WARF Presentation

8/7/2019 WARF Presentation

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The Supreme Court

& the Patent Law:

What it means for WARFand for other technology

transfer offices.

Presented by:

Brian Cholewa & Mike Wokasch


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Is the Supreme Court out tochange the patent system?

Three important Supreme Court decisions on

patent law during the last year:

KSR v. Teleflex patent prosecution/litigation

MedImmune v. Genentech patent

commercialization

eBay v. MercExchange patent enforcement


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KSR International Co. v.Teleflex Inc.

KSR Intl Co. v. Teleflex Inc., 127 S. Ct. 1727 (2007).


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Obviousness is . . .

One of the three requirements examined by the PatentOffice and courts when determining patentability.

103: "A patent may not be obtained though theinvention is not identically disclosed or described asset forth in section 102 of this title, if the differencesbetween the subject matter sought to be patented and

prior art are such that the subject matter as a wholewould have been obvious at the time the invention wasmade to a person having ordinary skill in the art towhich said subject matter pertains."


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So how do you know ifsomething is obvious?

Graham Factors

Determine the scope and content of the prior art;

Determine the differences between the claims and theprior art;

Determine the level of ordinary skill in the art; and

Secondary considerations:

Unexpected results; Commercial success;

Long-felt, but unresolved need; and

Failure by others.

Graham v. John Deere Co., 383 U.S. 1 (1966).


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What the "F" is wrong withobviousness?

Formalistic approach: TSM test

"A patent claim is only proved obvious if some

motivation or suggestion to combine the prior artteaching can be found in the prior art, the nature of theproblem, or the knowledge of a person having ordinaryskill in the art."

Adopted to minimize the effect of hindsight in Graham,

as obviousness is a subjective determination personaland subjective.

Court noted that TSM, however, is a "rigid approach."


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What the "F" is the newobviousness standard?

Functional and Flexible approach.

"[A] court must ask whether the improvement is more

than the predictable use of prior art elements accordingto their established functions."

Graham Factors emphasized, but TSM not

completely out as it "capture[s] a helpful insight."


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How can KSR affect patentprosecution?

Drafting applications

Focus on what theinvention accomplishes

that prior art does not. But, keep 'problem' out of

Background of theInvention.

Claims: Look for ways to

link elements in a way thathighlights that newfunctionality, reducing thelikelihood that an examinerwill be able to identifythose elements in the priorart.

Office Action responses:

Use declarations to opineon the non-obviousness of

claimed invention. Unpredictability of the

invention/teach away; and

Technical advances requiredto implement the invention.

Highlight secondaryfactors.

Refuse to acceptconclusory assertions thatobvious to combine certainreferences.


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How can KSR affect patentlitigation?

Use of experts may increase opine on the

obviousness of a patented invention.

Is "obviousness" now purely a question of law?

Use of Summary Judgment more prevalent?


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KSR in a nutshell

An Examiner can make a prima facie case forobviousness by a showing predictability, flexibilityand/or common sense. At that point, the burden shifts

to applicant to prove with substantial evidence that it isnot obvious.

The more flexible approach results in higher standards

in the patent system. Although patents may be moredifficult to obtain, they will likewise be more difficult toinvalidate.


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KSR cont.

Refines the current analysis of obviousness, but leaves inplace important limitations of the requirement, including thata reason to combine the prior art in the manner claimedand the predictability and technical feasibility of the claimedsubject matter at the time of invention.

Re-defines "person of ordinary skill in the art" by adding aquality of "ordinary creativity."

Resurrects an "obvious to try" standard when design or

marketplace demands dominate. Combination inventions that achieve predictable results are

likely to be obvious.


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Notables from the SupremeCourt . . .

"The combination of familiar elements according to knownmethods is likely to be obvious when it does no more thanyield predictable results."

"[W]hen a patent claims a structure already known in theprior art that is altered by the mere substitution of oneelement for another known in the field, the combinationmust do more than yield a predictable result."

"If a person of ordinary skill can implement a predictable

variation, Section 103 likely bars its patentability." "[A] court must ask whether the improvement is more than

the predictable use of prior art elements according to theirestablished functions."


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Living in a post-KSR world

Leap Frog v. Fisher-Price (Fed. Cir. 2007).

Fed. Cir. affirmed district courts finding of obviousness,

noting that the obviousness analysis requires a commonsense approach rather than any rigid formula.

