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Today, the Supreme Court issued its decision in Impression Products v. Lexmark Int’l that draws a bright line for triggering the patent exhaustion doctrine when products are sold and leaves post-sale activity restrictions subject to any contractual rights between the parties, not patent law.  This decision is sure to have patent owners and licensees reviewing their existing licensing agreements and tweaking future ones.   The decision also provides another reason why patent owners may license their patents at an end product level, rather than a component level, to ensure that they have direct patent law remedies against the end product manufacturer that otherwise may be exhausted and unavailable if the patent is licensed at a component level.

The Supreme Court summarized its decision as follows:

This case presents two questions about the scope of the patent exhaustion doctrine:

First, whether a patentee that sells an item under an express restriction on the purchaser’s rights to reuse or resell the product may enforce that restriction through an infringement lawsuit.

And second, whether a patentee exhausts its patent rights by selling its product outside the United States, where American patent laws do not apply.

We conclude that a patentee’s decision to sell a product exhausts all of its patent rights in that item, regardless of any restrictions the patentee purports to impose or the location of the sale.

Importantly, the decision focuses on whether patent rights exist after an authorized sale.  The decision does not mean that the sale extinguishes other non-patent law remedies that a patent owner may have after the sale, such as remedies under contract law.Continue Reading Supreme Court puts teeth into patent exhaustion (Impression Prods. v. Lexmark)

Today, the U.S. Supreme Court issued its decision in TC Heartland v. Kraft Foods that limits the venue — i.e., geographical location–of where patent cases may be brought.  For decades prior to this decision, venue was construed broadly to be essentially anywhere a defendant has minimum contacts.  By today’s decision, venue is  construed narrowly as limited to where the defendant either (i) is incorporated or (ii) has a regular and established place of business in which the defendant committed acts of infringement.

This ruling may substantially limit the number of patent cases that may be brought in the perceived patent-friendly Eastern District of Texas.  This also may increase the number of patent cases brought in patent-savvy Delaware, because that is where most companies are incorporated.  The decision also may make it harder to sue multiple defendants in a single action, because it may be difficulty to establish proper venue over all defendants.

This decision also takes more wind out of the sales of those seeking legislative changes to U.S. patent law.  Whether rightly or wrongly (we express no view here), the E.D. Texas has been used as an example of patent litigation abuse, venue shopping and the need for patent reform.  This decision may end that concern and follows other court decisions addressing patent litigation issues as well as the FTC’s patent assertion entity study that did not find the widespread patent litigation abuse that had fueled legislative efforts. (see, e.g., our Apr. 29, 2014 post on Supreme Court making it easier to get attorneys fees in patent cases and our Oct. 7, 2016 post on the FTC’s PAE study).
Continue Reading Supreme Court limits patent venue statute (TC Heartland v. Kraft)

Today the Supreme Court ruled that the laches defense could not be used to limit 35 U.S.C. § 284 patent damages given the 35 U.S.C. § 286 statute of limitations that permits recovery of patent damages up to six years prior to filing an infringement suit.  Specifically, the Court ruled that “Laches cannot be interposed as a defense against damages where the infringement occurred within the period prescribed by §286.”  The result of the ruling is that the laches defense may limit equitable relief, such as an injunction, but will no longer preclude past damages in patent cases.

From a practical standpoint, the ruling may not be as significant as it otherwise might appear.  Laches is a frequently raised, but seldom successful, equitable defense in patent litigation.   Laches basically arises from a patent owner unreasonably delaying its assertion of a patent right during a period of time when the accused infringer made investments and the infringer would be prejudiced by the delayed assertion of the patent.  If successful, the defense traditionally would bar all past damages, limit injunctive relief and preclude future royalties on products purchased during the laches period.  The Federal Circuit’s en banc decision below in the instant case limited the defense so that it would no longer preclude any future royalties (see our Sep. 18, 2015 post explaining the en banc decision).  In sum, prior to today’s decision, the laches defense could limit damages prior to the filing of the lawsuit and limit injunctive relief.  This might have little impact in most patent cases where the period of past infringement may be relatively short and the patent has many years of life remaining for which future royalties would be paid even if an injunction were not granted.

