Summer 2009

Another False Marking Case is Up on Appeal
In our last issue, we reported that cases for false marking of products with patent numbers are on the rise, and that a case was headed to the Federal Circuit to determine what level of intent was required to create liability for false marking. In another case, The Forest Group, Inc, v. Bon Tool Co., 2008 U.S. Dist. LEXIS 57134 (S.D. Tex. July 29, 2008), the court held that “false marking of products together with proof that the accused ‘had knowledge of its falsity’ proven by a preponderance of the evidence is adequate to create an inference of intent to deceive.” The court found that during the litigation, the patentee had knowledge of the falsity because it had read two summary judgement opinions that construed the claims to require an element that was missing from the patentee’s product. Because the patentee had not undertaken any documented efforts to eliminate the patent number from the products after it gained this knowledge, the court found sufficient intent to deceive.

The case is up on appeal, however, and at least one of the issues is the penalty, half of which goes to the patentee. The statute allows a penalty of no more than $500 “per offense.” The court found that the patentee had placed only one order for the falsely marked product after it had knowledge of the falsity, and thus was liable only for one offense. On appeal, the appellant is arguing that the penalty should have been imposed on a per-article basis, because a single $500 penalty is a meaningless deterrent. Once again, these cases serve as a reminder for patent owners to check their products to make sure they are marked properly. Expired patents and patents that do not apply should not be used.

Fraud in Trademark Prosecution Gets Tougher to Prove
For the last six years, the Trademark Trial and Appeal Board (“TTAB”) has applied its decision in Medinol v. Neuro Vasx, Inc., 67 USPQ2d 1205, 1209 (T.T.A.B. 2003), which held that a trademark owner who listed goods or services in its application or renewal with which it knew or should have known it was not using its trademark, is guilty of fraud on the trademark office and subject to having its registration cancelled. Bose Corporation had renewed their WAVE trademark registration with the original listing of goods, which included cassette players, even though they no longer sold them. The TTAB, relying on Medinol, cancelled the registration. Bose Corp. v. Hexawave, Inc., 88 USPQ2d 1332 (T.T.A.B. 2007).

The Federal Circuit, however, overturned that decision, holding that the “should have known” standard is insufficient. In re Bose Corp., 2009 U.S. App. LEXIS 19658 (Fed. Cir. Aug. 31, 2009). A trademark registration is obtained fraudulently only if the applicant or registrant knowingly makes a false, material representation with the intent to deceive the PTO. Id. Subjective intent to deceive, however difficult it may be to prove, is an indispensable element. Of course, because direct evidence of deceptive intent is rarely available, such intent can be inferred from indirect and circumstantial evidence. But such evidence must be clear and convincing, and inferences drawn from lesser evidence cannot satisfy the deceptive intent requirement. Id. The Federal Circuit seemed to base its decision on Bose’s testimony that it believed its return shipping of repaired previously-sold WAVE audio cassette players to its customers met the “use in commerce” requirement for the renewal of the trademark for those goods.

The TTAB, however, held that such activities were insufficient to constitute “use in commerce,” and thus the renewal was fraudulent. In reversing that holding, the Federal Circuit stated that there is no fraud if a false misrepresentation is occasioned by an honest misunderstanding or inadvertence without a willful intent to deceive. Since the opponent offered no evidence to counter Bose’s apparent misunderstanding, there was insufficient evidence of deceptive intent. As a parting note, the Federal Circuit stated that because the WAVE mark is no longer in use on audio tape recorders and players, the registration needs to be restricted to reflect commercial reality, and remanded the case to the TTAB to remove those goods from the registration.
The Bose case will make it more difficult for those challenging registered marks to prove fraudulent registration or renewal based on listing goods or services not actually sold under the mark. Nevertheless, it serves as a reminder to trademark owners to confirm during registration or renewal that all such goods and services are being offered under the mark. Under appropriate circumstances, fraud may still be found.

Production of Records as They are Kept in Electronic Format is Sufficient
The federal rules require a party answering discovery to produce documents either (a) as they are kept in the usual course of business, or (b) must organize and label them to correspond to categories in the document request. In Valeo Elec. Sys. v. Cleveland Die & Mfg. Co., 2009 U.S. Dist. LEXIS 51421 (E.D. Mich. June 17, 2009), the defendant had produced emails and other electronically stored information (“ESI”) in electronic form, in the same manner as they were kept on each person’s hard drive. The defendant produced all paper documents in searchable pdf format, and provided two spreadsheets that identified where each document came from. Defendant produced over 270,000 pages of electronic documents on 15 discs. The plaintiff complained that it had to open each electronic document individually and that the file names gave no clue as to what the document was, complicating its task to sift through the massive production. The plaintiff asked the court to make defendant organize the documents by document request.

