M10T01 Transcript
In this module, we'll begin the discussion on patent litigation. The question, what would happen, if the patent were litigated? It drives most of the strategic decisions around patents. But first, what do we mean by litigated? Do we mean the patent office, the US, foreign patent office or foreign court, a district court, an administrative court, a judge, a jury? All of these are potential places, venues to litigate, and they all work a little bit differently. But first, let's recognize that even though patent litigation drives most patent strategy decisions, very few patents are actually the subject of litigation. If you're a drafter, maybe you'll have one litigated over the course of your career. Personally, I've never had a case that I've drafted go to litigation. I have had a child of a case that I've drafted go to patent litigation. When they are asserted though, it's an experience that can have major consequences for both sides of the dispute in terms of technologies, business, and the economics involved. If a patent is found both valid and infringed, district courts can grant injunctive relief and/or monetary relief as appropriate, which can be devastating to the effected party. Substantial damages award can severely harm a business from suffering a financial loss to shutting down certain operations or laying off employees. When Polaroid won infringement action against Kodak, Polaroid simply bought Kodak. Similarly, an injunction preventing the defendant from continued infringement abruptly removes the product from the marketplace often causing the defendant to either withdraw altogether from the market or design an alternative, a design around, and that technology to continue to competing against the patent owner.
None of this is to mention the considerable expense of both bringing and defending against an infringement suit. Court costs, attorney fees, and other litigation expenses are generally born by each party whether they win or lose. With patent lawsuits, they typically cost between one and $5 million per side through trial. That expense alone can dramatically affect a business. I've been involved in multi- jurisdictional litigation with patent suits going on in multiple countries. Our litigation costs exceeded a million dollars a day and those lasted several years. In Europe, you have a different mechanism. There, the losing side pays. NPEs or non-practicing entities or patent trolls in the United States, they sort of exploit the cost model of litigation expenses. And so it is rational for companies to settle for an amount that is less than what the litigation costs would be. We'll talk about patent litigation in federal courts, the ITC, the International Trade Commission, or the PTAB, the Patent Trial and Appeal Board. But first, let's go back to the first principles that we talked about, the patent infringement in intellectual property is sort of equivalent to trespass in real property. Of course, the borders of the property that is the boundary or their words, they're not property lines that have been surveyed. The boundaries of the patent has to be ascertained, which means one has to determine the scope and the meaning of the claims. To that end, any assessment infringement is a two-step analysis. Step one, construe the language of the asserted claims to ascertain the scope of the patent rights, and step two, compare the properly construed claims to the accused device or product. The language in a patent claim defines the scope of that patent right in a particular invention. The wording of the claim communicates specific points about what is being claimed and these specific points are referred to as the elements of a claim, because each claim element defines the claim, thereby limiting its scope, claim elements are often called limitations. The elements of a claim form a checklist of sorts such that if an accused device or process contains all of the elements of a claim, then you have infringement. There are some unique features of patent litigation that require particular rules and procedures to help streamline the process. One, parties are
expected to exchange contentions early in the case, which detail their respective positions on issues relating to infringement and validity of the claims. Doing so can indicate how each party interprets the patent claim language, identifying any areas of disagreement as to the meaning of the claim terms. Two, and most significantly, to resolve those disputes. The courts will decide the meaning of such claim terms by holding a special claim construction hearing, known as a Markman hearing, relatively early in the case. Often, the Markman hearing is so dispositive that it frequently results in one party wanting to settle with the other.
But first let's talk about a threshold matter. Subject matter jurisdiction. The Patent Act provides one for a federal question, expressly stating that patent owners "shall have a remedy by civil action for infringement." In turn, Congress conferred US district courts with original jurisdiction over civil actions arising under patent laws. Thus a patent owner that files a complaint alleging patent infringement, clearly presents a claim "arising under" the patent law and is properly filed in the federal district court. Now, if a party has only been threatened with a patent infringement lawsuit, or otherwise reasonably believes that one might be filed against it, such a party, can preemptively go into court for purposes of negating the infringement argument or challenging the patents validity. Which is called a Declaratory Judgment Action or a DJ Action. The Declaratory Judgment Act provides that "in a case of actual controversy within the US, "any court of the United States may declare the right "and other legal actions "of any interested party seeking such declaration "whether or not further relief is or could be sought." So why would a party seek a DJ action? Usually it's to get to the most favorable venue, which district court will actually have to hear the case. When I worked personally at Microsoft and you're sued by a random plaintiff, a DJ action was often filed in the Western District of Washington. Think of it as home court advantage. There's a cost and expense that the other party would have to incur that you don't.
Also, if you're a company that is thought of favorably, one hopes that that being that hometown company will be to one's advantage.
Which then gets us to the threshold procedural question venue along with personal jurisdiction. Let's do personal jurisdiction first. Even if a claim is properly brought in federal court, and even if the plaintiff asserting that claim has standing to assert it the defendant must still be subject to the court's personal jurisdiction and the suit must have been filed in a proper venue. As to personal jurisdiction, the overarching civil procedure principles of general district jurisdiction and specific jurisdiction apply to the context of patent infringement suits. Accordingly for entities that are incorporated, headquartered or otherwise carrying on regular business activities in a forum state, or federal district that corporation would be subject to general jurisdiction and can be sued in that district court for all claims. Otherwise the corporation would need to have sufficient minimum contacts with the forum state or federal district to justify the exercise of specific jurisdiction allowing suit to be filed for a particular claim. Typically shipping the accused products or providing that accused service to customers in the forum is usually sufficient to establish specific jurisdiction in, to be sued for patent infringement. As to venue Congress enacted a venue statute that is specific to patent cases and 28 USC 1400 b. That statute provides for two potential venues in which patent suits may be filed. Let's read through it. Any civil action for patent infringement may be brought in the judicial district. One, where the defendant resides, or two, where the defendant has committed acts of infringement and has a regular and established place of business.
