The April 2006 edition of the North Carolina Bar Association
‘IP Links’ Newsletter carries a feature article Steven Gardner
and E. Danielle Thompson Williams of Kilpatrick Stockton
entitled “Basic Framework for Effective Responses to Patent
Trolls”.

The authors advocate an understandably aggressive stance
which is nicely summarized in Bill Heinze’s blog I/P Updates.

Comment

The strategies advocated by Gardner and Williams are not uncommon in
the patent litigator’s toolkit.
However, isn’t there a more long term, strategic approach that
could be taken? Namely — that a
regular, thorough review of the IP landscape relevant to your products and
services would identify the relevant patents well before they are asserted
(or possibly even owned) by the ‘Troll’. If the relevant patents come up on the
radar as potentially relevant to freedom to operate, then presumably their
ownership, status etc would also be investigated at that time. Following this logic to the next step, it
may sometimes be the case that you get the opportunity to acquire the patents
before the troll.

Also — one of the difficulties for a defendant in
proceedings brought by a ‘Troll’ is that counter-suit is very
difficult because the ‘Troll’, almost by definition, will not
have any products or services of their own.
However, given the right factual circumstances, a counter-suit which
should be seriously considered in the USA (where ‘Trolls’
seem to be most active) along with anti-trust, inducement, etc is an
interference proceeding. Again, early
identification of the existence of the relevant patents would make it more
likely that time to copy claims and file the suit would still exist. For the USPTO MPEP section on
Interferences, click here.

What is a
‘Patent Troll’

For anyone who hasn’t yet come across the term, a
‘Patent Troll’ is basically an entity which enforces and licenses
intellectual property without actually making or selling anything. It is now commonly used in the pejorative
due to several high-profile examples of companies buying cheap patent rights
for the sole purpose of suing and extracting license fees from multiple large
players in an industry. Click here for a nice
definition in Wikipedia.

Click here for an excellent article from Jeremy Phillips of the
IPKat Blog explaining why this kind of activity isn’t actually such an
evil thing — “Be kind to
that patent troll, he might just be an inventor”.

Click here
for a copy of Bruce Berman’s article from the February/ March 2005
edition of Intellectual Asset Management Magazine on the same point —
‘No more name-calling please”.

Click on download button to view the powerpoint presentation.

On 24 April 2006, a Jury in the Northern District of California
awarded Rambus US $306.9 million in damages for patent infringement of all 10
asserted claims of four of Rambus’s patents.

Click here for a copy of the Jury Verdict, here
for Rambus’s press release and here for Hynix’s website.

Background

Rambus has prevailed in the latest round of a complicated
series of patent infringement and antitrust litigation. For those who aren’t familiar with
the memory chip industry, Rambus has previously sued a number of very large
players in that space over allegations of patent infringement.. Click here
for details of their current litigation (including court rulings, opinions
and judgments).

Comment

Rambus’ business model
is focused on creating and out-licensing IP.From an IP Strategy perspective, high-profile litigation is a natural
product of this as it generates further out-licensing opportunities.Another well-known company which has
utilized this strategy is Australian-based Genetic
Technologies Ltd
which recently settled its final patent dispute with Applera Corporation.

On 31 January 2006, a Grand Panel of the Japanese
Intellectual Property High Court held that by recycling (refilling and
reselling) Canon’s inkjet cartridges, Recycle had infringed Canon’s
patent number JP 3278410. Click here for a summary of the case in English.

Take home

The doctrine of exhaustion of patent rights under Japanese
law is by no means simple. In essence:

1. Once a patented product is sold in Japan
by the patentee, it is no longer an infringement to use, assign or lease the
product.

2. If the patentee sells a patented product outside
Japan
the patentee may
not enforce patent rights in Japan
unless there is an agreement with the direct assignee not to exploit the
product in Japan.

3. Notwithstanding 1 or 2 (above), it is
an infringement to:

a.
reuse or recycle a patented product after its ordinary life (type 1
infringement);

b. modify or replace the whole or part of the components that
constitute an essential part of the patented product (type 2 infringement).

