Transcript Klepper Presentation - Law Seminars International

Skadden, Arps, Slate, Meagher & Flom LLP
Skadden
The Current State of IP
as a Core Asset:
The Supreme Court Weighs In
Allan M. Soobert
December 6, 2006
Copyright © 2006 Allan M. Soobert. All rights reserved.
1
Overview
Skadden
• Trends In IP Disputes
• Recent Supreme Court Decisions
eBay
• Illinois Tool Works
•
• Coming Attractions
KSR v. Teleflex
• MedImmune v. Genentech
• AT&T v. Microsoft
•
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Trends: Increased Filings
Skadden
PWC 2006 Patent and Trademark Damages Study
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Trends: Increased Awards
Skadden
• $505 million: Igen Int’l v. Roche (2002)
• $521 million: Eolas v. Microsoft (2003)1
• $250 million: Intergraph v. Gateway (2004)
• $301 million: Rambus v. Hynix (2006)2
• $612 million: NTP v. RIM (2006)
1
Subsequently overturned
2
Subsequently reduced to $133.6 million
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Supreme Court: eBay
Skadden
• MercExchange sued eBay on three patents
• One patent found not invalid and infringed
• E.D. Va. refused to enter a permanent injunction,
concluding that MercExchange would not be
irreparably harmed and could be adequately
compensated by money, among other factors
• Fed. Cir. reversed on appeal, ruling that
permanent injunctions should issue in patent
cases, absent exceptional circumstances
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Supreme Court: eBay
Skadden
• Justice Thomas for the 9-0 Court:
•
•
“[T]he decision whether to grant or deny injunctive
relief rests within the equitable discretion of the
district courts.”
“[S]uch discretion must be exercised consistent with
traditional principles of equity, in patent disputes no
less than in other cases governed by such standards.”
eBay, Inc. v. MercExchange, L.L.C.,
126 S.Ct. 1837, 1840-41 (2006)
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Supreme Court: eBay
Skadden
• Chief Justice Roberts, Concurring
•
•
“[T]here is a difference between exercising equitable
discretion pursuant to the established four-factor test
and writing on an entirely clean slate.”
“‘Discretion is not whim, and limiting discretion
according to legal standards helps promote the basic
principle of justice that like cases should be decided
alike.’”
eBay, 126 S.Ct. at 1841-42 (Roberts, C.J.)
(quoting Martin v. Franklin Capital Corp.,
126 S.Ct. 704, 710 (2005))
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Supreme Court: eBay
Skadden
• Justice Kennedy, Concurring
•
•
•
“In cases now arising trial courts should bear in mind that in
many instances the nature of the patent being enforced and the
economic function of the patent holder present considerations
quite unlike earlier cases.”
“An industry has developed in which firms use patents not as a
basis for producing and selling goods but, instead, primarily for
obtaining licensing fees.”
“For these firms, an injunction, and the potentially serious
sanctions arising from its violation, can be employed as a
bargaining tool to charge exorbitant fees to companies that seek
to buy licenses to practice the patent.”
eBay, 126 S.Ct. at 1842-43 (Kennedy, J.)
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Supreme Court: eBay
Skadden
• Justice Kennedy, Concurring
•
•
•
“When the patented invention is but a small component of the
product the companies seek to produce and the threat of an
injunction is employed simply for undue leverage in negotiations,
legal damages may well be sufficient to compensate for the
infringement and an injunction may not serve the public interest.”
“In addition injunctive relief may have different consequences for
the burgeoning number of patents over business methods, which
were not of much economic and legal significance in earlier times.”
“The potential vagueness and suspect validity of some of these
patents may affect the calculus under the four-factor test.”
eBay, 126 S.Ct. at 1842-43 (Kennedy, J.)
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Supreme Court: eBay
Skadden
• Post-eBay Cases
•
•
•
•
z4 Techs., Inc. v. Microsoft Corp., 434 F. Supp. 2d 437 (E.D. Tex.
2006) (applying four-factor test and denying permanent
injunction)
Paice L.L.C. v. Toyota Motor Corp., No. 2:04-CV-211, 2006 WL
2385139 (E.D. Tex. Aug. 16, 2006) (same)
Finisar Corp. v. DIRECTV Group, Inc., No. 1:05-CV-264 (E.D.
