Category: Patent

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Patent Damages: Lost Profits

A patent infringer is liable to a patent owner for damages adequate to compensate the patent owner for infringement, but no less than a reasonable royalty for the use made of the invention by the infringer. 35 USC 284.

Traditionally, there are three ways of measuring compensatory damages for patent infringement: (1) lost profits, (2) established royalty, or (3) a reasonable royalty. Today I’m going to discuss lost profit damages.

Lost Profits

In order to recover lost profits, the patent owner must “show ‘causation in fact,’ establishing that ‘but for’ the infringement, he would have made additional profits.” Wechsler v. Macke Int’l Trade, Inc., 486 F.3d 1286, 1293 (Fed. Cir. 2007). The “but for” causation asks, if the infringement had not occurred, would the patent owner made the alleged lost profits? If the patent owner is not selling a product, then usually there is no lost profits, except if the patent owner has the ability to manufacture and market the product, but for some legitimate reason is not. Id. 

Courts have allowed patent owners to present “market reconstruction theories showing all of the ways in which they would have been better off in the ‘but for world,’ [a world without the infringement] and accordingly to recover lost profits in a wide variety of forms.” Grain Processing Corp. v. Am. Maize-Products Co., 185 F.3d 1341, 1350 (Fed. Cir. 1999)

Lost profits can arise from a showing that but for the infringement the patent owner would have (1) made greater sales, (2) charged higher prices, or (3) incurred lower expenses.

Courts sometimes use the Punduit test to determine whether the patent owner proved causation for lost profit damages. The Punduit test requires the patent owner to establish: (1) demand for the patented product; (2) absence of acceptable non-infringing substitutes; (3) manufacturing and marketing capability to exploit the demand; and (4) the amount of the profit it would have made. Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1545 (Fed. Cir. 1995) (citing Panduit Corp. v. Stahlin Bros. Fibre Works, 575 F.2d 1152, 1156 (6th Cir. 1978)). 

If there are only two suppliers for the product at issue in the relevant market, the patent owner and the accused infringer, the first two Punduit test factors collapse into one in the two-supplier test. Under the two-supplier test a patent owner must show: (1) the relevant market contains only two suppliers, (2) its own manufacturing and marketing capability to make the sales that were diverted to the infringer, and (3) the amount of profit it would have made from these diverted sales. Micro Chem., Inc. v. Lextron, Inc., 318 F.3d 1119, 1124 (Fed. Cir. 2003). 

Lost Sales or Diverted Sales

When lost sales are the basis for lost profits, the interaction of the patent owner and the infringer in the market is important. “If the patentee and infringer do not sell their products in the same market segment, “but for” causation cannot be demonstrated.” Crystal Semiconductor Corp. v. Tritech Microelectronics Int’l, Inc., 246 F.3d 1336, 1360 (Fed. Cir. 2001)

Reduction in Prices or “Price Erosion”

A reduction of prices by the patent owner caused by the infringing competition is a proper ground for lost profit damages. The patent owner must show that “but for” infringement, it would have sold its product at a higher price. Id.

In a later post I will discuss royalties damages for patent infringement.

Update: A post on established royalties for patent infringement.

Update: A post on reasonable royalties for patent infringement.

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Who is an Inventor?

The US statute defines an inventor as “the individual or, if a joint invention, the individuals collectively who invented or discovered the subject matter of the invention.” 35 USC 100(f). 

For US patent purposes, an inventor is a natural person, and is not a corporation or sovereign. Univ. of Utah v. Max-Planck-Gesellschaft zur Forderung der Wissenschaften E.V., 734 F.3d 1315, 1323 (Fed. Cir. 2013).

Inventors are individuals that conceive of the invention. The Federal Circuit said:

“Conception is the touchstone of inventorship, the completion of the mental part of invention. It is the formation in the mind of the inventor, of a definite and permanent idea of the complete and operative invention, as it is hereafter to be applied in practice. Conception is complete only when the idea is so clearly defined in the inventor’s mind that only ordinary skill would be necessary to reduce the invention to practice, without extensive research or experimentation. [Conception] is a mental act…” Id.

