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.
There are three different ways a patent can be infringed: directly, by actively inducing infringement, or by contributing to infringement. Direct infringement occurs where the defendant itself makes, uses, sells, or offers to sell the infringing invention. Inducing infringement is essentially aiding and abetting infringement; it exists where the defendant knowingly induces another to infringe a patent and where the other does in fact infringe. Corporate officers and directors can be personally liable for inducing infringement. Contributory infringement exists where the defendant sells or offers to sell a component of the patented invention where the component is not a staple item of commerce that has a substantial noninfringing use. Neither inducing infringement nor contributory infringement can be found if there is no direct infringement.
How is patent infringement determined? Infringement is a two-step analysis. First, the claims of the patent are construed. The claims are the essence of a patent – the words of the claims define what is protectable. The particular invention that is described and disclosed in the patent’s specification is not determinative; in fact, the claims of a patent are often broader than the invention that is disclosed. Claim construction is the interpretation, under certain rules and guidelines developed by the courts, of the meaning and scope of the claims. In an infringement action, claim construction is a question of law for the court.
Second, after the claims are construed, the claims are compared to the accused (allegedly infringing) device or method. Again, the invention described in the patent is not determinative – the claims set forth what is protected. In other words, infringement cannot be determined by comparing the invention that is disclosed in the patent to the accused device or method. For infringement to exist, each element (or its equivalent under certain circumstances) of the claim must be present in the accused device or method. Although a patent may have many claims, only one claim need be infringed for the patent to be infringed. In an infringement action, this second step is a question of fact.
Where is a suit for patent infringement brought? The federal district courts have exclusive and original jurisdiction over patent infringement cases. The Court of Appeals for the Federal Circuit decides the appeals. Venue for a patent infringement claim is proper where the infringer resides or where acts of infringement have occurred and the infringer has a regular place of business.
What are the defenses to patent infringement? There are two key defenses: noninfringement and invalidity of the patent. Noninfringement is established if it is shown that the accused device or method does not contain at least one element of every claim of the patent. Invalidity may be shown in a number of different ways, including improper subject matter, lack of novelty, obviousness, and the failure to satisfy certain requirements of obtaining a patent. Invalidity is difficult to prove because a patent is presumed valid and invalidity must be shown by clear or convincing evidence. Both noninfringement and invalidity may be asserted as counterclaims. They can also form the basis of a declaratory judgment action brought by the alleged infringer against the patent owner.
What is a declaratory judgment action? A potential infringer can file an action for declaratory judgment of noninfringement, invalidity, or unenforceability of the patent. The federal district court has jurisdiction over such actions as long as there is an actual controversy, i.e. there must be a reasonable basis for the potential infringer to believe that the patent owner would file a suit for infringement. A cease and desist letter from the patent owner, stating the intent to file suit if the infringing conduct is not stopped, is such an example. The advantages of filing a declaratory judgment action include that the potential infringer is the plaintiff, rather than the defendant, and that the available venue choices may be more favorable.
What are the remedies for patent infringement? A successful plaintiff in a patent infringement case may obtain an injunction, compensatory damages, enhanced damages for willful infringement, and attorneys’ fees in exceptional cases. Compensatory damages are awarded for the plaintiff’s lost profits or in an amount at least equivalent to a reasonable royalty, for a period of time going back up to six years before the complaint was filed. A condition to recovering damages, however, is that the infringer had to have had actual or constructive notice of the patent. If willful infringement is established, enhanced damages, up to treble the compensatory damages, may be awarded by the court. Willfulness depends on a number of factors, including whether the defendant intentionally copied the patented invention. Attorneys’ fees may be awarded by the court to the prevailing party in exceptional cases, which may include cases of willful infringement.
What should a patent owner do if they think their patent is being infringed? The first thing to do is to obtain a legal opinion analyzing infringement and validity. This analysis should always be conducted before filing a patent infringement suit. The filing of a suit without merit or where the patent is invalid may subject the patent owner to antitrust liability or to the defense of patent misuse. If the validity analysis suggests that there is a significant risk of the patent being held invalid, the patent owner must decide whether that risk is worth taking, as a finding of invalidity is binding on the patent owner in any subsequent action. Next, if there is more than one potential infringer, the patent owner needs to consider who should be pursued (perhaps the competitor, but not the customer). The patent owner may want to send a letter to the infringer to offer to license the patent or to put the infringer on notice of the patent, but such a letter must be carefully worded so that it does not trigger the filing of a declaratory judgment action by the potential infringer.
What should a potential infringer do if they think they may be infringing a patent? A potential infringer has a duty to exercise caution after having received notice of the patent. Notice may be actual or constructive. Examples of actual notice include where the infringer has become aware of the patent during licensing negotiations or has received a letter from the patent owner asserting rights under the patent. Constructive notice exists if the patent owner has sold products marked with the number of the patent. In either case, the patent owner must try to avoid infringement.
The potential infringer has several alternatives. They can attempt to negotiate a license with the patent owner; they can stop the infringing conduct; they can try to design around the patent; or they can continue the conduct. If the potential infringer intends to continue the conduct, an opinion of counsel should be obtained. The opinion should analyze infringement, as well as validity and enforceability of the patent. A competent opinion should include a review of the patent’s file history (the record of the prosecution of the patent in the Patent and Trademark Office) because the file history may contain statements of the patent owner that affect the patent’s scope and validity. The opinion should also include an analysis of the relevant prior art. Depending on the outcome of the legal analysis, the potential infringer should consider filing a declaratory judgment action against the patent owner, for noninfringement and/or invalidity.