IP Advisor - May 2014 May 15, 2014
In This Issue

3-D Printing and the International Trade Commission – ITC Stops Importation of Infringing Digital Data Files


The International Trade Commission has jurisdiction to stop the importation of infringing “articles.” The ITC says that the term “articles” includes tangible goods and intangible electronic files. An electronic cross-border transmitted three-dimensional print file is an “imported article” within the scope of Section 337. The ITC may issue cease and desist orders to prohibit a respondent from importing a 3-D print file that is used to create an infringing product.

Today games, movies and music are transmitted electronically over the Internet and imported into the United States. Cases-in-point: Candy Crush Saga, created in the United Kingdom, and Angry Birds, created in Finland; both were imported into the United States by being uploaded to a server in the United States. For counterfeit copies of movies and music, the pirated digital file of a film is copied abroad and transmitted via the internet into the United States. The same is true for three-dimensional (“3-D”) print files. A 3-D print file may be transmitted electronically and uploaded to a server/printer located in the United States and used to fabricate an infringing physical article in the United States. The cross-border transmission of pirated music and movies, infringing gaming software and infringing digital 3-D print files are within the International Trade Commission’s (“ITC’s”) jurisdiction. Thus, a patent, trademark or copyright owner may take advantage of the ITC’s fast track to get injunctive relief to stop infringers.

In the International Trade Commission’s recent opinion addressing the scope of “articles,” Certain Digital Models, Digital Data, and Treatment of Plans for Use In Making Incremental Dental Positioning Adjustment Appliances, the Appliances Made Therefrom, and Methods of Making the Same, Inv. No. 337-TA-833, Comm’n Op. (April 10, 2014) (“the Align case”), the ITC determined that “articles” as stated in section 337 are not limited to tangible goods. It found that imported articles must be inclusive of articles in any form, particularly the digital data files at issue in the Align case.

A Digital Data File Is an “Article”

The imported “article” in the Align case is similar to a digital data file used for 3-D printing. The respondents in the Align case were found to have created in Pakistan digital data files for modeling dental aligners, and to have electronically transmitted those files to a server in the United States where the files were uploaded to fabricate dental aligners according to the imported data file. Align, at 17, 21. The respondents, arguing for a narrow definition of article, asserted that the legislative history suggests that Congress intended articles to cover only tangible goods, such as merchandise and commodities. The complainant argued for a broad definition under which articles would include any form. Interested third parties, Google and the Motion Picture Association of America (MPAA), also weighed in on whether an “article” should include a digital data file.

After many rounds of briefing on the issue, the ITC found that there was no support in the statute or legislative history for narrowly defining “article” as a tangible good. Specifically, the ITC examined the 1922 Tariff Act, the predecessor to Section 337, which recited the term “articles” with respect to importation and/or sales of articles as an act of unfair competition. The term, which was never defined in the statute, remained when the statute was amended in the Tariff Act of 1930.

In 1922 or 1930, Congress did not have foresight to know that imported articles would one day include digital files composed of only zeros and ones. But, apparently Congress did envision an evolution of technology. In the Align case, it is pointed out that “a Congressional Report accompanying the Tariff Act of 1930 recognizes that many new goods and manufacturing processes had been invented and brought to the U.S. market since the 1922 Act, and anticipates that many new goods and processes would come in the future.” Align, at 47. Perhaps Congress intentionally omitted defining the term “article” to accommodate changes in technology that could not have been foreseen.

The ITC’s analysis of the statute and its history is detailed and seems reasonable. Because the statute and legislative history do not indicate that “articles” should be limited to tangible goods, all types of forms, i.e., digital and physical, are included within the definition of “articles.”

Stopping the Importation of Digital Data Files

The Align case also addressed the issue of whether the ITC has to ability to enforce its remedial orders to stop the importation of digital data files. Generally, if the ITC determines that there is a violation of Section 337 the remedy is an exclusion order prohibiting the importation of the infringing article. Customs and Border Patrol (“Customs”) is tasked with enforcing the ITC’s exclusion orders. Customs can stop digital data files at the border when the files are stored on a physical medium, such as a DVD or hard drive. However, when digital files are imported via an electronic transmission as in the Align case, Customs is incapable of inspecting and stopping the importation. In spite of this limitation, the ITC’s remedial powers still have teeth in the context of infringing digital files.

