Competition for 'Design-Wins' and Speculative Damages Support Non-Practicing Entity's Preliminary Injuction

In Broadcom Corp. v. Qualcom Inc. (September 24, 2008), the Federal Circuit affirmed the district court did not abuse its discretion in issuing a permanent injunction where Broadcom provided evidence of irreparable harm and lack of adequate remedy at law, despite the fact that it does not practice the claimed inventions.

According to the opinion by Circuit Judge Linn,

The district court found that this factor [of irreparable harm] weighed in favor of an injunction with respect to both the ’317 and ’010 patents. Injunction Opinion at 10, 15. It remains an open question "whether there remains a rebuttable presumption of irreparable harm following eBay," Amado v. Microsoft Corp., 517 F.3d 1353, 1359 n.1 (Fed. Cir. 2008), but the district court did not abuse its discretion in finding irreparable injury here even if Broadcom benefits from no such presumption. The district court explained that the evidence at trial demonstrated that

[t]he market for baseband chips is unlike the typical market for consumer goods where competitors compete for each consumer sale, and the competition is instantaneous and on-going. . . . Competition for sales is
not on a unit-by-unit basis, but rather competition is characterized by
competing for "design wins" for the development and production of cell
phones which will embody the proposed chip. . . . In this kind of a market,
the exclusion has a competitive effect on a firm even if it does not have an
immediately available product.

Injunction Opinion at 5-6. And as identified by Broadcom, Qualcomm has
previously conceded this indirect competition. E.g., J.A. at 7785 n.7 ("Any cell
phone customer who has chosen between, e.g., Cingular (GSM) and Verizon (CDMA)
service knows that handsets and thus chipsets do compete and thus ‘substitute’
across standards.").

Thus, Broadcom provided evidence of irreparable harm, despite the fact that it does not currently practice the claimed inventions. . . . [T]he district court did not abuse its discretion in finding that allowing Qualcomm to sell CMDA2000 chips implementing Broadcom’s patented features would harm Broadcom’s efforts to market WCDMA solutions.

. . . We [also] agree with Broadcom that the district court did not abuse its discretion here [with regard to lack of adequate remedy at law], particularly in light of its findings that "the structural nature of a ‘design win’ market favors a finding that monetary damages are inadequate." Id. at 16. We also agree that the Verizon license has little bearing on the effect of a compulsory license to a direct competitor, particularly in light of these market realities. Additionally, while Broadcom’s damages expert testified that any comparison of Qualcomm’s lost profits based on an injunction to Broadcom’s potential gain would be "almost pure speculation at this point," J.A. at 3217, this difficulty in estimating monetary damages reinforces the inadequacy of a remedy at law. Cf. Jacobsen v. Katzer, 2008 WL 3395772, at *6 (Fed. Cir. Aug 13, 2008) (noting, in the copyright license context, that "because a calculation of damages is inherently speculative, these types of license restrictions might well be rendered meaningless absent the ability to enforce through injunctive relief").

Opinion of Counsel Relative to Question of Active Inducement

In Broadcom Corp. v. Qualcom Inc. (September 24, 2008), the Federal Circuit held that the failure to procure a noninfringement opinion may be probative of intent in the context of active inducement.

According to the opinion by Circuit Judge Linn,

Because opinion-of-counsel evidence, along with other factors, may reflect whether the accused infringer "knew or should have known" that its actions would cause another to directly infringe, we hold that such evidence remains relevant to the second prong of the intent analysis. Moreover, we disagree with Qualcomm’s argument and further hold that the failure to procure such an opinion may be probative of intent in this context. It would be manifestly unfair to allow opinion-of-counsel evidence to serve an exculpatory function, as was the case in DSU itself, see 471 F.3d at 1307, and yet not permit patentees to identify failures to procure such advice as circumstantial evidence of intent to infringe. Accordingly, we find no legal error in the district court’s jury instructions as they relate to inducement.

Thus, the district court did not err in instructing the jury to consider "all of the circumstances," nor in instructing the jury to consider—as one factor—whether Qualcomm sought the advice of counsel as to non-infringement. . . .

Personal Jusrisdiction Established with Request to Remove Convention Exhibitor

In The Campbell Pet Co. v. Miale (September 18, 2008), the Federa Circuit held that the presence of the defendant patent owner in the State of Washington and her attempt to have a convention manager remove the allegedly infringing exhibitor, were sufficient to allow a federal district court in that state to exercise in personam jurisdiction over the defendants, a California corporation and a California resident.

According to the decision by Circuit Judge Bryson,

In June 2007, Ms. Miale attended a three-day convention in Seattle, Washington, sponsored by the American College of Veterinary Internal Medicine. During that convention, Ms. Miale demonstrated her products and offered them for sale. In the course of the convention, she took two orders for tables from residents of Virginia and New York, for a total purchase price of $9,400. Plaintiff Campbell also had a display at the convention featuring its products. In the course of the convention, Ms. Miale and her mother confronted several of Campbell’s employees who were attending the convention and accused them of infringing the Miale patents. According to the Campbell employees, Ms. Miale said that she had contacted her patent attorney and threatened Campbell with patent litigation, stating that patent attorneys and litigation were expensive. The Campbell employees further alleged that the convention manager told them that Ms. Miale and her mother had asked that the Campbell display be removed from the convention because it infringed Ms. Miale’s patents, but that the convention manager had declined to do so on the ground that she was not qualified to evaluate a claim of patent infringement. The Campbell employees also alleged that a customer informed them that Ms. Miale and her mother were "bad mouthing" Campbell and its products to Campbell’s customers, and referred to Campbell as "copiers of their patent."