Laches was a more promising defense when a litigation patent assertion entity purchased and asserted a near-end-of-life dormant patent (i.e., a never asserted patent) against defendants who have long-used the alleged infringing technology (see our Oct. 7, 2016 post on the FTC’s PAE Study and distinction between non-problematic “portfolio PAEs” and some problematic “litigation PAEs”).  In such circumstances, a laches defense could have a substantial impact because it would bar the bulk of the damages period (six years prior to the lawsuit) and would bar injunctive relief.  This would leave a remedy of only a future royalty for the short period of time remaining in the patent’s life.  For example, consider a patent with only a year remaining before it terminates.  The litigation PAE could seek seven years of damages: six years of damages prior to the lawsuit and one year of royalties before the patent terminates.  A successful laches defense would limit the damages exposure by over 85% — i.e., remove all six years of pre-suit damages, leaving only one year of future royalties before the patent expires.

The Supreme Court’s decision today will now permit six years of pre-suit damages notwithstanding a successful laches defense.  The related doctrine of equitable estoppel still remains as a defense.  Equitable estoppel is a somewhat harder defense to establish, because it requires proof that the infringer relied on some action by the patent owner indicating it would not assert the patent.  But equitable estoppel is a more effective defense, because it is a complete defense — i.e., it precludes all past and future damages and injunctive relief.

Below is a short summary of the case and the Supreme Court’s decision.
Continue Reading Supreme Court rules laches cannot preclude statutory damages within the 6 year period before a patent suit is filed (SCA v. First Quality)

Today the Supreme Court in Life Technologies v. Promega ruled that 35 U.S.C. § 271(f)(1) liability for supplying from the U.S. “all or a substantial portion of the components of a patented invention” is a quantitative, not qualitative, analysis of the number of  components supplied such that supplying only a single component of a multicomponent invention does not give rise to liability under that section (though it might give rise to liability under § 271(f)(2) if that single component “is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use”). (see also our June 27, 2016 post on the Supreme Court’s grant of review of this case).  As Justice Alito’s concurrence states, the opinion “establishes that more than one component is necessary, but does not address how much more.”   So the art of litigating Section 271(f)(1)  will focus on the litigants’ ability to delineate how many separate “components” are in a claimed invention and whether the resulting number of such components supplied from the U.S. is “substantial.”
Continue Reading Supreme Court rules that number of components supplied from U.S., not their importance to invention, is relevant to Section 271(f)(1) infringement (Life Tech. v. Promega)

Today the U.S. Supreme Court issued its decision in the Apple v. Samsung design patent case on the limited of question of what constitutes an “article of manufacture” under the design patent statute, ruling that “The term ‘article of manufacture,’ as used in [35 U.S.C.] §289, encompasses both a product sold to a consumer and a component of that product.”  The decision is not surprising given the circumstances of this case and the unique statutory provisions for design patents, which are distinct from–and should not be confused with–the more commonly known and discussed utility patents (such as standard essential patents).  Below is a top-level summary of the decision, followed by a more detailed discussion.

Summary

Generally speaking, design patents cover how something looks–i.e., an “ornamental design.”  Importantly, design patents cannot include a shape or design that has some functional benefit, such as some novel shape that also has a functional benefit that makes something easier to carry, use, faster or the such.  Only utility patents can cover such functional innovations; thus, utility patents by and large have been the focus of patent law, including standard essential patents.  In contrast, design patents generally have been a niche’–almost obscure and somewhat confusing–area of law.  So much so that when practitioners, the courts and the general public talk about “patents” they usually mean “utility patents”; patent practitioner’s will specifically say “design patents” if they happen to be referring to that specialty.

