Archive for the ‘Patent Law – Current Issues’ Category

Apr
17

The Next Frontier in Patent Law – Can Artificial Intelligence Qualify as an Inventor?

On April 5th, a federal judge in the U.S. District Court of Virginia heard summary judgment arguments on this very issue in Thaler v. Iancu.  Thaler brought this action to challenge the current legal definition of inventorship of patent applications after the United States Patent & Trademark Office had rejected two of his patent applications for failing to identify a person as inventor in non-compliance with the Patent Statute’s statutory requirements.  Instead, he had named an artificial intelligence (AI)-based system, DABUS, as the inventor and disavowed any notion of being named a sole or at least a joint inventor.  Thaler may well have brought as a test case given AI’s increasing role in R&D in industries ranging from the life sciences to chemistry to engineering.

The judge is expected to rule in favor of the USPTO on the basis of the patent statute’s definition of inventor which states:  “The term “inventor” means the individual or, if a joint invention, the individuals collectively who invented or discovered the subject matter of the invention.”  Any change in the definition of inventor to include AI will require intervention by Congress.

The issue is not, however, as simple as expanding the definition to include the AI.  For example, an Inventor must contribute to the conception of the invention.  As the Manual for the Procedure for Examining Patents (MPEP) states, “[t]he threshold question in determining inventorship is who conceived the invention.  Unless a person contributes to the conception of the invention, he is not an inventor.”  MPEP § 2019.

In understanding the legal definition of inventorship, it is important to understand that the inventor is not required to reduce the invention to practice.  “Difficulties arise in separating members of a team effort, where each member of the team has contributed something, into those members that actually contributed to the conception of the invention, such as the physical structure or operative steps, from those members that merely acted under the direction and supervision of the conceivers.”  MPEP § 2019 citing a 1991 case from the Board of Patent Appeals and Interferences.

Can AI spontaneously conceive of an invention without any human input or is it actually being directed to reduce a human-inputted concept to practice?  Under this scenario, AI cannot be an inventor even if the definition for inventor is expanded to include AI.

Additionally, assignment of patent rights is a common practice.  Generally, any scientist or engineer employed by a company is required to execute and assignment of any patent rights resulting from his or her endeavors to the company-employer.  The company generally files the patent application as the assignee wherein the inventors must always be named.  Another common patent assignment scenario is one where the inventor, as the patent owner, assigns another person, often a business entity, to commercialize the patent.   Patent licensing is another common business transaction surrounding issued patents.   These routine contractual business transactions will clearly become complicated if AI is allowed to be named as an inventor.  Why? Because the party to an agreement must have the requisite intent to enter into the agreement.   Can AI have that requisite invent to assign its patent rights or enter into a licensing agreement?

Other considerations include:  1) An AI machine’s ability to have standing to sue or be able to testify as the inventor in a patent infringement lawsuit; 2) Ownership rights in any resulting patentable invention if the AI machine was designed by an independent person and purchased by the inventor.  Here, any purchase contracts should unequivocally state that any resulting patentable technology resulting from the usage of the AI machine belongs to the purchaser of that machine.  But what if the AI machine is named as the inventor?  The point is that any such contracts involving AI must be carefully tailored to anticipate possible scenarios.

This commentator is not in favor of having AI named as an inventor perhaps because of a bias in favor of the human brain as the ultimate source of creativity and ingenuity.  Instead, Congress should first address the upheaval in intellectual property law caused by simply bad court decisions in U.S. patent law concerning patent eligibility under § 101 and just this month, the questionable application of the fair use doctrine in a copyright law case.  Click here for a link to the blog on the copyright case.  There is also no question that human ingenuity is what created AI in the first place and that AI is here to stay.

As an alternative to complicating the patent law business transactions that are so essential to acquiring investment funding and commercially exploiting patented inventions, a separate statute for thoughtfully addressing the unique aspects of AI-involved inventions is suggested.  This suggestion of a separate patent classification has precedent through plant patents and design patents – types of patents that are separate and distinct from utility patent applications, the very type of patent application at issue in the Thayer case.

THANK YOU FOR YOUR INTEREST IN THIS BLOG.  AS USUAL THE CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT LEGAL ADVICE.

