Summary Judgment Granted For Microsoft on Patent Claims brought by Veritas

Judge Coughenhour adopted findings by the special master and granted Microsoft's motion for partial summary judgment on Veritas' claim for infringement of US Patent No. 5,469,573. Here is a summary of the decision from Jurisnotes and a link to the order's text:

Veritas sued Microsoft for patent infringement and related claims; the court adopted the report of the special master recommending that the court grant Microsoft's motion for summary judgment on Veritas's claim of infringement of the '573 patent. The '573 patent claims a data backup procedure and apparatus for backing up and restoring a fully configured operating system to the high capacity storage device of a computer workstation from standard system backup media without the need to reload and reconfigure the operating system from its original distribution media. Veritas alleges that certain operating system software sold by Microsoft have built-in backup and restore capabilities that can be used to infringe the '573 patent. Microsoft asserts that Veritas has not shown that any specific customer has used the accused software in a way that practices each step of any claim. Because the accused products had undisputed substantial non-infringing uses, Veritas could not show that use of the accused products necessarily infringed. As a result, Veritas had to point to a specific instance of direct infringement in order to avoid summary judgment on its charge of indirect infringement. Veritas had to show that deployment or restoration by a customer was accomplished using a method recited in the claims. The court noted that some of the claimed method steps were inherently ordered and indicated that Veritas had to prove that Microsoft's customers performed those steps in the order set forth in the claims. Veritas's evidence of direct infringement fell into three categories: 1) user manuals and other documents that instructed Microsoft customers on how to use the accused products; 2) testimony by Microsoft witnesses concerning use of the accused products; and 3) emails and other documents concerning use of the accused products.
It was clear that Veritas's reliance on various user manuals and related documents to show that a user actually performed the claimed method was too speculative to raise a genuine issue of material fact in that regard. The court noted that certain of these documents disclosed deployment scenarios that a customer could utilize without infringing the asserted claims. Moreover, Veritas's expert had to cobble together various parts of each document to show that they taught the claimed methods. But these parts were not disclosed together or in the claimed order. Nothing in the evidence indicated that Microsoft's customers had actually used the accused products in the manner suggested by Veritas. In addition, some of the documents did not even point to a sufficiently specific method such that a reasonable jury could identify an infringing method, much less conclude that a Microsoft customer had actually used the accused products to perform a claimed method.

Veritas still has claims for breach of contract and alleged misuse of confidential information. Those claims are set for trial in may 2008, but Vertas' damages are capped at $4,000,000.

Judge Leighton Dismisses Patent Case for Lack of Personal Jurisdiction

I'm beginning to wonder whether specific personal jurisdiction in the Western District of Washington can ever exist over an out of state defendant in a patent case. Perhaps it's too early to call this a "trend," but Judge Leighton's recent decision (November 2, 2007) dismissing a DJ complaint under Rule 12(b)(2), The Campbell Pet Co. v. Theresa Miale, (C07-5375 RBL) follows closely after a similar ruling by Judge Zilly in October, High Maintenance Bitch v. Uptown Dog Club, Inc. (C07-0888 TSZ).

In both cases, Defendants sold products within this judicial district, and both operated interactive web sites where people from Washington could purchase those products. The Campbell Pet Co. case involved a complaint for declaratory judgment that US Pat. Nos. 6,199,508 and 6,230,622 were invalid and not infringed by Campbell's sale of certain mobile folding stretchers for transporting injured animals. The accused products in Campbell Pet Co. were all made and sold in Vancouver, Washington. Further, over 40 people were employed by Campbell in Washington. No doubt these people were selling items in Washington accused of infringing both patents in suit. The existence of a reasonable apprehension of suit concerning these items was apparently not challenged by the Defendants, i.e., they did not deny the fact that they had accused a Washington company of infringement, and that these accusations placed a cloud of infringement over the products made and sold by Plaintiff's 40 Vancouver-based employees. Indeed, some of the accusations giving rise to DJ subject matter jurisdiction were carried out by the Defendants in person at a trade show in Seattle. Apparently threats of infringement were made directly to the plaintiffs, and then again to the trade show's organizer. Again, all of this happened in Seattle.

