Patent Law Practice Center

Court Finds Navy Committed Inequitable Conduct Under Therasense

By Brandon Baum and Mary T. Nguyen[i]

In Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011),an en banc Federal Circuit raised the standard to prove inequitable conduct, holding that an accused infringer must prove by clear and convincing evidence that (1) the applicant misrepresented or omitted material information, (2) with the specific intent to deceive the PTO. This heightened standard was intended to limit inequitable conduct to instances “where the patentee’s misconduct resulted in the unfair benefit of receiving an unwarranted claim.”

In one of the first decisions to apply Therasense, the district court in Network Signatures, Inc. v. State Farm Mutual Automobile Insurance Co., declared that a U.S. Government-owned patent was unenforceable because an attorney at the U.S. Naval Research Laboratory (“NRL”) committed inequitable conduct.[ii] Although Network Signatures is only a district court opinion, the facts underlying the decision are instructive.

In early 2004, the NRL conducted its review of IP assets and decided to allow the patent-in-suit to expire rather than pay the 7.5 year maintenance fee that was coming due. Shortly after the patent expired, the NRL was contacted by Hazim Ansari of Metrix Services, a patent procurement company. Ansari expressed interest in licensing the patent and claimed that he had attempted to contact the NRL before the patent expired but was unsuccessful due to problems with the NRL’s email. Ansari offered to “take the lead” on pursuing a petition to revive the patent and promised the NRL 15% of all revenue generated from enforcing the patent.

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The Cost of NPE Litigation

Written by James Bessen, Boston University School of Law, and Research on Innovation, and Michael J. Meurer, Boston University School of Law.

The America Invents Act requires the GAO to “conduct a study of the consequences of litigation by non-practicing entities… and assess [t]he economic impact of such litigation on the economy of the United States ….” Although we found it hard to get very excited about the smorgasbord of patent reforms bundled together in the AIA, this provision made us smile, and feel a little bit hopeful. Perhaps this signals a growing taste on the part of Congress for evidence over anecdote as the basis for patent policy-making. We’ve recently conducted two empirical studies of NPE patent litigation which we hope will prove useful to the GAO and other policy-makers.

One study, The Direct Costs from NPE Disputes, estimates the costs of NPE assertions based on a survey of defendant firms. We find that the aggregate accrued payments for outside counsel, licenses, and other direct payments to resolve patent disputes are large and growing rapidly; they totaled $29 billion in 2011, up from $6.5 billion in 2005.

The other study, The Private and Social Costs of Patent Trolls, estimates the cost of NPE litigation based on stock market reaction to the filing of lawsuits. We find that the filing of NPE patent lawsuits is associated with an $80 billion average annual loss of share value for defendant firms over the years 2006-2010. The higher costs in the second study are not surprising because rational investors take account of the direct costs enumerated above and also indirect costs such as business disruptions arising because researchers’ and managers’ attention is diverted from productive activity to litigation related issues, delays in product development and new product introductions caused by litigation concerns, and costs arising from litigation worries that spill over to suppliers and customers.

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USPTO Plans National Roadshow on AIA Implementation

The United States Patent and Trademark Office will once again take to the road in the Fall of 2012 to discuss implementation of the America Invents Act (AIA). The USPTO is planning to host eight (8) roadshows during September 2012 to share information about new final rules implementing provisions of the America Invents Act that become effective on September 16, 2012. The Roadshows are free and open to the public, and pre-registration is not required. Nevertheless, seating will be limited and is available only on a first-come, first-served basis. The USPTO has posted the agenda
for these Roadshows on their website.

The USPTO will webcast the roadshows during the first week (from Minneapolis, Alexandria, and Los Angeles) and post videos of those events on the micro-site. Copies of any written materials will also be made available on the USPTO micro-site devoted to the AIA Roadshows.
While attorneys are certainly invited to attend these Roadshow presentations, no CLE credit is available for attending any Roadshow event.

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Patent News from the Holiday Week

Last week, we in the United States celebrated the Fourth of July, which landed right in the middle of the week on Wednesday. Having a national holiday on a Wednesday typically leads to many taking vacation time and creating their own very long holiday weekend. So while you were away, or perhaps distracted by the scalding hot heat that more than half of the United States suffered from, there were a number of noteworthy patent stories. Yes, decision makers and deal makers did not take a break last week. Not by a long shot.

So while you were otherwise occupied, what did you miss? Here is a run down of five of the most noteworthy stories from last week.

 

1. WIPO Under Fire For Sending Computers to UN Sanctioned Countries

Earlier this year, the World Intellectual Property Organization (WIPO) came under fire for sending computers to North Korea in violation of United Nations sanctions. See WIPO Embroiled in North Korean Computer Deal. Now WIPO is under fire again. It seems they not only shipped computers to North Korea, but also shipped computers to Iran as well. Congresswoman Zoe Lofgren (D-CA) called this latest WIPO transgression “an outrage.” The United States Department of State is attempting to work with WIPO to make sure that new procedures are put into place to ensure this never happens again.

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Spotting Inventors You Might Want to Avoid

To paraphrase the famous quote of Ralph Waldo Emerson, if you build a better mouse-trap the world will make a beaten path to your door. Inventors and entrepreneurs frequently take this quote all too literally, thinking that if they make a better product theirs will sell and make them rich beyond their wildest dreams.

There are, of course, many different reasons why building a better mouse-trap is only the first of many steps on the road to financial freedom. There is no guarantee of financial success given by any patent office in the world. This is true even if you have a strong patent that covers a great product that enjoys robust consumer demand.

But this won’t stop many inventors from attempting to patent some rather peculiar inventions. Chances are that the more peculiar the invention, the more likely the inventor is going to want the patent attorney or patent agent to work for free, or on some kind of contingency basis. If an inventor like this approaches you, even if they seem normal, do yourself a favor and just say NO!

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