Affinity II: Who Has the Burden for Alice Step II?

by Dennis Crouch

A few days ago I wrote about the Federal Circuit decision in Affinity Labs. v. DirecTV  affirming that Affinity’s U.S. Patent No. 8,688,085 claims an ineligible abstract idea rather than a patent eligible invention.

The companion case – Affinity Labs v. Amazon was decided by the same panel of Chief Judge Prost and Judges Bryson (author) and Wallach and U.S. Patent No. 7,970,379 and also affirmed that the challenged claims lack eligibility under Section 101.

In DirectTV, the court first “stripped” the representative claim “of excess verbiage.”  Using the same approach but different words, the Amazon court here offered its version of the representative claim “stated more succinctly:”  the claim “is directed to a network-based media system with a customized user interface, in which the system delivers streaming content from a network-based resource upon demand to a handheld wireless electronic device having a graphical user interface.” [Full claim text below]

Abstract Idea: Analyzing the claimed invention, the court found that the claims are directed to a high level of generality “describing a desired function or outcome, without providing any limiting detail that confines the claim to a particular solution to an identified problem. The purely functional nature of the claim confirms that it is directed to an abstract idea, not to a concrete embodiment of that idea.”  In Enfish, the court considered technological inventions and queried whether the invention represents “an improvement in the functioning of a computer,” or merely “adding conventional computer components to well-known business practices.”  Here, of course, the invention uses more than just a “computer component” but the court still found Enfish applicable — finding that the claims “fall into the latter [ineligible] category.”  Further, the “tailoring of content based on information about the user . . . is an abstract idea that is as old as providing different newspaper inserts for different neighborhoods.”  Slip opinion at  10.

Burden Shifting for Step Two?:  Once a patent is deemed to be directed to an abstract idea, the burden appears to shift against the patentee to show that the claim includes “something more” such as an “innovative concept” that goes beyond the ineligible abstract idea.  This burden-shifting would go against the traditional rule that each each element in an invalidity analysis must be proven with clear and convincing evidence — and so it may still be proper to say that the challenger also has the burden under Step Two of Alice/Mayo to show the claim includes “nothing more” of patentable weight.  A complication of this internal dialogue is that eligibility is deemed a question of law whereas the C&C evidentiary requirement applies only to questions of fact.  That distinction became important in this case since the district court dismissed the case on the pleadings prior to the consideration of any factual conflicts.

Nothing More:  Enfish substantially increased the overlap between Steps One and Two of the eligibility analysis.  Typically, if a claim includes an eligible inventive concept then it will not be deemed directed to an abstract idea in the first place.   Here, the court found the converse logic also true:

As noted [in our Enfish analysis], representative claim 14 is written in largely functional terms, claiming “a collection of instructions” that perform the functions of displaying a selection of available content on a graphical user interface and allowing the user to request streaming of that content. . . . [These features] do not convert the abstract idea of delivering media content to a handheld electronic device into a concrete solution to a problem. The features set forth in the claims are described and claimed generically rather than with the specificity necessary to show how those components provide a concrete solution to the problem addressed by the patent.

Thus, the claim fails under Step Two as well – Judgment on the Pleadings of Invalidity Affirmed.

= = = = =

The court noted that the title of the patent ““System and Method to Communicate Targeted Information” has essentially no relation to the asserted claims.  That disconnect had no direct impact on patentability.  However, it appears to have lent credence to the notion that the claims lack innovative weight and technical application since the focus of the claims is something different than what was originally thought to be innovative and worth extensive description.

= = = = =

Claim 14: A media system, comprising:

a network based media managing system that maintains a library of content that a given user has a right to access and a customized user interface page for the given user;

a collection of instructions stored in a nontransitory storage medium and configured for execution by a processor of a handheld wireless device, the collection of instructions operable when executed: (1) to initiate presentation of a graphical user interface for the network based media managing system; (2) to facilitate a user selection of content included in the library; and (3) to send a request for a streaming delivery of the content; and

a network based delivery resource maintaining a list of network locations for at least a portion of the content, the network based delivery resource configured to respond to the request by retrieving the portion from an appropriate network location and streaming a representation of the portion to the handheld wireless device.

= = = = =

Traditional equitable defenses do not apply to IPR proceedings

Husky Injection Molding v. Athena Automation (Fed. Cir. 2016)

Referring to the headline. The PTAB (acting on behalf of the PTO Director) held that traditional equitable defenses do not apply to IPR proceedings.  Because this holding was made as part of an IPR institution decision, the appeal was dismissed for lack of jurisdiction. 

The case here is interesting because Husky’s former owner (Schad) is the founder of competitor Athena.  Schad is also co-inventor of Husky’s U.S. Patent No. 7,670,536 – that Schad’s company challenged in an IPR proceedings.  The PTAB ultimately found some of the challenged claims valid and cancelled others.

On appeal Husky argues that assignor estoppel bars the IPR proceeding.  The PTAB rejected that contention – holding that traditional equitable defenses do not apply to IPR proceedings.  Athena v. Husky, IPR No. 2013-00290 (P.T.A.B. Oct. 25, 2013) (Institution Decision on behalf of the Director).    On appeal, the Federal Circuit dismissed — holding that the institution decision is not appealable. 35 U.S.C. 314(d) (“The determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.”); Although the Supreme Court in Cuozzo suggested that some appeals of institution decisions may be available.  Here, however, the court rejected the idea of venturing into that abyss:

[Prior cases] establish a two-part inquiry for determining whether we may review a particular challenge to the decision whether to institute. First, we must determine whether the challenge at issue is “closely tied to the application and interpretation of statutes related to the Patent Office’s decision to initiate inter partes review,” or if it instead “implicate[s] constitutional questions,” “depend[s] on other less closely related statutes,” or “present[s] other questions of interpretation that reach, in terms of scope and impact,” “well beyond ‘this section.’” Cuozzo.  If the latter, our authority to review the decision to institute appears unfettered. But if the former, § 314(d) forbids our review. One further exception remains, however. At the second step of the inquiry, we must ask if, despite the challenge being grounded in a “statute closely related to that decision to institute,” it is nevertheless directed to the Board’s ultimate invalidation authority with respect to a specific patent. Id.; see also Versata; and Achates. If so, we may review the challenge.

After rejecting Husky’s challenge of the institution decision, the Federal Circuit moved to Athena’s appeal.

Incorporation by Reference: Athena challenged the portion of the Board’s opinion finding some of the claims not anticipated.  The basic issue is that the prior art (Glaesener – U.S. Patent Pub. No. 2004-0208950) did not itself disclose all of the claimed elements.  However Glaesener referred particularly to a prior patent (Choi): noting that Choi described “pineapple and toothed-ring mechanism” and in a separate paragraph stating that “All cross-referenced patents and application[s] referred to in this specification are hereby incorporated by reference.”  The combination of Choi and Glaesener do (arguably) teach all of the claim element but the Board refused to treat them as a single document despite the incorporation by reference. On appeal, the Federal Circuit has vacated that holding.

