U.S. Supreme Court to Rule on What is Patentable Subject Matter
When the Federal Circuit rendered its opinion in In re Bilski, 545 F.3d 943 (Fed. Cir. 2008), it significantly limited patent protection, particularly for business methods and software. The Court ruled that to be eligible for patenting, a “process” or method must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing (the “machine-or-transformation” test). The United States Supreme Court has now elected to review the Federal Circuit’s decision, considering two questions regarding the scope of patentable subject matter. First, whether a “process” is subject to the “machine-or-transformation” test to be eligible for patenting. Second, whether the “machineor- transformation” test contradicts the Congressional intent that patents protect “method[s] of doing or conducting business.” 35 U.S.C. § 273.
A decision will probably be reached sometime this Winter. Whatever the outcome, the future of business method and software patents that do not meet this current “machine-or-transformation” test hangs in the balance.
Patent False Marking Suits are Becoming a Cottage Industry
The patent law encourages patent owners to mark their products with any patent numbers covering those products. 35 USC § 287. The law also prohibits using such markings on non-patented products, which is called “false marking,” under 35 USC § 292. The law allows a fine of up to $500 for every such offense, which is split 50/50 between the plaintiff and the government. As a result, several law firms are now making a business for themselves by suing patent owners for false marking.
These recent suits usually cover two types of marking. First, those markings using the broad language “May be be covered by one or more of the following patents,” when not all the patents listed apply to the marked product. Second, those suits alleging that markings listing expired patents constitutes false marking of an unpatented product.
The suits are further alleging that every falsely-marked piece sold is a separate offense. The plaintiffs argue that otherwise there would be no deterrent, as the offender would simply pay a maximum of $500 for an offending product, no matter how many are sold. These legal theories have yet to be tested in the Federal Circuit. Nevertheless, a company would be wise to check its product markings to avoid these types of suits. Just before this newsletter went to press, summary judgment was granted for the defendant in one of those cases (Pequignot v. Solo Cup Co., 1:07cv897 (LMB/TCB) (E.D. Va.) (defendant failed to change its cup lid molds to remove patent numbers after patents expired). The judge commented at oral argument that the ruling was to get the case teed up for the Federal Circuit. One of the key issues on appeal is likely to be the level of intent necessary for a finding of “purposeful deception” required by the statute.
Infringement Doctrine of Equivalents Defense to be Decided by Judge, Not Jury
Patent infringement occurs when an infringer’s product falls within the scope of the patent claims, either literally (the product meets every claim element precisely) or under the “doctrine of equivalents” (which broadens a patent claim to cover products that are “equivalent” to the claim). A longstanding maxim under the “doctrine of equivalents” is that a patent owner cannot assert a scope of equivalency that would encompass, or “ensnare,” the prior art. (“Prior art” includes products, patents, or publications that pre-date the invention covered by the asserted patent).
A recent case decided by the Federal Circuit, Depuy Spine v. Medtronic, 567 F.3d 1314 (Fed. Cir. 2009), held that “ensnarement” is a matter for the judge to decide, rather than a jury. As a practical matter, this will typically benefit an accused infringer, as judges are usually more discerning when deciding equivalency, as well as whether its scope ensnares the prior art. Thus, the ruling provides accused infringers a better avenue to defend against doctrine of equivalents infringement.
Selling Infringing Goods Breaches a Dealer Agreement
Cislo & Thomas recently won a $1.7 million binding arbitration award on behalf of its client Kirby Morgan Dive Systems, Inc., the industry leader in the commercial diving industry. The defendant was a Kirby Morgan-authorized dealer, who was selling infringing dive helmets. These sales violated the dealer agreement, infringed upon Kirby Morgan’s intellectual property rights, and interfered with Kirby Morgan’s relations with its other customers and authorized dealers. The award requires the defendant to pay Kirby Morgan over $1.7 million in lost revenue, product reclamation, repairs, and return fees, attorneys’ fees, costs of arbitration, and punitive damages. Also, the award enjoins the defendant from infringing Kirby Morgan’s trademarks, trade dress, and copyrights, and requires it to refrain from designing, manufacturing, producing, and selling competing dive products.
Federal Circuit to Decide Proper Test for Design Patent Invalidity
As we noted in our last newsletter, the International Seaway v. Walgreens case, 599 F. Supp. 2d 1307 (S.D. Fla. 2009), in which we prevailed on behalf of Walgreens et al., has been appealed to the Federal Circuit. The plaintiff asked the appellate court to overturn the district court’s application of the Egyptian Goddess v. Swisa, 543 F.3d 665 (Fed. Cir. 2008) (en banc) test, because it was applied to an invalidity (anticipation) analysis. The Egyptian Goddess test changed the rules of how a design patent is infringed. We argued that because the Supreme Court and Federal Circuit have long held that the tests for infringement and anticipation are identical, the new Egyptian Goddess infringement test should therefore be applied to anticipation as well. In addtion, we noted that the rationale for changing the infringement test set forth in Egyptian Goddess also applies to validity determinations. The Federal Circuit may take this opportunity to clarify the application of Egyptian Goddess to validity determinations.
