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

Sen. Patrick Leahy announced last Thursday that agreement had been reached by a bipartisan group of Senators on a compromise bill providing for patent reform. The full text of the bill can be found here.

Undoubtedly, the blogosphere and legal publications will shortly become saturated with analysis of the compromise bill and speculation about its chances for passage.  Last April, we blogged about a relatively minor provision of the bill -- the provisions addressing venue.  As patent litigators in Virignia, we have a particular interest in venue, because the venue provisions of the bill will direcly affect the volume of patent cases filed here.

The compromise version of the bill includes the same provisions discussed in our earlier post, which can be found here. Here are the highlights (all of which are discussed in detail in the earlier post):

• the legislation provides that a district court shall transfer a case upon finding that a transferee forum is clearly more convenient. (Sec. 8 of the bill, page 72).
   
• the legislation establishes a pilot program in six U.S. District Courts that provides $5 million a year for education of judges and hiring of patent law clerks. (Sec. 16 of the bill, pages 92-93). 
   
• the legislation changes venue for civil actions appealing decisions by the BPAI relating to patent rejections and interferences, civil actions appealing decisions of the PTO relating to patent term adjustments, civil actions appealing decisions of the TTAB relating to registrations of a trademark, and civil actions appealing suspensions or exclusions from practice before the PTO from the District Court in Washington to the Eastern District of Virginia. (Sec. 8 of the bill, pages 72-73).

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On February 25, a jury found in favor of the patentee, CompX International, in the case of Humanscale Corp. v. CompX International, et al., Case No. 3:09cv86 (E.D. Va.), and awarded $19 million dollars in past damages and a reasonable royalty of 6% of future sales of infringing products. The jury’s verdict can be found here.

The patents-at-issue, U.S. Patent Nos. 5,037,054 and 5,257,767, cover adjustable platforms for computer keyboards. After an eight-day jury trial before Chief Judge Spencer in the Richmond Division of the EDVA, the jury found that Humanscale’s accused keyboards infringed three claims of the ‘054 patent and two claims of the ‘767 patent. The jury also found that the patents were valid and rejected Humanscale’s on-sale bar and laches defenses.
 

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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 Twombley, 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. Twombley, 550 U.S. 544 (2007).

To satisfy Iqbal and Twombley, 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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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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In Heinz Kettler Gmbh v. Little Tikes Co., Civil Action No. 2:09cv500 (E.D. Va.), Judge Doumar denied Little Tikes’ motion to dismiss Kettler’s claims for patent infringement and awarded sanctions against Little Tikes for filing the motion to dismiss in the first place.  The case against Little Tikes follows an earlier case that Kettler brought against Rand International and Little Tikes, Heinz Kellter GmbH v. Rand International, Case No. 1:08cv679 (E.D. Va.), for infringement of Kettler’s patents by certain tricycles sold by Rand International and Little Tikes.  In that case, Kettler agreed to dismiss its claims against Little Tikes relating to the Ofrat Model No. 129H tricycle at issue based upon Little Tikes’ multiple representations, in discovery responses and correspondence from Little Tikes’ counsel, that Little Tikes and did not manufacture, sell or distribute the Ofrat Model No. 129H tricycles, and that Little Tikes was nothing more than a trademark licensor.  Kettler later learned that these representations were, “at best, misinformation” (according to Judge Doumar), and brought suit against Little Tikes and its parent, MGA Entertainment, Inc., for patent infringement by Little Tikes’ Product No. 615221. 

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 On December 30, 2009, the Federal Circuit in The Forest Group, Inc. v. Bon Tool Company, issued a unanimous decision establishing a new standard for assessing the size of the penalty in an action for false patent marking.  This is a potentially significant development in the area of false patent marking. A full discussion of Forest Group, authored by James Moore Bollinger, George B. Snyder and Laura E. Krawczyk, can be found here.

