The Court Gives Roadmap to Patent Trolls on How to Obtain Lucrative Settlements from Customers without Declaratory Judgment Recourse from Manufacturers.

Stephen Parker | April 11, 2014

Microsoft v. DataTern, Inc. and SAP v. DataTern, Inc. (Precedential Opinion).

April 4, 2014

Before Chief Judge Rader, Prost and Moore.  Opinion by Moore.  Opinion dissenting-in-part by Rader.

Summary

DataTern, Inc., a company established to exploit IP opportunities (aka patent troll), sued hundreds of customers of Microsoft and SAP alleging infringement of its’ patents for a software product that facilitates interfacing of object-oriented applications with relational databases, seeking lucrative settlements from consumers disinterested in combating a full patent lawsuit without suing Microsoft and SAP.  Despite DataTern’s effort to avoid litigation with Microsoft and SAP, who as manufacturers of the products were well equipped and interested to seek legal recourse, Microsoft and SAP successfully filed declaratory judgment actions in New York district court and were awarded summary judgments for non-infringement.  DataTern appealed to the CAFC.   Although the CAFC affirmed the district court’s decision, as explained in the dissenting-in-part opinion of Chief Judge Rader, the CAFC’s opinion “creates a roadmap [for patent troll’s] to avoid declaratory judgment” actions by taking steps to ensure that their claim charts presented to allegedly infringing customers reference only customer activity and not activity of the product manufacturers.


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Nothing Lost but Nothing Gained: Generic Producer Evades Infringement but Fails to Invalidate Patent under §112.

Adele Critchley | April 3, 2014

Alcon Research Ltd., v. Barr Laboratories, Inc.

March 18, 2014.

Before Newman, Lourie and Bryson. Opinion by Lourie.

Summary:

The CAFC reversed the District Court’s judgment that Alcon’s patents lacked enabling disclosure and sufficient written description as Barr had failed to demonstrate that some experimentation was required, let alone undue experimentation.  Barr’s allegations that the claims were “too broad,” the specification was “too limited,” and the art was “too unpredictable,” was not sufficient without evidence to support that undue experimentation was required in order to practice the patented method.

The CAFC, however, affirmed the District Court’s judgment of non-infringement since Alcon had failed to prove that the polyethoxylated castor oil (“PECO)” in Barr’s product was present in a “chemically-stabilizing amount.”

The CAFC denied Barr’s judgment as a matter of law (“JMOL”) and Rule 59(e) (alter or amend a judgment) motions on non-infringement for the two patents that were omitted from the pretrial order and not litigated.


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No Claim Preclusion. No Issue Preclusion. No Problem. The Kessler Doctrine Fills the Gap.

Andrew Melick | March 26, 2014

Brain Life, LLC v. Elekta Inc.

March 24, 2014

Before O’Malley, Bryson, Wallach.  Opinion by O’Malley

 

Summary:

In a prior case, Medical Instrumentation Diagnostics Corporation (MIDCO) brought a patent infringement suit against Elekta asserting the apparatus claims and the method claims of US Patent No. 5,398,684 (“the ‘684 patent”). The method claims were later dropped from the suit “without prejudice.” MIDCO ended up losing the infringement action. Brain Life, the successor-in-interest of the ‘684 patent, brought a suit against Elekta alleging infringement of the method claims of the same patent against the same products except for one additional product.

The CAFC held that claim preclusion did not bar the suit with regard to alleged acts of infringement occurring after the judgment in the first suit brought by MIDCO. The CAFC also held that issue preclusion did not bar the suit with regard to the method claims because the method claims were not “actually litigated.” However, under the “Kessler Doctrine,” Elekta has a right to use the products held not to be infringing the ‘684 patent in the first action freely and without harassment. Thus, the CAFC affirmed the District Court’s determination that the suit is barred with regard to the products involved in the first action, albeit, on different grounds from the District Court. The CAFC vacated the District Court’s decision and remanded the case with regard to the product that was not previously litigated in the MIDCO case.


