IP Update, Vol. 16, No. 10, October 2013

Edited by Paul Devinsky and Rita Weeks

Patent Litigation / Declaratory Judgment Jurisdiction

No Case or Controversy in DJ Against Patentee Who Sued Manufacturer's Customers

Cisco Systems, Inc. v. Alberta Telecommunications Research Center by Cary Chien and Barrington E. Dyer

In a non-precedential opinion addressing declaratory judgment jurisdiction, the U.S. Court of Appeals for the Federal Circuit affirmed a district court's ruling that it lacked subject-matter jurisdiction over a declaratory judgment action by a manufacturer, finding that the manufacturer could not show that the patentee ever threatened or alleged direct or indirect infringement by the manufacturer. Cisco Systems, Inc. v. Alberta Telecommunications Research Center, Case No. 12-1687 (Fed. Cir., Aug. 29, 2013) (O'Malley, J) (non-precedential).

Cisco develops and manufacturers networking equipment used in telecommunications infrastructure. Alberta Telecommunications Research Center, doing business as TR Labs, brought suit against various telecommunication network providers, many of which are Cisco customers. In its complaints, TR Labs accused Cisco's customers of infringing patents based on the use of Cisco products. TR Labs provided infringement claim charts that identified use of Cisco products. In order to protect its customers, Cisco sued TR Labs, seeking a declaratory judgment of non-infringement and invalidity of TR Lab's patents.

TR Labs moved to dismiss Cisco's complaint for lack of subject-matter jurisdiction, arguing that Cisco failed to establish that TR Labs had accused Cisco itself of either direct or indirect infringement. Prior to opposing the motion , Cisco sought a covenant not to sue and a release for Cisco customers from TR Labs. While TR Labs agreed to grant Cisco a covenant, no agreement was reached because TR Labs would not agree to release Cisco's customers. After the district court granted TR Lab's motion to dismiss, Cisco appealed.

The Federal Circuit affirmed, reasoning that while Cisco may have an interest in saving its customers from infringement allegations based on the use of its products, the interest presented here was insufficient to give rise to a current, justiciable case or controversy. The Court recognized the concession by TR Labs that it had no basis for suing Cisco either for direct or indirect infringement, and that TR Labs offered Cisco a covenant not to sue.

The Federal Circuit distinguished these facts from Arkema and Arris, where it found declaratory judgment jurisdiction. The Court noted that in Arkema the parties had a history of litigation of the products allegedly covered by the asserted patents, both in the United States and abroad, and, moreover, the patentee acknowledged that there were no non-infringing uses for the accused products. In Arris, the Court found an actual controversy existed between the parties because there were substantial communications regarding alleged infringement theories before the declaratory judgment action was filed. In this case, there were no protracted discussions between Cisco and its customers and Cisco has never asserted, nor could it point to any such agreements, that it has any indemnity obligations for its customers.

Practice Note: If a manufacturer desires to seek declaratory judgment against patents being asserted against its customers, it must find a basis beyond just that its products are identified in the complaint and in infringement contentions.

Patents / Jurisdiction

No Appellate Jurisdiction over Clarifications of Existing Injunction

Aevoe Corp. v. AE Tech Co., Ltd. by Mark I. Bentley

In an appeal challenging an alteration to a previously granted preliminary injunction, the U.S. Court of Appeals for the Federal Circuit found that it lacked jurisdiction over an appeal because the appeal was filed more than 30 days after the original injunction and the subsequent alteration did not substantially change the legal relationship between the parties. Aevoe Corp. v. AE Tech Co., Ltd., Case No. 12-1422 (Fed. Cir., Aug. 29, 2013) (O'Malley, J.).

Aevoe sought a preliminary injunction barring sales of AE Tech products that allegedly infringed Aevoe's patent relating to screen protectors for hand-held electronic devices. After AE Tech failed to respond, the district court granted the preliminary injunction, ordering that AE Tech and "any persons acting in concert or participation with them, or having knowledge of this Order by personal service or otherwise" were preliminarily enjoined from practicing the patent or any "colorable imitation" thereof. Neither AE Tech nor its distributors appealed the original injunction within the available time period.

