Shukh v. Seagate: Fired Inventors and their Former Employers

Alexander Shukh v. Seagate (Fed. Cir. 2015)

Mr. Shukh sued his former employer Seagate asking for a correction of inventorship under 35 U.S.C. § 256 as well as breach of contract and discrimination associated with his firing.

Because Shukh had already assigned-away his ownership rights to the patents, the District Court ruled that the Shukh’s standing for the inventorship claim hung on his alleged reputational harm due Seagate’s failure to list him as a co-inventor on six different patents. The district court also dismissed the state law allegations for failure to state a claim. At the close of discovery, the district court then dismissed the case on summary judgment – finding that Shukh had not produced evidence to prove the reputational harm.

On appeal, the Federal Circuit has vacated the lower court’s summary judgment –

Today, we hold that concrete and particularized reputational injury can give rise to Article III standing. As we noted in Chou, “being considered an inventor of important subject matter is a mark of success in one’s field, comparable to being an author of an important scientific paper.” 254 F.3d at 1359. We reasoned that “[p]ecuniary consequences may well flow from being designated as an inventor.” Id. This is particularly true when the claimed inventor is employed or seeks to be employed in the field of his or her claimed invention. For example, if the claimed inventor can show that being named as an inventor on a patent would affect his employment, the alleged reputational injury likely has an economic component sufficient to demonstrate Article III standing.

We find that there is a question of material fact as to whether Dr. Shukh’s omission as a named inventor on the disputed patents caused him reputational injury. Dr. Shukh presented evidence such that a trier of fact could conclude that this omission injured his reputation in at least two ways: first, it harmed his reputation as an inventor in the field of semiconductor physics, and second, it contributed to his reputation for poor teamwork due in part to his accusations that others were stealing his work. Moreover, Dr. Shukh presented evidence from which a trier of fact could conclude that these reputational harms had economic consequences—namely, that Dr. Shukh was unable to find employment after he was terminated from Seagate.

This case highlights a troubling issue for inventors. The difficulty for inventors is that an inventor does not automatically have standing to sue for being improperly excluded from being listed as an inventor. Rather, the inventor must be able to allege additional cognizable harm before the court will hear the case.

Hereby Assign: Shukh’s employment contract with Seagate included a statement that he “hereby assign[s]” his future invention rights to Seagate. Although these contracts are generally interpreted by state-law, the Federal Circuit issued a 1991 patent-specific ruling that this clause results in an automatic assignment of rights. Filmtec Corp. v. Allied-Signal, Inc., 939 F.2d 1568 (Fed. Cir. 1991). The Filmtec outcome should be contrasted with agreements where employees “agree to assign.” In the agreement-to-assign case, legal title does not shift until the inventor actually does assign after inventing. In his appeal, Shukh asked the Federal Circuit to overrule Filmtec – which it refused to do here on stare decisis grounds. “[W]e cannot overrule that holding without en banc action.”

The suggestion for en banc action has some strong backers. In his dissenting opinion in Stanford v. Roche, Justice Breyer challenged the Federal Circuit rule. Relying upon history and tradition, Justice Breyer wrote that the initial “hereby-assign” employment contract as creating equitable title in the invention whose legal title does not automatically transfer.

Given what seem only slight linguistic differences in the contractual language, this reasoning seems to make too much of too little. Dr. Holodniy executed his agreement with Stanford in 1988. At that time, patent law appears to have long specified that a present assignment of future inventions (as in both contracts here) conveyed equitable, but not legal, title. See, e.g., G. Curtis, A Treatise on the Law of Patents for Useful Inventions §170, p. 155 (3d ed. 1867) (“A contract to convey a future invention . . . cannot alone authorize a patent to be taken by the party in whose favor such a contract was intended to operate”); Comment, Contract Rights as Commercial Security: Present and Future Intangibles, 67 Yale L. J. 847, 854, n. 27 (1958) (“The rule generally applicable grants equitable enforcement to an assignment of an expectancy but demands a further act, either reduction to possession or further assignment of the right when it comes into existence”).

Under this rule, both the initial Stanford and later Cetus agreements could have given rise only to equitable interests in Dr. Holodniy’s invention. And as between these two claims in equity, the facts that Stanford’s contract came first and that Stanford subsequently obtained a postinvention assignment as well should have meant that Stanford, not Cetus, would receive the rights its contract conveyed.

In 1991, however, the Federal Circuit, in FilmTec, adopted the new rule quoted above—a rule that distinguishes between these equitable claims and, in effect, says that Cetus must win. The Federal Circuit provided no explanation for what seems a significant change in the law. Nor did it give any explanation for that change in its opinion in this case. The Federal Circuit’s FilmTec rule undercuts the objectives of the Bayh-Dole Act. While the cognoscenti may be able to meet the FilmTec rule in future contracts simply by copying the precise words blessed by the Federal Circuit, the rule nonetheless remains a technical drafting trap for the unwary. It is unclear to me why, where the Bayh-Dole Act is at issue, we should prefer the Federal Circuit’s FilmTec rule to the rule, of apparently much longer vintage, that would treat both agreements in this case as creating merely equitable rights.

The majority in Stanford v. Roche did not particularly address the issue.

Non-Transitory Patent Claims

by Dennis Crouch

I was surprised when I ran these numbers and found that 4% of recently issued patents include a non-transitory claim limitation. (95% of these are in what I term computer-related arts).  For the most part, these are software patent claims.  However, because “software” per se is usually not considered patent eligible, patent attorneys moved toward claiming a computer-readable-medium having the software instructions stored therein.  More recently, the PTO concluded that those claims – when broadly interpreted – would encompass transitory signals which are not patent eligible under Section 101.  The PTO suggested that applicants amend their claims “by adding the limitation ‘non-transitory’ to the claims.”


Open question – how many of these cases have written description support for the new non-transitory limitation?

Will the Federal Circuit Recognize the U.S.–Foreign Tradeoff in Friday’s Lexmark Argument?