 

Intellectual property law is a complex area of the law.  Contact us at 305-279-4740 for a complimentary consultation on protecting your inventions, creative works, brands, and proprietary information through patents, copyrights, trademarks and trade secrets or our litigation services involving intellectual property disputes.   We represent both individuals and business entities.  Our mission is to serve innovators and creators in protecting the fruits of their hard work and ingenuity through our Client Services Creed:  Conscientious, Rigorous, Energic, Empathetic, and Diligent legal services. 

 


© 2021 by Troy & Schwartz, LLC

 

 

 

Jan
13

NON- DISCLOSURE AGREEMENT WORDING:  THE POTENTIAL TO IMPACT THE OUTCOME OF A PATENT-INFRINGEMENT LAW SUIT

These days, Non-Disclosure Agreement (NDA) templates are readily available on-line, often free-of-charge, making them an attractive alternative for many.  The problem with these templates is they are not necessarily applicable to the contracting parties’ unique circumstances and/or do not properly anticipate dealings between the parties. A poorly drafted, one-size-fits-all NDA can make or break a patent-infringement case many years into the future.   These assertions are supported by the Dec. 7, 2020 decision in Sionyx, LLC v. Hamamatsu Photonics K.K. by the Court of Appeals for the Federal Circuit (CAFC).

In Sionyx, the CAFC concluded that the district court mistakenly concluded that it lacked authority to compel the transfer of ownership of foreign patents from Hamamatsu Photonics, K.K. (Hamamatsu) to Sionyx, LLC (Sionyx).  Moreover, the lower court abused its discretion in distinguishing between the U.S. and foreign patents at issue in the case. The CAFC affirmed the district court on most other issues, including that Hamamatsu breached its non-disclosure agreement (NDA) with Sionyx, and that Sionyx was entitled to co-inventorship and sole ownership of the U.S. patents, as well as damages and an injunction.

The decision is largely based on the NDA signed by the parties in 2006.  This blog discusses the decision and emphasizes that an NDA can have consequences years later.  As the decision demonstrates, had the NDA lacked certain wording, Sionyx may well not have prevailed.

Background

In 1998, Professor Eric Mazur and his student, James Carey, discovered a novel process for creating “black silicon.” The two inventors filed a provisional patent application on May 25, 2001, from which U.S. Patent 8,080,467 ultimately issued, among other patents. Four years later in 2005, the inventors founded Sionyx and met with Hamamatsu – a company that produces silicon-based photodetector devices – a year later.  The two companies entered into an NDA to share confidential information for the purpose of “evaluating applications and joint development opportunities of pulsed laser process doped photonic devices.”

The NDA stipulated that a party receiving confidential information “shall maintain the information in strict confidence for seven years after the expiration of the agreement, after which the receiving party may use or disclose the confidential information.”  Commentator’s emphasis. The NDA also said that the receiving party of confidential information acknowledged that the disclosing party claims ownership of the information and all patent rights “in, or arising from” the confidential information.  Commentator’s emphasis.   The NDA also required that all confidential information received must be returned within 30 days of the termination of the agreement.  The term of the NDA was three years.

Hamamatsu and Sionyx worked together for about two years, at which time Hamamatsu said it wished to develop its products alone. Surprisingly, Sionyx did not request the return of any confidential information from Hamamatsu.  Hamamatsu began developing its own products and emailed Sionyx in 2009 to alert the company that it would be releasing a new photodiode at an upcoming exhibition that it did not believe infringed Sionyx’s IP or breached the confidentiality obligations. Hamamatsu then filed Japanese patent applications for photodetector devices and later filed in several other countries, including the United States, claiming priority to the Japanese patents.

One of Simony’s customers alerted the company to Hamamatsu’s U.S. patents five years later, in 2014.  When discussions between the two company’s failed, Sionyx sued Hamamatsu in the District of Massachusetts for (1) breach of contract; (2) unjust enrichment; (3) infringement of the ’467 patent; and (4) the equitable relief to transfer the foreign to Sionyx and name Carey as an inventor.

