Maria Pallante Out as Chief of Copyright Office: New Calls for Unified US Intellectual Property Office

In some interesting news – On Friday Oct 21st, Maria Pallante was apparently removed today from her post as Register of Copyright within the Library of Congress and Karyn Temple Claggett moved up as Acting Register.  According to reports, newly installed Librarian of Congress Dr. Carla Hayden ordered the change that involved Pallante being locked-out of her computer Friday morning.

An oddity – the US Copyright Office is part of the Library of Congress and thus under direct administration of Congress rather than the President (and Congress is not very good at running administrative agencies).  Under the current structure, the Register position is quite weak.  That said, Congress has recently relied upon the Copyright Office to make increasingly important market determinations.  However, the structure means that the President and Executive Agencies cannot rely upon the US Copyright Office for advice about copyright law or rely upon the agency to shape its policy.

In a 2012 post, I suggested creation of a United States Intellectual Property Organization (USIPO) akin to the UK IPO, Canadian IPO, and World Intellectual Property Organization (WIPO).  The structure would essentially be an expansion of the USPTO under presidential control although obviously still required to follow law set by Congress.  In 2012 I wrote that:

From a theoretical standpoint, it is unclear whether the [current] fractured administrative structure leads to rights that are either too strong or too weak.  What we can tell is that the [current] structure leads to a lack of coordination in administration of the various IP systems within the US.

A big problem with the fractured administration is that many operating businesses relying upon intellectual property (IP) rights typically do not focus on a single form of IP rights but instead take a layered approach that includes some combination of patent, trademark, copyright, contractual, employment, trade secret, and design rights, for instance. Each form of protection has weak points and overlapping coverage provides a greater level of certainty.  That overlapping nature also creates difficulties for users that hope to rely upon the public domain and fair use.  The overlapping approach suggests the need for a more unified administration approach to help ensure that IP rights serve their policy goals.

In her role as Register of Copyrights, Pallante had advocated transforming the Copyright Office into an executive agency.  It is unclear, however, whether those statements relate to her recent removal.


Medtronic: On Rehearing the Court Restates that IPR Termination Decision is Not Appealable

by Dennis Crouch

On rehearing in Medtronic v. Robert Bosch, the Federal Circuit panel has reaffirmed its earlier determining that the PTAB’s vacatur of an IPR institution decision is a decision as to “whether to institute an inter partes review” and therefore is “final and nonappealable.”  The original Medtronic decision had been released prior to Cuozzo v. Lee (2016) and the rehearing decision now explains that “nothing in Cuozzo is to the contrary.”

Although I continue to cringe at the prospect of no appeal, the decision here makes logical sense based upon the statutory and procedural structure. Here, the termination decision was based upon the petitioner’s failure to identify all real parties at interest — a core requirement of a complete petition.  Base upon that failure, the Board determined that the petitions were incomplete and therefore “cannot be considered.”  With that conclusion, the Board terminated the petitions and vacated the prior institution decisions.   In this framework, it makes sense for the termination/vacatur to be a decision on institution and thus not subject to appeal.  I could imagine a different scenario where the PTAB terminates an IPR based upon some other ground that is not a petition requirement — such as failure to prosecute or improper post-institution attorney conduct. In that hypothetical situation, the termination would be substantially divorced from the institution and – in my view – would no longer fall under the no-appeal requirement.

An additional difficulty with all of this stems from the pending Ethicon petition and the difference between action by the Director and action by the PTAB.  The statute separates the roles – indicating that the PTO Director’s role is in determining “whether to institute” an IPR.  Under the statute, the PTAB then steps in to conduct the trial.  Those separate roles were then combined by PTO regulation which states “The Board institutes the trial on behalf of the Director.” 37 CFR 42.4.   A question – unanswered in this case – is whether the Director’s regulatory delegation above should be interpreted to also extend to vacating and terminating petitions.  I’m not sure that it does. 

TC Heartland Law Professor Amicus Brief

In TC Heartland, the accused infringer has asked the Supreme Court to reset the law of venue and give effect to the statutory statement that infringement actions be brought either (1) “in the judicial district where the defendant resides” or (2)” where the defendant has committed acts of infringement and has a regular and established place of business.”  28 U.S.C. § 1400(b).   In its 1957 Fourco decision, the Supreme Court affirmatively answered this question.  However, Fourco has been undermined by subsequent Federal Circuit decisions.  Thus, the question presented again is the same as what was originally asked in Fourco: “Whether 28 U.S.C. § 1400(b) is the sole and exclusive provision governing venue in patent infringement actions and is not to be supplemented by 28 U.S.C. § 1391(c).”

From a policy perspective, the case is seen as a vehicle for defendants who do not like being sued in the Eastern District of Texas and into more venues perceived as more defendant friendly.

A group of 50+ law and economics professors led by Mark Lemley, Colleen Chien, Brian Love, and Arti Rai have filed an important brief in support of the TC Heartland petition that I have copied below.  Their position is (1) the Federal Circuit has erred on interpreting the law; and (2) the permissive venue result has fueled many of the problems of our patent system.

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Amici are 53 professors and researchers of law and economics at universities throughout the United States. We have no personal interest in the outcome of this case, but a professional interest in seeing patent law develop in a way that encourages innovation and creativity as efficiently as possible.


28 U.S.C. § 1400(b) provides that a defendant in a patent case may be sued where the defendant is incorporated or has a regular and established place of business and has infringed the patent. This Court made clear in Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. 222, 223 (1957), that those were the only permissible venues for a patent case.  But the Federal Circuit has rejected Fourco and the plain meaning of § 1400(b), instead permitting a patent plaintiff to file suit against a defendant anywhere there is personal jurisdiction over that defendant.  The result has been rampant forum shopping, particularly by patent trolls. 44% of 2015 patent lawsuits were filed in a single district: the Eastern District of Texas, a forum with plaintiff-friendly rules and practices, and where few of the defendants are incorporated or have established places of business.  And an estimated 86% of 2015 patent cases were filed somewhere other than the jurisdictions specified in the statute. Colleen V. Chien & Michael Risch, Recalibrating Patent Venue, Santa Clara Univ. Legal Studies Research Paper No. 10-1 (Sept. 1, 2016), Table 3. This Court should grant certiorari to review the meaning of 28 U.S.C. § 1400(b) because the Federal Circuit’s dubious interpretation of the statute plays an outsized and detrimental role, both legally and economically, in the patent system.


1. The Federal Circuit’s Expansive and Incorrect Interpretation of 28 U.S.C. § 1400(b) Allows Patentholders to Sue Anywhere in the Nation

Section 48 of the Judiciary Act of 1897 limited jurisdiction in patent cases to districts that the defendant inhabited or had a place of business and committed infringing acts. Act of March 3, 1897, c. 395, 29 Stat. 695. In 1942, this Court confirmed that “Congress did not intend the Act of 1897 to dovetail with the general provisions relating to the venue of civil suits, but rather that it alone should control venue in patent infringement proceedings.” Stonite Prods. Co. v. Melvin Lloyd Co., 315 U.S. 561, 563 (1942).