In Pequignot v. Solo Cup Co., No 1:07cv897-LMB/TCB (E.D. Va.), which we discussed in April 2009 (see link), Judge Brinkema initially denied Solo Cup’s motion to dismiss, but later granted summary judgment to Solo Cups upon finding that Solo lacked an intent to deceive the public given its reasonable reliance on advice of counsel in deciding to replace patent-marking molds with non-marking molds in a gradual fashion. See Pequignot v. Solo Cup Co., 646 F. Supp.2d 790, 2009 U.S. Dist. LEXIS 76032 (E.D. Va. August 25, 2009). Significantly, Judge Brinkema also held that an "offense" under the statute is the overall decision to mark improperly and rejected Pequignot’s argument that Solo should be penalized for each and every lid it marked. This decision by Brinkema may not stand given the logic of the Federal Circuit’s decision in Forest Group.

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LegalMetric, an intellectual property case law research and analysis company, recently released its list of district courts in which the most patent cases were filed in 2009.  That the Central District of California and Eastern District of Texas came in first and second, respectively, probably won't surprise any IP litigators.  Our own Eastern District of Virginia (the "Rocket Docket") placed tenth.

LegalMetric Director of Research Greg Upchurch, in a conversation with this author, stated that LegalMetric does a bulk download every quarter of every case identified in PACER as a patent case.  The company's business focuses on analyzing IP decisions so as to enable litigators to evaluate how particular courts, judges, and issues may impact their case.  Statistics like the 2009 patent filings list are a happy by-product of that business.

I think it's a great thing that there can be any degree of data mining from PACER and hope that the federal courts will continue to expand the ability to do queries and analysis.  In our electronic world, the data is there; the challenge is finding, organizing, and making good use of it.

Those interested in more information about the opportunities and challenges of litigating patent cases in the Eastern District of Virginia can check out past publications on that topic by my colleagues Robert Angle and Dabney Carr (listed under "Publications" on each's page or accessible directly here and here) and contact one of this blog's authors.

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Four times over the course of less than a year, the Federal Circuit has reversed a decision by the Eastern District of Texas (EDTex) denying a motion to transfer venue under 28 U.S.C. § 1404(a). Posts on the first two decisions, In re: TS Tech USA Corp., 551 F.3d 1315 (Fed. Cir. 2008) and In re: Genentech, 566 F. 3d 1338 (Fed. Cir. 2009), can be found here and here.

Last month, the Federal Circuit issued two more writs of mandamus reversing the EDTex for refusing to transfer a patent case to a different venue. See In re: Nintendo Co., Ltd., Misc. No. 914, 2009 U.S. App. LEXIS 27647 (Fed. Cir. Dec. 17, 2009); In re: Hoffman-La Roche Inc., Misc. No. 911, 2009 U.S. App. LEXIS 26244 (Fed. Cir. Dec. 2, 2009).

In Hoffman, the Court reversed a decision by EDTex Chief Judge Folsom denying transfer of a pharmaceutical patent case to the Eastern District of North Carolina.

• The Federal Circuit rejected the reasoning (which can be found in numerous EDTex cases) that where a case is “decentralized” because witnesses and documents are located across the country, transfer should be denied.
   
• The court held that the district court improperly ignored the significant contrast between the strong connections the cause of action had with North Carolina, where the accused drug was developed, and the Eastern District of Texas, which had no factual connection to the case.
   
• The Court also held that a plaintiff could not manipulate venue by transferring documents to litigation counsel in the EDTex, calling the assertion that these were “Texas” documents a “fiction” and characterizing the district court’s ruling as having “no legally rational basis.”

In Nintendo, the Court used similarly strong language in reversing a denial of transfer by Judge Davis, holding that “in a case featuring most witnesses and evidence closer to the transferee venue with few or no convenience factors favoring the venue chosen by the plaintiff, the trial court should grant a motion to transfer.”

• Unlike Judge Folsom in Hoffman-La Roche, Judge Davis acknowledged that the Western District of Washington had a strong interest in the dispute, while the EDTex did not.
   
• As in Hoffman-La Roche, the Federal Circuit rejected the reasoning that the EDTex was as convenient as any other forum because witnesses and documents were located in several locations. Instead, the Court should have more strongly considered the convenience of witnesses who must travel farther to reach the EDTex and the location of the Defendant’s documents in Washington.
   
