World of Warcraft Meets the Digital Millenium Copyright Act

The Digital Millennium Copyright Act (DMCA) was enacted by Congress in 1998 in part to prevent the circumvention of technological measures designed to prevent either access to or copying of a copyrighted work.  With certain exceptions, the DMCA made it a crime to circumvent such measures and outlawed the manufacture, sale, or distribution of devices used to illegally copy software.

Examples of such anti-piracy prevention measures include technology that prevents an unauthorized copy of a DVD from being played and software that limits the number of times a computer program can be installed.  Because the law is relatively new and because technology is constantly changing, the scope and application of the DMCA remains an evolving frontier.

On January 28, the DMCA was applied to circumvention software used in connection with the largest and most successful multi-player online game in the world, the World of Warcraft computer game (WoW).  WoW players control their characters in a virtual universe.  The players can explore the landscape, fight monsters, perform quests, build skills, and interact with other players and computer-generated characters.  While playing, the players may acquire in-game assets, experience, and power.

Blizzard created and now operates WoW and owns all copyrights related to the game.  Introduced in late 2004, WoW currently has approximately 11,500,000 players, generating over $1.5 billion in annual revenues.

To play WoW, a user obtains the game client software and loads it onto his or her computer hard drive.  When the game is played, the client software accesses Blizzard’s game server software through an online account for which the user pays a monthly fee.

In June 2005, MDY began selling Glider to WoW users, generating revenues of over $3.5 million to date.  Glider is a type of computer program known as a “bot” that plays WoW while a user is away from his or her computer.  This enables the user to advance more quickly within WoW.

To an outsider, the use of Glider may not appear to have a significant effect on WoW.  However, because WoW is a carefully balanced competitive environment in which players compete against each other to advance, the use of Glider upsets this balance by enabling its users to obtain more than their fair share of game assets.  This diminishes the value of the assets acquired fairly by other users.  As a result, Blizzard received numerous complaints about the use of bots from customers.

To combat bots, Blizzard developed a technical measure known as Warden to prevent the use of bots by WoW players.  Initially, the software prevented the use of Glider to play WoW.  However, MDY made changes to Glider designed to avoid detection by Warden.  Thus, Blizzard filed claims, among others, of violation of the DMCA.

In MDY Industries, LLC v. Blizzard Entertainment, Inc., the Arizona District Court held that the DMCA applied to Glider.  In reaching this decision, the court examined the aspects of the WoW software that Warden was designed to protect.  The literal code could be freely copied without connecting to the server where Warden resided.

Likewise, the non-literal elements which constituted the majority of the game client software–multimedia content such as environmental graphics, sound effects, music, player avatars, etc.–are stored on the user’s hard drive and can be accessed without connecting to the server.  Consequently, the court found that the DMCA did not apply to the literal code and the individual non-literal elements because Warden did not prevent access to these features of the program.

However, the court’s analysis did not end there.  Although the individual non-literal illustrations and sounds created by the game client software can be viewed in isolation and even in limited combinations, they cannot be viewed dynamically in the WoW game unless the user connects to the Blizzard server.  Upon connecting to the server, the user can experience the dynamic components–real-time travel through different worlds, hearing the sounds of those worlds, encountering their inhabitants and monsters, and encountering other players.

None of these dynamic features can be accessed on a user’s hard drive.  To connect to a server and access the dynamic features, Glider must bypass the circumvention protections provided by Warden.  Consequently, the court found that the DMCA applied with respect to the dynamic nonliteral elements of the game.

MDY argued that the dynamic nonliteral elements cannot be copyrighted because 1) they are not “fixed” in a tangible medium as is required by the Copyright Act and 2) the users control the dynamic elements of the game, not Blizzard.  The Court rejected these argument citing a number of cases for the proposition that audio-visual displays of computer games are subject to copyright protection even though a player’s actions determine, in part, what is diplayed on the computer screen.  Atari Games Corp. v. Oman, 888 F.2d 878, 884-85 (D.C. Cir. 1989); Midway Mfg. Co. v. Arctic Int’l, Inc., 704 F.2d 1009, 1011-12 (7th Cir. 1983); Williams Elec., Inc. v. Arctic Int’l, Inc., 685 F.2d 870, 874 (3d Cir. 1982); Stern Elecs., Inc. v. Kaufman, 669 F.2d 852, 855-56 (2d Cir. 1982).