The question about who owns the invention is different from who is an inventor. By default the inventor is an owner, unless by contract or law someone else is the owner, such as an employer of the inventor.

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Patent Drafting: The Best Mode Requirement

US4652259_FigWhen describing an invention in a patent application, every inventor must disclose the best mode of carrying out the invention, known to the inventor. This requirement is found at 35 USC 112(a).  Therefore if the inventor knows of multiple ways of making or using the invention, he/she must not withhold the best way known to him or her while disclosing one or more inferior ways. That is the inventor must not withhold disclosure of his/her preferred mode.

Courts have described the best mode requirement as one ensuring that the patent applicant plays ‘fair and square’ with the patent system. The requirement ensures a quid pro quo of disclosure exchanged for the patent grant. Amgen, Inc. v. Chugai Pharmaceutical Co., Ltd., 927 F.2d 1200, 1209-10 (Fed. Cir. 1991).

Go Medical Industries Example

Let’s see the best mode requirement in action. Go Medical Industries sued Alpine Medical for, among other things, infringement of US Patent No. 4,652,259 (the ‘259 patent). Go Medical Industries Pty., Ltd. v. Inmed Corp., 471 F.3d 1264 (Fed. Cir. 2006).

The ‘259 patent is directed to a catheter having a stop member that limits the insertion of a sheath of the catheter. It was known that urinary catheters can increase the risk of urinary tract infections because inserting a catheter can push bacteria into the normally sterile bladder. But, most of the bacteria are concentrated in the first 1.5 cm to 2 cm of the urethra, due to a natural pressure barrier located about 1.5 cm from the outer end.

The claims of the ‘259 patent are directed a stop member to limit the insertion of the sheath to either “about 1.5 cm” or moving the sheath along the urethra such that the distal end is in a “known position of maximum pressure,” but not beyond that position.

The original parent application did not contain a description of the 1.5 cm depth. Further, the inventor testified that when drafting the patent application, he purposefully “avoid[ed] any comment with relation to the length” because he “was aware that numbers would become limiting themselves.”

The appeals court concluded the inventor did not comply with the best mode requirement because the inventor viewed the (1) 1.5cm depth as the best mode and (2) did not disclose it in the original application. As a result, the ‘259 patent did not get the benefit of the parent application and was invalided by intervening prior art.

Lack of Best Mode No Longer a Defense

The American Invents Act changed the law to remove a best mode violation as an invalidity defense in an infringement suit. 35 USC 282(b)(3)(A). Therefore, the best mode might seem like a requirement with no teeth.

Reasons for Disclosing Best Mode

However, withholding the best mode is still not a good idea. The law requires it be disclosed. If it is not disclosed, then it will not be a part of your patent application. It may be that details about your best mode are necessary to obtain a patent over the prior art and the failure to include them will prevent you from obtaining a patent or from obtaining a patent with meaningful scope. Further, the failure to disclose the best mode might also result in a violation of the written description requirement.

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What is a Continuation-in-Part Patent Application?

A continuation-in-part patent application can be thought of as a part-child of a prior filed “parent” patent application. A continuation-in-part application is sometimes referred to as a CIP application.

A CIP application contains some or all of the subject matter from the prior parent application and some new matter that was not in the prior parent application.

The Manual of Patent Examining Procedure provides that a continuation-in-part is “an application filed during the lifetime of an earlier nonprovisional application, repeating some substantial portion or all of the earlier nonprovisional application and adding matter not disclosed in the said earlier nonprovisional application.” MPEP 201.08.

A CIP application can have claims with different priority dates depending on whether a given claim is completely supported in the parent application or whether it contains new matter that was not supported in the parent application.

Unless you need a split set of claims where some claims are completely supported in the original parent application and some are not, then you might want to consider not filing the application as a CIP but rather as just a new application. This is true because the downside of a CIP is that the resulting patent life (term) will be measured from the filing date of the parent application. Therefore, if you do not need the benefit of the parent application, then you will probably want to longer patent term afforded by not claiming priority to the parent.

