United States: Recent Federal Circuit Patent Decisions

In a break from precedent, the Federal Circuit overruled existing case law regarding the relationship between the attorney–client privilege, opinion letters and findings of willful infringement.

Historically, upon a finding of infringement, a court would analyze the totality of the circumstances and increase damages up to three times the amount assessed as an additional, punitive damage if the infringement was "willful." Precedent dictated that, upon actual notice of another’s patent rights, a potential infringer had an affirmative duty to obtain legal advice from an attorney before proceeding. If no opinion letter was produced at trial or if no opinion letter was sought by the infringer, the case law encouraged the court to adversely infer that the infringer’s actions were willful.

In this radical change, the Federal Circuit held that: (1) it is inappropriate to draw an adverse inference of willful infringement if the infringer invokes either the attorney-client privilege or the work product privilege during trial; (2) it is inappropriate to draw an adverse inference of willful infringement if the infringer has failed to obtain legal advice; (3) the existence of a substantial defense to infringement, in the case where legal advice was not obtained, is not determinative, but merely a factor in the totality of the circumstances when addressing the willful nature of infringement; and (4) there remains an affirmative duty of due care to avoid infringement of known patent rights. Because the specific issue was not raised on appeal, the Court declined to address whether a fact finder, in balancing the totality of the circumstances, can or should consider whether the infringer obtained legal advice.

The Federal Circuit recognized that previous case law improperly focused on an infringer’s disrespect for the law and not on the "significant social importance" of the attorney-client privilege. In support of its decision, the court noted that other areas of the law did not diminish the foundation of the attorney-client relationship by drawing adverse inferences upon the invocation of the privilege.

Finding that the claim amendment bore no more than a tangential relationship to the equivalent at issue, the Federal Circuit upheld a finding of infringement under the doctrine of equivalents. The original claim did not limit the number of vacuum cups; the amended claim called for, among other things, a single vacuum cup. In contrast, the accused device utilized multiple vacuum cups to achieve a similar function and result.

According to the patentee, the use of multiple vacuum cups was equivalent to the use of a single cup. Because the claim was amended during prosecution limiting the process to, among other things, the use of a single cup, the accused infringer argued that the Festo presumption barred any application of the doctrine of equivalents. (Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., Ltd. (Fed. Circuit; Sept. 26, 2003)).

In review of the infamous Festo decision, the Court explained that when a patentee amends a claim during prosecution for a reason related to patentability, there is a presumption that the patentee has surrendered the territory between the original claim limitation and the amended claim limitation. In other words, absent a rebuttal, the patentee may not use the doctrine of equivalents later in time to reclaim material equivalent to what was surrendered. Because the presumption is not a complete bar, the patentee can rebut the surrender if she establishes that the rationale underlying the narrowing amendment bore no more than a tangential relationship to the equivalent in question, i.e., the accused device.

Because the patentee in Insituform amended the claim in response to a prior art reference directed at the location of the vacuum source and not at the use of single or multiple cups, the patentee successfully defeated the Festo presumption.

Asked to resolve issues pertaining to claim construction and the recent schism of case law addressing this murky area, the Federal Circuit has agreed to an en banc appeal in Phillips. The recent order invited responses to the following seven questions: (1) Should dictionaries or the specification be primarily used in claim construction? If both should be utilized, in what order should the Court consult the sources? (2) If dictionaries are the primary source for claim interpretation, what role does the specification have in potentially limiting the dictionary definition? (3) If the specification is the primary source for claim interpretation, what role do dictionaries play in assessing claim scope? (4) In the alternative, should both a dictionary-first approach and a specification-first approach be treated as complementary methods equally applicable in each case? (5) When should a claim be narrowly construed for the sole purpose of avoiding invalidity? (6) What role should prosecution history and expert testimony play in determining claim scope? (7) What deference should a trial court claim construction be afforded?