Another of MDY’s arguments that was rejected by the court in a previous decision is that copying software into the RAM memory of a computer is not a violation of any copyright owned by Blizzard because that is a use that is permitted by the Copyright Act.  An amicus brief was also filed in the case by Public Knowledge supporting MDY’s position in this regard.  Under 17 USC § 117, it is not a copyright infringement to make a new copy or adaptation of a computer program where making that copy is “an essential step in the utilization of the computer program in conjunction with a machine and that is used in no other manner.”  The court rejected MDY’s argument based on the Ninth Circuit’s previous decision in MAI Systems Corp. v. Peak Computer, Inc., 991 F.2d 511 (9th Cir. 1993), holding that copying to RAM memory of a computer is a copyright infringement.

MDY has expressed its intent to appeal the trial court’s decision and ask the Ninth Circuit to overturn the MAI Systems decision.  It will be interesting to see how the Ninth Circuit deals with the MAI Systems precedent in this case.  This could be an important appeal as evidenced by the varied opinions regarding the effect of the trial court’s decision.  As an example of the varied opinions, see the Broken Toys blog on this case.

Remember the Alamo: Federal Trademark Dilution v. Texas Trademark Dilution

Trademark infringement occurs when a third party uses the same mark or a mark similar to a trademark owned by a trademark owner in such a manner that consumers of the products are likely to be confused as to the source of the products.  Generally speaking, a claim of trademark infringement does not exist when the competing products are not the same and are so unrelated that consumers will not be confused as to the source of each product.  That is, unless the mark is famous.

If the mark is famous, then the trademark owner may bring a federal trademark dilution claim against any party using the mark regardless of whether the trademark is being used for similar goods or services.  The rationale behind this theory of recovery is that the use of a famous mark, even if on differnt goods or services, weakens the commercial value of the mark. 

In 2006, Congress passed the Trademark Dilution Revision Act (TDRA) in response to Moseley v. V Secret Catalogue, Inc. in which the Supreme Court held that the plaintiff must prove “actual dilution” rather than “likelihood of dilution.”  Among other things, the TDRA amended the Federal Trademark Dilution Act to change the standard from “actual dilution” to “likelihood of dilution.”  Thus, proof of actual dilution is no longer required to prevail on a federal dilution claim.

To prove a federal dilution claim, a trademark owner must show (1) that the mark is famous, (2) that the mark is distinctive, (3) that the defendant began using a mark after it became famous, and (4) that defendant’s mark is likely to cause blurring or tarnishment of the mark.  Typically, the most difficult element of proof is showing that the mark is truly famous.  Under the TDRA, a mark is famous “if it is widely recognized by the general consuming public of the United States as a designation of source of the goods or services of the mark’s owner.” 

Most Texans, and indeed many people outside of Texas would recognize the longhorn silhouette used by the University of Texas in connection with the university’s athletic programs.  In Board of Regents v. KST Electric, Ltd., the university filed suit against the defendant for using the longhorn silhouette in connection with the logo for its business. 

In response to a motion for summary judgment by the defendant on the university’s federal dilution claim, the university presented evidence of how its football and other sports programs had acquired fame.  The court held that the university had only shown evidence of “niche fame” because evidence of fame among sports fans is not evidence of fame among the general consuming public.  The TDRA was enacted, in part, to get rid of “niche fame” by requiring a mark be “widely recognized by the general consuming public of the United States.”  “One of the major purposes of the TDRA was to restrict dilution causes of action to those few truly famous marks like Budweiser beer.”  Therefore, the court held that the university had not created a genuine issue of material fact as to whether the longhorn silhouette logo is “a household name.”

It is interesting to note that in KST Electric, the defendant did not move for summary judgment on the state dilution claim.  Why the defendant only moved for summary judgment on the federal dilution claim and not the state dilution claim in all likelihood relates to the broader scope of a Texas dilution claim. 

To prove a claim of dilution under Texas law, the trademark owner must show (1) that the mark is distinctive and (2) that defendant is making significant use of a very similar mark in a manner that is likely to cause dilution of the trademark owner’s mark by blurring or tarnishment.  Whether a mark is distinctive is determined by considering  (1) whether the mark is arbitrary, (2) the length of time a user has employed the mark, (3) the scope of the user’s advertising and promotions, (4) the nature and extent of the first user’s business, and (5) the scope of the first user’s reputation. 

Thus, there is no requirement that the mark be famous, and while it may be necessary to show that the mark is a strong mark, it is not necessary to prove that a mark is a household name to prevail on a Texas dilution claim.

