The budget and the patent office

Director Kappos's blog entry (reproduced below) explains it all.

An Update on the USPTO's FY 2011 Budget:

As you may know, the FY 2011 budget was enacted on April 15, 2011 and contains the USPTO’s appropriation through the end of this fiscal year, September 30, 2011. With the enactment of the Full-Year Continuing Appropriations Act, 2011, our total spending authority for FY 2011 has been limited to $2.09 billion.

Given this level of spending authority, USPTO will have to make significant reductions for the current fiscal year.

We have not come by these decisions lightly; I recognize that these measures will create new challenges for our ability to carry out our agency’s mission, but we will continue seeking innovative ways to do more with less.

Effective immediately and until further notice:

• Track One of the Three-Track program, which offers expedited patent examination and was scheduled to go into effect on May 4, 2011, is postponed;
• The opening of the planned Nationwide Workforce satellite office in Detroit, as well as consideration of other possible satellite office locations, is postponed;
• Hiring—both for new positions and backfills—is frozen;
  
• IT projects will be scaled back;
  
• Funding for Patent Cooperation Treaty (PCT) outsourcing will be substantially reduced;
• Employee training will be reduced;
• All overtime is suspended.

In addition, business units will be required to reduce all other non-compensation-related expenses, including travel, conferences and contracts.

Trademarks is unaffected and will maintain normal operations.

I would like to thank our entire team for their continuing cooperation and patience, and for their dedication and service during this challenging time.

Patently-O and IP Watchdog have additional details.

"Equitable estoppel" as a defense to false marking? Nah

Advanced Cartridge Technologies has sued Lexmark here in Tampa for infringement of a handful of patents and false marking. Regarding the false marking allegations, ACT claims that Lexmark lists a bunch of patents on various products, and there are various issues with those patents. ACT also argues that each product is not covered by each patent, and thus it is false marking to include all of them on the packaging. Lexmark responds that it is not subject to false marking liability in part because it includes a disclaimer stating that the product is covered by one or more of the listed patents. Thus, because each product is covered by at least one of the listed patents, Lexmark argues it should not be subject to false marking liability because of its disclaimer. ACT disagrees that the disclaimer shields Lexmark.

In discovery, Lexmark learned that ACT marked a waste bin product with some toner patents. Lexmark asked for leave to file an amended answer so that it could assert the affirmative defenses of unclean hands and equitable estoppel "in light of [plaintiff's] interpretation of the false marking statute."

The Court took a paragraph to deny Lexmark's motion:

The plaintiff asserts a false patent marking claim. Alleging that the plaintiff also engages in false patent marking, the defendant moves (Doc. 105) for leave to file an amended answer asserting “the affirmative defenses of unclean hands and judicial estoppel.” However, the proposed defenses, perhaps legally and factually dubious in this instance, are untimely raised and probably productive of unwarranted delay and unnecessary expense.* The defendant's motion (Doc. 105) to file an amended answer is DENIED.

* The defense of "equitable estoppel" appears meritless in the present circumstances. The defense of "unclean hands," if available, requires a distinct showing of inequitable and pertinent conduct. Interestingly, the defendant identifies no case in which the equitable defense of "unclean hands" has barred a statutory false patent marketing claim.

Advanced Cartridge Technologies, LLC v. Lexmark International, Inc., slip op. Case No. 8:10-cv-0486 (M.D. Fla. Apr. 14, 2011) (J. Merryday)

Want your patent application processed in 12 months? First 10,000 can pay $4,000 to participate

Want to jump to the front of the line and get your patent application processed in 12 months? The PTO's press release will be of interest to you.

Press Release, 11-24

USPTO Announces Launch Date for Fast-Track Patent Processing

USPTO to begin accepting requests for prioritized examination of patent applications on May 4, 2011

Washington – The United States Patent and Trademark Office (USPTO) announced today plans for the agency to begin accepting requests for prioritized examination of patent applications – allowing inventors and businesses to have their patents processed within 12 months. It currently takes nearly three years to process the average patent. The program, called Track One, launches May 4, 2011, and is part of a new Three-Track system, which will provide applicants with greater control over when their applications are examined and promote greater efficiency in the patent examination process.