The standard:

A host document incorporates material by reference if it “identif[ies] with detailed particularity what specific material it incorporates and clearly indicate[s] where that material is found in the various documents.” Advanced Display Sys., Inc. v. Kent State Univ., 212 F.3d 1272 (Fed. Cir. 2000). . . .  In making such a determination, we assess whether a skilled artisan would understand the host document to describe with sufficient particularity the material to be incorporated [giving no deference on appeal].  . . . [Thus t]he incorporation standard relies only on the reasonably skilled artisan and his or her ability to deduce from language, however imprecise, what a host document aims to incorporate

Here, the court found sufficient particularity to incorporate Choi by reference – noting that PHOSITA would “appreciate Glaesener’s reference of ‘pineapple and toothed-ring’ to describe, with sufficient particularity” the securing assemblies in Choi. “To find otherwise would be to undervalue the knowledge of a skilled artisan.”  On remand, the Board will need to re-evaluate anticipation based upon Glaesener now expanded by Choi.

Point of Novelty Returns to Indefiniteness Analysis

Cox Communications v. Sprint (Fed. Cir. 2016)

The district court found all of Sprint’s asserted claims invalid as indefinite under 35 U.S.C. § 112, ¶ 2.  The term “processing system” was common to the claims of all six asserted patents, and the lower court found it “functionally” described and claimed in a manner that did not provide the reasonable certainty of claim scope required under Nautilus.  U.S. Patent Nos. 6,452,932; 6,463,052; 6,633,561; 7,286,561; 6,298,064; and 6,473,429.  On appeal, the Federal Circuit has reversed.

Section 112, ¶ 2 requires claims “particularly pointing out and distinctly claiming” the invention and is seen as the textual source of the definiteness requirement.  In Nautilus, the Supreme Court held that “a patent is invalid for indefiniteness if its claims, read in light of the specification delineating the patent, and the prosecution history, fail to inform, with reasonable certainty, those skilled in the art about the scope of the invention.”

More Definiteness Leeway For Terms Outside the Point of Novelty: In thinking through its analysis, the Federal Circuit started with an interesting issue: Point of Novelty.  The appellate panel noted that the claimed “processing system” was did not provide newness to the claim but was “merely the locus at which the steps are being performed.”  To drive this point home, the court walks through a representative set of claims to show how “processing system” does almost no work in the claims.

Of course, “point of novelty” analysis has a history in indefiniteness cases – most famously in the pre-1952 Supreme Court cases of Halliburton Oil Well Cementing Co. v. Walker, 329 U.S. 1 (1946) and Gen. Elec. Co. v. Wabash Appliance Corp., 304 U.S. 364 (1938) that heightened the definiteness burden at the point of novelty.  Those cases particularly on functional claim language:

The vice of a functional claim exists not only when a claim is ‘wholly’ functional, if that is ever true, but also when the inventor is painstaking when he recites what has already been seen, and then uses conveniently functional language at the exact point of novelty.

Gen Elec. I’ll note here that the Federal Circuit’s Sprint opinion does not cite to either of these older cases. The court does, however, refer to the Post Nautilus decision in Eidos Display, LLC v. AU Optronics Corp., 779 F.3d 1360 (Fed. Cir. 2015). In that case, the court found the term “contact hole” sufficiently definite since the specification referred to well-established practice in the industry and the limitation was not itself offering a point of novelty.

Coming back to Sprint’s claims, the court writes

If “processing system” does not discernably alter the scope of the claims, it is difficult to see how this term would prevent the claims … from serving their notice function under § 112, ¶ 2.

Here, the court notes that the indefiniteness test focuses on each “claim” not “claim terms” themselves.  And, although we have a common practice of focusing on individual terms — that approach is merely a helpful tool.

Particularly focusing on the functional nature of the “processing system” claim term – the court first held that functional claim language is permissible and at times quite helpful in providing definite scope limits.

As Nautilus instructs, the dispositive question in an indefiniteness inquiry is whether the “claims,” not particular claim terms, “read in light of the specification delineating the patent, and the prosecution history, fail to inform, with reasonable certainty, those skilled in the art about the scope of the invention.”

The Sprint majority opinion here was authored by Judge Prost and joined by Judge Bryson. Judge Newman wrote a concurring opinion, protesting the majority’s approach to determining the term’s importance by removing the challenged term from the claim and then determining whether the removal changes the claim meaning.


Affinity Content Distribution Scheme – Abstract Idea

Affinity Labs v. DirecTV (Fed. Cir. 2016)

The Federal Circuit here affirms that Affinity’s challenged claims invalid as directed to an abstract idea.  when “stripped of excess claim verbiage”, Claim 1 of U.S. Patent No. 7,970,379 “is directed to a broadcast system in which a cellular telephone located outside the range of a regional broadcaster (1) requests and receives network-based content from the broadcaster via a streaming signal, (2) is configured to wirelessly download an application for performing those functions, and (3) contains a display that allows the user to select particular content.” Slip opinion.

Alice Step 1: Considering these limitations and the claim’s “character as a whole” the court identified the concept of “providing out-of-region access to regional broadcast content” as an unpatentable abstract idea.  The court explained its conclusion by noting that the practice (1) has been long employed in media distribution; (2) is not tied to any particular technology; and (3) could be implemented by very low-tech technology such as via mail.  The court went on to explain that (4) nothing in the claim “is directed to how to implement out-of-region broadcasting on a cellular telephone. Rather, the claim is drawn to the idea itself.” And, (5) unlike in Enfish, the claims are not directed to “an improvement in cellular telephones but simply to the use of cellular telephones as tools.” Taking all these together, the court found the claim was in fact directed to an abstract idea.

Alice Step 2: Step two of Alice indicates that a patent directed to an abstract idea is patent eligible if it claims “additional features” that constitute an “inventive concept” that go beyond “well-understood, routine, conventional activity.” Mayo. Here, the court found no such additional features. “The claim simply recites the use of generic features of cellular telephones, such as a storage medium and a graphical user interface, as well as routine functions, such as transmitting and receiving signals, to implement the underlying idea. That is not enough.” Slip Opinion at 15-16.

= = = = =

Claim 1 below – seen was used as representative for the analysis:

1. A broadcast system, comprising:

a network based resource maintaining information associated with a network available representation of a regional broadcasting channel that can be selected by a user of a wireless cellular telephone device; and

a non-transitory storage medium including an application configured for execution by the wireless cellular telephone device that when executed, enables the wireless cellular telephone device:

to present a graphical user interface comprising at least a partial listing of available media sources on a display associated with the wireless cellular telephone device, wherein the listing includes a selectable item that enables user selection of the regional broadcasting channel;

to transmit a request for the regional broadcasting channel from the wireless cellular telephone device; and

to receive a streaming media signal in the wireless cellular telephone device corresponding to the regional broadcasting channel, wherein the wireless cellular telephone device is outside of a broadcast region of the regional broadcasting channel, wherein the wireless cellular telephone device is configured to receive the application via an over the air download.


Obviousness does not Require Prior Art to Fit Together Exactly

ClassCo v. Apple (Fed. Cir. 2016)

In response to being sued for patent infringement, Apple filed for inter partes reexamination of ClassCo’s Patent No. 6,970,695. That litigation (originally filed in 2011) has been stayed pending the resolution here.  Although the patent had survived a prior reexamination, this time the Examiner rejected the majority of the patent claims as obvious; the PTAB affirmed those rejections; and the Federal Circuit has now re-affirmed.

The patent relates to a “caller announcement” system that uses a phone’s speaker (rather than screen or separate speaker) to announce caller identity information.  The system includes a “memory storage” that stores identify information being announced.

