February 9 / Patent, Trade Secret

Federal Circuit reviews the $1.5 billion judgment against Marvell

INTRODUCTION

In 2009, Carnegie Mellon University sued Marvell for infringement of U.S. Patent Nos. 6,201,839 and 6,438,180, relating to methods that reduce “noise” in magnetic recording systems.[1] The jury found that Marvell was in fact selling infringing, semiconductor products both domestically and abroad.[2] The jury awarded $1.17 billion in damages to Carnegie Mellon University, corresponding to 50 cents for each product sold.[3] Soon thereafter, the judge added $287 million in enhanced damages for willful infringement. The total judgment was $1.54 billion[4]; the largest judgment in the history of patent law. Marvell appealed.

On appeal, Marvell argued that the royalty rate was too high and should not have been applied to products sold outside of the United States.[5] On August 4, 2015, the Federal Circuit affirmed the judgment of infringement and validity; reversed the grant of enhanced damages; and vacated in part and remanded the royalty award.[6]

Analysis

The Federal Circuit threw out the enhanced damages under the governing willfulness standard.[7] Statute states “the court may increase the damages up to three times the amount found or assessed” upon proof of willfulness.[8] Willfulness requires “clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent” and “this objectively defined risk…was either known or so obvious that it should have been known.”[9]

In the instant case, Marvell’s defense to the infringement claims was “objectively reasonable” so the burden of proof for willfulness was not met.[10] In its defense, Marvell argued there was an invalidating prior art reference.[11] The Federal Circuit held there was uncertainty regarding what the reference disclosed such that the invalidity defense was objectively reasonable, though ultimately rejected.[12]

The Federal Circuit left $278.4 million in damages in tact because Marvell must pay royalties on the products that were imported and sold in the United States.[13] However, the award was vacated in part due to an issue of extraterritoriality.[14] Marvell had argued that the court cannot measure damages based on the total number of products sold worldwide; damages are calculated relative to the number of products sold in the United States.[15] The Federal Circuit agreed and ordered a new trial to recalculate the damages on products that were not imported into the United States.[16]

Statute mandates that anyone who “uses, offers to sell, or sells any patent invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent”.[17] Thus, the court must determine whether any of the activities listed in § 271(a) occurred in the United States.[18] For example, there was some evidence that Marvell had designed, tested, and marketed the infringing products in the United States.[19] Many of Marvell’s investors were companies based in the United States, including Google Inc., Microsoft Corp., and Broadcom Corp.[20] There was also evidence suggesting that Marvell made contractual commitments for specific volumes of products, signed in the United States.[21]

Implications

The day the Federal Circuit issued its opinion, Marvell shares dropped 2.4 percent in Nasdaq.[22] There will likely be a settlement between Marvell and Carnegie Mellon University because it is too expensive for either party to continue litigation.[23] It would be financially favorable for Marvell to license the technology from the university.

The outcome of this case is significant because domestic companies will now take extra measures to insulate foreign sales from United States patent law.[24] Domestic companies may be encouraged to move their design, testing, and marketing activities outside of the United States.[25] Alternatively, domestic companies may conduct all contract negotiations outside of the United States.[26]

[1] See Carnegie Mellon University v. Marvell Technology Group Ltd., 14-1492, *10, U.S. Court of Appeals for the Federal Circuit (Washington), https://www.bloomberglaw.com/document/X1Q6NDHQ1182/.

[2] See id. at *11.

[3] Id.

[4] Id. at *3.

[5] Id. at *11.

[6] Id. at *3.

[7] Id.

[8] 35 USC § 284

[9] Carnegie Mellon University, supra at *24 (quoting In re Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007)(en banc)).

[10] Id. at *25.

[11] Id. at *27.

[12] Id.

[13] Id. at *4.

[14] Id.

[15] See id. at *40.

[16] See id. at *38.

[17] 35 USC  § 271(a).

[18] Carnegie Mellon University, supra at *38.

[19] Id. at *15.

[20] Susan Decker, Marvell Gets Reduced Damages in $1.17 Billion Patent Verdict (2), BLOOMBERG NEWS ENTERPRISE, (August 4, 2015, 11:53 AM), https://www.bloomberglaw.com/ip_law/document/NSKETL6KLVRG/.

[21] Carnegie Mellon University, supra at *33.

[22] Jonathan Stempel, Marvell Technology wins cut in $1.54 billion Carnegie Mellon patent award, REUTERS, (August 4, 2015, 1:43 PM), http://www.reuters.com/article/2015/08/04/us-marvell-technlgy-carnegiemellon-idUSKCN0Q91K220150804/.

[23] See Decker, supra.

[24] See id.

[25] See id.

