Wednesday, August 26, 2009

Microsoft Submits Opening Brief in i4i Appeal

Microsoft submitted its opening appeal brief on Tuesday and the CAFC set oral argument on its motion to stay Judge Davis' order enjoining further distribution of infringing copies of Microsoft's multi-Billion dollar WORD product. Oral argument on Microsoft's motion to stay and on Microsoft's motion for an expedited consideration of the appeal is set for September 23, 2009.

An East Texas jury found that WORD infringed i4i's patents covering the use of XML technology, Judge Davis granted i4i's motion for an injunction, stopping any further distribution of infringing copies of WORD. That order will take effect sometime in October unless the CAFC steps in to stay the injunction.

Microsoft's arguments on appeal are summarized by the below preliminary statement taken from its opening appeal brief. I only got through part of the preliminary statement. The rest will be saved for another post. One of the problems I have with this brief is that the preliminary statement is too long and the brief raises too many issues. But I know that writing an appeal brief is a lot harder than critiquing one. This brief would have been especially hard to write with so many lawyers weighing in.

"In patent cases, even more than most, the trial judge’s role as a gatekeeper is
crucial. As gatekeeper, the judge must define the metes and bounds of a patent
through claim construction and then ensure that the evidence presented by the
parties’ numerous experts is both reliable and rooted in the facts of the case at
hand. And after the jury has rendered its verdict, it is the judge who . . . must ensure that the verdict is adequately supported by the evidence and supportable under the law. ... [this] is especially important in patent cases because of the
delicate balance struck by patent law to achieve its objective of promoting, rather than stifling, innovation. That balance can be lost if the district court does not protect the process, and patent litigation then becomes a tax on innovation rather than its guardian."

This sounds like a "patent law is special" argument, which is particularly out of style right now. And if you don't believe me, just read that last four or five Supreme Court opinions. The better argument is the good old-fashioned "junk science" argument, that the verdict cannot be supported by expert testimony that is fundamentally flawed at its premise, and that in view of shaky, but arguably admissible expert testimony, the judge's role to scrutinize the evidence allegedly supporting the verdict is critically important.


"This case stands as a stark example of what can happen in a patent case
when a judge abdicates those gatekeeping functions."

The "gatekeeping function" language sounds like an evidentiary challenge. An uphill battle because the standard of review is abuse of discretion. I suggest leading with an argument where the reviewing court is not so constrained in their ability to find error.

"The district court’s errors in this case began when it accorded a critical claim
term no meaning whatsoever, effectively erasing it from the patent. That
impermissible claim construction, in turn, enabled the plaintiffs to present to the
jury a theory of infringement that contradicted not just the asserted patent’s
specification, but also its prosecution history, and, indeed, its very title."

OK, now we are getting somewhere. A claim construction argument. CAFC has plenary review. This should be front and center. Get rid of this "gatekeeping" stuff.

"The court’s failure to act as a gatekeeper extended to Microsoft’s validity
defenses as well. After Microsoft invoked the on-sale bar with the inventor’s prelitigation statements that showed his invention to have been “implemented” and
sold before the critical date, the inventor insisted that he had lied to investors about his pre-sale invention date and that the invention really came later, and that
Microsoft could not prove otherwise because he had “discarded” the source code
of that product. In the absence of corroboration, an inventor’s manifestly self interested testimony should be insufficient as a matter of law to save his patent. But the district court demurred and sent the question to the jury."

Even this slanted account raises a number of factual questions in my mind. This statement does not convince me that there was an absence of evidence supporting plaintiff's theory. Especially in view of Microsoft's elevated burden of proof to prove invalidity by clear and convincing evidence.

"By the time the plaintiffs presented their damages case, the district court had
abandoned even the semblance (really?) of gatekeeping. Plaintiffs sought to quantify instances of indirect infringement—their royalty base—through a survey of 988 businesses. That survey garnered just 46 individual respondents, who then were paid to guess how many other persons in their place of employment used Microsoft Word in a manner similar to the alleged infringing implementation. Of those 46 respondents, 19—less than half—were aware of any such use of Word. And even they supplied inconsistent or confused responses, so plaintiff’s expert simply changed the data—all according to so-called principles of “data imputation,” of course. When his manipulations were done, he testified that the 19 responses to his survey proved that 1.85 million Word users infringed plaintiffs’ patent—nearly 100,000 for every usable response."