The examiner identified the prior art as U.S. Patent No. 4,894,861 (Fujioka) that teaches all of the claimed elements (of representative claim 2) except for use of the phone’s regular audio speaker (rather than a separate speaker) to announce a caller’s identity (claimed as the “audio transducer”).  A second prior art reference was then identified as U.S. Patent No. 5,199,064 (Gulick) that taught the use of the audio transducer for providing a variety of call related alerts.

On appeal, ClassCo argued that the combination of Fujioka and Gulick was unreasonable because it would involve changing the function of the known elements.  The Federal Circuit disagreed writing that:

KSR does not require that a combination only unite old elements without changing their respective functions. . . . Instead, KSR teaches that ‘[a] person of ordinary skill is also a person of ordinary creativity, not an automaton.’ And it explains that the ordinary artisan recognizes ‘that familiar items may have obvious uses beyond their primary purposes, and in many cases a person of ordinary skill will be able to fit the teachings of multiple patents together like pieces of a puzzle.

Slip opinion at 8 (quoting KSR).  The court goes on to explain that a combination of known elements can be obvious even the elements don’t fit perfectly together like puzzle pieces.  Rather, the approach is “flexible” in its pursuit of determining whether the combination would have been “predictable” – i.e., obvious.

Although KSR rejected a strict application of a motivation-to-combine, the court consistently required at least an explanation of that motivation.  Here, the court found that “substantial evidence” supports the PTO conclusions since some of the benefits were suggested by both prior art references.

Secondary Indicia: During reexamination, ClassCo had also presented evidence of industry praise for its products covered by the patent.  That evidence was disregarded by the PTO as, inter alia, not commiserate commensurate with the scope of the claims. :) In particular, the Board noted that the industry praised particular embodiments but did not praise other potential embodiments. On appeal, the Federal Circuit rejected those conclusions.  The court found that some of the evidence praised ClassCo features that were not available in the prior art and that were “within the scope” of the representative claims.

[T]he Board found the evidence not commensurate in scope with these claims on the ground that they are too broad, encompassing other embodiments. But “we do not require a patentee to produce objective evidence of nonobviousness for every potential embodiment of the claim.” Rambus. Rather, “we have consistently held that a patent applicant ‘need not sell every conceivable embodiment of the claims in order to rely upon evidence of [objective indicia of nonobviousness].’” In re Glatt Air Techniques, 630 F.3d 1026 (Fed. Cir. 2011) (quoting In re DBC, 545 F.3d 1373 (Fed. Cir. 2008)).

Although the Board erred in its approach to objective indica, that was harmless error since the prior art evidence was strong. “We nonetheless agree that the value this evidence possesses in establishing nonobviousness is not strong in comparison to the findings and evidence regarding the prior art under the first three Graham factors.”  Obviousness affirmed.

Although a different product, the following ClassCo video review is a fun throw-back:

Objective Reasonableness Still at Play in Willfulness Cases

WesternGeco v. Ion Geophysical (Fed. Cir. 2016) [WesternGeco]

Following Halo v. Pulse, the Supreme Court vacated and remanded WesternGeco’s case for further consideration.  Now on remand, the Federal Circuit now vacates the district court judgment denying willfulness.

The patent act authorizes district court to award enhanced damages. 35 U.S.C. 284 (“the court may increase the damages up to three times the amount found or assessed”).  In Halo v. Pulse, the Supreme Court held that the statute grants district courts discretion in awarding enhanced damages – although noting that the punitive damages should ordinarily be limited to egregious infringement – “typified by willful infringement.”  In rejecting the Federal Circuit’s Seagate test, the Court held proof of “subjective willfulness” is sufficient to prove egregious infringement.  “The subjective willfulness of a patent infringer, intentional or knowing, may warrant enhanced damages, without regard to whether his infringement was objectively reckless.”  Halo at 1933.  As with other punitive damage regimes – proof sufficient for an award does not necessitate such an award. In patent cases, punitive damages remain within the discretion of the district court even after sufficient evidence establish the egregious behavior.

In WesternGeco, the jury issued a verdict on subjective willfulness — that “ION actually knew, or it was so obvious that ION should have known, that its actions constituted infringement of a valid patent claim.”  However, following that verdict, the district court excused the willfulness under the objective willfulness prong of Seagate – finding that ION’s non-infringement and invalidity defenses were “not unreasonable.”

On remand, the district court will first determine whether the jury verdict was supported by substantial evidence and, if so, whether enhanced damages should be awarded.  The Federal Circuit writes:

The district court, on remand, should consider whether ION’s infringement constituted an “egregious case[] of misconduct beyond typical infringement” meriting enhanced damages under § 284 and, if so, the appropriate extent of the enhancement.

Slip Opinion. On remand, we vacate the district court’s judgment with respect to enhanced damages for willful infringement under 35 U.S.C. § 284 and reinstate our earlier opinion and judgment in all other respects.

Using Objective Evidence Going Forward: An interesting aspect of the WesternGeco decision is its discussion of the ongoing relevance of “the objective reasonableness of the accused infringer’s positions.” In particular, the Federal Circuit held that objective reasonableness is part of the “totality of the circumstances” that to be considered before awarding enhanced damages.  In some ways this holding is in tension with the Halo decision itself. Halo does not mention the “totality of the circumstances” approach and writes harshly against the objective test as merely awarding “attorney[] ingenuity.”  Judge Dyk explains the holding as follows: (1) “Halo relied upon the patent attorney fee case of Octane Fitness for the relevant standard of district court’s discretion; (2) Octane Fitness in turn held looked to the copyright case attorney fee case of Fogerty v. Fantasy; and (3) Fogerty required consideration of a “totality of the circumstances,” which “could” include objective unreasonableness.” Thus, the Federal Circuit writes: “objective reasonableness is one of the relevant factors.”

“Inherent Disclosure” in Priority Document is Sufficient to Satisfy Written Description Requirement

Yeda Research v. Abbott (Fed. Cir. 2016)

Abbott’s patent broadly covers Tumor Necrosis Factor α binding protein (TBP-II). U.S. Patent No. 5,344,915.  The U.S. application was filed in 1990, but claims priority to two German applications filed in 1989. A would-be anticipatory prior art reference (Engelmann) was published after the priority applications but before the U.S. application – and the parties have agreed that dispute turns on whether the claims get to rely upon the early priority date.

In the preceding interference proceeding, the Board sided with Abbott as did the district court – finding that one of the German applications sufficiently disclosed the invention.  (Yeda’s application was filed nine days after Abbott’s.)

A priority filing is only effective if the claimed invention was sufficiently described in the original filing.  This implementation of the written description requirement requires the invention “be disclosed in a way that clearly allows a person of ordinary skill to recognize that the inventor invented what is claimed and possessed the claimed subject matter at the date of filing.” Ariad Pharmaceuticals, Inc. v. Eli Lilly & Co., 598 F.3d 1336, 1351 (Fed. Cir. 2010) (en banc).  In the priority context, failure of written description does not directly invalidate the claims but instead effectively negates the priority claim.  Here, that date is critical because of the intervening prior art.


Abbott’s Claim 1 is directed to the binding protein with “a molecular weight of about 42,000 daltons” and that has at “the N-terminus the amino acid sequence Xaa Thr Pro Tyr Ala Pro Glu Pro Gly Set Thr Cys Arg Leu Arg Glu . . . .”  The problem though is that neither of Abbott’s priority filings expressly disclose the claimed N-terminus sequence.

