IP Update - December 2010

Patents

KSR'd Again: Including a Keypad Is an Obvious Improvement over a Fax Machine

Venue Jurisprudence Evolves ... Win Some; Lose Some

Stipulation to Final Judgment Does Not Constitute Waiver of Right to Appeal

Court Has Personal Jurisdiction over a Foreign Company that Imports Accused Products into the District

Section 101 Eligibility Satisfied if Invention Has Specific Application to Technology

License to Sue? It Depends on Standing

Patent Holders Cannot Reclaim Scope of Invention Disclaimed During Prosecution

CERT ALERT: There's Trouble Right Here in River City

Derivative Drugs Having Covalent, Non-Ester Modifications of a Previously Approved Drug Are Entitled to New Chemical Entity Exclusivity

Trademarks

Seventh Circuit Sets Own Standard for "Exceptional" Cases Justifying Attorneys' Fees Under the Lanham Act

FREECYCLE Marks Recycled to the District Bin

Copyright

Supreme Court Deadlock Leaves in Place Ninth Circuit Decision Denying First-Sale Doctrine Defense to Resale of Foreign-Made Copyrighted Items

PATENT

KSR'd Again: Including a Keypad Is an Obvious Improvement over a Fax Machine

Reversing a jury verdict that found three patents covering electronic money transfer were not obvious in view of the prior art, the U.S. Court of Appeals for the Federal Circuit held that the prior art keypad combined with a prior art electronic transaction system rendered the patents-in-suit obvious as a matter of law. The Western Union Co. v. MoneyGram Payment Sys., Inc., Case No. 10-1080 (Fed. Cir., Dec. 7, 2010) (Lourie, J.).

Western Union brought a patent infringement action against MoneyGram asserting infringement of four patents, three relating to methods of sending money through a financial services institution and the fourth relating to methods for receiving transferred money. A jury concluded that MoneyGram failed to show the patents were obvious and awarded Western Union reasonable royalty damages of $16.5 million. The district court declined to grant MoneyGram's request for judgment as a matter of law (JMOL) that the patents were obvious. MoneyGram appealed with respect to the three patents relating to methods of sending money.

The Federal Circuit first determined that MoneyGram's right to appeal based on obviousness had not been waived, despite the fact that MoneyGram's Rule 50(a) motion did not specifically set forth the prior art arguments asserted on appeal, noting at "even a cursory motion suffices to preserve an issue" so long as it alerts the court to the party's position and puts the opposing party on notice.

The claims in issue are directed to an electronic transaction system having a keypad that works over the internet. During trial, MoneyGram presented evidence as to a prior art Western Union system that used a fax machine. MoneyGram also presented testimony that keypads (missing from the fax used in prior art system) already existed at Western Union retail locations. The Federal Circuit concluded that no reasonable jury should have found the MoneyGram failed to present sufficient evidence at least demonstrating that the elements were present in the prior art.

Next, the Court analyzed whether there was a motivation to combine the prior art fax based system with a keypad. Citing the KSR "predictable results" standard, the Court found that common sense demonstrates why the combination would have been obvious, concluding that "the use of an electronic transaction device where the prior art employed a fax machine to be an unpatentable improvement at a time when such a transition was commonplace in the art." Addressing additional claim language requiring that the keypad access a database, the Federal Circuit found that when replacing a fax machine with a keypad, one "would necessarily have known how to retrieve transaction details from the database." Similarly, claim recitations regarding the use of internet-based communications were deemed an obvious improvement.

Finally, the Court considered whether claim recitations regarding a code stored on the database were obvious. At trial, MoneyGram presented evidence that the prior art taught invoices that had a code that could be used for tracking. In light of this evidence, the Federal Circuit determined that common sense would allow the code so generated to be used at another location, noting that a "person of ordinary skill is also a person of ordinary creativity."

Western Union argued that secondary considerations of non-obviousness supported the jury verdict. However, citing the requisite nexus between the commercial success and the claimed invention, the Federal Circuit concluded that Western Union failed to present any relevant evidence proving such a nexus. Finally, the panel noted that weak secondary considerations of non-obviousness generally do not overcome a strong prima facie case of obviousness.

