Philip Brooks' Patent Infringement Updates

LEARNING FROM QUALCOMM'S DISCOVERY ERRORS

The following guest post is by Michael V. Solomita and Steven B. Gauthier of Amster, Rothstein & Ebenstein LLP (Michael V. Solomita is Partner and Steven B. Gauthier is an Associate. They may be reached at msolomita@arelaw.com and sgauthier@arelaw.com).

In Qualcomm Inc. v. Broadcom Corp., No. 05-cv-1958-B, slip op. (S.D. Cal. Jan. 7, 2008), the Court sanctioned Qualcomm and its attorneys for failure to produce key electronic documents.  There is little doubt that the behavior of Qualcomm and its attorneys was egregious and warranted the severe sanctions imposed.  However, the Qualcomm decision underscores two key issues for clients and their attorneys to keep in mind with respect to discovery.

First, the decision highlights the ever-increasing importance of electronic discovery.  Indeed, the Court sanctioned Qualcomm and its attorneys for failure to search for and produce key electronic documents such as the relevant e-mails of the employees who testified on behalf of Qualcomm.  It is imperative, therefore, that clients and their attorneys make sure to adequately search for and produce electronic documents and information in litigation.

Second, the decision emphasizes the obligation of clients and their attorneys to work together regarding discovery to ensure that they produce relevant, non-privileged documents.  The Court found fault with Qualcomm for concealing and lying about key electronic documents.  The Court also found fault with Qualcomm’s attorneys for initially failing to perform a reasonable inquiry into whether the documents requested by Broadcom existed and later for concealing these documents once discovered.  The Court specifically faulted the Qualcomm attorneys for simply taking Qualcomm’s word that there were no relevant documents, even though there were many indications to the contrary.

As such, the key lesson from Qualcomm is that the burden is on both the client and its attorneys to ensure that a reasonable inquiry is performed to identify and produce relevant documents and information, particularly electronic documents.  For more information on the Qualcomm decision, see our Guest Column on IP Law 360,  which will soon be available here.

How to Effectively Litigate a Case of Active Inducement

As mentioned in my January 7, 2008 post, H. Keeto Sabharwal and Melissa D. Pierre of Blank Rome LLP presented "How to Effectively Litigate a Case of Active Inducement" at the Advanced Patent Law Institute.

35 U.S.C. § 271(b) states, “Whoever actively induces infringement of a patent shall be liable as an infringer." 

• Allows patentee to sue entities that sell products used to practice a claimed method even though defendant does not directly infringe that claim
  • E.g., instruction manuals, brochures, website information, product labels

• Imposes the same level of liability on a person or entity who induces infringement as it does on direct infringers

Two Requirements for Finding Inducement:

1. A showing that the conduct being induced is, in fact, a direct infringement; and
2. Proof of intent

See the full presentation (Download 50346830_1.PPT).

WILL THE SUPREME COURT CLARIFY THE EXHAUSTION DOCTRINE?

This guest post is authored by Charles R. Macedo, Esq., Joseph Casino, Esq., Michael Kasdan, Esq., and Howard Wizenfeld, Esq. (Messrs. Macedo and Casino are partners, and Messrs. Kasdan and Wizenfeld are associates at Amster, Rothstein & Ebenstein, LLP. They can be reached at cmacedo@arelaw.com, jcasino@arelaw.com, mkasdan@arelaw.com, and hwizenfeld@arelaw.com).

Today, for the first time in half a century, the Supreme Court heard oral argument on the extent to which a patentee can license its patents to different members of the same sales chain for the same product.  In Quanta v. LG Electronics, the High Court heard arguments on whether a patentee can grant patent rights and at the same time contract around the exhaustion doctrine.  Further, the issue of whether patent exhaustion applies to method claims was also before the Court.  Charley Macedo attended the oral arguments to get a first hand impression of how the Supreme Court might deal with the issues related to patent exhaustion.

