From 43(B)log:

Plaintiff Carter is defendant ALK’s former vice president and general manager. He alleged that ALK, which does business as ACME Security, took his idea for improving the security of safe-deposit boxes, applied for a patent that falsely listed ALK’s owner as an inventor, and coerced him to assign his rights therein. The court determined that none of Carter’s multiple claims stated a federal claim, though it agreed that his allegations were troubling.

Carter’s false designation of origin claims, based on ALK’s sales pitch to Wachovia, were precluded by Dastar. This is familiar territory: if ALK ultimately sells the invention to Wachovia, it will be the physical source of the relevant goods.

False advertising was not successful either, in part because Carter alleged that it occurred through the false patent application. The court had no problem deciding that this wasn’t “commercial advertising or promotion.” Moreover, this was the unusual case where the misrepresentations at issue didn’t involve any product or service, only the pending patent application. There is precedent holding that a patent isn’t a “good or service” under the Lanham Act. digiGAN, Inc. v. iValidate, Inc., 71 U.S.P.Q.2d 1455, 1459-60 (S.D.N.Y. 2004). (Note: a patent might be part of a defendant’s “commercial activities,” however, as that term has been broadly defined in false advertising cases. The court didn’t address the line of cases holding that misrepresentation that goods are patented or that a patent is pending can be false advertising in appropriate circumstances.)

Finally, invoking a sort of implied exhaustion requirement, the court pointed out that a falsity determination would require the court to determine who the real inventor/s was/were, and this is for the PTO in the first instance. The statutory scheme governing patents is pretty clear that courts should only determine inventorship disputes once (if) a patent issues. This isn’t akin to a garden-variety claim that the patent statute preempts the Lanham Act. There will be no patent unless the PTO approves it; it’s more like a false advertising claim based on statements about a drug the FDA has yet to approve.

Legal Filing:  Carter v. ALK Holdings, Inc., 2007 WL 1655857 (N.D. Ga.)

Related Posts:

• Soda Company Gets Sued Over False New Mexico Advertising
• IGT Suing Bally Over Wheel of Fortune Patent Infringement
• Patent Law Battle Plays Out Between Vonage and Verizon
• Patent Office Rejects Patent Protection For Latin American Enola Bean
• Patent Holders in the United States Can’t Enforce Foreign Patents in US Courts

From May It Please the Court:

By now, if you follow anything to do with current legal issues, you’ve seen most of the analysis and prognostications from lawyers across the country about the recent Supreme Court patent decisions, and the earth-shattering change one of Black Monday’s decisions will have on the patent bar and patent litigators, like this firm.  In case you missed it, however, click here for a roundup of the professor and practitioner’s take on the decision on KSR v. Teleflex.

Or, if you’re somewhat more kinesthetic, then you can listen to this podcast recorded today with three top patent experts.

If you’re not in the ivory towers, but rather in the trenches like we are, then perhaps this New York Times report is more apropos.  In that report, Vonage is requesting a new trial after it got slammed by a jury who favored Verizon’s version of the patent case.  The reason?  Black Monday’s Supreme Court decision.

Given that decision, anyone with a patent based in part on prior art, and if it’s “obvious” - as opposed to patentable - the patent holder can expect a challenge to their patent by someone who wants to do the same thing.  Patent holders just saw the value of their patent portfolios drop through the floor.

Perhaps this quote from Aubrey Menen encapsulates the Supreme Court’s ruling best:  “The essence of success is that it is never necessary to think of a new idea oneself.  It is far better to wait until somebody else does it, and then to copy him in every detail, except his mistakes.”

Related Posts:

• Patent Holders in the United States Can’t Enforce Foreign Patents in US Courts
• Patent Office Rejects Patent Protection For Latin American Enola Bean
• IGT Suing Bally Over Wheel of Fortune Patent Infringement
• False Patent Claim Doesn’t Mean False Advertising
• Real Life Sopranos Plays Out in Chicago Trial

From 4(3)Blog: 

After a jury trial, CollegeNET won a patent infringement claim, as well as its Lanham Act false advertising claim. The jury awarded $4.5 million in damages. The court rejected XAP’s argument that the Lanham Act claim was barred by laches, accepted the jury’s award of damages, refused to award extra recovery of XAP’s profits, and found that CollegeNET was entitled to attorneys’ fees because XAP’s conduct was willful.

