IP Law Blog

By: Audrey Milleman

The Supreme Court recently decided a key case addressing the patentability of business methods. In In Re Bilski, 2010 U.S. Lexis 5521(June 28, 2010), the Court rejected the Federal Circuit of Court of Appeals’ “machine-or-transformation” test for determining the patentability of a process. The Court also declined to adopt a rule that business methods are not patentable.

By:Audrey Millemann

The Federal Circuit Court of Appeals has reaffirmed that patent applications must satisfy a written description requirement separate from the enablement requirement. In Ariad Pharmaceuticals, Inc. v. Eli Lilly & Co., 598 F.3d 1336 (Fed. Cir. 2010), an en banc Court of Appeals held that 35 U.S.C. §112, first paragraph, contains a written description requirement separate and in addition to the enablement requirement. 

The plaintiff, Ariad Pharmaceuticals, sued Eli Lilly for infringement of a patent pertaining to methods for using a transcription factor to modify gene expression. At trial, the jury found that Eli Lilly had infringed the patent and that the claims of the patent were valid. The district court denied Eli Lilly’s motion for judgment as a matter of law. 

by Matt Massari

Patent lawyers have understood the consequences of sending a cease and desist letter to a potential infringer since the Supreme Court’s decision in MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007). After MedImmune, a party contemplating sending such a letter risks that the recipient may file for a declaratory judgment in their own jurisdiction.  This may require the sender to appear in a distant court, at their own expense.  Thus, the patent owner must be very careful when communicating with possible infringers. Several recent decisions have applied the MedImmune standard for declaratory judgment jurisdiction to trademark controversies, making it difficult for trademark lawyers to avoid exposure to a declaratory judgment action after contacting a potential infringer. 

By Audrey A. Millemann

The “first sale” or “patent exhaustion” doctrine provides that the first unrestricted sale by a patent owner of a patented product exhausts the patent owner’s control over that particular item. The doctrine is also analyzed as an implied license to the purchaser of a particular product of the rights to use and resell the product. Stated another way, the initial authorized sale of a patented item terminates the patent owner’s rights with respect to that item. 

by Audrey Millemann

Several weeks ago, on November 9, 2009, the United States Supreme Court heard oral argument in a key patent case. The case is Bilski v. Kappos (the USPTO). The issue before the Court was whether the Court should reverse the Federal Circuit’s “machine-or-transformation” test for the patentability of process inventions. The Supreme Court’s decision will determine the extent to which processes (or methods), particularly business methods, are patentable.

By Audrey Millemann

One of the requirements for obtaining a patent is enablement. As set forth in 35 U.S.C. §112, ¶1, the specification of the patent must teach a person skilled in the art how to make and use the invention without undue experimentation. The enablement requirement must be satisfied at the time the patent application is filed for each claim. If a claim in a patent is not enabled, it is invalid.

By Audrey A. Millemann

The Federal Circuit Court of Appeals has overruled a 2005 decision which addressed the liability of exporters of components of patented inventions for infringement of method patents. Under 35 U.S.C. §271(f), anyone who exports a component of a patented invention that is combined outside the United States is an infringer. The Court of Appeals, in Union Carbide Chemicals & Plastics Technology Corp. v. Shell Oil Co., 425 F.3d 1366 (Fed. Cir. 2005), held that §271(f) applied to method patents. In Cardiac Pacemakers, Inc. v. St. Jude Medical, Inc. 2009 WL 2516346 (Fed. Cir. 2009), an en banc decision on August 19, 2009, the Court of Appeals reversed its holding in Union Carbide.

by Audrey Millemann

Patent law is a complicated area of law governed by a confusing set of statutes and regulations that are interpreted by Patent and Trademark Office examiners and federal courts.  Patents themselves are often almost unintelligible and, if intelligible, require many hours of reading and comparing drawings in order to understand.  It is no wonder that clients (and non-patent attorneys) have a lot of misconceptions about patents.  Here are a few of the most common ones.

By Audrey A. Millemann

A recent decision from the Federal Circuit Court of Appeals has interpreted provisions in patent litigation settlement agreements that grant a covenant not to sue. The case is TransCore, LP v. Electronic Transaction Consultants Corp., 2009 WL 929033 (Fed. Cir. 2009). 

In TransCore, the plaintiff,TransCore, LP, owned several patents covering automated toll collection systems. TransCore sued Mark IV Industries, a competitor, in 2000, for infringement of the patents. The parties settled the case. In the settlement, Mark IV paid TransCore $4.5 million and TransCore released all existing claims against Mark IV and agreed to an unconditional covenant not to sue for future infringement of the patents.

By Audrey A. Millemann  

In another attempt to address the question of the patentability of business methods, the Federal Circuit Court of Appeals has vacated its September 2007 decision in In re Comiskey (499 F.3d 1365).

The patent application filed by Comiskey, in 1999, claimed a method for mandatory arbitration and a system, using a computer, for performing the method. The PTO examiner rejected both the method and system claims as obvious under § 103. Comiskey appealed to the Board of Patent Appeals and Interferences, who affirmed the rejections. 
 

by Audrey Millemann

In Net MoneyIN, Inc. v. Verisign, Inc., 545 F.3d 1359 (Fed. Cir. 2008), the Federal Circuit Court of Appeals clarified the test for anticipation under 35 U.S.C. §102(a).

The patents in the case covered systems for conducting credit card transactions over the internet. The existing systems involve four different entities: a customer, the issuing bank for the customer’s credit card, a merchant, and the merchant’s bank. The inventor developed his system in response to two problems with the existing systems. First, the existing systems required prospective purchasers to send their confidential credit card information to an unknown merchant over the Internet. Second, in the existing systems, the banks that had issued the customers’ credit cards imposed stringent requirements on merchants.
 

By Audrey A. Millemann

The beginning of the year is a good time to review your clients’ intellectual property needs. The first and most important thing to do is to determine what intellectual property the client has. Once the intellectual property has been identified, the means of protecting it can be analyzed and a plan for establishing protection set up. 

What is Intellectual Property?

Almost anything can constitute intellectual property. IP may fall into one or more of the following categories: inventions that can be patented, expression that is copyrightable, names or logos that are trademarks, and information that is a trade secret.

By Audrey A. Millemann

The Federal Circuit Court of Appeals has redefined the test for the patentability of business methods and computer software. In In re Bilski, 545 F. 3d 943 (Fed. Cir. 2008), an en banc decision, the court discarded the current test, which it established in its 1998 decision in State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998) for a test set forth in a Supreme Court case decided in 1972, Gottschalk v. Benson, 409 U.S. 63 (1972).

Bilski sought to patent a method for hedging risks in commodities trading. Claim 1 required three steps, the essence of which were: (1) initiating a series of transactions between a commodity provider and consumers; (2) identifying market participants for the commodity; and (3) initiating a series of transactions the between the commodity provider and the market participants. The U.S.P.T.O. rejected Bilski’s claims on the grounds that they were not a patentable subject matter under 35 U.S.C. § 101. 

