Generic Ink & Toner Cartridges and the Legal Challenges

Market exclusivity obtained through patent protection can lead to significant economic benefits because the inventor is provided with a monopoly over the invention for the 20-year period of the patent protection. Maximizing the scope of patent coverage by adopting patent continuation strategies can be an effective means for fending off aftermarket competitors and continuing to maximize market share during the term of patent coverage.

Recap

We have now provided a background on the history of the nine patents asserted in the 2018 litigation and constructed a timeline of the key patent events that took place between Canon establishing the December 2006 priority date and the filing of the 2018 complaints.

Introduction

It’s a misrepresentation to apply a “clone” label to describe the accused products because clones, by definition, the bulk of them cannot be.

Until the issuance of the patents now asserted in the 2018 litigation, Canon, the owner of the intellectual property, may have believed a case for infringement with regards to the competitor’s products with the redesigned dongle gears (which emerged subsequent to the 2014 litigation) was not a sufficiently clear-cut literal reading of the patent claims in the 2014 litigation.

By definition, a clone must be a direct copy and, by definition, the aftermarket products with the redesigned gears (and possibly many other unique features) are not direct copies.

However, while the cartridges may not be clones, there is now the possibility they may infringe Canon’s new patents. This is what will be determined by the future rulings of the ITC and the Federal courts.

Affected parties facing the greatest potential threats from the manufacturers of the disputed cartridges may elect to spread fear, uncertainty, and doubt as far and wide as they possibly can following the complaints filed against their competitors. However, while such campaigns may be part of a strategy designed to help protect their legacy positions, the other side of the argument, exposing the potential for pernicious behavior during the prosecution of patents, is entitled to an equal platform on which to be heard.

Observations:

1. The priority date is an important date in the processing of a patent. This becomes the “anchor” date for defining what materials may be considered prior art. In other words, any technology in the public domain that existed before the priority date was established is considered prior art and may render a patent application or issued patents worthless.

2. Third-party dongle gear technology, developed after Canon’s December 2006 priority date was established, is irrelevant to Canon’s continuation filings that benefit from the 2006 priority date, and has no bearing on whether or not the continuation filings may be granted.

3. So, not only can obtaining the earliest possible priority date be an important factor in the patentability of an invention it can also play a vital role in re-working and re-shaping the scope of coverage as a patentee executes a continuation strategy.

4. The A1 date of 06/28/2008, on what later became the ‘278 patent, was the “pre-grant” publication date. This is the point at which the public may have a view of the “parent” patent application for the first time and, from which point on, can then be utilized as a means to obtain visibility of the downstream “child” filings as and when they are added, as well as to monitor the progress of the “prosecution” of the publicly available Canon applications.

5. The ‘278 patent, granted in October 2012, was at the heart of the 2014 U.S. litigation Canon undertook against nearly 30 companies – many of which are the same companies sued again in 2018.

6. The defendants involved in the 2014 round of litigation either defaulted or settled the lawsuits with admissions of patent validity and infringement. As a consequence, the ‘278 patent, along with the eight others involved in the 2014 litigation is rock-solid and, in the absence of pertinent prior art coming to light, it’s very unlikely the validity or enforceability of any of these patents could be successfully contested.

7. The primary manufacturers of aftermarket versions of dongle gears, compatible with the Canon laser cartridges in question, redesigned them to avoid conflict with the ‘278 patent and the eight other dongle gear patents asserted in the 2014 litigation.

8. Aftermarket manufacturers such as Ninestar, Static Control (now owned by Ninestar), Print-Rite, and Aster Graphics all obtained U.S. patents on their versions of redesigned dongle gears in the period after the 2014 litigation commenced. Unfortunately for them, obtaining patents on their own design-around dongle gears developed after the Canon established priority date will not adversely impact the Canon patents.

9. We don’t know if the aftermarket dongle gear manufacturers went deep enough into the Canon patent applications to continually monitor for filings of continuations or divisionals after the 2008 “A1” date. However, in order for their 2014 redesign efforts to be effective for the longer term, it would have been prudent for them to do so.

10. None of the nine patents at issue in the 2014 litigation are identified in the 2018 litigation. There is no assertion from Canon that any of the aftermarket competitors have failed to honor the settlement agreements they entered into at that time, or that their products have infringed any of those patents since that time.