(In this case, type 2 infringement
was found since in recycling the cartridges to their former function, Recycle
restored two features of the cartridges which were held to be an essential
part of the product.)

Facts

Recycle Assist has bought used inkjet cartridges, recycled
and refilled them and imported them into Japan. Recycle conceded that the cartridges in
question fell within the scope of the claims of the JP ‘410
patent. Recycle argued that
Canon’s rights in the patent had been exhausted on first sale of the
cartridges and cited the Japanese Supreme Court in the BBS Case (Judgment of the Third Petty Bench of the Supreme Court
of 1 July 1997, Minshu Vol. 51, No. 6, 2299).

Canon had brought an action for patent infringement and
lost at first instance, appealing to the Grand Panel of the Intellectual
Property High Court. The Court
reversed the first instance judgment and granted an injunction.

Comment

The doctrine of exhaustion of rights in relation to patent
infringement is complicated and varies in sometimes subtle ways from
jurisdiction to jurisdiction. Please
do let me know if you would be
interested in a brief comparative article.

2006 has been a successful year so far for Canon in
enforcing patent rights relating to ink cartridge technology.In March it was confirmed that Canon had
won an appeal to the Higher District Court of Düsseldorfwhich dismissed an appeal by Pelikan Hardcopy Deutschland GMBH and held that Pelikan infringed Canon’s European Patent number EP 0 879 703 in Germany (see Canon’s press release).

On 10 April 2006, Judges Radar,
Schall and Prost of the United States Court of Appeal for the Federal Circuit
handed down their decision in Aventis Pharma SA v
Amphastar Pharmaceuticals [2006] CAFC
– 10 April 2006
.

Take home

While Aventis’s failure to disclose the correct
comparative data was material, there was insufficient evidence before the
District Court to base a finding of intent to deceive the USPTO on summary
judgment.

Facts

In the latest round of a Hatch-Waxman paragraph IV dispute,
Aventis appealed a decision of the US District Court for the Central District
of California which granted summary judgment in favour of Amphastar and Teva
and held US Patent No. 5,389,618
and US Reissue Patent No. 38,743
unenforceable. The ‘618 and
‘743 patents claim mixtures of low molecular weight heparins used to
prevent blood clots and cover Aventis’s Lovenox product.

The district court had granted a motion for summary
judgment of unenforceability without holding a hearing and based on repeated
representations by Aventis of patentability based on the purported half-life
of the claimed products. The court
found Aventis at fault for comparing data based on different doses to show an
improved half-life when a comparison of available data using the same doses
actually showed that there was little if any difference between the half
lives of the prior art and the purported invention.

The Court found the omission by Aventis to meet the test
for materiality but held that based on the evidence before the District
Court, it was inappropriate to find an intent to deceive the USPTO on summary
judgment.

The lower court’s decision was reversed and remanded
for further consideration.

Comment

A patent
challenger seeking summary judgment in relation to inequitable conduct will
do well to establish as far as possible an intent to deceive the USPTO.It will always be open to the patentee,
however, to challenge the motion by pointing to any one of a potentially
large number of remaining genuine issues of fact.

On 30 March 2006, the Intellectual Property
Laws Amendment Bill 2006 was introduced into the House of Representatives of the Australian
Commonwealth Parliament.

For a
copy of the bill — click here.

For a
copy of the explanatory memorandum — click here.

For a
copy of the Ministerial press release — click here.

For a copy of IP Australia’s press
release — click here..

Take
home

Proposed amendments to the Patents Act
include:

Clarification
of the prior use defense to infringement;

Adding
compulsory licenses of patents as a remedy under the Trade Practices Act;

Adding the
possibility of exemplary damages in patent infringement cases (this is
similar to the situation in the USA where treble damages may be
awarded for willful);

Adding a bolar
provision (a defense to infringement of pharmaceutical patents for activities
directed to obtaining regulatory approval);

Proposed amendments to the Trade Marks Act
include:

Power for the
Trade Marks Commissioner to revoke trade marks in certain circumstances;

Making more
documents relating to Trade Mark applications publicly available;

Other amendments include:

Clarification
of the effect of various aspects of the Plant Breeders Rights system in Australia.

