2011 Patent Reform’s Impact on
Litigation
IPO’s IP Chat Channel
November 8, 2011
(Slides Revised Post Presentation By D. Healey)
Charles Everingham, Akin Gump
David Healey, Fish & Richardson
Stephen Susman, Susman Godfrey
First A Word from the “GC”
• These slides are to provoke discussion only.
• The slides are not legal advice.
• The slides do not represent the positions of
any client or firm or attorney.
• The applicable law on any set of facts will be
different from the general overview in the
slides.
For Discussion Only
2
Changes in 2011 Leahy-Smith Act
• Little Substance Addressed:
– Vaporized False Marking Cases as private Qui Tam
Actions without any requirement for injury to
plaintiff.
– Created “Virtual Marking”: Web-based “notice of
patent”.
– Elimination of “Best Mode” as basis to later
invalidate patent (but not as requirement for
patent to issue).
For Discussion Only
3
Changes in 2011 Leahy-Smith Act
• Little Substance Impacting Litigation:
– Did not address substantive changes in prior bills
due to judicial revision of patent law:
• Damages: Lucent v. Gateway, 580 F.3d 1301 (Fed. Cir. 2009);
Uniloc v. Microsoft, 632 F.3d 1292 (Fed. Cir. 2011).
• Injunction: eBay v. MercExchange, LLC, 547 US 388 (2006). See
also Robert Bosch LLC v. Pylon Mfg. Corp., 2011 WL 4834266
(Fed. Cir. 2011).
• Venue: In re TS Tech USA Corp., 551 F.3d 1315 (Fed. Cir. 2008).
For Discussion Only
4
Section 299: Procedural Changes
The Leahy-Smith America Invents Act of 2011
has important procedural changes for patent
litigation:
– 28 U.S.C. Section 1295(a)(1): Expansion of Federal
Circuit Jurisdiction;
– 35 U.S.C. Section 299: Joinder of defendants in a
single lawsuit.
For Discussion Only
5
AIA: Other Changes
– Other Sections of Title 35 Amended by Act could
impact litigation as they are implemented over
time:
– 321-329: Post-Grant Review process;
– 311-319: Inter Partes Review process;
– 287(a): Virtual Marking;
– 112: Elimination of Best Mode Defense.
For Discussion Only
6
Section 299
• Prohibits joinder of defendants in a single
lawsuit or in a single trial:
– Unless same transaction or occurrence or series of
transactions or occurrences;
– Must allege joint, several or alternative liability;
– Must be same product or process;
– Statute expressly states a claim of infringement of
the same patent is not enough to meet this test.
For Discussion Only
7
299: Mandate for FRCP 20
• House Report expressly criticizes expansive view of FRCP 20:
– [Footnote 61: Section 299 legislatively abrogates the construction of
Rule 20(a) adopted in MyMail, Ltd. v. America Online, Inc.,223 F.R.D.
455 (E.D. Tex. 2004); Sprint Communications Co. v. Theglobe.com,
Inc., 233 F.R.D. 615 (D. Kan. 2006); Adrain v. Genetec Inc., 2009
WL3063414 (E.D. Tex. September 22, 2009); Better Educ. Inc. v.
Einstruction Corp., 2010 WL 918307 (E.D. Tex. March 10,
2010); Mannatech, Inc. v. Country Life, LLC, 2010 WL 2944574 (N.D.
Tex. July 26, 2010); Alford Safety Services, Inc., v. Hot-Hed, Inc., 2010
WL 3418233 (E.D. La. August 24, 2010); and Eolas Technologies, Inc. v.
Adobe Systems, Inc., 2010 WL 3835762 (E.D. Tex. September 28,
2010)--effectively conforming these courts' jurisprudence to that
followed by a majority of jurisdictions. See generally Rudd v. Lux
Products Corp., 2011 WL 148052 (N.D. Ill. January 12,
2011).](emphasis added).
For Discussion Only
8
Section 299
• What you can do? NO ONE KNOWS YET!
• Sue based on?
– Industry standard: Against those who participated in
standard-setting (inducement) and implement standard
(direct infringement)?
– Indirect infringer and direct infringer?
– Joint infringers?
– One retailer for sales of multiple brands of same product?
– MDL or coordination within district and division?
– DJ counterclaims are arguably outside of statute?
– International Trade Commission?
