When a sale is an authorized sale: Impression Products v. Lexmark International

August 16, 2017

In Impression Products, Inc. v. Lexmark International, Inc., 581 U.S. ___ (2017) [hereinafter ‘Impression Products’ and ‘Lexmark’] the United States Supreme Court [hereinafter ‘the Court’] held that a patent owner’s voluntary transfer of a U.S. patented item for value is the only requirement for an authorized sale of that item. The Court also held that a purchaser’s non-compliance with post sale restrictions does not result in this sale becoming unauthorized. Authorization is critical, because without it the patent owner retains patent rights in the item and a purchaser’s activity may result in patent infringement.  In contrast, with an authorized sale a consumer receives a product of a patented technology free and clear of these patent rights.

Lexmark sold its U.S. patented toner cartridges to Impression Products under a sales agreement which prohibited the purchaser’s reuse and resale. Subsequently, Lexmark filed a U.S. patent infringement suit based upon Impression Products’ sales of toner cartridges initially sold in (i) the United States and (ii) other countries and then imported into the United States. The trial court dismissed the infringement suit for U.S. sales  based upon patent exhaustion, but it did not dismiss the lawsuit based upon foreign sales and patent exhaustion.[1]

The en banc U.S. Court of Appeals for the Federal Circuit [hereinafter ‘the Federal Circuit’] held that for the patent owner’s sales occurring in the United States, Lexmark’s lawful post-sale restrictions, with adequate notice, prevents patent exhaustion. For Lexmark’s initial international sales, the Federal Circuit held that a U.S. patent owner does not forfeit the right to prevent infringing products from entering the U.S.  The Federal Circuit did not follow Kirtsaeng v. John Wiley & Sons, Inc., 568 U.S. 519 (2013) [hereinafter ‘Kirtsaeng] which held that that a U.S.  copyright owner does not retain rights to tangible items containing copyright if the owner voluntarily sells these items outside the United States.

The Court reversed the Federal Circuit and held that a U.S. patentee’s voluntary sale of patented items in the United States is authorized and exhausts all U.S. patent rights in those products. It further held that a sale is authorized even if there is non-compliance with contractual post-sale restrictions. The Court relied in part upon Quanta Computers, Inc. v. LG Electronics, Inc., 553 U.S. 617 (2008) which held that a patentee’s authorized sale through its licensee removed products from patent protection. The Court stated that extending U.S. patent rights beyond the first sale adversely affects business, especially in transactions with used products. However, the Court further stated that a breach of contract lawsuit for non-compliance with post-sale restrictions was a possible remedy.

For international sales, the Court found Kirtsaeng controlling, and so a patentee’s authorized sale of a product item anywhere in the world also exhausts patent rights. In sum, post-sale restrictions and sale location do not result in patent infringement by the purchaser, because the only relevant inquiry is whether the patentee voluntarily transferred an item of patented technology for a one-time financial reward.

© 2017 Adrienne B. Naumann, Esq. All rights reserved.

Ms. Naumann does not sponsor or endorse the advertisements at adriennebnaumann.wordpress.com.

[1] Patent exhaustion is defined as the absence of patent rights in a product after a patentee’s voluntary sale of a product, and where that product is a tangible representation of a U.S. patented technology. A licensee in the present context is defined as those rights transferred to another by a patent owner to use, sell or create the patented technology, but without transferring ownership of the patented technology.


It’s NOT complicated Part 2: TC Heartland v. Kraft Food Group Brands

August 15, 2017

In TC Heartland LLC v. Kraft Foods Group Brands, 581 U.S. ___ (2017) the U.S. Supreme Court [hereinafter ‘the Court’] held that U.S. patent infringement litigation takes place only in the state in which a corporation is incorporated. To arrive at this holding the Court concluded that the general federal venue statute at 28 U.S.C. 1391 does not define corporate residence in the patent infringement litigation venue statute.  28 U.S.C. 1400(b).[1]