• The Federal Circuit also chided the EDTex court for glossing over a record “without a single relevant factor favoring the plaintiff’s chosen venue.”

Despite the strong messages that the Federal Circuit continues to send regarding venue motions in the EDTex, it remains to be seen whether the district judges will listen. Hoffman-La Roche and Nintendo will be helpful to sole defendants sued in the EDTex, but transfer will continue to remain difficult where there are multiple defendants in different forums.

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            Hopefully you have already gotten a gift for that special IP litigant in your life this year.  If you’re thinking ahead to a 2010 wish list and have a preliminary injunction in mind, you may have noticed last month’s opinion by U.S. District Judge Henry E. Hudson in PRE Holding, Inc. v. Monaghan Medical Corp., no. 3:09CV458, 2009 U.S. Dist. LEXIS 107222 (E.D. Va. Nov. 17, 2009) (page citations to this opinion are to the version freely available from PACER/ECF).

            Other IP web news sources have questioned whether this opinion raises the bar for a preliminary injunction for patent litigants and whether it is consistent with case law from the U.S. Court of Appeals for the Federal Circuit.  (Federal Circuit law governs the issuance of injunctive relief under 35 U.S.C § 283 because the question “involves substantive matters unique to patent law.”  E.g., Hybritech, Inc. v. Abbott Labs, 849 F.2d 1446, 1451 n.12 (Fed. Cir. 1988).  “[P]urely procedural questions . . . are controlled by the law of the appropriate regional circuit.”  Id.

            In the post below, I conclude that debate over the PRE Holding opinion reflects the difficulties with the preliminary injunction standard and the hazards of not being concise, and that the PRE Holding opinion does not represent a change in the law.

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Yesterday the Supreme Court of the United States heard oral arguments in Bilski v. Kappos (SCotUS case no. 08-964, on appeal from In re Bilski, 545 F.3d 943 (Fed. Cir. 2008)).

The Supreme Court’s website has the oral argument transcript. The Washington Post report shows a recognition of the high stakes and illustrations of skepticism in the justices’ hypotheticals. The New York Times also describes discomfort with the patent at issue and notes the unusual level of attention the case has received, with one GW professor labeling it “the case of the century for patent law.”

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This post continues a roundup of recent Eastern District of Virginia decisions in IP cases, covering a patent summary judgment opinion and a Markman opinion.

In Rutherford Controls Int’l Corp. v. Alarm Controls Corp., Civil Action No. 3:08-cv-369, 2009 U.S. Dist. LEXIS 98762 (E.D. Va. Oct. 23, 2009), District Judge Henry E. Hudson issued an opinion rendering a decision on several summary judgment motions pending before the Court in a patent infringement action consisting of several consolidated cases. Rutherford filed a complaint for infringement against defendants Vanguard Security Engineering Corporation Ltd. and Harco Enterprise, and Vanguard and Harco filed counterclaims against Rutherford seeking declaratory judgment.

In a parallel action, Rutherford filed suit against Security Door Controls, Inc. seeking both damages for infringement and declaratory judgment. Security Door filed a counterclaim seeking declaratory judgment and damages for infringement. At issue were three patents regarding electronic door locking and unlocking mechanisms, often used to control access to buildings or closed areas. Two of the patent belonged to Rutherford and one was assigned to Security Door.

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In a case appealed from the Eastern District of Virginia, the Federal Circuit has clarified how the doctrine of res judicata / claim preclusion applies to subsequent patent infringement actions.

On September 8, 2009, the Federal Circuit affirmed Nystrom v. Trex Co., 553 F. Supp. 2d 628 (E.D. Va. 2008) [Norfolk – Kelley, J.]. See Nystrom v. Trex Co., case no. 09-1026, 2009 U.S. App. LEXIS 20016 (Fed. Cir.). The opinion has been marked as precedential but not yet assigned an F.3d citation. The Federal Circuit affirmed on alternative grounds, however, reaching a different conclusion with respect to claim preclusion than the Eastern District of Virginia did.

