Federal Circuit: Administrative Agencies Can Make Rules, But Must Also Follow Them

by Dennis Crouch

Align Tech v. USITC (Fed. Cir. 2014)

This Section 337 appeal is largely focused on the civil procedure associated with litigating cases before the United States International Trade Commission (USITC). In general, Section 337 investigations are conducted by administrative law judges (ALJs) who are employed by the USITC to determine various issues. ALJ decisions are then reviewed by USITC Commission itself (a six-member panel appointed by the president). The Commission does not, however, review mere “initial determinations” made by ALJs but rather awaits “orders.” 19 C.F.R. § 210.1. This rule is akin to the rule against appealing interlocutory orders. Although the initial-determination-rule was created by the commission, the commission does not have the power to disregard the rule in an ad-hoc basis. In this case, the Commission reviewed an initial determination by an ALJ and that decision has been reversed on appeal – based upon a finding that the Commission did not yet have authority to review the ALJ decision.

The underlying issue here involves Align (InvisAlign) orthodontic patents and trade secrets. See US Patent No. 6,685,469. The patents at issue were invented by Zia Chishti, Align’s co-founder. However, Chishti left the company and formed a competitor OrthoClear. Align then complained to the USITC asking for an importation ban based upon both patent infringement and trade secret misappropriation. A 2006 consent order from that USITC case resulted in an agreement that OrthoClear would no longer import infringing products or those “in violation” of the trade secrets. The present enforcement action is against “ClearCorrect Pakistan” that Align argues is the successor to OrthoClear. The ALJ order in question here was a denial of ClearCorrect’s motion to terminate the enforcement proceeding. However, the Commission reviewed that decision and terminated the enforcement proceeding – concluding that ClearConnect’s processes were not included in the original order and therefore not subject to the original consent order. As discussed above, the Federal Circuit now reverses – finding that the “Commission exceeded its authority by reviewing the order below.”

= = = = =

This decision was written by Judge Chen and Joined by Chief Judge Prost. (Judge Rader was originally on the panel). This pair will likely be the drivers of administrative patent law that will continue to develop as the USPTO asserts its substantive rulemaking authority under the America Invents Act and determines a growing number of contested post-issuance reviews. The decision here stands for the strong principle that, although administrative agencies have the power to make their own rules of procedure, the agencies can be held to those rules once set.

Jurisdiction over Contempt Finding

By Dennis Crouch

Arlington Industries, Inc. v. Bridgeport Fittings, Inc. (Fed. Cir. 2014)

Back in 2002, Arlington sued Bridgeport for infringing its patent covering a method of snap-fit electrical connectors. U.S. Patent No. 6,335,488. The parties settled that case in 2004 and the court issued a decree permanently enjoining Bridgeport from making certain products or their “colorable imitations.” Bridgeport then re-designed its product but not to Arlington’s liking. However, on motion, the district court agreed held Bridgeport in contempt – finding that the new design was too-close to the old. The court did not (yet) enter any sanctions, but did expressly enjoin Bridgeport from selling the re-designed product. To be clear, however, the district court [arguably] did not modify the injunction but instead held that the new products fell within the injunction. Here, Bridgeport appeals that decision.

On appeal, the Federal Circuit has dismissed the case – finding that it lacks appellate jurisdiction. In particular the court finds that (1) the contempt holding was not a “final” judgment and therefore not normally directly appealable and (2) the ruling regarding the injunction was not actually a modification of the injunction and therefore not directly appealable. See Entegris, Inc. v. Pall Corp., 490 F.3d 1340, 1343 (Fed. Cir. 2007).

The facts in this case parallel Entegris. And relying on that precedent, we similarly conclude that we lack jurisdiction to consider Bridgeport’s appeal because the district court’s order simply interpreted or clarified its original 2004 injunction.

Bridgeport will get its appeal. The district court has now determined a sanctions order and issued a final judgment that appears to be appealable. The next time around, the Federal Circuit will need to actually decide whether the contempt order was correct.

Looking through the district court docket for a case like this provides some suggestion as to how powerful injunctions – especially their ongoing power to control infringement without the need to re-do another trial.

Applicant’s IDS Submission of Litigation Documents Constituted Disclaimer

By Dennis Crouch

Golden Bridge Tech v. Apple (Fed. Cir. 2014)

This case should be seen as a follow-on to Judge Moore’s recent decision in X2Y Attenuators v. US International Trade Commission (Fed. Cir. 2014). In both cases, Judge Moore applies the doctrine of prosecution disclaimer to limit claim scope.

Here, Golden Bridge asserted two patents, U.S. Patent Nos. 6,574,267 and 7,359,427, the first of which had been previously asserted in a different case. In the prior case, Golden Bridge stipulated to a particular definition of the claim term “preamble.” (Note – the word “preamble” is in the claim and its definition is in dispute). Golden Bridge then submitted the stipulated construction to the USPTO for the still-pending application as well as the prior patent that was also under reexamination. Although submitted in an IDS, the stipulated dismissal was never directly or otherwise referred to in the prosecution history.

In the new lawsuit against Apple, Golden Bridge argued that the prior stipulation was not binding and the IDS filing certainly should not be seen as a prosecution disclaimer. Both the district court and now the Federal Circuit have rejected Golden Bridge’s position:

We conclude that GBT’s submissions during prosecution of its stipulated construction for the term “preamble” constitute disclaimer. . . . Here, GBT clearly and unmistakably limited the term.

Rather than merely filing the IDS form, the applicant included a cover-sheet letter asking the USPTO to consider the references stating:

It is respectfully requested that the documents be expressly considered during prosecution of this application.

In the only off-kilter portion of the opinion, Judge Moore identified that statement as important for the disclaimer – finding that “[i]t would have been natural for both the PTO and the public to rely upon the stipulation in determining the scope of the claimed invention.” (In my view, any IDS Submission already includes at least an implicit request that the documents be expressly considered.)

Judge Moore takes care to limit the ruling here by expressly indicating that the ordinary submission of third-party prior art should not ordinarily create any disclaimer. The difference here is that the IDS submission included an admission by the patentee to a court of law that related directly to claim term scope. Judge Moore also indicated that the patentee could have overcome the disclaimer with an express statement in the prosecution history denying the applicability of the prior in-court statement.

I wonder if the case would have been decided differently by Judge Moore if the IDS submission had included a boiler-plate statement that “No aspect of these submissions constitute a disclaimer of claim scope.” Judge Moore is a particular stickler regarding admissions and statements by parties, even when made in boiler plate language. Thus, I suspect that such a disclaimer-of-disclaimers would have been effective here. On the flip side, I also wonder whether the submission of the stipulated claim construction as a public document in Federal Court (even without the IDS submission) should itself be seen as a prosecution disclaimer in itself. Anyone truly concerned with the patents in question would have reviewed the court filings and likely seen them as more important than the prosecution history files of continuation or foreign applications, for instance.

Studying the Mongrel: Why Teva v. Sandoz Won’t Solve Claim Construction

Guest post by Heather F. Auyang, Senior Counsel at LTL Trial Attorneys in San Francisco, California. The views and opinions expressed herein are those of the author and do not reflect the views or opinions of LTL Trial Attorneys.

