A Constitutional Challenge to Inter Partes Review

by Dennis Crouch

The America Invents Act (AIA) created a set of new administrative review procedures (IPR, PGR, CPR) that allow third-parties to challenge already issued patents.  This new approach takes a power that was previously held by courts and gives it instead to the USPTO. From a separation-of-powers perspective, the new law shifts power from the Article III courts in favor of the Article I executive-controlled agency.

After losing on the merits of the inter partes review brought by HP, patentee MCM has now appealed to the Federal Circuit — asking the court to find the inter partes review statute unconstitutional for violation of the Seventh Amendment right to a jury trial.

Question Presented:

Whether actions to cancel or revoke a patent must be tried in Article III Courts with access to a jury under the Seventh Amendment to the United States Constitution.

Ned Heller, author of the brief, reaches back to Marbury v. Madison, 5 U.S. 137 (1803), for the standard and accepted principle that “the question whether a property right may be revoked lies within the exclusive province of the Courts.” In 1893 the court explained further that:

The only authority competent to set a patent aside, or to annul it, or to correct it for any reason whatever, is vested in the courts of the United States, and not in the department which issued the patent.

McCormick Harvesting Machine Co. v. Aultman, 169 U.S. 606 (1898).

The largest hurdle for MCM is that the Federal Circuit decided the parallel issue with regard to reexaminations in Patlex Corp. v. Mossinghoff, 758 F.2d 594 (Fed. Cir. 1985). In Patlex, the Federal Circuit found that rexaminations did not violate Seventh Amendment.  In response, MCM argues (1) Patlex is wrongly decided; and (2) Patlex was effectively overruled by the Supreme Court in Stern v. Marshall, 564 U.S. 2 (2011) (although bankruptcy judge had statutory authority, it lacked Constitutional authority).


  • Read the BriefMCMBrief
  • In the Alternative: MCM also argues its case on the merits of obviousness and that the case is time–barred under 35 U.S.C. 315(b) since one of HP’s affiliates (Pandigital) was served with an infringement complaint more than one year before the IPR request was filed. Thus, it is possible that the court will rule in MCM’s favor without reaching the Constitutional question.
  • The patent at issue is US Patent No. 7,162,549 that broadly claims a controller chip for interfacing with a flash memory card used in many devices, such as digital photo frames.  More than 100 companies have been sued for infringement over the past six years, but no court has yet found the claims invalid.


Obviousness: Cannot modify Prior Art a way that Disrupts the Reference’s Contribution to the Art

by Dennis Crouch

Plas-Pak Indus v Sulzer Mixpac (Fed. Cir. 2015) (non-precedential)

In 2011, Plas-Pak requested an inter partes reexamination of Sulzer’s paint-mixing Patent No. 7,815,384.  After considering the prior art, the examiner refused to issue the proposed obviousness rejection and that determination was affirmed by the PTAB. The proposed obviousness rejection involved two prior patents: Fukuta and Morris (inter alia).  Although the two references taught all of the Sulzer claim limitations the USPTO found that it would be improper to combine the references in an obviousness rejection.  In particular, the PTO found that the central feature of Fukuta involved the prevention of back-flow and the proposed combination with Morris would eliminate that core feature.  That required “substantial reconstruction” that so greatly impacts the “principle of operation” led to the Board’s conclusion that the combination would not have been obvious to one of ordinary skill in the art.

In most cases USPTO does not appeal an adverse PTAB decision. Here, however, the third party requester has appellate standing.

Under the rules of administrative procedure, factual findings made by the PTAB are reviewed by the Federal Circuit for “substantial evidence.” Under that low standard, the Federal Circuit will affirm factual conclusions so long as the evidence is sufficient such that “a reasonable mind might accept” that the conclusion is supported by the evidence.  Legal conclusions, on the other hand, are reviewed de novo by the Federal Circuit.

As with many areas of patent law, obviousness involves mixed questions of law and fact. On point here, questions of fact include (1) what a reference teaches; and (2) whether a proposed combination of references would impact a reference’s “principle of operation” while the ultimate conclusion as to whether an invention is obvious is seen as a question of law.  Of course another fundamental question of law is interpretation of the statute and precedent.

At first cut, the Federal Circuit appeared to follow these rules of review and gave deference to the PTAB’s principle of operation ruling. And, as a consequence affirmed the refusal to reject.

I see some error in the Federal Circuit’s approach.  In particular, the challenger’s argument here was not simply that the PTAB erred in reading the prior art to discover its principle of operation.  Rather, Plas-Pak argued that the PTAB erred by ruling that a prior art’s principle of operation should be limited to its innovative contribution to the art.  That general question of “how do we define a principle of operation” is a question of law and should be reviewed de novo by the court.  In its brief, Plas-Pak argued this particular point – that the appeal is focused on whether the Board applied the correct legal definition of a “principle of operation” — particularly “that a reference’s principle of operation is not equivalent or limited to its alleged contribution to the art.”

The decision here was authored by Judge Lourie and joined by Judges Moore and Reyna. However, because it was non-precedential, the standard operating procedures of the Federal Circuit do not require that it be first distributed to the other appellate judges prior to release.

Foreign Agent-Client Privilege?

by Dennis Crouch

A bedrock of U.S. legal practice is attorney-client privilege that allows a party to keep certain communications secret.  This is an important exception to the broad discovery that is ordinarily permitted in U.S. civil litigation.

In U.S. patent prosecution, a number of privilege issues have arisen – particularly when the communication is not between a client and a U.S. attorney, but rather with a non-lawyer patent agent or a non-U.S. legal service provider.

The USPTO is considering whether to provide a set of best practices as advice to U.S. courts.  Taking the first step in that direction, the USPTO has published a Federal Register notice asking for comment on the following questions:

Whether and to what extent U.S. courts should recognize privilege for communications between foreign patent practitioners and their clients; the extent to which communications between U.S. patent applicants and their non-attorney U.S. patent agents should be privileged in U.S. courts; and whether and to what extent communications between U.S. patent practitioners and their clients should receive privilege in foreign jurisdictions.

A Roundtable will be held on February 18, 2015 and written comments can be submitted to ACPrivilege@uspto.gov by February 25, 2015.

LINK: http://www.gpo.gov/fdsys/pkg/FR-2015-01-26/pdf/2015-01241.pdf


Next Up: Lighting Ballast

In Teva v Sandoz, the Supreme Court held that a district court’s factual conclusion supporting a claim construction determination should be reviewed with deference on appeal.  In the expected follow-up, the Supreme Court has now acted on a hadful of cases riding in Teva‘s wake. In particular, the Court has issued “GVR” decisions in the pending cases of Lighting Ballast v. Universal Lighting; Gevo v. Butamax, and Shire v. Watson Pharma.  In a GVR, the Supreme Court Grants certiorari, but, rather than deciding the case in the merits, immediately Vacates the appellate court holding and Remands for further consideration — Grant-Vacate-Remand.  For these cases, the Supreme Court wrote simply:

 The petitions for writs of certiorari are granted. The Judgments are vacated, and the cases are remanded to the United States Court of Appeals for the Federal Circuit for further consideration in light of Teva Pharmaceuticals USA, Inc., v.
Sandoz, Inc., 574 U. S. ___ (2015).

On remand, these cases will each challenge aspects of the new deferential review standards and, once they are decided, district courts will then understand whether the game has truly changed.

Delano Farms v. California Table Grape Commission (Fed. Cir. 2015)

by Dennis Crouch

Like their utility and design patent brethren, plant patents must also satisfy the patentability requirements of Section 102 and 103 of the Patent Act. In Delano Farms v. California Table Grape Commission (Fed. Cir. 2015), the plant patents at issue relate to Scarlet Royal and Autumn King table grapes. Plant Patent Nos. PP16,229 and PP16,284.  The declaratory-judgment plaintiffs are grape growers seeking to invalidate the patents so that they can grow the grapes without continuing to pay a license fee.

Public Use: Under pre-AIA law, Section 102(b) renders patents invalid if the claimed invention was “in public use” more than one year before the application priority filing date and here, the question is whether certain proven third-party uses count under the law.

Interesting Factual Story: The patented grapes here were created through a USDA project and the patents are owned by the USDA. More than one year before filing the patent applications, the USDA held an open house where it displayed the two varieties.  At the event, a USDA employee (Klassen) gave some of the plants to a local grower (Ludy) but asked Ludy not to sell the grapes he might grow.  Ludy also apparently understood at the time that Klassen had no authority and should not have given out the plants.  Nevertheless, Ludy did grow the variety and also gave some buds to his cousin for him to grow.  However, Ludy testified that his cousin also understood that he should keep the variety secret until it was commercially released by the USDA.  (However, there was nothing written regarding the secrecy needed).   The cousin grew several hundred plants but did not sell any of the resulting grapes before the one-year critical 102(b) date.  Finally, Ludy also showed the plants to Sandrini who was an outside marketer of grapes for both Ludy and his cousin.

