1. © 2007 Morrison & Foerster LLP All Rights Reserved Attorney Advertising The Global Law Firm for Israeli Companies Dramatic Changes in U.S. Patent Litigation Michael A. Jacobs Morrison & Foerster LLP October 29, 2007

2. The Global Law Firm for Israeli Companies 2006-7 – Tohu v Vohu in U.S. Patent Litigation Injunction standard Obviousness standard Declaratory judgment jurisdictional standard Willfulness standard

3. The Global Law Firm for Israeli Companies Am I at risk of an injunction? Old rule: If patentee wins on infringement and validity, injunction virtually always issues Articulated and enforced by Federal Circuit – the appellate court that hears virtually all patent appeals Powerful hammer in patent litigation – shut down a company New rule: If you dont practice the invention you may not get an injunction Supreme Court decision in Ebay v. MercExchange reversed Federal Circuit Applied traditional test for equitable relief of injunction District courts now denying trolls injunctive relief

4. The Global Law Firm for Israeli Companies Post-eBay: Injunction Denied

5. The Global Law Firm for Israeli Companies Implications of new rule on injunctions Patentees have more to prove in order to win an injunction District courts struggling with question of what to do if an injunction not issued Compulsory license? Renewed infringement litigation? More patent cases brought in International Trade Commission Bars infringing imports ITC not bound to apply the four-factor test

6. The Global Law Firm for Israeli Companies When is a patent invalid as obvious? Old rule: the teaching, suggestion, or motivation (TSM) requirement for combining two or more prior art references Articulated and enforced by Federal Circuit – appellate court that hears virtually all patent appeals Intended to guard against hindsight in obviousness analysis Need some objective reason to combine references Rule of thumb: need a prior art reference to itself suggest combining references

7. The Global Law Firm for Israeli Companies When is a patent invalid as obvious? New rule: it is all open for argument, and common sense is back Decided by U.S. Supreme Court in KSR v. Teleflex (2007) Rejects Federal Circuits rigid TSM test and reaffirms broad inquiry Emphasizes caution in granting patent based on the combination of elements found in the prior art The combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results Obviousness analysis need not seek out precise teachings Literature may have little discussion of obvious techniques Market demand may drive design trends

8. The Global Law Firm for Israeli Companies How do I get a patent declared invalid as obvious? Old rule: obviousness goes to the jury New rule: obviousness may be suitable for summary judgment by court Again, by the Supreme Court in KSR v. Teleflex Critically, dueling experts on obviousness does not preclude summary judgment Where, as here, the content of the prior art, the scope of the patent claim, and the level of ordinary skill in the art are not in material dispute, and the obviousness of the claim is apparent in light of these factors, summary judgment is appropriate

9. The Global Law Firm for Israeli Companies Implications of changes in obviousness law New patents likely to be harder to get from Patent Office -- but perhaps stronger in litigation Tougher for inventors to overcome obviousness rejections by PTO Examiners may rely on their own common sense of obviousness Old, weak patents easier to defeat in litigation Expensive battles on obviousness Trying the invention More opportunities to defeat patents using Patent Office reexamination procedures

10. The Global Law Firm for Israeli Companies What triggers Declaratory Judgment litigation? Old rule: need a threat to sue or clear statement of infringement Articulated by Federal Circuit as requiring an actual controversy We think you might be interested in licensing… not enough to trigger a DJ Hard to file a preemptive lawsuit against a patent holder New rule: any apparent disagreement is enough Foreshadowed by Supreme Court in a footnote in Medimmune, which reversed Federal Circuit on a related issue Articulated by Federal Circuit in SanDisk v. ST Microelectronics STM told SanDisk it did not intend to sue

11. The Global Law Firm for Israeli Companies Implications of new Declaratory Judgment rule No bright line test for patent holders to avoid being DJd in a court favored by worried potential infringers Patent holders are filing lawsuits first in their favorite courthouses, and negotiating second Worried potential infringers now have more options to tackle scarecrow patents More extensive reliance in license agreements on no challenge and venue clauses

12. The Global Law Firm for Israeli Companies Do I get an opinion to avoid treble damages? Old rule: To avoid willful infringement and increased damages (up to 3x), need to get an opinion Shows (supposedly) use of due care to avoid infringement Required by Federal Circuit in 1983 decision Opinions expensive Relying on opinion? Then waive attorney-client privilege -- not just for opinion but for all related documents New rule: Willfulness means "no objectively reasonable basis for believing patent invalid or not infringed Decided by Federal Circuit in wake of recent Supreme Court decision on meaning of willful in different context Resolved complicated privilege waiver issues

13. The Global Law Firm for Israeli Companies Implications of new rule on willfulness Much less pressure to seek opinions of counsel Modest decrease in patent litigation expenses Still need to have an explanation for conduct in view of patent

14. The Global Law Firm for Israeli Companies And coming soon – patent reform! Changes so far are mostly court made Supreme Court very active Congress getting into the game House bill passed September 7, 2007 First to file – like the rest of the world Post-grant opposition – like the rest of the world

15. © 2007 Morrison & Foerster LLP All Rights Reserved Attorney Advertising The Global Law Firm for Israeli Companies Presentations and related articles available on our Hebrew website www.mofo.co.il Email: israel@mofo.com This week: 054-3077022