. . . In this case, the district court erred by characterizing Ms. Miale’s actions at the June 2007 convention as constituting nothing more than attempts to inform Campbell of suspected infringement. As Campbell points out, its employees’ affidavits assert that Ms. Miale did more at the trade show than simply inform Campbell that its animal stretchers might infringe her patents. The affidavits state that Ms. Miale attempted to have Campbell’s allegedly infringing products removed from the convention and that she told Campbell’s customers that Campbell’s products were infringing. Of critical importance to the issue of personal jurisdiction, Ms. Miale’s attempts at "extra-judicial patent enforcement" were targeted at Campbell’s business activities in Washington and can fairly be characterized as attempts to limit competition from Campbell at the Seattle convention. Those efforts go beyond simply informing the accused infringer of the patentee’s allegations of infringement.

. . . In this case, . . . the defendants’ conduct went beyond simply informing the plaintiff that they regarded the plaintiff’s products as infringing. According to the plaintiff’s allegations, which were credited by the district court for purposes of the motion to dismiss, the defendants took steps to interfere with the plaintiff’s business by enlisting a third party to take action against the plaintiff. Although Ms. Miale’s efforts in that regard were not successful (unlike the efforts of the defendant in the Dudnikov case), in that the exhibit manager at the Seattle convention allegedly declined to remove Campbell’s exhibit at Ms. Miale’s behest, the pertinent step taken by Ms. Miale was the request that action be taken. The fact that her efforts did not succeed does not affect whether it is fair and just to treat her actions directed at
Campbell as sufficient to trigger personal jurisdiction in the forum state. Moreover, unlike the situation in both Dudnikov and Bancroft & Masters, Ms. Miale’s efforts at private enforcement occurred within the forum state and while she was personally present there. Under these circumstances, we hold that it would not be contrary to the principles of the Red Wing Shoe line of cases for the district court to assert jurisdiction over Ms. Miale and Ty-Lift based on Campbell’s allegations.

. . . Because Campbell’s allegations in its affidavits and complaint provide a sufficient basis for the district court to exercise specific jurisdiction over the defendants, we reverse the district court’s dismissal of Campbell’s complaint and remand the case to the district court for further proceedings consistent with this opinion.

New Federal Rule of Evidence 502 on Inadvertent Privilege Waiver

According to WilmerHale,

On September 19, 2008, Federal Rule of Evidence 502 became effective, as President Bush signed into law P.L. 110-322, 122 Stat 3537. For an analysis of Rule 502's provisions and some likely consequences, please see the WilmerHale Email Alert published on September 12, 2008.

According to Marcia Coyle writing for the The National Law Journal on September 16, 2008,

Under the new federal rule, disclosure of privileged materials will not be a waiver of the privilege if disclosure is inadvertent; the holder of the privilege or protection took reasonable steps to prevent disclosure; and the holder took reasonable steps to rectify the error.

The rule also addresses the problem of "subject-matter waiver" by providing that, when a party produces one privileged document, any resulting waiver of the privilege would not extend to other related documents, as long as there was no intentional and
misleading use of protected information.

Improper Revival No Defense to Patent Infringement

In Aritocrat Technologies Australia PTY Lmtd. v. International Game Tech. (September 22, 2008), the Federal Circuit held that "improper revival" may not be raised as a defense in an action involving the validity or infringement of a patent.

IGT alleged that the USPTO "improperly revived" the patent application by requiring Aristocrat only to show "unintentional delay." The district court concluded that the Patent Act permitted revival of an abandoned patent application only upon a showing of
"unavoidable delay." Aristocrat Techs. Austl. Pty, Ltd. v. Int’l Game Tech., 491 F. Supp. 2d 916, 924-29 (N.D. Cal. 2008). Next, the district court found that IGT was permitted, pursuant to 35 U.S.C. § 282, to raise the PTO’s alleged improper revival as a defense to infringement.

According to the decision by Circuit Judge Linn,

The salient question, then, is whether improper revival is "made a defense" by title 35. We think that it is not. Congress made it clear in various provisions of the statute when it intended to create a defense of invalidity or noninfringement, but indicated no such intention in the statutes pertaining to revival of abandoned applications. For example, 35 U.S.C. § 273 is entitled "Defense to infringement based on earliest inventor" and expressly provides that the provision "shall be a defense to an action for infringement." Similarly, 35 U.S.C. § 185 states that a patent issued to a
person who has violated the secrecy provisions of section 184 "shall be invalid," except under certain circumstances. Section 272 of title 35 provides that the temporary presence of a patented invention in the United States, if used exclusively for the needs of a vessel, aircraft, or vehicle, "shall not constitute infringement." The list goes on. What is important to note is simply that sections 133 and 371, relied upon by IGT, provide none of the signals that Congress has given in other circumstances to indicate that these sections provide a defense to an accused infringer. Rather, these provisions merely spell out under what circumstances a
patent application is deemed abandoned during prosecution and under what circumstances it may be revived. See 35 U.S.C. § 133 ("Upon failure of the applicant to prosecute the application within six months . . ., the application shall be regarded as abandoned . . . ."); id. § 371 ("Failure to comply with these requirements shall be regarded as abandonment of the application . . . ."). Because the proper revival of an abandoned application is neither a fact or act made a defense by title 35 nor a ground specified in part I patentability, we hold that improper revival may not be asserted as a defense in an action involving the validity or infringement of a patent.