District Court Declines to Transfer Foreign Patents

A jury found in favor of Sionyx, awarding almost $800K for breaching the NDA in February 2009, when it first referred to Sionyx’s confidential information in an internal report, and almost $600K in damages for unjust enrichment. The jury also found that Carey should be added as a co-inventor to the U.S. patents. At the post-trial motion stage, the district court then granted Sionyx sole ownership of the disputed U.S. patents, injunctions on Hamamatsu’s accused products practicing those patents and the ’467 patent, pre- and post-judgment interest on damages for breach of contract, and pre-judgment interest on damages for unjust enrichment. The court denied Sionyx’s motions for ownership of the disputed foreign patents because it was uncertain that it had jurisdiction to grant ownership of foreign patents and because Sionyx had failed to adequately identify the foreign patents for which it was requesting ownership.

Sionyx appealed the district court’s decision to refrain from transferring the foreign patents.  The CAFC agreed with Sionyx, holding that “the evidence that established Sionyx’s right to sole ownership of the Disputed (Hamamatsu) U.S. Patents also applies to the Disputed Foreign Patents.” The decision added:

As we discussed above with respect to the Disputed (Hamamatsu) U.S. Patents, we agree that the jury’s findings compel the conclusion that those patents arose from Sionyx’s confidential information and that Hamamatsu has not shown that it contributed [its own] confidential information entitling it to joint ownership. And because the Disputed U.S. Patents claim priority from Hamamatsu’s Japanese patent applications, the Japanese applications must be for the same inventions as the Disputed U.S. Patents. See 35 U.S.C. § 119(a). Thus, Hamamatsu’s Japanese patent applications and any applications claiming priority from the Japanese applications in other countries must also have arisen from Sionyx’s confidential information.

Simply put, the CAFC found that Hamamatsu’s Japanese and U.S. patents emanated from Sionyx’s confidential information which Hamamatsu became privy to under the terms of the 2005 NDA.  According to the court, Hamamatsu itself never provided its own confidential information to Sionyx, which might have justified joint inventorship of the patent with Cary as the jury had concluded.

Abuse of Discretion Standard

Accordingly, Sionyx was entitled to sole ownership of the Japanese applications and any foreign applications claiming priority therefrom. The CAFC further explained that “it is well established that courts have authority to compel parties properly before them to transfer ownership of foreign patents, just as they would any other equitable remedy,” since such an order is “an exercise of the court’s authority over the party, not the foreign patent office in which the assignment is made.” As such, the district court abused its discretion in distinguishing between the two groups of patents.

The CAFC denied Sionyx’s motion for fees under 35 U.S.C. § 285 on cross-appeal, declined to address the issue of willfulness, and affirmed the following findings by the district court: a) Hamamatsu breached the NDA; b) Sionyx is entitled to the damages and pre-judgment interest awarded by the jury, as well as post-judgment interest at the statutory rate for its breach of contract and unjust enrichment claims; c) Carey is a co-inventor of Hamamtsu’s U.S. Patents; Sionyx is entitled to an injunction prohibiting Hamamatsu from practicing its U.S. Patents for breach of the NDA; and d) Sionyx is entitled to an injunction prohibiting Hamamatsu from practicing its 467 patent.

Conclusions

The outcome may well have been different had the NDA not “directed” the ownership of all future patents emanating from Sionyx’s confidential information to Sionyx.   Furthermore, any resulting patent relying on confidential information emanating from both parties should have designated both Cary and an Hamamtsu inventor as joint inventors no matter where the patent applications were filed.  Inventorship does not, however, mean that the inventor(s) is also the owner(s) of the patent.  Generally, R&D and engineering personnel who work for companies assign any patent rights they may have over to their employer-company (e.g., Hamamtsu).  Or, where inventors establish a business entity, the inventors often assign their patent-related interests over to the company as part of their capital contribution.  (e.g., Sionyx).

As this case illustrates, an NDA can be a critical factor in determining patent (and other IP) ownership.  An NDA should be tailor-made for the particular situation at hand with particular emphasis on protecting the disclosing party which is often an individual inventor or a small start-up company.  Anticipate problems into the future since patents in particular can take several years to issue meaning that infringement lawsuits, patent ownership disputes, etc. may occur many years down the road.  It is also important that the disclosing party take steps consistent with protecting its confidential information upon early termination of the NDA or expiration by time.  For example, it is not clear why Sionyx did not insist on the return of all its confidential information when Hamamatsu indicated negotiations were over.