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There must be a Clear and Compelling Reason to Construe a Claim Term in a Way Other than its Ordinary Meaning

Scott Daniels | March 19, 2014

Ancora Technologies v. Apple

Decided March 3, 2014

Before Chief Judge RADER, Circuit Judges TARANTO and CHEN. Opinion by Circuit Judge TARANTO.

Summary:

Ancora stipulated that its patent was not infringed by Apple’s iOS operating system, in view of the trial judge’s narrow construction of the term “program” in Ancora’s patent claims.  Ancora appealed the judge’s claim construction.  Apple cross-appealed the judge’s construction of two other claim terms, “volatile memory” and “non-volatile memory” in the context of the judge’s determination that the claim terms were not indefinite.

The CAFC agreed with Ancora on both issues and remanded the case to the lower court for further proceedings.

Details:

Ancora’s patent claimed a method for determining whether software on a computer is authorized, and if not, taking remedial action.  A significant feature of the claimed method is that encrypted license information is stored in the computer’s basic input/output system (BIOS), where that information is less vulnerable to hacking than when stored in other types of memory space, as in the prior art. 

Representative claim 1 recited

A method of restricting software operation within a license for use with a computer including an erasable, non-volatile memory area of a BIOS of the computer, and a volatile memory area; the method comprising the steps of:

selecting a program residing in the volatile memory,

using an agent to set up a verification structure in the erasable, non-volatile memory of the BIOS, the verification structure accommodating data that includes at least one license record,

verifying the program using at least the verification structure from the erasable nonvolatile memory of the BIOS, and

acting on the program according to the verification.

Apple argued, and the trial judge agreed, that in view of the specification and the prosecution history, the claim term “program” would be understood by one skilled in the art as “an application program,” i.e., a program that relies on an operating system to run but is not itself an operating system, specifically “a set of instructions for software application that can be executed by a computer.”   

Holding:

The CAFC recited the principle of law that each claim term is given ordinary meaning in the context of the claimed invention, unless the applicant has clearly adopted a different meaning or clearly disclaimed the literal scope of the claim.  Here, one in the art would understand that “program” in the context of computers include application programs and operating systems that run application programs, plus other types of programs.  They are not limited to application programs.

Further, the recitation of “application software program” in another claim in the asserted patent suggests that the applicants did not intend the bare term “program” in representative claim 1 to have the same meaning.   

The specification refers to the programs to be verified as “software programs,” “software” and “programs” without limiting them to application programs.  Examples in the specification do refer to “application programs,” but they are non-limiting examples. 

Apple’s reliance on applicants’ statements during prosecution of the patent were also unpersuasive. Those arguments distinguishing prior art, “concerned software that implemented the invented method. The to-be verified software is different from the verifying software. The statements from the prosecution history on which Apple relies do not say that the program being verified must be an application program.” (Emphasis added).   

The CAFC also affirmed the trial judge’s rejection of Apple’s defense that the claims were indefinite because of the claim phrases “volatile memory” and “non-volatile memory.”  The CAFC began by noting the agreement among the parties and the lower court that the phrases are well-understood in the art: “to one of ordinary skill in the art, a volatile memory is memory whose data is not maintained when the power is removed and a non-volatile memory is memory whose data is maintained when the power is removed.” 

The CAFC acknowledged certain “loose wording” in the specification regarding these phrases, but the panel found that “the terms at issue have so clear an ordinary meaning that a skilled artisan would not be looking for clarification in the specification. There is no facial ambiguity or obscurity in the claim term. Moreover, the specification nowhere purports to set out a definition for ‘volatile’ or ‘non-volatile’ memory, and nothing in it reads like a disclaimer of the clear ordinary meaning.” (Emphasis added). 

Takeaway:

Of course, drafters need to be careful in their use of claim terminology.  Nonetheless, where claim terms are quite well understood in the relevant art, courts will not apply those terms in a manner contrary to their common understanding, unless the applicant clearly intended to redefine the term or clearly disclaimed a portion of the literal scope of the claim. 

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