“Track One provides a comprehensive, flexible patent application processing model to our nation’s innovators, offering different processing options that are more responsive to the real-world needs of our applicants,” said Under Secretary of Commerce for Intellectual Property and Director of the USPTO David Kappos. “The Three-Track program will bring the most important new products and services to market more quickly, helping to build businesses and create new jobs in America.”

Requests for prioritized examination will initially be limited to a maximum of 10,000 applications starting May 4, 2011 through the remainder of fiscal year 2011, ending September 30. The USPTO will revisit this limit at the end of the fiscal year to evaluate whether adjustments are needed for future years.

Filing a request for prioritized examination through Track One will include a fee under 37 CFR 1.102(e) of $4,000, in addition to filing fees for the application. For smaller entities, the USPTO is working to offer a 50 percent discount on any filing fee associated with the program, as it does with many other standard processing fees.

Under the Three-Track program, patent applicants may request prioritized examination through Track One, traditional examination under the current procedures through Track Two, and for non-continuing applications first filed with the USPTO, an applicant-controlled delay for up to 30 months prior to docketing for examination under Track Three. Track Three is expected to be available to applicants by September 30, 2011.

The Federal Register notice announcing the implementation of Track One is now available for review here. For additional background on the Three-Track program which USPTO plans to launch before the end of the fiscal year, see the initial program announcement here.

False marking claims must satisfy heightened pleading standard

There's been some back and forth on this issue. To plead a claim for false marking, a plaintiff must allege that the defendant marked something as patented with an "intent to deceive the public." Does a plaintiff asserting a false making claim need to satisfy the heightened pleading requirements of Rule 9? The Federal Circuit provided an answer yesterday:

This court holds that Rule 9(b)'s particularity requirement applies to false marking claims and that a complaint alleging false marking is insufficient when it only asserts conclusory allegations that a defendant is a "sophisticated company" and "knew or should have known" that the patent expired.

Here, BP Lubricants was sued for its CASTROL brand motor oil. It had a design patent which protected the ornamental design of the bottle. BP marked the bottles with this patent number. According to the complaint, BP continued to mark the bottles after the patent expired and, on the plaintiff's information and belief: (1) BP knew or should have known the patent was expired; (2) BP is a sophisticated company; and (3) BP marked the products for the purpose of deceiving the public.

At the trial level, the Court held that this pleading did satisfy Rule 9(b). Applying Federal Circuit law (Exergen), the trial Court held that this pleading provided the specific who, what, when, where, and how required to state a claim. Specifically, BP (who) had deliberately and falsely marked (how) at least one line of motor oil (what) with an expired patent, and continues to do so (when) throughout the US (where) with an intent to deceive.

But the Federal Circuit said this wasn't enough. To plead a claim:

a complaint must in the 292 context provide some objective indication to reasonably infer that the defendant was aware that the patent expired.

So, just saying the Defendant is a sophisticated player who "should have known better," isn't enough. A plaintiff must allege some objective indication that the defendant did know better. Without that, the pleading falls short of Rule 9(b), and is ripe for dismissal.

This case is also interesting from a procedural standpoint. BP lost its motion to dismiss at the trial level. Typically, you can't appeal that decision because it is not final. Instead, BP petitioned the Federal Circuit for a writ of mandamus -- an extraordinary remedy. An appellate court can issue a writ -- ordering someone (here, the trial court) to do something -- only when there has been a "clear abuse of discretion or 'usurpation of judicial power.'"

The Court found such extraordinary circumstances here. It had not yet decided the issue of whether Rule 9(b) applied to false marking cases. And this issue has been causing quite a bit of attention and disagreement lately. So, by granting the writ, the Federal Circuit is able to decide an "issue important to 'proper judicial administration.'"