Section 337 gives the ITC the power to issue cease and desist orders against a respondent that has been found to violate the statute. 19 U.S.C. §1337(f). Specifically, a cease and desist order prohibits a respondent from engaging in unfair methods or acts. Those acts include importation, distribution, sale and marketing in the United States. In the Align case, the foreign and domestic respondents were ordered to cease and desist from importing (through electronic transmission or otherwise) digital data files that infringe the claims of the patents. Because Customs is not enforcing the cease and desist order and the ITC does not have cease and desist watch dogs, the complainant must monitor the respondent’s activities for violations.

If the complainant believes that there is a violation of the cease and desist order, the ITC will enforce the order through an enforcement proceeding. An enforcement proceeding is initiated by a complaint that alleges a violation of any ITC remedial order. If it is determined after an investigation that the cease and desist order has been violated, then the violator may be ordered to pay civil penalties. 19 U.S.C. §1337(f). The civil penalties that the ITC is authorized to order are substantial.

By statute, the ITC may order a violator to pay for each day an importation or sale occurs up to $100,000. 19 U.S.C. §1337(f)(2). For example, the ITC recently ordered MaxLite, Inc., a respondent that was found in an enforcement proceeding to have violated a consent order, to pay a $10,000 per day civil penalty. See Dimmable Compact Fluorescent Lamps and Products Containing Same, 337-TA-830. Similar results would be expected if the respondent in the Align case continued or resumed importing data files for the dental appliances, or selling, distributing or advertising the dental appliances made from the imported data files in violation of the cease and desist order.

Detecting Importation of Infringing Data Files

It is relatively easy to detect if an importer is importing infringing tangible goods. There are several port watch services available. It is also fairly easy to detect if pirated movies and music are being imported into the United States, by monitoring the Internet. There are several watchdog services available for this mode of transmission. However, the electronic transmission of digital data files to a server for use with a 3-D printer is far more difficult to detect. The transmission will likely occur over a secure private network. In the Align case, the 3-D data file was created in Pakistan, transmitted over a network and uploaded to a server located in Texas. Align, at 17, 21. The dental appliances made based on the 3-D data files were fabricated in the United States. Id. at 17.

As a practical note, the injunctive relief in a cease and desist order is only as effective as the watchful eye of the patent, trademark or copyright owner. The owner must be diligent and immediately initiate an enforcement proceeding if it believes that the cease and desist order is being violated. The ITC has historically been an excellent forum for protecting intellectual property rights, and now digital data is clearly within the crosshairs of the ITC.

The author is a former Senior Investigative Attorney at the U.S. International Trade Commission, Office of Unfair Import Investigations.

Liberty Mutual Achieves Total Knockout of Progressive Patents in Series of Post-Grant CBM Proceedings


A recent dispute involving major automobile insurance companies resulted in the invalidation of five patents through the initiation of post-grant Covered Business Method Patent Review proceedings. The dispute demonstrates that the Patent Trials and Appeals Board provides a powerful alternative to district court litigation, and provides lessons in how the PTAB conducts such proceedings.

In an industry-wide patent fight involving five of the top automobile insurance companies in the United States, Liberty Mutual recently achieved a complete victory in the Patent Trials and Appeals Board (PTAB). Through the filing of 10 Covered Business Method Patent Review (CBM) petitions, Liberty Mutual successfully invalidated the asserted claims of five patents that Progressive Corp. had accused of infringement in several district court suits in the Northern District of Ohio. Liberty Mutual’s win will pay dividends for big players Allstate, State Farm, and The Hartford, among others, that were also sued by Progressive.

Progressive first launched its infringement allegations against Liberty Mutual in 2010, asserting U.S. Patent No. 6,064,970, which claimed a method for monitoring driver actions and vehicle data to determine insurance cost. Liberty Mutual then filed an ex parte reexamination request in late 2010, and the district court subsequently stayed the litigation pending reexamination. During that reexamination, all original claims of the ’970 patent were canceled or amended. The litigation restarted in 2012, with Progressive soon asserting two additional related patents, U.S. Patent Nos. 8,090,598 and 8,140,358, that had issued during the pendency of the reexamination. In a separate suit filed in 2011, Progressive also asserted U.S. Patent Nos. 7,124,088 and 7,877,269, which claimed systems that allowed a policyholder to access, view and update insurance policy information via the Internet. Liberty Mutual also filed ex parte reexamination requests against those patents, and the second litigation was stayed pending reexamination. Those patents survived unchanged and that litigation resumed in 2012.

