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 appropriateness of injunctive relief. The District Court should not have declined to issue 2

an injunction on the ground that MercExchange intended to license its technology 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 injunction to extract exorbitant concessions from businesses.

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0.2.1

Diamond v. Chakrabarty
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 0.2.3 0.2.4 0.2.5

Facts Issue Holding Reasoning

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1.1

Trade Secret
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 completed 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 misappropriated DuPont’s trade secrets. The Christophers argued that aerial photography of the incomplete plant could not support a claim for misappropriation 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 independently 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 accompanies 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 secret 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 negotiations, 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 parallel 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 “Clickety 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 request 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 protections 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 1.5.3 1.5.4 1.5.5 Facts Issue Holding Reasoning

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1.6.1 1.6.2 1.6.3 1.6.4 1.6.5

Sample
Overview Facts Issue Holding Reasoning

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