New Decisions

August 4, 2011

Federal Circuit Court Affirms Attorney Fee Award and Rule 11 Sanctions Of More Than $600,000 in Patent Infringement Case

Washington, D.C. – In an unusual decision; the Court of Appeals for the Federal Circuit has affirmed attorney’s fees and sanctions against a plaintiff who filed a meritless patent infringement lawsuit and committed other litigation misconduct. The case was appealed from the Western District of Washington, which had awarded Flagstar $489,150 in attorney’s fees and costs and $141,984 in Rule 11 sanctions.

EON-NET is a patent holding company and owning the patents at issue in this suit, patent numbers, 6,683,697, Information processing methodology, 7,075,673, Information processing methodology, and 7,184,162, Information

processing methodology, which have been issued by the US Patent Office. EON-NET had a long history of litigating claims related to these patents, including filing suit against Flagstar Bancorp, which became the decision here. Essentially, the district court had concluded that the lawsuit filed by EON-Net against Flagstar was meritless and little more than an attempt to extort a settlement from the defendants.

The appellate court found “the district court correctly construed the claims of the asserted patents, did not commit clear error in its exceptional case finding under 35 U.S.C. § 285, and did not abuse its discretion in invoking Rule 11 sanctions[.]” Therefore, the court affirmed. Judge Lourie, writing for the court, noted that “[m]eritless cases like this one unnecessarily require the district court to engage in excessive claim construction analysis before it is able to see the lack of merit of the patentee’s infringement allegations.” He further noted that Eon-Net’s settlement offer of less than 10 percent of what Flagstar spent defending its suit, “effectively ensured that Eon-Net’s baseless infringement allegations remained unexposed, allowing Eon-Net to continue to collect additional nuisance value settlements.”

Practice Tip: Federal Rule of Civil Procedure 11 allows for sanctions when a claim or defense is presented for an improper purpose such as “to harass, cause unnecessary delay, or needlessly increase the cost of litigation [,]” is a frivolous argument, or is not supported by factual evidence. Of particular note, the court may impose sanctions on the party, the party’s attorney or both. An award of sanctions under Rule 11 is rare, however, when awarded; the punishment is quite severe, as it was in this case.

August 1, 2011

Lilly Wins Appeal Protecting Attention-Deficit Disorder Drug Patent

By Overhauser Law Offices, LLC

Washington, D.C. – Indianapolis-based Eli Lilly & Co. won a lawsuit against seven other pharmaceutical companies that sought FDA approval to sell competing drugs that would have utilized Lilly’s patented drug formula. The seven defendants, Actavis Elizabeth LLC, Sun Pharmaceuticals, Sandoz Inc., Mylan Pharmaceuticals, Apotex Inc., Aurobindo Pharma Ltd., and Teva Pharmaceuticals, had filed an Abbreviated New Drug Application (ANDA) seeking to utilize Lilly’s patented formula and claiming invalidity of Lilly’s patent, No. 5,658,590, Treatment of attention-deficit/hyperactivity disorder, which has been issued by the US Patent Office. The patented drug is marketed under the name Strattera and is used to treat Attention-Deficit Disorder.

Upon the filing of the ADNA, Lilly’s patent attorneys immediately filed this patent infringement lawsuit in the United States District Court of New Jersey. The district court sustained the ‘590 patent against the defendants’ challenges on the grounds of inequitable conduct, anticipation, obviousness, and non-enablement. However, the court held the claims invalid for lack of utility, which the court called “enablement/utility.” The Federal Circuit Court went further in protecting Lilly’s patent and upheld the patent in its entirety. The ruling ensures that Lilly’s patent will be fully enforceable through its expiration in 2017.

According to the Indianapolis Business Journal, the drug generated $577 million in sales for Lilly last year.

The case is Eli Lilly & Co. v. Actavis Elizabeth LLC et al, Case No. 2010-1500 in the Court of Appeals for the Federal Circuit, decided July 29, 2011. The opinion notes it is “nonprecedential.”
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July 7, 2011

Update: Righthaven Controversial Copyright Infringement Case Dismissed, Countersued for Legal Fees

By Overhauser Law Offices, LLC

Las Vegas, NV — In May, Indiana Intellectual Property Law News reported on Righthaven, LLC, a controversial company that claims to enforce copyrights online. One of the cases Righthaven pursued has recently been in the news again and illustrates the risk of pursuing copyright lawsuits that are not well founded. Righthaven filed a copyright infringement against attorney Thomas DiBiase, a former federal prosecutor. Righthaven claimed DiBiase committed copyright infringement when he posted a news story from the Las Vegas Review-Journal on his blog No Body Murder Blog. In late June, U.S. District Court Judge Roger Hunt of the District of Nevada dismissed the case for lack of standing. It seems that Righthaven did not fully own the copyrighted work and therefore had no standing to sue.

In early July, Mr. DiBiase countersued for $119,000 in legal fees, as reported by Vegasinc.com. Other defendants who have succeeded in getting Righthaven lawsuits dismissed have already been awarded attorneys fees totally over $35,000. As Vegasinc.com reports, many of the early Righthaven lawsuits were settled, but the defendants who have fought the suits have largely won on either standing or under the fair use doctrine.

Practice Tip: The case illustrates the very real risk that Righthaven faced in filing its copyright infringement cases – that it would be forced to pay the attorney fees of those who successfully defended their cases. It also underscores the importance of having an experienced intellectual property attorney who will take an aggressive defense

June 22, 2011

Update to Harvest Scents v. KMI Jury Trial: Settlement Reached Before Case Sent to Jury

By Overhauser Law Offices, LLC

Indianapolis, IN – In May, Indiana Intellectual Property Law News blogged about the jury trial in the copyright infringement case Harvest Scents v. KMI. The jury trial began on May 2, 2011 in the Southern District of Indiana and was presided over by Senior Judge Larry J. McKinney. According to PACER, on May 9^that the conclusion of the presentation of evidence on day six of the jury trial, the Court heard several additional motions. The plaintiff moved for a judgment as a matter of law, which Judge McKinney denied. At that point, rather than waiting for a jury verdict, the parties reached a settlement, and the jury was dismissed.

According to PACER, on June 22, 2011, the court approved a joint stipulation of the parties regarding settlement and dismissed the case with prejudice. The terms of the settlement appear to be confidential.

June 15, 2011

Indiana Federal Court Rules EA Can Use “Dillinger” in Its Video Games

By Overhauser Law Offices, LLC

Indianapolis, IN – Intellectual property lawyers for Electronic Arts, Inc., (“EA”) of Redwood City, CA, emerged victorious when Judge Jane E. Magnus-Stinson of the Southern District of Indiana ruled that Indiana’s right of publicity statute and federal trademark law do not prevent EA from using the word “Dillinger” and other identifying characteristics of infamous depression-era bank-robber John Dillinger in its video games.

The plaintiff Dillinger, LLC, sued EA for allegedly including unauthorized references to John Dillinger in its series of video games based upon The Godfather novel and film series. In its complaint, among other things, Dillinger, LLC, claimed that it registered two U.S. trademarks for “John Dillinger” and that, under Indiana law, it had the right to control Mr. Dillinger’s “personality” rights for commercial purposes – that is, his “name, voice, signature, photograph, image, likeness, distinctive appearance, gestures, [and] mannerisms.” Dillinger, LLC, alleged to have acquired those publicity rights by assignment from the heirs of Mr. Dillinger.

Concluding that Indiana’s right of publicity law, which took effect in 1994, is not retroactive and does not apply to personalities who died before its enactment, the court found that the plaintiff failed to state a right of publicity claim. Moreover, Judge Magnus-Stinson opined that “literary works” exception in the Indiana statute should be read broadly in light of the First Amendment and cover video games.

In a separate order ruling on cross-motions for summary judgment, the court accepted EA’s First Amendment defense to its use of the John Dillinger name, finding such use has at least some relevance to the plot of the game and was not “explicitly misleading” with regard to the question of endorsement by Dillinger, LLC.

Practice Tip: The right of publicity is grounded in state law, and Indiana has an expansive right of publicity statute. Indiana law provides recognition of the right for 100 years after death and protects not only name, image and likeness, but also signature, photograph, gestures, distinctive appearances, and mannerisms.

