Business & Technology Law

Recent Explosion of False Patent Marking Lawsuit

Thomas Lebens — Tue, 16 Mar 2010 02:33:00 GMT

A recent Federal Circuit decision, Forest Group, Inc. v. Bon Tool Co., No. 2009-1044 (Fed. Cir. Dec. 28, 2009), has invoked new interest in the “false marking” statute, 35 U.S.C. § 292. The Bon Tool decision has led to dozens of new lawsuits, and we expect this trend to continue. We encourage our patent-owning clients to contact us to discuss the potential ramifications of, and our recommended responses to, the Bon Tool decision.

The false marking statute allows recovery of “not more than $500 for every such offense” for false marking. Under the statute, anyone with knowledge of false patent marking may bring a lawsuit against the manufacturer or seller of a falsely marked product. The statute is a qui tam statute, whereby the party who brings the lawsuit keeps half of any recovery, with the other half going to the government.

False marking allegations are not limited to cases of outright fraud. For example, in some cases a plaintiff may allege “false marking” where the product in question was covered by a patent, but where the patent has expired.

Before the Bon Tool decision, there were few reported false marking cases. Some of those cases held that the plaintiff’s recovery was limited to $500 per “decision to mark” – essentially, $500 per product line. Thus, a manufacturer who had applied a false patent mark to tens of thousands of units would be liable only for a single $500 penalty. But in Bon Tool, the Federal Circuit held that the statute permits a penalty of up to $500 for each item that is falsely marked. Now, it may be that a manufacturer who has applied a false patent mark is potentially liable for up to $500 per unit. Especially for mass-produced consumer products, the Bon Tool decision may create vastly larger potential liability for the manufacturer. Likewise, the decision creates significantly greater incentives for opportunistic plaintiffs to bring suit.

The Patent Office May Have Under-Calculated the Adjustment of Your Patent Term

Thomas Lebens — Sat, 23 Jan 2010 00:55:00 GMT

Under Wyeth v. Kappos, decided January 7, 2010 by the Court of Appeals for the Federal Circuit (Federal Circuit), if your U.S. patent failed to issue within three years from the filing date, the Patent & Trademark Office (PTO) may have under-calculated the adjustment of the term of your patent due to examination delays. If you have an allowed application, an application for which you recently paid the issue fee, or a patent that issued within the last six months, you are encouraged to review the Wyeth decision to verify that the PTO has determined the proper adjustment to your patent term. You should act quickly, because the right to contest the PTO's term calculations otherwise might expire.

Essentially, the Federal Circuit ruled that the Patent Office misinterpreted the law by "overlapping" certain examination delays that are required by the law to be "added together" when determining the adjustment of the term of a patent. Accordingly, under the Wyeth decision, many allowed applications and soon to issue and issued patents are entitled to a patent term adjustment beyond that calculated by the Patent Office.

Background
By way of background, the term of a patent filed on or after June 8, 1995 begins on the date the patent issues and ends 20 years from the filing date. It follows that the longer the Patent Office takes to examine a patent application, the shorter the effective life of the patent. To account for delays in the examination process, the law provides for "patent term adjustment" (PTA). The PTA laws provide for an extension of patent term for certain PTO delays.

There are two types of delay at issue in the Wyeth case - Type A and Type B delays. Type A delays accumulate if: 1) the PTO does not issue a substantive examination within 14 months from the filing date, 2) the PTO fails to respond to a reply or appeal within four months from the date the reply was filed or appeal was taken, 3) the PTO fails to take action within four months from the date of a decision by the Patent Board or a Federal court, or 4) the PTO does not issue the patent within four months from payment of the issue fee.

Type B delay accumulates if the patent fails to issue within three years from the filing date, not counting time consumed by a request for continued examination and/or during certain activities such as interference proceedings, secrecy orders, and appellate reviews.

Any available extension is limited by applicant delays and terminal disclaimers¹. Additionally, the law provides that Type A delays may not overlap with Type B delays. The Wyeth decision centered on what was meant by delay overlaps.

The PTO took the position that the Type A and Type B delays ran concurrently and determined PTA as the larger of the Type A and B delays. In contrast, Wyeth countered that the Patent Act requires the Type A and Type B delays to be added together, except when the delays actually occur on the very same day, when the delays run concurrently. The Federal Circuit sided with Wyeth.

Example
Whether the Type A and Type B delays overlap or add together is significant. Take, for example², an application in which a substantive examination (First Action) is mailed at 25 months, a reply is received at the PTO at 28 months, a Second Action is mailed at 31 months, a reply is received at the PTO at 34 months, a Notice of Allowance is mailed at 37 months, the issue fee is paid at 40 months, and the patent issues at 44 months.

Patent Office Determination of PTA = 11 months
Wyeth Determination of PTA = 19 months
Patent Owner is entitled to an additional 8 months of PTA!

For this application, the Type A delay is 11 months, because a substantive examination was not issued within 14 months from the filing date. The Type B delay is eight months, because the patent failed to issue within three years from the filing date.

Under the PTO's calculation, the delays run concurrently, thus the PTA is the larger of the Type A delay (11 months) and the Type B delay (8 months), that is, 11 months. Under Wyeth's calculation, the delays are added together. Thus the PTA is the sum of the Type A delay (11 months) and the Type B delay (8 months), that is, 19 months.

This makes a difference of eight months!

What Can You Do?
What can you do to get more PTA under Wyeth? Audit and act by the proper time. Audit your allowed applications and patents issued within the last six months for Type B delays, i.e., patents pending for longer than three years. If you have Type B delays and the right Type A delays, you may be entitled to a longer patent term than indicated by the PTO.

To act, you may file a petition with the Patent Office for reconsideration of the PTA on or before payment of the issue fee, or, if your patent has issued, within two months from the issue date.