TC Heartland LLC [hereinafter ‘Heartland’] is a corporation that is organized under Indiana law and headquartered in Indiana. Kraft Foods Group Brands [hereinafter ‘Kraft’] is organized in Delaware with its principle place of business in Illinois. Kraft filed a lawsuit in Delaware based upon Heartland’s alleged infringement of its patents for water enhancer products. Heartland’s position was that the Delaware trial court had no personal jurisdiction over Heartland, or in the alternative that venue should be transferred to Indiana. However, the trial court concluded there was personal jurisdiction over Heartland and denied its motion for a transfer of venue. Before the U.S. Court of Appeals for the Federal Circuit [hereinafter ‘the Federal Circuit’] Heartland contended that Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957) squarely held that venue for patent infringement litigation, based upon corporate residence, was exclusively in the state in which a corporation is incorporated. Nevertheless, the Federal Circuit agreed with the trial court, because the general federal venue statute explicitly states (i) a corporation is a resident of any judicial district subject to a court’s personal jurisdiction in that district and (ii) this definition applies “for all venue purposes,” including corporate residence in section 1400(b). 28 U.S.C. 1391(c).

The Court reversed the Federal Circuit decision and held that “residence” in the patent infringement venue statute refers exclusively to the state of incorporation for domestic corporations. It observed that amendments to section 1391 after Fourco did not result in Fourcos definition of corporate residence in section 1400(b) becoming obsolete. The Court further observed that Fourco is still good law, neither party has asked the Court to revisit its holding, and that Congress has not amended section 1400(b) since Fourco.   Therefore, the definition of corporate residence in section 1391(c) does not apply, because the section 1391 pre-amble reads “except as otherwise provided by law,” and Fourco qualifies as an exception.

In sum, section 1400(b) does not include the broader definition of corporate residence of the general venue statute.  The Court concluded by remanding the case to the Federal Circuit for further proceedings consistent with its decision.

© 2017 Adrienne B. Naumann. All rights reserved.

Ms. Naumann does not sponsor or endorse the advertisements at adrienneb.naumann.wordpress.com.

[1]Personal jurisdiction is defined as the power of a court over an actual person or entity. Venue is defined as the location where either party in a lawsuit may require the case to proceed. In other words, venue is a subset of locations where there is personal jurisdiction over the parties to the lawsuit.

 

 

 


It’s NOT complicated Part 1: SCA Hygiene Products v. Quality Baby Products

July 31, 2017

In SCA Hygiene Products Aktiebolag et al. v. First Quality Baby Products LLC et al., 580 U.S. ___ (2017[hereinafter ‘SCA’ and ‘First Quality’] the United States Supreme Court [hereinafter ‘the Court’]held that laches[1] does not bar U.S patent infringement awards when the lawsuit is filed by the time deadline of the U.S. patent statute. 35 U.S.C. section 286. This deadline is six years from the beginning of the infringing activity, and in this instance the patent infringement was ongoing. In so ruling, the Court concluded that its decision in Petrella v. Metro-Goldwyn-Mayer, 134 S. Ct. 1962 (2014) [hereinafter ‘Petrella’] was analogous to the present case, and even though the Petrella filing deadline was exclusively for copyright infringement. In Petrella the Court held that laches does not prevent an infringement award, because the lawsuit was filed by the copyright statute filing deadline.

In the present case, SCA developed a U.S. patented design for adult incontinence products. First Quality is a business competitor that manufactures private label disposable products. In 2003 SCA notified First Quality to cease using SCA’s patented technology without its authorization.  After First Quality asserted that SCA’s patent was invalid, SCA submitted its patent for re-examination in the U.S.  patent office.  After the patent office confirmed the patent’s validity, SCA filed a lawsuit six years and eleven months after its initial notice to First Quality addressing unauthorized use.

On summary judgment, the trial court found that SCA’s lawsuit was prevented by laches and equitable estoppel. An en banc Court of Appeals for the Federal Circuit [hereinafter the ‘Federal Circuit’] affirmed the summary judgement based upon laches with respect to timeliness. The Federal Circuit also concluded that the relevant statute implicitly includes laches as a defense to patent infringement, and even if laches was not explicitly designated therein. 35 U.S.C. section 282.The Federal Circuit also held that laches prevents money damage awards in a patent infringement lawsuit. In so ruling on this second issue the Federal Circuit relied upon patent judicial decisions related to laches in patent litigation.

The Court initially addressed the timeliness of the lawsuit and vacated in part the Federal Circuit’s decision. Instead, the Court instead found that Petrella applies and that section 286 reflects a Congressional preference for a uniform litigation commencement deadline. As a result, the implementation of the laches defense within the section 286 litigation commencement deadline would exceed judicial authority.  The Court also concluded that even if section 282(b)(1) incorporates some form of laches, the defense of laches does not prevent financial damages awards for patent infringement.  On this last point the Court further concluded that the prevailing judicial view prior to the implementation 1952 patent statute was that laches does not bar patent infringement damages.  As a result, a broad and unambiguous consensus of judicial decisions would be necessary for the contention that laches is implicitly included in the infringement defenses of section 282(b). However, the Court found that neither the Federal Circuit or First Quality had demonstrated this consensus.

