No Duty to Disclose Prior Art in Patent Term Extension Proceeding

Granting summary judgment and dismissing an inequitable conduct claim in Schering Corp. v. Mylan Pharmaceuticals, Inc., No. 09-6383 (JLL), 2011 WL 1885709, *3-*5 (D.N.J. May 17, 2011), the district court held that an applicant for a § 156 patent term extension has no duty to disclose to the PTO in that term extension proceeding any prior art that allegedly is material to the validity of the claims.  Instead the applicant only has a “a duty to disclose ‘material information adverse to a determination of entitlement to the extension sought, which has not been previously made of record in the patent term extension proceeding ….’ 37 C.F.R. § 1.765(a).”  Thus, “even assuming that counsel for [an applicant] knowingly fail[s] to disclose potentially invalidating prior art to the PTO in connection with the term extension proceedings for the ‘721 patent, such information [i]s not material [to] those proceedings.”  Id  The court instructed that “the relevant statute and rule simply do not require the disclosure of such material [i.e., material prior art] or the communication of any ‘knowledge’ of the legal conclusions that could be drawn therefrom.  Id.

For additional materials on duty to disclose applicable to PTO proceedings see generally Annotated Patent Digest § 27:8 PTO Regulations Applicable to Specific PTO Proceedings.

First-to-File Rule Barred Second False Marking Suit

Granting a Rule 12(b)(6) dismissal with prejudice, the district court in Champion Labs., Inc. v. Parker-Hannifin Corp., No. 1:10-CV-02371-OWW-DLB, 2011 WL 1883832, *4-*9 (E.D. Cal. May 17, 2011), held that as the government is the real plaintiff in a false marking suit, the first-to-file rule applies to bar a second suit brought for the same acts of alleged false patent marking by a different relator.  Thus, “[t]he qui tam statute provides for a single claim for false marking, not multiple claims for multiple penalties.”  Id. at *6 (emphasis in original)

For additional materials regarding multiple false marking suits see generally Annotated Patent Digest § 34:103.50 Different Suits by Different Plaintiffs on Same Alleged Acts of False Marking.

Computer Method Claim Held Invalid on Rule 12(b)(6)

Addressing a § 101 invalidity challenge on a Rule 12(b)(6) motion to dismiss, the district court in Glory Licensing LLC v. Toys “R” Us, Inc., No. 09-4252 (FSH), 2011 WL 1870591, *2-*4 (D.N.J. May 16, 2011), held invalid a claim reciting:

A method of processing information on a first computer system comprising at least one computer, which comprises:

a. receiving a file by transmission from another computer system external to said first computer system and automatically displaying said file on a computer display as a template;

b. automatically selecting and extracting information from said file according to content instructions; 

c. providing utilities capable of automatically routing the extracted information as input information to an unrestricted diversity of application programs according to customizable transmission format instructions tailored to enable correct processing of the input information by any application program that requires said input information;

d. transmitting said input information to each application program requiring said input information; and

e. automatically processing said input information by said each application program.”

The court concluded that the claim did not claim a machine as “[t]he case law is clear that simply the use of a programmed computer is not sufficient to satisfy the machine or apparatus prong of the test.”  Additionally, the court found the claim did not address any transformation since “the relevant claims in the Glory Patents address a ‘mere transfer’ of data from an electronic or hard copy document to an application program.  Glory cannot claim that the data itself is transformed or even changes at all.”   

For additional materials regarding § 101 challenges and computer/business methods see generally Annotated Patent Digest § 20:14 Mathematical Algorithms/Computer Programs; § 20:15—Cases Finding Invention With Mathematical Algorithm Had Patentable Statutory Subject Matter; § 20:16 —Cases Finding Invention With Mathematical Algorithm Lacked Patentable Statutory Subject Matter; § 20:18.100 Post-Bilski Cases Finding Claimed Business Method was Not Patentable Subject Matter.

Under the doctrine of no licensee estoppel set forth in Lear v. Adkins, 395 U.S. 653 (1969), public policy demands that a patentee generally cannot contractually prohibit a licensee from challenging the validity of a patent.  Applying this doctrine, the district court in Rates Technology Inc. v. Speakeasy, Inc., No. 10 Civ. 6482(DLC), 2011 WL 1758621, *3-*5 (S.D.N.Y. May 9, 2011), held unenforceable a liquidated damages provisions in a licensing agreement entered into to settle a patent infringement dispute before litigation commenced that provided that in the event the licensee challenged the validity of certain patents owned by the licensor, the licensee would have to pay $12 million in liquidated damages to the licensor. 

The court concluded that the liquidated damages provision “ directly contravenes the public interest in litigating the validity of patents.”  Id.  It further ruled that “strong policy in favor of enforcing settlement agreements,” and therefore enforcing the liquidated damages provision as requested by the licensor, “does not outweigh the specific concerns addressed in Lear and its Second Circuit progeny.”  Id.  Distinguishing the authority cited by the licensor, the district court noted the since the specific agreement was entered into before the parties initiated any litigation, other judicial opinions upholding restrictions on challenging a patent’s validity entered into after the parties had begun litigation were inapposite.

Granting the licensee’s motion to dismiss the licensor’s breach of contract claim, the court ultimately ruled that “[w]here, as here, an agreement purports to deprive a licensee of any opportunity to challenge validity, it directly contravenes ‘the important public interest in permitting full and free competition in the use of ideas.’”  Id.

For additional materials on licensee estoppel see generally Annotated Patent Digest § 35:38 No Licensor Estoppel.

