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Case Briefs on Patent Law

Yin Huang
November 27, 2010

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0.1 eBay Inc. v. MercExchange, L.L.C.
126 S.Ct. 1837 (2006)

0.1.1 Overview
The Supreme Court applied the traditional four-factor test in determining
whether to issue an injunction as a remedy for patent infringement. The
Court held that lower courts should neither grant nor deny injunctions as a
matter of course.

0.1.2 Facts
MercExchange, L.L.C. held a patent that covered auction websites of the kind
operated by eBay Inc. MercExchange attempted to license its technology to
eBay, but the parties ultimately failed to reach an agreement. MercExchange
then sued to enjoin eBay from operating its auction websites.

0.1.3 Issue
What test should courts apply in deciding whether to issue an injunction as
a remedy for patent infringement?

0.1.4 Holding
Courts should apply the traditional four-factor test in deciding whether to
issue an injunction as a remedy for patent infringement. A plaintiff seeking an
injunction must demonstrate (1) that it has suffered an irreparable injury;
(2) that remedies available at law are inadequate to compensate for that
injury; (3) that, considering the balance of hardships between the plaintiff
and defendant, a remedy in equity is warranted; and (4) that the public
interest would be not be disserved by a public injunction.

0.1.5 Reasoning
Justice Thomas delivered the opinion of the Court. Although the
Patent Act grants patentees “the right to exclude others from making, using,
offering for sale, or selling” their patented inventions, these protections do not
imply that courts should depart from the traditional test for the appropriate-
ness of injunctive relief. The District Court should not have declined to issue

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an injunction on the ground that MercExchange intended to license its tech-
nology rather than to develop its own auction websites. A patentee’s decision
to avoid the financial hurdles of marketing a product should not weaken the
exclusionary rights arising from the patent. The Court of Appeals should
not have taken the equally unsupported position that injunctions should be
granted as a matter of course.

Justice Roberts, with whom Justice Scalia and Justice Ginsburg


join, concurring. Courts frequently grant injunctions in patent litigation
because the traditional test frequently shows that injunctive relief is the
appropriate remedy. Because patents fundamentally grant a right to exclude,
courts can best protect this right by issuing injunctions.

Justice Kennedy, with whom Justice Stevens, Justice Souter, and


Justice Breyer join, concurring. Courts should consider the modern
realities of patent law in applying the traditional test for injunctive relief.
Courts should consider that a patentee may use the possibility of an injunc-
tion to extract exorbitant concessions from businesses.

0.2 Diamond v. Chakrabarty


0.2.1 Overview
The Supreme Court held that an organism engineered to have characteristics
not found in nature could be patent-eligible.

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0.2.2 Facts
0.2.3 Issue
0.2.4 Holding
0.2.5 Reasoning

1 Trade Secret
1.1 E. I. du Pont de Nemours & Company, Inc. v.
Christopher
451 F.2d 1012 (5th Cir. 1970)

1.1.1 Overview
The Fifth Circuit held that aerial photography can sometimes be an improper
means of appropriating a trade secret.

1.1.2 Facts
E. I. du Pont de Nemours & Company (“DuPont”) was constructing a plant
whose purpose was to produce methanol using a process that DuPont had
newly discovered. During construction, portions of the plant’s interior were
exposed. According to DuPont, aerial photographs of the partially com-
pleted plant could allow a sufficiently skilled individual to deduce DuPont’s
new method of methanol production from the plant’s configuration. After
Rolfe and Gary Christopher took aerial photographs of the plant on behalf
of an undisclosed third party, DuPont sued on the ground that they had mis-
appropriated DuPont’s trade secrets. The Christophers argued that aerial
photography of the incomplete plant could not support a claim for misap-
propriation of trade secrets.

1.1.3 Issue
May aerial photography of a partially completed chemical plant support a
claim for misappropriation of trade secrets?

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1.1.4 Holding
Aerial photography of a partially completed chemical plant may support a
claim for misappropriation of trade secrets.

1.1.5 Reasoning
Goldberg, Circuit Judge: In general, the misappropriation of a trade
secret occurs whenever one arrives at the discovery of another without in-
dependently undertaking the efforts necessary for the discoverer to uncover
the secret. The Restatement of Torts summarizes this rule by stating that
one is liable for infringing a trade secret when “he discovered the secret by
improper means.” The applicable case law contains rules to the same effect.
Although a breach of confidence or some other deceptive act often accom-
panies the misappropriation of a trade secret, nothing in the legal doctrine
states that such acts must occur before liability can exist.
Although one is entitled to observe a competitor’s operations and even
to reverse-engineer a competitor’s product, one may not obtain a trade se-
cret by circumventing the competitor’s reasonable precautions against the
divulgement of that trade secret. The Christophers violated this rule by
employing the special means of overflying DuPont’s plant in order to take
photographs that would show that plant’s configuration. DuPont could not
have guarded against such photography except by the impractical defense of
building a roof over the partially completed plant. Therefore, DuPont has
advanced a cognizable claim for misappropriation of a trade secret.

