Category Archives:Patent Law

Supreme Court agrees to hear case that may put limits on the foreign reach of US patents

Recently, the Supreme Court agreed to hear a case which may have effect on the foreign reach of United States patents.[1] The Supreme Court granted a petition for certiorari filed by Life Technologies, Corporation (“Petitioner”).[2]  The petition resulted from a lawsuit in which Petitioner was held liable for patent infringement for the shipment of a single component of a patented invention to the United Kingdom.[3] Section 271(f)(1) of the Patent act “assigns infringement to anyone who supplies or causes to be supplied ‘all or a substantial portion of the components of a patented invention.’”[4] The Federal Circuit specifically found that “there are circumstances in which a party may be liable under § 271(f)(1) for supplying or causing to be supplied a single component for combination outside the United States.”[5]

The petition asks the Supreme Court to decide whether the Federal Circuit committed error in finding that “supplying a single, commodity component of a multi-component invention from the United States is an infringing act under 35 U.S.C. § 271(f)(1), exposing the manufacturer to liability for all worldwide sales.”[6] The petition asserts that the Federal Circuit’s decision broadly expanded the extraterritorial application of United States patent law because patent infringement damages were awarded based on Petitioner’s worldwide sales, even though, according to Petitioner, the only connection between Petitioner’s foreign sales and the United States was the single shipment of a component from its facility in the United States to one of its United Kingdom based facilities.[7] The Petitioner made several arguments in its petition against the Federal Circuit’s ruling by citing to the text of the Patent Act and what it believed to be the proper interpretation of 35 U.S.C. § 271(f)(1).[8] The Petitioner also alleged that the Federal Circuit’s decision is contrary to the “‘presumption that United States law governs domestically but does not rule the world.’”[9] Petitioner warns that allowing expansion of the Patent Act’s extraterritorial reach would have a negative impact on the business community, requiring businesses to account for the “potentially crushing burden of U.S. patent infringement liability for worldwide sales, based on the supply of any individual component, however common and useful for non-infringing purposes.[10]

A ruling by the Supreme Court is likely to have a significant impact on the foreign reach of US patents. The Petitioner seeks a narrow interpretation whereas the Respondent seeks to keep the broader interpretation provided by the Federal Circuit. Our firm will be monitoring the status of this case and its potential impact. Please contact our office if you have any questions regarding the information in this article.

Daniel Devine, Esq.
Santucci Priore, P.L.
Shareholder

[1] See, Life Tech. Corp. v. Promega Corp., No. 14-1538, 2016 WL 3461575 (Jun. 27, 2016); http://www.scotusblog.com/case-files/cases/life-technologies-corporation-v-promega-corporation/
[2] Id.
[3] See, Promega Corp. v. Life Tech. Corp., 773 F.3d 1338, 1353 (Fed. Cir. 2014).
[4] Id. (emphasis in original)
[5] Id.
[6] See, http://www.scotusblog.com/wp-content/uploads/2016/03/Life-Techs-Pet-App-14-1538.pdf
[7] Id.
[8] Id.
[9] Id.
[10] Id. (emphasis in original).

Supreme Court to review Willful Patent Infringement and Damages standards

Recently, the Supreme Court agreed to hear two cases which involve questions regarding the proper standards for willful patent infringement and the enhancement of damages for infringement.[1] The Patent Act provides that damages in a patent infringement lawsuit may be enhanced where there is clear and convincing evidence that the infringement was willful.[2] Willful infringement may be found where: 1) there was an objectively high likelihood that the infringer’s actions constituted infringement, and 2) this likelihood was either known or so obvious that it should have been known to the accused infringer.[3] Further, “[o]bjective recklessness will not be found where the accused infringer’s ‘position is susceptible to a reasonable conclusion of no infringement.’”[4]

This is significant because the Supreme Court does not have to take every case that it is requested to hear and usually declines to hear most cases. In order to request for the Supreme Court to take on a case the petitioner must file a writ of certiorari. The writ of certiorari in the Stryker Corp. case, supra, focuses on whether proof of willful infringement should be a prerequisite for enhanced damages in patent infringement cases.[5] The writ makes an analogy to the Supreme Court’s recent softening of the standard for attorneys’ fee awards in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S.Ct. 1749 (2014) for support.[6] Further, the writ notes that the relevant statute does not explicitly use the term “willful” and criticizes the ability of alleged infringers to avoid a finding of willful infringement by being able to show a plausible defense, even in some situations, where the defense was not known to the alleged infringer prior to litigation.[7] The main question for the Supreme Court to decide appears to be whether proof of willfulness should be a prerequisite to enhancement of damages or if the decision should be left to the District Court’s discretion based upon an analysis of the totality of the circumstances.