Reading this provision in tandem with a general civil venue statute the federal circuit has interpreted a defendant's place of residence as including anywhere that the defendant was subject to personal jurisdiction relating to that claim. That interpretation represents an expansive view of proper patent venues. It basically includes anywhere in the country that infringement was alleged to have occurred. This has quickly led to rampant forum shopping particularly we're down in Texas, where a patent infringement suits have now become a cottage industry. About one third of all patent cases in the United States are currently be filed in the Eastern district of Texas. Which is a fairly rural part of the U.S with no major population centers or technology hubs. Silicon Valley software companies, Detroit base automobile makers, New York based medical device manufacturers, companies from Korea and China all find themselves in courts and sleepy towns like Tyler and Marshall Texas to resolve patent disputes.
Such a defendant's only connection to these towns was often the fact that its national sales and marketing campaigns happened to have yielded some small number of sales of the accused products of services to customers that reside in the Eastern district of Texas. In fact, Apple had one store in the Eastern district and decided to close it down so that they would not have that presence in the us Eastern district. Often the plaintiff likewise has little to no contention to the forum either but the Eastern district of Texas has gained a reputation for being very patent friendly. Getting cases to trial quickly, and with local juries awarding high damage amounts to the patent owners. This has caused some of frequent defendants to now try to influence the jury in different ways. For example, Samsung has paid for and buys large scoreboards in high school football stadiums in order to try to get some favor with the jury in places like Marshall and Tyler, Texas. This is now expanded to the Western district Texas well as. Then in the case, TC Heartland versus Kraft the Supreme Court severely curtailed, this kind of forum shopping.
Relying on the patent specific language trumping the general venue provisions as well as the court's own prior precedent and interpreting 1400 B. The court held that a domestic corporation resides only in its state of incorporation for purposes of the patent venue statute. Because many companies, manufacturers and service providers were not incorporated in Texas nor did they have a regular and established place of business in Texas, the Eastern district of Texas under 1400 B TC Heartland had an immediate effect of reducing patent lawsuits filed there. Many of those lawsuits now have been diverted into from Texas to places like Delaware and California where not only is the patent venue statute satisfied but also the lawsuits have a more substantive connection to the forum to the forum.
Many patent owners have now relocated to have a place of business in the Eastern district of Texas, Texas in order to get around TC Heartland.
Third, let's talk about standing. Even if there is subject matter jurisdiction over a claim, the plaintiff reporting to assert that claim must have constitutional standing to do so. Basically the claim must reflect a particularized harm allegedly suffered by the plaintiff, not a generalized or speculative grievance.
More specifically, the plaintiff must have one, suffered an injury in fact, two, that is fairly traceable to the challenge conduct of the defendant, and three, that is likely to be redressed by a favorable judicial decision. By its terms, the statute creating a civil action for infringement grants that right to a patentee, that is the owner of a patent. A patent owner suing for infringement has constitutional standing to assert that claim because the patent owner's right to exclude others has been legally harmed. The harm is caused by the infringer, and the court can remedy that infringement via damages or injunctive relief. But what about licensees of the patent, that is persons other than the patent owner who have certain rights to use the invention? Suppose for example, that a company is licensed by a patent owner to manufacture and sell a product protected by the patent. If another third-party company is infringing the patent, doesn't that injure the licensed company by diminishing its sales or market share? Is that injury sufficient to confer standing on the licensee to sue for a patent infringement? Well the answer depends on the nature of the license. For an agreement granting patent rights, courts do not focus on the labels in the agreement, but on the legal effect of the agreement's provisions. The question of standing by anybody other than the patentee comes down to whether an agreement transferred all substantial rights in the patent to the plaintiff, making the plaintiff in effect the assignee of the patent. While this is a fact-specific inquiry, certain factors tend to carry substantial weight, including exclusive licensees are more likely to have standing than nonexclusive licensees, the owner of an unqualified right to license others under the patent tends to have standing, and the owner of an unqualified right to sue and control litigation tends to have standing. Such factors weigh in favor of standing because an exclusive licensee is the sole entity permitted to make use of the patent, even to the exclusion of the patent owner. And having that unfettered right to control access to the patent, whether through licensing or litigation, is a hallmark of patent ownership. Importantly, standing issues such as these would preclude jurisdiction over a patent suit only if the licensee attempts to bring suit alone. In many cases, the licensee and the patentee can bring claims of infringement jointly, avoiding these standing problems. In that case, the patentee could be pulled in as a necessary party. However, this is frequently undesirable and may defeat the purpose as to why the patent was licensed in the first place. As an owner who gave a license, I would not want to be pulled into a lawsuit as a necessary party. You don't know what the relationship your company might have with that company, or you don't know, like perhaps the importance of the inventors that might get hauled into that lawsuit and have to be witnesses or give testimony. Finally, an issue that is not strictly a matter of standing, but which nonetheless can fatally preclude an infringement lawsuit concerns the legal status of the patent, in particular, whether any of the patent claims have been found invalid in a prior lawsuit. If so, collateral estoppel, also known the issue preclusion, can prevent any further enforcement of those invalidated claims. The Supreme Court has held that as long as a patentee had a full and fair opportunity to defend the patent's validity in the prior suit, that issue of validity cannot be re-litigated by the patentee in future cases. As such, a defendant in a new lawsuit may benefit from a prior invalidity decision by using that decision as a defense to infringement. There are some companies, like a company called Unified Patents, that has memberships in two technology verticals and they file IPRs to test validity. Is a member of Unified collaterally estopped? That answer is unclear today.
