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Dow v. Nova: “Nautilus changed the law of indefiniteness”

By Jason Rantanen

The Dow Chemical Company v. Nova Chemicals Corporation (Fed. Cir. 2015) Download Opinion
Panel: Prost, Dyk (author), Wallach

Earlier this year in the opinion on remand in Biosig v. Nautilus, Judge Wallach rejected the argument that the Supreme Court’s opinion on the indefiniteness doctrine  “articulated a new, stricter standard.”  783 F.3d 1374, 1379 (Fed. Cir. 2015).  Instead, the Court  “modified the standard by which lower courts examine allegedly ambiguous claims; we may now steer by the bright star of ‘reasonable certainty,’ rather than the unreliable compass of ‘insoluble ambiguity.’”  Id. The thrust of Judge Wallach’s opinion was that the problem the Supreme Court saw with the Federal Circuit’s previous indefiniteness doctrine was not with the standard that the Federal Circuit was actually applying; it was that the words the Federal Circuit had been using could lead district courts astray.

Dow v. Nova presents a dramatic contrast, one that (in my view) goes a long way towards righting the boat.   Here, Judge Dyk reiterates in the strongest words since Nautilus that the Court’s opinion clearly changed the standard for indefiniteness.  There is no hint of mere Supreme clarification in this opinion, as the outcome turns entirely on whether the pre- or post-Nautilus standard applies.  Under the old standard, the result at the Federal Circuit was that the claims were definite; under the new standard, the result was that they are indefinite.  And given the purely nondeferential review applied in both cases, this pair of cases provides possibly one of the neatest examples of how a legal standard can be outcome determinative.

Background: In 2010, Dow obtained an infringement judgment against NOVA, with a jury rejecting NOVA’s indefiniteness argument.  The Federal Circuit affirmed in 2012, holding that the patents were not indefinite under its pre-Nautilus precedent.  On remand, the district court held a bench trial on supplemental damages for the period after the judgment through expiration of the patents (October 2011). While NOVA’s appeal was pending, the Supreme Court issued Nautilus.  NOVA argued that this intervening decision required the supplemental damages award to be vacated because the patents are invalid for indefiniteness.

Bars to re-litigation of indefiniteness: Nova’s challenge faced a substantial procedural hurdle, however.  Because it had litigated, and lost, its indefiniteness challenge, it would ordinarily be barred from re-litigating that issue under the doctrine of issue preclusion or law of the case.  (Claim preclusion does not apply under Federal Circuit precedent because a claim based on continuing conduct constitutes a separate claim.)     “[T]he doctrine [of law of the case] posits that when a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages in the same case.”….Issue preclusion “bars ‘successive litigation of an issue of fact or law already litigated and resolved in a valid court determination essential to the prior judgment.’” Slip Op. at 11 (citations omitted).  However, “when governing law is changed by a later authoritative decision,” these two doctrines do not apply.  Id. at 12.

Nautilus and change in law: There are three requirements for the change in law exception to apply: (1) “the governing law must have been altered;” (2) “the decision sought to be reopened must have applied the old law;” and (3) “the change in law must compel a different result under the facts of the particular case.”  Slip Op. at 14-15.  Here, the court held, those requirements were met by the Nautilus opinion.  “First, there can be no serious question that Nautilus changed the law of indefiniteness. This was indeed the very purpose of the Nautilus decision.”  Slip Op. at 16.  Second, the earlier decision in Dow applied the old law:

Dow argues that our opinion in the previous appeal was not inconsistent with
Nautilus and that we did not apply the “amenable to construction” or “insolubly ambiguous standard.” But the fact that we did not include that particular language does not mean that we were not applying the prevailing legal standard. We cited Exxon, see Dow, 458 F. App’x at 917, which Nautilus specifically cited as exemplary of the rejected Federal Circuit standard…..We also explained that “the test for indefiniteness is not whether the scope of the patent claims is easy to
determine, but whether ‘the meaning of the claim is discernible, even though the task may be formidable and the conclusion may be one over which reasonable persons will disagree.’” Id. at 920 (quoting Exxon, 265 F.3d at 1375). This language corresponds exactly to the “amenable to construction” or “insolubly ambiguous” standard rejected in Nautilus.

Slip Op. at 17-18.

Third, the outcome was different under the Nautilus standard than under the pre-Nautilus caselaw.  Here, the issue was a measurement problem: which methodology should be applied to determine the “slope of strain hardening.”  “Three methods existed to determine the maximum slope, each providing, as Dow admits, “simply a different way of determining the maximum slope.”  Slip Op. at 21 (emphasis added).   None of these methods were taught in the patent, nor did it provide “any guidance as to which method should be used or even whether the possible universe of methods is limited to these four methods.”  Id. at 23.  And Dow’s expert used a fourth method, which he used after applying “only his judgment of what a person of ordinary skill would believe.”  He did not testify that one of ordinary skill in the art would choose his method over the three known methods.

Under the previous indefiniteness standard, the court observed, that Dr. Hsaio had developed a method for measuring maximum slope was sufficient.  But under the Nautilus standard, “this is no longer sufficient:

The question is whether the existence of multiple methods leading to different results without guidance in the patent or the prosecution history as to which method should be used renders the claims indefinite. Before Nautilus, a claim was not indefinite if someone skilled in the art could arrive at a method and practice that method. Exxon, 265 F.3d at 1379. In our previous opinion, relying on this standard, we held that the claims were not indefinite, holding that “the mere fact that the slope may be measured in more than one way does not make the claims of the patent invalid.” Dow, 458 F. App’x at 920. This was so because Dow’s expert Dr. Hsiao, a person skilled in the art, had developed a method for measuring maximum slope. See id. at 919–20.

Under Nautilus this is no longer sufficient.  “[A] patent is invalid for indefiniteness if its claims, read in light of the specification delineating the patent, and the prosecution history, fail to inform, with reasonable certainty, those skilled in the art about the scope of the invention.” 134 S. Ct. at 2124; see also id. at 2129 (“[W]e read § 112, ¶ 2 to require 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.”). Here the required guidance is not provided by the claims, specification, and prosecution history.

Slip Op. at 23-24. That an expert chooses to use a particular measurement technique is insufficient for meeting the requirements of indefiniteness.  “As we held in Interval Licensing, a claim term is indefinite if it “leave[s] the skilled artisan to consult the ‘unpredictable vagaries of any one person’s opinion.’”  Slip Op. at 25.  Perhaps this could have been satisfied by expert testimony as to which methodology a person of ordinary skill in the art would have used, but that will be a question for another day.

