A full recap would be too long for an update email like this, so for a PowerPoint presentation with considerable detailed analysis, please email mcutler@hdp.com and put “AIA PowerPoint” in the subject line.  Alternatively, we will be all over the country over the next few months providing detailed insight into the new law.  If you would like to schedule an in-house presentation, please email.  In the meantime, here are some major features of the bill:

First-To-File  Starting September 23, 2011, one week after the bill becomes law, the “first to invent” system is dead.  It is now a rush to the Patent Office, like the rest of the world.

Fee Increases  Starting 10 days from the enactment of the America Invents Act, fees will increase by about 15% on virtually all fees.

Third Party Challenges  For the first 9 months after a patent is issued, the avenue to challenge a patent’s validity is the “Post Grant Review” (or PGR).  Also, under a PGR, any grounds for invalidity can be used, not just printed publications/patents.  It is envisioned that this procedure will resemble a mini-trial, including discovery. After 9 months, the avenue to challenge a patent’s validity is an “Inter Partes Review” (or IPR).  As with the old reexamination procedure, only prior art patents and publications can be used, but the standard for instituting such a review has changed from “substantial new question of patentability” to “reasonable likelihood would prevail.”  Ex Parte Reexamination is still available.

Marking  The marking section of the Patent Act is destined to revert to the sleepy provision it was before the upheaval of the last two years following the Federal Circuit’s Forest Group v. Bon Tool case.  Under the new statute, virtual marking is OK – that is, a link placed on the product to a publicly accessible website.  Further, false marking claims can only be brought if there is “competitive injury.”  Also, damages are limited to that which is adequate to compensate for the competitive injury.  Lastly, there is an expired patent exception that will take the bite out of cases where a patent number is left on a product after that patent has expired.

Joinder  The major swipe at “non-practicing entities” comes via the new joinder section, which states that joinder of multiple defendants is only appropriate if several conditions are met, including that the claim to relief is common to all defendants, the same product or process is accused, questions of fact are common to all defendants, etc.  In other news, dozens of lawsuits have been filed in the last two weeks to keep those filed complaints under the old joinder rules.

Supplemental Examination  The AIA sets up a provision that allows a patent holder to return to the Patent Office after a patent has been issued and resubmit information that may not have been provided during prosecution.  This provision was included as a way to innoculate patents against inequitable conduct charges.

Advice of Counsel  This section codifies the In re Seagate decision, making it improper to use a failure to get an openion of counsel letter against a defendant.

Prior Art Uses and sales are no longer restricted to the United States and a sale may not even have to be public.

Best Mode  In a curious turn, the best mode requirement remains in the statute as a requirement, but failure to disclose the best mode cannot be used as a defense in an infringement action.  It is thought that this provision was included to appease foreign countries where there is no best mode requirement, but this could create more issues than it solves.  Time will tell whether a failure to disclose the best mode in a foreign filed reference means that the patentee cannot claim priority to that application when entering the United States.  As such, the foreign filed application may be prior art to any US application that it claims priority to that foreign application.

Prioritized Examination  Patent applicants can jump to the front of the line and have their patent examined much more quickly with the low easy payment of a $4,800 surcharge…

As mentioned, there are too many facets to this new law to set them all out in an article of this type.  Please email mcutler@hdp.com for a copy of a more detailed PowerPoint presentation with considerable more detail or to schedule an in-house presentation.

While the high cost of patent litigation in the U.S grabs the majority of the headlines, less understood by some non-U.S. patent lawyers are the various tools that can be used by their clients to contain litigation costs or tie litigation costs to results. By using one of these models, or a combination of two or more, your clients can enforce the valuable patent rights they have obtained in the United States, while limiting their exposure to burdensome litigation costs. To this end, below is a brief overview of several cost-contained, results-based litigation tools that are offered by some law firms in the U.S.:

Contingent Fee Arrangements: In a contingent fee arrangement, the client does not pay any legal fees for the representation. Instead, the law firm only gets paid from damages obtained in a verdict or settlement. Typically, the law firm will receive between 33-50% of the recovered damages, depending on several factors – a strictly results-based system.