M10T02 Transcript
When the suit starts, though approaches differ somewhat across district courts, overall, the rules tend to have two primary functions. One, facilitating early disclosure of the parties' substantive views and evidence regarding infringement and invalidity; and two, facilitating early resolution of disputes over patent claim interpretation. Relatively early in a patent case, local patent rules will require the patentee to serve its infringement contentions on the defendant. Infringement contentions are essentially claim charts, charts that identify which claims of the patents are being asserted, breaking down the claim into distinct elements and showing where each element exists in the accused product or process. There are typically two-column or three-column claim charts. Two-column claim charts have an element, and then a second column of mapping the accused product to the accused product or process. And then the third column, in those cases, would have a specification support of that claim. Normally about 45 days after the infringement contentions, the answer must reply to those infringement contentions. That's usually done in two ways, non-infringement and invalidity. So in non-infringement contentions, the answer would have to provide another claim chart, showing element by element, where at least one of the elements is not mapped. Invalidity, showing prior art as to why the patent being used for the infringement contention is invalid, under either 101, 102, and/or 103. Also done is a claim mapping, where the elements of the claim of the patent in question is mapped to invalidity contentions in one or more pieces of prior art. Among the most critical information obtained through the contentions is the parties' respective understanding of patent claim language. How did the parties construe the language of the claims in order to establish their respective positions. By obligating each side to expressly chart all the claim elements onto the accused device, and prior art, the parties indicate to each other what they believe the claim language actually covers. This serves as an important function of identifying where the parties are in agreement, as to claim scope, and where they appear to disagree. This narrows the aspects of the patent claims that are contentious. When each party has to interpret terms in certain ways, in order to make their arguments, the differences between those two may reveal some ambiguity which highlights the areas where the meaning of the claim language should be clarified. How the court construes those claim terms could make the difference between infringement versus non infringement, and validity versus invalidity. This means you have to have a view of claim construction or claim interpretation. So let's go through that.
So claim construction. After the parties have exchanged infringement and validity contentions, the parties began to discuss the claim terms that need the court's interpretation. First, each side provides a list of terms that are believed to be requiring some level of construing. Then they jointly identify the 10 terms likely to be most significant to resolving the parties' dispute. Including those terms for which construction may be case or claim dispositive. Second, they exchange proposed definitions of those terms along with any evidence they're using to support their definition such as prior art, dictionaries, experts or other references. Third, the parties issue a joint claim construction statement that details all the areas of agreement, and all the areas of disagreement that have been identified, essentially consolidating the parties' discussions and efforts to date. Fourth, to the extent that the parties have relied on declarations from witnesses to support their claim construction positions, the parties will have a period of time to conduct discovery as to those witnesses' opinions. That usually means depositions witnesses. Then fifth, the court conducts a claim construction briefing, a hearing, and a ruling. This hearing is called the Markman hearing to help decide those issues. This is heard by the judge, not by the jury, and is often dispositive as to the result of the case. Most cases settle around this point either just before or just after the Markman hearing. Ideally given the claim construction's ruling potential to resolve the lawsuit, the court will defer all other discovery in the case until after claim construction is complete, allowing the parties to avoid that burden and expense that may prove to be unnecessary.
Many judges will include such a phasing of discovery in the case management schedule, but just as often, parties will voluntarily forego such discovery until after claim construction. One other dimension of patent litigation that is vital for success is the involvement of expert witnesses. Because most patent cases are highly technical, the role of expert witnesses in patent litigation overall is very persuasive and critical, particularly those that can simplify the invention to the jury. Many litigators will say choosing the right expert can truly make or break your case. When I've talked to inventors in the past, the way I phrased it is try explaining this case to your grandmother. That usually starts to ground them into the level of simplicity that the invention needs to be described. The burden of proof in the patent litigation is a high bar. Patent infringement must be proven by preponderance of the evidence, that is more likely than not. While patent invalidity must be proven by a higher burden of clear and convincing evidence, that is highly probable.
Okay, now let's talk about enforcement at the ITC, the International Trade Commission. The ITC is a forum for patent cases, is very powerful primarily for two reasons. One, they stop infringing product at the border. They cannot be imported into the country. Given most of our manufacturing is outside the United States, this exclusionary order is very impactful. Second, it's really fast. Cases in the ITC move much quicker than in district courts. Exclusion orders are enforced by the US customs and border protection thereby effectively stopping any infringing goods at ports of entry before they even cross the border. This involvement by customs makes it a far more potent remedy than ordinary injunctions obtained in a district court, because an ordinary injunction only applies to the infringer, not customs.
The ITC has no authority to issue monetary relief, just the stopping of importation of goods. There are similar places in Europe that have this type of remedy. And it's very important there to have that injunctive relief in Germany or the Netherlands as those are the two primary ports of entry to get into Europe. I mentioned that ITC cases are fast. ITC investigations are handled by administrative law judges. There are no jury trials and discovery deadlines are much tighter. Cases are often included in less than 18 months, where a district court case can take several years. Like district courts, appeals from the ITC go straight to the federal circuit and ultimately to the Supreme Court. One important limitation on the ITC is that patent owners who choose that path must be able to establish that they have domestic industry that needs to be protected. In other words, a patent on an invention that does not relate to an industry in the United States will not be enforceable in the ITC. This domestic industry requirement does not exist for patent assertions that are made in district courts. The test for determining whether sufficient domestic industry exists relating the patent at issue has two prongs, the economic prong which requires that there be an industry in the US, and the technical prong, which requires the industry relate to articles protected by the patent. The economic prong can be satisfied by showing for example significant investments in equipment, labor, R&D or licensing relating to the article. The technical prong insists that these economic activities involve articles that are covered by claims of the patent. So basically if the patent owner actually uses the patent, or licensed the patent, they've met that domestic industry requirement. Some aspects of litigation in the ITC differ substantially from practices in district courts. For example, administrative judges in the ITC have broad discretion to admit into evidence a wide variety of things that would not be admissible under the Federal Rules of Evidence, such as hearsay. Also because of the speed of the ITC investigation, some judges will have a separate Markman hearing before trial and others won't. These looser standards are because the judge is hearing everything, not a jury. And there's an assumption that the judge can weed out the evidence that should not be construed. Perhaps the most dramatic difference in the ITC procedure involves the process of initiating an investigation, specifically the contents of the initial complaint. In district courts, it's a fairly low bar. Complaints are governed by the fair notice pleading standard of the Federal Rules of Civil Procedure Eight, which has been interpreted to require only enough detail to state a claim to relief that as plausible on its space. The ITC has a much higher bar. Here the initial complaint is complete when it has to include the identification of each patent, and its expiration date, identification of ownership of each patent, the identification of each licensee, a copy of all the license agreements, each foreign patent that is equivalent to the US one being asserted, a nontechnical description of the invention of each patent, specify the claims of interest, claim charts, showing domestic industry, any drawings or photographs of the infringing products or processes. The respondents must make their case whether it be non-infringement, invalidity or both in the same manner as described in the district court process.