Public Use: In interpreting the public use prong of 102(b), the Federal Circuit has focused on whether the invention was either accessible to the public or commercially exploited.  Importantly, the court has previously held that “secret or confidential third-party uses do not invalidate later-filed patents.” Dey v. Sunovion.  But the Leading public use case continues to be Egbert v. Lippmann, 104 U.S. 333 (1881).  In that case, the inventor gave an under-garment corset to his love (who was not yet his wife) who wore it in various forms for 11 years before the patent application was filed.  Even though there was no evidence that anyone in the public saw the corset, the Supreme Court found an impermissible public use and the patent void writing:

If an inventor, having made his device, gives or sells it to another, to be used by the donee or vendee, without limitation or restriction, or injunction of secrecy, and it is so used, such use is public, even though the use and knowledge of the use may be confined to one person.

The challengers in the grape case here latched onto Egbert and argued that there was no real secrecy limitation here despite the fact that only a few individuals actually knew of the public use.

Siding with the USDA Patentee, the Federal Circuit affirmed the district court’s factual findings that the patentee did not authorize Klassen to facilitate third party use of the invention and that Ludy understood that he should keep the variety secret until publicly released by the USDA. “The findings of the district court clearly establish, therefore, that both Ludys knew that they were not authorized to have the plants and that they needed to conceal their possession of the plants.”

Distinguishing Egbert, the Federal Circuit noted that case turned on the inventor’s lack of effort to maintain secrecy.  Here, the USDA made attempts to keep secrecy and, to a large extent, was successful.  The tale here is interesting because of the way it softens the otherwise harsh limits under Section 102(b).

Impact of the AIA: This case was decided under pre-AIA law because the patent application was filed prior to March 2013.  The AIA rewrote much of the novelty provision of Section 102, but included the limit on patenting inventions already “in public use.”  I would expect that under the new law, these same activities would likewise not be seen as being in public use. One difference with the AIA is that the critical date for public use is no longer one-year prior to the application filing date, but instead is moved-forward the actual filing date itself.  In this case, that change would likely have made a difference because the third-parties were less private in the year leading up to the application filing, including commercial sales of the grapes.

Dr. Sheppard Selected as Director of USPTO’s Detroit Office

By Jason Rantanen

Congratulations to my colleague at the University of Nebraska College of Law, Dr. A. Christal Sheppard, who I understand has been selected as the first Director of the PTO’s Detroit satellite office.  From her biography at the College of Law:

Dr. Sheppard began her career as a scientist earning a M.S. and Ph.D. in Cellular and Molecular Biology from the University of Michigan.  After receiving a J.D. from Cornell University Law School and interning with Judge Rader at the Court of Appeals for the Federal Circuit and the Executive Office of the President’s Office of Science and Technology Policy, she was a practicing attorney at the law firm of Foley & Lardner earning extensive experience in patent prosecution, client patent counseling and ligation. She then served in the Office of the General Counsel of the United States International Trade Commission working on Section 337 matters, arguing before the United States Court of Appeals for the Federal Circuit. In 2005, Dr. Sheppard also completed Harvard University’s John F. Kennedy School of Government’s Executive Education for Senior Managers in Government program.

Her successful career in intellectual property law and policy included her tenure as Chief Counsel on Patents and Trademarks for the United States House of Representatives Committee on the Judiciary where she was integral in many endeavors including the Leahy-Smith America Invents Act, the most comprehensive change to this nation’s intellectual property laws in over 60 years.


Director Lee: Next Step is to Focus on Patent Quality Initiatives

by Dennis Crouch

In her confirmation hearings on January 21, Michelle Lee reported to the Senate that both the USPTO and the Courts have taken significant steps in addressing problems in the patent system following enactment of the AIA. However, Lee supports further “balanced” statutory reform to particularly address patent litigation abuses.  However, Lee was unwilling to take a stance on any particular reform, such as the automatic-fee-shifting  that was a central aspect of the Goodlatte patent reform bill in 2014.  Republicans now control the Senate, and thus Republican support is a necessary element of the confirmation hearings.  However, it appears that Lee will garner full support from the committee. A letter sent the same-day to senate leaders signed by 200+ entities also calls for balance and moderation in any patent reforms. [Inventing America Patent Letter]

Lee did take more of a stand in her speech at the Brookings Institute on the 22nd in explaining her major top priority of enhancing the quality of patents issued by the USPTO to reduce the cost associated with issuing patents that should not have issued.  As part of that goal, the agency will soon announce a set of proposed quality initiatives and look for input from stakeholders.  In addition, Director Lee has appointed Valencia Martin Wallace as the first Deputy Commissioner for Patent Quality. Martin Wallace was already an Assistant Deputy Commissioner focused on Electrical Disciplines after rising through the ranks of the PTO.

Giving Deference to the Supreme Court in Teva v. Sandoz

by Dennis Crouch

In Teva v. Sandoz, the Supreme Court raised the standard of appellate review of a district court’s factual conclusions regarding extrinsic evidence relied upon during claim construction proceedings.  Although the decision represents a relatively small change in procedural law, it is important, both because claim construction has become such a major element of patent litigation and because the Court of Appeals for the Federal Circuit has a history of reversing a high percentage of claim construction decisions.

I asked a handful of patent law experts for their instant thoughts on the decision (and gave them strict word limits). Douglas Kline, Chair of Goodwin Procter’s IP Litigation Group spells out the basic first-order result of the case:

From now on, when a district court resolves factual disputes concerning extrinsic evidence bearing on patent claim construction, the Federal Circuit will review those subsidiary factual findings for clear error.  This should result in the Federal Circuit affirming some claim construction decisions it might have overturned under the old standard.

Thinking forward about how parties will react, MBHB Partners Joshua Rich and Andrew Williams suggest higher reliance on expert testimony and thus higher litigation costs:

Today’s decision is likely to increase the cost and complexity of claim construction because it encourages parties to introduce extrinsic evidence, especially expert testimony, in an attempt to maximize deference to a favorable decision.  And some trial courts may end up relying on that extrinsic evidence to insulate their decisions.

Joshua Rich & Andrew Williams, partners at McDonnell Boehnen Hulbert & Berghoff.  “At the district court level, the new standard of review will likely mean more reliance on experts in interpreting the claims.” Dominick Conde, partner at Fitzpatrick, Cella, Harper & Scinto LLP.

Providing Guidance: The decision itself does a nice job of detailing the level of review for each different aspect of a claim construction ruling.  Paul Hughes from Mayer Brown LLP comments that “the Court provided unusually robust prospective guidance to aid the Federal Circuit in distinguishing questions of fact from questions of law.”

As usual, Professor Lefstin’s comments are both insightful and linked to historic evidence. Here, Lefstin disagrees slightly with Hughes in that some surprising aspects of claim construction should also be considered extrinsic evidence.

As Justice Traynor pointed out long ago, sources of meaning such as dictionaries and the judge’s personal linguistic experience are ‘extrinsic.’ Under Justice Breyer’s holding, the act of consulting a dictionary – which is how a court might determine “the meaning of a term in the relevant art during the relevant time period” – seems entitled to deference.

Jeffrey A. Lefstin, Professor of Law, UC Hastings College of Law.  However, Lefstin – along with others – believes that the ultimate change in the law is too slight to make much difference. Or, perhaps more pointedly, Lefstin’s argument is that the Teva decision leaves the Federal Circuit with power to continue reviewing claim construction without deference.

Ultimately it will make no difference, since the CAFC can review without deference the district court’s assignment of that meaning “in the context of the specific patent claim under review.”  The opportunities for the CAFC to frame construction as a contextual inquiry are so pervasive that Teva will serve only to generate pointless disputes over the extrinsic/intrinsic and isolated/contextual boundaries.

Lefstin. Recognizing this same point, Professor Liivak explains that a legal analysis is still required for claim construction which will be reviewed de novo.

There is still ample room for de facto de novo review.  The district court “must” conduct a “legal analysis” on whether the factual determination is relevant in the “context of the specific patent claim under review.”  This is where all the maneuvering will be.

Oskar Liivak, Professor of Law, Cornell Law School.  With reference to the disputed “molecular weight” claim term in this case, Liivak foresees that the Federal Circuit could fairly easily modify its opinion to satisfy the Supreme Court without changing its ultimate determination.

On remand as to this claim term, a very few words have to change but the outcome need not:  the factual determination about SEC is quite plausibly irrelevant to interpretation of the intrinsic evidence in Fig. 1.

Liivak.  The question – in Professor David Berry’s mind is whether the CAFC will “flex its muscles” on the issue.  If not, we can “look for more expert testimony, especially on the crucial question of what the claim meant to those in the art. That finding frequently will be dispositive, and may insulate the whole construction from de novo review.”  Professor David C. Berry, Western Michigan University – Cooley Law School.