By Dale C. Campbell

The 2008 presidential election is just two weeks away. The candidates have discussed everything from foreign policy, the economy, the war in Iraq, washed-up homeland terrorists, and where you find the “real” America. But where do the candidates stand with respect to intellectual property protection?

For those of you who are interested, and the mere fact that you are continuing to read this article means that you are, a little-publicized conference sponsored by the IP section of the Colorado Bar was held in August 2008, during which two surrogates for Senator McCain and two circuits for Senator Obama discussed their respective candidates’ positions on topics of interest to the IP bar. A video presentation of the discussion can be if you search: IP Policy and the Presidential Debate Video Replay.

By Audrey A. Millemann

Last month, the Federal Circuit Court of Appeals revised the test for infringement for the design patent. The new test, set forth in Egyptian Goddess, Inc. v. Swisa, Inc. (Fed. Cir, September 22, 2008), will make it easier for design patent holders to prove infringement.

In Egyptian Goddess, the plaintiff, EGI, sued the defendant, Swisa, in the Northern District of Texas for infringement of its design patent covering a rectangular, hollow nail buffer. Swisa moved for summary judgment of noninfringement. The court applied the two tests which a plaintiff must satisfy to prove infringement: (1) that the allegedly infringing product is substantially similar to the claimed design under the “ordinary observer” test; and (2) that the allegedly infringing product contains “substantially the same points of novelty that distinguished the patent design from the prior art.” The district court granted the motion, finding that Swisa’s nail buffer did not include the point of novelty of EGI’s patented design.

By Audrey Millemann

In Prasco, LLC v. Medicis Pharmaceutical Corp., 2008 WL 3546217 (Fed. Cir. 2008), the Federal Circuit Court of Appeals has further limited the test for subject matter jurisdiction in declaratory judgment actions. The court held that the test, previously expanded by the Supreme Court in MedImmune, Inc. v. Genentech, Inc., 127 S.Ct. 764 (2007), requires affirmative actions by the patent owner to establish a case or controversy satisfying Article III. 

By Audrey A. Millemann

On May 8, 2008, the Federal Circuit Court of Appeals heard oral argument in a case that may significantly change the patent landscape. The court is expected to clarify, and perhaps narrow, the test for business method patents.

The case is In re Bilski, case no. 2007-1130. The patent claims are directed to a method of hedging the costs of a commodity, specifically, a method of managing risks for consumers of commodities, such as energy, and for commodity providers. The patent application was filed in 1997 and rejected by the PTO under 35 U.S.C. §101 as nonstatutory subject matter. The applicant appealed to the Board of Patent Appeals and Interferences, who affirmed the PTO’s decision in March 2006. The Board held that the applicant’s process was an abstract idea and therefore unpatentable. 

By Scott Cameron

After more than 150 years, the U.S. Supreme Court recently took exhaustion, or at least the doctrine of patent exhaustion, to new levels. The doctrine of patent exhaustion, also known as the first sale doctrine, has been used routinely to limit the patent rights that survive the initial authorized sale of a patented item. In QuantaComputer, Inc. v. LG Electronics, Inc., decided June 9, 2008, the Supreme Court reaffirmed the doctrine and held that it applied not only to patents on an apparatus, but on a method as well. 

By Audrey A. Millemann

One of the requirements of a valid patent is enablement. As set forth in 35 U.S.C. section 112, paragraph 1, a patent’s specification must contain “a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same.” The Court of Appeals for the Federal Circuit has explained that the enablement requirement is met “when one skilled in the art, after reading the specification, could practice the claimed invention without undue experimentation.” AK Steel Corp. v. Sollac, 344 F.3d. 1234, 1244 (Fed. Cir. 2003). Although anticipation or obviousness based on the prior art is a more frequently asserted basis for invalidating a patent in patent infringement litigation, the Federal Circuit’s decision in Sitrick v. Dreamworks, LLC, 516 F.3d. 993 (Feb. 1, 2008) suggests that lack of enablement may be becoming a far more powerful tool. 

By Andrea Anapolsky

In a complex case stemming from a dispute over scientific discoveries made more than three decades ago, the California Supreme Court has provided fresh guidance on determining when a fiduciary relationship exists. This past April, the court reversed the Court of Appeal’s findings that Genentech, Inc. (“Genentech”) violated a fiduciary duty to City of Hope National Medical Center (“City of Hope”) in connection with a 32-year old licensing agreement. Rather, the court held that a fiduciary relationship is not necessarily imposed simply when one party, in exchange for royalty payments, entrusts a secret invention to another party to develop, patent and market the product. This article provides a review of the case and its implications.

By Audrey A. Millemann

The Federal Circuit Court of Appeals recently reversed a district court’s dismissal of a declaratory judgment action, relying on the Supreme Court’s decision in MedImmune Inc. v. Genentech Inc., 127 S.Ct. 764 (2007). See Micron Technology, Inc. v. MOSAID Technologies, Inc., 2008 WL 540182 (Feb. 29, 2008)

Micron was one of the four largest manufacturers of dynamic random access memory (DRAM) chips. Micron, together with Samsung Electronics Company, Ltd, Hynix Semiconductor, Inc., and Infineon Technologies of North America, controlled seventy-five percent of the worldwide market for these chips.

By Scott Hervey

As 2008 gets underway, its time for companies to take a fresh look at how they manage intellectual property assets. This applies to companies that have never taken serious steps to protect intellectual property, and those companies that have an understanding of the value of intellectual property and take active steps to secure and protect these assets.   The three steps below are a good starting point for companies addressing this issue for a first time, and are a well needed refresher for companies that already have IP management protocols in place.

By Audrey Milleman

Patentable subject matter (i.e. what kinds of things can be patented) includes processes, machines, articles of manufacture, and compositions of matter. 35 U.S.C. §101.  Abstract ideas, natural phenomena, and laws of nature are non-patentable (or non-statutory) subject matter. Computerized methods of doing business are increasingly likely to be rejected as non-patentable subject matter by the PTO, and the courts are becoming more likely to affirm these rejections. In re Comiskey, 499 F.3d 1365 (Fed. Cir. Sept. 20, 2007) is such a case. 

By Audrey A. Millemann

By Audrey A. Millemann

By James Kachmar

On September 5, 2007, the Ninth Circuit issued its opinion in Zila, Inc. v. Tinnell, in which it considered the issue of a contract for payment of royalties on a patented invention in light of the 1964 U.S. Supreme Court Case, Brulotte v. Thys.   In what the Court considered to be an “otherwise unremarkable case,” the Ninth Circuit found it necessary to consider “the impact and bounds of Brulotte” in determining whether Tinnell was entitled to royalty payments on a patented invention he had assigned to Zila, Inc.

