All posts by Jason Rantanen

About Jason Rantanen

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

How is Patent Litigation like Baseball?

By Jason Rantanen

I’m a moderately-dedicated baseball fan*, so I’ve been listening** to quite a few baseball games over the past few weeks.  And as I’ve been listening to the games, it’s struck me that in many ways, patent litigation is a lot like a baseball game well beyond the Cubs reference.  Both are a game of one against many on a field where the participants operate under asymmetric rules.  For both, too, the individual success rate in an active contest isn’t all that high.

One of the most distinguishing aspects of baseball is the challenge an individual batter faces in actually achieving a positive result at the plate.  Most of the time, players don’t actually get a hit; a batting average of over .300 is considered exceptional.  This statistic has sparked the idea that baseball is a game of failure: there are numerous references to even the greatest baseball legends being failures 7 times out of 10.  Even when other measures of success are taken into account (such as drawing a walk), it’s still the case that most of the time a batter will make an unproductive out.

But, as other folks have pointed out, a batter’s performance is not so much a question of the individual triumph (or failure) of the batter; rather, it is a contest between the batter and the pitcher.  When the batter loses, the pitcher wins.

Or more accurately, when the batter loses, the other team wins.  This is a large part of what makes baseball so fascinating to me: it’s a lone batter facing off against a whole squad of nine opponents.  One against many.  Even the best players in the world are still the underdog here: Ted Williams, the all-time leader in getting on base, did so about 48% of the time over his career.

So too in patent law.  A patent holder is only one against many.  True, like a batter, the patent holder has an advantage: the patent, with its presumption of validity.  But there is only one patent holder and there is a whole world of potential infringers.  Including many creative, knowledgeable, and smart players who can develop arguments and theories and ideas that the patent holder could never have anticipated.

The end result is that perhaps we shouldn’t be all that surprised when patent holder success rates in infringement litigation tend to look a lot like batting averages.  Added to the challenge of one patent holder against many possible infringers is the difficulty of actually winning a patent suit: there are a multitude of possible validity challenges that an alleged infringer might raise and the patent holder must win on them all – and prove infringement – in order to prevail.   As in baseball, patent infringement litigation is an asymmetric contest with different rules for the batting team and the fielding team.***

None of this is to discount the very real challenges that our patent system faces, particularly when it comes to anything other than substantive merits determinations by a court.  We don’t really have a good sense from an empirical standpoint about the nature of post-filing settlements, let alone those that occur prior to the filing of the complaint.  And none of this should suggest that patent litigation is working as optimally as it might; it’s still extremely costly, complex litigation and there’s always room for improvement in patent law.  But thinking of patent litigation as akin to a baseball game also might help to put the Allison/Lemley/Schwartz study I posted about earlier this week in some context.

*By which I mean that I watch a fair number of Giants games via MLB TV, listen to many more, and have been to a dozen games or so over the last seven years.  Of course, it’s easy being being a fan when the team you follow makes it to the World Series three times out of the past five years…

**A cost of getting rid of cable tv is that one can only listen to postseason baseball games that are currently being played.  Which is actually my preferred way to follow the game.  Except for the constant repetition of political advertisements directed at a state in which I do not live.

***There are another analogies I could draw, such as the role of money in paying for players in the game.  Of course, that didn’t work out to well for the Dodgers this year…

Also, at some point the analogy stops working; a baseball game in its entirety is not all that asymmetric.  The team that bats will get its turn in the field.  The team that fields will get its turn at bat.  The analogy works best when talking about batting success.

Guest Post by Prof. Shubha Ghosh: Are South African Yellow Canaries a Question of Law or Fact?

Guest Post by Professor Shubha Ghosh.  Prof. Ghosh is the Vilas Research Fellow & George Young Bascom Professor in Business Law at the University of Wisconsin Law School, where he is also the Associate Director of the Initiatives for Studies in Transformational Entrepreneurship (INSITE).  

I was fortunate to be able to attend oral argument in Teva v Sandoz before the Supreme Court on October 15. At issue was a highly technical issue at the intersection of civil procedure and patent law: Is the standard of appellate review for patent claim construction de novo or clearly erroneous? The Justices’ engagement with this dry, but fundamental, question extended from hypos about bus crashes and South African Yellow Canaries (don’t ask) to elusive distinctions between facts and law in construing scientific terms like “average molecular weight.”