The enactment of the America Invents Act (“AIA”) provided Liberty Mutual with another opportunity to attack the validity of the patents, and it shifted the fight to the newly created PTAB. Liberty Mutual filed a total of 10 petitions, two against each asserted patent, seeking institution of CBM review proceedings. Although the PTAB declined to institute three of the petitions, among the remaining petitions, it agreed to review all asserted claims, and Liberty Mutual successfully convinced the district court to stay all proceedings during pendency of the review proceedings. Liberty Mutual’s dual-filing strategy helped get around the 80-page limit (although at added cost) for review petitions, and for one patent, allowed it a second chance to challenge claims that the PTAB had previously determined not to review based on the first petition.

The PTAB conducted four consolidated hearings in less than a month last fall, with the final written decisions issuing over a two-month period ending in March. In the end, the PTAB canceled all asserted claims, even claims that had previously survived ex parte reexamination.

At the outset, Progressive challenged the PTAB’s jurisdiction to hear each of the proceedings, arguing that the PTAB was required to conduct a claim-by-claim analysis and determine that every challenged claim was directed to a covered business method before it was authorized to review those claims. The PTAB disagreed, finding that the AIA was unambiguous in defining the subject matter for review as a “patent that claims a method or corresponding apparatus performing data processing or other operations used in the practice, administration, or management of a financial product or service,” rather than merely a claim directed to that subject matter.

Liberty Mutual relied mostly on straightforward obviousness combinations in its invalidity arguments. Of the grounds considered in the seven instituted petitions, the PTAB invalidated the claims of the five patents based on two anticipation references, two single obviousness references, 14 two-reference obviousness combinations, nine three-reference obviousness combinations, and four four-reference obviousness combinations. Liberty Mutual’s experts were repeatedly credited over Progressive’s experts and, for the ’598 patent, Progressive did not even submit an expert declaration in support of its validity arguments (although it did submit declarations in trying to establish that the ’598 patent claims were entitled to a priority date that antedated Liberty Mutual’s two anticipation references).

The PTAB rejected several of Liberty Mutual’s attempts to rely on secondary references that allegedly described inherent functionality of prior art systems disclosed in earlier references. The PTAB found that Liberty Mutual failed to show that the features described in the secondary references were necessarily present in the earlier references and that it also had not shown that the systems in each reference were necessarily the same system. However, Liberty Mutual’s failure to substantiate these secondary references did not prove fatal to one of its challenges, and the PTAB still invalidated the claims of one patent based on the original reference without relying on the secondary reference.

One other notable procedural aspect of the proceedings was Progressive and Liberty Mutual’s failure to exclude the other side’s expert declarations, with the PTAB rejecting all motions to exclude. In refusing to exclude expert declarations, the PTAB held that it was well-positioned as a non-jury tribunal with administrative expertise to determine and assign appropriate weight to each side’s expert declarations. It further held that it would generally exercise its discretion to accord evidence the appropriate weight, rather than exclude a particular piece of evidence in a manner that might later be held reversible error. The PTAB’s rulings caution parties from expending resources on motions to exclude except in unusual circumstances.

After the issuance of the PTAB’s decision, Progressive sought rehearing of two of the decisions based on a novel argument. Progressive argued that the PTAB had improperly issued non-concurrent written decisions for two patents because the PTAB posted its second written decisions 50 seconds in one instance and one hour in another instance after the posting of the respective first written decisions. Progressive contended that the PTAB was therefore estopped from invalidating on different grounds the same claims that it had invalidated in its first written decisions, despite the PTAB’s statement that both sets of decisions were issued concurrently. The PTAB rejected Progressive’s request for rehearing, finding, among other reasons, that the entry date, not the entry time, governs when a decision is actually issued.

