January 2013

The Federal Circuit’s New Obviousness Jurisprudence: An Empirical Study

By Jason Rantanen

[Download the draft article]

Obviousness remains one of the primary issues raised in patent cases.  A few weeks ago, Dennis noted that "the vast majority of BPAI/PTAB decisions focus on the question of obviousness,"  and 5 of the 11 opinions involving utility patents issued by the Federal Circuit this past month addressed obviousness.  Many of these cases revolve around application of the Supreme Court's decision in KSR v. Teleflex, and reflect disagreements over the interpretation of the Court's opinion 

This article presents the results of an empirical examination of the Federal Circuit's obviousness jurisprudence over a period of fifteen years, asking whether the Federal Circuit really changed its behavior as a result of KSR.  In systematically examining the court's opinions, I found the following:

  • Following KSR the Federal Circuit has become substantially less favorable to patentees on the issue of obviousness. 
  • The Federal Circuit’s ubiquitous pre-KSR requirement that patent challengers identify a “teaching, suggestion, or motivation” (“TSM”) to combine or modify the prior art has largely disappeared, at least in formal terms.
  • Although the concept underlying TSM has endured, in the form of a “reason to combine” requirement, the post-KSR form of that requirement differs substantially from its pre-KSR incarnation.
  • The Federal Circuit now routinely relies on language from KSR that “[a] court must ask whether the improvement is more than the predictable use of prior art elements according to their established functions”  and the use of “common sense” to find combinations and modifications of the prior art to be obvious.
Although there may be some disagreement within the court, taken as a whole this study provides strong evidence that the Federal Circuit has both changed what it says and does when reviewing appeals involving the issue of obviousness. The magnitude of some of my findings was particularly surprising: for example, in the five years after KSR the Federal Circuit affirmed the PTO on the issue of obviousness 91% of the time (94 out of 103 times).
 
Over the next few weeks I'll be posting some of my findings that didn't make it into the article. 

Patent Term Calculations: District Courts Split on PTA Calculations; Revive Focus on Deference to PTO Determinations

By Dennis Crouch

Exelixis v. Kappos (Exelixis II) (E.D. Va. 2013)

We now have a district court split on post-RCE patent term adjustment. This decision – siding with the PTO – arises from a second Exelixis case and will be called Exelixis II (Brinkema, J.) In Exelixis I, Judge T.S. Ellis sided with the patentee in finding that the PTO was improperly under-calculating the patent term owed to patentees who had filed a request-for-continued examination during the course of prosecution. Exelixis v. Kappos, — F. Supp. 2d —, 2012 WL 5398876 (E.D. Va. Nov. 1, 2012), as amended Nov. 6, 2012. In the parallel caes of Novartis AG v. Kappos, — F. Supp. 2d –, 2012 WL 5564736 (D.D.C. Nov. 15, 2012), Judge Huvelle adopted the reasoning of Judge Ellis in siding with the patentee. Those decisions basically held that "once the three year clock has run, PTA is to be awarded on a day for day basis regardless of subsequent events." The PTO has argued that an RCE stops the running of the PTA clock.

In her newly released opinion, Judge Brinkema has sided with the PTO in holding that "'any time consumed by continued examination of the application requested by the applicant under section 132(b)' (via the filing of an RCE) does not count toward that three-year period." Quoting 35 U.S.C. §154(b)(1)(B). Exelixis I is already on appeal to the Federal Circuit and part II may be there soon as well.

The PTA statute is poorly written and thus both sides offer reasonable interpretations. In that type of scenario the most important factor is often whether deference is given to the agency's statutory interpretation. Here, Judge Brinkema determined that the PTO's interpretation of its statute should be accorded Skidmore deference because the PTO's interpretation is a "reasonable conclusion as to the proper construction of the statute." Quoting Cathedral Candle Co. v. U.S. Int'l Trade Comm'n, 400 F.3d 1352 (Fed. Cir. 2005). In that case, Judge Bryson wrote "we believe the Supreme Court intends for us to defer to an agency interpretation of the statute that it administers if the agency has conducted a careful analysis of the statutory issue, if the agency's position has been consistent and reflects agency-wide policy, and if the agency's position constitutes a reasonable conclusion as to the proper construction of the statute, even if we might not have adopted that construction without the benefit of the agency's analysis." Of course, that case was not a patent case. And the Federal Circuit has appeared much less willing to offer deference to USPTO decisions.