Abbott was able to overcome the lack of express disclosure with an “inherent disclosure”:

Under the doctrine of inherent disclosure, when a specification describes an invention that has certain undisclosed yet inherent properties, that specification serves as adequate written description to support a subsequent patent application that explicitly recites the invention’s inherent properties.

Slip Opinion at 6 (citing Kennecott).

Here, the priority document described how to make TBP-II, but did not identify the actual sequence as claimed.  On appeal, the Federal Circuit ruled that the original disclosure “inherently discloses the remaining amino acids in the N-terminus sequence” and therefore “serves as adequate written description support for the patent claiming TBP-II.”




Your List of Lists is not the Disclosed List

AppleScreenIn re Lemay (Fed. Cir. 2016)

In a divided opinion, the Federal Circuit has sided with Apple Inc. and reversed the Patent Trial & Appeal Board (PTAB) — finding that no substantial evidence supported the USPTO’s factual findings regarding what was taught by the prior art.  Application No. 11/968,067 (2007 priority date).  The application here is one of 75+ that all claim priority to the same 2007 provisional application.

The claims at issue here relate to a method of displaying a “list of information about online video items” on a touchscreen.  The method includes scrolling after a “moving finger gesture;” requesting an online video after a “tap gesture” in one location; providing further information about the selected video after a different “tap gesture;” and displaying a different list of information after a “finger gesture on a respective icon.” The Board held that the combination of prior art references (Cook and Saarinen) taught each of the claim limitations and that the combination would have been obvious to a person of ordinary skill in the art.

Mapping of prior art onto the claim elements is sometimes tricky.  Prior art provides images, charts, and disclosures – but patent claims focus on boundary lines unique by design.  That said, the standard of appellate review makes it difficult to challenge PTAB findings as to what is taught by the prior art.  PTAB factual findings are generally upheld on a appeal if supported by at least a scintilla of evidence – substantial evidence.

Here, the Federal Circuit sided with the patent applicant – finding that the prior art failed to teach a “list of information” that corresponds to online video items as claimed.  The specification explains that this might be a listing of “most viewed” videos or “Pokemon theme music” videos.

The opinion is something of a confusing shame – essentially ends up arguing the impossibility of a list of lists. The court writes:

If each of the three sets of title, artist, and price information constitutes one of the “lists of information,” it cannot also be correct that the search results as a whole (i.e., “Mandy More,” “I Wanna Be With You,” and “Now That’s What I Call Music! 4”) constitute one of the lists.

Claim Construction: The dissent by Judge Moore identified the issue as one of claim construction — she would would have interpreted the claims slightly differently (and in a way suggested by the PTO) that the claimed “corresponding list of information about online video items” need not be associated with the set of icons as suggested by the majority.  She writes: “Understanding claim 1 in this way, I would hold there is substantial evidence to support the examiner’s finding, adopted by the Board, that these limitations are disclosed in Cook.”  This interpretation is also appropriate according to Judge Moore under the broadest reasonable interpretation of the claims given to terms during prosecution.

Supreme Court Patent Cases: Malpractice, Obviousness, and Venue

by Dennis Crouch

The Supreme Court will begin granting and denying petitions in early October.  Meanwhile, several new petitions are now on file.  Last week I wrote about the TC Heartland case as a mechanism for limiting venue. Without any good reason, the Federal Circuit overruled a 1957 Supreme Court case that had strictly limited patent venue as spelled out in the patent venue statute 1400(b).  See VE Holdings (explaining its overruling of Fourco Glass). A result of VE Holdings is the expansive venue availability that facilitated the rise of E.D. Texas as the most popular patent venue. TC Heartland simply asks the Supreme Court reassert its Fourco holding – something that could almost be done with a one-line opinion: “REVERSED. See Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957).”  The best arguments for the Federal Circuit’s approach are (1) the reasoning of Fourco itself is a bit dodgy; and (2) VE Holdings is well settled doctrine (decided 26 years ago) and Congress has revised the statutory provisions several times without amending.  As a side note, several members of Congress have suggested they will act legislatively if SCOTUS fails to act.

Two new petitions (Grunenthal v. Teva and Purdue v. Epic) stem from the same Federal Circuit OxyContin case and focus on anticipation and obviousness respectively.  Grunenthal v. Teva questions how ‘inherently’ operates for anticipation purposes.   Purdue suggests that – despite the final sentence of Section 103, that the actual circumstances of the invention should be available to help prove non-obviousness (but still not be available to prove obviousness).   Another new petition includes the BPCIA case Apotex v. Amgen that serves as a complement to the pending Sandoz case questioning the requirements and benefits of providing notice of commercial marketing.

Finally – Encyclopedia Britannica v. Dickstein Shapiro is a patent prosecution malpractice action.  The lower court held the lawyers harmless since Alice would have invalidated the patents even if drafted to perfection. The petition asks whether Alice Corp can excuse patent prosecutors from alleged prosecution errors made well prior to that decision.


Federal Circuit on PTAB Initiation Decisions: Still No Appeal …

Wi-Fi One v. Broadcom (Fed. Cir. 2016)

Wi-Fi One is the new owner of Ericcson’s U.S. Patent No. 6,772,215 that covers a method for encoding and sending packet-receipt error messages over the internet. In 2013, Broadcom brought this IPR challenge and the Board eventually found many of the claims anticipated.

On appeal here Wi-Fi challenges Broadcom’s standing to bring the IPR challenge under 35 U.S.C. § 315(b).  Section 315(b) indicates that an IPR proceeding may not be instituted if the petitioner (or its privy) had been served with an infringement complaint more than one year prior.

315(b) Patent Owner’s Action.— An inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.

Although Broadcom had not been previously sued on the patent, Wi-Fi argues that its privies had been previously sued.  The PTAB rejected that argument – finding that Broadcom was not a “privy” of the prior litigants because Wi-Fi did not prove that Broadcom had power to control the prior district court litigation or that Broadcom would be bound by the outcome of that prior litigation. The Board also refused Wi-Fi’s request for further discovery on the matter.

On appeal, the Federal Circuit affirmed — holding that the question of proper institution is unreviewable based upon the statutory statement that “The determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.” 35 U.S.C. § 314(d).  Although I have not quite found the line in the decision, is appears that the court also held that even the denial of discovery is unreviewable.

The Supreme Court extended the preclusion of judicial review to statutes related to the decision to institute; it did not limit the rule of preclusion to substantive patentability determinations made at the institution stage, as the facts of Cuozzo itself make clear.

Slip Opinion at 8.  The decision here essentially follows the Federal Circuit’s prior ruling in Achates.

The court also sided with the Board on Wi-Fi’s substantive argument – affirming the Board decision that the prior art anticipates.




Patentlyo Bits and Bytes by Anthony McCain

Get a Job doing Patent Law                  

Pre-GATT Applications

One small aspect of Director Michelle Lee’s testimony to congress was that the number of pending pre-GATT applications still pending has been reduced to only 20 – not counting those owned by Gill Hyatt. (She did not mention Hyatt by name, but it was clear who she was talking about.)  The PTO has 14 full time patent examiners going after these remaining applications that were all filed prior to June 7, 1995.

These pre-GATT applications are important because they retain the 17-year-from-issuance term.  An example is Patent No. 9,376,478 that was recently issued to the Japanese Foundation for Cancer Research and broadly claims: “2. Recombinant Human fibroblast β1 Interferon.” The application was filed June 5, 1995 and looks to be enforceable until 2033.  (This particular case was delayed by an interference proceeding).

