Supreme Court denies Certiorari in Quanta v. Ricoh

Does the unconditional sale of a patented item overseas result in a forfeiture of rights to enforce patent rights in the United States? Federal Circuit precedent has answered this question in the negative; see Harold C. Wegner, Post-Quanta, Post-Sale Patentee Controls, 7 J. Marshall Rev. Intell. Prop. L. 682, 698 (2008).

So called "international patent exhaustion" was the focal point of a certiorari petition that was recently denied by the Supreme Court in Quanta v. Ricoh. The Supreme Court's consideration of certiorari petitions is now over until the Court resumes for the October 2009 Term. Would Obama's pick, Judge Sonia Maria Sotomayor, have made a difference in this vote? Probably not. Regardless of this vote, most scholars believe that the Supreme Court will eventually need to take a hard look at this issue. Professor Hal Wegner says that "[t]here has been a wealth of legal writing on the subject since 1974, particularly from Europe, where intra-European exhaustion took root in the European Court of Justice Centrafarm case that year. The topic attracted much attention in Asia in the late 1990's when the Japan Supreme Court issued its blockbuster opinion in the BBS case. Quanta may well be the wakeup call for consideration of this issue in the United States."

Alcatel-Lucent v. Microsoft: A Reason to Delay Congressional Patent Reform?

The damages issue has been hotly debated among those supportive of congressional patent reform, including so-called "damages apportionment" and damages keyed to the "whole market value" of a device.

According to noted patent commentator, Hal Wegner, the case brought by Alcatel-Lucent against Microsoft embodies these damages "reform" issues and provides an opportunity for the Federal Circuit (and perhaps even the Supreme Court) to judicially consider these issues. Says Hal, "[b]ecause the matter will be pending for quite some time, this case will be perhaps more important as the EE/IT coalition’s poster child for arguments on Capitol Hill for damages reforms, making this perhaps the most important pending patent appeal."

Indeed, on March 3, 2009, Senator Spector wrote to Chairman Leahy of the Judiciary Committee asking for a postponement of patent reform hearings "until late May [2009] after the [ ] Federal Circuit has the opportunity to hear argument in Lucent Technologies, Inc. v. Gateway, Inc. The court may consider issues related to the damages debate; specifically the scope of the ‘entire market value’ rule when assessing damages."

Hal responded to Senator Spectors comments, explaining "[t]he prediction by Senator Spector is odd: The Federal Circuit has now posted its argument calendar through the end of May and does not list this case. Unless the case is taken out of turn, it is expected that the argument will be scheduled for the time frame June-August 2009."

For those unfamiliar with the history of this case, it has been called one of the most important legal battles of the modern era.

The early patent dispute involved audio coding patents. Alcatel-Lucent claimed that Microsoft's Windows Media Player infringed these patents by virtue of its MP3 capabilities. On February 22, 2007, a San Diego jury found for Alcatel-Lucent and against Microsoft. Alcatel-Lucent was awarded a record-breaking $1.52 billion in damages. On August 6, 2007, U.S. District Judge Rudi Brewster, granted Microsoft's motions for Judgment and for new trial, saying that the jury's decision was not supported by the evidence. The Judge's Order found that there was insufficient evidence both for Microsoft's liability and for the damages model used by Alcatel-Lucent. Alcatel-Lucent appealed and the Court of Appeals for the Federal Circuit heard oral arguments in July 2007. On September 25, 2008, upholding the dismissal of the case by Judge Brewster on two grounds, the CAFC that there was a joint developer and thus co-owner of one patent, which made Lucent lack standing to sue. The other patent was not infringed because Lucent failed to show that the accused algorithm was ever used.

A week after the first jury verdict, on March 2, Judge Brewster ruled in the second part of the case that Microsoft had not violated Alcatel-Lucent's patents relating to speech recognition and the case was therefore dismissed before going to trial. Alcatel-Lucent stated that it intends to appeal.

The trial in the third part of the San Diego case involved four patents. In April 2008, US jury awarded Alcatel-Lucent $367.4 million in damages after finding that Microsoft had violated two patents related to the user interface in its software. In June 2008, the trial judge upheld the jury's verdict and increased the damage award against Microsoft to $512 million to account for interest.

In Re Comiskey: Fed. Cir. Narrowly Denies Rehearing En Banc

Rehearing en banc was denied today in the closely watched case dealing with patentable subject matter under 35 USC Section 101, In re Comiskey. The petition for rehearing en banc failed by two votes, (failing to achieve a majority of seven judges) as only Newman, Mayer, Rader, Bryson, Moore, JJ., voted to rehear the case en banc. Hal Wegner, gave a great summary of the decision today:

"The nub of the controversy is the "affirmance" of the PTO’s denial of claims based upon a new ground of rejection, patent-eligibility under 35 USC § 101, as opposed to the PTO’s affirmance of the Examiner on the basis of obviousness under 35 USC § 103.

As explained in an important dissent from denial of rehearing en banc, "[t]his case goes to the fundamental role of the appellate court – to review the decision appealed. In this case, the court declined to address the only ground for rejecting the patent claims decided below and appealed by the parties (§ 103). Instead, the court reached out to decide a new ground of rejection (§ 101), raised sua sponte by the court. The court evaluated both the process and machine claims under its chosen ground, § 101, concluding that the process claims were not directed to patentable subject matter, but that the machine claims, in light of our well established precedent were directed to patentable subject matter." Comiskey, __ F.3d at __ (Moore, J., dissenting from the denial of the petition for reh’g en banc, joined by Newman, Rader, JJ.)

Defending the panel’s action, the author of the panel opinion issued a separate opinion, Comiskey, __ F.3d at __ (Dyk, J., joined by Michel, C.J., Prost, J., concurring in the denial of rehearing en banc). Judge Lourie also issued a concurring opinion, while Judge Newman issued a dissenting opinion.

Open and Troubling Questions Raised by the Dissent: It is difficult to understand how a brand new ground to deny a patent can sua sponte be raised by the court which has nothing whatsoever to do with the proceedings below. Indeed, it is difficult to challenge the logic of Circuit Judge Moore in her opinion. Does the majority’s action now mean that a party can come up with a brand new basis to challenge patent validity in the context of a patent interference? If a party cannot, how can the court sua sponte do so?"