached a copy of the patent, establishing the expiration date, as well as a picture of the actual product labeled with the expired patent number. The court held that this was a sufficient showing to survive the defendant’s motion to dismiss the complaint. Although the court declined to decide whether false marking claims were subject to the heightened fraud pleading standard of Rule 9(b), the court stated that, “[a]rmed with actual documentation that a product was falsely marked, a court may draw an inference of the defendants’ knowledge simply by the finite nature of patents and the ordeal an entity must go through to actively create and maintain a patent . . . Similarly, an actual photograph of a product recently injected into the stream of commerce with an expired patent number also creates an inference of a false statement.” The court cited to Pequignot, noting that defendant’s conclusory statements that it acted in good faith were insufficient to rebut the inference of deceptive intent.

In Advanced Cartridge Technologies, LLC v. Lexmark International Inc., the court took a more skeptical view of the plaintiff’s complaint. Although the Interdesign court specifically avoided the issue of whether Rule 9(b) is applicable to false marking cases, the United States District Court for the Middle District of Florida cited to the rule in holding that that the plaintiff’s complaint was factually deficient. Specifically, the court noted that, “Providing only sparse factual detail, the complaint utterly fails to state with particularity the circumstances constituting fraud.” The court dismissed the false marking claim, but provided the plaintiff leave to refile the complaint with the required degree of specificity.

A Legislative Fix on the Horizon?

In response to the unexpectedly high level of false marking litigation, legislators are scrambling to craft a fix. The Patent Reform Act of 2010 is currently under consideration by Congress (H.R. 4954).  If passed, this legislation would eliminate qui tam suits by requiring plaintiffs to show competitive injury related to false marking. Damages would be assessed in a manner “adequate to compensate for the injury,” as opposed to the current statute, which allows a fine of up to $500 for each article. The legislation as drafted would apply to all pending cases. However, it is not clear when or if this legislation will ever be enacted.

Thomas R. DeSimone is an Associate in the Gibbons Intellectual Property Department.

The Court found its basis for rejecting Bilski’s process claims on the grounds that these claims represented an attempt to patent “abstract ideas.” Making reference to its prior opinions in the Benson, Flook and Diehr cases, the Court found that Bilski’s claims “[explained] the basic concept of hedging,” and that this concept represented “an unpatentable abstract idea, just like the algorithms at issue in Benson and Flook.” The Court reasoned that the patent eligibility of these claims would impermissibly “pre-empt used of [hedging] in all fields, and would effectively grant a monopoly over an abstract idea.”

Justice Stevens, writing for himself and joined by Justices Ginsberg, Breyer and Sotomayor, concurred in the judgment of the Court but found that it was unclear how the grounds for rejecting Bilski’s claims as an abstract idea found sufficient support from the Court’s case law. Justice Stevens suggested that because, business methods have historically fallen outside of the subject matter that the Court has considered as patent-eligible, a “wiser” holding would find that Bilski’s claims were patent-ineligible as describing “only a general method of engaging in business transactions.” Justice Breyer, writing for himself and joined in part by Justice Scalia, concurred in the judgment of the Court to emphasize several aspects of the decision receiving full endorsement by the Court.

In Bilski, the Court continues a trend beginning with the KSR and eBay decisions for overturning “bright line” rules set forth by the Federal Circuit on patent questions. The Court asserts that, while disapproving an “exclusive” machine-or-transformation test for determining patent-eligible processes, it has not foreclosed the Federal Circuit’s ability to develop other “limiting criteria.” Nevertheless, it is likely that the Federal Circuit will proceed to craft such criteria henceforth with great caution, and with ample reference to the Court’s prior opinions. It remains to be seen how the United States Patent & Trademark Office will contribute to this process. In the interim, patent applicants would be wise to continue to draft business method claims that satisfy the machine-or-transformation test, and that clearly delimit the claimed method when performed by a machine in a manner defined by the operation of the machine.

