by Lee Gesmer | Sep 11, 2012 | Patents
As I’ve written before, getting sued for patent infringement in Texas (often the Eastern District, or “EdTX”) is generally viewed as undesirable by corporate America. Apparently seeking to avoid this unpleasantness, TomTom, Inc. filed a suit in Massachusetts, asking the court to declare that it did not infringe several patents held by Norman IP Holdings, Inc., over which Norman had already sued TomTom in EdTX. As its name suggets, and as best I can determine, Norman is a non-practicing entity that has been active in the courts of EdTX.
However, TomTom’s strategy of avoiding Texas appears to have failed. Massachusetts U.S. District Court Judge Saylor has upheld a decision by Magistrate Judge Judith Dein concluding that the Massachusetts court did not have jurisdiction over Norman, and therefore could not force Norman to confront it over these issues in Massachusetts. It appears that Texas is where TomTom will have to defend itself against Norman.
I will quote, not for the first or last time, the words of General Phillip Sheridan: “if I owned Texas and Hell, I’d rent out Texas and live in Hell.” Words that ring true for Texas patent defendants.
TomTom, Inc. v. Norman IP Holdings, LLC (D. Mass. September 4, 2012)
by Lee Gesmer | Sep 9, 2012 | Patents
“. . . the intolerable wrestle with words and meanings . . .” East Coker, by T.S. Eliot
__________
Congress enacts laws. The courts interpret and apply them in cases. Often, there is disagreement over what the words mean, and judges debate the meaning in published decisions. Judges on the same court may agree, disagree, dissent, concur, and form shifting majorities and minorities. Occasionally, congress will take notice and attempt to clarify a law by amendment. Sometimes, this only adds to the confusion.
The eleven active judges on the Court of Appeals for the Federal Circuit, the patent appeals court, exemplify this dynamic in their August 31, 2012 en banc decision in two cases consolidated on appeal, Akamai v. Limelight and McKesson v. Epic Systems (link). The decision, totaling over 100 pages, is comprised of three opinions, each with dramatically different views of a fundamental issue in patent law.
The core issue the judges on the CAFC were unable to agree upon on is this: does patent infringement occur when separate entities perform the steps of a patented method?
To take a simple example, assume that a patent claim involves just two steps: first, delivering a web page to a customer’s server, second, the some form of manipulation of the page by the customer (e.g., tagging or data hashing).*
In fact, this is, in highly simplified form, analagous to some of the patent claims at issue in this appeal. (U.S. Patent No. 6,108,703).
Until August 31st, the patent owner could not successfully claim patent infringement, because this was “divided” infringement – multiple parties (in this example two parties) performed different parts of the single claimed patent method. As the CFAC stated in BMC Resources, Inc. v. Paymentech, L.P.), “infringement requires, as it always has, a showing that a defendant has practiced each and every element of the claimed invention.”
In Akamai/McKesson the CAFC agreed to reconsider the divided infringment doctrine en banc. However, the eleven judges were barely able to eek out a 6-5 majority opinion.
Six of the CAFC judges — the thin majority — formulated a new doctrine of “induced infringement”: a party can be liable for inducing infringement if it either (1) induces several parties to jointly carry out the steps necessary for infringement, or (2) performs some of the steps of the claimed method itself and induces a third party to perform the remaining steps claimed. Under this new interpretation of the law all the steps of a claimed method must be performed in order to find induced infringement, but all the steps need not have been performed by a single entity. However, importantly, it appears that the CAFC intends only for the “inducer” to be liable for patent infringement, not the parties that directly infringe the patent claim.
Four of the eleven judges dissented, arguing that there should be no patent infringement where the steps are “divided.” In other words, this group argued for adherence to the “single-entity” rule that had been in effect.
One judge, Pauline Newman, dissented separately, arguing that under the patent statute when more than one entity performs all of the steps, the claim is directly infringed. As she states, “The court should simply acknowledge that a broad, all-purpose single-entity requirement is flawed, and restore infringement to its status as occurring when all of the claimed steps are performed, whether by a single entity or more than one entity . . ..”
What is the statutory language the judges cannot agree upon? It is this:
whoever without authority makes, uses, offers to sell, or sells any patented invention . . . during the term of the patent therefor, infringes the patent (35 U.S.C. 271(a))
While the dissenters cannot agree whether the word “whoever” requires a single actor or permits several actors to combine to infringe a patent, the majority ducks this question altogether, focusing instead on section 271(b) of the statute: “Whoever actively induces infringement of a patent shall be liable as an infringer,” and concludes that this provision permits liability based on inducement. Of course, as the dissenters point out, this approach begs the question whether there has been an “infringement” in the first place if multiple actors perform the elements of a patent claim.
The decision leaves unanswered questions and poses contradictions, not the least of which is that it appears the patent owner cannot sue the direct infringers when more than one entity participates in the infringement, an odd result indeed. It leaves unanswered whether the patent holder can obtain injunctive relief against the direct infringers, or whether the should even be named as defendants. It muddies the lines between direct, contributory and vicarious patent liability, which lines were already far from clear before this decision. And, most fundamentally, it fails to answer the question whether direct patent infringement can exist where the steps are “divided” – if it does not, there can be no “induced” infringement, since it is beyond question that direct infringement must exist before induced infringement can occur.
