Alerts and Updates
Federal Circuit Alert
November 2005
Disclosing Only a Single Embodiment Can Render Broad Patent Claim Invalid for Failure to Satisfy Written Description Requirement
Lizardtech, Inc., et al. v. Earth Resource Mapping, Inc., et al., No. 05-1062
In an October 4, 2005 opinion, the Federal Circuit affirmed a ruling of the United States District Court for the Western District of Washington finding that certain claims of U.S. Patent No. 5,710,835 ("the '835 patent") were invalid for failure to satisfy the written description requirement of 35 U.S.C. § 112, on the grounds that the expansive language of those claims was not supported by the single disclosed embodiment.
Lizardtech, the exclusive licensee of the '835 patent, alleged infringement of various claims of the '835 patent by Earth Resource Mapping's ("ERM's") geospatial imaging software product. The '835 patent related to what are known as "wavelet transforms," which are used to allow digital images to be greatly compressed with very little loss of information. The most useful type of wavelet transform is what is termed a discrete wavelet transform (DWT). The process described in the '835 patent involved first breaking the digital image into pieces, or "tiles," and then performing calculations on the individual tiles. A subsequent summation of DWT coefficients for pixels within each tile resulted in final DWT coefficients that are exactly the same as if there had never been any tiling at all. This process resulted in less edge artifacts and was described in the '835 patent to be a "seamless" DWT.
The District Court found independent claims 1 and 13 were not infringed by ERM's product because the ERM product did not form the DWT in the manner required by those claims. Specifically, both claims included a limitation requiring "maintaining updated sums" that addressed how a seamless DWT of the image was formed. Although independent claim 21 did not contain this limitation, the District Court found claim 21 (as well as its dependent claims) to be invalid for failing to satisfy the written description requirement of 35 U.S.C. § 112. Claim 21 was identical to claim 1, except that it did not contain the "maintaining updated sums" limitation, nor the term "seamless." The District Court reasoned that, because the specification did not describe a nonseamless DWT algorithm, claim 21 and its dependent claims were unsupported by the written description.
On appeal, Lizardtech maintained that even though claim 21 did not explicitly recite the "seamless" limitation, the claim would nonetheless cover algorithms that result in a seamless DWT, and a seamless DWT was adequately disclosed in the specification. The Federal Circuit agreed with Lizardtech that one of ordinary skill in the art, upon reading the patent and the prosecution history, would understand the DWT-based compression processes recited in claim 21 to create a seamless DWT of the image.
However, the Federal Circuit noted that the specification provided only one method for creating a seamless DWT, which is to "maintain updated sums" of DWT coefficients. That procedure was explicitly recited by claim 1. Claim 21 was necessarily broader than claim 1, though, because it lacked this "maintain updated sums" limitation. But because there were no limitations in claim 21 reciting how the seamless DWT was to be accomplished, claim 21 referred to taking a seamless DWT generically. However, the problem with allowing claim 21 to cover all ways of performing DWT-based compression processes that lead to a seamless DWT, the Federal Circuit reasoned, is that there was no support for such a broad claim in the specification. The specification provided only a single way of creating a seamless DWT, which is by maintaining updated sums of DWT coefficients. Further, claim 21 could not be directed to creating seamless DWT only by "maintaining updated sums" (i.e., the way claim 1 recites), because to do so would impermissibly read a limitation into the claim 21 and would also make claim 21 redundant of claim 1.
While confirming that a claim will not be invalidated on §112 grounds simply because the embodiments of the specification do not contain examples explicitly covering the full scope of the claim language, the Federal Circuit noted that the specification must disclose enough information "to convince a person of skill in the art that the inventor possessed the invention and to enable such a person to make and use the invention without undue experimentation." The problem with claim 21 was that it was directed to creating a seamless array of DWT coefficients generically, while the specification taught one specific method for creating a seamless DWT. A person of ordinary skill in the art would not have understood how to make a seamless DWT generically and thus would not understand the patentee to have invented a method for making a seamless DWT, except by "maintaining updating sums of DWT coefficients." The Federal Circuit noted that a contrary holding would entitle an inventor to a claim scope far greater than what a person of ordinary skill in the art would understand the inventor to possess or what a person of skill in the art would be enabled to make and use. The description of one method for creating a seamless DWT did not entitle the inventor of the '835 patent to claim any and all means for achieving that objective.
