May 2010 Archives

The Court of Appeals for the Federal Circuit has recently agreed to an en banc review of the litigation between TiVo and Dish Network.  TiVo's seemingly endless patent dispute is a perfect illustration of how important an asset IP is to a corporation and the effect that IP litigation can have on a particular market.

For concrete evidence, one need look no further than the fluctuations of TiVo's stock price during their litigation.  The news that TiVo had prevailed against Dish network broke on March 2, 2010 and TiVo's stock price closed that day at $10.03.  By the closing bell of March 4, 2010, TiVo's stock price had soared to $16.53, an increase of nearly 65%.

Subsequently, TiVo's win was vacated by the appeals court on May 14, 2010.  The closing price on May 13, 2010 was $17.39.  By the close of May 14, 2010, the price had dropped to $10.16, a decrease of about 42%.

TiVo undoubtedly has a great deal more litigation in its future as well.  Microsoft has also recently joined the fray, suing TiVo for infringement in the hope that they can push TiVo into a licensing agreement.  Over the coming months, we will be tracking how all of the TiVo litigation plays out and the resulting impact on TiVo's operations.

In Crocs v. ITC, the Federal Circuit overturned an ITC ruling on whether or not imitation shoes based on the Crocs design infringed both design and utility patents Crocs held.  The ITC had originally ruled that there was no infringement due to the middle strap not being uniform and not having evenly spaced holes as claimed in Crocs design patent.  However, on appeal, the Federal Circuit took a more holistic approach and used the "ordinary observer" test--whether or not an ordinary observer could be deceived into believing the infringing product is actually the same as the patented design--to make a determination regarding infringement.

The court found little difference between the patented design and the imitation: "If the claimed design and the accused designs were arrayed in matching colors and mixed up randomly, this court is not confident that an ordinary observer could properly restore them to their original order without very careful and prolonged effort. . ."  The court further warned against using small differences "as a checklist for infringement" and instead stressed the importance of viewing the small differences in the context of the product as a whole.

The ITC also had alternatively rejected Crocs utility patent for obviousness.  In holding the utility patent non-obvious, the court noted the commercial success of Crocs:

"[T]he Commission found, based on substantial evidence, that Crocs shoes practice the '858 patent and that the Crocs shoes were commercially successful"

Additionally, the court noted "industry praise" for the improvement of the utility patent:

"This court gives even more credit to the administrative judge's finding of substantial industry praise for the claimed invention and the products covered by the claimed invention."

The USPTO is now offering an application exchange program ("Project Exchange") allowing applicants that, prior to the program's inception, had more than one application pending at the USPTO to withdraw one of those applications in exchange for expedited examination of another application.  The program will be limited to 15 applications per entity and will run until December 31, 2010.

From the USPTO website: "By providing incentives for applicants to withdraw unexamined applications that may no longer be important to them, Project Exchange is expected to appreciably reduce the backlog of unexamined patent applications pending before the USPTO. "  Project Exchange is one a few initiatives with the goal of reducing the backlog of applications at the PTO implemented since Director David Kappos took office (see also the "First Action Interview Pilot Program").

DAMAGES

The changes proposed to 35 U.S.C. § 284 seem to be done with the intention of increasing the predictability of damages in patent litigation.  35 U.S.C. § 284 currently gives courts significant leeway to determine damages without a codified standard:

The larger patent reform bill has run into a roadblock and now Congress is currently trying to pass smaller scale reform.  One of these smaller scale bills, a bill that would have given the USPTO the ability to set its own fees, was temporarily withdrawn from the house today.  Several notable IP groups, including AIPLA and the IPO, opposed the bill and instead are pressing for funding along with a provision to stop fees collected in the patent office from being diverted to other parts of the government.  AIPLA president Alan J. Kasper, regarding this bill giving the PTO fee setting authority, contended:

"This year's funding represents an example of the problem: the House is considering legislation that would essentially raise the fees paid by users to the USPTO while significant monies will be diverted unless something is done. Given the importance of our intellectual property system as a key economic driver that attracts and protects investment in new technology, our country's innovators who pay the fees deserve no less. Furthermore, AIPLA supports a comprehensive approach to patent reform now working its way through the Congress, and not the piecemeal approach represented by this bill."

However, according to the IPO's website: "Judiciary leaders are understood to now be considering a more comprehensive USPTO funding bill that might include a 15 percent patent fee surcharge, a provision to stop fee diversion, and fee-setting authority."

The larger patent reform bill also has a similar provision allowing the PTO to set its own fees:

SEC. 9. FEE SETTING AUTHORITY.