And a last saving point for plaintiffs -- the Federal Circuit reminded trial courts that they should freely grant leave to plaintiffs to amend their complaints.

Petition for a writ of mandamus, directing the district judge to grant defendant's motion to dismiss granted in part.

In re BP Lubricants USA, Inc., Misc. Doc. 960 (Fed. Cir. Mar. 15, 2011)

Summary Judgment granted where plaintiff did not rebut defendant's expert's opinion on obviousness

Judge Fawsett previously held in the Voter Verified v. Election Systems dispute that you can not infringe a surrendered patent. She's now had a chance to address defendant's further summary judgment motion, asking the Court to find one of the claims of the patent invalid for being obvious in view of the prior art.

First, plaintiff objected to the prior art defendant relied on. The court considered some of the art prior art, but found that other references did not qualify because they were not reasonably accessible to the public interested in the art. The reference that didn't make it was purportedly presented at the Fifth International Computer Virus and Security Conference. Defendant asked the court to find this article prior art on the basis that: (1) defendant's expert stated that the paper was presented at the conference; (2) the paper had a legend in the bottom corner of each page stating the conference name. But this wasn't enough. Specifically, there was no evidence in the record concerning the manner in which the paper was published, and how it was made available to persons of interest in the art. Thus, it didn't qualify as prior art for purposes of summary judgment consideration.

That small win, though, didn't carry the day for plaintiff, because the defendant had other art that was considered prior art. The summary judgment dispute turned on whether the claimed invention was obvious in light of the prior art. To resolve this, the court went through the Graham factors and found the subject claim obvious. Defendant's expert opined on each of the factors ((1) the scope and content of the prior art; (2) differences between the claims and the prior art; (3) the level of ordinary skill in the pertinent art; and (4) secondary considerations such as commercial success and satisfaction of a long felt need). Plaintiff disagreed with the expert's conclusions, but does not have appeared to offer any evidence to the contrary. As such, summary judgment was appropriate.

Summary judgment granted. Claim held invalid for being obvious.

Voter Verified v. Election Systems & Software, Inc., Case No. 6:09-CV-01969 (M.D. Fla. Jan. 25, 2011) (J. Fawsett)

Do false marking complaints need to satisfy heightened pleading requirements? Court won't answer that question if the complaint falls short of Rule 8

Another false marking post this week. This one comes from the Ft. Myers division. Herengracht sued American Tombow for false marking. The Court ignored the various "shotgun" allegations in the complaint. Tombow asked for dismissal for failure to state a claim, arguing that the plaintiff must plead the heightened requirements of Rule 9(b) because the claim is based on fraud.

First, the Court laid out the elements necessary to survive a motion to dismiss:

(1) that a word or number indicating an article is patented (2) was marked upon, affixed to, or used in advertising in connection with (3) an article which was in fact not covered by the patent, (4) for the purpose of (the intent of) deceiving the public.

* * *

An article whose patent is expired is "unpatented."

Digesting the complaint, the Court found that plaintiff had pleaded that a Tombow product has been marked with U.S. Patent No. 4,851,076. The '075 Patent is currently expired. And Tombow is a sophisticated company. The Court didn't need to delve into whether or not heightened fraud pleading was required here, because these allegations didn't even satisfy Rule 8's notice pleading:

Because the instant Complaint does not even comply with the ordinary pleading rules of Rule 8, there is simply no need to address [the issue of whether heightened pleading requirements should apply.]

The complaint did not allege that Tombow marked its products with an expired patent number after the patent had expired.

Motion to dismiss granted, without prejudice. Plaintiff was given the ability to file an amended complaint. But Plaintiff did not, so the court closed this matter.

Herengracht Group LLC v. American Tombow, Inc., Case No. 2:10-cv-362 (M.D. Fla. Dec. 30, 2010) (J. Steele)

Willful infringement alone does not get you enhanced damages

Harris sued FedEx for infringing a number of patents relating to systems for gathering flight performance data from aircraft for analysis. Generally, the technology provided for aircrafts to wirelessly transmit certain flight performance data to an airport based receiver. In prior systems, the data needed to be manually removed from the aircraft and delivered to the centralized storage area, or through some direct line-of-sight infrared link or fiber optic cable. Harris' patents protected a system for this data gathering which utilized wireless transmission of the flight data via a radio frequency link.

