Posts Tagged ‘clear and convincing’

Supreme Court’s Stryker/Halo Decision Makes it Easier for Courts to Award Enhanced Damages In Patent Infringement Cases

Tuesday, June 14th, 2016

The recent Supreme Court decisions in the Stryker and Halo cases just made it easier for courts to award enhanced damages in patent infringement cases, discarding Seagate’s “objective recklessness” test.

The Seagate Test

In 2007, the Federal Circuit announced a test for enhanced damages whereby a plaintiff seeking enhanced damages had to show that the infringement of his patent was “willful.”  In re Seagate Technology, LLC,  497 F. 3d, 1360, 1371.  The Federal Circuit set forth a two-part test to establish such willfulness: First, “a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent,” without regard to “[t]he state of mind of the accused infringer.” Id., at 1371. This objectively defined risk is to be“determined by the record developed in the infringement proceedings.” Ibid. “Objective recklessness will not be found” at this first step if the accused infringer, during the infringement proceedings, “raised a ‘substantial question’ as to the validity or noninfringement of the patent.” That bar applied even if the defendant was unaware of the arguable defense when he acted.

Second, after establishing objective recklessness, a patentee had to show by clear and convincing evidence the risk of infringement “was either known or so obvious that it should have been known to the accused infringer.” Seagate, 497 F. 3d, at 1371. Only when both steps were satisfied could the district court proceed to consider whether to exercise its discretion to award enhanced damages. Ibid. 

Stryker / Halo Decisions Restore Courts’ Discretion to Award Enhanced Damages

The Supreme Court’s recent decision in the Stryker and Halo cases discarded the Seagate test and restored courts’ discretion to award enhanced damages.  The Court held “[t]he Seagate test is not consistent with §284.”  The relevant language of § 284 contains “no explicit limit or condition on when enhanced damages are appropriate, and this Court has emphasized that the “word ‘may’ clearly connotes discretion.”  So the Court found no explicit requirement for Seagate’s “objective recklessness” test.

The Court also found Seagate unnecessarily required a finding of “objective recklessness” even when wrongdoing was demonstrated by the facts of a case.  The Court also disagreed with Seagate’s requirement of a “clear and convincing evidence” standard for showing recklessness, and held that the proper standard for enhanced damages was a “preponderance of the evidence” — the same standard as for patent infringement determinations.

The Court explained that its decision did not contradict § 298, that failure to present advice to the court may not be used to prove willful infringement:

Section 298 provides that “[t]he failure of an infringer to obtain the advice of counsel” or “the failure of the infringer to present such adviceto the court or jury, may not be used to prove that the accused infringer willfully infringed.” 35 U.S.C. § 298. Respondents contend that the reference to willfulness reflects an endorsement of Seagate’s willfulness test. But willfulness has always been a part of patent law, before and after Seagate. Section 298 does not show that Congress ratified Seagate’s particular conception of willfulness. Rather, it simply addressed the fallout from the Federal Circuit’s opinion in Underwater Devices Inc. v. Morrison-Knudsen Co., 717 F. 2d 1380 (1983), which had imposed an “affirmative duty” to obtain advice of counsel prior to initiating any possible infringing activity, id., at 1389–1390. See, e.g., H. R. Rep. No. 112–98, pt. 1, p. 53 (2011).

Consequently, nine years after Seagate, the Supreme Court has made it easier for courts to make a determination of enhanced damages.  Time will tell if this decision will spur additional patent opinion practice, such as prior to the 2007 Seagate decision.

Early PTAB Orders Demonstrate Differences Between AIA Patent Trials and District Court Trials

Monday, April 29th, 2013

Patent practitioners are still absorbing some of the differences and advantages that are unique to litigation in the PTAB as opposed to district court litigation.  For example, PTAB proceedings only decide questions of validity and are not directed to rule on questions of infringement or damages, as is the practice in traditional litigation.  Another example is that PTAB trials require that the petitioner provide a lot of technical arguments and factual evidence in the original petition, as opposed to traditional litigation where parties make sure they have a good faith basis to sue and then rely on discovery to later develop the case.  Thus, a petition for review of patentability in PTAB practice is more akin to a summary judgment motion than a complaint in trial practice.  But a PTAB petition is still very different than a summary judgment motion.  And these differences can be exploited to more inexpensively and quickly resolve validity issues.

In considering summary judgment, a judge must decide if there is “no genuine dispute as to any material fact,” as set forth in FRCP Rule 56.  In contrast, the technical patent judges on the Board can decide technical disputes instantly and can resolve disputes of technical and legal nature.  PTAB panels use their technical and patent law experience to quickly identify dispositive issues and focus the parties on how their respective positions are being viewed by the Board early in the proceedings.  This means that PTAB trials will put a premium on identification of technical defects in patents early in the proceedings, as opposed to traditional litigation approaches that favor discovery before attempting summary judgment or that shy away from summary judgment as a mechanism for resolution of complex technical disputes.