In dismissing the complaint for lack of personal jurisdiction, Judge Leighton's opinion focuses on the complaint's challenge to the validity of the patents, and reasons that the "sporadic sales and marketing of [Defendant's] products in the State of Washington has no nexus with the validity of the patents at issue." Of course, focusing on the sales of Defendants into Washington may be only tangentially relevant to the personal jurisdiction inquiry where the claims arise under the Declaratory judgment Statute. When claims are in the nature of declaratory judgment, the suit "arises from" or is most related to the threat of infringement. Defendant's sale of products into Washington should be of lesser importance to determine whether the exercise of jurisdiction over Defendants comports with due process. The transaction giving rise to the complaint most certainly occurred in Washington, and this should have been given some weight by the Court in my view.

complaintcampbellpetco.pdf
OrderDismissCampbellPet.pdf

Digeo's Winning Appeal Lessens Blow in "Dead" Inventor Case

Digeo, Inc., maker of "state of the art home entertainment technologies," won an appeal yesterday brought by rival, Audible, Inc. in a dispute involving U.S. Patent No. 5,734,823, a patent entitled "Systems and Apparatus for Electronic Communication and Storage of Information." US5734823.pdf Yesterday's decision by the Federal Circuit Court of Appeals affirmed Judge Robart's ruling that the case is not "exceptional" within the meaning of 35 U.S.C. Section 285. Digeo lost the case on summary judgement in a bizarre turn of events, including the "discovery" that a listed inventor, presumed by all to be dead, was actually alive.

Put yourself in the shoes of plaintiff's counsel for a moment. Imagine receiving service of a subpoena for the deposition of a listed inventor you thought was dead for two years. Now imagine what this would do to your allegations in the complaint that your client is "the owner of all right, title, and interest in the '823 patent, including the right to sue for infringement of that patent." This sounds like every lawyer's nightmare.

Digeo's complaint was dismissed for lack of standing. Smelling blood, Audible moved for attorneys fees and a finding that the case was "exceptional" under section 285. Audible did not assert Rule 11 grounds for fees, just a ruling that the case was exceptional and that it should therefore be entitled to fees. Judge Robart denied Audible's motion, finding that Digeo and its lawyers did not know (and had no reason to know) certain assignment documents in the file history were "forgeries."

In affirming Judge Robart's decision, the CAFC clarified the often confusing cases granting attorney's fees under Rule 11 and section 285. Audible relied heavily on the CAFC's decision in View Engineering Inc. v. Robotic Vision Sys. Inc, 208 F.3d 981 (Fed. Cir. 2000), a case applying Ninth Circuit law and affirming an award of sanctions based on Rule 11. In View Engineering, the CAFC explained that the plaintiff has the burden of proof to identify facts showing a reasonable pre-filing investigation. Calling the View Engineering case "inapposite" to Audible's appeal, the CAFC drew a distinction between cases seeking fees under section 285 and those seeking fees under Rule 11. In a Rule 11 case, the plaintiff bears the burden of proof to show a reasonable pre-filing investigation, while in a section 285 context, the accused infringer will have the burden to prove that a given case is "exceptional." Of course, many "exceptional"cases are also ones where the prevailing party has sought sanctions under Rule 11, so in many cases both standards may apply.

Another rule from this case is that there is no affirmative duty for a plaintiff to investigate title prior to filing an infringement law suit, not unless he "knew or should have known its legal title was defective."

Emergency Appeal By the USPTO Expected

As the news of the USPTO's injunction spreads like chaparral wild fire, most are speculating that the USPTO will seek an emergency stay of the injunction tonight by way of an emergency motion to the Court of Appeals for the Federal Circuit.

Translogic Requests Rehearing En Banc in its Appeal against Hitachi

Translogic, a Northwest innovator of logic circuits known as multiplexers, saw its $85M jury verdict for infringement of U.S. Patent No. 5,162,666 against Hitachi evaporate into thin air when the Federal Circuit affirmed a decision by the Board of Patent Appeals and Interferences (BPAI) upholding an Examiner's final rejection in a Reexam. The reexam and litigation (D. of Oregon) proceeded simultaneously along parallel tracks. After winning a jury verdict that certain claims of the '666 patent were not invalid, the Examiner issued a rejection in the reexam, finding those same claims invalid for obviousness. Translogic was unsuccessful in its appeal of the Examiner's rejection before the BPAI, and subsequently appealed to the CAFC. Meanwhile, Translogic had won a jury verdict of willful infringement and judgment of $85M which was appealed by Hitachi. Both cases reached the CAFC at about the same time and the CAFC issued two independent rulings. First, the Court affirmed the BPAI's decision in an opinion dripping with comparisons to the U.S. Supreme Court's decision in KSR v. Teleflex [PDF] and reasoning that the BPAI correctly determined that the claims of the '666 patent were invalid. [PDF] Second, the Court vacated the jury's verdict [PDF] based on its decision affirming the decision by the BPAI.

