Archive

Author Archive

The Unleashing Of Twombly

July 10th, 2016 Alexander No comments

In light of the abrogation of Rule 84 and Form 18 as of Dec. 1, 2015, several district courts have been presented with a novel issue as to the proper application of the plausibility requirement of Federal Rule of Civil Procedure 8(a).

Accordingly, patent prosecution counsel are encouraged to take certain steps in drafting their complaints, in order to avoid potential dismissal of their complaints on a motions to dismiss under Federal Rule of Civil Procedure 12(b)(6), alleging improper pleading of plausibility under Rule 8 and according to Twombly and Iqbal.

Similarly, defense counsel are encourage to familiarize themselves with these developments in the law, in order to mount an effective defense against implausible claims and leverage a better settlement for their clients, in cases where the complaint does not adequately comply with the requirements of plausibility as explained in Twombly and Iqbal.

The Specific Requirements the Application of Twombly Pleading Standard Imposes in the Context of a Patent Case

In deciding on the sufficiency of a complaint, in light of a Rule 12(b)(6) motion to dismiss, the court evaluates whether a complaint states a cognizable legal theory and sufficient facts in light of Federal Rule of Civil Procedure 8(a), which requires a “short and plain statement of the claim showing that the pleader is entitled to relief.” Although Rule 8 “does not require ‘detailed factual allegations,’ … it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” In other words, “a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of a cause of action’s elements will not do.” “Nor does a complaint suffice if it tenders ‘naked assertion[s]‘ devoid of ‘further factual enhancement.’”

“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” A claim is facially plausible when the facts pled “allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” That is not to say that the claim must be probable, but there must be “more than a sheer possibility that a defendant has acted unlawfully.” “[F]acts that are ‘merely consistent with’ a defendant’s liability” fall short of a plausible entitlement to relief. Further, the court need not accept as true “legal conclusions” contained in the complaint. This review requires “context-specific” analysis involving the court’s “judicial experience and common sense.” “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged — but it has not ‘show[n]‘ — ‘that the pleader is entitled to relief.’”

In Atlas IP LLC v. Pac. Gas & Elec. Co.,[21] the Northern District of California applied the Twombly standard of plausibility. Since Atlas involved only one asserted claim, it provided the court with a good opportunity to explain the post-December 2015 standard of pleading for patent infringement cases in a relatively simple context. The asserted claim in Atlas was an “apparatus” (or “device” or “system”) claim.

In Atlas, the court concluded that “the complaint fails to state a plausible claim for direct infringement[]” because “the complaint recites only some of the elements of the sole asserted claim, and provides only a threadbare description of the alleged abilities of the accused device. In reaching this conclusion, the court made use of Elan Microelectronics Corp. v. Apple Inc. to demonstrate the point that “simply reciting some of the elements of a representative claim and then describing generally how an accused product operates, without specifically tying the operation to any asserted claim or addressing all of the claim requirements, is insufficient.” In Elan, the court held that “a bare assertion, made ‘on information and belief’” that defendant “has been and is currently, directly and/or indirectly infringing” the specified patents “through its design, marketing, manufacture and/or sale of touch sensitive input devices or touchpads, including but not limited to the Smart-Pad” was an insufficient recital of elements supported only by conclusory statements.

Furthermore, the Twombly decision and its progeny provide ample language suggesting that a stricter standard of pleading was imposed by Twombly. In Twombly itself, the court retired the lower standard of sufficiency under Rule 8, that it had previously set. As one eminent scholar of federal civil procedure has said of Twombly: “Notice pleading is dead. Say hello to plausibility pleading.” That is because the “liberal pleading standard of Federal Rule of Civil Procedure 8(a)(2) has been decidedly tightened (if not discarded) in favor of a stricter standard requiring the pleading of facts painting a ‘plausible’ picture of liability.” Twombly then made quite clear that:

While, for most types of cases, the Federal Rules eliminated the cumbersome requirement that a claimant “set out in detail the facts upon which he bases his claim,” Rule 8(a)(2) still requires a “showing,” rather than a blanket assertion of entitlement to relief. Without some factual allegation in the complaint, it is hard to see how a complainant could satisfy the requirement of providing not only “fair notice” of the nature of the claim, but also “grounds” upon which the claim rests.Bell Atlantic v. Twombly.