Fallacy of Predictability: One of the key policy goals of deference is to provide predictability – at least once the district court construes the claims.  Professor Mark Janis sees the potential that this particular outcome will, unfortunately, not aid that goal. Still, Janis has some optimism. He writes:

A long-overdue ruling.  But it’s one that leaves CAFC judges ample room to defer (or not) in any given case.   The CAFC’s challenge is to demonstrate that it can implement Teva in the service of better predictability – which may require some CAFC judges to set aside cherished views about who really gets to call the shots in claim construction.

Mark D. Janis, Robert A. Lucas Chair of Law, Center for Intellectual Property Research, Indiana Univ. Maurer School of Law.  I agree with the fallacy of predictability given by deference, but at an even deeper level.  If I may quote myself:

My problem with the decision is that giving deference on review only masks the major problem that claim scope is not well understood until decided by a court.  Claim scope should be clearly understood at the time of issuance.

Dennis Crouch, Professor at the University of Missouri School of Law.

Who Benefits?: Erich Spangenberg is the CEO of nXn Partners and founder and former CEO of IPNav. He has been on the patent-owner side of a very large number of patent lawsuits and he tends to provide insight that is spot on. In my prior article on Teva, I suggested that patentees will prefer the new rule and Spangenberg agrees, with caveats:

The appellate reversal rate was too high and created far too much uncertainty.  If what Teva means is that we are going to have greater certainty, faster resolution as a result of fewer reversals and the occasional district court decision that gets it wrong—I am in favor.  My enthusiasm is tempered by the likelihood that there are a few years of disputes as the new boundaries are defined—but longer term, this is a positive.

Erich Spangenberg.

Professor Roger Ford recognizes that “who benefits” may well depend upon the case:

How [Teva] will play out is unclear, since litigants don’t always know, before construction, what review standard they’d prefer. Optimistic parties may prefer deferential review, assuming they’ll win; risk-averse ones may prefer having two chances to win.

Roger Ford is Assistant Professor of Law at the University of New Hampshire School of Law.

Evidentiary Hearings: Few courts conduct evidentiary hearings as part of claim construction. Going against the tide, Michael Risch doesn’t foresee any change in that reality:

A key question after Teva will be whether District Courts are more likely to hear extrinsic evidence just because findings get deference. Given likely reversal if the intrinsic evidence is clear, I don’t see why they would waste their time that way.

Michael Risch, Professor of Law, Villanova University School of Law.  Implicit in Professor Risch’s remarks is the conclusion that the Phillips “intrinsic first” approach continues to reign. Dean Holbrook believes that conclusion is correct:

The Federal Circuit will continue to use the Phillips hierarchy, turning to extrinsic evidence only when the intrinsic evidence is ambiguous. I think, in the main, the Federal Circuit will view the intrinsic evidence as determinative, retaining de novo review in the vast majority of cases.

Timothy R. Holbrook, Associate Dean of Faculty and Professor of Law, Emory University School of Law.

Changing Claim Construction: Dean Holbrook’s conclusion is not universally supported.  Professor Jason Rantanen argues instead that Teva may have more generally changed the nature of claim construction:

As I read Teva, the Court endorses a claim construction process where the judge begins with the extrinisic evidence about a claim term, decides what the extrinsic evidence establishes for that term and then determines whether the way the patent uses the term is inconsistent with the established ordinary meaning of the term.  This approach is more consistent with Texas Digital than Phillips.

Jason Rantanen, Associate Professor of Law, University of Iowa College of Law.  Rantanen does fully agree with others that significant power is now in the Federal Circuit’s hands — in particular, he “fully expects the Federal Circuit to disagree with [his] reading” of the case.  Eileen M. Herlihy, a da Vinci Fellow at George Mason CPIP, recognizes a particular evidentiary focus here – the person having ordinary skill in the art. She notes that the court once again “reemphasizes the patent law specific importance of the PHOSITA, thereby adds to recent Supreme Court cases asserting this perspective.”

Although Rantanen in his claim-construction-shift compares precedent, Professor Shubha Ghosh encourages creative lawyering in suggesting alternative “styles of claim construction”

Teva teaches that patent claims consist of law, reviewed de novo, and evidence, reviewed for clear error.  Unanswered is what mix of law and evidence forms the basis for claim construction.  The Federal Circuit’s and rulings favored strict constuction.  The Court’s decision here opens the floodgates for experimentation by advocates and judges  in different styles of claim construction.

Shubha Ghosh, Vilas Research Fellow and George Young Bascom Professor
of Intellectual Property and Business Law, University of Wisconsin,
Madison, Law School.

Exceptionality: One theme of Supreme Court patent cases over the past decade is that patent law need not always be so exceptional – i.e., different from other areas of law.  Rather, when traditional principles apply across doctrines, then they should apply to patent law as well. Referencing eBay, an early case in this trend, Professor Clifford writes:

Patent law is not unique when balancing must be done before granting equitable relief. Now, as is required for other legal documents such as contracts, we must separate interpretation of the words used (a matter of fact) from the meaning and effect they have (a matter of law).

Ralph D. Clifford, Prof., Univ. of Massachusetts School of Law. Similarly, Professor Landers writes that “Teva underscores the Supreme Court’s view that (like eBay and Holmes v. Vorando) the procedural aspects of patent cases are not exceptional.” Prof. Amy Landers, Drexel University Kline School of Law.  “Teva has broad significance because it … conforms patent law to other areas of the law on a matter of proper appellate function.”  Eileen M. Herlihy, da Vinci Fellow at George Mason CPIP.

Indefiniteness and ambiguity have been important topics in recent patent law cases.  Profesor Laakmann reminds us that the setup for the Teva case is not so-much claim construction but instead the lower court determination that the claim was unduly ambiguous and therefore invalid as indefinite.

The case turns on whether there is cognizable distinction between a claim term being factually ambiguous (and thus amenable to extrinsic evidence under a “clearly erroneous” standard of review) and legally indefinite (and thus invalid under 112 under a de novo standard of review).  This is the crux of the disagreement between the majority and the dissent – the majority says “yes” and the dissent says “no.”

Anna Laakmann is an Assistant Professor at Lewis and Clark Law School.  On remand, an important feature of the case is that the lower courts will also now need to work-in the new standard of indefiniteness from Nautilus.

At the PTO: For the most part, we’re talking about patent litigation.  However, Professor Joe Miller thinks that there may be a broader impact on USPTO practice as well:

Justice Breyer, speaking for a split Court’s majority, set aside a Federal Circuit patent validity determination. According to the Court, the Federal Circuit had not reviewed the lower tribunal’s key factual findings with the greater deference the controlling rule requires. Today’s decision in Teva v. Sandoz? Sure. But also 1999’s Dickinson v. Zurko, 527 U.S. 150 (1999). Teva’s main effects may well be felt at the PTO.

Joe Miller, Professor, University of Georgia Law School.

Although there are differing perspectives here, the overarching thought is that we’ll have to wait to see what the Federal Circuit does — which is exactly the result deference is supposed to avoid.

– Dennis

* Thanks to my colleagues for providing their interesting input on this article.


Teva v. Sandoz: Partial Deference in Claim Construction

by Dennis Crouch

As President Clinton taught, the meaning of words is always up for debate.  In the patent realm, actual claim scope often depends upon the particular meaning given to the individual words and terms.  We have seen that claim construction can vary widely – easily flipping the outcome of cases.  Litigators know the construction is only ‘probabilistic’ until decided by the court.  And, district courts know that their decisions are likely to be overturned – at least partially because claim construction is a question of law reviewed de novo and without deference on appeal

In Teva v. Sandoz, the US Supreme Court has changed the litigation game – holding that factual conclusions that underpin claim construction rulings must be reviewed for “clear error” – i.e., given substantial deference on appeal.

Up-to-now, many litigants have not worried much about the fact/law divide because all aspects of a claim construction decision were to be reviewed de novo in the eventual appeal.  More-so, district court litigants have likely shaded toward arguments asking for legal conclusion because those conclusions do not require the same level of evidentiary support as factual conclusions.  I expect for (some) litigants and district courts to shift their behavior and focus much more on evidentiary aspects of the case — such as the understanding of a person having ordinary skill in the art at the time of the patent.  The traditional approach is for plaintiffs to focus more on facts so that the case will end if they win at the district court level and for defendants to focus more on legal issues that – in case of a loss – are more easily appealable. Thus, on balance, the outcome here likely favors patentees as compared to the prior full de novo review system.

