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SPOTLIGHT: KNORR-BREMSE SYSTEME V. DANA CORP. On Sept. 13, the U.S. Court of Appeals for the Federal Circuit issued a ruling that could drastically change the practices of companies seeking to avoid a finding of willful patent infringement. Before Knorr-Bremse Systeme Für Nutzfahrzeuge GmbH v. Dana Corp., et al., 2004 U.S. App. LEXIS 19185, an infringer’s failure to produce or to have obtained an opinion of counsel led to an adverse inference that the opinion was or would have been unfavorable. This adverse influence could be a factor in determining whether the infringement was willful. The cautious company thus tended to obtain formal exculpatory opinions on virtually any potentially adverse patent, even if it had a reasonable belief of noninfringement. Even an exculpatory opinion raised the difficult choice of either producing the opinion in litigation and thus waiving attorney-client privilege, or withholding the opinion and thus suffering the adverse inference. The two defendants in Knorr-Bremse faced this quandary. Haldex Brake Products had obtained a formal opinion, but declined to produce it or disclose the advice received. Dana, which sold the accused devices for Haldex, had not consulted counsel itself, but had relied on Haldex. The District Court drew an adverse inference against Haldex for withholding the opinion and against Dana for failing to obtain an opinion. Based on the totality of the circumstances, the court found willfulness. The Federal Circuit sua sponte granted en banc rehearing after oral argument to consider its precedent on adverse inferences. In an opinion by Judge Pauline Newman, the court answered four questions. First, it overruled almost 20 years of contrary precedent to hold that no adverse inference will arise from an infringer’s invocation of the attorney-client or work-product privilege. The court reasoned that the adverse inference improperly discouraged open relationships between lawyer and client. Second, the court held it inappropriate to draw an adverse inference based on an infringer’s failure to obtain legal advice — but did not say whether the finder of fact should be told of that failure. It remains unclear whether the absence of an opinion still factors into the totality of the circumstances. Third, the court held that, absent a legal opinion, a “substantial defense to infringement” is not per se sufficient to defeat liability for willful infringement. The court reasoned that this factor should be considered among the totality of the circumstances. Finally, the court remanded the case to determine, without applying any adverse inferences, whether the defendants committed willful infringement. Judge Timothy Dyk concurred with the elimination of the adverse inference, but dissented as to enhanced damages for failure to comply with a due-care requirement, holding that it conflicts with recent Supreme Court punitive damage decisions. Judge Paul Michel took no part in the case. Jeffrey Sanok of D.C.’s Crowell & Moring represented Knorr-Bremse. Stanley Lieberstein of Stamford, Conn.’s St. Onge Steward Johnston & Reens argued for Dana and Haldex. THE OTHER NINE CASES Pellegrini v. Analog Devices Inc. 375 F.3d 1113 Decided July 8, 2004 In a case decided without argument, the Federal Circuit held that products assembled outside the United States from parts manufactured outside the United States, where the products were never shipped to the United States, cannot infringe a U.S. patent. The court rejected the argument that the computer chips at issue gave rise to “supplying” liability under §271(f)(1) because the instructions for their design, manufacture, and disposition came from the United States. Judge Alan Lourie’s opinion was joined by Judges Randall Rader and William Bryson. For appellant: Gerald Pellegrini, Wellesley, Mass. For appellee: Wayne Stoner, Hale and Dorr, Boston. Unitherm Food Systems Inc., et al. v. Swift-Eckrich Inc. 375 F.3d 1341 Decided July 12, 2004 The Federal Circuit affirmed that the patentee had lost antitrust immunity under Walker Process because the patent had been procured by fraud, but nonetheless vacated the jury verdict finding a Sherman Act violation because the alleged infringer failed to present evidence supporting its proposed market definition. The alleged infringer offered evidence of the absence of technically interchangeable products (thus defining the market as coterminous with the patent), but no evidence of a lack of economically interchangeable products. Therefore it failed to prove an attempt to lessen competition in a relevant market. The Federal Circuit vacated the related award of antitrust damages. Judge Arthur Gajarsa’s opinion was joined by Judges Alvin Schall and Richard Linn. For appellees: Burck Bailey, Fellers, Snider, Blankenship, Bailey & Tippens, Oklahoma City. For appellant: Robert Schroeder, Bingham McCutchen, Los Angeles. Phillips v. AWH Corp., et al. 376 F.3d 1382 Decided July 21, 2004 Vacating its own April 8 decision, the Federal Circuit granted a rehearing en banc to resolve long-standing issues of claim construction, including: (a) the relative roles of dictionaries and the patent specification; (b) whether, if dictionaries are the primary source for claim construction, the specification limits when the patentee has acted as its own lexicographer or when the specification reflects a clear disclaimer; (c) the choice among multiple