All posts by Jason Rantanen

About Jason Rantanen

Jason is a Law Professor at the University of Iowa College of Law.

Law Schools and Clinical IP Hiring

By Jason Rantanen

Last month, the American Bar Association’s governing body approved a requirement that all law students at ABA-accredited law schools take a minimum of six credit hours of clinical or other “experiential” coursework during law school.  Since most law schools in the United States are accredited by the ABA, this new skills requirement will have a broad reach.

At the same time, several law schools have begun to ramp up their clinical intellectual property programs.  And despite the general downturn in faculty hiring over the past few years, there is substantial activity in this particular area.  Here are some of the current openings for clinical IP faculty:

Clinical Professor, Center for Intellectual Property Research, Indiana University – Bloomington Maurer School of Law.  From the posting: “Indiana University Maurer School of Law (Bloomington) invites applications for a full-time faculty position in the school’s new intellectual property law clinic, a part of the Center for Intellectual Property Research.”

Clinical Professor and Director, Indie Film Clinic, Benjamin N. Cardozo School of Law of Yeshiva University.  From Prof. Burstein: “Cardozo seeks a director for its Indie Film Clinic, which provides pro bono legal and business services — drafting and negotiating formation, acquisition, chain of title, and sales agreements and offering advice on licensing and fair use — for emerging and independent filmmakers in New York City.  The clinic director will design and oversee all aspects of the clinic’s teaching and client-service missions, including working with partner organizations, supervising students in all aspects of business representation, and preparing and teaching a seminar component of the clinic.”  More details available here: Indie Film job description

Transactional clinician, Boston College Law School.  Boston College is searching for a transactional clinician, with IP within the search area.  More details here: BC Clinical opening

Clinical Professor, Intellectual Property and Transactional Law Clinic, University of Richmond School of Law.  From Prof. Cotropia: “The University of Richmond School of Law seeks a full-time clinical faculty member to develop, run, and teach our Intellectual Property and Transactional Law clinic, which provides non-litigation legal services to small businesses, entrepreneurs, non-profits, authors, and artists.  The focus of the clinic is business formation, business transactions, and intellectual property issues, but the Clinical Professor will play a major role in determining the clinic’s specific emphasis and operation. ”  Details here: https://richmond.csod.com/ats/careersite/JobDetails.aspx?id=418

Director, Intellectual Property and Technology Law Clinic, University of Southern California Gould School of Law.  From the posting: “Applicants will be considered for continuous appointment to the Law School’s clinical professor track.  The Director will be responsible for all aspects of running the IPTL Clinic, including: course planning and teaching; curriculum development; individual case and project work; client selection; intensive supervision and mentoring of law students in representing clients; and clinic administration. Clinical faculty members also typically teach one non-clinical course per year in addition to the clinic.”  To learn more, visit the IPTL Clinic and read the job posting.

What would you ask a District Judge?

By Jason Rantanen

On Friday, October 3, I will be moderating a panel of three district court judges at the Iowa Intellectual Property Law Association annual conference.  This gives me a great opportunity to seek the collective wisdom of the new, higher quality commenting section!  So if there’s a question that you’re dying to pose to a typical district court judge about intellectual property law, or even practice before the court generally, I’d love to hear it.

Other speakers at the conference include: Tom Irving of Finnegan on Section 101 and 112 issues, Chris McKee of Banner and Witcoff on inter partes review, Alan Datri of the Office of the Deputy Director General at WIPO on the International Design System, Jim Voegeli, Assistant Chief Intellectual Property Counsel at 3M on trademark policing programs, and John White of PLI and Berepato & White on post-AIA Sections 102 and 103 at the PTAB.

More information available here: http://www.iipla.com/announcements/2014-annual-conference-registration

Important Damages Opinion: VirnetX v. Cisco and Apple

By Jason Rantanen

VirnetX, Inc. v. Cisco Systems, Inc. (Fed. Cir. 2014)  Virnetx v Cisco
Panel: Prost (author) and Chen

Plaintiffs VirnetX and Science Applications International Corporation obtained a successful verdict against Apple based on infringement by its Facetime and VPN On Demand products.  The two accused products are programs that run on Apple’s iOS platforms (e.g.: iPhones, iPads, iMacs, MacBooks, etc.).  FaceTime is a videoconferencing platform (similar to Skype) and VPN On Demand is a feature that allows iOS users to establish secure virtual private networks.  The patents involved were Nos. 6,502,135 and 7,490,151, which were asserted with respect to VPN On Demand, and 7,418,504 and 7,921,211, which were asserted against FaceTime.   The jury found the four patents were valid and infringed, awarding damages of $368,160,000.  Apple appealed.

On appeal, the Federal Circuit upheld the jury verdict of no invalidity and infringement as to most of the ‘135 and ‘151 claims (i.e.: the ones being asserted against VPN On Demand).  However, it reversed as to a doctrine-of-equivalents finding on one claim of the ‘151 and as to claim construction of a term in the ‘504 and ‘211 patents (i.e.: the ones being asserted against Facetime), thus resulting in a remand as to those claims.

The most important legal aspect of the court’s opinion, however, relates to damages.  At trial, VirnetX’s expert offered three reasonable royalty theories: one that began with the lowest sales price of each iOS device containing the accused feature and applying a 1% royalty to that base, and two that relied on the “Nash Bargaining Solution,” a mathematical theorem proved by Nobel Laureate John Nash.

“Smallest Salable Unit”: A key issue in calculating the infringement damages for complex technological products is whether it is appropriate to use the value of the entire device in the damages calculation.  Generally speaking it is not appropriate to do so: “when claims are drawn to an individual component of a multi-component product, it is the exception, not the rule, that damages may be based upon the value of the multi-component product.”  Slip Op. at 27.  Rather, “‘[a] patentee may assess damages based on the entire market value of the accused product only where the patented feature creates the basis for customer demand or substantially creates the value of the component parts.'” Id., quoting Versata Software, Inc. v. SAP Am., Inc., 717 F.3d 1255, 1268 (Fed. Cir. 2013) (emphasis added by court).  This is due to the general requirement that damages must be actually attributable to the infringing features within a reasonable degree of precision.

However, there is a line of cases suggesting that royalties may be based off of the “smallest salable patent-practicing unit.”  It was this line of cases that the district court presumably drew upon when it issued the relevant jury instruction:

In determining a royalty base, you should not use the value of the entire apparatus or product unless either: (1) the patented feature creates the basis for the customers’ demand for the product, or the patented feature substantially creates the value of the other component parts of the product; or (2) the product in question constitutes the smallest saleable unit containing the patented feature.

On appeal, the Federal Circuit held that the “smallest salable unit” case law does not mean that “when the smallest salable unit is used as the royalty base, there is necessarily no further constraint on the selection of the base.”  Id. at 28.  Rather, “the smallest salable unit approach was intended to produce a royalty base much more closely tied to the claimed invention than the entire market value of the accused products.” Id. at 29.  Thus,

“Where the smallest salable unit is, in fact, a multi-component product containing several non-infringing features with no relation to the patented feature (as VirnetX claims it was here), the patentee must do more to estimate what portion of the value of that product is attributable to the patented technology. To hold otherwise would permit the entire market value exception to swallow the rule of apportionment.”

Id.  Since the VirnetX’s expert relied on the iOS devices as the “‘smallest salable units,’ without attempting to apportion the value attributable to the VPN On Demand and Facetime features,” the legal error was not harmless.  Put another way, VirnetX sought to have the jury use the sales price of an iPhone when calculating infringement of its patents that covered two specific components of that product, without demonstrating that those components drove customer demand for the phones.

Royalty Base * Royalty Rate Theory:  For similar reasons, the Federal Circuit reversed the district court’s ruling to allow the expert’s testimony that used the sales price of iOS devices as the royalty base.  The accused products included both hardware and software components; the expert “made no attempt to separate software from hardware, much less to separate the FaceTime software from other valuable software components.”  Slip Op. at 31.  This was particularly problematic, since in his Nash Bargaining Solution approaches, the expert did attempt to break out the patentable contributions to the devices.  More, “a patentee’s obligation to apportion damages only to the patented features does not end with the identification of the smallest salable unit if that unit still contains significant unpatented features.”  Id. at 32.  Thus, it did not matter that Apple did not sell FaceTime separately on many of its iOS products: 

There is no “necessity-based exception to the entire market value rule.” Id. at 70. On the contrary, a patentee must be reasonable (though may be approximate) when seeking to identify a patent-practicing unit, tangible or intangible, with a close relation to the patented feature.

Id.  Apple also challenged the expert’s 1% royalty rate, which relied on six allegedly comparable licenses and VirnetX’s “policy” of licensing its patents for 1-2%.  The Federal Circuit concluded that reliance on the six challenged licenses was permissible.

Nash Bargaining Solution Theories: In addition to its ruling on the “smallest salable unit” issue, the Federal Circuit also rejected the invocation of the Nash Bargaining Solution as a model for reasonable royalty damages.  As described by the court, this theorem states that “under the conditions stated in the premises, where two person bargain over a matter, there is a ‘solution’…in which ‘each bargainer get[s] the same money profit.”  (The Nash Bargaining Solution).  The Nash Bargaining Solution is invoked to support the argument that the parties would have split between themselves the incremental profit associated with the patent technology.

Here, VirnetX’s expert used the Nash Bargaining Solution to support royalty rate that allocated 45% of the profits from the Facetime feature to VirtnetX.  (For these calculations, the expert used a much lower valuation of the feature than in the first approach discussed above).

The Federal Circuit held that the Nash Bargaining Solution may not be invoked “without sufficiently establishing that the premises of the theorem actually apply to the facts of the case at hand.”  Id. at 38.  That was not done here; rather, the use of the Nash Solution was as much an inappropriate “rule of thumb” as the “25 percent rule of thumb” rejected in Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1320 (Fed. Cir. 2011):

The Nash theorem arrives at a result that follows from a certain set of premises. It itself asserts nothing about what situations in the real world fit those premises. Anyone seeking to invoke the theorem as applicable to a particular situation must establish that fit, because the 50/50 profit-split result is proven by the theorem only on those premises. [The expert] did not do so. This was an essential failing in invoking the Solution.

Slip Op. at 38-39.  Indeed, “even if an expert could identify all of the factors that would cause negotiating parties to deviate from the 50/50 baseline in a particular case, the use of this methodology would nevertheless run the significant risk of inappropriately skewing the jury’s verdict.”  Id.

Interval Licensing v. AOL: Post-Nautilus Indefiniteness

By Jason Rantanen

Interval Licensing LLC v. AOL, Inc. (Fed. Cir. 2014) Interval v AOL
Panel: Taranto and Chen (author)*

One of the most frequent criticisms of Nautilius v. Biosig is that it simply provides a  general standard (Section 112 ¶2 requires that “a patent’s claims, viewed in light of the specification and prosecution history, inform those skilled in the art about the scope of the invention with reasonable certainty” ) and fails to offer any substantive discussion of what this meant.  In this post-Nautilius opinion affirming the district court’s ruling of indefiniteness, Judge Chen provides some of that guidance when it comes to words of degree.

