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

In a December 18 decision, the U.S. District Court in Richmond dismissed seven claims of patent infringement for lack of standing because the plaintiff did not have the exclusive right to license the patent.

In WiAV Solutions LLC v. Motorola, Inc., et al., Case No. 3:09CV447 (E.D. Va. Dec. 18, 2009), WiAV brought claims of infringement of nine patents involving wireless communication technology against multiple defendants. Seven of the patents (the “Mindspeed Patents”) had been assigned to Mindspeed Technologies, which was named in the case as defendant patent owner.

The defendants moved to dismiss the claims related to the Mindspeed patents for lack of standing. In a December 18, 2009 decision, Judge Robert E. Payne ruled that WiAV lacked constitutional standing because it was not an exclusive licensee of the patent. The key points from Judge Payne’s opinion:

• To show that a case or controversy exists, a plaintiff must meet both constitutional and prudential standing requirements.
   
• To have constitutional standing, a plaintiff in a patent suit must have both the contractual right to bring suit and the right to exclude others from making, using, selling or offering to sell the patented invention.
   
• A party with “all substantial rights” under a patent or an exclusive licensee of a patent in a field of use has standing to sue but a “bare licensee” has no standing.
   
• A licensee which is granted an exclusive license subject to prior, nonexclusive licenses has standing as an exclusive licensee.
   
• A licensee is not an exclusive licensee, however, if others retain the right to grant additional licenses, even when the right to sublicense is limited to subsidiaries and affiliates.

The Mindspeed Patents had been transferred and licensed through a complicated series of agreements. At least four other parties retained the right to grant new licenses in the field of wireless handsets, defeating WiAV’s claim of exclusivity.

Judge Payne rejected WiAV’s request to adopt a new legal principle that, if a grantor retains a limited right to sublicense, it does not defeat exclusivity because WiAV could have alleviated the standing issue at the time it contracted for its rights and because WiAV’s request ran against well-accepted legal principles.

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Last August, we raised here whether the Supreme Court’s decision in Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009) foreshadowed enhanced pleading requirements in patent infringement cases. After several months, the answer from the district courts appears to be yes and no.

For claims of direct infringement, the district courts have followed the Federal Circuit’s decision in McZeal v. Sprint Nextel Corp., 501 F.3d 1354, 1357 (Fed. Cir. 2007), a pre-Iqbal decision in which the Court set a low bar for pleading direct infringement.

For claims of indirect infringement, however, the courts have required specific factual allegations showing knowledge and intent to induce or contribute to infringement by another.

Direct Infringement

Only two reported decisions, Elan Microelectronics Corp. v. Apple, Inc., 2009 U.S. Dist. LEXIS 83715 at *5 (N.D. Cal. Sept. 14, 2009), and Fifth Market, Inc. v. CME Group, Inc., 2009 U.S. Dist. LEXIS 108776 at *3-*4 (D.Del. May 14, 2009), have granted a motion to dismiss a complaint for failure to meet the pleading requirements of Fed.R.Civ. P. 8, and in Fifth Market, the defendant's victory was short-lived, as the Court held that an amended complaint was sufficient.

Form 18 of the Federal Rules of Civil Procedure contains a sample complaint for direct patent infringement, and a range of district courts have held that a Complaint asserting a claim for direct infringement is sufficient if it contains the minimal information listed in Form 18. While several courts have noted that it is difficult to reconcile Form 18 with the Supreme Court’s guidance in Iqbal and Twombly, it appears that a claim for direct infringement requires only the following:

• An allegation of jurisdiction and the specific patent law infringed;
   
• An identification of the patent and a statement that the plaintiff owns the patent;
   
• An identification of at least one infringing product and a statement that the defendant has been infringing the patent “by making, selling, and using” the product;
   
• A statement that the plaintiff has given the defendant notice of its infringement, and
   
• A demand for an injunction and damages.

