Back To The Future
The technological changes of the 20th century and the first decade of the 21st century dwarf, in numerical terms, any similar period in history. Information, expression and communication advances are unparalleled. One commentator recently noted that 3,000 new books are now published daily. Another source reported that 18.7 billion text messages were sent by mobile phone users in the month of December 2006 alone.
The technological changes of the 20th century and the first decade of the 21st century dwarf, in numerical terms, any similar period in history. Information, expression and communication advances are unparalleled. One commentator recently noted that 3,000 new books are now published daily. Another source reported that 18.7 billion text messages were sent by mobile phone users in the month of December 2006 alone. This growth of technology, information and communication is a reflection of the massive growth in intellectual property in the past 30 years.
Intellectual property can be roughly divided into the subcategories of patents, copyrights and unfair competition, the latter of which encompasses trademark law, trade dress law, trade secret law and a number of related topics. Patent law is intended to cover inventions in the realms of machines, articles of manufacture, compositions of matter, and processes. As the United States Supreme Court stated in 1981, the subject matter of patents “include[s] anything under the sun that is made by man.” Copyright law is intended to reserve to authors their creative expression of an idea in words, paintings, sculpture, architectural drawings, music, etc. The unfair competition laws exist to establish threshold levels of business conduct, such as deterring the likelihood of consumer confusion under the trademark and trade dress laws, or protecting a competitive advantage of closely held information under the trade secret laws. Each of these intellectual property concepts has an inherent tension with the free market system in that they carve out from competition an ownership interest in an intangible asset. Accordingly, the degree of protection accorded to intellectual property by the courts has had a variable history. Since the revision of the Copyright Act in 1976 and the formation of the Court of Appeals for the Federal Circuit (which handles all appeals of patent litigation from the United States district courts) in 1982, the enforcement of rights in intellectual property has reached a high-water mark. Recently, however, at least in the patent law subcategory, the courts seem to be signaling a return to earlier approaches to reasoning in the enforcement context.
The growth of technology, information and communication is a reflection of the massive growth in intellectual property in the past 30 years.
Recent Case Law
Significantly, two recent United States Supreme Court cases and one Federal Circuit case revisit the status quo ante. Although it can be anticipated that a great body of law will develop from these cases and may grow in some unexpected directions, some of the present implications of the cases can readily be identified. In its early 2007 decision in MedImmune, Inc. v. Genentech, Inc.,1 the United States Supreme Court addressed the effects of placing suspected infringers on notice of potential infringement and the implications of the Declaratory Judgment Act when such notice is issued. Next, in April of 2007, the Supreme Court issued a landmark ruling in KSR Int’l Co. v. Teleflex, Inc.2 bearing on the standard used to determine whether an invention is “obvious” in view of the prior art, and thus unpatentable. In August, in In re Seagate Technology, LLC,3 the Federal Circuit reverted from its long-standing ruling on the duty of care owed and attorney-client privilege waivers by a potential infringer.
It was in Seagate that the Federal Circuit voiced its viewpoint on how the times have changed. In overruling a 1983 case, Underwater Devices v. Morrison Knudsen Co.,4 the Federal Circuit stated regarding the duty of care:
Where … a potential infringer has actual notice of another’s patent rights, he has an affirmative duty to exercise due care to determine whether or not he is infringing. Such an affirmative duty includes, inter alia, the duty to seek and obtain competent legal advice from counsel before the initiation of any possible infringing activity. (Citations omitted). This standard was announced shortly after the creation of the court, and at a time “when widespread disregard of patent rights was undermining the national innovation incentive.”…
In light of Supreme Court opinions since Underwater Devices and the practical concerns facing litigants under the current regime, we take this opportunity to revisit our willfulness doctrine and to address whether waiver resulting from advice of counsel and work product defenses extend to trial counsel.
Thus, just as innovation leads to obsolescence and sometimes makes the old new again, the laws regarding innovation themselves are made obsolete and must be revisited.
In MedImmune, the Court addressed the issue of whether an “actual controversy” existed when an accused infringer sought a declaratory judgment from a federal district court. The Federal Circuit case law since 1982 had developed a two-part test to determine whether there is an actual controversy in suits requesting a declaration of patent non-infringement, invalidity or unenforceability. One prong of the test examined whether the plaintiff seeking the declaratory judgment actually produced or was prepared to produce an allegedly infringing product. The other prong inquired whether conduct by the patent owner had created a reasonable apprehension on the part of the declaratory judgment plaintiff that the patentee would file suit if the allegedly infringing activity continued. The Supreme Court abrogated the “reasonable apprehension” test giving rise to the Federal Circuit’s rule, stating:
Jurisdiction may be met where the patentee takes a position that puts the declaratory judgment plaintiff in the position of either pursuing arguably illegal behavior or abandoning that which he claims a right to do. [Thus, the law] will not require the plaintiff to put itself at further risk by continuing to engage in the allegedly infringing activity before seeking a declaration of its rights. Indeed, even a patent owner’s willingness to negotiate a license will not shield it from a declaratory judgment suit by a prospective licensee who must make the above choice.
