GAO: Patent Office Must Define and Improve Patent Quality

The Government Accountability Office (GAO) has published two new reports on Patent Office Activities along with the results of a major survey of 2,600 patent examiners.

Regarding patent quality, the GAO suggested that the USPTO’s standard of patent quality should focus solely on the basics: defining “a quality patent as one that would meet the statutory requirements for novelty and clarity, among others, and would be upheld if challenged in a lawsuit or other proceeding.”  However, patent clarity must be an important element of that definition.  The GAO writes:

GAO estimates that nearly 90 percent of examiners always or often encountered broadly worded patent applications, and nearly two-thirds of examiners said that this made it difficult to complete a thorough examination. Without making use of additional tools, such as a glossary of key terms, to improve the clarity of patent applications, USPTO is at risk of issuing patents that do not meet statutory requirements.

The reports were requested by Rep. Goodlatte in his role as chair of the House Judiciary Committee.  I expect that Rep. Goodlatte will hold hearings with PTO representatives in the fall to focus on ways to move forward.

 

Guest post: 2016 U.S. Patent Practitioner Trends Part 2 – Removal and Retirement of Patent Practitioners

By Zachary Kinnaird, Patent Attorney with International IP Law Group, PLLC

Based on my analysis of the USPTO roster data:

  • There were 44,295 registered patent practitioners in the U.S. as of April 2016.
  • After 20 years on the USPTO roster, at least 15%  of practitioners originally registered between 1988 and 1996 are no longer registered as of April 2016.
  • Going back from April 2016, every subsequent year before 1986 shows an additional 2% of patent practitioners are no longer registered.
  • The USPTO either skipped or removed a large number of registration numbers originally to be assigned in 1964, 1966, and 2001 for currently unclear reasons.

Retirement trends based on removals from the USPTO roster

The number of practitioners removed from the USPTO database reveals a practitioner percentage removal trend that can be seen as a retirement estimate for patent practitioners. This trend shows that the longer a practitioner has had a registration number, the more likely they are to have retired, or otherwise been removed, from the roster.

The chart below shows the percentage of patent practitioners who still remain registered on the USPTO roster as a function of each practitioner’s year of registration. The further to the right, the more recently the practitioner earned their registration number.

Graph 1

*Gaps years 1964, 1966 removed as likely outliers as discussed more below

** Value for 2001 shown in red as data for 2001 came from the USPTO Official Gazette rather than from a calculation from the USPTO database. Data for 2001 from USPTO database calculations was an outlier as discussed more below

From the graph above, there appears to be an initial sudden dip at 1996 that suggests that about 15% of practitioners leave the practice after 20 years of being registered agents and attorneys. These numbers stay fairly level for another 10 years on the roster, or back until 1986 before another large dip in the percentage of practitioners still registered. The trend after this first 30 years on the roster is a nearly linearly removal at a rate of approximately 2% a year. This retirement pattern continues until 55 years after initial registration, or 1960 in the above chart.

At the time this data was collected, there were 44,295 individuals in the USPTO database, however there are likely far fewer than this actively filing or prosecuting patents with the USPTO. The percentages of practitioners still on the roster are very likely to be higher than in actual practicing attorneys and agents. Remaining on the roster is relatively costless for a practitioner due to the lack of dues and continuation education requirements. It is likely that many practitioners have effectively retired without yet being removed from the roster. Accordingly, the percentages shown on the above graph are a ceiling of the actual figures of practitioners who are actually still practicing.

Tracking removal rates of registered attorneys from the USPTO roster

The above retirement graph was generated from percentages of practitioners removed from the USPTO database. Finding the percentage of those removed can be a challenge, however, as the USPTO only maintains the current state of the patent bar in its public database and does not publicly provide a list of all practitioners ever registered at the USPTO.

Instead, the Office of Enrollment and Discipline periodically conducts a mandatory survey of active registered practitioners pursuant to 37 C.F.R. § 11.11. This survey, in part, determines if the practitioner is still active and wants to remain on the USPTO roster. As noted above, there is essentially no cost to remain on the roster as there are currently no annual dues or continuing education requirements. However, if a practitioner is no longer practicing and either indicates the end of their practice in the survey or does not respond to the survey, the USPTO removes that practitioner from the roster.

The below graph is constructed with the knowledge that practitioners can be removed through this survey system and by assuming that the USPTO assigns numbers in a sequential order. This visualization shows the number of registration numbers removed each year compared to the number of registration numbers initially assigned in that given year. For instance, while the USPTO roster may include 1,210 practitioners who first gained registration numbers in 2015, the first registration number assigned in 2015 (i.e. 73,303) compared to the last registration number assigned in 2015 (i.e. 74,530) suggests that 1,227 registration numbers were actually assigned in 2015 and that some of these 2015 practitioners have already been removed from the database. Carrying out this calculation for each year going back to 1950 yields the graph below.

Graph 2

As noted above, there are unusual red spikes in 1964, 1966, and 2001. The red spikes corresponding to 1964 and 1966 are far out of place and I believe they are likely outliers. The red spike in 2001 IS an outlier. This can be said with confidence based on comparison to number of practitioners found in the USPTO Gazette for the year of 2001. Potential practitioners in the PTO Gazette are listed provisionally to allow time for the public to report any additional information about the practitioners before they formally receive a registration number. 1,853 potential practitioners were listed for 2001 in the USTPO Official Gazette compared to the calculated value difference of 2,697 between the first registration number assigned in 2001 and the last. The corrected graph below reflects the modified value for 2001 based on the Official Gazette listings. Unfortunately, the listing of potential practitioners in the online resources of the Official USPTO Gazette currently only goes back as far as 1995 and can’t be used to find values for 1964 and 1966.

Graph 3

The outlier variation in 2001 is likely due to a conscious choice by the USPTO to jump to a higher registration number for assignment rather than adhere to a generally sequential and quantum assignment of registration numbers. This is likely true for 1966 and 1964 as well. For example, at the end of 1966 the last registration number assigned was 23,099 which is followed by a jump to 24,002 on the very next day numbers were assigned. These gaps suggest that there may have been a USPTO policy at the time to skip blocks of numbers and perhaps start at the next round number in the sequence (e.g. 24,000 in 1967) at the start of a next year.