While the discussion was lively, the big question of what is the appropriate methodology for claim construction was avoided. The Federal Circuit presumably answered that question in Phillips v. AWH, but the Supreme Court has never addressed that issue. Even a lively oral argument cannot cure the failure to address claim construction methodology. I will address that problem at the end of this post after setting forth these highlights.

(1) Justice Alito stated the issue as one of whether a patent is analogous to a statute (for which there is no deference to legislative facts) or to a private contract (for which there is deference on factfinding).  That may be just restating the question, but gives some indication on how some of the justices are approaching the matter. The question of right analogy is a bit of a red herring. Which analogy you choose depends on how you view the mix of law and fact in patent claims.

(2) Justice Roberts came out clearly, from my listening, on the side of patent as statute and emphasized the importance of uniformity (and implicitly the need to avoid forum shopping).  Go Federal Circuit!  Justice Scalia was hard to read although he did make a comparison between a patent and a deed. Also, given his opinion in Medimmune in 2007, he may come out on the side of a patent as a statute.

(3) Justice Breyer came out on the side of 52(a) and pushed back on Sandoz’ argument that the Court had already resolved the question of deference in Markman by concluding that claim construction is a matter of law. Justice Ginsburg pointed out the different context of the 7th Amendment in Markman. I think there were at least four Justices (Breyer, Ginsburg, Kagan and Kennedy) who seemed to be skeptical about special rules regarding fact finding for Markman hearings (which is one way of phrasing Sandoz’ argument). In addition, Justice Scalia’s strict constructionism would lead him to agree with Justice Breyer. Justice Sotomayor’s questions were more searching, but indicated some skepticism with Sandoz’ position.

(4) Even when there was sympathy for the Teva argument, there seemed to be some pushback on how to separate subsidiary facts from legislative facts (a big distinction for Teva and for the SG).  I did not find a completely great answer although the SG brief and argument came close to a methodology for parsing facts.

Based on this reading of the oral arguments, I would predict a victory for Teva on the 52(a) issue with Justices Breyer, Ginsburg, Kagan, Kennedy and possibly Scalia or Sotomayor voting for a reversal. The open question is how to distinguish facts and law in patent claims. This question may just be left for another day.

Looming in the background of this case is the issue of how claim construction should be done. Although Philips offers the accepted methodology (and one that seems to have reduced the reversal rate on claim construction by the Federal Circuit), the Supreme Court has neither endorsed the decision nor addressed how district courts should construe claims. But the law/fact question is intimately connected with the methodology of construction.

Treating claim construction as purely a question of law is consistent with the plain meaning approach to construing claims, as endorsed by the Philips decision. The more courts rely on sources other than the words of a claim, such as prosecution history or expert witnesses, the more fact-based claim construction becomes. It is no coincidence that Teva in its arguments emphasized the role of experts and prosecution history in construing the meaning of “average molecular weight.” A ruling in favor of Teva would suggest that claim construction relies more heavily on factors extrinsic to the language of the claims, a position different from the plain meaning approach of Philips.

Of course, the ruling in Teva will just be the start and perhaps the first step in the Supreme Court examining claim construction methodology head on.


Allison, Lemley & Schwartz on Patent Litigation

By Jason Rantanen

In 1998, John Allison and Mark Lemley published a groundbreaking empirical study of patent litigation, Empirical Evidence on the Validity of Litigated Patents.  Allison and Lemley’s focus in that article was on written, final validity decisions by either district courts or the Federal Circuit from 1989 through 1996.  The basic study design philosophy was to look at patent case outcomes; that is, what was the final outcome for patents that were litigated.  That study is still widely cited.

Working with Dave Schwartz, Allison and Lemley recently completed an updated (and much expanded) version of their 1998 study.  The results of that study are being published in several articles, but the one that links most closely with the earlier study is Understanding the Realities of Modern Patent Litigation.

Their undertaking in this project is truly quite impressive.  The authors expanded their scope to all available decisions (not just those that were published in the U.S.P.Q., as in the earlier study) for utility patent infringement suits filed in 2008 and 2009, and personally coded the relevant case information from the docket sheets, district court opinions, briefs, and Federal Circuit decisions for hundreds of cases.  As in the earlier study, the record unit they used were patent cases, with only final decisions for a given patent being counted; in other words, where there was more than one decision in a case, they reported the last final decision on the validity of the patent.  Thus, if there was a final Federal Circuit decision, it superceded a previous district court decision; if there was a remand and subsequent final decision by the district court, it superceded the Federal Circuit ruling, and so on.  Within this set of cases, Schwartz and Lemley coded information about the cases while Allison coded patent-specific information.