By Dale Campbell

Intellectual property litigation relies heavily upon the use of expert testimony. The Ninth Circuit Court of Appeals recently analyzed the intersection of Federal Rules of Evidence, Rule 702 and the ruling in Daubert v. Merrill Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993) (“Daubert”) concerning the admissibility of expert testimony and Federal Rules of Civil Procedure, Rule 56 for summary judgment. Stillwell v. Smith & Nephew, Inc., 482 F.3d 1187 (9^th Cir. 2007). Admissibility of expert testimony must be carefully evaluated for reliability and helpfulness, but that is different than the analysis for whether a triable issue of fact is established.

By Audrey Millemann

The first case the Federal Circuit Court of Appeals has decided under obviousness since the United States Supreme Court’s decision on April 30, 2007 in KSR International Co. v. Teleflex, Inc., 1727 S.Ct. 127 (2007) came just nine days later: LeapFrog Enterprises, Inc. v. Fisher-Price, Inc. (2007 WL 1345333; May 9, 2007).

United States patent no. 5,813,861, owned by LeapFrog, discloses a talking electronic toy or learning device called LeapPad that makes sounds in response to the user selecting a letter. The toy helps teach children phonics. Fisher-Price makes a toy called PowerTouch that performs some of the same functions as LeapFrog’s toy. The PowerTouch device includes a processor in a device that holds a special type of book used with the device, such that when the child selects a word on the page, the device audibly pronounces the word, then pronounces each phoneme of the word, and then pronounces the word again.

By Audrey Millemann

In its long awaited decision in KSR International Co. v. Teleflex, Inc., 127 S. Ct. 1727 (April 30, 2007), the United States Supreme Court has completely changed the patent landscape. The Court held that the test used by the Federal Circuit Court of Appeals to determine obviousness under 35 U.S.C. §103 is incorrect. Because of KSR, it will now be harder to get patent claims allowed and easier to invalidate issued patents. 

In KSR, Teleflex sued its competitor KSR, in the Eastern District of Michigan for patent infringement of Teleflex’s patent for an automobile pedal assembly. The invention combined an electronic sensor with an automobile pedal so that the pedal position could be communicated to a computer controlling the automobile’s throttle. KSR contended that the relevant claims of Teleflex’s patent were obvious under section 103.

By Audrey Millemann

            The number of patent infringement cases filed in the United States has increased dramatically over the last ten years or so, and we can expect to see that trend continue. One reason is that the number of patents issued is increasing, and many of those patents, particularly business methods patents, are viewed with suspicion by the high-tech industry. Another reason is that businesses are investing more time and money into intellectual property assets and the loss of those assets could cost the business greatly. 

What is patent infringement? Anyone who makes, uses, offers to sell, or sells in the United States, or imports into the United States, a patented invention, without authority from the patent owner, infringes a utility patent. The prerequisite is an issued (not pending or expired) U. S. patent. No intent is required. The patent is infringed if any of the above acts are committed in the United States. An infringer cannot, for example, avoid liability by moving a manufacturing operation outside the United States where the product is sold within the United States. Likewise, a manufacturer of a product made in the United States infringes the patent even if the product is only sold outside the United States. 

By Audrey A. Millemann

United States courts should not adjudicate rights under foreign patents, according to the Federal Circuit Court of Appeals. In an interesting case, the court was divided over whether a district court could decide infringement of a foreign patent. Voda v. Cordis Corporation, 476 F.3d 887 (February 1, 2007).

The plaintiff, Voda, owned several U.S. and foreign patents covering guiding catheters used in interventional cardiology. The plaintiff sued defendant, Cordis Corporation, a U.S. entity, in the Western District of Oklahoma for infringement of three U.S. patents. Cordis denied infringement and alleged invalidity.

By Audrey Millemann

        The Supreme Court has expanded the rights of licensees to challenge the validity of the patents being licensed and the terms of their licenses. In MedImmune, Inc. v. Genentech, Inc., 127 S.Ct. 764 (January 9, 2007), the Court addressed the question of whether a licensee of a patent was required to terminate or breach the license in order to obtain a declaratory of judgment of invalidity, unenforceability, or noninfringement. 

By Audrey Millemann

The Court of Appeals for the Federal Circuit has resolved a conflict in its precedents regarding the inducement of patent infringement, and, as a result, made the plaintiff’s burden heavier. In DSU Medical Corporation v. JMS Company, 471 F.3d 1293 (Fed. Cir. December 13, 2006), the court resolved the differences between its prior interpretations of 35 U.S.C. § 271(b) as set forth in Hewlett-Packard Co. v. Bausch & Lomb, Inc., 909 F.2d 1464 (Fed. Cir. 1990) and Manville Sales Corp. v. Paramount Systems, Inc., 917 F.2d 544 (Fed. Cir. 1990). 

By Scott Cameron

Rambus, Inc., applied for, and later received, several patents from the United States Patent and Trademark Office related to computer memory chips. A patent is generally thought of as conferring the patent holder with a legal monopoly over the patented subject. The patent holder owns the subject to the exclusion of all others. So how is it that, in a unanimous decision, the Federal Trade Commission recently found that the monopoly achieved by Rambus’ patent violated federal antitrust laws?

By Audrey A. Millemann

            A business's intellectual property may be its most valuable asset. Whether it is biotechnology, trade names, business methods, or computer software, intellectual property should be protected to the greatest extent possible in order to maximize the value of the business. This article summarizes the types of intellectual property protection that are available.

By Audrey Millemann

The United States Supreme Court has dismissed a closely-watched patent infringement case, declining to narrow patentable subject matter. Laboratory Corporation of America Holdings v. Metabolite Laboratories, Inc., Case No. 04-607 (U.S. Supreme Court, June 22, 2006). The stage is set, however, for just that.

By Audrey Millemann

The United States Supreme Court may be heading towards dramatically changing the rules in one of the most significant areas of patent law: nonobviousness.

By Scott Cameron

The U.S. Supreme Court issued a short ruling Monday that will allow eBay users to continue to use the popular "Buy It Now" option on its website. In the process, the Court may have significantly changed the shape of patent litigation.

At issue in eBay Inc. et al. v. MercExchange, L.L.C., was U.S. Patent No. 5,845,265, a business method patent held by MerExchange for an electronic market designed to facilitate the sale of goods between individuals on the Internet. The patent is designed to promote trust among buyers and sellers by establishing a central authority to process the transaction.

By Audrey Millemann

A new case decided by the Federal Circuit Court of Appeals has made it even harder to prove inequitable conduct. Inequitable conduct, which can be asserted by a defendant in a patent infringement suit as an affirmative defense or by a plaintiff in a declaratory judgment action, results in the patent being unenforceable. As is true of patent invalidity, inequitable conduct must be proven by clear and convincing evidence. In M.Eagles Tool Warehouse, Inc. v. Fisher Tooling Company, Inc., 439 F.3d 1335 (Fed. Cir. February 27, 2006), the Federal Circuit held that intent could not be inferred solely from the patent applicant's failure to disclose a prior art reference.