MedImmune and its progeny already teach that extreme care must be taken when informing potential infringers of patent rights. While the circumstances giving rise to jurisdiction for the potential infringer will vary depending on the facts of the case, it seems clear that a notice letter (written to bring a specific patent covering a specific technology to the attention of a potential patent infringer) will enable the competitor/potential infringer to decide when and where to file suit. In most instances, the patent owner would prefer not to file suit, although he wants the competitor/potential infringer to respect his patent. Clearly, the patent owner needs to evaluate the strength of his position in court with a more critical eye than under the “reasonable apprehension” test because the standard for jurisdiction to have the court examine the patent has been lowered.
In KSR, the Supreme Court looked at the statutory requirement that an invention must not be obvious, which is commonly raised as a defense to a claim that a patent is invalid. The Federal Circuit had previously employed the “teaching, suggestion, or motivation” test to determine obviousness. Under TSM, a patent claim is “obvious” only if the knowledge of a person of ordinary skill in the art reveals some motivation or suggestion to combine the prior art teachings to arrive at the claimed invention. The Supreme Court found in KSR that the TSM test should not be rigidly applied, but rather may provide “helpful insight” regarding obviousness. In so doing, the Court affirmed the factual inquiries for obviousness established in Graham v. John Deere in the 1950s: (1) the scope of the prior art; (2) the differences between the prior art and the claims at issue; (3) the level of a person of ordinary skill in the art; and (4) secondary considerations. The Court advocated an expansive inquiry to determine obviousness, including implicit “motivations” to combine (like market incentive), the nature of the problem to be solved, and whether the combination was simply “obvious to try.” The Court rejected the notion that one need consider only the problem that an inventor is trying to solve to find obviousness, noting that a plurality of prior art references might be combined to find obviousness.
Just as innovation leads to obsolescence and sometimes makes the old new again, the laws regarding innovation themselves are made obsolete and must be revisited.
In a sense, the decision moves the question of obviousness back to the reasoning prior to the formation of the Federal Circuit in 1982, in that the Court reiterated that the obviousness question is statutorily based and that the statutory interpretation in Graham v. Deere continues to be viable. The KSR decision affirms the broad inquiry needed to determine obviousness and the Court’s reluctance to uphold the validity of a patent based on the mere combination of elements found in the prior art. From a practical standpoint, KSR signifies that the TSM test is still viable, but should be applied flexibly to provide insight regarding obviousness. If a person of ordinary skill can implement a predictable variation of the claimed invention, the variation is likely obvious. The Court focuses on “common sense.”
In both the prosecution and litigation of a patent, the obviousness inquiry must analyze interrelated teachings of multiple patents; the effects of marketplace demands; the level of knowledge of those skilled in the art; and whether these factors produce an “apparent reason” to combine the claimed elements. Thus, it may now be even more important to consider the state of the relevant art during patent prosecution, as the KSR decision appears to invite a burden shift to a patent applicant to provide evidence that an invention is not obvious. Further, one must be mindful to articulate in an application that an invention or improvement is more than just a predictable use of prior art elements consistent with their known functions. Again, this case reminds the patent owner to carefully evaluate his patents before he puts them at risk in litigation.
In Seagate, the Federal Circuit again reversed its own preset course. The 1983 Underwater Devices case had spawned a number of cases in which infringers had been found to be willful for having failed to obtain a well-reasoned opinion of counsel before engaging in infringing conduct. These infringers were subjected to enhanced damage awards of up to three times the actual damages found. It also spawned a cottage industry among patent attorneys who were hired by astute business people to give well-reasoned opinions that the conduct to be engaged in would not constitute infringement of the patent at issue. Eventually, the court implicated the attorney-client privilege in the question. An imbroglio ensued as to when and what information could be given to whom, such that attorneys were spending significant amounts of their clients’ time and money seeking opinions, disclosing those opinions or protecting them from disclosure, and arguing as to whether the disclosure of the opinion waived the attorney-client privilege as to trial counsel.
The Federal Circuit had struggled with these practical applications, stating that “[p]roper resolution of the dilemma of an accused infringer who must choose between the lawful assertion of the attorney-client privilege and avoidance of a willfulness finding if infringement is found, is of great importance not only to the parties but to the fundamental values sought to be preserved by the attorney-client privilege.”5 The court noted that an accused infringer “should not, without the trial court’s careful consideration, be forced to choose between waiving the privilege in order to protect itself from a willfulness finding, in which case it may risk prejudicing itself on the question of liability, and maintaining the privilege, in which case it may risk being found to be a willful infringer if liability is found.”
Accordingly, the Federal Circuit in Seagate held:
We overrule the standard set out in Underwater Devices and hold that proof of willful infringement permitting enhanced damages requires at least a showing of objective recklessness. Because we abandon the affirmative duty of due care, we also reemphasize that there is no affirmative obligation to obtain opinion of counsel.
In so doing, the court noted that to establish willful infringement, a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.
These three recent cases indicate that the courts have shifted several of the factors involved in patent prosecution and patent litigation to a position less favorable to the patent owner. We are “back to the future” in the patent law context. Whether these changes along with the proposed changes to the patent laws and jurisdictional requirements of the courts will result in more victories for defendants, or better patents being written, or less litigation, remains to be seen, but at least the potential for each is feasible.