Some background: CollegeNET and XAP each allow high school students to apply online for admission to colleges and universities. While CollegeNET charges each school for each student application, XAP offers its services to schools free. XAP makes its money in part from the sale of students’ personal data, submitted in their online applications, to “state agencies, departments of education, student-loan guarantee authorities, and commercial-lending institutions such as banks.”

XAP’s privacy policy promises that personal data isn’t released to third parties “without the user’s express consent and direction.” At all relevant times, students using XAP were asked an “opt-in” question when creating certain types of accounts: “Are you interested in receiving information about students loans and financial aid?” XAP treated a “yes” answer as “express consent and direction,” and forwarded the student’s personal information to its partners for a fee.

The court found clear and convincing evidence that XAP didn’t inform students that a “yes” answer was “express consent and direction,” though it could have included such clarifying language. Further, XAP chose not to do this because it was a “bad idea” that would result in fewer opt-ins and lower revenues. Indeed, “XAP intended its privacy-policy statements to lull students into a false sense of security regarding the privacy of [their] personal information.” Though there was no direct evidence that students were actually deceived, the court found that there was a presumption of deception arising from XAP’s bad faith, and that XAP “knew its deception substantially increased the number of students who answered ‘yes’ to the opt-in question.”

CollegeNET’s expert testified that it suffered $35 million in damages, assuming that all XAP’s college applications included the opt-in feature. The evidence, however, showed that only 15% of the applications had an opt-in. The jury verdict of $4.5 million is slightly less than 15% of CollegeNET’s claimed damages, which the court found appropriate. (It also noted that, under the statute, its only discretion was to increase the damages to the extent that they didn’t fully compensate CollegeNET; there is no corresponding discretion to reduce damages.) XAP’s profits from applications with the opt-in question were $2.5 million. Given that the Lanham Act aims at compensation, not penalty, the court found that disgorgement of XAP’s profits on top of the damages would be inappropriate. Despite avoiding this extra hit, XAP is still on the hook for what’s likely to be substantial attorneys’ fees as well as the $4.5 million in damages.

My question: was the opt-in question really deceptive? Just because XAP knew that it would get fewer opt-ins if it made opt-in sound more alarming doesn’t mean that students were deceived by the actual representations at issue. What could they have thought they were agreeing to when they said they wanted to receive information about student loans and financial aid? I’m surprised that, without direct or survey evidence of deception, the court found not just deception, but willful deception. Eric Goldman may have further thoughts, given his background in privacy policies.

Related Posts:

• Punitive Damages Award May Now Not Exceed Compensatory Damages
• Invasion of Privacy With a Hidden Camera: Employer and Employee Law
• Disclosure Policy
• Class Action Lawsuit Filed Against Microsoft for Xbox360 “Bricking”
• Can the Oscars Be Considered a Generic Term for Award in Italian?

From 43(B)log:

IGT v. Alliance Gaming Corp., 2007 WL 911773 (D. Nev.)

The parties are competitors in the market for computerized gaming machines, specifically “wheel of fortune” type machines. IGT sued defendants (collectively Bally) for patent infringement. Defendants counterclaimed for declarations of invalidity, noninfringement, and unenforceability, as well as antitrust violations and false advertising based on IGT’s allegedly fraudulent acts in receiving its patents and claiming on its website that Bally was an infringer of those patents.

Usually, it’s difficult to maintain a false advertising claim based on a competitor’s statements about IP violations. The exception, which applied here, is when the relevant consumers are sophisticated businesses that can be expected to pay attention to allegations of patent infringement. The remaining hurdle is that courts generally impose an intent requirement – indeed, a bad faith requirement — not otherwise present in the Lanham Act, in order to allow people to make good-faith but mistaken claims about patent validity. Bally avoided summary judgment on this issue, because of disputed factual issues about what IGT knew about the validity of its patents when it issued a press release claiming that it filed a patent infringement case to “stop [Bally] from misappropriating IGT’s patented innovations.” Given the factual issue on bad faith, Bally could also take advantage of the presumption that intentional deception actually deceives the public.