An interesting aspect of oral argument at the Supreme Court was the focus of the Justices on whether patent exhaustion is an issue of patent law or contract/antitrust law.  Justice Breyer's questions appeared to suggest that, under contract law theories, a patentee should not be able to put a post customer restriction in a license because it would impose improper "equitable servitudes on chattel".  He also suggested that placing such a restriction could violate antitrust law doctrines.  By contrast, Justice Roberts focused on whether exhaustion is a patent law or contract law doctrine.   

In fact, the theory of patent exhaustion probably implicates both patent law and contract law.  It implicates patent law because, once an authorized sale is made, the patentee should have no further right to limit the sale of that item in commerce.  It implicates contract and antitrust law to the extent the patentee tries to impose an improper restriction in its license agreement.  Either way, the Supreme Court should preclude a patentee from contracting around the exhaustion doctrine.

The Justices were also interested in knowing why the exhaustion doctrine was codified in the Copyright Act but not in the 1952 Patent Act.  In this regard the Amici were unable to cite to any useful discussion.

During argument LGE also argued that the notices Intel sent to its customers were valid techniques of avoiding a defense of implied license.  LGE objected to the use of the exhaustion doctrine as an end-around to the defense of implied license.

The role of patent protection in the U.S. economy continues to remain important and should not be undermined.  However, once a patentee has authorized goods or services to be sold under its patent, it should not be entitled to obtain a second payment for the same patent.   The Supreme Court has a chance to reestablish this fundamental principle of U.S. Patent Law.  We will have to wait and see if the Court takes advantage of this opportunity.

Patent Reexamination Statistics

A reader posed a few questions about patent reexamination yesterday.  The questions were:

1. Is there any statistical data out there on how quickly reexamination happens?
2. Whether the litigation is put on hold (stay)?
3. What percentage of reexaminations hold the patent invalid?
4. What is the average length of a reexamination?

I did some brief research and uncovered the following:

Ashley N. Parker wrote an article titled, "Problem Patents: Is Reexamination Truly a Viable Alternative to Litigation?" (NORTH CAROLINA JOURNAL OF LAW & TECHNOLOGY, VOLUME 3, ISSUE 2: SPRING 2002) that stated, in part:

In 1992, the Advisory Commission on Patent Law Reform issued a report which recommended a number of proposed improvements to the reexamination system. The Commission recommended providing an efficient system that could accommodate validity challenges more quickly and inexpensively than litigation. It focused on three main methods:

1. increasing third party participation;
2. increasing the number of substantive grounds upon which validity challenges may be based; and
3. granting third party requesters the right to appeal.

In 1999, Congress, with the American Inventors Protection Act, finally passed a small measure of reexamination reform by granting optional inter partes reexamination. However, the Act as enacted gave third party requesters only a fraction of what the Advisory Commission originally proposed and of what was included under the Patent Reexamination Reform Act of 1994. Although the Act did partially increase third party participation, it did nothing to increase the number of substantive grounds upon which validity challenges may be based, nor to grant third party requesters the right to appeal.

When faced with a problem patent, a third party has two options in contesting the patent’s validity: (1) file a declaratory judgment action of patent invalidity in its local district court; or (2) request reexamination of the patent by the Patent Office, choosing either ex parte or inter partes reexamination. Inter partes reexamination is supposed to encourage third parties to use reexamination as an alternative to litigation when dealing with patent validity issues. However, even if a third party elects this new provision, the option of reexamination still appears to favor patent holders. Inter partes reexamination carries multiple consequences, which the third party requester must seriously consider before any decisions are made.

Congress made an effort to expand the rights of third party requesters when it passed optional inter partes reexamination in the hope of encouraging the use of the reexamination process over litigation. However, as evidenced above, a careful balance of the advantages and disadvantages of using this new provision weighs heavily in favor of not using it as an alternative to litigation. The most recent statistics released by the Patent Office in their FY 2000 USPTO Annual Report seem to support this conclusion. As of September 30, 2000, third parties filed only 172 requests for reexamination in 2000. This was a slight decrease from the previous year and a twenty-three percent decrease from the number of reexaminations requested by third parties as of September 30, 1996. Although statistically it is still hard to tell exactly what effect inter partes reexamination will have on the number of third party requested reexaminations, intuitively it appears that the trend will be away from reexamination.