This appeal was from Plaintiff Ron Nystrom’s second suit against several defendants, including Home Depot, alleging infringement of a particular patent related to certain types of boards for decking (“the ‘831 patent”). In the first suit, the judge construed the claims in the patent to apply to materials made of wood and manufactured with woodworking techniques and thus found no infringement in the challenged products because they were made of composite materials and not through woodworking techniques. 

Although the Eastern District granted summary judgment against Nystrom, it rejected Defendants’ claim preclusion argument in the second suit. Relying primarily on Hallco Mfg. Co. v. Foster (“Hallco II”), 256 F.3d 1290, 1294 (Fed. Cir. 2001), and Del Mar Avionics, Inc. v. Quinton Instrument Co., 836 F.2d 1320 (Fed. Cir. 1987), Judge Kelley explained that claim preclusion did not apply because the allegedly infringing product in the second suit was materially different from the allegedly infringing product in the first suit and because the proper way to apply the “essentially the same” test from prior Federal Circuit cases was to “compare[ ] device to device,” rather than the device to the claim. See Nystrom, 553 F.Supp.2d at 632, 633.

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Last week’s decision by the Federal Circuit regarding the pleading requirements for an inequitable conduct claim, Exergen Corp. v. Wal-Mart Stores, Inc., 2009 U.S. App. LEXIS 17311 (Fed. Cir. Aug. 4, 2009), and the Supreme Court’s decision earlier this summer in Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009) may foreshadow additional enhanced pleading requirements in patent infringement cases. 

Robert Matthews at Mathews Patent-Law Consulting has published a detailed analysis of Exergen that can be found here. In short, under Fed.R.Civ.P. 9, a claim of inequitable conduct must include specific identification of the who, what, when, where and how of the material misrepresentation committed before the PTO. As Matthews states, under Exergen, “an accused infringer must identify the exact information within a withheld prior art reference that it alleges is material, identify where that information can be found in the reference, identify the particular claim limitations or combination of claim limitations for which the withheld information is material, and then show how the prosecution record lacked that information.” 

An accused infringer must also identify by name the specific individual who allegedly knew of the allegedly material information and withheld or misrepresented that information to the PTO. A party may plead “on information and belief” but only if essential information lies within another party’s control and only if the pleading sets forth specific facts upon which the belief is reasonably based. Thus, the mere fact that an applicant disclosed a reference while prosecuting one application but did not disclose the same reference while prosecuting a second application is insufficient to plead the requirement of deceptive intent. 

Exergen echoes the Supreme Court’s decisions in Iqbal and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) that under Fed.R.Civ. P. 8, a pleading offering “labels and conclusions” or a “formulaic recitation of a cause of action will not do.” As the Court stated in Iqbal, “While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.” Thus, a plaintiff must make “well-pleaded factual allegations” that “plausibly give rise to an entitlement to relief.” 

Exergen takes Iqbal and Twombley a step further, requiring allegation of facts with a high degree of specificity and detail, and Exergen may presage stricter pleading requirements for other types of patent claims and defenses. 

So far, though, the Federal Circuit has not required stricter pleading of patent infringement claims. Applying Twombly, the Federal Circuit has held that a claim for patent infringement must only assert that the plaintiff owns the patent and that the defendant infringed the patent, must describe, in general terms, “the means by which the patent was infringed” and must identify the specific parts of patent law that are implicated. McZeal v. Sprint Nextel Corp., 501 F.3d 1354, 1357 (Fed. Cir. 2007). A patentee “is not required to specifically include each element of the claims of the asserted patent." Thus, here in Virginia, Judge Payne has held that a plaintiff satisfies McZeal by identifying the infringing devices at issue. Taltwell, LLC v. Zonet USA Corp., 2007 U.S. Dist. LEXIS 93465 at *40 (E.D.Va. Dec. 20, 2007).  Judge Dyk dissented in McZeal, arguing that a patentee should be required to specify which claims are infringed and the features of the accused device that correspond to the claim limitations, and Iqbal arguably supports Judge Dyk’s position. At this point, though, it appears that the Federal Circuit will not impose stricter requirements for pleading patent infringement, even though a plaintiff’s Rule 11 obligations requires a detailed infringement analysis before suit is filed and such information often must be provided in a claim chart filed early in the case. 