This is the Teva-update to last summer’s Patently-O Guest Post titled “Why Lighting Ballast Won’t Solve Claim Construction” (http://patentlyo.com/patent/2013/07/guest-post-why-lighting-ballast-wont-solve-claim-construction.html), which discussed two then-recently published empirical studies – a study of “close cases” (analyzing all post-Markman claim construction cases where the Federal Circuit panel was split) and a study of “reversals” (analyzing all post-Phillips claim construction cases in which the Federal Circuit reversed the district court).   Updates to both studies have now been published in a sequel article, which provides further explanation and answers to some of the questions that were raised in this very forum last year.  The past year’s data is unsurprising – it is exactly what the models provided by the original studies predicted, and it confirms, yet again, that changing the standard of review will not have a particularly beneficial effect on claim construction predictability or consistency. This conclusion is based on two key facts shown by the data:  (1) that Federal Circuit judges remain divided on how to approach the task of claim construction, and (2) that when district courts are reversed, it’s almost always because they have misapplied settled claim construction principles.  In fact, giving more deference to district courts will likely exacerbate, rather than fix, problems with claim construction.

The close cases study (of 105 cases) continues to show that each Federal Circuit judge who has participated in more than five close cases falls into a distinct camp.  Judges Wallach, Linn, Clevenger, and Moore “go broad” in over 66% of close cases (Judge Rader was also in this group); Judges Bryson, Prost, Mayer, Schall, and Dyk “go broad” in between 47% and 55% of close cases; and Judges Newman and Lourie “go broad” in under 31 percent of close cases.

As pointed out last year, if the goal is to make claim construction more predictable, a good place to start would be to ensure that all the Federal Circuit judges are following the same rules of claim construction.  This data clearly shows that they are not.  While any given judge in any given opinion can cite the same agreed-upon rules, the rules are not preventing significant differences in approach among the judges.  Last year’s post and article posited that some judges are expressly or implicitly following an “actually invented” standard that other judges reject.  Whatever the explanation, until these differences are ironed out, tinkering with other issues – like deference to district courts – is unlikely to be productive.

The reversals data (based on 153 cases) is even more relevant to the question of deference than is the close cases data, since it deals directly with the relationship between the Federal Circuit and the district courts.  Focusing on reversals makes sense because this dataset, presumably, includes the cases whose results would change if the Supreme Court determines that district courts should get more deference in claim construction.  Accordingly, these are the decisions that should be studied before one concludes that the current standard of de novo review should be changed.  As it turns out, the reversals data suggests that the high reversal rate is caused by district court error, not Federal Circuit arbitrariness. If that’s the case, why in the world are people advocating more deference to district courts?

The reversals study coded for whether the Federal Circuit decision was in a broadening or a narrowing direction.  The result for the 11-month period since the last study was a broadening rate of 87.5%, even higher than the previously-reported overall broadening rate of 72.5%.  In other words, in cases where district courts are “getting it wrong,” according to the Federal Circuit, they are systematically interpreting the claims too narrowly.  As pointed out last year, these narrowing interpretations typically enable district courts to grant summary judgment of non-infringement (or encourage the parties to enter such a stipulation), and thereby permit the Federal Circuit to review the claim construction issue without going through the trouble and expense of a trial.  In the year since then, we have not heard any other plausible explanation.  Last year’s post and article also challenged any advocate of deference to provide one or more examples from the “reversals” cases that (1) would have come out differently under a deference regime, and (2) should have come out differently.  We haven’t heard anything on that either.

This year’s article – including fancy color charts analyzing Federal Circuit judge proclivities across broad/narrow, less spec/more spec, pro-patent/anti-patent, and pro-affirm/pro- reverse; and pie-charts and tables for the reversals data –  is What Reversals and Close Cases Reveal About Claim Construction at the Federal Circuit – The Sequel, 13 J. Marshall Rev. Intell. Prop. L. 525 (2014) (available at http://repository.jmls.edu/ripl/vol13/iss3/3/). The comments here on last year’s article were of a very high caliber; hoping for the same again this time!

 

 

Federal Circuit affirms Rule 12 dismissal of a design patent case

Guest Post By Sarah Burstein, Associate Professor of Law at the University of Oklahoma College of Law

Anderson v. Kimberly-Clark Corp. (Fed. Cir. 2014) (nonprecedential)

Panel: Prost, Clevenger, Chen (per curiam)

In this case, pro se plaintiff Anderson alleged that nine different disposable undergarments infringed U.S. Patent No. D401,328 (the “D’328 patent”). Kimberly-Clark moved for judgment on the pleadings, asserting that it only manufactured five of the nine accused products—and none of those five infringed the D’328 patent. In a per curiam opinion released only two days after the case was submitted to the panel, the Federal Circuit agreed.

Under Egyptian Goddess, a design patent is infringed if “an ordinary observer, familiar with the prior art designs, would be deceived into believing that the accused product is the same as the patented design.” As these illustrations from Kimberly-Clark’s motion for judgment on the pleadings show, the accused products manufactured by Kimberly-Clark do not even arguably look “the same” as the patented design:

Indeed, in opposing Kimberly-Clark’s motion, Anderson did not even argue that the designs looked alike. And on appeal, her main argument was that the district court erred in considering the images shown above because they were not attached to her complaint. The Federal Circuit rejected this argument, concluding that the district court did not err in considering the images because: (1) Anderson did not dispute their accuracy or authenticity; and (2) the appearances of the patent illustrations and accused products were integral to her claims. And ultimately, the Federal Circuit found no error in the District Court’s conclusion that Anderson had failed to state a plausible claim for infringement.

So this was a pretty easy case on the merits. And it is, of course, nonprecedential. But it’s still noteworthy because of its procedural posture. Since Egyptian Goddess, a number of courts have granted summary judgment of noninfringement where, as here, the accused designs were “plainly dissimilar” from the claimed design. But Rule 12 dismissals are still rare. And dismissals pursuant to Rule 12(c) are even rarer. It will be interesting to see if cases like this inspire more defendants to seek dismissal of weak design patent claims at the pleading stage.

Federal Circuit Orders District Court to Stay Litigation to Await Conclusion of Later-Filed Post-Issuance Review (CBM) Proceeding

By Dennis Crouch

VirtualAgility Inc., v. Salesforce.com, Dell, Dr. Pepper, et al. (Fed. Cir. 2014)

The America-Invents-Act (AIA) created set of new and powerful administrative proceedings that allow third parties to challenge issued patents. These include post-grant review (PGR), covered business method review (CBM), and inter partes review (IPR). Congress maintained the less-powerful but still important third-party requested ex parte reexamination. In the coming months, the Federal Circuit will be challenged with reviewing various aspects of the new proceedings. Perhaps most importantly, the court will be challenged with determining how much deference and leeway to give the USPTO in developing its own procedures and interpretation of the law.

Apart from the agency deference issue, a second major issue whose steam continues to build involves the rising number of conflicts between federal courts and the patent office. Traditionally, post-issuance challenges have been handled by the courts, but the new procedures have shifted the balance of power. It turns out that most patents involved in post-issuance administrative challenges are also involved in parallel challenges in federal district court. These parallel proceedings will often have somewhat different results, and many remain confused over the potential result of such a conflict. In the extreme, the issue raises constitutional questions of separation of powers between the executive (the PTO) and the courts.

One solution to the conflict is to have the decision-makers take turns and apply principles of estoppel, preclusion, and comity to resolve the delayed process in a way that avoids conflict with the first-decided case. The PTO has generally refused to stay its proceedings and many district court judges have difficulty ordering stays – especially in cases such as this where the review request is filed several months after the infringement lawsuit. It is important to recognize that post-issuance review requests are limited by law to only challenge issues that can also be challenged in court. Thus, for a judge, the post-issuance review request serves as a transparent statement that the defendant does not trust the judge or jury to make the call.

