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While the 2001 Supreme Court session is widely recognized for its numerous decisions interpreting the Americans with Disabilities Act, the Court also issued two key patent law decisions late in the term. The first was the eagerly anticipated Festo ruling on May 28, followed a week later by Holmes vs. Vornado.
This session marked the second Supreme Court appearance for Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., Ltd., et al. (No. 00-1543). The first time the case was remanded for reconsideration in light of another decision the Court issued in 1997 (Warner-Jenkinson Co. v. Hilton Davis Chemical Co., 520 U.S. 17, 29). After review by the Court of Appeals for the Federal Circuit, it again made its way back to the Supreme Court.
Festo owns two patents for a device that uses magnets to move objects along a conveying system. The device is used in a wide range of equipment with current applications ranging from sewing machines to amusement park rides. Both of the original patent filings were rejected by the Patent Office and in both cases Festo amended its patent applications to more narrowly define the devices being patented. The first patent added the limitation that the device would have a magnetizable outer sleeve and both amendments included the restriction that it would use a pair of one-way seals.
The respondents (referred to in the decision as SMC) then started producing a similar device but with a single two-way sealing ring and a nonmagetizable sleeve. Festo sued claiming that SMC’s device infringed its patents. At issue was a conflict between the competing matters of prosecution history estoppel and the doctrine of equivalents. (See sidebar on p.4 for a brief description of these two.) Festo claimed infringement under the doctrine of equivalents while SMC countered by saying that this was barred by prosecution history estoppel since Festo had narrowed its patent applications so that using a nonmagnetizable sleeve and two-way seals were now in the public domain.
The U.S. District Court for the District of Massachusetts had ruled in favor of the plaintiffs. But in November 2000, the Court of Appeals for the Federal Circuit reversed the trial court’s decision and went on to hold that any time an applicant narrows a claim in order to comply with any part of the Patent Act, estoppel applies and that it acts as a complete bar against any claim of equivalence for the element amended.
“A complete bar, unlike a flexible bar, thus lends certainty to the process of determining the scope of protection afforded by a patent,” the majority opinion stated. “…This certainty aids both the public and the patentee in ascertaining the true scope and value of the patent without having to resort to litigation to obtain a case-by-case analysis of what subject matter the claims can cover.”
Rather than adding certainty, however, the decision created a lot of uncertainty. As Judge Newman stated in his dissent:
“The Federal Circuit’s sua sponte change in this law is a change in industrial policy that requires public discussion in advance of, not after, the law has been changed. This court’s initiative flows uncomfortably as a ruling that affects myriad vested rights, on a novel legal theory, without briefing or argument.”
Twenty-three different briefs seeking to overturn the Federal Circuit’s decision were filed with the Supreme Court including ones from the American Intellectual Property Law Association, Association of Patent Law Firms, Chamber of Commerce of the United States, Federal Circuit Bar Association, American Bar Association, American Intellectual Property Law Association, Federal Circuit Bar Association, National Bar Association, and the National Intellectual Property Law Institute. Among the chief concerns was that many patent holders who had elected to amend their claims, rather than petitioning a rejection, knowing that they were not completely giving up equivalency claims, would now find themselves without such protection.
In a rare unanimous decision, written by Justice Kennedy, the Supreme Court vacated the lower court’s ruling, holding that a flexible bar is more appropriate than an absolute bar:
“[T]here is no more reason for holding the patentee to the literal terms of an amended claim than there is for abolishing the doctrine of equivalents altogether and holding every patentee to the literal terms of the patent.” [p.13]
To begin with, given the inexactitude of human communications, the Court upheld the doctrine of equivalents.
“The language in the patent claims may not capture every nuance of the invention or describe with complete precision the range of its novelty. If patents were always interpreted by their literal terms, their value would be greatly diminished. Unimportant and insubstantial substitutes for certain elements could defeat the patent, and its value to inventors could be destroyed by simple acts of copying. For this reason, the clearest rule of patent interpretation, literalism, may conserve judicial resources but is not necessarily the most efficient rule. The scope of a patent is not limited to its literal terms but instead embraces all equivalents to the claims described.” [p.6]
But the Court also validated the application of estoppel.