Explaining the relationship between Rule 12(b)(6) and Rule 8(a)(2), the court said that:

The need at the pleadings stage for allegations plausibly suggesting (not merely consistent with) agreement [an element of an antitrust claim] reflects the threshold requirement of Rule 8(a)(2) that the “plain statement” possess enough heft to “show that the pleader is entitled to relief.” Only then, will a complaint be sufficient to withstand attack under Rule 12(b)(6).

The Twombly standard was further underscored two years later when the Supreme Court decided Iqbal, wherein the Supreme Court explained that Rule 8:

[D]oes not require “detailed factual allegations,” but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation… . A pleading that offers “labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not do.” Nor does a complaint suffice if it tenders  ”naked assertion[s]” devoid of “further actual enhancement.”

To explain what plausibility means, the court said, as to claims asserted under Rule 8, that “[a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” In other words, plausibility requires a complaint to place the legal conclusions it makes in context of facts that render the asserted claim plausible. Now, as professor A. Benjamin Spencer has aptly put it: “Only those complaints that plead facts suggestive of liability satisfy the Rule 8(a) obligation to state a claim that shows entitlement to relief.” The legal sufficiency of a complaint presented under Rule 8(a) is tested by a motion made under Rule 12(b)(6). “The question of whether a Rule 12(b)(6) mot[33]ion was properly granted is purely a procedural question not pertaining to patent law to which [courts apply] the rule of the regional … circuit.”

Accordingly, in cases post-Dec. 1, 2015, prosecution counsel are encouraged to allege sufficient facts, specifically tying the operation to any asserted claim or addressing all of the claim requirements. This may require patentees in certain cases to undertake more burdensome presuit investigations to learn sufficient facts to allege sufficient plausibility, as required by Twombly. This requires counsel to know exactly which limitations of the asserted claims of the patent(s)-in-suit are being infringed and how the accused products infringes on these limitations of the asserted claims of the patent(s)-in-suit.

For more information, see Law360.



2 Japanese Cos., 5 Execs Face Auto Parts Antitrust Charges

June 25th, 2016 Alexander No comments

Two Japanese companies, their U.S. subsidiaries and five executives have been indicted on auto parts antitrust charges.  As a result of the U.S. Department of Justice’s massive antitrust investigation into the auto parts industry, Tokai Kogyo Co. Ltd., Maruyasu Industries Co. Ltd. and their U.S. subsidiaries were hit with bid-rigging charges. One former Tokai executive and four former Maruyasu executives were also indicted.

Specifically, Tokai Kogyo and its U.S. subsidiary, Green Tokai Co. Ltd., were involved in a conspiracy to fix prices and rig bids for the sale of auto body sealing products to Honda Motor Company Ltd. and some Honda affiliates. Tokai Kogyo, Green Tokai and Tazumi allegedly coordinated with co-conspirators to bid for Honda’s sealing product orders at fixed prices, dividing up the automaker’s business among themselves. Participants in the conspiracy tried to cover their tracks by sending coded emails and telling recipients to delete messages that referred to the scheme, the DOJ said.

Deputy Assistant Attorney General Brent Snyder of the DOJ’s antitrust division said in a statement that the defendants were exercising their right to fight the charges.

“We will not be deterred from holding those involved — both corporations and individuals — accountable for their actions, and we welcome the opportunity to prove our cases to a jury,” Snyder said.

The DOJ said that Tokai Kogyo, Maruyasu and the subsidiaries are the first companies indicted as a result of the DOJ’s investigation. Other companies had previously agreed to settle charges stemming from the investigation.