Gilbert Hyatt apparently continues to have a substantial number of pre-GATT applications pending and is fighting multiple lawsuits against the Government regarding the applications.  According to his own court filings, Hyatt has more than 400 pending applications, most of which have been pending for over twenty years and more than a dozen pending for more than 35 years.

In Hyatt v. OMB, Civ No. 16-1944 (D.Nevada, Filed August 16, 2016), Hyatt explains that he “has experienced first-hand the unnecessary, duplicative, and overly burdensome information collection demands that the PTO imposes on individuals seeking patents.”  The lawsuit asks for an order that the OMB consider Rules 111, 115, and 116 (37 C.F.R. Sections 1.111, 1.115, and 1.116) and hold them subject to the requirements of the Paperwork Reduction Act.

In Hyatt v. USPTO, Civ. No. 16-1490 (D.Nevada, Filed June 22, 2016), Hyatt asks for injunctive relief to stop the PTO from repeatedly ‘reopening prosecution’ in his cases and consequently shielding the cases from judicial review by either the PTAB or Article III courts.  Hyatt is experiencing the common reality of examiners reopening prosecution once an appeal brief is filed.


Lawyer who copied and filed substantial portion of draft brief of co-party on appeal held to have violated copyright laws

The court in Newegg Inc. v. Ezra Sutton, PA (CV 15-01395 TJH C.D. Cal. Sept. 2016) (here), faced some interesting facts.  Boiled down, a lawyer representing a co-appellee of Newegg at the Federal Circuit copied a substantial portion of a draft brief written by a lawyer for Newegg, and filed it.

According to news reports, after that, the lawyer withdrew that brief and filed a shorter one which, allegedly, still was based substantially on Newegg’s draft brief.  Newegg then registered copyright for its brief after they were filed, covering both the draft and final brief.  (My mind wonders… if you register copyright on a draft brief, what’s the scope of waiver?) Then Newegg sued the lawyer for copyright infringement.

Rather than raising fair use right away, the defendant lawyer late in litigation moved to amend the final pre-trial order to add fair use as an affirmative defense; and the plaintiff moved for partial summary judgment on infringement.  In an order granting the defendant lawyer’s motion to amend the final pre-trial order to add fair use, the district court held that there was no fair use on summary judgment.  Thus, the lawyer was liable.

This creates some very interesting problems for lawyers, and calls to my mind the case a few years ago where a patent prosecutor was sued for using language from a patent in a specification for another client.  I’m not a copyright lawyer, and so just raise this case for you to think.

Patent Venue at the Supreme Court: Correcting a 26 Year Old Legal Error

TC Heartland v. Kraft Foods (Supreme Court 2016) [Petition for Writ of Certioari]

Patent litigation continues to be concentrated in a small number of venues.  This case is potentially a big deal because it could eliminate this concentration — especially patent cases in the E.D.Texas.  Both the PTO and Congress appear in favor of venue reforms, but statutory reforms will likely wait until the Supreme Court decides TC Heartland.

Background: The scope of patent venue is codified in 28 U.S.C. § 1400(b) and limits venue to judicial districts “where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.”  At first glance, this venue statute would seem to significantly limit venue — For instance, few patent infringement defendants actually reside or have a place of business in the E.D. Texas.  That narrowness was confirmed in the Supreme Court’s decision in Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957).  The issue in Fourco Glass involved the parallel statute of 28 U.S.C. § 1391 (titled “Venue generally”) that broadly defined a corporation’s residence to include “any judicial district in which it is … licensed to do business or is doing business.” Despite the seeming broadening statutory definition, the Supreme Court held that the more general Section 1391(c) could not be used to expand venue beyond what was contemplated in Section 1400(b).  Rather, the court held that “where the defendant resides” in § 1400(b) is limited to “the state of incorporation only.” Fourco Glass.

We hold that 28 U.S.C. § 1400(b) is the sole and exclusive provision controlling venue in patent infringement actions, and that it is not to be supplemented by the provisions of 28 U.S.C. § 1391(c).


In 1988 Congress amended 1391(c) to expand the definition of residency “for all venue purposes” to include “any judicial district in which such defendant is subject to the court’s personal jurisdiction.” Based upon that change, the Federal Circuit determined in 1990 that Fourco Glass had been implicitly overruled and that the new provision of 1391(c) now does redefine and greatly expand Section 1400(b) even though the legislative history of the 1988 amendment did not discuss patent venue. VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990).

The chart below from the cert petition shows the 1988 statutory change that the Federal Circuit found sufficient to indicate an overruling of Fourco Glass.


It is this 1990 combination of 1400(b)/1391(c) that is now the status quo – venue is proper in any any federal court that has personal jurisdiction over the accused infringer.*

TC Heartland challenges the VE Holding interpretation offering broad venue.  It writes:

The question in this case is thus precisely the same as the issue decided in Fourco: Whether 28 U.S.C. § 1400(b) is the sole and exclusive provision governing venue in patent infringement actions and is not to be supplemented by 28 U.S.C. § 1391(c).

The Supreme Court previously decided patent venue in Stonite Products Co. v. Melvin Lloyd Co., 315 U.S. 561 (1942) and also held that the specific patent venue provisions should prevail and remain unmodified by the general venue provisions.

I’ll be happy if TC Heartland wins because it will make it much easier for me to watch patent cases here in Missouri.

The new petition is filed by James Dabney and John Duffy who were the forces behind KSR v. Teleflex.

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* The one major caveat is that Congress again amended 1391(c) in 2011 and the associated legislative history suggests a Congressional recognition that “VE Holding is the prevailing law.”  Update and Correction – On suggestion from a reader, I followed chased down the above quote – it does not actually come from the Congressional Record but instead is Judge Moore’s conclusion found in the TC Heartland case.  The opinion states:

In fact, before and after these [recent] amendments, in the context of considering amending the patent venue statute, Congressional reports have repeatedly recognized that VE Holding is the prevailing law.

For its conclusion, the court cites several Congressional reports that I have not read: “See H.R. Rep. No. 110–314, at 39–40 (2007); S. Rep. No. 110–259, at 25 (2008); H.R. Rep. No. 114–235, at 34 (2015) (stating that “Congress must correct” our holding in VE Holding by amending § 1400); cf. Venue Equity and Non-Uniformity Elimination Act of 2016, S. 2733, 114th Cong. § 2(a) (2016).”  An important note with this is that the court did not identify any record contemporaneously with the 2011 report that suggests a conscious choice to keep VE Holding as the prevailing law.

Step-One: Don’t Assume an Abstract Idea

by Dennis Crouch

McRO v. Bandai Namco, et al.  (Fed. Cir. 2016)

In an important Eligibility case, the Federal Circuit has ruled that MRCO’s software patent claims are eligible — rejecting District Court Judge Wu’s judgement on the pleadings that the non-business-method claims are invalid as effectively claiming an abstract idea. In my 2014 post in the case I wrote that the case may serve as an opportunity fo the Federal Circuit “to draw a new line in the sand.

The invention at issue is directed toward a specific problem that had troubled the field of animation – automatically animating lip synchronization and facial expression of animated characters. See U.S. Patent Nos. 6,307,576 (“‘576 Patent”) and 6,611,278 (“‘278 Patent”).  The patented method employed by the invention is to key the audio signal to a set of phenome sequences and then create a set of morph-weight-set streams used as input sequences for the animated characters.  The morph stream input provides both timing and movement of facial expressions, including emotion.   The inventions claim priority back to 1997.

