Category Archives: Intellectual Property

When Smartphones Go to War, Patent Holders Seeking Injunctions against Infringement Win?

By Michael J. Zoller, Esq.

Prior to 2006, when a patent holder demonstrated that someone was infringing on its patent, it enjoyed a presumptive entitlement to an injunctive award permanently enjoining the infringement.  That all changed though when the Supreme Court handed down its decision in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006).  In eBay, the Supreme Court held that instead of a general rule presumption in favor of injunction, the same equitable standard that applied for granting injunctions in non-patent cases should also apply to disputes arising under the Patent Act.  Consequently, following the decision in eBay, in order to obtain a permanent injunction against patent infringement, a patent holder had to pass a four-factor test by showing:

(1) that it has suffered an irreparable injury;

(2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury;

(3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and

(4) that the public interest would not be disserved by a permanent injunction.

Id. at 391.

This change was bad for patent holders because instead of the presumed injunction they used to receive upon a showing of infringement, in addition to proving infringement, the patent holders now had to prove that an injunction was warranted too.

In the wake of the Supreme Court’s eBay decision, the “Smartphone Wars” were launched.  The Smartphone Wars are a series of litigation between Apple and Samsung regarding Samsung’s infringement on some of Apple’s patents for cellphone and tablet technology.  The first decision (“Apple I,” 678 F.3d 1314) in the Wars was handed down in 2012 and the fourth and latest was just handed down in September 2015 (“Apple IV,” 801 F.3d 1352).

In Apple I, the Federal Circuit affirmed the District Court’s holding that to show an irreparable harm, a patent holder must make a showing of a “casual nexus” between the infringement and the alleged harm to the patent holder.  The Apple I decision further stated that “[s]ales lost to an infringing product cannot irreparably harm a patentee if consumers buy that product for reasons other than the patented feature.” Apple I, 678 F.3d  at 1324.  The decision in Apple I was another blew to patent holders.  To be able to obtain an injunction they now had to show that the technology being infringed on was the cause of their sales in the first place.  This can be very difficult to show when the actual item being sold, like a smartphone, contains many different features and pieces of technology.

Recently though, the Federal Circuit’s decision in Apple IV has swung the power back to the patent holders.  In Apple IV, the Federal Circuit took a closer look at the requirements of a casual nexus.  In its review, the Federal Circuit determined that the proper approach for finding a casual nexus was not a determination that the infringing features were the reason for consumers purchasing the smartphone, but rather a determination that the infringing features were important to consumers when making their purchasing decision.  When there are many reasons why a consumer chooses to purchase a particular smartphone, having to show that the features being infringed on are important to consumers versus having to that they are the specific reason the consumer chose the smartphone is a much lower standard to meet.  Consequently, in Apple IV, the Federal Circuit ended up granting Apple its injunction.

The decision in Apple IV is a positive turn for patent holders after their rights had been limited in the earlier litigations.  That said, while patent holders may have won this battle, the war is not yet over.  Samsung has petitioned the Federal Circuit to rehear the case en banc.  Should the Federal Circuit grant the petition and reverse then patent holders may be telling a different story.  As they say, history is written by the victors…

“The Times They Are a-Changin’”

By Michael Zoller, Esq.

The system for obtaining a patent in the United States is in and of itself one giant machine.  The idea for protecting intellectual property dates all the way back to the writing of the Constitution and the first federal patent act was passed in 1790.  As time has passed and technology has evolved the need to update the “patent machine” has arisen.  Change, as one can expect, has generally been slow.  Until recently that is.  In the last three years the United States patent machine has undergone several significant changes.

The changes first started in September 2011 when President Obama signed into law the America Invents Act.  With all of the Acts provision in effect as of early 2013, President Obama continued to work on changes by sending seven proposals to Congress that intended to limit patent trolling.  At the same time, the President also announced five executive actions aimed at the same goal.  Now with its recent decisions in the companion cases of Highmark, Inc. v. Allcare Health Management Systems, Inc. and Octane Fitness, LLC v. Icon Health & Fitness, Inc., the Supreme Court has gotten in on the act as well.

