IP News

Ninth Circuit Confirms CA Jurisdiction in Website Copyright Case

On Aug. 8, 2011, the Ninth Circuit panel comprised of Judges Kim McLane Wardlaw, William A. Fletcher and Barbara M. Lynn (sitting by designation) issued its opinion in Mavrix Photo, Inc. v. Brand Technologies, Inc., No. 09-56134. The suit originated when Mavrix sued Brand Technologies, alleging that Brand infringed Mavrix's copyright by posting copyrighted photographs on its website.

Defendant Brand Technologies filed a motion to dismiss, arguing that the court lacked personal jurisdiction. The district court granted the motion. On appeal, the Ninth Circuit reversed, holding that a California federal court maintains personal jurisdiction over defendant, an Ohio corporation.

The Ninth Circuit held that, while the website naturally courts a national audience, “the website has some specific ties to California.” Slip Op. at 10338. Informing this conclusion are facts such as the website's advertisements, including advertisements for jobs, hotels, and vacations in California. Brand also uses a California-based Internet advertising agency to place advertisements on its website, and a California wireless provider hosts a version of the website that is accessible to mobile phone users. Id. The opinion also noted that Brand entered a “link-sharing” agreement with a California-based national news site, “according to which each site agrees to promote the other's top stories.” Id.

The Ninth Circuit held that these contacts fall “well short” of the requisite showing for general jurisdiction (Slip Op. at 10344), but that they justify the exercise of specific jurisdiction. Id. at 10355. The court held that Brand “continuously and deliberately exploited” the California market for its website, and a “substantial number of hits” to the website came from California residents. Id. at 10352. To hold otherwise, the court reasoned, would “allow corporations whose websites exploit a national market to defeat jurisdiction in states where those websites generate substantial profits from local consumers.” Id. at 10354.

Eastern District of Texas Issues Injunction in First Pharmaceutical Case

In the first patent case brought under the Hatch-Waxman Act to go to trial in the Eastern District of Texas, plaintiff Pozen, Inc. won an injunction barring Par Pharmaceuticals, Inc. and Dr. Reddy's Laboratories, Ltd. from making, using, or selling generic versions of migraine treatment Treximet.

In a 51-page opinion issued after a bench trial (Case No. 08-437), Judge Leonard Davis held that the asserted claims of the two patents in suit were valid and infringed, both directly and indirectly, by the defendants' proposed ANDA products. Defendants' obviousness, double patenting, and inequitable conduct arguments failed, leading the court to conclude that plaintiff Pozen would suffer irreparable harm if the defendants were not enjoined. Slip Op. at 48. The court noted that Pozen may be forced out of business from the loss of revenue stream if the generic defendants launched their products. Id. Interestingly, the court also set the effective date for the approval of defendants' ANDA applications until after the patents in suit expire. Id. at 50.

Federal Circuit Upholds Award of Frivolous Litigation Sanctions

In Eon-Net LP v. Flagstar Bancorp, Case No. 2009-1308, the Federal Circuit panel comprised of Judges Alan David Lourie, Haldane Robert Mayer, and Kathleen M. O'Malley upheld the district court's finding that the case was exceptional under 35 U.S.C. ' 285 and also approved the award of Rule 11 sanctions.

The opinion authored by Judge Lourie held that the district court did not commit clear error in its exceptional case finding and did not abuse its discretion when it invoked Rule 11 sanctions. The asserted patents relate to document processing systems, and are titled “Information Processing Methodology.” The asserted claims all require a system for “inputting information from a document or file on a computer into at least one application program ' ” According to the Federal Circuit, the patented system is one that allows a business to create electronic copies of hard-copy business records and manipulate them electronically. Slip Op. at 6.

The plaintiff's patent portfolio had been heavily exposed to litigation, being involved in more than 100 lawsuits on behalf of Eon-Net or its related entities. Early in this case, Flagstar moved for summary judgment of noninfringement because it utilized document processing technology provided by a third party that held a license to the patents in suit. The district court granted the motion, and with it also granted Rule 11 sanctions on the grounds that Eon-Net failed to investigate the basis for its suit. Slip Op. at 7. On a first appeal, the Federal Circuit reversed both orders and remanded because the district court failed to afford Eon-Net notice and the opportunity to present its infringement and claim construction arguments during briefing on the motions. Eon-Net LP v. Flagstar Bancorp, 249 F. App'x 189, 198 (Fed. Cir. 2007).