The Timeline Here: In January 2013, VA sued the defendants in the Eastern District of Texas, alleging infringement of its U.S. Patent No. 8,095,413. Five months later (May 2013) one of the defendants (Salesforce.Com) filed a covered business method review (CBM) petition alleging that that the claim of the patent were all invalid under Sections 101, 102, and 103 of the Patent Act. In November 2013, the PTAB partially granted the CBM petition and ordered review of the claims under Sections 101 and 102 (but not 103) and setting a July 2014 PTAB trial date with a final decision expected by November 2014. At that point, the district court was made-aware of the PTAB’s late-start but rapid progress. However, the district court refused to stay the litigation pending outcome of the PTAB case and continued moving forward with claim construction hearing set for April 2014 and trial also set for November 2014.

One aspect of the new CBM process is that the statute allows for interlocutory appeal of a district court’s decision to grant or deny a stay of litigation pending CBM review. Thus, after the district court refused to grant the stay, Salesforce appealed. The Federal Circuit quickly granted a stay of the district court litigation pending appeal and has now ordered that the district court to stay its proceedings pending the CBM review. The majority decision here is written by Judge Moore and joined by Judge Chen. Judge Newman wrote in dissent arguing that the decision here removes the discretion given to district courts.

The statute provides four factors that a district court must consider when determining whether or not to grant a stay of a late-filed CBM review.

[T]he court shall decide whether to enter a stay based on—

(A) whether a stay, or the denial thereof, will simplify the issues in question and streamline the trial;

(B) whether discovery is complete and whether a trial date has been set;

(C) whether a stay, or the denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party; and

(D) whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court.

AIA §18(b)(1). Regarding appeals, the statute indicates that the Federal Circuit’s “shall review the district court’s decision to ensure consistent application of established precedent, and such review may be de novo.” AIA §18(b)(2). Thus, Judge Newman’s call for deference is likely misplaced. For its part, the majority refused to determine whether any deference is required and instead held that reversal was warranted even under an abuse of discretion standard.

The result here provides a strong suggestion to district courts that they should stay litigation once the PTAB has indicated that it will review the identical claims being litigated in court.

Federal Circuit Sends Patent Case to Eighth Circuit

By Dennis Crouch

US Water Services, Inc. v. ChemTreat (Fed. Cir. 2014)

The Federal Circuit has determined that it lacks subject-matter appellate jurisdiction over the patent infringement appeal and has thus transferred the case to its sister-court, the Court of Appeals for the Eighth Circuit.

The unusual outcome stems from the parties pleading posture that began pre-AIA. Under the law when the case was filed, the Federal Circuit has subject-matter appellate jurisdiction over cases that “arise under” federal patent law. Arising-under jurisdiction is a term of art that follows the “well-pled complaint rule” which requires the patent law question appear on the face of the plaintiff’s original complaint as outlined in the Supreme Court’s 2002 decision on point. Holmes Grp., Inc. v. Vornado Air Circulation Sys., Inc., 534 U.S. 826 (2002).

Here, the original complaint was filed by USWS against ChemTreat for trade secret misappropriation under Minnesota law. In a counter claim, ChemTreat alleged invalidity and non-infringement of one of USWS’s issued patents. The parties then settled the trade secret claim and the district court subsequently granted ChemTreat’s motion for summary judgment of non-infringement. USWS now appeals that noninfringement determination. Since the patent issue was first raised in the responsive pleading (rather than in the complaint), the case cannot be said to arise under the federal patent laws. The result then is that the Federal Circuit has no subject matter appellate jurisdiction over the appeal.

As the patentee with a technical argument on appeal, the USWS was looking for Federal Circuit jurisdiction. It raised two arguments on the appeal (1) that it consented to the counterclaim filing; and (2) that the counterclaim joined additional parties (the patent owners since USWS was merely the exclusive licensee) and thus should be seen as the equivalent to a complaint under the well-pled-complaint rule. In its decision here, the Federal Circuit rejected both of those arguments, finding instead that the rule is hard and inflexible. See also Wawrzynski v. H.J. Heinz Co., 728 F.3d 1374 (Fed. Cir. 2013).

tl;dr: patent issue was first raised in a counterclaim so the case did not arise under the US patent laws.

If the same lawsuit had been more recently filed, it is possible but still unlikely that the Federal Circuit would have subject matter appellate jurisdiction based upon the AIA amendments made in 2011. In particular, the Federal Circuit jurisdiction now additionally extends to cases where the patent law issue is raised only in a “compulsory counterclaim.” Although not expressly decided it does not appear that the patent issue here should be seen as compulsory under the rules of civil procedure but instead merely supplemental. As such, even the broader appellate subject matter jurisdiction rules of the AIA would not permit the Federal Circuit to hear the case.

= = = = =

The decision here was based upon appellate subject matter jurisdiction and did not reach the merits of the underlying appeal. Those underlying merits focused on whether the district court held declaratory judgment jurisdiction since (according to USWS), USWS never threatened patent infringement and the challenged patent was so different from ChemTreat’s activities that it would be silly to fear such an action.

Patently-O Bits and Bytes by Dennis Crouch

Get a Job doing Patent Law:

 

Compulsory License as a Remedy for Trade Secret Misappropriation

by Dennis Crouch

Sabatino Bianco, M.D. v. Globus Medical, 2:12-cv-00147 (E.D. Tex 2014) (Decision)

Spinal FusionFederal Circuit Judge William Bryson is sitting by designation in this trade-secret misappropriation case brought by the Dr. Bianco, a Texas Neurosurgeon. According to the allegations, Bianco shared his intervertebral fusion device with Globus (under a confidentiality agreement) and then Globus began selling its version of the device. The jury sided with the doctor, finding Globus liable for trade-secret misappropriation and awarded $4.2 million in past damages. Following the jury verdict, Judge Bryson denied Bianco’s request for permanent injunctive relief. In that decision, the court concluded that three of the eBay factors pushed against such a ‘dramatic’ award: irreparable harm; balance of the hardships; and the public interest.

In his most recent opinion in the case, Judge Bryson has awarded ongoing damages of 5% of Globus’s future sales of the device (for the next 15-years). The one problem with the Judge’s decision is that he did not cite a single case where ongoing royalties have been awarded for trade secret misappropriation under Texas law. Rather, Judge Bryson analogized to the Federal Circuit’s decision in Paice LLC v. Toyota Motor Corp., 504 F.3d 1293 (Fed.Cir.2007) that permitted the award of ongoing (future) damages for patent infringement at a set reasonable royalty rate. Judge Bryson writes here:

Although this case involves trade secret misappropriation rather than patent infringement, the two torts are sufficiently analogous that the Federal Circuit’s decision in Paice, as supplemented by cases from the Federal Circuit and from this district that have applied Paice [in the patent context] provide an appropriate starting point for this Court in deciding whether to grant an ongoing royalty and what the amount of that royalty should be.

Of course, this trade secret case is based upon Texas state law and not on Federal Patent law and the remedy must be guided by Texas law even if limited by the Federal Court’s equitable power. In the interesting case of Guarantee Trust Co. of New York v. York, 326 U.S. 99 (1945), the Supreme Court explained:

This does not mean that whatever equitable remedy is available in a State court must be available in a diversity suit in a federal court, or conversely, that a federal court may not afford an equitable remedy not available in a State court. . . . State law cannot define the remedies which a federal court must give simply because a federal court in diversity jurisdiction is available as an alternative tribunal to the State’s courts. Contrariwise, a federal court may afford an equitable remedy for a substantive right recognized by a State even though a State court cannot give it. Whatever contradiction or confusion may be produced by a medley of judicial phrases severed from their environment, the body of adjudications concerning equitable relief in diversity cases leaves no doubt that the federal courts enforced State-created substantive rights if the mode of proceeding and remedy were consonant with the traditional body of equitable remedies, practice and procedure, and in so doing they were enforcing rights created by the States and not arising under any inherent or statutory federal law.

