Kirk Teska, BridgeTower Media Newswires
As usual, it’s time for an update to IP happenings in 2017:
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Inducement
In February, the U.S. Supreme Court decided Life Technologies Corp v. Promega Corp., a case involving cross-border patent infringement. A U.S. patent covers only infringing activity in the United States. So, an old tactic to avoid infringing a U.S. patent claiming a combination of components was to ship those individual components separately outside of the country and have a partner overseas combine the components for sale in other countries.
The patent laws changed in 1952 to fix that loophole. Now, supplying from the United States a “substantial portion” of the components of a patented invention to someone outside the country constitutes patent infringement. It’s called “infringement by inducement.” What happens, though, in a case in which only a single component is shipped overseas?
The Life Technologies case concerned a patent covering a tool kit for genetic testing used, for example, in forensics. The patented tool kit has five components, one of which is an enzyme. Life Technologies, the alleged infringer, manufactured the other four components of the tool kit outside the United States but did, in fact, manufacture the enzyme in the country and then shipped it to the United Kingdom, where the enzyme was combined with the other four components into a kit. The kit was then marketed outside the United States.
Can one component of a patented invention constitute a “substantial portion” of the invention? No, held the Supreme Court, even if that single component is the most important one.
As usual, the court left room for further cases to more clearly define what constitutes a “substantial portion” of a patented invention: 50 percent, 75 percent, 95 percent?
So, if a client cannot afford foreign patents for a key invention, it would be a worthwhile exercise to evaluate draft patent claims to ascertain how infringement might be avoided by a competitor in the United States that supplies one or more key parts of the invention to an overseas company. Then, take the appropriate steps to cover such activities based on the new case law.
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Laches
In patent infringement cases, damages can be collected only for infringing sales within the six years prior to the lawsuit. This is the Patent Act’s six-year statute of limitations.
Laches, on the other hand, is a defense that has evolved in case law. It basically holds that if a patent holder knew of an infringement but waited too long to sue, there should be no recovery out of fairness to the infringer.
Laches is derived from a Latin word meaning “lax.” Lower courts previously upheld laches defenses in spite of the Patent Act’s six-year statute of limitations.
In the March case of SCA Hygiene Products v. First Quality Baby Products, the Supreme Court held laches doesn’t apply in patent cases.
As a result, a patent owner can wait many years to a file a lawsuit without fear of a laches defense. But, damages can still be recovered only for the six-year period before the lawsuit is filed. Waiting too long to sue could also adversely affect a patent owner’s ability to win an injunction against further infringements.
And, an equitable estoppel defense could also come into play, preventing any recovery if a patent owner leads an infringer into believing there will be no lawsuit.
That aspect of the case was not decided by the Supreme Court. So, for now, do not wait too long to file a patent infringement lawsuit (unless you want your case decided by the Supreme Court). Don’t be lax with your IP!
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Copyright
Also in March, the Supreme Court decided Star Athletica v. Varsity Brands. Copyright protection lasts a long time, a lot longer than the 20-year term of a patent. So, many years ago, it was decided that functional matter cannot be copyrighted. The line between art and function, however, is often blurred. Consider a lamp base that is also a statue — it functions as a base for the lamp, but couldn’t it also be artistic?
In the case, Varsity Brands designed and sold cheerleading uniforms with different fabric designs, and Star Athletica copied the same designs in its own cheerleading uniforms. The uniform is functional, of course — it serves as clothing and also identifies the wearer as a cheerleader. Still, the Supreme Court held the fabric designs at issue could be perceived as a work of art protectable apart from the uniform:
“In sum, a feature of the design of a useful article is eligible for copyright if, when identified and imagined apart from the useful article, it would qualify as a pictorial, graphic, or sculptural work either on its own or when fixed in some other tangible medium.
“Applying this test to the surface decorations on the cheerleading uniforms is straightforward. First, one can identify the decorations as features having pictorial, graphical, or sculptural qualities. Second, if the arrangement of colors, shapes, stripes, and chevrons on the surface of the cheerleading uniforms were separate from the uniform and applied in another medium — for example, on a painter’s canvas — they would qualify as two-dimensional works of art. And, imaginatively removing the surface decorations from the uniforms and applying them in another medium would not replicate the uniform itself.”
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Patent venue
In May, the Supreme Court issued an opinion in the case of TC Heartland v. Kraft Food Group that resolves, for the most part, when a patent holder can sue an infringer.
A statute particular to patents states that an infringer can be sued in any state a) where the infringer “resides” or b1) where the infringer has a regular and established place of business and b2) where the infringer has committed regular acts of infringement.
Another more general statute states that a defendant “resides” wherever it is subject to personal jurisdiction. Thus, “resides” in the patent-specific statute has been interpreted by the lower courts for a long time pursuant to the more general statute, meaning a patent infringer could be sued almost anywhere.
As a result, many patent owners chose the federal district courts located in the Eastern District of Texas. More patent cases have been filed there in recent years than in all the other states combined, due to perceived friendliness of judges and juries to patent owners. Patent trolls especially like the Eastern District of Texas.
The Supreme Court has now decided, however, that “resides” means, for patent cases, where the infringer is incorporated. So, from now on, a patent owner is limited to suing where the infringer is incorporated or where the infringer has committed regular acts of infringement and has a regular and established place of business.