Guest post by Daniel Hemel, Assistant Professor at the University of Chicago Law School, and Lisa Larrimore Ouellette, Assistant Professor at Stanford Law School.

On Friday, the en banc Federal Circuit will hear argument in Lexmark v. Impression Products, the printer cartridge resale case that will determine the fate of two key patent exhaustion precedents, including the current Jazz Photo rule that foreign sales do not exhaust U.S. patent rights. Despite extensive briefing (including over thirty amicus briefs), we argue in a new Essay that the key distributive tradeoffs between U.S. and foreign interests remain ignored (or misunderstood).

Both sides in Lexmark argue that their proposed rule would be more efficient. Those advocating broader exhaustion rules (including Google, Costco, EFF, and a group of IP professors) argue that the current regime is complex and uncertain. Those favoring the status quo (including PhRMA, BIO, and IPO) point to the aggregate welfare gains from geographic price discrimination. While it is possible to construct models to support both views, we argue that the efficiency question cannot be answered without first making a choice about whose welfare is aggregated.

As explained in more detail in our Essay, Trade and Tradeoffs: The Case of International Patent Exhaustion, the U.S. rule on international patent exhaustion implicates at least two tradeoffs between U.S. and foreign interests:

First, there is a tradeoff between U.S. and foreign consumers. A U.S. rule of international exhaustion would cause prices of patented products in low-income countries to increase and prices of those same products in the United States to fall. It is thus surprising to see groups focused on global access to medicines such as Public Citizen advocating for this change; we are not aware of any study suggesting that a U.S. rule of international exhaustion would decrease prices in the developing world. As counterintuitive as it may be for developing countries and global access-to-medicines proponents to take the side of pharmaceutical companies, we think that their interests are in fact aligned on this issue. Developing-world consumers and pharmaceutical companies would both be better off if the Federal Circuit sticks with its Jazz Photo rule.

Second, a U.S. rule of international patent exhaustion would make it more difficult for foreign countries to allocate access to patented goods using non-market mechanisms. Some national governments subsidize their citizens’ consumption of patented products; examples range from the UK National Health Service’s provision of pharmaceuticals to Uruguay’s one-laptop-per-child program. As we explain in our Essay, such subsidies could end up being transferred to U.S. consumers via arbitrage if the Federal Circuit overrules Jazz Photo. At the very least, the decision to overrule Jazz Photo would make it more difficult for foreign governments to subsidize access to patented goods.

We argue that one cannot answer the policy question at the heart of Lexmark without taking a position on these distributive questions. If one assigns zero value to the interests of foreigners, then the United States might well be better off if it adopted a rule of international patent exhaustion. (While international patent exhaustion would also reduce profits for U.S. patent holders, a majority of U.S. patents are issued to foreigners; if one adopts a purely nationalistic approach, the interests of most patent holders wouldn’t count in the welfare analysis.) If one assigns a high value to the interests outside the United States, particularly those in developing countries, then one should almost certainly come down against a U.S. rule of international exhaustion. (If one assigns equal weight to the interests of all individuals regardless of nationality, then the question is somewhat closer.) How much the Federal Circuit should care about foreign consumers is a question that defies easy answer, but we hope that our Essay at least brings these tradeoffs into clearer focus. We also offer some tentative suggestions as to how U.S. courts might approach questions of global distributive justice.

Patent Grants Per Fiscal Year (USPTO)

As expected, the USPTO has posted its first reduction in patent grants of the Kappos-Lee era.  In Fiscal Year 2015, the PTO issued 296k utility patents. That is a 3% drop from the record high of 304k patents issued in FY2014.  Although a modest reduction in the absolute number of patents granted, FY2015’s numbers still represent the second-highest number of patents granted in the PTO’s 200+ year history. FiscalYearPatentGrants

Design Patent Damages

By Dennis Crouch

Nordock v. Systems Inc (PowerAmp) (Fed. Cir. 2015)

Nordock’s asserted design patent covers the ornamental design of a lip and hinge plate for a dock leveler. (U.S. Patent No. D579,754). The lever is designed to be attached to a truck loading and can then be adjusted to provide a smoother linkage between the dock and the truck being loaded/unloaded. As a design patent, the patentee does not claim a new and useful invention, but rather the “ornamental design” as shown in the figure below.

Disgorging all of the infringer’s profits: A jury sided with the patentee on infringement and validity, but awarded only $46,000 in reasonable royalty damages. On appeal, the Federal Circuit vacated – finding that the district court had improperly calculated the profit-disgorgement damages.

A design patent holder may seek damages under the standard patent damages statute 35 U.S.C. 284 that sets a floor for damages as “a reasonable royalty for the use made of the invention by the infringer.” As an alternative, the patentee can collect damages under the design-patent-damages provision codified in 35 U.S.C. 289. Under Section 289, an infringer is “be liable to the owner to the extent of his total profit, but not less than $250.” To be clear, when the statute speaks of “his total profits” – that refers to the total profits of the infringer. Opining on the statute, the Federal Circuit has written that § 289 requires “the disgorgement of the infringers’ profits to the patent holder, such that the infringers retain no profit from their wrong.” Nike Inc. v. Wal-Mart Stores, Inc., 138 F.3d 1437 (Fed. Cir. 1998). The Federal Circuit has ruled that a patentee can collect either of these damages theories, but not both. Catalina Lighting, Inc. v. Lamps Plus, Inc., 295 F.3d 1277 (Fed. Cir. 2002). That result is also demanded by the statutory language that “[n]othing in this section shall prevent, lessen, or impeach any other remedy which an owner of an infringed patent has under the provisions of this title, but he shall not twice recover the profit made from the infringement.”

