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Recent U.S. Patent Decisions and Their Significance to Chinese Companies Electrical & Mechanical Engineering Patent Conference Shenzhen, China October.

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Presentation on theme: "Recent U.S. Patent Decisions and Their Significance to Chinese Companies Electrical & Mechanical Engineering Patent Conference Shenzhen, China October."— Presentation transcript:

1 Recent U.S. Patent Decisions and Their Significance to Chinese Companies Electrical & Mechanical Engineering Patent Conference Shenzhen, China October 19-20, 2011 Edmund J. Haughey Feng Xu, Ph.D.

2 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 2 About Us More than 175 lawyers Exclusively Intellectual Property law Coast to coast presence in three major business and regulatory hubs of the U.S. (New York, Washington D.C., and California) Patents Trademarks Copyrights Trade Secrets Litigation Prosecution Licensing Due Diligence

3 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 3 Becton Dickinson Canon The Clearing House Payments Company Electrolux Entegris Georgia- Pacific Hewlett- Packard IBM Johnson Outdoors Medtronic Reliable Sprinkler Co. Sirona Dental Systems Electronics & Computers Nanotechnology Pharmaceuticals, Chemicals & Biotechnology About Us ǀ Industries & Clients Served

4 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 4 About Us ǀ Technical Qualifications

5 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 5 Leading Firm in Intellectual Property ǀ Chambers Global 2011 Band 1 Intellectual Property Firm ǀ Chambers USA 2010 Tier 1 Patent Litigation Firm ǀ IAM Patent Litigation Leading Firm ǀ PLC Which Lawyer 2011 Top Patent Prosecution Firms ǀ Intellectual Property Today Tier 1 for Intellectual Property ǀ Benchmark: The Definitive Guide to America's Leading Litigation Firms & Attorneys 2011 National Tier 1 and New York Tier 1 Firm for Intellectual Property Law ǀ U.S. News & World Report 2010 Best US IP Law Firm ǀ International Legal Alliance Summit and Awards 2010 About Us ǀ Recent Accolades

6 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 6 Review of significant decisions by the U.S. Supreme Court and the Federal Circuit from the past year relating to the electrical, mechanical, and computer arts. Lessons to be learned from these decisions. Overview of Presentation Global-Tech v. SEB Therasense v. Becton Microsoft v. i4i CyberSource v. Retail Decisions Hyatt v. Kappos Ultramercial v. Hulu TiVo v. EchoStar Akamai v. Limelight Uniloc v. Microsoft McKesson v. Epic

7 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 7 The Case Global-Tech v. SEB ǀ U.S. Supreme Court ǀ May 31, 2011

8 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 8 Global-Tech v. SEB ǀ Issue What is the proper intent standard for proving induced infringement under 35 U.S.C. § 271(b)?

9 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 9 Global-Tech v. SEB ǀ Facts SEB invented and patented a cool touch deep fryer. Global-Techs subsidiary, Pentalpha, purchased SEBs commercial fryer outside the U.S. and copied all but the fryers cosmetic features. Pentalpha hired U.S. attorney to conduct right-to-use study, but did not tell attorney it had copied SEBs design. Attorney did not find SEBs patent and issued favorable opinion. Pentalpha then started selling its fryers to Sunbeam for resale in U.S.

10 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 10 Global-Tech v. SEB ǀ Holding Induced infringement requires actual knowledge that the induced acts constitute patent infringement. Deliberate indifference does not satisfy the knowledge requirement, but willful blindness does. Willful blindness occurs: (1)when the defendant subjectively believes there is a high probability that a fact exists; and (2)the defendant takes deliberate actions to avoid learning of that fact.

11 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 11 Global-Tech v. SEB ǀ Lessons #1 #1Blinding oneself to probable risks is not a viable patent defense strategy. #2 #2Copying anothers product is inherently risky. #3 #3A competent opinion from U.S. counsel can be a useful defense to induced infringement, but be sure to provide full disclosure. #4 #4Patent owners: Make the risk obvious to would-be infringers. #5 #5Potential ramifications for willful infringement?

12 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 12 The Case Microsoft v. i4i ǀ U.S. Supreme Court ǀ Jun. 9, 2011

13 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 13 Microsoft v. i4i ǀ Issue What is the proper standard of proof for overcoming a patents presumption of validity?

14 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 14 Microsoft v. i4i ǀ Facts Patentee i4i sued Microsoft for willful infringement of a patent claiming an improved method for editing computer documents. Microsoft asserted that i4is patent was invalid based on i4is sale of its S4 software more than one year before the patent filing date. Undisputed that the S4 software was never considered by the PTO examiner during prosecution. Microsoft objected to clear and convincing evidence jury instruction, and instead requested preponderance of the evidence instruction. Court gave clear and convincing evidence instruction, and jury found patent valid and willfully infringed.

15 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 15 Microsoft v. i4i ǀ Holding Invalidity must be established by clear and convincing evidence. Burden does not vary depending on whether the asserted prior art was considered by the PTO. Jury may be instructed to evaluate whether the prior art before it is materially new, and if so, to consider that fact when determining whether an invalidity defense has been proved by clear and convincing evidence.