Read the new opinion here: /media/docs/2013/01/gov.uscourts.vaed.280154.31.0.pdf.

Smartphone Wars: Micron’s Slide-to-Unlock Patent

by Dennis Crouch

Adding a bit of drama to the slide-to-unlock debate, Micron has just received its own patent covering a "system and method for controlling user access to an electronic device." U.S. Patent No 8,352,745 issued in January 2013 but claims priority to an original application filed in February 2000 and lists Jim McKeeth as inventor.

Claims:

1. A system comprising:

a touch screen upon which a user is to enter, by drawing, a geometric pattern in a specified direction to gain access to the system; and

a processing circuit coupled to the touch screen to compare the user entered geometric pattern to a predefined geometric pattern stored in a memory.

6. The system of claim 1 wherein the user entered geometric pattern is a line.

Apple's slide-to-unlock patents claim priority only to the 2004-2005 timeframe and, although they may be separately patentable, Apple's patents will not serve to invalidate Micron's new patent.

Samsung has a 10-year cross-license deal with Micron. I have not seen reports of any similar deals with Apple, Google\Motorola, or RIM. It will be interesting to see whether Micron holds onto the patent or shifts it to an enforcement company as it did in 2010 in sending 4,000+ patents to John Desmarais for enforcement. Micron is a major manufacturer of computer memory with a market valuation of about $8 billion, perhaps they should just ask for Apple to endorse-over its recent billion dollar patent infringement judgment. One complicating factor is that I suspect Micron is a supplier for all of the potential defendants.

NO DISCLAIMERS OR DISAVOWALS

What do you think of the following boiler-plate language that some applicants are including in their office-action responses:

NO DISCLAIMERS OR DISAVOWALS

Although the present communication may include alterations to the application or claims, or characterizations of claim scope or referenced art, the Applicants are not conceding in this application that previously pending claims are not patentable over the cited references. Rather, any alterations or characterizations are being made to facilitate expeditious prosecution of this application.

Applicant reserves the right to pursue at a later date any previously pending or other broader or narrower claims that capture any subject matter supported by the present disclosure, including subject matter found to be specifically disclaimed herein or by any prior prosecution.

Accordingly, reviewers of this or any parent, child or related prosecution history shall not reasonably infer that the Applicants have made any disclaimers or disavowals of any subject matter supported by the present application.

Piercing the Corporate Veil: Corporate Officers Are Liable for Their Own Torts

by Dennis Crouch

Hall v. Bed, Bath & Beyond, Inc. and Nachemin, __ F.3d __ (Fed. Cir. 2013)

This design patent decision is interesting and important on several levels and so I have divided the post into two sections. This section focuses on the Federal Circuit’s dismissal of the charges filed personally against a Bed Bath & Beyond employee who allegedly caused the infringement. In my view, the court arrived at the wrong conclusion in holding that the corporate veil protected the employee from patent infringement liability. In a separate post, I wrote about the court’s decision to maintain a low notice pleading requirement for design patent infringement litigation.

Set Up From the Complaint: Mr. R.J. Hall designed a new product known as a “Towel Tote” that is basically an absorbent scarf with pockets on the ends.  [See one here]. After filing his design patent application, Hall e-mailed with Mr. Farley Nachemin at Bed Bath & Beyond (BB&B) to see whether the company would retail his product.  Nachemin is a VP at BB&B and is employed as the General Merchandise Manager. Nachemin showed interest and two later met face-to-face. In the meetings and e-mails Hall made clear that the patent was pending. However, instead of moving forward with Hall, BB&B (with direct participation from Nachemin) mailed Hall’s product to Pakistan and had it copied and manufactured for retail distribution back in the US.

When Hall later sued BB&B, he also sued Nachemin for infringement and inducing infringement (as well as other federal and state business torts).