In 1948, Congress enacted 28 U.S.C. § 1400(b), specifying that “patent venue is proper in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.” In 1957, this Court confirmed that patent venue should not be interpreted with reference to the general jurisdiction statute, holding that “28 U.S.C. 1400(b) . . . is the sole and exclusive provision controlling venue in patent infringement actions, and that it is not to be supplemented by the provisions of 28 U.S.C. 1391(c).” Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. 222, 223 (1957).

In 1990, the Federal Circuit declined to apply this Court’s longstanding precedent and decided that the general venue statute should define interpretation of the patent venue statute.  It made this decision on the basis of a ministerial change Congress made in 1988 to 28 U.S.C. § 1391. VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1583 (Fed. Cir. 1990). That statutory language changed the wording in 28 U.S.C. § 1391, from defining residence “for venue purposes” to defining residence “for purposes of venue under this chapter.” There was no indication that Congress intended this change to impact the patent venue statute.

The Federal Circuit’s conclusion that Congress’s ministerial change overruled this Court’s longstanding precedent is incorrect for at least two reasons.  First, it violates fundamental rules of statutory construction.  It is well-established that Congress “does not alter the fundamental details of a regulatory scheme in vague terms or ancillary provisions—it does not, one might say, hide elephants in mouseholes.” Whitman v. American Trucking Assns., Inc., 531 U.S. 457, 468 (2001) (citing MCI Telecomm. Corp. v. American Tel. & Tel. Co., 512 U.S. 218, 231 (1994); FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 159-60 (2000)).

Second, the Federal Circuit’s interpretation renders the second half of § 1400(b) largely superfluous.  That section provides:

Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.

The term “resides” in § 1400(b) must mean something different than having “a regular and established place of business.” Otherwise, there would have been no reason to include both provisions in the venue statute, or to link them through the disjunctive term “or.”  In Brunette, this Court, interpreting 28 U.S.C. § 1400(b) as well as 28 U.S.C. § 1391(d), confirmed that where a corporation “resides” is where it is incorporated. Brunette Mach. Works v. Kockum Indus., 406 U.S. 706, n.2 (1972).

Instead of parsing § 1400(b) carefully, the Federal Circuit has chosen to read the § 1391(c)(2) definition of corporate residence for general venue purposes into the specific patent venue provision.  In relevant part, § 1391(c)(2) provides that corporate defendants:

shall be deemed to reside . . . in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question . . . .

For patent infringement cases, the relevant aspect of personal jurisdiction is typically specific jurisdiction, which focuses on whether the defendant’s suit-related conduct establishes a “substantial connection” with the judicial forum in question.  Walden v. Fiore, 134 S.Ct. 1115, 1121 (2014).  But a corporation will have established a suit-related “substantial connection” with, and thus be subject to jurisdiction in, any district in which it “has committed acts of infringement and has a regular and established place of business.” So the Federal Circuit’s decision to read the § 1391(c) definition of “resid[ing]” into § 1400(b) renders the second half of the latter section superfluous as to corporations, a category which includes virtually all patent defendants.  A judicial reading that renders half of a statutory provision superfluous is strongly disfavored.  United States v. Jicarilla Apache Nation, 131 S.Ct. 2313, 2330 (2011) (“‘As our cases have noted in the past, we are hesitant to adopt an interpretation of a congressional enactment which renders superfluous another portion of that same law.’” (quoting Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 837 (1988))); Babbitt v. Sweet Home Chapter of Communities for a Great Oregon, 515 U.S. 687, 698 (1995) (noting “[a] reluctance to treat statutory terms as surplusage”).

The Federal Circuit’s expansive, and we believe incorrect, interpretation of 28 U.S.C. § 1400(b) effectively allows patent owners to file suit in any federal district where an allegedly infringing product is sold.  In re TC Heartland, LLC, No. 2016-105, at 10 (Fed. Cir. Apr. 29, 2016) (holding that jurisdiction is proper in a patent suit “where a nonresident defendant purposefully shipped accused products into the forum through an established distribution channel and the cause of action for patent infringement was alleged to arise out of those activities”).  The widespread availability of products over the internet means, in effect, that patentholders can bring their suits in any district in any state in the country.

2. Permissive Venue has Fueled and Enabled Forum Shopping and Selling, Patent Trolls, and Case Concentration

The Federal Circuit’s expansive interpretation of 28 U.S.C. §1400(b) has harmed the patent system in three distinct ways. It has led to forum selling and forum shopping, it has contributed to the growth of opportunistic patent litigation by patent trolls, and it has led to undue case concentration.

Patent lawyers today spend a great deal of time figuring out the best districts in which to file patent cases, and for good reason. The district in which you file your patent case has consequences for how much your case will cost, how long it will last, and whether you will prevail in court. Mark A. Lemley, Where to File Your Patent Case, 38 AIPLA Q.J. 401 (2010); Brian J. Love & James C. Yoon, Predictably Expensive: A Critical Look at Patent Litigation in the Eastern District of Texas, Stan. Tech. L. Rev. ___ (forthcoming, 2016).

The choice of venue enabled by the Federal Circuit’s liberal interpretation of the statute has created an incentive for courts to differentiate themselves in order to compete for litigants and “sell” their forum to prospective plaintiffs. See J. Jonas Anderson, Court Competition for Patent Cases, 163 U. Pa. L. Rev. 631 (2015); Daniel M. Klerman & Greg Reilly, Forum Selling, 89 S. Cal. L. Rev. 241 (2016).

Among district courts, the Eastern District of Texas is the clear forum of choice for patent plaintiffs. It has been the most popular venue for patent cases in eight of the last ten years. Chien & Risch, supra at 3.  Whether intentionally or not, judges in the Eastern District of Texas have adopted rules and practices relating to case assignment, joinder, discovery, transfer, and summary judgment that attract patent plaintiffs to their district. Klerman & Reilly, supra; Matthew Sag, IP Litigation in U.S. District Courts: 1994-2014, 101 Iowa L. Rev. 1065 (2016) (detailing evidence of “forum selling” and five advantages to plaintiffs of filing suit in the Eastern District of Texas).

A study of all patent cases filed from 2014 to June 2016 quantifies some of the advantages. Love & Yoon, supra.  Compared to their colleagues across the nation, judges in the Eastern District of Texas take 150 additional days on average to rule on motions to transfer, id. at 15, and are 10 percentage points less likely to stay the case in favor of an expert adjudication on the validity of the patent by Patent and Trademark Office (PTO) in inter partes review, id. at 26., despite the fact that patents asserted in the Eastern District of Texas are challenged in inter partes review more often than patents asserted in any other district. Saurabh Vishnubhakat, Arti Rai, & Jay Kesan, Strategic Decision Making in Dual PTAB and District Court Proceedings, 31 Berkeley Tech. Law J. 45, 109 (2016).  At the same time, judges in the Eastern District of Texas have adopted discovery rules that begin earlier, end sooner, and require broader disclosure than just about anywhere else in the country. Love and Yoon, supra at 19-22 (comparing discovery and other pretrial deadlines applicable in the Eastern District of Texas and District of Delaware).  In combination, relatively early and broad discovery requirements and relatively late rulings on motions to transfer ensure that defendants sued in the Eastern District of Texas will be forced to incur large discovery costs, regardless of the case’s connection to the venue.