In the cases, the Supreme Court took aim at patent trolls, by making it easier for them to be forced to put their money where their mouth is.  Patent trolls gum up the patent machine by hoarding patents they have no intention of utilizing just so they can file law suits when any new idea might in the slightest most tangential way have a hint of infringing on one of their patents.  The trolls then usually use the high cost of defending a suit to force a settlement.  One defense to this type of action is to award attorney’s fees to a successful defendant and section 285 of the patent statute has always authorized the awarding of such fees in “exceptional cases.”  The problem has been that the Federal Circuit has applied the “exceptional cases” language so rigidly that fees were rarely shifted.

In its Octane Fitness decision, the Supreme Court aims to loosen the reins.  Instead of the rigid test previously utilized, the Supreme Court has instructed that courts should determine whether a case is exceptional “in the case-by-case exercise of their discretion, considering the totality of the circumstances.”  Moreover, in its Highmark, Inc. decision, the Court declared that the District Court’s decision to shift fees should be reviewed utilizing the abuse of discretion standard.  The idea is that the Highmark, Inc. decision will make it harder for the rigid Federal Circuit to overturn fees that are awarded by the District Courts under the new Octane Fitness approach.  Now that patent trolls know that it should be easier for defendants to be awarded attorney’s fees for defending frivolous patent infringement lawsuits, the hope is that we will see fewer such suits and the “machine” will better able to deal with serious patent infringement actions.

Even with the Octane Fitness and Highmark, Inc. decisions, the Supreme Court may not yet be done in attempting to affect change on the patent machine.  On April 28th the Court heard oral argument in the case of Nautilus, Inc. v. Biosig Instruments, Inc.  At the heart of the case is a dispute over how much detail needs to be in a patent so that it is not “indefinite” and thus invalid.  If the Court rules in such a way as to raise the bar on the specificity required in a patent it could be a major strike to patent trolls because it would potentially make it harder for them to pursue litigation on a lot of the patents they currently hold.

Only time will tell what effect the Supreme Court’s recent and future decisions will have on the US patent machine.  But as Bob Dylan once sang, “The Times They Are a-Changin’” so stay tuned to find out what comes next.

Trolling the Patent Trolls

By Michael Zoller, Esq.

A “patent troll” is an entity whose sole business is to collect and license patents.  When it cannot extort the license it wants, the troll is likely to file an infringement suit.  A troll does not create or do anything beneficial with the patents it owns.  Trolls are a major problem in the American patent system.  They clog court dockets with frivolous law suits and raise the cost of doing business for all patent owners.

When President Obama signed into law the America Invents Act in 2011, the new law made some substantial changes to the American patent filing system.  At the time the law was signed most people involved in the business of patents were happy with the changes, but some were still concerned that the new laws did not do enough to counteract the rise of patent trolls.  As of early 2013, all of the provisions of the America Invents Act are in effect and since they went into effect, the President has announced more changes that will be coming to address the concerns regarding trolls.

President Obama announced that seven proposals intended to contain and limit the effect of trolls are being submitted to Congress.  The proposals are aimed at: (1) increasing demand letter transparency; (2) fixing transparency; (3) expanding the Patent and Trademark Office’s transitional program for covered business method patents; (4) protecting end users; (5) changing the International Trade Commission standard for obtaining an injunction; (6) permitting more discretion in the awarding of fees to prevailing parties in patent cases; and (7) changing the rules for the ITC in hiring administrative law judges.  Of course, the downside to legislative proposals is that it cannot be known what form the proposals will be in when and if they finally pass through Congress.  Additionally, there is no way to know how long it will take for any of the proposals to actually pass through Congress.

As a way of addressing this uncertainly, President Obama also announced that the White House will be taking five executive actions.  The five executive actions are intended to (1) tighten functional claiming; (2) fix transparency; (3) empower downstream users; (4) expand outreach and study; and (5) strengthen the enforcement of exclusion orders.  As executive actions, the impact of moves made by the White House will be felt before those of the legislative proposals.