See McZeal, 501 F.3d 1354, 1356-58;
Mark IV Indus. Corp. v. Transcore, L.P., 2009 U.S. Dist. LEXIS 112069 at *8-*10 (D.Del. Dec. 2, 2009);
Sharafabadi v. University of Idaho, 2009 U.S. Dist. LEXIS 110904 at *10-*11 (W.D. Wash. Nov. 27, 2009);
Mallinckrodt, Inc. v. E-Z-EM, Inc., 2009 U.S. Dist. LEXIS 108696 at *9-*10 (D.Del. Nov. 20, 2009);
Fifth Market, Inc. v. CME Group, Inc., 2009 U.S. Dist. LEXIS 108776 at *3-*4 (D. Del. May 14, 2009)

• A plaintiff is not required to plead specifics as to how an allegedly infringing product works. McZeal, 501 F.3d at 1358; Mark IV, at *10.

Indirect Infringement

There is no form complaint for indirect infringement analogous to Form 18.  As a result, district courts have applied a higher standard for pleading claims of indirect infringement.   One court, Elan, has even held that where a Complaint alleges that a defendant “directly and/or indirectly” infringed, a plaintiff cannot rely on Form 18 but must comply with the stricter standards in Iqbal and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).

To satisfy Iqbal and Twombly, a claim of indirect infringement must include:

• Facts showing how the alleged infringer either induced or contributed to another party’s direct infringement. Sharafabadi at *14.
   
• An allegation that the alleged infringer knew of the patent at the time of the infringing activities. Mallinckrodt at *11.
   
• For induced infringement, an allegation that the alleged infringer specifically intended to induce infringement. Mallinckrodt at *11.
   
• For contributory infringement, an allegation that the alleged infringer knew that the combination for which his component was especially designed was both patented and infringing. Mallinckrodt at *12.

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On January 29, 2010, Judge Ellis issued a comprehensive, 49-page opinion (available here) on the parties’ motions for summary judgment in Netscape Communs. Corp. v. Valueclick, Inc., et al., Civil Action No. 1:09cv225 (E.D. Virginia). Plaintiff Netscape claims that the Defendants willfully infringed U.S. Patent No. 5,774,670 (the ‘670 Patent), known as the “Internet cookie patent.” After several months of discovery, the parties filed for summary judgment on twelve separate issues. Specifically, the parties filed cross-motions on:

(1) invalidity based on the on-sale bar of 35 U.S.C. § 102(b); and

(2) whether plaintiff waived its right to enforce the ‘670 patent.  

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In a February 5 decision, the Federal Circuit clarified that an accused infringer need not have actual knowledge of a patent to be liable for inducement of infringement. SEB S.A. v. Montgomery Ward & Co., Inc., 2010 U.S. App. LEXIS 2454 (Fed. Cir. Feb. 5, 2010).

A little over three years earlier, an en banc panel of the Court held in DSU Med. Corp. v. JMS Co., 471 F.3d 1293, 1304 (Fed. Cir. 2006) that “[t]he requirement that the alleged infringer knew or should have known his actions would induce actual infringement necessarily includes the requirement that he or she knew of the patent.”

The DSU decision would appear to require that an accused infringer have actual knowledge of a patent as a basis for inducement liability. The SEB panel held, though, that DSU did not set out the “metes and bounds” of the knowledge-of-the-patent requirement. Since the record showed that the accused infringer had actual knowledge of the patent in suit, the Court noted, the DSU Court never addressed the scope of knowledge required to prove intent.

The “knowledge” requirement, SEB holds, is met not only by actual knowledge but also by “deliberate indifference” to the existence of a patent. The basis for the Court’s conclusion, though, is unclear. The Court simply notes that inducement requires the specific intent to encourage another’s infringement, and that in other contexts, specific intent includes “deliberate indifference.” This reasoning assumes that the specific intent and knowledge of the patent are not separate elements of proof of inducement. Rather, the Court conflates knowledge of the patent within the requirement of specific intent and concludes that specific intent may be proven not only through actual knowledge but also through deliberate indifference.