Study Findings

The vast majority of patent cases still settle: Out of the roughly 5,000 patent infringement suits filed in 2008 and 2009, only 290 patents went to trial.  All together, less than 10% of the patent suits filed in these years resulted in any merits decision (that is, a summary judgment ruling or trial).  The remainder settled before that point (although, the authors note, there are a small number of cases still pending that may add another 2-3% to the number of suits resulting in a merits decision).

More indefiniteness challenges: One notably change from the 1998 study was the dramatically grater number of indefiniteness challenges.  Out of the 555 summary judgment motions brought on validity issues by either the patent challenger or the patent holder, 176 decided summary judgment motions involved the issue of indefiniteness, a dramatic increase from the 1998 study.  And the authors observed a less substantial, but still noticeable, increase in summary judgment decisions based on patentable subject matter (26), a category that has likely continued to experience growth.  For context, there were 149 decided summary judgment motions on obviousness and 154 on anticipation.

Many arrows in the challenger’s quiver: In terms of the success rates on motions for summary judgment of invalidity, challengers tended to lose on individual issues: with the exception of patentable subject matter challenges, the percentage of successful summary judgment motions of invalidity was 20% or below for each individual issue (102, 103, indefiniteness, enablement, written description).  But, the overall rate of invalidation on summary judgment was 30% and the overall rate at which patent challengers successfully won on invalidity was 42%.  This is an example of what Lemley has called the “fractioning” of patent law; that is, the idea that a patentee must win every issue in a case while the accused infringer must prevail on only one issue; a particular challenge with patent law and its multiple grounds for invalidation.

Overall, patent challengers tend to win: Overall, patent holders tended not to win in cases that went to a definite merits resolution.  Overall, patentees won only about 26% of the time (164/636 definitive merits rulings).  In addition to invalidity, patent holders lost on frequently-brought motions for summary judgment of noninfringement 54% of the time (257/473) and infrequently obtained summary judgment on more rarely-brought motions for summary judgment of infringement (41/128).  Thus, although patentees had a fairly high success rate at trial (winning on 59% of patents when juries made the decision and 64% when the bench did), the 1-2 punch of summary judgment followed by trial meant that most patent cases that went to judicial resolution were resolved in favor of the patent challenger.

I’ve only covered some of the data presented in the paper and barely scratched the surface of the authors’ analysis.  If you’re interested in reading more, the article can be downloaded directly from the Texas Law Review’s website or via ssrn: 

NYU Engelberg Center on Innovation Law and Policy looking for Executive Director

By Jason Rantanen

Continuing the string of high-profile center director openings, the Engelberg Center on Innovation Law & Policy at NYU School of Law is searching for a new executive director.   From the posting:

The Engelberg Center on Innovation Law & Policy sponsors legal and interdisciplinary work in the area of innovation law and policy, including but not limited to intellectual property. It draws together legal scholars and practitioners, economists, historians, social scientists, and representatives of the innovation industries to study the legal regimes and cultural forces that influence innovation, to explore methods for optimizing the exploitation of intellectual products, and to search for new ways to facilitate the transfer of technology from creator to end-user, across fields, and among nations. The Center produces scholarship and regularly hosts speakers, conferences, workshops, and other events, around these central themes.

The Executive Director oversees all aspects of the Center, and works closely with Faculty Co-Directors Professors Barton Beebe, Rochelle Dreyfuss, Jeanne Fromer, Jason Schultz, Christopher Sprigman, and Katherine Strandburg.

Read more here:

ABA IP Scholarship Symposium: Call for Papers

By Jason Rantanen

Dennis highlighted two calls for papers below.  In addition, the American Bar Association’s Intellectual Property Section will be holding an IP scholarship symposium in late March 2015 and is seeking scholars interested in presenting their works.  The full description:

The ABA Section of Intellectual Property Law will host its second annual Intellectual Property Law Scholarship Symposium during the ABA-IPL Section’s 30th Annual Intellectual Property Law Conference, March 25-27, 2015. IP Scholars are encouraged to submit an abstract describing a current scholarship project by December 12, 2014, for a chance to present their work during the Intellectual Property Law Scholarship Symposium at the 30th Annual Intellectual Property Law Conference. The symposium seeks authors and papers for three simultaneous sessions (each of which attracted 50-70 attendees in 2014): patent/trade secret; copyright; and trademark/unfair competition.