For Discussion Only
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Section 299: Standards
• Patent owners/applicants involved in setting standards
are required to give SSO and other
members/participants notice of patents/applications
they allege will be infringed and their licensing policy.
• Infringement can in some cases be proven by showing
industry standard infringes.
• Is industry standard a) common nucleus of fact for
transaction or occurrence test, and b) same product or
process, for joinder of direct infringement claims?
• Arguably inducement claims based on participation in
creation of standard and also use of standard can be
joined?
For Discussion Only
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Section 299: Standards
Are products or process that practice the standard the
same?
• Handsets that must meet CDMA or WCDMA standards?
• Semiconductor memories that must meet JEDEC pin out,
packaging (size, thickness), clock, other interoperability
standards?
• Flash memory cards that must meet interface standards?
• Computers that must meet USB standards, wireless
standards, or ethernet standards?
• Standards for chemical or refinery plant components,
conduit for wiring, safety devices on hot water heaters,
“best practices” for methods of operations, etc.?
• Are standards implemented to induce compliance by new
market entrants?
For Discussion Only
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299: Indirect Infringement:
Inducement and Contributory
Notice of patent and potential infringement
through virtual marking and website
publicity, coupled with “willful blindness”?
PARTY A
PARTY A Instructs on Use
Makes and Sells
Software
(Inducement to perform
method or to combine
with computer)
(apparatus/specially
made)
For Discussion Only
Party B operates
software (method) or
combines it with
hardware (apparatus)
12
299: Indirect Infringement-Same series of
transactions or occurrences?
All XY Memory
Cards must fit
all XY products
Virtual
marking
creates notice
of patent
Making XY
product
arguably
induces more
card mfg
All XY products
must accept all
XY Cards
Making XY
Card arguably
induces
product mfg
For Discussion Only
13
299: Joint Infringement?
Joint infringement is
direct infringement:
No intent required.
Wireless
Service
Provider 2
Wireless Service
Provider 1
Contracts to connect
calls, texts,
data/email, crossbilling arrangements,
roaming
ISP
For Discussion Only
14
1 Retailer: X Brands of TVs Sold.
Advertising infringes “offer to sell”.
Operation of TVs on display
infringes method claims. Sales
infringe apparatus claims
299: Retailer suit –
Eliminates
joinder issue
Method claim=same process. TV=same
product. Advertising and sales=same series of
transactions or occurrences.
Display and sale within the
district = venue
Can retailer displays, advertising,
product placement, create basis
to sue manufacturers in one
case?
Damages on retailer’s
margins
For Discussion Only
15
299: MDL?
• 299 only prohibits single suit and single trial.
• 299 does not prohibit Pretrial Coordination or
Multi-District Litigation.
• Pretrial coordination or MDL can cover
discovery, claim construction and summary
judgment.
For Discussion Only
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Parts (b) and (c) of 299
• (b) Allegations insufficient for Joinder – For
purposes of this subsection, accused infringers
may not be joined in one action as defendants
or counterclaim defendants or have their
actions consolidated for trial, based solely on
allegations that they each have infringed the
patent or patents in suit.
• (c) Waiver - A party that is an accused
infringer may waive the limitations set forth
in this section with respect to that party.
For Discussion Only
17
Section 299(b) & (c): DJ Claims?
• DJ is a separate claim: Is it a “waiver”?
– Not required: Often brought to force patentee to “Super
Sack” claims that patentee drops.
• Super Sack Mfg. Corp. v. Chase Packaging Corp., 57 F.3d 1054,
1057 (Fed. Cir. 1995).
• No explicit prohibition against consolidated trial on
DJ claims of invalidity or other counterclaims.
• One invalidity trial reduces patentee’s cost and risk
and reduces judicial burden.
• Clearly common fact questions under 299(a)(2); but
is it the same series of transactions or occurrences
under 299(a)(1)?
For Discussion Only
18
299: Does It Apply To ITC?
• 299(a) applies “to any civil action arising under
any Act of Congress relating to patents…”
• ITC action is distinguished in AIA from a “civil
action” in 28 U.S.C. 1295. Compare parts (a)(1)
and (a)(6).
• ITC remedy is order excluding importation: Often
“better than damages”.
• ITC case law requires joinder of impacted parties.
