Patent Infringement

February 14, 2011

Appeals Court Overturns Southern District Court of Indiana Decision in Centillion v. Qwest Communications

Washington, D.C. — The Court of Appeals for the Federal Circuit recently overturned a patent infringement decision by the Southern District of Indiana. Attorneys for Centillion Data Systems, of Indianapolis, Indiana, brought a patent infringement lawsuit against Qwest Communications, a Denver, Colorado company. Centillion, which has merged with CTI Group, owns U.S. Patent Number 5,287,270, a system for collecting, processing, and delivering information from a service provider, such as a telephone company. According to Centillion’s patent attorneys, several of Qwest Communication’s billing systems infringe upon Centillion’s patent. Qwest’s systems performed backend tracking automatically, but also allowed customers to download an application to their home computers to track their usage “on-demand.” Patent attorneys for Qwest argue that it did not infringe upon the patent because home users, not Qwest, performed some of the functions of the patented system.

Judge Tinder of the Southern District of Indiana heard the case and granted summary judgment in favor of Qwest. Centillion appealed to the Court of Appeals for the Federal Circuit, which reversed the decision below. The Court of Appeals examined the definition of “use” in § 271(a) of the patent infringement statute and held “that to “use” a system for purposes of infringement, a party must put the invention into service, i.e., control the system as a whole and obtain benefit from it.” The court found that it does not matter that “the user did not have physical control over the relays, the user made them work for their patented purpose, and thus “used” every element of the system by putting every element collectively into service.” The court sent the case back to the district court to resolve the disputed factual issues.

Practice Note: This type of situation is sometimes referred to as joint or divided infringement. In this case, for example, it seemed that Qwest invited its customers to infringe Centillion’s patent. This case illustrates the importance of carefully drafting patent infringement claims when joint infringement may be an issue.

February 10, 2011

USITC Seeks Clarification from Indiana’s Eli Lilly in Cancer Drug Patent Dispute

By Overhauser Law Offices, LLC

Indianapolis — This week, an attorney from the United States International Trade Commission (USITC) asked Indiana-based Eli Lilly for clarification regarding Lilly’s allegations of patent infringement over the chemotherapy drug gemcitabine. Eli Lilly owns U.S. Patent Number 5,606,048, which is a process of preparing the gemcitabine. The FDA approved gemcitabine for treatment of breast, lung, ovarian, and pancreatic cancer. Lilly alleges that its process is the only commercially viable process of producing the drug and that several companies, including Illinois-based Hospira Incorporated, are making and selling a generic version of the drug using the patented process. In a letter this week, the USITC has asked Lilly to explain why it believes its patented process is being used.

In January, patent attorneys for Eli Lilly filed a complaint with the USITC that alleges patent infringement by unlawful importation and sale of the drug. Lilly seeks an exclusion order from USITC that would ban the importation of the drug into the United States. Lilly alleges that manufactures in China and India use the patented process to make the drug, which Hospira imports and sells in the United States. Patent attorneys for Hospira and Lilly have been litigating over alleged infringement the patent in U.S. and foreign courts for several years. In September, Hospira filed a suit in the United States District Court for Northern Illinois (Case Number 1:2010cv06275) seeking a declaratory judgment stating that Hospira is not infringing Lilly’s patent. According to the Indiana Business Journal, Lilly’s global sales the drug fell 14%, or about $906 million, in the first three quarters of 2010.

Practice Note – When an imported product infringes on a patent, the patent holder can seek an exclusion order from the United States International Trade Commission. USITC patent attorneys will investigate whether the imported product violates U.S. patent law. In prior litigation it appears that Eli Lilly had difficulty proving that its patented process is being used rather than another process. Lilly claims it has been unable to do so because Hospira and the foreign manufacturers have not complied with discovery requests. Nonetheless, it appears from this week’s letter that the USITC is concerned about this factual issue.

January 31, 2011

Dataflow Systems, Inc. Sues Arrival Star S.A. and Melvino Technologies Limited, Seeking Declaratory Judgment on Vehicle Tracking Patents

By Overhauser Law Offices, LLC

Indianapolis, IN – Patent lawyers for Dataflow Systems, Inc. of Indianapolis, IN, filed a declaratory judgment suit seeking a ruling that the company has not violated certain patents held by Defendants Arrival Star S.A. or Melvino Technologies Limited.