Some more thoughts on the opinion:

  • The opinion takes pains to distinguish Biosig v. Nautilus.  In Biosig, the question was how one of ordinary skill in the art would determine what “spaced relationship” meant.  There, “we held that the prosecution history, the language of the claims, and the knowledge of one skilled in the art demonstrated that “a skilled artisan would understand the inherent parameters of the invention as provided in the intrinsic evidence” and that the claim term at issue “informs a skilled artisan with reasonable certainty of the scope of the claim.”  Dow at 25, n. 10.   One way to think about Nautilus is that it’s really about figuring out the meaning of words in the claim, whereas this case and Teva are really about how to determine whether those words, with their meaning understood, are met.
  • The weird tension about indefiniteness being a question of law but involving factual determinations remains.  Here, the issue was originally tried to a jury (probably erroneously as the Federal Circuit implied in the original Dow opinion), and the Federal Circuit’s analysis here focuses less on interpreting the text of the claims and more on identifying which measurement methodology a PHOSITA would have picked (which sounds like a factual question to me).  Regardless of this tension, I’d expect that in future cases knowledgeable counsel will make sure that there’s good support for the particular measurement methodology used by their experts, with the experts also providing support for the proposition that their methodology is the one that a PHOSITA would have used.
  • Another way to think about this case is in tandem with Wiliamson v. Citrix, in which the Federal Circuit relaxed the difficulty of invoking § 112, para. 6 when the words “means” or “step” aren’t used in the claim.  The effect of that decision was to make it riskier to use functional language in a claim when no corresponding structure is disclosed in the specification.  Dow moves in a similar direction: when no measurement methodology is described or suggested in the specification, functional limitations such as the one here may render the claim indefinite, at least when a PHOSITA would not know which of several possible methods to use.
  • Lisa Larrimore Ouellette discusses the decision on the Written Description blog as well.

Sequenom’s Patent

Sequenom’s patent claim in question:

1. A method for detecting a paternally inherited nucleic acid of fetal origin performed on a maternal serum or plasma sample from a pregnant female, which method comprises:

amplifying a paternally inherited nucleic acid from the serum or plasma sample and

detecting the presence of a paternally inherited nucleic acid of fetal origin in the sample.

The big idea here was to recognize that fetal DNA might be floating around in the mother’s blood and that the fetal DNA could be selectively amplified by focusing on the paternally inherited portion of its DNA (rather than the maternally inherited).

The claim itself has two simple steps: (1) amplifying paternally inherited DNA from a plasma sample from a pregnant female and then (2) detecting the presence of the DNA. The technology for amplifying and detecting was already well known at the time of the invention here.  Further, these two steps are the ones always almost used to detect particular DNA.

The invention here solves a very practical problem accessing fetal DNA without creating a major health risk for the unborn child.  Of course, the problems solved in Mayo and Alice were also very practical and that fact did not change the result.

I am hard-pressed to see how this claim overcomes Mayo/Alice.  The “big ideas” expressed in the invention are seeming laws of nature and the idea of amplifying paternal DNA just relies upon a natural correlation in the same way that the inventors relied upon the drug metabolite in Mayo.  The actual implementation of these ideas appear preemptive of the ideas and rely only upon well known and expected implementation steps.

To me, the push for en banc review is – at its heart – either a showpiece for the Supreme Court or a request to undermine the Supreme Court’s precedent.

Drawing Severable Lines in Claim Construction

Inline Platics v. EasyPak (Fed. Cir. 2015)

In this claim construction case, the Federal Circuit has reversed in favor of the patentee – finding that the district court improperly limited the claims to a specific embodiment. Here, the patents at issue are directed toward tamper-resistant food packaging. The idea behind the invention is easy to see from the drawings. A plastic lid connected to the plastic base by a perforated strip. The claims identify this perforated portion as a “frangible section” and the district court interpreted that language to mean “a removable tear strip, delimited by at least two severable score lines.” The result of that construction was that the accused EasyPak containers didn’t infringe.

On appeal, the Federal Circuit held that the lower court improperly narrowed the construction. The district court had offered the prosecution history as a reason for limiting the definition to the particular embodiment. However, the appellate court (reviewing this intrinsic evidence de novo) found the district court’s conclusions of the file wrapper “inaccurate” and noted that the specification included an embodiment with a single score line.

Judge Newman offered the Federal Circuit’s opinion that leads me to the conclusion that nothing-much has changed in the area of claim construction following Teva v. Sandoz, 135 S.Ct. 831 (2015).

In its pending petition for writ of certiorari in MobileMedia Ideas v. Apple, MobleMedia asks a number of follow-on questions:

1. Did the … Federal Circuit violate due process by summarily reversing a patent infringement judgment based upon a new and unprompted claim construction without remand to the district court in denial of Petitioner’s right to present evidence at trial and fully and fairly litigate the matter of infringement for the first time based on the new construction?

2. What standard should apply to denying remand for trial on a new claim construction used by the Federal Circuit to summarily reverse a patent infringement judgment?

3. Has the Federal Circuit effectively rendered Markman hearings and rulings meaningless by creating an unworkable, burdensome and judicially inefficient precedent that will require plaintiffs to present evidence at trial of every imaginable claim construction?

(Pending Petition Case No. 15-206, mobilemediapetition).

Guest Post by Profs. Lefstin & Menell on Sequenom v. Ariosa

In a parallel post, Dennis summarized the numerous amicus briefs filed in support of Sequenom’s petition for rehearing en banc.  Below, professors Jeffrey Lefstin (Hastings) and Peter Menell (Berkeley) discuss the core issues raised in their amicus brief.

Don’t Throw Out Fetal-Diagnostic Innovation with the Bathwater:
Why Ariosa v. Sequenom Is an Ideal Vehicle for Constructing a Sound Patent-Eligibility Framework

By Jeffrey A. Lefstin and Peter S. Menell
Over the past five years, the U.S. Supreme Court has reinvigorated patentable subject-matter limitations, issuing four significant decisions after nearly three decades of dormancy.  These decisions reflect justifiable concerns about the patenting of abstract business methods and laws of nature. Just as importantly, they reveal internal inconsistencies and confusion about the scope of patentable subject matter and tension with the centuries-old fabric of patent-eligibility jurisprudence. As Justice Breyer remarked at the oral argument in Alice Corp. v. CLS Bank Int’l (2014), the Mayo (2012) decision did no more than “sketch an outer shell of the content” of the patent-eligibility test, leaving much of the substance to be developed by the patent bar in conjunction with the Federal Circuit.