By Vincent J. Allen

Design Patents after Egyptian Goddess: The Comeback Kid

In 1871, the Supreme Court established the standard for proving design patent infringement in Gorham Manufacturing Company v. White.The design patent in Gorham covered the ornamental features of forks and tablespoons. The Supreme Court explained that the appearance of an article may increase its “salable value.”  The test of identity of design “must be sameness of appearance, and mere differences of lines in the drawing or sketch . . . or slight variances in configuration . . . will not destroy the substantial identity.”  Based on this rationale, the Court outlined the “ordinary observer” test that is still used by courts today in design patent infringement cases:

[I]f in the eye of an ordinary observer, giving such attention as a purchaser usually gives, two designs are substantially the same, if the resemblance is such as to deceive such an observer, inducing him to purchase one supposing it to be the other, the first one patented is infringed by the other.

In 1984, the Federal Circuit added an additional requirement to the ordinary observer test in Litton Systems Inc. v. Whirlpool Corporation.  In Litton, the Federal Circuit held that to prove design patent infringement, the accused design must not only be substantially similar under the ordinary observer test but it must also contain the novelty of the claimed design.  In other words, the accused design must contain substantially the same points of novelty that distinguished the patented design from the prior art.  This test came to be known as the “point of novelty” test.

The combination of the point of novelty test along with the extensive verbalization of the drawings of design patents in construing the claim led to an environment in which few design patents were found to be infringed. The pendulum has now begun to swing the other way with a recent en banc decision by the Federal Circuit.

After over twenty-four years of applying and refining the point of novelty test in addition to the ordinary observer test in design patent cases, the Federal Circuit rejected the test last year in Egyptian Goddess, Inc. v. Swisa, Inc.   The court held that only the ordinary observer test should be applied to a claim of design patent infringement.  The Federal Circuit also criticized the practice of providing excessive details in the construction of a design patent claim.

In rejecting the point of novelty test, the court pointed to the problems with the jury focusing on a single specified feature of the claimed design. The court found it significant that the more novel the design, the more opportunities there are for a defendant to argue its product does not infringe because it does not appropriate all of the points of novelty.

After rejecting the point of novelty test as being inconsistent with the Supreme Court’s ordinary observer test, the court then discussed the use of prior art in connection with the application of the ordinary observer test.  The court noted that in some instances the claimed design and the accused design will be sufficiently different that it is clear that the two designs would not appear substantially the same to the ordinary observer.  Thus, there is no need to compare the accused design and the patented design to the prior art.

However, where the accused design and the claimed design are not plainly dissimilar, the ordinary observer test will require a comparison of the claimed and accused designs with the prior art.  The court noted that the differences that may not have previously been noticed in the abstract may become important to the ordinary observer familiar with the prior art.

In the case at hand, the Egyptian Goddess patent claimed a fingernail buffer consisting of a rectangular hollow tube having a generally square cross-section. The buffer had buffer surfaces on three of its four sides. Swisa’s accused fingernail buffer was similar but had a buffer surface on all four sides.

swisa-design

Accused Design

 
Patented Design

Patented Design

 

The court compared the accused design, the patented design, and two of the closest prior art references-the Nailco patent and a product called the Falley Buffer Block.  The Falley Buffer Block is a rectangular block similar in shape to the accused design and the patented design, but the body is solid, not hollow as are the accused and patented designs.  The Falley Buffer Block also has four raised buffing surfaces similar to the accused design.  The Nailco patent disclosed a three sided hollow buffer with a triangular cross section and buffer pads on all three sides.

Prior Art--Top Nailco Buffer, Bottom Falley Buffer Block

Prior Art: Top--Nailco Buffer, Bottom--Falley Buffer Block

The court then considered the question whether an ordinary observer familiar with the prior art would be deceived into believing that the accused Swisa design is the same as the patented design.  After examining the expert testimony presented by each side concerning the appearances of the accused and patented designs and the prior art, the Federal Circuit held that an ordinary observer would not be deceived, thus affirming the district court’s grant of summary judgment in favor of Swisa.

Although the claim construction of the district court was stipulated by the parties in Egyptian Goddess, in its order granting en banc review the Federal Circuit raised the issue of whether trial courts should conduct claim construction in design patent cases.  The court noted that while it has held that trial courts should conduct claim construction in design patent cases, it has not prescribed any particular guidance as to the form claim construction must take.  The court provided guidance as discussed below in regard to claim construction, but found that there was no inaccuracy in the district court’s description and that neither party pointed to any prejudice resulting from the court’s interpretation.

Recognizing that a design is better represented by an illustration and that “a description would probably not be intelligible without the illustration,” the court stated that “the preferable course ordinarily will be for a district court not to attempt to ‘construe’ a design patent claim by providing a detailed verbal description of the claimed design.”  Nevertheless, the court held that the “level of detail to be used in describing the claimed design is a matter within the court’s discretion, and absent a showing of prejudice, the court’s decision to issue a relatively detailed claim construction will not be reversible error.”

Although allowing trial courts the discretion to provide a detailed claim construction, the Federal Circuit discourages the practice.  The court cautioned trial courts to recognize the risks of a detailed claim construction, such as a fact finder placing undue emphasis on particular features or focusing on each individual feature described rather than on the design as a whole.

As a practical matter, it is probable that most district courts will elect not to spend the time and effort to develop a detailed description of the drawings in a design patent.  Rather than issue a claim construction that might introduce reversible error into the case, the trial court could instead opt to construe the claim in the following simple form: A _____ as shown in Figures ______.  This is the manner in which the district court construed the claims in Dexas International, LTD v. Office Max Inc. even though it had previously adopted detailed claim constructions in another case regarding two of the same patents but different defendants.

While the Egyptian Goddess court held that the Swisa design did not infringe the patented design, the decision is a victory for owners of design patents because of the Federal Circuit’s rejection of the “point of novelty” test.  The new standard is arguably not as broad as intended by the Supreme Court in Gorham in that the ordinary observer is presumed to have considered the prior art in determining whether infringement exists. Nevertheless, the new standard will likely result in a finding of infringement in a higher percentage of cases than what was seen under the former standard.

Moreover, the Federal Circuit’s criticism of providing a detailed description of the drawings in claim construction will result in the fact finder relying on the drawings in most cases to determine infringement rather than focusing on specific elements in a detailed claim construction.  This will make it more difficult for defendants in most cases to get out on summary judgment by arguing that specific elements of the patented design are not present in the accused design.

BPAI Limits Patent Eligibility for Software Patent Claims after Bilski

In Bilski, the Federal Circuit held late last year that the machine-or-transformation test should be used for determining patent eligibility of a process. This test can be satisfied 1) by showing that the claim is tied to a particular machine or 2) by showing that the claim transforms an article.

Although the Federal Circuit did not decide in Bilski whether the recitation of a computer is enough to tie a process claim to a particular machine, the BPAI in Ex Parte Gutta found that a recitation in the preamble of the claim to a “computerized method performed by a data processor” adds nothing more than a general purpose computer that is associated with the steps of the process in an unspecified manner. The BPAI held that such a field of use limitation is insufficient to render an otherwise ineligible process claim patent eligible.

The BPAI also found that because the claim did not require any particular structure for the step of “displaying,” this was also insufficient to satisfy the machine prong of the test. The BPAI reasoned that a conclusion that such post-solution activity is sufficient to impart patentability to a claim involving solving a mathematical algorithm would exalt form over substance.

Finally, in finding the transformation prong was also not satisfied, the BPAI held that the data being manipulated did not represent a physical or tangible object. The data at issue represented information about user selection histories, which the BPAI found was an intangible.

In conclusion, the BPAI is not suggesting that software method claims are unpatentable. However, to avoid a 101 rejection, special attention should be paid to process claims to ensure that the claims satisfy one of the two prongs of the machine-or-transformation test. A general purpose computer recitation will no longer satisfy the patent eligibility requirement. Rather, the claim should be tied to a particular machine.

By Vincent J. Allen

The Federal Circuit Puts a Damper on Forum Shopping

The Eastern District of Texas has the reputation of being a favorable forum for filing patent infringement suits.  For the year ending September 31, 2007, more patent cases were filed in the Eastern District than in any other district in the nation.  The Central District of California, despite having a substantially greater population of businesses, trailed the Eastern District’s 359 filings by 25. 

Historically, a patent owner has been able to file suit against infringers in the Eastern District of Texas without fear of having the case transferred to another district so long as the court had personal jurisdiction over the alleged infringers.

Plaintiffs will now have a more difficult time maintaining venue in the Eastern District of Texas in many patent cases filed there and elsewhere in the Fifth Circuit in light of the Federal Circuit’s recent In re TS Tech USA decision handed down December 29, 2008.

venuecartoon

In that case, TS Tech filed a motion to transfer venue arguing that the Southern District of Ohio was a far more convenient venue to try the case.  The physical and documentary evidence was mainly located in Ohio, and the key witnesses all lived in Ohio, Michigan, and Canada. The only connection to Texas was that several Honda vehicles with the allegedly infringing headrest assembly had been sold in Texas.

Because a motion to transfer venue relates to a procedural matter rather than substantive patent law, the Federal Circuit looked to the Fifth Circuit’s recent In re Volkswagen of America, Inc. decision in deciding In re TS Tech.  In re Volkswagen involved an automobile accident that occurred in Dallas.  An injured motorist, a passenger, and the mother of a deceased passenger sued Volkswagen in the Eastern District of Texas.  Volkswagen moved to transfer venue to the Northern District of Texas on the grounds that all of the sources of proof were located in the Northern District of Texas.  The trial court denied the motion to transfer and Volkswagen filed a mandamus petition. 

Mandamus is an extraordinary remedy designed to be used only in those situations where a trial court “clearly” abused its discretion such that refusing transfer would produce a “patently erroneous result.”  The Fifth Circuit, finding that the case had no connection with the Eastern District, held that the trial court clearly abused its discretion in refusing to transfer the case to the Northern District of Texas. 

Following In re Volkswagen, the Federal Circuit in In re TS Tech held that the trial court abused its discretion in refusing to transfer the case to a venue with a more substantial connection to the case.  The Federal Circuit held that the fact that some infringing products were sold in the Eastern District is not enough to prevent transfer of the case to a venue where the physical and documentary evidence was mainly located and where the location of the court was more central to key witnesses.

Although In re TS Tech is different from In re Volkswagen in that infringing activity took place in the Eastern District, the Federal Circuit found that “the fact that this is a patent case as opposed to another type of civil case does not in any way make the district court’s rationale more logical or make the factor weigh against transfer.”  The court reasoned that the Eastern District’s connection with the case was no more significant than any other district because the infringing products were sold throughout the United States.

Thus, at least as to cases that have no connection with the Eastern District other than the fact that some of the infringing products are sold there, potential plaintiffs might want to consider filing in another district with a more substantial connection to the case.  Otherwise, there is a risk of having the alleged infringer choose where the case should be transferred.  Based on the risk involved in filing in the Eastern District, districts such as the Northern District of Texas, with its relatively new patent rules, could see an increase in the number of patent cases filed.

Proponents of legislative reform of venue statutes may have achieved the desired effect judicially, at least in part, with the In re TS Tech decision.  Defendants who find themselves in plaintiff-friendly venues now have another weapon to fight the plaintiff’s choice of venue in many cases. 

However, judges in the Eastern District will likely remain resistant to transferring cases, and thus the effect of the decision should be limited to those cases having no other contact with the Eastern District except that infringing activity took place there.  Additionally, the facts of many cases will not be the same as the facts of In re TS Tech, particularly in cases involving multiple defendants.  In a typical multiple-defendant case, defendants are located all over the country and there is no one location that is more convenient to try the case.

In conclusion, much more thought should be given to convenience transfer motions.  The likelihood of success of a convenience transfer motion should be considered by plaintiff’s counsel before the lawsuit is filed so as to maximize the chances of keeping a case in the plaintiff’s choice of venue.  Likewise, defense counsel should consider whether a transfer motion might be used to transfer the case to a more favorable venue for the defendant.

By Vincent J. Allen

A Smart Car for a Smart Firm

smartcarCelina Diaz, an attorney at Carstens & Cahoon, is shown modeling the firm’s recently purchased firm automobile (or maybe we should call it half an automobile).  The contraption is one of the new Smart Cars recently imported into the United States.  A Smart Car is an ultra-low emission vehicle (“UEV”) that is manufactured in France using environmentally-friendly manufacturing techniques. This cute conveyance is available to all our employees for trips relating to firm business and has been turning heads all around Dallas.

Ding Dong! The Witch is Dead…or is She?

witch-picWhich old witch?  The wicked witch of patent reform.  Many in the patent community are singing the joyous news that the Patent Reform Act of 2007 is dead.

The departure of former Solicitor of the U.S. Patent and Trademark Office, John Whealan, from his temporary position with Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.) on May 1, 2008 is a strong indicator that patent reform legislation will not pass in 2008.  Whealan has been on leave from the PTO for the past year to assist Senator Leahy with crafting patent reform legislation.  If the bill were not in fact dead, it is unlikely that Mr. Whealan would have left his position with the task unfinished.