On remand, a new district judge construed the claim terms “document,” “file,” “extract,” and “template” to be limited to information originating from a hard-copy document. Slip Op. at 8. After a stipulation of non-infringement, Flagstar moved for an exceptional case order and Rule 11 sanctions, arguing that Eon-Net pursued baseless infringement claims for the improper purpose of obtaining a nuisance value settlement, destroyed evidence, and maintained “offensive litigation tactics.” Id. at 8-9. The district court awarded Flagstar $141,984.70 in fees and costs under Rule 11, and another $489,150.48 in fees and costs under ' 285 for litigating the case following the remand.

On appeal, the Federal Circuit upheld the district court's claim construction order, and the awards of fees and costs. The court noted that “the district court has lived with the case and the lawyers for an extended period” and with only the cold record before them “are not in the position to second-guess the trial court's judgment.” Slip Op. at 16. The Federal Circuit commented that Eon-Net intentionally did not implement a document retention plan prior to litigation. Further, the court noted that Eon-Net failed to offer a construction for any disputed claim terms, lodged incomplete and misleading extrinsic evidence with the court, and submitted declarations that contradicted earlier deposition testimony by the declarants. Id. at 19. The court further noted that Eon-Net's strategy of filing litigations followed by a demand for a quick settlement at a price lower than the cost to defend the litigation supported the district court's finding that the litigation was objectively baseless and for a frivolous purpose. Id. at 22.

Earlier Date of Patent Claims Can Be Considered During Re-examination

In an appeal from the Board of Patent Appeals and Interferences, the Federal Circuit panel comprised of Judges Arthur J. Gajarsa, Raymond C. Clevenger, and Kimberly Ann Moore held that priority issues may be properly considered during re-examination proceedings. In In re NTP, Inc., Case No. 2010-1277, the court held that “when a patentee argues that its claims are entitled to the priority date of an earlier filed application, the examiner must undertake a priority analysis to determine if the patentee meets the requirements of ' 120″ as opposed to simply accepting the patentee's proposed priority date. Slip Op. at 15. According to the court, absent this ability, “the examiner would be stripped of a critical legal tool needed in performing a proper reexamination.” Id. The court concluded that the examiner's determination of priority during a re-examination was proper because the examiner did not consider priority during the original prosecution.

Howard J. Shire is a partner and Joseph Mercadante is an associate in the New York office of Kenyon & Kenyon LLP.

Ninth Circuit Confirms CA Jurisdiction in Website Copyright Case

On Aug. 8, 2011, the Ninth Circuit panel comprised of Judges Kim McLane Wardlaw, William A. Fletcher and Barbara M. Lynn (sitting by designation) issued its opinion in Mavrix Photo, Inc. v. Brand Technologies, Inc., No. 09-56134. The suit originated when Mavrix sued Brand Technologies, alleging that Brand infringed Mavrix's copyright by posting copyrighted photographs on its website.

Defendant Brand Technologies filed a motion to dismiss, arguing that the court lacked personal jurisdiction. The district court granted the motion. On appeal, the Ninth Circuit reversed, holding that a California federal court maintains personal jurisdiction over defendant, an Ohio corporation.

The Ninth Circuit held that, while the website naturally courts a national audience, “the website has some specific ties to California.” Slip Op. at 10338. Informing this conclusion are facts such as the website's advertisements, including advertisements for jobs, hotels, and vacations in California. Brand also uses a California-based Internet advertising agency to place advertisements on its website, and a California wireless provider hosts a version of the website that is accessible to mobile phone users. Id. The opinion also noted that Brand entered a “link-sharing” agreement with a California-based national news site, “according to which each site agrees to promote the other's top stories.” Id.

The Ninth Circuit held that these contacts fall “well short” of the requisite showing for general jurisdiction (Slip Op. at 10344), but that they justify the exercise of specific jurisdiction. Id. at 10355. The court held that Brand “continuously and deliberately exploited” the California market for its website, and a “substantial number of hits” to the website came from California residents. Id. at 10352. To hold otherwise, the court reasoned, would “allow corporations whose websites exploit a national market to defeat jurisdiction in states where those websites generate substantial profits from local consumers.” Id. at 10354.

Eastern District of Texas Issues Injunction in First Pharmaceutical Case

In the first patent case brought under the Hatch-Waxman Act to go to trial in the Eastern District of Texas, plaintiff Pozen, Inc. won an injunction barring Par Pharmaceuticals, Inc. and Dr. Reddy's Laboratories, Ltd. from making, using, or selling generic versions of migraine treatment Treximet.

