Federal Circuit Divided on Federal Jurisdiction over Legal Malpractice Claims

Stephen Byrne v. Wood, Herron & Evans (Fed. Cir. 2011)

Byrne’s malpractice claim alleges that his former patent attorneys at WHE failed to secure broad enough patent protection for his weed trimming device. See RE 34,815. In 2004, Byrne sued Black & Decker but lost on summary judgment. In that case, the district court ruled that B&D’s device could not infringe because of it did not include a “generally planar outboard flail stabilizing surface” as required by Byrne’s patent claims.

In the subsequent legal malpractice claim, WHE filed a summary judgment motion arguing that the prosecution history showed clearly that the “generally planar” limitation was necessary in order to distinguish Byrne’s invention from the cited prior art.  WHE also argued that Mr. Byrne’s claim should fail because he had so fully participated in the prosecution, including the addition of that limitation into the claim. In the responsive motion, Byrne filed an affidavit discussing the scope of the cited prior art and arguing that the limitation was not necessary for patentability.  Acting sua sponte, the district court rejected Byrne’s testimony — holding that he was not qualified to offer expert testimony as one of ordinary skill in the art.  Without any rebuttal evidence, the court then granted WHE’s motion for summary judgment of no malpractice.

Jurisdiction over Patent Prosecution Malpractice. In several recent cases, the Federal Circuit has expanded the scope of federal court and Federal Circuit jurisdiction over patent malpractice cases. Writing for a 2–1 majority, Judge O’Malley agreed that stare decisis compels federal jurisdiction in this case, but argued that the jurisdictional law should be revisited for cases like this where the cause of action is based upon state-law (malpractice) and the patent issue is only a question of a hypothetical patent claim.

Indeed, it is only the “special and small category” or “slim category” of cases in which a state law cause of action will trigger federal jurisdiction. . . .

[I]t is difficult to see teh federal interest in determining the validity of a hypothetical patent claim that is ancillary to a state law malpractice action. The outcome of such determinations invariably will rest on case-specific inquiries comparing prior art against patent claims that have not and will never issue. As such, these determinations, which involve only application and not interpretation of patent law, have little or no bearing on other cases. On the other hand, finding federal jurisdiction over malpractice cases involving questions of hypothetical patent claims opens the federal courthouse to an entire class of actions, thereby usurping state authority over this traditionally state law tort issue. . . .

Applying these federalism considerations, several courts either have outright disagreed with our analysis or have found a meaningful distinction when only hypothetical patent rights are at stake. . . . In many cases, the procedural posture prevents us from reviewing these decisions, thus allowing courts simply to ignore our law. We address the issues in this appeal, however, because our existing case law compels us to do so.

This is the type of issue that the Supreme Court tends to hear, and a high quality petition for certiorari would have a good chance of gaining the high court’s attention.  Aiding this theory are the growing number of state and federal court decisions that have criticized the Federal Circuit jurisdictional holdings and the general rarity non-patent-related cases of finding federal question “arising under” jurisdiction where no federal cause of action is alleged. 

On the merits, the Federal Circuit ruled that the lower court abused its discretion by refusing to let the inventor testify regarding the scope and content of the prior art and its relation to the invention. The particular problem with the lower court’s finding was that it made no finding of the qualifications of one of ordinary skill in the art and whether Byrne possessed that level of skill.  In several prior cases, the Federal Circuit has held that inventors typically possess at least ordinary skill in the relevant art and therefore “it is especially inappropriate for the district court to strike Byrne’s affidavit without going through the exercise of identifying the requisite level of skill.”  On remand, the district court will likely hear Byrne’s testimony and consequently reject WHE’s summary judgment motion.

Therasense: Encouraging Intentional Deception?

Powell v. Home Depot (Fed. Cir. 2011).

Michael Powell’s invention is fairly simple –  it covers a guard for a circular saw on an arm.  In 2004, Mr. Powell developed the guard and provided several prototypes to Home Depot for the company to use in its in-store saws for cutting raw lumber to customer specifications.  Rather than having Powell manufacture the guards, Home Depot turned to another company for its 2,000 stores.  Powell obtained a patent then sued Home Depot.  After a three-week trial, a Florida jury awarded Powell $15 million in damages.  The district court also awarded enhanced damages, attorney fees, and pre-judgment interest — bringing the total to $24 million.

On appeal, the Federal Circuit affirmed claim construction, infringement, willfulness, inequitable conduct, and damages. Dissenting-in-part, Judge Dyk argued only that the finding of willful infringement was incorrect because Powell did not prove that Home Depot’s non-infringement defense was objectively unreasonable as is required under the objective prong of the willfulness inquiry.