"An obviousness determination is not the result of a rigid formula

disassociated from the consideration of the facts of a case. Indeed, the

common sense of those skilled in the art demonstrates why some

combinations would have been obvious where others would not. SeeKSR Intl Co. v. Teleflex Inc., 550 U.S. __ (2007) ('The combination of

familiar elements according to known methods is likely to be obvious

when it does no more than yield predictable results.')."


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MedImmune v. Genentech


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Who should be payingattention?

Anyone in this room that's involved in the

commercialization of WARF technology.

It impacts:

HOW you approach prospective licensees, AND

WHAT you should be asking for during negotiations.


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What changed?

Question for the Court: Is there an"actual controversy" when thedispute is over a patent that issubject to a license between the

parties?

Supreme Court:

Yes. Licensee coerced to payroyalties by threatenedenforcement action.

A licensee does not need tobreak or terminate its licenseagreement in order to seek adeclaratory judgment that apatent is invalid, unenforceable ornot infringed.


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Declaratory Judgment

MedImmune is not limited to only licensed patents!

"We hold that where a patentee asserts rights under a patent basedon certain identified ongoing or planned activity of another party,and where that party contends that it has the right to engage in theaccused activity without license, an Article III case or controversywill arise and the party need not risk a suit for infringement byengaging in the identified activity before seeking a declarationof its legal rights."

"No practical stopping point short of allowing declaratory judgmentactions in virtually any case in which the recipient of an invitation to

take a patent license elects to dispute the need for a license andthen to sue the patentee" (concurring).

Sandisk v. STMicroelectronics, March 26, 2007(CAFC 05-1300)


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The negotiations . . .

There is no longer a license negotiation "safe harbor."

Things to avoid:

Referring to a particular infringing activity;

Presenting the prospective licensee the choice of eitherlicensing or engaging in infringing activity;

Refrain from revealing any detailed infringement

study/analysis. New safe harbors?

File suit first.

Enter a confidentiality agreement as soon as possible.


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Preventing post-licensechallenges

Will certainly work:

More up-front money; fully paid-up

More exclusive licenses

Likely to work:

Attorney's Fees for successful defense

Step-up royalty payments for valid, enforceable patents.

Seek "cooperative" licensees

May not be enforceable

Terminate upon dispute

Other punitive measures


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What does this mean forWARF?

Negotiations

Be careful about what yousay.

Recognize the context of theoffer of a license agreement.

Have you sued otherpeople?

Have you sued this

company in the past? Have you said anything to

lead them to believe they'reinfringing?

Post-Negotiations

Be careful about what you

say.

Recognize the context in

which you negotiated the

license:

Is this a settlement of a suit

you filed?

Have you accused the other

of infringement?

Licensee will have more

power once you execute a

license.


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eBay v. MercExchange


22/27

Injunctions aren't automatic

There is no "general rule" that a permanent

injunction should be awarded in Patent Act cases

once infringement and validity have been shown.

Instead, a four-factor test applies.


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The four-factor test

Under the four-factor test, a plaintiff must show:

1. It has suffered an irreparable injury;

2. Remedies available at law, such as monetary damages,are inadequate to compensate for that injury;

3. Considering the balance of hardships between theplaintiff and defendant, a remedy in equity is warranted;and

4. The public interest would not be disserved by apermanent injunction.


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UnlicensedUncommercialized

This case will change how injunctions are awarded

in cases where WARF seeks protection of

unlicensed and uncommercialized patents.

As of July 1st, district courts issued injunctions in

only 23 of 30 cases.


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Where does that leaveWARF?

"Some patent holders, such as university

researchers or self-made inventors, might

reasonably prefer to license their patents, ratherthan undertake efforts to secure the financing

necessary to bring their works to market

themselves. Such patent holders may be able to

satisfy the traditional four-factor test, and we seeno basis for categorically denying them the

opportunity to do so."


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What district courts arelooking at?

Post-eBay cases suggest that district courts arelooking at the following:

Are the parties competitors?

Are both parties making products?

Is the patent owner licensing the invention and/or willing to do so

Does the patent cover the core product or a small piece?

Does the infringer have a significant marketplace advantages overthe non-infringers?

Is the infringement willful?

Are there special non-monetary terms needed to control theinvention? (e.g. Bayh-Dole obligations?)

Is an injunction going to put the infringer out of business?


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Questions?

Documents

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