Recent U.S. Patent Decisions
and Their Significance
to Chinese Companies
Electrical & Mechanical Engineering Patent Conference
Shenzhen, China
October 19-20, 2011
Edmund J. Haughey
Feng Xu, Ph.D.
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Overview of Presentation

Review of significant decisions by the U.S. Supreme Court
and the Federal Circuit from the past year relating to the
electrical, mechanical, and computer arts.
Global-Tech v. SEB
Therasense v. Becton
Microsoft v. i4i
CyberSource v. Retail Decisions
Hyatt v. Kappos
Ultramercial v. Hulu
TiVo v. EchoStar
Akamai v. Limelight
Uniloc v. Microsoft
McKesson v. Epic
 Lessons to be learned from these decisions.
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Global-Tech
v. SEB ǀ
The Case
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U.S. Supreme Court
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ǀ
May 31, 2011
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Global-Tech v. SEB ǀ Issue
What is the proper intent standard for proving
induced infringement under 35 U.S.C. § 271(b)?
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Global-Tech v. SEB ǀ Facts
 SEB invented and patented a “cool touch” deep fryer.
 Global-Tech’s subsidiary, Pentalpha, purchased SEB’s
commercial fryer outside the U.S. and copied all but the
fryer’s cosmetic features.
 Pentalpha hired U.S. attorney to conduct right-to-use study,
but did not tell attorney it had copied SEB’s design.
 Attorney did not find SEB’s patent and issued favorable
opinion.
 Pentalpha then started selling its fryers to Sunbeam for
resale in U.S.
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Global-Tech v. SEB ǀ Holding
 Induced infringement requires actual knowledge that the
induced acts constitute patent infringement.
 Deliberate indifference does not satisfy the knowledge
requirement, but willful blindness does.
 Willful blindness occurs:
(1) when the defendant subjectively believes there is a high
probability that a fact exists; and
(2) the defendant takes deliberate actions to avoid learning
of that fact.
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Global-Tech v. SEB ǀ Lessons
#1 Blinding oneself to probable risks is not a
viable patent defense strategy.
#2 Copying another’s product is inherently
risky.
#3 A competent opinion from U.S. counsel can
be a useful defense to induced infringement,
but be sure to provide full disclosure.
#4 Patent owners: Make the risk obvious to would-be infringers.
#5 Potential ramifications for willful infringement?
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Microsoft
v. i4i ǀ
The Case
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U.S. Supreme Court
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Jun. 9, 2011
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Microsoft v. i4i ǀ Issue
What is the proper standard of proof for overcoming
a patent’s presumption of validity?
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Microsoft v. i4i ǀ Facts
 Patentee i4i sued Microsoft for willful infringement of a patent
claiming an improved method for editing computer documents.
 Microsoft asserted that i4i’s patent was invalid based on i4i’s
sale of its S4 software more than one year before the patent
filing date.
 Undisputed that the S4 software was never considered by the
PTO examiner during prosecution.
 Microsoft objected to “clear and convincing evidence” jury
instruction, and instead requested “preponderance of the
evidence” instruction.
 Court gave “clear and convincing evidence” instruction, and
jury found patent valid and willfully infringed.
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Microsoft v. i4i ǀ Holding
 Invalidity must be established by clear and convincing
evidence.
 Burden does not vary depending on whether the asserted prior
art was considered by the PTO.
 Jury may be instructed to evaluate whether the prior art before
it is materially new, and if so, to consider that fact when
determining whether an invalidity defense has been proved by
clear and convincing evidence.
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Microsoft v. i4i ǀ Lessons
#1 When attacking a patent’s validity, preferable to rely on prior
art not considered by the PTO.
#2 Seek “materially new” jury instruction when arguing invalidity
based on new prior art.
#3 Instead of attacking validity with prior art previously
considered by the PTO, consider using such art in arguing for
a narrow claim construction.
#4 Consider reexamination or post grant review, where there is
no presumption of validity and the lower preponderance of
the evidence standard applies.
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Hyatt
v. Kappos ǀ
The Case
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Federal Circuit (en banc)
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Nov. 8, 2010
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Hyatt v. Kappos ǀ Issue
Whether a patent
applicant who sues the
PTO in district court (a
Section 145 civil action)
may introduce new
evidence that could have
been presented to the
PTO in the first instance?
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Hyatt v. Kappos ǀ Facts
 Hyatt applied for a patent related to a computerized display
system for processing image information.
 PTO examiner issued 2,546 separate rejections of 117 claims.
 PTO Board reversed 93% of rejections, but affirmed rejections
based on written description and enablement.
 Hyatt filed a Section 145 civil action, but lost on summary
judgment when the court refused to consider his declaration,
which, according to the court, could and should have been
submitted earlier to the PTO.
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Hyatt v. Kappos ǀ Holding
 Patent applicant may introduce new evidence in a Section 145
civil action, irrespective of whether such evidence could have
been presented to the PTO, subject only to the Federal Rules
of Evidence and Civil Procedure.
 Factual issues to which the new evidence pertains must be
considered de novo, without deference to the Board.
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Hyatt v. Kappos ǀ Lessons
#1 A Section 145 civil action is the only option if you need to
supplement existing record.
#2 Even when existing record is complete, a Section 145 civil
action offers applicants an additional chance to prevail before
appealing to Federal Circuit.
#3 Speed and cost generally favor presenting all available
evidence to the PTO examiner.
#4 Supreme Court will have the last word. Safest course in
meantime is to present all available evidence to the PTO.
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TiVo
v. EchoStar ǀ
The Case
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Federal Circuit (en banc)
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Apr. 20, 2011
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TiVo v. EchoStar ǀ Issue
What is the standard for
determining whether an
adjudged infringer is in
contempt of an injunction?
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TiVo v. EchoStar ǀ Facts
 TiVo sued EchoStar for infringement of TiVo’s “time warp” patent.
 Following jury verdict of willful infringement, EchoStar ordered to:
(1) stop making, using, offering to sell, and selling infringing DVR
receivers; and
(2) disable DVR functionality in existing receivers in customers’
homes.
 EchoStar came out with redesigned DVR product, and TiVo brought
contempt proceeding for violation of injunction.
 District court found EchoStar in contempt and imposed sanctions of
nearly $90 million, plus another $110 million for continued infringement.
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TiVo v. EchoStar ǀ Holding