[26] See id.

February 9 / Patent

“Cross-checking” as a Claim Construction Strategy

The Supreme Court has long held that claim construction is a question of law reserved for the court.[1] During claim construction, the proper meaning of a term is construed from the intrinsic evidence and, when appropriate, extrinsic evidence.[2] The intrinsic evidence includes the claims, the specification, and the prosecution history.[3] The weight of the intrinsic evidence is often determinative. Therefore, a patent attorney should maintain a consistent claim construction strategy from the start of prosecution. This strategy should encompass the full scope of the invention. Otherwise, the patent owner will have little protection against infringers.

One helpful strategy is “cross-checking” the list of features. For example, features A and B can both be implemented via X. However, feature A can also be implemented via Y. Therefore, it is important to cross-check whether B can also be implemented via Y. The inventor and the patent attorney should work together, at the start of prosecution, to identify all the features and all the ways each feature can be implemented. Then, cross-checking can be performed.

Failure to cross-check the list of features may result in a narrow claim interpretation, as shown in Intellectual Ventures I LLC v. Capital One Bank.[4] On June 19, 2013, Intellectual Ventures sued Capital One Bank for infringement of U.S. Patent No. 7,260,587 (the ‘587 Patent) which relates to a method of organizing digital images.[5] In the simplest embodiment, hard-copy prints are placed into a desired order. A machine readable instruction form is placed in front of the hard-copy prints. The instruction form is scanned to identify one or more categories associated with the hard-copy prints, e.g., “vacation 1999.” The hard-copy prints are scanned to obtain the digital images. The digital images are manipulated such that each digital image is associated with the one or more categories, according to the instruction form.[6] This allows the user to organize and easily search for specific images.[7]

Claim 1 of the ‘587 Patent recites “digitally scanning a plurality of hard copy prints [that have been grouped into one or more categories, each category separated by] an associated machine readable instruction form”.[8] Capital One Bank argued non-infringement on the basis that the claimed method required a hard-copy instruction form which Capital One Bank did not practice.[9] Intellectual Ventures argued that there was no requirement that the instruction form be in a hard-copy format.[10] The District Court construed the terms “machine readable instruction form” to require a hard-copy format, rather than an electronic format.[11] The parties stipulated there was no infringement.[12] Intellectual Ventures appealed.

On appeal, the Federal Circuit reviewed the District Court’s claim construction de novo and ultimately affirmed that the “machine readable instruction form” must be in a hard-copy format based on the intrinsic evidence.[13] First, the claim language suggests the machine readable instruction form must be in a hard-copy format to physically separate the categories of hard-copy prints before scanning.[14] Second, the specification of the ‘587 Patent consistently describes the machine readable instruction form as a hard-copy document, and there are no examples of the machine readable instruction form being anything other than a hard-copy document.[15] The provided examples describe that instructions are written on a machine readable instruction form, the machine readable instruction form is physically placed in an envelope with the hard-copy prints, and the machine readable instruction form is then physically placed in front of the hard-copy prints before scanning. Third, during prosecution, in response to an office action, the Applicant argued that the instructions are digitally scanned, stating that this was “clearly a physical step.”[16] Therefore, the patentee did not maintain a consistent claim construction strategy in prosecution and litigation.

Here, the patentee should have used varied examples to show different embodiments of the feature at issue. The patentee also should have performed cross-checking. In fact, the specification discussed another feature of the invention (the user instructions, i.e. how to use the method generally) that could be in audio or visual format.[17] The court believed this discussion showed the patentee could have discussed the feature at issue (the machine readable instruction form) also being in audio or visual format. [18]

In this instance, the patentee would have benefitted from cross-checking feature A (i.e. the user instructions) and feature B (i.e. the machine readable instruction form.) Feature A can be implemented via X (i.e. hard-copy format), Y (i.e. audio format), and Z (i.e. visual format). Feature B can be implemented via X. Therefore, the patentee should have cross-checked whether feature B can also be implemented via Y and Z. Then, the patentee would have been motivated to use more varied examples to describe the different ways each feature can be implemented via Y and Z. The patentee also would have maintained a consistent claim construction strategy in prosecution and litigation.

Thus, at the start of prosecution, the patent attorney should discuss different embodiments with the inventor and cross-check the list of features. This strategy will help identify whether claim limitations can be met physically versus electronically for the purposes of litigation.

[1] Markman v. Westview Instruments, 517 U.S. 370, 391, 116 S.Ct. 1384, 1396 (1996).

[2] Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005)(en banc).

[3] See id. at 1314.

[4] See Intellectual Ventures I LLC v. Capital One Bank (USA), 2015 U.S. App. LEXIS 11537, *2 (Fed. Cir. July 6, 2015).

