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On March 31, 2011, the United District Court for the Eastern District of Texas (Judge Ward) entered a judgment against Johnson & Johnson and Cordis Corporation in the amount of $583 million. The judgment stems from a patent infringement action filed by Bruce Saffran, M.D., Ph.D. against Johnson & Johnson and Cordis over drug eluting stents (this is not the first time Dr. Saffran has won a large patent case against a medical device maker for drug eluting stents as he previously prevailed on a case against Boston Scientific for over $400 million which has since settled).

In upholding the jury verdict, the Court found that, based on the Court’s earlier claim construction (which the Court declined to reconsider), there was sufficient evidence to support the jury verdict of patent infringement. In reaching this conclusion, the Court noted the testimony of plaintiff’s expert and found that a reasonable jury could have relied on the testimony of plaintiff’s expert and that was sufficient to support the finding of infringement.

The Court also rejected defendants’ challenge to the validity of the patent and also noted that the parties had stipulated to use a preponderance of the evidence standard for prior art that was not before the patent office in light of the i4i v. Microsoft case that is currently pending before the United States Supreme Court. Such a strategic decision by the plaintiff eliminate a potential ground for reversal of this award in the event that the United States Supreme Court changes the burden of proof for validity challenges.

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On April 12, 2011, the Federal Circuit rejected McKesson Technologies Inc.’s suit for patent infringement against Epic Systems Corporation. McKesson Technologies Inc. v. Epic Systems. Corp., Case No. 2010-1291 (Fed. Cir. April 12, 2011). The Federal Circuit rejected McKesson’s claim for patent infringement because McKesson could not prove that one party (i.e., the Epic customers) performed all of the steps of the method claim recited in the patent.

McKesson’s patent is directed to an electronic method of communication between healthcare providers and patients involving personalized web pages for doctors and their patients. Epic is a software company that licenses software to healthcare providers and one of its products was accused of infringement, Epic’s MyChart software. Notably, Epic itself does not use the MyChart software and it was undisputed that Epic’s customers did not perform one of the steps required by the method claim, i.e., “initiating a communication,” nor did the customers exercise control or direction of another who performs this step. Based on this record, the district court granted Epic’s motion for summary judgment based on divided infringement in that no one person or entity performed all the steps of the method claim.

The Federal Circuit affirmed the decision of the district court, noting that McKesson had brought its claims against Epic on the theory of inducing infringement and to show inducing infringement McKesson was required to show that one person or entity performed every step of the method claim. The Federal Circuit also rejected any argument regarding joint infringement as it reiterated that this requires a showing of an agency relationship where a party is contractually obligated to perform a specific step of the method.

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The assignment provisions in employment agreements have taken on added importance with recent case law from the Federal Circuit. The Federal Circuit’s decision in Stanford University v. Roche, 583 F.3d 832 (Fed. Cir. 2009), drew a sharp distinction between language in assignment provisions focusing on the difference between “agree to assign” and “do hereby assign,” with the former constituting a mere agreement to assign in the future, which is ineffective absent an additional agreement to assign intellectual property that is created in the future.

Read a more detailed description here: Protect Your Intellectual Property: Draft Employment Agreements Carefully.

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On April 4, 2011, the District Court for the Eastern District of Texas set aside a jury verdict of $625 million in favor of Mirror Worlds and against Apple, Inc. Mirror Worlds, LLC v. Apple, Inc., Case No. 6-08-CV-88 (E.D. Tex. April 4, 2011) (Judge Davis). The Court set aside the jury’s finding of infringement because Mirror Worlds failed to prove that Apple directly infringed Mirror Worlds’ patents because Mirror Worlds did not present evidence that Apple performed the steps detailed in the method claims.

The Court found that it was insufficient to show that Apple sold software that could perform the steps; rather, the Court held that Mirror Worlds needed to prove through appropriate evidence that Apple performed each and every step of the method claimed in the patent, i.e., that Apple itself used the methods claimed in the patent. As Mirror Worlds failed to proceed on that theory–and relied instead on mere sales of software–there was not sufficient evidence to support the jury verdict.

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On April 1, 2011, the Federal Circuit issued another decision regarding the written description requirement. In Crown Packaging v. Ball Metal, No. 2010-1020 (Fed. Cir. April 1, 2011), the Federal Circuit analyzed a district court’s decision holding that certain claims of the Crown patent were invalid for violating the written

description requirement.

The patent at issue pertained to an invention for seaming metal cans. The district court held that the asserted claims covered driving a chuck either inside or outside of the reinforcing bead for seaming the can, but the specification only supported driving a chunk outside of the can end’s reinforcement bead. Thus, according to the district court, the specification did not support the claims in the patent because the specification only taught “outside,” while the claim covered both “outside” and “inside.” The patent therefore was invalid.

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Many considerations go into licensing and settling disputes over intellectual property. But one often overlooked consideration is the impact of taxes on decisions to license or settle. Because there are complex tax issues that stem from either the licensing of intellectual property or the settlement of lawsuits concerning intellectual property, it is important to analyze the tax issues impacting a particular transaction at the early stage of the transaction and certainly long before the particular transaction is finalized. In addition, there are tax advantages for inventors of patents in transactions involving the transfer of patent rights, as inventors may be able to achieve favorable tax treatment for the sale of their patents, provided that certain guidelines are followed.

For a more detailed discussion, see my article on Taxes — An Overlooked But Important Consideration for Inventors and Patent Owners.

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