The big difference though is really time. Instead of having several months to reply, the reply is due in 20 days As a tactic, you'll often see ITC cases filed in November or mid December to put pressure on the defendants during the holidays. Similar to a Markman hearing, the ITC issues an initial determination. Basically, the ITC indicates at a preliminary level what direction they're leaning in. Again, once the parties know that, that's a common portion of the process where settlement can occur. Though sometimes the ITC rules differently, than what the initial determination was, most often the ITC doesn't change its mind from that point forward. Another thing you'll see is that the ITC and district court cases are often filed simultaneously to take advantage of both processes.
M10T03 Transcript
Next, let's talk about challenging patents at the PTAB. The Patent Trial and Appeal Board, or the PTAB, is an appellate tribunal within the patent office. That PTAB was created as part of the America Invents Act in 2011, and it comprises hundreds of administrative patent judges who have specialized patent law or have technical backgrounds. The PTAB has no authority to make decisions on infringement or to award any monetary or injunctive relief. Rather, their only authority is to rule on matters of patentability.
Anyone seeking to challenge the validity of a patent, other than the owner of a patent, may submit a petition to the PTAB for a ruling. The AIA created three different proceedings where the PTAB is tasked with deciding whether issued patent rights were properly granted. These proceedings are known as Inter Partes Review, or IPRs, Post-Grant Reviews, PGRs, and Covered Business Methods, CBMRs.
Together, they're collectively referred to as the AIA Review Proceedings. At a high level, PGRs apply only to AIA patents. It allows challenges on all grounds of patentability. IPR applies to all patents, both pre and post AIA, and it limits the kinds of challenges that can be raised. CBMR applies to all pre and post IPA covered business methods. It allows challenges essentially on all grounds. Anyone other than the patent owner can petition the PTAB to review the claims of an issued patent under one of these proceedings and seek to cancel those that are proven to be unpatentable. There's no right to have the PTAB conduct one of the AIA review proceedings like there is a right to initiate a lawsuit in court. Rather petitioners must make a threshold showing on the merits before the proceedings will be instituted. Like an ITC complaint, threshold showing can be onerous. A petition is required to identify, in writing and with particularity, each claim challenged and the evidence that supports the grounds for the challenge to each claim, including copies of patents and printed publications and supporting evidence and opinions. In making the showing with particularity, claim charts are not required but they are strongly encouraged. Most petitions also include supporting declarations including those from experts that help tie all the evidence together in a clear and persuasive way. The result is a highly polished argument reading like a motion for summary judgment, laying out the entire factual basis and legal authority of the petitioners invalidity positions. Patent owners then can file a preliminary response to the petition within three months of receiving it. Then the PTAB panel of judges assigned to the petition will decide whether to institute the proceedings and review the challenge claims. For inter partes review, the PTAB may institute a proceedings to review the challenge claims if the petition shows that there is a reasonable likelihood that the petitioner would prevail with respect to at least one of the claims challenging the petition. By contrast, for a post-grant review or a covered business method review petitions, the PTAB may institute a proceeding if it's more likely than not that at least one of the claims challenged the petition is unpatentable. Although only one of the claims challenged in the petition needs to satisfy these standards, the Supreme Court has held that a decision to institute a proceeding must institute review of all of the claims challenged in the petition. Moreover, the PTAB must consider all the grounds raised in the petition for arguing the invalidity of all of the challenge claims. The PTAB cannot institute review on some claims or some invalidity grounds but decline to institute on others, it's an all or nothing decision. Once the threshold showing as to a single challenge claim is made by a petition and proceeding is instituted, The petitioner need only prove unpatentability on the alleged grounds by a preponderance of the evidence. This is a lower burden than what's required at the district courts where issued patents are presumed valid and must be invalidated by a higher showing of clear and convincing evidence. This difference is somewhat controversial. If the PTAB denies the petition and declines to institute the proceeding, well then the matter is over and there's generally no right to appeal. If the PTAB decides to institute the proceeding, the parties will then embark on the phases of discovery and briefing. Over those next three months, the patent owner will conduct its discovery and submit its response brief and supporting evidence to defend the challenge claims. Then over the following three months, the petitioner will conduct its discovery and submit its reply brief and supporting evidence to invalidate the challenge claims. The patent owner will then have a reply period. In the meantime, patent owners also have the right to move to amend the claims in an effort to better sustain their validity. This can be a helpful option providing a fallback position in the event that the claims as presently written are found to be invalid. However, there's some strategic consequences and trade-offs in amending those claims, especially if there's a co-pending litigation and you're relying on those broader claims in the litigation. So after the briefing is concluded, the proceedings will go to trial. However, this trial is more like an extended evidentiary hearing and oral argument. Most often there are no live witnesses. Soon afterwards the parties will receive the PTABs final written decision or judgment. Notably the judgment is required to be issued within 12 months from the date of institution. After the Alice decision the patentability bar was essentially raised. This means that there were a lot of issued patents that were probably invalid under the new ALICE test. Therefore, the PTABs invalidity proceedings were wildly popular for those accused of infringement. So much so that former CAFC Judge Rader called the PTAB the patent death squad. The PTAB had this reputation for quite some time.
