The dispute stems from a decision that essentially reduces the scope of many future and existing patents. The case has attracted the interest of tech heavyweights including Hewlett-Packard and IBM, which have filed briefs in support of the decision. And Festo, which makes robotics and automation systems and is one of the major players in the suit, has hired former special prosecutor Kenneth Starr to help it appeal the case to the U.S. Supreme Court.
If the decision stands, some legal experts predict it will significantly weaken patents by forcing extremely literal interpretations of protected claims. Although backers of the decision say that could help head off litigation down the road, critics say it could throw thousands of already issued patents into doubt.
"The effect upon previously issued but unexpired patents may be dramatic," Judge Paul Michel of the U.S. Court of Appeals for the Federal Circuit wrote in a partial dissent to the Nov. 29, 2000, ruling. "While I cannot predict all the consequences that may flow from (the) decision, I think it is safe to say that the majority's rule will reduce the effective scope, and thus, the value of most of the 1,200,000 patents that are unexpired and enforceable."
The decision in Festo v. Shoketsu Kinzoku Koygo Kabushiki trims a legal principle that once let patent holders assert rights broader than the span of the original claim. Known as the "doctrine of equivalents," the principle let inventors claim rights to ideas beyond the scope of their patents because, under the theory, any product that performed an equivalent function of the patented product could be found to violate the patent. As a result of the decision, however, any changes or additions to the initial filing would not be protected under the doctrine of equivalents.
For example, if company specified in its amended patent claim that it has the right to a certain product that uses a copper wire, a competitor who creates a similar product performing an equivalent function could insert an aluminum wire in place of the copper wire and not infringe the patent.
The ruling is crucial because patents have grown important to companies' business strategies, especially in the tech world, where intellectual property rights can mean millions of dollars in sales or licensing fees. Critics of the decision say it could spawn rampant copycat products and quash innovation because companies won't want to spend research and development money on products that can be easily imitated and sold by a competitor. Instead, they'll take somebody else's work and make minor alterations.
Supporters say the decision clarifies ambiguity in the patent claim process and forces patent holders to be more precise in their patent applications.
"I used to have to tell my clients, I'm not sure how it's going to come out in court," said Fred Boehm, an attorney with IBM, which has signed onto an amicus brief in support of the decision. Instead of relying on the whims of a judge or jury to interpret a claim, Boehm said, he now can read a patent claim and have a good idea whether IBM will win or lose the case.
Boehm said the doctrine of equivalents left open too many loopholes, allowing companies to file sweeping claims and leaving the onus on the patent office to trim them.
"We feel very strongly that the rule caused mischief," he said. "This puts a lot more discipline into the process."
But Festo, which is trying to protect its patents and pinning its final hopes of doing so on a Supreme Court ruling in its favor, is painting the battle as a David vs. Goliath-style clash. The company says that larger companies such as Hewlett-Packard and IBM now have even more of an advantage, not only because they can afford large legal fees to ensure that their original patent claims are precise, but also because they can swoop in and easily copy products patented by smaller businesses.
Charlie Hoffman, an attorney with Hoffman & Baron who's representing Festo, fears the decision will encourage duplication instead of innovation.
"It's already having an economic impact," Hoffman said. "If you limit the scope of patents, you make it easier for copiers, so companies have to rethink how much they're going to put into (a research and development) investment."
What's more, because the rule would apply retroactively, companies may begin to scour their licensing agreements and challenge them on the grounds that the product they're paying for isn't really protected under patent law after all, Hoffman said.
He said that could destroy small technology companies whose business models are based solely on patented products that might not be protected anymore.
The case started when Festo filed a patent infringement suit against Shoketsu, claiming the company violated its patents for a rodless cylinder used in robotic arms on an assembly line. The company had made some minor changes to the Festo product. Festo won its case at both the district and appeals level, and Shoketsu appealed the case to the Supreme Court. However, that court sent the case back to an appeals court for another review, and in November a 12-judge panel reversed the two earlier decisions, ruling against Festo on the grounds that the doctrine of equivalents did not apply in this case.
Festo said it is preparing to ask the Supreme Court to hear the case, and is planning to file that request by the end of April. In January, Festo hired Ken Starr to help it fulfill that quest.
Meanwhile, legal experts say it's too soon to tell whether the worst-case scenarios of the decision's critics will come true. But one thing's for sure, said Dave Wallace, a patent attorney with Washington D.C.-based law firm Venable Baetjer Howard & Civiletti who's not involved in the case: Potential patent holders will have to be extremely precise and thoughtful when wording their patent applications, so they don't leave loopholes for other companies to take advantage of.
"You can't just be lackadaisical about your claims, as had been the case before," Wallace said.
Though it's far from clear what the fallout from Festo will be, if it stands, companies that want to design similar products will find it easier to do so without running afoul of patent law, Wallace said.
Already, defenders in patent infringement cases are starting to cite the decision, and at least one has already gotten a ruling against it overturned. Still, some lawyers say Festo doesn't necessarily mean a copying free-for-all.
Morgan Chu, an attorney representing Hewlett-Packard, which also filed a brief supporting the decision, said there are ways to protect patent holders' rights, even under Festo.
"You don't get a free pass" to copy, he said.
Still, Chu said the decision could greatly affect companies that rely on the doctrine of equivalents.
"Whatever the impact is, it's going to be across the board--from biotech to semiconductors, from high-tech to low-tech companies," he said.