Liberty Mutual’s victory over Progressive (pending Progressive’s appeal to the Federal Circuit) demonstrated that the PTAB is a powerful forum for accused infringers seeking a quicker and less expensive route than full-blown district court litigation. Although the PTAB conducted four separate hearings, each lasted only two hours, compared to a costly and burdensome trial proceeding.

Inventors Take Note: Supreme Court to Decide How Ambiguous is Too Ambiguous for Patents


In a case argued in April, Nautilus v. Biosig Instruments, the U.S. Supreme Court is being asked to decide the question “how ambiguous can a patent claim be before it is invalid?” Regardless of the Court’s decision, the case highlights the need for inventors to pay close attention to the language their patent attorneys use to claim their inventions.

The first time you laid eyes on a patent claim, your reaction was probably something like “what the heck does that mean?” Your second reaction was probably “who would write something like that, and why?”

Claims are written using abstruse language for a number of reasons. Most importantly, an inventor is entitled to claim his or her invention in the broadest sense that is still novel and not “obvious.” Inventors often think of their invention in the specific technical terms in which they first conceived or built it. For example, the inventor may describe the invention as using a particular circuit. It is the patent attorney’s job to make certain that the patent is not unnecessarily limited to implementations that use that particular circuit. The impulse to avoid narrow claiming leads the patent attorney to use language like “an encryption module” or “lookup means” instead of a more specific hardware or software description.

While U.S. patent law requires the language of the claims to be clear and distinct, language is inherently imprecise. There may also be occasions where some attorneys deliberately use unclear or ambiguous language. If the claims have some ambiguity, there is room to argue later that they cover a wider range of technologies than the attorney thought to describe when the claim was drafted. Ambiguity also increases the risk of trying to design around a patent, and ultimately of defending a product from a claim of infringement. By increasing risk, the attorney increases the settlement value of the patent when it is asserted.

This brings us to the question the U.S. Supreme Court will answer in Nautilus, Inc. v. Biosig Instruments, Inc., a case that was argued on April 28, 2014. In effect, the Supreme Court is being asked to decide the question “how ambiguous can a patent claim be before it is invalid?”

U.S. Patent No. 5,337,753, which is owned by Biosig Instruments, describes a heart rate monitor for use with exercise equipment. Figure 1 of the patent shows an arrangement of electrodes, numbered 9, 11, 13 and 15. Electrodes 11 and 15 are grounded.

Heart Rate Monitor

The device works on the principle that noise and electromyogram signals generated by both hands are approximately equal in amplitude and phase, whereas the electrocardiogram signals generated by both hands have opposite phase. Subtracting the signals from the “live electrodes” 9 and 13, amplifies the ECG signals and eliminates noise and EMG signals.

Claim 1 of the ’753 patent requires pairs of electrodes (e.g., 9 and 11) “in spaced relationship with each other,” and it is this “spaced relationship” language that gave rise to the dispute. The trial court decided that the claim language “did not tell me or anyone what precisely the space should be. * * * not even any parameters as to what the space should be.” The Court of Appeals for the Federal Circuit disagreed. According to the Federal Circuit, a claim is invalid for “indefiniteness” “only when it is ‘not amenable to construction’ or ‘insolubly ambiguous’,” such that “reasonable efforts at claim construction result in a definition that does not provide sufficient particularity and clarity to inform skilled artisans of the bounds of the claim.” The Federal Circuit looked at the claim language, which says the user’s hands must contact the electrodes, the drawings and the specification, and concluded that the space cannot be so small that the live and common electrodes “effectively merg[e] . . . into a single electrode with one detection point” and “cannot be greater than the width of a user’s hands.”

Not surprisingly, Nautilus and Biosig characterize the dispute quite differently. Nautilus attacks the Federal Circuit’s “insolubly ambiguous” language, arguing that it allows too much ambiguity, and creates an incentive to “draft some ambiguous claims in the hope of creating a de facto penumbra enlarging the patentee’s monopoly beyond its invention.” Nautilus asks the Supreme Court to rule that claims may not be ambiguous at all, and may not be “susceptible of multiple reasonable interpretations.” Biosig argues that the Federal Circuit’s “insolubly ambiguous” language is just short-hand for the court’s actual analysis, which invalidates claims when “reasonable efforts at claim construction result in a definition that does not provide sufficient particularity and clarity to inform skilled artisans of the bounds of the claim.” Biosig insists that a claim may be valid even though reasonable persons disagree about its interpretation. The United States filed a friend of the court brief coming down somewhere in the middle.

