Intel, Oracle, Smith & Nephew: Intellectual Property

A federal judge threw out claims by Intel Corp. (INTC) that accused the University of Wisconsin of accepting money to begin a research program and then demanding billions of dollars in royalties on the work.

U.S. District Judge Barbara B. Crabb in Madison, Wisconsin, dismissed the suit April 24, saying Intel’s claims belonged in state, not federal, court.

The university’s licensing agency, the Wisconsin Alumni Research Foundation, or WARF, sued Intel last year seeking patent royalties on the Intel Core 2 Duo processor and other microprocessors. Intel countered with its own suit claiming the university secretly obtained the patent on research funded by the U.S. government and Intel in the mid-1990s.

The patent suit will continue, and Intel will challenge WARF on issues of both infringement and the validity of the school’s patent, said Chuck Mulloy, a spokesman for Santa Clara, California-based Intel.

As to the breach of contract claims that were dismissed, “we’ll look at our options and we may take them to state court,” Mulloy said in a telephone interview May 1.

The company said it gave payments of $28,000 and $30,000 after receiving signed letters in 1994 and 1995 that Santa Clara, California-based Intel “shall have unrestricted rights at no cost to the result of this research” that it was funding, according to the complaint.

In 1996, Intel gave another $31,000 and in an accompanying letter said Intel gets rights for internal, non-commercial use and “this agreement entails no grant of license rights to make commercial use of the university’s intellectual property.” WARF submitted the letter in a court filing.

WARF Managing Director Carl Gulbrandsen, in a January statement, called the Intel suit a “diversionary tactic” and said he “regrets that Intel has chosen to harass the university.”

The lawsuit contends that the researchers and university breached the contract implicit in the signed letters. In an interview earlier this year, Steven Rodgers, Intel’s director of litigation, said the dispute could affect the ability of other universities to raise money from corporations.

The cases are Intel Corp. v. Board of Regents of the University of Wisconsin System, 08cv700, and Wisconsin Alumni Research Foundation v. Intel Corp., 08cv78, both U.S. District Court for the Western District of Wisconsin (Madison).

Grove Says Patent System May Have Same Flaws as Derivatives

Andy Grove, who oversaw Intel Corp.’s emergence as the world’s largest chip company, says the U.S. patent system suffers from the same kind of flaws that brought about the global financial crisis.

Grove, Intel’s chief executive officer from 1987 to 1998, is now a senior adviser at the Santa Clara, California-based company.

Patents have evolved to a point where they often aren’t developed into products, and instead are instruments traded by speculators looking for the highest possible profit, Grove said May 2 at an event in Mountain View, California. Similar to financial derivatives, the link between patents and the products they protect is getting more tenuous, he said.

The result is that industries ranging from technology to health care are failing to take advantage of new inventions, because sitting on patents can be more attractive than developing products, a process that can be “expensive, dirty and unrewarded,” Grove said in an interview. If the government awards a patent -- granting a limited monopoly -- the onus should be on the owner to develop a product, Grove said.

Intel and Cisco Systems Inc. (CSCO), the largest maker of networking equipment, are lobbying in Congress to make it easier to challenge patents and lessen the penalties when accused infringers lose at trial. The companies say they spend millions of dollars to defend against frivolous lawsuits filed by companies that own patents but don’t make products.

Patent lawsuits jumped to 2,909 in the fiscal year that ended last September, from 1,840 in 1996, an increase of 58 percent, according to the Administrative Office of U.S. Courts.

It costs an average of $5 million to defend a patent- infringement claim, David Simon, Intel’s chief patent counsel, told Congress last month. The companies that buy patents to make money are referred to as “non-practicing entities,” or “trolls,” a term coined by a former Intel executive.

Opponents say the lobbying effort could end up hurting the entire patent system, just to fix a problem facing only a few big companies.

Patents are property like a house, and an infringement claim protects against trespassing, said Dean Kamen, the inventor of the Segway motorized scooter. Patent protection is a big incentive to come up with new inventions, and changes to the system should focus on improving funding for the U.S. Patent and Trademark Office, he said. That would ensure the agency has the resources to do a better review of patent applications.

As Grove sees it, the patent system requires fundamental changes, rather than “tinkering away at the edges.” One challenge is to persuade judges and juries to think about patents less as pieces of property and more in terms of how they grant a monopoly for future products.

The separation between patents and products reflects a broader split between research and manufacturing in Silicon Valley and the rest of the country, Grove said. It also makes it more difficult for the U.S. to compete with countries such as China, he said.