However, not all types of plaintiffs choose to take advantage of the leverage that these rules and procedures make possible.  Patent assertion entities (PAEs), or patent “trolls” use patents primarily to gain licensing fees rather than to commercialize or transfer technology. Colleen V. Chien, From Arms Race to Marketplace: The Complex Patent Ecosystem and Its Implications for the Patent System, 62 Hastings L.J. 297 (2010) Trolls make particular use of the advantages provided by the Federal Circuit’s permissive approach to forum shopping. Since 2014, over 90 percent of patent suits brought in the Eastern District of Texas were filed by trolls established for the purpose of litigating patent suits.  Love & Yoon, supra at 9. By contrast, operating companies, individuals, and universities are more likely to sue in other districts.  Chien & Risch, supra at 3-4, 40.

The troll business model explains this difference in behavior. As the FTC’s recent report describes, “litigation PAEs” sign licenses that are “less than the lower bounds of early stage litigation costs,” a finding “consistent with nuisance litigation, in which defendant companies decide to settle based on the cost of litigation rather than the likelihood of their infringement.” Federal Trade Commission, Patent Assertion Entity Activity: An FTC Study,   Rather than a decision on the merits and damages commensurate with the value of patented technology, litigation PAEs instead seek to leverage the high cost of litigation to coerce nuisance-value settlements keyed not to the merits of the lawsuit, but the cost of litigation.  Mark A. Lemley & A. Douglas Melamed, Missing the Forest for the Trolls, 113 Colum. L. Rev. 2117 (2013). Further, unlike operating companies that sell products, litigation PAEs generally lack customers and regular operations and therefore have the flexibility to incorporate and file suit based solely on litigation considerations, through shell companies or otherwise.

While forum shopping in general impairs the operation of law, disadvantages those who lack the resources to engage in forum shopping, and creates economic waste, Jeanne C. Fromer, Patentography, 85 N.Y.U. L. Rev. 1444, 1464-1465 (2010), the rise of the troll business model exacerbates these problems in patent litigation, creating a particularly urgent need for the Court to hear this case. This Court has previously warned against the problems of abusive patent litigation.  More than a century ago, it worried about the rise of “a class of speculative schemers who make it their business to watch the advancing wave of improvement, and gather its foam in the form of patented monopolies, which enable them to lay a heavy tax upon the industry of the country, without contributing anything to the real advancement of the arts.”  Atlantic Works v. Brady, 107 U.S. 192, 200 (1883).  And in Commil v. Cisco, this Court said:

The Court is well aware that an “industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees.” eBay Inc. v. MercExchange, L. L. C., 547 U. S. 388, 396 (2006) (KENNEDY, J., concurring). Some companies may use patents as a sword to go after defendants for money, even when their claims are frivolous.

576  U.S. __, 135 S.Ct. 1920 (2015).

Because troll suits now dominate patent litigation nationwide, their filing patterns have led to an overall concentration of 44% of all patent cases in the Eastern District of Texas in 2015. Among cases initiated 2014 through 2016, one U.S. District Judge on the Eastern District of Texas—Judge Rodney Gilstrap of Marshall, Texas—was assigned almost one quarter of all patent case filings nationwide, more than the total number of patent cases assigned to all federal judges in California, New York, and Florida combined.[2]

This level of concentration is a problem for the legal system whatever one thinks of the decisions of the Eastern District of Texas and regardless of how fair and capable the judges there are. Simply from a logistical standpoint, the current caseload in the Eastern District of Texas is problematic.  If even 10 percent of the 1,686 patent cases assigned to Judge Gilstrap in 2015 go to trial, he will need to preside over three to four patent trials per week every week for an entire year to avoid creating a backlog.

Further, when Congress decided to consolidate patent appeals in the newly-created United States Court of Appeals for the Federal Circuit, it deliberately chose to include both appeals from the United States Patent and Trademark Office and the district courts, so the new court would not hear only appeals from patent owners.  And it considered and rejected proposals to create a specialized district court to hear patent cases.  But the Federal Circuit’s interpretation of § 1400(b) has in practice created just such a court.

The current distribution of patent litigation filings is the result of strategic behavior by a specific type of patent enforcer, not an artifact of proximity to the original locus of invention or alleged infringement. Forum-shopping plaintiffs will naturally gravitate towards whatever district seems to have the most favorable rules. The effect of the Federal Circuit’s decision to expand patent venue beyond the scope of the statute and this Court’s decisions has been to create a de-facto specialized patent trial court, one chosen by litigants on one side rather than by Congress.


The Federal Circuit’s permissive venue rule has fundamentally shaped the landscape of patent litigation in ways that harm the patent system, by enabling extensive forum shopping and forum selling, supporting opportunistic patent litigation by patent trolls, and creating undue case concentration.  This Court should grant certiorari in order to curb abuse of venue based on its misinterpretation of § 1400(b).

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[1] No person other than the amici and their counsel participated in the writing of this brief or made a financial contribution to the brief. Letters signifying the parties’ consent to the filing of this brief are on file with the Court.

[2] According to Lex Machina, between January 1, 2014 and June 30, 2016 Judge Gilstrap was assigned 3,166 new patent suits, more than the combined total of all district courts in California, Florida, and New York: 2,656. Love & Yoon, supra, at 5 (collecting these statistics).

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Signed, Professor John R. Allison (Texas); Professor Margo Bagley (Emory); Professor James Bessen (BU); Professor Jeremy Bock (Memphis); Professor Daniel H. Brean (Akron); Professor Michael A. Carrier (Rutgers); Professor Michael W. Carroll (American); Professor Bernard Chao (Denver); Professor Tun-Jen Chiang (George Mason); Professor Colleen V. Chien (Santa Clara); Professor Andrew Chin (UNC); Professor Robert Cook-Deegan (ASU); Professor Rochelle Dreyfuss (NYU); Dr. Dieter Ernst (Honolulu); Professor Robin C. Feldman (Hastings); Professor Lee Fleming (Berkeley); Professor Brian Frye (Kentucky); Professor William Gallagher (Golden Gate); Professor Shubha Ghosh (Wisconsin); Professor Eric Goldman (Santa Clara); Professor Bronwyn H. Hall (Berkeley); Professor Yaniv Heled (Georgia State); Professor Christian Helmers (Santa Clara); Professor Joachim Henkel (Technische Universität München); Professor Susan Helper (CWRU); Professor Tim Holbrook (Emory); Professor Herbert Hovenkamp (Iowa); Professor William Hubbard (Baltimore); Dr. Xavier Jaravel (Stanford); Professor Dennis S. Karjala (ASU); Professor Peter Lee (UC Davis); Professor Mark A. Lemley (Stanford); Professor David K. Levine (WashU); Professor David S. Levine (Elon); Professor Doug Lichtman (UCLA); Professor Yvette Joy Liebesman (SLU); Professor Orly Lobel (USD); Professor Brian Love (Santa Clara); Professor Phil Malone (Stanford); Professor Michael J. Meurer (BU); Dr. Shawn Miller (Stanford); Professor Matthew Mitchell (Toronto); Professor Susan Barbieri Montgomery (Northeastern); Professor Sean Pager (Michigan State); Professor Arti K. Rai (Duke); Professor Jacob H. Rooksby (Duquesne); Professor Jorge R. Roig (Charleston); Professor Matthew Sag (Loyola Chicago); Professor Pamela Samuelson (Berkeley); Ana Santos Rutschman (DePaul); Professor Lea Bishop Shaver (Indiana); Professor John L. Turner (Georgia); Professor Jennifer Urban (Berkeley); Professor Eric von Hippel (MIT).