 

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Is that Patented Design Really New?

United General Supply sued Rural King alleging Rural King sold products infringing three design patents, one of which is D577,520 (the ‘520 patent) for a chair back.

D577520_fig9RuralKing

The claimed chair back has 5 slats, the center slat being wider than the lateral pairs. The claimed design also includes a longer upper horizontal bar and a shorter lower horizontal bar extending behind the slats. The remaining part of the chair shown in figure 9 is in broken lines and therefore not claimed. The accused Rural King product is shown in the color photo and looks pretty close to the claimed design.

One might ask, “is that patented design new?” or “Doesn’t this five slat design exist in the prior art?” And that’s what every defendant in a patent infringement asks and searches to answer. Because if the design is in the prior art, then the patent is invalid and the defendant wins. However, don’t just look at the slats. You must consider the upper and lower horizontal bars that are claimed.

But even as to the slats, the prior art cited by the patent examiner in the ‘520 patent does not get close enough to the claimed design. Below are figures from some of the patents cited by the Examiner during the prosecution of the ‘520 patent.

PriorArtChairBacks

 

None of the figures above show a chair back with a wide center slat and smaller lateral slats.

Defendants look beyond the prior art cited during the prosecution of the patent. They search US and foreign patents and patent applications, as well as non-patent prior art to try to invalidate the patent.

Yet, design patent scope is often quite narrow. That means small changes may be sufficient to distinguish the prior art. And therefore invalidating design patents based on the prior art can be challenging.

If Rural King is to succeed it will need to deal with the ‘520 patent as well as U.S. D597,352 which is directed to the rocking chair frame. The ‘352 patent, shown below, provides more details and may be harder to attack.

D597325

Citation: United General Supply Co., Inc. v. Rural King Administration, Inc., No. 2:18-cv-02004 (C.D.Ill 2018).

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Patent Examiner Interviews

Most patent applications are rejected, at least in part, on the first review by a patent examiner. The rejection is issued in a writing called an Office Action. The applicant has the option to file a written response. But the applicant also has the option to hold an interview with the patent examiner. The interview can be in-person, by phone, or by video conference. The applicant need only provide a proposed amendment or an agenda of topics to discuss with the Examiner during the interview.

An oral discussion can often be a very effective and dynamic way to advance and defend an argument. Plato recognized this in the extreme when he determined that certain knowledge should not be written down (i.e. Plato’s unwritten doctrines). He explained in Phaedrus: “He who has knowledge of the just and the good and beautiful … will not, when in earnest write them in ink, sowing them through a pen with words, which cannot defend themselves by argument and cannot teach the truth effectively.”

In other words, an oral discussion allows a party to dynamically respond to the opposition.

I think that Plato’s point can be modified for our purposes: an oral discussion with the patent examiner can be an important supplement to a written response. It can serve to quickly identify and resolve differences between the patent applicant and the examiner. It can quickly illustrate an agreeable path toward allowed patent claims.

An Examiner interview is not always needed, for example, if the path to overcoming the rejection is very clear and simple. However, an interview is often helpful to understand the Examiner’s position and advance a patent application to allowance.

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What is a Continuation Patent Application?

A continuation patent application can be thought of as a “child” application of an earlier filed “parent” application, in a way similar to a divisional application. The continuation application must be filed while the parent application is pending.

A continuation application is often filed to introduce into the application a new set of claims and to establish a right to further examination. Continuation application does what it’s name says, it “continues” the examination and prosecution of the application. It is one way to keep negotiating with the patent office (another way is to file a request for continued examination (RCE)).

Unlike a divisional, the new or amended claims in a continuation application are not necessarily directed an independent or distinct invention.