Dale L. Carlson and Jason Crain wrote an article titled, "Reexamination: A Viable Alternative to Patent Litigation?" (3 YALE SYMP. L. & TECH. 2 (2000)) that stated, in part:

Because the inter partes reexamination is so new and there will not be a patent that could possibly go through this procedure for another year, the only data available covers original examinations, interference procedures, and the ex parte reexamination procedure. Over the course of five years we have collected a significant amount of data to show what the trends are, at least for indicating a bias or lack of bias. In studying the ex parte reexamination, we looked at the first step, when a third-party requester submits a request with prior art to the PTO and asks the PTO to determine whether the prior art raises a new question of validity. That would be the first and most logical point for any bias to manifest itself, because the request goes back to the same examiner. The examiner's inclination might be just to say, "Not a significant question," and be done with it; however, the statistics that we gathered from 1984 to 1988 showed that only ten percent of ex parte reexamination requests were turned down. In ninety percent of the cases the examiner was willing to say, "Yes, this is significant, let's take a look at this again." Thus, little bias against third parties requesting reexaminations is apparent.

The next place that bias might show up is in the actual result of the reexamination. The third party only gets one brief in which to explain its argument, while the patent owner files written arguments and converses with the examiner for six months to year, working out how the patent can still stand in light of the new prior art. It really is not a fair shake for a third party, and thus you would think that almost all claims would sail through ex parte reexamination unscathed. What we found, though, was something drastically different. The Advisory Committee found that twenty-four percent of ex parte reexaminations resulted in the confirmation of all claims. While a quarter do sail through unscathed, sixty-four percent end up with the cancellation of some claims, and twelve percent result in the cancellation of the entire patent. Thus, seventy -six percent of third parties' reexamination requests result in findings at least partially in their favor.

Included in the inter partes procedure are particular rights of appeal for the third party. If the inter partes reexamination goes against the third party, the third party has a right to appeal to the BPAI. Is the BPAI a fair panel for such an appeal? Are they rubber-stampers for the examiners, or are they indeed legitimate second checks on what the examiners are doing? We performed a study, again with the 1984 to 1988 data, on interferences and examinations that were contested to the BPAI. These are cases where the BPAI was asked to rule against the patent examiner or the patent owner. The BPAI fully or partially reversed the examiner thirty - nine percent of the time: 3827 instances out of 9791 appeals to that board over four years. Furthermore, the BPAI reversed and remanded on some points thirteen percent of the time. Therefore, roughly fifty percent of the time the examiner's decisions were affirmed, but fifty percent of the time they were either fully or partially reversed. These data sets-the statistics on ex parte reexamination requests and results and the statistics on BPAI reversals-indicate that the new inter partes reexamination can be a fair venue for the third party.

These articles are somewhat dated, so take a look at the U.S. Patent and Trademark Office's "Performance and Accountability Report Fiscal Year 2007" TABLE 13A: EX PARTE REEXAMINATION (FY 2003 - FY 2007) and TABLE 13B: INTER PARTES REEXAMINATION (FY 2003 - FY 2007).

I am interested in hearing from anyone who has some additional input on the reexamination process.  Feel free to post a comment here.

Social Networking Site for Attorneys, LawLink, Launches

Martha Neil reporting for the ABA Journal writes:

A new social networking site for attorneys called LawLink launched last week after two years of development. It already has 200 members, according to Steven Choi, an Oakland, Calif., civil litigator who is one of its founders. Free to members—who must be licensed attorneys—the site is intended to serve as a forum for referrals, discussion of professional issues and information-sharing, Choi tells ABAJournal.com.

Still on the drawing board is Legal OnRamp, a similar online, members-only community of corporate in-house counsel and the law firm attorneys that represent their companies. It is the brainchild of Mark Chandler, general counsel of Cisco Systems. He envisions a limited-access site that serves both as a marketplace for corporations to find qualified legal counsel and as an information-sharing forum for discussion of issues and strategies, according to the ABA Journal.