One Last Try: Is the Inter Partes Review system Unconstitutional?

Cooper v. Square is the final pending constitutional challenge to the inter partes and post grant review proceedings created by Congress in the America Invents Act of 2011 and briefing in the case is now complete.

In the final reply brief in the petition process, Cooper explains how this case is a good vehicle for the challenge:

This case is the only one left of three that raised a facial constitutional challenge to inter partes review (IPR). This Court relisted in Cooper v. Lee, No. 15-955, and MCM Portfolio v. HP, No. 15-1330, before denying cert on October 11, 2016. This case is distinct from both of those, and far more amenable to adjudication by this Court. This case does not have the vehicle problem identified by the federal respondent in Cooper v. Lee (since this case arises directly from an agency final decision, whereas Cooper v. Lee arose from a collateral proceeding). And this case does not seek the extreme constitutional remedies of the petitioner in MCM Portfolio (since this case seeks relief in the form of making IPR outcomes advisory, not in the form of annihilating an entire section of a federal agency).

In its responsive brief Square argued that Cooper waived his constitutional argument by not repeatedly raising the issue.  The Cooper brief does a nice job of explaining the errors in that conclusion.

Patent Academic Ray Mercado also took advantage of the request for a responsive brief to file an amicus brief. Mercado argues that patents should be seen as “private rights” and therefore cannot be administratively cancelled.  He writes: “Once the historical uniqueness of patent law is taken into account, it is clear that patents are ‘private rights’ for purposes of this Court’s separation of powers jurisprudence, and their validity must be decided by Article III courts.”

Dissenting on Obviousness

In re Efthymiopoulos (Fed. Cir. 2016)

In a split opinion, the Federal Circuit has affirmed the PTAB’s determination of obviousness.  Biota’s patent claims influenza treatment through oral inhalation of zanamivir while the prior art teaches the identical treatment by nasal inhalation.   A second prior art reference also suggests that similar compound can be taken via “inhalation” (without the nasal or oral modifier).  On appeal, the Federal Circuit affirmed that the general inhalation disclosure “is reasonably understood to disclose inhalation by either the nose alone, mouth alone, or both.”

Judge Newman writes in dissent:

The PTAB and now this court rule that it was obvious to administer this drug by oral inhalation, although there is no reference, no prior art, no suggestion, proposing that this mode of application might succeed, or that it should be tried. There was evidence of skepticism even as oral inhalation was evaluated. There was no contrary evidence. The evidence on which the Board and now this court rely is the evidence in the patent application itself, describing oral inhalation, its benefits, and its effectiveness. Upon learning this information from this inventor’s disclosure, the Board found that it was obvious, and my colleagues agree that it is obvious to them.



In its brief, the PTO wrote:

Efthymiopoulos seeks to capture as his exclusive property right a particular (but not particularly new) way of delivering an old compound to treat a well-known disease. Specifically, Efthymiopoulos claims a method for treating influenza, an infectious disease of the respiratory tract caused by influenza (flu) viruses, by administering zanamivir, a compound known in the prior art as an inhibitor of influenza virus production, by inhalation of zanamivir through the mouth alone. Efthymiopoulos contends that his contribution to the art is the route of inhalation – treating influenza solely by oral inhalation.
But the evidence of record shows that oral inhalation would have been obvious. Specifically, as of the effective filing date, skilled artisans understood inhalation to mean oral, nasal, or both. The prior art was replete with available oral inhaler devices for use with well-known micronized dry powder formulations. Skilled artisans also knew that oral inhalation delivers more drug to the lungs and that nasal inhalation delivers more drug to the nasal cavity. Skilled artisans further knew that some strains of influenza infect the lungs, and that young children are more susceptible to lung infections.

The case here is an example of the difficulty with the flexible obviousness analysis — it allows for well supported arguments on both sides.

Bad Patents and the False Claims Act

by Dennis Crouch

An interesting False Claims Act case has recently been unsealed. USA ex rel. Lower Drug Prices for Consumers (LDPFC) v. Allergan and Forest Labs., Case No. 16-cv-09 (E.D.Tex. 2016) (SEALED USA Complaint).

The False Claims Act provides special incentives for whistleblowers to uncover fraud against the U.S. Government.  The Act authorizes the whistleblower to file a qui tam lawsuit on behalf of the Government and then receive a cut of any recovered damages. See 31 U.S.C. §§ 3729–3733.  The whistleblower here LDPFC appears to be a branch of the hedge fund Foxhill Capital.

This case involves Allergan/Forrest Labs U.S. Patent No. 6,545,040 that is listed in the FDA Orange Book as covering the drug Bystolic.  The basic false claims argument is that the market price of Bystolic is high because of the patent coverage – but the patent is (allegedly) invalid.  If true, this means that Medicare, Medicaid, and the VA hospitals are all paying more than they should for the drug.  As stated by the complaint: “The current market price for Nebivolol (Bystolic) is a false price because the ‘040 patent is invalid.”

Although the legal theory makes sense, the facts may get in the way: Is the patent invalid (PTAB says its close, but no) and, if it is invalid – did the patentee have knowledge of the invalidity?

Patentlyo Bits and Bytes by Anthony McCain

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USPTO Seeks Further Public Input on Patent Subject Matter Eligibility

From the USPTO: The U.S. Department of Commerce’s United States Patent and Trademark Office (USPTO) today announced that as part of its effort to solicit input from the public regarding the legal contours of patent subject matter eligibility, it will be holding two roundtables, one in November and one in December.

“In recent years, the jurisprudence on the very basic issue of what is patent eligible subject matter has been evolving requiring adjustments by innovators, businesses, lower courts and administrative agencies such as the USPTO,” said Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office Michelle K. Lee. “Our goal is to minimize any uncertainty in the patent system by ensuring  we not only continue to apply the statute and case law in this area as faithfully as possible, but also understand the impact of the jurisprudence on innovation by assessing what, if any, changes might be helpful to further support innovation.”

In a notice published today in the Federal Register, the USPTO announced that it will begin a nationwide conversation on patent eligible subject matter through two roundtable discussions. The first roundtable will be held November 14, 2016, at the USPTO headquarters in Alexandria, Virginia. This roundtable will focus on the USPTO’s continuing efforts to seek input from across the country and across industries on how the USPTO can improve the agency’s subject matter eligibility guidance and training examples. To facilitate a broader legal discussion on the contours of patentable subject matter, the USPTO will host a second roundtable on December 5, 2016, at Stanford University in Stanford, California. Through the power of USPTO’s nationwide footprint, each of our regional offices will also participate in both roundtables, enabling individuals and industries from around the country to share their perspectives at a location closest to them, in addition to written submissions.

Together, these roundtables will help facilitate discussion on patent subject matter eligibility in view of several decisions in recent years by the courts. If you wish to attend or participate in a roundtable, please see the Federal Register notice to learn more. You may also visit the USPTO’s Events Page.