At trial, the district court forced an apportionment of profits – requiring a calculation the infringer’s profits associated with the lip and hinge plate even though the infringer sold the dock leveler with the plate as an entire unit. As it recently did in Apple, the Federal Circuit here rejects that approach:

[W]e recently reiterated that apportioning profits in the context of design patent infringement is not appropriate, and that “Section 289 explicitly authorizes the award of total profit from the article of manufacture bearing the patented design.” Apple Inc. v. Samsung Elecs. Co., 786 F.3d 983 (Fed. Cir. 2015) (rejecting Samsung’s attempt to limit the profits awarded to the “portion of the product as sold that incorporates or embodies the subject matter of the patent”); see also Nike, (discussing the legislative history of § 289 and Congress’s decision to remove “the need to apportion the infringer’s profits between the patented design and the article bearing the design”).

Here, the dock is welded-to and sold as a unit with the dock leveler and – as such – the calculated profits must be associated with the entire dock leveler being sold. This result should boost the patentee’s damages up to at least $600,000, which represents the infringer’s total profits associated with the infringing sales.

Based upon this error, the Federal Circuit ordered a new trial on damages.

Is it Functional? Preserving the Appeal: There is no question that the design patent here covers a functional invention. The question raised by the infringer’s cross-appeal is whether it is impermissibly functional such that the design patent is invalid. However, in the appeal, the Federal Circuit ruled that argument to be waived because Systems’ counsel “failed to renew the motion for JMOL as to validity with sufficient particularity.” Here, defendant’s counsel gave a general motion following the verdict stating that “as a routine matter whatever motions we made during the trial, JMOL and so forth, we would renew those motions to the extent that they are necessary. . . . Everything we made we renew. I’m not sure what that is, but just for the record whatever we said before.” The patentee did not file any further particular post-verdict motions with respect to validity and – as such – the Federal Circuit ruled that the general post-verdict motion was insufficient to preserve the infringer’s rights.

Is it Functional? The Test: As an alternative judgment, the court also ruled the jury had been presented with sufficient evidence to support a not-impermissibly-functional verdict.

A design patent will be deemed invalid if the claimed design “as a whole, is dictated by functionality.” Factors often considered in the functionality analysis include:

  • Whether the protected design represents the best design;
  • Whether alternative designs would adversely affect the utility of the specified article;
  • Whether there are any concomitant utility patents;
  • Whether the advertising touts particular features of the design as having specific utility; and
  • Whether there are any elements in the design or an overall appearance clearly not dictated by function.

High Point Design LLC v. Buyers Direct, Inc., 730 F.3d 1301 (Fed. Cir. 2013) (these factors “may help”). At trial, the jury heard testimony from the patentee indicating that the design was intended to be distinctive and ornamental, that the claimed plate is not necessary to perform the dock leveling function, and that other designs are available to achieve the same utilitarian purpose. “On this record, there was substantial evidence from which a jury could conclude that the claimed design is not dictated by function.”

= = = = =

There has been some outcry regarding the relatively large disgorgement profits without any proof of an innovative leap or a business impact of the design. However, up to now there have been no congressional proposals on point.  In 1946, Congress eliminated equitable disgorgement from utility patent doctrine. (as interpreted by Aro II (1964)).

The pending design patent legislation would excuse spare-auto-parts manufacturers and sellers from liability.

Method Patent Claims

by Dennis Crouch

The Patent Act opens the door to patenting of “any new and useful process, machine, manufacture, or composition of matter.” In recent years, the patenting of processes in particular (or at least process claims) has risen sharply. The chart below shows the percentage of patents with at least one independent method or process claim, grouped by issue year.* Over the past 30 years, the percentage of method patents has risen from around 30% of patents to almost 60% today.

* For this data, I parsed each independent claim of each issued patent for the past 30 years and tallied the number of patents that included the word “method” or “process” within the claim (excluding processor, etc.).

Some of these claimed method are new uses of known products as well as new processes for manufacturing a known product. It may be difficult to even draft an apparatus claim in those cases (other than product-by-process) when the invention does not involve the creation of any new device or system. These new-use claims are expressly authorized by Section 100(b) of the Patent Act that defines a process as including “a new use of a known process, machine, manufacture, composition of matter, or material.”  (cf Alice Corp.).

On the other hand, the majority of method claims are tied to some form of new apparatus/software.  In that situation, it is legally appropriate and often good strategy to protect the apparatus as well as methods performed by the apparatus, methods of using the apparatus, and/or methods of manufacturing the apparatus.  

By adding the method steps, a patentee is able to include fewer structural limitations and still obtain protection.  It is perhaps that potential of altered scope – more than anything else – that gives method claims their power.

Of course, most patents still also include non-method claims too.  The chart below splits these into three categories and displays.


Federal Circuit Sends Bad-Faith-Patent-Assertion Case back to State Court

Vermont v. MPHJ Tech (Fed. Cir. 2015)

In an interesting opinion, the Federal Circuit has rejected MPHJ’s plea to get into Federal Court. The State of Vermont sued the patent holder for violations of Vermont Consumer Protection Act (VCPA) stemming from MPHJ’s patent enforcement campaign. The letter campaign had three stages:

  1. Letter from the shell company stating that “we have identified your company as one that appears to be using the patented [scanner-to-email] technology” suggesting that “you should enter into a license agreement with us at this time.”
  2. Follow-up letter a few weeks later from the Farney Daniels firm stating that a prior-non response is considered “an admission of infringement” and implying that litigation would commence if the recipient did not enter into a license agreement.
  3. A third follow up following the pattern of the second.

These actions prompted the Vermont Attorney General to sue under the VCPA – alleging unfair and deceptive trade practices based upon MPHJ’s “threating litigation even though litigation was unlikely, targeting small businesses, placing the burden on the recipient to do the investigation, using shell corporations to minimize liability; and stating in its letters that it would bring suit immediately absent a license, the licensing program was successful with many businesses taking part, and the average license was $1000/employee.” The state demanded a permanent injunction requiring that MPHJ comply with state law.

After VT filed its original complaint (but before it filed its amended complaint), the state enacted the “Vermont Bad Faith Assertions of Patent Infringement Act” (BFAPIA) that creates a new Vermont cause of action for “bad faith assertion of patent infringement” based upon factors such as “the contents of the demand letter, the extent of any pre-assertion investigation, demands for payment of a license fee in an unreasonably short time, and deceptive assertions of infringement.”