Take Home Points

1. Do not presume a generic NDA template will adequately protect your interests.  An NDA should reflect the parties’ particular situation and the nature of their business relationship under which confidential information may be disclosed.

2. Know and follow the procedures required of you and your company in the NDA as the Disclosing or Receiving Party.

Contact Susan at 305-279-4740 on matters related to your NDA to ensure it addresses potential scenarios consistent with the particular circumstances involving the contracting parties.   We are here to serve you and answer your questions related to intellectual property & business law in both transactional matters and litigation.  Check her reviews at AVVO.com where she has received Client’s Choice Badges for both 2019 and 2020.  She is a registered patent attorney.

WE THANK YOU FOR READING THIS BLOG AND HOPE YOU FOUND IT INFORMATIVE.  HOWEVER, THE CONTENT IS PROVIDED FOR INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE.

 

©2021

Troy & Schwartz, LLC

Where Legal Meets Entrepreneurship™

(305) 279-4740

 

 

Nov
15

A REJECTION OF PATENT CLAIMS BY THE USPTO BASED ON ANALOGOUS ART REQUIRES PROPER ANALYSIS UNDER THE CORRECT STANDARD

Posted by Susan Dierenfeldt-Troy, Esq.

Troy & Schwartz, LLC

Where Legal Meets Entrepreneurship™

Patent claims may be rejected on anticipatory grounds under 35 U.S.C § 102 and/or on obviousness grounds under 35 U.S.C. § 103.  This blog discusses the USPTO’s obligations when making rejections on obviousness grounds, an area of patent law that can be particularly confusing as a November 9, 2020 decision by the CAFC demonstrates.

Background

In order for a reference to be proper for use in an obviousness rejection, the reference must be analogous art to the claimed invention.   This does not require that the reference be from the same field of endeavor as the claimed invention, in light of the Supreme Court’s instruction that “[w]hen a work is available in one field of endeavor, design incentives and other market forces can prompt variations of it, either in the same field or a different one.”  KSR Int’l Co. v. Teleflex, Inc., 550 U.S. 398, 402 (2007).  Rather, a reference is analogous art to the claimed invention if:  (1) the reference is from the same field of endeavor (even if it addresses a different problem); or (2) the reference is reasonably pertinent to the problem faced by the inventor (even if it is not in the same field of endeavor as the claimed invention).   However, in order for a reference to be “reasonably pertinent” to the problem, it must “logically have commended itself to an inventor’s attention in considering the problem.”  In re Icon Health and Fitness, Inc., 496 F.3d 1374, 1379-80 (Fed. Cir. 2007).

The Case

These requirements were re-visited by the U.S. Court of Appeals (CAFC) in its Nov. 9, 2020 decision in Donner Technology, LLC v. Pro Stage Gear, LLC.  Donner had petitioned the Patent Trial & Appeal Board (PTAB) for an inter partes review (IPR) of U.S.  patent no. 6,459,023 (the ‘023 patent), asserting that the various claims of the ‘023 patent were obvious under 35 U.S.C. § 103 in view of U.S. Patent No. 3,504,311 (Mullen).  The ‘023 patent is directed to guitar effects pedals, electronic devices that affect the amplified sound of a guitar.  The specification explained that there was a need for “ ‘an improved pedals effect board which  allows easy positioning and changing of the individual guitar effects while providing a confined and secured area for cable routing and placement.’ ”

The Mullen reference related to electrical relays where an “ ‘object of the invention is to provide an improved support for supporting one or more relay structures and for providing wiring-channel space for receiving wires that would be connected to the relay structures to connect the relay structures in various controlled structures.’ ”  Donner contended that figures in the Muller patent depict a structure that is analogous to the structure claimed in the ‘023 patent which includes surfaces for mounting relays, cable connection openings, and areas for accommodating routing cables.

The PTAB found in favor of Pro Stage Gear, finding that Donner had not shown that Mullen falls within the scope of analogous art under either of the two tests.  On appeal to the CAFC, the parties did not dispute that the 023 patent and Mullen were not from the same field of endeavor.  The only issue on appeal was whether Mullen was “reasonably pertinent to one or more particular problems to which the ‘023 patent relates.”