1.2 Learning Curve Toys, Inc. v. PlayWood Toys, Inc.


342 F.3d 714 (7th Cir. 2003)

1.2.1 Overview
The Seventh Circuit held that the copying of a simple toy design disclosed
under a confidentiality agreement may support liability for misappropriation
of a trade secret.

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1.2.2 Facts
PlayWood Toys was an upstart company whose business consisted of selling
wooden toy trains. When PlayWood displayed its toy trains at the New York
Toy Fair, Learning Curve Toys expressed interest in arranging for PlayWood
to manufacture Learning Curve’s line of toy trains. During subsequent nego-
tiations, Learning Curve disclosed to PlayWood that it was facing difficulties
in differentiating the wooden tracks for its toy trains from its competitors’
tracks. PlayWood responded by proposing a wooden track carved with par-
allel grooves, which would cause toy trains to make a “clickety-clack” sound
as they rolled along the track. To illustrate its idea, PlayWood machined a
model segment of the track during the meeting. After orally agreeing not
to disclose the substance of the negotiations, Learning Curve representatives
took possession of the prototype track.
The negotiations between PlayWood and Learning Curve were ultimately
unfruitful. Upon discovering that Learning Curve was producing the “Click-
ety Clack Track,” PlayWood sued for misappropriation of a trade secret.
The trial court granted judgment as a matter of law to Learning Curve on
the ground that PlayWood had not established a material issue of fact as to
whether its prototype track was a trade secret.

1.2.3 Issue
Did PlayWood establish a material issue of fact as to whether its prototype
track was a trade secret?

1.2.4 Holding
PlayWood established a material issue of fact as to whether its prototype
track was a track secret.

1.2.5 Reasoning
Ripple, Circuit Judge.

1.3 CMBB, LLC v. Lockwood Manufacturing, Inc.


628 F.Supp.2d 881 (N.D.Ill. 2009)

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1.3.1 Overview
The court held that an unprotected customer list is not a trade secret.

1.3.2 Facts
Shortly before Chicago Metallic went out of business, it sold to CMBB a list
of its customers. During the transaction, Chicago Metallic did not indicate
to CMBB that the list was a considered a trade secret, nor did CMBB re-
quest that Chicago Metallic ensure the list’s secrecy by destroying all extra
copies. CMBB subsequently came believe that a former employee of Chicago
Metallic disclosed a copy of the list to Lockwood Manufacturing. CMBB
sued Lockwood on the ground that Lockwood had misappropriated a trade
secret.

1.3.3 Issue
Is an unprotected customer list a trade secret?

1.3.4 Holding
An unprotected customer list is not a trade secret.

1.3.5 Reasoning
Milton I. Shadur, Senior District Judge. CMBB has not shown that
Chicago Metallic treated the customer list as a trade secret. When Chicago
Metallic was still in business, it placed no restrictions on what employees
could do with the list. When the list was sold to CMBB, Chicago Metallic
did not indicate that the list was a trade secret, nor did CMBB ask Chicago
Metallic to take any steps to prevent the disclosure of the list to other parties.
In all, the reasonable protections that would normally protect a trade secret
were entirely absent.

1.4 Bonito Boats, Inc. v. Thunder Craft Boats, Inc.


109 S.Ct. 971 (1989)

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1.4.1 Overview
The Supreme Court invalidated a Florida statute prohibiting the duplication
of non-patented boat hulls. The Court found that the statute contravened
federal patent law.

1.4.2 Facts
Bonito Boats used “direct molding” to produce the hulls of its recreational
boats. In direct molding, the manufacturer first constructs a wooden model
of the hull to be produced. The manufacturer then sprays a layer of fiberglass
onto the model. When the fiberglass hardens, it forms a mold from which
production hulls can be made.
Bonito used direct molding to produce its Model 5VBR recreational boat.
The boat had been on the market for six years when Florida enacted a
statute making it “unlawful for any person to use the direct molding process
to duplicate for the purpose of sale [any boat hull].” Bonito subsequently
sued Thunder Craft Boats for violating the statute by duplicating the Model
5VBR hull.

1.4.3 Issue
Does federal patent law preempt and thereby invalidate the Florida statute?

1.4.4 Holding
Federal patent law preempts and thereby invalidates the Florida statute.

1.4.5 Reasoning
Justice O’Connor delivered the opinion of the Court. The Florida
statute contravenes federal patent law by providing inventors with protec-
tions that run counter to congressional intent.

1.5 Laboratory Corp. of America v. Metabolite Labs,


Inc.
126 S.Ct. 2921 (2006)

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1.5.1 Overview
Three Supreme Court justices disapproved a patent covering

1.5.2 Facts
1.5.3 Issue
1.5.4 Holding
1.5.5 Reasoning

1.6 Sample
1.6.1 Overview
1.6.2 Facts
1.6.3 Issue
1.6.4 Holding
1.6.5 Reasoning