“Prosecution history estoppel ensures that the doctrine of equivalents remains tied to its underlying purpose. Where the original application once embraced the purported equivalent but the patentee narrowed his claims to obtain the patent or to protect its validity, the patentee cannot assert that he lacked the words to describe the subject matter in question. … In that instance the prosecution history has established that the inventor turned his attention to the subject matter in question, knew the words for both the broader and narrower claim, and affirmatively chose the latter.” [p.9]
In doing so, the Court rejected Festo’s claim that estoppel only applied when a patentee narrowed his application to exclude prior art, not when it was made to comply with some other requirement of the Patent Act, such as clarifying an ambiguous term or improving the translation of a foreign word. [p.12] Instead, any amendment to a patent creates a rebuttable presumption and that “the patentee should bear the burden of showing that the amendment in question does not surrender the particular equivalent in question.” [p.15]
The case was sent back for further proceedings to determine whether or not the plaintiffs could overcome this presumption since the infringements claimed were both specifically included in the earlier applications.
Holmes v. Vornado
The other decision concerned the jurisdiction of the Court of Appeals for the Federal Circuit.
Both The Holmes Group, Inc. and Vornado Air Circulation Systems, Inc. produce fans which have a spiral design in their grills. In an earlier lawsuit (Vornado Air Circulation Systems,Inc.v. Duracraft Corp.,58 F.3d 1498), the Tenth Circuit ruled in 1995 that Vornado did not possess a protectible trade-dress right in the grill design. Subsequent to this decision, Vornado in 1999 complained to the U.S. International Trade Commission that the spiral design on Holmes’ fans and heaters infringed on its patents and trade-dress.
To counter this action, Holmes filed an action with the Kansas District Court seeking, among other relief, a declaratory judgment of non-infringement. Vornado filed a counter-claim alleging patent infringement. Holmes won at the trial court prompting Vornado to lodge an appeal with the Federal Circuit basing jurisdiction on its patent-related counter-claim. Over Holmes’ objections, the Federal Circuit accepted jurisdiction, vacated the lower court’s decision and remanded the case for further consideration. (13 Fed.Appx.961 )
The Supreme Court granted review of the decision on the point of whether the Federal Circuit had jurisdiction over the matter.
At issue was the interpretation of 28 U.S.C §1295(a)(1) and §1338(a) which together give the Federal Circuit exclusive jurisdiction over appeals in actions arising out of “any Act of Congress relating to patents.” Vornado asserted that, based on its patent-related counterclaim, its appeal properly belonged with the Federal Circuit.
The Supreme Court disagreed, vacating the decision and remanding the case, this time for review by the Court of Appeals for the Tenth Circuit.
“Not all cases involving a patent-law claim fall within the Federal Circuit’s jurisdiction,” Justice Scalia wrote for the majority. “By limiting the Federal Circuit’s jurisdiction to cases in which district courts would have jurisdiction under §1338, Congress referred to a well-established body of law that requires courts to consider whether a patent-law claim appears on the face of the plaintiff’s well pleaded complaint.” [p.8]
The court ruled that it should remain the prerogative of the plaintiff, not the counterclaimant, to select the forum by the nature of the original complaint.
“Allowing a counterclaim to establish ‘arising under’ jurisdiction would also contravene the longstanding policies underlying our precedents. First, since the plaintiff is ‘the master of the complaint,’ the well-pleaded-complaint rule enables him, “by eschewing claims based on federal law…to have the cause heard in state court.” [Caterpillar, Inc. v. Williams, 482 U.S.398-399] The rule proposed by respondent, in contrast, would leave acceptance or rejection of a state forum to the master of the counterclaim. It would allow a defendant to remove a case brought in state court under state law, thereby defeating a plaintiff’s choice of forum, simply by raising a federal counterclaim. Second, conferring this power upon the defendant would radically expand the class of removable cases, contrary to the “[d]ue regard for the rightful independence of state governments ” [p.5].
Both Supreme Court decisions are posted on the Court’s website at www.supremecourtus.gov/opinions/01slipopinion.html.
The Federal Circuit decision in Festo is available from the Georgetown University Law Library at www.ll.georgetown.edu/Fed-Ct/Circuit/fed/opinions/95-1066.html