Today, Translogic requested rehearing by the CAFC en banc in a brief that raises some interesting arguments. Translogic challenges the Constitutional character and make up of the BPAI, with its lack of Article III judges. There is support for this argument in a recent article in the Patently O Law Journal.

Second, Translogic asserts a US Supreme Court case from 1861 arguing that the CAFC's decision violates the "antiretroactivity doctrine." Essentially, this doctrine does not permit the CAFC to eliminate a judgment based solely on a decision of the BPAI, where that decision came later in time than the jury's verdict. (i.e., "What the jury giveth, the BPAI cannot take away.") Of course, this argument would still require the CAFC to go back and evaluate the other issues on Hitachi's appeal of the underlying judgment.

I think both of these arguments have some legs. Rehearings en banc are always a long shot, but I hope the CAFC takes another look at this decision. If judgment on the Jury's verdict is flawed for some reason (like lack of sufficient evidence) that would be one thing, but if the verdict is supported by the evidence, it "beat" the Examiner's rejection, and it should be upheld no matter what the result of the reexamination was. I think this is important to preserve the sanctity of our judicial system which is based on the institution of the jury. When a jury sits to decide a case and renders a verdict, that verdict should be respected and upheld unless it is flawed for some reason under the Federal Rules. Jury Verdicts should not be open to collateral attack by independent agency decisions, applying different rules. What is to stop any party who loses in district court and is hit with damages for patent infringement from simply trying the case over again before the BPAI, in an attempt to invalidate claims that have already been held not invalid by a jury? This promotes duplicate proceedings and could lead to inconsistent results.

New Kid On The Block

The Patent Holding Company that recently sued Nintendo of America for patent infringement in East Texas (6:07-cv-490) was formed just months ago on July 2, 2007. Follow these links to see documents of formation: SaxonFormation.pdf SaxonCorrection.pdf Here is a snippet from Patent Troll Tracker about the history of this Holding Company:

"Saxon purports to be a Texas corporation, but we all know how that song and dance goes. In fact, state records show that Saxon Innovations was formed on July 2, 2007, and is a subsidiary of Saxon Holdings, LLC, a Delaware corporation formed just a tad before the Texas corporation was formed, with a business address on Madison Avenue in New York City."

Read more about the history of the patents-in-suit here.

Nintendo Targeted by Patent Licensing Company in Eastern District of Texas

Nintendo was sued last week, along with cell phone makers Nokia, LG, Research in Motion, Samsung, HTC, and Sharp, for infringement of several patents claiming private wireless communications technology. The case is Saxon Innovations LLC v. Nokia Corp. et al. (6:07-cv-490) The patents-in-suit are U.S. Nos. 5,592,555; 5,771,394; 5,502,689; and
5,247,621. All patents were originally assigned to computer chip maker Advanced Micro Devices, Inc. The plaintiff is described as a "Texas-based licensing company," although it is becoming more common these days for shell companies to be formed in East Texas for the sole purpose of pursuing patent litigation there, as reported by Patent Troll Tracker. Nintendo seems to be a target because of its popular wireless gaming devices, including the Nintendo Wii.

Microsoft and Proclarity Settle Patent Suit with Timeline

One day before a scheduled jury trial in its long-running patent dispute with Timeline, Inc, Microsoft and its Subsidiary, ProClarity Corporation entered into a binding settlement agreement. The following is from Timeline's form 8-K filed today with the SEC.

"Pursuant to the Settlement Agreement, the parties agreed to dismiss, with prejudice, their respective claims and counterclaims against each other asserted in the Actions. The parties further agreed to release and discharge each other from any claims existing as of the effective date with respect to the Actions or related to the facts and circumstances asserted in the Actions. In addition, Timeline agreed to release and discharge customers of Microsoft and ProClarity for liability for patent infringement, to the extent set forth in the Patent License Agreement. The Settlement Agreement is not an admission of liability by any party with respect to the Actions.
Under the Settlement Agreement, Microsoft agreed to pay Timeline a one-time payment of $5 million within 14 days as consideration for entering into the Settlement Agreement and the Patent License Agreement. The net proceeds to Timeline from this amount will be reduced by payment of its 45% contingent attorneys' fees and other expenses of the litigation."