dictionary definitions; (d) when claim language should be narrowed to avoid invalidity; (e) the roles of prosecution history and expert testimony by one of ordinary skill in the art; and (f) whether any deference should be accorded to a trial court’s claim construction. Chief Judge H. Robert Mayer dissented on the ground that the court would better reconsider its holding in Markman v. Westview Instruments (1995). For appellant: Carl Manthei, Boulder, Colo. For cross-appellants: Mark Fischer, Faegre & Benson, Boulder, Colo. High Concrete Structures Inc. v. New Enterprise Stone & Lime Co. Inc., et al. 377 F.3d 1379 Decided July 29, 2004 The Federal Circuit reversed a grant of summary judgment of invalidity. While the inventors did not disclose the preferred mode of practicing the invention, the court held that “[i]nvalidation based on a best-mode violation requires that the inventor knew of and intentionally concealed a better mode than was disclosed. . . . The best-mode requirement of §112 is not violated by unintentional omission of information that would be readily known to persons in the field of the invention.” Judge Pauline Newman’s opinion was joined by Chief Judge H. Robert Mayer and Judge Raymond Clevenger. For appellant: Manny Pokotilow, Caesar, Rivise, Bernstein, Cohen & Pokotilow, Philadelphia. For appellees: Erik Videlock, Pepper Hamilton, Philadelphia. In re Klopfenstein, et al. 2004 U.S. App. LEXIS 17151 Decided Aug. 18, 2004 The Federal Circuit upheld the denial of a patent application for lack of novelty on the ground that the invention was described in a “printed publication” more than one year before. Slide shows displayed for two days at a conference constituted a printed publication under §102(b), said the court, even though they were never distributed or indexed. The key inquiry is whether the publication was “publicly accessible.” Judge Sharon Prost’s opinion was joined by Judges Paul Michel and Alvin Schall. For appellants: John Collins, Hovey Williams, Kansas City, Mo. For appellee: Henry Sawtelle, Patent and Trademark Office, Arlington, Va. In re Bigio 2004 U.S. App. LEXIS 17981 Decided Aug. 24, 2004 The Federal Circuit upheld the rejection of a patent application for a hair brush design as obvious based on three prior art references for toothbrushes. In so doing, the court reaffirmed the use of the “field of endeavor” test for determining analogous art. Judge Randall Rader’s opinion was joined by Judge Alvin Schall. Judge Pauline Newman dissented. For appellant: Robert Kain, Fleit, Kain, Gibbons, Gutman, Bongini & Bianco, Fort Lauderdale, Fla. For appellee: Thomas Krause, Patent and Trademark Office, Arlington, Va. Cardiac Pacemakers Inc., et al. v. St. Jude Medical Inc., et al. 2004 U.S. App. LEXIS 18386 Decided Aug. 31, 2004 The Federal Circuit held that a party does not necessarily waive its right to challenge on appeal a claim construction from a pretrial Markman hearing because it does not object to the jury instruction. Any such objection would be “futile” and “unnecessary.” Therefore, the appeals court overturned the lower court’s judgment of invalidity as a matter of law, reinstated the jury verdict of validity, and remanded the case for a new trial on infringement. Judge Pauline Newman’s opinion was joined by Senior Judge Daniel Friedman and Judge Randall Rader. For appellants: Arthur Neustadt, Oblon, Spivak, McClelland, Maier & Neustadt, Alexandria, Va. For cross-appellants: Denis Salmon, Gibson, Dunn & Crutcher, Palo Alto, Calif. The Toro Co. v. White Consolidated Industries Inc., et al. 2004 U.S. App. LEXIS 19180 Decided Sept. 13, 2004 Affirming a grant of summary judgment of noninfringement, the Federal Circuit held that the patentee was barred from asserting infringement under the doctrine of equivalents because it disclosed but failed to claim, and thus dedicated to the public, the relevant subject matter. The court held that the disclosure-dedication rule is a question of law subject to de novo review and that the disclosure need not satisfy the standards of patentability under §112 to bar to equivalents. Judge Richard Linn’s opinion was joined by Judges Randall Rader and Timothy Dyk. For appellant: Earl Reiland, Merchant & Gould, Minneapolis. For appellees: William McGuinness, Fried, Frank, Harris, Shriver & Jacobson, New York. Poly-America, L.P. v.GSE Lining Technology Inc. 2004 U.S. App. LEXIS 19234 Decided Sept. 14, 2004 The Federal Circuit found that the District Court erred as a matter of law in ruling that the patentee could recover as damages the lost profits of a sister company that held a nonexclusive license. Even though the patentee had contracted with the sister company to have the right to recover its infringement damages, the patentee had to accept the “consequential limitations” of its corporate structure — i.e., the inability to claim the lost profits of a nonexclusive licensee. The court remanded for a redetermination of damages. Judge Alan Lourie’s opinion was joined by Judges Paul Michel and Randall Rader. For appellee: Jerry Selinger, Jenkens & Gilchrist, Dallas. For appellant: Donald Dunner, Finnegan, Henderson, Farabow, Garrett & Dunner, Washington, D.C. Troy E. Grabow ([email protected]) and Eric W. Adcock ([email protected]) are associates in the IP firm of Finnegan, Henderson, Farabow, Garrett & Dunner, resident in the D.C. and Reston, Va., offices respectively.

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