If dissatisfied with a determination made by the Patent Office, you may seek judicial review in the U.S. District Court for the District of Columbia within 180 days from issuance.

If you missed these deadlines, the law is not clear as to whether the PTO's term calculations are binding. In other words, you may be entitled to a longer patent term irrespective of whether the PTO calculated the term correctly.

Alternatively, you may wish to investigate the mechanisms under Chapter 25 of the Patent Act for correcting a patent. A certificate of correction fixes a mistake incurred through the fault of the Patent Office or the patentee. A reissue corrects a defect in a patent resulting from an error, including, for example, not only an error of fact but also an error of law. One or both of these mechanisms may be available to amend PTA, because the Patent Office under-calculated the term of your patent. Beware of timeliness. Under Ex Parte Anthony, 230 U.S.P.Q. 467 (Bd. Pat. App. & Interferences 1982), substitution of a later expiration date would necessarily vertically or temporally broaden the scope of the patented claims, therefore such activity would be considered to be statutorily time barred unless reissue were filed within two years from the issuance of the patent.

In Bayer AG v. Carlsbad Technology Inc., 64 U.S.P.Q.2d 1045 (Fed. Cir. 2002), the patentee used a petition to have the Patent Office correct its records substituting a later expiration date for a prior expiration date of a patent set forth in a terminal disclaimer. On the reasoning that a new law altered the patent term from seventeen years from the date of issuance to twenty years from the date of filing, the expiration date changed by operation of law. By way of comparison, for an analogous new law, that of the decision in Wyeth altering PTA, the expiration date changes, thus requiring the Patent Office to correct its records.

Many allowed applications, applications where issue fees have been recently paid, and recently issued patents are entitled to additional PTA beyond that calculated by the PTO under Wyeth. You can take steps now to preserve your ability to obtain additional PTA. Actions taken now can be tailored to your specific needs. In Bayer, the patentee used a petition to have the Patent Office correct its records, filing the petition within one month of the adoption of the new law. If the Patent Office under-calculated the term of your patent, you may be able to get more PTA if you audit and act by the proper time.

¹Applicant delays reduce the adjusted term of the patent. In general, an applicant who fails to conclude processing within three months is charged with delay; shortened statutory periods have no effect. Terminal disclaimers prohibit the patent term from extending beyond the full patent term of the patent or application to which the disclaimer is filed.

²For simplicity, "months" are used in this example although patent term adjustments are determined as a number of "days."

International Seaway Trading Corp. v. Walgreens Corp

Thomas Lebens — Sat, 23 Jan 2010 00:49:00 GMT

In a recent opinion, the Court of Appeals for the Federal Circuit has clarified the standard for determining validity of a design patent. In International Seaway Trading Corp. v. Walgreens Corp., the court eliminated the “point of novelty” test in the validity analysis of a design patent.

Until recently, courts applied two distinct tests in determining design patent infringement. The first test, dating back to the nineteenth century, required courts to determine, through the eyes of an “ordinary observer,” whether the patented design and the accused design were substantially the same. The second test, the “point of novelty” test, required courts to first identify the novel features of the patented design, and then determine whether the accused design appropriates those novel features. The “point of novelty” test was deemed to be a separate and distinct inquiry from the “ordinary observer” test.

In last year’s landmark decision in Egyptian Goddess v. Swisa, Inc., 543 F. 3d 665 (Fed. Cir. 2008), the Federal Circuit discarded the “point of novelty” test for infringement analyses, holding that this test is inconsistent with the “ordinary observer” test. In doing so, the court left the “ordinary observer” test as the sole test for determining whether a design patent has been infringed. Nonetheless, although this decision clarified the standard for infringement analysis, the court left open the issue of whether the same standard applies to a patentability analysis.

This question was answered in the International Seaway case. The three patents at issue were directed towards designs for casual footwear. The defendants contended that International Seaway’s patents were invalid over a prior art patent to Crocs, Inc.

Relying on Egyptian Goddess, the U.S. District Court for the Southern District of Florida held that the ordinary observer test was the sole test for design patent validity. The district court held that International Seaway’s patents were anticipated by the Crocs patent, and granted summary judgment to the defendants.

On appeal, the Federal Circuit agreed that the “ordinary observer” test used by the district court was the sole test to be applied. For purposes of analyzing anticipation, the court reasoned that the abandonment of the point of novelty test logically followed from its earlier Egyptian Goddess decision:

"In light of Supreme Court precedent and our precedent holding that the same tests must be applied to infringement and anticipation, and our holding in Egyptian Goddess that the ordinary observer test is the sole test for infringement, we now conclude that the ordinary observer test must logically be the sole test for anticipation as well."

The court further held that this rule also applies when analyzing obviousness:

"For design patents, the role of one skilled in the art in the obviousness context lies only in determining whether to combine earlier references to arrive a single piece of art for comparison with the potential design or to modify a single prior art reference. Once that piece of prior art has been constructed, obviousness, like anticipation, requires application of the ordinary observer test, not the view of one skilled in the art."

The Federal Circuit affirmed the validity test applied by the district court, and remanded for the district court to apply the proper test.

The International Seaway decision left some questions open. For instance, the court stated that it’s holding “does not prevent the district court on summary judgment from determining that individual features of the design are insignificant from the point of view of the ordinary observer and should not be considered as part of the overall comparison.” The Federal Circuit then reiterated that only “significant differences,” not minor differences, should be taken into account when comparing two designs in assessing validity. The court did not, however, elaborate on how one might distinguish minor differences from significant differences.

Nevertheless, the International Seaway decision has clarified the law in one significant respect. Through its extension of Egyptian Goddess, the court has unequivocally discarded the “point of novelty” test in favor of the ordinary observer test as the sole test of design patent validity.