Thus, companies who might face patent infringement lawsuits might want to rethink where they incorporate.
In In re Cray, the Federal Circuit promptly decided what it means to have a “regular and established place of business.” Is that limited to where the company has its headquarters or is registered to do business? What about a small business located in Massachusetts that has a single sales person working from his home in Florida?
The answer is the “business” must be a physical place where continuous business is carried out by the defendant. The home office of an out-of-state employee is not a regular and established place of business.
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Exhaustion
Also in May, the Supreme Court decided Impression Products, Inc. v. Lexmark International, Inc., a patent exhaustion case. Patent exhaustion means that once a patented product is sold by the patent owner to a buyer, the buyer cannot be sued for patent infringement.
That’s a good thing — your smartphone is covered by an estimated 250,000 patents, and you’d be an infringer were it not for patent exhaustion.
Understandably, some businesses have tried to get around patent exhaustion contractually. Lexmark, for example, will send you printer toner cartridges at a discount if you sign up for Lexmark’s “return program” and agree to return the empty cartridges only to Lexmark. When Impression Products (and others) obtained Lexmark’s return program cartridges from consumers and then refilled and resold the cartridges, Lexmark sued.
But, the court squarely held patent exhaustion allowed Impression Products’ activities.
What’s left? To decide if Lexmark’s customers are guilty of violating the single-use/no-resale restrictions in Lexmark’s contracts (and whether, as a practical matter, Lexmark wants to enforce those contracts against its customers). Impression Products was not a party to the Lexmark contract, so Impression Products could not violate them.
Also left to decide is if there is any other clever way, contractually or otherwise, to restrict what a purchaser can and cannot do with patented products. Probably.
Software and computer patents
After the Alice Supreme Court decision in 2014, numerous software patents fell at the Patent Office and in the courts, and counseling clients concerning the eligibility of software patent protection became more difficult.
In 2017, a few cases from the Federal Circuit helped, notably Visual Memory LLC v. Nvidia Corp. (enhanced computer memory system held patent eligible) and Thales Visionix, Inc. v. U.S. (processor used to calculate the location and orientation of an object relative to a moving platform held patent eligible).
There is now a growing body of cases like these holding that certain software patents are valid. Alas, there are also a lot of cases holding just the opposite.
Disparaging marks
In Matal v. Tam, Simon Tam sought to register the name of his band, “The Slants.” The Trademark Office denied the application as disparaging. The Supreme Court decided the Trademark Office, under free speech grounds, could not reject applications for trademark registration of marks which are disparaging:
“The Government has an interest in preventing speech expressing ideas that offend. And, as we have explained, that idea strikes at the heart of the First Amendment. Speech that demeans on the basis of race, ethnicity, gender, religion, age, disability or any other similar ground is hateful; but the proudest boast of our free speech jurisprudence is that we protect the freedom to express ‘the thought that we hate.’”
Interesting thought given the current state of certain affairs in the United States.
Patent infringement claims
It used to be that complaints for patent infringement were bare bones: Pursuant to the Federal Rules of Civil Procedure form 18, the plaintiff simply listed the patent number at issue along with a general accusation that the defendant was infringing the patent.
Form 18, however, was abrogated by the Supreme Court in December 2015. So, lately it has been difficult to ascertain exactly what level of specificity has to be included in a complaint for patent infringement in order for it to survive a motion to dismiss under Rule 12(b)(6).
In Lifetime Industries v. Trim-Lok, Inc., the Federal Circuit set out the requirements for an adequate pleading of direct patent infringement, inducement and contributory infringement.
The on-sale bar
When an invention is placed “on-sale,” a one-year clock for filing a patent application for the invention begins to run. Any patent that results from an application filed after one year is invalid.
What about private sales never made public? What about a contract for future sales of the invention? Did certain changes in the America Invents Act affect the on-sale bar? What about distribution agreements?
In the Federal Circuit’s Helsin Health Care S.A. v. Teva Pharmaceuticals case, it’s now fairly clear, at the least, that if a sale is public then the details of the invention need not be publicly disclosed in the terms of the sale in order for the one-year clock to start ticking.
As for the other questions, we will have to wait and see. Still, it’s probably best to file early and often since dicta by the Federal Circuit seems to indicate that even secret sales would trigger the on-sale bar.
Biosimilars
A biologic is a drug derived from animals or microorganisms. After a patented biologic drug is FDA-approved, generic drug companies inevitably introduce “biosimilar” drugs under a complex procedure involving FDA approval of the biosimilar and a required notification to the patentee of the generic’s intentions in order to enable the patentee to file a lawsuit for patent infringement and seek an injunction to prevent launch of the biosimilar.
Since Sandoz v. Amgen was decided by the Supreme Court in June, biosimilar applicants do not need to wait anymore for FDA approval of the biosimilar before notifying the patentee of its commercial marketing efforts.
Previously, the biosimilar applicant had to wait until its drug was approved by the FDA and then wait another six months before marketing the drug. Now, biosimilars may be ready to market immediately upon FDA approval.
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Kirk Teska is managing partner of Iandiorio, Teska & Coleman in Waltham. He is an adjunct professor at Suffolk University Law School and the author of “Patent Savvy for Managers” and “Patent Project Management.”