Under the new rule, determinations regarding evidence “intrinsic to the patent” will continue to be reviewed de novo on appeal. This intrinsic evidence includes both the patent document and the prosecution history of record.  The change, is that conclusions regarding other evidence considered – so called “extrinsic evidence” – are subject to the ordinary fact-finding rules of court and will be reviewed with deference on appeal.  Finally, the Supreme Court was also clear that application of the extrinsic evidence to the patent-in-question will also be seen as an issue of law reviewed de novo.

A major open question is the extent that the decision here modifies the standard approach to claim construction that has been explained by the Federal Circuit in Phillips v. AWH Corp - namely the rule that extrinsic evidence is of secondary importance and perhaps should not be considered absent ambiguity in the intrinsic evidence.  In my view, that approach is contrary to the rule that the interpretation should be based upon the contemporary understanding of a person having ordinary skill in the art.

At the prosecution level there is a bit of a logical conundrum – parties that present factual evidence during prosecution may get the USPTO to make factual conclusions and agree with that construction. However, if the case later goes into litigation that evidence and those conclusions will be seen as purely intrinsic evidence and thus given no deference in a Federal Circuit appeal.  It will be interesting to see how this works on a contemporary basis for the administrative post-issuance review proceedings where any testimony or extrinsic evidence presented instantly becomes part of the prosecution history record.

The 7-2 majority opinion was penned by Justice Breyer and joined by Chief Justice Roberts and Justices Scalia, Kennedy, Ginsburg, Sotomayor, and Kagen. Justice Thomas wrote in dissent an was joined by Justice Alito.

Statute vs Contract: In his dissenting opinion, Justice Thomas drew an analogy between claim construction and statutory construction and found that neither involve “finding of facts” even when conclusions are drawn from extrinsic evidence.  At least at a rhetoric level, this argument makes tremendous sense – the word “patent” itself references a publicly documented grant by a sovereign – something that seems awfully close to a statute.  Replying to the dissent, Justice Breyer argues for stare decisis — pointing to the fact that the Court already ruled in Markman that claim construction can have “evidentiary underpinnings.”  Rather, the majority links claim construction to that of a deed or contract where factual conclusions are sometimes needed.

Federal Circuit Exceptionalism: A theme running through most recent Supreme Court patent cases is that, when applicable, common-law patent doctrines should follow the common law approach rather than some specialized patent rule. Here, one aspect of the majority opinion is that the process of patent claim construction should look like the process of construing a deed or contract.  As Professor Ouellette wrote this morning: “Today’s opinion joins a long line of Supreme Court decisions rebuking the Federal Circuit for patent law exceptionalism.”  Of course, the link to deeds and contracts only goes so-far because with claim construction we’re not really looking to figure out what the patentee intended by the words but rather what is the proper public understanding of the words (as J. Scalia noted). Nevertheless, it will be interesting to see how district courts fare with that analogy and the extent to which the Federal Circuit is accepting.

Cybor No Longer Subject to Challenge: The Federal Circuit’s decision in Cybor has long been subject to renewed efforts for en-banc review. This happened most recently in Lighting Ballast Control LLC v. Philips Electronics N.A. Corp. (Fed. Cir. 2014) (En banc).  Although the Supreme Court here modified Cybor and Lighting Ballast, it also foreclosed future challenges to increase the level of deference. Rather, the Court is clear in Teva that – apart from factual conclusions regarding extrinsic evidence – that no deference should be given on appeal.


Masking the Problem of Claim Ambiguity: My problem with the decision is that giving deference on appellate review only masks the major problem that claim scope is not well understood until decided by a court. Claim scope should be clearly understood at the time of issuance rather than years later following an expensive litigation effort.

Teva v. Sandoz: Deferential Review on Factual Issues; de novo review of final question of construction

By Jason Rantanen

Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc. (2015) Download Opinion
Breyer (author), joined by Roberts, Scalia, Kennedy, Ginsburg, Sotomayor, and Kagan; Thomas (dissenting) joined by Alito.

One (or both) of us will certainly write more on this very important opinion.  The Court holds that subsidiary factual issues are reviewed for clear error while legal determinations continue to be reviewed de novo.  From the Court’s syllabus:

Held: When reviewing a district court’s resolution of subsidiary factual matters made in the course of its construction of a patent claim, the Federal Circuit must apply a “clear error,” not a de novo, standard of review.  Pp. 4–16.


(c) This leaves the question of how the clear error standard should be applied when reviewing subsidiary factfinding in patent claim construction. When the district court reviews only evidence intrinsic to the patent, the judge’s determination is solely a determination of law, and the court of appeals will review that construction de novo. However, where the district court needs to consult extrinsic evidence in order to understand, for example, the background science or the meaning of a term in the relevant art during the relevant time peri­od, and where those subsidiary facts are in dispute, courts will need to make subsidiary factual findings about the extrinsic evidence.  The district judge, after deciding the factual dispute, will then interpret the patent claim in light of the facts as he has found them.  The ulti­mate construction of the claim is a legal conclusion that the appellate court can review de novo. But to overturn the judge’s resolution of an underlying factual dispute, the appellate court must find that the judge, in respect to those factual findings, has made a clear error. Pp. 11–14.

(d) Here, for example, the District Court made a factual finding, crediting Teva’s expert’s account, and thereby rejecting Sandoz’s ex­pert’s contrary explanation, about how a skilled artisan would under­stand the way in which a curve created from chromatogram data re­flects molecular weights.  Based on that factual finding, the District Court reached the legal conclusion that figure 1 did not undermine Teva’s argument that molecular weight referred to the first method of calculating molecular weight. When the Federal Circuit reviewed the District Court’s decision, it did not accept Teva’s expert’s explanation, and it failed to accept that explanation without finding that the Dis­trict Court’s contrary determination was “clearly erroneous.”  The Federal Circuit erred in failing to review this factual finding only for clear error.  Teva asserts that there are two additional instances in which the Federal Circuit rejected the District Court’s factual find­ings without concluding that they were clearly erroneous; those mat­ters are left for the Federal Circuit to consider on remand.  Pp. 14– 16.

The Court provides a few examples of how this new standard is to be applied:

In some cases, however, the district court will need to look beyond the patent’s intrinsic evidence and to consult extrinsic evidence in order to understand, for example, the background science or the meaning of a term in the rele­vant art during the relevant time period.  See, e.g., Seymour v. Osborne, 11 Wall. 516, 546 (1871) (a patent may be “so interspersed with technical terms and terms of art that the testimony of scientific witnesses is indispensable to a correct understanding of its meaning”).  In cases where those subsidiary facts are in dispute, courts will need to make subsidiary factual findings about that ex­trinsic evidence. These are the “evidentiary underpin­nings” of claim construction that we discussed in Mark-man, and this subsidiary factfinding must be reviewed for clear error on appeal.

For example, if a district court resolves a dispute be­tween experts and makes a factual finding that, in gen­eral, a certain term of art had a particular meaning to a person of ordinary skill in the art at the time of the inven­tion, the district court must then conduct a legal analysis: whether a skilled artisan would ascribe that same mean­ing to that term in the context of the specific patent claim under review. That is because “[e]xperts may be examined to explain terms of art, and the state of the art, at any given time,” but they cannot be used to prove “the proper or legal construction of any instrument of writing.” Winans v. New York & Erie R. Co., 21 How. 88, 100–101 (1859); see also Markman, supra, at 388 (“‘Where tech­nical terms are used, or where the qualities of substances . . . or any similar data necessary to the comprehension of the language of the patent are unknown to the judge, the testimony of witnesses may be received upon these sub­jects, and any other means of information be employed. But in the actual interpretation of the patent the court proceeds upon its own responsibility, as an arbiter of the law, giving to the patent its true and final character and force’” (quoting 2 W. Robinson, Law of Patents §732, pp. 482–483 (1890); emphasis in original)).

Accordingly, the question we have answered here con­cerns review of the district court’s resolution of a subsidi­ary factual dispute that helps that court determine the proper interpretation of the written patent claim. The district judge, after deciding the factual dispute, will then interpret the patent claim in light of the facts as he has found them. This ultimate interpretation is a legal con­clusion. The appellate court can still review the district court’s ultimate construction of the claim de novo. But, to overturn the judge’s resolution of an underlying factual dispute, the Court of Appeals must find that the judge, in respect to those factual findings, has made a clear error. Fed. Rule Civ. Proc. 52(a)(6).

The full discussion of the Teva example makes a similar point, finding that the Federal Circuit erred because it should have determined whether the district court’s acceptance of Teva’s expert’s explanation of figure 1 in the patent was “clearly erroneous.”



Next Steps on the USPTO Sensitive Application Warning System

The USPTO has now offered some public information regarding its secretive Sensitive Application Warning System with the apt acronym: SAWS. [LINK]  SAWS came to light after it was ‘leaked’ by examiners and Devon Rolf has written about his experience with the program on IP Watchdog.

