Guns, Warm Houses, and Cable TV

In our last set of cases from the beginning of October, the court addresses patents for gun accessories, insulation, and cable connectors. None of the patent holders had much success when defending their IP turf. Let’s see what happened.

The Federal Circuit Meets John Grisham

Well, not literally, but with the combo of weapons, cutthroat competitors, and a tainted jury, this case comes as close to The Runaway Jury as the Federal Circuit may ever get.

Atlantic Research Marketing Systems, Inc. v. Stephen P. Troy, Nos. 2011-1002, -1003 (Fed. Cir. Oct. 6, 2011) (Judges Prost, Mayer, and O’Malley)

This case got to the Federal Circuit on a combined patent/trade secret platform. Atlantic sued Stephen Troy, a former employee, for infringing its patent and for taking and using its trade secret. The “secret” technology: a particular type of rifle handguard that is special because it attaches to the gun barrel in only one place.

On the patent front, the trial court found the relevant claims in Atlantic’s patent invalid because they didn’t meet the written description requirement—the patent’s specification describes only a handguard that attaches in two places, not in just one place. The Federal Circuit agreed with this decision.

The trade secret side of the case presented a great adventure. The trade secret case went to trial in front of a jury. The jury deliberated for several days. On the third day of deliberations, the jury told the court that one juror had brought a clamp in from home, which is against the rules. The judge took the clamp, which had been in the jury room for a full day, but she didn’t do anything else. The jury continued to deliberate and later reached a verdict in favor of Atlantic.

After the jury announced its verdict, the judge gave the jury a short questionnaire about the rogue clamp. The judge didn’t ask any questions about whether the clamp had swayed or influenced any jury members, and she only followed up with the juror who had brought the clamp in for show-and-tell. Troy moved for a mistrial, arguing that the jury was tainted (prejudiced in a way that nothing can fix) by the presence of the clamp in the conference room during deliberations. The judge denied Troy’s motion, saying the “clamp’s presence did not result in prejudice.” (See page 26.)

The Federal Circuit said the trial judge was dead wrong. Even though a trial court has a lot of flexibility with this kind of juror questioning, the Federal Circuit said that the trial judge was required to ask the jurors if and how the clamp influenced their decision. The judge didn’t ask those questions, so, according to the court, the judge didn’t do her job. The Federal Circuit sent the trade secret claim back for a new trial.

As an aside, the Federal Circuit mentioned that Atlantic had a basic problem in accusing Troy of both patent infringement and trade secret stealing: “A trade secret is secret. A patent is not. That which is disclosed in a patent cannot be a trade secret.” (See page 19.) So, by definition, Atlantic couldn’t have a trade secret in the rifle handguard and also have a patent on it. By alleging both, Atlantic shot itself in the foot.

Enter your verdict after reading the Atlantic opinion.

What’s New?

In re Stepan Co., No. 2010-1261 (Fed. Cir. Oct. 5, 2011) (Judges Dyk, Friedman, and Prost)

This case involves a reexamination of a patent for foam insulation. The examiner said the patent is obvious, and, therefore, invalid. The Board of Patent Appeals and Interferences (BPAI) agreed that the patent is obvious and invalid. The problem? The BPAI and the examiner gave the applicant different reasons for the obviousness ruling.

The Federal Circuit confirmed that if the BPAI changes the reason behind a patent rejection, that’s a new basis for rejection. In that situation, the BPAI has to (1) tell the applicant that it is giving a new reason for rejection, and (2) let the applicant reopen prosecution of the patent or ask for another hearing at the BPAI. Because the BPAI didn’t do that, the court sent the case back to the PTO.

Take a look at the In re Stepan opinion.

Same Show, Different Reviews

John Mezzalingua Assoc., Inc. d/b/a/ PPC, Inc. v. International Trade Commission, No. 2010-1536 (Fed. Cir. Oct. 4, 2011) (Judges Bryson, Linn, and Reyna)

The judges who ruled on this patent case had their cable boxes tuned to different channels. Here’s the background.

PPC owns four patents for coaxial cable connectors, which are the gizmos you use to hook your cable box up to your television. Two patents are utility patents (patents that cover how something works) and two are design patents (patents that cover what something looks like). PPC brought a complaint in the International Trade Commission (ITC) about imports of cable connectors that infringe its patents. This particular case deals with one of the design patents.

The ITC is a little different from a district court because a complainant (like a plaintiff in the district court) has to prove that there is a “domestic industry” relating to the patented products. The statute gives a few different ways to prove that, but for this case, PPC had to show a “substantial investment in [the industry’s] exploitation, including engineering, research and development, or licensing.”

Before its ITC case, PPC sued its competitor, Arris, for patent infringement for a cable connector. PPC said that this cable connector infringed both a utility patent and the design patent at issue here. Ultimately, PPC licensed these patents to Arris, which was the only company to get a license for this design patent.

Back at the ITC… PPC said that the money it spent enforcing the design patent in the court case was its “substantial investment” in licensing, because those cases resulted in a license. But the ITC said that only the litigation costs that were directly connected to licensing would count. After looking at the legal bills (plus the fact that PPC granted only one license and had no formal licensing program), the ITC concluded that the amount of money PPC spent on licensing efforts for the design patent was not a “substantial investment.”

At the Federal Circuit, two of the judges on the panel agreed with ITC. They thought the ITC’s review of the evidence was thorough and didn’t see anything wrong with its conclusions.

Judge Reyna was watching a different show. To Judge Reyna, the ITC and his fellow panelists are being too literal: engineering, research and development, and licensing are just examples, not a set list of what patent owners must spend their money on. Judge Reyna also had some strong feelings about the role of the ITC in IP protection:

I view the ITC as an intellectual property enforcement forum . . . . [T]he incentive for domestic producers to innovate is all but destroyed if their patents are being infringed by foreign companies that vanish at the first sign of legal opposition to their importation or domestic sales, only to resurface under a new name with more infringing products. . . . Under the broad language of [the statute], patent infringement litigation is an investment in the exploitation of a patent. (See pages 18 and 20 of Judge Reyna’s dissent.)

So, according to Judge Reyna, the ITC should think bigger about how the “domestic industry” requirement fits into patent enforcement generally. This discussion is likely to come up again at the Federal Circuit, and it will be interesting to see if other judges agree with Judge Reyna. Stay tuned!

Click over to the PPC case.

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