Because the claim term "operatively connected" is not a technical term with a specific meaning in the mechanical arts, the Federal Circuit in Innova/Pure Water, Inc. v. Safari Water Filtration Sys., Inc. (Fed. Circuit, Aug. 11, 2004) held that the term should be afforded its full and ordinary meaning. Although the examples in the specification consistently used the term in the context of a "physical engagement result[ing] in a unitary structure," the Court held that it was improper to narrow the breadth of the claim in the absence of a clear disavowal "using words or expressions of manifest exclusion or restriction."

In a similar vein, the Federal Circuit reversed a district court claim construction finding a term unduly limited by the preferred embodiment without an unmistakable disavowal of scope; the ordinary meaning of claims was overlooked. Home Diagnostics, Inc. v. LifeScan, Inc. (Fed. Circuit, Aug. 31, 2004). The preferred embodiment equated the claim term "upon detection of a suitable stable endpoint" to waiting a predetermined amount of time. Because the preferred embodiment is only one way of using the invention, the silence with respect to other embodiments could not be regarded as a disavowal of claim scope. The Court further noted that the specification suggested other methods that, when employed, would satisfy the claim limitation.

In Irdeto Access, Inc. v. Echostar Satellite Corp. (Fed. Circuit, Sept. 14, 2004), the Federal Circuit indirectly distinguished Innova and Home Diagnostics by holding that the usage of the term in the specification controlled over any customary meaning. During prosecution, the patentee admitted that while the claim term "group" had no accepted meaning in the art of cryptographic access control technology, the term could be properly understood by reference to the specification. The Court explained that in the absence of an accepted meaning, claim terms are construed only as broadly as they are described in the specification. Therefore, the presumption that claim terms are afforded their ordinary meaning did not apply.

Providing a second example where the customary meaning of a claim term did not control, the Federal Circuit in Astrazeneca AB v. Mut. Pharm. Co., Inc. (Fed. Circuit, Sept. 30, 2004) held that a clear disavowal of claim scope could be implied from the patentee’s language in the specification and prosecution history. Although the patentee did not directly state that the claim term "solubilizer" was limited to a particular meaning, the specification stated that "the solubilizers suitable to the invention are defined below." In addition to defining the term "solubilizer" and describing its features, the specification criticized other products that did not contain these features. Because "rigid formalism is not required" to act as one’s own lexicographer, the Court narrowed the otherwise broad, ordinary meaning of the term.

Public accessibility is the touchstone in determining whether a reference is a printed publication under 35 U.S.C. § 102(b). In re Klopfenstein (Fed. Circuit, Aug. 18, 2004). Generally speaking, the Patent Act forbids a patent from issuing if the invention was described in a printed publication more than one year before the date of application (the "critical date"). In Klopfenstein, the patentee displayed the invention in printed form on poster boards for three days in connection with presentations more than one year before the application date. The Court held that the patentee’s previous publication barred the patent from issuing after balancing the totality of the circumstances. The Court relied on evidence that there were no professional norms entitling the patentee to an expectation that the display would not be copied, that the viewers were free to take notes and photograph the poster boards, and that the novel concept in the patent was easily understood by the audience due to the nature of the invention.

In Poly-Am., L.P. v. GSE Lining Tech., Inc. (Fed. Circuit, Sept. 14, 2004), the Federal Circuit addressed the on-sale bar of the Patent Act, which prohibits a patent from issuing if the invention was on sale before the critical date. The Court explained that although the product was both on sale more than one year before the filing date and capable of performing the claimed method, the product was not used in the claimed process until after the critical date. Moreover, because the process was not ready for patenting until after the critical date, the sale of the third-party product did not invalidate the patent. The absence of confidentiality agreements is only one factor in the totality of the circumstances when determining if a patented design was publicly used prior to the critical date. Bernhardt, L.L.C. v. Collezione Europa USA, Inc. (Fed. Circuit, Oct. 20, 2004). The Federal Circuit held that the district court in Bernhardt erred by not considering the fact that confidentiality agreements might not be needed in certain industries. Because the patentee took other safeguards and could reasonably expect a high level of secrecy, the alleged display of patented designs in a furniture showcase did not invalidate the patent.