 

©2017 Adrienne B. Naumann, Esq. All rights reserved.

Ms. Naumann does not sponsor or endorse the advertisements at adriennebnaumann.wordpress.com.

[1] Laches is defined as the failure to assert a claim during a lapse of time and other circumstances that thereby result in prejudice to an opposing person.


It’s Complicated Part 2: Life Technologies Corporation v. Promega Corporation

July 28, 2017

In Life Technologies Corporation et al. v. Promega Corporation, 580 US. ___ (2017) [hereinafter ‘Life Technologies’ and ‘Promega’] the U.S. Supreme Court [hereinafter ‘the Court’] held that U.S. patent infringement liability does not result from (i) a single non-innovative component that (ii) originates from the United States for assembly abroad. The statutory provision was 35 U.S.C. section 271(f)(1) which states that patent infringement liability exists where all or a substantial number of components of a patented technology originate from the United States for assembly in another country. In contrast, section 271(f)(2) provides liability resulting from a newly designed single U.S. component without significant non-infringing uses. Because of its potential economic consequences, all U.S. based manufacturers with international facilities should be aware of this case prior to assembly and production related business decisions.

Promega is an exclusive licensee of a U.S. patented technology for genetic testing kits. Life Technologies sublicensed this patented technology from Promega for specified limited utilities of genetic testing kits. Life Technologies manufactured one kit component in the U.S. (a previously existing widely used enzyme) and sent this component abroad for assembly with remaining components.  Life Technologies then sold these kits abroad for utilities which were not authorized under Promega’s sublicensing agreement. Promega filed a patent infringement lawsuit against Life Technologies, based upon sales of kits that included this single component enzyme from the United States. The trial court granted judgment to Life Technologies, because (i) only one component of Promega’s multi-component patented technology originated from the U. S., but (ii) all or a substantial number of components must originate from the U.S for liability under section 271(f)(1). The court also stated that subsection 271(f)(2) does not apply, because the single U.S. component enzyme was a previously existing ‘commodity’ item.

However, the Federal Court of Appeals for the Federal Circuit [hereinafter ‘the Federal Circuit’] reversed the trial court and concluded that ‘all or a substantial portion’ could be either of (i) a qualitatively important component or (ii) a quantitative number of components. The court concluded that in this case the single enzyme originating from the U.S. was qualitatively a substantial potion because (i) it was important to the utility of the entire invention, and (ii) even though this enzyme was a ‘commodity’ component with numerous non-infringing uses.

The Court concluded that the quantitative interpretation of section 271(f)(1) is the exclusive meaning of section 271(f)(1), and thereby reversed the Federal Circuit’s holding.  To reach its decision the Court reviewed the statutory words such as ‘all’ and ‘portion’, and concluded that the statute exclusively conveyed a quantitative meaning. The Court reasoned that under the quantitative approach, a single component cannot constitute a ‘substantial portion,’ because section 271(f)(1) consistently refers to plural components, and thereby indicates that multiple components comprise a substantial portion. The Court also observed that interpreting section 271(f)(1) to include any single component results in section 271(f) (2) becoming superfluous. The Court further stated that requiring a fact finder to resolve infringement under either a qualitative or quantitative approach would compound any ambiguity of section 271(f)(1). Finally, the Court found that it was Congress’ intent to hold a supplier liable for sending U.S. components to another country for assembly, but only under the explicit conditions of section 271(f).  In sum, for the present case where only a single commodity enzyme originated from the United Sates, Life Technologies’ activity is outside the scope of section 271(f).

©2017 Adrienne B. Naumann, Esq.  All rights reserved. Ms. Naumann does not endorse or sponsor the advertisements at adriennebnaumann.wordpress.com.