While the intentions of the President are good for the American patent system, only time will tell what impact they actually make on trolls.  If the President’s goal of limiting patent trolls is reached then all individuals and businesses who own patents will benefit.  Consequently, this is a developing area of law that patent owners will want to keep an eye on.

Express Repudiation Needed to Start Statute of Limitations Running on Coauthor’s Copyright Claim

By Michael Zoller, Esq.

In a recent precedential ruling a Third Circuit Appellate Court clarified the rights of a coauthor to defend his or her copyright in a joint work.  A “joint work” is created when a work is prepared by two or more authors with the intention that their contributions be merged into inseparable or interdependent parts of a unitary whole.  17 U.S.C. §101.  The copyright in the joint work is vested independently in each coauthor at the time the work is created.  The ruling in Brownstein v. Lindsay, will impact any coauthor’s ability to defend that copyright going forward so it is a ruling that every coauthor should be aware of.

In Brownstein, the plaintiff and defendant co-created a program that allowed for the identification of the ethnicity of a random list of people.  Lindsay created a set of rules and Brownstein created computer code; put together their rules and code allowed the program to function.  After the program was created Lindsay and Brownstein worked together to profit from the program; Lindsay was responsible for running the business end of their operation including registering the copyright on their program.  Shortly after the program was created, in copyright registrations Lindsay began identifying herself as the sole creator of the program.  It took 14 years for Brownstein to eventually file suit seeking a declaratory judgment that he was in fact a coauthor of the program.

At the trial level the District Court found in favor of Lindsay and dismissed Brownstein’s claim on the basis of it being filed beyond the three year statute of limitations allowed for any claim regarding a copyright.  On appeal, the Appellate Court reversed the District Court’s decision and remanded for a new trial.  In its decision, the Appellate Court held that even though it had been 14 years since Lindsay had begun to encroach on Brownstein’s copyright the three year statute had not necessarily begun to run because there had not been an “express repudiation” of Brownstein’s copyright.[1]

Leaning on the decisions of other Federal Circuits, the Appellate Court established that, in the Third Circuit, only an express repudiation can trigger the running of the statue of limitations.  An express repudiation requires that one coauthor do something that communicates not merely that he/she is the author, but that he/she is the sole author or that the other party is not a coauthor.  (Emphasis supplied by the court).  More specifically, the Appellate Court stated that identifying oneself as a sole owner in a copyright registration is not enough to establish an express repudiation.

Going forward, the Brownstein decision will provide coauthors a greater chance to defend a copyright they have in a joint work because the determination will not hinge on a strict counting of years, but rather fact questions regarding what steps were taken by the infringing party and when the party being infringed upon knew about the alleged infringement.  These changes should present a boon to those who participate in the creation of joint works.

[1] In addition to its holding on the requirement of express repudiation, the Appellate Court also held that the District Court did not have the power revoke Brownstein’s copyright registration.  That holding is not discussed in this post.

NJ Appellate Division Upholds Summary Judgment in Favor of Former Employee and Employer on Alleged Trade Secret Theft

By Sean Mack, Esq.

NJ Appellate Division: Former employees can use substantial knowledge gained from their work experience to compete, where the manufacturing process is largely disclosed publicly and is susceptible to reverse engineering  (UCB Manufacturing, Inc. v. Tris Pharma, Inc., 11-2-1124 , (App. Div. August 27, 2013))

The New Jersey Appellate Division, interpreting New York law, upheld the grant of summary judgment in favor of a former employee and his new employer who were alleged to have stolen trade secrets and confidential manufacturing information to develop a competing generic cough syrup.   The court’s conclusion rested primarily on the trial court’s finding that no trade secrets had been articulated and the alleged confidential information could be gleaned from an expired patent, other public information, and the former employee’s general knowledge and negative-know-how – knowing what does not work.

Plaintiff, the manufacturer of Tussionex, a cough syrup, brought claims of breach of a confidentiality agreement and unfair competition against one of its former employees and his new employer, a competitor generic drug manufacturer.  Plaintiff alleged that defendants stole confidential information and used that information to develop a generic version of Tussionex.