To be clear, the ongoing damages award in Paice has been classified as equitable because it goes beyond what would have been available to a court of law.

In eBay, the Supreme Court spelled out the factors that must be considered as a pre-requisite before a Federal Court can award permanent injunctive relief. Although that case focused on injunctive relief, the Supreme Court requires federal courts to walk through several steps before any equitable relief is awarded. In the York case cited above, the court wrote that any award of equitable relief by a Federal Court “is of course subject to restrictions: the suit must be within the traditional scope of equity as historically evolved in the English Court of Chancery. . . ; explicit Congressional curtailment of equity powers must be respected. . .; the constitutional right to trial by jury cannot be evaded. . . ”  In general, any ongoing royalty award should also also include a determination that the remedies available at law are inadequate to protect the interest of the right holder.

Where to Appeal?: It will be interesting to see how the Federal Circuit handles this case on appeal. (The complaint also requests change of inventorship under 35 U.S.C. 256).

The case should also serve as a warning against parties seeking injunctive relief in Federal Courts. Namely, Federal Courts are required to follow eBay even when enforcing State law.  State courts are not so limited.

Federal Circuit: How Not to Describe the Invention

By Dennis Crouch

X2Y Attenuators v. US International Trade Commission as well as Intel, Apple, & HP (Fed. Cir. 2014)

In this case, the Federal Circuit affirms a narrow construction of X2Y’s claim terms based upon a disavowal of scope. In the face of USPTO pleas for patentees to more particularly define claim terms, this case offers reasons for applicants to push-back against that approach.

The decision here fully and problematically supports the current patent drafting norms where the true nature and advances offered by inventions are hidden in order to avoid unduly limiting claim scope. Under standard patent drafting technique, no elements are described as necessary, critical, preferred, or even discouraged. And, “the invention” is never particularly defined or called-out. That strategy has the result of substantially decreasing the disclosure value of a patent.

= = = =

The founder of X2Y Tech was Mr. Anthony A. Anthony who passed away in 2012 while continuing to fight for royalty agreements from major manufacturers. During his life, Anthony obtained more than 100 patents covering a variety of electronic components and circuitry configurations.

X2Y’s claims require a set of electrodes but do not expressly indicate their relative configuration. The specification discusses a particular “sandwich” configuration of electrodes and the USITC found that the claims should be construed as also requiring the sandwich formation. On appeal, the Federal Circuit affirms – finding that the language of the specification requires that the claims be so limited.

Under Phillips v. AWH, the specification and prosecution history of a patent can provide insight into proper the claim interpretation. In addition to the scope-shading offered by Phillips, scope disclaimers or term definitions coming from the applicant can dramatically shift claim scope. However, the law requires that any disclaimer must be found in a clear and unambiguous statement made by the applicant.

In this case, the specification refers to the sandwich configuration as “universal to all the embodiments” and as “an essential element among all embodiments or connotations of the inventions.” The court finds these statements to represent a “clear and unmistakable disavowal of claim scope.” The standard for finding disavowal, while exacting, was met in this case.

To be clear, an important element of the decision here is that the disavowal is not tied to any particular claim language, but applies to all claims of the patent without regard to their express claim terms. In fact, the court goes even further and found that statements made in some family-member applications also apply to establish the disclaimer here.

The court notes that one mechanism for overcoming the disclaimer in a child application would be to expressly amend the claim scope so as to reject the disclaimer – of course that result may well have written description problems.

A unanimous majority opinion was filed by Judge Moore and joined by judges Reyna and Wallach. Judge Reyna also filed a separate concurring opinion discussing whether claim construction must come before determining whether a priority claim is proper.

Alice, Artifice, and Action – and Ultramercial

Guest post by Emily Michiko Morris, Associate Professor, Indiana University Robert H. McKinney School of Law

Anyone familiar with recent Supreme Court patent jurisprudence was perhaps disappointed but certainly not surprised by the Court’s latest decision, Alice Corp. v. CLS Bank Int’l. The Court once again left many questions unanswered and failed to provide a clear rubric for identifying patentable subject matter. When viewed within the broader context, however, Alice fits nicely within what is actually a long-standing pattern in § 101 cases. IF Ultramercial v. Hulu follows this pattern after its now second GVR, the Federal Circuit may finally affirm that the internet-mediate advertising method at issue there is unpatentable subject matter.

In What Is “Technology”?, I explain that as unmethodical as patentable subject matter often seems, two surprisingly consistent concepts explain how courts identify patentable subject matter. The article dubs these concepts “artifice” and “action.”

Artifice refers to the well-recognized requirement that patentable subject matter be the product of human ingenuity, not nature. Less appreciated is the fact that artifice requires more than just changes in structural or other physical characteristics; to be patentable, a claimed invention must also function in some new, non-naturally occurring way. We can see this latter point illustrated in the purification line of cases as well as Myriad, Funk Brothers, and Chakrabarty.

Much more obscure but more relevant to Alice is the concept of action. Roughly defined, action is the requirement of active rather than passive utility through operating, behaving, performing, or otherwise actively doing something; that is to say, an invention must be “self-executing.” Inventions that display, transmit, or even store information may satisfy the action requirement, but works such as laws of nature, mathematical algorithms, and “abstract ideas” are (perceived as) merely informational or descriptive in value and therefore unpatentably inert. Moreover, as Alice explains, the abstract idea category is not “confined to ‘preexisting, fundamental truth[s].’” By definition any purely informational or descriptive content, whether naturally occurring laws of nature and mathematical algorithms or human-made financial and economic methods, fails the action requirement. As the Court in Diamond v. Diehr put it, such works simply do not “perform[ ] a function which the patent laws were designed to protect.”

To the extent different tests appear to govern natural products versus laws of nature and abstract ideas, then, artifice and action – and more importantly, the circumstances in which each are likely to be invoked – account for these differences. Artifice obviously plays its largest role in cases involving products or laws of nature, whereas action is most important in cases involving abstract ideas and laws of nature. Nonetheless, patentability under § 101 requires both artifice and action.

Both Alice and Bilski illustrate what role action plays under § 101. The methods in both Alice and Bilski involved hedging risk during business transactions by relying on intermediaries, but more importantly, both methods served solely to inform parties about when they can safely transact. The Alice and Bilski opinions describe this as the abstract concept of intermediated settlement, but really it is just information – information about risk. As such, both methods were unpatentably inactive under § 101.

And although Alice differs from Bilski in that Alice’s method was computer-implemented, the Court found both methods to be unpatentable. Like artifice, action is also a scalar characteristic. Just as artifice depends on an invention’s perceived degree of alteration from nature, action depends on an invention’s perceived degree of activity, and despite Alice’s computer-implementation, the method was still not active enough under § 101.

Indeed, both Alice and Mayo emphasize the scalar nature of patentability under § 101. Under Mayo’s two-step test, a court first determines whether a claim is directed to a law of nature, natural phenomenon, or abstract idea. As the Alice Court observed, however, all inventions are directed to one of the patent-ineligible concepts at some level. The second and pivotal step is therefore to determine whether the claim demonstrates an “inventive concept” – that is, does the claim add elements “sufficient” and “enough” to establish patentable subject matter.