For Discussion Only
19
Post-Grant Review and Litigation
• Post grant review even when fully implemented still
may not be “cure all”:
• 2 Types of Post Grant review will be implemented over
time:
– Post grant review within 9 months of issue (Sections 321329):
• Can be based on any ground and bars any later invalidity issue in
litigation that could have been raised in review;
• Written ruling of the Patent Trial and Appeal Board (PTAB) of PTO
is the bar.
– Inter Partes Review after 9 months from issue (Sections
311-319):
• On publications and patents only;
• Standard raised to likelihood of success;
• PTAB’s written decision is the “bar”.
For Discussion Only
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Post-Grant Review and Litigation
For both could turn out to be 37-49 month time
line:
•
•
•
•
Suit filed;
“Guesstimate” 3 or more months for defendant to file;
Director to set response time (3 months?);
3 months to initiate AFTER response or time for patentee to
file initial response lapses;
• 1 year to 18 months to PTAB decision;
• Approximately, 19-25 Months from filing of suit to PTAB
decision - collateral estoppel?
• 18 months to 2 years to appeal to Federal Circuit?
For Discussion Only
21
Pluses
Minuses
Post-Grant review will eventually allow full
litigation of invalidity in PTO to Judge. Inter
Partes Review remains limited to publications
and patents.
Post-Grant Review will deprives defendant of
any invalidity defense at trial for claims that
survive or emerge. Inter Partes leaves other
“jury friendly” art for trial (e.g., devices).
Post-Grant will be limited to 9 months of
issuance of patent.
Time to resolution probably 19-25 months from
filing suit depending on when defendant files for
review: Is this more incentive for district court to
stay lawsuit?
Higher standard to initiate-less likelihood of
acceptance-lower incentive to stay pending
initiation by PTO.
Collateral estoppel bar sets in at PTAB written
decision not Federal Circuit appeal.
Post Grant Review Pluses/Minuses
Higher standard to initiate will show more
Can result in amended claims tailored to
potential upside from stay.
accused product: “Go from bad to worse”.
Can wipe out patent.
Re-examined patent is almost impossible to
Can create intervening rights to revised or new
attack in later lawsuit or trial.
claim.
Can create willfulness defense if accepted by
For Discussion Only
22
PTO based on “likelihood” standard.
Elimination of Best Mode Defense
• Best Mode is only part of 112 written description
requirement:
– Subjective to inventors; never a strong defense.
• Preferred embodiment will always be in patent.
• Enablement still requires complete written
description, figures, at least one preferred
embodiment.
• PTO still will require disclosure of Best Mode for
patent to issue.
For Discussion Only
23
Elimination of Best Mode Defense
• Elimination of Best Mode is not a “big deal” to
Patent Litigation.
• But is a potential trap for patent drafters:
– May reduce care taken in drafting applications
since reduces consequences of sloppy work?
– May cause drafters to fall short on enablement?
– May cause drafters not to describe or claim
features of actual commercial products they are
trying to protect?
For Discussion Only
24
28 U.S.C. Section 1295(a)(1):
Federal Circuit Jurisdiction
• Expansion of Federal Circuit
Jurisdiction:
– Overrules 2002 US SCT decision in
Holmes Group, Inc. v. Vornado
Aircirculation Systems, Inc., 535 U.S. 826
(2002);
– Gives Federal Circuit jurisdiction of “any
civil action” where a patent issue is
raised in a claim or counterclaim.
For Discussion Only
25
28 U.S.C. Section 1295(a)(1)
Federal Circuit favors patents over competition:
• In re Princo Corp., 478 F.3d 1345 (Fed.Cir.
2007) (circumscribing patent misuse under
271(d));
• Rambus v Infineon Techs AG, 318 F.3d 1081
(Fed. Cir. 2003)(disfavors counterclaims on
standard-setting conduct);
• In re Independent Service Organizations
Antitrust Litigation, 203 F.3d 1322 (Fed. Cir.
2000)(CSU, Xerox)(giving immunity to
unilateral acts by patentee);
• Intergraph v. Intel, 195 F.3d 1346 (Fed. Cir.
1999)(limiting antitrust claims to those
enumerated in the past by US SCT).
What you can do: File in state court without
challenging validity or scope of patent.
For Discussion Only
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“Substance Trumps”
Patent Litigation is driven more by remedies, less so
by procedure.
Remedies are a function of substantive law.
Procedure should not impact substantive law.
Have Courts more than Congress impacted the
value of patents by limiting remedies?
Increased litigation cost and time will have
negative impact, but not drive value as much as
remedy…
For Discussion Only
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