Blended Arrangements: A hybrid of the contingent fee arrangement, that also includes a measure of the traditional bill-by-the- hour approach, involves keeping track of attorney fees in an hourly fashion, but placing a percentage of those fees into a trust account, pending the outcome of the litigation. To the extent a winning result is obtained, the fees that were placed in trust, plus a bonus, are paid to the law firm. If there is a losing result, those fees in trust are returned to the client. This model, therefore, has appropriate incentives and offers an alternative fee structure that distributes risk and reward in an effort to enhance financial success of both the client and the law firm.

Flat Fee Arrangements: Litigation is undertaken in specific stages, from a pre-litigation investigation and various phases of discovery, to trial and appeal. In a flat fee arrangement, each of these phases can be capped at a particular budget limit to provide definite cost containment.

In summary, the best option for your client will depend on its litigation goals. While three specific models are discussed above, the flexibility they offer can mean the difference between a competitor being allowed to continue to infringe on the subject patent, or the client being able to stop that infringement.  Harness, Dickey has had great success in handling contingent fee, flat fee, and blended billing arrangements.  It would be our pleasure to discuss these arrangements with you in more detail.

You’ve read the news reports that Chinese patent enforcement actions are succeeding on a more frequent basis.  Your competitors are manufacturing in China and you would like to have some tools at your disposal to stop potentially infringing conduct.  Is it time to go “all-in” in China and start aggressively engaging the Chinese Patent Office by filing for numerous Chinese patents?

A comprehensive foreign filing strategy is imperative during these difficult economic times and pressures on your IP budget.  When deciding whether to file for patent protection in China for a particular product or family of products, recognize that it is still the “Wild West” there, though the number of success stories is growing.  For example – can your patent litigation lawyer even get the evidence you need to succeed in a patent litigation?

To illustrate this point, consider the case of a component part manufacturer, Ace Manufacturing.  Pursuant to a prudent patent filing strategy, Ace evaluated the market for its component, the likely locations its competitors would be manufacturing, and the likely locations its customers would be manufacturing the end product.  All of this analysis was done as part of a smart strategic plan to maximize the impact of Ace’s patent portfolio by only filing where it was most likely Ace would some day seek to enforce its patents.  In the end, Ace filed for patent protection in China, among other jurisdictions. 

After years of supplying its component to Customer, Ace is underbid by Competitor and loses the business.  After diligent investigation, Ace determines that the assumptions underlying its foreign filing strategy were correct – Competitor is making the infringing product in China.  Ace also determines that Competitor is shipping most of the infringing components to Customer within China.  Customer then ships the end product throughout the world.

Ace considers its enforcement options to re-gain its business lost to infringing Competitor.  Enforcement in the United States is not possible – only Customer is infringing in the US and Ace is certainly not going to sue its Customer.  As such, it’s time to enforce Ace’s Chinese patent rights.

But wait – this is the Wild West, remember?  Unlike the United States where, with a good faith basis for filing a lawsuit, necessary evidence can be obtained in the discovery process – in China, there is no discovery and, therefore, no certain way to obtain the evidence necessary to prove that Competitor is infringing.  Let’s examine the various means of obtaining the evidence Ace needs to prove its competitor is infringing, under the Chinese system:

1.  Purchase of Infringing Product.  The most common method of obtaining the required evidence for proving patent infringement is to go into the marketplace and purchase the infringing product.  In China, this is typically done in the presence of a notary.  This route will not work for Ace, however.  First, Customer is the only potential purchaser for the component, so there is no “marketplace” for the component from which Ace can purchase it (Competitor is certainly not going to cooperate and sell one to Ace).  Second, infringement can be proven via purchase of the end product, but then Customer will be needed to establish the link to Competitor.  To protect its relationship with Customer, Ace does not want to involve Customer in the litigation. 