The basic idea is that examiners have been encouraged to flag applications that claim “highly controversial” or those that might create “unwanted media coverage.”  Those applications are then tiered and then before allowance must be approved by either a technology center director or upper PTO management.

A major problem with the program of course is that none of the heightened reviews are made of-record.  Thus, neither the applicants nor the public are told which applications are up for review or whether the review is following any semblance of legal process.

My position is that the USPTO is right to allocate more time and energy on applications whose claims are clearly very broad in a way that would significantly alter the marketplace.  Of course, the review cannot be directed at avoiding USPTO embarrassment but rather to ensure that the issued patent complies with the law of patentability.  Avoiding embarrassment will be a secondary benefit.  As I mentioned above, the real problem here is the Office’s continued secrecy in this front.  We do not know which applications have been chosen, why they were chosen, or whether the level of review follows the law.  Because nothing is done on record, applicants likewise have no recourse regarding potential political capture of the examination process.

After the SAWS reports were leaked (and on my private suggestion) the office finally publicly admitted that the program exists and has provided some information regarding its progress.

[SAWS] is one of many practical, internal efforts that the USPTO has in place to ensure that only the highest quality patents are issued by the Agency.  {DC What are the other internal efforsts?} By bringing an additional quality assurance check to a very small number of pending patent applications, the USPTO helps ensure that those applications that could potentially be of special interest, are properly issued or properly denied.    An application flagged for such a quality assurance check undergoes the same types of examination procedures as any other patent application, and is held to the same substantive patentability standards.

In terms of numbers, the USPTO also reported that only about 0.04% of applications fall into the program.  This is only one application out of every 2,500 considered — the message here is “trust us – we’re just dealing with the oddballs.”  Overall, it looks like about 1,000 applications have been part of this particular program.


I have requested that the USPTO provide a list of publicly-available applications that have been flagged for the SAWS program. Thus far, the USPTO has refused – claiming that the list of applications is privileged under exemption (b)(5) of FOIA.  My position is that privilege is not applicable to protect this list – especially based upon the tradition and legal requirements that examination be done on the written record with proper notice. See 35 U.S.C s132 and 37 C.F.R. s1.104.


USPTO Too Broad in its Broadest Reasonable Interpretation

by Dennis Crouch

Stoller holds several patents directed to a winterizing golf course greens.  In particular, Stoller’s approach is to roll-out a rubber blanket over the turf.  His most recent patent application was rejected by the USPTO examiner — with the broadest claim being anticipated and the dependent claims obvious. That decision was then affirmed by the PTAB.  Now, the Federal Circuit has largely affirmed — finding that the anticipation finding was erroneous but that the obviousness findings were correct.  The result then is that on remand the examiner should now also reject the broadest claim as obvious.

The broadest claim requires a layer of polyurethane “laminated” to a fabric layer and the primary dispute on appeal is the broadest reasonable interpretation of laminated clause. The importance of the construction comes up because the prior art uses for the anticipation rejection fastens its layers together by with strings going through a series of grommets at the cover’s perimeter.  The USPTO took the position that be broadest reasonable interpretation of a laminated structure would require only that the structure have multiple layers while Stoller argued that laminated requires a fusing or bonding.

The application itself provides no definition of the term but it does provide an example that requires using a molten polymer to bond the layers and repeatedly explains the durability benefits of the laminate approach. [I should note here that I’m hard-pressed to understand how the Court’s broadest reasonable construction is different or any broader than the seemingly more narrow construction that would be used post-issuance.]

On appeal, the Federal Circuit sided with the patent applicant – finding that even a broad dictionary definition of the laminate terms requires “uniting” layers in a way that goes beyond simply stacking them together.

Because the cited anticipation reference did not disclose laminated layers, the rejection was improper.  On the other hand, a number of additional references taught laminating in its ‘properly’ construed form and those references were included in the obviousness rejections of the more narrow claims. As such, the court found those obviousness rejections proper.

Thus, we’re left with the odd situation that the broader claim is not rejected while the narrower claims are rejected.  Addressing that situation, the Federal Circuit refused to take the logical step of finding the the broader claim obvious as well. Instead, the court simply remanded with – I assume – the expectation that the USPTO will make that determination for itself.

We do not turn a blind eye to the many references in this record that demonstrate that laminating two (or more) layers together was well-known in the art. The only rejection of claim 35 before us, however, is a § 102 rejection based only on Sibbet. That rejection is not supported in the record. Accordingly, we reverse the rejection of claim 35.

Read the decision.

Federal Circuit Gives Malpractice Case New Hope by Remanding to State Court

In NeuroRepair v. Nath Law Group (Fed. Cir. 2015), the Federal Circuit has dismissed NuroRepair’s malpractice case against its patent prosecution attorneys – holding that the Federal Courts lack subject matter jurisdiction because the case does not arise under the patent law.  Citing Gunn v. Minton, 133 S. Ct. 1059 (2013).  The basics of the case here appear to be that the client was upset with the defendants alleged (1) lack of communication; (2) ineffective pursuit of the patent application; and (3) failure to accurately record and bill time. However, the district court had sided with the attorneys – finding no malpractice.

Although patent attorneys are regulated by the USPTO’s Office of Enrollment and Discipline (OED), malpractice cases are generally based upon state law – here, the plaintiff alleged “professional negligence, breach of fiduciary duty, breach of written contract, breach of oral contract, breach of implied covenant of good faith and fair dealing, negligent misrepresentation, and false promise” – all of which are protected by California law rather than Federal Law.  The lawsuit was originally filed in California State Court (Superior Court) but then removed by the defendants to Federal Court on the grounds that the case “related to patents.”

All of that occurred prior to the Supreme Court’s decision in Gunn v. Minton. And, as in the Gunn case, the plaintiff has appealed – asking that the entire case be set aside because of a lack of subject matter jurisdiction.

Federal Law provides for exclusive federal jurisdiction over patent cases – this means that state courts cannot decide patent infringement cases.  However, there exists a large grey area of cases that arise under a state cause of action (such as breach of contract or legal malpractice) but that turn on an interpretation of either a patent or the Patent Act.  Are those “patent cases?”

In Gunn v. Minton, the Supreme Court released most of this grey-area to state court jurisdiction — holding that a state law claim relating to patents creates arising under jurisdiction if it “necessarily raise[s] a stated federal [patent] issue, [2] actually disputed and [3] substantial, [4] which a federal forum may entertain without disturbing any Congressionally approved balance of federal and state judicial responsibilities.”  Quoting Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., 545 U. S. 308 (2005).  The Court went on to note that malpractice cases will “rarely, if ever, arise under federal patent law” because their resolution will not substantially impact the patent laws.

The Nath case here was fairly easy to decide because the court found only one patent law issue necessary for decision — whether the patent could have issued earlier and with broader claims.  As in Gunn, the appellate court here found that issue not of substantial importance to the patent system and that relegating cases such as this to Federal Court would “disrupt the federal-state balance.”

The case ends with an order to the district court to remand the case back to California state court where the plaintiff will get another shot at proving malpractice.

Hearing for Director Michelle Lee Nomination

It has now been 24 months since the USPTO has been led by a Senate confirmed director and, for the past year Michelle Lee has been in the limbo position as being de facto head of the USPTO without actually being named director or acting director.  In October 2014, President Obama finally nominated Lee to take over as Director of the USPTO and Undersecretary of Commerce.  Although a first confirmation hearing was held in 2014, Senators agreed to delay a confirmation vote until after the Republicans took over this term.

Acting quickly, new Republican chair of the Senate Judiciary Committee Chuck Grassley has acted quickly to schedule a new hearing for January 21 (with Senator Cornyn scheduled to preside). Barring some unforeseen complications, I expect that Lee will be confirmed as director forthwith despite the new Republican control of the Senate.  The hearing will also focus on Daniel Marti who has been nominated as the White House Intellectual Property Enforcement Coordinator — the so called IP Enforcement Czar.  That role began with Victoria Espinel in 2009 and focuses primarily on international counterfeiting and copyright enforcement.

As I wrote in December: It is Time to Confirm Michelle Lee.


Willfulness Interplays Between Patent and Copyright

by Dennis Crouch

As with patent law, willful copyright infringement also leads to enhanced damages. In Seagate (Fed. Cir. 2007), the en banc Federal Circuit drew an analogy to copyright doctrine in determining that willfulness in the patent context should also include reckless indifference.  Truthfully though, copyright law was not as uniform in its approach as suggested by the panel decision.

In Olem Shoe Corp. v. Washington Shoe Corp. (11th Cir. 2015), the Eleventh Circuit goes the other way and relies on the Federal Circuit doctrine on willfulness to help it further refine the test for copyright.  In a issue of first impression for the Atlanta-based Court of Appeals, affirmed that willfulness in copyright law also requires proof that the infringer acted “despite an objective high likelihood that the actions taken” constituted infringement and that the risk of infringement was known or should have been known by the infringer.