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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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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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Below is a guest post from my colleague Merril Hirsh about a recent Federal Circuit decision on patent pools: 

On April 20, 2009, the Federal Circuit issued a 2-1 decision in Princo Corp. v. Int’l Trade Comm’n, analyzing whether there was "patent abuse" in the operation of a patent pool used for compact discs. The majority held that patent pools that are "too deep" (because they include unnecessary patents) could constitute an abusive tying arrangement (but that this one did not); and that patent pool that are "too wide" (because they also restrict the development of potentially alternative technology) could constitute an abusive agreement not to compete (and this one might). Read more about this important decision here.
 

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To start, I have to admit my bias in favor of having local patent rules for the U.S. District Court for the Eastern District of Virginia (the "EDVA") and was involved in the process of the proposal discussed below. With that disclosure, I urge you to consider and offer support for this proposal. Obviously, the judges of the EDVA will 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. Below is the text from an email distributed to the members of the Virginia State Bar’s Intellectual Property Section:

Over the past several years, many U.S. district courts have adopted some form of local patent rules (see http://www.nyipla.org/public/PatentLocalRules.doc for a slightly out-of-date list of U.S. district courts that have adopted some form of local patent rules) to provide judges and parties with a roadmap for handling patent cases. There are no local rules for patent cases in the U.S. District Court for the Eastern District of Virginia (the "EDVA"), and, indeed, the manner in which Judges in the EDVA handle patent cases vary widely from district to district and judge to judge. Believing that the EDVA would benefit from the adoption of some local rules for patent cases, several members of this IP Section of the Virginia States Bar contacted Chief Judge James C. Spencer to gauge the judges'  willingness to consider a proposal for some sort of local patent rules and to clarify the procedure for having such a proposal considered by the Court. At that time, Chief Judge Spencer expressed a willingness to consider local patent rules and described the procedure for getting such proposed local rules considered, which involves submitting them to a Local Rules subcommittee of judges for consideration over the summer so that they can be vetted and presented at the Court's annual conference in the Fall. Thus, he suggested that any proposal be submitted by late May or early June. By way of further guidance and advice, Chief Judge Spencer suggested that the proposed rules not be too long or intricate, and that they afford the judges substantial discretion in implementing the proposed rules or procedures in their own cases.
 
With this guidance and timeline in mind, a small working group (involving Dabney Carr, Maya Eckstein, Dave Finkelson, Dana McDaniel, Chip Molster, Steve Noona, Bob Barrett and Robert Angle) worked to craft a proposal that balances the various competing factors and interests in EDVA patent litigation, promotes consistency amongst the divisions, and saves the parties involved time and money. Attached is a draft proposed Local Rule and model Pretrial Order. Without explaining all of the back-and-forth that went into them, the proposed Local Rule and model Pretrial Order are drawn from practices and procedures already used by some of the judges in the EDVA, require parties to produce relevant disclosures and encourage resolution of claim terms early in the case to ameliorate the problem of late claim construction overlapping with expert witness disclosures, and leave much of the implementation to the discretion of the individual judges (which was deemed necessary to have any chance of adoption by the Court as a whole). The draft proposal has been reviewed with Chief Judge Spencer and a few other EDVA judges, all of whom have been generally favorable to the proposal.  Before making a formal presentation of the proposed Local Rule and model Pretrial Order to the Court, however, the drafters of the proposed Local Rule and model Pretrial Order are seeking the review and support of this Section and other IP-related organizations in the state. 

Please review the attached draft Local Patent Rule and model Pretrial Order and provide any questions or feedback you may have to Bob Barrett at rbarrett@hunton.com by May 15.

