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Litigation Venue Changes

Posted Thursday, June 1, 2017 by Kyle Straughan

For the past decade, the Eastern District of Texas has been a hotbed of patent litigation, in large part due to its perception as being patent-owner friendly. However, on Monday, May 22, 2017 the Supreme Court in a unanimously issued a decision that will dramatically shift the venues of future patent litigation. The case came down to two apparently conflicting statutes. First, is 28 U. S. C. §1400(b) which states that a patent infringement action may be brought against a corporation in the judicial district where the defendant resides, interpreted in Fourco Glass Co. v. Transmirra Products Corp., 353 U. S. 222, 226 (1957) as being its place of incorporation, or where the defendant has committed acts of infringement and has a regular and established place of business. Second is 28 U. S. C. §1391(c), which states that for venue purposes a corporation shall be deemed, if a defendant, to reside in any judicial district in which it is subject to the court’s personal jurisdiction with respect to the action in question. The issue in the present case was whether the definition from §1391(c) supplanted §1400(b) and the court’s previous decisions.

The Petitioner, TC Heartland LLC, is a corporation organized and headquartered in Indiana, while the respondent, Kraft Foods Group Brands LLC, is organized under Delaware law and has a principle place of business in Illinois. Kraft sued TC for allegedly infringing its patented products, and chose the District Court for the District of Delaware as the venue. TC moved to dismiss the case or transfer to the Southern District of Indiana on the grounds of improper venue under the venue provisions in §1400(b). The lower courts disagreed and concluded that §1391(c) now supplied the proper definition of where a corporation “resides;” stating that because the District of Delaware could exercise personal jurisdiction over TC, then TC essentially resided there under §1391(c) and in turn §1400(b).

The Supreme Court reversed, finding that the more general venue statute, §1391(c), had not supplanted the patent specific venue statute, §1400(b). The court observed that Congress typically makes special note when it intends such reversal, and did not when it adopted the newest version of §1391(c) in 2011. The court also noticed that the newest provision of §1391(c) includes language stating that it does not apply when “otherwise provided by law,” in this case, by §1400(b). As a result, the court held that §1400(b) is the governing statute.

While this decision may seem innocuous at first glance, its effects will be wide ranging. The Electronic Frontier Foundation reports that in 2015 the Eastern District of Texas handled over 2500 patent suits. Following this decision, defendants will only be subject to jurisdiction there if they are incorporated in Texas or have a regular and established place of business there. However, this decision does mean that many future lawsuits will likely be brought in Delaware, where many U.S. Corporations are incorporated.

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Lexmark Patent Exhaustion

Posted Tuesday, April 18, 2017 by Kyle Straughan

On March 21, 2017 the Supreme Court heard oral arguments in Impression Products, Inc. v. Lexmark Int’l, Inc., a case that will have a large impact on patent exhaustion. In brief, patent exhaustion is the doctrine which holds that a patentholder’s right to enforce its patent on something is exhausted the moment the patentholder sells the thing. In the present case, Lexmark owns patents to refillable print cartridges, and thus under the exhaustion doctrine its rights would be exhausted when it sells them to retail buyers. The primary issue facing the Court is whether Lexmark may condition sales on the promise that the buyer will not refill the cartridge. Currently Lexmark sells the cartridges at a discount, but the buyer agrees not to refill the cartridge. Impression Products is in the business of refilling Lexmark’s cartridges, which Lexmark argues is in violation of the agreements it has with buyers.

During oral argument, the Justices revealed little about their opinion, with Chief Justice John Roberts and Justice Stephen Breyer questioning as to why Lexmark’s desired arrangement could not be handled purely with contract law. Additionally, the Justices questioned why they should read an exhaustion doctrine into the existing law when Congress clearly did not include it. The Justices noted that the Patent Act, unlike the Copyright Act, does not codify exhaustion. Noteworthy is that in a recent copyright case, Kirtsaeng v. John Wiley & Sons, Inc., the court adopted a broad rule of copyright exhaustion, even on international sales. Although it is currently unclear based on the Justices’ questions which direction they are leaning, the decision in this case will go lengths in clarifying a patentee’s rights both domestically and internationally.

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New Trademark Rule for Use Requirement Begins on March 21, 2017

Daniel Mills, Trademark Attorney

Posted Friday, February 24, 2017 by Daniel Mills

The key to trademark rights is use in commerce. With or without federal registration, rights are created by use. The rights are stronger with federal registration, but nonetheless, if there is not proper use, there are no rights. When applying for a trademark at the USPTO, an applicant is required to submit a specimen of use showing the mark used in commerce in the category of goods or service for which it had applied before a registration is granted.

A common example is a broad category of Clothing. You can find registrations where the goods description contains every article of clothing imaginable; e.g. (shirts, hats, sweatshirts, pants, socks, and ties). You can also find registrations where the description is “tops”. This is significant because when one applies for a trademark, whether under existing use or intent to use, the applicant is only required to submit proof of use in commerce for one good in its description. So, in the above example, proof of use on a bow tie would satisfy the requirement for the entire description. This will continue to be the rule for new applications

Beginning on March 21, 2107 that requirement will change when it comes time for filing the affidavit of continued use under section 8 or section 71 as part of trademark maintenance. Under the new rule, the USPTO has the right to request further documentation, proof, and declarations for ALL the goods listed in the description. Under the previous example, the trademark owner may have to submit proof of use on each article of clothing listed in its description.

It will be interesting to see the effect this will have on goods and services descriptions, line expansion, and foreign trademarks coming into the US where standards are different.

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When is a Patent Subject to CBM Review

Jim Ruttler, Patent Attorney

Posted Thursday, February 23, 2017 by Jim Ruttler

There is a procedure to challenge business method patents that sunsets in September of 2020. Until that time, it is a popular way to challenge patents because it allows for review under all statutory provisions, including Section 101 for ineligible subject matter. The IPR alternative to challenging patents is not as accommodating and allows for challenges only for not being new or for being obvious using prior art.

The problem for CBM review is that it only applies under statute to claims that are directed to a financial service. Many challengers attempt to squeeze in technical inventions into this category by arguing that CBM applies whenever the claims could be used in a financial service environment. Obviously, this argument would sweep everything into CBM because every technology could be used in a financial services environment.

Fortunately, the Courts have limited CBM to only those claims that actually claim a financial service. Unwired Planet and Secured Axcess are two cases of the Federal Circuit that are on point here.

For applicants, it is therefore important to be careful what you claim. Should one claim be determined to be directed to a financial service, all the claims can be swept into a CBM challenge later and easily invalidated using Section 101 for being an abstract idea.

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Supreme Court Limits Contributory Liability for Exports

Jim Ruttler, Patent Attorney

Posted Thursday, February 23, 2017 by Jim Ruttler

In Life Tech v. Promega, the Supreme Court has limited contributory liability for supplying parts overseas that are combined to infringe a U.S. patent.

The statute 35 U.S.C. §271(f)(1) creates liability for supplying from the US “all or a substantial portion of the components of a patented invention” to be combined abroad in a manner that would infringe the US patent (if it had been combined in the US). That is, if a substantial portion of the patented invention is shipped overseas only to be combined into an infringing product, there is liability here in the U.S. This prevents companies from escaping infringement liability by making most of the patented product here and then shipping it overseas to finish up the product.

Here the defendant was only shipping one component/ingredient overseas and that ingredient was being used to create the infringing product. The Federal Circuit held that one ingredient could be a substantial part of the patented product. However, the Supreme Court reversed and said it is never enough to supply only one component. There must be a substantial number of components shipped overseas and not just one.

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