Virginia IP Law : Virginia Intellectual Property Lawyer & Attorney : Troutman Sanders Law Firm : Technology & Patent Litigation

As detailed in an earlier blog post found here, a group of intellectual property attorneys from around the Eastern District, including myself, Robert Angle, Maya Eckstein, Dave Finkelson, Dana McDaniel, Chip Molster, Steve Noona and Bob Barrett, have been working over the past several months to draft a local patent rule and model patent pretrial schedule and pretrial order to use in patent cases in the Eastern District of Virginia.

A draft of a proposed local rule was circulated to several statewide intellectual property bar groups, and comments were received from practicioners in all parts of the district. The comments were considered and many were adopted, and a revised proposed local rule, model scheduling order and model pretrial order have been submitted to Chief Judge Spencer.  The judges will consider the proposal at their district-wide meeting, which occurs in October. The revised rule can be found here, and an executive summary of the rule is here.

As we’ve said before, the judges of the EDVA will obviously decide on their own whether to adopt any proposed changes to their Local Rules. That said, the support of practitioners and interested bar organizations cannot hurt and may well help. If you believe the proposed rules make sense, please express your support to the EDVA judges.  If you have other comments, submit them on this blog, and we will pass them on to the judges.
 

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A common concern in all patent litigation is how to maintain the confidentiality of proprietary and valuable business information produced in discovery.  Before trial, standard protective orders provide an easy, straightforward solution. Even confidential documents submitted with pre-trial motions are routinely filed under seal – and requests to seal such exhibits are rarely challenged. It is less certain, though, whether exhibits shown to a jury at trial may be kept from becoming a part of the public record.

Judge Davis in the Norfolk Division recently addressed the confidentiality of trial exhibits in Level 3 Comm’s., LLC v. Limelight Networks, Inc., Case No. 2:07cv589, 2009 U.S. Dist. LEXIS 37775 (E.D.Va. April 30, 2009). In Level 3, a third party, Savvis, produced confidential information under a protective order. Two days before trial (on a Sunday), Level 3 informed Savvis that it intended to introduce some of Savvis’ documents as trial exhibits. In the evening after the first day of trial, Savvis responded by asking Level 3 to inform the Court that Savvis wanted the documents to remain under seal. Level 3 refused Savvis’ request, and Savvis took no further action until more than a month later (three weeks after the trial had ended), when it moved to seal the trial exhibits that contained its documents.

Judge Davis held that Savvis had waived the confidentiality of its documents by failing to object before the exhibits were introduced. Even if Savvis had objected, the judge ruled, the public’s First Amendment right of access to trial exhibits trumped Savvis’ confidentialiy interest because Savvis did not claim the documents contained trade secrets.

The main points in Judge Davis’ opinion are:

• The public has a right of access to documents filed in a District Court under both the common law and the First Amendment.
   
• The common law right of access extends to all judicial records and documents. The First Amendment right of access extends only to materials filed in connection with a dispositive motion or used at trial.
   
• The First Amendment right of access is far stronger than the common law right of access.
   
• Property rights in trade secrets can override the First Amendment right of access. Confidential information that is not a trade secret, however, will not overcome the public’s First Amendment right of access.
   
• Where only the common law right of access applies (such as in discovery or when documents are filed in connection with a non-dispositive civil motion), confidential information may receive more protection.
   
• Once information is released to the jury at trial, a party waives any confidentiality interest in that information.
   
• Even if Savvis had not waived its right to assert that the trial exhibits were confidential, Savvis could not overcome the public’s First Amendment right of access because it did not claim the exhibits contained any trade secrets.

Judge Davis did not define what constitutes a “trade secret” and the term could potentially encompass a multitude of categories of confidential business information – not just formulas, designs or inventions but also costs, pricing and specific contractual terms. Thus, while Judge Davis ultimately (after 33 pages) sets forth a simple rule – only exhibits that contain trade secrets can potentially remain sealed at trial – he does not shed any light on how broadly  the “trade secret” protection for trial exhibits extends.

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In 2008, the Court of Appeals for the Federal Circuit (“CAFC”) issued an opinion in In re Bilski establishing the rule for determining whether a new process or improvement to a process is eligible for patent protection. Generally, processes are patentable subject matter in the United States. U.S. Patent Law provides that “[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”

The CAFC held Mr. Bilski’s process, a method of managing the risk for commodity seller, was ineligible for patent protection because it did not meet their “machine or transformation” test. In stating the test, the CAFC held that a “process is surely patentable subject matter if (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.” This test does not establish the clearly resolve the question of whether business method or software inventions are patentable subject matter. It is surely not a bright line test. The CAFC opinion leaves open that other processes or methods may be eligible for patent protection, but if meets the “machine or transformation” test is surely patentable subject matter. The CAFC also stated that the old test stating that the method must produce a “useful, concrete and tangible result” test from State Street is not to be relied upon by patent owners.

This week, the justices of the U.S. Supreme Court granted Bilski’s petition for writ of certiorari and will review the decision of the CAFC. Hopefully, the Supreme Court will be able to review the precedent and provide clarity to the issue. Many issued patents include claims directed to business methods, biotechnology, and software may not meet this “machine or transformation” test. The validity of these patents and patentability of many pending patent applications is at stake in this case. We anticipate many amicus briefs zealously arguing both sides of this contentious issue.

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Since I posted here on the shift of patent infringement case filings away from the Eastern District of Texas, the Federal Circuit has issued another decision reversing a denial of a motion to transfer venue in a patent case in the Eastern District of Texas (EDTex).  See In re Genentech, Misc. Dock. No. 901, 2009 U.S. App. LEXIS 10882 (Fed. Cir. May 22, 2009).

Genentech rejects several grounds cited in recent EDTex decisions denying transfer.

• First, the Court rejected the rationale that the location of witnesses favors transfer only if transfer is more convenient for all witnesses. Many post-TS Tech decisions in the EDTex have routinely rejected transfer if the plaintiff could identify relevant witnesses who lived far away from both Texas and the transferee forum.

In Genentech, fourteen witnesses lived in California, the proposed transferee forum, while the six inventors lived in Europe, a prior art witness lived in Iowa and four of the patent prosecuting attorneys lived on the East Coast. The Federal Circuit held that the District Court had placed too much emphasis on the additional distance that the European witnesses would have to travel to go to California rather than Texas.

Thus, the Court soundly rejected the rationale that “Texas must be more convenient because it’s in the middle of the country” found in several EDTex decisions. Rather, where material witnesses reside in the transferee forum and no witnesses reside in the EDTex, it is clear error to find that the convenience of witnesses weighs against transfer.

• The Federal Circuit also faulted the EDTex for requiring a showing that the witnesses in the transferee forum were “key witnesses.” Since they had relevant information, “it was not necessary for the district court to evaluate the significance of the identified witnesses’ testimony.”

Two other holdings in Genentech will also weigh in favor of transfer in future cases.

• First, despite the storage of most documents electronically, the Court found that it was clear error to discount the burden to transport documents from California to Texas.
   
• Second, the Court held that it was clear error to consider Genentech’s filing of an unrelated patent infringement suit in Texas in the decision to deny transfer.

One common basis for denying transfer post–TS Tech remains available – the presence of multiple defendants in different forums. In Genentech, both defendants were located in California (though they were in two different court districts). Where defendants are in multiple forums, or where there are relevant defense witnesses in multiple forums, transfer will remain difficult in the EDTex.
 

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