Corporate Veil Protecting Officers and Directors: In a recent opinion, the Federal Circuit agreed with the district court that the Corporate Veil shields Nachemin from liability under New York law (the law applicable to this case). The basic contention is that – as a Vice-President of the Company, Nachemin is an officer of the company and therefore cannot ordinarily be held liable for debts of the company unless the corporate veil is pierced. Under New York law, “the party seeking to pierce a corporate veil [must] make a two-part showing: (i) that the owner [or officer] exercised complete domination over the corporation with respect to the transaction at issue; and (ii) that such domination was used to commit a fraud or wrong that injured the party seeking to pierce the veil.” Quoting Am. Fuel Corp. v. Utah Energy Dev. Co., 122 F.3d 130, 134 (2d Cir. 1997). The appellate panel arrived at the reasonable conclusion that the complaint did not sufficiently allege domination by Nachemin.

Error: However, the error in the Federal Circuit’s decision is its seeming assumption that the corporate veil applies to protect an officer who personally committed the tort of patent infringement. It does not. The court wrote:

[Defendants] primarily argue that under New York law, “the party seeking to pierce a corporate veil [must] make a two-part showing: (i) that the owner exercised complete domination over the corporation with respect to the transaction at issue; and (ii) that such domination was used to commit a fraud or wrong that injured the party seeking to pierce the veil.” Am. Fuel Corp. v. Utah Energy Dev. Co., 122 F.3d 130, 134 (2d Cir. 1997); see also Wm. Passalacqua Builders, Inc. v. Resnick Developers South, Inc., 933 F.2d 131, 138 (2d Cir. 1991) (“[T]o pierce the corporate veil, the parent corporation must at the time of the transaction complained of . . . have exercised such control that the subsidiary ‘has become a mere instrumentality’ of the parent, which is the real actor.”). Applying the principles of New York law, we do not discern reversible error in the district court’s dismissal of the action against Mr. Nachemin.

The problem with the court’s conclusion is that the corporate veil does not liberate an individual from personally committed torts.

The Corporate Veil: Corporate law is, for the most part, a creature of state law. Each state has its own rules regarding the various corporate forms and their resulting limitations of liability that protect corporate owners as well as officers and directors of the corporation. However, all states follow the general principle that certain qualified parties will not be held liable for debts of a corporation unless the facts conform to a veil-piercing exception to the rule as suggested above.

Agents Personally Liable for Their Own Torts: One enormous caveat to the corporate veil protection is the general rule that corporate officers and agents are personally liable for their own tortious conduct. Thus, a bouncer who commits battery will be personally liable for the damage caused even if the improper action was at the behest of his nightclub employer. See Aguirre v. Paul, 862 N.Y.S.2d 580 (2008) (“A corporate officer is not held liable for the negligence of the corporation merely because of his official relationship to it; it must be shown that the officer was a participant in the wrongful conduct.”); Munder v. Circle One Condominium, Inc., 596 So2d 144 (Fla 4th DCA 1992); Messenger v. Frye, 176 Wash 291 (1934).

Agent Personally Liable for Their Own Torts Even if Act is On Behalf of Company: It is generally not an excuse that the tortious conduct was done on behalf of the corporate entity. Thus, a person is liable for his own tortious conduct even when acting for the benefit of another.

Personal Liability for Patent Infringement: A plain reading of the patent laws make clear that individuals can be held liable for patent infringement. 35 U.S.C. 271(a) (“whoever without authority makes … any patented invention, within the United States … infringes the patent”). That reading is supported by a long history of holding individuals personally liable for patent infringement. There have been a few Federal Circuit cases on point. In Orthokinetics, lnc. v. Safety Travel Chairs, Inc., 806 F.2d 1565 (Fed. Cir. 1986), the court wrote:

[I]t is well settled that corporate officers who actively aid and abet their corporation’s infringement may be personally liable for inducing infringement under § 271(b) regardless of whether the corporation is the alter ego of the corporate officer.

Id. See also Wordtech Systems, Inc v. Integrated Networks Solutions, Inc., 609 F.3d 1308 (Fed. Cir. 2010) (corporate structure does not shield officers from liability for personally participating in contributory patent infringement); Power Lift, Inc. v. Lang Tools, Inc.,774 F.2d 478 (Fed. Cir. 1985) and Manville Sales Corp. v. Paramount Systems, Inc., 917 F.2d 544 (Fed. Cir. 1990).

In a 2003 article, Professor Lynda Oswald foreshadowed the wrong-turn made by the court here. Oswald writes:

[Courts] tend to mis-apply the general principles of agency and tort law described above when evaluating the liability of an officer for the infringing acts of his or her corporation. Although courts purport to look for personal participation by the officer in the patent infringement of the corporation, courts typically gauge such personal participation by examining whether the corporate veil can be pierced to hold the officer personally liable for violating § 271(a)’s prohibition against ” making, using, or selling” the patented invention. In doing so, however, courts fail to recognize that piercing analysis is irrelevant to issues of officer liability.

See Lynda J. Oswald, The Personal Liability of Corporate Officers for Patent Infringement, 44 IDEA 115, 130 (2003).

Nachemin might not be liable in this case, but it is clear that the corporate veil does not serve as his shield.

Notes

  • The individual liability of Mr. Nachemin was something of an appendage to the decision as a whole. I suspect that the confused language that I note is most likely due to the light treatment given to the issue.

Rexnord v. Kappos

By Jason Rantanen

Rexnord Industries, LLC v. Kappos and Habasit Belting, Inc. (Fed. Cir. 2013) Download 2011-1434.Opinion.1-18-2013.1
Panel: Newman (author), Lourie, Prost

In Rexnord v. Kappos, the Federal Circuit reversed the Board of Patent Appeals and Interferences' conclusion of nonobviousness, concluding that claims 1-14 of Patent No. 6,523,680 are obvious as a matter of law.  The significant aspect of this opinion is the court's rejection of the PTO's arguments that "the Board need not consider other grounds that had been presented during the reexamination, for they had not been raised on the appeal to the Board" and that "the Board does not consider aspects
beyond those relied on by the examiner."  Slip Op. at 12.  The CAFC's ruling on the latter point, however, creates some significant tensions and does not cleanly resolve the issue. 

The '680 patent relates to a mechanical convey belt formed of rows of belt modules interlinked by transverse rods.  Rexnord filed a petition for inter partes review, arguing that claims 1-4 of the '680 patent were invalid as anticipated and obvious.  The issue on appeal focused on a limitation in representative claim 1 that required a web with a diameter of less than 10 mm. In its petition for inter partes reexamination, Rexnord included the argument that the 10mm limitation was merely a "design choice."  Slip Op. at 13.  In holding that this element was obvious in light of the prior art, however, the Examiner did not reference the "design choice" argument.  Instead, the Examiner stated that:

Thompson ’048 discloses the broad teaching of providing a corrugated intermediate portion with
an adjacent web portion to prevent objects from being pinched between adjacent modules where a
space bounded by the web, an outer end of the first link end and the sidewalls of the second link
ends is completely closed. It would have been obvious to one of ordinary skill in the art to [include
in] the modules of Horton ’248 . . . a web adjacent the corrugated portion to prevent objects from being pinched between adjacent modules as taught by Thompson ’048

Slip Op. at 9 (emphasis added).

Habasit, the patent owner, appealed the examiner's rejection to the BPAI.  In its appeal, Habasit argued that the examiner erred because none of the references disclosed a space with a diameter less than 10 mm, as required by the claims. Although only the second argument is discussed in the CAFC opinion, Rexnord raised two arguments in response: (1) both Palmaer and Thompson disclosed a completely closed space (i.e.: a space with a diameter of 0 mm) and (2)

Thompson, Jr. et al. goes beyond merely disclosing a closed space in a preferred embodiment, and teaches the exact subject matter that Habasit asserts is novel in the '680 Patent. Despite the efforts by Habasit to distort the teachings of Thompson, Jr. et al., the reference clearly teaches solving the identical problem, see col. 1, lines 26-34 of Thompson, Jr. et al. (“objects being conveyed are subject to being caught in the gaps between the links”), solved by Habasit using an identical solution, see col. 14, lines 38-41 of Thompson, Jr. et al. (“the plates 51 on the links 25 cover the gaps 37 to prevent catching articles therein, while providing movement between adjacent links so as to allow traversing of a radiused section”). Accordingly, Thompson, Jr. et al. clearly teaches one skilled in the art to prevent objects from being pinched between modules by modifying Horton to at least partially, or completely, cover a gap in which the object can be pinched.