The Manual of Patent Examining Procedure provides that a continuation application “is an application [e.g. a child application] for the invention(s) disclosed in a prior-filed copending [1] nonprovisional application, [2] international application designating the United States, or [3] international design application designating the United States [e.g. parent application].” MPEP 201.07. It also provides, “The disclosure presented in the continuation must not include any subject matter which would constitute new matter if submitted as an amendment to the parent application.”

Therefore, no new subject matter can be added in a continuation application. Rather, the continuation application merely claims an invention that was already described in the original parent application.

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Patent Drafting: The Written Description Requirement

US6906700_fig12Anascape sued Nintendo alleging that Nintendo’s game controller infringed U.S. Patent 6,906,700 (the ‘700 patent). Nintendo challenged the ‘700 patent asserting that it did not comply with the written description requirement of 35 USC 112.

The written description requirement provides the “that specification [of the patent/patent application] shall contain a written description of the invention, and of the manner and process of making and using it…”

The claims of the ‘700 patent were directed to a controller that received multiple inputs that were together operable in six degrees of freedom. But, the ‘700 patent was issued from a continuation application that claimed priority to a prior parent application (that became U.S. Patent 6,222,525 (the ’525 patent)). The ‘525 patent only disclosed a single input member (controller) capable of movement in six degrees of freedom. The ‘525 patent repeatedly referenced (over twenty times) the input member as a single input member. It also disparaged the prior art devices having multiple input members.

The court concluded that the ‘525 patent did not disclose multiple input members, but rather only a single input member. Therefore, the ‘700 patent failed to meet the written description requirement for multiple inputs to obtain the benefit of the filing date of the ‘525 patent.

Intervening prior art existed between the filing of the ‘525 patent and the filing of the ‘700 patent. Therefore, without the benefit of the earlier filing date of the ‘525 patent, the claims of the ‘700 patent were invalid and Nintendo avoided infringement.

Given the repeated use of “single input member” and the disparagement of multiple input members, it appears that the original ‘525 patent was intended to be limited to only a single input member. That is, it was not a drafting error that a variation of the invention with multiple input members was omitted.

Nevertheless, this case demonstrates why when drafting a patent application, it is important to account for multiple variations of the invention. You should think about what components can be multiplied and describe those in a manner that can account for such versions of the invention. The use of exclusively restrictive language like “single” or “only one” may confine a patent resulting on your invention.

The written description requirement is separate, and arguably more stringent, than the enablement requirement. Further, the courts have been strict in asserting that it is not enough to assert that claimed variation is obvious in light of what was disclosed. Rather, to be safe, the variations should be clearly explained in the description.

Citation: Anascape, Ltd. v. Nintendo of Am., Inc., 601 F.3d 1333 (Fed. Cir. 2010)

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Divided Infringement: When Acts of More Than One Party Are Necessary to Meet All Elements of the Claim

US7021537Divided infringement occurs when no one party actually performs all of the steps of a patent claim. For example, one party performs some of the steps and another party performs the remaining steps. One way to solve this problem is to draft patent claims such that one party will likely perform all of the claimed steps.

However sometimes its not easy to do so given the prior art. Take David Tropp’s patent no. 7,021,537 for example. That patent is directed to a method of improving airline luggage inspection through he use of dual access locks.  Claim 1 of the ‘537 patent provides the following general steps (a) providing locks to customers that have two means of opening: a combination lock portion and a master key lock portion, and (b) using the master key to open the lock during luggage screening.

In the case of Travel Sentry Inc. v. Tropp, No. 2016-2386 (Fed Cir. 2017), Travel Sentry provided on behalf of itself or through licensees the locks according to step (a). But the TSA performs step (b). The question is whether the TSA’s acts of opening the locks with a master key are attributable to Travel Sentry, such that Travel Sentry is liable for infringement. The court found that a reasonable jury could  answer that question in the affirmative.

I suspect that there was probably prior art showing locks having to means of opening so that Tropp needed the claimed method to include the step of opening the locks during luggage screening to have a novel method over the prior art and obtain the patent.