Data Retrieval Methodology

The USPTO provides both a database for practitioner information as well as a zip file of this data in spreadsheet form that is updated daily. However, the spreadsheet provided by the USPTO does not include the dates of registration as an attorney or agent. Accordingly, the process of retrieving the registration date information from the USPTO online database was automated with web macros to yield the data that is analyzed in this post. As many practitioners have been registered as both patent agents and as patent attorneys, only the date an individual first received a registration number was used for this analysis. For access to the data set being used, or if any errors are noticed, please feel free to reach out by email.

This article is a continuation and extension of my previous analysis on the USPTO database graphing the USPTO attorney and agent database as well as my update to that story as of April 30, 2016.

Editor’s note: Comment moderation policy is in effect.  Excessive or uncivil posts will be deleted without further notice. 

 

BASCOM v. AT&T: Section 101 Jurisprudence Continues to Develop

By Jason Rantanen

BASCOM Global Internet Services, Inc. v. AT&T Mobility LLC (Fed. Cir. June 27, 2016) Download Bascom
Panel: Newman (concurring in the result), O’Malley, Chen (author)

Since Alice v. CLS Bank, the Federal Circuit has issued four opinions rejecting a lack of patent eligible subject matter challenge: DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245 (Fed. Cir. 2014)Enfish LLC v. Microsoft Corp., 2016 WL 2756255 (Fed. Cir. May 12, 2016); Rapid Litigation Management Ltd. v. Cellzdirect, Inc., 2016 WL 3606624 (Fed. Cir. 2016), and BASCOM v. AT&T, with the latter three coming the last few months.  (Many more decisions affirm invalidity on § 101 grounds.)  Each of these opinions is important for understanding the contours of the post-Mayo/Alice patentable subject matter doctrine.   In this post, I’ll summarize BASCOM and examine its treatment of the relationship between steps one and two of the Mayo/Alice framework.

Background: The claimed invention involved in this case is a “system for filtering Internet content.”  Slip Op. at 6.  The patent’s first claim reads:

1. A content filtering system for filtering content retrieved from an Internet computer network by individual controlled access network accounts, said filtering system comprising:

a local client computer generating network access requests for said individual controlled access network accounts;

at least one filtering scheme;

a plurality of sets of logical filtering elements; and

a remote ISP server coupled to said client computer and said Internet computer
network, said ISP server associating each said network account to at least one filtering scheme and at least one set of filtering elements, said ISP server further receiving said network access requests from said client computer and executing said associated filtering scheme utilizing said associated set of logical filtering elements.

At the district court, AT&T moved to dismiss BASCOM’s complaint on the ground that the asserted claims were invalid under 35 US.C. § 101.  “AT&T argued that the claims were directed to the abstract idea of ‘filtering content,’ ‘filtering internet content,’ or ‘determining who gets to see what,” and that none of the limitations “transforms the abstract idea of filtering  content into patent-eligible subject matter because they do no more than recite routine and conventional activities performed by generic computer components.”  Id. at 8.  The district court agreed with AT&T, finding that “the claims were directed to the abstract idea of ‘filtering content’ because ‘content provided on the Internet is not fundamentally different from content observed, read, and interacted with through other mediums like books, magazines, television, or movies,”  Id. at 9, and that “no individual limitation was inventive because each limitation, in isolation, was a ‘well known, generic computer component[]’ or a standard filtering mechanism.”  Id.  Nor were the limitations in combination inventive because “[f]iltering software, apparently composed of filtering schemes and filtering elements, was well-known in the prior art” and “using ISP servers to filter content was well-known to practitioners.”  Id., quoting district court.

“Ordered combination of limitations” can provide the “inventive concept”: On appeal, the Federal Circuit reversed based on the second step of the Mayo/Alice framework.   Critical to its conclusion that the claims were directed to patent eligible subject matter was the court’s focus on the particular arrangement of generic and conventional components in the claims.

“An inventive concept that transforms the abstract idea into a patent-eligible invention must be significantly more than the abstract idea itself, and cannot be simply an instruction to implement or apply the abstract idea on a computer.”  Slip Op. at 14.  Under the court’s step two analysis, the specific limitations were sufficient to establish eligibility on the limited record before the court–not because the limitations themselves provided that “inventive concept,” but because the arrangement of those elements did.  “The inventive concept inquiry requires more than recognizing that each claim element, by itself, was known in the art.  As is the case here, an inventive concept can be found in the non-conventional and non-generic arrangement of known, conventional pieces.”  Slip Op. at 15.  On the limited record before the court, the specific method of filtering content claimed in the patent “cannot be said, as a matter of law, to have been conventional or generic.”  Id. at 16.

The relationship between Mayo/Alice Step One and Step Two:  The court’s step one analysis is, unfortunately, somewhat muddled.  The court first states that the claims are directed to an abstract idea, that of filtering content on the Internet, id. at 12, then shifts to the conclusion that the claims present a “close call,” requiring progression to step two.  Id. at 13 (“This case, unlike Enfish, presents a “close call[] about how to characterize what the claims are directed to….Here, in contrast, the claims and their specific limitations do not readily lend themselves to a step-one finding that they are directed to a nonabstract idea.  We therefore defer our consideration of the specific claim limitations’ narrowing effect for step two.”)

Ultimately, the choice between claims that are clearly directed to an abstract idea and those that are “close calls” may not matter.  If a claim is either unambiguously directed to an abstract idea or is a “close call,” the result is that the claim fails Mayo/Alice step one and the analysis proceeds to step two, the search for an inventive concept.  Viewed in this light, resolving disputes over the articulation of the abstract idea isn’t necessary as long as it fits in the “close call” category.