Inequitable Conduct: One interesting element of the appeal involved inequitable conduct.  During prosecution, Powell had filed a Petition to Make Special on grounds that he was obligated to manufacture and supply devices embodying the claims sought. MPEP 708.02.  That original petition was roughly correct based upon ongoing manufacturing negotiations with Home Depot. Although negotiations with Home Depot fell-through before the PTO granted the petition, Powell never informed the PTO that he no longer qualified for the Special designation under the prospective manufacture prong and actively encouraged the PTO to decide the petition.

In a pre-Therasense decision, the district court held that the failure to inform the  PTO was done with intent to deceive the PTO, but that the intentional omission was not material because (1) the timing was not related to patentability and (2) Powell could have instead filed a petition to make special based upon ongoing infringement of the applied-for claims.  Under Therasense, inequitable conduct will not normally be found based upon an applicant’s improper omission unless the omission is the but-for cause of the patent being issued.

On appeal, the Federal Circuit affirmed — holding that:

Where, as here, the patent applicant fails to update the record to inform the PTO that the circumstances which support a Petition to Make Special no longer exist—that conduct does not constitute inequitable conduct. That is so because Mr. Powell’s conduct obviously fails the but-for materiality standard [of Therasense] and is not the type of unequivocal act, “such as the filing of an unmistakably false affidavit,” that would rise to the level of “affirmative egregious misconduct. Id.

This case creates further difficulty for patent attorneys by giving a free-pass to patent applicants who intentionally deceive the PTO in order to benefit their case.  Although participating in such activity violates the rules of conduct for patent law professionals under 37 C.F.R. 10.22, patent owners apparently will not face consequences.  Adding to the incentive for bad behaviour is the PTO’s lax enforcement through the Office of Enrollment and Discipline; the new statute of limitations on attorney misconduct charges; and the new supplemental examination procedures that allows patentees to whitewash patents obtained through inequitable conduct.  For some this may not be intuitive, but the primary solution is not increased enforcement but instead for the PTO to avoid relying upon attorney statements.

Fighting the Retroactive Elimination of False Marking Claims

The Public Patent Foundation (PubPat) has continued its push against "the negative effects that over-patenting, unmerited patenting and excessive patent rights can have on society." The organization, founded by patent attorney Dan Ravicher, typically focuses on what it sees as bad patents being over-exerted. In the false marking heyday, PubPat also filed false marking suits against Cumberland (Sweet'N Low), Iovate (Xenadrine), and McNeil (Tylenol). Unlike ordinary usual public-interest lawsuits, the false marking claims had the potential earning PubPat substantial monetary returns. Under the false marking statute, 35 U.S.C. § 292, PubPat was eligible to receive half of the eventual fine paid by any adjudged false markers.

However, when Congress passed the Leahy-Smith AIA it included a provision that denies standing for any false marking complainant who cannot prove a competitive injury.  The standing provision is retroactive and many of the false marking claims have already been dismissed. 

In a new filing, PubPat has argued that the retroactive denial of standing violates the organizations Fifth Amendment due process rights.

While the claim underlying the cause of action in qui tam cases originally belongs to the United States, qui tam statutes perform a partial assignment of that claim to the qui tam plaintiff and the resulting cause of action is therefore partially the property of the qui tam plaintiff. . . . Retroactive congressional action that deprives a private party of its property violates the Due Process Clause of the Fifth Amendment if it is not “supported by a legitimate legislative purpose.” United States v. Carlton, 512 U.S. 26, 30-31 (1994). Further, the retroactive effect of legislation must separately have a legitimate legislative purpose apart from the prospective substantive changes. Id. . . . The America Invents Act . . . is completely silent as to why the substantive changes are to be applied retroactively. . . . Without being overly cynical, the only honest explanation for the America Invents Act's retroactive elimination of qui tam false marking suits is that it was the result of lobbying efforts by corporations like McNeil who wished to deliberately eliminate the rights of private parties like PUBPAT to continue to pursue pending qui tam cases for false patent marking. This targeting of those who were deliberately induced to file false marking suits is an expressly improper purpose under Carlton and any potential “public good” argument that McNeil or the United States might proffer for the retroactivity would surely be pretextual, further indicating its impropriety. . . . PUBPAT agrees, for example, that “retroactive laws are not [categorically] prohibited by the Constitution.” . . . All PUBPAT suggests is that retroactive statutes can violate the Due Process Clause and that the America Invents Act's retroactive application of substantive changes to the false marking statute in a way that does nothing but deprive PUBPAT of its property interest in order to bestow a private benefit on McNeil is an example of precisely such a violation.