Tex. July 6, 2006) (same)
TiVo Inc. v. Echostar Communications Corp., No. 2:04-CV-1, 2006
WL 2398681 (E.D. Tex. Aug. 17, 2006) (granting permanent
injunction in light of eBay)
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Supreme Court: Illinois Tool Works
Skadden
•
Illinois Tool Works sold printing systems having three components:
(1) a patented print head; (2) a patented ink container that attaches
to the print head; and (3) specially designed, but unpatented, ink
•
Independent Ink alleged illegal tying and monopolization in violation
of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2
•
District court granted summary judgment for Illinois Tool Works,
holding that patent on the print head system did not confer market
power and Independent Ink offered no proof of such power
•
Federal Circuit reversed based on the Supreme Court's decisions in
International Salt and Loew's, as well as the dicta in Jefferson Parish
•
Supreme Court reversed and held that the mere fact that the tying
product is patented does not support a presumption of market power
Illinois Tool Works v. Independent Ink, 126 S.Ct. 1281 (2006)
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Coming Attractions: KSR
Skadden
• Earlier Supreme Court decisions on obviousness
•
•
Graham v. John Deere Co., 383 U.S. 1, 17 (1966)
(obviousness requires consideration of scope and
content of prior art, level of ordinary skill in the art,
and differences between the claimed invention and the
art, along with secondary considerations such as
commercial success, long felt need and failure of others)
Sakraida v. Ag Pro Inc., 425 U.S. 273, 282 (1976) (patent
obvious where combination of known elements did not
produce “an effect greater than the sum of the several
effects taken separately”)
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Coming Attractions: KSR
Skadden
• Question for Review
•
Whether the Federal Circuit erred in holding
that a claimed invention cannot be held
"obvious," and thus unpatentable under 35
U.S.C. 103(a) in the absence of some proven
“teaching, suggestion, or motivation” that
would have led a person of ordinary skill in
the art to combine the relevant prior art
teachings in the manner claimed.
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Coming Attractions: KSR
Skadden
• Quotes from the November 28, 2006 oral argument
•
C.J. Roberts: “[T]the Federal Circuit’s approach focuses
. . . on prior art — as opposed to, I would say, common
sense.”
•
J. Scalia: “And in the last year or so, after we granted
cert in this case after these decades of thinking about it
[the Fed. Cir.] suddenly decides to polish it up . . . .”
•
J. Scalia: “[The test] is meaningless. . . . this is
gobbledygook. It really is, it’s irrational.”
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Coming Attractions: KSR
Skadden
• Quotes from the November 28, 2006 oral argument
•
J. Breyer: “I’ve read it about 15 or 20 times now, I just
don’t understand what is meant by . . . ‘motivation.’”
•
J. Alito: “But what is the difference between asking
whether something is implicit . . . in the prior art and
simply asking whether it would have been obvious to a
person of ordinary skill in the art?
•
Mr. Hungar [for U.S. Gov’t]: “[The test] is contrary to
the Patent Act, irreconcilable with this Court's precedents and bad policy. It asks the wrong question and in
cases like this one, it produces the wrong answer.”
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Coming Attractions: KSR
Skadden
• Quotes from the November 28, 2006 oral argument
•
J. Souter: “[If we change the test, is the change]
going to produce chaos . . . [A]re there going to
be 100,000 cases filed tomorrow morning?”
•
J. Kennedy: “Well, . . . would it be inadvisable
for us to say the motive test teaches us something
important; it has a valuable place; it's just not
the exclusive test for what's obvious.”
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Coming Attractions: MedIumme
Skadden
•
MedImmune had licensed patents from Genentech on cell
cultures to manufacture human antibodies
•
MedImmune later contended that the patents were invalid
and filed suit, seeking declaratory judgment of invalidity
•
The district court declined to exercise jurisdiction because
there was no reasonable apprehension of suit in light of the
license agreement
•
On appeal, the Federal Circuit upheld the district court’s
decision and held that a licensee cannot bring a declaratory
judgment action under such circumstances
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Coming Attractions: MedIumme
Skadden
• Question for Review
•
Does Article III's grant of jurisdiction of "all Cases ...
arising under ... the Laws of the United States,"
implemented in the "actual controversy" requirement
of the Declaratory Judgment Act, 28 U.S.C. § 2201(a),
require a patent licensee to refuse to pay royalties and
commit material breach of the license agreement before
suing to declare the patent invalid, unenforceable or
not infringed?
• Supreme Court heard argument on October 4, 2006
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Coming Attractions: AT&T
Skadden
•
AT&T’s patent covers certain speech codecs that are
included in Microsoft’s Windows® product
•
Microsoft generates its source code in the U.S. and that
source code is copied and shipped abroad to Foreign
computer manufacturers who, pursuant to their license
agreement with Microsoft, generate 2nd generation copies
of the software that are then installed and sold
•
The district court ruled that Microsoft was liable for
foreign sales under Section 271(f) for shipping components
of a patented invention
•
On appeal, the Federal Circuit affirmed
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Coming Attractions: AT&T
Skadden
• Questions for Review
Whether software object code can be a
component of a patented invention; and, if so,
• Whether copies of software object code are
“supplie[d]” from the United States when those
copies are created overseas by replicating a
separate master version supplied from the
United States
•
• Case will be heard later this term
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Skadden, Arps, Slate, Meagher & Flom LLP
Skadden
The Current State of IP
as a Core Asset:
The Supreme Court Weighs In
Allan M. Soobert
December 6, 2006
Copyright © 2006 Allan M. Soobert. All rights reserved.
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