Another potential issue is whether press releases count as “advertising or promotion”; again, at least with sophisticated consumers, it’s likely that they do. Indeed, Bally submitted evidence that it received numerous concerned inquiries as a result of the press release and lost at least one order for 100 machines. Given that patent owners can pursue end-users of infringing devices, Bally’s customers were right to be concerned. IGT did, however, win summary judgment on Bally’s intentional interference with prospective economic advantage claim, because there was no evidence IGT knew about this particular lost order.

Related Posts:

• Patent Holders in the United States Can’t Enforce Foreign Patents in US Courts
• False Patent Claim Doesn’t Mean False Advertising
• Patent Office Rejects Patent Protection For Latin American Enola Bean
• Patent Law Battle Plays Out Between Vonage and Verizon
• The 3 Types of Patents: Utility, Design, & Plant Patents

From(4)3Blog:

2.5 million patents have issued in the last 20 years, over 1/3 of the total number issued in US history. Many are in the information industries. And these are component industries: to make and sell things, you have to put together a bunch of components. The patents generate royalty stacking and holdup concerns, not just in theory but in practice. Microsoft owes 1.2 billion for one invention used in Windows, $500 million for another. Then add in willful infringement and treble damages, as well as the outrageous cost of patent litigation — $4.5 million to pay your lawyers, win or lose.

And yet – the anticommons hasn’t disabled any of these industries. People are running their businesses notwithstanding the patent shadow.

Why? Because people ignore patents all the time, especially in component industries. This may not be true in the pharmaceutical industry, but he’ll talk about that in a bit.

Scientists, engineers, software writers don’t read patents to gather information. Even if they thought it was a good idea, the business and legal types are telling engineers: whatever you do, don’t read patents. Don’t put us on notice.

Similarly, companies don’t engage in prior art searches before filing for patents or before making products. Not surprisingly, once that happens, they get threat letters. The received wisdom in Silicon Valley is that you always ignore the first threat letter you get. Sometimes they go away. Only if they’re serious do you start evaluating.

When you’re sued for patent infringement, you never stop making the product pending the outcome of the litigation. You always roll the dice, even if you’re also trying to design around the patent just in case. The Blackberry is an example of this, settling for $613 million rather than implementing a workaround.

What if we took seriously the idea that patents are just like real property? Nobody would build a house without being sure they owned the land. If it were a shopping mall and needed to aggregate land to create it, you wouldn’t start building in the hopes that you wouldn’t get sued or the plaintiff would turn out to have a defect in title. Even if you did, no one would loan you the money to do so. In real property, we’ve got to be sure, at least to a high degree of certainty.

Analogously, Intel couldn’t design a new chip until it had cleared all the possible rights. You’d need patent title insurers who’d spring up to clear the rights. In the university setting, scientists would investigate patents before starting research.

Mark A. Lemley from Stanford University Law School thinks this would be a disaster. The benefits: patent owners would get paid more. The subset of patent owners in competition with accused infringers, and who want to use patents to exclude competitors, would benefit tremendously. Filing a lawsuit would deter people from entering the market.

Research and product sales would be delayed by years, even decades, in every industry. Cost would be the least of the problems – patent applications may be sought, or may have claims that differ when they’re issued. And because of continuations, you can’t identify all the claims until 20 years after the filing date. Even once you’ve identified a patent owner, you don’t know what the patent covers. 46% of patents litigated to judgment are ultimately held invalid. Given the 40% reversal rate on Markman hearings, you don’t know what a patent means until after Federal Circuit review. And there are many, many patents out there. Third-generation wireless – one bit of your cellphone – is covered by nearly 7000 “essential” (self-identified) patents.

This is more than a problem of layering. If I must buy and aggregate rights from a bunch of people, we can’t expect those individuals will set an efficient systemwide price. If one voluntarily reduces price, others will charge more and they’ll be the suckers. This creates a real risk of bargaining breakdown. The real property rule presupposes the absence of bargaining breakdown.