Contempt finding requires clear and convincing evidence that:
(1) the newly accused product is not more than colorably different
from the product found to infringe; and
(2) the newly accused product actually infringes.

Colorable difference test looks to the significance of differences
between infringing features of old product and corresponding
features of new product.

Nonobvious modifications may be significant, while obvious ones
may not be.

After-the-fact arguments that an injunction is unduly vague or
overbroad are unlikely to prevail in a contempt proceeding.
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TiVo v. EchoStar ǀ Lessons
#1 Good faith alone is not a defense. Better be correct as well.
#2 A successful design-around begins with significantly modifying
or removing at least one feature previously adjudged to satisfy
a claim limitation.
#3 Innovative design-arounds are more likely to avoid a contempt
finding than obvious ones.
#4 Appeal or seek clarification/modification of vague or
overbroad injunctions immediately. Do not take it upon
yourself to decide what is and is not enjoined.
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Uniloc
The Casev. Microsoft ǀ
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Federal Circuit
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Jan. 4, 2011
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Uniloc v. Microsoft ǀ Issue
Whether the “25 percent rule” is a permissible
starting point for determining reasonable royalty
damages?
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Uniloc v. Microsoft ǀ Facts
 Uniloc sued Microsoft for infringement of a patent directed to a
software registration system to deter copying of software.
 Jury returned verdict of willful infringement by Microsoft.
 Uniloc awarded $388 million in reasonable royalty damages
based on “25 percent rule.”
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Uniloc v. Microsoft ǀ Holding
 The “25 percent rule” is a fundamentally flawed tool for determining
a baseline royalty rate in a hypothetical negotiation.
 Evidence relying on the “25 percent rule” is inadmissible under
Daubert and Federal Rule of Evidence 702.
 Reasonable royalty damages must be determined under the unique
facts of each case according to the Georgia-Pacific Factors, without
using the “25 percent rule” as a starting point.
 Reference to total product revenues is inappropriate, even as a
“check,” unless entire market value rule is satisfied.
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Uniloc v. Microsoft ǀ Lessons
#1 Facts, facts, and more facts.
#2 Increased use of Daubert challenges.
#3 Cross-examine your own damages expert early and often.
#4 Accused infringers: If entire market value rule does not apply,
seek to preclude prejudicial references to total product
revenues.
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