Various minor
technical changes to the Acts.

On 10 March 2006, the Australian Full Federal
Court handed down its decision in Commissioner of Patents v Emperor Sports.

Take home

In
dismissing the appeal, the Full
Court reinforced the logical, stepwise approach
to assessing the availability of prior art in an obviousness attack based on
s 7(3). In essence, the approach to
take is as follows:

1
— identify the relevant art of the patent specification;
2
— identify the person skilled in the relevant art;
3
— consider whether this notional person could reasonably have:

(a) ascertained (ie, found) the relevant
prior art document;

(b) understood the content of the document;
and

(c) regarded the document as relevant to
solving the problem in question.

If the
answer to all three questions is yes, then the document is available to use
in an obviousness attack (along with the common general knowledge of such a
person).

In Emperor Sports, the person skilled in
the relevant art was held to be “a Rugby League or Australian Rules coach,
referee/umpire or administrator” and the prior art documents in
question were US Patents. The Full Court held
that such a person could not reasonably be expected to ascertain such
documents.

Strategy

Interestingly,
the case was kicked off by a post-grant third party re-examination request
filed by the Australian Football League (AFL) (see s
97(2) of the Act
). The claims were
narrowed during re-examination several times with the result that they are
limited to use of the (touch football) product for Rugby League or Australian
Rules Football. This will presumably
be cold comfort for the AFL.

Consequently,
unless there is a settlement, we should not be surprised to see the patent
back before the courts in either a revocation or infringement suit, or both.

On 24 February 2006, the US CAFC handed
down its decision in SmithKline v Apotex.

Take home

In
essence, SmithKline v Apotex provides generic pharmaceutical companies with
another avenue of attack when seeking to invalidate later-filed process
patents in the USA. However, as discussed below, it is unlikely
that this case will change the practice of filing (or litigating) such
patents as there appear to be several clear grounds to distinguish it.

Facts

The product-by-process
claims to paroxetine in tablet form in SmithKline’s ‘944 patent
were invalidated by the District Court by summary judgment in light of the
earlier broad product claims to paroxetine in tablet form in
SmithKline’s ‘723 patent.
A key point was that the later, product-by-process claims were to the
same product. The CAFC affirmed the
District Court’s ruling.

SmithKline
had attempted to argue before the CAFC that the products claimed in each
patent were not the same. However,
argument was precluded on appeal as this point wasn’t raised in the
appeal brief.

Comment

We are
obviously left wondering who would have prevailed if SmithKline had been
allowed to argue the ‘different product’ point.

This
case is unlikely to act as a deterrent to filing such patents, as there are a
number of avenues left open to distinguish (and possibly overrule) this
case. The obvious ones being to firstly argue that the product of the
later patent is different and secondly to argue that novelty requires disclosure
of each and every claim element. The
process-elements being further limitations and therefore novelty-conferring.

The flip
side for patentees is that inherent in the Court’s decision is the
finding that product-by-process claims are not limited by the process
elements. Thus, if they can chart the
now-more-difficult waters of validity, then, in the US, the patent confers a much
broader monopoly than in other countries.

If this
case is appealed, then it is quite likely that it will be reversed since, as
pointed out in the dissenting opinion by Judge Newman, the basic rules of
novelty seem to have been ignored.

Australian patent litigation strategy

(The following is a set
of speaker notes, so please forgive the truncated style.)

Types of proceedings

The standard proceedings are available in Australia:
namely – infringement / revocation and declarations of non-infringement

In addition to the above, unjustified threats
and re-examination by the Patent Office are also possible, though the
re-examination procedure can be problematic.