File Attachment: PubPatOpp.pdf (102 KB).

 

Claim Construction in the Abstract

By Dennis Crouch

Typhoon Touch Tech. v. Dell, Lenovo, Toshiba, Fujitsu, Sand Dune Ventures, Panasonic, Apple, HTC, and Palm (Fed. Cir. 2011)

Touch screen technology has taken-off as an important element of consumer electronics. Typhoon’s US Patent Nos. 5,379,057 and 5,675,362 cover various embodiments of a “portable keyboardless computer system” with a “touch-sensitive screen.”

Typhoon appealed an E.D. Texas ruling that its patents were invalid and not infringed. The appeal focused on the claim construction that served as the basis for both invalidity and non-infringement. The appellate decision is notable for the detached process that the court used to consider claims elements at issue. The opinion never discussed the crux of the invention or its contribution to the art and instead simply looked to the disputed claim terms and the relation of those terms in the specification (as required by Phillips v. AWH).

This week, I participated in a roundtable discussion at Yale Law School sponsored by the Kauffman foundation and by Yale’s Information Society Project (ISP). A substantial amount of the discussion focused on problems stemming from our current claim construction process and our ongoing focus on claim language as opposed to invention or its contribution to the art.

For patent attorneys prosecuting patents, the claims are often seen as equivalent to the invention. The new patent act supports that definition by shifting focus away from the invention and instead onto the “claimed invention.” Thus, the new § 102(a)(1) asks whether “the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.” The new statute’s sole focus on invention as claimed is largely just a codification of fairly well accepted Federal Circuit precedent without much thought of the consequences. Of course, broad subject matter eligibility described in State Street Bank and the TSM test for obviousness were, until quite recently, well accepted Federal Circuit precedents as well. In the past few years, the Supreme Court rolled-back the clock on those issues – returning focus to pre-1982 case law. For “invention” however, the new statute appears to lock-in the claimed-invention as the ongoing focus of patent law.

Judge Kimberly Moore highlighted this issue in her recent dissent from the court’s denial of en banc rehearing of Retractable Technologies, Inc. v. Becton, Dickinson and Company (Fed. Cir. 2011). In that opinion, Judge Moore noted that the approach of the panel decision in Retractable is evident of a major divide amongst Federal Circuit judges as to whether the inventor’s contribution to the art – “what the inventor actually invented” – should be considered in the claim construction process.

This week, my patent law students each argued a mock-Markman hearing – revisiting the facts of Nystrom v. Trex and arguing over whether Ron Nystrom’s claimed decking “board” should be limited to cover only to wood cut from a log. That litigation was interesting because it involved five different court decisions on the proper construction of the term. The final appellate decision narrowed the term’s meaning in a way that allowed Trex’s composite planking to avoid infringement.

Claim construction has become a fundamental aspect of every patent case – even to the extent that Section 101 patentable subject matter decisions turn on the meaning bestowed upon particular claim terms. For patent attorneys, all of this focus on claim meaning puts more pressure on the drafting of the claims and the specification. The sad thing about Nystrom’s patent is that he would have easily won the case if the patent attorney who drafted the application had thrown-in language indicating that a “board” could be made of various materials, not just wood cut from a log. This counterfactual conclusion is sad for Nystrom as the inventor, but it is also sad that such a major weight is placed on non-inventive boilerplate language. In my mind, the importance of claim construction should push the USPTO to do a better job of ensuring that the terms of issued patents are well defined.

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The Typhoon decision is also notable in the way that the court narrowly interpreted functional claim limitations. As background, Typhoon’s claim was directed to a “computer” that included various elements including a “memory for storing [a] data collection application.” Typhoon argued its claimed invention only required that the memory be capable of storing the data collection application. However, the District Court Judge Davis and Federal Circuit agreed that the proper construction required that memory actually be used for storing the data collection application. In so holding, the courts looked to the specification and found that the described embodiments all had memories that actually included the application rather than just the capability.

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Finally, the court looked at Typhoon’s “Means for cross-referencing” limitation. The district court held that limitation invalid as indefinite under 35 U.S.C. § 112 because the specification did not include an algorithm adequate to provide sufficient structure for the means-plus-function limitation, citing Aristocrat Technologies Australia PTY Ltd. v. International Game Technology, 521 F.3d 1328, 1334 (Fed Cir. 2008). On appeal, the Federal Circuit rejected that conclusion – finding that the specification did disclose a cross-referencing algorithm in plain language in the text of the specification. The court went on to write that “computer code is not required to be included in the patent specification.” Rather, what is required is disclosure so that one of ordinary skill in the art would recognize the structure as linked to the claimed function.