For instance, Corning International Kabushiki Kaisha, a Japanese unit of materials science giant Corning, agreed last month to pay a $66.5 million fine and plead guilty to fixing prices for ceramic substrates used in vehicle emission control systems.

In total, the investigation has produced charges against 64 individuals and 44 companies, leading to agreements to pay a total exceeding $2.7 billion in criminal fines, according to the DOJ.

For more information, see Law360.

Categories: Litigation


Fed. Circ. Refuses To Restrict Venue In Patent Cases

May 8th, 2016 Alexander No comments

The Federal Circuit recently denied liquid sweetener company TC Heartland LLC’s request for new restrictions on where patent suits can be filed. TC Heartland was sued by Kraft Foods Group Brands LLC in the District of Delaware and was seeking to have the case moved to the Southern District of Indiana, where it is based.

TC Heartland’s petition for a writ of mandamus, which urged the court to cast aside a 1990 ruling that patent suits can be filed in any district where the defendant makes sales, was denied.

TC Heartland argued that the 1990 decision known as VE Holding was overruled by a 2011 federal law, and that under that statute, patent suits can be filed only in places where the defendant is incorporated or has an established place of business and has allegedly infringed. The Federal Circuit rejected that argument, calling it “utterly without merit or logic.”

“The 2011 amendments to the general venue statute relevant to this appeal were minor,” the court wrote, adding that the statute was in fact “a broadening of the applicability of the definition of corporate residence, not a narrowing. This change in no manner supports Heartland’s arguments.”

“Boy, doesn’t this feel like something a legislature should do rather than something we should be asked to do?” U.S. Circuit Judge Kimberly A. Moore said at oral arguments.

Although the case did not actually involve the Eastern District of Texas, where the most patent suits are filed, it has been closely watched because a decision restricting venue in the way TC Heartland requested would have kept most suits out of the district, since few patent defendants are based there.

According to statistics compiled by Law360, there were 2,523 new patent complaints filed in the Eastern District of Texas last year, accounting for 45.5 percent of all cases nationwide. The collection of small cities 100 miles east of Dallas saw nearly 2,000 more new suits than the next-busiest court, the District of Delaware.

For more information, see Law360.



Jury Hits Tata With $940M Trade Secrets Verdict

April 28th, 2016 Alexander No comments

A Wisconsin jury slapped Tata with a $940 million trade secrets verdict, including $700 million in punitive damages, for stealing information related to Epic Systems Corp.’s health care software.

After Tata reviewed Epic’s intellectual property under the pretense of doing consulting work for an Epic client, Epic accused Tata of stealing documents and other confidential information tied to the software it builds for health care companies to manage billing, insurance benefits management and referral services.

Epic’s software is used in a wide variety of health care contexts, and the company boasts that 190 million people have an electronic record in Epic. For example, Kaiser Permanente, the largest managed health care organization in the U.S., hired Epic in the past to handle its patient records.

A few years later, people working for Tata sent requests for access to the company’s sensitive internal web under the guise of being Kaiser Permanente employees in need of training, Epic said.

Kaiser assured Epic that the consultants were working for the health care organization, so Epic had the workers sign a privacy contract to keep the inner workings of its software secret.

But behind Epic’s back, the Tata workers had been accessing Epic’s internal network to gather information about the software, which they used to benefit Tata’s competing product.

Tata  argued that Epic was unfairly accusing the company of fraud without supporting its claims with facts, but their motion to dismiss was rejected by the judge.

For more information, see Law360.



Fox Rothschild Sanctioned $25K For Altering Docs In IP Suit

April 12th, 2016 Alexander No comments

A California federal judge ordered Fox Rothschild LLP to pay $25,000 in sanctions to two California-based clothing companies that lost a copyright infringement suit they filed against the firm’s clients.

U.S. District Judge Dolly M. Gee determined that Fox Rothschild attorneys, representing China-based clothing wholesalers Saza Jeans Inc. and Rich Cowboy USA Inc. in a trademark and copyright infringement dispute lodged by Sweet People Apparel Inc. and RCRV Inc., altered financial information on invoices in order to reflect only the amounts related to the relevant product, but didn’t inform the plaintiffs of the changes or why they did so.