It’s complicated Part 1: Amgen v. Sandoz

July 22, 2017

In Amgen v Sandoz, 582 U.S. ___ (2017) the U.S. Supreme Court [hereinafter the Court] held that an applicant need not disclose certain technical information to another company under the federal abbreviated drug approval   process. See 42 U.SC. sections 262(k) and 262(l).  The Court also held that an injunction is not available to enforce compliance with this specific federal disclosure requirement. [1] Under this abbreviated process an applicant may obtain a license for commercial marketing of its pharmaceutical product, if its pharmaceutical is (i) derived from living organisms and (ii) sufficiently similar to a licensed pharmaceutical that had undergone the traditional approval process. The traditional process requires numerous clinical tests and other technical data by a ‘sponsor,’ so there is a strong incentive for an applicant to ‘piggyback’ on the sponsor’s submissions under the abbreviated process. Also during the abbreviated process, the two companies may determine whether the sponsor’s patents would be infringed prior to the applicant’s pharmaceutical’s manufactured and sales.  The statute expressly provides a remedy of an immediate declaratory judgment to the sponsor if the applicant does not disclose its FDA licensing application and manufacturing information to the sponsor.

In the instant case, Amgen was the sponsor with a traditionally licensed protein to stimulate white blood cell production. Sandoz submitted an abbreviated approval application for a biosimilar product, but it refused to disclose its application or manufacturing information to Amgen. Thereafter Amgen filed a lawsuit against Sandoz for patent infringement, conversion and unfair competition, but the trial court dismissed these counts. The U.S. Court of Appeals for the Federal Circuit [hereinafter the Federal Circuit]  affirmed and held that Sandoz need not disclose the licensing application or manufacturing information to Amgen. It also held that there was no injunction available for compliance with this particular disclosure.

Before the Court, Amgen contended in part that the term “shall” of the statute conclusively demonstrates that disclosure of a licensing application and manufacturing information is mandatory. Amgen also contended that merely because the statute did not expressly include an injunction as a remedy did not preclude its use. However, Sandoz contended that non-disclosure was simply a conditional precedent that results in forfeiture of litigation rights to the sponsor. Sandoz further stated that injunctions were not explicitly included as a remedy for this non-disclosure, whereas in other statutory provisions an injunction was included as a remedy.

The Court agreed with Sandoz on both these points. However, it also concluded that although an injunction was not an option under the federal statute, it may be a remedy under the state law count of unfair competition. The Court then remanded the case to the Federal Circuit to determine whether Sandoz’s non-disclosure constitutes unfair competition under state law, and it so whether an injunction was possible.

© 2017 Adrienne B. Naumann, Esq. Ms. Naumann does not endorse or sponsor the advertisements at adriennebnaumann@wordpress.com

[1] Another issue before the Court was whether the applicant may provide the notice of initial commercial marketing to the sponsor prior to FDA licensing. The Court reversed the Federal Circuit which had previously held that notice must be provided only after the applicant actually receives its license. Instead the Court squarely held that notice may be  provided either before or after actual receipt of the license.

 


Free speech in the trademark office: Matal v. Tam

June 29, 2017

This past term the U.S. Supreme Court [hereinafter the Court] held that the disparagement clause in the U.S. federal trademark statute [the Latham Act at 15 U.S.C. 1052(a)] is facially unconstitutional, because it abridges the free speech clause of the First Amendment. This challenged clause of the statute states in relevant part that trademarks and service marks [hereinafter marks] are not be eligible for federal registration if they disparage, or otherwise hold in contempt, persons, institutions or beliefs.  Federal registration is a process by which the U.S. trademark office evaluates submitted marks, in part based upon their use and legal sufficiency. If a mark qualifies for federal registration, then the mark owner obtains significantly more legal rights than owners of unregistered marks.

Mr. Simon Tam applied to federally register the logo THE SLANTS as a service mark associated with live performances by his band. The trademark examiner refused registration because the logo is disparaging to persons of Asian ancestry, and the Trademark Trial & Appeal Board affirmed this basis. However, the Court of Appeals for the Federal Circuit Court en banc reversed the Trademark Trial & Appeal Board and held that section 1052(a) is facially unconstitutional because (i) it penalizes speech of which the government disapproves, and (ii)under a strict scrutiny standard for viewpoint based restrictions upon speech, it penalizes mark owners without a compelling government interest. The trademark office’s petition for a writ of certiorari was subsequently granted.