Two of the Supreme Court’s recent patent-eligibility decisions (Bilski and Alice) involve non-technological business methods.  Mayo glosses over several key issues, including how to reconcile prior discordant decisions (Flook and Diehr), and whether the requirement of “inventive concept” demands an unconventional application, or merely more than the generic instruction to “apply the law.” And Myriad departs from Mayo in a critical respect in that it authorizes patentability for a conventional transformation of a natural compound.

Unfortunately, the Federal Circuit’s panel decision in Ariosa v. Sequenom elides the critical questions.  In view of Congress’s reluctance to weigh in on the scope of patentable subject matter and the Supreme Court’s signals to the patent bar and the Federal Circuit to bring coherence to these rough outlines, Ariosa v. Sequenom marks a critical juncture in the development of a modern patent-eligibility framework.  Failure to vet these issues risks undermining the patent system’s role in promoting biomedical research.  Beyond Supreme Court review, which is never guaranteed (consider the havoc wreaked by the Court’s passing on State Street Bank), or corrective legislation (which is even more speculative), en banc review by the Federal Circuit presents the last clear chance to avert potentially dire consequences.

Our amicus brief urges the Federal Circuit to grant en banc review in Ariosa v. Sequenom to ventilate the critical issues left unanswered by the Supreme Court’s patent-eligibility decisions.  Although some language in Mayo could be interpreted to set forth unconventional or inventive application as a possible test for patent-eligibility, Mayo suggests two other possibilities for an “inventive concept”: non-preemptive application; and non-generic application – that is, more than a statement of a natural law coupled with an instruction to apply it.  While the panel was correct to perceive that Mayo describes preemption as the underlying justification for the patent-eligibility doctrine, not the operative test, we believe that the panel was incorrect to conclude that Mayo dictates unconventional or inventive application.

Our brief further shows that the Ariosa panel decision conflicts with several strands of prior Supreme Court decisions.  The panel decision jeopardizes valuable innovation in diagnostic research and other biomedical fields as unintended fallout of the Supreme Court’s justifiable desire to discard vague and non-technological business method patents.  The primary responsibility for developing patent-eligibility doctrine now rests with the Federal Circuit and this case presents an ideal vehicle for explicating sensible jurisprudential boundaries.

Jeffrey A. Lefstin is Professor of Law at the University of California Hastings College of Law.  Peter S. Menell is Koret Professor of Law and a Director of the Berkeley Center for Law & Technology at the University of California at Berkeley School of Law.  Their amicus brief in support of en banc review in Ariosa v. Sequenom is available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2652452

In Brief: Amici Provide Reasons to Reconsider Ariosa v. Sequenom

[This post includes links to the 12 amicus briefs supporting Sequenom’s petition for en banc rehearing in this Subject Matter Eligibility Case.]

by Dennis Crouch

Ariosa Diagnostics, Inc v. Sequenom, Inc. (Fed. Cir. 2015) (en banc petition 2015)

This subject matter eligibility case revolves around an important scientific discovery that a pregnant woman’s blood plasma/serum contains fetal DNA and that the fetal DNA can teased-out by amplifying paternally-inherited sequences from the cell-free fractions of the mother’s blood. Sequenom’s patents focus on methods of prenatal genetic diagnoses that rely upon these discovery by the inventors. U.S. Patent No. 6,258,540.

Invalid: Applying Mayo v. Prometheous, the Federal Circuit held all the claims in-suit to be ineligible. In step one of the Mayo inquiry, the court found that the claims were all directed to a natural phenomenon: the existence of paternally-inherited cell-free fetal DNA (cffDNA) in the maternal bloodstream. In step two, the search for an ‘inventive concept,’ the court found that the practical implementation of the natural phenomenon was insufficient because it merely involved well known methods of amplifying DNA.  (CitingFlook).  Without an inventive concept beyond the excluded subject matter – the claims were left ineligible for patent protection.

In his usual understated approach, Professor Chris Holman identified the Federal Circuit decision “not good news for innovation in the life sciences.”  The USPTO has also seemingly delayed providing examiner’s with guidance on how to implement Ariosa during examination.

En Banc Rehearing Petition: The patentee has now put forward a strong move for rehearing en banc  with a well drafted petition and support from a host of amici. Aptly describing the core issue, Sequenom’s counsel Tom Goldstein explains:

[Under the Federal Circuit’s rule] the person who first discovers a natural phenomenon can never obtain a patent on any practical application of that new knowledge, however surprising or revolutionary the results, unless the steps she teaches to use it are independently novel. . . . that cannot be correct.

Read the Ariosa.Petition.  The petitioner’s main argument here is with the Supreme Court’s broad language used in Mayo that also revitalized Flook.  Of course, those cases conflict with other Supreme historic precedent. In the coming months, the Federal Circuit will decide this en banc request, but the case is very much being set-up for Supreme Court review.

The 12 amicus briefs filed in support of the petition are strong and well written.

My former boss Kevin Noonan is counsel of record for a group of 23 law professors, including Adam Mossoff, Dan Burk, Tim Holbrook, and Richard Epstein. The brief makes two main arguments: (1) the genetic diagnostic tests developed and commercialized here are the type “historically unforeseen invention” that the patent system is designed to promote; and (2) the panel’s approach here of requiring novelty beyond straightforward application of excluded natural phenomenon “would call into question nineteenth century patented innovation the Supreme Court deemed valid.”Read Ariosa.lawprof.  The sentiment of the Law Professor Brief is consistent with the brief filed by Matthew Dowd on behalf of JYANT Tech, explaining that “in Diamond v. Diehr … the [Supreme] Court explained that “a new combination of steps in a process may be patentable even though all the constituents of the combination were well known and in common use before the combination was made.” Read Ariosa.JYANT

As we will discuss in a parallel post, the brief of Professors Lefstin and Menell provide their reading of recent Supreme Court cases of Mayo and Alice — arguing that (1) a close reading shows that inventive application of a law of nature is not required but instead a non-preemptive or non-generic application; and (2) the Flook-type claim dissection is prohibited. Read Ariosa.Leftsin. This analyze-it-as-a-whole sentiment was repeated by the IPO Brief field by Tiege Sheehan as well as the brief from Amarantus filed by Gideon Schor. Read  Ariosa.IPO and Ariosa.Amarantus.

My Fellow Missouri Professor Chris Holman filed a brief on behalf of the major industry organizations BIO and PhRMA making the credible argument that all this is a very big deal in the diagnostic space and that the resulting uncertainty is having a negative impact on research. Read Ariosa.BIO.

Preemption: When the Supreme Court explained its two two-step approach in Mayo andAlice, it noted the purpose was to avoid preemption of any excluded subject matter — that is, to ensure that no single entity could claim exclusive sovereignty over an abstract idea, law of nature, or natural phenomenon.  Rather, those basic fundamentals of society should not be subject to private claims of right.  Although the purpose behind the test is preventing this preemption, the test itself seemingly does not ask whether preemption has occurred. In its brief, the NYIPLA argues that this fundamental question of preemption must be asked and the Mayo/Alice framework does not authorize a court to ignore that inquiry.READ Ariosa.IPLA.  This focus on preemption is repeated by WARF’s brief filed by Dan Bagatell — writing that “the critical question is whether a patent impermissibly claims and prevents others from using a natural phenomenon, law of nature, or abstract idea itself, or instead permissibly claims a practical application of one of those things.”Read Ariosa.WARF.

Myriad‘s counsel Benjamin Jackson filed a brief on behalf of the industry organization21st Century Medicine that challenges the “gist” method of determining whether a claim encompasses excluded subject matter and suggests that the claim here is simply a technological improvement over the prior art.

Sequenom’s patent teaches it was known in the art that fetal cells can pass into the mother’s blood. Diagnostic techniques had been devised to isolate these cells and analyze fetal DNA extracted from them, but these techniques were expensive and time consuming. The phrase “cell-free fetal DNA” was therefore not an attempt to claim a natural phenomenon but instead a key claim limitation to distinguish over the art. Fifteen years ago, back when patent claiming and examination focused on prior art rather than ill-defined “natural phenomena,” Sequenom appropriately emphasized that its methods used cell-free fetal DNA rather than the cell-derived fetal DNA known in the art.

Thus, the claimed invention is a significant technical improvement in the laboratory process for prenatal diagnosis, allowing laboratories to eliminate the costly and labor-intensive step of isolating fetal cells and then fetal DNA. Such an inventive improvement to the technical performance of an existing technological process is precisely what patents are for.

Read Ariosa.21st. The Novartis brief, filed by its in house counsel Corey Salsberg, makes the important point eligibility has become a tougher test that patentability (nonobviousness). Read Ariosa.Novartis.

Taking a more international approach,Paul Cole and Donald Zuhn teamed-up to file a brief indicating, inter alia, that the panel’s approach in Ariosa creates a potential TRIPs Violation. “This case is an example of an internationally discordant, not harmonious, result, contrary to the eligibility requirements of TRIPS Article 27.”  Read Ariosa.COLE. Similarly, the Bioindustry Association (BIA) also argues that the panel’s approach here means that U.S. eligibility is substantially narrower than that of our global trading partners. Read Ariosa.BIA.

The Federal Circuit may take several weeks to decide this en banc petition. This case is a hot potato and the court’s likely reason for ducking the case would be to avoid being scalded.

 

Citing References – An Alternative Look

A lot has been said for the increased number of references being submitted to patent examiners. It is true that the average number of references submitted per application continues to skyrocket and for patents issued in 2015 that average number is 40 references. However, the average is skewed by a relatively small number of applications with an unusually large number of references cited.

If we look at the median case — the number of references remains reasonable. The chart below shows the median number of references submitted by patentees – grouped according to patent issue year. 1 out of every 6 recently issued patents included no prior art submissions by the patentee.

Patentlyo Bits and Bytes by Anthony McCain

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PTO Proposed Pilot Program on IPR Initiation

Inter Partes Review (IPR) Trials have become an effective tool for cancelling invalid patent claims that lack novelty or fail the nonobviousness test. The IPR process has two main stages: Institution and Trial. At the institution stage, the Patent Trial and Appeal Board (PTAB) must determine whether the third-party challenge is sufficient enough to warrant a full trial on the merits of the challenge. The institution test outlined by the statute is a “reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.”

One design choice for IPRs is whether the judges who decide to institute the IPR should be kept-on to decide the ultimate merits of the trial. In its initial design of the process, the PTO determined that keeping the same judges provided for both efficiency and internal consistency. Thus, under the current rules, the same three APJs who decide whether to institute a trial also conduct the trial and ultimately decide the trial outcome.

A number of losing-patentees have argued that the process creates an improper bias or implicit presumption against the patentee during the trial stage. The basic idea is that a judge who sides with the challenger at the institution stage will be mentally locked-in to supporting the petitioner’s case and at trial will improperly give the presumption to the challenger rather.

The USPTO is now requesting comments on a proposed pilot program that would address these concerns. In particular, the PTO’s proposal is that the institution decision would be made by a single judge. If that judge decides to institute then the trial would be held before that single judge along with two additional APJs added to the panel who were not previously involved in the decision to institute.

The statute requires the two-step process and also requires a set of three APJs to decide the trial, but gives the USPTO authority to determine additional process elements. There are a host of alternative designs and structures available, such as an entirely new panel.

The PTO’s proposal benefits the PTO by requiring only one judge at the institution stage – likely allowing it to handle more cases. Right now, the PTO is looking for comments on the proposal. If those seem favorable, the PTO is likely to move ahead with a pilot program. Comments to PTABTrialPilot@uspto.gov by October 26, 2015.

I am personally concerned about the initiation decision by a single APJ.  Generally, you might think that three-judge panels would offer more consistent decisions because more eccentric judges would be outvoted.  However, there are team-project problems that can arise with panel decision making– often one or more panel member can check-out mentally and simply rely upon the decisions by a single judge.  I do not know which of these (if either) is more likely with PTAB judges.

 

A few notes on USPTO Progress

  • Filings Down?: USPTO expects application filings for FY2015 to be down 1.8% from FY2014. Most of this downward trend is in Request-for-Continued-Examination (RCEs) that the office usually counts as application filings. RCEs filings are down about 6% from FY2014 meaning that actual application filings have roughly held steady from FY2014.
  • Money Still There: Despite the drop in filings, fee collections are up over $3 billion. The USPTO is on schedule to spend about $200 million more than it collects – eating away about 1/3 of its operating reserve fund.
  • Petitions: PTO Dashboard has been updated with petitions information.
  • Ex Parte Appeals Backlog: For the first time in a decade, the backlog of ex parte appeals before the PTAB have begun to drop and are now below 23,000 pending cases. The appeals process is still about 2-years too long.
  • USPTO Solicitor Nathan Kelley is serving as the Acting Chief Administrative Judge of the PTAB as the PTO searches for a replacement for Chief Judge Smith. Although it is unclear to me, I expect that Kelley did go through the Constitutionally required appointment process.