If the Supreme Court rules in favor of the petitioners it will be a big victory for patent holders as it will become easier to obtain enhanced damages against patent infringers. The Patent Statute allows for damages to be enhanced up to three times.[8] Our firm will be monitoring the status of these cases. Please contact our office if you have any questions regarding the information in this article.

Daniel Devine, Esq.
Santucci Priore, P.L.
Shareholder

[1] See, Halo Electronics, Inc. v. Pulse Electronics, Inc., et al., No. 14-1513, 2015 WL 3883472 (Oct. 19, 2015) and Stryker Corp., et. al. v. Zimmer, Inc., et. al., No. 14-1520, 2015 WL 3883499 (Oct. 19, 2015). These cases have been consolidated for hearing by the Supreme Court.
[2] See, 35 U.S.C. § 284.
[3] See, Stryker Corp. v. Zimmer, Inc., 782 F.3d 649, 660-661 (Fed. Cir. 2014).
[4] Id. at 661 (internal quotations omitted).
[5] See, http://www.scotusblog.com/wp-content/uploads/2015/10/Stryker-Petition-for-Certiorari.pdf
[6] Id.
[7] Id.
[8] See, 35 U.S.C. § 284.

Florida’s Patent Troll Prevention Act Will Be A Disaster

Unlike some of the neutral and unbiased articles published on this blog, this article is purely my opinion.  Florida’s new Patent Troll Prevention Act, Florida Statutes §§ 501.991-997, will be a disaster.  Similar to the “tort reform” trend of the prior decade, this Act is another overcompensation by the Florida Legislature to accommodate accused wrongdoers with large lobbying budgets who are in need of far less protection than other segments of the public and business community.

Problematic Provisions of the Act

The Act states that it prohibits plaintiffs from making “a bad faith assertion of patent infringement.” § 501.993, Fla. Stat.  The Act creates a private right of action for violations, entitling accused patent infringers to awards of equitable relief, actual damages, punitive damages and awards of attorneys’ fees.  That sounds like a worthwhile goal on its face.  However, as with any statute, the possibility for various interpretations will create problems and lead to additional litigation of new issues and to abuse.  For example, what constitutes a “bad faith assertion” of infringement?  The statute does provide some guidance, however, the guidance is problematic in several respects.

The statute says that one of the factors the Court may consider in determining whether the claim was asserted in bad faith is whether the claimant “offered to license the patent for an amount that is not based on a reasonable estimate of the value of the license,” and whether claimant “negotiated an appropriate remedy.” See, § 501.993(1)(e) and (2)(c), Fla. Stat.  It is very common for patent license agreements and awards of damages or settlement in patent cases to be based, in some way, on the profits of the infringers.  Those financial records are usually in the exclusive possession of the infringer, and cannot be obtained without filing a lawsuit and using the power of the court to force the infringer to produce the records.  Therefore, an innocent patent owner will be deterred by this Act from trying to resolve the matter amicably before filing a federal lawsuit.  If the patent owner makes a rough estimate of the infringer’s revenues in an attempt to resolve the matter outside of the courts, (s)he risks a counterclaim for asserting a claim in “bad faith.”  In this way, the new Florida statute will actually encourage litigation instead of deter it.

Another problematic provision gives the courts the authority to consider “[a]ny other factor the court finds relevant” when determining whether the patent owner has acted in bad faith.  See 501.993(2)(g).  This will insure that many, if not most, defendants accused of patent infringement will assert a counterclaim against the patent owner for violation of the new Florida Act.

Am I in Danger of the Act Being Applied Retroactively?

The Florida Patent Troll Prevention Act went into effect on July 1, 2015.  However, at least one U.S. district court judge in Florida has recently opened the door to the Act being applied retroactively.  (I practice in front of this particular judge so I will not name the judge or the case).

Is the Act Preempted by the Patent Act?

This Act may also lead to litigation to resolve the question of whether, and to what extent, the Act is preempted by the United States Patent Act.  Section 501.991 of the Florida statute explicitly raises the issue of preemption and states:  “The Legislature recognizes that it is preempted from passing any law that conflicts with federal patent law.” See § 501.991(1), Fla. Stat.

The Act Unfairly Favors Accused Patent Infringers

The remedies are also unfair and skewed in favor of accused infringers (which are often enormous, multi-national corporations who get sued often for infringement).  The Patent Act does not permit an award of punitive damages to a Plaintiff, per se, yet this new Florida Act permits such an award to an accused infringer.

