Written by Matthew Langer, PhD, partner in Cooley's Patent Counseling & Prosecution group
Actual Notice is Merely Knowledge: Rosebud v. Adobe
In a case of first impression, the Federal Circuit in Rosebud LMS Inc. v. Adobe Sys. Inc., No. 2015-1428 (Fed. Cir. Feb. 9, 2016), held that "actual notice" under the provisional-rights statute, 35 USC § 154(d), requires that an accused infringer only have actual knowledge of the patentee's published application, not be affirmatively notified by the patentee of the application's existence.
Rosebud filed three lawsuits against Adobe for patent infringement. The first related to Adobe's alleged infringement of a grandparent patent; the second related to Adobe's alleged infringement of a parent patent, which is a continuation of the grandparent patent; and the third related to Adobe's alleged infringement of a child patent, which is a continuation of the parent patent. Rosebud relates to the third suit. Adobe moved for summary judgment of no remedies for infringement of the child patent, claiming that Rosebud was not entitled to post-issuance damages because Adobe discontinued using the accused technology prior to child patent's issuance and that Rosebud was not entitled to pre-issuance damages because Adobe had no actual notice under § 154(d)(1)(b) of the child application that issued as the child patent. The district court granted Adobe's motion. Rosebud appealed.
Adobe argued that the actual-notice requirement was not satisfied because Rosebud did not affirmatively notify Adobe of the existence of the child application. The Federal Circuit rejected this argument, reasoning that although actual notice includes that which is "expressly and actually given", it is "synonymous with knowledge." Rosebud, slip op. at 5 (quoting 58 Am. Jur. 2d Notice § 4 (2015)). Moreover, the Federal Circuit distinguished the notice requirement of § 154 from that of the patent marking statute, § 287(a), which "explicitly requires an act of notification". Rosebud, slip op. at 6.
Rosebud argued that Adobe had actual notice of the child patent because Adobe had knowledge of the grandparent patent. The Federal Circuit disagreed and stated that even though the grandparent patent and child application "share a specification … [t]he alleged infringer must also have notice of the claims of the published patent application and the fact that the applicant is seeking a patent covering those claims." Id. at 8 (emphasis added). Rosebud also argued that Adobe "followed Rosebud and its product", id., and would have discovered the child application while preparing for its defense in the second Rosebud infringement suit. The Federal Circuit dismissed these arguments and affirmed the decision of the district court.
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Restricted- and Ex-US Sales and Patent Exhaustion: Lexmark v. Impression Products
The Federal Circuit in Lexmark Int'l, Inc. v. Impression Prods., Inc., Nos. 2014-1617, 2014-1619 (Fed. Cir. Feb. 12, 2016), considered as separate issues whether a patentee's US sales of an article subject to a use restriction and foreign sales of an article, regardless of any restriction placed on its use, exhausts the patentee's US patent rights in the article or its use. The court concluded that a patentee's foreign sales, without more, do not exhaust the patentee's US rights and that a patentee's restricted US sales do not exhaust the patentee's US rights in the restricted use.
Lexmark owns patents covering printer cartridges and their use. Lexmark sold in the US cartridges that Lexmark subjected to a single-use/no-resale restriction and sold outside the US cartridges that were subject to the restriction and cartridges that were not. Impression acquired the cartridges, had them modified to enable their reuse, resold in the US the cartridges that it acquired in the US and imported into the US the cartridges that it acquired abroad.
Lexmark sued Impression for patent infringement. Impression argued that it did not infringe because Lexmark's US and ex-US cartridge sales exhausted its patent rights in the cartridges. With respect to the cartridges that Impression acquired and resold in the US, the district court granted Impression's motion to dismiss, reasoning that the restrictions were for post-sale uses, while the initial sales were unrestricted, and that Quanta Computer, Inc. v. LG Electronics, Inc., 533 US 617 (2008), where a patent licensee's unrestricted sale resulted in patent exhaustion, is controlling law. Regarding the cartridges that Impression acquired abroad and imported into the US, the district court denied Impression's motion to dismiss, holding that under Jazz Photo Corp. v. International Trade Comm'n, 264 F.3d 1094 (Fed. Cir. 2001), exhaustion does not apply to foreign sales.