2.  Evidence Preservation.  After the initiation of an Administrative and/or Civil Enforcement proceeding, an “evidence preservation” procedure is available.  Pursuant to this procedure, a judge shows up unannounced at Competitor’s factory and seeks financial documents, samples of the infringing product and/or other evidence relating to the infringement claim.  An un-cooperative Competitor can, however, thwart this procedure by refusing to acknowledge that the product is being manufactured onsite.  Incredibly, there is no deterrent to this behavior because even if Competitor is later deemed to have misled the judge, there are no penalties for such deception.  If the judge is not aggressive in seeking to overcome the blocking efforts of the Competitor, this avenue will fail and Ace will be forced to dismiss its Administrative or Civil action.

3.  Customs Seizure.  If Ace gets customs involved, in addition to the daunting task of finding out when and where Competitors products are being shipped overseas (possible via use of investigators), Chinese law mandates that customs hold the goods for a minimum of 2-weeks.  Ace cannot ask Customs to seize the goods only for as long as is necessary to obtain a few samples of the infringing product – the product is going to be held for a significantly longer period of time.  As a result, Customer’s supply chain will be disrupted – an event that will certainly anger Customer.

In short, Ace is left with a handful of unappetizing options to obtain the evidence it needs to successfully enforce its patent in China.  Keep these shortcomings in mind as you consider traveling to the Wild West – Chinese patent litigation.

This September, the new .XXX registry will begin accepting registrations and protection against registrations, that is, requests to block registration of non-adult industry trademarks as domains (example: blocking registration of HDP.xxx). As with most extension launches, applications will be accepted in stages called sunrises, with priority depending on the applicants’ trademark rights or rights in related extensions. Under Sunrise B provisions, non-adult industry brand owners can pro-actively prevent registration of their trademarks as .XXX domain names by third parties. These “blocking” applications must be filed between September 7, 2011 and October 7, 2011.

Launch Time Line

Beginning on September 7, 2011, applications for the .XXX extension will be accepted as follows:

September 7, 2011 (30 days)

• Sunrise A – Members of the adult industry with either verifiable trademark rights or owners of exact matching domains in other top-level extensions (“grandfathering”)
• Sunrise B – Non-adult industry brand owners with verifiable trademark rights can block their domains in .XXX 

October 24, 2011 (10 days)

• Landrush – Members of the adult industry without qualifications

December 6, 2011 (unlimited)

• General Availability – Members of the adult industry get regular, resolving domains (e.g., domain will point to a website) on a first come, first served basis. Non-members of the adult industry get “Non-Resolving” domains (e.g., domain will not point to a website)
   

Sunrise B Details

Sunrise B is available to owners of a trademark registration in any country, with a registration date prior to September 1, 2011. The trademark must match the requested domain name exactly, and be between 3 and 63 characters in length.

 The 30-day Sunrise B period is not first come, first served. All Sunrise B applications submitted during this 30-day period will be treated as submitted at the same time.

A “blocking” registration obtained under Sunrise B is for a minimum 10-year term. Depending on the registrar, costs are expected to be a few hundred dollars (US) for the initial 10-year term.

If both Sunrise A and Sunrise B applicants submit applications for the same domain name, priority will be given to the Sunrise A applicant to register the domain name. Both parties will be notified.

Recommendation
Non-adult industry brand owners who wish to block their registered trademarks should submit an application during Sunrise B, beginning on September 7, 2011. This is especially important for owners of trademarks that comprise words with adult connotations, or trademarks that have been the target of abusive registrations or parodies in the past. Unregistered trademarks cannot be blocked.

Harness Dickey maintains a relationship with a reputable registrar who represents brand holders only, and can assist with preparing a Sunrise B application.

Further information is available from the .XXX registry.

Virginia E-Commerce Solutions v. eBay, Inc. and PayPal, Inc., 2011.