For the full opinion, see: http://fedcir.gov/opinions/05-1062.pdf
Package Patent Licensing Arrangements Do Not Constitute Patent Misuse
U.S. Philips Corp. v. Int'l Trade Comm'n, No. 04-1361
In a September 21, 2005 opinion, the Federal Circuit addressed patent misuse in the context of package patent licenses and a unanimous three judge panel reversed a holding of the International Trade Commission ("ITC") that six of Philips' patents were unenforceable. The ITC had held that Philips employed an impermissible tying arrangement because it required prospective licensees to license packages of patents rather than allowing the prospective licensees to choose which individual patents they wished to license and paying a licensing fee corresponding to the particular patents designated by the licensees. Faced with the question of whether a tying arrangement between patents in a mandatory package licensing constituted patent misuse rendering the patents unenforceable, the Federal Circuit concluded that such a broad proposition was "not supported by precedent or reason."
Philips owns patents to technology for manufacturing recordable and rewritable compact discs (CD-Rs and CD-RWs), which Philips offers to prospective licensees through package licenses. Potential licensees were not permitted to license the patents individually and were not offered a lower royalty rate for licenses to fewer than all the patents in a package. In the late 1990s, Philips entered into package licensing agreements with Princo America Corp., GigaStorage Corp. Taiwan, GigaStorage Corp. USA and Linberg Enterprise Inc. Soon after entering into the agreements, these companies stopped paying the license fees. Philips filed a complaint with the ITC alleging violations of 19 U.S.C. § 1337(a)(1)(B) by importing into the United States certain CD-Rs and CD-RWs that infringed Philips' patents. In the course of the proceedings, the respondents raised patent misuse as an affirmative defense, arguing that a number of the patents Philips included in the packages were not essential for manufacturing recordable and rewritable compact discs because there were other commercially viable alternative methods that did not require the patented technology.
The administrative law judge found all six of the asserted patents were unenforceable due to patent misuse. The ITC affirmed the administrative law judge's decision, finding that Philips' licensing practice constituted patent misuse per se as a tying arrangement between patents that are essential to manufacture compact discs according to industry standards and licenses to patents that are not essential to that activity. The ITC ruled that Philips' patent package licensing arrangement constituted per se patent misuse because Philips did not give prospective licensees the option of licensing individual patents rather than licensing one or more of the patent packages as a whole. The ITC also ruled that Philips' arrangement constituted patent misuse under the rule of reason analysis, because the anticompetitive effects of including nonessential patents in the packages of essential patents outweighed the pro-competitive effects of the practice.
The Federal Circuit first noted that the purpose of the patent misuse defense "was to prevent a patentee from using the patent to obtain market benefit beyond that which inheres in the statutory patent right." Quoting C.R. Bard., Inc., v. M3 Sys., Inc., 57 F.3d 1340 (Fed. Cir. 1998), the Court stated that the key inquiry was "whether, by imposing conditions that derive their force from the patent, the patentee has impermissibly broadened the scope of the patent grant with anticompetitive effect." The court referred to its decision in Virginia Panel Corp. v. MAC Panel Co., 133 F.3d 860 (Fed. Cir. 1997) as summarizing the principles of patent misuse as applied to "tying" arrangements and identified two specific practices that constitute per se patent misuse: (1) arrangements in which a patentee conditions a patent license on the purchase of a separable, staple good; and (2) arrangements in which a patentee effectively extends the term of its patent by requiring post-expiration royalties. Otherwise, the practice is reviewed under the rule of reason in which a practice is impermissible "only if its effect is to restrain competition within the relevant market."
The Federal Circuit proceeded to reject the ITC's finding that a tying arrangement between patents in a mandatory package licensing was patent misuse, distinguishing prior cases such as Virginia Panel as involving a tying patent and a tied product rather than a tying patent and a tied patent. In the case of a patent-to-product tying, the patent owner uses the market power conferred by the patent to compel customers to purchase a product in a separate market that the customer might otherwise purchase from a competitor. By contrast, the Federal Circuit noted that a package licensing agreement that includes both essential and non-essential patents does not impose any requirement on the licensee, and does not bar the licensee from using alternative technology that may be offered by a competitor. Contrary to the Commission's characterization, the Federal Circuit reasoned, the licensees were not "forced" to "take" anything from Philips they did not want, nor were they restricted from obtaining licenses from other sources to produce the relevant technology.
The Federal Circuit also distinguished Supreme Court precedent concerning the practice of movie distributors' "block-booking" - which has been found to be per se illegal - from the present circumstances because the "block-booking" arrangements required the licensee to exhibit all of the licensed features, even those features the licensee was not interested in exhibiting. The Philips arrangement, by contrast, did not require the licensees to use all of the patents in a particular package. Further, Philips charged a uniform licensing fee for its patented technology based on the number of discs manufactured and not on which, or how many, of the patents the licensee chose to use in its manufacturing process. Thus, the Federal Circuit concluded that the Philips licensing arrangements did not compel the licensees to use any particular technology covered by any of the licensed patents.