On the other hand, the articulation of the abstract idea in step does matter because it provides an important ingredient for step two.  Here, the court drew upon the articulation of the “abstract idea” as “filtering content on the Internet” to conduct its step two analysis.  “The claims do not merely recite the abstract idea of filtering content along with the requirement to perform it on the Internet, or to perform it on a set of generic computer components.  Such claims would not contain an inventive concept.”  Id. at 16.  With that articulation of the abstract idea in hand, it is relatively easy to see the method of filtering claimed in claim 1 as providing the necessary “inventive concept.”  The articulation of the abstract idea as “filtering content on the Internet” also provides the foundation for the court’s analysis of the invention here as compared with its previous decisions on patent eligible subject matter.

But if one were to articulate the abstract idea as being “controlling access to content by using centrally-held accounts with different permissions,” it might be significantly more difficult for the claims to pass the step two analysis because that idea is much closer to the inventive concept described by the court.  “The inventive concept described and claimed in the ‘606 patent is the installation of a filtering tool at a specific location, remote from the end-users, with customizable filtering features specific to each end user.”   Id. at 15.  To be sure, it would be harder for such an articulation to fail the Mayo/Alice step 1 analysis, but it’s not immediately clear to me that it would.

Judge Newman’s Concurrence: Concurring in the result, Judge Newman wrote separately “to urge a more flexible approach to the determination of patent eligibility, for the two-step protocol for ascertaining whether a patent is for an “abstract idea” is not always necessary to resolve patent disputes.”  Newman concurrence at 2.  Judge Newman’s concurrence, while raising the academic question of whether there is actually an “abstract ideas” limit on the § 101 categories or instead whether questions of abstractness are fully resolved by application of §§ 102, 103 and 112, does not really offer much in the way of a path forward under current patent law.    To the extent Judge Newman is suggesting that district courts should be able to deny 12(b)(6) motions when there are evidentiary disputes, then I would agree.  But if she is suggesting something else, it is not clear to me how  proposal would fit into the procedural constraints of Rule 12(b)(6) or current § 101 jurisprudence.

Supreme Court Challenge to ITC’s Broad Authority

by Dennis Crouch

DBN (formerly DeLorme) v. US International Trade Commission (Supreme Court 2016)

In addition to district court infringement litigation, U.S. law offers a second avenue for patent enforcement – the United States International Trade Commission (USITC).  In today’s free-trade environment, the USITC’s role is somewhat counter — protecting of U.S. industry.  A substantial portion of USITC work involves enforcement actions to prohibit importation into the U.S. of “articles that … infringe a valid and enforceable” patent. See 19 U.S.C. 1337.

Despite the statutory language “articles that . . . infringe”, in Suprema an en banc Federal Circuit held that the USITC has the power to block importation based upon an inducement theory of infringement — even if the imported products themselves are not infringing. (6 – 4 en banc decision)

In a well written petition, DBN has challenged the holding of Suprema – asking “Whether the International Trade Commission’s jurisdiction over the importation of ‘articles that … infringe a valid and enforceable’ patent extends to articles that do not infringe any patent.”

The case also involves an interesting separation of powers issue — although the USITC found the patent enforceable, a district court found the patent invalid.  DBN terms this a “zombie patent” penalty.  In the case, the ITC first issued the exclusion order and the patent was later found invalid.  In that interim, DBN violated the exclusion order and the ITC assessed a $6 million contempt penalty that is being challenged in the second question presented: “Whether the Federal Circuit erred in affirming the Commission’s assessment of civil penalties for the domestic infringement of a patent that has been finally adjudicated to be invalid.”

USITC Procedure sets up the USITC as the party prosecuting the case rather than the patentee. As such, the agency is the named respondent and will be represented by the Solicitor’s Office. I expect that the patentee BriarTek will also weigh-in.  The patent at issue is U.S. Patent No. 7,991,380 and covers an emergency satellite communication system.  The asserted claims were found invalid as anticipated and/or obvious.  That holding was then affirmed on appeal by the Federal Circuit.

AIA Patents: Trickle becomes a Stream

by Dennis Crouch

The first-to-invent rules of the America Invents Act of 2011 began taking effect in March 2013. New patent applications filed after the changeover date are examined under the new rules while those that were eather already on file or properly claim priority* to a pre-AIA filing are examined under the old rules. [updated to fix typo]

Although more than three years have passed since the changeover date, most new patents still fall under the old-rule. This long transition period is explained by the reality that most patents that issue claim priority to a prior patent filing document such as a foreign priority filing, international PCT application, US provisional application or parent non-provisional US filing.  Once the non-provisional application is filed, patent prosecution process still that typically takes around three years.  This results in an average pendency from priority filing to issuance of around five years.

The chart below shows results of a sample of 6,000 recently issued patents and their AIA status.  Time series is grouped by the quarter-year in which the patent issued.

AIAPatents

* My reading of the statute is that the determination of whether an application is an AIA application or pre-AIA application is determined as a whole – for the whole application. If an application ever included a claim to an invention whose earliest effective filing date (counting priority claims) is on or after March 16 2013.  This automatically includes all applications filed after the March 2013 deadline that do not claim priority to any earlier applications. Applications filed before the March 2013 date are all pre-AIA because the new-matter restriction would require that all claims be associated with that pre-AIA filing date.  In the middle are applications filed after the March 2013 date but that claim priority to a pre-AIA application.  For those bridge applications, the patent applicants have been asked to self-determine whether their applications are considered pre- or post-AIA.

Patent Filings Rising Slowly

Patent Filings

The chart above shows USPTO application filings for non-provisional patent applications as well as RCE’s.  Both have been on the rise for many years.  The filing numbers appear to have continued to rise since implementation of the America Invents Act, although at a slower rate (acceleration has slowed).  The USPTO expects that applications filed today will receive a first action within 16 months.

