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Category Archives: Contributory Infringement

SoCal IP Institute :: October 27, 2014 :: Divided Infringement of System Claims and Pleading Inequitable Conduct

Our weekly SoCal IP Institute meeting on Monday, October 27, 2014 will be a discussion of two older cases. The first is a 2011 Federal Circuit case regarding divided infringement of a system claim and the second is a district court case on the requirements of pleading inequitable conduct after Therasense.

Centillion Data Systems, LLC v. Qwest Corp. Int’l et al., No. 2010-1110, 01131 (Fed. Cir. Jan 20, 2011) (available here).  Here, Centillion appealed a decision finding that there was no direct infringement of a system claim by Qwest.  In particular, Centillion’s claims included “backend” and “frontend” computer components such that the claims relied upon user’s computers to cause the backend components (servers, etc.) to begin to function.

On appeal, while discussing “use” infringement under 271(a), the Federal Circuit held “that to ‘use’ a system for purposes of infringement, a party must put the invention into service, i.e., control the system as a whole and obtain benefit from it.”  Qwest, as a matter of law, cannot use its own system that is reliant upon the personal computers of its users.  However, in this case, Qwest’s customers did use the system and were the direct infringers. However, Qwest did not vicariously infringe because “Qwest in no way directs its customers to perform nor do its customers act as its agents. While Qwest provides software and technical assistance, it is entirely the decision of the customer whether to install and operate this software on its personal computer data processing means.”

Cutsforth v. LEMM Liquidating, 2013 U.S. Dis. LEXIS 79385 (June 6, 2013) (available here).  Here, a defendant answered with a counterclaim of inequitable conduct and the plaintiff filed a motion to strike from the complaint.  The district court here found that LEMM Liquidating had adequately pled inequitable conduct where Cutsforth had previously asserted two patents during the pendency of a third and been presented with invalidity charts identifying several references that allegedly invalidated the patents.  That earlier case was soon thereafter dismissed prior to even an early meeting of counsel in the case.  Cutsforth submitted the references identified by that defendant in the then-pending patent, but did not provide the invalidity charts provided by that defendant to the PTO.  On that basis, the district court here found this withholding of the invalidity charts sufficient to meet the Therasense requirements at least at the pleading stage.

All are invited to join us in our discussion during the SoCal IP Institute meeting on Monday, October 27, 2014 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Noelle Smith by 9 am Monday morning.

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SoCal IP Institute :: December 17, 2012 :: Withdrawing Terminal Disclaimers and Rule 11 Sanctions

We will be discussing two Federal Circuit cases during our weekly SoCal IP Institute meeting on Monday, December 17, 2012. Brief synopses are presented below.

In Re Yamazaki, Case No. 2012-1086 (Fed. Cir. December 6, 2012) (attached).

During the prosecution of U.S. Patent 6,180,991, Applicant Yamazaki filed a terminal disclaimer to overcome an obviousness-type double patenting rejection based on his earlier issued U.S. Patent 4,581,476.  Yamazaki later amended each independent claim of the application such that he believed the claims were now patentably distinct over the prior ’476 patent.

Accordingly, Yamazaki filed a petition request to withdraw the terminal disclaimer. Unfortunately, the PTO did not act on the petition for some time.  The examiner issued a Notice of Allowance and Yamazaki paid the issue fee while the petition to withdraw was still pending.  The ‘991 patent issued on January 30, 2001.  The PTO eventually dismissed the petition based upon its conclusion that a terminal disclaimer cannot be nullified after issuance.

On January 16, 2002 Yamazaki filed a reissue application seeking to rescind the terminal disclaimer.  The PTO did not act on the reissue until 2004, which is after the ’991 patent with the terminal disclaimer had expired. After an in-person interview in 2005, the examiner agreed in writing that a Reissue application could be used to correct a terminal disclaimer. However, the PTO delayed further action for more than two more before issuing another non-final office action rejecting the reissue application as premised on a defective basis for reissue.

Yamazaki then appealed to the BPAI on September 24, 2007.  The BPAI did not issue its initial decision until January 11, 2011, where they held that the PTO could not reissue the ’991 patent to remove the terminal disclaimer under 35 USC § 251 because the statute (1) prohibits reissuing an expired patent, and (2) precludes expanding a reissued patent’s term beyond that set when the original patent issued.