The district court had found infringement but no willfulness. (See comparisons above). On appeal, the panel affirmed — finding that the copyright holder presented no evidence “with regard to actual knowledge that Olem’s boots infringed Washington Shoe’s copyrights. That is, there is no evidence that Olem knew of Washington Shoe’s copyrights and chose to violate them.”  The panel also found insufficient evidence to raise a genuine issue of material fact of reckless disregard.

In particular, Washington Shoe argued that its cease-and-desist letters should have created sufficient notice.  However, that suggestion was rejected because the letters “did not include reference to copyright registration numbers or deposit copies. . . [and thus] provided nothing from which Olem could have determined that the claim was legitimate.”  Washington Shoe also noted the similarity of the boots  – including evidence that the boots are identical – as a clear signpost of infringement.   However, the appellate panel also found that similarity to provide no basis for a willfulness finding.  Finally, for willfulness, the panel refused to place any burden on the infringer to prove that it had an alternative design source.

* * * * *

A few interesting aspects of the case:

  • First, I should note that, although expounding upon new law, the panel determined that the decision was non-precedential.  This is likely because two of the three panel members were sitting by designation (one from a district court and the other from the USCIT).
  • As part of its deliberative process, the district court requested insight from the register of copyrights regarding whether certain alleged inaccurate information regarding the copyright registration would have caused the register to deny registration. Such a request is permitted under 17 U.S.C. 411(b).  This approach is wildly different from the patent law approach where there is essentially no communication between the patent office and the court of enforcement.
  • The copyright statute only particularly provides for enhanced willfulness damages if the copyright holder first chooses statutory damages (rather than proving actual damages).

Upcoming Conferences and Workshops

By Jason Rantanen
Three upcoming conferences that may be of interest to readers:
This Friday and Saturday, January 16 and 17, the University of San Diego School of Law’s Center for Intellectual Property Law & Markets is holding its 5th Annual Patent Law Conference.  This year’s topic is “Patent Invalidity after the America Invents Act.”  Speakers include Judges Bencivengo, Bartick & Chen.  I attended last year as part of PatCon and thought it was a great event.  More details here: http://www.sandiego.edu/law/centers/ciplm/detail.php?_focus=49377#overview
Hal Wegner’s 3rd Annual Naples Patent Law Experts Conference will be held February 9 and 10.   This beachfront Conference in Naples, Florida, will involve  an interactive discussion by more than thirty faculty members.  Topics to be covered include recent and pending Supreme Court patent law decisions, potential legislative activity, issues of international law, and more. Further information from the sponsoring organization, the University of Akron, is available here: http://www.uakron.edu/law/ip/naples-midwinter.dot
On March 5-6, Don Chisum and Janice Mueller will conduct a two-day patent roundtable seminar.  The program is limited to a total of ten participants to maximize opportunities for interactive discussion and debate.  All sessions are led by treatise authors and educators Don Chisum and Janice Mueller. Coverage focuses on recent significant patent decisions of the Federal Circuit and U.S. Supreme Court. Topics currently planned for discussion include:
  • The Supreme Court’s Alice Corp. decision on patent-eligible subject matter and subsequent Federal Circuit decisions applying Alice
  • The Supreme Court’s grant of certiorari in Commil USA concerning the intent requirement for inducing infringement;
  • The Supreme Court’s grant of certiorari in Kimble v. Marvel concerning the propriety of post-patent expiration royalties;
  • The Supreme Court’s pending decision in Teva v. Sandoz on review of patent claim construction;
  • The Federal Circuit’s grant of en banc review in SCA Hygiene to determine whether the Supreme Court’s Petrella decision changed the law of laches as a defense to patent infringement;
  • Patent Practice Gone Wrong: Lessons from Patent Malpractice, Exceptional Case and Rule 11 Sanctions, and Inequitable Conduct Cases;
  • Patent Claim Construction and Definiteness in the Wake of Nautilus (and Anticipating Teva); and
  • Inter Partes Review: Two-Year Snapshot and Lessons from Case Studies.
No advance preparation is expected or required. The Supreme Court of Ohio Commission on Continuing Legal Education has approved the seminar for 12.0 hours of CLE instruction. For additional details on the venue, topics, and registration form, see http://chisum-patent-academy.com/upcoming-patent-law-seminars/advanced-patent-law-seminars-cincinnati-oh/ or e-mail info@chisum.com.


Google Looks to Narrow both Copyrights and Patents through Supreme Court Action

by Dennis Crouch

Two pending Supreme Court now have higher profiles with the Supreme Court’s invitation to the Solicitor General to provide views of the administration.  In both cases, the petitioners have set-up the Federal Circuit as a misguided court.

The focus of Google v. Oracle (Sct. Docket No. 14-410) is the extent that software is eligible for copyright protection. The petition asks:

Whether copyright protection extends to all elements of an original work of computer software, including a system or method of operation, that an author could have written in more than one way.

Unlike patent law, the copyright eligibility statute includes a set of express exclusions. In particular, although “original works of authorship” are generally eligible for copyright protection, “[i]n no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.” 17 U.S.C. § 102(b).  In its decision the Federal Circuit found Oracle’s Java API taxonomy copyrightable as a whole. In particular, the appellate panel led by Judge O’Malley rejected the idea/expression merger doctrine since there are many other ways that functionally equivalent method-calls could have been constructed besides those found in Java.  “Merger cannot bar copyright protection for any lines of declaring source code unless Sun/Oracle had only one way, or a limited number of ways, to write them.” [Read my prior discussion here and here]


The second case – also involving Google – is Google v. Vederi (Sct. Docket No. 14-448).  In that case, the Google raises the following question:

Whether, when an applicant for a patent amends a claim to overcome the PTOs earlier disallowance of the claim, a court should (i) presume that the amendment narrowed the claim and strictly construe the amended claim language against the applicant, as this Court has held; or (ii) presume that the claim scope remained the same and require that any narrowing be clear and unmistakable, as the Federal Circuit has held.

Although the first part of the question is interesting, the second part appears quite misguided as Federal Circuit law does not presume that claims maintain the identical scope following an amendment to overcome a rejection by the PTO.  That said, the Federal Circuit has strayed significantly from Pre-1952 disclaimer law exemplified by cases such as Supply Co. v. Ace Patents Corp., 315 U.S. 126, 137 (1942); Keystone Driller Co. v. Nw. Eng’g Corp., 294 U.S. 42, 48 (1935); Smith v. Magic City Kennel Club, Inc., 282 U.S. 784, 789–90 (1931); I.T.S. Rubber Co. v. Essex Rubber Co., 272 U.S. 429, 443–44 (1926); and Hubbell v. United States, 179 U.S. 77, 84 (1900).


Bard v. W.L. Gore: Revisiting Willful Infringement (Again)

By Jason Rantanen

Bard Peripheral Vascular, Inc. v. W.L. Gore & Associates, Inc. (Fed. Cir. 2015) 14-1114.Opinion.1-7-2015.1
Panel: Prost (author), Hughes (concurring), Newman (dissenting)

Professor Tom Cotter has an excellent write-up of this opinion over on his blog, Comparative Patent Remedies.   The main issue involves willful infringement: applying the de novo standard of review to the objective prong of the willfulness inquiry, as per Seagate and the earlier Bard decision, the majority affirmed the district court’s conclusion that Bard willfully infringed because its noninfringement defense is not “susceptible to a reasonable conclusion of no infringement. ” Judge Hughes wrote separately to reiterate his “belief that the full court should review our willfulness jurisprudence in light of the Supreme Court’s recent decisions” in Highmark  and Octane Fitness.  Judge Newman dissented; in her view, the majority failed to apply the de novo standard of review required by Seagate; applying that standard, the district court erred.   Judge Newman also questioned the imposition of double damages.

Judge Hughes’ concurrence, like Judge O’Malley’s concurrence in Halo v. Pulse last fall, suggests that the Federal Circuit remains divided on the appropriate legal standard for willful infringement post-Highmark and Octane Fitness.  Panels remain bound by the de novo standard set out in Seagate, but Judges Hughes and O’Malley strongly believe that the court should reconsider that precedent.  It may be only a matter of time before the Federal Circuit either addresses this divide en banc or the Supreme Court grants cert.  It’s also possible that the Court will provide some guidance on the issue in Commil v. Cisco; we’ll know later this year.


Non Practicing Entities in Europe

Guest Post by Peter Arrowsmith. Arrowsmith is a patent attorney and partner at the London based firm Cleveland IP.

Non practicing entities (NPEs) are a familiar part of the IP landscape in Europe, just as they are in the US. However, NPE activity has historically been lower in Europe. This article analyses the present situation in Europe compared to the US. In addition, we analyse how NPE activity might develop in Europe with the anticipated arrival of the Unified Patents Court (UPC).