Unlike the reasonable royalty remedy for infringing utility patents under 35 U.S.C. §284, the §289 design patent remedy requires that the infringer “shall be liable to the owner to the extent of his total profits” for selling an “article of manufacture” that infringes a design patent.  Samsung’s mobile phones were found to infringe Apple design patents generally directed to the look of the housing and screen icons of the mobile phone.  Apple argued that the “article of manufacture” was the entire Samsung mobile phone and it was entitled to the “total profits” made from selling the phone; Samsung argued that the “article of manufacture” would just be the patented design components of the phone– e.g. housing–and the damages should be limited to the “total profits” made from selling such components within the phone.  The Federal Circuit ruled below that “articles of manufacture” always must be the entire end product because only the end product–not an individual component–is sold to consumers.

Thus, the specific issue presented in this case was whether, under the design patent statute, an “article of manufacture” for which “total profits” are awarded always must be the entire end product or could such article of manufacture be individual components of the end product.  The Supreme Court today disagreed with the Federal Circuit and decided that an “article of manufacture” under the design patent statute may be either the end product or a component–i.e., in some circumstances it may be the end product and in other circumstances it may be the component.  The decision stopped there without deciding whether in this case the relevant “article of manufacture” is the mobile phone or only some of its component.  Rather, the Supreme Court has sent the case back down to the Federal Circuit for further consideration based on its limited ruling here.

This is an important case for design patent law in determining remedies for infringing a design patent.  The many open questions will require much more future development of design patent law.

Understanding what the Court did and did not decide here also is important:

  • The decision concerns the unique design patent statute’s mandatory “total profits” remedy and not the utility patent statute’s reasonable royalty remedy.
  • The decision does not address whether the design patent statute remedy is (a) an award of all total profits without further analysis or (b) an award limited to only total profits made because of the infringement–e.g., show that the infringing ornamental design caused any of Samsung’s sales and resultant profits where there are a host of other factors that contribute to sales.
  • The decision does not address how to determine whether the relevant “article of manufacture” is the end product or component.

In sum, the Supreme Court decided that, in determining statutory damages for infringement of a design patent, an “article of manufacture” is not always required to be the end product, but also could be components of that end product.  We await future developments in this interesting and often overlooked area of design patent law.
Continue Reading Supreme Court rules that design patent statute term “article of manufacture” can be an end product or component thereof (Samsung v. Apple)

Today the U.S. Supreme Court decided to review the Federal Circuit’s decision regarding international patent exhaustion in Impression Products, Inc. v. Lexmark Int’l, Inc.   Things to look for in whatever decision the Supreme Court ultimately reaches in this case is not only the mechanical aspect of applying the patent exhaustion doctrine generally, but whether the Supreme Court agrees with, strengthens or weakens the Federal Circuit’s en banc view that there are extraterritorial limits on the ability of foreign countries to control U.S. patents and access to U.S. markets.
Continue Reading Supreme Court will review international patent exhaustion doctrine (Impression Prod. v. Lexmark)

Today, the U.S. Supreme Court decided to review the Federal Circuit’s ruling of infringement under 35 U.S § 271(f)(1) based on supplying from the United States a component of a patented invention.  This case may provide the Supreme Court’s view of whether and to what extent a single component may be “a substantial portion of the components of a patented invention” under § 271(f)(1).
Continue Reading Supreme Court to review § 271(f)(1) liability for exporting a component of a patented invention (Life Tech v. Promega)

Today the Supreme Court issued its awaited Cuozzo decision and gave strong deference to the U.S. Patent & Trademark Office (“Patent Office”) power (1) to make an unappealable determination to institute inter partes review (IPR) of an issued patent and (2) to make both procedural and substantive rules governing the IPR process, including what standard the Patent Office wants to use when construing patent claims in an IPR proceeding.  The Court’s ruling on the specific Patent Office IPR regulations at issue here was generally expected.  The broader impact of the decision may be the Court’s indication of how much power Congress gave the Patent Office to regulate IPRs.
Continue Reading Supreme Court confirms Patent Office’s power to regulate inter partes reviews (Cuozzo v. Lee)

Today, the Supreme Court declined to overrule its prior decision in Brulotte v. Thys Co., 379 U.S. 29 (1964), and maintained its ruling that a patent holder cannot charge royalties for the use of his invention where the use occurs after the patent term has expired.  The Supreme Court held that stare decisis…