Background. Interval owns the two patents-in-suit, Nos. 6,034,652 and 6,788,314, that claim priority back to 1996.  These patents are directed to a system that “acquires data from a content provider, schedules the display of the content data, generates images from the content data, and then displays the images on a device.”  The system does not simply initiate images on the display device, however.  Rather, almost all of the asserted claims state that the images are displayed “in an unobtrusive manner that does not distract a user.”  The idea is that the images will occupy the peripheral attention of a person in the vicinity of the display device while not interfering with their primary interaction with the device.  The main issue on appeal was whether this “unobtrusive manner” language was indefinite.

Representative claim 1 of the ‘314 patent (with emphasis added):

1. A method for engaging the peripheral attention of a person in the vicinity of a display device, comprising the steps of:
providing one or more sets of content data to a content display system associated with the display device and located entirely in the same physical location as the display device;
providing to the content display system a set of instructions for enabling the content display system to selectively display, in an unobtrusive manner that does not distract a user of the display device or an apparatus associated with the display device from a primary interaction with the display device or apparatus, an image or images generated from a set of content data; and
auditing the display of sets of content data by the content display system;
wherein the one or more sets of content data are selected from a plurality of sets of content data, each set being provided by an associated content provider, wherein each associated content provider is located in a different physical location than at least one other content provider and each content provider provides its content data to the content display system independently of each other content provider and without the content data being aggregated at a common physical location remote from the content display system prior to being provided to the content display system, and wherein for each set the respective content provider may provide scheduling instructions tailored to the set of content data to control at least one of the duration, sequencing, and timing of the display of said image or images generated from the set of content data.

Interval sued AOL, Apple, Google, and Yahoo for infringement.  In its claim construction order, the district court held the “in an unobtrusive manner” language indefinite under the pre-Nautilius standard, thus rendering invalid most of the asserted claims.  (The parties stipulated to noninfringement of the remaining claims based on the court’s claim construction).  Interval appealed.

Indefiniteness.  Under Nautilus, “[a] claim fails to satisfy [the Section 112, 2] requirement and is thus invalid for indefiniteness if its language, when read in light of the specification and the prosecution history, ‘fail[s] to inform, with reasonable certainty, those skilled in the art about the scope of the invention.'”  Slip Op. at 10, quoting Nautilus.  However, there is more to the inquiry than just this general statement.  Here, the term at issue was a term of degree.  That, by itself, was not fatal:

We do not understand the Supreme Court to have implied in Nautilus, and we do not hold today, that terms of degree are inherently indefinite.  Claim language employing terms of degree has long been found definite where it provided enough certainty to one of skill in the art when read in the context of the invention….As the Supreme Court recognized in Nautilus, “absolute precision” in claim language is ‘unattainable.'”

Slip Op. at 11 (internal citations omitted).  But meaningful boundaries – which Judge Chen indicates must be objective – are necessary; that one might identify some standard for measuring claim scope does not mean the claims meet the § 112 requirement:

Although absolute or mathematical precision is not required, it is not enough, as some of the language in our prior cases may have suggested, to identify “some standard for measuring the scope of the phrase….The Supreme Court explained that a patent does not satisfy the definiteness requirement of § 112 merely because “a court can ascribe some meaning to a patent’s claims.”  Nautilus, 134 S. Ct. at 2130. The claims, when read in light of the specification and the prosecution history, must provide objective boundaries for those of skill in the art.

Id. at 12 (internal citations omitted).  Here, no such no such “objective boundaries” for those of skill in the art are provided in the patent:

The patents’ “unobtrusive manner” phrase is highly subjective and, on its face, provides little guidance to one of skill in the art….Although the patented invention is a system that displays content, the claim language offers no objective indication of the manner in which content images are to be displayed to the user. As the district court observed, “whether something distracts a user from his primary interaction depends on the preferences of the particular user and the circumstances under which any single user interacts with the display.”

The lack of objective boundaries in the claim language is particularly troubling in light of the patents’ command to read “the term ‘image’ . . . broadly to mean any sensory stimulus that is produced from the set of content data,” including sounds and video. ’652 patent, 6:60–64. The patents contemplate a variety of stimuli that could impact different users in different ways.  As we have explained, a term of degree fails to provide sufficient notice of its scope if it depends “on the unpredictable vagaries of any one person’s opinion.”

Id. at 13.  Nor did the written description provide the necessary guidance.  “Where, as here, we are faced with a “purely subjective” claim phrase, we must look to the written description for guidance.”  Id. But Interval’s principal argument, that “unobtrusive manner” is defined through its relationship to the “wallpaper” embodiment, thus informing those of skill in the art that “unobtrusive” has only a spatial meaning in the context of the patents, failed because the link was not clear: other portions of the specification suggest that the phrase may also be tied to the “screen saver” embodiment.  The specification is “at best muddled, leaving one unsure of whether the “unobtrusive manner” phrase has temporal dimensions as well as spatial dimensions.”  And it’s secondary argument, that the court must adopt a “narrow example” from the specification, failed because the “narrow example” from the specification was just that: an example, not a definition.  The patent drafter used the term “e.g.” (“exempli gratia”), which in English usage means “for example.”  If the drafter had instead used words of definition, such as “i.e.” (“id est” which in English usage means “that is”), it might have helped provide the necessary clarity.  Nor was one example sufficient here: “With this lone example, a skilled artisan is still left to wonder what other forms of display are unobtrusive and non-distracting. What if a displayed image takes up 20% of the screen space occupied by the primary application with which the user is interacting? Is the image unobtrusive? The specification offers no indication, thus leaving the skilled artisan to consult the “unpredictable vagaries of any one person’s opinion.”  Slip Op. at 18 (quoting Datamize).

Claim Construction/Noninfringement.  The Federal Circuit revised the claim construction of two terms in the four claims of the ‘652 patent that did not contain the “unobtrusive manner” language, vacated the district court’s judgment of noninfringement as to these claims, and remanded for further proceedings.

Nonobviousness: Not at issue here.  Are these patents obvious?  That’s a different question.  After the suit commenced, two of the defendants initiated an ex parte reexamination against the ‘652 patent and a third initiated an inter partes reexamination against the ‘314 patent.  While the examiners found the asserted claims of the patents to be patentable over the cited prior art,the PTAB reversed the decision on the ‘314 patent during the appeal in this case and held that all the claims of that patent were obvious, anticipated, or both.  The Federal Circuit opinion notes that Interval indicated that it will appeal that decision.

Guest Post: The Case Against Federalizing Trade Secrecy

Guest post by Christopher B. Seaman, Assistant Professor of Law at Washington and Lee University School of Law. 

As Dennis recently discussed, the idea of creating a private cause of action for trade secret misappropriation under federal law appears to be gaining traction. Bipartisan legislation has been introduced in both the House and the Senate, and congressional action on these bills may occur as early as this fall. A number of influential actors in the intellectual property world, including the AIPLA, former USPTO Director David Kappos, and a coalition of large manufacturing and technology firms, have publicly supported federalizing trade secrecy. And several legal academics have advocated adoption of a federal trade secrets act.[1]

In a forthcoming article in the Virginia Law Review, I contend there are several important reasons why trade secrecy should remain primarily the province of state law. First, despite claims by proponents, the adoption of a federal civil cause of action would not create greater uniformity for trade secret protection. Currently, there is widespread agreement regarding the basic principles of trade secrecy under state law.   For instance, to establish the existence of a trade secret, both the UTSA (adopted by 47 states) and the Restatement of Torts (largely followed by the remaining jurisdictions) require the trade secret holder to prove that the allege secret has value because it is not generally known or used, and that the holder of the trade secret took sufficient efforts to keep the information secret from others. Similarly, the UTSA and Restatement largely agree on what conduct qualifies as “improper means” of acquiring a trade secret, and both recognize that reverse engineering and independent invention cannot create liability for misappropriation. While there are some variations between states regarding the particular details of trade secret protection, these differences are relatively minor, as the Federal Circuit has recognized.[2]

In fact, adopting federal legislation likely would result in less uniformity by creating two parallel regimes—federal and state—with overlapping authority over trade secret claims. As noted in the recent letter signed by 31 law professors, none of the current bills pending Congress would preempt state law, thus permitting a federal cause of action to exist in parallel with existing state remedies. Notably, there are important differences between the Economic Espionage Act (“EEA”), which would be amended to create a private cause of action, and current state law, such as the EEA’s mens rea (intent) requirements and its lack of express protection for reverse engineering. Moreover because trade secret claims frequently turn on the resolution of related state law issues—such as the scope and enforceability of nondisclosure agreements, or the fiduciary duties of an employee to a current or former employer—courts would either have to borrow from existing state law or create a new body of federal law in these areas to supplement the statutory text.

Second, proponents claim that federal legislation is needed to secure access to a federal forum, which they argue is imperative to adequately protect vital trade secret information. However, a substantial number of trade secret claims are already litigated in federal courts under diversity and/or supplemental jurisdiction, with the number of reported trade secret decisions increasing at least fourfold since the late 1980s.[3] In particular, acts of misappropriation by foreign actors and entities—which feature prominently in proponents’ arguments for federalization—generally would fall within the scope of district courts’ so-called alienage jurisdiction.[4] Others claim that additional federal remedies, like the ex parte seizure provisions in the House and Senate bills, are necessary to prevent irreparable harm after a trade secret has been stolen. However, they fail to explain why existing procedures, such as temporary restraining orders,[5] preliminary injunctions,[6] and civil seizures pursuant to state law under Federal Rule of Civil Procedure 64, are inadequate to protect trade secret holders.

Third, and perhaps most significantly, the proposed federalization of trade secrecy may negatively impact innovation by undermining a key objective of patent law: the disclosure of patentable inventions. Innovators who develop a potentially patentable invention often face the dilemma of whether to incur the cost, delay, and uncertainty of seeking patent protection, or instead maintaining the invention as a trade secret. Stronger trade secret protection via federalization will likely cause more inventors to opt out of the patent system in favor of trade secrecy. This, in turn, will reduce the amount of public disclosure regarding patentable inventions that can be used by others to improve upon the invention and to practice it after the patent’s expiration. In contrast to patenting, trade secret protection is “theoretically unlimited in duration, lasting so long as the information remains a trade secret.”[7]

As an alternative to federalization, my article instead proposes a modest expansion of federal courts’ jurisdiction over state law trade secret claims that could be achieved by tweaking some existing jurisdictional rules. For instance, Congress could adopt a so-called “minimal diversity” standard in trade secret cases that would make a federal forum available whenever at least one party is a citizen of another state from the other parties. Congress also could adopt a “national contacts” standard that would allow a U.S. company to rely on a foreign misappropriator’s contacts with the United States a whole, rather than just the forum state, to establish personal jurisdiction over foreign defendants. This proposal would offer the benefits of a federal forum for more trade secret claims, while at the same time avoiding the potential drawbacks of creating a new federal private cause of action for trade secret misappropriation.

[1] David L. Almeling, Four Reasons to Enact a Federal Trade Secrets Act, 19 Fordham Intell. Prop. Media & Ent. L.J. 769, 770 (2009); Marina Lao, Federalizing Trade Secrets Law in an Information Economy, 59 Ohio St. L.J. 1633, 1653 (1998); Christopher Rebel J. Pace, The Case for a Federal Trade Secrets Act, 8 Harv. J.L. & Tech. 427, 433-34 (1995).

