Federal Circuit Review Provided by Patterson, Belknap, Webb & Tyler LLP
The following is a review of Federal Circuit intellectual property cases decided the week ending June 27, 2003.
INVENTORSHIP, INEQUITABLE CONDUCT
Board of Educ. v. American Bioscience, Inc., No. 02-1109 (June 23, 2003).
Opinion by Lourie, joined by Rader and Linn.
In an inventorship action in the Northern District of Florida involving U.S. Patent No. 5,780,653, the district court removed three inventors, retained one inventor, added three other inventors, and declared the patent unenforceable for inequitable conduct.
American Bioscience ("ABI") appealed, and the Federal Circuit affirmed in part, reversed in part, and vacated in part.
The patent-in-suit is assigned to Vivorx Pharmaceuticals, Inc., ABI's precursor, and names Chunlin Tao, Neil Desai, Patrick Soon-Shiong, and Paul Sandford as inventors. The district court removed Soon-Shiong, Desai and Sandford as inventors, having determined that none of the three contributed to the inventions in the patent, retaining only Tao; added Holton, Yang and Nadizadeh as inventors; and found that Soon-Shiong's and Desai's failure to inform Reiter of Tao's former employment at FSU constituted inequitable conduct that rendered the '653 patent unenforceable.
Reviewing the inventorship issue de novo, the Federal Circuit reversed the district court's removal of Soon-Shiong and Desai as inventors,
because FSU did not meet its burden of showing by clear and convincing evidence that they had
been misjoined as inventors. The Federal Circuit also found that the district court had properly
dropped Sandford as an inventor, and retained Tao as an inventor.
Because invention requires conception and because there was no evidence that any FSU scientist conceived any of the specific claimed compounds with all their component substituents, the Federal Circuit determined that the district court had erred when it found that Holton, Nadizadeh and Yang could claim inventorship of the '653 compounds. Although Tao may have used Nadizadeh's secret beta-lactam method in making the '653 compounds, such an indirect contribution to the final product does not make Nadizadeh a co-inventor of the patented compounds. Likewise, Yang's discovery that PNIP was the most efficient radiosensitizer of the compounds he tested at FSU and his discussions with Tao on that topic are not sufficient to make Yang a co-inventor of the patented products. Only Tao, Soon-Shiong and Desai co-invented the '653 compounds.
The Federal Circuit reviewed the district court's determination of inequitable conduct for abuse of discretion, and found that Tao's former employment at FSU was not material to the issue of patentability. While Tao's former employment status may have been pertinent to a question of patent ownership, Tao's former employment was immaterial to patentability
since no FSU scientist was an inventor of the '653 compounds. Therefore, the Federal Circuit vacated the district court's finding of inequitable conduct. http://www.fedcir.gov/dailylog.html
The following is a review of Federal Circuit intellectual property cases decided the week ending July 4, 2003.
Eli Lilly & Co. v. Board of Regents, No. 02-1610 (July 3, 2003).
Opinion by Michel, Lourie, and Gajarsa. Dissent by Gajarsa
This is an appeal from a patent interference proceeding before the USPTO. The USPTO granted the Board of Regents of the University of Washington (“Bd of Regents”) motion declaring that no interference-in-fact existed on the grounds that the invention of the corresponding Eli Lilly reissue application is separately patentable over the ‘529 patent assigned to the Bd of Regents.
The Federal Circuit affirmed the USPTO and held the USPTO was not incorrect in applying a “two-way” test for determining whether two parties claimed the same patentable invention where a species claim to a presumptive senior party allegedly anticipates a genus claim to a presumptive junior party. The two-way test analyzes whether the claimed invention of Party B anticipates or renders obvious the claimed invention of Party A, and the claimed invention of Party A anticipates or renders obvious the claimed invention of Party B. Under this test, it was not reversible error to conclude that the parties claimed separate subject matter.
Judge Lourie dissented on the grounds that Lilly should have been senior party rather than Bd of Regents and that the language of 37 C.F.R. 1.601(n) clearly describes a one-way test and does not support a two-way test. http://www.fedcir.gov/opinions/02
The following is a review of Federal Circuit intellectual property cases decided the week ending July 11, 2003.