Addressing the issue of infringement in Bernhardt, the Court further noted that an accused product must be substantially similar to the claimed design from the standpoint of an ordinary observer. In addition, the accused product must also incorporate the points of novelty of the claimed design. However, the Court held that the patentee is not generally required to explain novel aspects through expert testimony. A district court should be able to determine the points of novelty from the design patent itself, the cited prior art references, the prosecution history, and the party’s contentions as to the points of novelty. Because the patentee submitted proposed findings of fact and conclusions of law addressing the points of novelty present in the patented design, the district court erred in requiring additional testimony.

An obviousness determination involving two or more references requires, among other things, motivation to combine the prior art. The Federal Circuit held in Cardiac Pacemakers, Inc. v. St. Jude Medal., Inc. (Fed. Circuit, Aug. 31, 2004) that it was improper for the district court to find a motivation to combine references based upon a known need for the patented invention. "Recognition of the problem . . . does not render obvious the achievement that meets that need." In other words, the Court recognized that the motivation behind solving a problem is different from the motivation required to create the inventive solution to that problem.

Further addressing the standards behind combining references in an obviousness decision, the Federal Circuit rejected a patent application directed at a shoe sole with increased traction. In re Fulton (Fed. Circuit, Dec. 2, 2004). The applicant argued that the references cited by the Patent Office did not recognize the importance of the claimed features in the shoe sole over other alternatives in the prior art. Therefore, the applicant argued that the prior art: (1) failed to suggest the combination of the references; and (2) taught away from the claimed invention. The Federal Circuit, however, noted that the question for obviousness is not whether the prior art illustrates the most desired combination, but rather whether there is something that would suggest the desirability of the invention. Furthermore, the Court held that the law does not require that the prior art references be combined for the same reasons the applicant created the combination. Because the references did not discourage or criticize other alternatives, it did not teach away, but rather suggested the obvious combination.

Analyzing the obviousness of a weight plate with three grips over prior art references disclosing plates with one, two and four grips, the Federal Circuit held that when a claim discloses a limitation falling within a known range, there is a presumption of obviousness. Iron Grip Barbell Co., Inc. v. USA Sports, Inc. (Fed. Circuit, Dec. 14, 2004). Because there was no evidence of teaching away in the prior art references, and because the three-grip weight plate did not produce any unexpected results, the Court turned to secondary factors in determining obviousness. The Court next found that there was no nexus between commercial success and a three-grip weight plate. Moreover, while the alleged infringer copied the design, the Court held that this act alone did not negate the otherwise obvious nature of the claimed plate. The patent was held invalid.

In response to Oddzon Prods., Inc. v. Just Toys, Inc. (Fed. Circuit, Aug. 8, 1997), Congress recently amended the Patent Act by enacting the Cooperative Research and Technology Enhancement (CREATE) Act of 2004. The Federal Circuit in Oddzon sent a clear message to Congress in 1997 when it specifically interpreted the Patent Act to exclude from obviousness determinations certain prior art references owned by the same entity to the disadvantage of entities working under a joint R&D agreement. Effective December 10, 2004, the Act amended 35 U.S.C. § 103(c) to allow joint researchers the same ability to disqualify certain prior art references owned by any party subject to the same written, joint research agreement.

In Lighting World, Inc. v. Birchwood Lighting, Inc. (Fed. Circuit, Sept. 3, 2004), the district court held that the claim term "connector assembly" invoked means plus function treatment in the absence of the phrase "means for" because the claim limitation described only a function and not the structure performing that function. The Federal Circuit, however, reversed, acknowledging the heavy presumption against applying 35 U.S.C. § 112, ¶ 6 and explaining that even when claim terms cover a plurality of different structures, the claim does not invoke means plus function interpretation. "What is important is whether the term is one that is understood to describe structure, as opposed to a term that is simply a nonce word or a verbal construct that is not recognized as the name of structure and is simply a substitute for the term ‘means for.’" Furthermore, the Federal Circuit implicitly endorsed the use of dictionaries in determining whether a claim term denotes structure or a class of structure.