Our conclusion that improper revival is not a defense comports with the approach we took in Magnivision, Inc. v. Bonneau Co., 115 F.3d 956 (Fed. Cir. 1997), which we continue to believe is a sound one. In that case, we concluded that "[p]rocedural lapses during examination, should they occur, do not provide grounds of invalidity. Absent proof of inequitable conduct, the examiner’s or the applicant’s absolute compliance with the internal rules of patent examination becomes irrelevant after the patent has issued." Id. at 960; see also id. ("Imperfection in patent examination, whether by the examiner or the applicant does not create a new defense called 'prosecution irregularities' amd does not rplace the experience-based criteria of Kingsdown, 863 F.2d 867 (Fed. Cir. 1988)]."). There is good reason not to permit procedural irregularities4

[footnote 4: We take this opportunity to point out that "prosecution irregularities" is distinct from "prosecution laches." Prosecution laches stems not from any procedural lapse or irregularity during prosecution, but rather from an abuse of statutory provisions that results, as a matter of equity, in "an unreasonable and unexplained delay in prosecution." Symbol Techs., Inc. v. Lemelson Med., Educ. & Research Found., 422 F.3d 1378, 1385 (Fed. Cir. 2005). Moreover, the legislative history of 35 U.S.C. § 282 suggests that it was intended to incorporate preexisting equitable defenses, including prosecution laches. Symbol Techs., Inc. v. Lemelson Med., Educ. & Research Found., 277 F.3d 1361, 1366 (Fed. Cir. 2002).]

during prosecution, such as the one at issue here, to provide a basis for invalidity. Once a patent has issued, the procedural minutiae of prosecution have little relevance to the metes and bounds of the patentee’s right to exclude. If any prosecution irregularity or procedural lapse, however minor, became grist for a later assertion of invalidity, accused infringers would inundate the courts with arguments relating to every minor transgression they could comb from the file wrapper. This deluge would only detract focus from the important legal issues to be resolved—primarily, infringement and invalidity. We wish to stress, however, as we did in Magnivision, that where the procedural irregularity involves an "affirmative misrepresentation of a material fact, failure to disclose material information, or submission of false material information, coupled with an intent to deceive," it may rise to the level of inequitable conduct, and is redressible under that framework. See Innogenetics, N.V. v. Abbott Labs.the applicant, does not create a new defense called ‘prosecution irregularities’ and does not displace the experience-based criteria of Kingsdown[ Medical Consultants, Ltd. v. Hollister, Inc.4 , 512 F.3d 1363, 1378 (Fed. Cir. 2008) (citations omitted); cf. Ferguson Beauregard/Logic Controls v. Mega Sys., LLC, 350 F.3d 1327, 1343-44 (Fed. Cir. 2003) .

Once a patent has issued, the procedural minutiae of prosecution have little relevance to the metes and bounds of the patentee’s right to exclude. If any prosecution irregularity or procedural lapse, however minor, became grist for a later assertion of invalidity, accused infringers would inundate the courts with arguments relating to every minor transgression they could comb from the file wrapper. This deluge would only detract focus from the important legal issues to be resolved—primarily, infringement and invalidity. We wish to stress, however, as we did in Magnivision, that where the procedural irregularity involves an "affirmative misrepresentation of a material fact, failure to disclose material information, or submission of false material information, coupled with an intent to deceive," it may rise to the level of inequitable conduct, and is redressible under that framework. See Innogenetics, N.V. v. Abbott Labs. . . .

Point of Novelty Test Scrapped: Ordinary Observer Test for Design Patent Infringement Now "Informed by Prior Art"

In Egyptian Goddess v. Swisa Inc. (September 22, 2008), the Federal Circuit held en banc that the "point of novelty" test should no longer be used in the analysis of a claim of design patent infringement.

According to the en banc opinion written by Circuit Judge Bryson,

. . . in accordance with Gorham and subsequent decisions, we hold that the "ordinary observer" test should be the sole test for determining whether a design patent has been infringed. Under that test, as this court has sometimes described it, infringement will not be found unless the accused article "embod[ies] the patented design or any colorable imitation thereof." Goodyear Tire & Rubber Co., 162 F.3d at 1116-17; see also Aminiak & Assocs., Inc. v. Saint-Gobain Calmar, Inc. . . .

In some instances, the claimed design and the accused design will be sufficiently distinct that it will be clear without more that the patentee has not met its burden of proving the two designs would appear "substantially the same" to the ordinary observer, as required by Gorham. In other instances, when the claimed and accused designs are not plainly dissimilar, resolution of the question whether the ordinary observer would consider the two designs to be substantially the same will benefit from a comparison of the claimed and accused designs with the prior art, as in many of the cases discussed above and in the case at bar. Where there are many examples of similar prior art designs, as in a case such as Whitman Saddle, differences between the claimed and accused designs that might not be noticeable in the abstract can become significant to the hypothetical ordinary observer who is conversant with the prior art.

We emphasize that although the approach we adopt will frequently involve comparisons between the claimed design and the prior art, it is not a test for determining validity, but is designed solely as a test of infringement. Thus, as is always the case, the burden of proof as to infringement remains on the patentee. However, if the accused infringer elects to rely on the comparison prior art as part of its defense against the claim of infringement, the burden of production of that prior art is on the accused infringer. To be sure, we have stated that the burden to introduce prior art under the point of novelty test falls on the patentee. See Bernhardt, 386 F.3d at 1384. Under the ordinary observer test, however, it makes sense to impose the burden of production as to any comparison prior art on the accused infringer. The accused infringer is the party with the motivation to point out close prior art, and in particular to call to the court’s attention the prior art that an ordinary observer is most likely to regard as highlighting the differences between the claimed and accused design. Regardless of whether the accused infringer elects to present prior art that it considers pertinent to the comparison between the claimed and accused design, however, the patentee bears the ultimate burden of proof to demonstrate infringement by a preponderance of the evidence. As in our recent decision in In re Seagate Technology, LLC, we "leave it to future cases to further develop the application of this standard." 497 F.3d 1360, 1371 (Fed. Cir. 2007) (en banc).