[2] See TianRui Grp. Co. v. U.S. Int’l Trade Comm’n, 661 F.3d 1322, 1327-28 (Fed. Cir. 2011) (noting that “trade secret law varies little from state to state”).

[3] David S. Almeling et al., A Statistical Analysis of Trade Secret Litigation in Federal Court, 45 Gonzaga L. Rev. 291, 293, 302 tbl.1 (2010).

[4] See 28 U.S.C. § 1332(a)(2) (granting the district courts original jurisdiction over civil actions between “citizen of a State and citizens or subjects of a foreign state”).

[5] See, e.g., V’Guara Inc. v. Dec, 925 F. Supp. 2d 1120 (D. Nev. 2013) (granting a TRO to prevent trade secret misappropriation).

[6] See, e.g., Core Labs v. Spectrum Tracer Servs., 532 Fed. Appx. 904 (Fed. Cir. 2013) (granting preliminary injunctive relief for a trade secret misappropriation claim).

[7] Nova Chems., Inc. v. Sekisui Plastics Co., 579 F.3d 319, 327 (3d Cir. 2009).

Federal Circuit Reminds Courts of Discretion on Fee Awards

By Jason Rantanen

Icon Health & Fitness, Inc. v. Octane Fitness, LLC (Fed. Cir. 2014) (nonprecedential) Octane Fitness Remand
Panel: Newman, Mayer, and Lourie

In Octane Fitness v. Icon the Supreme Court rejected the “objectively baseless” legal standard that the Federal Circuit had been applying in exceptional case determinations.  Procedurally, the appeal was of the district court’s ruling that this case was not exceptional under 35 U.S.C. § 285, which the Federal Circuit had affirmed under its then-authoritative standard.  Following remand by the Supreme Court, the Federal Circuit has itself now remanded the case back to the district court for further proceedings consistent with the new legal standard.

Most of the nonprecedential opinion involves a straightforward recitation of portions of the Court’s holding:

The Supreme Court abrogated both the clear and convincing evidence standard and the two-part test for objective baselessness and subjective bad faith of Brooks Furniture. Octane, 134 S. Ct. at 1757–58. The Court held that within the context of § 285 “an ‘exceptional’ case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” Id. at 1756. The Court further concluded that “[d]istrict courts may determine whether a case is ‘exceptional’ in the case-by-case exercise of their discretion, considering the totality of the circumstances.” Id. The Court explained that there is no precise rule or formula for making those determinations and noted that district courts should exercise “equitable discretion” in considering a nonexclusive list of factors that could include “‘frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence.’” Id. at 1756 n.6 (quoting Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 n.19 (1994)). The Supreme Court also observed that “a case presenting either subjective bad faith or exceptionally meritless claims may sufficiently set itself apart from mine-run cases to warrant a fee award.” Id. at 1757.

Slip Op. at 5-6. However, the Federal Circuit also took the opportunity to remind district court judges that the inquiry does not end with the exceptional case determination.  Specifically, under earlier Federal Circuit precedent, the court held that district courts can continue to apply their discretion even after a case is determined to be exceptional:

The Supreme Court’s decision in Octane did not, however, revoke the discretion of a district court to deny fee awards even in exceptional cases. Long before Brooks Furniture, we held that “an exceptional case does not require in all circumstances the award of attorney fees.” S.C. Johnson & Son, Inc. v. Carter-Wallace, Inc., 781 F.2d 198, 201 (Fed. Cir. 1986); see also Gardco Mfg., Inc. v.
Herst Lighting Co., 820 F.2d 1209, 1215 (Fed. Cir. 1987) (“After the district court determines that a case is exceptional, there remains in every case its freedom to exercise its discretion informed by the court’s familiarity with the matter in the litigation and the interest of justice.” (internal quotations omitted)). Indeed, in the companion case Highmark, the Court held that “[b]ecause § 285 commits
the determination whether a case is ‘exceptional’ to the discretion of the district court, that decision is to be reviewed on appeal for abuse of discretion” and that
district courts should have discretion in “all aspects of [the] § 285 determination.” Highmark, 134 S. Ct. at 1748–49.

Slip Op. at 6.  The court goes on to remand the whole mess back to the district court to apply its discretion under the new standard (and presumably, to also apply its discretion to the award of fees).

What I find particularly fascinating about this whole area of law is that there is a substantial line of intertwined Section 284 and 285 cases that deal with the district court’s discretion on fee awards after a finding of willful infringement or that a case is exceptional.  These cases (which often involve an analysis under the factors set out in Read Corp. v. Portec, Inc., 970 F.2d 816, 826–27 (Fed.Cir.1992) are essentially a totality of the circumstances analysis.  This produces two interesting results.  First, although I haven’t fully thought through whether two issues are sufficiently parallel, it seems that there’s a relevant body of law on totality of the circumstances analyses in this context that already exists that courts will be able to draw upon when applying the Court’s new standard for exceptional case determinations.  Second, how should the analysis play out if both the exceptional case determination and the decision to award fees (and how much those fees should be) involve essentially the same totality of the circumstances inquiry?  Does it make sense to retain a formal distinction between the exceptional case determination and the amount of the fee award?  My sense is that the answer is yes, particularly since there will inevitably be factors in the amount-of-fee determination that are not relevant in the is-the-case-exceptional determination (for example, I have seen a district judge apportion fees based on what happened with which patents, with fees being granted for attorney activity in connection with one patent but not when the activity was solely related to other patents involved in the litigation).

Guest Post by Prof. Risch: A Generation of Patent Litigation: Outcomes and Patent Quality

By Michael Risch, Professor of Law, Villanova University School of Law.

Full article available here.

Almost three years ago, I guest posted here about Patent Troll Myths, my study of the ten most litigious NPEs at that time. One of my great regrets in that study was that I did not have a control set—a randomly matched sample to compare against the studied NPEs. Thus, in that paper, I tried to compare with other people’s outcome data. In the years since much has happened. First, most of the cases I studied came to resolution. Second, I collected data on nonNPE litigation to compare with my NPE litigation. I gathered data on 1313 cases distributed over a 25 year period in roughly the same proportion as the 917 cases filed by NPEs over that time. The numbers grow substantially starting in 2004. This led to 792 nonNPE patents versus 352 NPE patents, which indicates that the NPEs asserted the same patents in more cases.

The result is my new paper, A Generation of Patent Litigation: Outcomes and Patent Quality, which is forthcoming in San Diego Law Review. This is the first of at least two papers; the next one will focus on innovation and markets. The paper is full of comparative data about number of defendants, number of patents, choice of districts, complexity of litigation, etc. I don’t have enough room here to describe all of it, so I want to point out some of the key takeaways.

First, the data confirms the conventional wisdom: that NPEs prefer to settle earlier. There were more settlements among NPEs, many fewer trials, and durations were shorter even when holding things that lengthen cases constant, like appeals, merits rulings, and stays. There was one effect that bears further mention, though: NPEs filed more cases that were transferred or consolidated, and transfer/consolidation tended to lengthen cases.

Percentage of Cases Transferred or consoldiated

Even this, however, was not enough to make NPE cases longer. First, NPE transferred cases were shorter than nonNPE transferred cases (some might argue because NPEs dropped many cases if they were transferred, but the data doesn’t show that either way). Second, NPE cases were so much shorter that the average NPE case – including all those that were transferred or consolidated—was only 20 days longer than the average nonNPE case – excluding transferred cases. Once the transferred cases were added back to the nonNPE total, the average difference grew much longer. Full regressions are presented in the paper.

Second, when adjudicated on the merits, NPE patents were invalidated about 3 times as often as nonNPE patents. However, this was only about 12% of all the patents asserted by NPEs. Furthermore, this 12% was invalidated in less than 3% of the cases. For nonNPEs, it was about 4% of the patents in about 1.8% of the cases.

Percentage of cases adjudicated on invalidity merits, NonNPE v. NPE

Percentage of cases adjudicated on invalidity merits, NonNPE v. NPE

That is, of the patents asserted by NPEs, 88% were never tested on the merits, and 97% of the cases did not involve a patent invalidation. Most studies only report invalidity rates once a patent is adjudicated (and it’s bad for NPEs, like 91% of adjudicated patents because patents are only validated after trial, and NPEs never go to trial). This study asks what about the other 97% that are never adjudicated? I suspect the answer will vary depending on who you talk to, though I give some clues based on procedural dismissals, etc. The full paper includes reexamination results as well. Interestingly, reexaminationrs were only lightly correlated with litigation results.

Third, because I had data about all of the cases involving each of the patents, as well as the outcomes in each of those cases, I was in a unique position to test something I don’t think anyone else has been able to test: what causes a patent to by invalidated? The problem with just focusing on those patents that are adjudicated is that you lose most of the data in the set – data about the very same patents asserted by the same parties against potentially similar parties. The question is why does a patent eventually get invalidated?

It turns out that there is nothing on the face of the patent that will tell you. All of the traditional patent metrics, like future citations, number of claims, continuations, etc. are not statistically significant. (It turns out that this is true even if you look at adjudicated patents). Instead, aside from unobserved features of the patent (perhaps it’s “true” quality) and technology (which will be addressed in a later paper), the factors that most correlate with invalidation in court are those that relate to whether the defendant is more likely to challenge the patent in the first place. Thus, the number of defendants, number of times the patent has been asserted, the number of reexaminations (but, interestingly, not the results of the reexaminations), etc., are most predictive of invalidation. Now, to be sure, the NPEs in the study were more likely to do these things, but once the regression corrected for these choices and other selection variables, the NPE dummy variable added zero explanatory power in the model. Invalidation was a function of suing too often, suing the wrong parties, suing too many parties, or suing on too many patents at once, regardless of NPE status.

There was one further surprising result in all of this. Backward citations, or the number of other references cited in the patent, had a significant effect on invalidity. But the sign was wrong! The more citations, the more likely a patent is invalid. This is contrary to the conventional wisdom that “gold plating” with more references can help the patent. My interpretation is that more references means that the patent was one more likely to be asserted in a high impact way (thus, reexamined, etc.), and that backward citations is merely another variable that identifies likelihood of a challenge. I do not think it is about crowded art, because forward citations do not have the same result, which you would expect in a crowded art.

That’s all I can write in a guest post, but there is much more in the paper, including examination of infringement, reexamination outcomes (and their correlation to litigation outcomes), choice of district over time, etc. This is prepublication, so comments appreciated.

Guest Post: Publishing Design Patent Applications: Time to Act

Gary L. Griswold

Mr. Griswold is a Consultant residing in Hudson, WI and was formerly President and Chief Intellectual Property Counsel for 3M Innovative Properties Company. The essay reflects the views of the author. He wishes to thank Bob Armitage and Mike Kirk for their excellent contributions to the essay.