However, more recently, under Commissioner Andrei Iancu, the institution rate has precipitously declined. So much so that a group of tech companies including Google and Apple, sued the patent office and are questioning the motives of the patent office administration and the sudden decrease in institutions of proceedings. Altogether the PTAB proceedings generally follow the timeline that you see here. As you can see a petition is filed then the patent owner has time for a preliminary response. At the time of the institution decision you can see there's a 12 month clock that starts until the final written decision at which time the patent owners respond, the petitioner's reply, and there's a back and forth that goes in there. The trial occurs and then there may be an appeal after that. So it's a pretty quick process. The critical juncture is the institution decision. Many cases are settled here or even just before it. The proceedings are a popular alternative to challenging the validity of a patents in court. The cost of an AIA proceeding is also comparatively low due largely to the speed and narrowly focused scope of discovery. The AIA proceedings are also proving to be effective on the merits as patents are more likely to be struck down by the PTAB than in court. Partly due to the PTABs judges expertise and partly due to the lower burden of proof. I also think it's mostly due to a change in drafting styles. Remember before the Alice case, the bar for patentability was fairly low. Typically when people are asserting patents or are subject to litigation, it's usually around eight to 12 years before that happens. So because these patents were written 10 years ago or so and then the bar for patentability increased, naturally a number of these patents would be invalid under the newer case law. The vast majority of petitions that are filed are usually in response to allegation of infringement by the patent owner. This is often in an effort to level the playing field and pursue a more offensive strategy in addition to ones litigation defenses. To think about why this is so effective, it's helpful to talk about NPEs or Non-Practicing Entities. Very large companies are usually facing hundreds of lawsuits at any one point in time and Non-Practicing Entities have sort of turned this into a business model. They have taken advantage of the fact that these large companies have so many, so many lawsuits facing it against it at a time. And remember litigation costs sort of go from one to $5 million. So NPEs take advantage of knowing that if that, if the defendant is going to have to pay something in the order of millions of dollars, they would probably be willing to settle for something of hundreds of thousands of dollars. And this has turned into a business model because now for the larger company, it's rational to settle for less but by doing so, you're feeding the beast, the money you're paying to that NPE, they're going to go out and buy more patents and assert against you again. So the AIA in validity proceedings, it basically flips the model. By challenging the validity of the patents, the NPEs must incur more costs up front. This is having the impact of driving settlement costs very very low if the parties choose to settle at all. As drafting styles have changed, we will probably see less PTAB challenges. I recommend, as I mentioned earlier, drafting to the European Technical Effect Standard. it tends to be a bit more stable As such, it's probably true that PTAB proceedings will be less effective going forward and more balanced as drafting styles catch up to where the law is.
M11T01 Transcript
- Earlier, we discussed that for infringement, there are two parts, construe and compare. Construe is construing the claim language to understand the scope of rights. And compare is applying those construed claims to the infringing device or process. Now, the English language, or really, any language, it's imperfect. Therefore, many patent disputes pivot on misunderstandings or misinterpretations of what the claims actually say. So let's dive into the first section, construing, or more specifically, claim construction. The construction of patent claims has been described as "the single most important event in the course of a patent litigation." It defines the scope of the property right being enforced and is often the difference between "infringement and non-infringement, or validity and invalidity." Given this importance, having a reliable, predictable methodology for interpreting claim language would seem to be the most important thing to get accurate and to be right. However, the analytical framework for claims construction has changed and continues to change over time.
Now, there are a handful of canons of claim construction. A patent is a legal document. This means that the content, language, and particular phrasing within that document directly affects the legal rights that the document purports to create. In that respect, a patent is similar to a contract or a statute. Over time, there are several canons that have been developed with respect to claim construction. Let's go over some of them. First is, interpret claims in light of the specification. Because the claim language is part of the patent specification, it must be interpreted in context of the specification. The written description and drawings can provide clear guidance as to the meaning of a claim term. The ordinary meaning to a person of having ordinary skill in the art. Absent clear evidence that a claim term was intended to have a different meaning, all claim language should have been construed to have the plain and ordinary meaning that a person having ordinary skill in the art would ascribe to. That person having ordinary skill in the art's perspective is applicable because patent applications are intended to be read by such persons having ordinary skill in the art. Lexicography and coined terms. Patent applications can expressly assign a special meaning or definition to a term used in the specification, indicating that the ordinary meaning may not be applicable. Patent applications can also coin new terms to help describe their inventive concepts. I've actually seen that quite a bit over the years, particularly on cutting-edge technology, where there really isn't new terminology associated with those, so one company might coin a certain term to mean the thing and a separate company might coin a different term for the same thing. All claim terms should have meaning. Where possible and reasonable to do so, interpret the claim language to avoid rendering any portions meaningless or superfluous. Next one's claim differentiation. The use of different language within a claim or across different claims is presumed to reflect different meanings. Otherwise, it would use the same words. Next one is, do not read in claim limitations.