By Dale Campbell

Last week, the United States Supreme Court heard eBay's appeal of the Federal Circuit Court of Appeals' decision issuing a permanent injunction against eBay, which prevents eBay from utilizing the technology involved with its "Buy It Now" purchasing method. The case involves an action brought by MercExchange against eBay alleging that eBay's "Buy It Now" purchasing method infringes upon three patents held by MercExchange. "Buy It Now" allows an individual to purchase an auction item at a fixed price, rather than through the bidding process. At trial, eBay was found to have infringed two of the three patents alleged in the complaint and ordered to pay monetary damages. The trial court refused to impose a permanent injunction prohibiting eBay's use of the "Buy It Now" technology. Both parties appealed to the Federal Circuit

By Audrey Millemann

This month, the United States Supreme Court has held that owning a patent is not equivalent to having a monopoly. It may be, but it is not necessarily so. In Illinois Tool Works Inc. v. Independent Ink, Inc., 2006 WL 468729 (March 1, 2006), the Court reversed its long-standing rule (in place since 1947) that a tying arrangement involving a patented product is per se illegal. This is a significant victory for patent owners.

By Pamela Winston Bertani

Suppose your client discovers that a patent application pending before the United States Patent and Trademark Office discloses information or includes claims that infringe your client's existing United States patent - and your client wants to know what can be done to challenge the pending application without actually filing a patent infringement suit. Your answer should be that there are several options for challenging a patent or patent application before the Patent and Trademark Office, instead of in court. This article briefly reviews the alternatives your client should be aware of.

By Scott Cameron

In baseball, "taking one for the team" means you lean out over the plate and let the pitch hit you, earning a free trip to first base. To a guy out with his friends, it has an entirely different meaning. For Canadian company Research In Motion, the maker of the BlackBerry wireless email device, it means writing a $612.5 million check for a lifetime, perpetual license to use an invalid patent. That's a hard fastball to have to "take for the team."

By Dale Campbell

Your client receives a cease-and-desist letter claiming your client's product infringes a competitor's newly-issued patent. The competitor advises your client to cease the manufacture and sale of the product. Your client's response may very well define the scope of potential damages if it is later proved that your client's product does, in fact, infringe the patent.

By Dale Campbell

Last week the United States Supreme Court denied the petition filed by the maker of the Blackberry seeking to overturn adverse rulings that the popular hand held email device violated patents owned by NTP, Inc., an East Coast based intellectual property holding company. The Supreme Court's denial puts the Blackberry one step closer to enforcement of an issued permanent injunction.

By Audrey Millemann

Amazon.com was recently in the news again. This time, it is defending its "1-click system" from accusations of patent infringement. The issue before the Federal Circuit Court of Appeals was one of first impression: whether a single patent claim could cover both a system and a method. The answer, according to the court, is no.

By Pam Bertani

The prospect of obtaining patent protection for inventive business methods has become considerably more likely in light of a recent decision by the United States Board of Patent Appeals and Interferences, and corresponding guidelines subsequently issued by the United States Patent and Trademark Office. In the case of Ex Parte Lundgren, the Board reversed a patent examiner's rejection of Lundgren's business method patent claims, which the examiner rejected on the grounds that the claims were not linked to a computer or other electronic device; lacked a technological basis; were therefore outside the "technological arts"; and consequently did not constitute patentable subject matter. (Ex Parte Carl A. Lundgren, Appeal No. 2003-2088 (Bd. Pat. App. & Interf. Sept. 2005.) Within a few weeks after Ex Parte Lundgren was published, the PTO issued Interim Guidelines for Examination of Patent Applications for Patent Subject Matter Eligibility, which are consistent with Ex Parte Lungren, and confirm that patent examiners are no longer allowed to reject business method claims simply because those claims are not linked to a computer, database, or other electronic device.

By Todd Wilson

Companies that develop and maintain patent portfolios and also participate in standards setting organizations (SSOs) must be aware of a duty to disclose patents and patent applications that relate to the development and publication of industry standards. Each SSO has disclosure policies to ensure that patented technology makes its way into industry standards in order to advance the state of the technology. Patent holders that participate in the development of the technology standards must understand the individual policies of the particular SSO in making a determination as to whether it must disclose its patent and applications and whether the required disclosure is financially tolerable.

By Pam Bertani

On October 31, 2005 the United States Supreme Court granted a petition for writ of certiorari to hear argument in the case of Metabolite Laboratories, Inc., et al. v. Laboratory Corp. of America, a patent infringement case that will once again test the boundaries of what constitutes patentable subject matter, and one that has already stirred some controversy in the world of jurisprudence. (Metabolite Laboratories, Inc. et al. v. Laboratory Corp. of America Holdings (Fed. Cir. 2004) 370 F.3d 1354; Petition for Writ of Certiorari granted (October 31, 2005) WL 2838583.) In an interesting twist to what already promises to be a closely watched decision, not more than two days after granting certiorari, the High Court vacated its October 31, 2005 Order, having been advised by freshly appointed Chief Justice John Roberts that, after initially participating in the vote on whether to hear the case, the Chief Justice realized he should have recused himself from participation. On November 2, 2005, the Court issued a subsequent Order, again granting the petition, but expressly without the Chief Justice's participation in the vote to withdraw the October 31, 2005 Order, and without the Chief's participation in reconsidering the petition. Chief Justice Roberts did not provide a detailed explanation as to why recusal was appropriate, but reportedly acknowledged that he made a mistake in participating in the early stages of the Federal Circuit appeal. Chief Justice Roberts' former law firm filed the appeal on behalf of defendant Laboratory Corporation of America Holdings (LabCorp), the company that stands accused of infringing Metabolite Laboratories, Inc.'s (Metabolite's) broadly patented method for detecting vitamin deficiencies in humans.

By Adam Jones

How many of you have ever cleaned out your garage, dusted the cobwebs off of old ski boots, exercise equipment and children's toys that have been outgrown or forgotten, and put all the stuff that you don't use anymore in front of your house for a weekend garage sale? Or maybe, when you could really use some extra cash, you decided that you were finally willing to part with your commemorative Star Trek shot glass collection and listed it for sale on ebay, hoping it would trigger a ferocious bidding war between a few obsessed Trekkies around the world. Auctions, whether held online or in your front yard, have long been a great way for buyers and sellers to come together and exchange goods for mutual benefit. If auctions are a great way to sell your old junk, can they work for the sale of less tangible assets like intellectual property?

By Audrey Millemann

In an interesting decision in the biotechnology area, the Court of Appeals for the Federal Circuit recently held that certain nucleic acid sequences had no utility and were not enabled. In re Fisher (Fed. Cir., September 7, 2005).