At AE Tech's request and without opposition from Aevoe, the district court removed the colorable imitation language from the preliminary injunction. AE Tech made revisions to its product, but the district court held that the revised product was a non-functional and trivial attempt to design around the patent and "not more than colorably different than the enjoined products." The district court reintroduced the colorable imitation language and named AE Tech's distributors in the preliminary injunction. The distributors were not parties to the lawsuit when the original injunction was granted, but Aevoe provided notice to the distributors within a week after the original injunction issued and named them in the lawsuit before the injunction was altered. The district court held AE Tech and its distributors in contempt of the preliminary injunction. AE Tech and the distributors appealed the addition of the colorable imitation language to the injunction. The distributors appealed the addition of their names to the injunction.

The Federal Circuit found that it lacked jurisdiction over the appeal. The Court reasoned that to determine whether a redesigned product falls under the strictures of an existing injunction the primary question is whether the new product is "colorably different" from the old product. Given this legal standard, the Federal Circuit found that colorable imitations were within the scope of the earlier injunctions, whether or not such terms were explicitly mentioned therein. The Federal Circuit further reasoned that the distributors fell within the express language of the original injunction, whether or not they were explicitly named as enjoined parties, because the original injunction was directed to "any persons acting in concert" with AE Tech or having knowledge of the order. The Federal Circuit determined that the distributors had notice of the original injunction and were "acting in concert" with AE Tech in connection with the resale of the redesigned products. By virtue of the distribution agreement, the distributors were "privies" of AE Tech, did not act independently of AE Tech and were subject to the original injunction.

Neither the addition of "colorable imitation" nor the addition of the distributors to the injunction altered the legal relationship between the parties, because the additions merely clarified the original injunction. Accordingly, the alterations did not reset the time period available for an appeal, and the Federal Circuit dismissed the appeal for lack of jurisdiction.

Patents / Written Description

Differentiating the Written Description Requirement and the Claim Construction

Trading Techs. Int'l, Inc. v. Open E Cry, LLC by Zachary Getzelman

Analyzing the interplay between claim construction and the written description requirement, the U.S. Court of Appeals for the Federal Circuit reversed and remanded a lower court's summary judgment of invalidity for failure to comply with the written description requirement, finding that prior claim construction rulings do not control compliance with the written description requirement. Trading Techs. Int'l, Inc. v. Open E Cry, LLC, Case No. 12-1583 (Fed. Cir., Aug. 30, 2013) (Lourie, J.).

Trading Technologies (TT) filed a complaint alleging infringement of four of its patents relating to electronic trading in commodities. The patents claimed priority to an earlier-filed parent patent. Three of the asserted patents share a common written description, while the other is a continuation-in-part that contains substantial new disclosure.

The district court entered summary judgment for the defendants, holding all four patents to be invalid for failure to comply with the written description, premised on the previous claim construction ruling in eSpeed. In eSpeed, the Federal Circuit held that "static," as used in the claims of the earlier-filed parent patent on which the four asserted patents rely for priority, referred to a display of price columns that does not change positions unless manually re-centered. The term expressly excluded displays that re-center automatically. In the asserted patents, TT amended the claims by removing the term "static" from references to the price column display. In the CIP patent, TT provided additional disclosure aimed at redefining and broadening the term "static." The claims of the CIP patent still include the term "static."

The defendants argued that the eSpeed decision was dispositive to the present dispute because the claim construction analysis turned on the same basic issue of whether the written description disclosed a display of price columns that move through means other than manual re-centering, such as automatic re-centering. The district court entered summary judgment of invalidity.

In reversing the district court, the Federal Circuit emphasized the difference in purpose of claim construction and the written description requirement. Claim construction, while guided by the specification, focuses only on defining a discrete claim term in order to better ascertain the boundaries of the claims. In contrast, the written description focuses on preventing patentees from claiming more than they have invented and disclosed to the public through the written description.

In eSpeed, the Federal...

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