Systemic problems: consumers would lose the benefits of competition, in situations where the patent would be held invalid or not infringed. And patentees only win 25% of their litigated cases – 75% of the time you’re sued, you’re right to refuse to pay. And that helps consumers get the benefit of the product during the period when the patent’s validity and scope are uncertain. Competitors and innovators generally would lose the benefits of going ahead without waiting for approval from patent owners. Design-around efforts would wither. If competition is a better spur to innovation than monopoly, then we’d lose out in innovation as well.

In the pharmaceutical industry, we have a world in which patent owners all neatly list their patents in one place, the Orange Book. The FDA and Hatch-Waxman rules restrict generic entry when there is an Orange Book entry. If you certify that you don’t infringe or the patent is invalid, the patent owner can sue you and get an automatic 30-month injunction. Even after those expire, as they’ve started to do, generic companies are mostly afraid to enter at risk. They act like real property owners.

Does this system work? Pharma is different – Lemley thinks we need stronger patent rights because of the cost and delay of the regulatory environment needed to guarantee safe and efficient drugs. So the benefits are a lot stronger in pharma. Correspondingly, the cumulative innovation that drives software and semiconductors is a lot less important. Discovering a new blockbuster is correspondingly more valuable than improving on the dosage system of that blockbuster. Moreover, there are fewer patents – by orders of magnitude – in the industry, and the claims are a lot clearer. Chemical patents don’t have huge Markman problems the way other patents do, for example when they specify the high-level functional characteristics of a computer program.

Nonetheless, there are problems even in pharma: Evergreening – listing as many patents as possible on the Orange Book, even if they’re obviously bogus or unrelated to the underlying drug. Product-hopping to game the FDA approval system – changing products just as a generic is about to enter the market. Exclusion payments: paying generic competitors to stay out. The result is surprisingly little generic entry while patents are in force and even a number of years after the original patent expires.

Second what-if: What if we wanted to create a robust market for patent license, which wasn’t the current “ignore patents” world but also wasn’t the sclerotic world of land rights? That would require really radical changes to solve the problem of uncertainty early on in the development process. Requirements: much better review of applications, which would have costs of its own; early publication, possibly on the date of application; ban continuations; allow post-grant oppositions; other mechanisms for collecting information before a lawsuit began; a prior user or independent invention defense, since we shouldn’t make people buy rights for things they’ve already invented, or at least change the rules for willfulness when people look at patents; and change remedies to limit the holdup problem – ban injunctions and make royalties reasonable in line with the actual technical contribution of the patent. Only in those circumstances should you make people enter into search and negotiations before they developed new products.

My Q: This sounds like the trademark system, except for the prior user part and the remedies.

Lemley: Yes, it sounds similar, but the market for patents he’s interested in imagining would be fundamentally different – he doesn’t want a market for licensing trademarks because that would cause consumer confusion. (Though Lemley doesn’t believe in licensing rights for TMs generally, at least not for communicative/secondary products.)

Q: What about penalties for wrongly putting a patent in the Orange Book?

A: We might see fewer evergreening problems.

Q: Are there industries in the middle ground between IT and pharma?

A: We need more research! Biotech may be different from classic chemicals, though his guess is that it’s close because of the FDA regulatory background.

Q: Would more third-party involvement help?

A: Interpleader might be helpful – if we could bring all the patent owners together, that might help solve problems and make clear that a single inventor’s claim for “just 1%” of royalties would quickly make a product like a cellphone noneconomic. The difficulty would be patent applications in the pipeline.

Q: When you sit down to create something artistic, you ignore copyright because you assume you’re making an independent creation (wow, this questioner’s experience of creation is very different from mine), so copyright is a good comparison for ignoring patents. In a world with a de facto independent invention defense, do we get all the results you want? Can you have a property right with injunctive remedies and still do well for efficiency?

A: He’s not necessarily advocating independent invention as a defense. Rather, if you wanted to move to a market model, this would be one of the requirements. Copying is difficult to prove or disprove. With copyright, we can usually distinguish between people who copied, though they say they didn’t, and people who didn’t copy. That’s much harder when it comes to a DNA sequence or other more basic concept, like a cheese slicer with a wire that works with a slicer. (I’m not convinced by Lemley’s distinction – the rule works pretty badly in music copyright, especially given that copyright recognizes “unconscious copying” as sufficient.)