The lawsuit concerns several patents, issued by the U.S. Patent Office, which cover “vehicle tracking and status messaging systems,” typically used in the shipping industry.

The complaint alleges that, early in 2011, the Defendants sent a letter to the Plaintiff asserting patent infringement and proposing a “highly favorable” license. The letter gave a two-week period for reply and threatened that the Defendants would “proceed accordingly here in the court system” if the deadline was not met. The day before the deadline, Plaintiff’s counsel responded, saying their analysis was not complete and promising a substantial reply early the next month, February. Defendants’ counsel then insisted on a reasonable settlement offer by February 1st or else litigation would be brought in the U.S. and Canada. Plaintiffs soon filed for declaratory relief and allege that none of their products include all the limitations of any of the asserted patents’ claims. They further allege that the Defendants, in bad faith, did not perform a pre-suit investigation into infringement.

The patents at issue are: Patent No. 6,486,801, BASE STATION APPARATUS AND METHOD FOR MONITORING TRAVEL OF A MOBILE VEHICLE; Patent No. 6,714,859, SYSTEM AND METHOD FOR AN ADVANCE NOTIFICATION SYSTEM FOR MONITORING AND REPORTING PROXIMITY OF A VEHICLE; Patent No. 6,317,060, BASE STATION SYSTEM AND METHOD FOR MONITORING TRAVEL OF MOBILE VEHICLES AND COMMUNICATING NOTIFICATION MESSAGES; Patent No. 6,748,320, ADVANCE NOTIFICATION SYSTEMS AND METHODS UTILIZING A COMPUTER NETWORK; Patent No. 6,952,645, SYSTEM AND METHOD FOR ACTIVATION OF AN ADVANCE NOTIFICATION SYSTEM FOR MONITORING AND REPORTING STATUS OF VEHICLE TRAVEL; Patent No. 7,030,781, NOTIFICATION SYSTEM AND METHOD THAT INFORMS A PARTY OF VEHICLE DELAY; and Patent No. 7,400,970, SYSTEM AND METHOD FOR AN ADVANCE NOTIFICATION SYSTEM FOR MONITORING AND REPORTING PROXIMITY OF A VEHICLE.
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January 21, 2011

Consulting Engineer Sues, Claiming He Is Co-Inventor of Suros Surgical Patent Worth Millions

By Overhauser Law Offices, LLC

Indianapolis, IN – Patent lawyers for plaintiff Schwindt, claim the defendants Miller and Mark omitted Schwindt as an inventor on a patent application, that turned out to be worth millions. All three were early founders and investors in Suros Sugical Systems, an Indianapolis medical device manufacturer founded in 2000. Suros grew quickly, and was acquired for $240 million by Hologic in 2006.

Plaintiff Schwindt did some outside engineering consulting for Suros. He claims his contributions (suggesting a pneumatic control, a pressure switch and a pneumatic circuit manifold for a biopsy device) elevate him to the status of an “inventor” of the system on which he worked. Suros applied for and was issued several patents, including 6,758,824, although Schwindt was not named an “inventor” on the applications filed by Suros.

Schwindt later started his own company, Tissue Extraction Devices, and filed for his own patent applications for the same invention. This led to an interference proceeding, which remains pending. According to the complaint, in that proceeding, “the USPTO suggested that it is the district court and not the Office that is in the best position to fashion an equitable remedy to fit the facts in cases [such as this one] where inequitable conduct is established.” In contrast, Suros claims in the interference that Schwindt simply followed instructions to fabricate a circuit board and console for Suros’s device using off-the-shelf components and had no involvement in the biopsy device’s development.

Notwithstanding the ongoing interference proceeding, in the present suit, Schwindt asks the Court to declare him a co-inventor of the patents issued to Suros.

Practice Tip: This case highlights the importance of having clear intellectual property rights agreements when utilizing outside consultants. Even though a company may pay an outside firm to assist with developing a product, unless the agreement specifically calls for the assignment of inventions, the consultant will own the right to any resulting inventions, not the company commissioning the work.

It will be interesting to see how the Court addresses jurisdictional issues. The Complaint asserts claims for fraud/deception, unjust enrichment, and “accounting,” which are all state law claims that do not appear to invoke Federal jurisdiction. The only claim alleged to justify federal jurisdiction is that for declaratory judgment that the plaintiff is a co-inventor of the patents. However, patent ownership issues usually arise under state law. Jim Arnold Corp. v. Hydrotech Systems, Inc., 109 F.3d 1567 (Fed. Cir. 1197), cert. denied sum nom., 118 S. Ct. 338 (1997).