Travel Sentry entered into a memorandum of understanding with the TSA which provides that the TSA “will make good faith efforts to distribute the passkeys and information provided by Travel Sentry on the use of the passkeys, and to use the passkeys to open checked baggages secured with Travel Sentry certified locks…”

The court found that a common thread in its case law on whether steps actually performed by a third party can be attributable to the defendant was whether there exists “evidence that a third party hoping to obtain access to certain benefits can only do so if it performs certain steps identified by the defendant, and does so under the terms prescribed by the defendant.”

The court found that a reasonable jury could find that TSA receives a benefit from being able to identify Travel Sentry-marked luggage and, where necessary, open that luggage using passkeys that Travel Sentry provided.

Ideally, patent claims are drafted such that one party will perform all the steps. When that is not the case, however, the Travel Sensory case clarifies and likely expands the circumstances where it is possible to show that the acts of another are attributable to the defendant so that the defendant can be charged with all steps of the claimed method.

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Patent Drafting: Enabling Skilled Person to Make and Use the Invention

USPatent5231253_Fig3Automotive Technologies International (ATI) sued numerous vehicle and parts manufacturers including BMW and Delphi Automotive Systems for infringing US patent 5,231,253 on side impact crash sensors for deploying an air bag. The court of appeals determined that the patent was invalid for failing to enable the claimed invention in Auto. Techs. Int’l, Inc. v. BMW of N. Am., Inc., 501 F.3d 1274 (Fed. Cir. 2007).

The law requires that your patent application describe your invention to such a level of detail so as to enable one who’s skilled in the art to  make and use the invention, without undue experimentation. This is known as the enablement requirement. The relevant statute states that every patent must describe “the manner and process of making and using [the invention], in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the [invention].” 35 USC 112.

This is part of the patent bargain. You tell the world how to make and use the invention and the government grants you a limited monopoly.

It is not uncommon for an inventor to leave out details of the invention that he/she thinks are well known in the art. But you want to draft a application that is well within the knowledge of one skilled in the art area and no where near the boundary of what one skilled in the art knows. Therefore, you often want to explain concepts and details that one skilled in the art already knows. When in doubt, provide more detail.

This is true because when an inventor chooses to rely upon general knowledge in the art to render his/her disclosure enabling, the inventor bears the risk on this issue of whether those of ordinary skill in that can be expected to possess or know where to obtain this knowledge. In re Howarth, 654 F.2d 103 (CCAP 1981).  “To avoid the risk, [he/she] need only set forth the information in his specification…” And you should want to avoid this risk, as the ATI case demonstrates.

In the ATI case, the patent disclosed two impact crash sensors, one was a mechanical sensor and the other was an electronic sensor. The patent described the mechanical sensor at length (figure 1). But it only provided one short paragraph and one “conceptual” drawing (figure 11) about the electronic sensor. The court found the thin disclosure of an electronic sensor was not sufficient to inform one skilled in the art how to make the invention with the electronic sensor. Since the claims were broad enough to cover both mechanical and the non-enabled electronic sensors, all of the patent claims were found invalid.

USPatent5231253_Fig1

USPatent5231253_Fig11

The description of the electronic sensor in the patent failed to disclose a structure or circuitry  for the sensor. The court found that ATI could not rely on prior art knowledge of front electronic impact sensors because ATI stated that the novel aspect of the invention was the side impact sensor. The court said, “given that the novel aspect of the invention is a side impact sensor[], it is insufficient to merely state that known technologies case be used to create an electronic sensor. Moreover, there were no electronic sensors in existence to detect side impact crashes at the time the application was filed.

Also, the court stated electronic sensors are of the same class of technology as mechanical ones: “Electronic side impact sensors are not just another known species of genus consisting of sensors, but are a distinctly different sensor compared with the well-enabled mechanical side impact sensor [described]…”

As the ATI case demonstrates, it is best not to get close to the line between what is and is not enough detail to enable a person skilled in the art to make and use your invention. Instead you should spend the time to provide the level of detail, with respect to each variation of the invention, so there can be no question. And that often involves describing details known to one skilled in the art.