For more details see the Call For Papers posted here: or contact one of the three Symposium co- organizers:

•        Susan Barbieri Montgomery, Northeastern University School of Law
•        Andrew Beckerman-Rodau, Suffolk University Law School
•        June M. Besek, Columbia Law School


STC.UMN v. Intel: Co-owners are necessary parties but may not be involuntarily joined

By Jason Rantanen

STC.UMN v. Intel Corp. (Fed. Cir. 2014)

Original panel: Rader (author), Dyk, Newman (dissenting)
Denial of rehearing en banc: Dyk, concurring (joined by Moore and Taranto); Newman, dissenting (joined by Lourie, O’Malley, and Wallach); O’Malley, dissenting (joined by Newman, Lourie and Wallach)

Panel opinion

Denial of rehearing en banc

The issue at the core of this appeal was whether a co-owner of a patent can be forced to join an infringement lawsuit brought by another co-owner or instead effectively block the suit by refusing to participate. The Federal Circuit is deeply split on this issue, as evidenced by both the June 2-1 panel opinion  and the 6-4 refusal to rehear the decision en banc. The panel majority held that a co-owner may not be forced to join the infringement suit and because the full court denied rehearing en banc, that holding stands unless the Court grants cert. Judge Newman and Judge O’Malley both wrote dissenting opinions.

The patent right and co-owners. Co-owners of a patent may separately exercise all the rights of a patent owner: they may make, use, offer for sale, and import the patented invention without needing the permission of the other co-owner. They may also grant a license to the patent. Importantly, they may do all of this without giving the other co-owner a dime; unlike for copyrighted works, there is no right of accounting for patents.

A consequence of this is that if there are co-owners of a patent, a prospective infringer need only obtain a license from one co-owner. This makes unity of patent rights important for any party who wishes to actually enforce those rights as against future conduct.

This rule is clear as to future conduct; the complexity comes about when dealing with past infringing activities. A patent co-owner may only grant a prospective license to the patent and a release as to its own claims for liability for past infringing conduct; it may not release infringers from liability to the other co-owner for past infringement. However, it is also blackletter law that all owners of a patent must be parties to an infringement suit for there to be standing. But not all co-owners may cooperate with the party wanting to bring the suit. Perhaps they have some contractual obligation to the accused infringer; perhaps they are even directly connected to the accused infringer. Or perhaps, as in this case, the co-owner just wants to remain “neutral.” Does the uncooperative co-owner have the right to do so?

This case can be seen as an old fight renewed. The origins of the split go back to the Federal Circuit’s 1998 decision in Ethicon v. United States Surgical, 135 F.3d 1456. The majority opinion, written by Judge Rader, dismissed the suit on the ground that a co-owner could not and did not consent to the infringement. This conclusion followed the following statement of law:

Further, as a matter of substantive patent law, all co-owners must ordinarily consent to join as plaintiffs in an infringement suit.9 Consequently, “one co-owner has the right to impede the other co-owner’s ability to sue infringers by refusing to voluntarily join in such a suit.” Schering, 104 F.3d at 345.

Footnote 9 referred to two exceptions: where the co-owner has waived its right to refuse to join the suit and where there is an exclusive licensee, the exclusive licensee may sue in the owner’s name.

Judge Newman dissented in Ethicon. While much of her dissent focused on the issue of whether an inventor on only some of the claims is a co-owner of the patent as a whole (Judge Newman would have held no), she also pointed out that Rule 19’s involuntary joinder rule should apply here.

Involuntary Joinder Does Not Apply: Drawing heavily upon Ethicon, the panel opinion in this case – also written by Judge Rader -extended the rule that co-owners of a patent may refuse to voluntarily join an infringement suit to preclude operation of Federal Rule of Civil Procedure 19(a). The relevant portion of that rule states:

(1) Required Party. A person who is subject to service of process and whose joinder will not deprive the court of subject-matter jurisdiction must be joined as a party if:

(A) in that person’s absence, the court cannot accord complete relief among existing parties; or

(B) that person claims an interest relating to the subject of the action and is so situated that disposing of the action in the person’s absence may:

(i) as a practical matter impair or impede the person’s ability to protect the interest; or

(ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest.