Work-Product Immunity for Patent Holding Co.

After an in camera review, Judge Ward holds that documents a patent-holding company shared with potential investors, under a non-disclosure agreement, to secure funding for litigating and licensing an acquired patent were protected under work-product immunity.  The court explaining: “Some documents reveal Inpro’s overall litigation and licensing strategy and others provide information—such as balance sheets including licensing and litigation revenues—that show the implementation of that strategy.  All of the documents were prepared, however, with the intention of coordinating potential investors to aid in future possible litigation.  The Court holds that these documents are protected by the work product protection.”   Mondis Technology, Ltd. v. LG Elecs., Inc., Nos. 2:07-CV-565-TJW-CE, 2:08-CV-478-TJW, 2011 WL 1714304, *2-*3 (E.D. Tex. May 4, 2011).  For additional discussion and case authority on this topic see Annotated Patent Digest § 42:41.50 Patentee and Financiers of the Litigation; and § 42:161 Prepared in Anticipation of Litigation.

Refusing to Read into Claim a Requirement of FDA Approval

Court rejects contention that a claim to drug composition that was useful to treat an aliment had to meet FDA standards for approval.  The court concluded that because “FDA approval is irrelevant to proceedings before the Patent and Trademark Office” it would not read into the claims the suggested requirement of FDA approval to find that the treatment was useful.  Allergan, Inc. v. Sandoz Inc., 2011 WL 1599049, *8-*10 (E.D. Tex. Apr. 27, 2011).  For additional discussion and case authority on this topic see Annotated Patent Digest § 4:192 “Treat” and § 1:8 Patent Rights do Not Trump State or Federal Regulatory Prohibitions.

False Marking Relator has a Right to a Jury Trial

Ruling that because a qui tam action under § 292(b) seeks a legal remedy, in view of the monetary penalty, a Seventh Amendment right to a jury trial applies.  U.S. ex rel. Hallstrom v. Aqua Flora, Inc., No. CIV S-10-1459 KJM-EFB, 2011 WL 1668984, *2-*3 (E.D. Cal. May 3, 2011). For additional discussion and case authority on right to jury trials see Annotated Patent Digest § 39:135 Supreme Court Cases Addressing Right to Jury Trial.

For many years the Federal Circuit has appeared to hold that an inventor can violate the best mode requirement even if he or she did not intend to conceal the best mode.  For example, in Minco Inc. v. Combustion Engineering Inc., 95 F.3d 1109, 1116 n.* (Fed. Cir. 1996), the court instructed that “invalidity may result from the failure to disclose, regardless of whether the inventor specifically intended to conceal his or her best mode.”  This followed CCPA precedent instructing that “only evidence of concealment (whether accidental or intentional) is to be considered.” In re Sherwood, 613 F.2d 809, 816 (CCPA 1980).  Indeed, one panel of the Federal Circuit has expressly held that “[i]nquiry into an intent to conceal, being subjective, is inconsistent with the objective nature of the second aspect of best mode compliance”, therefore, the “district court did not need to determine that [the inventor] intentionally concealed his best mode[, r]ather it was sufficient that the court held that there was no genuine dispute that the `267 specification did not adequately disclose William’s best mode in a way that would allow those of ordinary skill in the art to practice it.”  United States Gypsum Co. v. National Gypsum Co., 74 F.3d 1209, 1216 (Fed. Cir. 1996).

Despite these and other similar precedents some members of the Federal Circuit have stated their view that a best mode violation requires intent to conceal.  One of the most notable supporters of this view has been Judge Newman.  E.g., High Concrete Structures, Inc. v. New Enterprise Stone and Lime Co., 377 F.3d 1379, 1383 (Fed. Cir. 2004) (Newman, J.) (“Invalidation based on a best-mode violation requires that the inventor knew of and intentionally concealed a better mode than was disclosed.”); Brooktree Corp. v. Advanced Micro Devices, Inc., 977 F.2d 1555, 1575 (Fed. Cir. 1992) (Newman, J.) (“Invalidity for violation of the best mode requires intentional concealment of a better mode than was disclosed[.]” (emphasis added, citing Engel Indus., Inc. v. Lockformer Co., 946 F.2d 1528, 1531, 20 USPQ2d 1300, 1302 (Fed. Cir. 1991) (Newman, J.))

In the court’s most recent opinion addressing best mode, Judge Rader appears to agree with Judge Newman’s view as to the necessity of finding an intent to conceal before a best mode violation will be found.  In Wellman, Inc. v. Eastman Chemical Co., No. 2010-1249, __ F.3d __, __, 2011 WL 1601994, *9 (Fed. Cir. Apr. 29, 2011) (Rader, CJ.), the panel, quoting and following High Concrete Structures, affirmed a finding of a best mode violation because the “record also shows that [the inventor] intentionally concealed the best mode.” Id. 2011 WL 1601994, at *9.  The court specifically relied on evidence of intentional concealment of the best mode proven by the patentee’s “choosing to maintain [the best mode] as a trade secret.”  Id. 

Wellman and High Concrete appear in direct conflict with United States Gypsum Co. as to the requirement of an intent to conceal the best mode.  In most instances an apparent conflict in Federal Circuit authority would strongly suggest the need for en banc rehearing.  But, should patent reform pass, with its provision to eliminate best mode as an invalidity defense assertable by an accused infringer, a practical need for resolving this difference of opinion may be diminished. 

For additional discussion and case authority on this topic see Annotated Patent Digest § 21:44 Necessity of Intent to Conceal.