The CAFC found that the PTAB had failed to establish whether it had meaningfully considered all of the evidence Donner had put forth, including expert testimony, to try and establish that Mullen was reasonably pertinent to the problems faced by the 023 patent’s inventor.   Additionally, the PTAB also failed to “properly identify and compare the purposes to which Mullen and the ’23 patent relate.”

Proper analysis requires that the “problems to which the claimed invention and reference relate must be identified and compared from the perspective of a person having ordinary skill in the art.”  Making conclusory statements without more is insufficient to determine whether a reference is analogous art.  Here, the PTAB merely asserted that the ordinary skilled person would have a “relatively low level of skill and would have had “a poor understanding of Mullen’s relay technology.”  Interestingly, the PTAB had acknowledged that there may be “ ‘pertinent similarities between Mullen and the ‘023 patent but concluded that those similarities, even if credited, did ‘not establish why a person of ordinary skill would have considered a reference from a different technology and time.’ ”  The CAFC disagreed, explaining that such a person may consult a reference.  The issue is not whether the person would have understood every last detail of a reference but “whether she understood portions of the reference relevant to solving the problem well enough to glean useful information.”

The CAFC concluded that the PTAB had applied the wrong analogous art standard.  It declined to hold that “no reasonable fact finder could conclude under the reasonably pertinent standard, that Mullen is not analogous art.”  Instead, it vacated the PTAB’s decision and remanded for consideration of the proper standard for analogous art.

Conclusion

Here is a simple example of analogous art.  An inventor files a patent application for a collapsible ski pole and the examining attorney cites analogous prior art for a collapsible tent pole patent. Here the tent pole patent would likely be reasonably pertinent to the problem the ski pole inventor was trying to solve: to provide less unwieldy, more readily transported poles.   Whether or not the ski pole will qualify for patent protection will depend on structural differences between the two poles and whether any ski pole structure would have been obvious over the prior art.

The patents at issue in the Donner matter of course involve more complex structures than the ski pole/tent example.  Whether or not Mullen, an invention from the 1970s, is reasonably pertinent to the problem the guitar pedal effects patent was trying to solve will now be assessed by the PTAB using evidence and expert testimony.   If yes, then the PTAB will evaluate whether the ‘023 patent is obvious over the Mullen patent.   Unfair in this situation? Is it likely that the ‘023 patent inventor found and “used” what was shown in the Mullen patent for a structure related to improving guitar effects pedals? The PTAB’s first decision suggested that it was not “pleased” with this particular IPR.  The 023 invention must have value in the market place for Donner to have spent the money involved so far on legal fees to try and invalidate the ‘023 patent.   Stay tuned for an update on the PTAB’s new decision.

Take Home Points

Whether dealing with the prosecution of a patent application or an IPR proceeding involving an existing patent, the USPTO must apply the appropriate standards in considering analogous prior art. Failure of the USPTO to do so during patent application prosecution can provide the patent applicant with the opportunity to try and overcome the USPTO’s reliance on the cited analogous prior art.  In an IPR proceeding, failure of the PTAB to properly apply the two analogous art tests may well result in an appeal of the matter to the CAFC as in the Donner Technology, LLC v. Pro Stage Gear, LLC matter by the losing party in the IPR proceeding.   

 

THANK YOU FOR YOUR INTEREST IN THIS BLOG.  AS USUAL THE CONTENT IS FOR   INFORMATIONAL PURPOSES ONLY AND IS NOT LEGAL ADVICE.

Call us at (305) 279-4740 for a complimentary consultation on matters related to obtaining patent protection or handling a legal dispute before the PTAB or the CAFC.  

 

May you and your loved ones stay safe & be well during these challenging times.


© 2020 by Troy & Schwartz, LLC

 

 

Apr
30

New Guidance by the Patent Trial & Appeal Board on Overcoming Obviousness Rejections: Part I – Lectrosonics, Inc. v. Zaxcom, Inc.