And to see that a sufficient “inventive concept” requires sufficient action, one need only look at how the Court treats computer-mediated elements with regard to patentability under § 101. Computers are widely regarded as “technological,” but much computer technology is “information technology,” and computer use primarily to manipulate data or other information thus adds no patentable action. Computer implementation in Alice’s method followed exactly this pattern – as the Court noted, the computer served only to create and maintain “shadow” accounts, obtain data, adjust account balances, and issue automated instructions. Accordingly, whether Alice claimed its invention as a method, system, or medium, the invention failed to provide an adequate “inventive concept” because it did not demonstrate sufficient action.

Under an artifice-plus-action standard, then, Ultramercial’s internet-mediated advertising method fails § 101. Ultramercial claimed a method of distributing copyrighted content for free in return for viewing an advertisement. The method is purely an exchange of informational and expressive content and performs no action whatsoever, and the claim’s cursory reference to the internet does nothing to add a “sufficient inventive concept.”

This is not to say, of course, that computer-implemented methods are never patentable subject matter. The Alice Court pointed out the difference between computers used purely for information processing and computers used to effect improvements in “any other technology or technical field,” or improvements in the function of the computer itself. Diehr’s computer-assisted rubber-curing process, for example, was adequately “technological” and therefore patentable, whereas the computer-implemented methods in Benson and Flook yielded “simply a number” and were therefore unpatentable. Per the view of the patent system, information processing is simply not “technological.” Similarly, computer or storage media that are distinguishable only by their informational or expressive content alone been held unpatentable if the content has no “functional” relationship with the device. The variable role that computers and other tangible devices can thus play in an invention may be why the Supreme Court rejected the machine-or-transformation test as the sole test for methods under § 101.

And while the discussion here focuses mostly on business methods, note that the Mayo two-step test as stated in Alice covers all patent-ineligible abstract ideas, laws of nature, and even phenomena of nature – all are subject to the same requirement that a claimed invention add “enough” to constitute a patentable inventive concept. For claims directed to phenomena of nature, “enough” means artifice and meeting the age-old test of “markedly different characteristics from any found in nature.” For abstract ideas, laws of nature, mathematical algorithms, mental processes, and all other forms of information, “enough” means action and demonstrating function beyond merely informing.

As simple as artifice and action may sound, however, patentable subject matter clearly remains a difficult and ambiguous issue. The difficulty lies in the scalar quality of both artifice and action and deciding where along these spectra any given new invention falls. The requisite degree of artifice and action has also varied over time as the liberality of patentable subject matter has waxed and waned, creating yet further uncertainty. Most significantly, where the line between patentable and unpatentable lies along the spectrum is entirely unclear. There are no bright-line rules and no magical claim elements that can guarantee patentability under § 101.

The Court has often (but not always, as our host Jason Rantanen has pointed out) expressed a preference for a “functional” approach to patent law, however: that is, a preference for standards over hard and fast rules. As stated in Bilski’s rejection of the machine-or-transformation test, to do otherwise would “make patent eligibility ‘depend simply on the draftsman’s art.’” True, the artifice-plus-action standard requires courts to make many judgment calls about where along the spectrum of artifice and action any given invention must fall before it can be considered patentable technology, but standards are often vague. Besides, patent law frequently must address these kinds of line-drawing exercises. The non-obviousness, utility, enablement, and even written description requirements all force courts to make judgment calls.

Compounding the difficulty is the fact that § 101 determinations are in the end based on nothing more than intuition. As I and a number of others have noted, none of the pragmatic justifications commonly cited in support of § 101, such as preemption and disproportionality explain how patentable subject matter determinations are actually made or, more importantly, why. Thus, although artifice and action consistently appear in patentable subject matter, the combination does not necessarily reflect the most efficient or “correct” way to define patentable subject matter. Rather, the combination merely reflects an underlying intuition about what constitutes technology. (In Intuitive Patenting, a companion article to What Is “Technology”?, I argue that there simply are no more objective bases on which to make these determinations.) Unfortunately, patentable subject matter’s intuitive nature leaves courts effectively unable to specify how they reached their determinations. This often leads to language that sounds more like non-obviousness, novelty, or utility than to § 101, but in the end, artifice and action are better explanations for these otherwise perplexing references.

Patent Examiners and Litigation Study

Guest Post by Prof. Shine Tu.  Dr. Tu is an Associate Professor of Law at the West Virginia University College of Law and a shareholder in PatentCore. His research focuses on large-scale empirical studies of the patent examination system.

In August of 2013, the GAO recommended that the PTO examine trends in patent infringement litigation and link this information to internal data on patent examination to improve the quality of issued patents and the patent examination process.  In our current study, we attempt to answer these questions: (1) which patent examiners are issuing litigated patents, (2) are examiners who are “rubber stamping” patents issuing litigated patents at a disproportionately higher rate, and (3) are examiners with less experience issuing more litigated patents?  In sum, do patent examiners who issue litigated patents have common characteristics?  Intuition would argue that those examiners who issue the most patents (approximately one patent every three business days) would exhibit a higher litigation rate.  Surprisingly, this study suggests that this is wrong.

This study uses two new patent databases, that code for nearly 1.7 million patents and approximately 12,000 patents that were litigated between 2010 and 2011.  This study determined that litigated patents mainly come from primary examiners who grant between 45-60 patents per year with between three to five years of experience.  These examiners are contributing to the litigated patent pool at a higher rate than expected.  Interestingly, the highest volume primary examiners (examiners who on average grant more than 80 patents per year and have more than 8 years of experience) do better than expected.

In the figures below, the dotted line represents the “expected litigation” based on the proportion of patents issued by the examiner.  The solid line represents the “actual litigation” rates seen.  Thus, when the solid line is above the dotted line, the examiners in that group issue more litigated patents than expected.  Conversely, when the dotted line is above the solid line, the examiners in that group issue less litigated patents than expected.

Figure 1Figure 2Certain structural factors, combined with the Preist-Klein type selection may explain the phenomena that primary examiners with 3-5 years of experience have higher than expected rate of litigated patents. During the first four or five years, when the examiner does not yet have full signatory authority, the examiner is under heavier scrutiny (review by a primary examiner as well as Quality Control).  During these years, the examiner removes easy cases from their docket (by allowing the clearly allowable cases, or by rejecting the unpatentable cases), and builds up a docket of “on the fence” applications.  Once a primary examiner obtains permanent full signatory authority (usually years 3 and above) are no longer heavily scrutinized. Additionally, production rates increase when a primary examiners acquires full signatory authority (usually an examiner moves to a GS-14 after gaining permanent full signatory status). Thus, new primary examiners who have permanent full signatory authority are in the new position of increased production rates while experiencing reduced supervision, with a larger docket of “on the fence” applications. Accordingly, these primary examiners (usually with more than 2-3 years of experience as a primary examiner) may issue these “on the fence” applications on their docket that they would have been hesitant to allow beforehand. Furthermore, applications that are “on the fence” might be more litigated than most patents. This is because strong patents could be allowed quickly by the examiner, and competitors would most likely need to license these patents, thereby avoiding litigation. Correspondingly, weak patents might take longer to issue, but would most likely not be litigated because of their weak standing. However, patents where validity is unclear may require litigation. These more uncertain patents may be issued at a higher rate when the primary examiner first receives full signatory authority (without supervision), thereby explaining the higher litigation rates in years 3-6.