The owner of the patent at issue is the biotechnology giant, The Monsanto Company. The patent application claimed five purified nucleic acid sequences known as expressed sequence tags (ESTs) that encode certain proteins in maize plants. Although the inventors identified the ESTs, they did not know the function of the genes or the proteins. The application described several uses for the ESTs, including gene mapping in maize, providing primers to use in polymerase chain reaction processes to duplicate genes, determining the presence of polymorphisms, isolating promoters, controlling gene expression, and locating genes in other plants.

The examiner rejected the claim under 35 U.S.C. §101 on the grounds the ESTs had no specific and substantial utility. The examiner found that the uses described by Monsanto were not specific as they were no different from the uses of any EST, and were not substantial as the proteins encoded by the ESTs had no identifiable function. The examiner also rejected the claim on the grounds that it was not enabled under 35 U.S.C. §112, first paragraph, finding that the application could not teach how to use the ESTs because they had no specific and substantial utility.

By Pamela W. Bertani

As Congress continues to mull over the Patent Act of 2005, and the Act is subjected to ever increasing scrutiny, what some believe are serious flaws in the legislation have surfaced, creating considerable cause for concern. A previously published companion article highlighted various provisions of the proposed legislation, which bill sponsor Congressman Lamar Smith (R., Texas) extolled as being necessary "to bolster the United States economy and improve the quality of living for all Americans" as well as to "create new jobs." While these objectives are clearly inviting - particularly in light of growing criticisms regarding Patent Office inefficiency, the lack of qualified patent examiners, the poor quality of issued patents, and the corresponding escalation of profoundly expensive patent litigation - some believe that the legislation may result in fixing current patent procedures that are not broken, which will create more chaos than stability in an already stressed system. Two hotly contested provisions in this regard concern the Act's redefinition of "prior art", and the provision governing the issuance of injunctions.

By Audrey Millemann

It finally happened. A patent applicant sued the federal government for diverting millions of dollars to the general fund. Surprise! The plaintiff lost.

By R. Todd Wilson

The U.S. Court of Appeals for the Federal Circuit held on July 13, 2005 that the export of software from the United States to foreign computer manufacturers which copy and install the software and then sell computers loaded with the software abroad constitutes an infringing supply of a patented component in violation of Section 271(f) of the United States Patent Act. The case is AT&T Corp. v. Microsoft Corp., 2005 WL 1631112 (Fed. Cir. July 13, 2005). This case, considered together with Eolas Technologies Inc. v. Microsoft Corp., 399 F.3d 1325 (Fed. Cir. 2005), lays out the Federal Circuit's current interpretation of Section 271(f) regarding the exportation of software code.

#160

By Audrey Millemann

The Federal Circuit Court of Appeals issued its long-awaited decision in the patent infringement case, Phillips v. AWH Corporation, 2005 WL 1620331 (Fed. Cir. July 12, 2005).#160 The en banc opinion is significant both for what it did hold and what it did not.

The court held that patent claims are to be interpreted in accordance with the specification, and that dictionaries should not be used in the first instance.#160 After requesting briefs on the broader question of whether a district court's claim construction decision should be given any deference, and receiving over 30 amicus briefs, the court declined to reach that issue.#160

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By Pam Bertani

#160 #160

Approximately two months ago the United States Supreme Court decided the controversial case of Merck v. Integra Lifesciences I, Ltd., 125 S.Ct. 2372 (June 13, 2005).#160 The case surfaced concerns among patent owners, and all serious players in the multi-billion dollar pharmaceutical industry, specifically those using patented compounds to develop their own drugs.#160 As one commentator aptly framed the issue - the question before the Court was how much patent infringement does the safe harbor allow?

By Audrey Millemann

#160 #160#160 #160#160 #160#160 #160The "peanut butter and jelly sandwich patent" has been a hot topic lately, from television news broadcasters to intellectual property commentators.#160 The triggering event was a Wall Street Journal article on April 5, 2005 concerning a hearing to be held that day by the Federal Circuit Court of Appeals.#160 The case was an appeal by the J. M. Smucker Company of an earlier decision by the Board of Patent Appeals and Interferences.#160 The Board had upheld the Patent and Trademark Office examiner's rejection on obviousness grounds of two patent applications filed by Smucker's for its crustless peanut butter and jelly sandwich (sold as the "Uncrustable"), a product that apparently generated $27.5 million in sales in 2004.

#160 #160#160 #160#160 #160#160 #160One of the claims at issue in these applications states:

#160 #160#160 #160#160 #160#160 #160"A method of creating a hermetically sealed crustless sandwich, said method comprising:

#160 #160#160 #160#160 #160#160 #160(a)#160 #160#160 #160#160 providing a first slices of bread with an edge crust;

#160 #160#160 #160#160 #160#160 #160(b)#160 #160#160 #160#160 applying a layer of peanut butter onto said first slice in an area inside said crust and defining a substance free outer periphery of said first slice;

#160 #160#160 #160#160 #160#160 #160(c)#160 #160#160 #160#160 applying a layer of fruit spread over said peanut butter layer leaving a perimeter of uncovered peanut butter;

#160 #160#160 #160#160 #160#160 #160(d)#160 #160#160 #160#160 covering said layer of fruit spread by a second layer of peanut butter contacting said first layer of peanut butter to encapsulate said fruit spread;

#160 #160#160 #160#160 #160#160 #160(e)#160 #160#160 #160#160 applying a second slice of bread over said first slice of bread with an edge crust matching said the edge crust of said first slice;

#160 #160#160 #160#160 #160#160 #160(f)#160 #160#160 #160#160 #160providing a cutter with a continuous cutting edge having a desired cut shape larger than said periphery;

#160 #160#160 #160#160 #160#160 #160(g)#160 #160#160 #160#160 positively forcing said cutting edge through said slices in unison with said cut shape outside said area to cut two matching cut portions of bread with an outer periphery outside side area and a contour matching said cut shape and surrounding said area;

#160 #160#160 #160#160 #160#160 #160(h)#160 #160#160 #160#160 compressing said bread completely around said outer periphery to seal said bread around said contour with said peanut butter and encapsulated first spread captured between said bread portions, wherein said compressing operation also crimps said substance free periphery at spaced pressure points to give space locations of greater sealing force at said outer periphery of said bread portions; and,

#160 #160#160 #160#160 #160#160 #160(i)#160 #160#160 #160#160 #160placing said crustless sandwich into an airtight package for long term storage."