In its decision, the Federal Circuit holds “that the ordered combination of claimed steps, using unconventional rules that relate sub-sequences of phonemes, timings, and morph weight sets, is not directed to an abstract idea and is therefore patent-eligible subject matter under § 101. Accordingly, we reverse.”  Thus, the court followed its precedent in Enfish and holds here that the claims do not even meet Alice Step-One.  In addition to the 20+ defendants, briefs were also filed by EFF, Public Knowledge, BSA and The Software Alliance.  The Decision here was authored by Judge Reyna and joined by Judges Taranto and Stoll.

A patent may not effectively cover an abstract idea, law of nature, or natural phenomena. Alice Corp.   The Supreme Court in Alice/Mayo established its two-step framework that first asks whether a patent claim is “directed to” one of these eligibility exceptions.  If so, the claim can be saved if it also includes an “inventive concept” that sufficiently transforms the nature of the claim.  However, “[i]f the claims are not directed to an abstract idea, the inquiry ends.”  McRO at 20.

One problem with the two step framework is based upon the fact that all inventions can be boiled down to an ineligible abstract idea. In Mayo, the Supreme Court recognized this risk in its statement that “all inventions at some level embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas.”  This starting point, risks removing any teeth from Alice/Mayo Step-1.  The Federal Circuit, however, has refused to follow that pathway but instead has set down precedent that courts “must be careful to avoid oversimplifying the claims” in seeking a gist or abstraction. TLI Commc’ns.

A second problem with the framework is that the meaning of “abstract” has not been fully defined.  Here, the Federal Circuit attempts to provide a rough framework based upon the idea of preemption. The court looked particularly for (1) specific limitations that help avoid preemption (e.g. Morse); and (2) more than merely automation of existing human activity. The court also emphasized that the eligibility analysis must consider the claim as a whole.

The court writes:

Here, the structure of the limited rules reflects a specific implementation not demonstrated as that which “any [animator] engaged in the search for [an automation process] would likely have utilized.” Myriad. By incorporating the specific features of the rules as claim limitations, claim 1 is limited to a specific process for automatically animating characters using particular information and techniques and does not preempt approaches that use rules of a different structure or different techniques. See Morse. When looked at as a whole, claim 1 is directed to a patentable, technological improvement over the existing, manual 3-D animation techniques. The claim uses the limited rules in a process specifically designed to achieve an improved technological result in conventional industry practice. Alice. Claim 1 of the ’576 patent, therefore, is not directed to an abstract idea.

I have pasted claim 1 below:

1. A method for automatically animating lip synchronization and facial expression of three-dimensional characters comprising:

obtaining a first set of rules that define output morph weight set stream as a function of phoneme sequence and time of said phoneme sequence;

obtaining a timed data file of phonemes having a plurality of sub-sequences;

generating an intermediate stream of output morph weight sets and a plurality of transition parameters between two adjacent morph weight sets by evaluating said plurality of sub-sequences against said first set of rules;

generating a final stream of output morph weight sets at a desired frame rate from said intermediate stream of output morph weight sets and said plurality of transition parameters; and

applying said final stream of output morph weight sets to a sequence of animated characters to produce lip synchronization and facial expression control of said animated characters.

Santa Clara – Duke Law Patent Quality Conference: Patent Quality – It’s Time

Guest Post from Professors Arti Rai and Colleen Chien.

“I know well the difficulty of drawing a line between the things which are worth to the public the embarrassment of an exclusive patent, and those which are not.“ – Thomas Jefferson, 1813

Santa Clara –Duke Law Patent Quality Conference: Patent Quality – It’s Time

At 1 pm today, USPTO Director Michelle Lee will be testifying before the House Judiciary Committee at a USPTO Oversight Hearing.  The hearing will focus on questions of patent quality raised by two recent GAO reports (here and here) as well as the issue of examiner reporting of time raised by a  report by the Department of Commerce’s Office of the Inspector General (here).

As we have discussed, the two of us are following closely the USPTO’s efforts to address issues of patent quality through its Enhanced Patent Quality Initiative (EPQI) – an urgent but also enduring challenge that one of our nation’s first patent examiners, Thomas Jefferson, struggled with.  Our institutions, the Duke Law Center for Innovation Policy and the Santa Clara High Tech Law Institute, are also co-sponsoring two conferences on EPQI and other levers for improving patent quality.

On Friday, September 9, we held the first of these conferences at Santa Clara Law School.  The conference brought together Deputy Commissioner for Patent Quality Valencia Martin-Wallace, Deputy Commissioner for Patents Andy Faile, former PTO Director David Kappos, EPO Director of Quality Support Alfred Spigarelli, GAO officials, industry representatives, and legal academics.  Here we provide a brief summary of the event.  Video and links to the presentations and related papers will be available here (a uncut version of the video is here). Several of the commentators will be publishing op-ed versions of their remarks with IPLaw360 from now until the December 13, 2016 conference, and the Berkeley Technology Law Journal has published short commentaries from a number of the speakers on their topics.

Valencia Martin-Wallace began by highlighting 6 aspects of the EPQI: case studies the USPTO is implementing in response to stakeholder requests; the Master Review Form (MRF), which is now being used as the exclusive review form by the Office of Patent Quality Assurance; other quality metrics; USPTO study of post-grant outcomes for purposes of improving ex ante patent examination, both in child applications of parents there are the subject of a post-grant review and more generally; a post-prosecution pilot; and a clarity of the record pilot.

Martin-Wallace’s comprehensive discussion of the MRF and quality metrics honed in on the difficult question of what quality means and how the PTO should measure it.  According to the USPTO, the MRF’s focus on clarity and correctness of the examination is a key aspect of how the agency measures product quality. The agency is also very interested in process quality, by which it means a focus on reducing rework and ensuring consistency.  The USPTO will also continue to monitor perceptions of quality through internal and external quality surveys. USPTO Case studies on 101 – the compliance of rejections with 35 U.S.C. 101 Official Guidance and the consistency of the application of 101 across art units/technology centers – will be issued on September 30 and December 9 respectively.  They will be followed by case studies on other types of rejections.

Martin-Wallace’s presentation was followed by a panel discussion of claim clarity and examination consistency.  Peter Menell discussed how claim clarity could be improved through a claim template [link] and the importance of putting all interactions with the examiner into the record.  Charles Duan also highlighted the importance of a clear prosecution record, particularly for purposes of allowing courts to find claim scope disavowal.  Jay Kesan focused on the lack of standardized claim language in software and suggested mechanisms for improving standardization.  Finally, Xavier Jaravel of Stanford presented his research with Josh Feng of Harvard showing that NPEs tend to purchase patents granted by lenient examiners that are incremental and vaguely worded; they estimate that a one-standard deviation change in the “examiner effect” could lower the rate of litigation and NPE purchased patents by 50%.

The conference then turned to issue of examiner time allocation, and in particular ensuring adequate time for search.  Deputy Commissioner for Patent Operations Andy Faile outlined the count system and the time that examiners are given to achieve each count.  On the first round of examination, examiners receive 1.25 counts for the first office action; 0.25 counts for the final rejection in that round; 0.75 counts for an allowance disposal: and 0.5 counts for termination of the first round of examination (“abandonment”).  The time allocated to achieve each count is a function of the area of technology – for example, while 16.6 hours are allocated per disposal in fishing lures, examiners are given almost double that, 27.7 hours per satellite communications disposal. It is also a function of GS-level of the examiner – as in the EPO, senior examiners at the USPTO are expected to produce more work than junior examiners.