The Gibbons Institute of Law, Science & Technology at Seton Hall Law School will present a free webinar - Understanding the Supreme Court's Bilski Decision - on Thursday, July 1, at 9:00 am. For more information or to attend this program, please visit the Gibbons website.

Robert E. Rudnick is a Director in the Gibbons Intellectual Property Department. Thomas J. Bean, Counsel to the Gibbons Intellectual Property Department, assisted in the preparation of this post.

The Dual Requirements for Written Description Are Part of 35 U.S.C. §112

With respect to a patent specification, the first paragraph of 35 U.S.C. § 112 sets forth that the specification shall contain a written description of:

1. the invention; and
2. the manner of making and using the invention (the enablement requirement)

Therefore, there are two requirements set forth in this statute with respect to the written description, one as to the invention and the other as to enablement (the manner of making and using the invention). The case of In re Barker, 194 U.S.P.Q. 474 (C.C.P.A. 1977) explicitly articulated that 35 U.S.C. §112 first paragraph set forth these two separate requirements for written description. To provide a written description of the invention, the specification must include a written description of each and every element of the claimed subject matter. This was enunciated by the Federal Circuit in Lockwood v. American Airlines. In the Lockwood case, the Federal Circuit specifically stated that:

It is the disclosure of the application that counts. Enablement of a filing date does not extend to subject matter which is not disclosed but which would be obvious over what is expressly disclosed.

The Written Description Requirement Has Been The Backbone of U.S. Patent Law Well Before 1967

The requirement for written description was reiterated by the C.C.P.A. in In re Ruschig. In Ruschig, the C.C.P.A. specifically held that a description of a genus does not constitute a description of a claimed subgenus unless that specific claimed subgenus is specifically described in the specification. The Ruschig case was directed to whether the specification contained a written description of a specific claimed compound. The claimed compound in Ruschig had a phenyl group substituted with chlorine and the C.C.P.A., in a prosecution and interference setting, held that there was no written description of this compound even though the application disclosed that phenyl ring could be substituted with chlorine or bromine. Discussing the written description requirement of 35 U.S.C. §112, first paragraph, the C.C.P.A. stated as follows:

Appellants refer to 35 USC 112 as the presumed basis for this rejection and emphasize language therein about enabling one skilled in the art to make the invention, arguing therefrom that one skilled in the art would be enabled by the specification to make chlorpropamide. We find the argument unpersuasive -- the question is not whether he would be so enabled but whether the specification disclosed the compound to him, specifically, as something appellants actually invented.

379 F.2d at 995.

Ariad May Not Affect the Law as to the Written Description Requirement and Its Dual Nature

The outcome of the per curiam appeal in the Ariad case may not affect the law as to the written description requirement and its dual nature because the appeal does not challenge these requirements for written description. The issue in Ariad is whether the describing of a claimed method which utilizes a compound to regulate by altering the transcription factor of specific genes to express proteins is sufficient to provide a written description for this method, even though no specific compound is disclosed for such regulation. Therefore, the Ariad application claims the use of any compound which provides a specific function and the issue is whether this description is sufficient for a written description of the invention and to enable the invention. The issue presented in Ariad is not directed to the fact that there is no new matter claimed which is not disclosed but whether the written description of the invention in chemical and biotech cases requires the definition of compounds by structure, formula, chemical name or physical properties and not by function. Therefore, the Ariad case never really challenges the basic requirements of 35 U.S.C. §112 for written description that, for at least 40 years, have and remain instrumental to the operation of the U.S. patent system.


William H. Epstein is Counsel to the Gibbons Intellectual Property Department.