Patent Law Alert from the Law Offices of Troy & Schwartz, LLC

April 30, 2020

New Guidance by the Patent Trial & Appeal Board on Overcoming Obviousness Rejections:  Part I  – Lectrosonics, Inc. v. Zaxcom, Inc

One way for the patent applicant to try and overcome an obvious rejection is to prove nonobviousness through secondary considerations (also known as “objective indicia of nonobviousness”). Yet, proving nonobviousness through secondary considerations to the satisfaction of the Patent Trial & Appeal Board (“Board”) has always been challenging even before Supreme Court’s KSR decision.  On April 14, 2020, the Board issued guidance in arguing secondary considerations by designating its most recent decision as precedential (Lectrosonics, Inc. v. Zaxcom, Inc., Case IPR 2018-00129 (P.T.A.B. Jan. 24, 2020)) and two earlier decisions as informative (Ex parte Thompson, Appeal 2011-011620 (P.T.A.B. March 21, 2014) and Ex parte Whirlpool Corp., Appeal 2013-008232 (P.T.A.B. Oct. 30, 2013)).

This blog discusses the precedential decision in Lectrosonics, Inc. v. Zaxcom, Inc., Case IPR 2018-00129 (P.T.A.B. Jan. 24, 2020). Given the importance of this topic, the two other decisions will be summarized in a forthcoming blog. The three decisions address nonobviousness issues in three different proceedings before the Board: an applicant’s exparte appeal, an AIA trial, and a reexamination proceeding.

Secondary considerations involve evidence “outside” the four corners of the application with a caveat: the applicant must demonstrate a nexus between the proffered evidence and the claimed invention.  If established, the Board will consider the strength of the objective-indicia evidence itself.

The Board’s Discussion of the Threshold for Establishing “Nexus”

Secondary considerations are generally related to the invention’s commercialized product. For objective indicia of nonobviousness to be accorded substantial weight, its proponent (the applicant or patent owner) must establish a nexus between the evidence and the merits of the claimed invention.  This means that the proponent must show that the asserted objective evidence is actually tied to a specific product and that product indeed “embodies the claimed features and is coextensive with them.”

Courts have considered the following secondary considerations in determining obviousness; (1) the invention’s commercial success, (2) long felt but unresolved needs, (3) the failure of others, (4) skepticism by experts, (5) praise by others, (6) teaching away by others, (7) recognition of a problem, (8) copying of the invention by competitors, and (9) other relevant factors.

The product for which objective evidence is presented must be claimed in its entirety within the patent or application.  CAFC precedent, which the Board must follow, requires that a nexus between the invention and evidence of secondary considerations is only presumed “when the product is the invention as fully disclosed and claimed – that the product embodies the claimed features and is coextensive with them.”  See Fox Factory, Inc. v. SRAM, LLC, 944 F.3d 1366 (Fed. Cir.  2019). 

Nevertheless, all is not lost if an “automatic” nexus presumption is deemed inappropriate.  The patent owner is still afforded an opportunity to prove nexus by showing that the proffered evidence of secondary considerations is the “direct result of the unique characteristics of the claimed invention.”   The ultimate decision depends on the fact finder who “must weigh the secondary considerations evidence presented in the context of whether the claimed invention as a whole would have been obvious….”

Secondary Considerations as to the Original Claims

The Board considered the nexus requirements twice  – first with respect to the patent’s original claims and again with the patent owner’s proposed substitute claims as discussed below.  Relying on Fox, the Lectrosonics Board found that the patent owner had not demonstrated a nexus between the evidence presented and the merits of the invention as originally claimed because the evidence presented was directed to an unclaimed feature of the invention.  Secondary evidence is inapplicable if it does not apply to the patent’s actual claims.

Secondary Considerations as to the Substitute Claims

The patent owner filed a contingent motion to amend the patent to replace the six problematic patent claims with six substitute claims; the written description had disclosed features that had not been claimed and the patent owner now sought to claim these features.    The Board first held that the Motion to Amend complied with the statutory and regulatory requirements for amending found in a previous precedential order for assessing the merits of a Contingent Motion to Amend in Feb. 2019.

The Board then considered whether the proposed substitute claims were obvious, finding that the Petitioner’s (the party seeking claims invalidation of the patent) proposed prior-art combination (the combining of references in an obviousness rejection) “at best only weigh slightly weigh in favor of a conclusion of obviousness.”

The Board then turned to the patent owner’s secondary consideration case but now focusing on the substitute claims.  Had the inquiry only involved the original claims, the patent owner would have been out of luck.  The Board found, however, that the substitute claims shared a nexus with the patent owner’s proffered secondary consideration evidence: the affidavit of two declarants tying long-felt need directly to the newly added claim limitations and an industry award.