16 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 16 Microsoft v. i4i ǀ Lessons #1 #1When attacking a patents validity, preferable to rely on prior art not considered by the PTO. #2 #2Seek materially new jury instruction when arguing invalidity based on new prior art. #3 #3Instead of attacking validity with prior art previously considered by the PTO, consider using such art in arguing for a narrow claim construction. #4 #4Consider reexamination or post grant review, where there is no presumption of validity and the lower preponderance of the evidence standard applies.

17 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 17 The Case Hyatt v. Kappos ǀ Federal Circuit (en banc) ǀ Nov. 8, 2010

18 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 18 Hyatt v. Kappos ǀ Issue Whether a patent applicant who sues the PTO in district court (a Section 145 civil action) may introduce new evidence that could have been presented to the PTO in the first instance?

19 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 19 Hyatt v. Kappos ǀ Facts Hyatt applied for a patent related to a computerized display system for processing image information. PTO examiner issued 2,546 separate rejections of 117 claims. PTO Board reversed 93% of rejections, but affirmed rejections based on written description and enablement. Hyatt filed a Section 145 civil action, but lost on summary judgment when the court refused to consider his declaration, which, according to the court, could and should have been submitted earlier to the PTO.

20 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 20 Hyatt v. Kappos ǀ Holding Patent applicant may introduce new evidence in a Section 145 civil action, irrespective of whether such evidence could have been presented to the PTO, subject only to the Federal Rules of Evidence and Civil Procedure. Factual issues to which the new evidence pertains must be considered de novo, without deference to the Board.

21 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 21 Hyatt v. Kappos ǀ Lessons #1 #1A Section 145 civil action is the only option if you need to supplement existing record. #2 #2Even when existing record is complete, a Section 145 civil action offers applicants an additional chance to prevail before appealing to Federal Circuit. #3 #3Speed and cost generally favor presenting all available evidence to the PTO examiner. #4 #4Supreme Court will have the last word. Safest course in meantime is to present all available evidence to the PTO.

22 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 22 The Case TiVo v. EchoStar ǀ Federal Circuit (en banc) ǀ Apr. 20, 2011

23 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 23 TiVo v. EchoStar ǀ Issue What is the standard for determining whether an adjudged infringer is in contempt of an injunction?

24 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 24 TiVo v. EchoStar ǀ Facts TiVo sued EchoStar for infringement of TiVos time warp patent. Following jury verdict of willful infringement, EchoStar ordered to: (1)stop making, using, offering to sell, and selling infringing DVR receivers; and (2)disable DVR functionality in existing receivers in customers homes. EchoStar came out with redesigned DVR product, and TiVo brought contempt proceeding for violation of injunction. District court found EchoStar in contempt and imposed sanctions of nearly $90 million, plus another $110 million for continued infringement.

25 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 25 TiVo v. EchoStar ǀ Holding Contempt finding requires clear and convincing evidence that: (1)the newly accused product is not more than colorably different from the product found to infringe; and (2)the newly accused product actually infringes. Colorable difference test looks to the significance of differences between infringing features of old product and corresponding features of new product. Nonobvious modifications may be significant, while obvious ones may not be. After-the-fact arguments that an injunction is unduly vague or overbroad are unlikely to prevail in a contempt proceeding.

26 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 26 TiVo v. EchoStar ǀ Lessons #1 #1Good faith alone is not a defense. Better be correct as well. #2 #2A successful design-around begins with significantly modifying or removing at least one feature previously adjudged to satisfy a claim limitation. #3 #3Innovative design-arounds are more likely to avoid a contempt finding than obvious ones. #4 #4Appeal or seek clarification/modification of vague or overbroad injunctions immediately. Do not take it upon yourself to decide what is and is not enjoined.

27 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 27 The Case Uniloc v. Microsoft ǀ Federal Circuit ǀ Jan. 4, 2011

28 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 28 Uniloc v. Microsoft ǀ Issue Whether the 25 percent rule is a permissible starting point for determining reasonable royalty damages?

29 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 29 Uniloc v. Microsoft ǀ Facts Uniloc sued Microsoft for infringement of a patent directed to a software registration system to deter copying of software. Jury returned verdict of willful infringement by Microsoft. Uniloc awarded $388 million in reasonable royalty damages based on 25 percent rule.

30 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 30 Uniloc v. Microsoft ǀ Holding The 25 percent rule is a fundamentally flawed tool for determining a baseline royalty rate in a hypothetical negotiation. Evidence relying on the 25 percent rule is inadmissible under Daubert and Federal Rule of Evidence 702. Reasonable royalty damages must be determined under the unique facts of each case according to the Georgia-Pacific Factors, without using the 25 percent rule as a starting point. Reference to total product revenues is inappropriate, even as a check, unless entire market value rule is satisfied.

31 FITZPATRICK, CELLA, HARPER & SCINTO © 2011 | 31 Uniloc v. Microsoft ǀ Lessons #1 #1Facts, facts, and more facts. #2 #2Increased use of Daubert challenges. #3 #3Cross-examine your own damages expert early and often. #4 #4Accused infringers: If entire market value rule does not apply, seek to preclude prejudicial references to total product revenues.


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