Was i4i supposed to put all 1.85 million users on the stand? There has to be some recognition that a survey can be a reasonable way to quantify the level of inducement, especially in view of what I'm sure were piles of statements in instruction manuals and "help menus" from Microsoft explaining just how WORD can be used to infringe the patent.

"Plaintiffs then extrapolated that the 1.85 million infringing uses supposedly demonstrated by the survey had grown to 2.1 million in the six months before trial. When Microsoft challenged the survey as inherently unreliable, the district court offered the clearly erroneous response that fundamental admissibility considerations such as whether a survey respondent has personal knowledge of facts surveyed and whether the results were manipulated went only to the weight of the evidence."

Sounds like great cross examination. But the jury didn't buy it.

"If this survey passes muster, there are no limits to what “evidence” can be presented to lead juries astray, and patent law suffers."

Again, if Microsoft is right here, all law suffers, there is nothing special about patent law when it comes to the application of the FRE, or at least the Supreme Court is inclined to say that there is nothing special about patent law.

"A similar fate befell Microsoft’s challenge to plaintiffs’ Georgia-Pacific
analysis. Plaintiffs’ expert concluded that, in a hypothetical negotiation, Microsoft would have agreed to a royalty rate of $98—more than half of the current retail price of Word 2007. Wagner reached this conclusion by applying the much maligned “25 percent rule of thumb” to the hypothetical profit one might have
received if Microsoft’s profit margin applied to an unrelated third-party’s radically dissimilar product .... But the district court ... permitted the expert to testify that a “reasonable royalty” was $200,000,000."

Again, great cross material, but the appellate court is constrained by the standard of review. Also, Mike Wagner's testimony has been admitted in probably more than one hundred IP cases. Maybe he went wrong in this case, I don't know, but it would be a rare event to exclude his testimony.

OK, I'm getting tired here, and will deal with the rest of the preliminary statement in another post



i4imicrosoftappealbrief.pdf

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Tuesday, August 25, 2009

Nintendo Settles Patent Suit with Hillcrest


Nintendo has reached an agreement with Hillcrest Laboratories, Inc, signing a license agreement under three patents that are currently the subject matter of an ITC investigation. (For more, see my previous post here) On Friday, the companies filed a joint motion with the ITC, requesting dismissal in view of a settlement that resolved the ongoing dispute between them.

According to Hillcrest's allegations in the case, Nintendo's popular Wii gaming console infringed U.S. Patent Numbers 7,158,118; 7,262,760; and 7,414,611, three patents covering a technology used on TVs that allows users to access several forms of digital content, such as digital photographs, Web sites and games. The software typically uses a main menu that prompts users to choose which program they wish to use. Maryland-based Hillcrest launched the two-pronged attack against Nintendo in August 2008, claiming Wii's remote controllers stole technology enabling players to interact with digital media, inclduing media on television sets. Both suits have reportedly been settled. All other terms remain confidential.

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Saturday, August 22, 2009

Ariad v. Lilly: Written Description Showdown at the CAFC


Yesterday the CAFC granted rehearing en banc in Ariad v. Lilly. The order poses two questions: 1. Whether 35 U.S.C. § 112, paragraph 1, contains a written description requirement separate from an enablement requirement? and 2. If a separate written description requirement is set forth in the statute, what is the scope and purpose of the requirement?

The debate at the CAFC centers around whether the so called "written description requirement" of section 112, paragraph one, should be used to police the introduction of new matter into claims, or whether it presents a distinct requirement for patentability of claims; that is, separate from the enablement requirement of the same paragraph.

The panel decision in Ariad continued a trend that began in 1997 with litigation that also involved Eli Lilly, Regents of Univ. of Cal. v. Eli Lilly (opinion here). The 1997 Lilly case is often cited as the first to use written description as a separate requirement for patentability. In Ariad's case against Eli Lilly, the Court reversed a Massachusetts District Court and invalidated Ariad's claims broadly reciting methods of repressing the activity of NF-kB, an important regulator on gene transcription. Many saw the Ariad case as raising issues under scetion 101 relating to patent eligible subject matter, however, the panel deciding the case avoided the issue of patent eligibility by ruling that all of the asserted claims failed to comply with the written description requirement.

