If the Supreme Court had ruled in favor of a complete bar rule on patent prosecution, all patent holders who made amendments during the prosecution process would be at great risk of being unable to prosecute copycats under the doctrine of equivalents.

Supreme Court Issues New Guidelines In Patent Infringement Cases

"The patent laws [reward] innovation with a temporary monopoly . . .. The monopoly is a property right; and like any property right, its boundaries should be clear. This clarity is essential to promote progress, because it enables efficient investment in innovation. A patent holder should know what he owns, and the public should know what he does not. For this reason, the patent laws require investors to describe their work in ‘full, clear, concise, and exact terms,’ …as part of the delicate balance the law attempts to maintain between investors, who rely on the promise of the law to bring the invention forth, and the public, which should be encouraged to pursue innovations, creations, and new ideas beyond the inventor’s exclusive rights."

This quote by Justice Kennedy, from the Supreme Court’s unanimous opinion (only the eighth this term, out of almost 50 cases) issued this week in Festo Corp. v. Shoketsu Kinzoku Kogyokabushiki Co. (No. 00-1543) underscores the importance of America’s patent laws to protect and fully enforce intellectual property rights. The relatively short, but highly complex decision, addresses the relation between two patent law concepts, the doctrine of equivalents and the rule of prosecution history estoppel, in a patent law case that has significant consequences for inventors of everything from medicine to parts for a roller coaster ride.

The Founding Fathers recognized the importance of encouraging innovative ideas and investment in technology when they provided the Federal government with exclusive jurisdiction over patents. The U.S. Constitution, Article I, section 8, clause 8, provides Congress with the power "to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries."

The United States adopted its first patent act in 1790 and President George Washington issued the first patent that same year. Since then, over six million patents have been issued. It is estimated that as many as 1.2 million existing patents could be impacted by the Festo decision.

The Patent and Trademark Office (PTO) governs the process of issuing patents. Simply stated, the process commences when a patent-seeker submits an application to the PTO, disclosing the invention in great detail, and ends when the PTO grants the patent, effectively giving the patentee the right to exclude others from making, using or selling the patented invention for twenty years after the patent application was filed. This process often takes years, with the application undergoing amendments and perhaps even an appeal to the United States Court of Appeals for the Federal Circuit if the patent is not allowed by the examiner.

Once a patent is issued, the PTO makes public the record of its proceedings, including every detailed element of the invention. Thus begins the relatively easy opportunity for competitors to copycat claimed inventions. And from that after-arising technology often comes claims by patent holders against competitors for patent infringement.

From those cases has developed the "doctrine of equivalents." Under the doctrine of equivalents, a patent holder can claim patent infringement even if a device is not an exact copy if the patentee can show that the accused device performs substantially the same function in substantially the same way to obtain the same result. When the Supreme Court first adopted what has become the doctrine of equivalents almost 150 years ago, it stated that "[t]he exclusive right to the thing patented is not secured, if the public are at liberty to make substantial copies of it, varying its form or proportions." Winans v. Denmead, 15 How. 330, 343 (1854). The need for this doctrine comes from the fact that very often the invention cannot be fully described and a patent application cannot always be interpreted literally, as Justice Kennedy noted in Festo when he stated that "[i]f 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."

But the doctrine of equivalents has limitations, developed as the courts recognized the need to balance the competing policies of the patent system --providing public notice of patented inventions to inspire further innovations versus providing patentees protection for their inventions and some opportunity for return on investment.

One limitation to the doctrine of equivalents is the rule of prosecution history estoppel. This defense precludes a patentee from claiming that subject matter covered by the original, broader claim is nothing more than an equivalent when the patentee narrows the claim in response to a rejection during the patent proceedings. Obviously, the broader the claim, the greater the patent protection, so savvy patentees frequently try for as much as they can get in the initial application, providing more detail only as forced to by the PTO.

By way of example, Festo applied for two patents for an industrial device. After the patent examiner rejected the initial application for the first patent because of defects in description, the application was amended to add that the device would contain a pair of one-way sealing rings and an outer sleeve would be made of a magnetizable material. The second patent application also was amended to include the sealing rings detail. Festo received the patents and began selling the device. Thereafter, it learned that one of its competitors was selling a similar device that uses a two-way sealing ring and a nonmagnetizable sleeve. Festo sued the competitor for patent infringement under the doctrine of equivalents.