Overview

Design patenting has come of age. According to a recent World Intellectual Property Organization (WIPO) study, the filing of design patent applications more than doubled between 2004 and 2011.[1] The stakes in design patent litigation today can be enormous. One commentator on the recent Apple-Samsung iPhone IP wars noted, “After operating in the intellectual property backwaters for years, design patents took center stage in the epic battle.”[2]

Enterprises of all sizes have come to recognize the value to be had from securing patents on their innovative designs. This also means that more businesses now need to consider whether design patents of others might impair their freedom to operate when placing a new product on the market.

Unlike conventional (“utility”) patent applications, design patent applications are not subject to the “publication” provisions that were placed in the U.S. patent law in 1999 with the enactment of the American Inventors Protection Act (AIPA). Utility patent applications, with a few exceptions, must all be published and made publicly available within 18 months after filing.[3]   However, all design patent applications are required to be kept in secret in the United States Patent and Trademark Office (USPTO) until the patent issues on the application.

Today this secrecy can have significant and negative consequences – for the design’s creator and for those who commit resources to manufacture a similar product before the issuance of the design patent. Unlike most utility patents today, the first inkling that a patent is being sought on a new product’s design may come with grant of a design patent, in other words come at the end of the examination process in the USPTO.

The growing importance of design patents suggests that this exclusion from publication with respect to design patent application publication should be rectified by Congress. This can best be done by requiring that all pending design patent applications be made available to the public by publishing these applications at 6 months after the date that they were originally filed.

Doing so would put the public on notice, shortly after the design patent application is filed, that a new product’s design may be protected. The growing prominence of design patenting, as well as other developments in the law since 1999, now make it timely for Congress to act.

Background

Two major pieces of patent legislation over the past 15 years have worked to make the U.S. patent law operate with vastly greater transparency, predictability and simplicity. The AIPA, with its requirement that most new non-design patent filings must be published at 18-months after their original filing dates was followed by a host of even more significant patent reforms. These were contained in the Leahy-Smith America Invents Act (AIA) of 2011.[4]

Key provisions of the AIA were designed to allow inventors to accurately assess whether they could secure – or had secured – a valid patent. For utility patents, access to earlier-filed patent applications comes though the AIPA’s publication provisions. Clearly, since some patents can take years to issue, holding earlier-filed patent applications in secrecy in the United States Patent and Trademark Office (USPTO) until a patent issued meant that an inventor might mistakenly invest based on the apparent validity of a patent that might then evaporate upon the issuance of a patent on a never-published, earlier-filed patent application.

The AIA also sought to assure that members of the public could more effectively participate in the patenting process. It allowed members of the public to be involved in the determination of whether a claimed invention in a patent application can be validly issued as a patent, both before the patent issues and after the patent issuance.

If action is taken promptly after a pending patent application is published, the AIA permits a member of the public to make a “pre-grant submission” of relevant prior art that the patent examiner handling the patent application must consider in deciding whether a patent should issue on the application.[5] These submissions, most notably include the earlier-sought patent applications of other inventors that have been published under the AIPA’s provisions.

In addition, the new “post-grant review” or “PGR” provisions of the AIA permit a member of the public to raise in a USPTO proceeding any issue of a patent’s validity that could be raised in court by someone accused of infringing the patent. However, these PGR provisions, like the pre-grant submission provisions, require that an individual act promptly. In this case, the PGR petition must be filed within nine months of the issue date of the patent that is being opposed.

Given the formidable requirements for requesting a PGR, most individuals making a PGR request will benefit from advance notice that a patent is about to issue. This notice, of course, is automatic when the patent application has been published under the AIPA’s provisions.

The manner in which the AIA built upon the AIPA’s provisions, both with pre-grant submissions and with post-grant review, work to benefit patent owners and their potential competitors alike. However, while these new pre-grant and post-grant provisions technically apply both to design and utility patents, the lack of any “publication provision” for design patents means that these provisions are now significantly less effective for designs.

The Rationale for Excluding Design Patents from the AIPA Publication Provisions No Longer Makes Sense

When the AIPA was enacted, there were two significant exceptions to the rule that pending applications for patent would be published and made publicly accessible. First, these provisions allowed inventors seeking only U.S. patents to opt-out of the publication requirement. This was done for inventors interested in patent protection only for the U.S. market on the assumption that at least some of them might not want their inventions publicly disclosed if they were ultimately not going to be able to receive a valid patent. However, for almost all such inventions, marketing the invention necessarily discloses to the public what the invention is and, in fact, discloses much more about the invention to the public than would normally be found in an inventor’s patent application if published.

Thus, this rationale, particularly today, makes little sense. The inventor can be “protected” from public disclosure by opting-out of the publication provisions of the AIPA only in the situation where the invention is never commercialized and essentially has no economic value, or in the limited situations where the invention can be effectively practiced as a trade secret. Consequently, it is a protection that seldom affords any economic value to the inventor.

Under the AIA, the publication of an invention in a pending patent application provides an inventor with a guarantee that no one else will be able to successfully secure a patent on the same or a similar invention based on an application filed after the inventor’s patent filing. Where someone subsequently files for a patent, the earlier-filed application limits the later-filing inventor to validly patenting only subject matter both novel and non-obvious over what was disclosed in the earlier-filed application.

Design patents were totally excluded from the 18-month publication provisions. The rationale for the design patent exclusion can be found in the legislative history of the AIPA: “Since design applications do not disclose technology, inventors do not have a particular interest in having them published.” That statement, whatever its validity then, was made before design patenting came of age and has little relevance today, as evidenced by the litigation between Apple and Samsung.

Another reason given for the design exception was that “The Hague Agreement Concerning the International Registration of Industrial Designs” was being revised and that any change to the design patent law should await the outcome of that exercise. That outcome is now clear; Congress has acted to remove the exception for design patents filed under The Hague Agreement.[6]

Yet another reason that design patents may have been left out of the mix when the publication provisions of the AIPA were being drafted was the short pendency of a design patent application. “Pendency” is the time taken by a patent examiner between filing and issuance of the design patent. With pre-grant submissions of prior art and post-grant review under the AIA now in place, that relatively shorter pendency before the Patent Office for design applications versus utility applications makes it much more important to have design applications not only published, but published quite promptly, i.e., at six months from the patent filing.[7]

The last reason Congress may have excepted design patents from publication is that some manufacturers may not have wanted the designs for new products to be prematurely disclosed, prior to market introduction.[8] Under the AIA, however, the filing of a design patent application assures that no similar designs can be patented based upon a later-filed design patent application. In addition, early publication puts competitors on notice that there is a “patent pending” on the design so that they dare not copy the design without the risk of infringing a subsequently issued design patent. Instead of a problem for manufacturers, pre-grant publication carries with it undeniably important benefits.

In addition to the “notice” function that arises from publishing a design patent application, inventors whose design patent applications publish secure yet another benefit under the AIPA. They can qualify for “provisional rights” – that is the right to collect reasonable royalty damages from anyone who uses the design during the period from the date the user received notice of the published design application until issuance of the patent on the design.[9] This again reflects the upsides of publication, much potential gain with a negligible prospect of incurring any pain.

Conclusions

The AIA increased the openness and transparency of the patent system by providing for pre-grant submissions and post- grant review. These provisions work to protect the public against patents that lack valid claims – and similarly protect the inventor from making investments in reliance on patents that could never be successfully enforced. Those aspects of the AIA are premised in part on the publication of pending patent applications.   Whatever reasons can be cited for excluding design patent applications from these important provisions of the AIPA, such reasons now have only historic significance. Today, all design patent inventors deserve equal treatment. The availability of the benefits of publishing pending design patent applications should not depend on where a design patent inventor seeks patent protection.

In sum, the agreement to allow publication of design patent applications filed by U.S. inventors under The Hague Agreement represents a significant step by the United States toward achieving the open, transparent 21st century patent system contemplated by the AIPA and AIA. The increase in design patent application activity – and the prominence of design patent enforcement efforts – renders this a perfect time to remove the exclusion from publication of those design patent applications filed only in the United States.

 

[1] According to WIPO, in 2012, “the 1.22 million industrial designs contained in applications grew by 17%—the highest growth on record.” http://www.wipo.int/export/sites/www/freepublications/en/statistics/943/wipo_pub_943_2013.pdf, at p. 4.

[2] See http://designpatentattorney.com/wp-content/uploads/2013/01/Carani-Lanslide-Article-Design-Patents-Take-Center-Stage-Jan-Feb-2013.pdf.

[3] Most utility patent applications must be published under the AIPA’s publication provisions. The time period set for publishing utility patents is 18 months after the initial patent filing date. 35 U.S.C. § 122(b).

[4] The United States adopted a so-called first-inventor-to-file system as the principle for determining what subject matter can represent “prior art” to a claimed invention. Also, a number of subjective and non-transparent aspects of the rules on patenting were removed.

[5] Because prior art can be submitted to the USPTO anonymously, members of the public and competitors of the applicant are normally comfortable in making such submissions. Since the processing time is shorter for design patent applications than that of utility patent applications, a narrower time window (e.g., before the earlier of a notice of allowance and the later of (1) the first rejection or (2) 2 months after publication) would be necessary for submitting third party submissions.

[6] The implementing legislation for the Geneva Act of The Hague Agreement has been enacted by the United States and rules for its implementation are being finalized by the USPTO. Once the rules are completed, the formal process for membership will be initiated and completed. The Common Regulations Under the 1999 [Geneva] Act and the 1960 Act of The Hague Agreement provide for publication of international applications six months after the date of the international Registration (which occurs upon receipt by WIPO of the international application). This publication of the international application will be considered a publication in the U.S. under 35 USC 390. The U.S. will not allow deferral of publication. Thus, any concerns related to the early publication of design patent applications as a policy matter have already been decided by Congress in favor of publication.

[7] As with utility patent applications, the public may well be aware of better prior art for design patent applications than the USPTO. If design patent applications were published, interested members of the public could submit prior art to the USPTO with the result that any issuing design patents would have been more thoroughly examined, benefiting both the applicant and public.

[8] Because of the speed of issuance, design applications filed only in the U.S. would need to be published 6 months after their U.S. filing date. Any concern with timing of publication relative to commercialization would seem to be handled by a 6 month period between filing and publication, which mirrors The Hague Agreement, and the relatively rapid grant (typically 15 months) of design patents.

[9] By providing that publication under The Hague Agreement will be deemed a publication under 35 USC 122(b), the implementing legislation (35 U.S.C. 390) makes such design patent applications eligible for provisional rights under 35 USC 154(d).

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

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

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

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

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

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

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

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

 

 

Alice, Artifice, and Action – and Ultramercial

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Patent Examiners and Litigation Study

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

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

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

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

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

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

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

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

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

Taming the Mongrel: Aligning Appellate Review of Claim Construction with its Evidentiary Character in Teva v. Sandoz

Guest Post by Peter. S. Menell, J. Jonas Anderson, and Arti K. Rai.  Below, they summarize their recently filed amicus brief in Teva v. Sandoz.