Examples of the Board’s unique capabilities are already being demonstrated in recent orders.  For example, in an inter partes review by Chimei Innolux Corporation against Semiconductor Energy Laboratory Co.,Ltd. concerning U.S. Patent No. 8,068,204 (IPR2013-00068), the Board squarely addressed technical disputes between what the petition asserted versus what the patent owner’s preliminary statement set forth when the Board decided to institute trial.

The Board took great care to understand and sift through extremely technical differences between the claimed subject matter and the prior art as it was characterized by the parties.  This is a highly complicated task, because the patent relates to improvements for substrate bonding and electrical connections in liquid-crystal displays and because the parties were advancing very technical arguments on both sides of the validity issue.  In this early order to institute trial the Board construed a phrase from the claims and used that construction to decide the merits of the positions taken by the petitioner and patent owner.  The Board then considered technical arguments made by both parties, such as whether a reference used in combination in an obviousness challenge teaches away from the combination (page 15), or whether it would have been obvious to employ a known (contact) structure (page 18).  The Board decided that certain arguments were not persuasive and used the order to focus the parties on the issues it ruled upon.  The following excerpt from pages 19-21 of the the order instituting trial demonstrates the attention to detail that the Board is devoting to these proceedings:

SEL responds that “[. . .] a person of ordinary skill in the art does not know whether an insulating film (first insulating film) is formed between the bottom layer of the first wiring line 127 (formed in the step of forming the scanning lines Yj) and the top layer of the first wiring line 127 (formed in the step of forming the data lines Xi).” (Prelim. Resp. 31.) According to SEL, Shiba’s “‘two-layered structure’” might be “sequentially stacked” without an insulating layer therebetween. (Id.) As noted, claim 31 requires such an intervening insulating layer.

SEL’s argument is not persuasive. Shiba implies or suggests that the two wiring layers in the two-layered structure 127, formed in the same manner as the two-layered scanning and data lines as the quoted passage shows, have an insulating layer therebetween just like the scanning and data lines. [cite omitted]  [. . .  .]  Skilled artisans also would have understood that overlapping portions readily could have been “partially connected” together by known methods, including using a connecting hole through such an insulating layer. [cite omitted]

Because the two-layered structure in Shiba’s lines 127 connect to pad 751, SEL maintains that under various hypothetical scenarios, pad 751 also must have a two-layered structure, and as such, with Sukegawa’s transparent layer modified to be on Shiba’s pad as CMI proposes in its ground of unpatentability, the pad structure would become a three-layered structure. . . .  SEL also argues that the Petition inconsistently conflates or interchanges Sukegawa’s transparent layer and the top layer of Shiba’s two-layered wiring structure 127, and thereby fails to show how the combination renders obvious the external connection line and transparent conductive film as recited in claims 31 and 54. (See Prelim. Resp. 25-26.)

It is clear from the analysis set forth by the Board that it is not afraid to weigh in on very technical issues and clarify how it perceives the arguments.  Of course, the preliminary response by the patent owner is considered a first initial response and is not a comprehensive response with evidence.  Therefore, the Board’s institution of trial is based on limited argument and is well before the patent owner has had an opportunity to fully respond.  But this process focuses the parties on issues that the Board (at least initially) perceives to be negative to the patent.  It is a preliminary ruling on the disputed issues by the Board that will shape discovery to come, as opposed to traditional litigation where discovery often leads and shapes the issues brought before the court.

Parties who believe that an asserted patent has validity issues may find it difficult to challenge disputed technical issues in summary judgment motion practice.  Validity issues are frequently accompanied with fact questions and in litigation there is a clear and convincing standard for invalidity that makes it hard to prove invalidity.  And it is unlikely that counsel will recommend a motion for summary judgment before conducting at least some discovery.  In contrast, in patent reviews and reexaminations the burden of proof is based on a preponderance of the evidence and can be done without discovery.  Given the different standards and the costs of e-discovery, there are significant advantages to the PTAB patent review option for defendants with genuine validity arguments.  But one must be careful to choose the PTAB trial option carefully to avoid estoppel should the proceeding not result in destruction of the relevant patent claims.

Petitioner Allowed to Submit Supplemental Information After Institution of CBM PTAB Trial

Wednesday, April 17th, 2013

In Interthinx, Inc. v. Corelogic Solutions, LLC (CBM2012-000007), the Petitioner (Interthinx) was allowed to submit supplemental information under 37 C.F.R. § 42.223 after trial was instituted in this covered business method patent review (CBM).  Trial was instituted by the PTAB on January 31, 2013.  On February 27, 2013, Interthinx filed a Request for Authorization to File Motion to Submit Supplemental Information Pursuant to 37 C.F.R. § 42.223.  Corelogic sought to oppose the Petitioner’s request and motion.  Corelogic requested authorization to oppose Petitioner’s motion to supplement the record.  The PTAB denied Corelogic’s request and granted Petitioner’s request.