#160 #160#160 #160#160 #160#160 #160The key issue before the Board was whether Smucker's method of crimping the edge of the Uncrustable sandwich was unique.#160 The Board had adopted the examiner's reasoning, finding that Smucker's claims were obvious based on existing methods used to make ravioli and pie crust.#160 The Board cited prior art including an international tart cookbook and related device and a newspaper article telling parents how to make peanut butter and jelly sandwiches that didn't get soggy in school children's lunch boxes.#160 The Board was not persuaded by the commercial success of the Uncrustable product, stating that there was no "nexus between the claimed invention and the evidence of commercial success."#160 The Board affirmed the examiner's rejection.#160 2003 WL 23507730 (Dec. 10, 2003).

#160 #160#160 #160#160 #160#160 #160On appeal to the Federal Circuit, Smucker's argued that the prior art disclosed a "smashed edge," not a "surface-to-surface-seal" as was used in Smucker's method.#160 According to Smucker's, the prior art was "the antithesis" of Smucker's method; Smucker's method preserved the integrity of the two separate slices of bread at the edge while the prior art method crushed the edge into one mass.#160

#160 #160#160 #160#160 #160#160 #160Things did not go well for Smucker's at the Court of Appeals hearing.#160 One judge stated that he and his wife had used a crimping method when making peanut butter and jelly sandwiches for their child (presumably many years before Smucker's patent application was filed).#160 Two days later, on April 8, 2005, the Court of Appeals affirmed the Board's decision without an opinion.#160 In re Kretchman, Case No. 04-144849 (Fed. Cir. April 8, 2005).#160

#160 #160#160 #160#160 #160#160 #160This is not the first venture of Smucker's into the world of patenting peanut butter and jelly sandwiches.#160 The original Uncrustable product was developed in 1995 by two dads in the Midwest who filed a patent application in 1997 and were selling the sandwiches to schools.#160 Smucker's bought the dads' business, and on December 21, 1999, the patent issued as United States patent no. 6,004,596.#160 The two patent applications before the Federal Circuit were continuations of continuations of the '596 patent.

#160 #160#160 #160#160 #160#160 #160Smucker's takes the peanut butter and jelly sandwich business very seriously.#160 In 2001, it filed a patent infringement suit against a Michigan grocery/catering business, Albie's Foods, alleging that Albie's crustless peanut butter and jelly sandwiches infringed the '596 patent.#160 That case was eventually dismissed, but the '596 patent is now under reexamination.#160

#160 #160#160 #160#160 #160#160 #160As happened a few years back with Amazon.com's "one-click" business#160 method patent, Smucker's peanut butter and jelly sandwich patent has caused a flurry of criticism of the United States patent system and (yet another) demand for patent reform.#160 These critics argue that the patent system must be broken because it resulted in the '596 patent being allowed.#160 They believe that it is too easy to get a patent allowed and too difficult to invalidate a patent, all of which stifles competition.#160 They also feel that the costs of obtaining a patent and enforcing it in litigation (or defending against a bogus patent infringement claim) are too high.#160

#160 #160#160 #160#160 #160#160 #160All of this is well and good, but, at least at this time, with respect to Smucker's two pending applications, the patent system appears to be working.#160 When the decision in the reexamination is made, we will know for sure.

By Pamela Winston Bertani

Last month in a patent infringement suit involving SmithKline Beecham's patent for the active ingredient in its antidpressent drug Paxil^®, the Federal Circuit affirmed judgment in defendant's favor where SmithKline Beecham's patent was held invalid as anticipated under 35 U.S.C. Section 102 - for being inherently disclosed in a prior part patent. (SmithKline Beecham Corp. v. Apotex Corp., 403 F.3d 1331 (Fed. Cir. April 8, 2005).)

In 1980, SmithKline licensed from the British company Ferrosan, U.S. Patent No. 4,007,196 ('196 Patent) and related technology for a compound called paroxetine hydrochloride ("PHC"). PHC is the active ingredient in SmithKline's Paxil^® product. At issue in this case are two forms of PHC, namely the anhydrous form ("PHC anhydrate") and the hemihydrous form ("PHC hemihydrate"). The '196 Patent disclosed PHC anhydrate. In 1985, a SmithKline Beecham scientist discovered PHC hemihydrate, which proved to be more stable, and thus more easily packaged and preserved than PHC anhydrate.

On October 25, 1985, SmithKline Beecham filed a patent application in the British Patent Office for crystalline PHC, its preparation and its uses as a therapeutic agent. The British application identified the invention as covering PHC anhydrate, PHC hemihydrate, and mixtures containing a major portion of either form. One year later, on October 23, 1986, SmithKline filed a United States patent application claiming priority to the British application filing date - for the PHC invention that ultimately issued as U.S. Patent No. 4,721,723 ('723 Patent), which is at issue in this case. The '723 Patent does not claim PHC anhydrate and does not claim mixtures of the two PHC forms - but rather claims only PHC hemihydrate.

After obtaining FDA approval, in 1993 SmithKline placed Paxil^® on the market, containing the active ingredient PHC hemihydrate. In 1998, an Apotex affiliate filed an Abbreviated New Drug Application ("ANDA") with the FDA, seeking approval to market its own generic PHC antidepressant drug, containing the active ingredient PHC anhydrate. Apotex's application stated the company's intent to market the generic drug before SmithKline's '723 Patent expired because the generic drug would not infringe the '723 Patent, since it would not contain PHC hemihydrate, but rather PHC anhydrate, which was covered by the soon to be expired '197 Patent.

Later in 1998, SmithKline filed this patent infringement suit against Apotex. Interestingly, SmithKline did not allege that the '723 Patent covers PHC anhydrate (Apotex's active ingredient), since PHC anhydrate - the Ferrosan technology - constituted prior art for the '723 Patent. Rather, SmithKline argued that the Apotex antidepressant drug would infringe the '723 Patent because Apotex's PHC anhydrate tablets necessarily contain, by a conversion process, at least trace amounts of PHC hemihydrate - SmithKline's invention. The District Court ruled that, based on its construction of SmithKline's '723 Patent claim at issue, the claim must be construed only to cover products containing "commercially significant amounts" of hemihydrate - and that Apotex's generic drug would not infringe the '723 Patent, because Apotex's drug would contain only trace amounts - but not "commercially significant amounts" - of PHC hemihydrate. In other words, the District Court limited and narrowed the '723 Patent claim to cover only products containing "commercially significant amounts" of PHC hemihydrate in finding noninfringement.

Not surprisingly, the Federal Circuit disagreed with the District Court's claim interpretation, and held that the claim was not limited to "commercially significant amounts" of PHC hemihydrate, but encompassed - without limitation - any amount of the compound. Under this broad construction of SmithKline's '723 claim, Apotex's drug, which by conversion would ultimately contain trace amounts of PHC hemihydrate, would indeed infringe the '723 Patent.