In its seminal Markman decision, the Supreme Court sought to usher in a more effective, transparent patent litigation regime through its ruling that “the construction of a patent, including terms of art within its claim, is exclusively within the province of the court.” Markman v. Westview Instruments, Inc. (Markman II), 517 U.S. 370, 372 (1996). Notwithstanding the constitutional right to patent jury trials, the Court ruled that claim construction would no longer be conducted by lay jurors in shrouded deliberations. Rather, based on historical analysis of the role of juries in patent cases, characterization of the nature of claim construction, and a comparative assessment of judicial institutional capabilities, the Court concluded that the Seventh Amendment right of trial by jury did not extend to claim construction and that trial judges were better equipped than juries to resolve the mixed fact/law controversies inherent in construing disputed patent claim terms.

In the aftermath of Markman II, the Federal Circuit adhered to its Markman decision, Markman v. Westview Instruments, Inc. (Markman I), 52 F.3d 967 (1995) (en banc) – that claim construction is a “purely legal issue” subject to plenary de novo review, see Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448, 1451 (Fed. Cir. 1998) (en banc) – downplaying the Supreme Court’s more nuanced description of claim construction as a “mongrel practice” merely “within the province of the court.” Markman II, 517 U.S. at 372, 378. Over nearly two decades of experience in the post-Markman era, it has become apparent that the Federal Circuit’s adherence to its Markman I plenary de novo appellate review standard has frustrated district courts’ distinctive capabilities to apprehend and resolve the factual disputes inherent in claim construction determinations, undermined the transparency of the claim construction process, discouraged detailed and transparent explanations of claim construction reasoning, and produced unusual and at times alarming levels of appellate reversals. These effects have cast doubt on the predictability of patent litigation, discouraged settlements, delayed resolution of patent disputes, and run up the overall costs of patent litigation.

The Supreme Court’s Markman II decision points toward a balanced, structurally sound, legally appropriate, hybrid standard of appellate review that would promote more accurate and efficient patent dispute resolution. Factual determinations underlying claim construction rulings should be subject to the “clearly erroneous” standard of review, while the Federal Circuit should retain de novo review over the ultimate claim construction decision. In this manner, district court judges, in their capacity as fact-finders, could better surmount the distinctive challenges posed by the technical, mixed fact/law controversies inherent in patent claim construction. A hybrid standard would encourage district judges to identify the “person of ordinary skill in the art” and, where appropriate, build fuller, more transparent records to support their claim construction decisions. These effects would promote clearer substantive analysis, more settlements following claim construction and trial, more effective appellate review, and fewer reversals and remands.

A hybrid appellate standard is unlikely to undermine the national uniformity of the patent system. In any event, concerns about national uniformity and clarity of patent claims are more appropriately addressed through improvements to the patent prosecution process, meaningful implementation of the 35 U.S.C. §112(b) claim indefiniteness standard, post-grant review and reexamination procedures, consolidation of claim construction through multi-district litigation, and adjustments to substantive claim construction jurisprudence.

Our brief filed in Teva v. Sandoz can be accessed at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457958

Peter S. Menell is the Koret Professor of Law and Director of the Berkeley Center for Law & Technology at the University of California at Berkeley School of Law (Boalt Hall), J. Jonas Anderson is an Assistant Professor of Law at American University Washington College of Law, and Arti K. Rai is the Elvin R. Latty  Professor of Law and Co-Director of the Duke Center for Innovation Policy at Duke Law School.

Teva v. Sandoz: Teva’s Opening Merits Brief

By Jason Rantanen

Teva recently filed its merits brief in Teva v. Sandoz (previous PatentlyO discussion here and here).  It’s main argument on the issue of claim construction is that claim construction involves making findings of fact and Rule 52(a)(6) of the Federal Rules of Civil Procedure states that “[f]indings of fact, whether based on oral or other evidence, must not be set aside unless clearly erroneous.”   In support of the first part of this argument, the brief points to determinations about the perspective offered by a person of ordinary skill in the art and the use of extrinsic evidence to resolve ambiguities; these, the brief argues, are inherently factual determinations for which deference should be given to the district court.

A key issue will be whether these types of judicial determinations are actually factual findings, or whether they are something else.  Certainly reviewing courts make determinations about some types of historical evidence all the time – one need only look at Justice Breyer’s discussion of legislative history and Congressional intent in Aereo for recent example – without invoking deference.  These determinations aren’t limited to “purposivists”: Justice Scalia’s originalist approach to interpreting legal statutes, for example, involves looking to how the text would have been understood at the time it was issued, something that can involve historical linguistic research.  Figuring out whether the “facts” involved in claim construction are akin to something like legislative history or the historical determinations involved in an originalist approach, or instead are the type of “facts” encompassed by Rule 52 is central to the invocation of that rule.  Much of Teva’s brief seeks to tackle this challenge, arguing that the facts involved in claim construction are exactly the kinds of facts that are encompassed by Rule 52.

Of these arguments, I found the most compelling to be the point that even as  determinations such as the knowledge of a person of ordinary skill in the art are factual and reviewed with deference in one context (such as obviousness and enablement), they are reviewed without deference in claim construction.  It will be interesting to see how Sandoz responds.

One important tension that the brief fails to resolve, however, is the key question of how deference on factfinding plays into decisions about claim construction.  If the ultimate determination of the meaning of claim terms remains one of law, does that basically invite an obviousness-like determination wherein certain subsidiary issues – such as the knowledge possessed by a PHOSITA and content of extrinsic evidence – are reviewed with deference, but the reviewing court makes the final determination, weighing each of the various pieces of information, without deference?  Or is it something else?

The brief does seem to indirectly offer a vision of how deference to factual findings should work, but it strikes me as leaving no place for the other side of the mongrel practice: the legal component.  The vision offered by the brief appears in Part IV., on pages 53-54, where Teva argues that the Federal Circuit erred by not granting deference to the district court on the “understanding of Figure 1, of SEC technology,
and of the prosecution history.”  In other words, Teva’s view of deference manifests as the lens through which the interpreter of the legal doctrine looks at not just the extrinsic evidence (the SEC technology), but also the patent document itself and the prosecution history.  If this is the correct approach to deference – that the reviewing court must give deference to the district court’s interpretation of the patent document and prosecution history – it is hard for me to see anything left that isn’t entitled to deference.  (Maybe the ordinary meaning of the claims themselves?  But that’s “the ordinary meaning to a person of skill in the art,” so that doesn’t work.).  This “lens” approach to deference seems to go too far, in my mind, and is fundamentally at odds with the way other factual findings and deference work in patent law doctrines such as nonobviousness and enablement.

The brief also challenges the various rationales for reviewing factual issues in claim construction de novo: “Markman requires it” argument, the interpretation of legal documents is a question of law argument, and the uniformity argument.  It also  argues that allowing de novo review of facts on appeal produces poorer decisions and is costly to the patent system, citing to the reversal rate data.  (Although this latter point seems to depend heavily on how deference is actually implemented – it would seem that the de novo review of certain subsidiary elements of claim construction, alone, would have only a very marginal effect on decision quality and litigation cost).

You can download a copy of the brief here: Teva’s Opening Brief

Teva v. Sandoz: Standard of Review for Claim Construction(?)

By Jason Rantanen

While many eyes will be on the Supreme Court on Monday when it releases its decision in Hobby Lobby v. Sebelius, the term is over for patent cases.  Over the past few months, the Court issued an astonishing six patent law-related opinions (almost 10% of the Court’s docket), covering ground from claim definiteness (Nautilus) to the exceptional case standard in Section 285 (Octane, Highmark) to multi-actor infringement (Limelight) to the burden of proof in noninfringement declaratory judgment actions (Medtronic) to the ever-present patentable subject matter case (Alice).  Three of these opinions (AliceHighmark, and Limelight) resolved deep intra-circuit splits at the Federal Circuit.  Altogether, this term profoundly altered the landscape of patent law jurisprudence.  Perhaps more important than the substance of the Court’s opinions was the change itself: through opinions such as Nautilius and Alice, the court made it clear to participants that the law of patents can be a dynamic, changing thing, an organicness that forward-thinking patent attorneys and agents – even more than litigators – will be forced to grapple with.

I’ll be talking more about this year’s developments in patent law at the Wisconsin State Bar Association’s annual Door County Intellectual Property Academy in a few weeks, and the Supreme Court will certainly take center stage.  Dennis will be there as well.

For now, though, the next major event in patent law jurisprudence is likely to be the Court’s opinion in Teva v. Sandoz, in which the Petitioner posed the question:

Whether a district court’s factual finding in support of its construction of a patent claim term may be reviewed de novo, as the Federal Circuit requires (and as the panel explicitly did in this case), or only for clear error, as Rule 52(a) requires.

But this case is more complex than the (relatively) simple issue of deference in appellate review of claim constructions.  At the trial court level, the district judge did not simply construe the claim in a way unfavorable to Sandoz, the accused infringer.  Rather, the district judge rejected Sandoz’s argument that the claim term “Average Molecular Weight” was indefinite and construed the claim in Teva’s favor.  On appeal the Federal Circuit reviewed the issue of claim definiteness without deference and concluded that the term was indefinite (applying it’s pre-Nautilus standard of “not amenable to construction” or “insolubly ambiguous”).  

Herein lies the sticky part: If one takes the view that questions of claim definiteness and claim construction are effectively one and the same, then this case squarely presents a question about the appropriate standard of review for claim construction. This seems intuitive: both revolve around determining claim meaning.

But treating issues of claim definiteness and construction as if they are just different sides of the same coin runs into a glitch if there is a factual component: one issue (definiteness) arguably comes with a “clear and convincing” evidentiary standard while the other (claim construction) does not.  (While there is a canon that claims should be interpreted to preserve their validity, it’s  a weak one that only operates as a last resort.  See Phillips v. AWH Corp., 415 F.3d 1303, 1327 (Fed. Cir. 2005) (“While we have acknowledged the maxim that claims should be construed to preserve their validity, we have not applied that principle broadly, and we have certainly not endorsed a regime in which validity analysis is a regular component of claim construction.”).)  If different evidentiary standards are being applied to the factual components of each, then claim definiteness and claim construction must be separate issues.

If this logic is sound and claim definiteness and construction are distinct issues, then Teva v Sandoz is really only about the standard of review on the issue of claim definiteness, not about the standard of review of claim construction.  But the observation about evidentiary standards notwithstanding, it seems counterintuitive to say that the question of whether “a patent’s claims, viewed in light of the specification and prosecution history, inform those skilled in the art about the scope of the invention with reasonable certainty” is somehow different from how those skilled in the art would interpret the claims.  And Teva’s Brief, which I’ll summarize tomorrow, treats indefiniteness and claim construction as if they were the same thing.

How, then, could the Court escape this conundrum of different evidentiary standards for what is essentially the same determination, aside from concluding both are pure issues of law, a position that would be at odds with Markman and probably Nautilus?   First, the Court could conclude that indefiniteness does not implicate the clear-and-convincing evidence standard.  The Court went halfway there in Nautilus, observing that the “presumption of validity does not alter the degree of clarity that §112, ¶2 demands from patent applicants,” but left open the question of whether subsidiary issues of definiteness trigger the clear-and-convincing evidence standard.  A second possibility would be for the Court to implement a “clear-and-convincing” evidentiary standard for issues of fact in claim construction (although how that would work in a form other than the current pro-validity canon, I have no idea).