“Defendants’ counsel altered at least some of the documents produced in a manner that obfuscated the true meaning of the information provided,” the judge wrote. “At the very least, defendants’ counsel knew or should have known that they had altered the documents and were aware of the risk that plaintiff was being misled by the alterations.”

In July, a jury ruled that Saza and Rich Cowboy’s denim apparel did not infringe any of the at-issue copyrighted designs belonging to Sweet People, which sells Miss Me brand jeans, and RCRV, which makes Rock Revival brand jeans.

RCRV and Sweet People claimed that at trial, they were able to identify several documents produced by the Fox Rothschild attorneys during discovery that had been altered to change information on invoices that made their clients’ businesses seem smaller by a factor of 15.

“When plaintiffs attempted to ask defendants’ witnesses why they had altered the documents, defendants’ attorneys objected, arguing that defendants themselves did not change the invoices. Instead, at first, defendants’ attorneys blamed plaintiffs without the slightest basis,” the companies said. “Eventually they conceded that defendants’ attorneys had changed the documents.”

For more information, see Law360.

Categories: Intellectual Property


Appeal of $400M Award In Apple-Samsung Patent War

March 28th, 2016 Alexander No comments

The U.S. Supreme Court recently decided to hear Samsung’s appeal of a $400 million judgment that Apple won in a smartphone patent suit.  The Supreme Court agreed to consider Samsung’s argument that the damages test for design patents results in “unjustified windfalls” for patent owners.

The Supreme Court granted Samsung’s petition for a writ of certiorari, which challenged a lower court’s decision that the tech giant must pay Apple its entire profits from smartphones found to infringe Apple’s design patents on the look of the iPhone.

Samsung told the justices that the Federal Circuit misread the law and argued that requiring companies to pay their entire profits when they are found to infringe design patents results in exorbitant awards and gives design patents too much power.

“The decision below is thus an open invitation to litigation abuse, and has already prompted grave concern across a range of U.S. companies about a new flood of extortionate patent litigation, especially in the field of high technology,” Samsung said.

In 2012, a jury found that Samsung infringed Apple’s patents and awarded more than $1 billion in damages, but a damages retrial reduced the award to $548 million. Samsung elected not to appeal the portion of that award dealing with utility patents, and focused its Supreme Court petition on the $399 million in damages related to the jury’s finding of design patent infringement.

Samsung noted that the justices had not heard a case dealing with design patents in more than 120 years. The rule that companies must pay their “total profit” from expensive products like smartphones found to have infringed design patents makes no sense in the modern world, the company argued.

“With the recent explosion of design patents in complex products like smartphones, the time is ripe for this court to again take up the issue,” it said.

Apple told the Supreme Court that the law “could not be clearer” that infringers must pay their total profits for design patent infringement, so there was no need to hear the case.

“Samsung had its day in court — many days, in fact — and the properly instructed jury was well-justified in finding that Samsung copied Apple’s designs and should pay the damages that the statute expressly authorizes,” Apple said.

“We welcome the court’s decision to hear our case. We thank the many large technology companies, 37 intellectual property professors, and several groups representing small business, which have supported our position,” Samsung said. “The court’s review of this case can lead to a fair interpretation of patent law that will support creativity and reward innovation.”

For more information, see Law360.



Fed. Circ. Recognizes Non-Lawyer Patent Agent Privilege

March 13th, 2016 Alexander No comments

In a case over smartphones, a split Federal Circuit ruled that communications between U.S. patent applicants and their non-attorney patent agents should be afforded some degree of privilege.

For the first time, the appeals court recognized a patent agent privilege, affording the same type of protections in attorney-client privilege to communications between registered patent agents and their clients.

Patent agents are not licensed attorneys, but they are certified to prepare and prosecute patent applications before the U.S. Patent and Trademark Office.