MPHJ alleges that the proposed injunction would force it to comply with BFAPIA, but that law is preempted by the US patent laws and – as such – that the case should be removed to Federal Court.

The Federal District Court denied MPHJ’s first removal request (based upon the first complaint) and second removal request (based upon the VT amended complaint).  It is that second denial that was appealed and the Federal Circuit here has affirmed the denial – limiting the appeal question to the BFAPIA issue and finding that the VT injunction does not raise the BFAPIA enforcement issue – especially since Vermont stipulated during oral arguments that they were not seeking an injunction that would require compliance with that statute.

Federal Circuit Jurisdiction: The most interesting aspect of the decision is Judge O’Malley’s discussion of Federal Circuit jurisdiction post-AIA and post-Gunn.

The America Invents Act amended Title 28 to now grant Federal Circuit appellate jurisdiction “in any civil action arising under, or in any civil action in which a party has asserted a compulsory counterclaim arising under, any Act of Congress relating to patents.” 28 U.S.C. § 1295(a)(1). This change extends the Federal Circuit’s jurisdiction to include cases where the patent issues arise only in a compulsory counterclaim (formerly, the focus was only on the complaint). The new statute also added additional language that “no state court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents,” 28 U.S.C. § 1338(a), and a new removal statute indicating that “a civil action in which any party asserts a claim for relief arising under any Act of Congress relating to patents . . . may be removed to [federal] district court . . . .” 28 U.S.C. § 1454.

At the same time, in Gunn (2013) the Supreme Court contracted Federal Circuit jurisdiction to cases where (1) federal patent law creates the cause of action or (2) where, although the claim arises under state law, that a federal patent law issue is: (a) necessarily raised, (b) actually disputed, (c) substantial, and (d) capable of resolution in federal court without disrupting the federal-state balance approved by Congress. Gunn (interpreting pre-AIA law).

Here, MPHJ asserts that the Federal Circuit has jurisdiction over the appeal because its Counterclaim (No. 5) raises a patent law issue. In particular, MPHJ asked for “a declaratory judgment that the VCPA is invalid or preempted by the First, Fifth, and Fourteenth Amendments, the Supremacy and Patent Clauses, and Title 35 of the U.S. Code.”

Walking through this morass, the Federal Circuit first ruled that the counterclaim is a compulsory counterclaim because of its close factual and logical relationship with the main claim found in the complaint. The next question under Section 1295(a)(1) then, also answered affirmatively here, is whether the counterclaim “arises under” federal patent law. Although not a cause of action, the federal circuit found that the preemption defense is an important and necessary federal patent question whose resolution will have a broad impact on the federal patent system as a whole.

Whether federal patent laws preempt or invalidate the VCPA as applied has considerable significance beyond the current case. A hypothetical finding that the VCPA is not invalid or preempted in state court would affect the development of a uniform body of patent law, as such a decision would be binding in Vermont, but would not be in other states with similar laws or in federal court. The facts of this case are fundamentally unlike Gunn, in which the Court recognized that the federal issue was a “backward-looking . . . legal malpractice claim” that would be unlikely to have any “preclusive effect” on future patent litigation and was, therefore, not substantial. As an “as applied” challenge, counterclaim 5 depends to a certain extent on the specific facts of this case, but the resolution of this case would assist in delineating the metes and bounds of patent law and clarifying the rights and privileges afforded to patentees in pursuing patent infringement claims.

With that, the Federal Circuit found that it does indeed have appellate jurisdiction to hear the appeal.

At this point, you may be seeing a disconnect between the ultimate holding that I first described (effectively denying removal) and the new statute permitting removal of cases “in which any party asserts a claim for relief arising under any Act of Congress relating to patents” (§ 1454) – especially since the court just decided that the court here decided that MPHJ had indeed asserted a claim for relief arising under federal patent law. The resolution of that seeming conflict is procedural – “MPHJ has not appealed the district court’s ruling pursuant to 28 U.S.C. § 1454 [and thus] we have no occasion to address … how that newly enacted provision should be interpreted.”

The complicating factor is that it looks like the State court will now need to dismiss MPHJ’s preemption counterclaim because it arises under the patent law. 1338(a) and, at that point, MPHJ would seemingly have standing to file a federal declaratory judgment action raising preemption.

Fractures, Fault Lines, and the MPEP

By Jason Rantanen

As part of my standard preparation for teaching a given doctrine in my patent law class, I like to review the relevant section of the Manual of Patent Examination and Procedure (MPEP).  The MPEP typically offers a relatively well-organized description of the doctrine, with critical cases referenced.  But my review leaves me frustrated almost every time.

The reason for my frustration is that the MPEP, while doing a terrific job with legal issues on which there is clear precedent, frequently elides over the doctrinal fractures and fault lines that are at the heart of contemporary patent law disputes.  Or worse, it simply does not acknowledge their existence at all.  The result is a resource that, in presenting patent law as clear and determinate on its face, masks the existence of  sharp tensions and breakpoints in patent law.

For example, today I’ll be covering § 102 “public use” and “on sale.”   A glance through the MPEP’s sections on public use under the First-to-File regieme reveals a landscape that seems dry and barren, with the only major feature being the question of whether pre- or post-AIA § 102 applies.  From reading MPEP § 2152, one gets the sense that post-AIA, the only issue once the question of regime is resolved is whether the activity was “accessible to the public.”  Secret sales or offers for sale, for example, do not place the invention “on sale”:

“AIA 35 U.S.C. 102(a)(1) does not cover secret sales does not cover secret sales or offers for sale. For example, an activity (such as a sale, offer for sale, or other commercial activity) is secret (non-public) if it is among individuals having an obligation of confidentiality to the inventor.”

MPEP § 2152.02(d).  Experimental use has been entirely dropped from the MPEP’s discussions of post-AIA public uses and sales.  It’s as if it never existed.