The supplemental information included testimony by the inventor (Dr. Jost) in an action styled Corelogic Information Solutions, Inc. v. Fiserv, Inc. et al. (1:10-CV-132-RSP)(E.D. Texas).  The PTAB reasoned that the Corelogic v. Fiserv trial occurred after the petition in the instant action was filed, and therefore the information from Dr. Jost was not available at the time the petition was filed.   The Petitioner also sought to submit testimony of another inventor (Krishna Gopinathan) taken in a depostion before the trial.  The inventors’ testimony relates to what the inventors invented, which the PTAB found to be directly related to an issue for which the trial was instituted.

The PTAB concluded the order by granting the Petitioner’s motion to submit supplemental information.  The order was entered April 16, 2013 as paper number 28.

Parallel Litigation and PTAB Review Create Complex Interplay of Patentability and Validity

Sunday, September 30th, 2012

A company called CoreLogic Solutions, LLC owns U.S. Patent No. 5,361,201, relating to a process for appraising real estate property.  The ‘201 patent was filed on Oct. 19, 1992 and issued on Nov. 1, 1994.  Absent some kind of patent term extension, the ‘201 patent will expire soon.  The ‘201 patent is the subject of both a litigation and a covered business-method (CBM) patent review with an accused infringer/petitioner Interthinx, Inc.  The litigation is CoreLogic Information Solutions, Inc. v. Fiserv, Inc., et al., Civil Action No. 2:10-CV-132-RSP (E.D. Texas).  The CBM patent review is CBM2012-00007.  Claim 1 of the ‘201 patent is as follows:

1. A computer-implemented process for appraising a real estate property, comprising the steps of:

collecting training data;

developing a predictive model from the training data;

storing the predictive model;

obtaining individual property data for the real estate property;

generating a signal indicative of an appraised value for the real estate property responsive to application of the obtained individual property data to the stored predictive model;

developing an error model from the training data;

storing the error model; and

generating a signal indicative of an error range for the appraised value responsive to application of the individual property data to the stored error model.

PACER reveals a jury verdict form just entered in the Texas litigation on September 28, 2012, where Interthinx was found to not have infringed claims 1 and 10 of the ‘201 patent, and that Interthinx failed to show claims 1 or 10 invalid.  This jury decision comes only 9 days after the CBM petition was filed in the USPTO/PTAB.

What will happen next is anyone’s guess.  Interthinx may elect to wait and see if a CBM trial is instituted.  It may settle with CoreLogic to avoid appeal.  Or it may do a little of both.  It may also pursue the CBM in an effort to challenge the patent  and extinguish any possible reversal and remand by the Federal Circuit on appeal of the trial court action by CoreLogic.

If the CBM PTAB trial is pursued, it will be interesting to see how the PTAB regards a prior litigation decision, such as the one in this case, given the differences between administrative review and litigation.  The differences in  interpretive standards and burdens of proof are  summarized in the slide below:

We already learned from cases such as  In re Baxter International (Fed. Cir. 2012), that the PTO can find a patent unpatentable even after the Federal Circuit affirmed a lower court decision that the patent was not invalid.  As stated in Baxter:

“[T]he PTO in reexamination proceedings and the court system in patent infringement actions “take different approaches in determining validity and on the same evidence could quite correctly come to different conclusions.’[citing Swanson, quoting Ethicon]”

But that does not mean that the PTAB trial judges will ignore district court decisions and that courts will ignore PTAB decisions.  It remains to be seen how much one process defers to the other.

Comparative Study of Post Issuance Review Options

Friday, September 21st, 2012

Today I had the pleasure of co-presenting at the Midwest IP Institute on various post-issuance proceedings with Kevin Rhodes, Chief Intellectual Property Counsel and President of 3M Innovative Properties Company.  A PDF of our joint presentation is found here.

The presentation provides a comparison between IPR (inter partes review), PGR (post grant review), and CBM (covered business method) patent review.  It contrasts these proceedings to ex parte reexamination (EPX).  The goal was to present the available options for review of patents now that inter partes reexamination is no longer available.

The presentation further covered administrative trials in the PTAB.  A hypothetical was used to demonstrate the use of litigation, IPR, PGR, CMB, and EPX depending on strength of 35 USC § 101 and § 112 arguments as opposed to 35 USC § 102 and § 103 prior art invalidity arguments.  Different scenarios were used to demonstrate the complexity of the analysis.

My thanks to Kevin Rhodes and 3M for allowing me to post these slides.