Venue Challenges Part 2

While law professors call for venue patent reform, the TC Heartland venue and personal jurisdiction challenge appears to still have legs.  In April 2016, the Federal Circuit rejected the mandamus action, but the Supreme Court recently granted TC Heartland’s delay petition – allowing its petition for writ of certiorari to be filed by September 12, 2016.  In the case, TC Heartland argues that the statute itself (28 U.S.C. § 1400(b)) limits where patent claims can be brought and that the Federal Circuit has unduly broadened venue in ways that harm the system.  [SCT Docket]

= = = = = =

28 U.S.C. § 1400(b) provides the venue requirements for patent cases – limiting proper venue to (1) “the judicial district where the defendant resides” or (2) “where the defendant has committed acts of infringement and has a regular and established place of business.”   This appears to be quite narrow in that few defendants actually reside or have an established place of business in the Eastern District of Texas.  The catch, however, comes in the form of 28 U.S.C. § 1391(c). That provision expansively defines the term “reside” — indicating that “except as otherwise provided by law . . . [a defendant] shall be deemed to reside . . . in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question.”  Section 1391(c) appears to completely gut the limits of 1400(b) to indicate that venue is proper whenever a court has personal jurisdiction.  TC Heartland argues that the statute should be interpreted differently – namely that the express limits of 1400(b) should take precedence over the broad definition of 1391(c) as suggested by the “otherwise provided by law” exception.

 

Sales Activity: MedCo, Helsinn, and the AIA

by Dennis Crouch

In The Medicines Co. v. Hospira an en banc Federal Circuit confirmed the validity of MedCo’s Angiomax product-by-process patent claims over an on-sale challenge. More than one-year before filing the patent application, MedCo had hired a third-party supplier to provide three batches of the drug using an embodiment of the claimed processes.  The question was whether this ‘supply contract’ constituted a commercial offer for sale sufficient to trigger the on-sale bar of Section 102(b) (pre-AIA).   In the appeal, the Federal Circuit held that the supply contract was “for performing services” rather than a triggering sale.  “[A] contract manufacturer’s sale to the inventor of manufacturing services where neither the title to the embodiments nor the right to market the same passes to the supplier does not constitute an invalidating sale.”

The en banc MedCo opinion focuses on a pre-AIA patent, but it seems clear to me that the limits here are equally applicable to post-AIA patents.  Of course, many (including the USPTO and DOJ) argue that this type of activity would also be disqualified as on-sale because it was done under cover of secrecy rather than publicly.

In the pending case of Helsinn v. Teva is set to answer the AIA question – whether under the AIA “on sale” activity is limited to activity that is “available to the public.” In a new filing, the accused infringer (Teva) has looked to distinguish the MedCo — noting that “[u]nlike the MedCo. contract, where the patent-holder paid another party to manufacture its drug, the distribution contract [in Helsinn] was an offer for sale.”  The letter-of-authority goes on to point the court to the language on MedCo supporting the Metallizing Engineering policy:

MedCo. also reaffirmed multiple precedents finding “confidential transactions to be patent invalidating sales under §102(b).” Although a transaction’s “confidential nature … weighs against the conclusion that [it was] commercial,” it remains “a condition upon an inventor’s right to a patent that he shall not exploit his discovery competitively after it is ready for patenting.” (quoting Metallizing Eng’g). That is what Helsinn did here.

Oral arguments have not been scheduled in the case, but I expect that it will be scheduled for early Autumn 2016. While the Helsinn case is not yet en banc, it has drawn significant amicus interest.

Of these positions, the former would make it easier to invalidate patents and the latter would make it more difficult.  If the Overrule-Metallizing-Engineering position prevails, I expect that the “on sale” question become an evolutionary vestige and the whole prior art focus of 102(a) will be on whether purported prior art was sufficiently “available to the public.”

 

Law Professors Call for Patent Venue Reform

A group of 45 professors sent the following letter to Congress arguing for statutory reforms to limit venue in patent infringement cases.  One focus of this move is to direct intention toward a focused and limited action rather than another round of comprehensive patent reforms.  This type of limited reform could come as part of a late-session omnibus package.

– Dennis

= = = =

The undersigned patent law academics and economics experts write to express our support for patent venue reform.  Changes to the venue rules are necessary and urgent to address the significant problem of forum shopping in patent litigation cases.

As Colleen Chien and Michael Risch recently wrote for the Washington Post, “[t]he staggering concentration of patent cases in just a few federal district courts is bad for the patent system.”[1]  It is imperative that Congress address patent venue reform to return basic fairness, rationality, and balance to patent law.  Specifically, venue reform that treats plaintiffs and defendants equally by requiring a substantive connection to the venue on the part of at least one party is critical to ensure fairness and uniformity in patent law.

As a result of current venue rules, though there are 94 federal judicial districts, a single district is home to nearly half of all patent cases.  Of the 5,819 patent cases filed in 2015, nearly half— 2,541 cases—were filed in the Eastern District of Texas,[2] and 95% of those cases were filed by non-practicing entities (NPEs).[3]  And the Eastern District of Texas’s percentage of patent cases has been steadily increasing over the last several years, rising from 11% in 2008 to 44% in 2015.4  By comparison, the Northern District of California, home of Silicon Valley, saw only 228 patent cases filed in 2015.[4]

A single judge in the Eastern District of Texas had 1,686 patent cases filed assigned to his docket in 2015—in other words, a single judge handled two-thirds of the patent cases in that district, and nearly one-third of all patent cases nationwide.  If all of those cases were to go to trial, that single judge would have to complete 4 to 5 trials every day of the year (including weekends)—not counting any time for motions or other hearings.  The burden of this overwhelming number of cases leads, unsurprisingly, to a high reversal rate on appeal.  The United States Court of Appeals for the Federal Circuit affirmed only 39% of the decisions from the Eastern District in 2015.[5]

One reason for the disproportionate number of patent filings in the Eastern District of Texas is that the district employs procedural rules and practices that attract plaintiffs, including by delaying or denying the ability of defendants to obtain summary judgment to terminate meritless cases early.[6]  For example, the district requires parties seeking summary judgment in patent cases to first seek permission before filing any summary judgment motion, the effect of which is to delay and deter early resolution of cases.[7]

While parties can seek transfer out of the district, some NPEs have opened offices in the district simply for the purpose of bolstering their arguments to stay in their preferred venue.  The average grant of transfer in this venue took over a year (490 days), and the average denial of a transfer motion took 340 days, meaning that even cases that are ultimately transferred remain pending in the district for nearly a year.[8]  Local discovery rules permit discovery to go forward even while a motion for transfer is pending, so even successfully moving to transfer only partially relieves the expense of litigating in a distant venue and the burden on the court.