In a 51-page opinion issued after a bench trial (Case No. 08-437), Judge Leonard Davis held that the asserted claims of the two patents in suit were valid and infringed, both directly and indirectly, by the defendants' proposed ANDA products. Defendants' obviousness, double patenting, and inequitable conduct arguments failed, leading the court to conclude that plaintiff Pozen would suffer irreparable harm if the defendants were not enjoined. Slip Op. at 48. The court noted that Pozen may be forced out of business from the loss of revenue stream if the generic defendants launched their products. Id. Interestingly, the court also set the effective date for the approval of defendants' ANDA applications until after the patents in suit expire. Id. at 50.

Federal Circuit Upholds Award of Frivolous Litigation Sanctions

In Eon-Net LP v. Flagstar Bancorp, Case No. 2009-1308, the Federal Circuit panel comprised of Judges Alan David Lourie, Haldane Robert Mayer, and Kathleen M. O'Malley upheld the district court's finding that the case was exceptional under 35 U.S.C. ' 285 and also approved the award of Rule 11 sanctions.

The opinion authored by Judge Lourie held that the district court did not commit clear error in its exceptional case finding and did not abuse its discretion when it invoked Rule 11 sanctions. The asserted patents relate to document processing systems, and are titled “Information Processing Methodology.” The asserted claims all require a system for “inputting information from a document or file on a computer into at least one application program ' ” According to the Federal Circuit, the patented system is one that allows a business to create electronic copies of hard-copy business records and manipulate them electronically. Slip Op. at 6.

The plaintiff's patent portfolio had been heavily exposed to litigation, being involved in more than 100 lawsuits on behalf of Eon-Net or its related entities. Early in this case, Flagstar moved for summary judgment of noninfringement because it utilized document processing technology provided by a third party that held a license to the patents in suit. The district court granted the motion, and with it also granted Rule 11 sanctions on the grounds that Eon-Net failed to investigate the basis for its suit. Slip Op. at 7. On a first appeal, the Federal Circuit reversed both orders and remanded because the district court failed to afford Eon-Net notice and the opportunity to present its infringement and claim construction arguments during briefing on the motions. Eon-Net LP v. Flagstar Bancorp , 249 F. App'x 189, 198 (Fed. Cir. 2007).

On remand, a new district judge construed the claim terms “document,” “file,” “extract,” and “template” to be limited to information originating from a hard-copy document. Slip Op. at 8. After a stipulation of non-infringement, Flagstar moved for an exceptional case order and Rule 11 sanctions, arguing that Eon-Net pursued baseless infringement claims for the improper purpose of obtaining a nuisance value settlement, destroyed evidence, and maintained “offensive litigation tactics.” Id. at 8-9. The district court awarded Flagstar $141,984.70 in fees and costs under Rule 11, and another $489,150.48 in fees and costs under ' 285 for litigating the case following the remand.

On appeal, the Federal Circuit upheld the district court's claim construction order, and the awards of fees and costs. The court noted that “the district court has lived with the case and the lawyers for an extended period” and with only the cold record before them “are not in the position to second-guess the trial court's judgment.” Slip Op. at 16. The Federal Circuit commented that Eon-Net intentionally did not implement a document retention plan prior to litigation. Further, the court noted that Eon-Net failed to offer a construction for any disputed claim terms, lodged incomplete and misleading extrinsic evidence with the court, and submitted declarations that contradicted earlier deposition testimony by the declarants. Id. at 19. The court further noted that Eon-Net's strategy of filing litigations followed by a demand for a quick settlement at a price lower than the cost to defend the litigation supported the district court's finding that the litigation was objectively baseless and for a frivolous purpose. Id. at 22.

Earlier Date of Patent Claims Can Be Considered During Re-examination

In an appeal from the Board of Patent Appeals and Interferences, the Federal Circuit panel comprised of Judges Arthur J. Gajarsa, Raymond C. Clevenger, and Kimberly Ann Moore held that priority issues may be properly considered during re-examination proceedings. In In re NTP, Inc., Case No. 2010-1277, the court held that “when a patentee argues that its claims are entitled to the priority date of an earlier filed application, the examiner must undertake a priority analysis to determine if the patentee meets the requirements of ' 120″ as opposed to simply accepting the patentee's proposed priority date. Slip Op. at 15. According to the court, absent this ability, “the examiner would be stripped of a critical legal tool needed in performing a proper reexamination.” Id. The court concluded that the examiner's determination of priority during a re-examination was proper because the examiner did not consider priority during the original prosecution.

Howard J. Shire is a partner and Joseph Mercadante is an associate in the New York office of Kenyon & Kenyon LLP.