At the district court level, Microsoft claimed that the on-sale bar of 35 USC 102(b) rendered the patent-at-issue invalid.  Specifically, Microsoft contended that a sale of a software program by plaintiff more than one year prior to the patent’s priority date embodied the invention claimed in the patent-at-issue.  Op. at 4. Relying on the undisputed fact that the sale of the prior software was not presented to the Patent Office examiner, Microsoft objected to i4i’s proposed instruction that Microsoft was required to prove its invalidity defense by clear and convincing evidence.  Id.  Instead, Microsoft sought an instruction that “…Microsoft’s burden of proof with regard to its defense of invalidity based on prior art that the examiner did not review during prosecution of the patent-in-suit is by preponderance of the evidence.”  Id. at 5.

The jury found that Microsoft willfully infringed the i4i patent and that the patent was not invalid due to the prior software sale, or otherwise.  The Federal Circuit affirmed.

The Supreme Court’s analysis focused on how to treat the statutory pronouncement that patents are presumed valid and that “[t]he burden of establishing invalidity of a patent…shall rest on the party asserting such invalidity.”  35 U.S.C. 282. In the end, and counter to Microsoft’s position that the words of the statute only worked to shift the burden of production and persuasion, the Court held that the clear and convincing standard remains unchanged from 30 years of Federal Circuit precedence.

The Court did, however, specifically address the situation in which a prior art reference had not been considered by the Patent Office.  In this regard, the Court noted that “a jury instruction on the effect of new evidence can, and when requested, most often should be given.”  Op. at 17.  Further, “[w]hen warranted, the jury may be instructed to consider that it has heard evidence that the PTO had no opportunity to evaluate before granting the patent.”  Id.

In summary, while the clear and convincing evidence standard remains in effect, the Supreme Court’s explicit guidance to instruct a jury regarding any new prior art that was not considered by the Patent Office will make it easier for an accused infringer to meet the clear and convincing evidence standard.

Matt Cutler, Patent Litigation Attorney, and Harness, Dickey & Pierce provide intellectual property news and analysis as a service to its clients and colleagues. The enclosed content is meant to highlight and comment on developments within the field of intellectual property law. The information contained is not intended as legal advice, and persons receiving it should not act on it without consulting legal counsel.

Harness Dickey represented Atlas Sound against accusations of infringement of a utility patent.  Harness Dickey researched and located significant prior art references early in the litigation.  After presenting Atlas Sound’s preliminary invalidity contentions, and following up with detailed correspondence, plaintiff Lowell filed a covenant not to sue, ending Atlas Sound’s potential damage exposure before significant fees and costs were accrued.

Harness Dickey represented Triumph against accusations of infringement of two patents. Following extensive discovery, Harness Dickey filed four separate motions for summary judgment. After oral argument on the motions, the Court granted summary judgment in Triumph’s favor on all four motions finding non-infringement of either patent and both patents were invalid under 35 U.S.C. §§ 102 and 103.

Triumph Pharmaceuticals v. Oxyfresh Worldwide (2001)

Harness Dickey represented Graphics House during this week-long jury trial which involved the inventorship of a patent, patent infringement and violation of partnership agreement concerning novelty ink pens. The jury found that Mr. Collins, owner of Graphics House, was the inventor of the product, and therefore the owner of the patent, and that Bead Pens did infringe the patent and violate the oral agreement it had with Graphics House. The jury awarded Graphics House several hundred thousand dollars in damages and the Court entered a permanent injunction against Bead Pens International. Following entry of the injunction, Bead Pens settled, agreeing to pay royalties on future sale of beaded ink pens.

Mark Collins v. Andrew Platts and Namebeads, Int’l., LLC(2005)

Harness Dickey represented Synergetics in this case involving the misappropriation of trade secrets concerning laser products used in eye surgery. The jury awarded Synergetics $1,700,000 in actual damages and an additional $600,000 in punitive damages. The defendants appealed to the 8th Circuit, and the lower court’s decision was affirmed in favor of Harness Dickey’s client.

Synergetics, Inc. v. Hurst, 2005 WL 3358298 (E.D.Mo., Dec. 9, 2005) aff’d, 477 F.3d 949 (8th Cir. 2007)