In a related opinion, the Federal Circuit held that the presumption in favor of applying means plus function construction where the term "means for" is present was rebutted due to the amount of structure present in the limitation. Searfoss v. Pioneer Consol. Corp. (Fed. Circuit, July 6, 2004). Additionally, the Court affirmed the district court construction of the term "connecting" as requiring a direct connection. As a result, the application of the doctrine of equivalents did not apply when the accused device utilized an indirect connection. The Court stated that to read out the limitation directed toward a direct connection would be to vitiate the connecting function. Because the accused device operated in a different way, i.e., through indirect connection, there could be no finding of infringement.

In Versa Corp. v. AG-Bag Int’l., Ltd. (Fed. Circuit, Dec. 14, 2004), the Federal Circuit held that, when interpreting a means plus function claim, the claim should be construed to include only the structure necessary to complete the stated function. The patentee claimed a compost bagging machine for bagging compost material including "means associated with the bagging machine for creating air channels." The specification explained that, while a perforated pipe would be sufficient to achieve decomposition, the use of additional flutes was preferred. Therefore, construing the means plus function limitation to include both flutes and a perforated pipe was improper. The flutes were not essential structure. The court found additional support in the claim language and under the doctrine of claim differentiation.

On an issue of first impression, the Federal Circuit held that infringement under §271(f)(1) applies only to situations where components of a patented invention are "physically present in the United States and then either sold or exported in such a manner as to actively induce the combination of such components outside the United States in a manner that would infringe the patent if such combination occurred within the United States." Pellegrini v. Analog Devices, Inc. (Fed. Circuit, July 8, 2004). Historically, § 271(f) was enacted in 1984 out of concern that manufacturers could avoid U.S. patent infringement if patented components were made in the United States and then shipped abroad for assembly. In Pellegrini, the Court found no infringement because the alleged infringer manufactured patented components outside the United States, and further because the components were never physically shipped to or from the United States. The fact that the accused infringer was an American corporation that designed the components inside the United States and shipped from the United States instructions for their manufacture and combination did not control the analysis. In interpreting § 271(f)(1), the Court stressed the territorial application of U.S. Patent Law while further explaining that, in general, patent infringement occurs where the act of making, selling, offering for sale or importing occurs, and not where the injury is felt. Because no component court’s finding of noninfringement was affirmed.

After a lengthy history, the Federal Circuit once again heard an appeal from the district court in Juicy Whip, Inc. v. Orange Bang, Inc. (Fed. Circuit, Sept. 3, 2004). In a case that had languished in the courts since 1999, Orange Bang was previously held to have infringed Juicy Whip’s patent directed at a post-mix beverage dispenser that imitates a pre-mix dispenser. The invention generally consists of a transparent bowl that creates the impression that it is the source of the dispensed beverage. Affording the dispenser a greater capacity to store liquid and further preventing bacteria growth, the invention maintains separate compartments for syrup and pre-mixed water. In the most recent district court opinion, the court prevented Juicy Whip from offering testimony regarding its lost syrup sales. The Federal Court reversed on the basis of the entire market value rule articulated in Rite- Hite v. Kelley Co. (Fed. Circuit, June 15, 1995).

In Rite-Hite, the court explained that a patentee could recover lost profits on, among other things, unpatented components sold separate from the patented invention so long as: (1) the unpatented components were considered part of a single, complete assembly or machine; or (2) the unpatented components, together with the patented invention, constituted a functional unit. Because Juicy Whip’s dispenser functioned with the syrup to imitate the visual appearance of a pre-mix dispenser, the Federal Circuit held that the two components worked together to achieve a single result. Accordingly, the district court improperly denied Juicy Whip’s motion to present evidence establishing its lost syrup profits.

In Centricut, L.L.C. v. Esab Group (Fed. Circuit, Dec. 6, 2004), the Federal Circuit addressed the burden of proof required of a patentee when establishing infringement. Refusing to adopt a hard rule, the Court held that, when a patent involves complex technology and when the accused infringer presents expert testimony negating infringement, the patentee can satisfy its burden only through use of expert testimony refuting that of the accused infringer. However, the Court did note that, in many patent cases, patentees need not present expert testimony where the art is not unduly complex. Because the district court described the invention (plasma arc torch electrodes) as "black art," the Court held that the patentee had not met its burden of proof.