Differences Between Biological and Chemical Drugs

One of the critical differences between biological drugs and chemical drugs is that biological drugs are made by living cells whose DNA has been modified by introduction of the gene of interest to synthesize the active component. Compared to small molecule drugs made up of only a few dozen atoms, biological drugs can consist of many thousands of atoms making up the protein, which is folded into a complex three-dimensional structure. Living cells synthesizing biological drugs must be grown and maintained in a highly controlled sterile environment and any contamination (viruses, bacteria, mold, etc.) can have catastrophic consequences. The innovator company may seek to protect products and processes -- including gene isolation, cell-line creation, maintaining cell growth and isolation and purification of the biological drug from the cells -- through patents or trade secrets. Follow-on companies will not likely have access to the products or processes and will likely seek to design around any relevant patents.

Argument for a Longer Exclusivity Period

BIO argues that recent trends have been towards narrowing biotech patents, and therefore a substantial exclusivity period is necessary because reliance on patents alone cannot guarantee incentives to foster innovation of biological drugs. This argument may have some support. In an unpublished paper, two law professors stated that for composition of matter patents on biotech drugs:

There does not appear to be a single appellate-level decision in which a patent on the active ingredient of a biotech drug has been found valid and infringed.

The paper also noted that competitors can circumvent patent protection by shifting production of the biotech drugs to foreign countries where no patent protection exists or where enforcement is weak or nonexistent. Although the paper concludes that multiple barriers exist to entry of biosimilars thereby promoting competition and lowering costs, it agrees that a reasonable basis exists for a twelve-year exclusivity term to support innovation of biological drugs.

It appears that a longer term data exclusivity period may be gathering support as a number of organizations and legislators were recently reported to back follow-on biologics bills containing 12-year data exclusivity terms.

The exclusivity debates mark the ongoing dialog in establishing a regulatory pathway for biosimilar drugs. In the upcoming months, we will explore, in a series of posts, the legal and regulatory landscape concerning biosimilars and any notable commercial activities by the pharmaceutical industry as they relate to patents.


Lisa H. Wang is an Associate in the Gibbons Intellectual Property Department.

A few years later, during prosecution of the ‘551 patent, the prosecuting attorney, who was familiar with the EPO opposition proceedings, established a new point of novelty before the USPTO to advance the prosecution of the ‘551 patent. That new point of novelty was that never before was the sensor known to work without a membrane. This assertion directly contradicted an earlier statement made by the applicant during the EPO opposition proceedings. See Therasense at pages 19–23.

The Federal Circuit affirmed the district court’s finding of invalidity of U.S. Pat. No. 5,820,551 due to inequitable conduct by applying the standard recently summarized by the Federal Circuit in McKesson Info. Solutions, Inc. v. Bridge Med., Inc.

To establish inequitable conduct by failure to disclose, the asserting party must show materiality of the information and the intent to deceive. The trial court held that the prosecuting attorney knew that to disclose the EPO opposition arguments would defeat the patent grant before the USPTO. The trial court then balanced the levels of materiality and intent, and found the withheld information “richly material” and that the prosecuting attorney had no explanation for his conduct, and that this was proved by clear and convincing evidence.

As we previously posted, a patent applicant’s duty of disclosure may also extend to references and office actions in “similar” but unrelated, co-pending patent applications. The Therasense and McKesson cases show continued development in the caselaw of inequitable conduct. Stay tuned for future developments.


Frank A. Bruno is a Director in the Gibbons Intellectual Property Department. Lucy Emhardt, an Associate in the Gibbons Intellectual Property Department, assisted in the preparation of this post.

While considering the post trial motions, the Court examined the Federal Rules of Evidence to consider whether the expert’s testimony met the evidentiary threshold. In particular, the court examined the following relevant Federal Rules of Evidence which state: 

Rule 704 . . . testimony in the form of an opinion or inference otherwise admissible is not objectionable because it embraces an ultimate issue to be decided by the trier of fact.

Rule 705 . . . The expert may testify in terms of opinion or inference and give reasons therefor without first testifying to the underlying facts or data, unless the court requires otherwise. The expert may in any event be required to disclose the underlying facts or data on cross-examination.