[5] Id. at *3.

[6] U.S. Patent No. 7,260,587, col. 2 ll.11-32.

[7] Id. at col. 5 ll.50-53.

[8] U.S. Patent No. 7,260,587, claim 1.

[9] Intellectual Ventures I LLC v. Capital One Bank (USA), 2015 U.S. App. LEXIS 11537, *16 (Fed. Cir. July 6, 2015).

[10] Id.

[11] Id.

[12] Id. at *4.

[13] Id. at *2.

[14] Id. at *16.

[15] Id. at *17.

[16] Id. at *18.

[17] Id. at *17.

[18] Id.

February 9 / Article, Patent

A Review of the Modern IPR Process

Abstract: In the pharmaceutical industry, patents protect a drug-maker’s right to exclusively produce a drug or issue a license for its production by another entity. In either instance they have the ability to control distribution and, more importantly, the cost. This exclusivity exists until the time the
patent term expires, at which point other manufacturers can begin producing a generic versions of the drug. Production of generic drugs significantly cuts the market share of brand name drug as well as drives down the overall cost of the drug. This makes patent protection a big concern for pharmaceutical companies spending years and billions of dollars in drug development. Once a patent is issued for a drug there is still a chance that the validity of the patent may be challenged. One such way a purported infringer or competitor can challenge a patent’s validity is through an inter partes review (IPR) Process allowed by the United States Patent and Trademark Office (USPTO). Until recently the use of this process by generic drug-makers to invalidate patents has had no success. However, a recent decision by the Patent Trial and Appeal Board (PTAB) gave generic drug-makers their first break when they invalidated the patent for the multiple sclerosis drug Gilenya. The following will review the IPR process and examine the decision by the PTAB to invalidate the Gilenya patent under 35 U.S.C §103.

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February 9 / Article, Patent

The CRISPR Patent Battle: Who Will be “Cut” Out of Patent Rights to One of the Greatest Scientific Discoveries of Our Generation?

Abstract: At the center of the United States patent system lies an intricate balance between creating monetary incentives that lead to creation, invention, and discovery, and impeding the flow of the very information that
might permit invention. One such invention, that of a novel gene-editing technology called CRISPR-Cas9, has been called one of the “greatest scientific discoveries in the last century.” In simplest terms, the ability to edit genes (the basis of hereditary traits in living organisms made up of DNA) allows scientists to target a specific mutated gene sequence that leads to disease, cut that region out, and, if necessary, replace that sequence with a “healthy” version. CRISPR-Cas9 has already been applied in experiments to rid mice of Muscular dystrophy, block cells from HIV infection, and cure mice of rare liver disease.

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November 25 / Blogs, Computing, Technology

Obama’s Broadband Plan

Abstract: This January, President Barack Obama announced a federal government initiative to expand broadband infrastructure. Given the widespread use of technology in today’s society, the President believes that broadband access is an essential piece of infrastructure that needs improvement.

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November 25 / Article, Other Intellectual Property, Technology

Telemedicine & The Courts: Teladoc v. Texas Medical Board as a Case Study

Abstract: Using varied technology platforms to leverage healthcare accessibility has become a principal goal for the venture capitalists that fund tech startups. Today, health
insurance companies such as Aetna and United Healthcare have partnered with telemedicine companies in order to provide the service for its members. Teladoc, Inc., which markets itself as the first and largest telehealth provider in the United States, is one such company. Of all of business generated by Teladoc’s 11.5 million members, one quarter comes from Texas.

Over the course of the past year, however, Teladoc’s ability to continue its services in the state has been on legally tenuous ground due to repeated steps taken by the Texas Medical Board to oust the company from its state. The Teladoc, Inc. v. Texas Medical Board case exemplifies the collision between emerging technology and healthcare law, and serves as a useful study of the treatment such a dispute receives from the court system.

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November 25 / Blogs, Copyright

‘HAPPY BIRTHDAY TO YOU’: The World’s Most Famous Celebratory Song’s Copyright Challenged

Abstract: It is a well-known adage that the best things in life are free, but how true could this be with a copyright looming over the “Happy Birthday to You” song’s head? On
September 22, 2015, a U.S. District Court in California freed “Happy Birthday to You” by ruling on the case Marya v. Warner/Chappell Music, Inc. and declaring Warner/Chappell’s copyright invalid. Although the song is widely known by all, many individuals do not know that “Happy Birthday to You” was copyrighted at all, let alone know that Warner/Chappell was making $2 million a year from ownership. The history of how the song came to be provides an insight into how Warner/Chappell obtained a copyright and how the existence of the copyright was impacting everyone from filmmakers to restaurant chains.