11. While we don’t know the terms of the 2014 litigation settlements, it’s possible they contained language that protected the defendants from being sued again on the specific patents asserted in the 2014 dispute. However, based on the commencement of the 2018 litigation, it seems clear the settlements cannot have contained language that protected them from being sued on any continuation, continuation-in-part or divisional patents that subsequently issued (or continue to issue) as “children”, “grand-children”, or “great-grandchildren”, etc., of the patents involved in the 2014 dispute.

12. Running a patent suit from start to finish through the U.S. Federal Courts takes a long time and costs a lot of money. However, there’s a high legal threshold to cross before a Court will issue an order such as a Temporary Restraining Order (to prevent the ongoing sale of products alleged to infringe patents) while the dispute continues to work its way through the legal process. In other words, relying on the Federal Court system to provide quick relief and prevent disputed products from entering the market while the complaint is litigated, is unlikely.

13. The strategic decision to simultaneously file complaints with the International Trade Commission is likely to have been taken as part of an attempt by Canon to obtain faster relief by winning a General Exclusion Order. A GEO prevents the importation of products into the United States that are determined by the ITC to infringe intellectual property.

14. By filing complaints in both jurisdictions, not only do the defendants face higher legal costs, but Canon may obtain a quicker, more effective outcome through the granting of a General Exclusion Order (GEO), long before the Federal Court complaints would be expected to be resolved.

Summary Points

Canon’s tactic to fight the battle on multiple fronts may motivate defendants to settle the Federal complaints with admissions of infringement and patent validity. However, in the event of continuing to elect not to fight the Federal cases for patent infringement, the net may be tightening around the aftermarket manufacturers, a net which may then serve to restrict their design opportunities for non-infringing versions of their dongle gears.

Continuing to monitor the Canon patent file at the US PTO after the A1 date in June 2008, is necessary for the purposes of ensuring aftermarket design-around technology avoids the claims of any potential future patents waiting in the wings as continuation filings. Of course, this becomes an increasingly difficult task to accomplish as the need to remain compatible with the OEM product is a requirement.

There can only be so many ways for developing unique, patentable inventions on a single component such as the dongle gear. In fact, you’d think Canon would have already exhausted all possibilities for additional patents because of the sheer number they’ve already obtained.

We must hand it to the aftermarket technology resources that have been able to come up with novel inventions and multiple patents of their own despite all the Canon obstacles.

Canon is a prolific innovator and a master for utilizing the patent system to its fullest advantage. In 2017 Canon obtained 3,285 U.S. patents, the third largest number issued to a single entity, although still a long way behind IBM (9,043) and Samsung Electronics (5,837).

Until the mid-1990s a patent was valid for 17 years after it’s issue date. Many sophisticated companies, including Canon, leveraged the system to prolong issue dates as long as they could, a tactic which effectively served to extend the period of patent coverage.

It’s likely to have been these types of practices that contributed to a change in the rules during the mid-1990s when the patent term changed from 17 years from the date of issue to 20 years from the date of application or earliest claimed priority date. However, although this change may have successfully eliminated incentives for prolonging the application process, it was not designed to (and nor did it) eliminate the practice for leveraging continuation filings for the purpose of broadening or altering the scope of claim coverage.

An Empirical Study:

In a comprehensive 2003 report prepared by Mark A. Lemley and Kimberly A. Moore (citation below), it was suggested that:

“Continuation applications may be more likely than average to result in bad patents” and “empirical evidence suggests that patents based on continuation applications are far more likely to be litigated than other sorts of patents”.

Furthermore, the report also pointed out that:

“Inventors can keep an application pending in the PTO for years, all the while monitoring developments in the marketplace and then draft claims that cover those developments. In the most extreme cases, patent applicants add claims during the continuation process to cover ideas they never thought of themselves, but instead learned from a competitor”.

They went on to qualify this by stating:

“Applicants do not have carte blanche to rewrite their claims as the new claims must find adequate support in the original application. If not, the patent will be invalid for lack of written description, or alternatively, the new claims will be considered “new matter” invented only as of the date the claims were added. However, if the patentee can find sufficient support in the original patent application for the new claims, the legal rights can be obtained over ideas that never occurred to the inventor until after it was seen what others were already doing”.

Conclusions

Whether or not Canon may have pushed the boundary in terms of its patent continuation prosecutions is, at this time, unknown to us. However, we imagine, as the defendants prepare themselves for the battle ahead, the file histories associated with the patents in suit will be under the microscope as they’re examined for claim language, any modifications to claim language, and potential similarities to aftermarket redesigns along with the timing of those redesigns appearing in the public domain.