With regard to whether trial courts should conduct claim construction in design patent cases, the decision leaves

. . . the question of verbal characterization of the claimed designs to the discretion of trial judges, with the proviso that as a general matter, those courts should not treat the process of claim construction as requiring a detailed verbal description of the claimed design, as would typically be true in the case of utility patents.

Under this standard, the question before the court amounted to "whether an ordinary observer, familiar with the prior art Falley and Nailco designs, would be deceived into believing the Swisa buffer is the same as the patented buffer" (in that order below):

. . . It is agreed that the general shape of the accused nail buffer at issue in this case is the same as that of the patented buffer design. The difference between the two is that the accused buffer has raised buffing pads on all four sides, while the patented buffer has buffing pads on only three sides. The two closest prior art nail buffers before the court were the Falley nail buffer, which has a solid, rectangular cross section with slightly raised buffers on all sides, and the Nailco patent, which shows a nail buffer design having a triangular shape and a hollow cross section, and in which raised buffing pads are located on all three sides . . .

In light of the similarity of the prior art buffers to the accused buffer, we conclude that no reasonable fact-finder could find that EGI met its burden of showing, by a preponderance of the evidence, that an ordinary observer, taking into account the prior art, would believe the accused design to be the same as the patented design. In concluding that a reasonable fact-finder could not find infringement in this case, we reach the same conclusion that the district court reached, and for many of the same reasons. Although we do so by using the ordinary observer test as informed by the prior art, rather than by applying the point of novelty test, our analysis largely tracks that of the district court. After analyzing the Nailco patent and the claimed design, as they related to the accused design, the district court concluded that "in the context of nail buffers, a fourth side without a pad is not substantially the same as a fourth side with a pad." While the district court focused on the differences in the particular feature at issue rather than the effect of those differences on the appearance of the design as a whole, we are satisfied that the difference on which the district court focused is important, viewed in the context of the prior art.

Finally, although we do not adopt the "non-trivial advance" test employed by the panel in this case, we note that our analysis under the ordinary observer test is parallel to the panel’s approach in an essential respect. The panel focused on viewing the difference between the claimed and accused designs in light of the prior art, as we do. The panel wrote: "The Swisa buffers have raised, abrasive pads on all four sides. When considering the prior art in the nail buffer field, this difference between the accused design and the patented design cannot be considered minor." 498 F.3d at 1358. That point captures the essence of the rationale of our decision today, even though the panel decision employed a different analytical approach. For the foregoing reasons, we sustain the district court’s entry of summary judgment of no infringement, but we do so under the ordinary observer test in the form that we have adopted, and we hold that the accused design could not reasonably be viewed as so similar to the claimed design that a purchaser familiar with the prior art would be deceived by the similarity between the claimed and accused designs, "inducing him to purchase one supposing it to be the other." without using the point of novelty test that we have disapproved. In the language used by the Supreme Court in Gorham,
81 U.S. at 528, we hold that the accused design could not reasonably be viewed as so similar to the claimed design that a purchaser familiar with the prior art would be deceived by the similarity between the claimed and accused designs, "inducing him to purchase one supposing it to be the other."

AFFIRMED.

EPO Strike Set for September 18, 2008

Thanks to the IAM Magazine Blog for pointing out that

The Stop Software Patents website carries a copy of a press release put out by SUEPO – the union representing European Patent Office examiners – to coincide with the one day strike of EPO staff and a protest to be held in Brussels, both of which are scheduled for this Thursday, 18th September.

For more, see "Union calls European patent examiners out on strike."

No Copyright First Sale Defense for Watches Made Overseas

In Omega S.A. v. Costco Wholesale Corp. (September 3, 2008), the Ninth Circuit held that the copyright "first sale doctrine" in 17 U.S.C. § 109(a) did not provide a defense to an infringement action where

Costco obtained watches bearing the copyrighted design from the “gray market” in
the following manner: Omega first sold the watches to authorized distributors overseas. Unidentified third parties eventually purchased the watches and sold them to ENE Limited, a New York company, which in turn sold them to Costco. Costco then sold the watches to consumers in California. Although Omega authorized the initial foreign sale of the watches, it did not authorize their importation into the United States or the sales made by Costco.

. . . In summary, our general rule that § 109(a) refers “only to copies legally made . . . in the United States,” id., is not clearly irreconcilable with Quality King, and, therefore, remains binding precedent. Under this rule, the first sale doctrine is unavailable as a defense to the claims under §§ 106(3) and 602(a) because there is no genuine dispute that Omega manufactured the watches bearing the Omega Globe Design in Switzerland. Id.; Fed. R. Civ. P. 56(c); see also Swatch S.A. v. New City, Inc., 454 F. Supp. 2d 1245, 1253-54 (S.D. Fla. 2006) (concluding that Quality King is consistent with the interpretation that “lawfully made under this title” means “legally made . . . in the United States”); 2 Goldstein on Copyright § 7.6.1, at 143-44 (concluding that Quality King “indicates an intention not to disturb lower court holdings that the first sale defense is unavailable to importers who acquire ownership of gray market goods made abroad”).

Display of Medical Device at Trade Show Insufficient to Establish Personal Jusridiction for Patent Infringement

In Medical Solutions Inc. v. C. Change Surgical (September 9, 2008), the Federal Circuit held that CCS’s mere display of the allegedly infringing medical device device at a trade show did not constitute a "use" under the patent laws sufficient to establish personal jurisdiction.