As explained in Timeline's SEC filing, Microsoft was granted a worldwide license to Timeline's patents that were the subject of the Actions (including U.S. Patent Nos. 5,802,511, 6,023,694, 6,026,392, 6,625,617 and 6,631,382) "for use in connection with Microsoft's products and services."

Judge Zilly Dismisses "Dog" of a Patent Case

Plaintiff, High Maintenance Bitch, a local maker of dog accessories, sued a Texas defendant, Uptown Dog, Inc. for infringement of a number of design patents. A small operation by any measure, Uptown was run by the company's co-founder out of her home. Defendant Uptown had made only one isolated sale into the sate of Washington over the last three years through its interactive web site. On this basis, Uptown sought dismissal of the complaint for lack of personal jurisdiction. Despite Uptown's interactive web site and the existence of at least one sale into the state of Washington, Judge Zilly dismissed the complaint, calling Plaintiff's allegations of jurisdiction "frivolous" and granting Uptown its attorney's fees. Read the opinion here by clicking the following link. hmb%20order.pdf

Exclusive Enterprise Licensee Lacks Standing to Sue for Patent Infringement According to Federal Circuit

Yesterday, the Federal Circuit decided that an "exclusive enterprise license" (an amalgam of an exclusive territorial license and an exclusive field of use license) does not confer standing to sue for patent infringement under 35 U.S.C. 281 (link to precedential opinion here).

Plaintiff International Gamco, Inc. owns rights under U.S. Patent No. 5,324,035 which claims a gaming system network configured to allow multiple players to engage in games drawn from a finite and centrally controlled pool of game plays, including predetermined numbers of winning and losing plays. Technology claimed in the '035 patent covers many state lottery games, including video poker and other such games. Gamco had originally owned the '035 patent by way of an assignment. Subsequently, Gamco assigned the '035 patent to International Game Technology, the well-known manufacturer of gaming products and systems with headquarters in Reno, Nevada. In its assignment of the '035 patent to IGT, Gamco reserved certain rights in the "New York State Lottery Market." In its opinion finding that Gamco lacked standing to sue for alleged violations of its reserved rights, the Federal Circuit characterized its own statements in a prior case, Textile Products, inc. v. Mead Corp., 134 F.3d 1481, 1484 (Fed. Cir. 1998), as "dicta." The Textile opinion contains broad language regarding exclusive "fields of use" licenses, suggesting that a licensee with exclusive "fields of use" under a patent would have standing to sue for infringement under section 281.

Note: This opinion marks a significant deviation between patent and copyright law (at least in the Ninth Circuit). In copyright law, an exclusive licensee of any exclusive right under 17 U.S.C. 106 may sue for infringement. See Silvers v. Sony Pictures Entm't, inc. 402 F.3d 881, 885 (9th Cir. 2005) ("'the owner of' the particular exclusive right allegedly infringed" may sue for infringement).

Company Loses $85M Because of Patent ReExam

On Friday, the US Court of Appeals for the Federal Circuit vacated an award of $85M in damages which followed a jury verdict of infringement of US Patent No. 5,162,666. The '666 patent covers certain multiplexers, a type of logic circuit with multiple inputs, one or more control lines, and one output. Claims16, 17, 39-45, 47&48 of the '666 patent were found obvious under 35 U.S.C. 103(a) in a decision from the same panel of the court, Judges Mayer, Rader, and Prost. The Court's obviousness decision affirmed a prior ruling of invalidity made by the U.S. Patent and Trademark Offices Board of Appeals and Interferences, which had affirmed an examiner's rejection made in a reexamination proceeding. The Reexam was filed June 4, 1999, following an infringement case brought by the owner of the '666 patent, Beaverton Oregon Company, Translogic Technology, Inc. on March 24, 1999 in the District of Oregon (No. 99-407-PA) against Hitachi. Instead of staying the district court case in view of the Reexam, Translogic pushed ahead, winning a jury verdict that the claims of the '666 patent were not invalid in October 2003 and a subsequent verdict of infringement by Hitachi in May 2005 and an award of $85M in damages. The District court also entered a permanent injunction which was stayed by the Federal Circuit pending appeal. Only claims 16 and 17 of the '666 patent were litigated by Translogic to verdict.