Impression appealed, and Lexmark cross-appealed
The Federal Circuit began its analysis by emphasizing that infringement under 35 USC § 271(a) "mean[s] committing the identified acts without authority (synonymously, without consent or permission)", Lexmark, slip op. at 20 (emphasis added), and occurs unless "whoever engages in the enumerated acts receive[s] permission from the patentee (directly or indirectly) for the acts being performed", id. at 22 (emphasis added). As such, the Federal Circuit instructed that the "exhaustion doctrine in the Patent Act must be understood as an interpretation of § 271(a)'s 'without authority' language", id. at 23, and held that "unless a sale restriction is improper under some other body of law … a patentee's own sale of its patented article subject to a clearly communicated restriction does not confer authority to sell or use the article in violation of that restriction, i.e., does not exhaust the patentee's § 271 rights against such conduct involving that article", id. at 28 (emphasis added). As to the district court's conclusion that Quanta controls and compels a finding of patent exhaustion, the Federal Circuit determined that Quanta is inapposite because it did not involve patentee sales or restrictions on sales made by the licensee. Lexmark, slip op. at 29.
Regarding foreign sales, the Federal Circuit agreed with the district court that under Jazz Photo, "United States patent rights are not exhausted by products of foreign provenance," Jazz Photo, 264 F.3d at 1105, i.e., products "previously sold only abroad", Lexmark, slip op. at 61, but that "an express or implied license [under US patents] might be found based on the circumstances of particular foreign sales", id. at 63. The Federal Circuit reasoned that "[t]he [patent] statute gives patentees the reward available from American markets [and] from the right to exclude in the United States," id. at 71 (internal quotations omitted), and emphasized that "foreign markets are not the predictable equivalent of the American markets in which the US patentee is given a right to exclude and the rewards from that exclusivity", id. at 81.
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Assignor Estoppel: MAG Aerospace v. B/E Aerospace
The Federal Circuit in MAG Aerospace Indus., Inc. v. B/E Aerospace, Inc., Nos. 2015-1370, 2015-1426 (Fed. Cir. Mar. 23, 2016), considered the doctrine of assignor estoppel and affirmed the district court's determination that assignor estoppel barred a patent infringement defendant from challenging the asserted patent's validity.
MAG owns patents relating to vacuum toilets of the type used in commercial aircraft. MAG's rights in the patents derive from, among others, an inventor who assigned his rights to a third party that subsequently assigned its rights to MAG. Sometime thereafter, the inventor became an employee of B/E. MAG sued B/E for infringement, B/E counterclaimed on the basis of invalidity and MAG moved for summary judgment of no invalidity due to assignor estoppel. The district court granted MAG's motion, and B/E appealed.
The Federal Circuit began its analysis by defining assignor estoppel as "an equitable remedy that prohibits an assignor of a patent, or one in privity with an assignor, from attacking the validity of that patent when he is sued for infringement by the assignee." MAG Aerospace, slip op. at 9-10 (emphasis added). According to the Federal Circuit, whether privity exists—here, between the inventor-assignor and his new employer, B/E—depends upon the parties' relationship, in that "[t]he closer that relationship, the more the equities will favor applying the doctrine" of assignor estoppel to the new employer. Id. at 10 (quoting Shamrock Techs., Inc. v. Med. Sterilization, Inc., 903 F.2d 789, 793 (Fed. Cir. 1990)). The Federal Circuit listed several factors for determining privity, including: the inventor-assignor's leadership role at the new employer; whether the defendant company changed course from manufacturing non-infringing goods to infringing activity after the inventor-assignor was hired; the inventor-assignor's role in the infringing activities; whether the inventor-assignor was hired to start the infringing operations; and whether the inventor-assignor was in charge of the infringing operation. MAG Aerospace, slip op. at 10-11.
Relying on the district court's findings that B/E hired the inventor-assignor specifically to develop accused products, that B/E used the inventor-assignor's knowledge to conduct the allegedly infringing activities and that the inventor-assignor was Director of Engineering for B/E and later became Vice President and General Manager a B/E division that manufactured the accused products, the Federal Circuit determined that B/E "availed itself of [the inventor-assignor's] knowledge and assistance to conduct the alleged infringement", id. at 11 (internal quotations omitted); concluded that B/E and the inventor-assignor were in privity; and affirmed the district court's ruling that assignor estoppel bars B/E from challenging the validity of MAG's patents.
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