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CAFC Weekly: May 28, 2010

by Orlando Lopez

This week’s opinions included a variety of topics ranging from equitable estoppel, patent exhaustion, Rule 11 sanctions, the effect of proffering a covenant not to sue, and an inequitable conduct case.

In Aspex Eyewear v. Clariti Eyewear, the CAFC considered whether Aspex was precluded from suing Clariti due to equitable estoppel.  Aspex had sent letters informing Clariti that Apex believed some of Clariti’s products infringed some of Aspex’s patents.  Three years later, Aspex sued Clarity for infringement.  The CAFC agreed with the District Court’s findings that Aspen’s letters included a threat of suit, that Clariti relied on Aspen’s decision not to sue in order to expand the accused product line and would suffer more damages due to the delayed suit.  The CAFC upheld the District Court’s ruling that Aspex is equitably estopped from suing Clariti.

In Leviton Mfg v. Universal Security, the CAFC considered a District Court’s grant of summary judgment of inequitable conduct.  Leviton had filed two applications with substantially identical claims and different inventors, one having significantly earlier priority than the other.  Leviton did not disclose the later priority application in the prosecution of the earlier priority application.  While the CAFC found that the later priority application was material to the prosecution of the earlier priority application, the CAFC reversed the summary judgment of inequitable conduct and remanded for evidentiary hearings.  By the time this case gets back to the CAFC, the issue of the connection between materiality and intent being considered in the en banc hearing of Therasense (see CAFC Weekly-April 30, 2010), should be resolved.

In FujiFilm Corporation v. Benun, one issue considered was whether the US Supreme Court decision in Quanta Computer, Inc. v. LG Electronics, Inc. eliminated the territoriality requirement for patent exhaustion. The Patent exhaustion doctrine, a.k.a the first sale doctrine, states that an unrestricted sale of a patented item exhausts the patentee’s rights over the item.  The territoriality requirement states that the rights under a U.S. patent can only be exhausted by a sale in the U.S.  The CAFC upheld the District Court’s ruling that the territoriality requirement is valid after Quanta.

In Dow Jones v. Ablaise Ltd, the CAFC considered whether offering a covenant not to sue in exchange for dropping a validity challenge, divests the District Court of subject matter jurisdiction.   The CAFC stated that, under the circumstances in the case under review, offering a covenant not to sue in exchange for dropping a validity challenge, divests the District Court of subject matter jurisdiction and reversed the District Court’s denial of Ablaise’s motion to dismiss the invalidity claim for one patent.

In Carter v. Alk Holdings, the CAFC reviewed the District Court imposing Rule 11 sanctions against Myers & Kaplan, Carter’s counsel.  Myers & Kaplan had outstretched creativity in the drafting of the complaint, beyond what attorneys with knowledge of patent law would do.   The CAFC applied the Circuit law, which states that “creative claims … may merit dismissal, but not punishment.”   The CAFC reversed the imposing of Rule 11 sanctions.

In Vizio v. ITC, the CAFC reviewed both the ITC’s limited exclusion and cease and desist orders, due to finding that the accused products infringed claims 1, 5, and 23 of Vizio’s ’074 patent.  After a review of the claim construction, the CAFC affirmed the decision for the “legacy products,” but reversed the decision for the “work around” products.  The review of the “use of the claim” preamble in claim construction, provides a useful summary of that issue.

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