Although claim language must be interpreted in context of the spec, the spec should not be relied on to effectively add limitations into the claims that are not expressly recited therein. Next one is, include the disclosed embodiments. A patent claim should be construed to encompass at least one disclosed embodiment or a species of the invention in the patent application. This principle stems from section 112, which requires that the spec include a written description of the invention and that the invention so described is then distinctly claimed. Remember that canons are only interpretive principles and
guidelines. They're not hard and fast rules that demand a certain result. And although the canons might suggest a straightforward interpretive process, the reality is that the canons can often conflict. Applying one canon may yield an interpretation while another one would yield an entirely different interpretation. Patent law has also developed guidelines concerning the intrinsic and extrinsic evidentiary sources that may be used to interpret the claims, similar to those applied in contract and statutory interpretation. There's a bit of a hierarchy that has been established in case law in how to determine the meaning of claims. The spec of a patent is usually the best guide to the meaning of the claim language. The prosecution history is next, especially if it explains the rationale behind any amendments made to the claim language. Extrinsic evidence, like dictionaries or expert witness opinions, is even further removed and tends to be less reliable. Finally, as with contracts and statutes, the meaning of claim language is to be determined by the court not the jury in a famous case called Markman v. Westview. Today, claim construction hearings are called Markman hearings, named after that case. The gist of the Markman case is that because patents and claims construction is so highly specialized, juries are ill-equipped to handle claims interpretation, and the judges are more likely to properly interpret claims.
- Let's go over a case that gets into claims interpretation. Just Phillips versus AWH. Phillips v. AWH is a CAFC case from 2005. And Judge Bryson delivered the opinion. Phillips invented modular steel shell panels that can be welded together to form vandalism resistant walls which are used in building prisons because they are load bearing and impact resistant, while also insulating against fire and noise. Mr.
Phillips obtained a patent on the invention which is the 798 patent. And he subsequently entered into an arrangement with AWH corporation to market and sell the panels. That arrangement ended in 1990. In 91 however, Phillips received the sales brochure from AWH that suggested to him that AWH was continuing to use his trade secrets and patented technology without his consent. There was a series of letters for the next couple of years and Phillips accused AWH of patent infringement and trade secret misappropriation. But it wasn't until 1997 that Mr. Phillips brought suit in the US District Court for the District of Colorado charging AWH with misappropriation of trade secret, and infringement of certain claims within the 798 patent. The District Court dismissed the trade secret misappropriation claim as being barred by Colorado's three-year statute of limitations. With regard to the patent infringement issue, the District Court focused on the language of claim one which recited, further means dispose inside the shell for increasing its load bearing capacity comprising internal steel baffles extending inwardly from the steel shell walls. Now, looking at the spec of the 798 patent, the court noted that every textual reference in the spec and its diagrams show baffled deployment at an angle other than 90 degrees to the wall faces. And that placement of the baffles at angles such as those created intermediate interlocking but not solid internal barriers. The district court therefore ruled that for purposes of the 798 patent, a baffle must extend inward from the steel shell walls at an oblique or acute angle, meaning really anything except a 90 degree angle to the wall face and must form part of an interlocking barrier in the interior of the wall module. Now, because Phillips could not prove infringement under that claim construction, the District Court granted summary judgment of non- infringement. The court then goes through a long section of the opinion discussing how to approach claims interpretation. They first state that claims are generally given their ordinary and customary meaning based on what a person having ordinary skill of the art at the time of the invention. The inquiry into how a person of ordinary skill in the art understands a claim term, provides an objective base line from which to begin claims interpretation. The starting point is based on the understanding that inventors are typically person skilled in the field of the invention, and that patents are addressed and intended to be read by others of skill of the patent art. Importantly, the person of ordinary skill in the art is deemed to read the claim term not only in the context of the particular claim in which the disputed term appears, but in the context of the entire patent spec. When the ordinary meaning of a claim language as understood by a person of skilled in the art is not readily apparent, determining the ordinary and customary meaning of the claim requires examination of terms that have a particular meaning in the field of art. Because the meaning of a claim term as understood by persons of skill in the art is often not immediately apparent, the court looks to other sources available to the public that show what a person of skill in the art would have understood disputed claim language to mean. Those sources would include the words of the claims themselves, the rest of the spec, the prosecution history, extrinsic evidence concerning the relevant scientific principles, the meaning of technical terms, and the state of the art at the time. The claims themselves provide substantial guidance as to the meaning of a particular claim term. The context in which a term is used in the asserted claim, it can be highly instructive. To take a simple example, the claim in this case refers to steel baffles. Which strongly implies that the term baffles doesn't inherently mean objects made of steel since the word steel modifies baffles. Other claims of the patent in question both asserted and unasserted can be valuable sources of enlightenment as to the meaning of a claim term. Because claim terms are normally used consistently throughout the patent, the usage of a term in one claim can eliminate the meaning of the same term in other claims.