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On March 27, 2009, Judge Brinkema ruled in Pequignot v. Solo Cup Company, 2009 U.S. Dist. LEXIS 26020 (E.D.Va. March 29, 2009), that 35 U.S.C. § 292 -- which prohibits false patent marking -- is "one of the few remaining qui tam statutes in American law." Matthew Pequignot, a licensed patent attorney, sued the Solo Cup Company ("Solo"), the well-known maker of many disposable cups, lids, plates, bowls and utensils, for falsely markings its products with two expired patents, U.S. Patent No. RE28, 797, entitled "Lid," and U.S. Patent No. 4,589,569, entitled "Lid for Drinking Cup," and for including the phrase "This product may be covered by one or more U.S. or foreign pending or issued patents" on products that were not protected by any patent or pending patent application. Solo moved to dismiss asserting that Pequignot lacked Article III standing because he failed to allege any actual or imminent injury. Solo also argued that Pequignot’s claims violated the constitutional separation of powers doctrine under Article II. Judge Brinkema rejected both arguments.

While agreeing that Pequignot lacked Article III standing as a traditional plaintiff, Judge Brinkema held that § 292(b) confers standing on him to sue as a qui tam relator. Section 292(a) provides that whoever falsely marks a product with either a patent number, the words "patent" or "patent pending," or other words or numbers implying that the product is protected by a current or pending patent when it is not, and does so with the intent of deceiving the public, "[s]hall be fined not more than $500 for every such offense." Significantly, § 292(b) provides that "Any person may sue for the penalty, in which event one-half shall go to the person suing and the other to the use of the United States." (Emphasis added). Judge Brinkema explained that § 292(b) meets five of the six elements of a qui tam statute:

It defines a wrong to the government as the false patent marking in violation of § 292(a). It imposes a statutory penalty of up to $500 per violation. It provides that "any person may sue for the penalty," regardless of whether or not such a person is personally harmed. Finally, it allows the suing person to receive half of the recovery from the suit, with the remainder going to the government.

Id. 2009 U.S. Dist. LEXIS 26020 at *18. Judge Brinkema also noted that "the Supreme Court and those courts that have adjudicated cases under § 292 have explicitly termed a § 292(b) a qui tam statute."  Id. at *18-19 (citations omitted). Accordingly, "[t]hese factors are more than sufficient to conclude that § 292(b) is indeed a qui tam statute, and therefore, that Pequignot has Article III standing, as a partial assignee of the government’s claims, to sue Solo."  Id. at *26.

Judge Brinkema swept aside Solo’s argument that such a construction of § 292(b) violates Article II by impermissibly undermining the Executive Branch’s ability to control qui tam litigation:

Enforcement of the substantive provisions of § 292 is not the type of executive function whose delegation to an authority not controlled by the Executive Branch would presumptively raise serious Article II questions.

Id. at *37. Judge Brinkema appeared to rue her decision to deny the motion to dismiss, describing the survival of § 292(b) as a qui tam statute as "likely an accident of history."  "The only practical impact of the qui tam provisions of § 292(b) appears to be its potential to benefit individuals, such as the plaintiff in the case at bar, who have chosen to research expired or invalid patent markings and to file lawsuits in the hope of financial gain."  Id. at *42.  Judge Brinkema invited Solo and other potential defendants to seek revision of it in Congress as has been done with other qui tam statutes. Until then, however, Pequignot opens the door for other qui tam plaintiffs to get into the potentially lucrative game of suing product manufacturers who continue to mark their products with expired patents.

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The Federal Judicial Center has recently published a draft “Patent Case Management Judicial Guide” which is available on-line.  The Patent Case Management Guide is described as a “comprehensive, user-friendly, and practical judicial guide for managing patent cases” that addresses the distinctive case management challenges of patent litigation.  

The Guide is primarily intended to be a resource for district judges. Like past Federal Judicial Center publications, such as the Manual for Complex Litigation and the Reference Manual on Scientific Evidence, the Patent Case Management Guide is likely to become widely used by district judges as an authoritative source for best practices for patent case management. 