There are also some less-than-helpful options that would further churn up the muddy bottom of patent law. It’s entirely possible that the Court could issue an opinion solely addressing the issue of whether or not the appellate court must grant deference to district court factual findings on the issue of indefiniteness, and leave unanswered the question of whether deference is appropriate in the context of claim constructions.  Or, it could avoid discussing the appropriate evidentiary standards for claim construction and indefiniteness (as it did in Nautilus), instead leaving folks to ponder whether they are the same or different.

I’ll also make the observation that after the Court granted certiorari in this case, it issued Nautilus v. Biosig, which lowered the standard for finding claims indefinite.  Even if the Court were to reverse in this case – ruling that factual issues in claim construction and claim definiteness are entitled to deference – it would seem that the inevitable result would be a remand to the Federal Circuit, and then probably to the district court, to apply the new standard.

PTO Issues Alice-based Examination Instructions

By Jason Rantanen

Today, the patent office issued new instructions (download: PTO Alice Instructions) for patent examiners to follow when examining claims for compliance with Section 101.  This practice is similar to those  it followed after the Court issued other substantive patent law opinions.  One important component of the new instructions are that they make it clear that going forward, the PTO will be applying the Mayo v. Prometheus framework to all types of inventions:

[T]he following instructions differ from prior USPTO guidance in two ways:

1) Alice Corp. establishes that the same analysis should be used for all types of judicial exceptions, whereas prior USPTO guidance applied a different analysis to claims with abstract ideas (Bilski guidance in MPEP 2106(1I)(B)) than to claims with laws of nature (Mayo guidance in MPEP 2106.01).

2) Alice Corp. also establishes that the same analysis should be used for all categories of claims (e.g., product and process claims), whereas prior guidance applied a different analysis to product claims involving abstract ideas (relying on tangibility in MPEP 2106(Il)(A)) than to process claims (Bilski guidance).

In addition, the PTO provides a bit of guidance for determining whether a claim will fail one of the two steps.  For the first step (determine whether the claim is directed to an abstract idea), the memorandum provides four examples of abstract ideas referenced in Alice:

  • Fundamental economic practices;
  • Certain methods of organizing human activities;
  • “[A]n idea of itself; and
  • Mathematical relationships/formulas

If an abstract idea is present in the claim, the examiner should proceed to the next step, determining whether any element or combination of elements in the claim  sufficient to ensure that the claim amounts to significantly more than the abstract idea itself.  Examples of limitations that may be sufficient to qualify as “significantly more” include:

  • Improvements to another technology or technical fields;
  • Improvements to the functioning of the computer itself;
  • Meaningful limitations beyond generally linking the use of an abstract idea to a particular technological environment.

Examples of limitations that are not enough to qualify as “significantly more” include:

  • Adding the words “apply it” (or an equivalent) with an abstract idea, or mere instructions to implement an abstract idea on a computer;
  • Requiring no more than a generic computer to perform generic computer functions that are well-understood, routine and conventional activities previously known to the industry.

Read the entire memorandum here:  PTO Alice Instructions. Thanks to David Taylor at SMU Law for sending me a copy of the memo.

If you thought Alice v CLS Bank lacked a useful analytic structure

wait until you read Aereo.

By Jason Rantanen

American Broadcasting Cos., Inc. v. Aereo, Inc. (2014) Download ABC v Aereo

This morning the Supreme Court issued the much-awaited opinion in American Broadcasting Cos. v. Aereo, in which a 6-3 majority concluded that Aereo’s subscription television service, which uses thousands of small antennas and other equipment housed in a warehouse, violates the petitioners’ exclusive rights to perform their copyrighted works publicly within the meaning of the Transmit Clause.  Writing for the majority, Justice Breyer eschewed formal distinctions, instead reasoning that if it’s basically the same as a duck, it’s a duck:

In other cases involving different kinds of service or technology providers, a user’s involvement in the operation of the provider’s equipment and selection of the content transmitted may well bear on whether the provider performs within the meaning of the Act.  But the many similarities between Aereo and cable companies, considered in light of Congress’ basic purposes in amending the Copyright Act, convince us that this difference is not critical here.  We conclude that Aereo is not just an equipment supplier and that Aereo “perform[s].”

Much of the critiques and discussion immediately following the release of the opnion focused on the difficulty in applying this “looks-like-cable-TV” rule to the vast ecosystem of current and emerging content access, distribution and dissemination technologies.  These criticisms mirror points made by Justice Scalia in dissent (who used the “looks-like-cable-TV” term):

III. Guilt By Resemblence

The Court’s conclusion that Aereo performs boils down to the following syllogism: (1) Congress amended the Act to overrule our decisions holding that cable systems do not perform when they retransmit over-the-air broadcasts; (2) Aereo looks a lot like a cable system; therefore (3) Aereo performs.  [] That reasoning suffers from a trio of defects

(Internal citation omitted).

While Aereo unquestionably has profound implications for the technology sector generally, for patent law purposes it offers another insight into how the Judges might approach the issue of claim construction that is currently being briefed in Teva v. SandozAereo involved a question of statutory interpretation – itself undeniably a question of law.  Here, the majority adopted a legislative history/legislative intent/legislative purpose that resulted in something akin to the “essence” of the statute being what was really important.  The dissent would have applied a much more formal textualist approach in ascertaining its scope.  It is the first of these two approaches that seems to me to be strikingly similar to how the Court has approached patent claims in recent opinions when directly confronted with substantive issues in cases such as KSR, Bilski, and Alice.  If the Court does embrace a more purposivist approach to claim construction in Teva, it would be dramatically alter the landscape of patent claims even more than its decisions on substantive doctrines such as nonobviousness and patentable subject matter.

Of course, the question presented in Teva is nominally only about the question of whether deference to district courts on issues of claim construction is appropriate, not about claim construction philosophies generally.  That said, it seems to me that it will be difficult for the Court to avoid interjecting its views on claim construction into whatever opinion it issues on deference.

The Three Faces of Prometheus: Alice and Generic Application

Today continues our mini-symposium on Alice v. CLS Bank with a guest post by Jeffrey A. Lefstin, Professor at the University of California, Hastings College of the Law.  

Alice Corp. marks the Supreme Court’s eighth subject-matter eligibility case since the 1952 Act. Without question, the most problematic aspect of the Supreme Court’s § 101 jurisprudence has been discerning the actual test for patent-eligibility. In Mayo v. Prometheus, the Court purported to establish a general framework for subject-matter eligibility: that to be patent-eligible, a claim must include an “inventive concept” beyond an underlying fundamental principle, such as a law of nature, natural phenomenon, or abstract idea. The Court’s omission of significant reference to Mayo in Association for Molecular Pathology raised some doubt as to whether Mayo defined a universal test for eligibility under § 101.  Yet Alice Corp. appears to confirm that Mayo is a universal framework for discriminating between ineligible principles and patent-eligible applications.

Mayo’s ambiguity led to the Federal Circuit’s fracture when it heard CLS Bank en banc.  Mayo suggested three possible tests for patent-eligibility, without committing definitively to any one of them:  inventive application, pre-emption, and “more than just apply it.” Justice Thomas’s opinion in Alice does not expressly commit to a single interpretation of Mayo. Yet Thomas’s presentation of Mayo, his framing of the Court’s prior precedent, and his application of Mayo to Alice’s claims all indicate that Alice endorses the last aspect of Mayo: that a claim must do more than set forth a fundamental principle and add a generic instruction to “apply it.”  If this interpretation is correct, then Alice may in the long run be more significant for fields such as biotechnology, where Mayo’s “inventive application” aspect has cast doubt on the patent-eligibility of many discovery-based inventions.

Mayo’s first test of patent-eligibility is a test for inventive, or non-obvious, application of a fundamental principle.  Drawing from Flook, where Justice Stevens wrote that “conventional and obvious” post-solution activity cannot transform an unpatentable principle into a patentable process, and Funk Brothers, where Justice Douglas held that a composition of matter was not patentable because the patentee’s application was “a simple step” once his discovery was assumed away, Justice Breyer invalidated Prometheus’s claims because the steps of the claimed method beyond the underlying natural law were merely “well-understood, routine, conventional activity already engaged in by the scientific community.” Breyer contrasted those steps with the additional steps claimed in Diamond v. Diehr, which in context were not “obvious, already in use, or purely conventional.”  The Mayo Court drew support for this test from the Court of Exchequer’s 1843 opinion in Neilson v. Harford, where the patent was said to have been sustained because the patentee implemented his newly discovered principle “in an inventive way.”*  This view of Mayo – that obvious applications of fundamental principles are not patent-eligible – was the one taken by the Northern District of California in the Ariosa v. Sequenom litigation, where Judge Ilston invalidated Sequenom’s claims largely because once Sequenom’s discovery of cell-free fetal DNA in the maternal bloodstream was assumed to be known, the application in the form of a test for fetal abnormalities required only routine and well-known methods of DNA amplification.

The second test of eligibility suggested by Mayo is a test of pre-emption. The Court explained that subject-matter exclusions were grounded in pre-emption, echoing Benson’s concern that patents should not monopolize “the basic tools of scientific and technological work.”  Mayo seemed to state that pre-emption was analytically secondary to categorical exclusion:  the concern that Prometheus’s claims would tie up too much future use of the underlying natural laws “simply reinforces our conclusion” that the claimed processes were not patent-eligible.   Yet Breyer’s opinion intertwined pre-emption with inventive application as a criterion for patent-eligibility:  Diehr was described as a case where the patentee had not sought to pre-empt the use of the Arrhenius equation. While the patentee in Flook had failed to “limit the claim to a particular application,” the supposedly unconventional steps in Neilson had “confined the claims to a particular, useful application of the principle.” This interpretation of Mayo was followed by the majority of the Federal Circuit when it heard CLS Bank en banc. Both Judge Rader and Judge Lourie rejected the notion that Mayo’s “inventive concept” demanded “inventiveness” in the sense of a non-obvious application. And while they disagreed on the proper framework, both Judge Lourie and Judge Rader founded their analyses on the question of whether Alice’s claims would pre-empt every practical application of the underlying abstract idea.

But Mayo suggests a third test beyond inventive application or pre-emption: that a claim must represent more than a mere direction to apply a fundamental principle. According to Justice Breyer, one could not transform a law of nature into a patent-eligible application by simply disclosing the law of  nature, and adding the words “apply it;” Einstein or Archimedes, for example, could not have patented their famous discoveries by merely appending an instruction to apply them. This aspect of Mayo has received the least attention in subsequent cases and commentary. And yet in Justice Thomas’s opinion in Alice, it is this aspect of Mayo that becomes the core of the doctrine.