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November 25 / Blogs, Other Intellectual Property, Trade Secret

The Defend Trade Secrets Act: Arrival of the Trade Secret Trolls?

Abstract: In today’s world it is increasingly apparent that advancements in technology have allowed information to be shared, and to be stolen, more than ever before. This
encompasses simple tweets, as well as information guarded and seemingly protected by small businesses and large corporations alike. There have been expected downsides with these technological capabilities, namely state-backed cyber espionage and trade secret misappropriation. A new bill that is currently facing Congress, the Defend Trade Secrets Act, is aimed at creating a federal private cause of action under the Economic Espionage Act of 1996 (EEA). It is a bill that will, if passed, expand the EEA to provide federal jurisdiction for the theft of trade secrets. There is no question as to the degree of importance the protection of trade secrets is to United States businesses and society at large. The question is whether the well-intentioned DTSA will actually do more harm than good. There are a substantial number of legal professionals that have voiced their concern that not only will it fail to significantly hinder cyber-espionage, but it will open the door to a new breed of predators, trade secret trolls

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November 25 / Blogs, Copyright, Other Intellectual Property, Patent, Trademark

Intersection of American Law and Technology: The Innovation Act’s Fight Against Patent Trolls

Abstract: Few issues have attracted more legal attention and spurred more public debate in recent years than the controversy over patent rights. The crossroads of American law
and innovation finds its origin in the U.S. Constitution. Article 1, section 8 states that “Congress shall have the power to…promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.” The founding fathers recognized the social value of innovation, and the critical role government will inevitably play in protecting and encouraging technological advances.

Out of the foundations of the Constitution grew an elaborate system of patent laws, evolving over time to meet the needs of modern society. Nevertheless, in recent years, the frequency of extraneous patent lawsuits has become increasingly concerning. The economic and social burdens of frivolous litigation have led “academics, policymakers, and even judges to suggest that patent law[s] may have overleaped its proper bounds, or at least become too likely to frustrate, rather than to fulfill, its constitutional purpose of ‘promot[ing] the progress of science and useful arts’. The primary causes of this problem are the overly litigious entities pejoratively known as patent trolls, who are collectively responsible for the majority of today’s patent infringement cases. Although solutions to this complex problem are evasive, the need for reform is readily apparent. One of the most important and highly debated pieces of legislature surrounding the issue of patent trolls is the Innovation Act. This article introduces the Innovation Act, discusses proposed arguments for and against it, and opine on its merit.

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November 25 / Article, Featured, Other Intellectual Property, Patent

Daraprim and the Pharmaceutical Pricing Paradox: A Broken System?

Abstract: On August 10, 2015, at a cost of $55 million, Turing Pharmaceuticals acquired the exclusive U.S. marketing rights to Daraprim, a drug that treats toxoplasmosis (a life-threatening parasitic infection), from Impax Laboratories. Just a few weeks after the acquisition, Turing announced that, effective immediately, the price of Daraprim would be raised from $13.50 a tablet to $750 a tablet, an increase of over 5,500 percent. The overnight price spike has generated considerable censure from healthcare professionals, politicians and the general public. Yet, Turing Pharmaceuticals is not the only company in recent months to substantially increase the price of one of its brand-name drugs.  Just nine days after Turing’s acquisition of Daraprim, Rodelis Therapeutics announced its acquisition of Cycloserine, a drug used to treat tuberculosis, and subsequently raised the price for 30 capsules of the drug from $500 to $10,800. While public pressure has since forced the price of Cycloserine to be scaled back to $1,050, Turing and Rodelis have shown that pharmaceutical companies can realize substantial upside by targeting old, neglected drugs (often for rare diseases) and refashioning them into high-priced specialty drugs.

In a recent study by the American Association of Retired Persons (AARP), the average prices for brand-name prescription drugs were found to have increased by an average of 13 percent in 2013, compared to the inflation rate the year of just 1.5 percent. The Daraprim and Cycloserine cases, while extreme illustrations, depict a broader trend of increasing U.S. drug and health care costs to patients. The two manufacturers’ pricing decisions illustrate a longstanding tension in the pharmaceutical industry between the need for firms to recoup the high costs associated with bringing drugs to market and keeping drugs affordable for consumers.  To date, neither Turing nor Rodelis faces any lawsuits tied to their pricing decisions for Daraprim and Cycloserine respectively.  However, given what has transpired with Daraprim and Cycloserine, and the need to keep drug and health care costs down, perhaps action should be taken to deter future price spikes on brand-name drugs.  That is, under these circumstances, should the government intervene to curb the considerable price-making power that pharmaceutical companies possess in order to better serve the patients who rely on their brand-name drugs and society at large?

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