There are many limitations to this study.  First, the database that we use is a broad database but suffers from some selection bias due to the examiner-matching step. Specifically, temporal selection bias occurs in the database since the examiner database contains only those patents that were issued between 2001 and 2012. Accordingly, litigations dealing with “older patents” (i.e., those patents issued before 2001) are not included in our database. Additionally, since we only have data starting from 2001, there may be a “left justification” issue.  Because we start at 2001, examiners who have worked prior to 2001 (inclusive) will be coded as working less years than they actually have worked.  For example, if an examiner started working in 1998 and quit in 2003, our database would code the examiner as working for 3 years, while in actuality the examiner was at the office for 6 years. We are currently segmenting the data to account for these examiners.  Accordingly, our results may be slightly positively skewed.

Another limitation is based on the fact that there are many reasons to bring litigation, but many of these reasons may not represent errors by the patent examiner. For example, a patent could be litigated and found invalid because of inequitable conduct. In this situation, the patent examiner may have issued a valid patent based on the fraudulent information given to her by the applicant. Another example deals with a patent that was found valid, but non-infringed. Here, the litigated patent may have been correctly issued, but litigated due to incorrect interpretation of the scope of the claims. Accordingly, simply because a patent is litigated, does not mean that there were errors made at the patent office.

To address these issues, we are currently working on a study that reviews only those patents that have been litigated to final judgment and found invalid. We then connect these invalidated patents to their corresponding examiners to determine if there are any common characteristics among the examiners who issue invalidated patents. However, we note that the pool of litigations that are litigated to final judgment dramatically reduces the sample size.

The paper will be published in 17 Stan. Tech. L. Rev. 507 (2014).  A draft of the paper is available on ssrn at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2458140

Guest Post: Selectively Targeting the Patent Troll Problem

Over the past two years, a number of legislative proposals have been proposed to address the perceived problem of “patent trolls.” A common problem of the proposed reform mechanisms is that they would result in broad reforms against all patent owners rather than specifically targeting problematic elements. For those with general anti-patent bent, that result may be acceptable. However, the pro-patent lobby remains strong enough to ensure that congressional reforms will not completely eviscerate the system. In his guest post below, Mr. Shah outlines his proposal for reforms that more selectively target patent trolls. – Dennis

Guest Post by Varun A. Shah, Head of IP Development for Aruba Networks.

The Innovation Act was a great attempt at solving the patent troll problem for the Information Technology industry. For example, the Innovation Act proposed heightened pleading standards for asserting patent infringement. However, the Innovation Act is now stalled in Congress, in part, due to the rejection by the Pharmaceutical and Biotech industries of new requirements for enforcing patents such as the heightened pleading standards. A solution is needed that solves the patent troll problem for the Information Technology industry without reducing the patent assertion rights of the original patent Applicant, i.e., the innovator.

I propose modifying the Innovation Act to require heightened pleading standards only if the current patent owner is not (a) the original Applicant or (b) an assignee that the Applicant is obligated to assign to at time of filing. In other words, only third parties (e.g., patent trolls or middle men) that acquire the patent would be required to follow the heightened pleading standards for asserting patents. Similarly, other patent rights, damages, and requirements for patents would depend on whether or not the current patent owner is (a) the original Applicant /an assignee that the original Applicant is obligated to assign to at time of filing or (b) a third party that acquired the patent. In case of legitimate business spin-offs (that are not primarily a patent sale), the business spin-off or acquiring company would hold the same rights as the original Applicant, and would not be subject to heightened pleading requirements for asserting patents.

This proposal reduces the patent troll problem for the Information Technology industry without reducing the patent assertion rights for the original patent Applicant. More generally, this proposal will protect the interests of all innovators that actually generate the ideas/patents while partially diluting the value of the patents if commoditized and transferred to others that are abusing and burdening the patent system. This re-structuring of patent value is in-line with the true goals of the patent system, i.e., the promotion of innovation.

= = = = =

Mr. Shah suggests that those who care about these ideas should contact the policymakers: Senator Leahy, Representative Goodlatte, and the White House Office of Science and Technology Policy (OSTP).

Federal Circuit: You Don’t Infringe . . . You Still Must Pay for Infringing

By Dennis Crouch

Retractable Tech v. Becton Dickinson and Co (Fed. Cir. 2014)

This patent infringement lawsuit is now in its seventh year. The case revolves around a set of patents owned by Retractable that cover a form of retractable safety-syringe. The original jury found that BDs 1mL and 3mL syringes both infringe with the result of $5 million for past damages and the district court ordered a permanent injunction. In the 2011 appeal, the Federal Circuit altered that claim construction and concluded that there was no infringement of the 3mL devices. On remand, the district court then altered the injunction (to only focus on the 1mL device). However, the district court refused to reconsider the damage award – finding that the damage award was subject to a final judgment that had not been directly appealed nor the subject of an order for reconsideration from the prior appeal. Now, the Federal Circuit affirms that judgment – finding that the lower court properly precluded BD from re-raising the damages issue on remand. This case is a bit of a civil procedure oddity. The jury awarded damages for infringement based on a finding that two different products infringe and final judgment was entered. The appellate court then partially reversed the decision – finding that only one of the products infringed. But, the infringer is not able to get the damage award modified.

In Verizon Services v. Vonage, 503 F.3d 1295 (Fed. Cir 2007), the court wrote that “where the jury rendered a single verdict on damages, without breaking down the damages attributable to each patent, the normal rule would require a new trial as to damages.” That case appears on-point to the present situation. However, both the district court and appellate panel have disagreed – finding that a district court is not permitted “to revisit damages in the absence of a reversal or remand of a damages determination. . . . [T]here is no ‘normal rule’ giving district courts the authority to regularly revisit or recalculate damages that fall within our mandate.”

Conceding that the rule here is very much a technicality, the court writes that the whole case outcome would be different had BD included one additional phrase in its prior appeal brief that requested a remand on the damages issue. Although a technicality, it appears that the decision not to include that phrase was a strategic decision made by BD’s appellate attorneys from WilmerHale and not any sort of oversight. In particular, BD wanted (and asked for) a bigger outcome (complete reversal or new trial) rather than simply a reduction in the damage award. I don’t believe that anyone will go home feeling sorry for BD.

This decision here was written by Judge Linn and joined by Judge Lourie. Judge Rader had been on the original panel but has now retired and thus did not participate in the final determination.

The Written Description of a Trade Secret

By Dennis Crouch

New Castle Beverage, Inc. v. Spicy Beer Mix, Inc. (California App. Ct. 2014)

New Castle sells a “spice cup” known as the “Micheladas Antojitos.” The Styrofoam cups are factory-dipped in a secret spice blend that is “carefully selected to enhance the flavor of your favorite beer or cocktail .” While an employee of New Castle, Robert Montiel learned the “secrets” behind the spicy-mix-cup and later sold that information to Greg Murkijanian who began to develop a competing product known as Cheveladas. New Castle then sued for trade secret misappropriation under California law and demanded preliminary injunctive relief. (New Castle did not have any patent rights).

The trial court rejected the claim for preliminary relief and here the California appellate court affirms – finding that the trade secret mix was has not been sufficiently described in order to warrant protection.

Unlike patent rights, trade secrets need not be expressly defined on paper prior to the establishment of those rights. Rather, it is enough that a valuable and protectable secret exist. However, the law does typically require trade secret owners to provide some written description of its asserted trade secret at the point of enforcement.