Differences among claims can be a useful guide in understanding the meaning of a particular claim term. And this is known as claim differentiation. For example, the presence of a dependent claim that adds a particular limitation gives rise to a presumption that the limitation question is not present in the independent claim. The claims, they don't stand alone. Claims must be read in view of the spec of which they are apart. And the spec is always highly relevant to the claim construction analysis. Usually it's dispositive, it's the single best guide to determine the meaning of a disputed term. The spec may reveal a special definition given to a claim term by the patentee that differs from the meaning it would otherwise possess. In such case, the inventor's lexicography it governs. In other cases, the spec may reveal an intentional disclaimer or a disavow of claim scope by the inventor. In that instance, the inventor has dictated the correct claim scope and the inventor's intention as expressed in the spec is regarded as dispositive. The pertinent of the spec to claim construction is reinforced by the manner in which a patent is issued. The PTO determines the scope of claims by giving claims their broadest reasonable construction in light of the spec, as it would be interpreted as one of ordinary skill in the art. Now, the court also needs to look at the patent's prosecution history. The prosecution history consists of the complete record of the proceedings before the patent office and includes all the prior art that was cited during the examination of the patent, and all the arguments that were made back and forth. Like the spec, the prosecution history provides evidence of how the PTO, and the inventor understood the claims of the patent or the patent itself. The prosecution history was created by the patentee in attempting to explain and obtain the patent, and can often inform the meaning of the claim language by demonstrating how the inventor understood the invention, and whether the inventor limited the invention in the course of prosecution, making the claim scope narrower than would otherwise be. Now, what you'll see practitioners often do in that case is have examiner interviews where they have verbal conversations with the examiner and therefore the record, that's the prosecution history can be really scanned with respect to what happens in an interview. They often do that to sort of minimize the amount of prosecution history. Now, the courts can also look at extrinsic evidence like expert testimony, and vendor testimony, dictionaries, and other external information. It's a bit dated now. I mean, who has a dictionary that's not online? Remember, this analysis needs to be done through the eyes at the time of the invention. Generally, extrinsic evidence is less reliable as it's not part of the patent, and it's often out of context. So now let's get back to the case. The critical language of claim one of the 798 patent further means disposed inside the shell for increasing its load bearing capacity comprising internal steel baffles extending inwardly from the steel shell walls. It imposes three clear requirements with respect to the baffles. First, the baffles have to be made of steel, second, they must be part of the load-bearing means for the wall section, and third, they must be pointed inward from the walls. Now, both parties can see that the term baffles refers to objects that check, impede, or obstruct the flow of something. The intrinsic evidence confirms that a person of skill of the art would understand that the term baffles as used in the 798 patent, would have that generic meaning. The court then looked at what the dependent claim state, as they must defer and cover things that further modify claim one. For example, dependent claim two states that the baffles may be oriented with the panel section dispose at angles for deflecting projectiles, such as bullets able to penetrate the steel place. The inclusion of such spec limitations on the term baffles in claim two, makes it likely that the patentee didn't contemplate that the term baffles already contain that claim limitation in claim one. And there are several other examples like that. The fact that the written description of the 798 patent set forth multiple objectives to be served by the baffles recited in the claims, confirms that the term baffles should not be read restrictively to require that the baffles in each case serve all of the recited functions. The fact that a patent asserts that an invention achieved several objectives, does not require that each of the claims be construed as limited to structures that are capable of cheating all of the objectives. Although deflecting projectiles is one of the advantages of the baffles of the 798 patent, the patent does not require that the inward extending structures always be capable of performing that function. Accordingly, the court concluded that a person of skill in the art would not interpret the disclosure and claims of the 798 patent to mean that a structure extending inward from one of the wall faces is a baffle if it is at an acute or obtuse angle. But somehow is not a baffle if it's at a 90 degree angle. So in this case, the patent holder wins.
Now let's talk a little bit about means-plus-function claiming. There's a special form of functional claiming known as means-plus-function claiming. This claiming approach involves a generic indication that an unspecified thing, a means, is used to accomplish a specific function. For example, rather than claiming a hammer, one could claim a means for driving a nail. Section 112 of the Patent Act expressly authorizes means-plus-function claiming and explains the interpretation of such claim language. It says that an element in a claim for a combination may be expressed as a means or step for performing a specific function without the recital of structure, material, or acts in support thereof, and such claim shall be construed to cover the corresponding structure, material, or acts described in the spec and equivalents thereof. Means-plus-function claiming therefore allows one to recite the structure of the invention in general terms, focusing instead on the results and the outcome that's achieved. In the US, this means that the scope of the claim will not encompass all possible means to those ends, but only those means that were disclosed in the specification. For example, if a claim recites means for attaching one piece of wood to another and the spec describes the use of nails and screws, the claimed means would encompass nails and screws and some other fasteners that are say technically equivalent to nails and screws. The means for attaching would not encompass substantially different ways to attach to objects, such as adhesives or chemical bondings. Thus, if you choose to invoke 112 means-plus-function claims style, you should disclose a wide range of possible means to ensure an adequate scope of protection. This is very common in the software space where the structure is really just the processor that runs the computer and that processor, as a structure, is generic to processors on any general purpose computer. So in software, one is most frequently describing the function that the software performs through the mean-plus-function language. However, recognize that this is all very US-centric. Europe, India, China, most of the rest of the world, means does mean all possible means, and it would include things broader than what is disclosed in the specification. That would actually mean it brings in a whole bunch of prior art that you may not otherwise be intending to bring in. Therefore, like validity, could be a more difficult issue.
M11T02 Transcript
- Okay, now let's talk about direct infringement. The general concept is pretty straightforward. If all of the elements in the claim are found in the product, the product infringes. As a threshold matter, there are a few overarching prerequisites to infringement liability. Section 271 of the Patent Act defines infringement as follows. Let's read through it. "Except as otherwise provided in this title, whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefore, infringes the patent." Within this provision, there are four general requirements for infringement liability. The first is specified conduct. The statute defines five distinct acts that constitute patent infringement: making, using, offering to sell, selling, or importing the claimed invention. Next is in the United States.