“We find that the unique roles of patent agents, the congressional recognition of their authority to act, the Supreme Court’s characterization of their activities as the practice of law, and the current realities of patent litigation counsel in favor of recognizing an independent patent-agent privilege,” Circuit Judge Kathleen McDonald O’Malley wrote on behalf of the majority panel.

The scope of this privilege is limited to exclude communications that are not “reasonably necessary and incident to the prosecution of patents before the Patent Office.” For example, an opinion about the validity of someone else’s patent is something that would not be protected.

The ruling comes from a case between Queen’s University at Kingston, a research university in Ontario, Canada, and Samsung Electronics Co. Ltd.

Queen’s University sued Samsung, claiming Samsung’s Galaxy S4 and Galaxy Note 3 smartphones infringe its patents for technology that allows humans to communicate with computers with their eyes. Samsung the year before had unveiled its SmartPause feature, which enabled users to pause a video simply by looking away from the screen.

During the course of discovery, Queen’s University refused to hand over certain documents, including communications between university employees and registered patent agents talking about the prosecution of the disputed patents.

After Samsung protested, the district court ordered Queen’s University to produce the communications, finding they were not protected by attorney-client privilege and that a separate patent agent privilege did not exist. The ruling was stayed until the Federal Circuit could hear the university’s mandamus petition.

The Federal Circuit said an applicant has a reasonable expectation that all communications relating to “obtaining legal advice on patentability and legal services in preparing a patent application” will be privileged.

“Whether those communications are directed to an attorney or his or her legally equivalent patent agent should be of no moment,” the judge wrote. “Indeed, if we hold otherwise, we frustrate the very purpose of Congress’s design: namely, to afford clients the freedom to choose between an attorney and a patent agent for representation before the Patent Office.”

For more information, see Law360.

Categories: Intellectual Property


Fed. Circ.’s Lexmark Ruling Good Sign for Patent Owners

February 23rd, 2016 Alexander No comments

The Federal Circuit’s recently decided to retain limits on patent exhaustion, which is good news for patent owners like Lexmark, allowing them to exert control over products after they’re sold.

The Federal Circuit’s Lexmark opinion sends a mixed message for patent owners.

In the 10-2 en banc decision, the Federal Circuit decided not to disturb two of its longstanding rules: that overseas sales of a product don’t exhaust a patent owner’s right to sue in the U.S. and that patent owners can impose restrictions on the use of patented items after they are sold in order to keep the sale from exhausting their rights.

The court decided to take the case en banc to determine whether those rules remained good law following recent U.S. Supreme Court decisions that printer cartridge reseller Impression Products Inc., which Lexmark International Inc. accused of infringement, cast doubt on the prior holdings. The court found that the rulings don’t require it to change its precedent.

“On its face, this is a win for patent owners because it allows them to maximize their protection through contractual restrictions or where they sell their products geographically,” said Derek Dahlgren of Rothwell Figg Ernst & Manbeck PC.

A decision that either foreign sales or post-sale restrictions exhausted the rights of patent owners would have diminished their ability to use patents to protect their market, he said.

While the Lexmark case involves printer cartridges, the issue of patent exhaustion has broad ramifications across a wide range of industries, including technology, pharmaceuticals and medical devices. Patent owners have relied on the limitations on patent exhaustion to restrict post-sale uses of patented products, a strategy that would have been disrupted had the Federal Circuit overruled its precedent.

“It’s a pro-patent owner decision that reaffirms Federal Circuit precedent,” said Jeffrey Fisher of Farella Braun & Martel LLP. “It’s a less welcome decision for consumers and those who may potentially be accused of infringement down the road.”

The en banc Federal Circuit also gave its blessing to the practice of imposing post-sale restrictions on patented products. It held that as long as those restrictions, such as a requirement that a product can only be used once, are lawful and clearly communicated to buyers, they do not exhaust patent rights.

The issue of post-sale restrictions is particularly important to medical device makers as they use them as a way to protect patient safety, said Joseph Re of Knobbe Martens Olson & Bear LLP, whose firm filed an amicus brief in the case on behalf of the Medical Device Manufacturers Association.