After finding a nexus, the Board then considered the secondary consideration evidence itself.  As to long-felt need as a secondary consideration, the Board was convinced that the two declarations demonstrated “a persistent need, recognized by those of ordinary skill in the art.”

Next, the Board considered the evidence of industry praise, citing the testimony of one of the patent owner’s declarants who stated that he “can’t emphasize enough the revolution these recording radios brought on.” The Board recognized that the award also “specifically praises features of the proposed substitute claims including the digital recording of microphone signals in the wireless transmitter.” Although some of the industry praise the patent owner supplied was “directed to features not explicitly recited by [the proposed substitute claims],” the patent owner’s evidence of industry praise ultimately weighed in favor of nonobviousness.

Lastly, the Board considered the evidence of the failure of others. Here, the Board determined that the patent owner’s testimony submitted in support of this factor was “conclusory and without adequate [evidentiary] support for the proposition that others failed.” This factor thus weighed in favor of the Petitioner’s obviousness arguments.

The Board ultimately concluded that, although the failure of others weighed in favor of the Petitioner because of lack of evidentiary support favoring the patent owner, the long-felt need and industry praise weighed heavily in favor of nonobviousness.  The Board concluded that the substitute claims were nonobvious, thereby saving the day for the patent owner.

Take Home Points

It has been historically very difficult to win on a secondary consideration argument before the Board and appellate courts. The following lessons can be drawn from the Lectrosonics decision:

  • In presenting an objective-indicia case, practitioners during patent prosecution or the patent owner in a post-patent proceeding must present solid evidentiary support (e.g., long-felt need, failure of others, industry praise, copying, etc.).
  • Conclusory statements are not evidence. Additionally, the nexus between that evidence and the claimed invention must be proven in those cases where the Board or a court determines that the patent applicant or patent owner are not entitled to a nexus presumption.  Such a nexus will be found lacking if the evidence does not relate to the patent’s claims.   Here, the patent owner’s win is because the Board agreed that the patent could be amended to include substitute claims after finding that the original claims had no nexus with the proffered objective evidence.
  • The Lectrosonics decision is also a good reminder for practitioners to claim everything the applicant is entitled to claim based on the written disclosure to help ensure that the required nexus between the claims and secondary considerations will be found in any “obviousness” contest. Here the patent owner won because the Board first granted its contingent motion to amend the claims to include substitute claims which then were found to be “covered” by objective secondary consideration evidence.  If a patent owner plans to file such a motion during a patent claim contest, it would be well advised to review the Board’s requirements for granting this type of motion as set forth in the decision available here. The outcome would have been far different absent the Board’s approval of the motion to amend.

©Troy & Schwartz, LLC

THANK YOU FOR YOUR INTEREST IN THIS BLOG.  AS USUAL THE CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT LEGAL ADVICE.

Mar
13

Patent Licensing Agreements: Ensuring They Won’t Thwart the Patentee’s Rights to Damages in a Later Patent Infringement Lawsuit

Attorneys often categorize themselves as either only transactional or only litigation attorneys. The fact is that legal documents, whether drafted by a transactional attorney specifically retained to draft an agreement or “grabbed off” the Internet, may become the subject matter” of a lawsuit, either directly as in a breach of contract claim or indirectly as where an agreement fails to properly address statutory requirements pertinent to the contact.   The latter situation is discussed in the Federal Circuit Court of Appeal’s Feb. 19, 2020 decision in Arctic Cat, Inc., v. Bombardier Recreational Products, Inc.

Arctic Cat is the owner of two patents directed towards thrust steering systems for personal watercraft (“PWCs”). Although it initially sold the inventions before the patents had issued, Arctic Cat later entered into a license agreement with Honda for several patents including the PWC patents.  Somewhere along the licensing negotiating process, the provision requiring Honda, as the licensee, to mark all licensed patented products with the applicable patent numbers was deleted.  The final version even expressly stated that Honda had no marking obligations.  This provision was contrary to the requirements of 35 U.S.C. § 287 and case law involving the interpretation of that statute.