The California Code of Civil Procedure provides that:

Any action alleging the misappropriation of a trade secret under the Uniform Trade Secrets Act, before commencing discovery relating to the trade secret, the party alleging the misappropriation shall identify the trade secret with reasonable particularity subject to any orders that may be appropriate under Section 3426.5 of the Civil Code.

CODE OF CIVIL PROCEDURE SECTION 2019.210. See also, Mark Lemley, The Surprising Virtues of Treating Trade Secrets as IP Rights, 61 Stan. L.Rev. 311 (plaintiff should be required to “clearly define[ ] what [trade secret] it claims to own, rather than (as happens all too often in practice) falling back on vague hand waving”).

Here, the plaintiff only generally alluded to the “process of applying a secret solution to the inner and outer surfaces adjacent the lip of a beverage cup to permit a first mixture of spices to adhere to those surfaces.” According to the courts, that general allusion is insufficient to meet the burden required by California law .

The trial court questioned whether New Castle and Monugian had any trade secrets because of the lack of details in their trade secret designation and their failure to describe their trade secrets with sufficient particularity. The court expressed concern that “what we need is a description with sufficient particularity,” and the court asked, “If I were [to] grant your [requested] preliminary injunction on the record as it stands right now, how would we ever know whether it was violated or not?” On appeal, New Castle and Monugian do not address these concerns by making a well-reasoned argument that their trade secret designation was sufficiently specific to justify an injunction prohibiting use of their claimed trade secret information. New Castle and Monugian assert in their reply brief, without citing to any evidence, that “the sufficiency of the disclosure could have been resolved by simply viewing the device” and that “had the trial court viewed the device, the boundaries of an injunction would have been easier to fashion.” They do not explain, however, how a physical inspection of the device would reveal the precise nature and description of their secrets or guide the court in crafting an appropriate injunction, nor how such an inspection would be relevant to the alleged trade secrets in the spice mixture and blending.

Obviously, without proof of a trade secret, no preliminary injunction could issue.

For those of us coming from the patent field, it easily makes-sense that someone wanting to protect information as a trade secret should be able to at least describe the information to the court in a way that is reasonably precise and complete. That burden is somewhat less than what is placed on patent applicants and is not applied until the point of enforcement. However, an important and unique element of this case is that the written description requirement noted above comes from California Civil Procedure law. It is unique to California law and not generally an aspect of the Uniform Trade Secret Act that has been adopted across the nation. See, Graves & Range, Identification of Trade Secret Claims in Litigation: Solutions for a Ubiquitous Dispute, 5 Nw. J. Tech. & Intell. Prop. 68 (2006).

California is absolutely on the right path here and some courts have caught-on: Engelhard Corp. v. Savin Corp., 505 A.2d 30 (Del.1986), DeRubeis v. Witten Technologies, Inc., 244 F.R.D. 676 (N.D.Ga.2007); Automed Techs., Inc. v. Eller, 160 F .Supp.2d 915 (N.D.Ill.2001); Dura Global Technologies, Inc. v. Magna Donnelly, Corp., 2007 WL 4303294 (E.D.Mich.2007); Del Monte Fresh Produce Co. v. Dole Food Co., Inc., 148 F.Supp.2d 1322 (S.D.Fla.2001); and Ikon Office Solutions v. Konica Minolta Business Solutions, 2009 WL 4429156, *4–*5 (W.D.N.C.2009); and Switch Comm’n Group v. Ballard, 2012 WL 2342929, *5 (D. Nev. June 19, 2012). Judge Cote wrote the following in her 2008 Sit-Up decision:

A corollary requirement of specificity for claimed trade secrets is inferable from this holding: If a particular piece of information, or a formula, is not entitled to trade secret protection because it is “so vague and indefinite” at the time it is divulged, then it cannot be granted protection as a trade secret by a court during litigation if it is “vague and indefinite.” Specificity is required at the moment of divulging so that the party to whom the secret is revealed understands the contours of the secret information and does not inadvertently or purposefully transgress its boundaries. Similarly, specificity is required before the court so that the defendant can defend himself adequately against claims of trade secret misappropriation, and can divine the line between secret and non-secret information, and so that a jury can render a verdict based on a discriminating analysis of the evidence of disclosure and misappropriation.

Sit-Up Ltd. v. IAC/InterActiveCorp., 05 CIV. 9292 (DLC), 2008 WL 463884 (S.D.N.Y. Feb. 20, 2008). See also, Big Vision Private Ltd. v. E.I.DuPont De Nemours & Co., 2014 WL 812820 (S.D.N.Y. Mar. 3, 2014); Triple Tee Golf, Inc. v. Nike, Inc., 485 F.3d 253, 265 (5th Cir.2007); SL Montevideo Tech., Inc. v. Eaton Aerospace, LLC, 491 F.3d 350, 354 (8th Cir.2007) (“[s]imply to assert [that] a trade secret resides in some combination of otherwise known data is not sufficient, as the combination itself must be delineated with some particularity in establishing its trade secret status”).

Federal Circuit: To Satisfy the Written Description Requirement, a patent “must at least describe some species representative” of the accused product.

By Dennis Crouch

AbbVie v. Janssen Biotech and Centocor Biologics (Fed. Cir. 2014)

This decision is important in the way that it confirms a strong Post-Ariad Written Description requirement – especially with regard to genus-species claim situations. The decision also includes a key (but preliminary) discussion on the preclusive effect of PTAB decisions and also attempts to justify Federal Circuit decisions that extend beyond questions necessary for the judgment. Hal Wegner has already classified this opinion – written by Judge Lourie – as “unnecessary judicial activism.”

In 2013, Abbot Labs spun-off AbbVie as a separate company with a focus on biopharmaceutical research and a current Market Cap of $90 Billion US (ABBV). In the split, AbbVie obtained ownership of a number of valuable patents. In this case, AbbVie asserted various claims of U.S. Patent Nos. 6,914,128 and 7,504,485. These patents broadly cover antibodies that can bind to and neutralize activity of human interleukin 12 (IL-12). These antibodies have been found useful in the treatment of autoimmune disorders, including psoriasis and rheumatoid arthritis.

A key asserted claim is listed as follows:

29. A neutralizing isolated human antibody, or antigen-binding portion thereof that binds to human IL-12 and disassociates from human IL-12 with a Koff rate constant of 1×10−2s−1 or less, as determined by surface plasmon resonance.

A jury found the claim invalid for lacking a sufficient written description, lacking enablement, and also for obviousness. AbbVie appealed the §112(a) claims (WD & enablement) and, as for obviousness, AbbVie argued that that issue should never have been decided by the district court since it had already been fully litigated during the prior interference contest. On appeal, the court affirmed – agreeing that the patent was properly held invalid for lack of written description and that the collateral estoppel did not apply to the obviousness question because the interference proceeding was not sufficiently “final” at the time of the complaint filing.

Written Description: In Ariad, the Federal Circuit confirmed that the written description requirement is separate and distinct from that of enablement and that it serves an important role of ensuring that the patent is based upon an actual describable invention and that the patent scope does not overreach beyond the scope of the inventor’s contribution.