In Alice’s framework, once it has been determined that a claim is drawn to an abstract idea, ‘step two’ of the Mayo test is to determine whether it contains an “inventive concept” sufficient to transform the claim into a patent-eligible application. But in contrast to Flook and Mayo, “inventive concept” in Alice bears little trace of “inventiveness.” Justice Thomas does describe the computer implementation in Alice as “conventional.” But nowhere does he label it non-inventive, and the word obvious is conspicuously lacking from the opinion. And while Alice hardly addresses the Federal Circuit’s opinions at all, it may be significant that Thomas never contradicts Judge Lourie’s and Judge Rader’s rejection of “inventiveness” as an aspect of “inventive concept” in their CLS Bank opinions.
The contrast between Alice and Mayo is most apparent in their treatment of Diehr.  In Mayo, the claims in Diehr represented an inventive application of the Arrhenius equation, and were not “obvious, already in use, or purely conventional.” But in Alice, the claims in Diehr were sustained not because they were non-obvious, but because “they improved an existing technological process,” and achieved a result the industry had not been able to obtain. Likewise, in Mayo, the failing of the Flook claims was that the steps of the claim were well-known, conventional or obvious; in Alice, while Thomas notes that the Flook implementation was purely conventional, Flook primarily stands for the proposition that limitation to a particular technological environment does not render an abstract idea patent eligible.

As for pre-emption, which intertwined so closely with inventive application in Mayo, is hardly present for ‘Mayo step two’ in Alice. Again the characterization of precedent is telling: in Mayo, the claim in Benson was vulnerable because it was “overly broad.”  In Alice, Benson requires a “new and useful” –  but not inventive – application of an idea for patent eligibility, but the lesson of Benson is that simply implementing a principle on a computer is not a patentable application.

For Justice Thomas, the ‘step two’ inquiry involves neither inventiveness nor pre-emption, but revolves around Mayo’s proscription against “more than just apply it.” Alice follows Flook and Mayo in holding that “conventional” activity cannot transform a principle into a patent-eligible application, but in Alice “conventional” seems to connote generic more than it connotes obvious.  Thus Thomas introduces ‘step two,’ the search for an inventive concept, by invoking the third aspect of Mayo: patent-eligible application requires more than a statement of the abstract ideas plus the words ‘apply it.’  And while Thomas notes that the measuring steps in Mayo were “well known in the art,” he again quotes the ‘more than apply it’ language from Mayo to establish that those steps adding nothing of significance to the underlying natural law.

Most significantly for the Alice analysis, Thomas ends his summary of Mayo by quoting language that played little role in Mayo itself: it was not that conventional steps cannot supply an ‘inventive concept,’ but “conventional steps, specified at a high level of generality” (emphasis added) could not supply an inventive concept. For it is genericness, not lack of invention or pre-emption, that dominates the remainder of Thomas’s opinion.  His summary of the Court’s § 101 jurisprudence touches upon the notion of pre-emption, but emphasizes above all else the requirement of “more than generic” application:

These cases demonstrate that the mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention. Stating an abstract idea “while adding the words ‘apply it’” is not enough for patent eligibility. Nor is limiting the use of an abstract idea “‘to a particular technological environment.’ ” Stating an abstract idea while adding the words “apply it with a computer” simply combines those two steps, with the same deficient result. Thus, if a patent’s recitation of a computer amounts to a mere instruction to “implemen[t]” an abstract idea “on . . . a computer,” that addition cannot impart patent eligibility. This conclusion accords with the pre- emption concern that undergirds our §101 jurisprudence. Given the ubiquity of computers, wholly generic computer implementation is not generally the sort of “additional featur[e]” that provides any “practical assurance that the process is more than a drafting effort designed to monopolize the [abstract idea] itself.”

(citations omitted).

Similarly, Alice’s application of the test to the claims in suit emphasizes “more than apply it” and generic application;  the question for Justice Thomas “is whether the claims here do more than simply instruct the practitioner to implement the abstract idea of intermediated settlement on a generic computer.” Thomas does describe the functions performed by the computer as “routine, conventional, and well-known in the field,” but his characterization serves to support the conclusion that the claimed steps do nothing more than define generic computer implementation. And taken as a whole, the claims at issue fail not because they lack inventiveness, nor because they reach too broadly, but because they amount to “’nothing significantly more’ than an instruction to apply the abstract idea of intermediated settlement using some unspecified, generic computer.

So Alice may fail to provide clear boundaries for the eligibility of computer-implemented inventions. But it could clarify something more important.  As I have described in a recent paper, the actual test for patent-eligibility in cases like Neilson v. Harford, and in American jurisprudence for the next century, was a requirement that the patentee claim a specific mode of application of a fundamental principle, rather than a generic claim to the principle as applied. If Alice does indeed endorse the third aspect of Mayo, then the test for patent-eligibility is not a question of non-obvious application, nor a question of pre-emption, but a question of whether the claim does significantly more than state a fundamental principle coupled with an instruction to “apply it.” Embracing that aspect of Mayo could signal a return to the historical standard of patent-eligibility.

*As I discussed in a previous post, the Court’s reliance on Neilson in Mayo and Flook was entirely misplaced.  The patent in Neilson was sustained not because the patentee’s implementation was inventive, but precisely because it was entirely conventional and well-known in the art.

The Supreme Court’s Alice Decision on Patent Eligibility of Computer-Implemented Inventions: Finding an Oasis In the Desert

Guest Post by Donald S Chisum, Director of the Chisum Patent Academy and author of Chisum on Patents.

In Alice (June 19, 2014), the Supreme Court held that the two step framework for determining the Section 101 patent-eligibility of a patent claim, which the Court previously articulated in the 2012 Mayo decision on the patentability of a diagnostic method, applied to computer-implemented inventions.  Thus, one determines: (1) does the claim recite an ineligible concept (natural phenomena, natural law or abstract idea), and (2) if so, does the claim recite sufficient additional elements to make the claim one to an application of the concept, rather than to the concept itself?

On Mayo step one, Alice held that the claims at issue were to an abstract idea, an “intermediated settlement.”  On step two, it held that “merely requiring generic computer implementation” did not “transform that abstract idea into a patent-eligible invention.”  Thus, claims to a method, a computer system configured to carry out the method, and a computer-readable medium containing program code for performing the method all fell invalid under Section 101.

I considered but then reconsidered entitling this comment “Alice in Wonderland.”  For, indeed, the Supreme Court’s chain of decisions creating a judicial exception to the statute defining patent eligible subject matter (35 U.S.C. § 101) and holding unpatentable claims to algorithms and abstract ideas, stretching from Benson in 1972 to Alice in 2014, is wondrous.  But I will not here review the “big picture,” including the fundamental flaws in the chain; I and others have already done that.

Instead, my focus is on the “small picture,” the every day problem: does the Alice opinion provide some meaningful guidance to fill the near void left by the Court in its prior Mayo and Bilski decisions?  Those decisions provided no definition of an “abstract idea” (or “law of nature”) and little direction on, precisely, how much “more” was required for the transformation.

The Court’s fuzz left stranded in a desert of uncertainty an array of feet-on-the-ground decision makers, from inventors to rights owners to patent professionals drafting and amending claims to examiners to PTO officials to licensing negotiators to litigators to district court judges to federal circuit judges to treatise authors.

Positive news.  At least on first analysis of Alice, I find some additional guidance, perhaps enough to lead us toward an oasis in the desert.

In particular, the Alice opinion supports the following proposition:  a novel and unobvious solution to a technical problem is not an “abstract idea,” and a claim drawn to such a solution, even if broad, is not subject to the Mayo framework (though, of course, it is subject to scrutiny for disclosure support).

The Alice opinion does not state the proposition directly.  The Court expressly indicated that it did not need to “delimit the precise contours of the `abstract ideas’ category” because the concept at issue was so similar to that in Bilski.  But the proposition is fairly inferred from the Court’s rejection of the patent owner’s argument that the intermediated settlement concept in its claims was not an “abstract idea” within the implicit exception to Section 101 and from its novel description of the prior Diehr decision.

Based on prior Supreme Court cases and language in Mayo, the patent owner argued that the definition of “abstract ideas” for Section 101 was: “preexisting, fundamental truths that exist in principle apart from any human action.”  The Court disagreed because that definition did not fit Bilski, which held that risk hedging was an abstract idea. Hedging was a “longstanding commercial practice” and a “method of organizing human activity,” but not a “truth” about the natural world that “always existed.”  Hedging and the similar concept of intermediated settlement were abstract ideas because they were “fundamental economic practices.”

Thus, concepts that constitute abstracts ideas fall into two categories.  First are mathematical equations, mathematical formulae and algorithms (at least ones of a mathematical nature, and, I would emphasize, not all algorithms are mathematical or numerical).  Second are methods of “organizing human activity,” at least if they constitute a fundamental economic practice “long prevalent in commerce.”

What’s left out of the “abstract idea” category?  The Court in Alice declined to say explicitly, but there are hints in its discussion of the 1981 Diehr decision in connection with the second Mayo step.  The Court noted that Diehr had held a computer-implemented process for curing rubber was patent eligible, not because it involved a computer but rather because “it used that equation in a process designed to solve a technological problem in `conventional industry practice.”  It reiterated: “the claims in Diehr were patent eligible because they improved an existing technological process, not because they were implemented on a computer.”  In contrast, the claims in Alice did not “improve the functioning of the computer itself” or “effect an improvement in any other technology or technical field.”

The Court had discussed and distinguished the Diehr case before, in both Bilski and Mayo, but never on the basis that Diehr entailed a technological improvement.  Thus, the Alice discussion of Diehr in terms of a solution to a technical problem is important new ground.

Hence there are strong grounds for the proposition that a patent claim reaches a safe harbor from Section 101 abstract idea scrutiny, including the Mayo second question for an “inventive concept,” if the claimant establishes that the claim is directed to a solution of a technological problem.  This definition of abstract idea as excluding applied technology accommodates the case law treating pure mathematical statements, economics and finance, and schemes of a non-technical character (“methods of organizing human activity”) as “abstract ideas” that must be include additional elements to achieve patent eligibility (Mayo step two).

Is this shift in focus to “technological” an oasis of greater clarity?  No doubt there will be arguments about what is technological and what is not.  But there are at least three advantages to the verbal change.  First, technology is the historic core of the patent system, especially given  the Constitutional phrase “useful Arts,” which is 18th century terminology for “technology” in 21st century terminology.  Thus, an inquiry about the technological is much less of an alien intruder than prior Supreme Court language about the abstract idea exception to Section 101.  Second, evaluating the Section 101 abstract idea prohibition in terms of technological versus non-technological conforms to the language Congress used in Section 18 of the America Invents Act in setting up special PTO review of business method patents.  Finally, a technology test aligns the United States standard with the language used in Europe and elsewhere to address exceptions to patent eligible subject matter.

SCOTUSblog symposium on Alice v. CLS Bank

By Jason Rantanen

SCOTUSblog is publishing a series of essays on Alice v. CLS Bank.  Current participants include:

David KapposSupreme Court leaves patent protection for software innovation intact

From the perspective of the parties involved, this week’s Alice Corp. v. CLS Bank decision held that a process that lessens settlement risk for trades of financial instruments is too abstract for patenting. However, to the leagues of interested onlookers holding their collective breath across our country and indeed around the world, the Supreme Court’s unanimous ruling subtly conveyed a much more significant judgment:  software, as a class, is every bit as worthy of patent protection as any other medium in which innovation can be practiced.

Robert MergesGo ask Alice — what can you patent after Alice v. CLS Bank?