FedEx developed a system for gathering flight statistics on its B727 aircraft. This system wirelessly transmitted flight data from parked airplanes to one of FedEx's servers in Tennessee. This system was found to infringe Harris' patents. And the infringement was found to be willful. Harris sought enhanced damages, attorneys' fees, and an injunction.

Enhanced Damages

35 U.S.C. 284 allows a court to increase a patent infringement damage award by up to three times. A plaintiff must establish that the defendant's infringement was willful. Damages are enhanced in order to penalize an infringer for their increased culpability. A court should consider consider the following factors in deciding whether or not to enhance damages:

1. whether the infringer deliberately copied the ideas or design of another
2. whether the infringer, when he knew of the other's patent protection, investigated the scope of the patent and formed a good-faith belief that it was invalid or that it was not infringed
3. the infringer's behavior as a party to the litigation
4. the defendant's size and financial condition
5. the closeness of the case
6. the duration of the defendant's misconduct
7. remedial action taken by the defendant
8. the defendant's motivation to harm; and
9. whether the defendant attempted to conceal its misconduct

The court analyzed each of these factors, finding 1, 3, 6, 8, and 9 weighed against enhancing damages, while 2 and 5 supported (the others were neutral). FedEx's defenses, even though they didn't succeed, weren't frivolous. FedEx had made a good faith effort to defend itself. In sum, FedEx's conduct was not to egregious as to warrant an award of enhanced damages.

Attorneys' Fees

In patent cases, the prevailing party may be awarded its attorneys' fees if the case is an "exceptional case." If a defendant is found to be a willful infringer, the case is presumed to be an exceptional case, and the court must explain why a case is not exceptional if the court is going to refuse an award of attorneys' fees. Here, the Court did not need to provide that explanation, because it found the case was exceptional and awarded Harris its reasonable attorneys' fees.

Permanent Injunction

It used to be (until 2006) that if you prevailed as a plaintiff in a patent infringement case, you were presumably entitled to an injunction. (That presumption could be rebutted, but the defendant had to do the rebutting). The Supreme Court changed this landscape with its eBay decision, throwing patent law back into the category of other harms -- if you wanted an injunction, you have to prove you're entitled to it. To prove that, a plaintiff must show:

1. it suffered irreparable harm
2. the remedies at law (i.e. money damages) are inadequate to compensate for that harm
3. the balance of hardships in granting an injunction favor the plaintiff; and
4. the public interest would not be disserved by entering an injunction

The court addressed each of these elements. Concerning irreparable harm, the court noted that a finding of past infringement, alone, does not show irreparable harm. But it does tend to suggest such harm. Here, FedEx argued in part that Harris also licensed its patents. Because of this, FedEx argued, Harris didn't suffer irreparable harm because it has shown that it is willing to license (i.e. accept money) the use of its technology. The court was not convinced by this argument. FedEx's use of its infringing system interfered with Harris' licensing opportunities. This interference was irreparable.

Regarding the second factor, FedEx's interference with Harris' licensing opportunities was not curable by money. As such, Harris was entitled to equitable relief. The final two factors also favored an injunction. So the Court ordered one be entered. The parties now have to submitted a proposed injunction for the Court to issue.

Conclusion

Just because a defendant is found to have willfully infringed a patent does not mean the plaintiff will necessarily get enhanced damages. Nor does it mean the plaintiff will get its attorneys fees (although the defendant has to convince the court to explain why attorneys's fees wouldn't be warranted against the willful infringer). And the right to an injunction depends on the existence of irreparable harm (and the other elements).

Harris v. FedEx, Case No. 6:07-cv-1819, slip op. (M.D. Fla. Feb. 28, 2011) (J. Antoon)