The complaint and more information about this suit is below.

January 20, 2011

Bald Spot Racing sues BSCI for Patent Infringement of Vehicle Seat Inserts

By Overhauser Law Offices, LLC

Indianapolis, IN – Patent lawyers for Bald Spot Racing, LLC of Indianapolis, IN have filed a patent infringement suit alleging BSCI, Inc. of Mooresville, NC infringed patent no. 6,733,710 VEHICLE PASSENGER RESTRAINT AND METHOD OF PRODUCING SAME, which has been issued by the US Patent Office. Despite the title of the patent, its single claim is limited to a method for making a car seat that is custom formed to a specific driver.

The single independent claim of the patent is:

1. A method of producing a restraint for a passenger of a vehicle comprising the steps of:
placing an enclosure of flexible plastic within a vehicle;

placing a passenger of the vehicle atop and adjacent said enclosure while in said vehicle;
allowing said flexible plastic to form around the passenger forming a plastic restraint;
removing the passenger from the vehicle;
causing the plastic restraint to harden;
removing the plastic restraint from the vehicle; scanning said plastic restraint to profile said plastic restraint; and, shaping solid plastic in accordance with the profile of the plastic restraint producing a passenger restraint.

This case has been assigned to Judge Jane E. Magnus-Stinson and Magistrate Judge Tim A. Baker in the Southern District of Indiana, and assigned case no. 1:11-CV-00095-JMS-TAB.

Practice Tip: The complaint alleges upon “information and belief” that the defendant “sold or offered for sale seat inserts for a racecar within this judicial district that were made by the defendant using a process protected by the patent . . .” An intriguing issue in this case is likely to be whether the defendant is subject to personal jurisdiction in Indiana if it did not actually practice the method in Indiana, and has no other contacts with Indiana. Personal jurisdiction could be more likely if there was an actual sale of a product of a seat insert to a customer in Indiana that was made using the patented method. It is not unusual for a patent owner to purchase one of the defendant’s products in the State where the patent owner plans to file suit, and then to reference that sale in the complaint to improve the odds so of acquiring personal jurisdiction over the defendant. The complaint here does not reference such a purchase.

January 5, 2011

Hillenbrand, Batesville Casket Company win ban of knockoff coffins from Mexico from the U.S. International Trade Commission

By Overhauser Law Offices, LLC

Batesville, IN – Patent attorneys for Batesville-based Hillenbrand Inc., and its subsidiary Batesville Casket Company, the largest U.S. maker of coffins, have won an order to ban imports of knockoff caskets from Mexico in a patent infringement decision.

The U.S. International Trade Commission (USITC) in Washington said Monday that Ataudes Aguilares, a Mexican company, will be barred from importing caskets with patented memorabilia compartments and ornamental corner pieces. Batesville has patented caskets with memorabilia compartments, which is a drawer where family members can put personal mementos, Batesville said in its complaint. The patented ornamental corner pieces allow funeral directors to easily change the pieces quickly and easily. The four patents for the caskets with memorabilia compartments, U.S. Patent Numbers 5,611,124; 5,727,291; 6,836,936; 6,976,294; and, and the parent for the quick change corner attachment, Number 7,340,810, are registered with the US Patent Office. Batesville has also patented the specialty coffins in Canada and Mexico.
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January 4, 2011

25% Rule of Thumb for Patent Royalty Damages Rejected By Court of Appeals for the Federal Circuit

By Overhauser Law Offices, LLC

Washington DC – The “25% Rule” has often been used by damages experts in assessing damages in patent infringement cases. The rule states that in determining a base royalty rate in a hypothetical negotiation, a starting point is to consider that a reasonably royalty would be 25% of the marginal profits that would be realized by using the patented improvement. USE OF THE 25 PER CENT RULE IN VALUING IP, 37 les Nouvelles 123, 123 (Dec. 2002). On January 4, 2011, the Court of Appeals for the Federal Circuit resoundingly rejected this theory in Uniloc USA v. Microsoft. The Court stated:

“This court now holds as a matter of Federal Circuit law that the 25 percent rule of thumb is a fundamentally flawed tool for determining a baseline royalty rate in a hypothetical negotiation. Evidence relying on the 25 percent rule of thumb is thus inadmissible under Daubert and the Federal Rules of Evidence, because it fails to tie a reasonable royalty base to the facts of the case at issue.”