“That’s the common theme: It applies to Silicon Valley, it applies to the U.S.,” Grove said. “We have a social, national competitor in China that is substantially better at these things.”

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Oracle Accused of Infringing 11 Patents by I2

Oracle Corp. (ORCL) was accused of infringing 11 patents in a lawsuit by I2 Technologies Inc., a supplier of software to manage business supply chains, according to reporting by Susan Decker.

I2, based in Dallas, filed the complaint April 30 in federal court in Tyler, Texas. The company seeks a court order to block further use of its inventions and cash compensation.

The patents, issued from July 1999 to May 2008, cover things such as planning coordination systems, ways to allocate products to sellers and “value chain management.” I2 didn’t name any specific Oracle products, only that the “acts of infringement have caused damage to I2.”

Oracle, based in Redwood City, California, is the world’s second-biggest software maker behind Microsoft Corp. (MSFT) Deborah Hellinger, an Oracle spokeswoman, didn’t immediately return an e-mail seeking comment.

In July, SAP AG, the world’s biggest maker of business- management software, agreed to pay I2 $83.3 million to end a patent-infringement lawsuit over supply-chain software.

The case is i2 Technologies Inc. v. Oracle Corp., 09cv194, U.S. District Court, Eastern District of Texas (Tyler).

Smith & Nephew Says Court Invalidates Patent Claims

A U.K. court ruled most patent claims asserted against Smith & Nephew Plc (SN/)’s “negative pressure” wound-treatment technology by Kinetic Concepts Inc. are invalid.

While seven of 10 U.K. patent claims asserted against Smith & Nephew’s technology were thrown out, three other claims were upheld and remain in effect in Britain. Smith & Nephew, based in London, said it will pursue an appeal to invalidate those three claims “as a matter of urgency.”

The judgment extends an order blocking Smith & Nephew from promoting or selling foam wound-treatment kits in the U.K. while the court considers further remedies. The patents asserted against Smith & Nephew are licensed by Kinetic Concepts from Wake Forest University in North Carolina.

The ruling “has no impact on Smith & Nephew’s ability to sell gauze-based” negative pressure wound-treatment systems, the company said in a statement.

Johnson & Johnson Unit Sued by Hologic Over Patent

A unit of Johnson & Johnson (JNJ), the world’s largest maker of health-care products, was sued by surgical-equipment maker Hologic Inc. (HOLX), which claims it infringes a patent for a device used to perform breast biopsies.

Bedford, Massachusetts-based Hologic said in a complaint filed April 30 in federal court in Wilmington, Delaware, that Ethicon Endo-Surgery Inc. should pay damages for using the technology, patented in 2008.

“Ethicon has infringed and continues to infringe the patent” through sales of its Mammotome MR excision system, Hologic lawyers contend in the lawsuit.

Biopsies can be used to gather tissue samples to detect breast cancer, which claimed the lives of more than 40,000 women in the U.S. last year, according to the National Cancer Institute.

Jeffrey Leebaw, a Johnson & Johnson spokesman, couldn’t immediately comment on the lawsuit.

The case is Hologic Inc. v. Ethicon Endo-Surgery LLC, U.S. District Court, District of Delaware (Wilmington).

To see the patent, click: 7,347,829.

For other patent news, click here.

Copyright

Anthony Srock Sues Over Copyright to ‘Take Me Away’ Song

Anthony Srock sued an individual named Jerry Capaldi on April 30 in federal court in Detroit over royalties to a song called “Take Me Away,” according to the complaint.

Srock is the registered copyright-holder of the song together with co-writer Jeff Mills, according to the suit.

On March 20, 1989, Srock and Mills transferred ownership of the master recording of “Take Me Away” to Capaldi, the complaint says. At the same time, Srock informed BMI, the music licensing company, that he had transferred ownership of the recording “as to publishing,” the complaint said. Srock says he continued to own the copyright to the sound recording and the underlying composition, according to court files.

Srock says in the complaint that Capaldi failed to pay to Srock the mechanical royalties due to him as the “artist owning the underlying composition.” Under industry standards, he claims he is entitled to 50 percent of mechanical royalties.

Srock seeks an accounting and damages. He is represented by Thomas E. Donohue of Dickinson Wright PLLC in Bloomfield Hills, Michigan.

Capaldi hasn’t yet appeared in the action.