The Patent Case Management Guide includes guidelines on

• preliminary injunctions
• discovery
• claim construction
• summary judgment
• trial management
• ANDA cases
• a “Patent Law Primer” for judges
• patent local rules from the Northern District of California and the District of New Jersey
• Model Patent Jury Instructions from the Northern District of California (2007) and the National Jury Instruction Project (December, 2008). 

The Patent Case Management Guide is authored by Professor Peter Menell of the Berkeley Center of Law and Technology, Lynn Pasahow at Fenwick & West LLP, James Pooley at Morrison & Foerster LLP and Matthew Powers at Weil, Gotshal & Manges LLP. The Judicial Advisory Board for the Guide includes district judges from around the country, including Judge Payne of the Eastern District of Virginia, as well as three Federal Circuit Judges.

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On April 2, the Senate Judiciary Committee passed a compromise version of S. 515, the Patent Reform Act (the “Act”). The original bill can be found here, and the amended bill is here.  A few observations on the Act’s impact on litigation in Virginia:

Venue

• The original bill limited venue in most patent cases to districts where the defendant is incorporated, has its principal place of business or has a “regular and established physical facility . . . that constitutes a substantial portion of [its] operations.” This provision would have shifted cases from popular plaintiff’s forums like the Eastern District of Texas to the homes of high-tech companies such as California, Delaware and New Jersey/New York and perhaps Virginia, based on the high-tech presence in Northern Virginia.

• The amended bill replaced those venue provisions with a very short new subsection, 28 U.S.C. §1400(c), which provides that “for the convenience of the parties and witnesses, in the interest of justice,” a district court shall transfer a patent case “upon a showing that the transferee venue is "clearly more convenient” than the current venue. (emphasis added).

• The “clearly more convenient” language comes from In re Volkswagen, 545 F.3d 304, 315 (5th Cir. 2008) (en banc) and In re TS Tech, 551 F.3d 1315 (Fed. Cir. 2008). Some commentators have characterized the amendments as “codifying” TS Tech, but the true impact is likely to be more muddled. Since the Act does not alter 28 U.S.C. § 1404(a), courts may well continue to apply their existing venue transfer standards and ignore the “clearly more convenient” standard. More likely, courts will simply add the “clearly more convenient” standard to their existing analysis.

• In Virginia, a “clearly more convenient” standard may produce fewer venue transfers. In several post-TS Tech decisions, transfer has been denied as not “clearly more convenient” where parties, evidence or witnesses are located in several forums. See Novartis Vaccines & Diagnostics, Inc. v. Hoffman LaRoche, Inc., 2009 U.S. Dist. LEXIS 14656 (E.D. Tex. Feb. 3, 2009) (transfer denied where drug developed in North Carolina, manufactured in Colorado, processed in Michigan or Switzerland, packaged in New Jersey and sold nationwide). Under Virginia federal court precedent, by contrast, transfer is often granted if the parties are not located in Virginia and Virginia is not the “center of accused activity.” See GTE Wireless v. Qualcomm, 71 F.Supp. 2d 517, 519 (E.D.Va. 1999). Thus, a “clearly more convenient” standard may shift the focus from whether the case has ties to Virginia to whether the case has ties to a particular transferee district. That accused activity is occurring nationwide, for instance, would count against transfer rather than, as it presently does, in favor of transfer.

District Court Pilot Program

• The amended bill establishes a 10-year pilot program for patent cases in at least six U.S. District Courts. Courts included in the program must be among the 15 districts with the largest number of patent cases or that have adopted local patent rules. At least three of the courts must have more than 10 active judges (including three judges who have requested and been designated to hear patent cases), and at least three must have fewer than 10 active judges (including two designated patent judges). The pilot program includes $5 million a year for education of judges and hiring patent law clerks. Cases would still be randomly assigned to all judges, but non-patent judges could decline to accept patent cases.