 Factors that encourage NPE activity

There are various factors in a patent system that might influence or encourage activity by a NPE.  A non-exhaustive list of possible factors is outlined below, and Europe is compared against the US.

1. Low cost risk in litigation

A NPE is likely to be encouraged to litigate if they can initiate infringement proceedings without incurring a significant cost risk. In the US this is often possible because the losing side does not typically pay the winner’s legal costs. Additionally, NPEs can often find a law firm willing to take the case on a conditional fee basis. In Europe, by contrast, the losing side is typically required to pay at least a portion of the winner’s legal costs. Conditional fee arrangements are also less common.

Verdict: US more favourable to NPEs

2. High costs in litigation for the other side

A NPE is likely to benefit in a system where the opposing side will incur high costs in defending themselves. In such a system the pressure to settle will be significant, simply to avoid the costs involved in litigation. In Europe the cost of multi-jurisdictional litigation is likely to be high, but not necessarily higher than the costs involved in US litigation.

Verdict: Dead heat

3. Uncertainty

A NPE is likely to benefit in a patent system where the outcome of a case is difficult to predict, especially if this is coupled with high costs in litigation. This is likely to encourage a NPE to bring more cases on the basis that they are statistically likely to register some wins. In turn, this will increase pressure to settle before trial. Europe may be considered more predictable than the US in this comparison, simply because decisions are made by experienced patent judges, rather than lay juries.

Verdict: US more favourable to NPEs

 4. Size of Market

A NPE is likely to benefit if their patent has a wide geographical scope in an important market because a single adverse decision could have a large economic impact on the other side. In the US a single decision can be effective across the entire country, whereas in Europe it is necessary to enforce patents country-by-country.

Verdict: US more favourable to NPEs

 5. Bifurcation

A system in which the issues of infringement and validity are considered separately is also likely to favour a NPE. In such a system the NPE can obtain a favourable decision on infringement before validity is even considered. This may increase pressure on the other side to settle following an initial decision, even in cases where the validity of the patent is questionable. Europe may be more attractive to NPEs in this comparison since certain countries (notably Germany) permit bifurcation.

Verdict: Europe more favourable to NPEs

 6. Speed

A fast system can allow a NPE to exert pressure on the other side, which can encourage early settlement. These systems are likely to favour NPEs. In this comparison there is little to choose between Europe and the US, since fast or slow decisions are possible in both systems, depending on the forum chosen to commence proceedings.

Verdict: Dead heat

Overall this analysis suggests that the US patent system is more attractive than Europe for NPEs, which is consistent with the reality that we see. The European system is, however, still viable for NPEs, although they may need to be more selective about the cases and targets they pursue.

The Unified Patents Court – a new opportunity for NPEs

NPEs have registered a number of recent successes in European Courts (see, for instance, Vringo vs. ZTE in the UK), demonstrating that the European patent system can support this business model. All of the factors above would need to be considered by a NPE to decide whether litigation would be worthwhile in each case.

Of course, the patent system in Europe is on the verge of significant change, and the Unified Patents Court (UPC) is close to becoming a reality. The introduction of this Court will significantly alter the litigation landscape, meaning that a change in NPE activity can be expected.

In the current European system only national courts of individual countries are competent to decide on the infringement of European patents. Once it is established, the UPC will be competent to decide on validity and infringement of patents across the cooperating states, which covers most of Europe. A significant motivation in the development of this Court has been the desire to increase simplicity and decrease the cost of pan-Europe patent litigation. If successful, the new Court is likely to have many advantages for conventional business. However, a side effect is that the new Court may increase the attractiveness of Europe from the perspective of a NPE.

In particular, the UPC would appear to present a number of potential advantages from the perspective of a NPE.

1. Size of Market

The UPC will issue decisions that are effective across most of the European continent. Thus, the economic impact of individual decisions is likely to be high for the losing party – much higher than in the present system.

2. Bifurcation

The UPC is likely to permit bifurcation in certain instances. This is likely to favour NPEs, since they may be able to obtain a favourable decision on infringement before validity is considered. This is likely to increase the pressure to settle, even in situations where a patent has questionable validity.

3. Uncertainty

There is currently a great deal of uncertainty about how the new Court will operate, especially in the early days, in the absence of a body of case law. This initial uncertainty is likely to favour NPEs, since it will be harder to predict how a case will be decided, increasing the pressure to settle before trial.

Once the UPC is established there will be a period during which patent owners can ‘opt out’ of the exclusive jurisdiction of the Court. During the early years, this will allow patent owners to continue to use national courts, while there is uncertainty over how the UPC will operate.  Many European practitioners anticipate that conventional applicants are likely to exercise this opt out, provided the fee for doing so is not exorbitant. For a NPE there are likely to be more advantages in the UPC than the current system, meaning that few are likely to opt out of the Court’s jurisdiction. This means that a significant number of early cases in the UPC may involve NPEs.

Promega v. Life Tech, pt. 2: Inducing Oneself

By Jason Rantanen

Promega Corp. v. Life Tech. Corp. (Fed. Cir. 2014) Download Promega v. Life Tech
Panel: Prost (dissenting-in-part), Mayer, Chen (author)

Before the holidays, I wrote about the enablement issue in this case.  Today I’ll talk about the inducement issue, which involves two significant—and probably erroneous—doctrinal developments.  I say “probably erroneous” because in my view at least one, if not both, would likely be reversed by the Supreme Court were it to grant cert.

The short version is that the majority held that in 35 U.S.C. § 271(f)(1), “induce” means “specific intent to cause” and “a substantial portion of the components” includes “a single important or essential component.”  The consequence of the former is that one can induce oneself; the consequence of the latter is that merely supplying a single “main” or “major” component of the claimed invention is sufficient for purposes to 271(f)(1).  Judge Prost dissented as to “induce” and would not have reached the “substantial portion” issue.

The patent claim: The asserted claim, claim 42 of patent No. RE 37,984, is directed to “[a] kit for analyzing polymorphism in at least one locus in a DNA sample.”  The claim limitations involve vessels containing a variety of materials: a mixture of primers, a “polymerizing enzyme suitable for performing a primer-directed polymerase chain reaction,” adenosine, guanine, cytosine and thymidine, a buffer solution, and template DNA.

LifeTech’s activities: LifeTech manufactured Taq polymerase in the United States and shipped it to its facility in the U.K. where it was combined with foreign-manufactured components to produce kits containing all the claimed elements.  While some of the kits were sold in the United States, the main issue on appeal involved kits that never entered the United States.  Taq is indisputably “a polymerizing enzyme suitable for performing a primer-directed polymerase chain reaction.”

Procedural History: At trial, the jury was instructed to consider liability for all “United States sales,” which included “all kits made, used, offered for sale, sold within the United States or imported in the United States as well as kits made outside the United States where a substantial portion of the components are supplied from the United States.” Id. at 11 (emphasis added).  LifeTech preserved its challenge to the italicized language.  The jury returned a verdict finding that “all of LifeTech’s worldwide sales were attributable to infringing acts in the United States.”  Id.  The district court subsequently granted JMOL in LifeTech’s favor.

On appeal, Promega challenged the court’s grant of JMOL as to both sales infringing under 271(a) and under 271(f)(1).  The Federal Circuit focused primarily on the 271(f)(1) issue. 35 U.S.C. § 271(f)(1) states:

Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

(emphasis added).  LifeTech raised two legal grounds for affirming the district court’s grant of JMOL.  First, it argued that 271(f)(1) requires inducement of another; one cannot induce oneself.  Thus, it could not be liable under 271(f)(1) for exporting the Taq polymerase to itself to combine with the other components.  Second, it argued that 271(f)(1) requires that a “substantial portion” of the components be exported; “one” component is not a “substantial portion” of the components.

For 271(f)(1), one can induce oneself: The majority first rejected LifeTech’s argument that 271(f)(1) should be interpreted as requiring another person to be induced.  Rather, it means “merely the specific intent to cause the combination of the components of a patented invention outside the United States.”  Slip Op. at 23.  In reaching this conclusion, it first looked to the dictionary definition of “induce,” observing that it means “to bring about, to cause.”  Id.  From this, it concluded that “[t]he object of the transitive verb ‘induce’ can either be a person or a thing, such as an activity or result.”  Id.  Here, it is the activity that is being “induce[d]”: “The statute is written such that an activity—”the combination”—is the object of “induce,” not a person.”  Id.  Thus, no third party is necessary.  Furthermore, “[h]ad Congress wanted to limit “induce” to actions contemplated by two separate parties, it could easily have done so by assigning liability only where one party actively induced another “to combine the [p]atented components.”  Id.  To bolster its conclusion, the majority drew upon its reading of the legislative history and what it divined as Congress’s intent in passing the statute.  The result is to effectively turn the word “induce” into word “cause.”