Despite providing duplicative protection of questionable need, the actual provisions of the Florida Act expressly favor accused infringers.  The right of an accused infringer to request a monetary bond be posted by the patent owner under section 501.994 is not reciprocal.  The Act permits the accused to demand a separate evidentiary bond hearing, costing the patent owner additional litigation expenses, time and effort, for purposes of providing security to the defendant in the event plaintiff is ordered to pay its attorneys’ fees.  However, the plaintiff/patent owner has no such right to secure its ability to collect an award of damages, attorneys’ fees or costs.   How is that fair?  Plaintiffs have always had to weigh the risk of not collecting on a money judgment when deciding whether to assert their rights in court.  Defendants are spared much of that risk now, and can be assured of collection of up to $250,000 under the Florida Act.

The Act is also one-sided in that it permits only a “prevailing plaintiff” an award of attorneys’ fees.  There is no provision in the Act to prevent its abuse by accused patent infringers.  To my knowledge, the issue of whether such a seemingly one-sided provision would violate Florida’s mutuality of remedy principle has not yet been decided.

Overcompensation – Overkill – Intimidation

The State of Florida should stay out of the domain of federal law and litigation.  The Federal Rules of Civil Procedure already give the federal courts broad powers to sanction litigants and their attorneys, on both sides, for frivolous claims and defenses under Rule 11, Fed.R.Civ.P.  Federal law also provides for monetary sanctions against litigants and their attorneys who “unreasonably and vexatiously” cause the multiplication of the proceedings.  The sanctions include litigation expenses and attorneys’ fees.  See, 28 U.S.C. § 1927.  I don’t think patent owners or their attorneys need yet another deterrent, and potentially devastating risk, when asserting their rights in the courts.

Rule 11 and § 1927 are already abused by defendants and, at times, used by large companies to intimidate smaller patent owners.  It is not uncommon for a large defendant to claim they pay their attorneys $650+ per hour for patent litigation, and over a million dollars in legal fees for a single patent infringement case.  Therefore, a small business or single inventor who holds a patent has to weigh the risk of bankruptcy.  Financial devastation is a very real result if the patent owner cannot withstand the expense of litigation through trial and appeal.  This risk is now compounded by the new potential of a seven-figure judgment for the defendant’s legal fees and punitive damages if the business owner or inventor does not successfully overcome the infringer’s newly-created counterclaim.  This is true even after a plaintiff gives up and voluntarily drops her own infringement claims.

The U.S. Patent Act itself also provides for an award of attorneys’ fees in “exceptional” cases.  See 35 U.S.C. § 285.  Cases have routinely been found to be exceptional in cases of willful infringement and for claims and defenses alleged in bad faith.  These three separate protections afforded to accused infringers are more than sufficient, and even duplicative and overlapping in some ways.

Yet, now, under Florida law, these accused infringers have two new bombs to drop.  The first is a counterclaim under the new Florida Patent Troll Prevention Act for actual damages, punitive damages and attorneys’ fees, and the possible requirement to post a $250,000 bond as a prerequisite to having its case heard at trial.  §§ 501.993, 501.994.

The Legislature also piles on more penalties, risk and deterrence by also making the same finding of a “bad faith assertion” of infringement to also constitute a violation of Florida’s Unfair and Deceptive Trade Practices Act, §§ 501.201-213 which provides for an additional award of attorneys’ fees and damages. See §§ 501.996, 501.2105 and 501.211(2). This is overkill.  How much protection do companies like Montsano, Hewlett Packard, Disney and Microsoft really need from individual inventors and small companies – the primary targets of the over-used label “patent trolls?”

What Are Our Lawmakers Thinking?

Is our Florida Legislature really kept up at night worrying about the plight of accused patent infringers?  Why do they believe such corporations need two new bases to crush and stifle patent owners?  Don’t our leaders have more pressing problems to solve?  Apparently, this was high on the list of priorities of our elected officials.   …or did big corporate donors have something to do with this Act?

Is the Act Unconstitutional?

In my opinion, this statute, and especially the bond requirement, is unconstitutional as it violates a patent owner’s rights under the Due Process clause of the Fourteenth Amendment to the United States Constitution by denying equal access to the courts.

Help is Here

If you or your company has been accused of violating, or has already been found liable under Florida’s Patent Troll Prevention Act, and are still within your permissible time period for appeal, the attorneys at Santucci Priore, P.L. will evaluate the merits of your defense or appeal, and the possibility of having this Act struck down – free of charge.

Michael I. Santucci
Santucci Priore, P.L.
Managing Partner
mis@500law.com