As at the date of writing, no application for
a declaration of non-infringement has been made under the 1990 Act. This is for a number of reasons, including
that it is Onerous on the applicant,
who amongst other things, must seek written a admission; pay legal costs &
costs of proceedings and can not challenge validity.

Split validity
and infringement

This is unusual due to inconvenience for the
court. However, the court will
entertain such an application if will be determinative of the proceedings.

Split liability
and quantum

This is often ordered. The parties will often negotiate a
settlement after liability and before full investigation of quantum.

Streamlined / expedited cases

Increasingly favoured by the courts.

8-10 months from issue to trial is possible.
(Depends on facts & whether parties consent.)

Judgments can still take 12mths or more after
trial.

Courts

First instance, Court of Appeal, etc

1st instance — Federal Court or a State
Supreme Court. (Fed. Court hears
almost all cases.)

Appeal — 3 Judges — Full Court of the
Federal Court (or Full Court of the Supreme Court as applicable),

Final Appeal – High Court (5 Judges).

Specialist judges, Juries

No formal specialist judges. Certain Judges in Federal Court hear most
IP cases.

No juries.

Remedies

Injunction, damages, account of profits,
delivery up etc

All available.

Other remedies might include rectification of
the Register of Patents (eg. where invalidity is based on proprietorship of
the patent.)

Procedure

Time taken from issue of proceedings to trial,
then to appeal

1st Instance: (Issue to trial ~ 1-2
years

Trial to Judgment ~ 3-12 months

Issue to Judgment ~ 33 months.)

First Appeal: (Hearing ~1 year from 1st
instance judgment; Judgment ~3-6mths).

Costs — how much and is it recoverable?

~AU $2m / ~�1.25m / ~ US $1.5m —
is a moderate figure for a 1st instance – fully litigated
infringement & invalidity proceedings

Recovery usually ~50% but periodically as low
as 0% or up to 66% depending on conduct of parties.

Evidence

Discovery / Disclosure

Based on pleadings and narrowed to categories
ordered by court (after negotiation by parties).

Standard practice is that substantial time is
spent on negotiating categories and substantial money on reviewing large
volumes of discovered documents.

Experiments

Apply for directions from court, which has
discretion about conduct.

Parties negotiate terms (eg. who to be
present, what will be done, etc.)

Process inspections

As per experiments (above).

Evidence from abroad (letters of request)

Depositions outside jurisdiction — both
parties present; independent examiner, transcript etc

Letters of Request — file copy of letter
interrogatories � certified translation

Experts / Witnesses of fact

Strict guidelines for communication with
experts.

Experts – ability to give evidence from
Skilled Addressee’s perspective: (Issues include: Australian Art, are
they too inventive, actual experience before priority date etc).

Witnesses of fact are rarely required.

Cross-examination of witnesses

Evidence in Chief tendered by affidavit.
Examination in Chief is restricted to correcting typographical errors and
clarifying details if necessary.

Parties inform each other which witnesses they
wish to cross examine.

Re-examination usually required.

Interim injunctions

What are the requirements?

(1) Serious question to be tried, (2)
Irreparable harm; and (3) Balance of convenience.

Other factors: (delay; are damages
quantifiable; undertakings by respondent; etc).

Pharmaceutical cases – new requirements s
26A-D Therapeutic Goods Act 1989 (Cth):

Certification by generic about infringement of
patents granted ‘in relation to’ the drug

If generic filed a ‘b’ certificate
(ie under s 26B(1)(b)):

Prior to commencing patent infringement
proceedings, patentee must certify to TGA & generic: good faith,
reasonable prospects of success, conduct without unreasonable delay.

AUD $10m penalty — false or misleading,
or breach of undertaking (will take into account profit of patentee &
loss suffered by any person)

� compensate Aust. Govt for damages if
interloc. injunction had been granted.

Patentee to notify Attorney General before
seeking interlocutory injunction

Potential enormous damages awards to generic
Australian government if interlocutory granted and proceedings later
dismissed / discontinued / vexatious.

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