Before the Court Mr. Tam asserted in relevant part that the disparagement clause is impermissibly vague with no clear boundary for the term ‘disparages.’ Secondly, he asserted the statute imposes a significant burden upon speech with a particular content, because it deprives mark owners of important rights only available through federal mark registration. Thirdly, when a statute distinguishes speech, such as marks, based upon viewpoint and content there must be a compelling state interest for either private or commercial speech. The trademark office’s position in relevant part was that the disparagement clause does not penalize unpopular speech: Instead the clause (i) prevents the government from affirmatively assisting owners of marks which belittle a person or persons, and (ii) otherwise provides participation criteria for a government sponsored activity. It also asserted that even if the marks by themselves are purely private speech, they do not retain that status after federal register approval. The trademark office further asserted that there is no constitutional right to affirmative assistance from the government for promotion of private speech.

The Court held that the disparagement clause facially violates constitutional free speech protection and provided several reasons in support of this holding. First, it stated in relevant part that trademarks and services are private speech, and government may only regulate private speech if (i) there is a substantial government interest (ii) narrowly drawn to that interest.  Because the government restriction is viewpoint based, then the restriction also requires heightened judicial scrutiny. The Court concluded there was no compelling or legitimate reason for the disparagement clause’s viewpoint based restriction, and that there is no such interest even if Mr. Tam’s mark is commercial speech. The Court also stated that even if viewpoint based regulation was appropriate, the disparagement clause is not sufficiently narrow in scope to exclusively eliminate marks that denigrate ethnic, racial and religious groups.  For example, by its terms the clause forbids parodies of public figures, celebrities and institutions, but courts have consistently found these activities protected from viewpoint based restrictions. However, the Court did not suggest that the disparagement clause might become constitutional with an amendment that results in a narrower scope of viewpoint restricted private speech.

 

© 2017 Adrienne B. Naumann, all rights reserved.

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Less is more: Samsung v. Apple

February 19, 2017

With numerous intellectual property cases pending before the United States Supreme Court this term, the earliest decision to issue in 2016 is Samsung Electronics Co., Lt. et al. v. Apple Inc., 580 U.S. ___ (2016) [hereinafter ‘the Court’] [ hereinafter Samsung and Apple]. The decision resolved whether a component of a product is an article of manufacture when calculating damages for infringement of a U.S. design patent. If a person manufactures or sells a manufactured article displaying a patented design or similar design without the patent owner’s consent, then that person is liable to the patent holder for the infringer’s total profit. 35 U.S.C. section 289. Samsung’s position was that damages for its infringement of Apple’s product should only include the component that was actually copied, and thereby reduce the trial court’s award to Apple. The Supreme Court agreed and held that for a multicomponent product the relevant article of manufacture maybe only a component of that product.

Prior to this litigation Apple obtained several U.S. design patents for iPhones that were initially released in 2007. Subsequently Samsung sold a series of smartphones that resembled Apple’s iPhone. Apple then sued Samsung for infringement of its design patents and the trial court awarded Apple damages of $399 million for infringement. The Federal Circuit Court of Appeals affirmed this award for the entire profit Samsung acquired from its sales of infringing smartphones. In reaching its conclusion the Federal Circuit reasoned that the interior components of Samsung’s smartphones were not sold separately from the phone exterior surface that displayed an infringing design.

The Court resolved the threshold legal question of whether an article manufacture (i) must also be the entire end product sold to consumer, or (ii) may comprise only a single component of that product. The Court looked to section 289 and concluded that its term ‘article of manufacture‘ is sufficiently broad to include a product component, in part because the component is created by hand or machine. The Court also observed that section 289 does not explicitly limit design infringement damages exclusively to complete articles or to articles as sold. The Court further relied upon 35 U.S.C. section 101 that defines a new and useful manufacture as patent eligible and which is interpreted to include parts of a machine separate from the totally assembled machine. The Court concluded that there was no legislative history or statutory text to support the Federal Circuit’s conclusion that section 289 solely addresses damages for sales of a complete end product.

The Court declined to identify the relevant component of Samsung’s infringing smartphones or provide a test for designating the relevant article of manufacture. Instead, it reversed the Federal Circuit’s holding and remanded the case to the Federal Circuit to address this test along with any remaining issues. On February 7, 2017 the Federal Circuit remanded the case to the federal district court to determine whether additional proceedings are necessary. If such proceedings are warranted the trial cour0000000000l may present a test for identifying the relevant article of manufacture under section 289.

© 2017 Adrienne B. Naumann
All rights reserved.
Ms. Naumann does not sponsor or endorse the advertisements at adriennebnaumann.wordpress.com.