Yet, these are far from resolved issues.  There are plausible arguments that Congress legislatively changed the meaning of “public use” through the AIA; there are at least equally plausible arguments that Congress did not.  The PTO’s position on secret commercial activity is on even weaker footing.  Inevitably, the Federal Circuit, and likely the Supreme Court, will weigh in on this issue of statutory construction.  But the MPEP’s characterization of this issue as settled hides a very real tension in patent law, one that will really matter to inventors and patent attorneys.  It’s not difficult to imagine a hypothetical situation in which someone relies on the MPEP’s language about secret commercial activity not constituting sales for purposes of § 102(a)(1), only to be placed in a very bad position should the Federal Circuit or Supreme Court conclude otherwise.

These issues are only the most obvious fault lines hidden under the MPEP’s seemingly solid description of patent law doctrine.  But there are others, and creative, knowledgeable attorneys likely know many of them already.  One that has always fascinated me is the question of what constitutes a “use” for purposes of § 102 “public use.”  The casebook I use for patent law, Craig Nard’s The Law of Patents, does a good job of setting up this issue through Motionless Keyboard Co. v. Microsoft Corp., 486 F.3d 1376 (Fed. Cir. 2007).  The issue is whether just showing, or perhaps even demonstrating, an embodiment of the invention constitutes a public use.  Motionless Keyboard suggests that sometimes not, at least if the invention is not used for its intended purpose.  But in other cases, the Federal Circuit brushes aside the “intended purpose” language of Motionless Keyboard.  See, e.g. Pronova Biopharma Norge AS v. Teva Pharmaceuticals USA, Inc., 549 Fed. Appx. 934, 939-943 (Fed. Cir. 2013) (nonprecedential).  This question of what constitutes a use is a substantial fracture point where the law is indeterminate, but one gets no hint of this potential tension from the MPEP.  See § 2133, 2152.  Other fracture points and fault lines are apparent if one digs into the recent cases: the question of what constitutes an offer for sale versus an assignment or license is another fracture point within the § 102 space on which disputes ultimately get resolved,  See, e.g. Elan Corp. v. Andrx Pharmaceuticals, Inc., 366 F.3d 1336 (Fed. Cir. 2004), but which one gets no hint of from the MPEP.  Likewise, while there is an extensive discussion in the MPEP of whether an invention is “ready for patenting,” see § 2133.03(c),  there is no discussion about a fundamental important question: what is the invention for purposes of a product claim? Is it just an embodiment of the invention or is it the technical know-how (i.e.: what we usually think of as “the invention” when talking about patents)?

My point is not that the MPEP should definitely include extensive discussions of fault lines and fracture points within the caselaw.  Indeed, the MPEP isn’t much worse than most treatises, which similarly elide or ignore all but the most well-recognized tension points in the law.  And “on sale” and “public use” issues, which typically involve information within the inventors’ own possession rather than information that is easily found by the examiner, are perhaps not the most efficient places for the MPEP to offer substantial guidance.  Whether or not the MPEP would benefit from greater detail is a normative question that I’d be curious to hear folks’ thoughts on.  I do note, though, that on some issues, such as experimental use prior to the AIA, the MPEP goes into substantial detail already, so it’s treatment is more inconsistent than uniformly thin.

My point is simply that the MPEP’s presentation of patent law doctrine inherently implies a patent law that is far more determinate and clear than it really is.  There are hard questions in patent law, but reading the MPEP gives the impression that they are just complicated questions with definite answers.  The caselaw suggests otherwise.

Guest Post: To File a CON? Empirical Popularity and Prosecution Outcomes

Guest Post by Kate S. Gaudry, Ph.D and Thomas D. Franklin, Kilpatrick Townsend & Stockton LLP.  The opinions expressed in this article are those of the authors and do not necessarily reflect the views of Kilpatrick Townsend & Stockton LLP or its clients. This article is not intended to be and should not be viewed as legal advice.

An increasing number of statistics are available on trends in patent application filings and prosecution outcomes. However, it is uncommon to see the data segregated based on type of application. Specifically, how frequently are continuation applications filed? And does previous prosecution experience with a parent application result in favorable prosecution outcomes?

Answers to these questions may be pertinent when developing strategies as to whether to file a continuation application. Frequent continuation filings may indicate that competitors consider it important to have the claiming flexibility of keeping a family alive or a trend toward filing omnibus applications (disclosing multiple ideas or idea aspects per specification). Meanwhile, any advantage of a continuation must be considered in view of its cost, which depend in part on prosecution expectations.

Accordingly, we requested data from the USPTO that identified, for each fiscal year and technology center (TC), the number of new applications filed (excluding RCEs) that were: (1) a continuation application; (2) a divisional application; (3) a continuation-in-part application; or (4) none of the above. Further, we requested, for each of these application types: (1) the number of patents issued and number of abandonments between July 1, 2014 and July 8, 2015 (to generate a final-disposal allowance rate for this time period); and (2) the average number of office actions issued for each application that received a notice of allowance during this time.

Continuation Applications: Increasingly Common

Overall, in fiscal year 2015, 20% of the filed applications were continuation applications. Divisionals comprised 6% of the data set, and continuation-in-part applications accounted for 3% of the applications. The remaining 72% lacked a priority claim to another non-provisional U.S. application. (FIG. 1)

FIG. 1

FIG. 1

FIGs. 2A and 2B respectively show the unnormalized and normalized distributions of filing types per fiscal year. The percentage of applications that were continuations doubled from 9% in 2005 to 18% in 2015.

Patently-O App-Type FIG 2

FIG. 2

The increased popularity of continuation applications is observed across all TCs. (FIG. 3.) The most substantial increases is observed in TCs 2100 (Computer Architecture, Software, and Information Security) and 2600 (Communications), where the contribution of continuation applications to total filings increased by 142% and 132%, respectively, between 2005 and 2015.

