In Centillion Data Systems, LLC v. Qwest Communications International (PDF), the Federal Circuit limited its doctrine that for patent infringement, “every element” of a claim needs to be infringed by a single party.
Patent claims describe the scope of an invention. To infringe on a patent, a party must practice every element of the claimed invention. BMC Resources Inc. v. Paymentech, L.P., 498 F.3d 1373, 1378-79 (Fed. Cir., 2007). If no single party can be found to practice all the claims, then no infringement will be found, even if multiple parties combine to do so (this is known as divided infringement). While parties can be liable for actively inducing patent infringement or for contributing to infringement under 35 U.S.C. § 271, this requires a predicate finding of an infringing party.
In the recent Uniloc v. Microsoft (PDF), the Federal Circuit made two significant changes to the standards by which a patentee can recover damages from an infringer. First, the court abolished the “25% Rule of Thumb” which had previously been used to calculate reasonable royalty rates, and second, the court emphasized the limitations on using the “entire market value” test.
The patent at issue involved a software registration system, which requires customers to enter the product key supplied by the software manufacturer in order to install the product. The system, patented by Uniloc, is meant to deter customers from copying the software without the manufacturer’s permission. (If you’ve ever used a serial number or product key to activate a copy of Microsoft Word, you’ve used both the patent and the infringing technology at issue.) At trial, the jury found that Microsoft had infringed Uniloc’s patent and, basing its verdict on Uniloc’s expert testimony that the appropriate damages should be $565 million, the jury awarded Uniloc $388 million in royalty rate damages. Uniloc’s expert had used two rules in his calculation, the “25% Rule” and the “Entire Market Value Rule,” both of which the Federal Circuit rejected on appeal.
This January in People v. Diaz (PDF), the Supreme Court of California affirmed the Court of Appeals decision that a warrantless search of the text message folder on an arrested person’s phone was valid as incident to a lawful custodial arrest. The facts of this case are as follows: Diaz was arrested after selling Ecstasy to a police informant posing as a drug purchaser. Upon arrest, Diaz’s cell phone was seized and placed into evidence. After Diaz was interviewed in custody, Senior Deputy Sheriff Victor Fazio looked through Diaz’s cell phone text messages and found a text detailing a sale of Ecstasy. Diaz was charged with selling a controlled substance. Diaz pleaded not guilty and moved to quash the information gained from the search of his text messages, alleging such a warrantless search of his cell phone violated the Fourth Amendment. The trial court denied the motion, reasoning the search was incident to the arrest. The Supreme Court of California affirmed. The primary issue was whether a cell phone is considered property incidental to a person and therefore searchable without a warrant or instead a pathway to personal data which consequently necessitates greater Fourth Amendment protection.
The Immigrations and Customs Enforcement (ICE), under the Department of Homeland Security, engaged in another round of domain name seizures Valentine’s Day, February 14, 2011. The 18 domain name seizure, “Operation Broken Hearted,” focused on counterfeit sites for selling counterfeit luxury product brands such as Tiffany, Burberry and Channel. As with previous rounds, magistrate judges provided authorization for the domain name seizure once the website’s goods were confirmed as being illegal. “Operation Broken Hearted” is the fourth phase of “Operation in Our Sites,” led by the National Intellectual Property Rights Coordination Center of ICE (IPR). The investigation targets “.com” websites that illegally provide counterfeited or pirated goods.
The first seizure, in June 2010, targeted nine movie, music and software websites. The second and third rounds presumably were “crackdowns” in expectation of high levels of internet traffic on Cyber Monday and Super Bowl Sunday. In November 2010, there was a one-day seizure of 82 domain names in both the counterfeit retail and music industries. Five of the sites, rapgodfathers.com, torrent-finder.com, rmx4u.com, dajaz1.com and onsmash.com, were suspected of facilitating copyright infringement in relation to BitTorrent filesharing or hosting music for download. In early February 2011, prior to the Super Bowl, the agency seized ten more domain names which engaged in sportscast streaming. In response to the seizures, many websites resumed operations with domain names outside of the United States jurisdiction or opting for “.org” or “.info” names.
The recent Tokai v. Easton opinion (PDF) raises a timely standard of review issue that the Supreme Court will soon consider in Microsoft v. i4i, and highlights the danger of hindsight bias in an obviousness analysis.
The timely issue here regards the level of deference that a court should accord the Patent and Trademark Office (PTO) when considering prior art references that the PTO did not consider during prosecution. Should the clear and convincing standard for invalidating an issued patent be further tightened for prior art that the PTO had previously considered? The Supreme Court will take up this issue soon in the Microsoft v. i4i case, which is set for oral argument on April 18, 2011. 
The rest of this piece focuses on hindsight bias in the court’s obviousness analysis. Continue reading
Collectively, Brooks Furniture and iLOR v. Google (PDF) establish the standards a defendant must meet for an award of attorney fees from vexatious and unjustified litigation under 35 U.S.C. § 285. Brooks Furniture Manufacturing, Inc. v. Dutailier International, Inc., 393 F.3d. 1378 (Fed. Cir. 2005); iLOR v. Google (Fed. Cir. 2011). These cases create a two-part test for identifying vexatious or unjustified litigation, where Brooks Furniture applies the subjective prong of the test and iLOR v. Google applies the objective prong of this test.
Two-Part Test for Identifying Vexatious or Unjustified Litigation
Under § 285, a “court in exceptional cases may award reasonable attorney fees to the prevailing party.” The court may deem a case “exceptional when there has been some material inappropriate conduct related to the matter in litigation, such as . . . vexatious or unjustified litigation[.]“ Brooks Furniture. Litigation is vexatious or unjustified “only if both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.” Therefore, the patentee may only be liable for attorney fees when it is established by clear and convincing evidence that the patentee’s case does not have an objective foundation and that the patentee actually knows this.