The disproportionate number of patent plaintiffs—and NPEs in particular—bringing cases in a single venue ultimately results in wasted judicial resources, as more of those cases are overturned on appeal.  For accused infringers, the costs of innovation are increased when they have little or no connection to the venue and are forced to litigate from a distance.  The harm caused by abuse of the system and the resulting loss of trust in the uniformity and justness of the U.S. patent law system is unmeasurable.

This type of dynamic is bad for patent law, and bad for United States innovation.  It is thus critical that Congress act now to pass targeted patent venue reform.

[Read the PDF Letter]

= = = = =

[1] Colleen Chien and Michael Risch, A Patent Reform We Can All Agree On, Wash. Post, (June 3, 2016, 3:07pm).

[2] Data from Lex Machina (analysis as of June 7, 2016).

[3] Joe Mullin, Trolls made 2015 one of the biggest years ever for patent lawsuits, arstechnica (Jan. 5, 2015). DocketNavigator Analytics, New Patent Cases Report,  (report run June 2, 2016).

[4] Lex Machina, Patent Litigation Year in Review 2015, at 5 (Mar. 2016).

[5] Ryan Davis, EDTX Judges’ Love of Patent Trials Fuels High Reversal Rate, Law360.com (Mar. 8, 2016).

[6] Daniel Klerman and Greg Reilly, Forum Selling, 89 S. Cal. L. Rev. 241, 252-53 (Jan. 2016) (“Eastern District judges are particularly hostile to summary judgment in patent cases. Patent litigators, but not other litigants, are required to seek permission before filing summary judgment motions . . . and are prohibited from moving for summary judgment if permission is denied.”)

[7] See, e.g., Judge Rodney Gilstrap, Sample Docket Control Order—Patent.

[8] Lex Machina, Patent Litigation Year in Review 2015, 10 (Mar. 2016).

Insurance IP Exclusion without IP Claim

Many insurance policies include “intellectual property” exclusions. 

Hammond v. TCA, arose out of a failed business relationship in which Hammond (a software developer) had been cut-out as the middle-man.  In the case, TCA alleged that it owned the software and Hammond counterclaimed.  That underlying case eventually settled. 

Meanwhile, Hammond’s insurance company USLI had refused to indemnify Hammond based in-part upon the intellectual property exclusion found in the policy that specifically excluded coverage for any “loss, cost, or expense . . . [a]rising out of any infringement of copyright, patent, trademark, trade secret or other intellectual property rights.”  Agreeing, the court particularly found that the basis for TCA’s attorney fee requests stemmed from the Pennsylvania Uniform Trade Secrets Act as well as the Copyright Act – even though no intellectual property infringement claim had been asserted in the underlying case.   On appeal, the Third Circuit affirmed this ruling:

[T]he intellectual property exception to the Policy precluded coverage. To repeat, that exception bars coverage for “personal and advertising injury” “[a]rising out of any infringement of copyright, patent, trademark, trade secret or other intellectual property rights.” The basis for the claim of attorney’s fees here was under 12 Pa.C.S. § 5305 (PA UTSA) and 17 U.S.C. § 505, which allow shifting of attorney’s fees in cases of bad faith trademark [sic] and copyright claims, respectively. Though no intellectual property claim was filed against Hammond, the basis of the request for attorney’s fees was an alleged infringement by him of TCA and LanTEK’s intellectual property rights. Hence the intellectual property exception precludes coverage.

[Read the 3rd Circuit Non-Precedential Decision].

Of course, the oddity of this result is that attorney fees under both the UTCA and Copyright Act are generally thought to require first an underlying claim of trade secret or copyright infringement.  Hammond has petitioned for writ of certiorari, but the petition appears to have little chance of success.

 

Federal Circuit Pre-AIA “On Sale” Bar to UCC Level Offers

In The Medicines Company v. Hospira, Inc., App. No. 14-1469 (Fed. Cir. 2016) (en banc), the Federal Circuit has ruled that an invention claimed as a “product-by-process” is only “on sale” if “the subject of a commercial sale or offer for sale . . . that bears the general hallmarks of a sale pursuant to Section 2-106 of the Uniform Commercial Code.”

Read the Case: MedCo

 

Patenting From China

The new China-Patenting article from Jay Kesan, Alan Marco, and Richard Miller offers some interesting insight on developments in how Chinese innovators are using the patent system. The “More than Bric-a-Brac” article particularly focuses on how the Chinese approach has changed over time.  The article concludes that China’s approach is not exceptional but rather is following the same pattern exhibited by other nations such as South Korea and Japan in decades past.

ChinaSouthKorea

Read the Article: Kesan, Jay P. and Marco, Alan C. and Miller, Richard, More than Bric-À-Brac: Testing Chinese Exceptionalism in Patenting Behavior Using Comparative Empirical Analysis (March 8, 2016). Michigan Telecommunications and Technology Law Review, Vol. 22, No. 53, 2015; Available at SSRN: http://ssrn.com/abstract=2744731.

 

MORE THAN BRIC-A-BRAC: TESTING ` CHINESE EXCEPTIONALISM IN PATENTING BEHAVIOR USING COMPARATIVE EMPIRICAL ANALYSIS Jay P. Kesan*, Alan Marco**, and Richard Miller*** Cite as: Jay P. Kesan, Alan Marco & Richard Miller, More than BRIC-`a-Brac: Testing Chinese Exceptionalism in Patenting Behavior Using Comparative Empirical Analysis, 22 MICH. TELECOMM. & TECH. L. REV. 53 (2015). This manuscript may be accessed online at repository.law.umich.edu.