The problem with Ariad's claims appear to be breadth: they are broadly drawn to cover any method for reducing NF-kB activity in cells, including both known and unknown methods (on this point, see the arguments raised by Chris Holman's blog). This issue of "overbreadth" is a common one running through the CAFC's written description cases. With claims as broad as these, the question becomes which doctrine between written description and enblement, is more appropriately used to invalidate the claims.

The statute requires clarity in order to (1) put the public on notice as to what the patentee claims as his or her invention, and (2) a teaching of how to make and use the invention as part of the quid pro quo for granting a limited monopoly in the form of a patent.

In my view, both policy goals are adequately furthered by the enablement requirement. To date, the CAFC has failed to articulate a clear standard that applies the written description requirement in a way that clearly furthers either statutory goal. Perhaps the en banc court in Ariad will finally clear up this confused body of case law.

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Thursday, August 13, 2009

Judge Davis Orders Microsoft to Stop Selling Word


As many of you undoubtedly already know, Judge Leonard Davis granted plaintiff i4i's motion for a permanent injunction following a jury verdict in the case for infringement of US Patent No. 5,787,499, which covers software controlling document architecture and content and enables individuals to manipulate electronic documents without using manually embedded command codes (i.e., A/K/A "XML"). (see my previous posts here)

I've read the order, and it does a pretty good job of setting forth factors justifying an injunction according to the Supreme Court's new standard in Ebay. This certainly sounds like the sort of case where an injunction is appropriate. Let's hear it for Judge Davis for putting some teeth back in our patent system! I don't think it is realistic to think that Microsoft will actually pull Word. Further, there are some things that Microsoft can do at the appellate court level to try and get the injunction lifted, they are no doubt in the process of filing papers with the CAFC seeking to stay enforcement of the injunction pending appeal. My money, however, is on settlement.

The order is attached below, and here is are some snippets:

"First, i4i has overwhelmingly shown that it has been irreparably injured by Microsoft’s continuing infringement of the ‘449 patent and could not be compensated with monetary damages. The fact that there is direct competition in a markplace [sic] weighs heavily in favor of a finding of irreparable injury."

"i4i’s damages expert also testified that Microsoft’s entry into the custom XML marketplace rendered i4i’s products obsolete in 80% of that market."

"In response to i4i’s claims of direct competition, Microsoft presents evidence that i4i’s current products are designed to be compatible with Microsoft’s infringing WORD products and that Microsoft’s entry into the market allowed such “add-on” products to succeed. . . . This argument entirely misses the point. The fact that i4i is capable of existing in a marketplace where Microsoft is infringing does not negate the injury incurred as a result of Microsoft’s infringement."

"The evidence shows that i4i lost a, perhaps irretrievable, opportunity in the early days of the custom XML market. See PX 172. This continuing loss of market share and brand recognition is the type of injury that is both incalculable and irreparable."i4iOrdergrtnginjuntion.pdf

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Saturday, August 8, 2009

Section 293 and Baseball

The following was written by my colleague, Darby & Darby principal, Steve Lipman.

In my recent efforts to learn the name of the “Section 293 Notice” representative of a client’s U.S. patent, I came upon the following incredible story. By the way, for those of you who may not know about a “Section 293 Notice,” it is a provision of Title 35 that gives a foreign owner of a U.S. patent the option of designating a U.S. representative for service of process relative to its U.S. patent; otherwise, the foreign owner can be sued on the patent in the District Court for the District of Columbia.

Since I was informed by a client that it believed it had designated a 293 representative in NY, I looked in PAIR to confirm that belief. Strike number one. I then searched the entire PTO website to find where such information may exist in the bowels of the PTO. Strike number two. Now, with bases loaded in the bottom of the ninth, I telephoned the PTO directly and, after speaking to four different people in four different PTO “departments” – none of whom had ever heard of Section 293, I thought I had struck out and left all three runners on base …. but then, as I was about to drag my bat back to the dugout, my phone rang. It was Marilyn Ricks (703.756.1169), the Manager of a “Records Branch” in “Shirlington.” Since I spent 11 years at the PTO I knew Shirlington well (it is just South of Arlington, VA, where the PTO used to be located ), and still includes a great movie theater that my wife and I used to frequent, Ms. Ricks (an incredibly sweet and friendly person) and I hit it off immediately. (Get the “hit” pun?). By the way, the alleged “NY-style” delicatessen that used to be in Shirlington left town long ago (as I did), but I was always bothered by the fact that my first lunch at the “Shirlington Deli” included a pastrami sandwich served on white bread