Q: What about the potential that people are both plaintiffs and defendants?

A: True for the big guys, who don’t sue each other – enter into cross-licensing or just leave each other alone on a mutually assured destruction theory. Non-practicing entities (e.g., patent trolls) have nothing to lose from Intel’s 10,000 patents. They account for a substantial number of the cases that are actually filed.

Q: Would liability rules mean people would still ignore patents?

A: It’s a system design question. We could still create incentives for people to do deals outside the legal system instead of inside. But perhaps patent challenges are undersupplied – a property system could heighten this problem. If we really had a market system, he’d want a search obligation and an obligation of entering into good-faith negotiations. If you don’t do that, you should pay penalties, but if you do, you should be able to take your chances if you conclude that the patent is invalid or the price too high and not be penalized.

Q: Are patents for outsiders worth it?

A: Intel and others might tell you that they’d be happy with unilateral patent disarmament. But patents might still encourage innovation by people who can’t get into the market, e.g., for chip design. The problem now is that the legitimate small-inventor patent gets lumped in with the general “ignore patents” trend. Also, major companies get a return from innovation because their patent portfolios entitle them to participate in industry oligopolies – though that might not be necessary.

Q: This is a caricature of property law. Every issue beyond 7-8 core cases involves substantial indeterminacy within property law. Everything from adverse possession to easements to equitable servitudes – you don’t know what the answer is until the judge rules. When you step outside the commercial context, indivdual landowners are less likely to review all necessary rights – banks give conditional loans even when people discover easements on their lands. Trespass may be determinate, but not the rest of the property law.

A: Agrees that there is indeterminacy; this is why we can spend a year teaching property. But there is not the same level of indeterminacy in the average real property case. It’s not the case that 46% of real property deeds are invalidated. It’s not the case that people always fight over the boundaries of real property, as they do in every case after Markman. Add to that the hundreds to thousands of potential claimants in patent, which is unusual in real property. It’s true that individuals don’t read their title insurance or loan documents. But the banks generally do, and that’s why there’s title insurance.

Related Posts:

• The 3 Types of Patents: Utility, Design, & Plant Patents
• Patent Holders in the United States Can’t Enforce Foreign Patents in US Courts
• IGT Suing Bally Over Wheel of Fortune Patent Infringement
• False Patent Claim Doesn’t Mean False Advertising
• Patent Office Rejects Patent Protection For Latin American Enola Bean

From May It Please the Court: 

Many EU countries and patent holders outside the US breathed a sigh of relief earlier this week because of something that didn’t happen.  The United States Federal Court of Appeals decided not to decide.

Foreign patents, that is.

It seems that Jan K. Voda, M.D. wanted to enforce three Angioplasty guide catheter patents granted by the USPTO to him.  He brought suit against Cordis Corporation, a medical device manufacturer in Oklahoma.  Voda also alleged that Cordis was selling the catheter in foreign countries and those sales violated foreign patents that Voda held.

Since Voda was already in US District Court in Oklahoma over his three US patents, he figured that he might as well get two for one:  he asked the Court to assume supplemental jurisdiction over the foreign patents.  That court let him try, but the US Federal Court of Appeals reversed that decision.

Trouble is, there are several foreign conventions and provisions in US law that require us to respect their laws and them to respect ours.  The Paris Convention for the Protection of Industrial Property requires the signatory countries to maintain the independence of each others’ patent systems.

It worked.  US patent holders can’t litigate foreign patents in US courts, but will have to go to the foreign country where the patent is being infringed.  It should work in reverse, too.

Maybe we need an international patent court?

Related Posts:

• The 3 Types of Patents: Utility, Design, & Plant Patents
• Patent Office Rejects Patent Protection For Latin American Enola Bean
• False Patent Claim Doesn’t Mean False Advertising
• IGT Suing Bally Over Wheel of Fortune Patent Infringement
• The Reality of Ignoring Patents

From p2pnet:

Bill and the Boyz have the distinction of achieving a ‘first’ in the world of patents.