The case is Srock v. Capaldi, 09-cv-11651, U.S. District Court, Eastern District of Michigan (Detroit).

For other copyright news, click here.

Trademark

Google Faces Suit Over Android Operating System Name

Google Inc. (GOOG), which unveiled its “Android” operating system for mobile phones last year, was sued by a man claiming his business already holds a trademark for the use of that name in connection with e-commerce.

Erich Specht of Palatine, Illinois, and his Android Data Corp., sued Mountain View, California-based Google, claiming he obtained U.S. trademark rights to Android in 2002 and that when Google applied for a similar right, the U.S. Patent and Trademark Office in 2008 rejected it.

Google’s actions and the actions of its business partners that will use its software “will undoubtedly lead to deception, confusion and mistake among the consuming public,” according to Specht’s complaint, which seeks a court order barring their use of the name. Specht, in his complaint filed April 28 in federal court in Chicago, also seeks at least $2 million in damages.

Google’s Android software has been used in phones sold by T-Mobile USA Inc., a unit of Bonn, Germany-based Deutsche Telekom AG (DTE), and South Korea’s Samsung Electronics Co. LG Electronics Inc. (066570), also of South Korea, and Schaumburg, Illinois- based Motorola Inc. have said they’ll introduce Android phones this year.

Each of those companies are identified in Specht’s complaint as members of Google’s Open Handset Alliance, which is named as a defendant in the case.

“We believe these claims to be without merit,” Andrew Pederson, a Google spokesman, said May 1 in a phone interview. The company said it will defend the case “vigorously.”

Android Data’s software “enables remote administration of Web sites,” according to Specht’s complaint.

The case is Specht v. Google Inc., 09cv02572, U.S. District Court, Northern District of Illinois (Chicago).

For trademark news from last week, click here.

Regulatory/Legislative Developments

Patent-Law Changes Not Planned for Now, Judiciary Chairman Says

House Judiciary Chairman John Conyers said he has no immediate plans to advance legislation to rewrite U.S. patent law as corporations and lawmakers remain at odds over how, and whether, it should be done.

A committee vote on patent legislation hasn’t been scheduled, Conyers, a Michigan Democrat, said after hearing testimony from officials of Intel Corp., Cisco Systems Inc., Johnson & Johnson and other companies.

Patent legislation has been on the congressional agenda for almost a decade amid a 58 percent surge in litigation from 1996 to 2008, according to the Administrative Office of U.S. Courts. The court challenges have created a new body of patent law.

The patent policy debate has aligned large computer-related patent holders such as Microsoft Corp. against drugmakers such as Johnson & Johnson and venture capitalists who invest in fledgling technologies, which have differing business concerns with respect to patents.

While Congress has struggled with proposals to revamp the patent system, companies have challenged many of its provisions in court.

For more, click here.

Drug Trials/Market News

Can-Fite Plunges 59% After Rheumatoid Arthritis Trial Fails

Can-Fite BioPharma Ltd. (CFBI), the Israeli biopharmaceutical company, fell the most on record in Tel Aviv trading after a clinical trial of its treatment in patients with rheumatoid arthritis failed to achieve its goals.

Preliminary results of the phase IIb trial for Can-Fite’s CF101 drug showed that there was no significant statistical difference between the group that took the treatment and the one that took the placebo, according to a statement to the Tel Aviv Stock Exchange on May 1.

IP Moves

Heller Hit with Old Client Claim in Bankruptcy, Recorder Says

Heller Erhman LLP, the bankrupt law firm that once had 730 lawyers, now faces its largest claim from a patent holding company, according to reporting by the Recorder.

Heller Erhman filed for Chapter 11 bankruptcy protection in December in San Francisco, the paper said.

Ronald A. Katz Technology Licensing LP, together with A2D LP, filed a claim for $50 million against the bankruptcy estate to cover the cost of retaining new outside counsel to prosecute patent claims that Heller Erhman had been handling before the bankruptcy, the newspaper said.

Technology Licensing claims its current counsel at Covington & Burling LLP cannot pursue the cases because of a conflict of interest, the Recorder said, citing court papers. The conflict exists because lawyers at Covington & Burling that represent Technology Licensing include a group of 14 attorneys who formerly worked at Heller Erhman, the newspaper said.

The case is In re Heller Erhman LLC, 08-32514, U.S. Bankruptcy Court, Northern District of California (San Francisco).

To contact the reporter on this story: Carla Main in Jersey City, New Jersey, at cmain2@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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