The competitor responded that because Festo had amended its patent, Festo was precluded from recapturing the broader description surrendered by amendment as a condition of obtaining the patent. In effect, the competitor wanted Festo’s patents to be limited to the literal terms of the amendments, namely only for a device using one-way sealing rings and a mangetizable sleeve. The competitor wanted the court to ban Festo from invoking the doctrine of equivalents and limit its patent protection to the device described in the amendment.

Courts have struggled for years to define the boundaries of prosecution history estoppel in doctrine of equivalent patent infringement cases. Most recently, the Supreme Court reaffirmed in Warner-Jenkinson Co. v. Hilton Davis Chemical Co., 520 U.S. 17 (1997), that "a patent protects its holder against efforts of copyists to evade liability for infringement by making only insubstantial changes to a patented invention." In that case, the Court adopted what has become known as the "Warner-Jenkinson presumption," which permits a competitor to rely on the prosecution history to ensure that their own devices will not be found to infringe by equivalence. In the Warner-Jenkinson unanimous opinion, the Court concluded that the doctrine of equivalents would be firmly entrenched as part of patent protection unless and until Congress legislates it out. "[T]he lengthy history of the doctrine of equivalents strongly supports adherence to our refusal in Graver Tank to find that the Patent Act conflicts with that doctrine. Congress can legislate the doctrine of equivalents out of existence any time it chooses. The various policy arguments now made by both sides are thus best addressed to Congress, not this Court." 520 U.S. at 28.

At the time of the Warner-Jenkinson decision, Festo had a petition pending before the Supreme Court. In that case, Festo’s first appearance at the Supreme Court almost five years ago, Festo had requested a review of the lower court’s holding that Festo’s amendments to its patent application were not the kind to give rise to prosecution history estoppel. The Supreme Court granted certiorari, vacated, and remanded Festo in light of its Warner-Jenkinson decision.

In Festo’s second trip to the Supreme Court, it challenged the Federal Circuit’s most recent ruling that "by narrowing a claim to obtain a patent, the patentee surrenders all equivalents to the amended claim element." Festo then asked the Supreme Court to address "whether every claim narrowing amendment designed to comply with any requirement of the Patent Act — including those not related to prior art — automatically creates prosecution history estoppel" and "whether every finding of prosecution history estoppel completely bars every application of the doctrine of equivalents."

This time, the Supreme Court made clear that prosecution history estoppel does not bar the inventor from asserting infringement against every equivalent to the narrowed element. The Court rejected the lower court’s desire to adopt a complete-bar rule to replace a case-by-case approach (the flexible-bar rule). In the lower court’s view, "the complete-bar rule, under which estoppel bars all claims of equivalence to the narrowed element, would promote certainty in the determination of infringement cases." But the Supreme Court found that "[w]hile this Court has not weighed the merits of the complete bar against the flexible bar in its prior cases, we have consistently applied the doctrine in a flexible way, not a rigid one."

In a "hand-slapping" fashion, the Supreme Court stated that "[t]he Court of Appeals ignored the guidance of Warner-Jenkinson, which instructed that courts must be cautious before adopting changes that disrupt the settled expectations of the investing community. . . . The petitioner in Warner-Jenkinson requested another bright-line rule that would have provided more certainty in determining when estoppel applies but at the cost of disrupting the expectations of countless existing patent holders. We rejected that approach . . .."

After 13 years in court and twice at the Supreme Court, poor Festo’s legal troubles continue despite its partial victory. After declaring that estoppel does not effect a complete bar, the Supreme Court vacated the judgment of the Federal Circuit and remanded the case for determination whether Festo has rebutted the presumptions that estoppel applies and that the equivalents at issue have been surrendered. Be that as it may, this Festo decision should save numerous existing patent holders from being stripped of the protection they deserve.

If the Supreme Court had ruled in favor of a complete bar rule on patent prosecution, all patent holders who made amendments during the prosecution process would be at great risk of being unable to prosecute copycats under the doctrine of equivalents. That ultimately could have led to significant modifications in the application process and probably an increase in patent determination appeals, because a prospective patent holder would see a significant benefit to appealing an original application rather than amending and risking a complete bar to pursuing copycat infringers. Justice Kennedy, obviously aware of the far-reaching consequences of an opposite conclusion, stated that: "Inventors who amended their claims under the previous regime had no reason to believe they were conceding all equivalents. If they had known, they might have appealed the rejection instead. There is no justification for applying a new and more robust estoppel to those who relied on prior doctrine."

To download the Court’s opinion, click here.

May 30, 2002
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