The majority’s pseudo-textualist analysis: I’m thoroughly unconvinced by the majority’s analysis.  Setting aside the majority’s reading of the legislative history, which Judge Prost criticizes in her dissent, its textual analysis is deeply flawed.  Proper textualism involves the consideration of the ordinary meaning of words, evaluated in context, and an application of the canons of statutory construction.  But just as in patent law, “ordinary meaning” doesn’t just mean “ordinary meaning.”  Rather, terms with a legal meaning (such as “person”) are given their ordinary legal meaning.   The problem with the majority’s analysis begins with its reliance on a general-purpose dictionary for a term that has a well-established legal meaning and goes downhill from there.

While “induce” might mean “to bring about, to cause” in the general-usage context, in the legal context—and particularly the patent law context—its meaning invariably involves a relationship between two separate persons.  I am not aware of any instances (but would be interested to learn of them) where courts have interpreted “induce”  as encompassing one’s own performance of the proscribed acts.  This is especially true with respect to 271(b), where both the Federal Circuit and the Supreme Court have written extensively about the requirements for the relationship to rise to the level of inducement.  One would not “induce” infringement of a patent by using a machine to carry out a claimed process; one would be liable for direct infringement.  To treat the word as if it were necessary to start from first principles, looking it up in a general purpose dictionary, is to ignore all of this well-established legal meaning.

As part of my background reading for this post, I took a look at Bryan Garner’s Black’s Law Dictionary.  Here’s his entry for “inducement” (there is no separate entry for “induce”), defining it as “The act or process of enticing or persuading another person to take a certain course of action”:

Garner 1999 InducementCongress did not have the benefit of Professor Garner’s text in 1984, when it passed 274(f); this definition comes from the 1999 version of Black’s.*  But my sense is that Garner’s definition is a lot closer to the legal meaning of “actively inducement” than “http://www.merriam-webster.com/dictionary/induce.”  Slip Op. at 23.  And to the extent it is descriptive of the legal meaning, it unquestionably supports the interpretation as involving another person.

Edit to add a legal citation: “It is, however, well established that “[w]here Congress uses terms that have accumulated settled meaning under… the common law, a court must infer, unless the statute otherwise dictates, that Congress means to incorporate the established meaning of these terms.”  CCNV v. Reid, 490 U.S. 730 (1989) (quoting NLRB v. Amax Coal Co., 453 U.S. 322, 329 (1981)).

“Congress knows how to say…”: In addition to its dictionary definition, the majority also observed that Congress could easily have included the word “another” in the statute.  The main problem with this interpretative principle is that it only applies when it’s clear that Congress actually does know how to say something.  Typically, the principle is invoked in the context of a parallel statute in which Congress actually said it.  See, e.g., Limelight Networks, Inc. v. Akamai Technologies, Inc., 134 S. Ct. 2111, 2118 (2014) (“As this provision illustrates, when Congress wishes to impose liability for inducing activity that does not itself constitute direct infringement, it knows precisely how to do so.”) (emphasis added).  Here, however, there is no such contrasting statute that contains that “something;” worse, the closest parallel—Section 271(b)—does not contain the word “another.”  Rather, it says simply “Whoever actively induces infringement of a patent shall be liable as an infringer.”

Edit to add a citation: “Ordinarily, ‘Congress’ silence is just that—silence.”  CCNV v. Reid (quoting Alaska Airlines, Inc. v. Brock, 480 U.C. 678, 686 (1987)).

Judge Prost’s Dissent: Judge Prost’s dissent identifies another problem with the majority’s interpretation: that interpretation is foreclosed by precedent.  “[W]e have never before held—in the context of either § 271(f) or § 271(b)—that a party can induce itself to infringe.  And for good reason: this conclusion runs counter to unambiguous Supreme Court precedent.”  Dissent at 2.

Twice the Supreme Court has held that inducement liability requires a third party. In interpreting the phrase “induces infringement” in § 271(b), the Supreme Court wrote that it requires “that the inducer lead another” or “persuade another.” Global-Tech Appliances, Inc. v. SEB SA, 131 S. Ct. 2060, 2065 (2011) (emphases added). Additionally, in Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., a case in the analogous copyright context, the Supreme Court stated that inducement is defined as “entic[ing] or persuad[ing] another” to infringe. 545 U.S. 913, 935 (2005) (emphasis added). The majority cannot point to a single case—from the Supreme Court or otherwise—that supports its contrary interpretation of inducement.

Id. at 2-3.

Judge Prost might go too far in arguing that the majority’s interpretation is foreclosed by precedent (As the majority points out, none of these cases directly confronted the question of whether one can “induce” oneself), but her underlying point is sound: these cases demonstrated that the meaning of “induce” is already well-established as requiring another person.

Multinational companies must be careful: As long as the accused party meets the “supplies…a substantial portion of the components” requirement, it will be liable for its own foreign combination of those elements.**   This has particular importance for multinational companies that engage in distributed manufacturing.  As a policy matter, the court’s decision pushes those companies towards one of two alternatives: purchasing their components from another (possibly US) supplier or simply making the components abroad.  Perhaps the lack of liability in this situation was an oversight in the statute, a statutory loophole.  But if so, the appropriate response would be—as was the case following Deepsouth—legislative action.  (I’m not convinced that it’s necessarily a loophole, but need to think further on that point.)

Every “essential” component is a “substantial portion of the components.”  The majority also interpreted the requirement that “all or a substantial portion of the components of a patented invention” be supplied, concluding that “substantial portion of the components” includes “a single important or essential component.”  Slip Op. at 27.  Here, that component was the Taq polymerase, a widely-used enzyme for polymerase chain reaction.  The court concluded that supplying Taq was enough based on the following evidence: “Without Taq polymerase, the genetic testing kit recited in the Tautz patent would be inoperable because no PCR could occur.  LifeTech’s own witness admitted that the Taq polymerase is one of the “main” and “major components of the accused kits.”  Id. at 32.  As the Taq example demonstrates, under the court’s interpretation any component of a patented invention is an essential component.  If one removes Taq, the kit won’t work; if one removes the primers, the kit won’t work; if one removes the nucelotide bases, the kit won’t work.  This has the potential to greatly expand liability under 271(f)(1).

Rendering 271(f)(2) superfluous: In my view, the majority’s textual analysis of  “substantial portion” suffers from similar flaws as its analysis of “induce.”   The deepest, however, is that by reading “substantial portion” as it does, the majority renders 271(f)(2) superfluous.  That section states:

(2) Whoever without authority supplies or causes to be supplied in or from the United States any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use, where such component is uncombined in whole or in part, knowing that such component is so made or adapted and intending that such component will be combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

Under the majority’s interpretation of “substantial portion,” 271(f)(1) reads:

“Whoever without authority supplies or causes to be supplied in or from the United States an important or essential component of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.”

The only differences between the two are that (f)(2) is limited to components that are “especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use;” a knowledge of infringement requirement in (f)(2); and the “intending that such component will be combined” language of (f)(2) versus the “in such manner as to actively induce the combination” language of (f)(1).  The first two differences make (f)(2)’s scope narrower than that of (f)(1), and the third does not constitute a meaningful difference under the majority’s interpretation of “actively induces.”***  The result is that, under the majority’s interpretation, I can’t envision any conduct that would fall within (f)(2) that would not also fall within (f)(1).

*The older definition of “induce” from Black’s doesn’t provide much interpretative help in my view.  See Black’s Law Dictionary, Fourth Edition (West 1951) (defining “induce” as “to bring on or about, to affect, cause, to influence to an act or course of conduct, lead by persuasion or reasoning, incite by motives, prevail on”) (this definition was carried forward through at least the 1990 version). Part of my ambivalence is that without looking at the source of the definition, it’s not clear that another party isn’t required.  And once you look at the source of the definition, it’s apparent that the case wasn’t talking about the legal meaning of “induce” but it’s general purpose meaning.  See State v. Stratford, 55 Idaho 65 (Idaho 1934).

**Nor does the argument that the majority’s interpretation still imposes an “intent” requirement change the analysis.  The majority concludes that “actively induce the combination” means “merely the specific intent to cause the combination of the components of a patented invention outside the United States.”  Slip Op. at 23.  This is nothing more than a volitional conduct requirement: a person that combines the elements will necessarily have the “specific intent to cause the combination” except in very rare, very unusual circumstances.  And the jury instruction discussed above did not mention any requirement of intent.

***If “actively induce” were interpreted as requiring the participation of a third party, then there might be a difference between the two in that a reasonable reading of 271(f)(2) is that it covers one’s own combination of the components.

Side note: This appeal is one of the two that were at the heart of In re Reines; Ed Reines represents LifeTech.  In the other appeal, the district court’s judgment in favor of Promega was summarily affirmed in March.

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