The Court also clarified that “deliberate indifference” is not synonymous with a constructive knowledge. Deliberate indifference, unlike constructive knowledge, may require a subjective determination that a defendant knew of and disregarded a risk. Thus, “deliberate indifference” appears to be an intermediate standard, somewhere between constructive and actual knowledge. In fact, the Court held that deliberate indifference “is not different from actual knowledge, but is a form of actual knowledge.”

In SEB, there was no direct evidence of actual knowledge of the patent, but there was adequate evidence that the defendant deliberately disregarded a known risk that the plaintiff had patented its product based on the following factors:

• the defendant purchased the plaintiff’s product in Hong Kong and copied it but did not tell the counsel it hired to conduct a right-to-use study that it had done so, which was “highly suggestive” of deliberate indifference. 
• the defendant’s president was well-versed in the U.S. patent system and understood the plaintiff to be cognizant of patent rights. 
• the defendant produced no exculpatory evidence that it believed there were no patents covering the accused product.

The Court also left the door open to other ways of proving knowledge of a patent. For example, the Court suggested that constructive knowledge of a patent combined with “persuasive evidence of disregard for clear patent markings” may be sufficient.
 

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In view of the Federal Circuit's decision in Wyeth v. Kappos, Case No. 2009-1120 (Jan. 7, 2010), the U.S. Patent and Trademark Office ("PTO") has implemented an interim procedure for patentees to request a recalculation of a patent term adjustment under 35 U.S.C. § 154.  In Wyeth, the Federal Circuit held that "overlap," for the purposes of § 154(B)(2)(A), does not occur unless the delay attributable to the ground(s) specified in § 154(B)(1)(A) ("A delay") occurs at the same time as the delay attributable to the grounds specified in § 154(B)(1)(B) ("B delay").  The A delay grounds relate to the PTO's delay in meeting examination deadlines, and the B delay begins when the PTO fails to issue a patent within 3 years of the actual filing date of the patent application.  Thus, according to Wyeth, the potential for overlapping A delay and B delay can only begin after 3 years from the actual filing date.

In view of Wyeth, the PTO is modifying the computer program it uses to calculate patent term adjustments and such modification should be complete by March 2, 2010.  In the meantime, patentees can request (without a fee) a patent term adjustment recalculation using a form issued by the PTO entitled, Request for Recalculation of Patent Term Adjustment in View of Wyeth.  According to the PTO's interim procedure, a patentee may request a patent term adjustment if (1) the patent issued prior to March 2, 2010, (2) the sole basis for requesting reconsideration of the patent term adjustment is based on Wyeth, and (3) the request is filed within 180 days of the day the patent was granted.  On or after March 2, 2010, a patentee who believes the patent term adjustment calculation for his/her patent is incorrect must file a request for reconsideration under 37 C.F.R. § 1.795(d) that complies with the requirements of 37 C.F.R. 1.705(b)(1) and (b)(2) within two months of the date the patent issued.

For more information, please click here.

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On January 11, the Supreme Court declined certiorari in the case of Astellas Pharma, Inc. v. Lupin, et al., Case No. 09-335, upholding a June, 2007 decision by Judge Payne in the Eastern District of Virginia. Our earlier post on the Federal Circuit's Decision can be found here.

The Astellas case involves a generic version of the drug Omnicef (cefdinir), which is an antibiotic used to treat a number of common infections. The generic manufacturer, Lupin, alleged that Astellas’ patent on crystalline cefdinir only covered the Crystal A form of the drug, and Lupin alleged that its generic version of Omnicef only contained the Crystal B form.

In his claim construction opinion, Judge Payne ruled that Astellas’ patent was limited to the Crystal A form, effectively deciding the case in favor of Lupin. In short, the claims at issue were “product by process” claims, and Judge Payne ruled that each of the process steps in the claim were limitations on the invention. In an en banc decision, the Federal Circuit agreed, settling a long-standing split of authority on product by process claims.

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