Patently-O App-Type FIG 3

FIG. 3

Continuation applications were most common in TCs 1600 (Biotechnology and Organic Chemistry), 2100 (Computer Architecture, Software, and Information Security) and 2400 (Computer Networks, Multiplex Communication, Video Distribution and Security), where continuation applications accounted for 29%, 28% and 30% of the applications, respectively. Continuation applications were least common in TC 3600 (Transportation, Construction, Electronic Commerce, Agriculture, National Security and License & Review), accounting for only 14% of the applications. The infrequency of TC 3600 continuation applications may be due, in part, to the rarity of allowances in the business-method art units.[1]

Continuation and Original Applications have Similar Prosecution Statistics

Potentially, experience with a parent application (and, typically, a same examiner) may guide claiming strategy for a continuation. Thus, perhaps, continuations represent a two-fold cost-savings opportunity: a savings in drafting and in prosecution costs. Assessing the latter potential savings requires evaluating allowance rates and office-action counts of continuation applications. Accordingly, we evaluated prosecution statistics from a recent time period (July 2014-July 2015) for each of the application types.

Overall, the final-disposal allowance rate for continuations is slightly higher than that for original applications (80% versus 74%). (FIG. 4A.) The average office-action count per patent is slightly lower for continuation applications (1.85 versus 1.96). (FIG. 4B.)

FIG. 44

FIG. 4

Discussion: Why and How to File Continuations

Continuation applications provide a variety of advantages, including an opportunity to seek a new scope of protection in view of business priorities and to strategically draft claims in view of ongoing or threatened challenges to a patent. This latter upside is becoming increasingly significant as the number of post-grant challenges continues to grow.

Should an applicant decide that the advantages of keeping a family alive are sufficiently important, claiming strategy for the child application must then be identified. Slightly tweaking an allowed claim may result in minimal prosecution costs. However, a fast allowance will lead to an overall cost of the family exploding (assuming repeated continuation filings). Seeking substantially broader protection, meanwhile, may lead to extended and frustrating prosecution. Our data showing that continuation and original applications have similar prosecution statistics suggest that applicants are not consistently choosing an easy or hard continuation-claiming path, though it may be explained by split uses of these types of claim-drafting techniques.

Another approach to continuations is to seek protection of a completely different idea in the specification. This could allow a resulting patent family to provide diverse protections towards different elements of an applicant’s technology. However, a new focus requires that the new idea be supported and enabled by the original specification. In an era where flat fees and legal bidding wars are common, it is our hypothesis that few applicants are willing to pay the higher drafting fees for preparation of such enhanced applications. However, we believe that this is a strategic approach and should be more frequently used.

Consider a case where an applicant is seeking patent protection of two ideas. A traditional approach is that separate patent applications be drafted for each idea. Another approach is to draft a single “omnibus” patent application that describes both ideas. One idea can be the focus of an original filing, and another the focus of a continuation filing. Then, by investing in keeping a single family alive (via the original and continuation filings and/or additional continuation applications), claiming flexibility for each idea is preserved. Further, if ideas within an omnibus application are related, drafting fees may be less than preparing two independent applications. The application may also illuminate synergies and interactions between the ideas, which may further expand claiming possibilities.

Concluding Thoughts

Our data shows that continuation-application filings are becoming increasingly common. Filing continuation applications offers many advantages, particularly now that patents are frequently challenged. However, blindly filing continuation applications will lead to an explosion in costs. Strategic filing of omnibus continuation applications, however, will offer long-term cost savings and prosecution advantages. Therefore, applicants should consider intelligently identifying and organizing sets of ideas into omnibus applications.

[1] Gaudry KS. 2015. Post-Alice, Allowances are a Rare Sighting in Business-Method Art Units. IPWatchDog. <>

The Lost ‘Art’ of the Patent System

by Dennis Crouch

Sean O’Connor has released a draft version of his new article titled The Lost ‘Art’ of the Patent System.  O’Connor builds on his earlier UChicago Article on the meaning of Discovery, now focusing on the term useful arts.

I contend that the shift from ‘‘art’’ to ‘‘technology’’(and, even worse, ‘‘science’’) loses sight of critical parts of a well functioning patent system and blurs boundaries than can result in both a temptation for problematic ‘‘upstream’’ patenting of basic science research results and an improper bias against ‘‘nonscientific’’ artisanal innovation. Instead, I argue for a system that focuses once again on advances in the ‘‘useful arts.”

Read it here:


Iowa Intellectual Property Law Association Annual Conference at the Iowa College of Law

By Jason Rantanen

Next Friday, October 2, the Iowa Intellectual Property Law Association will hold its annual conference.  This year’s conference is being held at the Boyd Law Building at the University of Iowa, and is being co-sponsored by the Iowa Innovation, Business & Law Center.  We’ve got a great lineup of speakers, including Profs. Dennis Crouch (Missouri) & Herb Hovenkamp (Iowa), Dr. Christal Sheppard (USPTO), Gene Quinn (IPWatchdog), Bernie Knight (McDermott Will & Emery) and David C. Hilliard (Pattishall, McAuliffe, Newbury, Hilliard & Geraldson).

Here’s the registration page.


Shire Wins Vyvanse Case, but Supplier Escapes Liability

Shire LLC v. Amneal Pharma, et al. (Fed. Cir. 2015)

This ANDA patent litigation arose after the defendants filed Abbreviated New Drug Applications (ANDAs) with the FDA requesting permission to make and sell a generic version of Shire’s “safe” amphetamine Vyvanse. According to the unreputable urban dictionary: “Unlike other amphetamine pills like Adderall that have distinct ups and downs, and relatively quick effects, Vyvanse is like a big slow moving amphetamine truck that hits you all day long.”

Under 35 U.S.C. 271(e)(2), the filing of an ANDA with the FDA is a form of patent infringement so long as the original NDA owner has listed covering patents in the FDA’s Orange Book. Shire sued the ANDA filers for infringement under this provision.

The money-ruling: The Federal Circuit affirmed the lower court’s finding that – as a matter of law – the claimed inventions of the asserted patents are not obvious and that the lower court did not abuse its discretion by denying a late-filed on-sale-bar defense. The result is that patents will remain in force until their expiration in 2023 – protecting Shire’s billion dollar market.