The matter was assigned Case No. 1:09-cv-01236-JMS-DKL.
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June 9, 2011

U.S. Supreme Court Affirms Strong Presumption of Patent Validity in Microsoft v. i4i LP

By Overhauser Law Offices, LLC

Washington, D.C. – The United States Supreme Court has issued a decision in Microsoft v. i4i LP, against Microsoft and unanimously reaffirming that patents are presumed to be valid at the standard of clear and convincing.

Microsoft had argued for a lower standard of the presumption of validity. The decision will require Microsoft to pay i4i over $290 million in damages.

Patent attorneys for i4i brought this suit against Microsoft alleging that Microsoft infringed i4i’s patent for a method of editing computer documents. Microsoft used the patented technology in its Microsoft Word program.

June 6, 2011

U.S. Supreme Court Sides with Roche in Patent Ownership Controversy

By Overhauser Law Offices, LLC

Washington, D.C. – The United States Supreme Court has issued its opinion in Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, a patent ownership case. The Court held that the Bayh-Dole Act,35 U.S.C. §§ 200-212, “does not automatically vest title to federally funded inventions in federal contractors or authorize contractors to unilaterally take title to such inventions.” The decision affirmed the Federal Circuit Court‘s decision below. Justice Roberts delivered the opinion, which Justices Scalia, Thomas, Kennedy, Alito, Sotomayor, and Kagen joined. Justices Breyer and Ginsberg dissented.

In this case, an inventor performed some research while he worked for Stanford University and had signed a patent ownership assignment agreement with Stanford. The inventor later left this employment and performed further research, culminating in an invention, while employed by Roche. He had also signed a patent assignment agreement with Roche. Essentially, controversy was over whether Stanford or Roche had a valid assignment of the patent rights. The Supreme Court’s decision sided with Roche.

An analysis by the SCOTUS blog noted “Of particular interest to Court watchers, the Court paid no heed in either case to the views of the Solicitor General, which usually has a high degree of success in pressing government views on the Court, especially in statutory cases, and has led much of the charge criticizing Federal Circuit doctrines in the past.”

June 6, 2011

Federal Circuit Applies Analogous Art Test to Exclude Prior Art References from Obviousness Analysis

By Overhauser Law Offices, LLC

Washington, DC – In a decision that may impact both patent prosecutors and litigators, the United States Court of Appeals for the Federal Circuit applied the analogous-art test to exclude certain prior art references from the consideration of whether a claimed invention was obvious in light of the prior art.In this case, patent applicant Arnold Klein appealed the rejection of certain claims in U.S. Patent Application No. 10/200,747 as obvious under 35 U.S.C. § 103. The relatively simple technology at issue is “a mixing device for use in preparation of sugar-water nectar for certain bird and butterfly feeders,” with sugar and water compartments separated by a removable divider. The placement of the divider can vary, depending on the species of bird to be fed. The device maintains a proper nectar ratio so long as water and sugar are at the same “line of sight” level.Citing prior art patents, the examiner at the USPTO made five rejections, each based on the notion that Mr. Klein’s invention would be obvious to one of ordinary skill in the art, and these rejections were each affirmed by the Board of Patent Appeals and Interferences (“the Board”).

Noting that a reference qualifies as prior art for an obviousness determination under § 103 only when it is “analogous” to the claimed invention, the Federal Circuit initially focused on the particular problem being solved by Mr. Klein and narrowly stated it as: “making a nectar feeder with a movable divider to prepare different ratios of sugar and water for different animals.” The court found that the three cited prior art references (respectively disclosing a type of drawer, a particular tray, and an “apparatus for keeping accounts”) which feature solid item separators are not pertinent to this problem “since none of these three references shows a partitioned container that is adapted to receive water or contain it long enough to be able to prepare different ratios in the different compartments.”

As for the two remaining prior art references (disclosing a type of “blood plasma bottle” and a certain fluid container), they are directed at dividing liquids which are mixed later; the Federal Circuit concluded that neither of these references are pertinent to Mr. Klein’s invention “because they do not address multiple ratios or have a ‘movable divider’.” Because none of the cited references were completely analogous to the stated problem, no grounds remained to support the obviousness rejections, and the Board’s decision was reversed.