Waymark Corp. et al. v. Porta Systems Corp., No. 3-1012 (July 10, 2003)
Opinion by Dyk, joined by Newman and Rader
The Federal Circuit reversed an order by the District Court of California imposing sanctions in the form of an award of attorney's fees under 35 U.S.C. § 285 and 15 U.S.C. § 1117 which govern awarding attorney fees to the prevailing party, and under 28 U.S.C. § 1927, which cover sanctions on a party's lawyer for abusing court processes.
The district court awarded attorney fees under § 285 and § 1117 for three reasons: (1) plaintiffs lacked basis to file a trademark infringement claim since their mark was not registered until over a year after the suit was filed; (2) plaintiffs lacked standing to sue for patent infringement since they did not have a written as opposed to oral exclusive patent license agreement; and (3) plaintiffs gave a misleading responses to defendant's document request and to the district court's order to show cause. The district court imposed the § 1927 sanctions on plaintiff's lawyers for abusing court processes by "multipl[ying] the proceedings in any case unreasonably and vexatiously." These sanctions were based both on the three reasons above and on the basis that plaintiffs filed a summary judgment motion unsupported by evidence of patent or trademark infringement.
Regarding the attorney fees, the Federal Circuit acknowledged that sanctions are proper in "exceptional cases" under both statutes, but cautioned that "a district court must be careful not to award sanctions based on a misunderstanding of the governing law." It then determined that each of the three rationales behind the district court's award was based on such a misunderstanding. First, plaintiffs had a basis for their trademark infringement case since they sought relief under § 43(a) of the Lanham Act, which provides a remedy for unregistered as well as registered marks. As to the patent infringement claim, the Federal Court noted that since an exclusive patent license agreement need not be in writing, the oral license to the one plaintiff and subsequent alleged written assignment to the other plaintiff, allowed for standing. Finally, the Federal Circuit found that plaintiffs had not made misleading responses in response to defendant's document request for "all documents relating to the licensing" at issue since it was agreed by the parties that no documents fitting that description existed.
As for the sanctions, the Federal Circuit reasoned that since the former grounds had already been negated, and since the summary judgment motion was only brought with respect to the patent count (to which a colorable argument existed), sanctions were inappropriate. Moreover, even if the claim lacked merit entirely, § 1927 requires "[s]omething more than a lack of merit." As there was no bad faith present, no sanctions could be awarded. http://www.fedcir.gov/opinions/03-1012.doc
RES JUDICATA; STANDING
Media Technologies Licensing LLC v. Upper Deck Co. et al., No. 02-1555 (July 11, 2003)
Opinion by Mayer; joined by Michel and Dyk
The district court granted summary judgment that plaintiff's infringement suit was barred by res judicata based on the dismissal of an earlier lawsuit. The Federal Circuit reversed and remanded.
In the first lawsuit, licensee Telepresence's infringement claim was dismissed for lack of standing because of a defective assignment from the inventor of the patent-in-suit to the licensor, LNCJ. After the dismissal, plaintiff in the instant case, Media Technologies, was incorporated. The inventor then effectively assigned the same patent to LNCJ, which subsequently assigned it to Media Technologies, which then sued defendants Upper Deck and others. The district court dismissed the second lawsuit under res judicata because Media Technologies was in privity with Telepresence, whose case was previously dismissed for lack of standing.
The Federal Circuit held that there were two grounds for reversal. First, Telepresence's dismissal in the first lawsuit for lack of standing was not a final judgment on the merits as required by the law of res judicata because lack of standing is a jurisdictional dismissal, which precludes a ruling on the merits. Second, Media Technologies was not in privity with Telepresence because it was not and could not have been virtually represented by Telepresence in the first action: Media Technologies did not then exist. In reaching its decision, the Federal Circuit applied the law of the regional circuit "because this case turns on general principles of claim preclusion, not on any rule of law having special application to patent cases." http://www.fedcir.gov/opinions/02-1555.doc