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

As we blogged here, Judge Smith’s dismissal of the Complaint in Adiscov, L.L.C. v. Autonomy Corp., Case No. 2:10cv218, 2011 U.S. Dist. LEXIS 11551 (E.D.Va. Jan. 27, 2011), based on Twombly/Iqbal, went a step beyond similar decisions by holding that a patentee must set forth how the accused products infringe the patent at issue.  That decision has caused some among the EDVA patent bar to question how much detail a Complaint must contain to satisfy Fed. R. Civ. P. 8.

Adiscov clearly got the message. Its re-filed Complaint specified the accused products and included a detailed claim chart laying out the basis of its claims. Earlier this week, on a renewed motion to dismiss, Judge Smith held that “Adiscov has cured the fatal deficiencies which caused the court to dismiss its complaint in the first case.” Adiscov, L.L.C. v. Autonomy Corp., 2:11Cv201 (E.D.Va. April 26, 2011) (“Adiscov II”), which can be found here.

Specifically, Adiscov’s complaint met the pleading requirements of Rule 8 because it:

• “specifically identified the Autonomy’s products that it claims to infringe”
• “names the elements of Claim 1 of the ‘760 patent which are specifically infringed”
• states “in general how such products infringe the ‘760 patent.”

Judge Smith brushed aside Autonomy’s arguments that Adiscov’s allegations were overinclusive and conclusory, implying that Rule 8 only requires that a patentee set forth some theory of infringement. Beyond determining whether that theory is plausible, the District Court will not delve any further.

Adiscov II clarifies that Twombly/Iqbal and Rule 8 set a low bar to plead patent infringement that a patentee should be easily able to meet. In sum, a Complaint for patent infringement need only:

1. assert that the plaintiff owns the patent
2. identify the defendants
3. assert that the defendant infringed the patent
4. identify the accused products
5. state in general how the accused products infringe
6. identify the parts of patent law that are implicated.

As a result, dismissals under Twombly/Iqybal will be rare and short-lived, as any competent patent lawyer should be able to meet any grounds for dismissal in a re-filed Complaint.

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On April 20, 2011, the Fourth Circuit affirmed the judgment and injunction entered by Chief Judge James R. Spencer in PBM Products, Inc. v. Mead Johnson & Co., Civil Action No. 3:09cv.269, on December 1, 2009. This lawsuit was the third chapter in a long-running combat between PBM and Mead Johnson relating to baby formula products. PBM sued Mead Johnson twice before, in 2001 and 2002, for similar false advertising, and settled both cases.

PBM filed the most recent suit in April 2009 claiming a false advertising in violation of the Lanham Act (15 U.S.C. § 1125) and product disparagement based on various Mead Johnson claims about its Enfamil product. Mead Johnson shot back with claims for breach of contract, false advertising, and civil contempt based on the prior settlement agreements between the parties, and a claim for defamation arising from PBM CEO Paul Manning’s public statement that “Mead Johnson Lies About Baby Formula … Again.”  None of Mead Johnson’s claims made it to the jury, as Judge Spencer granted PBM summary judgment on the defamation claim, and granted judgment as a matter of law after Mead Johnson’s case in chief on the other claims. PBM’s claim, on the other hand, resulted in a jury verdict and award of $13.5 million in damages, and a permanent injunction against advertising claims found to be false. 

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As we noted here, Judges Bryson and Newman forecasted in the McKesson Tech’s. v. Epic Systems decision issued last week that the full Federal Circuit would have to resolve whether a method claim was directly infringed where the steps of the claim are performed by separate actors who are not under the other’s direction or control.

Sure enough, yesterday the Court granted rehearing en banc in Akamai Technologies v. Limelight Networks, No. 2009-1372 (Fed. Cir. 2011) to address that issue. (en banc order here).

In its order granting rehearing en banc, the Court ordered the parties to address the following question: “If separate entities each perform separate steps of a method claim, under what circumstances would that claim be directly infringed and to what extent would each of the parties be liable?”

Our earlier post discussing the Akamai decision in detail can be found here.