Rule 103 . . . (a) Error may not be predicated upon a ruling which admits or excludes evidence unless a substantial right of the party is affected, and (1) Objection. In case the ruling is one admitting evidence, a timely objection or motion to strike appears of record, stating the specific ground of objection, if the specific ground was not apparent from the context . . .

The Court stated the expert’s opinion, while conclusory and unsupported, not only satisfied the evidentiary threshold, but fit these rules “as the hand the glove.” But the Court further noted that the Federal Circuit’s Koito decision made clear that, on the issues of anticipation, obviousness, and doctrine of equivalents, the unsupported opinion even of a qualified expert is simply not “substantial evidence” adequate to support a jury verdict. The District Court further explained the tension between the patent laws and the Federal Rules of Evidence:

The central holding of Daubert runs precisely to the contrary – lower federal courts are not permitted to engraft additional hurdles on the admissibility of evidence beyond those found in the Rules themselves. Despite the express teaching of Daubert, this is exactly what Federal Circuit jurisprudence does, at least on the issues of anticipation, obviousness, and doctrine of equivalents.

Notwithstanding Rules 704 and 705, Federal Circuit case law renders legally inadequate the opinions of qualified experts on the ultimate issues of anticipation, obviousness, and doctrine of equivalents unless the bases therefor are spelled out on the record.

Although the tension between the Federal Rules of Evidence (with their statutory authority) and the decisions of the Federal Circuit (with their precedential authority) seems irreconcilable, it is not open to a district court to chose one in disregard of the other. Both requirements necessarily must be followed. (citations and footnotes omitted)

After recognizing the tension between the two areas of law, the Court noted that the expert’s opinion was fatally flawed since its bases were never explained and the jury therefore was not entitled to credit. Absent the expert opinion, the jury had no basis to resolve the issue of obviousness of claims 9-11 and the matter ought not have been given to them to consider. The Court then ordered a new trial on the issues of infringement and invalidity of claims 9-11.

After being illuminated to the hidden disconnect between the two areas of law, Judge Young stated that he would revise his judicial procedures to avoid this issue by, at the earliest possible moment when an expert opinion is proffered on the issues of obviousness, anticipation, written description, or doctrine of equivalents, ruling sua sponte on the adequacy of the testimony. In this manner, Judge Young noted that Judge Lungstrum’s thoughtful opinion in Sprint v. Vonage No. 05-2433, 2007 WL 2572417, at *2 (D. Kan. 2007) would serve as a useful guide.

As a practical matter and to avoid the situation presented in this case, patent litigators should carefully scrutinize all expert testimony being offered by the opposing party. If such testimony lacks the requisite basis, appropriate preemptive relief should be obtained (e.g. through a motion in limine).


Erich M. Falke is Counsel to the Gibbons Intellectual Property Department.

Similarly, in a case where the parties requested construction of sixteen terms, Judge Crabb of the Western District of Wisconsin denied the parties’ requests for an early claim construction hearing, stating that “neither [party] met its burden with respect to the need for claims construction.” Semiconductor Energy Laboratory Co., Ltd. v. Samsung Elec. Co., Ltd., No. 09 cv-01, 2009 WL 3731959, at *1 (W.D. Wis. Nov. 4, 2009). In Samsung, the Court issued an order requiring the parties to “persuade the court that construction of each specified term [wa]s necessary to resolve a disputed issue concerning infringement or invalidity.” The Court had issued this order to “avoid devoting judicial resources to the issuance of advisory opinions on the construction of claim terms about which the parties ha[d] no concrete dispute.”

Practice tip: When litigating a patent infringement case, in addition to studying any local patent rules that may be in effect in the jurisdiction in which you are litigating, it is advisable to review decisions by your particular judge and others in the district to see whether the court has been imposing limits on the number of terms they will construe, and if so, be prepared to limit the number of terms and phrases to those most important to your case.


Wendy R. Stein is an Associate in the Gibbons Intellectual Property Department.