Method of Selecting Desired Trait from Cell Plate is Patent Eligible

Rapid Litigation Management v. CellzDirect (Fed. Cir. 2016)

In an interesting decision, the Federal Circuit has rejecting a district court Section 101 invalidity finding.  On appeal, the Federal Circuit held that the claimed hepatocyte prep-method was “not directed to a patent-ineligible concept.”

The claim of the ‘929 patent is directed to a method of preparing frozen hepatocytes that can be thawed and re-frozen (at least twice) while remaining viable.  The claimed method is basically an artificial-selection approach of freezing-and-thawing a group of hepatocytes and then selecting the ones still viable.  The claims include a few additional details such as using density gradient fractionation (centrifuge) to separate the viable from nonviable; not plating the cells between the first and second freeze; and using a pooled preparation of hepatocytes from multiple sources. U.S. Patent No. 7,604,929.

After reading the claims, the district court found that the patent effectively claimed the ‘natural law’ that some hepatocytes can survive multiple freeze-thaw cycles.   On appeal the Federal Circuit disagreed with this characterization and instead found that the claims “directed to a new and useful laboratory technique for preserving hepatocytes.”

The inventors certainly discovered the cells’ ability to survive multiple freeze-thaw cycles, but that is not where they stopped, nor is it what they patented. Rather, “as the first party with knowledge of” the cells’ ability, they were “in an excellent position to claim applications of that knowledge.” Myriad, 133 S. Ct. at 2120 (quoting Ass’n for Molecular Pathology v. U.S. Patent & Trademark Office, 689 F.3d 1303, 1349 (Fed. Cir. 2012) (Bryson, J., concurring in part and dissenting in part)). That is precisely what they did. They employed their natural discovery to create a new and improved way of preserving hepatocyte cells for later use.

Here, the court distinguished this invention from others – noting that the claimed application was not an “abstract mental process” but instead directed to a production method.  In trying to draw a line to protect important advances in science and technology, the court added to the oft-stated argument that a true application of Mayo/Alice would decimate the patent system:

Through the recited steps, the patented invention achieves a better way of preserving hepatocytes. The ’929 patent claims are like thousands of others that recite processes to achieve a desired outcome, e.g., methods of producing things, or methods of treating disease. That one way of describing the process is to describe the natural ability of the subject matter to undergo the process does not make the claim “directed to” that natural ability. If that were so, we would find patent-ineligible methods of, say, producing a new compound (as directed to the individual components’ ability to combine to form the new compound), treating cancer with chemotherapy (as directed to cancer cells’ inability to survive chemotherapy), or treating headaches with aspirin (as directed to the human body’s natural response to aspirin).

Method Claim: The court here distinguished this case from Funk Brothers primarily by indicating that the present case is about a method-of-producing while the Funk Brother’s invalid claim was directed to a product – namely a mixture of already existing bacteria. In that case, the Supreme Court expressly stated that it was not addressing the question of whether a method of creating the mixture might be patent eligible.

Obviousness for Pharma/BIO

The new petition for writ of certiorari in MacDermid v. DuPont focuses on the central question of U.S. patent law – obviousness. In the case, the patent challenger asks that the Supreme Court reinvigorate the doctrine with flexibility – especially with regard to the ‘unpredictable arts.’  The question presented:

Whether the Federal Circuit has erred in holding that there “must” be a proven “reasonable expectation of success” in a claimed combination invention in order for it to be held “obvious” under 35 U.S.C. § 103(a).

It is a well known secret that both the USPTO and the Federal Circuit treat pharmaceutical and biotechnology obviousness cases differently than they do electronics, software, and mechanical inventions.  This has to be kept a secret though, because both are applying the same law and the same Supreme Court precedent.  The case here looks to rejoin the two — in a way that makes it easier to invalidate the pharma/bio patents.

Read the petition: MacDermid

Guest Post: U.S. Patent Practitioner Trends of 2016 – Part I

By Zachary Kinnaird, Patent Attorney with International IP Law Group, PLLC

As an update to last year’s write-up on this topic, 1,210 new U.S. patent practitioners earned registration numbers in 2015, a slight rebound from the recent low in 2014 according to data gathered from the USPTO roster. These 2015 results extend a nearly 40% dip over the past six years from recent highs in 2008 and 2009 when around 2000 new practitioners were added each year. Based on Jan-April 2016 registrations, I project about 1,150 new practitioners in 2016.

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Last year I projected 1,000 new patent agents and patent attorneys would earn their registration number. My prediction missed by ~17% of the final total. However, last year I used only one month’s data was to make a year-end prediction, while this year my prediction is made with four months of data as a guide. Otherwise, I used the same methodology for this finding as the previous write-up last year.

The above graph shows only initial registrations.  It does not show changes in which a patent agent becomes a patent attorney, as the practitioner does not receive a new registration number.  The registrations for 2015 indicate that 42.4% of the initial registrations were for patent attorneys and 57.6% were for patent agents (some of whom later became or will become patent attorneys).

Prof. Radin’s Patent Notice and the Trouble with Plain Meaning

By Jason Rantanen

Professor Margaret Radin, who recently retired from the University of Michigan Law School, is a leading scholar known for her work in property theory, contracts law, intellectual property, and internet commerce.  She’s best known to my students  for her articulation of a modern personhood theory of property in Property and Personhood, 34 Stan. L. Rev. 957 (1982).