Regardless, the sophisticated patent continuation strategy adopted by Canon appears to stack the odds against the defendants in this latest round of litigation. While not without a risk of failure, it seems their best shot to get through this and to strengthen their future position, may be to stand up and fight the Canon complaints in the Federal Courts. To be successful, they must either prove there is no infringement or that the asserted patents are invalid. As noted by Lemly and Moore, one non-prior art avenue for challenging the validity of the continuation patents is to prove there is insufficient support in the original patent application for the new claims now being asserted against them.

In the next section, we plan to ask some open-ended questions relating to the dispute and the tactics and to further examine the challenges facing the aftermarket manufacturers in terms of continuing to develop their own non-infringing technologies.

Citations:

There are similarities between the 2014 (‘918) ITC investigation and the new 2018 (‘1106) ITC investigation as both involve the dongle gear assembly used in certain Canon original and aftermarket alternative laser cartridges. The new complaint from Canon is built around nine recently obtained patents that were spawned from the 8,280,278 B2 “parent” patent which was at the core of the 2014 investigation.

Our purpose here is to provide a brief recap of the ‘918 investigation, its named respondents, and to identify how each of them was ultimately dispositioned in the months leading up to the completion of that investigation on August 31, 2015. We’ve then provided a summary table of the ‘1106 respondents and identified which of those were also previously named respondents in the 2014 investigation.

The main point here, whether this experience was desirable or not, is that the previously named respondents now have knowledge of the ITC investigation process, the format it takes, and the necessity for complying with (and dealing with the pressure of) the frequent deadlines for required responses. This experience will be valuable in terms of shaping how the respondents finalize their strategies for defending their technology and their future position in the marketplace.

The 2014 Investigation (377-TA-918)

In the Canon initiated 2014 Dongle Gear ITC Investigation (337-TA-918) there were 33 named respondents. These were ultimately dispositioned as follows:

1. Between the dates of November 4, 2014, and April 3, 2015, the Administrative Law Judge (ALJ) issued initial determinations (ID’s) terminating the investigation as to 15 of the respondents based on consent orders.

2. On August 1, 2014, the ALJ issued an ID terminating the investigation on two respondents based on Canon’s withdrawal of its complaint, and;

3. On April 1, 2015, one further ID was issued terminating the investigation as a consequence of a corporate dissolution of a named respondent.

4. Ten ID’s were issued between August 25, 2014, and November 17, 2014, that dealt with respondents who defaulted.

5. The remaining five respondents, each of which acknowledged and stipulated they had failed to act within the meaning of a Commission Rule, (as a result of not filing a pre-hearing statement and brief as required), meaning they had no standing to contest Canon’s evidence and arguments.

The Named Respondents 2014 (‘918) ITC Dongle Gear Complaint

On May 12, 2015, the ALJ issued an ID (Order #34) granting Canon’s motion for summary determination of violation and recommending the issuance of a GEO and several cease and desist orders. No party petitioned for review of the ID and the final determination and issuance of remedial orders was completed on August 31, 2015 and sent for the 60-day Presidential Review two weeks ahead of the scheduled date set that had been set 13 months earlier.

The 2018 Investigation (377-TA-1106)

There are 49 named respondents in the new investigation 377-TA-1106 facing allegations of patent infringement on multiple claims associated with nine recently issued Canon patents. Although this is 50% greater than the number of respondents named in the 2014 investigation, with the substance of the investigation being similar and the structure of the ITC investigation so well defined, it’s likely there will be many similarities to the 2014 proceedings. Please click the following embedded link for a projected timeline of the 337-TA-1106 investigation.

Given that there are only a small number of manufacturers involved in the investigation and that the manufacturers usually provide indemnifications to the importers, who in turn provide indemnifications to the distributors and resellers, then the bulk of the litigation cost is going to tree-up to the manufacturers.

Given also that the payer of the legal fees is likely to be the dictator of the respective defense strategies, it provides another reason to closely observe who responds to the ITC investigation and who does not. Defaulters will ultimately be considered guilty of any infringement findings entered by the commission and subject to remedial actions, such as general or limited exclusion orders as well as any cease and desist orders.

The Named Respondents 2018 (‘1106) ITC Dongle Gear Complaint

The summary table of ‘1106 respondents will be maintained and accessible from this link as we continue to add currently missing details for each of the named respondents in terms of their known status as a manufacturer, an importer, distributor, reseller, or internet retailer.

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