Supplier Liability: As part of each case, Shire also sued Johnson Matthey who was partnering with each of the ANDA filers and supplying the drug to those entities. As part of its work, Matthey had (1) filed a drug master file with the FDA (but did not itself file an ANDA) and (2) supplied each of the ANDA filers with product covered by one of the patents. In the appeal, the Federal Circuit ruled that these acts do not constitute infringement – either direct or by inducement.

First, the appellate court found that Matthey’s supply of the infringing product qualified under the research exemption of Section 271(e)(1) –

Johnson Matthey is correct that it cannot be liable for the [active ingredients – API] it sold the ANDA defendants up to this point. Johnson Matthey, as an API supplier, has thus far done nothing more than provide material for use by the ANDA defendants in obtaining FDA approval. As the district court found, these sales, and the ANDA defendants’ use of the API for filing the ANDA, were “reasonably related to the submission of an ANDA.” As such, Johnson Matthey’s activities are protected by the safe harbor of § 271(e)(1), and the district court erred by entering judgment that Johnson Matthey has induced infringement of the compound claims at issue.

Second, the appellate court found that Matthey “cannot be liable for infringement under § 271(e)(2)” because it did not submit an ANDA.

The court here seems to skirt its prior holding in Forest Laboratories, Inc. v. Ivax Pharmaceuticals, Inc., 501 F.3d 1263 (Fed. Cir. 2007). In that case, the Federal Circuit found that a supplier could be held enjoined to prevent it from inducing infringement: “Section 271(e)(2) may support an action for induced infringement. . . . Under the standards for inducement which we apply to 35 U.S.C. § 271(b), [the supplier] has therefore actively induced the acts of [the ANDA filer] that will constitute direct infringement upon approval of the ANDA, and it was thus not inappropriate for the district court to include [the supplier] within the scope of the injunction.”

In Forest, the court explained though that – at the point of an ANDA lawsuit – that the supplier was not infringing (for the two reasons discussed above), but that it would be infringing/inducing if the ANDA was approved. As such, the Forest court found that it was appropriate to preemptively enjoin the suppler from taking that action that would constitute infringement. Coming back to the Shire case, the appellate panel distinguished Shire – finding that “Forest involved the scope of an injunction under § 271(e)(4). No such injunction has been issued against Johnson Matthew here and thus Forest is inapposite. Johnson Matthey is therefore not currently liable for infringement.”

High Priced Generic Drugs

The news has been abuzz regarding the drug Daraprim and the major price-hike by its US-distributor (Turing Pharma).  According to its website, Turing “acquired” Daraprim in August 2015 from CorePharma who had previously obtained rights in 2010 from GlaxoSmithKline.  When CorePharma bought rights, it increased the price from $1 to $13.50 per pill, Turing’s increase pushed the price up to $750.

My first thought was that the price-hike was likely backed by the exclusivity of patent rights. However, I then read that the drug has been on the market for more than 60 years and any patent rights associated with its sale and distribution have long expired.  Although the deal is not public, the rights purchased by Turing appear to include marketing rights (FDA right to market) along with related trade mark and trade secret rights associated with the manufacture, sale, and testing of the drug.

At this point, it is a straightforward process for a generic competitor to enter the market by filing an Abbreviated New Drug Application (ANDA).  However, that ANDA process is still expensive and was previously not cost effective because of the low number of Daraprim users. Turing is apparently now lowering its price, but if it remains high enough, a competitor will likely enter the market.

Outside of the U.S., the drug is sold generically for $1 per pill or less. However, foreign drugs cannot be directly imported and sold without first seeking and obtaining approval from the FDA through the ANDA process. In the meantime, the company with exclusive marketing rights can demand monopoly rents.

The situation should highlight the fact that patent rights are only a small-bit of the ‘game.’  The barriers to entry are such that – even in the generic market – drug pricing in the US will often have little relation to the marginal cost of production – with the exception being drugs used by millions of Americans.




Said Element

The tradition in patent law is to begin discussing an element then continue discussing said element. I never liked that particular approach because the word “said” seemed odd to me. Instead, my claim drafting practice was to largely avoid the word “said.” Instead, once a claim element is given antecedent basis, I would then refer to it as “the [element].” It appears that my approach is now the conventional wisdom. The chart below shows the breakdown in patents using “said” in Claim 1 vs those using “the.” You’ll note a sharp decline in the popularity of “said” that appears to have begun around the mid 1990’s.

From Jeff Sheldon:

I am going to claim some credit here. My book “how to write a patent application ” came out in about 1990. I advocated for “the” rather than “said” for readability by judges and juries. The book is widely used and updated twice per year. So a generation of patent practitioners have developed with that recommendation.

Patent Landscape Report

by Dennis Crouch

I have known Tony Trippe for many years now, and he continues to build his reputation as one of the top patent-information-specialists.  I wanted to highlight his newest guide to patent landscaping:

The basic idea here is to consider ways that aggregate analysis of patent data can help inform business decisions. These approaches include landscape mapping; freedom-to-operate and clearance decisions; patentability and validity maps; competitor monitoring; supporting mergers and acquisitions; data mining, etc.

Patentlyo Bits and Bytes by Anthony McCain

Get a Job doing Patent Law

Federal Circuit: Damages Expert Credibility is a Question for the Jury

Summit 6 v. Samsung (Fed. Cir. 2015)

A jury sided with the patentee – finding that Summit 6 had proven infringement and that Samsung had failed to prove invalidity of U.S. Patent No. 7,765,482 (claims 38, 40, 44-46, and 49).  The award – $15 million in damages.  On appeal, the Federal Circuit affirms that judgment.  Here, I’ll focus on the damages issues.


Experts: In a Daubert appeal, Samsung asked the Federal Circuit to rule that Summit 6’s damages expert’s testimony was inadmissible.  The general rules for expert testimony are found in Fed. R. Evid. 702 and allows testimony from a qualified expert relating to:

(a) the expert’s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;

(b) the testimony is based on sufficient facts or data;

(c) the testimony is the product of reliable principles and methods; and

(d) the expert has reliably applied the principles and methods to the facts of the case.