Cancellation of Progressive’s Business Method Patents Confirmed on Appeal

Progressive Insurance v. Liberty Mutual Insurance (Fed. Cir. 2015)

This case stems from a set of seven overlapping post-grant-review proceedings (CBM PGR) before the Patent Trial and Appeal Board (PTAB) that Liberty Mutual filed against Progressive’s “business method” patents. The patents relate to auto-insurance pricing based upon customer vehicle use patterns – such as the number of sudden stops over a given period of time – as well as online insurance policy adjustments. See U.S. Patent No. 8,140,358 as an example.

In the Covered-Business-Method Review, the PTAB found a number of Progressive’s claims invalid as either anticipated or obvious. On appeal, the Federal Circuit affirms in all respects.

Two different proceedings for the same patent: Liberty Mutual filed two different CBM proceedings against the ‘358 patent. In one, the Board invalidated all claims except for 1, 19, and 20 while in the other the second the Board invalidated all claims of the patent. These two decisions were released about 1-hour apart.

The first challenge on appeal was that the second judgment was improper because – according to Progressive’s theory – the Board lost jurisdiction once it issued the first decision. That theory stems from Section 325(e)(1) that prohibits a petitioner from “maintain[ing] a proceeding before the Office” on issues that “reasonably could have” been raised during a post-grant review that has already reached a final written decision. The argument here is that, once the PTO reached the first final judgment that the second case should immediately disappear. On appeal, the Federal Circuit rejected that approach finding (1) that the statute does not prevent the PTO from maintaining the proceeding and in any event (2) the PTAB indicated that the two decisions were “concurrent” even though actually made public about 1-hour apart. Finally, the Court noted that the PTO has statutory authority to decide how to deal with multiple related proceedings.

Written Description and Claiming Priority: On the merits, a substantial amount of the problem here dealt with patent families and the difficulty in understanding whether a later claim can properly claim priority to an earlier filed application. The PTO typically (except in Hyatt’s case) does not require a patentee to expressly connect each patent claim with its effective priority date. As a result, those arguments are typically saved until later in litigation (thus, the benefit of filing a CIP . . . )

Here, the claims in question included an interface module that produce a “driver safety score” – construed by the PTAB to mean a “calculated insurance risk value associated with driver safety.” The priority application disclosed “rating factors” that might include safety factors, but did not expressly disclose a risk value associated only with driver safety. (Note the seeming subtle shift in construction by the Federal Circuit). In any event, the ruling is that the priority application disclosed the genus but not the later claimed species – as such it does not meet the written description requirement. In this situation, the result is that the priority filing date for the particular patent at issue here is pushed back to the later filing and that date was predated by the intervening prior art disclosures.

= = = =

It does not appear that Section 101 was raised as a challenge:

1. A system that monitors and facilitates a review of data collected from a vehicle that is used to determine a level of safety or cost of insurance comprising:

a processor that collects vehicle data from a vehicle bus that represents aspects of operating the vehicle;

a memory that stores selected vehicle data related to a level of safety or an insurable risk in operating a vehicle;

a wireless transmitter configured to transfer the selected vehicle data retained within the memory to a distributed network and a server;

a database operatively linked to the server to store the selected vehicle data transmitted by the wireless transmitter, the database comprising a storage system remote from the wireless transmitter and the memory comprising records with operations for searching the records and other functions;

where the server is configured to process selected vehicle data that represents one or more aspects of operating the vehicle with data that reflects how the selected vehicle data affects a premium of an insurance policy, safety or level of risk; and

where the server is further configured to generate a rating factor based on the selected vehicle data stored in the database.

 

Naming the Rule: Anticipating the Patent

Prior to the America Invents Act of 2011 (AIA), prior art were either (1) prior in time to the invention and thus anticipated the invention (e.g., 102(a), (e), and (g)); or (2) more than one-year prior to the application filing date and thus raised a statutory bar (102(b)). Within this schema, the pre-AIA Section 102 included the title of “Novelty and Loss of Right” where novelty refers to anticipation and loss of right refers to the statutory bar.

The AIA totally rewrote Section 102 and eliminated the notion of anticipating the invention and also altered the notion of the statutory bar. The new rules focus instead on the effective filing date of the invention create what looks a lot like the statutory bar of 102(b) (except for automatic one-year grace period). The rule is not about absolute novelty in terms of invention-date (as that term has always been used in the US) but instead about filing of an application before prior art emerges. Although this seems to fit within what we used to call the statutory bar, Congress included “novelty” within the title of the new Section 102(a) and left-out loss of rights.

Although we understand how the statute is supposed to work, we’re left with the small matter of crystalizing the name for prior art that qualifies under post-AIA 102. It doesn’t necessarily anticipate the invention – and congress appeared intent on moving away from the passive loss-of-rights designation. We could spell-out “qualifies as prior art under Section 102”, but that’s not the kind of identifier that sticks. I propose using the middle ground of “anticipating the patent” or “anticipating the application,” depending upon whether a patent has yet issued. This proposal seems to fit within Congressional intent but also implicitly recognizes that we’re no longer concerned with the invention date but instead the key patent date (i.e., effective filing date). This approach seems to also roughly fits with the language used by European Courts that have long focused on filing dates. Overall, this is not a big deal, but it may end up being important to get the words right.

Federal Circuit: We don’t Decide Claim Construction in the Abstract

Personalized User Model, LLP v. Google Inc. (Fed. Cir. 2015) (Part II).

In Part I, I discussed the aspect of this decision dealing with the statute-of-limitations for dealing with an inventor who had (allegedly) breached his employment agreement by failing to assign patent rights. In Part II here I focus on the second important portion of the decision – a holding that the appellate court has no jurisdiction to address a claim construction appeal unless the result would impact the outcome of the case at hand.

At the district court, Google won the case based upon a finding of invalidity and non-infringement. The patentee (PUP) did not appeal those holdings, but did ask the court to review the lower court’s claim construction – arguing that the district court misconstrued the term “document” and that mis-construction may well impact future litigation of other claims in the patent family in the form of collateral estoppel (issue preclusion)

On appeal, the Federal Circuit refused to consider the claim construction appeal – finding that the appellate panel would be in violation of the US Constitution if it heard the case. In particular, the Federal Circuit panel held that the dispute over claim construction offered no case or controversy as required by Article III of the US Constitution.

Despite PUM’s concerns that the construction might be given preclusive effect in future litigation involving its related patents, we may not provide an advisory opinion on the meaning of a claim term that does not affect the merits of this appeal and thus is not properly before us.

Although it lost the appeal, asking the question may be good strategy on the part of the patentee here since the appellate court’s refusal to hear the appeal is potentially sufficient to negate the presumption that the patentee had a full and fair opportunity to litigate the issue. Thus, the result may be no issue preclusion.

– Dennis

Working through Old Patent Applications

The decision in Hyatt v. Lee (Fed. Cir. 2015) included a citation to a June 2013 letter submitted by then Acting Director Terry Rea to the Senate Judiciary Committee. The letter was submitted in a response to a Senate request for information regarding still pending patent applications filed pre-GATT.

Rea reported that 482 applications are still pending that were filed prior to June 8, 1995. That cutoff is important because those applications – if ever issued as patents – will be entitled to 17-year patent terms following the issue date.  Applications filed since that date are given 20-year terms that begin counting at the application filing date.

The letter goes on to list the serial number, inventor, assignee, priority date, and other information for each of the 482 applications.

Leading the pack is Gilbert Hyatt with 399 applications pending. Runner-Up is Personalized Media Communications (John Harvey) company with 38 applications pending.  The remaining ancient-application-owners are all smaller players with only one or two pending (as of 2013). These include UCB Pharma; Boeing; US Dept of HHS; Sanofi-Aventis; and US Smokeless Tobacco Company, as examples.

Although the letter does not so indicate, it is apparent to me that the data does not include applications kept from issuing due to secrecy orders.  On example is recently issued U.S. Patent No. 9,057,604 that was filed as an application in 1989 but did not issue till 2015 because of a secrecy order by the U.S. Government.  Since Rea’s letter, 30 of Harvey’s patents have issued. See link.

 

Federal Circuit Gives PTO “OK” to Treat Hyatt as a Special Case

Gilbert Hyatt v. Michelle Lee (Fed. Cir. 2015)

Hyatt is a highly successful patentee with more than 75 issued patents and hundreds of millions of dollars in licensing revenue. He also has over 400 patent applications pending before the USPTO that were all filed more than 20-years ago. Hyatt’s applications represent 80% of the applications still-pending that were originally filed prior to the June 1995 patent term transition. Because these old patent applications were filed under the old regime, if they ever issue they will be given a 17-year patent term extending from the issue date (barring a terminal disclaimer or prosecution laches finding). Many of these applications claim priority to much earlier filed applications – some claiming priority back in to the 1970s and most having a complex set of continuation and continuation-in-part applications.

According to the USPTO, these 400 pending applications have – on average – 300 claims each – resulting in about 120,000 pending claims – roughly the equivalent of 6,000 ordinary-sized applications.

I expect that many of Hyatt’s patent claims would cover chip and display technology that is now ubiquitous. If valid and enforceable then we’re talking billions of dollars in licensing fees. If the USPTO has anything to do about it, that result is not coming anytime soon.

Over the years, the USPTO has developed a number of special procedures for Hyatt applications. In 2013, the USPTO began issuing requirements that Hyatt limit each patent family to <600 claims absent a showing of necessity and also identify the earliest priority date for each chosen claim (along with links to the supporting disclosure).

The USPTO also indicated that it would publicize the family linkage of Hyatt’s (otherwise secret) applications. In particular, the disclosure would occur by placing the requirements in the file histories of all of Hyatt’s pending applications, some of which are public. Apparently, this requirements document includes a number of examples of how Hyatt applications overlap claim scope – relying upon specific claim texts of Hyatt’s otherwise secret applications.

In response, Hyatt filed a complaint in the E.D. Virginia asking the district court to enjoin the USPTO from disclosing information in violation of 35 U.S.C. 122(a) (“applications for patents shall be kept in confidence by the Patent and Trademark Office and no information concerning the same given without authority of the applicant or owner unless necessary to carry out the provisions of an Act of Congress or in such special circumstances as may be determined by the Director”). However, the district court dismissed the case for lack of jurisdiction and – in the alternative – held that the extraordinary nature of Hyatt’s situation created “special circumstances” that allowed for the publication.

Although the statute provides the PTO with seeming authority to determining when to disclose the confidential information (“special circumstances as determined by the director”), the Federal Circuit on appeal here found that the PTO’s power is both “narrow and reviewable.” In particular the appellate panel found that the PTO must “determine that special circumstances exist” and those special circumstances must be sufficient and particular enough to “justify the specific content to be disclosed.” However, because of the seeming discretionary nature of the statute, the Federal Circuit determined that it should review the PTO’s determination of these factors with deference and only overturn the PTO’s decision upon finding of an abuse of discretion.

In determining that the PTO had then acted within these requirements, the panel first held that the requirements were proper – given Hyatt’s unique and special status among patent applicants. The court also found that the disclosure of confidential claim scope proper.

In light of the nature of Mr. Hyatt’s applications, longstanding PTO rules justify the issuance of the Requirements. 37 C.F.R. § 1.75(b) provides that, in a patent application, “[m]ore than one claim may be presented provided they differ substantially from each other and are not unduly multiplied” The PTO issued the Requirements to ensure that Mr. Hyatt’s applications complied with § 1.75(b). Given the extraordinary number and duplicative nature of Mr. Hyatt’s various pending applications, all drawn from the same 12 specifications, it was reasonable for the PTO to be concerned that the claims did not “differ substantially from each other,” and that some claims were “unduly multiplied.” § 1.75(b). In fact, in the Requirements the PTO demonstrates that across these applications, Mr. Hyatt has in numerous cases filed identical or nearly identical claims. This sort of redundant, repetitive claiming is inconsistent with § 1.75(b).

These special circumstances, which justify issuing the Requirements, also justify the disclosure of the confidential information contained in them. . . .

We hold that the Director did not abuse her discretion when she found that the “special circumstances” exception justified the otherwise-prohibited disclosure of the Requirements

It is fairly amazing to look at the effort going-in on both sides in Hyatt’s patent applications. One that is public and available in PAIR Application No. 05/849,812 that claims priority back to 1970 through a series of 20 continuations-in-part.

It’s News to Anthony McCain

Some of you may have noted that Anthony McCain is now writing Bits and Bytes posts for Patently-O.  Anthony is a 2L at Mizzou where he also earned a degree in Mechanical Engineering.  So far, I have asked Anthony to keep his posts straightforward without much extra commentary because he is new to blogging and is only now enrolled in my Patent Law course.  Once again I’m running Patent Law as a practically oriented class with time spent primarily doing projects, writing claims, amending applications, drafting briefs, and conducting hearings.  McKool Smith has sponsored our Patent Law Moot Court competition that will take place in November — winner gets $1,000.

Back to Anthony:

— Dennis

Rarity: Federal Circuit Reverses Jury Verdict of Non-Obviousness

ABT Systems and University of Central Florida v. Emerson Electric (Fed. Cir. 2015)

The patent at issue here is owned by UCF and covers a circulating fan system. U.S. Patent No. 5,547,017. Co-Plaintiff (licensee) ABT is the company started by Armin Rudd who is the named inventor on the ‘017 patent.

Prior art systems, such as the one in my house allow for the circulation fan to be left-on even when the air conditioning system is off in order to better distribute conditioned air. The improvement offered by Rudd is to turn on the fan only periodically “after a preselected time period.” That intermittent approach would save “energy and power.”

A jury found that Emmerson’s high-end “Big Blue” thermostats infringe and awarded $300,000 in damages based upon a royalty of $2.25 per unit. The jury also held that Emerson had failed to prove the claims invalid as obvious.

On appeal, the Federal Circuit has reversed – finding that the district court should have granted JMOL on obviousness.

Invalidating a Patent on Obviousness: The question of obviousness asks whether the “differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time of the invention was made to a person having ordinary skill in the art to which said subject matter pertains.” 35 U.S.C. 103(a)(pre-AIA). In KSR v. Teleflex, the Supreme Court held that a “combination of familiar elements according to known methods” that “yield[s] predictable results” is likely invalid as obvious.

Here, elements of the patented system were all known in the art as was the motivation of improving circulation at reduced cost. Likewise, one prior art reference disclosed a “single-shot” fan operation that came on one-time after a heating/cooling cycle and another disclosed period fan-only cycles at times when there was no call for heating. The question then is whether it would have been obvious to create the claimed system of periodically activating and deactivating the fan after a predetermined time following a cooling cycle. Applying KSR, the Federal Circuit found that the law requires an obviousness finding.

Commercial Success: ABT had also argued that the commercial success and long-felt need of the invention should provide enough weight to prove the invention nonobvious. Objective evidence of nonobviousness, such as commercial success, long-felt need, failure of others, copying, and unexpected results can each provide evidence for the analysis. On appeal, however, the Federal Circuit was not persuaded that ABT had proven its case. In particular, ABT did not present evidence particularly linking product commercial success to the claimed periodic fan operation. Likewise, there was no particular evidence presented that Emerson’s infringing product market was being driven in any way by the recycling feature. ABT does have a number of patent licensees that weigh in favor of nonobviousness. However, the Federal Circuit held that those licenses were insufficient to overcome the convincing case of obviousness coming from the prior art.

Holding: Patent Claims Obvious

New Rules on PTAB Trials

Earlier this year, the USPTO released a set of ‘quick fixes‘ to AIA trial procedures before the Patent Trial and Appeal Board (PTAB) and also promised second package of rule changes. That second package has now been detailed in the USPTO’s Proposed Rule Changes now found in the Federal Register. The proposed rules focus on a number of practical changes to PTAB Trial Procedures:

  • Testimonial Evidence (Such as Expert Declarations) in Patent Owner’s Preliminary Response (to be considered but viewed in the light most favorable to the petitioner when determining whether to institute an inter partes review proceeding)
  • Claim construction standards for patents about to expire (use actual construction for patents that “will expire” before final judgment rather than broadest-reasonable-interpretation)
  • Rule-11 Requirement associated with all papers filed with the PTAB – giving the USPTO “a more robust means with which to police misconduct.”

In her blog-post on the topic, USPTO Director Michelle Lee indicated that the USPTO will also “amend its Office Patent Trial Practice Guide to reflect developments in practice before the Office concerning how the Office handles additional discovery, live testimony, and confidential information.”

As part of the process, Director Lee also offers a “where we stand” set of statistics for the past three years of AIA filings:

  • 3,655 petitions, of which 3,277 are IPRs, 368 are CBMs, and 10 are PGRs.
  • 63% focus on patents from electrical/computer technology centers (TCs) and only 9% in the the bio/pharma TC.
  • Review Institution: Trials have been instituted on 1,389 of 3,277 IPR petitions, 185 of 368 CBM petitions, and 2 of 10 PGR petitions.
  • Trial results: 12% of total claims available to be challenged (4,496 of 38,462), were determined by the PTAB to be unpatentable in a final written decision. Other claims were either not challenged, resolved by settlement, cancelled, or upheld as patentable. Of the first IPRs to reach a conclusion, 25% of claims actually challenged (4,496 of 17,675) were found to be unpatentable.

According to Director Lee, the number of petitions is “around three times more” than what were originally expected by Director Kappos.

These statistics fit with those discussed by Richard Bone in his recent post.

Comments on the proposed rules go to trialrules2015@uspto.gov and discussions will be held at the upcoming roadshows: August 24, 2015 in Santa Clara, August 26, 2015 in Dallas, and August 28, 2015 at USPTO HQ.

Guest Post on Conflicting Claims: The Raw Statistics of PTAB Trials

Guest Post by Richard Bone. Mr. Bone is a partner at the VLP Law Group.

The popular view of the PTO’s new AIA reviews, or “patent trials”, is that they have been disproportionately unfavorable to patentees in their outcomes, provoking characterizations such as “patent death squad” for the Patent Trial and Appeal Board (PTAB), the body that administers the trials.

Yet the PTAB’s own statistics paint a different picture: that, in fact, as few as 25% of patent claims challenged are actually held “invalid” by the PTAB, and that figure actually represents only 11% of all of the claims in all of the patents which received at least one AIA challenge. That being the case, patent owners ought to be less fearful than most commentators suggest.

To understand the discrepancy between published statistics and public perception, it’s necessary to dissect the data. Fortunately the PTAB has made various layers of data available on its website. The data is cumulative over all petitions filed from the inception of AIA trials, in September 2012. For all data, the PTAB counts proceedings that have received a final adjudication, whether that be as a result of a settlement, or a request for adverse judgment by the patent owner, or because the PTAB issued a final written decision. Between September 2014 and April 2015, the data was presented on three occasions, as a sequence of bar-graphs condensed into a single graphic. From April 2015, the PTAB has presented the data monthly in a more informative manner, with multiple graphic representations and an accompanying narrative. From both formats, it’s possible to see what is going on, though the numbers mask a number of subtleties.