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Supreme Court Update: Extending the ITC’s Reach Beyond US Borders

by Dennis Crouch

Constitutional Challenge to Inter Partes Review: Although the Constitutional issues in Cooper v. Lee and MCM v. HP were law-professor-interesting, they were not substantial enough for certiorari.  The Supreme Court has now denied the Cooper and MCM petitions — leaving the IPR regime unchanged.  Although Cooper v. Square is still pending, its chances are slight. The Supreme Court has also denied certiorari in Encyclopaedia Britannica (malpractice), Gnosis (appellate review), and GeoTag (case-or-controversy).

A new 101 Challenge: In its first conference of the term, the Supreme Court denied all of the pending petitions regarding patent eligibility.  However, Trading Technologies has filed a new petition asking whether a new card game is categorically unpatentable so long as it uses a standard deck (rather than a novel deck) of cards.  My post on the case asks: Does the Patent Statute Cabin-in the Abstract Idea Exception?  That question references Section 100 of the Patent Act that expressly allows for the patenting of new use of a known manufacture.

Extra Territoriality of Trade Secrecy Law: On the trade secrecy front, Sino Legend has petitioned to review the Federal Circuit’s affirmance of the International Trade Commision’s ban on Legend’s importation of rubber resins used for tire production. The underlying bad-act was a trade secret misappropriation that occurred in China and the question on appeal asks: Whether Section 337(a)(1)(A) permits the ITC to adjudicate claims regarding trade secret misappropriation alleged to have occurred outside the United States.  A Chinese court looked at the same case and found no misappropriation.

Design Patent Damages: Oral arguments were held earlier this week in Samsung v. Apple. During the arguments, all parties agreed that (1) the statute does not allow for apportionment of damages but rather requires profit disgorgement; (2) the article-of-manufacture from which profits can be calculated may be a component of the product sold to consumers; and (3) the determination of what counts as the article-of-manufacture is a question of fact to be determined by the jury.   The only dispute then was on the factors that a jury should be considered and when the “inside gears” of a product should ever be included in the calculation.

Upcoming Supreme Court Oral Argument: SCA Hygiene (laches) on November 1; Star Athletica (copyright of cheerleader outfit) on October 31.


Samsung v. Apple: A view from inside the courtroom


By Sarah Burstein, Associate Professor of Law at the University of Oklahoma College of Law

Samsung Elecs. Am., Inc. v. Apple Inc., No. 15-777 (argued Oct. 11, 2016) Transcript

On Tuesday, I attended the oral arguments in Samsung v. Apple.  As mentioned in a previous Patently-O post, the Court granted cert on a single issue, namely:

Where a design patent is applied to only a component of a product, should an award of infringer’s profits be limited to those profits attributable to the component?

The relevant statute is 35 U.S.C. § 289, which provides a special additional remedy for certain acts of design patent infringement. Section 289 states:

Whoever during the term of a patent for a design, without license of the owner, (1) applies the patented design, or any colorable imitation thereof, to any article of manufacture for the purpose of sale, or (2) sells or exposes for sale any article of manufacture to which such design or colorable imitation has been applied shall be liable to the owner to the extent of his total profit, but not less than $250, recoverable in any United States district court having jurisdiction of the parties.

Nothing in this section shall prevent, lessen, or impeach any other remedy which an owner of an infringed patent has under the provisions of this title, but he shall not twice recover the profit made from the infringement.

In Apple and a case decided briefly after it, Nordock v. Systems, the Federal Circuit ruled that § 289 requires a court to award the total profit from the entire infringing product to a successful design patentee—even when the design patent claims a small portion of the overall product design.

In its cert petition and merits brief, Samsung argued that the “article of manufacture” in § 289 could be something less than the entire infringing product. In its brief opposing cert, Apple defended the Federal Circuit’s interpretation. Yet, in its merits brief, Apple agreed with Samsung (and the United States) that the relevant “article of manufacture” could be something less than the entire infringing product.

At oral argument, Samsung informed the Court that it was dropping its “causation argument” (i.e., that § 289 must be read in light of background causation principles from general tort law) and wanted to focus on its “article of manufacture” argument (i.e., its argument that a successful design patentee should be entitled to the “total profit” from the “article of manufacture” but that the relevant article should be determined mainly by looking at whether the patent claims a whole design or only part).

Unsurprisingly, the bulk of the oral argument was spent discussing how factfinders should  determine what constitutes the relevant “article of manufacture” for the purposes of § 289. The Justices seemed particularly interested in how a jury could be instructed to perform this determination. The Justices spent a lot of time pressing the parties about the desirability of the four-part test proposed by the United States, asking if they thought that approach was appropriate and if there were any factors they would add.

It was also very clear during the argument that Apple really wanted to focus on its new waiver argument. In its merits brief (though not in its brief opposing cert), Apple argued that Samsung failed to preserve the “article of manufacture” argument for appeal. After a few questions, however, the Justices’ patience for this line of argument waned and the Chief Justice rather pointedly told Apple’s counsel to move on. The clear message conveyed was that the Justices didn’t need to be told what was in the record; they were perfectly capable of reviewing it for themselves.

On the whole, and based solely on the arguments, it seemed like the Justices were leaning toward adopting some form of multi-factor test to determine what constitutes the relevant “article of manufacture.” What that test might look like was far from clear. At some points, the Justices seemed visibly frustrated by the prospect of coming up with a workable test; whether they were convinced that any of the proposed tests would, indeed, be workable remains to be seen.

In this observer’s opinion, the real problem is the attempt to add a qualitative element to this test, instead of focusing on what the patentee actually claims. Also, it’s no wonder that the Justices and parties had difficulty trying to identify the relevant article of manufacture for the D’305 patent, which claims a design for a single screenshot of the iPhone graphical user interface (“GUI”). Like other GUI designs, the D’305 patent claims a design for software, not a design for a screen (no matter what the PTO says).

In any case, there was no indication that any of the Justices were seriously considering upholding the Federal Circuit’s whole-product rule, which a couple of justices derided as clearly absurd. Justice Breyer did express some concern, at the end, about subverting the original congressional intent. However, he seemed more concerned about creating/affirming a rule with “absurd results.”

One thought: The phrase “article of manufacture” doesn’t just appear in § 289. It also appears in § 171, which defines design-patentable subject matter. Although the Federal Circuit wasn’t asked to construe that phrase in § 289 until Apple, it has issued a number of decisions on what constitutes an “article of manufacture” in the context of § 171. The Federal Circuit didn’t mention any of those cases in its decision in Apple and the parties haven’t relied on them to make their points before the Supreme Court. However, under normal principles of statutory construction, this phrase should mean the same thing in both of these key design patent provisions. It seems fairly clear that the Federal Circuit expanded the definition of “article of manufacture” in § 171 without thinking of the potential consequences for § 289 (arguably leading to the worst of the “absurd results” created by the Federal Circuit’s Apple/Nordock rule). And it seems likely that the reverse might happen here—the Justices might redefine the “article of manufacture” in § 289 without considering any potential consequences for § 171. Of course, those issues weren’t briefed. But it’s still an issue worth keeping an eye on.

Does the Patent Statute Cabin-in the Abstract Idea Exception? (Yes)

by Dennis Crouch

In a new Supreme Court petition, Trading Technologies (TT) has again challenged USPTO and Federal Circuit eligibility determinations.