Pequignot v. Solo Cup Company

In Pequignot, Solo Cup initially moved to dismiss for failure to state a claim. Judge Leonie M. Brinkema denied the motion, holding that marking an article with an expired patent number was tantamount to a false marking under the statute. The court found that an article once protected by an expired patent was no different than an article that had never been covered by a patent. The court next denied Solo Cup’s motion to dismiss for lack of subject matter jurisdiction, finding that although Pequignot did not have traditional standing under Article III of the Constitution, the false marking statute was a true qui tam statute, and Pequignot was entitled to recover as an assignee of the government’s claim for any harm that resulted from the false marking of products.

Pequignot’s suit was ultimately derailed on summary judgment when Solo Cup produced evidence that it had relied upon advice from counsel that it was permissible to mark the articles after the patent had expired, taking into account that it would have cost Solo Cup nearly $ 2 million to replace the equipment used to produce the marked lids. Solo Cup’s outside attorneys had advised that such expensive and burdensome steps were unnecessary so long as the equipment was replaced with non-marked substitutes as the parts wore out over time.

Last, the court determined that Pequignot’s suggested construction of the term “offense” to mean “each article” was unsupported. Judge Brinkema held that an “offense” was to be defined as a distinct decision by a defendant to falsely mark an article. Although this issue was not case dispositive, it may be subject to attack on appeal based on Federal Circuit's recent holding in The Forest Group, Inc. v. Bon Tool Company. In that case, the Federal Circuit held that the statutory fine should be assessed on a "per article" basis as opposed to the "per decision to mark" basis favored by Judge Brinkema.

Stauffer v. Brooks Brothers, Inc.

Stauffer’s suit was deemed dead on arrival, and was dismissed for lack of standing. The hypothetical nature of the allegations found within Stauffer’s complaint proved fatal. Stauffer’s allegation that Brooks Brothers’ conduct “wrongfully quelled competition with respect to such bowtie products thereby causing harm to the economy of the United States” was rebutted by declarations and exhibits submitted by Brooks Brothers showing that the adjustolox mechanism was not made by the defendants, but instead by a third party that also sold the mechanism to Brooks Brothers competitors, which actually fostered competition. Finding the standing issue to be dispositive, the court declined to address the failure to state a claim motion.

Lessons For Business Owners

Although the false marking suits brought by Pequignot and Stauffer have to date proved to be unsuccessful (both cases are currently on appeal before the United States Court of Appeals for the Federal Circuit), the suits could have been avoided entirely with some simple preventative planning on the part of the defendants. If it is not feasible to remove an expired patent number, a company should be prepared to produce evidence to that effect. Widely available services such as the USPTO’s internet patent database, and Google’s Patent Search, make it easier than ever for a consumer to access information about almost any patent marking affixed to any product. In a struggling economy, a large corporation with some improperly marked products could provide a tempting target for an enterprising consumer. Even if the likelihood of a plaintiff winning such a suit is remote, companies should take proactive steps to avoid becoming embroiled in litigation.


Thomas R. DeSimone is an Associate in the Gibbons Intellectual Property Department.

As you sow, so shall you reap, and in the flurry of legislative activity that has recently ensued, the proposed presumption shift has now made its way into a proposed amendment to antitrust laws. On October 15, 2009, the Judiciary Committee of the U.S. Senate passed a bill that could effectively ban the use of reverse payments to settle Hatch-Waxman actions. The bill, known as the Preserve Access to Affordable Generics Act, would amend the Clayton Antitrust Act, and as initially proposed, would have made reverse payments per se illegal. The bill was subsequently amended to make the payments presumptively illegal, where the presumption can be rebutted upon a showing of a promotion of competition under a clear and convincing standard.

The new proposed legislation again raises the classic dilemma: at what point do antitrust curbs impermissibly cut into patent exclusivity? Given that reverse payments are viewed favorably by both branded drug companies and generics because they provide business flexibility for Hatch-Waxman action settlements, future fights on this issue inevitably remain to be fought.


Sheila F. McShane is a Director in the Gibbons Intellectual Property Department.