Assistant GAO director Robert Marek next discussed highlights from the agency’s studies of patent quality and prior art search.  These studies relied heavily on a survey that produced 2669 USPTO examiner respondents.  The survey found that 70% of examiners reported having insufficient time to examine applications; the majority reported wanting more time for prior art search; and the majority also reported encountering vague and indefinite claims.  Examiners also reported conducting only limited searches for non-patent literature (NPL).  On the issue of search, the GAO recommends that the PTO develop guidance of what constitutes a good prior art search; identify key sources of NPL; monitor search quality; and assess the time examiners need for search.  On claim clarity, GAO recommends the PTO consider requiring patent applicants to include term glossaries or claim charts.

The morning concluded with a panel discussion of prior art search and time.  Colleen Chien discussed the findings of a recently released study that suggests that the EPO is much more likely to cite NPL in its search reports than PTO examiners are to rely upon NPL in their examination, despite that the PTO’s examiners are more likely to receive NPL, through IDS’. The paper argues that that the greater amount of time that EPO examiners spend on search (8-12 hours per app, vs. 4-5 hours at the PTO), contributes to this difference. However, the PTAB, which intensely reviews challenged patents, appears to cite NPL even more than EPO examiners do. Michael Frakes and Melissa Wasserman then summarized their empirical research on 1.4 million utility patent applications initiated after March 2001 and disposed of by July 2012.  Their research suggests that tightening of examiner time constraints as they move up GS-levels appears to lead to more grants, less examiner citation of prior art, and fewer time-intensive non-obviousness rejections.  Their analysis, which follows examiners as they rise up GS-levels within art units, capitalizes on the essentially random assignment of applications within an art unit and employs an examiner fixed-effect design. Moderator Karen Wong called the After Final Consideration Pilot 2.0 one of the PTO’s best inventions, and Steven Reid and others noted that the Post-Prosecution Pilot (P3) examination was also a valuable option for achieving resolution without the need for a full request for continued examination (RCE).

Jay Kesan and Colleen Chien kicked off the afternoon with a discussion of the differences between EPO and USPTO processes (the former bifurcates search and examination, doesn’t allow for continuations (but does tolerate divisionals), and charges higher fees, earlier), perceptions of the two institutions (based on a recent survey of ~650 practitioners), and outcomes. Drawing upon matched pair analysis, Kesan’s research suggests that on average EPO patents have fewer claims, and the claims are longer and have greater pendency. Chien’s paper suggests that the lower EPO allowance rate isn’t driven by a higher rejection rate but more applicant withdrawals.

EPO Patent Quality Director Alfred Spigarelli’s presentation was titled: “Patent Quality: Get it Right the First Time.” He emphasized the human resources component of the patent quality equation, from the hiring standards the EPO applies (e.g. examiners must be able to actively work in three languages), to the training each EPO examiner receives, to the low turnover rate. Search is viewed as the cornerstone of the patent examination process, with 60% of time dedicated to search.

On the panel that followed (“Once and Done” and Differentiating Between Patents), Laura Sheridan outlined a proposal to increase quality and predictability by introducing greater finality into the patent application process.  Under Sheridan’s proposal, examination would terminate after a predetermined maximum number of office actions, and the application would be then adjudicated by a panel.  Steven Yelderman discussed the dynamic effects on RCE practice of recent changes to fees as well as mechanisms by which post-grant review could feed information back into initial patent examination. Sandy Swain discussed steps that could be taken by applicants now, without any policy changes, stressing the importance of open communication and clear documentation. Alan Marco presented a study in progress of litigated patents, suggesting that small entities are more likely to litigate and finding that (with the exception of continuations) applicant characteristics are more likely to be predictive of litigation than examination characteristics.

Studies have shown that delays in patent examination are detrimental to startup firms. For these firms, long pendency could be considered a sign of poor examination quality.  Building on this work, Arti Rai discussed her ongoing research on accelerated examination through the Track 1 program.  She finds that the program is in fact disproportionately used by small and micro entities. However, the top filers in the program are large entities, and she is studying whether their applications show signs of poor quality. Josh Makower, an investor, inventor, and entrepreneur in the biotechnology and medical device industry, said that all his startups used TrackOne, underscoring the importance of patents to them. According to Oskar Liivak’s interpretation, 35 USC 115 makes it a felony for a patent applicant to claim more broadly than the actual invention. Brian Love noted that the EPQI had two important gaps – already granted patents and the flexing of the USPTO’s fee-setting authority. He recommended raising maintenance fees to cull low-value, low-quality patents and decreasing PTAB fees.  Love’s proposals generated vigorous discussion.

Dave Kappos provided the final keynote of the day, noting that patent quality has been a focus for as long as we’ve had a patent commissioner. He noted that many efforts he oversaw during his administration to increase quality – giving examiner 2.5 more hours of time, redesigning the IT system, creating the Edison Scholar program, ensuring Examiner received training from industry experts, and many more. What didn’t work, he noted, was working with the AIPLA to devise a set of quality indicia for applicant filings that all agreed upon and that could be applied to applications. What he would work on, were he still in office, would include Track 3 (some version of deferred examination) and allocation of more time, not across the board, but as appropriate.

How will we know if the EPQI has been successful in two years? When this question was posed to them, closing panelists Faile, Martin-Wallace, and PTO Silicon Valley Director John Cabeca mentioned a few milestones: greater transparency and engagement of all members of the patent community, creative rethinking of the count system, more time for certain applications, and the leveraging of state of the art examination processes and resources.

* * * * *

Arti Rai is the Elvin R. Latty Professor of Law at Duke Law School and co-Director, Duke Law Center for Innovation Policy.  Colleen Chien is Associate Professor of Law at Santa Clara University School of Law.

Stryker v. Zimmer: Federal Circuit Remands Enhancement Determination for Enhancement Determination

By Jason Rantanen

Stryker Corp. v. Zimmer, Inc. (Fed. Cir. 2016) Download opinion
Panel: Prost (author), Newman, Hughes

Stryker prevailed in a patent infringement suit against Zimmer, obtaining partial summary judgment of infringement as to some claims, a jury verdict of infringement as to another claim, and a jury finding that the claims were valid.  The jury awarded Striker $70 million in lost profits, further finding that Zimmer’s infringement was willful.  In a post-trial order, the district judge awarded treble damages, found the case exceptional and awarded Stryker its attorneys’ fees.

On appeal, the Federal Circuit affirmed as to infringement, validity and damages.  Applying In re Seagate, however, it reversed as to willful infringement and the enhancement of damages.  Based on that reversal, it also vacated the award of treble damages and attorneys’ fees.  Styrker sought, and obtained, review by the Supreme Court in a case that was consolidated with Halo Electronics., Inc. v. Pulse Electronics., Inc.  In Halo v. Pulse, the Supreme Court held that the the Federal Circuit’s two-part Seagate “test for determining when a district court may increase damages pursuant to § 284” was not consistent with § 284.  Both Halo and Stryker were remanded to the Federal Circuit for further proceedings.  Last month, the Federal Circuit issued its revised opinion in Halo.  Today, the court released the  revised Stryker opinion.