Whealan’s departure was not the only sign that the bill was finished.  On April 10, 2008, Senator Arlin Specter (R-Pa.), ranking minority member of the Senate Judiciary Committee, commented on the floor of the Senate that the Republican caucus may refuse to act on pending patent reform legislation “as a matter of leverage to get fair and equitable treatment” in regard to the confirmation of federal judges.  On the same day, Senate Majority Leader Harry Reid (D-Nev.) stated that he was “disappointed we are not going to be able to move to the patent bill . . . we are not going to do a patent bill now.”  He also reported that “the chairman and ranking member [of the Senate Judiciary Committee] could not work out what they wanted to bring to the floor.”

The disagreement stemmed from the most controversial portions of the legislation, the apportionment of damages and Applicant Quality Submissions (AQS) provisions.  The current damages apportionment provision in the bill provides for a reasonably royalty to be calculated based on the economic value attributable to an invention’s specific contribution over the prior art.  This provision is opposed by the Bush Administration, the Court of Appeals for the Federal Circuit, and the PTO.  The AQS provision of the bill burdens patent applicants with a duty to search and describe the prior art in connection with filing an application.  The patent bar  vehemently opposes the AQS provision while the Bush Administration and the PTO are strongly in favor of AQS. 

Hal Wegner, a prolific commentator and former director of the intellectual property law program at George Washington University Law School, suggests that the AQS “is a major reason why many in the patent community have moved away from Senator Leahy’s bill.”  He also opines, “Indeed, it is hard to understand responsible members of the patent community supporting this provision.”  A system similar to that of AQS has already been tested in the PTO’s accelerated examination program initiated in August 2006.  According to PTO statistics, 85% of all petitions for accelerated examination during the first eight months of the program were dismissed or denied.  This was for applicants who voluntarily elected to apply for accelerated examination.  Although a portion of the failure rate may be attributable to the learning curve associated with a new program, the statistics do not bode well for the success of AQS. 

While the continuation rules that the PTO attempted to implement were blocked in the Tafas v. Dudas litigation in the Eastern District of Virginia, the Patent Reform Act provides for a legislative override of the summary judgment granted by the court barring implementation of the rules.  The PTO’s attempt to strong arm the patent community into accepting the continuation rules along with the PTO’s tireless lobbying for AQS has angered many in the patent bar.

Although the supporters of patent reform legislation promised on numerous occasions over the past several months that she would live, the witch is “most sincerely dead.”  The year 2008 will probably pass without further damage to the patent system other than reform provided by case law.  In any event, it is unlikely that the bill would be signed into law without major revisions.

This is not good news to the groups who lobbied Congress for patent reform.  The Coalition for Patent Fairness, a group of technology companies desiring to limit the damage awards and legal costs associated with patent litigation, spent $2.5 million on lobbyists during the past fifteen months according to the New York Times.  The group’s antithesis, the Coalition for 21st Century Patent reform, spent $1.8 million.  Apparently, the groups were unwilling to compromise on the major portions of the bill as reflected by the inability of the Senators to come to an agreement.

Although the Patent Reform Act of 2007 may be dead, reform of the patent system will be proposed again.  While change may be necessary to keep up with the times, change for the sake of change or to protect the special interests of lobbyists is not the solution.  As patent practitioners, we should heed the famous quote of Abraham Lincoln: “The patent system . . . added the fuel of interest to the fire of genius, in the discovery and production of new and useful things.”  Before making major changes to our patent system, we should encourage an open and honest debate about the best means for accomplishing a productive change.  Otherwise, we could end up harming the very system that has led to unprecedented innovation during the United States’ short history.

 By Vincent J. Allen

The Battle Continues: Supreme Court v. Federal Circuit

     The U.S. Supreme Court has reversed all nine patent cases decided on appeal from the Federal Circuit since 2002.  In two cases handed down in April of 2007, the Court continues its trend of reversing the Federal Circuit.  In a much anticipated decision, the Court in KSR v. Teleflex unanimously rejected the Federal Circuit’s rigid approach to determining whether a patent is non-obvious in view of the prior art.  Although not as far reaching as KSR, a second case, Microsoft v. AT&T, may hamper owners of software patents in their ability to prevent copying of software outside the United States.

KSR v. Teleflex

    A patent applicant is entitled to a patent only for inventions that are useful, novel, and non-obvious.  Because almost all inventions are combinations of elements that are already known, the non-obvious requirement is usually the highest hurdle. 

    The Supreme Court established the framework for determining obviousness in the 1966 Graham v. John Deere decision.  In that case, the Court held that the obviousness of an invention must be decided by determining the scope and content of the prior art, ascertaining the differences between the prior art and the claimed invention, and resolving the level of ordinary skill in the pertinent art. 

    To provide uniformity and to prevent the use of hindsight in deciding the obviousness question, the Court of Customs and Patent Appeals established the requirement of a “teaching, suggestion, or motivation” (TSM) to combine known elements to show that a combination is obvious.  Over the years, the TSM test has been refined by the Federal Circuit to require that “some motivation or suggestion to combine the prior art teachings” exist in the prior art, the nature of the problem, or the knowledge of a person having ordinary skill in the art.

    In KSR, Teleflex argued that there was no teaching, suggestion, or motivation in the prior art to make the combination of an adjustable accelerator pedal and an electronic sensor claimed by the patent at issue.  The Supreme Court reversed the Federal Circuit’s decision that upheld the validity of the patent.  The Court reasoned that Graham provides an expansive and flexible view to the obviousness question that is inconsistent with the narrow, rigid manner in which the Federal Circuit applied the TSM test.  The Court found convincing KSR’s evidence that combining the inventions of two prior patents was a design step that was well within the grasp of a person of ordinary skill in the relevant art.  Thus, the claimed combination of two previously known components was obvious.  The Court found that although the TSM test provides a helpful insight, “[t]he obviousness analysis cannot be confined by a formalistic conception of the words teaching, suggestion, and motivation, or by overemphasis on the importance of published articles and the explicit content of issued patents.”

    The KSR decision does not result in a radical change to patent law, but simply reinforces prior Supreme Court precedent.  However, the effects of the rejection of the TSM test as a bright line rule could prove significant, affecting both prosecution of patent applications and litigation of patent infringement disputes.  Patent applicants and litigants alike can minimize the effects of KSR by taking a proactive approach during prosecution and litigation. 

Patent Drawing of Pedal Assembly

Patent Drawing of Pedal Assembly

 

    The difference between the Federal Circuit’s application of the TSM test and the approach outlined by the Court in KSR is that the TSM test is now only a factor in the obviousness analysis rather than an absolute requirement.  The KSR Court favored a less rigid approach to determining the scope and content of the prior art.  This approach recognizes a long established corollary that “the combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results.”

    A court must now consider whether inventions available both inside and outside the field of endeavor might be predictably modified in response to “design incentives and other market forces.”  In rejecting the Federal Circuit’s holding that courts and patent examiners should look only to the problem the patentee was trying to solve, the Court stated,  “Common sense teaches, however, that familiar items may have obvious uses beyond their primary purposes, and in many cases a person of ordinary skill will be able to fit teachings of multiple patents together like pieces of a puzzle.”

    For similar reasons, KSR rejected the Federal Circuit’s holding that a patent claim cannot be proved obvious by a showing that the combination of elements was “obvious to try.”  The Court reasoned that “[w]hen there is a design need or market pressure to solve a problem and there are a finite number of identified, predictable solutions, a person of ordinary skill has good reason to pursue the known options within his or her technical grasp.”

    Only time will tell the full extent of the KSR decision.  The U.S. Patent & Trademark Office could reject more patent applications citing KSR.  The flexibility allowed by the Supreme Court could make it easier for examiners to establish a prima facie case of obviousness based on “common sense” while placing the burden on applicants to present evidence of non-obviousness.  The Director of the Patent Office has acknowledged that “[t]he decision gives our examiners more flexibility to use their considerable technical skills to reject obvious changes to existing technology.”  Nevertheless, examiners must still provide an explicit non-conclusory analysis for the basis of any obviousness rejection.

    To help avoid obviousness rejections based on “common sense,” applicants should identify any improvements, unexpected results, and other evidence that the invention is not obvious.  Applicants should also avoid identifying problems in the prior art in a way that would lead the examiner to believe that the solution proposed by applicant is predictable.

    The KSR decision casts doubt on the validity of many existing patents, possibly affecting the licensing value and litigation value of certain combination patents.  For example, the Federal Circuit quickly followed the KSR decision with the Leapfrog v. Fisher-Price decision, deciding on facts similar to the KSR case that the conversion of a known mechanical toy into an electronic version of the same toy was obvious.  The court relied on the fact that the plaintiff failed to present any evidence that the claimed combination was outside the technical grasp of a person of ordinary skill in the art. 