In the world’s largest award for patent violation, Microsoft has been ordered to pay France’s Alcatel-Lucent the grand total of $1.52 billion for improperly using Alcatel-Lucent audio technologies in the Windows Media Player, including the version in the new Vista operating system.

On top of that, Alcatel-Lucent, the world’s biggest maker of communications equipment, can also ask for an order barring Microsoft from using the patented technology, says Bloomberg News.

“Alcatel-Lucent’s victory also may clear the way for legal actions against hundreds of companies that rely on MP3, the standard for playing music and sound files on a computer, mobile phone or digital-music player,” says the story.

However, the $1.52 billion, which represents a mere six weeks or so of free cash flow for Microsoft, observes Bloomberg dryly, may be halved if it wins an unrelated case currently before the Supreme Court, “that could alter how patent damages are calculated for software companies with overseas sales”.

“Microsoft, which had almost $29 billion in cash and short- term investments as of Dec. 31, said it will ask U.S. District Judge Rudi M. Brewster to overturn the verdict and will seek further review in an appeals court if necessary,” says the story.

Alcatel-Lucent will decide later whether to seek to block Microsoft from using the technology, says Bloomberg, adding:

“The dispute started in 2002 when Lucent sued computer makers Gateway Inc. and Dell Inc. over technologies including this one. Microsoft joined the case because it may be obligated to reimburse Dell and Gateway for any damages they have to pay. The trial over MP3 was between only Microsoft and Alcatel-Lucent.”

The case is Lucent Technologies Inc v Gateway Inc, 02cv2060, US District Court for the Southern District of California (San Diego).

Related Posts:

• Viacom Sues YouTube and Google For 1 Billion Dollars in Damages
• Law Firm Beats Microsoft: $4 Million Dollar Lawsuit
• Microsoft Getting Sued Over Scratching Xbox 360 Games
• Class Action Lawsuit Filed Against Microsoft for Xbox360 “Bricking”
• Microsoft Strikes Back With Legal Actions Against Cybersquatters

As a general rule, patents are associated with things and processes which are vital to the world the only exception though are innovative designs. Patents also allow the creator of some inventions to preclude others from making use of it commercially without the permission of the creator. It is possible to acquire patent on technologies used in arts.

Nevertheless, the exceptions to the general rule are on product designs. It is thus theoretically potential to acquire design patent on the purely ornamental aspects of design while also having a copyright on same design.

Patents convey to the creator the right to exclude others from using or producing the former’s creation for a limited time. A patent for an invention is an award of a property right to the inventor. It is given by the United States Patent and Trademark Office. A new patent may last up to 20 years from the date of application in the US. In special cases, it may start from the date of an earlier filed application. The application is subject to maintenance fees. It is also noteworthy to know that patent grants in US are only effective within US, its territories and possessions. If you want your patent grants to have extensions or adjustments, you can avail of the same under certain circumstances.

There are three types of patents. They are:

1. Utility patents which may be granted to anyone who invents or discovers a machine, vital process, composition of matter, article of manufacture or any useful improvement thereof
2. Design patents may be granted to anyone who creates a new, original and ornamental design for an article of manufacture
3. Plant patents may also be granted to anyone who creates or discovers at the same time asexually reproduce any distinct and new variety of plant.

What is vested by the patent is not the right to make, use, offer for sale, sell or import but the right to EXCLUDE others from making, using, offering for sale, selling or importing said creation or invention. If the patent has already been issued, the patentee must enforce it without the assistance of the United States Patent and Trademark Office.

The gist of this statute is to grant authority to protect discoveries and creations. In order to be patented an invention must be novel, useful, and not of an obvious nature. Now, the creators/inventors can shun their worries about having works copied or used without their permission.

Related Posts:

• Patent Holders in the United States Can’t Enforce Foreign Patents in US Courts
• The Reality of Ignoring Patents
• Plant Robber Attempts to Rob Store With Yucca
• False Patent Claim Doesn’t Mean False Advertising
• Patent Office Rejects Patent Protection For Latin American Enola Bean