Section 287(a) provides in pertinent part:

Patentees, and persons making, offering for sale, or selling within the United States any patented article for or under them, or importing any patented article into United States, may give notice to the public that the same is patented . . . by fixing thereon the word “patent” . . . . In the event of failure so to mark, no damages shall be recovered by the patentee in any action for infringement, except on proof that the infringer was notified of the infringement and continued to infringe thereafter, in which event damages may be recovered only for infringement occurring after such notice. Filing of an action for infringement shall constitute such notice.

The notice provision of § 287 does not apply to patents directed to processes or methods. Nor does it apply if a patentee never makes or sells a patented article; such a patentee may recover damages even absent notice to an alleged infringer.  On the other hand, the patentee who either directly sells the patented article or indirectly introduces into the market through a licensee, cannot collect damages until it either begins providing notice or sues the alleged infringer.  Any resultant damages are limited to the period after notification.  A patentee can cure the marking dilemma by beginning to mark (or have the licensee mark) its products in accordance with § 287.

The public policy behind § 287 is threefold: to (1) help avoid innocent infringement; (2) encourage patentees to give public notice that the article is patented; and (3) aid the public to identify whether an article is patented.   Arctic Cat at 8 citing Nike, Inc. v. Wal-Mart Stores, Inc., 138 F.3d 1437, 1443 (Fed. Cir. 1998).   Failure of a patentee to inform the public that an article is patented is deemed problematic because of its potential to mislead others into believing they are free to make and sell an article that is actually patented and then finding themselves on the receiving end of a patent infringement lawsuit.

The statute also actually provides incentive to the patentee to sell marked products so as to maximize its damages in any subsequent patent infringement lawsuit by a “knowing” infringer. That is, the marking statute imposes notice obligations on the patentee.  Whether or not the alleged infringer may have had mere knowledge that unmarked patented articles were actually patented is irrelevant.  A patentee who does not comply with the marking statue cannot later claim entitlement to “willful infringement” damages without establishing that the alleged infringement had been put on proper notice.

The duty to mark is not limited to the patentee but is also imposed on any licensee or assignee. Arctic Cat at 6.   The licensing/assigning patentee has to demonstrate that it made reasonable efforts to ensure any third parties’ compliance with § 287 to the satisfaction of the court.  Inexplicably, the licensing agreement between Arctic Cat and Honda expressly stated that Honda had no obligation to mark the patented PWCs.   As such, in its later filed infringement lawsuit, Arctic Cat was in no position to argue that it had made reasonable efforts to ensure labeling.  The “wrong” provision included within the patent licensing agreement with Honda executed years before proved fatal from a damages maximization perspective.

And this begs the question:  Who drafted that licensing agreement and why was the original provision referencing marking deleted?  Did Arctic Cat’s authorized representative understand the implications of what he was signing?  Did its transactional attorney explain the consequences?

From our perspective, the Arctic Cat decision drives home the point that a faulty transactional agreement may well mess up a party’s rights in a future lawsuit.  Faulty agreements can range from unartful, overly verbose, and ambiguous wording to provisions that are inexplicably contrary to federal and/or state statutory requirements and public policy.  The latter should never happen at least when a transactional attorney is involved.  Any such attorney must have a thorough understanding of the legal area the agreement involves to determine how much latitude may be incorporated into the agreement without running afoul of governing law.  Failure to do so denotes sloppy work.

The commentator handles both legal disputes involving intellectual property rights including patents and drafts and negotiates complex licensing and assignment agreements.  In my opinion the preferred approach to drafting these and other types of agreements is to draft with an eye toward future litigation whether between the parties to the agreement or a third party as in the Arctic Cat case.  Such agreements should also be drafted by an attorney with experience in the subject matter.

Considering licensing your intellectual property? Contact us to see how we can provide value to you or your company from drafting the licensing agreement from scratch through negotiating the draft (or a previously existing draft) with the other party to the agreement.  Our services including taking care to explain the agreement in detail to our clients and providing a summary of the agreement’s provision to provide for ready reference.  

WE HOPE YOU FIND THE ARTICLE INSTRUCTIVE.  HOWEVER, THE INFORMATION PRESENTED IS NOT LEGAL ADVICE AND IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY.

© Troy & Schwartz, LLC 2020

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