A blog about patent, copyright and trademark law in the U.S. District Court
for the Southern District of New York

Court Permits Discovery of Foreign Sales of Infringing Goods Made in the United States

In a November 25, 2015 ruling, Judge Laura Taylor Swain permitted the plaintiff in this patent infringement action to seek discovery of the amount of the defendant's foreign sales of allegedly infringing goods manufactured in the United States.  The Court wrote that "[l]ong-established Federal Circuit precedent recognizes that, when an allegedly infringing product is produced in the United States and subsequently sold by the manufacturer to foreign buyers, the foreign sales are relevant to the determination of damages suffered as a result of the domestic act of infringement." Judge Swain rejected the defendant's argument that the Federal Circuit's recent tightening of the extra-territoriality of patent rights prevented the discovery sought, finding that none of the defendant's "cited authorities demonstrates that discovery of foreign sales information – which is relevant to [the plaintiff's] claim for damages for allegedly infringing activities in the United States since it has, at a minimum, implications for the valuation of the invention – is precluded by the presumption against extraterritoriality."

Court Finds "Clever" Invention Claims Patent-Ineligible Subject Matter

In a November 18, 2015 ruling, Judge Colleen McMahon found the plaintiff's patent for routing a long distance call invalid as merely claiming an abstract idea.  Judge McMahon described the claimed invention as:
For example, suppose I am the end user. My service provider assigns me the number 555- 222-1234; I tell the service provider that, when I dial those digits, I want to be connected to my best friend (the recipient), who lives in Ohio, and whose telephone number is 614-555-1213. When I dial the assigned incoming telephone number (555-222-1234) from my personal telephone number (987-654-3210)- which number is recognized via some unclaimed but well known device like Caller ID - the call is forwarded directly to my best friend's home telephone number (614-555-1213). I need not input any additional information in order to get the call routed to its intended recipient.
The Court then noted that:
 The claim is directed to a well-known activity that is almost as old as telephony itself making a long distance telephone call. What plaintiff did was figure out a way to make such a call more cheaply, by dialing a ten digit local number and nothing more. He combined two activities that have long been performed, by humans and by machines -- caller ID and call forwarding- such that the recipient of a local call (area code plus seven digit number) uses some type of caller ID to recognize who the incoming caller is, and then forwards the incoming call to its intended recipient by associating the assigned incoming telephone number with a particular recipient's telephone number. Neither caller ID nor the method by which the call actually gets forwarded to its intended recipient (over what telephone network, using what switching facilities) is claimed. No physical aspect of this process is claimed. What is claimed is the idea of dialing only ten digits, at which point some unspecified intermediary will identify both the caller and the intended recipient of the call and connect them.
Judge McMahon then found that:
 Defendant argues that the claims of the '156 patent are directed to the patent ineligible abstract idea. I agree. Defendant, in an effort to shoehorn this case into as many of the above fact-patterns as it possibly can, says that the abstract idea is "a call routing system that employs a two-dimensional lookup table such that calls are routed to intended recipients based on the call-in number being dialed and the identity of the caller." I think it is simpler to say that the claims in suit are directed to the idea of "connecting two people via long distance telephony using caller ID and call forwarding." However you put it, it is clear, on the basis of the precedents discussed above, that this patent is directed to an abstract idea.
Although the Court characterized the invention as both "clever" and "an elegant solution," Judge McMahon nevertheless concluded that the claimed invention lacked any inventive concept, and merely claimed patent-ineligible subject matter.

Court Finds Lack of Subject Matter Jurisdiction Over Invalidity Claim After Plaintiff Dismissed its Infringement Claim

In a November 10, 2015 ruling, Judge Jed S. Rakoff dismissed the defendant's declaratory judgment counterclaim of invalidity for lack of subject matter jurisdiction when the plaintiff dismissed its infringement claim after an adverse Markman construction.  The plaintiff also offered a covenant not to sue that was effective as to future claims against the defendant unless the adverse claim construction was reversed.  Judge Rakoff found that the covenant not to sue eliminated subject matter jurisdiction over the invalidity counterclaim, writing:
In light of the parties' joint stipulation of non-infringement and plaintiff's covenant not to sue on the [patent-in-suit] barring a change in the law of the case, there is no live controversy between the parties as to infringement and defendants have no immediate interest in the validity of defendants' . . . Patent as long as that remains so. While defendants might gain such an interest if plaintiff both appeals the Court's Markman Order and persuades the Federal Circuit of what it could not persuade this Court, there is no certainty that plaintiff will even take an appeal. Plaintiff has not committed to doing so and defendants themselves recognize that plaintiff very well may choose not to, asserting that plaintiff is posturing in threatening to appeal. . . . A controversy this speculative simply cannot be considered to have the "sufficient immediacy" needed to invoke the Declaratory Judgment Act. As such, this Court does not have jurisdiction to entertain the invalidity claim.
Judge Rakoff also ruled that even if the Court had jurisdiction, the Court would decline in its discretion to exercise it given the lack of any immediate controversy.  Judge Rakoff found that "that it would be imprudent and a potential waste of both the parties' and judicial resources for the Court to proceed to determine the validity of the [patent-in-suit], when plaintiff has categorically dropped its infringement allegations barring a reversal of the Court's construction of the term" at issue.

Court Finds Unjust Enrichment Claim Raises Federal Question Under Patent Act

In an October 29, 2015 ruling,Judge Jesse M. Furman found federal question jurisdiction over the plaintiff's unjust enrichment claim which depended on the defendant's infringement of the plaintiff's patent.  The plaintiff administers a number of patent license pools, and the defendant took a license under one of the pools.  After the defendant stopped paying royalties, the plaintiff sued in state court for breach of contract and unjust enrichment.  The defendant removed to this Court, and the plaintiff moved to remand.  Plaintiff's unjust enrichment theory was that the defendant "'benefited by acting as if it had a patent pool license . . ., i.e., that it was "under the umbrella of the protection of the [relevant] Contract"'" and 'it [did] so at the expense of [the plaintiff] which had nonetheless provided this umbrella of protection but was not adequately compensated for doing so.'"  Judge Furman found that "to prevail on that claim, [the plaintiff] must necessarily prove infringement of one or more of the patent in the patent pool," "[t]hat is, the only way [the plaintiff] can prove that [the defendant] benefited at its expense is by showing that it used (and therefore infringed) a patent in the pool."  The Court noted that that "fact distinguishes [the plaintiff's] claim from breach of contract cases found not to raise federal patent questions because the claims turned on interpretation or application of a term in the contract, and infringement or non-infringement was not the determining factor," and denied the plaintiff's motion to remand.

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