   While it is clear that the Supreme Court is attempting to curtail patent protection, this does not mean that patent holders should dismiss all their suits or forego filing suits.  Rather, the patentee should focus greater efforts on proving how a patented invention is non-obvious.  This can be done, for example, by providing expert evidence that the claimed combination resulted in something more than a predictable use of prior art elements.  When appropriately handled, litigation of patents will likely result in a patent being found invalid only in the most unmistakable cases.  As for defendants, KSR is an added bonus in some cases, but will not always be a silver bullet.  Defendants must likewise present expert evidence of the obviousness of a claimed combination in the absence of explicit teachings in the prior art.

Microsoft v. AT&T

    A U.S. patent allows its owner to exclude others from making the invention in the United States.  But what if the components of the invention are built in the U.S. and assembled overseas?  In Microsoft v. AT&T, the Court was faced with interpreting a patent statute providing that where components of a patented invention are shipped out of the United States prior to assembly, whoever causes those components to be supplied for the purpose of assembly is liable for patent infringement.

    The application of the statute is relatively easy when faced with a patent that claims a machine or an apparatus.  However, because of the difficulty of defining “components,” the application of the statute is complicated where the components at issue include intangibles such as software.

    Microsoft argued that software in the abstract is not a component, and therefore, Windows software sent on a master disk or through electronic transmission from the United States did not constitute infringement of the AT&T patent.  The Supreme Court agreed, reversing the Federal Circuit and holding that only software in a tangible medium could qualify as a component.  Because the Windows software was copied onto a tangible medium outside the United States, the Court held that Microsoft was not liable for patent infringement for computers assembled outside the United States.  The Court found it inconsequential that the copying of the master disk was easy, opining that “the extra step is what renders the software a usable, combinable part of the computer.”

    In conclusion, the KSR and Microsoft decisions evidence the Court’s efforts to curtail the perceived proliferation of patent protection, a trend which will likely continue in the years to come.      

 By Vincent J. Allen

Local Patent Rules for the Northern District of Texas

     In an order issued April 2, Chief U.S. District Judge of the Northern District of Texas, A. Joe Fish, established case management rules on a trial basis for patent cases filed in the Dallas Division.  The patent rules apply to all civil actions containing an allegation of utility patent infringement and to any action seeking a declaration that a utility patent is not infringed, is invalid, or is unenforceable.  The patent rules take effect on May 1, 2007 and apply to any Dallas Division patent case filed on or after that date and to certain cases filed prior to the effective date.  Although other districts such as the Eastern District of Texas and the Northern District of California have had patent rules for some time, many other districts are now considering creating patent rules as well.  Dallas is the first in a new wave of districts likely to enact patent rules.

    In addition to the conference requirements of Federal Rule 26(f), parties in a patent case filed in Dallas must now confer on a number of additional matters common to patent cases. The patent rules also require certain disclosures designed to bring the parties to an early position on pivotal issues such as infringement and invalidity.  This will decrease the average time to bring a case to trial by both avoiding common pre-trial disputes that arise in patent cases and focusing the parties on the important issues.   

   The patent rules are based on rules proposed after debate by the Northern District of Texas Patent Rules Task Force, which is comprised primarily of local attorneys from law firms and companies interested in patent litigation.  Although modeled after rules established in the Eastern District of  Texas, there are some differences.  The differences include provisions requiring more detailed preliminary infringement and validity contentions (with potential sanctions for failing to comply), more liberal provisions regarding amendment of initial infringement and invalidity contentions, and a provision that the scope of discovery is not limited to the preliminary infringement or invalidity contentions.

    Adoption of the patent rules along with potential changes to the venue statute governing federal actions could significantly increase the number of patent cases filed in Dallas. Currently, the federal venue provisions allow a plaintiff to sue a corporate defendant in any judicial district in which that defendant is subject to personal jurisdiction.  Thus, the Eastern District is able to attract a large volume of patent filings, despite its sparse population and lack of a business presence there for many of the defendants sued.   

   Venue rules will be tightened should Congress enact the Patent Reform Act of 2007.  Identical bills with bipartisan support were introduced in both the Senate and the House on April 18.  If passed, the bills will amend the federal venue provisions to require patent cases to be brought in the district (1) where either party resides or (2) where the defendant has committed acts of infringements and has a regular place of business.  This would eliminate the Eastern District as a proper venue in many cases, causing some of the cases that would have been filed in the Eastern District under the old venue rules to be filed in Dallas instead.

    Upon enactment of the Patent Reform Act, the Dallas patent rules could provide additional incentive for patent holders to choose Dallas over other venues lacking patent rules.  Even without the change in the venue rules, the patent rules are expected to attract litigants who would not have otherwise considered filing in Dallas.

By Vincent J. Allen