Venue for Patent and Trademark Appeals

• A technical amendment in the Act moves venue for civil actions appealing various decisions of the PTO, BPAI and TTAB from the District Court in Washington, D.C. to the Eastern District of Virginia. Such actions include civil actions appealing decisions by the BPAI relating to patent rejections (35 USC 145) and interferences (35 USC 146), civil actions appealing decisions by the PTO relating to patent term adjustments (35 USC 154(b)(4)(A)), civil actions appealing decisions of the TTAB relating to registration of a trademark (15 USC 1071(b)(4)), and civil actions appealing suspensions or exclusions from practice before the PTO (35 USC 32). Though such actions are relatively rare, this change could increase the volume of patent practice in Virginia.

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The Eastern District of Texas led the country in patent case filings in 2008 with 306, more than 100 cases more than the next two districts (the Central District of California with 198 and the Northern District of California with 171).

In two recent cases, though, the Fifth Circuit and the Federal Circuit overturned rulings from the Eastern District of Texas denying motions to transfer venue. In the Federal Circuit case, In re: TS Tech USA Corp., 551 F. 3d 1315 (Fed. Cir. 2008), decided on December 29, the Court held that the district judge had committed a “clear abuse of discretion” in refusing to transfer a case to Ohio when the relevant evidence and witnesses were located in Ohio, Michigan and Canada.

In the three months since TS Tech was decided, there have been 9 rulings on motions to transfer venue from the Eastern District of Texas. Five of those motions have been granted and four have been denied. Transfer has been denied where the relevant evidence or witnesses was not confined to a specific forum or region but are located around the country or in other countries, even if the case has no strong connection to Texas. Transfer has been granted where most of the parties, witnesses or evidence are located in one particular forum or where the plaintiff or the inventors are located outside of Texas.

Tellingly, since TS Tech, patent case filings in the Eastern District of Texas appear to be plummeting. So far in 2009, the Eastern District of Texas has fallen into fourth place, behind the Central District of California, the Northern District of California and the District of New Jersey. On average, filings in the Eastern District of Texas appear down approximately 40% off last year’s rate, while filings in the next three most popular districts appear on pace with last year. See Stanford IP Litigation Clearinghouse (registration required).

Here in Virginia, patent case filings are in line with average filings in 2008. The drop in filings in Texas, though, could mean that the Eastern District of Virginia, with its fast docket and the presence of a number of high technology companies in the district, may become even more popular for patent case filings.

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In recent years, federal district courts around the country have enacted local rules governing patent cases. The  Northern District of California was one of the first, and its local rules are now extensive and detailed. The Eastern District of Texas enacted local rules to speed up the litigation of patent cases, and it is now  the most popular forums for the litigation of patent suits in the country. The volume of patent cases, however, has slowed the E.D. Texas docket considerably.  Other districts have followed suit, including the Western District of Pennsylvania and, most recently, the District of Massachusetts, adopting local rules for patent cases. At least one result (and perhaps an underlying purpose) of those rules has been to encourage the filing of patent cases in those districts.

The Eastern District of Virginia is the original “Rocket Docket” having enacted local rules to speed up cases almost forty years ago. The E.D.Va. continues to be one of the fastest courts in the United States, with an average time to resolution of civil cases of only about six months. The E.D. Va. has also been a relatively popular forum for patent cases, ranking in the top ten of federal district courts for filing patent suits.

The E.D.Va., however, has no local rules for patent cases. Rather, the three divisions of the court, and even judges in the same division, follow different procedures for dealing with their cases and different ways of handling patent cases.  As a result, there is little predictability in the E.D.Va. on issues such as whether tol extend the pre-trial period for patent cases to allow for the greater amount of preparation necessary in such cases, whether the Court will allot more trial days for a patent trial than the two or maybe three days it allows for most trials and whether the Court will incorporate patent-specific procedures, such as the filing of claim charts and the scheduling of a Markman hearing.

There are many potential benefits to adoption of local patent rules. Scheduling can be more uniform, and the litigation can be streamlined. Conducting claim construction early in the case can remove uncertainty and encourage earlier resolution of cases, decreasing the Court’s workload. Given the volume of patent cases filed in the E.D.Va., the Court should consider adopting limited local rules addressing the unique features of patent litigation. Such rules should be simple, and they should be permissive, so that individual judges can adapt them to each judge's docket and the needs of a specific case.

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