May 10, 2011

Judge McKinney Presides over Jury Trial in Harvest Scents v. KMI Copyright Infringement Lawsuit After Denying KMI Evidentiary Motions

By Overhauser Law Offices, LLC

Indianapolis, IN – This week Senior Judge Larry J. McKinney of the Southern District of Indiana is presiding over a jury trial of a copyright infringement lawsuit. The case is Harvest Scents & Traders LLC v. KMI International Corporation. The trial began on Monday, May 2, continued through last week, and resumed on Monday. According to the latest information available on PACER, the trial continues today.

Copyright attorneys for Harvest Scents, of Indianapolis, filed this copyright infringement lawsuit in March 2008. The complaint alleges that KMI, an Illinois company, has sold and distributed products that contained material that Harvest Scents has copyrighted. There are six works at issue that registered by the US Copyright Office:

Willow Tree, registration number VA 1-380-918

Primitive Pear Collection, registration number VA 1-421-622

Primitive Wood Button Collection, registration number VA 1-421-623

Baskets-n-Berries Collection, registration number VA 1-424-839

Homespun Collection, registration number VA 1-421-620

Roughsawn Collection, registration number VA 1-424-205

The trial began following several recent rulings on evidentiary matters by Judge McKinney. On February 28, 2011, Judge McKinney denied KMI’s motion in limine to preclude Harvest Scents from introducing evidence at trial of its products that it had not deposited with the US Copyright Office when it submitted its copyright application. KMI had argued that “the introduction of this evidence will invite the jury to find that KMI infringed on unregistered derivative works, unduly prejudicing KMI because Harvest Scents may not bring suit based on infringement of unregistered works, 17 U.S.C. § 411.” The court rejected this argument and allowed the evidence at trial. The court explained, “Direct copying of the registered work is not necessary to infringe, so long as the protected elements are copied. See JCW Invs., Inc. v. Novelty Inc., 482 F.3d 910, 914 (7th Cir. 2007) (noting that the elements of infringement include “copying of constituent elements”); see also KnowledgeAZ, Inc., 617 F. Supp. 2d at 789.” This ruling is available here.
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May 10, 2011

TiVo and EchoStar’s Attempt to Settle Case After Appeal Decision Fails

By Overhauser Law Offices, LLC

Washington, DC – As a nonprecedential disposition, the United States Court of Appeals for the Federal Circuit has issued an order denying an attempt by TiVo, Inc., EchoStar Corporation, related EchoStar affiliates, and Dish Network Corporation to settle, following a decision on appeal, their long-running patent dispute.

At issue is certain video recording technology, such as that employed in digital video recorders (DVRs), allowing DVR users to watch one program while another is recorded. Following a trial at which it was held liable for infringement and permanently enjoined from making or selling infringing products, EchoStar modified its product and continued to sell it. TiVo brought a contempt action, and the trial court found EchoStar in contempt because the modified product violated the injunction by not being “colorably different” from the infringing version.

The contempt ruling was appealed. On April 20, 2011, the Federal Circuit issued a rare en banc (the full court, rather than just a panel) decision which would have required EchoStar and Dish Network pay $90 million in damages to TiVo. Importantly, that opinion provided new rules for courts to utilize in contempt proceedings involving infringing products which have been modified following issuance of an injunction.

The parties reached a settlement on April 29th and, informing the Federal Circuit of this on May 2nd, they asked the court to dismiss the appeal. At that point, the Federal Circuit had not issued a mandate to the trial court implementing the appellate decision. However, in the latest order, the Federal Circuit, again ruling en banc, succinctly refused to grant the parties’ request. Citing decisions by sister federal courts of appeal, the Federal Circuit noted that dismissing the case would essentially vacate the prior en banc opinion, which is “neither required nor a proper use of the judicial system.”

Practice Tip: Regardless of what type of wrong is alleged, if parties to a case on appeal reach a settlement before the court issues a decision, they have a duty to inform the court of the agreement.
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