This has been a much-anticipated case, because the jury had awarded Uniloc damages of $388 million – a huge amount by any measure.

Practice Note: Although this case did not originate in Indiana, appeals in all patent infringement litigation are made to the Court of Appeals for the Federal Circuit. Thus, this ruling impacts patent infringement cases in every State, including Indiana.

This opinon is also notable because it comments on other important subjects in patent law, such as:

The Entire Market Value Rule – “The entire market value rule allows a patentee to assess damages based on the entire market value of the accused product only where the patented feature creates the ‘basis for customer demand’ or ‘substantially create[s] the value of the component parts. . . This case provides a good example of the danger of admitting consideration of the entire market value of the accused where the patented component does not create the basis for customer demand.”

Standard of Review of Jury Verdicts The Court ruled that de novo review applies in cases where “the parties conceded that under one claim construction there was infringement and under the other there was none, and were arguing only over which claim construction was appropriate.” In contrast, if “the claim construction itself is not contested, but the application of that claim construction to the accused device is,” the substantial evidence standard governs

Willful Infringement. A court can “treble” damages and award attorneys fees when “willful infringement” occurred. The Court stated, “If the accused infringer’s position is susceptible to a reasonable conclusion of no infringement, the first prong of Seagate cannot be met.” Slip Op. at 32. Particularly obtuse is the court’s triple-negative articulation of the factual holding: “Uniloc has not presented any evidence at trial or on appeal showing why Microsoft, at the time it began infringement, could not have reasonably determined that [Microsoft’s algorithms] did not meet the “licensee unique ID generating means,” “licensee unique ID,” or “registration system”/”mode switching means” limitations.”

Clear and Convincing Standard for Proving Patent Invalidity. Microsoft had vigorously argued that patent invalidity need only be shown by a preponderance of the evidence as opposed to clear and convincing evidence . However, the Court did not rule in Microsoft’s favor, stating, “Until changed by the Supreme Court or this court sitting en ban, this is still the law.”

Given the amount of damages at issue, the case is likely to be appealed to the U.S. Supreme Court.

The opinion appears below

December 17, 2010

ERICO International Sued by NIBCO for Patent Infringement

By Overhauser Law Offices, LLC

South Bend, Indiana – Patent lawyers for NIBCO, Inc., of Elkhart, IN, have filed a patent infringement suit alleging ERICO International Corporation of Solon, OH, has infringed the following patents issued by the U.S. Patent Office: Patent Nos. 6,517,030,. 6,953,174, 7,191,987, and. 7,441,730. All four patents have the same title, SWAY BRACE FITTING, which is a device for “bracing pipes and other loads, suspended below ceilings and beams, against sway and seismic disturbances.”

The plaintiff is a manufacturer of support system products. Citing photographs and an advertisement, the complaint states that the defendant is making, using, selling, offering for sale, or importing sway brace products which infringe these patents. As is usually the case in intellectual property litigation, the plaintiff seeks both damages and injunctive relief.
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December 2, 2010

GS Cleantech Files Patent Infringement Lawsuit Against Flottweg in Indiana

By Overhauser Law Offices, LLC

Indianapolis, Indiana – In a case which was transferred from federal court in Connecticut, patent lawyers for GS Cleantech Corporation of New York City have filed a lawsuit alleging Flottweg Separation Technologies, Inc. of Norwalk, CT, and Flottweg AG of Germany are infringing Patent No. 7,601,858, titled METHOD OF PROCESSING ETHANOL BYPRODUCTS AND RELATED SUBSYSTEMS and issued by the U.S. Patent Office.

The complaint notes that a separate lawsuit, filed by ICM, Inc., is pending in federal court in Kansas. The plaintiff in that case requests a declaratory judgment of non-infringement and invalidity of the ‘858 patent.
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November 10, 2010

Zimmer, Inc. Obtains Transfer of MedIdea Patent Infringement Complaint to Indiana

By Overhauser Law Offices, LLC

A patent infringement suit filed in Illinois by MedIdea LLC against Zimmer, Inc. of Warsaw, Indiana has been transferred to the Northern District of Indiana. The suit alleges infringement of the following patents issued by the U.S. Patent Office: 6,200,350 and 6,383,225, which relate to Hips, and Nos. 6,267,785, 6,379,391, 6,398,812, 6,821,300, and 7,229,478 which relate to shoulders.