(a) FEE SETTING.--

(1) IN GENERAL.--The Director shall have authority to set or adjust by rule any fee established or charged by the Office under sections 41 and 376 of title 35, United States Code, or under section 31 of the Trademark Act of 1946 (15 U.S.C. 1113), or any other fee established or charged by the Office under any other provision of law, notwithstanding the fee amounts established or charged thereunder, for the filing or processing of any submission to, and for all other services performed by or materials furnished by, the Office, provided that patent and trademark fee amounts are in the aggregate set to recover the estimated cost to the Office for processing, activities, services and materials relating to patents and trademarks, respectively, including proportionate shares of the administrative costs of the Office.

We will continue to monitor any changes in proposed patent law reform as they develop.

False Marking:

The proposed changes to the false marking statute would have the effect of limiting the potential plaintiffs to only those who have suffered a "competitive injury" as a result of the false marking: 

(k) FALSE MARKING.--

(1) IN GENERAL.--Subsection (b) of section

292 of title 35, United States Code, is amended to read as follows:

''(b) A person who has suffered a competitive injury as a result of a violation of this section may file a civil action in a district court of the United States for recovery of damages adequate to compensate for the injury.''

The main purpose of the proposed changes to the false marking statute is to take away the "lottery ticket" effect of allowing anyone to sue, regardless of injury, and receive a windfall.  After the decision in Forest Group, Inc. v. Bon Tool Company, in which the court ruled that the penalty for false marking was to be applied per item sold, an explosion in qui tam suits ensued.  This reform legislation is intended to cut off plaintiffs who have suffered no real injury and are merely looking for a windfall.

However, "competitive injury" may be difficult to demonstrate for a small entity; most small entities likely do not have the resources to invest heavily into exploring possible new products and, as a result, demonstrating to a court that they somehow lost out on an opportunity due to false marking would be challenging.  Consequently, the proposed legislation could favor larger corporations.

More extensive coverage of the rise in qui tam false marking suits can be found at http://www.patentlawyers.net/Patent-Law/Patent-Marking.aspx .

This is the first entry in a series of entries analyzing the impact the proposed Patent Reform Act of 2010:

First-To-File:

Perhaps the most major change that the proposed patent reform legislation contains is the change away from a first-to-invent system and in the direction of a first-to-file system.  Below is an excerpt from the proposed changes to 35 U.S.C. § 102:

''§ 102. Conditions for patentability; novelty

''(a) NOVELTY; PRIOR ART.--A person shall be entitled to a patent unless--

''(1) the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention; or

''(2) the claimed invention was described in a patent issued under section 151, or in an application for patent published or deemed published under section 122(b), in which the patent or application, as the case may be, names another inventor and was effectively filed before the effective filing date of the claimed invention."

Essentially, the new 35 U.S.C. § 102 would use the "effective filing date" as the date which the prior art is balanced against.  Effective filing date is only defined in the proposed changes to 35 U.S.C. § 100 by either the filing date of the application or by a claim of priority:

''(i)(1) The term 'effective filing date' of a claimed

invention in a patent or application for patent means--

''(A) if subparagraph (B) does not apply, the

actual filing date of the patent or the application for

the patent containing a claim to the invention; or

''(B) the filing date of the earliest application

for which the patent or application is entitled, as to

such invention, to a right of priority under section

119, 365(a), or 365(b) or to the benefit of an earlier

filing date under section 120, 121, or 365(c).

Disclosures made 1 year or less from the effective filing date will be an exception that will not count as prior art, but only if the inventor or joint-inventor was the first to disclose.

The Supreme Court has granted certiorari to decide Costco Wholesale Corp. v. Omega, S.A., in which Omega sued Costco when it bought a shipment of Omega watches from another importer and sold them for below Omega's suggested retail price.  Omega is claiming that Costco's sale infringes on their copyright of the Omega logo on the back face of the watch. 

Costco 's affirmative defense is that Omega is precluded from bringing a copyright action after a sale due to the Doctrine of Exhaustion, or "first sale" rule, under which certain rights are "exhausted" after a sale of the copyrighted good.  While the "first sale" rule certainly applies to goods purchased within the United States and subsequently resold within the United States, at issue here is whether or not the rule applies to goods bought abroad and then resold in the United States, as Costco did in this case.

Essentially, Omega is attempting to use the copyright associated with their logo to engage in price discrimination for different countries, as their watches typically sell for less outside of the United States.  Costco Wholesale Corp. v. Omega, S.A. is set to be heard by the Supreme Court this fall and could have a major impact on companies throughout the world utilizing similar pricing schemes.  Maier and Maier will be monitoring any developments in this upcoming case.