The former employee was primarily responsible for formulation development and was the lead formulator for one of the cough syrups, which was based on a proprietary technology involving an extended release suspension system that utilizes a coated polymer resin to control the rate of drug release.  During a five day evidentiary hearing, experts testified about the complexity of the manufacturing process for Tussionex, which prevented generic alternatives from quickly entering the market place after the plaintiff’s patent expired.

On a summary judgment motion, the parties disputed whether defendants manufactured their generic alternative using confidential and proprietary information, or from publicly available information and general knowledge and skill defendant obtained from his work experience.

Despite those disputed facts, the trial court concluded, and the Appellate Division affirmed, that much of the alleged confidential information is disclosed on the product label and patent and is susceptible to reverse engineering, and therefore is not subject to protection as a trade secret or as confidential information.

The Appellate Division then confirmed the grant of summary judgment in favor of defendants, finding that the plaintiff had no legitimate business interest in preventing the former employee and competitor from using non-confidential information and know-how to compete with Plaintiff.  The court went on to find that the confidentiality agreement signed by defendant was overbroad in that it sought to restrain the use or disclosure of knowledge and information not protectable as a trade secret and imposed unreasonable restrictions on defendant’s employability in his specialized field.

“America Invents,” But Does It File?

By Michael Zoller, Esq.

The process to patent an invention in the United States can best be described as archaic.  Recent legislation that is now beginning to take effect looks to change the process (and hopefully improve it, but that remains to be seen).  On September 16, 2011, President Obama signed into the law the “America Invents Act.”  All of the Acts provisions became effective as of March 16, 2013.  The Act presents some big changes to US Patent Law that every inventor, or business that employees inventors, needs to be aware of.

The biggest change is that the Act changes the United States from a “first-to-invent” country to a “first-inventor-to-file” country.  Under the old system, when a person filed for a patent was not as important as being able to show that he was the true inventor of the material for which the patent was sought.  Now, under the new system, baring a few exceptions described below, the most important thing for establishing the right to a patent will be who was the first to file the application not who actually invented the material.

A second change to the system is an expansion in the definition of “prior art.”  Under the old system, prior art that caused the denial of a patent only came from the United States.  Under the new law, prior art can come from anywhere in the world.  An exception to the prior art that excludes a patent is a “disclosure.”  A disclosure, though not fully defined in the Act, is when the inventor reveals his invention to the public within a year prior to filing for a patent.  While this sounds very beneficial to the patent applicant, an applicant needs to be aware that a lot of countries do not have the disclosure grace period that the US system offers, so if a patent applicant makes a disclosure it might not affect his ability to obtain a patent in the US, but it could ruin his chance of obtaining a patent in other countries.

As mentioned above, even though the system is now a first-inventor-to-file system, the first person to file will not always be the one to retain the patent.  Once a patent is granted, there are three procedures whereby a person can challenge the patent to have it revoked from the filer.  Under the new derivation proceeding, within a year of a patent being granted, a fellow patent holder can challenge the newly patented invention as being derivative of his previously granted patent by showing that the new patent is the same or substantially similar to his previously granted patent.  If the person who brings the derivation proceeding is successful, the new patent will be transferred to the successful claimant.

If a person who does not have a patent of their own wants to challenge a newly granted patent, they can do so either via an inter partes review or a post grant review.  An inter partes review has to be brought within nine months of a patent being granted and a non-patent holder can challenge the new patent on the specific grounds of either the patent not being novel or consisting of non-obvious material.  If the challenger is successful, the patent will be canceled.  A post grant review also has to be brought within nine months of a patent being granted and in it, a non-patent holder can challenge a new patent on any ground related to patentability.  Again if the challenger is successful, the patent will be canceled.  Even though the US system is now a “first-inventor-to-file” system, all of these review procedures will stop a patent from remaining with a filer, regardless of him being the first to file.

These changes to the US patent system are intended to make the system clearer, speed up the process and bring it closer to conformity with the systems in other countries.  Whether these goals will be achieved remains to be seen, but all inventors and companies that employee inventors need to be aware of the new laws and proceed accordingly.