TT v. Lee asks the following question:

Given that 35 U.S.C. § 100(b) sets forth that a patent eligible “process” includes a “new use of a known process, machine, manufacture, composition of matter, or material,” did the Federal Circuit err by holding that an indisputably new and non-obvious use (i.e., game steps) of an existing manufacture (i.e., playing cards) was patent ineligible under Alice Corp. v. CLS Bank Int’l, 134 S.Ct. 2347 (2014)?

The underlying appellate decision In re Smith involves a patent application claiming a new method of playing Blackjack. The new approach offered by offers ability to bet on the occurrence of “natural 0” hands as well as other potential side bets.  Claim 1 in particular requires a deck of ‘physical playing cards” that are shuffled and then dealt according to a defined pattern.  Bets are then taken with the potential of more dealing and eventually all wagers are resolved.  The Federal Circuit affirmed the PTAB/Examiner determinations that the claimed method of playing cards constitutes an unpatentable abstract idea. As I previously wrote:

The court held that a wagering game is roughly identical to fundamental economic practices that the Supreme Court held to be abstract ideas in Alice and Bilski. . . . Following the Board’s lead, the appellate court then found that the “purely conventional steps” associated with the physical act of playing cards do not “supply a sufficiently inventive concept.”

Important for this case, the court noted that some card games are patent eligible, but that universe appears to be limited only to patents claiming “a new or original deck of cards.”  Of course, the patent statute expressly states that processes are patent eligible – and that set of eligible processes “includes a new use of a known process, machine, manufacture, composition of matter, or material.”  35 U.S.C. 100(b).

Above the Statute?: An important fundamental question is whether the eligibility exceptions of Alice and Mayo supersede the statute.  Some argue that their origins are Constitutional – embedded in the “discoveries” limitation and thus control the law regardless of the statutory text.  But the Supreme Court has repeatedly indicated that the abstract idea and law of nature exceptions are grounded in the 35 U. S. C. §101 (despite the absence of express language).  Under a plain language interpretation, these atextual exceptions should not be extended so far as to conflict with the statute — especially the express definitions of §100(b). Thus, TT writes:

Under the statute, new processes that use conventional equipment or materials are clearly patent eligible subject matter. 35 U.S.C. § 100(b) (patent eligible processes include “a new use of a known process, machine, manufacture, composition of matter, or material.”). This Court has never abrogated § 100(b). And Alice did nothing to change this. Indeed, to fail the first step of the Alice test, a claim needs to tie up an “abstract idea,” which for purposes of this test was defined to be a preexisting practice that serves as a fundamental “building block of human ingenuity,” such as a “longstanding” and “prevalent” economic practice. . . . The Federal Circuit has improperly extended Alice step one to claims that indisputably recite a new set of game steps that was not preexisting, let alone “fundamental.”

My own take is that the Constitutional intellectual property clause probably does have some teeth and – as an extreme example – would not empower Congress to authorize patents covering abstract ideas as such.  That said, Congressional power certainly extends to authorizing the grant of patents covering the types of inventions being identified as abstract ideas under Alice Corp such as the blackjack game at issue here.

[In re TT – Petition]

DISCLOSURES – The petition was filed by my friends and former colleagues Leif Sigmund and Jennifer Kurcz at the MBHB firm and the firm is a paid sponsor of Patently-O.  I also represented TT in other matters up until 2007.  That said, I have not discussed this particular case or my here with TT/MBHB other than to request a copy of the petition after I noted its filing.

It is Improper to Consider Extra-Record Claim Construction Evidence On Appeal

Apple v. Samsung (Fed. Cir. 2016) (En banc)

Note: This SamsApple case is not the design patent damages case now before the US Supreme Court. Rather, this case involves Apple’s patents covering slide-to-unlock; phone number recognition; and auto spell correction. At the district court, the jury found that three of Apple’s touch-screen patents infringed by Samsung devices (resulting in $119.6 million in damages).  The jury also found one Samsung patent  infringed by Apple, but only awarded less than $200,000 in damages.  In a February 2016 opinion authored by Judge Dyk, the Federal Circuit reversed the jury verdicts – finding two of Apple’s patents invalid as obvious and the other not-infringed.

Now, in a surprise en banc ruling Friday, the Federal Circuit has chastised the that original panel in this case – writing to:

[A]ffirm our understanding of the appellate function as limited to deciding the issues raised in the appeal by the parties, deciding these issues only on the basis of the record below, and as requiring appropriate deference be applied to review of fact finding.

Zeroing in here, the en banc found that the original panel had improperly considered “extra-record extrinsic evidence to construe a patent claim term.”

Prior to Teva v. Sandoz (and especially prior to Phillips v. AWH) Federal Circuit panels regularly relied upon extra-record evidence such as dictionary definitions in reaching appellate decisions.  In Phillips, the court shifted focus away from dictionary definition toward intrinsic evidence such as the patent document and prosecution history.   Then, in Teva, the Supreme Court held that extrinsic factual conclusions of a district court must be given deference on appeal.  According to the en banc panel here – “After Teva, such fact findings are indisputably the province of the district court.”  With this framework, the en banc majority then offered its holdings:

(1)  the appellate court cannot rely on extra-record extrinsic evidence in the first instance or make factual findings about what such extrinsic evidence suggests about the plain meaning of a claim term in the art at the relevant time or how such extra record evidence may inform our understanding of how the accused device operates

(2) the appellate court is not permitted to reverse fact findings that were not appealed; and

(3) the appellate court is required to review jury fact findings when they are appealed for substantial evidence.

In discussing the obviousness determination, the en banc majority noted that the panel (and en banc dissents) raise important questions, but found those questions must wait for a different case since “no party—at the panel or the petition for rehearing en banc stage—invited this court to consider changing the existing law of obviousness.”

After chastising the original panel, the en banc majority then reaffirmed the jury verdicts – finding them supported by substantial evidence and thus reinstated the verdict for Apple.

The en banc opinion judgment here was 8-4 8-3 with Judge Moore authoring the 7-member majority opinion; Judge Hughes concurring in judgment but without authoring any opinion whatsoever; The original panel members, Chief Judge Prost, Judge Dyk, and Judge Reyna each dissented and each authored their own opinions; and Judge Taranto not participating.

Judge Dyk’s is the most interesting in the way that it reveals some inner-court-workings:

 For the first time in 26 years, this court has taken an obviousness case en banc. See In re Dillon, 919 F.2d 688 (Fed. Cir. 1990) (en banc). Remarkably, the majority has done so without further briefing and argument from the parties, amici, or the government, as has been our almost uniform practice in this court’s en banc decisions. . . .

The present en banc decision will have a significant and immediate impact on the future resolution of obviousness issues. While purporting to apply established circuit law, the majority is in fact making significant changes to the law as articulated by the Supreme Court. Indeed, as Judge Reyna convincingly points out, it is difficult to understand how this case would satisfy the requirements for en banc review if the majority’s purpose were not to clarify the law.

The majority states that it takes this case en banc to correct the original panel’s reliance on extra-record evidence. This could hardly be the reason the majority has granted en banc review, since the panel has continuingly expressed willingness, and indeed desire, to eliminate references to any extra-record evidence because of concerns raised in Apple’s petition for rehearing and because they were unnecessary to the panel opinion. . . . [T]he principles that the majority announces are inconsistent with the Supreme Court’s decisions in KSR, Graham v. John Deere, as well as earlier Supreme Court cases, and will make proof of obviousness far more difficult.