In her essay Patent Notice and the Trouble with Plain Meaning forthcoming in the Boston University Law Review, Professor Radin offers her thoughts on a topic at the heart of contemporary debates in patent law: the extent to which the words of claims can operate as boundaries that provide the same degree of notice that we expect in the real property context. The abstract reads:

In their book, Patent Failure, James Bessen and Michael Meurer took the position that notice of the scope of a patentee’s property right is usefully analogous to notice conveyed by real property boundaries. In this essay I argue to the contrary that the idea that patent claim language could be rendered determinate enough to justify an analogy with physical fences or metes and bounds is illusory. Patent claims raise the question, in a way that fences do not, of how words “read on” objects in, or states of, or events in the world. I take a small detour through the language theory of Quine as backdrop to my argument that there is no such thing as plain meaning, at least not in situations involving innovative products and processes where there is money at stake. I draw on three landmark patent cases — Markman, Phillips, and Festo — to illustrate this basic point. In my concluding Postscript I bring the big picture into play. The costs of providing better notice, even if that were possible, might outweigh the gains. Plus, even if the analogy with physical boundaries and the commitment to plain meaning were not illusory, such rigidity in interpreting claims would undermine a significant feature of the patent system: the flexibility to reward breakthrough inventions proportionately to their importance.

Professor Radin’s discussion is worth a read for the eloquent way that she captures and synthesizes the raw strands floating around in current discussions about patent claims.

Viewed through the lens of my current projects, though, her essay raises deeper questions about the meaning of claim construction itself.  Over the last two decades, patent law has experienced the emergence of the perception that claim construction is simply the process of interpreting the meaning of the words in the claims.  From Markman to Cybor to Phillips, claim construction grew into a search for linguistic meaning.  Even Teva reinforces this perception, with its focus on the role of evidence in determining the meaning of key claim terms.

But patent law’s dirty secret is that claim construction isn’t just about divining the linguistic sense of words and phrases in the claims.  That’s a seemingly fine inquiry when analyzing questions such as infringement, or anticipation or even, perhaps, nonobviousness.  Yet when it comes to other issues in patent law–enablement, written description and especially § 101–defining the meaning of words is less central to the analysis.   To be sure, sometimes the formalized procedure of Phillips does matter in enablement.  Liebel-Flarsheim and Automotive Technologies offer two examples.  But for the most part, the formalized claim construction that we’re used to is absent from the Federal Circuit’s enablement, written description and § 101 determinations.

Nevertheless, claim construction of a sort is present.  The court articulates something that it uses in its analysis.  In the enablement and written description contexts, I’ve come to call this something a target that must be enabled or adequately described.  What it really is, though, is claim construction–just not in the sense that we’ve become comfortable with.

The Federal Circuit’s opinion on Monday in Bascom v. AT&T Mobility [Download Opinion] illustrates this point.  That case involved a motion to dismiss granted by the district court on the ground that the claims were invalid on § 101 grounds.  (I’ll summarize the facts and holding in more detail in a subsequent post.)  After assuming that the claims were directed to an abstract idea under Enfish‘s statement about “close calls” at step one of the Alice/Mayo framework, the court turned to step two: the search for an “inventive concept.”  Here, the court concluded that the “inventive concept described and claimed in the []patent is the installation of a filtering tool at a specific location, remote from the end-users, with customizable filtering features specific to each end user,” a concept that the court concluded was not (on the record before it) conventional or generic.  Slip Op. at 15-16.  This determination–of identifying an “inventive concept”–is as much claim construction as the linguistic machinations of Phillips.  Indeed, the court even refered to what it is doing as construing the claims: “Thus, construed in favor of the nonmovant–BASCOM–the claims are “more than a drafting effort designed to monopolize the [abstract idea].”  Slip Op. at 17.

Supreme Court Patent Report: End of 2015 Term

by Dennis Crouch

The Supreme Court has completed its patent law business for the 2015 term and will re-open decision making in September 2016.  Briefing and new filings will, however, continue throughout the summer.

Two Decisions: The Supreme Court has decided its two major patent cases – Halo/Stryker and Cuozzo.  In Halo, the court re-opened the door to more treble-damage awards for willful patent infringement.  The decision rejects the objective-recklessness standard of Seagate (Fed. Cir. 2007)(en banc) and instead places substantial discretion in the hands of district court judges for determining the appropriate sactions “egregious infringement behavior.”  In Cuozzo, the court affirmed the Federal Circuit’s pro-PTO decision.  The decisions confirms the PTO’s authority construe claims according to their broadest-reasonable-construction (BRI) even during post-issuance review proceedings and also confirms the Federal Circuit ruling that the PTO’s initiation of an inter partes review (IPR) proceeding is not appealable (even after final decision).  A major caveat of this appealability issue is that the court limited its holding to run-of-the-mill IPR patent issues.  The court did not determine when other issues arising from institution, such as constitutional due process challenges, might be appealable.

Both decisions are important. Halo adds at least a gentle breeze to the would-be patent infringement armada.  I heard many discussions of pendulum’s swinging in the days following the case, although I would not go quite so far.  Cuozzo was a full affirmance of the PTO position and will operate to continue to raise the statute and importance of the agency.

Three Pending Cases Set the Stage for Next Term: With the certiorari writ grant in Life Tech v. Promega, we now have three patent cases set for review and judgment next term.  The issue in Life Tech is fairly narrow and involves export of of a component of a patented invention for combination in a would-be-infringing manner abroad.  The statute requires export of a “substantial portion of the components” and the question in the case is whether export of one component can legally constitute that “substantial portion.”  In the case, the component (Taq) is a commodity but is also an admitted critical aspect of the invention.  Life Tech may be most interesting for those generally interested in international U.S. law (i.e., extraterritorial application of U.S. law).  The other two pending cases are Samsung v. Apple (special damages in design patent cases) and SCA Hygiene (laches defense in patent cases).

None of these three pending cases are overwhelmingly important in the grand scheme of the patent system, although Samsung is fundamental to the sub-genre of design patents.  This week, the Supreme Court denied certiorari in Sequenom v. Ariosa – a case that some thought might serve to rationalize patent eligibility doctrine in a way that favors patentees.  For now, the Mayo, Alice, _____ trilogy remains open-ended. This leaves the Federal Circuit in its nadir.