According to the opinion by District Judge Zagel sitting by designation,

Several courts addressing whether a defendant has "used" a patented invention have held that "the mere demonstration or display of an accused product, even in an obviously commercial atmosphere" is not an act of infringement for purposes of ' 271(a). Fluid Mgmt. Ltd. P’ship v. H.E.R.O. Indus., Ltd., No. 95-5604, 1997 WL 112839, at *4 (N.D. Ill. Mar. 11, 1997) (quoting Intermedics, Inc. v. Ventritex, Inc., 775 F. Supp. 1269, 1286 (N.D. Cal. 1991) (concluding that absent concurrent sales-oriented activity which results in, or at least substantially advances, an actual sale, the demonstration of an accused product at a scientific trade show does not constitute an infringing "use")); see also Brennan v. Mr. Hanger, Inc., 479 F. Supp. 1215, 1231 (S.D.N.Y. 1979) (noting that the mere display of the infringing hanger bars would not constitute an infringing "use").

footnote 3. A demonstration of an accused device plus the simultaneous solicitation of purchase orders has been held to amount to a sufficient degree of "selling" activity. See U.S. Envtl. Prods., Inc. v. Infilco degremont, Inc., 611 F. Supp. 371 (N.D. Ill. 1985). However, that
holding is inapposite here since MSI hangs its hat on the "uses" rather than the "sells" prong of ' 271(a).

The inquiry as to what constitutes a "use" of a patented item is highly case-specific, Van Well Nursery, Inc. v. Mony Life Ins. Co., 362 F. Supp. 2d 1223, 1229 (E.D. Wash. 2005). We find that the district court correctly considered and interpreted all of the facts with regard to CCS’s "use" of the allegedly infringing IntraTemp product at the trade show. In Gerber Garment Technology, Inc. v. Lectra Systems, Inc., 699 F. Supp. 1576, 1580-81 (N.D. Ga. 1988), the court found that the plaintiff established a prima facie case for the exercise of personal jurisdiction where the defendant demonstrated the allegedly infringing knife-cutting machines at a trade show, but the defendant in that case also purposefully engaged in other activities related to the litigation in that forum. Here, MSI asserts nothing other than CCS’s activities, which appear to fall short of practicing all of the elements of any one claim, at the trade show as evidence to confer personal jurisdiction over CCS.

The ordinary meaning of "use" is "to put into action or service." NTP, Inc. v. Research In Motion, Ltd., 418 F.3d 1282, 1317 (Fed. Cir. 2005) (quoting
Webster’s Third New International Dictionary 2523 (1993)). MSI’s patented
technology pertains to systems for warming and controlling the temperature of
medical and surgical items. At the trade show, CCS displayed a prototype of its
product, staffed its booth with representatives, and made available brochures
about the product. But none of these activities was putting the IntraTemp device into service. MSI claims that "[t]he infringing InterTemp [sic] warmer was not just passively shown or displayed; CCS staffed its booth with several sales epresentatives, who actively demonstrated the IntraTemp’s actual functions in use." The portion of the joint appendix cited in support of this claim, however, does not indicate whether the IntraTemp device was used to heat medical items at the trade show. The closest evidence that MSI points to on appeal in support of its claim that CCS "actively demonstrated" IntraTemp at the trade show appears to be the declaration of Mr. Cordell stating that the CCS representative showed at least one attendee how to take the basin off the device when the basin still had fluid in it. Even if we accept as true that a CCS representative took a basin off an accused device during a trade show, that alone would not establish that the accused device was put into service so as to
constitute an infringing use. Much more would be needed to qualify as an infringing use, including that the device was used to heat medical items at the show. In this case we need not (and do not) decide whether the demonstration of a product at a trade show could ever be sufficient to establish an infringing use.4

footnote 4. That said, we do recognize other courts have held that demonstrations of a device are not proper evidence of "use" because using a device means using it to perform its actual function or service, not using it as a demonstrative display. See Union Asbestos & Rubber Co. v. Evans Prods. Co., 328 F.2d 949, 951 (7th Cir. 1964); Advanced Semiconductor
Materials Am., Inc. v. Applied Materials, Inc., No. 93-20853, 1995 WL
419747, at *6 (N.D. Cal. July 10, 1995) (holding that a demonstration
"hardly qualifies as using the patented process for its intended purposes").

We simply conclude that the facts as alleged in this case do not establish a prima facie case. For these reasons, we agree with the district court’s conclusion that CCS’s display and demonstration of IntraTemp at the trade show did not constitute a "use" of the allegedly infringing product.5

footnote 5. Because MSI fails to make a prima facie case of personal jurisdiction under the District of Columbia’s long-arm statute, we too do not reach the issue of whether the exercise of personal jurisdiction over CCS in the District of Columbia comports with the requirements of due
process.

. . . While we can conceive of situations where CCS’s conduct would constitute a “use” under the statute, such a situation would involve, at a minimum, practicing all of the elements of at least one claim. The declaration MSI provided gave no hint of such
an appropriate set-up, so the decision to deny discovery based upon that declaration was a judgment call the district court was entitled to make.

EPO E-Learning Modules

Thanks to the Intellectual Property Intelligence Blog for pointing out the European Patent Office's free, e-learning webinars at http://www.epo.org/patents/learning/e-learning.html:

The European Patent Office currently offers the following e-learning modules in
order to maximise equal access to IP training throughout Europe and offer cost-saving and flexible opportunities for attending patent related IP courses on-line.