On appeal, the Federal Circuit affirmed, holding that the plain language of § 251 along with § 253 prohibit using a reissue to expand a patent’s term.

Raylon LLC. v. Complus Data Innovations, Inc., Case No. 2011-1355 (Fed. Cir. December 7, 2012) (attached).

Raylon owns U.S. Patent No. 6,655,589, directed to a hand-held identification investigating and ticket issuing system.  The object of the invention is to provide an affordable, durable system that reduces the amount of time a user spends identifying and issuing tickets and allows the user to maintain visual contact with the individual throughout the process. The system has a housing with an input assembly for entering data, an elongated slot for receiving identification forms that have a magnetic tape, an elongated aperture for access to the housing’s interior, a transceiver assembly to communicate remotely with a computer, a printer assembly for printing tickets, and a display, pivotally mounted on the housing.

Raylon filed three suits in the US District Court for the Eastern District of Texas against software integrators and product component manufacturers of various ticket-writing and enforcement handheld devices, alleging direct infringement literally and under the doctrine of equivalents, induced infringement and contributory infringement. The defendants filed motions in each suit for Rule 11 sanctions, stating that Raylon’s complaints violated Rule 11(b)(2) and Rule 11(b)(3) because, inter alia, Raylon’s claim construction positions were unsupportable by intrinsic evidence and its infringement positions with regards to the display, magnetic strip reader, and printer elements of the asserted claims were unreasonable.

The district court granted summary judgment in favor of the defendants, denied their motions for Rule 11 sanctions, and denied attorneys’ fees and costs under 35 U.S.C. 285, citing its Rule 11 decision.

The Federal Circuit reversed as to Rule 11, stating that the district court erroneously evaluated Raylon’s damages model and early settlements to determine whether it brought its suits in good faith or merely to obtain nuisance value settlements.   The Court stated that the district court should not have evaluated what Raylon’s motives were in bringing the litigation, rather should have conducted an objective inquiry.  “The district court denied Rule 11 sanctions through the lens of an erroneous view of the law, and thus abused its discretion.”  The Court also vacated as to the denial of attorneys’ fees because the court’s evaluation of section 285 relied on its Rule 11 analysis.

All are invited to join us in our discussion during the SoCal IP Institute meeting on Monday, December 17, 2012 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Noelle Attalla by 9 am Monday morning.

SoCal IP Institute :: September 24, 2012 :: Induced Infringement and Covenants Not to Compete

We will be discussing one Federal Circuit case and one California Court of Appeal case during our weekly SoCal IP Institute meeting on Monday, September 24, 2012. Brief synopses are presented below.

Akamai Techs., Inc. v. Limelight Networks, Inc., Case Nos. 2009-1372, -1380, -1416, -1417 and McKesson Techs., Inc., v. Epic Systems Corp., Case No. 2010-1291 (Fed. Cir. August 31, 2012) (attached).

This decision involved two cases that were decided together in this en banc rehearing.  In the first case, Akamai Technologies, Inc. owns a patent that covers a method for efficient delivery of web content.  Akamai alleged that Limelight Networks, Inc. directly infringed and induced infringement of their patent. The patent’s method claims required “placing some of a content provider’s content elements on a set of replicated servers and modifying the content provider’s web page to instruct web browsers to retrieve that content from those servers.” Limelight maintained a network of servers and placed some content elements on its servers. However, Limelight did not modify the content providers’ Web pages and instead taught its customers how to modify the pages.

In the other case, McKesson alleged that Epic induced infringement of their patent covering a method of electronic communication between healthcare providers and patients.  Epic licensed its software to healthcare organizations, which allowed healthcare providers to communicate electronically with patients.  Epic did not perform any of the steps of the method patent, rather the infringing steps were performed partially by patients, who initiate communications, and partially by healthcare providers.

The district courts found in both Akamai and McKesson that the defendants did not infringe the asserted patents because they neither performed all of the claimed steps themselves nor exhibited the necessary control over the other parties that did perform the claimed steps.