Members of the LawLink site can post a photo, profile and brochure about themselves; view the same information in linked networks of colleagues; post and view classified ads seeking anything from a law firm employee to a date; or surf the site to participate in discussion forums and meet other attorneys. "I've been involved in the Internet since the inception, and I'm very familiar with the social networking sites," Choi says. "It was just my own desire that there would be a social networking site for attorneys, only for attorneys, not for anybody else."

Read the full article here.

Courting a Jury

John Bringardner wrote on July 18, 2007 at Law.com:

For all of the hype these days over enormous jury verdicts -- including the record $1.5 billion judgment against Microsoft Corp. in March -- few juries ever decide a patent dispute. The huge stakes and the unpredictability of juries ensure that "most companies choke down some kind of a settlement or licensing deal," says veteran patent litigator Woody Jameson, a partner at Duane Morris in Atlanta. And, of course, the cost of just getting in front of a jury is staggering: A big patent trial now costs each side more than $4 million to try.

These factors explain why there were only 102 jury trials about patent disputes in 2006, out of 2,830 such cases filed, according to the Administrative Office of the U.S. Courts. Jameson, for instance, has won nearly 20 cases on summary judgment in his 19 years as a patent litigator, but he has tried only four cases in front of a jury, including a February defense win for client EarthLink Inc. in federal district court in Wilmington. "In some respects it is mind-boggling" how infrequently jury trials occur, Jameson says.

So when the rare dispute does arrive before a jury, each side must be convinced that it has a decent chance of winning. And what usually tips the scale to the winner? Lawyering.

Because patent trials are rare, the few lawyers who have actually tried patent cases in front of juries are in high demand. Special skills are required: While every trial lawyer has to be adept at building rapport with a jury, patent litigators also often face the difficult challenge of making complicated technology understandable to those six or eight ordinary folks.

Top patent litigators identify three factors that contribute to winning: crafting a compelling story, educating the jury with a high-tech trial presentation and savvy use of local counsel.

See the full article for a detailed discussion of these three factors illustrated with real case examples.

"If You Wouldn't Want The Whole World to Read It, Don't Put It in an e-mail!"

Anya Sostek, writing yesterday, July 24, 2007, for the Pittsburgh Post-Gazette, states:

A report released yesterday found that more than a quarter (27.6 percent) of U.S. companies surveyed fired an employee in the last year for violating e-mail policies, and nearly half (45.5 percent) of companies had disciplined employees in the last year for e-mail violations.

"The Golden Rule of e-mail still applies," said Keith Crosley, director of market development for ProofPoint, an Cupertino, Calif.-based e-mail security vendor. "If you wouldn't want the whole world to read it, don't put it in an e-mail."

"E-mail is understood now as being the primary business communication medium, kind of a de facto filing system," he said. "E-mails hold a goldmine of information about a company."

For that reason, he said, e-mail is rapidly making its way into the legal system as well.

Nearly a third, or 29.1 percent, of companies with more than 20,000 employees that were surveyed said that employee e-mail had been subpoenaed in the past year.

On the horizon, said Mr. Crosley, are other types of electronic communication such as instant messaging, blogging, social networking sites and YouTube, that, while not currently as widespread as e-mail, have just as much potential for damage -- if not more.

Mr. Crosley noted that John Mackey, chief executive officer of Whole Foods, is now under investigation by the Securities and Exchange Commission over anonymous blog comments made about a competitor. And the potential for embarrassing videos on YouTube, he noted, is endless.

"If you haven't specifically formulated a policy about instant messaging, or blogging, now's the time to do it," he said. "It's not too early."

Over the course of my litigation assignments over the years, I have been amazed at what people retain in e-mails, as well as in hard copy documents.  Many emblazoned with such warnings as "Destroy After Reading" or twenty copies of an email with "Please Don't Circulate" in the subject line.  For many years, my own admonition to clients and colleagues has been "Don't write it down, if you don't want to see it on the front page of the Wall Street Journal tomorrow."  Read the full article here.

U.S. Patent Litigation Statistics

The University of Houston Law Center Institute for Intellectual Property & Information Law compiles U.S. Patent Litigation Statistics.  Among the statistics provided are quarterly patent statistics from the first quarter of 2006 through the first quarter of 2007 and annual statistics for 2005 and 2006.