The European patent system

• Revision of the European Patent Convention (EPC 2000)
• European patent system
• Biotechnology

Searching and documentation

• Patent Information - general
• The European Patent Classification
• esp@cenet
• "Search matters" seminar

IP, innovation, business and commerce

• Growing business with IP
• Patents: realising and securing value
• Special topics
• PCT in China

Substantial New Question of Patentability Raised During Reexam with Secondary Reference from Initial Examination and Prior Appellate Decision

In In Re Swanson (September 4, 2008), the Federal Circuit held that under 35 U.S.C. § 303(a), as amended in 2002, despite consideration of U.S. Patent No. 4,094,647 ("Deutsch") in the initial examination as a secondary reference for obviousness and in prior appellate decision on anticipation, there was a substantial new question of patentability regarding whether Deutsch anticipated and made obvious claims 22-25 that made reexamination warranted.

According to the opinion by Circuit Judge Gajarsa,

. . . we sustained the judgment that Deutsch did not anticipate the asserted claims, noting that "the burden having been on Syntron to prove by clear and convincing evidence that the claims were anticipated, we cannot conclude that the jury verdict on anticipation was not supported by substantial evidence."

. . . The district court and this court did consider the precise question at issue on reexamination: whether Deutsch satisfies the "flowing" limitation of the asserted claims and, thus, anticipates them. And both courts upheld the validity of the ’484 patent in light of Deutsch. Nevertheless, the statutory language, legislative history, and different purposes underlying reexamination and federal court proceedings suggest that the determination of a substantial new question is unaffected by these court decisions.

. . . We agree with the PTO’s current position. Section 303’s language and legislative history, as well as the differences between the two proceedings, lead us to conclude that Congress did not intend a prior court judgment upholding the validity of a claim to prevent the PTO from finding a substantial new question of validity regarding an issue that has never been considered by the PTO. To hold otherwise would allow a civil litigant’s failure to overcome the statutory presumption of validity to thwart Congress’ purpose of allowing for a reexamination procedure to correct examiner errors, without which the presumption of validity never would have arisen. See Patlex, 758 F.2d at 604 ("A defectively examined and therefore erroneously granted patent must yield to the reasonable Congressional purpose of facilitating the correction of governmental mistakes."). . . .

We, therefore, conclude the Board did not err in holding that the prior district court litigation did not prevent the Deutsch reference from raising a "substantial new question of patentability" under § 303(a). As properly interpreted a "substantial new question of patentability" refers to a question which has never been considered by the PTO; thus, a substantial new question can exist even if a federal court previously considered the question.

Surmodics also argues that Deutsch does not raise "a substantial new question of patentability" because Deutsch was considered by the PTO during the initial examination and relied on as a secondary reference for rejecting various dependent claims as obvious.
Surmodics recognizes that the 2002 amendment to § 303 overrides our prior rule in In re Portola Packaging, where we held that a reference could not raise "a substantial new question of patentability" if it was previously considered by the PTO in reference to the same or broader claims. It nevertheless urges this court to adopt a bright-line rule that "would preclude rejections in reexaminations based solely on references used in a rejection of claims in the original patent prosecution." Appellant Reply Br. 14. We decline the invitation. Such a rule would be plainly inconsistent with the clear text of the amendment. Section 303(a) now mandates that "the existence of a substantial new question of patentability is not precluded by the fact that a patent or printed publication was previously cited by or to the Office or considered by the Office." Thus, under § 303(a) as amended, a reference may present a substantial new question even if the examiner considered or cited a reference for one purpose in earlier proceedings. Nothing in the statute creates an exception to this rule for references considered in the context of a rejection of prior claims. Indeed, such an exception would overwhelm the rule and thwart a central purpose of the amendment, to overrule In re Portola Packaging. In that case, as here, the issue was whether a piece of prior art relied on for a prior rejection could nevertheless create a new question of patentability sufficient to warrant a reexamination. See In re Portola Packaging, 110 F.3d at 787-89. After the amendment to § 303, the answer to that question must be yes.

. . . As the legislative history clarifies, to decide whether a reference that was previously considered by the PTO creates a substantial new question of patentability, the PTO should evaluate the context in which the reference was previously considered and the scope of the prior consideration and determine whether the reference is now being considered for a substantially different purpose. See H.R. Rep. No. 107-120, at 3 ("The appropriate test to determine whether a ‘substantial new question of patentability’ exists should not merely look at the number of references or whether they were previously considered or cited but their combination in the appropriate context of a new light as it bears on the question of the validity of the patent."); see also 147 Cong. Rec. H5359 (statement of Rep. Berman) ("Ideally, a reexamination could be requested based on prior art cited by an applicant that the examiner failed to adequately consider . . . .").

Determining the scope of an examiner’s previous consideration of a reference will generally require an analysis of the record of the prior proceedings to determine if and how the examiner used the reference in making his initial decisions. As we believe that this inquiry is most accurately viewed as a question of fact, we will review the Board’s findings regarding the scope of consideration of a reference during prior examinations for substantial evidence. See also H.R. Rep. No. 107-120, at 3 (stating that there should be "substantial evidence" that the examiner "did not properly understand the reference, or did not consider a portion of the reference in making his decision."). However, the ultimate question of whether the reexamination is based on a substantial new question of patentability, in light of how a reference was previously considered, remains a question of law, which we review de novo. While the standard is more flexible than before, we are mindful that Congress intended that the courts continue to "judiciously interpret the ‘substantial new question’ standard to prevent cases of abusive tactics and harassment of patentees through reexamination." H.R. Rep. No. 107-120, at 3.