Melody Wirz is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm's Houston office. Melody focuses her practice on patent prosecution and strategic patent portfolio management and counseling in the mechanical, energy and alternative energy sectors.

Venue Jurisprudence Evolves...Win Some; Lose Some

The U.S. Court of Appeals for the Federal Circuit recently issued two more mandamus opinions on motions to transfer patent cases out of the U.S. District Court for the Eastern District of Texas, one denying transfer and one granting it. In re Vistaprint Limited and OfficeMax, Misc. Docket No. 954 (Fed. Cir., Dec. 15, 2010), (granting mandamus order); In re Acer, Misc. Docket No. 942, (Fed. Cir., Dec. 3, 2010) (denying mandamus order).

In In re Vistaprint Ltd. and OfficeMax, the Federal Circuit declined to grant the mandamus request to transfer the case to Massachusetts. The district court weighed the various transfer factors, finding some favored transfer, but it ultimately concluded these factors did not outweigh considerations of judicial economy. The district court previously handled a case involving the same patent in suit (the only one), and it had become familiar with the technology and issued a claim construction. There also was another currently pending case before the district court with the same plaintiff and patent involving the same underlying technology and similar accused services.

The petitioner essentially argued for a per se rule that, when all of the convenience factors clearly favor transfer, it is necessarily an abuse of discretion to deny transfer based on judicial economy. The Federal Circuit rejected this position, noting, "[a]t the end of the day, §1404(a) balances a number of case-specific factors, not just convenience." It also reiterated that the Federal Circuit has "repeatedly rejected the use of per se rules in forum non conveniens analyses."

The Federal Circuit also rejected the petitioners' argument that it was the magistrate judge who construed the patent claims in the earlier case, not the district judge, finding, "it was not plainly incorrect to conclude that having the same magistrate judge handle this and the co-pending case involving the same patent would be more efficient than requiring another magistrate or trial judge to start from scratch."

The Court did note, however, that it was not intending the In re Vistaprint holding to mean that once a patent is litigated in a particular venue, the patent owner would have a "free pass" to maintain all future litigation in that venue.

The Federal Circuit reached a different conclusion in In re Acer, ordering the case transferred to the U.S. District Court for the Northern District of California. In Acer, a plaintiff headquartered in the Northern District of California sued 12 defendants for patent infringement in the Eastern District of Texas. One of these defendants, Dell, was headquartered in Texas, though not within the Eastern District. The majority of the defendants, however, were headquartered in California, with five of them headquartered in the Northern District of California. No party was headquartered in the Eastern District of Texas.

The Federal Circuit noted that the majority of documents and witnesses would be within the Northern District of California or at least closer to it. The presence of one Texas defendant did not overcome this: "The number of Dell witnesses, even if greater than one, will be insignificant, given that the allegation of infringement against Dell is largely based on integrated software of other defendants with headquarters outside of Texas." The Federal Circuit also noted the importance of the subpoena power to compel witnesses and evidence in California, as well as the localized interest in California given that the plaintiff, most of the defendants, the inventor and the prosecuting attorneys all were located there.

The Court did not overrule the district court's position that court congestion, familiarity with governing law and conflict of law factors do not favor either venue.

David M. Stein is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm's Orange County office. David focuses his practice on patent litigation and commercial litigation.

Stipulation to Final Judgment Does Not Constitute Waiver of Right to Appeal

The U.S. Court of Appeals for the Federal Circuit rejected the contention that a party waived its right to appeal by stipulating to final judgment. Taylor Brands LLC v. GB II Corp. d/b/a Columbia River Knife and Tool Co., Case Nos. 10-1151; -1294 (Fed. Cir., Dec. 9, 2010) (Dyk, J).

Taylor Brands sued Columbia River Knife and Tool Company (CRKT), alleging infringement of its U.S. patent directed to "assisted opening" knives. CRKT counterclaimed, seeking declaratory judgments of...