Just as patents are asserted on a claim by claim basis, so invalidity is adjudicated claim by claim. The overwhelming majority of patent trials to date have been Inter Partes Reviews (IPRs), with almost all of the remainder being “Covered Business Method Reviews” (CBMs). Although the PTAB’s data through January 2015 was presented in aggregate form for the two types of proceeding, the more recent data shows that, statistically, the outcomes of the two types of proceeding are very similar. In both an IPR and a CBM, the petitioner (party challenging the patent) must identify the claims challenged, and advance a ground of invalidity of each. The fee structure for filing an IPR or a CBM includes a challenge to up to 20 claims of a patent, but exacts an additional fee of $200 per claim challenged in excess of 20. Subsequently, if the petition is accepted and trial proceeds, the PTAB levies a further fee of $400 per claim in excess of 15 on which trial is instituted. With this type of fee structure, and accepting that – beyond the filing fees – there is an effort and therefore a cost to prepare a separate argument for each claim challenged, and that there is also an overall page limit for the petition, many petitioners may have been choosy over which claims to challenge. In some cases that choice will have been based on the patent claims asserted in litigation, which need not have been all of the claims in the patent. In others, it will have been based on an assessment that, after demolishing certain well-chosen claims, what remains of the patent is essentially toothless.

So, according to the PTO, through July 2015, in patents for which AIA petitions were filed, 47% of the claims were challenged. This number is little changed from the 45% figure from September 2014. However, the July 2015 numbers, when broken down into the different types of proceedings, show that across all CBMs 58% of patent claims were challenged. This could be because of the longer page limits for CBM petitions (80 pages vs. 60 pages for IPRs) but could equally be because Section 101 challenges are permissible in CBM’s: when arguing invalidity of an independent claim under section 101, it is not significant additional effort to argue invalidity of claims depending from it.

It has to be assumed from the way that the data is characterized that trials recently instituted that have not yet received a final adjudication are not included in the data. Because of the fact that a patent trial typically takes 18 months from filing a petition to issuance of a final written decision, any large scale trend that has happened recently will take some time to be reflected in the PTAB’s cumulative averages.

In any case, just based on claims challenged to date, patent owners could see – on average – patents surviving with more than half of their claims intact, not adjudicated as patentable per se but simply not challenged. Furthermore, the PTAB’s latest charts suggest that the numbers do not include the petitions that were wholly denied, and thus did not result in a trial. Thus, the reported data is based on petitions that resulted in a trial on at least one challenged claim. The statutes governing inter partes review state that trial should only be instituted if “there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition”, and this takes into account any preliminary response filed by the patent owner. If the petition was judged not to have met that standard for any claim challenged then trial does not proceed (the petition is “denied”): those claims are not included in the PTAB’s data and hence the overall numbers of surviving claims are actually slightly more favorable to patent owners because trial is not always instituted. It is difficult to calculate this effect precisely because in many instances multiple petitions are filed against a single patent and those several petitions are consolidated into a single proceeding for trial. It is not clear from the PTAB’s data how such petitions that formally do not proceed to trial on their own because they are subsumed into another proceeding are differentiated from those petitions that fall short on all challenged claims and thus lead to no trial on the challenged patent. Nevertheless, comparing fiscal years 2013, 2014, and the first 10 months of 2015, we are seeing a growing number of petitions denied: rising from 14% in 2013 to 32% in 2015, a trend that can only be welcome to patent owners.

The statistics for those claims on which trial is instituted become more complicated, however. As of September last year, the PTO reported that trial was instituted on 66% of challenged claims. By July of this year, that number had dropped slightly to 63% of all challenged claims in all types of petitions: however, CBM’s had an institution rate that was slightly above the average, at 65%.

At this point, looking at the situation from the point of view most favorable to patent owners, trial is only being instituted on 31% of the claims in the patents that have been challenged in an AIA review (and this may be a smaller proportion overall, if it is accepted that a growing number of petitions are being denied outright). It is also fair to say that any claim whose validity was challenged in an IPR or CBM petition and on which trial was not instituted has emerged from that process as a stronger claim, unless the claim escaped that evaluation because the parties entered a settlement even before the PTAB had issued a decision on whether to institute a trial.

Once trial has been instituted, however, patent owners appreciate that the claims proceeding to trial are in considerable jeopardy. For the claims that proceed to trial, the PTAB identifies 4 distinct categories of outcome: held unpatentable (in a final written decision); held patentable (in a final written decision); cancelled (e.g., by patent owner’s amendment), or disclaimed (by patent owner); and “remaining patentable”.

The last of these categories is perhaps the most controversial in the way that the numbers are presented, and one that has been least well understood. It arises from a settlement that precludes the need for a final written decision by the Board. According to the PTAB, by July 2015, 45% of all IPR’s in which trial was instituted were terminated by settlement. One has to assume that a common form of settlement permits the patent owner to retain their patent without an adjudication of invalidity of any of the challenged claims in return for dropping a contemporaneous infringement suit against the petitioner. Claims subject to a settlement in this way have been undoubtedly weakened by the fact of there being a determination of probable invalidity (an institution of a patent trial) in the public record, but they have nevertheless “survived” a formal written judgment from the PTAB.

Claims cancelled by the patent owner are a casualty of the proceeding and arise – most likely – from a desire by the patent owner to minimize the ongoing costs of defending the patent before the PTAB. In any view of the proceedings, an instituted IPR or a CBM is, to any patent owner, an expensive way to lose a patent.

The most important two categories, those claims that are found invalid, or whose patentability is upheld, by the PTAB in a final written decision are those that grab the headlines. Respectively, 42% and 9% of claims proceeding to trial are found invalid and valid. In the grand scheme of things, these are a small fraction of the total number of claims challenged (26% and 6%), and a still smaller fraction of the total number of claims in patents receiving challenges under the AIA. However, what is clear is that patent owners who have decided to fight to the very end are on the whole being severely bruised in the process. The PTO reinforces this point with a break out of 447 IPR trials to date that have “reached final written decisions”: in 2/3rds of them (295 trials), all claims on which trial had been instituted were found unpatentable; by contrast, only in 16% of final written decisions were all claims adjudicated to be patentable. In CBM’s these numbers are even further skewed in favor of petitioners: 79% of final written decisions in CBM’s involved wholesale invalidation of the claims taken to trial, whereas in only 4% were all of the claims upheld. When considered claim by claim, in CBM’s the validity of just 2% of claims are upheld in a final written decision of the Board.

There are a number of questions that the data do not answer: for instance, how many patents sustained a challenge to all of their claims and were ultimately found invalid in their entireties.

But it is clear how the gap between perception and the actual numbers can be bridged: final written decisions are on balance unfavorable to patentees, more so in CBM’s than in IPR’s. It is likely to be the most valuable claims that are contested in this way. Even though such claims represent a tiny proportion of all patent claims that came under jeopardy in an AIA review, it may be little consolation to patent owners that the claims they are left with – if any – are those they would have least interest in enforcing.

Patentlyo Bits and Bytes by Anthony McCain

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