The fact that the en banc court was unable to reach consensus on such a fundamental issue of patent law is disturbing. Speculation that the Supreme Court will attempt to straighten out this mess began almost immediately after release of the decision. Perhaps the Supreme Court will answer the central question dodged by the majority in Akamai/McKesson, whether multiple-actor infringement constitutes patent infringement, and thereby serve as the basis for induced infringement, and vindicate one of the dissenting positions. However, the Supreme Court has been known to make matters worse, not better, when it comes to “the intolerable wrestle with words and meanings,” particularly in cases involving patent law.
Akamai Techs., et al. v. Limelight Networks and McKesson Techs., Inc. v. Epic Systems Corp.
[Update: Reversed by U.S. Supreme Court on June 2, 2014. Link]
by Lee Gesmer | Sep 5, 2012 | Contracts
A contract between a company and its supplier states that the supplier shall not “develop any other product derived from or based on” the company’s product. Can the company enforce this provision against the supplier when the supplier develops a product that does not appropriate any trade secrets or novel features of the company’s product?
Not according to a decision of the First Circuit issued on September 4th.
Where the features of the product are well known in the art, and there has been no appropriation of novel features of the product, such a contract provision cannot be used to enjoin sales of the “derived” product: “a private contract may restrict copying of an idea that was not in the public domain at the time of contracting, but may not withdraw any idea from the public domain.”
Contour Design, Inc. v. Chance Mold Steel Co., Ltd. (1st Cir., Sept. 4, 2012)
by Lee Gesmer | Sep 4, 2012 | Copyright
Now that the patent trial of the century is on pause for a bit (Apple v. Samsung), it’s time to catch up on the other tech trial of the century, Oracle v. SAP. Yes, it’s difficult to keep track of all these tech trials of the century. I hope that 80 years from now the world remembers that we had the tech trials of the century back in 2010 and 2012.*
*Oh, I almost forgot the other (the third) tech trial of the century, the copyright/patent trial between Oracle and Google earlier this year. There may even be other tech trials of the century I have forgotten that were tried back in the early years of the century. My memory for this type of thing cuts out after a few years.
Seriously, for those who may have forgotten, in 2010 Oracle won a $1.3 billion copyright infringement judgment against SAP, reportedly the largest copyright judgment ever. There was much hullaballo over the size of this verdict, until the trial judge threw a wet towel over the case, ordering remittitur, reducing the judgment by over $1 billion, and giving Oracle the choice of accepting a paltry $272 million or retrying its case. Oracle elected to retry the case, and the second trial was scheduled to begin in late August.
However, neither side really wanted to retry the case, and they figured out a way around. In early August Oracle and SAP entered into a stipulation that would allow the parties to avoid a retrial and permit Oracle to appeal the district court remittitur order.
The stipulation (which was accepted by the court, which was probably more eager to avoid another trial of the century than the parties) works like this:
- The district court entered final judgment. This opens the way for Oracle to appeal the court’s remittitur decision (and any other issues that are the proper subject of appeal) to the 9th Circuit. Procedurally, Oracle could not appeal until final judgment was entered.
- Judgment was entered in favor of Oracle in the amount of $306 million. However, Oracle may not enforce the judgment until all appeals are concluded. The $306 million appears to be a negotiated amount, and probably reflects some past and future interest on the $272 million; however, we don’t know exactly where this number comes from.
- This is a pretty good deal for Oracle, which has a floor and upside potential. If a second trial occurs (after remand from the 9th Circuit, for example), and Oracle’s verdict is less than $306 million, SAP will still have to pay $306 million. That’s the floor. If the 9th Circuit reinstates the $1.3 billion Oracle can recover that from SAP. That’s the upside.
- The judgment also includes the $120 million in attorney’s fees that Oracle has already been paid (in other words, it awards these retroactively, and acknowledges that they have been paid).
Why would SAP agree to this deal? Likely, it thinks its chances of obtaining a verdict below $300 million at a second trial are poor. Add to this the costs of that trial (which could include additional attorney’s fees incurred by Oracle), and it’s not worth the risk and uncertainty. SAP is hoping the 9th Circuit will dispose of the case by upholding the trial court’s ruling that Oracle failed to prove damages based on a “hypothetical license fee,” leave the $306 million in place (Oracle’s lost profit damages), and that will be the end of it.
Of course, if the 9th Circuit remands for a retrial, watch out – we may be looking at another “trial of the century.”
Oracle/SAP Stipulation
by Lee Gesmer | Sep 3, 2012 | Patents
I’ve been meaning to post a link to the jury verdict form in the Apple v. Samsung patent case. Here it is, linked at the bottom of the post. And no, that’s not some weird crossword puzzle on the left, it’s a tiny section of the verdict form.
If this isn’t the most complex jury verdict form in American legal history, I can’t imagine what is. The Verge did a nice job of dissecting the jury verdict form pre-verdict, and concluded that a decision on the approximately 700 decision points would “not go quickly.”
Turns out The Verge was mistaken; the jury was able to wrap things up in just over two days, awarding over $1 billion to Apple. They did this with the help of a jury foreman who had applied for and obtained a patent – the only juror who had even the slightest familiarity with patents before this trial. Do you think his (presumably) pro-patent views influenced the outcome in this case? Did Apple get really, really lucky? Could make a person wonder ….
Jury verdict in Apple v. Samsung (on Groklaw)