Most of the new Stryker opinion involves a recitation of the Federal Circuit’s previous opinion affirming the district court as to infringement and validity.  The last three pages, however, deal with the § 284 enhancement issue on remand.  What’s interesting is that the Federal Circuit is maintaining its bifurcated approach to enhancement of damages, first requiring a predicate willfulness determination followed by the judge’s discretionary determination of whether and how much to enhance damages.  This is essentially the same process as before.   See i4i Ltd. Partnership v. Microsoft Corp., 598 F.3d 831 (2010) Pre-Halo, the second step of the process (the district judge’s determination of whether and how much to enhance damages) was a totality-of-the circumstances analysis that was reviewed for abuse of discretion (i.e.: basically the same as the court required in Halo).  Id. The Federal Circuit’s post-Halo approach to enhancement involves the same two steps, with the exception that the willfulness determination itself is guided by the holding in Halo rather than requiring the two-element objective/subjective determination of Halo. (The enhancement determination is too, but it’s hard to see much difference there.)  Under Halo, the subjective component alone can be enough to establish willfulness.

Here, Zimmer did not challenge the subjective component so the Federal Circuit affirmed willfulness on remand.  However, it then remanded the case back to the district court for a further determination as to whether and how much damages should be enhanced. In Halo, this remand made sense, as the district judge had relied on the Seagate test to grant JMOL of no willful infringement over a jury verdict of willful infringement.  Here, however, after the jury found willful infringement and the district judge denied JMOL of no willful infringement, the district judge exercised his discretion to treble damages.  The consequence is that a remand in this case is somewhat odd given that the district judge has already made a discretionary determination to award the maximum amount of enhancement.  In any event, the Federal Circuit decided that the better course of action was to ask the district judge to re-make the discretionary determination:

“As Halo makes clear, the decision to enhance damages is a discretionary one that the district court should make based on the circumstances of the case, ‘in light of the longstanding considerations . . . as having guided both Congress and the courts.’ Id. at 1934. Thus, it is for the district court to determine whether, in its discretion, enhancement is appropriate here. We therefore vacate the district court’s award of enhanced damages and remand to the district court so that it may exercise its discretion.”

Based on a similar rationale (although relying instead on Octane Fitness v. ICON), the Federal Circuit also remanded on the issue of attorney’s fees.

Disclosure: I co-authored an amicus brief in support of neither party in Halo v. Pulse.

Demand Letter without Accusing a Particular Product Creates DJ Jurisdiction

Asia Vital v. Asetek Danmark (Fed. Cir. 2016),

Article III Federal Courts only have jurisdiction over caess where a substantial and current controversy exists between the parties.  in 2014, Asia Vital (AVC) sued Asetek in E.D. Virginia – asking the district court for a declaratory judgment of non-infringement of the claims of Asetek’s U.S. Patent Nos. 8,240,362 and 8,245,764. The district court dismissed the case for lack of subject matter jurisdiction — finding no substantial controversy.  On appeal, however, the Federal Circuit has reversed that opinion – finding a substantial controversy.

The Asetek patents cover liquid cooling systems used to cool integrated circuits (such as those on a computer).  Over the past several years, Asetek has sued several competitors for infringing the patents including CoolIT and Cooler Master. In 2014, Asetek sent AVC a letter accusing the company of infringing — however the letter mistakenly accuesd AVC of manufacturing the Liqmax 120s (it does not). After some letters back-and-forth, Asetek eventually sent a letter that it “believes that AVC is likely selling other infringing products in the United States.”  After an unsuccessful meeting, AVC filed its declaratory judgment action.  The question is whether these facts are sufficient to show an actual controversy between the parties.

The leading precedent actual-controversy precedent for patent cases is the Supreme Court’s 2007 decision in MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007) In MedImmune, the Court explained the test as “whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.”  The ongoing principle is that the controversy must be based upon a “real and immediate injury or threat of future injury that is caused by the [DJ] defendants.”

In the patent context, the court has held that jurisdiction does not arise merely based upon learning of the existence of a patent or by a perception of a risk of infringement unless there is an affirmative act by the patentee.

Here, the Federal Circuit found ample evidence of action by the patentee. The one missing element was the lack of evidence that Asetek directed its accusations toward AVC’s actual products (the K9 and K7 products).  The court noted the lack of product specific accusation, but still found Asetek’s actions “sufficient to conclude that a substantial controversy between the parties existed at the time of the complaint.”  The court writes:

Asetek relies heavily on the fact that it never referenced AVC’s particular products or product line as potentially infringing, and, in fact, did not even know of AVC’s products at the time of the complaint. . . . The question of jurisdiction does not turn on Asetek’s knowledge of the specific AVC products or whether Asetek specifically alleged that the K7 and K9 products infringed the asserted patents; instead, the question is whether, under all the circumstances, Asetek’s actions can be reasonably inferred as demonstrating intent to enforce a patent.

Id. (internal citations omitted).




Patentlyo Bits and Bytes by Anthony McCain

Get a Job doing Patent Law                  

On USPTO Oversight

by Dennis Crouch

I am generally in favor of additional Congressional oversight of the U.S. Patent & Trademark Office – this is especially true because members of the House and Senate Judiciary Committees tend to be smart, well informed, and act with intention to improve the patent system.* Although partisan politics do come into play, much of the focus tends to be on real issues and real solutions.  The oversight process forces additional USPTO transparency and is the standard mechanism for getting information from Executive Agencies.  On this point, I will note that the information exchange is often done in the background lead-up to the actual hearing — thus, although a hearing might not be too exciting or informative, the associated deadlines force the new communications.

The House Judiciary Committee’s Subcommittee on Courts, Intellectual Property, and the Internet has set its next oversight hearing for Tuesday, September 13 at 1:00 pm E.T.  Michelle Lee is expected to testify both about general USPTO operations as well as the recent Inspector General’s review of potential time and attendance fraud. Although the subcommittee chair – Rep Darryl Issa – is a bit combative and divisive, he is also always well informed and practically minded.   The hearing is also expected to address USPTO’s implementation of the America Invents Act (AIA); abusive patent litigation; and patent quality — all within the context of promoting innovation and creating American jobs.

USPTO Director Michelle Lee will testify at the hearing.  No other witnesses have been released (and it is likely that none-others will be present).

On the issue of the Inspector General’s report, I substantially agree with Matt Levy’s Washington Post Letter titled “Cries of ‘fraud’ at the patent office are overblown.”  Working out the numbers, Levy finds the average unaccounted-for hours are 6-minutes per day.  I would additionally add that most of us in the patent law industry are focused more on whether patent examiners are doing quality work in a timely manner — that was happening, but the examiners were essentially a bit too efficient as judged by the parallel time and examination-quota requirements. My largest caveat is that the unaccounted-for hours were not evenly distributed as implied by Levy’s letter. Rather, the IG report highlights the fact that a relatively small number of examiners claimed a large percentage of the total unaccounted-for hours (based purely on a computer database analysis). I would think that those particular examiners should be reviewed to ensure that there was no actual fraud.  The IG report suggested (but did not actually state) that such a review would be improper under the law, and I expect that one aspect of the hearing will focus on that question.

Levy’s also makes the important point that the fraud charges in the media are likely to shift attention away from the patent quality improvements that should be the agency’s major focus.

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* My position may well change if major control shifted to, for instance, the Energy & Commerce Committee.