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Much of the reaction to the Federal Circuit’s en banc decision yesterday in TiVo Inc. v. EchoStar Corp., No. 2009-1374 (Fed. Cir. April 20, 2011) (found here), will focus on the Court’s affirmance of the $90 million contempt sanction and the holding that EchoStar waived its challenges to the scope and specificity of the permanent injunction.
That aspect of the decision offers an important cautionary lesson for patent litigators, but the more significant ruling in TiVo was the Court’s unanimous decision to overrule the two-step analysis set forth in KSM Fastening Sys., Inc. v. H.A. Jones Co., 776 F.2d 1522 (Fed. Cir. 1985) for determining whether a contempt hearing is appropriate for evaluating the effectiveness of a design-around. In TiVo, the Court collapsed “the current two-fold KSM inquiry into one, eliminating the separate determination whether contempt proceedings were properly initiated.” TiVo, slip op. at 17.
The contempt analysis for redesigned products will now proceed as follows:

• The patentee moving for contempt “must prove both that the newly accused product is not more than colorably different from the product found to infringe and that the newly accused product actually infringes” by clear and convincing evidence.
• “the contempt analysis must focus initially on the differences between the features relied upon to establish infringement and the modified features of the newly accused product.” The analysis must focus on “those aspects of the product that were previously alleged to be, and were a basis for, the prior finding of infringement.”
• “Where one or more of those elements previously found to infringe has been modified, or removed, the court must make an inquiry into whether that modification is significant. If those differences between the old and new elements are significant, the newly accused product as a whole shall be deemed more than colorably different from the adjudged infringing one” and contempt is inappropriate.
• “The court must also look to the relevant prior art, if any is available, to determine if the modification merely employs or combines elements already known in the prior art …”
• “[W]hen a court concludes there are no more than colorable differences between the adjudged infringing product and modified product ... the court is required to evaluate the modified elements of the newly accused product against the asserted claim, on a limitation by limitation basis, to ensure that each limitation continues to be met.”
• The Court’s finding on both whether the modified product is colorably different and whether the modified product continues to infringe are reviewed for clear error.

In TiVo, the Court vacated the finding of contempt on the infringement portion of the injunction because the feature accused of infringement in the contempt proceeding was different from the feature accused of infringement at trial. The Court remanded the case to the district court for a determination of whether the differences between the two features at issue were significant. If that were the case, the new device would be more than colorably different, and TiVo would have to pursue a new infringement proceeding against the modified product.
In many instances, the TiVo analysis may cut off a patentee’s ability to use the relatively swift contempt process to attack the sufficiency of a design-around. Where a design-around eliminates or even just changes the feature accused of infringement at trial, a patentee may find it easier to file a new infringement action rather than attempt to meet the heavy clear and convincing burden of proof to obtain a contempt sanction.

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In McKesson Tech’s. Inc. v. Epic Sys. Corp., No. 2010-1291, 2011 U.S. App. LEXIS 7531 (Fed. Cir. April 12, 2011), found here, the Federal Circuit reaffirmed its recent holdings that infringement of a method claim requires that all the steps of the claim be performed by a single party -- but not without a strong dissent that may portend en banc review.

In McKesson, the defendant sold an interactive computer system that allowed health care providers to create personalized web pages for their patients. The parties did not dispute that the first step of the asserted method claims was performed by the patient and the remaining steps by the health care provider. Citing a series of recent cases, including BMC Resources, Inc. v. Paymentech LP, 498 F.3d 1373 (Fed. Cir. 2007), Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008) and Akamai Tech’s., Inc. v. Limelight Networks, Inc., 629 F.3d 1311 (Fed. Cir. 2010) (summarized here), the Court held that the actions of multiple parties could establish direct infringement of a method claim only where one party exercised control or direction over the entire process. Since the patients were not agents of the health care providers nor were they contractually obligated to perform any of the method steps, the patentee could not show the necessary control or direction.

While McKesson breaks no new legal ground, it is interesting that both Judge Bryson, in a two-sentence concurrence, and Judge Newman, in a lengthy dissent. suggested that the issue may warrant en banc review. Judge Newman pointed out that there was no bar to patenting computer-implemented methods simply because their performance involves more than one entity, yet the majority’s ruling effectively held that such claims could never be infringed. The majority erred, she argued, in pronouncing a “single entity rule” as an absolute rule of law when “no rule of law, no precedent, prohibits patenting and enforcing a method that is performed by interacting entities.”