We agree with the Board that whether Deutsch anticipates claims 22-24 raises a substantial new question of patentability under the amended § 303(a). Substantial evidence supports the Board’s conclusion that in the initial examination, "Deutsch was relied upon, as a secondary reference," for the limited purpose of "teaching immunoreactions in general, and not for the specific method steps claimed." In re Swanson, No. 2005-0725, Reexamination No. 90/006,785, at 18-19 (B.P.A.I. May 29, 2007). Deutsch was not evaluated as a primary reference that taught or made obvious the specific analytical method claimed. The independent claims, such as original claim 9, were found obvious without any reliance on Deutsch. Deutsch was cited only to reject the dependent claims that limited the analyte-reactant pair used in the method to a ligand-antiligand pair, e.g., original claim 10, or, more specifically, an antigen-antibody pair, e.g., original claim 11. Original Office Action at 9-10. The examiner explained that "it would be obvious that any known reaction within reasons [sic] could be incorporated in the modified method and apparatus of either Morison and [sic] Bauer" and cited to Deutsch as one of three references that disclosed immunoreactions. Id. In other words, since Deutsch and the other secondary references taught immunoreactions, immunoreactions were one type of "known reaction" that could be adopted to the method made obvious for any known reaction (within reason) by Morison and Bauer. Nowhere in its decision did the examiner consider the particular analytical method disclosed by Deutsch.

In light of the extremely limited purpose for which the examiner considered Deutsch in the initial examination, the Board is correct that the issue of whether Deutsch anticipates the method disclosed in claims 22, 23, and 25 was a substantial new question of patentability, never before addressed by the PTO.6

footnote 6 - In reaching this holding, we do not rely on the fact, discussed by the Board, that claim 22 differed from the rejected claims in the initial patent. While the difference between rejected claims and the claims at issue during a reexamination may be relevant to whether there is a substantial new question of patentability, a change in the scope of a claim will not, in itself, make all questions of patentability of the revised claim "substantial new question[s]." As the limited scope of the examiner’s consideration of Deutsch is sufficient to find that anticipation by Deutsch raises a substantial new question of patentability, we need not consider what effect the change in scope of the claims would have had had Deutsch been more fully considered during the initial proceeding.

No Clear and Convincing Evidence of Bad Faith in Infringement Allegations

In 800 Adept, Inc. v. Murex Securities, Ltd., the Federal Circuit concluded that there was not clear and convincing evidence on which a reasonable jury could find that Targus acted in bad faith by asserting objectively baseless patent infringement allegations.

According to the decision written by Senior Circuit Judge Plager,

State tort claims against a patent holder, including tortious interference claims, based on enforcing a patent in the marketplace, are “preempted” by federal patent laws, unless the claimant can show that the patent holder acted in “bad faith” in the publication or enforcement of its patent. Id. at 1355; Hunter Douglas, Inc. v. Harmonic Design, Inc., 153 F.3d 1318, 1336-37 (Fed. Cir. 1998). As the Supreme Court said long ago, “Patents would be of little value if infringers of them could not be notified of the consequences of infringement, or proceeded against in the courts. Such action, considered by itself, cannot be said to be illegal.” Virtue v. Creamery Package Mfg. Co., 227 U.S. 8, 37-38 (1913).

The issue in this case is whether Adept presented to the jury sufficient facts, if believed, that a reasonable jury could find for Adept on the issue of Targus’s bad faith. This “bad faith” standard has objective and subjective components. Dominant Semiconductors Sdn. Bhd. v. Osram GmbH, 524 F.3d 1254, 1260 (Fed. Cir. 2008). The objective component requires a showing that the infringement allegations are “objectively baseless.” Globetrotter Software, Inc. v. Elan Computer Group, Inc., 362 F.3d 1367, 1375 (Fed. Cir. 2004). The subjective component relates to a showing that the patentee in enforcing the patent demonstrated subjective bad faith. See id. Absent a showing that the infringement allegations are objectively baseless, it is unnecessary to reach the question of the patentee’s intent. See id.

Infringement allegations are objectively baseless if “no reasonable litigant could realistically expect success on the merits.” Prof’l Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60 (1993); see also GP Indus., Inc. v. Eran Indus., Inc., 500 F.3d 1369, 1374 (Fed. Cir. 2007); Globetrotter, 362 F.3d at 1375-76. To prove at trial that Targus’s actions were objectively baseless, Adept was required to offer clear and convincing evidence that Targus had no reasonable basis to believe that its patent claims were valid or that they were infringed by Adept’s customers. See Golan v. Pingel Enter., Inc., 310 F.3d 1360, 1371 (Fed. Cir. 2002). Because of the value placed on property rights, which issued patents share, see 35 U.S.C. § 261 (“[P]atents shall have the attributes of personal property.”); Consol. Fruit-Jar Co. v. Wright, 94 U.S. 92, 96 (1876) (“A patent for an invention is as much property as a patent for land.”); Kearns v. Gen. Motors Corp., 94 F.3d 1553, 1555 (Fed. Cir. 1996) (“By statutory and common law, each patent establishes an independent and distinct property right.”), and in light of the underlying jurisprudential basis for the bad faith standard, rooted as it is in Supreme Court cases and Constitutional principles, see Globetrotter, 362 F.3d at 1375-77, a party attempting to prove bad faith on the part of a patentee enforcing its patent rights has a heavy burden to carry.

The jury verdict was that Adept had proved its case. Targus appeals the trial court’s denial of its motion for judgment as a matter of law, arguing that there was no clear and convincing evidence on which a reasonable jury could conclude its actions were objectively baseless. On the record before us, for the reasons we shall explain, we believe Targus is correct that Adept has not successfully carried its burden.