The Federal Circuit initially upheld the decision.  However, in this en banc rehearing, the Court considered whether a defendant may be held liable for induced infringement if the defendant has performed some of the steps of a claimed method and has induced other parties to commit the remaining steps (as in Akamai), or if the defendant has induced other parties to collectively perform all the steps of the claimed method, but no single party has performed all of the steps itself (as in McKesson).”

In overturning their earlier decision in BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007), the Court held that a single actor is not required to perform all of the infringing steps. The Court stated that liability for induced infringement exists where the accused infringer knows of the patent and induces performance of the steps of the patented method by causing, urging, encouraging or aiding the performance of such steps.  In order for a party to be liable for induced infringement, it is no longer necessary to show that a single entity performed all the steps of the claimed method.   Furthermore, it is no longer necessary for the accused infringer to “control or direct” the actors who perform the steps of the method.

Fillpoint, LLC. v. Maas, Case No. G045057 (Cal. Ct. App. August 24, 2012) (attached).

Michael Maas was an employee of Crave Entertainment Group, Inc., which was acquired by Handleman Company.  As part of the acquisition, Maas executed a stock purchase agreement selling all of his stock in Crave to Handleman.  The stock purchase agreement contained a three-year non-compete clause.  Maas also entered into a new employment agreement with Crave containing a one-year non-compete, customer non-solicit, and employee non-solicit covenants, all of which would begin to run upon the termination of his employment. The stock purchase agreement included an integration clause referencing the form employment agreement. Additionally, Maas’ employment agreement referred back to the stock purchase agreement and stated that the stock purchase agreement would prevail in the event of any conflict between the agreements.

Maas eventually resigned from Crave three years after the acquisition and about six months later, began working for a competitor of Crave.  Fillpoint, LLC, which had acquired Crave from Handleman, brought suit against Maas for breach of his employment agreement. The Superior Court of Orange County concluded that: (1) the covenants in the stock purchase agreement and the employment agreement were separate; and (2) the covenants not to compete and not to solicit in the employment agreement were unenforceable under California’s general rule against such covenants (Business and Professions Code Section 16600).

On appeal, the Court of Appeal for the Fourth District found that the trial court erred in its conclusion that the covenants in the stock purchase agreement and the employment agreement were separate.  The Court of Appeal held that the agreements must be read together as an integrated agreement because of the cross references between the stock purchase agreement and employment agreement.  Furthermore, the two agreements were part of a single transaction because they were entered into between the same parties and around the same time. The Court then determined that the covenants in the employment agreement were intended to restrict Maas’ right to pursue his profession in the future and, thus, did not meet Section 16601’s limited exception.  For these reasons, the Court held that the covenants in the employment agreement could not “be reconciled with California’s strong public policy permitting employees the right to pursue a lawful occupation of their own choice” and were unenforceable.

All are invited to join us in our discussion during the SoCal IP Institute meeting on Monday, September 24, 2012 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Noelle Attalla by 9 am Monday morning.

SoCal IP Institute :: June 18, 2012 :: Patent Infringement Pleading Standards and Indirect Infringement

We will be discussing two Federal Circuit cases during our weekly SoCal IP Institute meeting on Monday, June 18, 2012. Brief synopses are presented below.

In re Bill of Lading Transmission and Processing System Patent Litigation, Case Nos. 2010-1493, -1494, -1495, -1496; 2011-1101, -1102 (Fed. Cir. June 7, 2012) (attached).  In this case R + L Carriers, Inc. sued a number of defendants alleging infringement of a patent directed to a method of transmitting bills of lading from a truck cab, as the truck is in the process of transporting freight from a location to a destination.  The case was consolidated to the S.D. of Ohio wherein each of the complaints were dismissed as failing to identify specific customers who directly infringed.  The defendants in these cases provide systems that enable trucking companies to transmit the bills of lading.  The district court noted that for contributory infringement, R+L was required to allege that the accused products were not staple articles and that they were not suitable for substantial non-infringing uses.  R+L did not and, therefore, these claims were dismissed.  The remaining claims for indirect infringement were similarly dismissed. R+L appealed.