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After Exergen v. Wal-Mart Stores, Inc., 575 F.3d 1312 (Fed. Cir. 2009) (summarized here), it appeared that claims of inequitable conduct would fail at the pleading stage because of the requirements of a specific “who, what, when, where and how” of the alleged misrepresentation and specific facts that permitted an inference of an intent to deceive.

A recent case before Judge Brinkema, though, breathes some new life into inequitable conduct claims in the EDVA. Rolls-Royce PLC v. United Tech’s. Corp., 1:10CV457, 2011 U.S. Dist. LEXIS 20679 (E.D.Va. March 2, 2011) (Brinkema, J.) (found here). The key is the specificity of the allegations. If a defendant's allegations state a plausible claim of inequitable conduct, Judge Brinkema concluded, questions of materiality and intent are merely issues of disputed fact unsuitable for resolution on either a motion to dismiss or a motion for summary judgment. 

In her decision on the motion to dismiss in Rolls-Royce, Judge Brinkema addressed four theories of inequitable conduct:

• First, the defendant claimed the inventor had filed a false inventor declaration. Judge Brinkema held that the inventor’s deposition testimony presented a plausible claim of a false statement and “would lead to a reasonable inference that Rolls-Royce intended to deceive the PTO by filing the declaration.”
  
• Second, the defendant alleged that Rolls-Royce had falsely claimed a priority date in a continuation-in-part application in order to avoid disclosure of material prior art. Judge Brinkema held that the defendant’s specific identification of material prior art and its explanation of Rolls-Royce's reasons for its conduct date were sufficient. Whether the application contained new subject matter, the Court held, was a question of fact.
   
• Third, the defendant asserted that Rolls-Royce failed to disclose several pieces of prior art and proffered reasons why the art was material, not cumulative and might have impacted the examiner’s review. Rolls-Royce claimed that the art was cumulative, but Judge Brinkema held that it could not make that determination on a motion to dismiss.
  
• Finally, the defendant claimed that Rolls-Royce misrepresented the defendant’s patent during prosecution. Rolls-Royce conceded that it had mischaracterized the patent but claimed its statements were immaterial. Again, Judge Brinkema held that the allegations satisfied Rule 9(b)’s standard of specificity and that whether Rolls-Royce’s statement was material required evidence beyond the scope of a motion to dismiss.

In essence, Judge Brinkema concluded at the motion to dismiss stage that the defendant had established a prima facie case of inequitable conduct, particularly on issue of intent to deceive.  Indeed, Judge Brinkema denied Rolls-Royce’s motion for summary judgment based on a lack of intent to deceive on April 8. Thus, the lesson for litigants may be that if claims of inequitable conduct are sufficiently fact-based to overcome a motion to dismiss, they will also create a genuine issue of fact to defeat summary judgment.

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The VSB Intellectual Property Section has announced that  Mr. Michael McCabe will be presenting the IP Section's third annual Spring Ethics CLE that will be conducted both on-site and via the Internet. Mr. McCabe’s presentation will cover various ethical issues that arise in intellectual property prosecution and litigation settings. Mr. McCabe is a partner at Oblon Spivak, where he is Chairman of the firm’s Risk Management Committee.  In this role, he advises firm members on ethical duties before the state bar and the U.S.P.T.O.

The CLE is schedule for Tuesday, May 10, 2011, 10:00 a.m.–11:00 a.m. (registration begins at 9:30 a.m.) The seminar will be presented both as a live event and as a webinar.  The registration form can be downloaded here.

The live event will take place in our Richmond office at:
Troutman Sanders Building
1001 Haxall Point
Richmond, VA 23219
Directions can be found here.

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As reported by Patently-O here, intellectual property law scholar John Duffy will join the UVA Law School faculty this fall. Duffy, who is currently a professor at George Washington University Law School, has been named as one of the 25 most influential people in the field of intellectual property by American Lawyer and one of the 50 most influential people in the world by the UK publication Managing Intellectual Property. In 2007, he represented the prevailing petitioner in KSR v. Teleflex before the Supreme Court, and in 2008 the Federal Circuit invited him to present oral argument in its en banc consideration of In re Bilski. Duffy’s academic scholarship has focused on the relationship between patents and competition and, in particular, on how competition to obtain rights affects the legal and economic structure of the patent system. The announcement by UVA can be found here.

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