Ms. Ricks admitted sheepishly that she really did not know too much about Section 293, but she did reveal that there was a “Green Ledger Book” in her Records Branch that has hand-written entries "about 293.” Ms. Ricks had no idea how “the Book” made its way to her Branch, but it was her understanding that “the Book” had been around since about 1960. The bad news for me, however, was that not a single hand-written entry had been made in “the Book” since 2004 – thus likely indicating, assuming no mistake had been made by the Records Branch, that no such NY representative had been designated by the client under Section 293 – or attempted to be recorded in the PTO by the client. Ms. Ricks and I shared a couple of laughs about “the Book,” and then said our goodbyes with some nice memories about the ol’ Shirlington Movie Theater.

One of several morals to this story is that the PTO is not as “E-savvy” as it portrays itself. Another moral is that baseball is a wonderful game, especially when one plays catch with ones father on a beautiful cornfield.

Steve Lipman

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Thursday, August 6, 2009

Seattle Patent Litgiation Update: July 2009

There were three patent cases filed in July. Here they are.

July 27, 2009
F5 Networks Inc v. Kemp Technologies Inc. (Judge Jones)

July 23, 2009
Sharafabadi v. University of Idaho et. al. (Judge Robart)

July 22, 2009
Avtech Corporation v. Day-Ray Products Inc. (Judge Pechman)

Th F5 case is another action to enforce US Pat. No. 6,473,802 entitled "Method and System for Storing Load Balancing information with an HTTP Cookie." You may recall that previous actions to enforce this patent were filed in 2007 against Coyote Point Systems, Inc. (Judge Pechman 2:2007cv01831), and A10 Networks Inc. (Judge Lasnik, 2:2007cv01927) Both suits settled short of discovery or claim interpretation.

The case against the U of I is also filed against WSU, U of O, and others. The case was filed pro se by inventor Soheil K. Sharafabadi, a resident of New Westminster, Canada. The patent-in-suit is US 4,980,186 entitled "Psuedoplastic Yellow Mustard Gum." This patent issued December 25, 1990 on an application that was filed August 14, 1989. According to GATT transition rules for calculating patent term of a patent that is in force on or that results from an application that was filed before the effective date of the 20-year patent term (June 8, 1995), this patent will expire, well, next Wednesday, August 14, 2009. The patent has claims drawn to "[a]n improved process of gum extraction from whole yellow mustard seed."

Claim 1 is reproduced below:

1. In a process of water extraction of gum from dried
yellow mustard seed, including the steps of
(a) treating said mustard seed with water
(b) separating the resulting water extract from said
seed, the improvement comprising
(c) said water being at a temperature in the range
from about 55'C. to about 100" C.


The third case filed by Avtech also involves a patent that was issued in 1990 and recently expired, U.S. 4,958,108, entitled "Universal Fluorescent Lamp Ballast." The plaintiff in this case is local company, Avtech Corporation, an "internationally recognized . . . leader in the design development, and manufacture of electronic systems for the aerospace industry" according to allegations in Avtech's Complaint. The defendant is California company, Day-Ray.

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Tuesday, August 4, 2009

Inter Partes Reexamination: When is a Final Ruling "Finally Determined"

The following case addresses the under appreciated concept of estoppel from so-called "final" rulings in an inter partes reexamination.

In Safoco, Inc v. Cameron Int. Corp. (USDC SD Texas H-05-0739), the US District Court for the Southern District of Texas addressed when estoppel attaches to a "final" ruling at the PTO in an proceeding for inter partes reexamination. This case interprets the inter partes reexam estoppel provision of 35 USC 315(c), which prevents a losing requester from putting on an invalidity defense in court. In the decision, the court interpreted the words "finally determined" to find that the estoppel is first triggered by the issuance of a reexamination certificate (after all appeals are final). Those relying on this case may argue that estoppel will not be triggered by intermediate events that might be characterized as "final" for various purposes, such as the issuance of a "Right of Appeal Notice" at the Examiner level.

Thanks to Hal Wegner and Matt Smith for providing the above analysis.

Safoco.pdf

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