Judge’s Prost and Reyna also agreed that the majority’s application of the law in this case is inconsistent with Supreme Court precedent.

If you made it here, then you you see that there is substantially more to discuss – save that for the next post.


2016 Corporate IP Institute

CrouchCoopBy Dennis Crouch

I have greatly reduced my travel schedule this fall – spending time instead milling lumber and building my chicken coop (as well as teaching patent law & internet law).

I am, however, looking forward to returning to Atlanta in two weeks to take part in the 2016 Corporate IP Institute at Georgia State University. (October 25-26).

Image result for georgia stateChason Carroll, Jeff Kuester, and Perry Binder have put together a great program. In addition to Professor Hricik’s ethics talk, I’m particularly looking forward to the discussions of cybersecurity.  I’ll be doing an IP Year-in-Review (Cases, Legislation, Regulation, etc.)  The event typically has a high turnout of in house IP attorneys.   See you there.

Patentlyo Bits and Bytes by Anthony McCain

Get a Job doing Patent Law                  

FTC Study on Patent Assertion Entity Activity

Image result for FTCThe FTC has released its long awaited study on Patent Assertion Entity Activity. [FTC Report]   Using its subpoena power, the agency obtained data on more than 2000 patent holding companies, a minority of which have asserted their patent rights in court.

The report offers important insight into PAE business models – primarily identifying two categories: Litigation PAEs and Portfolio PAEs.  The FTC found that Litigation PAE licensies are “typically … less than the lower bounds of early stage litigation costs” and thus seen by the FTC as consistent with “nuisance litigation.”  The report suggests a variety of litigation reforms to help alleviate potential abusive litigation tactics by patent owners.

The 269 page report will be a catalyst for patent reform measures and thus should be considered carefully.


Guest Post: Recalibrating Patent Venue

In the following guest post, Professors Colleen V. Chien (Santa Clara) and Michael Risch (Villanova) follow up on their earlier work calling for patent venue reform. They have written a full article on the topic available on SSRN: — DC

Earlier this year, we presented some initial results of our study of what might happen if patent venue reform took place. Since then, Senator Flake (R-Az) introduced the VENUE Act of 2016, and last month, petitioners, led by a group including James Dabney and John Duffy, filed a petition for writ of certiori in the TC Heartland case in the Supreme Court. Amicus briefs are due October 17, 2016 and Kraft’s brief is due on November 16, 2016.

To support these deliberations, we examined the history of the patent venue law and presented some statistics about plaintiff venue preferences for the Eastern District (for even more statistics on this point see the new paper by Brian Love and James Yoon). Additionally, we empirically modeled both reforms by randomly selecting 939 cases from 2015, and making our best guess as to where cases would have been filed under the proposed rules, assuming they would have been filed at all. Since 2015, the overall number of patent cases has declined, about 20% YTD based on data from Lex Machina (4,216 cases by this time last year vs. 3,369 today). The Eastern District of Texas has made a number of changes and its share is also down from 44% in 2015, to 35% 2016 YTD (30% in 1Q, 36% in 2Q, and 38% in 3Q); the next closest district (Delaware) has seen about 9% of filings, based on data from Lex Machina.

In modeling different venue reform choices, we do not purport to claim that any venue reform would be, on balance, welfare enhancing, nor can we know with certainty where or if cases would be filed. However, we do make one thing clear: a patent system in which so much rides on where a lawsuit is filed is deeply flawed, and, as we have said before, we hope that policymakers will take the opportunity to clarify what has been a complicated area of law.

A draft of the complete paper is available here. In brief, however, TC Heartland reform would require cases to be filed either where the defendant is incorporated or where the defendant has a place of business and is infringing. VENUE Act would add the location of the original inventors as well as anywhere the patent owner performed R&D on the patent (patent assertion entities are, by definition, excluded). To model these provisions we gathered relevant case and location information; we also gathered information on industries, plaintiffs, and defendants of different sizes to understand the differential impacts of reform.

In brief, we looked to see the following under the conditions of each reform: 1) could the plaintiff have filed in the district that the case is already in? 2) if not, could the plaintiff have sued in a district in which it has sued in the last two years? 3) if not, could the plaintiff have sued in a district popular among plaintiffs like it in the last five years? 4) if not, we assume that the plaintiff would sue at the defendant’s primary place of business. Option 1 means “no change” – the case would stay put. Options 2, 3, and 4 mean, “change”—the case would have been filed in another district and the model where the suit would end up based on the proposed venue rules. Note that the 2nd and 3rd assumptions bias our model towards the currently concentrated status quo. Patentees might well pick other favorite districts if they can find a basis for venue there.

Applying this methodology, we found a few interesting things.

First, 86% of cases were filed outside the defendant’s primary place of business,[1] including 80% of cases brought by operating companies and  90% of cases brought by NPEs. When we considered any of defendant’s place of business, cases were filed outside of where the defendant had a location 83% of the time. This suggests that, in general, permissive venue leads to plaintiffs filing where it is convenient or advantageous, which is usually not where the defendant is located.

Second, we find that if TC Heartland reform had been in effect, 52% of operating companies would have to pick a different district than they had originally chosen. For NPEs, 60% would have to pick a different district. If the VENUE Act were passed, however, the change from the status quo would be a lot less dramatic for operating company plaintiffs – only 18% would have to move their case while the rest could have been filed as is. NPE plaintiffs would have been impacted differently, particularly under the VENUE Act, with PAEs most impacted. The reason for this is relatively straightforward: the VENUE Act allows operating companies (and failed companies or individuals) to sue where they do research and development, but does not allow PAEs to do the same. Furthermore, operating companies are more likely to sue where they do research and development, while NPEs are more likely to sue in the Eastern District of Texas.

Third, we find that cases would be more geographically distributed, but our reported distributions are likely in the eye of the beholder and sensitive to our assumptions particularly about the prioritization of familiar districts by plaintiffs, which might not hold in practice. That said, we believe that one thing is clear: cases would leave the Eastern District of Texas. The following table shows the top 5 districts before and after reform as we modeled it:

Final Districts – OpCo π Final Districts – NPE π
District Actual Case Prediction Heartland Prediction VENUE Act Actual Case Prediction Heartland Prediction VENUE Act
E.D.Tex. 7.8% 4.6% 5.0% 64.1% 19.0% 19.1%
D.Del. 10.0% 18.9% 11.0% 7.3% 25.8% 23.1%
D.N.J. 10.3% 12.1% 10.7% 0.9% 2.4% 2.0%
C.D.Cal. 7.5% 14.2% 9.6% 2.1% 2.6% 2.4%
N.D.Cal. 5.0% 2.8% 3.9% 3.0% 17.3% 16.6%

Fourth, Heartland and VENUE Act reform would affect companies of different sizes differently. In general, Heartland would require suits to be filed where the defendant is located much more often than the VENUE Act (on the order of ~65% to ~45% depending on company size). Smaller defendants would benefit more from TC Heartland venue reform than would larger defendants, because of their relatively smaller footprints.