Novartis Vaccines (formerly Chiron Corp.) Suffers Loss in Long-running Interference Battle over HIV Diagnostic Assays

On Wedndesday, the USPTO published its decision that certain Novartis Vaccines and Diagnotics (formerly Chiron Corp.) inventors were not entitled to patent protection covering certain "Methods For Detecting Human Immunodeficiency Virus Nuclaeic Acid" claimed in US Patent no. 6,531,276. According tot he USPTO, National Institute of Health inventors successfully developed and tested an HIV hybridization assay in May 1984, predating the earliest allowable priority date for Novartis/Chiron. This loss echos an earlier ruling in December 2006 by the USPTO in an interference between Novartis/Chiron and the French research institution, Institut Pasteur concerning proper inventorship of the '276 patent. Novartis/Chiron sought review of that ruling in US District Court, and a similar lawsuit could be expected in response to the USPTO most recent findings regarding the '276 patent.

Microsoft Subsidiary Tries to Keep Invalidity Defense At Issue in Local Patent Dispute

In a case set for trial in Seattle on October 16, 2007 (C05-1013), Microsoft subsidiary Proclarity, Inc. hopes to keep evidence of obviousness in the case despite an earlier ruling that the defense fails as a matter of law. The maker of business intelligence software is accused of violating five patents owned by Timeline, Inc. The patents at issue cover an invention that "automatically obtain[s] information about the logical organization of a data source without the need for a human user to examine and analyze that data source." ProClarity argued that the invention was obvious in view of prior art, including Microsoft's own software products in use and on sale before the earliest possible priority date. U.S. District Judge James L. Robart disagreed, granting summary judgment in favor of Timeline. Claiming the defense has continued relevance notwithstanding Judge Robart's summary judgment order, ProClarity cites the Federal Circuit's recent en banc decision In re Seagate Technology, 2007 U.S. App. LEXIS 19768 (Fed. Cir. August 20, 2007) and argues that the evidence establishes an "objectively reasonable defense" to infringement. As a consequence, ProClarty claims that evidence relating to obviousness should be considered by the jury in response to Timeline's willful infringement allegations. To be sure, the argument is a novel one but not entirely without merit. The Federal Circuit's Seagate decision fundamentally changed the law of willful infringement by requiring an objective inquiry into the conduct of the accused infringer, asking whether the patentee can show by clear and convincing evidence that the infringer "acted despite an objectively high likelihood that its action constituted infringement of a valid patent." The problem ProClarity faces in its efforts to keep obviousness in this case appears to be one of timing. According to Timeline, ProClarity never developed an obviousness defense prior to initiation of the litigation. This fact, according to Timeline, makes the defense of obviousness irrelevant because "the starting point of any wilfullness analysis is what the infringer actually did when confronted with the patents." Timeline appears correct in its identification of the relevant "starting point" for assessing whether someone's infringement is willful, however, this begs the question of when (if ever) is it appropriate to examine new defenses that arise after the initiation of litigation. Because infringement is often an on-going, continuous injury, would not evidence showing a reasonable defense post-complaint be relevant to any claim of willful infringement arising after the complaint was filed?

Patent Office Publishes Long-Awaited Guidelines for Obviousness Rejections

Today the U.S. Patent office finally published examination guidelines for determining obviousness of an invention under 35 U.S.C. 103 in view of the Supreme Court decision in KSR International v. Teleflex Inc. The guidelines were published "to assist USPTO personnel to make a proper determination of obviousness under 35 U.S.C. 103 and provide an appropriate supporting rationale."

Defendants in Digital Printing Battle Seek Seattle Venue

Printer manufacturers Canon, Kodak, Panasonic, Richo, and Kyocera are attempting to bring battle over digital printing technology to a Seattle venue. In an apparent belief that the best defense is a good offense, the manufacturers sought a declaratory judgment that US Patent No. 5,166,809 ("Apparatus and Methods for Digital Halftoning") is not infringed, invalid, and unenforceable due to inequitable conduct. The suit in Seattle is in response to an August 8, 2007 lawsuit filed by an affiliate of Acacia Research Corporation in the Eastern District of Texas (2:07CV340DF). The Seattle suit also names an individual, Paul S. Snypp. The Manufacturers are challenging jurisdiction and venue in the Eastern District of Texas.