Only conduct that occurs within the territorial limits of the United States can give rise to a liability for infringing a US patent. Third is without authority. The specified conduct within the United States only constitutes infringement if it is done without authority of the patent owner. Thus, licensed manufacturers, marketers, sellers, users, and importers of the invention are not infringers. And last, during the patent term. Patent rights generally expire 20 years from the effective filing date. Only conduct that takes place before the patent expires can be infringing. You'll see that there's no requirement of knowledge or center. One does not need to know about the existence of the patent or know that one is infringing in order to be liable for direct infringement. A patent owner does not even need to show that an infringer was negligent or should have known that they were infringing. It's enough that the entire claimed invention was made, used, offered for sale, sold, or imported into the United States during the patent term by the person or entity that is accused. For these reasons, patent infringement is often referred to as a strict liability type of tort. Unlike other intellectual property regimes such as copyright and trade secret, independent discovery or creation of the subject matter is not a defense. Taken together, the list of infringing acts covers the points along a supply and distribution chain for an invention. From the initial construction to the ultimate use of a patented product, it might be made by one party, offered for sale by a second, imported by a third, sold by a fourth, and finally used by a fifth party. This affords the patent owners with a variety of options to strategically target the source of infringement. For example, if an infringing device is sold by various US retailers, but is built and provided to those retailers by a single manufacturer, the patent owner can enforce the patent against that maker and stop the supply of the device. Similarly, if a research lab builds an infringing machine and permits other researchers to use that machine, enforcing the patent against the lab for its own making and using the device can prevent or lead to compensation for all the infringing uses by third-party researchers as well. Even if a patented product is made or sold completely outside of the US, such that those foreign activities would not infringe the US patent, any attempt to bring the product into the country would be an infringing act of importation. In general, a single person or entity must be responsible for satisfying all the elements of the claim in the accused product or process. So if a company sells the entire claimed device, or if that company uses an entire claimed process to manufacture its products, that company is deemed to have directly infringed. But if one company sells only half of the claimed invention and another company sells the other half of the invention, then neither company is directly infringing. This is split infringement and it's a common problem that I see in claims drafting. When one is working with the inventor, it's important to draft the claims of the invention in such a way that you preserve the ability to address a direct infringer. So what happens if the accused product or process is the result of multiple parties' combined efforts? It's still infringement, but it falls under joint direct infringement or indirect infringement which we'll discuss in a minute.
But back to direct infringement. There are two types of direct infringement. First one is literal infringement and the second is infringement under the doctrine of equivalents. So let's talk about literal infringement. That's the first species, and frankly it's the more straightforward of the two. It requires a comparison of the literal claim language with the corresponding aspects of the accused product or process. In patent law, literal really means literal. The exact literal meaning of each and every claim term or the construction of that term as provided by the court must be applied to compare the claim language to the accused product or process. The second is the doctrine of equivalents and you can have direct infringement under that doctrine of equivalents. So even if a claim is not literally infringed, in some circumstances, the doctrine of equivalents expands the scope of the claim beyond its literal meaning. In essence, the doctrine of equivalents allows for a finding of direct infringement when the corresponding claimed elements and accused features are not literally the same, but are technologically equivalent. Infringement requires each and every element of the claim to be satisfied, literally or equivalently, in the accused product or process. So what does equivalents mean? Well, let's say a patent claims a synthetic floor covering material comprising 10 to 12% of epoxy resin. Does a flooring material and fringe if it's made of 9.99999% of the epoxy resin? Well, literally no, it doesn't. On the one hand, this result is economically and technologically efficient, a competing flooring company can make a product with confidence that it doesn't infringe. Plus don't forget that the inventors are in charge of drafting their own claims. They have a lot of latitude to customize their patent rights. And here the claim was drafted with an explicit lower cutoff of 10%. On the other hand, the use of the claimed invention in all respects except for that trivial difference may seem unfair to the patentee. Such a product designed to be just so slightly outside the literal boundary of the patent claim may possess all of the utilitarian benefits of the invention. Yet the inventor, they'd have no legal right to complain. So this example's on the easier side, but you can see how this would get complicated as the infringing product is say less infringing, like what if it's 9.9%, 9.8% 9.7? At some point you have to draw a line and there needs to be a logic behind why the line is drawn where it is. In essence, the doctrine of equivalents allows for a finding of direct infringement where the corresponding claim elements and accused features are not literally the same, but again they're technologically equivalent. There's a famous case back in 1950 called Graver Tank. And it phrased it as one may not practice a fraud on a patent, meaning you can't technically get around when you're really doing the same thing. Although the doctrine of equivalents is basically saying, Hey we're promoting substance over form here. The doctrine can be problematic in how it blurs the boundaries of a patent claim. So we talked a little bit earlier about how the test is one of technological equivalents. Eventually there's a case called Warner Jenkins V Hilton Davis, and it turned it into a triple identity test. Under that test, two features are equivalent if they perform substantially the same function in substantially the same way, to accomplish substantially the same result. So the doctrine of equivalents is the same function way result. So you can see that from a policy perspective, the doctrine of equivalents is intention with notice. A patent is supposed to give the public notice as to what the patent is meant to cover. The borders, if you will, of the property. However, doctrine of equivalents means the borders are fuzzy. So doctrine of equivalents is fundamentally in tension with the public notice function of patent claims. So cases have narrowed the doctrine of equivalents over time to be limited to the same function way result. But in addition to those limitations, patent law recognizes whether the doctrine of equivalents may be invoked to argue equivalency at all. That is some circumstances prevent a patentee from arguing that an accused feature is equivalent to the corresponding claim element. Even if the accused feature is technologically equivalent to the claim feature, courts have recognized that a variety of situations where a patentee is prohibited from relying on the doctrine of equivalents argument. In general courts reject the doctrine of equivalents in those situations to restore some of the claim scope certainly that is blurred by the doctrine of equivalents. The most common way of limiting the application of the doctrine of equivalents is that a prosecution history estoppel. If a patentee narrowed the scope of a claim during prosecution, in order to obtain the patent and that narrowed claim excludes an equivalent feature that was within the scope of the original claim, the patentee cannot attempt to recapture the equivalent via the doctrine of equivalents. The equivalents is presumed to have been surrendered by the amendment. Prosecution history estoppel is by far the most common argument raised to prevent a patentee from asserting the doctrine of equivalents. The other things are such as prior art. That is the equivalency of one is trying to read on can't be in the prior art. And dedication to the public, which is if you disclose a number of equivalent features in the patent, but only claim some of them, you can't go back and claim the other features that you could have, but you didn't claim before. But again, prosecution history estoppel is by far the most pervasive, rendering the doctrine of equivalents to be rarely applied. I personally have never used it.
And when I've heard it brought up on the other side of the licensing negotiations, it's usually met with skepticism and laughter. It's too risky of a proposition for someone to assert on the doctrine of equivalents.