(2) Joinder by Court Order. If a person has not been joined as required, the court must order that the person be made a party. A person who refuses to join as a plaintiff may be made either a defendant or, in a proper case, an involuntary plaintiff.

A few things to note: First, no one appears to be disputing that Rule 19 has the force of law or that a co-owner may refuse to voluntarily participate in a patent infringement suit. Rather, the disagreement boils down to (1) whether the co-owner has a “substantive right” not to participate in a patent infringement suit and (2) if there is such a right, whether it preclude the application of Rule 19.

Unfortunately, as Judge O’Malley’s dissent points out with particular rigor, the panel majority opinion is is quite short on the basis for this “substantive right.” The basic legal move the majority makes is to rely on precedent holding that a co-owner may refuse to voluntarily participate in a patent suit as providing the basis for a substantive right not to join an infringement suit, with the policy basis that the anti-involuntary joinder rule ” protects, inter alia, a co-owner’s right not to be thrust into costly litigation where its patent is subject to potential invalidation.”

Concurring in the denial of en banc review, Judge Dyk’s opinion fleshes out the argument in more detail. In Judge Dyk’s articulation, the question is whether there is a “substantive obligation” for the co-owner of a patent to join the suit; in the absence of a “substantive obligation,” the co-owner cannot be forced to join through the operation of procedural rules, such as Rule 19. Judge Dyk thus flips the question: while he points to cases where the co-owner did not consent, and thus the suit was dismissed, he also points out the lack of patent cases imposing a “substantive obligation on a patent co-owner to consent to the assertion of an infringement claim.” This allocation of substantive rights cannot be changed by application of Rule 19.

Writing in dissent to the denial of rehearing en banc, Judge O’Malley challenged both the basis for the substantive right as well as way such a “right” interacts with Rule 19. Walking through Ethicon and the other cases cited by Judges Rader and Dyk, Judge O’Malley challenges the precedential basis for such a “right.” Nor, Judge O’Malley argues, is there any basis in statute for this “right;” indeed, it is directly contradicted by other statutory “rights,” particularly Section 154(a)(1), “the right to exclude others.” And in any event, Rule 19 is *mandatory.* “By its terms, therefore, when a person satisfies the requirements of Rule 19(a), joinder of that person is required.”

So what’s going to happen? As Hal Wegner has noted in his email newsletter, a petition for certiorari is expected in this case. And, given that the core issue is one of civil procedure, albeit intertwined with an issue of the nature of the patent right, it may be particularly appealing for the Court – especially coupled with the deep split and thoughtful opinions of two of the Federal Circuit’s sharpest thinkers.

An odd issue raised by the majority rule here: What happens when one co-owner sends out threatening letters to an accused infringer but the other does not. Can the accused infringer bring a declaratory judgment action against both co-owners? If not, must the declaratory judgment action be dismissed for lack of standing? Or is this sufficiently different from an affirmative suit for infringement as to make the “all parties required” rule not apply?

Berkeley Center for Law and Technology is looking for an Executive Director

By Jason Rantanen

About a week ago I highlighted several schools that are seeking clinical IP faculty.  Rob Merges of the Berkeley College of Law recently reached out to me to share that the Berkeley Center for Law and Technology is looking for a new Executive Director.

The BCLT is at the core of Berkeley’s extensive law and technology program: it coordinates research funding and the many course offerings in this field at Berkeley Law, organizes terrific conferences and workshops, and serves as a hub for lawyers and scholars interested in IP, privacy, and other aspects of law and technology.  The current Executive Director is Robert Barr, former Chief IP Counsel for Cisco and past Executive Dirctors have included Ray Ocampo, former General Counsel for Oracle (and Olympic luger).

From the job posting:

The Berkeley Law Center for Law & Technology (BCLT) invites applications for the position of Executive Director. This is a 100% full-time appointment.
BCLT is a research center at the University of California, Berkeley, School of Law. For the past fourteen years, BCLT has been rated by US News & World Report as one of the top intellectual property programs in the country, in part because of the high quality, high impact research conducted by its faculty and students. BCLT’s research includes intellectual property, electronic commerce, telecommunications regulation, cyberlaw, privacy and other areas of law that are affected by new information technologies.

Read more at the official posting:

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:

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:

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.


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.


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.


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.”, at p. 4.

[2] See

[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” (, 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 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:

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:

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