Since reusing medical devices like syringes can lead to the transmission of infection diseases, “single patient use restrictions are critical in a hospital setting,” Re said.

Such restrictions can protect patients, as well as the reputation and sales of device makers. If a product is reused and leads to complications, the original manufacturer will likely be blamed, and “you want people to think highly of your products, and you don’t want them to be the cause of a medical disaster.”

For more information, see Law360.



Dow Can’t Shake $456M Plant Patent Arbitration Loss

January 31st, 2016 Alexander No comments

U.S. District Judge Raymond A. Jackson confirmed that Dow broke a license agreement over four patents for genetically modified cotton and soybean crop products, awarding Bayer Cropscience AG $455.5 million plus interest.

Bayer initially sued Dow in January 2012, contending that Dow violated its intellectual property by selling vectors used to make plants and seeds containing a genetic modification that inhibits the effects of the herbicide Bialaphos.

Dow claimed it never breached the agreement and that because the deal was not terminated correctly, it remained in effect.  Dow also claimed that because the four patents at issue were either invalid or not infringed, it did not require a license for them.

Dow had argued the arbitration was “fundamentally flawed,” saying it wrongly determined Bayer’s patents were valid, that Bayer properly closed out its agreement with Dow, that Dow infringed the patents and that Bayer should receive the award as compensation.

Bayer shot back in November that Dow was merely trying to use the district court venue as a way to take a second bite at the apple, fighting out the issues again.

Judge Jackson found no evidence to sustain Dow’s “very heavy burden” to vacate the award, and that Dow’s contention that it should be vacated on public policy grounds was also unpersuasive.

Judge Jackson said, “a motion to vacate an arbitration award is not an appropriate avenue to relitigate the entire case,” Judge Jackson wrote. “After reviewing the voluminous submissions of the parties and the extensive record in this case … the court finds absolutely zero basis to vacate the award.”

“Ultimately, the most pressing public policy concern at this point in this matter is the public policy in favor of the arbitration process,” Judge Jackson wrote. “The policy supporting fair, competent and judicially respected arbitration proceedings is about as strong and compelling a public policy that our federal courts embrace.”

“To vacate the award on this record would be fundamentally inapposite to our nation’s public policy,” he added.

For more information, see Law360.

Categories: Uncategorized


‘Monkey Selfie’ Judge Says Animals Can’t Sue Over Copyright

January 9th, 2016 Alexander No comments

The California federal judge overseeing the People for the Ethical Treatment of Animals’ lawsuit accusing a nature photographer of violating a monkey’s copyright on the primate’s selfie said that he doesn’t see any protections for animals in the Copyright Act.

U.S. District Judge William H. Orrick III said he would dismiss PETA’s suit on behalf of Naruto, the crested macaque whose popular self-portrait was included in a book photographer David Slater self-published through Blurb Inc. Judge Orrick said he doesn’t see any indication that animals have standing under the Copyright Act.

“There are lots of statutes that protect animals’ rights” and give humans the ability to sue for that protection, Judge Orrick said. “The issue here is whether [lawmakers] did so in the Copyright Act. … If they intended to give animals standing they would do so plainly.”

PETA claims in its lawsuit that Naruto has the same authorship rights in the photo as any human would, meaning that Slater infringed Naruto’s copyright by publishing the famous photo in a book. The suit seeks an order declaring that Naruto owns the copyright, and that all proceeds from Slater’s book and other commercial uses of the photograph go toward helping macaques and preserving their habitats.

“This is an issue for Congress and the president,” the judge said. “If they think an animal should be able to have copyright, they are free to do so. But you haven’t told me anything to convince me they’ve done it already.”

Slater’s attorney argued that monkeys simply don’t have statutory standing to sue and that Slater shouldn’t have to continue defending himself in the case. “We’re engaging in something of a Socratic debate here, and that’s inappropriate,” he said.

For more information, see Law360.

Categories: Intellectual Property