In an interesting twist, however, the Federal Circuit ruled that the '723 Patent claim, while infringed by Apotex's product, was nonetheless invalid. Why? Because based on SmithKline's own argument, Apotex's product, containing the active ingredient PHC anhydrate, undergoes conversion and ultimately contains trace amounts of PHC hemihydrate, which is covered by SmithKline's '723 Patent. But the prior art - the licensed '196 Ferrosan Patent - covered PHC anhydrate - which by SmithKline's own admission, ultimately converts to include at least trace amounts of PHC hemihydrate - the '723 patented invention. In other words, the prior art invention ultimately converted into SmithKline's PHC hemihydate invention, albeit unknowingly at the time of the '196 Patent, and therefore anticipated SmithKline's '723 Patent invention. Put another way, the '196 Patent inherently disclosed PHC hemihydrate, rendering the '723 Patent invalid and anticipated under 35 U.S.C. 102, which precludes patentability for inventions that have already been patented our published more than one year before the patent application filing date for a new invention. In fact, SmithKline's PHC hemihydrate was serendipitously made while SmithKline's chemist was actually attempting to make the licensed PHC anhydrate under the '196 Ferrosan Patent - the prior art. Thus, while the '196 Patent did not literally disclose PHC hemihydrate - it inherently disclosed the compound because the compound is naturally and necessarily present as a result of the conversion process SmithKline explained in detail to the District Court.

The Federal Circuit identified the real bottom line of this case, and unequivocally stated that SmithKline sued Apotex for infringement of the'723 Patent in an express attempt to prevent Apotex from practicing the '196 Patent upon its expiration. However, this doctrine of inherent anticipation served its function here, which, according to the Court, is:

[T]o ensure that the public remains free to make, use or sell prior art compositions or processes, regardless of whether or not they understand their complete makeup or the underlying scientific principles which allow them to operate. Invalidating claim 1 of the '723 Patent furthers this policy of allowing the public to practice expired patents.

This case represents a significant win for generic drug manufacturers, which rely on the opportunity to practice expired inventions in the production and sale of previously patented pharmaceutical products. Consumers, and the market in general, benefit from product diversity resulting from generic drug availability.

From a practitioner's point of view, the take home message here is to be careful of what you ask for in court - because you just might get it. Here, SmithKline aggressively pursued its "compound conversion" theory in the District Court to argue that Apotex's product ultimately converted into a product containing SmithKline's patented compound. This came back to haunt SmithKline on appeal, since the Federal Circuit relied on that very argument to show that not only Apotex's product - but the '196 Patent prior art invention as well - underwent the asserted conversion, which inherently anticipated SmithKline's '723 Patent. There was simply no credible way for SmithKline to neutralize this argument on appeal. The fall-out from this case may be considerable, given the value of SmithKline's Paxil^® product - which may very well now be subject to generic manufacture. We will keep an eye on related developments as the market adjusts to the Federal Court's ruling.

By Pamela W. Bertani

#160 #160#160 #160#160 #160 Biotechnology and pharmaceutical companies - and their counsel - should take note that on January 7, 2005, the United States Supreme Court granted a writ of certiorari to review the Federal Circuit's decision in Integra v. Merck.#160 (Integra Lifescienxes v. Merck et al. (Fed. Cir. 2003) 331 F.3d 860.)#160 The High Court will examine the scope of 35 U.S.C. § 271(e)(1)- the statutory exemption from patent infringement for drug development testing required to obtain regulatory approval pursuant to federal law.#160 The Court's decision could significantly impact a drug company's ability to identify and develop new drugs and move those drugs to market. #160 #160#160 #160

35 U.S.C. § 271(e)(1)is the so-called FDA exemption and provides, in pertinent part,#160 that making, using, offering to sell, selling or importing a patented invention is not an act of infringement if such activities are performed "solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs or veterinary biological products."#160 Thus, if a drug company practices another company's patented invention in order to obtain and submit information necessary to get FDA approval on their drug, then that company is exempt from patent infringement liability.#160

#160 #160#160 #160#160 #160 The § 271(e)(1) FDA exemption permits pre-market drug approval activity conducted for the sole purposes of sales after patent expiration.#160 The express objective of § 271(e)(1) was to facilitate the immediate entry of safe, effective generic drugs into the marketplace upon expiration of a pioneer drug patent.#160 The House Committee that initiated this provision expressly described the pre-market approval activity as "a limited amount of testing so that generic manufacturers can establish the bioequivalency of a generic substitute."#160 The Committee further characterized the limits of the exemption, noting that the nature of the interference with a patent owner's rights would not be substantial, but rather de minimus, and, importantly, that "all that the generic can do is test the drug for purposes of submitting data to the FDA for approval."#160

#160 #160#160 #160#160 #160#160 To appreciate the import of the case's outcome, it is important to distinguish between experiments employing patented inventions to create data for FDA submission (i.e., activities that are currently exempt from infringement liability); and experiments employing patented inventions to identify potentially new drugs (i.e., activities currently not exempt from infringement liability).#160 The pre-clinical experimental drug testing in Integra was not performed to supply information for submission to the FDA, but instead was performed to identify the best drug candidate that Merck would subject to future clinical testing under FDA procedure.#160 The Federal Circuit affirmed the Southern District of California's interpretation of the exemption to cover clinical trials - but, to exclude pre-clinical trial experiments that were performed to identify potentially new drugs.#160 The Federal Circuit held that the pre-clinical trial experiments at issue in the case were not exempt from infringement under § 271(e)(1) because the tests were not performed for the sole purpose of providing information to the FDA - but rather for the commercial purpose of identifying potentially new drugs for Merck.

#160 #160#160 #160#160 #160#160 From both a scientific and economic standpoint, the issue of whether pre-clinical trial experiments are exempt from patent infringement liability is significant because pre-clinical trial testing often involves the use of what are known in the industry as "tool patents."#160 Tool patents cover inventions that help companies identify potential new drug candidates.#160 Tool patents are useful primarily for two purposes - facilitating and expediting drug research to identify new candidate drugs; and facilitating downstream safety-related experiments on those potentially new drugs - both of which no doubt benefit us all.#160 The royalties that companies currently receive from issued tool patents encourages further research and development of these kinds of inventions.#160 If the Supreme Court reverses the Federal Circuit, and brings pre-clinical testing into the § 271(e)(1) safe harbor from infringement liability, then the value of tool patents will become virtually nil, since companies could practice the patented inventions without paying corresponding royalties.#160 Conversely, if the Supreme Court affirms the Federal Circuit and excludes pre-clinical testing from the § 271(e)(1) safe harbor, companies that wish to use another company's tool patents for new drug development must maintain the status quo and continue paying royalty fees.#160 The United States Patent and Trademark Office has issued approximately 8,000 to 10,000 tool patents to date - the Court's anticipated decision will determine the fate of their value.