In addition, the following "Special Patent Report Information" is available:

• Number of patent suits vs. number of util. patents issued
• Patent Suits and Other Civil Actions, Over Time
• Settlement Rates for patent cases
• Sampling of 2004-05 Patent Suits

The "patstats" service is described in detail.  The excerpt below is a highlight from this description:

We portray data on all reported patent decisions, including those affirmances decided by the Federal Circuit under Rule 36 with no published opinion. We track the cases on an issue-specific basis, e.g., public use bar under 35 U.S.C. § 102(b) [issue 03], or infringement under the doctrine of equivalents [issue 24], or inequitable conduct [issue 17]. ... We hope to provide scholars, commentators, and practitioners with valuable data on trends in the enforcement side of patent law, to complement published data from other sources regarding the filing of patent applications and the issuance of patents. Beginning with the first quarter of 2005, we have posted a caselist identifying the cases from which our statistics are drawn. Each case on the list has an index number. Next to each entry in patstats there is a bracketed string of smaller numerals identifying the cases that make up the entry. For example, if there were 7 patentee victories on the public use issue, the entry might read: P: 7 [33, 38, 66(3), 74(2)]. This signifies that case numbers 33, 38, 66, and 74 were the cases in which these seven patentee victories on public use occurred. Recall that patstats counts successes patent-by-patent. Case 66 involved public use holdings on three different patents and case 74 involved public use holdings on two patents. We report only on the current highest level decision in a given case, and we discard earlier rulings.

The annual 2006 decisions for Damages calculations were as follows (P =Patent owner prevailed on the issue; I =Accused infringer prevailed on the issue):

Lost profits
   P = 7 (5 appell. affirmances, 1 bench trial, 1 jury trial)
   I = 3 (1 appell. affirmance, 2 bench trials)

Reasonable royalty
   P = 10 (3 appell. affirmances, 5 bench trials, 2 jury trials)
   I = 3 (1 appell. affirmance, 1 bench trial, 1 JMOL, 1 summary judgment)

See the reports here.

Microsoft's Vista's Impact on e-Discovery

Jason Krause writing in the July ABA Journal states:

Vista—Microsoft’s latest operating system—may prove to be most appropriately named, especially for those seeking evidence of how a computer was used.

Available since late January, Vista offers a host of new security and built-in backup features. But from a litigator’s perspective, the interesting point is that it keeps a lot more information—and more detailed information—about what a person does with a PC. This means lawyers can potentially discover more forensic evidence about what is on a computer and construct more detailed time lines about what was done with that information.

R. Lee Barrett, an associate attorney with Forshey & Prostok in Fort Worth, Texas, has worked bankruptcy cases for both banks and debtors. He believes Vista will be a useful tool for attorneys, but will also pose new challenges in litigation.

“From a defense perspective, it scares me to death,” says Barrett. “One of the things I have a hard time educating my clients on is the volume of data that’s now discoverable.”

For example, a new feature called Transactional NTFS, or TxF in Windows-speak, keeps much more detailed user records. These records allow attorneys to construct a more accurate time line of events.

See the full article for a discussion of the potential impact of Vista's new Instant Search technology and bitlocker encryption features.

European Judicial Perspective

Jeremy Phillips writes at IPKat:

EPLAW, the European Patent Lawyers Association, was formed in 2001 "with a view to promote the equitable and efficacious handling of patent disputes in Europe and to strengthen the links between lawyers having relevant litigious experience in patent law in Europe". The Association held a conference this week in Munich. Among the speakers was Lord Justice Jacob, who gave a paper entitled "The Judge’s Perspective", the subject of the perspective being the resolution of Europe's horrendous patent litigation problems.

It is rare for the IPKat to post an entire document of this length; it is even rarer for the Kat to withhold his comments. However, he thinks that this paper is an excellent summary of the live issues faced by patent litigants and of the way an experienced appellate and trial judge, and former advocate, envisages how they can be dealt with; on this basis he doesn't want to distract readers by interposing his own observations - though IPKat comments will doubtless follow in the near future.

See the post for the complete paper.