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• Judge Newman wrote the court opinion and was joined by Chief Judge Rader and Judge Prost;
• The Appellant-Patentee is represented on appeal by Charles Wolfe (Blank Rome);
• Ed Reines (Weil Gotshal) and Joe Re (Knobbe) were co-lead-counsel for all the appellee-defendants. Briefs were also signed by attorneys at K&L Gates, Baker Botts, Amster Rothstein, Perkins Coie, Covington & Burling, and Malloy & Malloy, as well as Eric Albritton from the Albritton firm.

Patentable Subject Matter: Relying on Benson; Construing Claims for Eligibility

By Dennis Crouch

FuzzySharp Tech. Inc. v. 3DLabs Inc. (Fed. Cir. 2011)

In a per curiam opinion marked nonprecedential, the Federal Circuit has vacated and remanded the subject matter invalidity finding of a N.D. California District Court and instead ordered the court to rework its decision in light of Bilski v. Kappos, 130 S. Ct. 3218 (2010) and subsequent Federal Circuit decisions on point. As discussed below, FuzzySharp’s invention relates to compression software for computer graphics. U.S. Patent Nos. 6,172,679 and 6,618,047. The main idea of the invention is to avoid calculations associated with always hidden surfaces. Although the specification explains that its implementation uses “fuzzy” math to calculate always hidden surfaces. However, “fuzzy” limitations are not found in the asserted patent claims. The application was filed in 1997, but claims priority to a 1991 Australian patent application.

FuzzySharp’s appeal was filed after the district court determined that the claimed method failed to pass the machine-or-transformation and therefore, under the prevailing law at the time, the method did not constitute patentable subject matter. In re Bilski, 545 F.3d 943 (2008). In its 2010 Bislki decision, the Supreme Court rejected the notion that the machine-or-transformation test could serve as the exclusive test of the patentable subject matter of a newly invented process. In the new rubric, the machine-or-transformation test offers only an important clue.

In its opinion, the Federal Circuit largely agreed with the lower court’s conclusion that the FuzzySharp claims fail the machine-or-transformation test, but, following the new Bilski rubric, remanded for a determination on the ultimate question of patentable subject matter.

Meaningful Limitations: FuzzySharp’s asserted claims involve two elements that are potentially linked to a machine – computation and computer storage. However, the appellate panel found those elements lacked “meaningful limits” on claim scope in the same way that the recitation of a general-purpose-computer is not a meaningful limitation of a software process that will only be performed on a computer. (Citing Gottshalk v. Benson, 409 U.S. 64 (1972)).

Claim Construction: An important and arising issue is the interplay between claim construction and patentable subject matter. Under Federal Circuit precedent, claim construction appears to be a necessary precursor. However, the Supreme Court has regularly ignored details of claim language in making its determinations – focusing instead on what it saw as the invention.

Here, the court held that some claim construction is necessary: “[W]e conclude that … the patent eligibility of at least one of the asserted claims turns on questions of claim construction that the district court did not have the opportunity to address.” It will be interesting to watch how the parties argue on remand for claim construction results that favor their hoped-for subject matter eligibility outcome.

Notes:

• The per curiam panel included Judges Bryson, O’Malley, and Reyna.
• The U.S. application was prosecuted by Carl Oppedahl’s Colorado-based firm.
• The patentee is represented by Matthew McAndrews from the Niro firm on appeal; Jonathan Baker from Skadden Arps is handling the appellate defense.
• Here is Claim 12 of the ‘047 patent that the Federal Circuit analyzed:

  12. A method of reducing a step of visibility computations in 3-D computer graphics from a perspective of a viewpoint, the method comprising:

  computing, before said step and from said perspective, the visibility of at least one entity selected from 3-D surfaces and sub-elements of said 3-D surfaces, wherein said computing step comprises:

  employing at least one projection plane for generating projections with said selected set of 3-D surfaces and said sub-elements with respect to said perspective;

  identifying regions on said at least one projection plane, wherein said regions are related to the projections associated with said selected 3-D surfaces, said sub-elements, or bounding volumes of said 3-D surfaces or said sub-elements;

  updating data related to said regions in computer storage; and

  deriving the visibility of at least one of said 3-D surfaces or said sub-elements from the stored data in said computer storage; and

  skipping, at said step of visibility computations, at least an occlusion relationship calculation for at least one entity that has been determined to be invisible in said computing step.