The court denied plaintiff’s motion, holding that the ESI was produced as kept in the usual course of business and thus did not require orgnization. The emails had been segregated by custodian, arranged in chronological order and were produced with the attachments. The non-email ESI was segregated by custodian and location on the computer, including the directory and file name. The paper records were produced in the manner agreed to in advance by the parties, in searchable pdf.

This ruling is a victory for those parties producing large amounts of electronic documents, and presents significant review challenges for parties receiving them. The ruling does not mean that a party can simply copy its hard drives and do nothing more, however, as the court heavily relied on the fact that the two spreadsheets gave the defendant quite a bit of information regarding where the documents came from and where they could be found on the discs. Nevertheless, parties requesting large amount of ESI should be prepared to electronically search the documents.

Inventorship Begins at Conception
In the United States, rights to a patent originate with the inventor(s), who can then assign or enforce those rights. Thus, determination of inventorship is crucial to determining who owns the patent rights, particularly where there are multiple potential inventors (co-inventors).

In a battle for inventorship, the Federal Circuit has held that conception is the touchstone of inventorship, rejecting the notion that invention requires proof that the invention works to a scientific certainty. In University of Pittsburgh v. Hedrick, 573 F.3d 1290 (Fed. Cir. 2009), a researcher was trying to claim inventorship due to his contributions to verifying that the invention (conceived by two other researchers) actually worked. In rejecting Hedrick’s inventorship, the court held that an inventor need not know that his invention will work for conception to be complete. He need only show that he had the complete mental picture and could describe it with particularity. In contrast, the discovery that the invention actually works is part of its “reduction to practice,” which is not required for conception or inventorship. Since the first two researchers had sufficiently conceived the invention prior to Hedrick’s arrival, he was denied inventorship.

Companies should take care to document what involvement particular employees have in the inventive process. If it is unclear what role each employee had, and at what stage of conception, then it may be difficult to unravel inventorship questions in later litigation. Bound, handwritten lab notebooks should be kept up to date by each employee, signed and dated as to each significant entry. Such notebooks should be carefully archived by the company, and should never be taken from the premises. Looseleaf binders or electronic records are poorly suited for such documentation, as they are too easily altered.

Inventorship Requires Significant Contribution to Conception
In another case regarding co-inventorship, the Federal Circuit held that an inventor’s contributions to conception must be significant. One who simply provides the inventor with well-known principles or explains the state of the art without ever having a firm and definite idea of the claimed combination as a whole does not qualify as a joint inventor. In Nartron Corp. v. Schukra U.S.A., Inc., 558 F.3d 1352 (Fed. Cir. 2009), the plaintiff designed a controller for lumbar supports of automotive seats to provide a massage to the occupant. The defendant, a supplier to the plaintiff, added an extender to the lumbar support adjuster, connected it with the controller, and claimed inventorship of the invention as a whole. The Federal Circuit disagreed, noting that the controller was the invention; lumbar support adjusters with an extender were already known in the art.

Quoting case law, the court noted that a joint inventor must contribute in some significant manner to the conception of the invention and make a contribution to the claimed invention that is not insignificant in quality, when that contribution is measured against the dimension of the full invention. The basic exercise of the normal skill expected of one skilled in the art, without an inventive act, does not make one a joint inventor. Moreover, one who merely suggests an idea of a result to be accomplished, rather than means of accomplishing it, is not a joint inventor. Because the defendant merely added existing prior art to the controller, and described the desired result from the controller, its contribution was insufficient to render it a co-inventor.

This case further illustrates the need to document the contributions made to a patented invention by each co-inventor. Lab notebooks are a very good method to keep such records. But if you are dealing with another company or outside contractors to supply portions of a project, especially if any part of that project is to be patented, the company should fully document its communications with such outside companies or contractors.

Accelerated Patent Examination May Have Benefits
In 2006, the patent office changed the rules for expedited patent examination. The rules now require the patentee to pay an additional fee, conduct its own prior art search, identify the closest prior art, and explain how its claims are patentable over that prior art. There are additional requirements, but these are the ones that make most patent attorneys reluctant to pursue accelerated examination, because of the high costs for searching and preparing the required disclosure, plus the risks involved in doing a search and characterizing the prior art that is sure to be challenged in any subsequent infringement action.

Nevertheless, accelerated examination (“AE”) has some significant benefits. The first benefit, of course, is accelerated examination and allowance. The normal average pendency for an application is reported to be 3.5 years, while first actions for AE applications are averaging 157 days to the first action, and 197 days to completed prosecution. Early allowance also leads to longer patent terms. Since the term is calculated from the filing date, any reduction in time between the filing date and allowance yields a longer, effective term. The second significant benefit is better allowance rate for AE applications, averaging over 73%, while regular applications average about 40%.

AE may not be suitable for every application. Good AE candidates are companies building a patent portfolio on already-prosecuted base patents whose prior art has been ascertained. Additionally, a startup company that needs to have issued patents in order to obtain investor funding might want to use AE to obtain its patents quickly.

Peter S. Veregge – Newsletter Editor