The Federal Circuit also identified a variety of pro-competitive effects flowing from such patent packages, including reducing transaction costs, obviating potential patent disputes between a licensor and licensee, and allowing parties to price the package based on their estimate of what it is worth to practice a particular technology. Philips' patent package arrangement was deemed similar to the package licenses in Broadcast Music v. Columbia Broadcast Systems, 441 U.S. 1 (1978), in which the Supreme Court determined that a blanket copyright package license had useful, pro-competitive purposes and determined that such conduct should fall under "a more discriminating examination under the rule of reason." In view of the efficiencies of package patent licensing and the important differences between product-to-patent tying arrangements and group licensing of patents, the Federal Circuit rejected the ITC's conclusion that Philips' conduct showed a "lack of redeeming virtue" and ITC's finding that the Philips package licensing agreements were per se illegal.
The Federal Circuit likewise rejected the ITC's finding of misuse under the rule of reason because the ITC incorrectly concluded that the package licenses at issue had the anticompetitive effect of foreclosing competition in the alternative technology that competes with the technology covered by the so-called nonessential patents. In addition to citing the pro-competitive effects noted above, the Federal Circuit found that the evidence did not show that including the nonessential patents in the patent packages had a negative effect on commercially available technology. Thus, the Commission's ruling on patent misuse was reversed remanded for further proceedings.
For the full opinion, see: http://fedcir.gov/opinions/04-1361.pdf
Pfaff Test Applies to Determination of Public Use Under 35 U.S.C. § 102(b)
Invitrogen Corp. v. Biocrest Mfg. L.P., et al., Nos. 04-1273, -1274
In an October 5, 2005 opinion, the Federal Circuit reversed a judgment of the U.S. District Court for the Western District of Texas that Invitrogen's patent was invalid under the "public use" bar of 35 U.S.C. § 102(b). In reversing the District Court and finding no "public use" bar, the Federal Circuit extended the applicability of the two-part test set forth by the Supreme Court in Pfaff v. Wells Elecs., Inc., 525 U.S. 55 (1998) in the context of the "on sale" bar to determinations of a "public use" bar.
Invitrogen sued Biocrest, Stratagene Holding Corp. and Stratagene, Inc. (collectively "Stratagene") for infringement of U.S. Patent No. 4,981,797 ("the '797 patent"), which involved the introduction of recombinant DNA molecules into E. coli cells to improve the cells' "competence," i.e., their ability to grow. The District Court initially construed the claims and granted Stratagene's summary judgment of non-infringement. In a first appeal, the Federal Circuit decided that the District Court had incorrectly construed a claim limitation and remanded for further proceedings. On remand, the District Court found literal infringement of various claims, but also found the claims invalid under the public use provision of 35 U.S.C. § 102(b). 35 U.S.C. § 102(b) states that a person shall be entitled to a patent unless "the invention was . . . in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States."
On subsequent appeal, the parties did not dispute that Invitrogen had used the claimed process before the critical date (i.e., more than one year prior to filing the application that issued as the '797 patent) in its own laboratories. Invitrogen maintained that it did not sell the claimed process or any products made with it prior to the critical date, and further, that use of the claimed process was maintained as a secret within the company until some time after the critical date.
The Federal Circuit began its analysis by rejecting the "totality of the circumstances" test for determining whether an invention was in public use, as contrary to the Pfaff case in which the Supreme Court rejected the "totality of the circumstances test" in the context of the "on sale" bar of 35 U.S.C. 102(b). The Federal Circuit then stated that the Supreme Court's "ready for patenting test," applied to the public use bar under 102(b) because the "on sale" and "public use" bars were based on the same policy considerations, i.e., both stem from the same reluctance to allow an inventor to remove existing knowledge from public use. Thus, the Federal Circuit held that a "public use" bar under 102(b) arises where, before the critical date, the invention is (i) in public use and (ii) ready for patenting. Further, the Federal Circuit stated that "the proper test for the public use prong of the § 102(b) statutory bar is whether the purported use: (1) was accessible to the public; or (2) was commercially exploited."Invitrogen admitted that it used the claimed process in its own lab before the critical date to grow cells to be used in other projects within the company. The District Court determined that, under the totality of the circumstance test, the use of the invention in Invitrogen's general business of widespread research generated commercial benefits, which constituted public use. In applying the Pfaff test, the Federal Circuit found that no "public use" bar arose because Invitrogen neither sold nor offered for sale the claimed process or any product derived from the process, nor did it otherwise place into the public domain either the process or any product derived from it. The process also was maintained under a strict obligation of secrecy prior to the critical date. The Federal Circuit went on to state that an agreement of confidentiality, or circumstances creating a similar expectation of secrecy, may negate a "public use" where there is not commercial exploitation.
For the full opinion, see: http://fedcir.gov/opinions/04-1273.pdf
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