Those of us who sweat in the clammy gymnasia of patent law have been waiting – with a mix of excitement, dread, and cynical disregard – for the Alice v. CLS Bank decision.  The idea was, when the Court took the case, that we would finally have an answer to the question whether software can be patented under U.S. law. To say we did not get an answer is to miss the depth of the non-answer we did get. Reading the opinion reminds me of a famous passage in The Hitchhiker’s Guide to the Galaxy.  Acolytes wait at the feet of a giant supercomputer, which 7.5 million years before had been asked “What is the meaning of life?”  Finally, after eons of waiting, the computer spoke.  Its answer was: “42.”  The acolytes went forth, armed with this non-answer.  And life went on.  So it is with us, in the patent field. We have met our “42,” and its name is Alice.  Now life must go on.

Justin NelsonFor patent litigants, Court affirms status quo

The reaction from patent litigants to the Supreme Court’s decision yesterday in Alice Corp. v. CLS Bank was one big shrug.  The decision was exactly as expected.  While the Court made clear that abstract ideas remain unpatentable, it “tread[ed] carefully” in construing patentability.  Indeed, the most notable part of the decision was that it shied away from any grand pronouncements.  Rather, it relied heavily on prior cases such as Bilski v. Kappos, Mayo Collaborative Services v. Prometheus Laboratories, Inc., and Association for Molecular Pathology v. Myriad Genetics. As the Court correctly concluded, “[i]t follows from our prior cases, and Bilski in particular, that the claims at issue here are directed to an abstract idea.”  Yet it went no further than necessary: “[W]e need not labor to delimit the precise contours of the ‘abstract ideas’ category in this case.  It is enough to recognize that there is no meaningful distinction between the concept of risk hedging in Bilski and the concept of intermediated settlement at issue here.”

Sandra Park - The Supreme Court as promoter of progress

Yesterday’s Supreme Court decision in Alice Corp. v. CLS Bank International revisits a fundamental question about our patent system:  which patents promote the progress of science?

There’s also a detailed analysis and commentary by John Duffy that begins:

Although Alice Corp. v. CLS Bank was identified by this website and many other commentators as a major case on patent law, the Supreme Court’s unanimous resolution of the case does little to change, or even to clarify, pre-existing law.  The case becomes the fourth Supreme Court decision since 2010 to hold patent claims invalid based on judicial exceptions to patentability. While Alice Corp. is only an incremental addition, the continuation of that larger trend is hugely important because, as the Court itself acknowledges, the judge-made doctrine in this area has the potential to swallow all of patent law.

Guest Post by Prof. McKenna: The Implications of Blackhorse v. Pro-Football, Inc.

Professor Mark P. McKenna of The University of Notre Dame Law School is one of the leading scholars of trademark law.  Below, he provides his thoughts on the legal consequences of the TTAB’s decision in Blackhorse v. Pro-Football, Inc.

The Trademark Trial and Appeal Board (TTAB) just wrote another chapter in the long-running battle over the registration of the Washington Redskins trademarks. In Blackhorse v. Pro-Football, Inc., the Board cancelled 6 federal registrations of various Redskins marks (including stylized versions and logos – though not the one currently used by the team) on the ground they were disparaging to a significant proportion of Native Americans at the time of registration. As most readers of this blog likely know, this is the second time the TTAB has ordered cancellation of the marks – in 1999, after seven years of litigation, the Board cancelled the marks, finding them scandalous and disparaging. That ruling did not stand up on appeal, and the petitioners in this case are different. (Significantly, unlike the petitioner in Harjo, the petitioners’ claims here were not barred by laches.)

There are many things one could say about this ruling – about its societal significance, about the legal standard the TTAB applied (especially the focus on a “substantial composite” of the affected group), or about the likelihood that the decision with withstand appellate review. I am going to focus here on the legal consequences of the decision, assuming it stands. (The PTO will not actually remove the marks from the register until the team has exhausted its appeals.) Contrary to some of the press reports on the decision, cancellation does not entail loss of exclusivity of the marks. In particular it does not mean that the marks are not enforceable under federal law. It simply means that the marks will no longer be federally registered and therefore will not receive any of the benefits of registration.

The team will lose the benefits of the statutory presumption of validity and incontestability. And it will lose the benefit of nationwide constructive use. For many other parties, limiting protection to the geographic areas of actual use would be a significant consequence, but here that is unlikely to be important since the team very likely has nationwide rights by virtue of its actual use. Of perhaps greatest economic consequence, the government will no longer seize imported goods bearing any of the cancelled marks, since only goods bearing registered trademarks are subject to forfeiture. 19 U.S.C. § 1526. And none of the civil or criminal counterfeiting provisions will apply, as counterfeits are by definition making unauthorized use of registered marks. 15 U.S.C. § 1116; 18 U.S.C. § 2320.

These consequences are not meaningless, of course, but they are not nearly as significant as some have made them out to be. ESPN’s report, for example, claimed that the decision stripped the team of all federal rights, and that, if the decision stands, “any fan can produce and sell Washington Redskins gear without having to pay the league or the team for royalties and wouldn’t be in violation of any law for doing so.” It’s obviously not news that press reports mischaracterize legal decisions, but these kinds of statements pretty egregiously overstate things, in my view. That would be true even if there were no federal enforcement of the cancelled marks, since the logos themselves were not cancelled and any merchandise bearing both the word marks and the logos is almost certainly subject to enforcement. But it’s not even true that there will be no federal enforcement of the cancelled marks.

Of course, all of this depends on the assumption that courts do not interpret §2(a) to impose a limitation on one’s ability to enforce rights in an unregistered mark under §43(a). I would have thought that assumption was pretty uncontroversial, but some discussions of the new decision suggest that not all my colleagues in the academy share my view. One recent district court decision (Renna v. County of Union, N.J., 2014 WL 2435775, No. 2:11–3328 (D.N.J. May 29, 2014)) is on their side – that case held that marks barred from registration (in that case, under § 2(b)) could not be enforced under §43(a) either. (See here for Rebecca Tushnet’s analysis of the case). If that conclusion were generalizable, then today’s decision on the Redskins marks would have much more significant effect, since it would leave the football team with only state law rights, and those rights might be uncertain given courts’ general tendency to interpret state law as identical to federal law. But I think people are reading far too much into a single district court case, and that in any case Renna is wrong to conflate registrability under § 2 with protectability under §43(a).

Section 2 of the Lanham Act begins “No trademark by which the goods of the applicant may be distinguished from the goods of others shall be refused registration on the principal register on account of its nature unless …”. Thus, to be registrable, the claimed designation must (1) be a trademark; and (2) not run afoul of any of the limitations in subsections (a)-(f). That is to say that only a subset of trademarks qualify for registration, and the subsections of § 2 identify the boundaries of that subset. When the Lanham Act was originally drafted, it was fair to say that the limitations on registrability demarcated the universe of trademarks that warranted federal protection. When the Lanham Act was passed, it was clear that only federally registered marks were enforceable under federal law; unregistered marks could be enforced, if at all, only through a common law unfair competition claim. Thus, the unfair competition cases primarily involved unregistrable marks. As I explained here, those common law unfair competition claims were, post-Erie, state law claims. But federal courts were (probably unjustifiably) concerned that this would give rise to a lack of uniformity in the law, and beginning around the mid-1960’s they began to interpret §43(a) to embrace a cause of action for infringement of unregistered marks. In other words, they expanded the federal statute to embrace the claims that previously would have been relegated to the common law.

With this very brief history in mind, one can see just how radical is the claim that the registration bars apply in § 43(a) cases – the claim fully conflates registered and unregistered marks, applying all of the same limitations to unregistered marks despite the fact that § 43(a) was expanded specifically for the purpose of providing a federal cause of action for unregistrable marks. That would be a truly remarkable departure, and one that draws no support from the text of § 43(a), which makes actionable use of “any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which … is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person.” Note that nothing in the section requires that the confusion result from use of a designation that meets the registrability requirements. There’s a reason for that.

It is therefore wrong, in my view, to say that the § 2 bars apply in § 43(a) cases, at least categorically. Nevertheless, one can understand why a court might be attracted to the argument that bars to registrability should be understood as bars to protection, full stop. After all, courts, with the active encouragement of trademark plaintiffs, have spent the last several decades eviscerating the substantive differences between trademark infringement and unfair competition. Indeed, the project has been so successful that courts and commentators alike now routinely say that registration status is largely irrelevant for purposes of enforcement. Such a sweeping claim is, of course, somewhat overstated, since registration obviously can affect priority and the geographic scope of rights in addition to the statutory presumptions and incontestability. Nevertheless, for most purposes courts have treated registered and unregistered marks the same, and the Supreme Court said in Two Pesos that “it is common ground that § 43(a) protects qualifying unregistered trademarks and that the general principles qualifying a mark for registration under § 2 of the Lanham Act are for the most part applicable in determining whether an unregistered mark is entitled to protection under § 43(a).”

I think courts that say this mean to say that the distinctiveness and functionality rules are the same for registered and unregistered marks (save for the question of which party bears the burden), and that infringement is determined the same way in either context. In this respect it is telling that these kinds of statements nearly always precede general statements of legal principles and that they rarely, if ever, accompany any real statutory analysis. The reason is that the registrability requirements and fundamental questions of trademark validity are, and have long been, understood to be distinct issues.  It is not simply that trademark rights arise through use such that one can develop trademark rights without having ever applied for a trademark registration. It is that the Lanham Act imposes requirements for registrability that simply do not apply to unregistered marks. (Some of the registrability requirements – non-genericness, for example – go to validity, and those obviously do apply in §43(a) cases, but not because they are registration requirements.)

It is, of course, possible that courts would import into § 43(a) cases some particular bars to registration for policy reasons, just as common law courts might have had policy reasons to refuse to provide unfair competition remedies in particular cases. And perhaps there are good policy reasons for courts to deny protection to disparaging marks in any context. But it is worth noting that nothing has precluded parties from making these policy arguments before, and hardly anyone has done so. We have not, for example, seen defendants disputing the validity of unregistered marks on the ground that they are primarily geographically deceptively misdescriptive. That could be because it has just taken a long time for litigants to discover these arguments, given how much § 43(a) has changed over time. But I think it’s much more likely that most people have assumed that arguments about registrability have no purchase in the context of enforcement of an unregistered mark.

Finally, even if one thought the § 2 bars ought to apply generally in § 43(a) cases, we should be reluctant to import the § 2(a) bars specifically, since barring enforcement of scandalous, immoral, or disparaging marks raises even more serious constitutional questions than does refusing registration. Section 2(a) has occasionally been challenged on the ground that it denies government benefits on the basis of the content of speech. Courts have rejected that argument primarily on the ground that § 2 only precludes registration and does not proscribe conduct or prevent use of a mark. That reasoning has always been suspect to me, but it is significantly more questionable if it is to be understood to mean that the restrictions are constitutional simply because they do not forbid use rather than because they leave the user with the ability to rely on use-based rights. If we can expect courts to start applying the § 2(a) bars in the context of unregistered marks, we can expect to see this issue litigated much more pointedly.

Mark P. McKenna is the Associate Dean for Faculty Development, Professor of Law, and Notre Dame Presidential Fellow at the Notre Dame Law School.