Written Description
– Genus-Species: By design, patent claims generally cover a set of a variety of potential embodiments. Likely, most claims cover an infinite variety of potential embodiments each involving a minor tweak in one way or another. The courts have never required that all potential embodiments be disclosed – however, the written description doctrine has been applied to invalidate patent claims that do not disclose a sufficient representative sample of embodiments. This is generally known as part of a genus-species problem – with the operative question here being how many different species (embodiments) of an invention must be described in a patent document before the applicant can properly claim rights to the genus of all related species. A key case on point is Regents of the University of California v. Eli Lilly & Co., 119 F.3d 1559 (Fed. Cir. 1997) (Lourie, J.) that was also affirmed in Ariad Pharm., Inc. v. Eli Lilly & Co., 598 F.3d 1336, 1355 (Fed. Cir. 2010) (en banc; Lourie, J.) (“[No] bright-line rules govern[] the number of species that must be disclosed to describe a genus claim, as this number necessarily changes with each invention, and it changes with progress in a field.”). Rather than simply listing various embodiments, the usual approach is to also describe common structural features of the species.

Here, AbbVie’s generic claim can be classified as a set of human antibodies defined functionally by their high affinity and neutralizing activity to the human IL-12 antigen. However, AbbVie did not disclose any structural features common to the members of the genus. Rather, AbbVie’s patent described only one type of structurally similar antibodies rather than antibies representative of the full scope of the genus.

In the decision, Judge Lourie focuses particularly on the alleged infringing antibodies and notes that:

[While] AbbVie’s patents need not describe the allegedly infringing [compound] in exact terms . . . [t]he patents must at least describe some species representative of antibodies that are structurally similar to [the accused compound].

Because the patent document lacked any such structural description, the court confirmed that the corresponding claims were invalid under 112(a).

Functional Patent Claims Are Inherently Vulnerable: In discussing the case, Judge Lourie was clear that one problem here is that the invention was described in terms of its function rather than its structure. Lourie writes:

Functionally defined genus claims can be inherently vulnerable to invalidity challenge for lack of written description support, especially in technology fields that are highly unpredictable, where it is difficult to establish a correlation between structure and function for the whole genus or to predict what would be covered by the functionally claimed genus.

With functional claims, the patentee must establish “a reasonable structure-function correlation” either within the specification or by reference to the knowledge of one skilled in the art. Of importance, the court is clear that functional claim limitations are patentable, but, in order to be patentable, they must be linkable to structure by PHOSITA. An interesting distinction though is that, unlike many written description issues, the linkage between the function and structure need not necessarily be found in the patent document itself.

Patent attorneys will also note that Judge Lourie’s reference to “highly unpredictable” arts is designed to refer primarily to bio-related sciences. We shall see whether the subsequent case law is so limited.

= = = =

Collateral Estoppel applies to preclude a court from re-deciding issues. Generally collateral estoppel only applies when the same issue was actually litigated and decided by a final and binding judgment in a way that was essential to the judgment. It is also generally true that collateral estoppel applies even when the first case is still pending on appeal – so long as the original court’s judgment was a final judgment being appealed.

Here, a prior interference proceeding between the parties had resulted in a determination that the AbbVie claims were not-obvious. Following the PTAB interference decision, Centocor filed a civil action under 35 U.S.C. § 146 that was pending at the time the present infringement litigation began. In the present appeal, the Federal Circuit held that the PTO decision should not be considered a “final judgment for the purposed of collateral estoppel” since the district court decision was still pending and during that case the parties have the opportunity to expand the factual record. The court left open the possibility that collateral estoppel would apply once the decision is final and that collateral estoppel may have applied if Centocor had appealed directly under § 141 instead of filing a civil action.

= = = =

Because AbbVie did not appeal the substance of the obviousness question, the collateral estoppel question fully decided the case. However, in its decision, the court offered an explanation for its reasons for going ahead and deciding the written description question.

AbbVie did not substantively challenge the district court’s holding of obviousness of the asserted claims. It might therefore be concluded that we could affirm that court’s obviousness holding and proceed no further. However, as an “inferior” court, we are well-advised to review more than one issue raised before us on appeal, lest higher authority find error in any basis for a more limited review. Cardinal Chem. Co. v. Morton Int’l, Inc., 508 U.S. 83, 97–98 (1993) (“[T]he Federal Circuit is not a court of last resort. . . . [Its] decision to rely on one of two possible alternative grounds (noninfringement rather than invalidity) did not strip it of power to decide the second question, particularly when its decree was subject to review by this Court.” (emphasis in original)); see also Wm. Wrigley Jr. Co. v. Cadbury Adams USA LLC, 683 F.3d 1356 (Fed. Cir. 2012) (affirming invalidity based on anticipation and obviousness); Verizon Servs. Corp. v. Cox Fibernet Va., Inc., 602 F.3d 1325 (Fed. Cir. 2010) (same); Union Pac. Res. Co. v. Chesapeake Energy Corp., 236 F.3d 684 (Fed. Cir. 2001) (affirming invalidity based on indefiniteness and lack of enablement). Because the written description issue constituted the principal basis of AbbVie’s appeal to this court, we proceed to consider the written description issue rather than affirm merely on any procedural defect or omission relating to the obviousness issue.

In her concurring opinion, Judge O’Malley did not sign-on to the “thoughtful written description analysis” of the majority – finding it not “necessary or dispositive ot the outcome of the case.”

Federal Circuit: Now is Not the Time to Judge the Constitutionality of the First-to-File Patent Regime

By Dennis Crouch

MadStad Enginering v. USPTO (Fed. Cir. 2014)

In 2012, MadStad and its owner Mark Stadnyk filed a declaratory judgment lawsuit against the USPTO alleging that the new first-to-file regime implemented by the America Invents Act of 2011 (AIA) was unconstitutional. See Crouch, Constitutional Challenge to the First-to-Invent Rule
(2012), and Crouch, Constitutionality Question Looms as USPTO Implements Regime that favors a “Filers” over “Inventors”
(2013). In discussing the case, I wrote:

MadStad’s basic argument is that when the U.S. Constitution speaks of exclusive rights for “inventors” it should be interpreted to mean “first and true inventor.” Under this analysis, the AIA fails because it purposefully rewards the first-to-file a patent application rather than the first-to-invent.

Further, MadStad argues that the new law allows non-inventors to obtain patents on inventions that they learned-of because the law no longer requires that the applicant be an inventor.

Rather than reaching the merits of MadStad’s allegations, the district court rejected the case for lack of standing. The Federal Circuit has now affirmed that decision — holding that MadStad’s potential injury due to the legal change is too speculative. MadStad’s alleged injuries due to the change are creative, but ultimately the court determined that they lacked sufficient concreteness. The alleged injury included increase cost of computer security to avoid hacking that – if not blocked – could result in stolen ideas that the thief could patent under the new regime. A second alleged injury is increased time and effort to file additional patent applications before the invention’s value is properly understood.

The key precedent relied upon by both the Federal Circuit and the District Court is the secret FISA court case of Clapper v. Amnesty International USA, __ U.S. __, 133 S. Ct. 1138 (2013). In that case Amnesty Int’l did not have proof that the NSA was tapping its conversations (because the activity is secret) and the Supreme Court held that the threat was too speculative. In my view, the direct applicability of Clapper here is somewhat attenuated because it is clear that MadStad’s new patent applications would be governed under the new regime and the separation-of-powers issues are not so great.

Next steps: Regardless of the merits of this decision, by now there should be at least some patent applications that have been rejected due under the new first-to-file regime that would not have arguably been patentable under the old regime. Applicants injured in that way would certainly have standing to bring this challenge.

= = = = =

The decision by Judge O’Malley also includes an interesting discussion of Federal Circuit Jurisdiction. The law provides that the Federal Circuit has jurisdiction over appeals that arise under the patent law statutes. Here, however, the claim is based upon the U.S. Constitution.

New Headlines from Patently-O