We first address the question of whether Targus could have had a reasonable belief that its patents were valid, beginning with the ’897 patent. The main dispute regarding the validity of the ’897 patent was whether Neville discloses a two-table embodiment, which would anticipate the claims of the ’897 patent. While the preferred embodiment in Neville uses a single-table TNTTN database, one sentence in the written description states that “the correlational database may be relational or hierarchical,” which implies that the database could have more than one table. ’111 patent col.9 ll.50-51. The issue before us is not the validity vel non of the ’897 patent, but whether the evidence was such that Targus could not have had a reasonable basis for believing that the patent was valid when it asserted the patent against Adept’s customers.

Adept alleges that Targus knew the disclosure in the Neville patents anticipated the claims of the ’897 patent, and that Targus misrepresented the scope of Neville to the PTO so that the ’897 patent claims would survive the reexamination requested by Adept in 1999. Adept’s argument sounds more like an allegation of subjective bad faith on Targus’s part, a question that is not at issue absent the predicate showing that the claims asserted by Targus were objectively baseless. Furthermore, none of the evidence cited in Adept’s brief supports its theory that Targus acted deceptively. The evidence introduced at trial shows that many people, including the examiner who conducted the reexamination and even Adept’s own patent attorney, understood Neville to disclose only a one-table system. Notably, Targus did not file suit against any of Adept’s customers until after reexamination of the ’897 patent had been completed. On this record, a reasonable jury could not have found by clear and convincing evidence that Targus lacked a reasonable basis to believe that the claims of the ’897 patent were not anticipated by Neville.

Adept also asserts that Targus knew that Neville anticipated Targus’s one-table claims—claim 1 of the ’608 patent and claim 4 of the ’982 patent. Targus argues that it reasonably believed Neville did not disclose the automated table-build process required by the Targus claims. This was a reasonable view, as evidenced by the opinion of Targus’s expert at trial that Neville does not teach a fully automated system. The contrasting opinion of Adept’s expert does not render Targus’s position unreasonable. As with the ’897 patent, we conclude that no reasonable jury could have found that Adept met its burden to show that there was no reasonable basis on which Targus could believe in the validity of its one-table claims.

Regarding the ’131 patent, Adept argues that Targus knew it was subject to an on-sale bar based on work that Targus did for Federal Express, and that Targus actively concealed that information from the PTO. The record indicates, however, that Targus reasonably believed that that work was experimental, even if ultimately the jury in this case may have found otherwise. Furthermore, during prosecution of the application that led to the ’131 patent, Targus submitted a declaration to the PTO detailing the development and testing of the FedEx system. Under these circumstances, no reasonable jury could find that Adept proved by clear and convincing evidence that Targus lacked a reasonable basis for believing that the claims of the ’131 patent were not subject to the on-sale bar.

With respect to Targus’s other patents, Adept alleges that the examiner was led astray so that he failed to consider Neville in combination with Riskin or other references, even though Neville and Riskin and multiple other references were before him. Yet Adept cites no evidence demonstrating that Targus knew its claims were invalid for obviousness or showing that Targus somehow caused the examiner not to combine prior art references. On this record, no reasonable jury could have found that a belief by Targus that its patents were valid had no reasonable basis.

We must also consider whether there was a basis for Targus to reasonably believe that Adept’s customers infringed the Targus patents. Adept essentially argues that Targus could not have had a reasonable basis for asserting its patents against Adept’s customers because Targus did not succeed at trial on its infringement claims against Adept. Courts, however, “must ‘resist the temptation to engage in post hoc reasoning by concluding’ that an ultimately unsuccessful ‘action must have been unreasonable or without foundation.’” Prof’l Real Estate, 508 U.S. at 60 n.5 (quoting Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 421-22 (1978)); see also Dominant, 524 F.3d at 1261 & n.6 (citing Prof’l Real Estate, 508 U.S. at 60 n.5). Thus the result of Targus’s infringement claims in this case is not dispositive of whether Targus’s claims against Adept’s customers were reasonable.

Targus presented evidence that it reasonably believed Adept’s customers were infringing the Targus patents. For instance, Adept admitted that the database it provided to two of its customers was in the same format as the database used in the Targus system. Also, Targus did not assert its claims against another Adept customer until after Targus’s in-house counsel had prepared claim charts explaining Targus’s infringement theories. Adept has not cited any contradictory evidence that was introduced at trial. On this record, no reasonable jury could find by clear and convincing evidence that Targus had no reasonable basis for believing that Adept’s customers were infringing its patents.

Adept’s tortious interference claim with respect to its customer Allstate Motor Club (“AMC”) was based on Targus’s infringement claim against its own customer, Vail Systems. In providing routing services to AMC, Vail used data received from AMC, which included a database that Allstate had received from Adept. After learning about this arrangement through discovery in this case, Targus believed that Vail infringed its patents and filed claims against Vail, which subsequently sought indemnification from AMC. While Adept alleges that Targus and Vail colluded to pressure AMC, Adept fails to cite evidence showing that Targus’s belief that Vail infringed its patents was unreasonable. As with Targus’s infringement allegations against Adept’s customers, no reasonable jury could find that Adept met its burden to show that Targus lacked a reasonable basis for believing that Vail infringed its patents.

In sum, we conclude that there is not clear and convincing evidence on which a reasonable jury could find that Targus acted in bad faith by asserting objectively baseless patent infringement allegations. Thus Adept’s state-law tortious interference claim is preempted by federal patent law. The trial judge erred in denying Targus’s motion for judgment as a matter of law on this claim, and we therefore reverse the trial court’s judgment.