Claim Interpretation for Post-Grant Review and Inter Partes Review under the AIA – Part I

Wednesday, June 20th, 2012

Today, USPTO Director David Kappos posted a comment advocating the use of  the broadest reasonable interpretation standard (BRI) for claim interpretation in post grant review and inter partes review under the America Invents Act.  This is a topic of great interest among those conducting post-grant review of patents because of numerous conflicts occuring in practice due to different intepretive standards used in reexamination (now also post-grant review and inter partes review) and litigation.


Fractus SA Gets $23M Verdict Against Samsung in Antenna Patent Litigation

Wednesday, May 25th, 2011

In Fractus, S.A. v. Samsung Electronics Co., Ltd., et al. (6:09-CV-203, EDTX), a jury gave a verdict of patent infringement of four different patents owned by Fractus S.A. against Samsung to the  tune of $23,129,321 in damages.  The jury found that Fractus proved the infringement was willful by clear and convincing evidence.  The Verdict Form provides details as to the patents and the particular claims found to be infringed.  The infringed patents are:

  • U.S. Pat. No. 7,015,868 (see the nonfinal rejections of claims 26 and 35 in reexamination control no. 95/001,390 for example);
  • U.S. Pat. No. 7,123,208 (see the nonfinal rejections of claims 7 and 12 in reexamination control no. 95/001,389 for example);
  • U.S. Pat. No. 7,397,41 (see the nonfinal rejections of claims 14 and 30 in reexamination control no. 95/001,482 for example); and
  • U.S. Pat. No. 7,394,432 (see the nonfinal rejection of claim 6 in reexamination control no. 95/001,483).


Microsoft v. i4i – Part III: Changing the Presumption of Validity: Impact on Reexamination Practice

Tuesday, March 15th, 2011

Posted March 14, 2011

The prior post discussed only some of the many options the Supreme Court has in the Microsoft v. i4i case (i4i).  In summary, the presumption of validity of a patent as we currently know it may be changed and the standard of proof required for an accused infringer to prove invalidity may be lowered from the current “clear and convincing” evidence standard. 

But we have all read that the presumption of validity does not apply in reexamination, right?  And the i4i case turned on evidence of a statutory bar concerning offer of sale evidence that could have been difficult to introduce in a reexamination context because of the limited scope of reexamination.  So how can a change to the presumption of validity affect reexamination?  We have to assume different Supreme Court holding scenarios to answer that question.  Of course, these scenarios are not exhaustive and are used simply to demonstrate the commensurate impact on reexamination practice. (more…)

Microsoft v. i4i and the Presumption of Validity – Part 1

Saturday, March 5th, 2011

Posted March 5, 2011

In Microsoft v. i4i, which has been granted certiorari by the Supreme Court, Microsoft’s position is that the presumption of validity should not be enjoyed by a patent owner for prior art not considered by an Examiner in ex parte prosecution of a patent application.  The upshot of its position is that the standard for the burden of proof of patent invalidity should be “preponderance of the evidence” (as opposed to the “clear and convincing evidence” standard) for prior art not considered by the Examiner in the original ex parte prosecution.

This blog posting will not take a position as to what the law should be.  That is the Supreme Court’s job.  But let’s consider the presumption of validity and how a change in the standard of the burden of proof affects reexamination, among other things.

Microsoft’s petition for certiorari includes alleged facts that i4i had offered for sale software containing the invention over a year before its filing date.  Thus, the patent claims to the invention were alleged to be invalid under 35 U.S.C. 102(b) because of the offer of sale.  (i4i alleges that the software offered for sale did not have the invention.)  That offer of sale evidence was not before the Examiner in the prosecution of i4i’s patent.  And i4i did not have the software at the time of the litigation.  Ultimately, Microsoft was unable to prove the offer of sale included the invention under the clear and convincing standard applied by the trial court.  So Microsoft’s position is that the presumption of validity should not apply for prior art not considered by the examiner, and it should not have to prove invalidity based on the higher “clear and convincing evidence” standard.

This is the fact pattern:

  • Applicant makes a prior offer of sale of software
  • Applicant gets a patent without presenting the prior offer of sale information and it is not considered by the Examiner
  • Evidence of prior art software is destroyed or lost and litigation commences without the software in evidence
  • Defendant alleges prior art software includes the invention
  • Defendant is held to a clear and convincing standard for proof of invalidity
  • Evidence not enough for trial court under the clear and convincing standard

Microsoft offers up KSR v. Teleflex and several circuit decisions that find the presumption of validity compromised when the examiner does not have all of the relevant evidence for consideration in the ex parte prosecution.

That is because the presumption of validity is premised on a presumption of administrative correctness.  That means the Patent Office is deemed to have done its job in examining the patent application and in deference to that presumption of administrative correctness, a higher burden of proof standard (clear and convincing) is used.

So what might the Supreme Court do with all of this?  And how does this relate to reexamination?  These will be discussed in my next few posts.