#160 #160#160 #160#160 #160 As expected, the proponents and opponents of expanding the § 271(e)(1) exemption are polarized.#160 On the one hand, Merck and its supporters argue that § 271(e)(1) exempts drug development activities even before a drug is identified for potential FDA approval.#160 Obviously, this statutory construction leaves companies free to use existing tool patent inventions without paying royalties or being subject to infringement liability.#160 On the other hand, Integra and its supporters contend that such a construction of § 271(e)(1) is contrary to Congress' intent in passing the statute, which was to have a de minimus effect on existing patent rights while allowing competitors to complete regulatory testing, using patented technology while such patents are still in effect, which in turn would facilitate market entry upon expiration of the corresponding pioneer patent.#160

#160 #160#160 #160#160 #160#160 Several major biotechnology and pharmaceutical companies have obtained the Supreme Court's permission to file amicus curiae briefs, including Wyeth and Eli Lilly.#160 The next article in this series will examine arguments advanced on both sides of the issue via those brief.#160 The outcome of the case - either way - will impact significantly new drug development from both a scientific and economic point of view.

Pamela W. Bertani is an associate in Weintraub Genshlea Chediak Sproul's Intellectual Property group.#160 Her practice includes providing advice in obtaining various forms of intellectual property protection, including patent, trademark, and copyright protection.#160 Ms. Bertani is a member of the United States Patent Bar, and her practice also includes both patent litigation and prosecution.

By#160 Pamela Winston Bertani

Pamela W. Bertani is an associate in Weintraub Genshlea Chediak Sproul's Intellectual Property group.#160 Her practice includes providing advice in obtaining various forms of intellectual property protection, including patent, trademark, and copyright protection.#160 Ms. Bertani is a member of the United States Patent Bar, and her practice also includes both patent litigation and prosecution.

It is a well known fact that federal funding recipients have been notoriously non-compliant with Bayh-Dole Act disclosure requirements, and federal agencies have been lax in enforcing those requirements.#160 But, the Federal Circuit's recent Campbell Plastics opinion should serve as a serious wake-up call for federal fund recipients that do not believe in the prospect of losing - completely - title to valuable patent rights.#160 Universities, small businesses and other entitles receiving federal funding to conduct research, which results in patentable inventions, could very well forfeit valuable patent rights in those inventions if they fail to comply strictly with Bayh-Dole Act disclosure requirements.#160 The Federal Circuit's Campbell Plastics case makes clear that noncompliance could result in patent rights being stripped away under these circumstances, even if reporting noncompliance did not harm the funding agency.#160

Campbell Plastics Engineering & Mfg., Inc. v. Brownlee (Nov. 10, 2004) 389 F.3d 1243. Congress enacted the Bayh-Dole Act approximately 25 years ago to encourage United States innovation by giving inventors an incentive to create valuable technology using federal funding. (35 U.S.C. §§ 200-212.)#160 Under Bayh-Dole, persons or entities receiving federal funding are allowed to apply for patents rights to corresponding inventions, so long as those persons or entities comply with specific disclosure requirements spelled out in the Act at 35 U.S.C. 202 and corresponding Federal Acquisition Regulations ("FARs").#160 Pursuant to the Bayh-Dole Act, each government contract entered into under the Act must contain provisions that require the contractor to disclose each discovered invention to the federal agency providing funding within a reasonable time after the invention is discovered, and - importantly - the federal government may receive title to any such invention not disclosed within a reasonable time.#160 The Act not only provides nonprofit organizations and small businesses the right to elect title to an invention created with federal funding, but also gives the government the right to a royalty-free license to the invention when the contractor elects to retain title.

FAR 52.227-11 derives from the Bayh-Dole Act statutory scheme and provides, inter alia, the detailed timeline for invention disclosures, and the format in which those disclosures are to be made to funding agencies.#160 For instance, FAR 52.227-11(c) requires disclosure of each subject invention within two months after the invention is disclosed to the contractor's patent personnel, and that each disclosure be made via detailed written reports.#160 FAR 52.227-11(d)(1) expressly states that upon government request, a contractor will convey patent title to the federal government when that contractor fails to disclose the subject invention within the timeframe and format requirements specified in FAR 52.227-11(c).

Campbell Plastics profiled what has become a prototypical federal funds recipient that carelessly disregarded its Bayh-Dole reporting requirements - but this time lived to regret it.#160 In 1992, Campbell Plastics entered into a contract with the United States Army to develop certain components of an aircrews protective mask.#160 The government contract incorporated the FAR 52.227-11 reporting requirements.#160 Between 1992 and 1997 Campbell Plastics submitted to the Army a series of piecemeal disclosures, which neither substantively nor procedurally complied with the Bayh-Dole/FAR reporting requirements.#160 The reports were not submitted in the proper format, and did not disclose the very invention, developed with federal funds, to which Campbell Plastics ultimately obtained patent title.#160 Rather, the Army became aware of the invention only after the Patent and Trademark Office forwarded the patent application to the Army for a statutory security determination.#160 The patent application issued on April 20, 1999, expressly reserving for the Army a royalty-free license, and a week later Campbell Plastics notified the Army in writing of the issued patent.#160

The Army demanded title to the invention for Campbell Plastics' failure to comply with its Bayh-Dole reporting requirements, and the Federal Circuit affirmed an administrative decision awarding the Army title.#160 The Federal Circuit likened its analysis to a breach of contact claim, and found that the plain meaning of the

FARs was clear, unambiguous, and breached by Campbell Plastics' noncompliance.#160 The Court also found that the plain-meaning interpretation of the contract was buttressed by policy considerations behind the Bayh-Dole Act.#160 According to the Court:

[W]hile Congress clearly intended to promote the commercialization and public availability of inventions made in the United States by United States industry and labor, and to encourage maximum participation of small business firms in federally supported research and development efforts, it also provided the government with certain aforementioned rights to the inventions and sought to ensure the safeguard of those rights by requiring government contractors to disclose subject inventions.

Sound policy is promoted by the rule of strict compliance with the method of disclosure demanded by the contract.

The Court concluded that Campbell Plastics' piecemeal disclosures did not adequately disclose the subject invention under the parties' contract, which entitled the Army to invoke forfeiture proceedings and obtain title to the patent.#160 Importantly, the Court also found that the Army was not required to show harm from Campbell Plastics' reporting noncompliance in order to obtain patent title.#160 According to the Court, FAR 52/227-11(d) vests discretion in the government in determining whether to invoke forfeiture when an invention has not been correctly disclosed to it, and harm is not a requirement for the government to obtain title under these circumstances.

This case is important because it signals a new - stricter - approach to enforcing Bayh-Dole Act disclosure requirements, and conceivably all other requirements set forth in government contracts.#160 Apparently gone are the days of careless disregard for compliance with these requirements.#160 The Federal Circuit's tone in Campbell Plastics is sharp and succinct - its rulings clear and to the point - comply or lose your patent rights.#160 Thus, a word to the wise - take your Bayh-Dole Act reporting requirements (and all funding contract provisions) seriously and comply in a timely manner - otherwise risk irrevocably losing title to corresponding patents.