Fifth, we found that manufacturing and biopharma defendants would benefit the least from venue reform. For biopharma, the result is complicated. Contrary to conventional wisdom, all of the cases are not in New Jersey, though as shown in the table above, many of them are. Instead, because reform allows for suit where parties are incorporated, many cases would remain in Delaware, where they are already located. Industries that would see the most benefit from Heartland reform would be in high tech and consumer/durable goods manufacturing. These are often companies with only one place of business, which limits where they could be sued. High tech, especially, is a sector that is often sued by NPEs, so their cases would be relocated under either Heartland or the VENUE Act. On the other hand, manufacturing industries are often sued by operating companies and thus, they would see much less benefit under VENUE Act reform than they would under Heartland.

Despite its limitations, we believe that this study provides valuable insight into patent venue. Examination of venue by industry, comparison of the differences between the options (including who wins and who loses), and analysis about where cases might wind up will hopefully provide fruitful information for anyone involved in patent practice and policy. The full paper has much, much more analysis, with a representative sample of the types and sizes of companies being sued in addition to detailed discussion of how each reform proposal will affect parties by plaintiff type, geography, and defendant industry and size.


= = = = =

[1] We found that, for a random sample of 99 of our defendants’ other litigations, 80% were filed outside the defendant’s primary place of business

Fees Rising: USPTO Proposes New Fees in Search of New Revenue

The USPTO has issued a notice of proposed rulemaking (NPRM) on patent and PTAB fees with the goal of raising revenue in order to improve patent quality and examination timeliness. Public comments are due by December 2, 2016.

The proposal includes:

  • Major increase in inter partes review fees – from $23,000 to $30,500 (petition + institution).  Similar increases for PGR and CBM.
  • Large fee increase for patent applications with > 3 independent claims or > 20 dependent claims
  • Large fee increase for design patent search, examination, and issue fees — hopefully the PTO will increase its quality on that front.
  • New fee for sequence listing submissions of > 300 MB ($1000) and > 800 MB ($10,000).
  • Ex parte appeals +25% (up to $3,500)
  • Standard fees for utility applications are relatively steady => only about 10% increase.


Read More and Comment:

Infringement Complaint Must Provide Factual Allegations at the Claim-Element-by-Claim-Element Level

by Dennis Crouch

Lyda v. CBS (Fed. Cir. 2016)

Although at first glance, Lyda appears as a narrow decision against an individual-inventor plaintiff, the decision is important because it establishes that a patent infringement complaint must provide factual allegations at the claim-element-by-claim-element level in order to avoid a dismissal on the pleadings.  

In a civ-pro focused decision, the court has affirmed the dismissal of Lyda’s infringement case for failure to state a claim – finding that Lyda’s complaint fails to satisfy the Twiqbal pleading standards.[1]  Rule 8 of the Federal Rules of Civil Procedure require a “ a short and plain statement of the claim showing that the pleader is entitled to relief.”[2]  Failure to state a claim is grounds for dismissal under R. 12(b)(6).[3] The Supreme Court gloss requires allegations of sufficient facts to state a plausible claim for relief.  Although statements in the complaint are taken as true, “threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”[4] “While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.”

Until recently, Twiqbal was not directly applied to patent complaints because the existence of a bare-bones form infringement complaint (Form 18) that the rules deemed to be sufficient.  Form 18 was eliminated in the December 1, 2015 changes to the rules.  In the present case, the amended complaint was filed prior to the change, but the court held that Form 18 does not apply in this case because Lyda implicitly alleged a claim of joint infringement rather than the standard direct infringement that is the focus of Form 18.[5]

Applying Twiqbal is not easy – although the general rule is that the pleadings must include enough plausible facts that – if taken as true – would lead to a verdict for the plaintiff.  In discussing its application, the Supreme Court noted that it will be “context-specific” requiring both “judicial experience and common sense.”  Applying that approach to patent infringement cases, the court here took the fairly bold stance of requiring that the facts plausibly pled be “sufficient to allow a reasonable inference that all steps of the claimed method are performed.”

Lyda’s case was particularly dismissed because the patentee failed to plead the elements of joint infringement required by Akamai.  The Lyda court writes:

[Under the plaintiffs theory of infringement, the] Amended Complaint must plausibly allege that Defendants exercise the requisite “direction or control” over the performance of the claim steps, such that performance of every step is attributable to Defendants. The Amended Complaint alleges that CBS Interactive controls certain independent contractors who in turn direct and control the “participation” of unnamed third persons to send votes on either their own or borrowed cell phones. Mr. Lyda does not set forth any factual allegations in support of his assertion that CBS Interactive directed or controlled the independent contractors. Nor does the Amended Complaint contain factual allegations relating to how the independent contractors directed or controlled the unnamed third parties. Most importantly, the Amended Complaint does not allege any relationship between the Defendants and the unnamed third parties, who own or borrow cell phones, in a way that the actions of these unnamed third parties should be attributed to Defendants. Rather, the Amended Complaint alleges conclusively and without factual support that CBS directed or controlled the independent contractors who then directed or controlled the unnamed third parties. There are thus no allegations in the Amended Complaint that can form the basis of a reasonable inference that each claim step was performed by or should be attributed to Defendants. The Amended Complaint fails to plausibly plead sufficient facts to ground a joint infringement claim under this court’s Akamai decision and does not satisfy the Iqbal/Twombly pleading standard.

The district court also denied Lyda leave to amend the complaint a second time. On appeal, the Federal Circuit affirmed that determination – finding that the district court has “broad power to control its own docket.” With the case dismissed, I expect that Lyda can refile and just potentially lose some of the back damages.

= = = = =

[The complaint]

[1] Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007); Ashcroft v. Iqbal, 556 U.S. 662 (2009).

[2] Fed. R. Civ. Pro. R. 8.

[3] Fed. R. Civ. Pro. R. 12(b)(6) (“a party may assert . . . (6) failure to state a claim upon which relief can be granted”).

[4] Iqbal.

[5] See Akamai Techs., Inc. v. Limelight Networks, Inc., 797 F.3d 1020 (Fed. Cir. 2015) (en banc) (requiring that “(1) one party exercises the requisite ‘direction or control’ over the others’ performance or (2) the actors form a joint enterprise such that performance of every step is attributable to the controlling party).

Not Eligible: Supreme Court Denies All Pending Subject Matter Eligibility Petitions

The Supreme Court has greatly simplified the patent docket by denying certiorari in 10+ cases.  Gone are GEA Process (IPR termination decision), Amphastar (scope of 271.e safe harbor) , Commil (appellate disregard of factual evidence), MacDermid (obvious combination), Jericho (Abstract Idea) , Trading Technologies (mandamus challenging CBM initiation), Tobinick (interference), Neev (arbitrator autonomy), Genetic Tech (eligibility), Essociate (eligibility), Dreissen, and Pactiv (ex parte reexamination procedure).   Notably, all of the eligibility petitions have been denied.

The constitutional challenges of MCM and Cooper are the only cases that particularly survived the Court’s latest culling. Those cases have been relisted for consideration at the next conference (October 7). However, there is some chance that the court is simply waiting for Square’s responsive brief due October 12.  Meanwhile, on October 11, the court will hear oral arguments in Samsung v. Apple.