Regardless of how the Supreme Court rules, this case highlights the need for inventors to pay close attention to the language their patent attorneys use to claim their inventions. The attorney’s goal of avoiding unnecessary narrowing language is laudable, but the inventor may be in a better position to suggest general language that will still have clear meaning to others in the field. As an inventor, have in mind the difference between describing a concept generally and describing it ambiguously. Your goal should be to help your attorney draft general, but unambiguous, claims. Abdicating your role, arcane legalese runs the risk of creating a patent that is invalid.

The author is a former software engineer.

Publications and Upcoming Events


How To Kick Ass At Fed. Circ. Oral Args
April 14, 2014
Quoted: J. Anthony Downs

Wearable Patent Battles Ahead
EE Times
February 24, 2014
Author: Charles H. Sanders

PTAB Takes Hard Line at First Inter Partes Review
Intellectual Property Magazine
February 14, 2014
Authors: Eleanor M. Yost and Jonathan A. Auerbach

Multiple Petition Practice: Getting the Most Out of the New Post-Grant Proceedings Before the U.S. Patent and Trademark Office
Bloomberg BNA
January 5, 2014
Authors: Eleanor M. Yost and April E. Weisbruch

Upcoming Events

AIPLA’s Annual Women Working in IP Networking Event
May 22, 2014
Boston, MA

The AIPLA Women in Intellectual Property Committee organizes this series of cross-country networking gatherings that offers women involved with IP a chance to meet and network with local colleagues. Goodwin Procter will host the 7th Annual event in its Boston office. 

Patent Infringement: Structuring Opinions of Counsel
May 22, 2014

This CLE webinar will provide patent counsel with an analysis of the evolving standard for patent infringement claims and the use of opinions of counsel. Goodwin Procter partner Eleanor M. Yost and associate April E. Weisbruch will present on the panel, which will discuss the issue of waiver of the attorney-client privilege and provide best practices for leveraging opinions of counsel.

Managing Complex ITC Litigation
June 5-6, 2014
Palo Alto, CA

Goodwin Procter partner Charles H. Sanders will present a session discussing the appropriate standard that should be used when analyzing whether or not an exclusion order should be granted in a 337 investigation. This session will discuss the relevant issues for both complainants and respondents, and the possibility that the standard for the issuance of an exclusion order could be changed.

NJIPLA 2014 Jefferson Medal Dinner
June 6, 2014
Short Hills, NJ

As president of the New Jersey Intellectual Property Law Association (NJIPLA), Goodwin Procter partner Mark J. Abate will host the 2014 Jefferson Medal Dinner and provide an introduction to the evening. Following a 64-year tradition, the NJIPLA presents the Jefferson Medal annually to someone who has made exceptional contributions to the field of intellectual property law. Former USPTO Director David J. Kappos is the 2014 Jefferson Medalist. Goodwin Procter will host clients and guests at the dinner.
PLI’s Fundamentals of Patent Prosecution 2014: A Boot Camp for Claim Drafting & Amendment Writing
June 11-13, 2014
New York, NY

This program will focus on teaching the basics of claim drafting and patent application preparation and prosecution, as well as a review of recent developments in the law. Goodwin Procter partner Marta E. Delsignore will participate in a panel discussion about prosecution issues in claim construction, “divided infringement” issues, avoiding disclosures of claimed subject matter, effective use of secondary considerations of non-obviousness, means plus function claim language, Doctrine of Equivalents analysis in view of the Festo decisions, inequitable conduct, and the preparation of non-infringement and invalidity opinions.

Prior Art and Obviousness 2014: Current Trends in Sections 102 and 103
June 17, 2014
San Francisco, CA

This program will discuss AIA 102, including recent interpretations, case law and a thorough exploration of the statutory revisions. Additionally, the event will focus on 103 from inside and outside the PTO as both the CAFC and PTO try to shoehorn their past decisions into a KSR pigeonhole. Goodwin Procter partner Annemarie Hassett will speak at this event.