Following Cuozzo, the only AIA post-issue review cases still ongoing are Cooper and MCM.  These cases raise US Constitutional issues that were expressly not decided in Cuozzo.  Briefing is ongoing in MCM and one scenario is that the court will sit on Cooper and then grant/deny the pair together.  A new petition was filed by Trading Technologies just before Cuozzo was released – the case focuses on a mandamus (rather than appeal) of a CBM institution decision for a patent covering a GUI tool. (Full disclosure – while in practice I represented TT and litigated the patent at issue).  Of minor interest, the court issued a GVR order (Grant-Vacate-Remand) in Click-to-Call Tech. v. Oracle Corp (15-1014) with instructions to the Federal Circuit to reconsider its prior decision in light of the recently decided Cuozzo Speed Technologies, LLC v. Lee, 579 U. S. ___ (2016).  It will be interesting to see whether the patentee can develop a new hook for the Federal Circuit.

The end-of-term clean sweep leaves only two-more briefed-cases with potential for certiorari: Impression Prod. v. Lexmark Int’l. (post-sale restrictions); and Sandoz v. Amgen (BPCIA patent dance).  In both cases the court called for the views of the Solicitor General (CVSG). DOJ briefs should be filed around the end of the year – although the election may shift some of the timing.  SG Donald Verrilli has stepped down with former deputy Ian Gershengorn now serving as Acting SG.

The big list:

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Supreme Court denies Sequenom Petition: Alice and Mayo Remain

by Dennis Crouch

Patentees in the biotech and software industries had placed substantial hope on the pending Supreme Court case of Sequenom v. Ariosa: The hope being that the case would serve as a vehicle for the Court to step-back from the strong language of Alice and Mayo that has led to rejection and invalidation for many.  The Supreme Court has now denied certiorari in Sequenom – effectively ending that campaign.

Supreme Court to Decide Patent Export Case: Life Tech v. Promega

by Dennis Crouch

The Supreme Court has granted a petition for writ of certiorari in the pending patent case of Life Tech. v. Promega Corp (14-1538) – focusing only on Question 2:

Whether the Federal Circuit erred in holding that supplying a single, commodity component of a multi-component invention from the United States is an infringing act under 35 U.S.C. § 271(f)(1), exposing the manufacturer to liability for all worldwide sales.

The court will not review the Billy Idol question of whether one can induce ones self.

As the question presented indicates, the case focuses on the statutory interpretation of Section 271(f)(1). That section provides for infringement liability against someone who exports components of a patented invention. The text:

Whoever without authority supplies … from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

I have underlined the requirement that at least “a substantial portion of the components” be supplied before infringement occurs because that language forms the basis for the case.

Here, the case in question involves certain genetic testing that occurred abroad. However apparently a single component of the invention (Taq polymerase) was supplied from the US. For those who have not learned biology in the last 20 years, Taq polymerase is now a commodity product used to amplify DNA via the polymerase chain reaction (PCR).

The jury found that export of the single component was sufficient to meet the requirement of “a substantial portion of the components” when the accused genetic testing kits include a primer mix, a PCR reaction mix, a buffer solution, control DNA, and the polymerase Taq.  However, the district court granted JMOL against the patentee.  On appeal, the Federal Circuit sided with the jury – finding that substantial evidence supported the verdict.

[The asserted claim] recites five components: a primer mix, a polymerizing enzyme (such as Taq polymerase), nucleotides, a buffer solution, and control DNA. Tautz patent, LifeTech’s domestic arm supplies the Taq polymerase to its facility in the United Kingdom, which both manufactures the remaining four components and assembles all the components into the accused STR kits. Taq polymerase is an enzyme used to amplify the DNA sequences in order to obtain enough replicated sample for testing. Without Taq polymerase, the genetic testing kit recited in the Tautz patent would be inoperable because no PCR could occur. LifeTech’s own witness admitted that the Taq polymerase is one of the “main” and “major” components of the accused kits. In short, there is evidence in the record to support the jury’s finding that a polymerase such as Taq is a “substantial portion” of the patented invention.

On the question of law, the Federal Circuit held that, in some circumstances “a party may be liable under § 271(f)(1) for supplying or causing to be supplied a single component for combination outside the United States.”  In his essay on the decision, Jason Rantanen wrote this holding was “probably erroneous.”  

 

 

End of the Road for Ethicon’s Anti-Delegation Argument?

by Dennis Crouch

In a 10-1 decision, the Federal Circuit has rejected Ethicon’s petition for en banc rehearing on the question of  whether the USPTO Director improperly delegated IPR institution decisionmaking. Ethicon will likely petition the Supreme Court for its views.  The case raises interesting, but ones that I expect will ultimately fail.  Chief Judge Prost likely held the decision release to await the Cuozzo affirmance that implicitly supports the court’s ruling here.

Inter Partes Reviews (IPRs) can be broken down into a two step process. At the institution stage, the Patent Office Director is tasked with determining whether to institute the proceeding. 35 U.S.C. § 314. Once instituted, the Patent Trial and Appeal Board (PTAB) holds trial and makes a final determination of merits. 35 U.S.C. § 316(c).  Despite the statutory separation, the Director has delegated the entire procedure to the PTAB – including the institution decision.  In its failed petition, Ethicon questioned this delegation – asking: “Does the Patent Act permit the [PTAB] to make inter partes review institution decisions?”

The decision in Cuozzo does not directly address the challenge issues here, but the court’s loose language does suggest that it would side with the Federal Circuit.  In particular, the court repeatedly refers to actions by the “Patent Office” regarding institution and other decision rather than using the statutory language “Director.”  Although not as consistent, the court also repeatedly refers to actions by the PTAB as by the “Patent Office.”  In his dissent, Judge Alito addresses the issue directly and without criticism, although failing to note that Director Lee is a woman:

The Director of the Patent Office has delegated his authority to institute inter partes review to the Patent Trial and Appeal Board (Board), which also conducts and decides the inter partes review. See 37 CFR §§42.4(a), 42.108 (2015); 35 U. S. C. §§316(c), 318(a). I therefore use the term “Patent Office” to refer to the Director, the Board, and the Patent Office generally, as the case may be.

Alito dissent at footnote 2.