First, R+L argued that no direct infringement in an offer-to-sell case was necessary.  The Federal Circuit noted that this argument was incorrect under the law.  Direct infringement is always required.  R+L also argued that it adequately pled the presence of a direct infringer in each case.  On this the Federal Circuit agreed citing Form 18 of the Appendix of Forms to the Federal Rules of Civil Procedure.  The Federal Circuit indicated that these forms, though written before Twombly, were adequate to meet pleading requirements.  R+L’s pleading roughly fulfilled Form 18’s boilerplate language.  The Federal Circuit took the opportunity to subtly note its displeasure with the bare bones nature of Form 18.  With regard to one of the complaints, that against Intermec, the complaint simply alleged that “[Intermec] customers are in fact practicing the ‘078 Patent” without naming a specific direct infringer.  The Federal Circuit found that it was sufficient.

Turning to contributory infringement, the Federal Circuit found that R+L’s claims were not helped by Form 18, which was directed only to direct infringement.  Because the Federal Circuit agreed that there were many substantial non-infringing uses, the contributory infringement dismissal was affirmed.  Induced infringement was discussed at some length for each defendant, taking care to note the district court’s dismissal and the factual allegations associated with each defendant. In each case, the Federal Circuit found that, taking all reasonable inferences for the benefit of the non-moving party, the six complaints met the pleading standards for induced infringement.

Judge Newman dissented to voice concern regarding the adoption of the bare bones pleading standards of Form 18 for patent infringement actions.

Toshiba Corp. v. Imation Corp. et al., Case No. 2011-1204 (Fed. Cir. June 11, 2012) (attached).  Toshiba accused a number of DVD manufacturers of infringing two patents related to finalized DVD writing and the information associated with finalization.  The defendants moved for summary judgment on Toshiba’s claims of indirect infringement.  Because, the district court found that there were substantial non-infringing uses of the DVD’s, all indirect infringement claims must fail.  The parties stipulated to dismissal of the remaining claims and Toshiba appealed.

The Federal Circuit agreed with the district court’s decision regarding contributory infringement for the same reasons given by the district court. However, the Federal Circuit pointed out that the district court applied the law of indirect infringement incorrectly when it stated that a substantial non-infringing use was a bar to liability for infringement. As an alternative on appeal, the appellees argued that Toshiba failed to proffer evidence of direct infringement, a requirement for indirect infringement liability.  In response, the Federal Circuit relies upon circumstantial evidence to support at least one direct infringer and to enable Toshiba’s indirect infringement claim to survive summary judgment.

Toshiba also appealed the construction of claim 1, particularly as to an alleged “reading in” of a “purpose” to the construction of claim 1 when it construed claim 1 as requiring the identifying information on the DVD to provide identifying information for the entire recording medium.  The Federal Circuit agreed. Instead, the identifying information need only “uniquely identify a recording plane.”  The case was remanded for further proceedings.

All are invited to join us in our discussion during the SoCal IP Institute meeting on Monday, June 18, 2012 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Noelle Attalla by 9 am Monday morning.

SoCal IP Institute :: October 4, 2010

Please join us for the SoCal IP Institute meeting, Monday, October 4 at Noon. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to  Amanda Jones by 9 am Monday.

We will be discussing the following cases:

Fujitsu Ltd. v. Netgear Inc., (Fed. Cir. Sept. 20, 2010) (case is attached).  In a patent infringement suit related to patents that describe and claim a different aspect of wireless communication technologies, district court’s grant of defendant’s motion for summary judgment of noninfringement is affirmed in part, reversed in part, and remanded where: 1) district court correctly granted summary judgment of noninfringement of the asserted claims of the ‘642 and ‘993 patents; 2) summary judgment of noninfringement regarding the ‘952 patent was affirmed for all products but for the four models for which plaintiff produced appropriate evidence of direct infringement; and 3) with respect to these four models, district court’s summary judgment of no contributory and no induced infringement was reversed because genuine issues of material fact remain.

In re Chippendales USA, Inc., (Fed. Cir. Oct. 1, 2010) (case is attached).  In an appeal of plaintiff’s application to register its Cuffs & Collar mark as inherently distinctive for “adult entertainment services, namely exotic dancing for women,” in the nature of live performances, the Trademark Trial and Appeal Board affirmed the examining attorney’s refusal to register the mark as inherently distinctive.  The Board determined that the Cuffs & Collar mark was not inherently distinctive and that plaintiff’s additional arguments for setting aside the Board’s decision were without merit.