Although a court may exclude testimony based upon unreliable principles or methods, once that threshold has been passed the question of expert credibility goes to the fact finder and may be uncovered by “[v]igorous cross-examination, presentation of contrary evidence, and careful instruction on the burden of proof are the traditional and appropriate means of attacking shaky but admissible evidence.” Daubert.

Here, the damages expert (Paul Benoit) relied upon an unpublished methodology based upon the premise “that a feature’s use is proportional to its value.”   On appeal, the Federal Circuit indicated that this type of “analytical method” for calculating damages was sufficient to pass as expert testimony and be relied upon by a jury.

[W]here the methodology is reasonable and its data or evidence are sufficiently tied to the facts of the case, the gatekeeping role of the court is satisfied, and the inquiry on the correctness of the methodology and of the results produced thereunder belongs to the factfinder.

The particular invention at issue involves pre-processing of an image on a mobile device before uploading it to a server. In estimating a reasonably royalty, Benoit estimated that 65% of phone users regularly use the cameras to take photos; 77% of those share the photos; and 41% of those share by MMS in a way that infringes the patent. Taking the product of these percentages, Benoit found that 20% of the relevant users regularly infringe.  Taking a step back, Benoit estimated Samsung’s camera-related revenue as $14.15 per phone (calculated based upon proportional production costs) and then took the leap of concluding then that 20% of the $14.15 per phone ($2.93) is attributable to the infringement.  Thinking proportionally again, Benoit then estimated that $0.56 of every $2.93 in revenue was profit for Samsung and that – based upon a Nash Bargaining Solution, that a reasonable royalty would split that profit – or $.28 per phone in license fees. Since Samsung has distributed about 100,000,000 phones, that would add up to $29 million.

Reviewing that methodology, the Federal Circuit found:

Mr. Benoit’s damages methodology was based on reliable principles and was sufficiently tied to the facts of the case. Mr. Benoit first estimated Samsung’s economic benefit from infringement by specifically focusing on the infringing features and by valuing those infringing features based on Samsung’s own data regarding use and on its own financial reports outlining production costs and profits. Mr. Benoit then envisioned a hypothetical negotiation in which the parties would have bargained for respective shares of the economic benefit, given their respective bargaining positions and alternatives to a negotiated agreement. Mr. Benoit’s methodology was structurally sound and tied to the facts of the case.

That Mr. Benoit’s methodology was not peer-reviewed or published does not necessitate its exclusion. We recognize that the fact-based nature of Mr. Benoit’s damages testimony made it impractical, if not impossible, to subject the methods to peer review and publication. . . .  Here, the district court did not abuse its discretion in determining that Mr. Benoit’s methodology, involving the correlation of use with value, was not unreliable.

Verdict affirmed.


Can the U.S. Government Infringe a U.S. Patent? (The U.S. Government Says it’s Impossible)

Astornet Technologies Inc. v. BAE Systems, Inc., — F.3d —- (Fed. Cir. 2015)

Although a patentee can sue the U.S. government for unlicensed use of its invention, Congress requires that those cases be filed in the Court of Federal Claims (CFC) rather than in district court. No jury trial is available, and the only remedy is a reasonable royalty.

The statute also protects companies doing work for the U.S. – providing cover by limiting the cause of action.

Whenever an invention described in and covered by a patent of the United States is used or manufactured by or for the United States without license of the owner thereof or lawful right to use or manufacture the same, the owner’s remedy shall be by action against the United States in the United States Court of Federal Claims for the recovery of his reasonable and entire compensation for such use and manufacture.

28 U.S.C. § 1498. The common interpretation of this section is – when the U.S. government is using the invention – that the only action is “against the US.” Here, the patentee sued several private companies for inducing the TSA to infringe its airport vehicular gate control patent. US Patent No. 7,639,844. On appeal, the Federal Circuit confirmed that the inducement theory does not avoid the coverture of 1498.

[T]he statute protects government contractors against infringement liability and remedies where it applies. As indicated by the statute’s use of the definite article in providing “the owner’s remedy” and its statement that the remedy is for payment of the owner’s “entire compensation,” the statute, within its ambit, makes the remedy against the United States exclusive. . . .

The claim of use of the patented invention by the United States is squarely within the statutory terms. The language is not limited to claims that are filed against the United States or its government agencies. And it would cut a substantial hole in the provision, and its intended function, to read it to be limited in that way. Doing so would expose a significant range of government contractors to direct liability (and possible injunctive remedies), namely, those accused of indirect infringement of claims directly infringed by the government. There is no justification for departing from the clear meaning of the text to produce a result that runs counter to the evident, established statutory policy.

The government brief on this point is interesting. The government argues that the U.S. government should never be seen as an “infringer” but rather as a sovereign who has agreed to offer compensation for its use of someone else’s patents. The logical result for this case would be that there cannot be any inducement liability because there was no infringement.

Similarly, this Court need not resolve appellees’ argument that because the United States does not “infringe” when it uses a patented invention without authorization, no party can be liable for inducing or contributing to that use. . . . [T]he plain language of Section 1498(a) encompasses use of a patented invention by the United States. Where a patent owner alleges such use, either directly or indirectly, Section 1498(a) applies by its express terms. There is, consequently, no need for the Court to decide whether the unauthorized use of a patented invention by the United States constitutes “direct infringement” in the sense that would be necessary to support liability for induced or contributory infringement in the absence of Section 1498(a).

Government appellate brief.

The outcome here is that the dismissal is affirmed.


  • USPTO has a new data viewer with direct data access: PatentsView
  • USPTO earlier created a pilot program for streamlining PTAB ex parte appeals.  However, the nature of those appeals limited the process only to entities with multiple appeals pending.  The Office has now launched a second track focused on small and micro entities that only have one appeal pending. LINK.
  • USPTO has created a new tool for scheduling interviews – “USPTO AIR” available here: