by Lee Gesmer | May 8, 2008 | Courts, Trademark
What does it mean when a contract requires that notice be given “in hand”? Believe it or not, despite over 225 years of Massachusetts jurisprudence, until now no Massachusetts court had ever considered this question. In McMann v. McGowan, 17 Mass. App. Ct. 513 (2008), decided on April 7, 2008, the Appeals Court held that “in hand” means delivery into the hand of an authorized receipient. The Court rejected the argument that “in hand” includes delivery by hand, the position argued by the losing party. Of such things the law is built.
Everyone knows that false or deceptive advertising is illegal, but a recent decision by Superior Court Judge Thayer Fremont-Smith provides a reminder of how difficult it is for a competitor allegedly harmed by false advertising to prove actual harm and damages, except in the rare case where there are only two firms in the market. Where there are more than two competitors, as Judge Fremont-Smith points out, “it cannot confidently be inferred that any customers procured by defendants’s false advertising were at plaintiffs’ expense.” While not dismissing the case outright, recovering any damages looks like a steep uphill fight for the plaintiff in this case. IDT Telecom v. Voice Distributors, Middlesex Superior Court, April 11, 2008.
by Lee Gesmer | May 6, 2008 | Courts, Patents
A postcript on my last posting regarding the so-called “rocket docket” in the Eastern District of Texas. Our firm is counsel for a client in a patent suit filed in Marshall, Texas (the very heart of darkness for patent defendants, some would say) on November 2, 2007. To date (more than six months later), the Court has yet to schedule the initial case management conference which, under the local patent rules, is the “kick off” event for patent cases in EDtTx. To date, there has been almost no activity in the case apart from the filing of answers and a motion to dismiss (not yet acted on) by one of the defendants.
by Lee Gesmer | May 6, 2008 | Courts, Patents
“a renegade jurisdiction”
Justice Antonin Scalia, referring to Marshall, Texas, during oral argument in eBay v. Mercexchange
______________________
There are all kinds of bubbles – stocks, commodities, housing, tulip bulbs, and even litigation. The Eastern District of Texas (EDtTx) has been the scene of a patent law bubble for the last seven years. However, like all bubbles, it can’t last forever, and it’s only a matter of time before this one pops.
The patent litigation history of EDtTx and the causa sine qua non of its popularity in with the plaintiff’s patent bar, Judge T. John Ward, are described in detail is an excellent article in the March issue of the American Lawyer. The article, titled “Taming Texas” and written by Nate Raymond, describes how Judge Ward nurtured the patent practice in Texas with a “rocket docket” and the support of pro-plaintiff jurors who are strongly partial to the protection of property rights. Among the highlights of the story:
- As of 2007, there had not been a defense win in a patent infringement case the district in three years. From 2001 to mid-2006 plaintiffs had won 90% of the district’s patent trials.
- The flood of patent cases in EDtTx has created an economic boom in the services industries (hotels, restaurants), and of course in the legal profession. Many lawyers who formerly focused on “PI” (personal injury) now focus on “IP” (intellectual property).
- Patent reform working its way through Congress would tighten the venue requirements for patent cases, and dramatically reduce the ability to file cases in ED Tex. The article has a sidebar titled “Waiting for the End of the World,” which describes the economic apprehension created by this proposed legislation. Of course, the local lawyers are nervous as well, and they are lobbying against any change.
- 860 patent cases have been filed in EDtTx since 2000, 350 in 2007 alone.
- East Texas judges are disinclined to grant summary judgment (meaning that cases are more likely to go to trial).
Of course, no trend can continue forever, and the pendulum appears to be swinging the other way in the last year, with a number of defense verdicts. More importantly, lawyers from outside Texas have learned what it takes to win there:
- First and foremost, it’s important to hire strong local counsel, and use them aggressively during trial. They can “talk Texan,” something that’s hard to do if you weren’t born and raised there. And local counsel doesn’t mean lawyers from Houston or Dallas – it means “country lawyers” from EDtTx.
- Second, jury consultants are particularly helpful in helping lawyers streamline these cases, and make them comprehensible.
Of course, every bubble contains the seeds of its own destruction, and the very thing that made EDtTx so successful is now contributing to its downfall. With a huge number of case filings, the district cannot maintain its reputation as a “rocket docket” that moves cases quickly to trial (something that plaintiff’s lawyers, who are often on a contingent fee, appreciate – inevitably, the faster the case moves, the less money is spent on it). 350 patent cases were filed in the district in 2007, and EDtTx is now the busiest patent district in the nation. In terms of speed, however, it has fallen to 18th, according to LegalMetric, a litigation analysis firm.
The American Lawyer article ends with a sobering warning – even if Congress does tighten up the venue requirements, litigation in EDtTx will not come to a standstill – lawyers are filing cases aggressively to be sure to “grandfather” them in under the current rules. The cases being filed today will precede any changes in the law, and be with us for years to come.
by Lee Gesmer | Apr 25, 2008 | Patents
Here’s a link to an interesting article in the May 5, 2008 issue of Forbes, that highlights the use of anonymous, ex parte requests for reexamination of issued patents to the Patent Office. The result of a reexamination is to stall enforcement of the patent.
The article highlights the plight of Anthony Brown, a lawyer who purchased the patent for compression of an electronic file for transmission over a communications line (think JPEG, this ubiquitous). Before Brown purchased this patent it had laid dormant (the fate of the vast majority of issued patents). After Brown purchased the patent and began a licensing/enforcement program –
“A petition filed in 2000 by parties unknown asked the U.S. Patent & Trademark Office to reexamine whether the processes the patent described were novel enough to deserve a patent. The feds agreed to the review, a common practice if the questions raised seem substantial. The catch is that during the review the holder of the patent can’t demand licensing fees, and the patent’s life doesn’t get extended accordingly. The reexam of the JPEG patent lasted seven years”
After the patent survived that challenge, Brown hit his next roadblock –
“But last year saw yet another anonymous challenge. This one was filed by Chicago patent attorney Vernon Francissen, who declines to identify his client. Francissen suggested the JPEG patent’s current version had slipped through an overburdened system and was being applied too broadly. In March the Patent Office agreed to a second reexam, again putting up a roadblock to Brown’s licensing campaign.”
As a result of the impact of a successful request for rexamination, reexamination requests have become an almost standard strategy for defendants in patent litigation.
by Lee Gesmer | Apr 23, 2008 | Patents
One of the largest jury verdicts in the notoriously plaintiff- friendly Federal District Court for the Eastern District of Texas was the June 2006 $79 million jury award, enhanced for wilfulnes by $25 million by U.S. District Judge Ron Clark in the case of Finisar Corporation v. DirectTV. (Note: Texas judges often have nicknames as their legal first names. It’s a Texas thing. If he were Massachusetts bred, he’d be Ronald Harrison Clark, III). In addition to this award, the judge refused Finisar a permanent injunction (applying the USSC eBay decision), but ordered DirectTV to pay a compulsory license of $1.60/set-top box until expiration of Finsar’s patent.
This judgment is no more. On April 18th the Court of Appeals for the Federal Circuit held that Judge Clark had misconstrued the term “downloading into a memory storage device.” You would think that such a simple term would be easy to construe, but apparently that wasn’t the case in Beaumont, Texas. Result: infringement verdict of over $104 million (not including interest) vacated, case remanded for a new trial.
In addition to correcting the district court on the construction of the “memory storage” term, the Federal Circuit held that one of Finisar’s patent claims had been anticipated by prior art, and therefore was invalid. Moreover, the Federal Circuit ordered the district court to reconsider its holding of non-obviousness with respect to the surviving claims. Piling on, the Federal Circuit reversed the district court’s finding of wilfulness (the basis for the $25 million enhancement), finding that DirectTV had obtained a proper opinion of noninfringement. This, in the event the issue should arise upon a retrial of the case.
It must be a sad day in Sunnyvale. And, Finisar is in a far weaker position today than it was in 2006, given the Supreme Court’s 2007 KSR decision, which has made patents more difficult to enforce and easier to invalidate. In the process, perhaps the widely-feared Eastern District of Texas has lost a bit of its luster for plaintiffs.
This case illustrates the fragility of any patent infringement verdict. After the expenditure of millions of dollars in costs and fees, thousands of hours of attorney and executive time, stock market gyrations, careers made and destroyed, a case can be reversed simply because the Federal Circuit disagrees with the trial court’s interpretation of a few words found in the patent. In the patent context, more than almost any, id imperfectum dum confectum erit (or, it ain’t over until it’s over, for those of you whose Latin is rusty). For a losing plaintiff, an appeal is “baked into” the process.
There is much more to this important case than I’ve had time to discuss here (including discussion of structural disclosures in “means-plus-function” claims involving a general purpose computer) and Dennis Crouch at Patently-O has done such a fine job that I’ll refer you to two entries in which he discusses other aspects of this decision, here and here.