Ways to Lower Costs and Obtain a Better Patent
Patent drafting, when done correctly, takes time and money. Yet there are ways a client can help decrease the amount of time and costs to draft the patent application. As our clients look to trim costs, we would like to provide some tips on how to reduce the overall costs of preparing a patent application.
1) Provide the best write-up possible with some sketches and diagrams, along with any design documents. This may not be easy to do for a raw idea, but thinking through the invention and its practical applications will help to flesh it out.
2) Try to do as much of the work as you can yourself. Patent attorneys usually do not know as much about the invention as the inventor. If the attorney has to learn and draft everything from scratch, it will obviously cost a lot more than if the inventor presents a full write-up of the invention, its background, and applications. Use an inhouse technical writer who can effectively communicate ideas on paper, to prepare a write up for the attorney.
3) Try to fully envision the invention before consulting the attorney. If the inventor continues to invent as the application is being drafted, it will cost a great deal more than if the concept is finished before drafting begins. Although a well-drafted patent application may inspire the inventor to come up with alternative embodiments and new implementations of the invention, if those go beyond minor refinements of the original invention, there will almost assuredly be increased costs.
4) Fully answer any questions the attorney has about the application. If the answers are bare and cryptic, then the attorney will have to spend additional time and resources figure it out. Err on the side of inclusion. Providing a lengthier answer than required is usually better than one that is too short.
A Recession is a Good Time to Obtain Intellectual Property
It is no secret that the economy has been bleak. But no recession lasts forever. At some point, we will emerge from the recession and begin an upward economic trend. The question is, will you be prepared to compete during that growth cycle? We expect that competition during the growth cycle will be fierce. Domestic and global competitors will fight for market share. Those having an edge will have the upper hand.
One of the best ways to obtain an edge over the competition is through intellectual property (“IP”) protection using patents, trademarks, and copyrights. Obtaining and enforcing IP puts a lid on competitors who would otherwise copy your innovations. The time to begin obtaining your IP is now. Not only can you benefit from having an early filing date, but trademarks, and especially patents, can take some time to be granted. A patent cannot be enforced until it is granted, so it is better to apply early and get the process started, so that you will have the patent in hand by the time the competitors arrive. In addition, a recession may be the best time to license IP from others, or buy IP outright, especially from struggling or bankrupt companies. If you would like to discuss how we might help you with your IP needs, please call us to schedule an appointment.
New Business Intellectual Property (“IP”) Checklist
The following is a checklist designed to help new businesses or existing businesses with new line extensions or brands to identify their intellectual property needs. For additional information, please visit our website at www.cislo.com and use our IPSEARCH and IPNEWS tabs for links to numerous IP resources. If we can be of any assistance, please feel free to call us for an appointment to discuss your situation.
- ___ File for federal and/or state trademark registration for product names, packaging, slogans, and logos.
___ File for service mark registration of company name where possible.
___ Check to see that Affidavits of Use have been filed for any existing registrations.
___ Record existing trademarks with United States Customs to block importation of infringing goods.
___ Use the “®” symbol only with federally registered marks, and use “™” for any unregistered marks or state trademark registrations.
___ Arrange for a trademark watch service to learn quickly if others attempt to register similar marks.
- ___ File provisional or utility applications to protect unique product designs, formulations, or technologies, file as early as possible to avoid filing deadlines that will bar the granting of a patent.
___ File design patent applications to protect ornamental designs of products.
___ Pay maintenance fees on existing patents.
__ Mark products with “Pat. Pending” where applicable, and mark all patented products with applicable Patent Number.
___ Have all employees and outside designers sign agreements assigning all patent rights for any
inventions to the company.
- ___ File Fictitious Business Name Statement.
___ Check renewal date for existing Fictitious Business Name Statement.
- ___ Develop written trade secret policy to maintain secrecy, have employees read and sign.
___ Locate and physically secure trade secret information and matters.
___ Have employees and vendors sign non-disclosure agreements.
___ Establish hiring and exit interview protocols to address proper handling of any trade secrets.
- ___ File for copyright registration for any website, written works, graphics, design, or any other work that
might need protection from direct copying.
___ Use the “©” symbol, author’s name, and date of the first publication of the work on all original materials, including catalogs, advertisements, websites, instruction manuals, unique product designs, graphics, etc.
___ Have all employees and outside designers agree in writing that that all such works are “works for hire,” and assign their rights to any original works to the company.
- ___ Register all company names and popular product names.
___ If feasible, register all variants and common mis-spellings of main domains.
___ Check renewal dates for existing registrations, and sign up for auto-renewal.
- ___ Conduct Internet searches to find possible competitors and competing products/services to determine if there are any potential infringement issues. We provide links to many of the relevant searchable databases at www.cislo.com
___ Commission independent patent searches for new and existing products and services sold.
___ Commission independent trademark searches for all trade names and product names.
___ Online Service Providers should register an agent with the Copyright Office to receive immunity for online copyright infringement by others.
___ Check your Comprehensive General Liability insurance policies to see if they cover infringement, consider obtaining an intellectual property insurance policy.
Peter S. Veregge – Newsletter Editor