2008 WL 8119276.

The Board ruled in favor of Habasit, holding that "the Examiner has not identified where the prior art discloses that this space has a diameter of less than 10 mm as required by the claims,"  Slip Op. at 10, quoting Board opinion at 11, and rejecting the space of 0 mm argument.  In reaching this conclusion, the Board did not discuss Rexnord's second argument above.  Slip Op. at 9. 

In its request for rehearing from the Board decision, Rexnord subsequently raised two arguments relating to the 10mm limitation: that the 10 mm spacing was inherent in the prior art and that it was merely a design choice in light of the prior art. The Board denied rehearing, stating that “Rexnord’s reasons as to why it would have been obvious to construct a space as recited in the claims (Request, 3–5) were not the rationale of the Examiner’s rejection.” Slip Op. at 11, quoting Dec. on Rehearing at 3.

On appeal, the CAFC rejected Rexnord's inherency argument but agreed with its obviousness argument.  The main aspect of the appeal, however, was the Federal Circuit's rejection of the PTO's argument that Rexnord couldn't argue grounds for affirming the rejection that were not articulated by the Examiner:

When Habasit appealed the examiner’s decision, Rexnord was not barred from presenting this argument in defense of the examiner. The PTO states in its brief on
this appeal:

Just as this Court does not entertain arguments made outside of appellant’s opening brief, see, e.g., In re Watts, 354 F.3d 1362, 1367 (Fed. Cir. 2004); In re Schreiber, 128 F.3d 1473, 1479 (Fed. Cir. 1997), the Board has a rule that similarly bars the presentation of new arguments outside appellant’s opening brief (absent circumstances not alleged here), see 37 C.F.R. § 41.79(b).

PTO Br. 24. We observe that Rexnord was not the appellant before the Board, and that the premise is an incorrect statement of the appellate process. On judicial review, the correctness of the decision appealed from can be defended by the appellee on any ground that is supported by the record, whether or not the appellant raised the argument.

While this general point seems to be solid, the opinion uses it to support two rules that are in tension: (1) that the appellee can include in its response brief arguments that it raised before the examiner but were not discussed in the examiner's decision ("When Habasit appealed the examiner's decision, Rexnord was not barred from presenting this argument in defense of the examiner," Slip Op. at 13), and (2) that the appellee before the Board does not need to raise those arguments until its request for reexamination ("The issue was fully raised before the examiner, and these references were not again a patentability issue until after the Board reversed the examiner," Slip Op. at 13; "Rexnord asked the Board on rehearing to consider the other grounds before the examiner, in support of the examiner's decision," Slip Op. at 14). 

In other words, the CAFC seems to be saying that the appellee to the board can raise these arguments in its response brief or it can wait until it files its request for rehearing (or maybe that it can only raise these arguments in its request for rehearing; I'm not sure given the court's ambiguity).  Both seem somewhat inconsistent with the way appellate practice usually works: if an appellee doesn't argue an issue in its responsive brief, it generally can't argue that issue in its request for rehearing regardless of whether it made the argument before the lower tribunal. 

Note that this opinion invovled an appeal from the BPAI, which is now the Patent Trial and Appeal Board.  If it carries over into PTAB practice, however, it could have significant consquences for how appeals are structured. 

Antigua to Reject Intellectual Property Rights of US Companies as WTO Authorized Trade Sanction for Killing Offshore Online Gambling

By Dennis Crouch

The Caribbean nation of Antigua and Barbuda has won its case against the United States at the World Trade Organization (WTO) and is now authorized and moving forward with the granted sanction – suspension of all American-owned intellectual property rights within the Antigua borders. This trade sanction comes as a response to the US campaign against off-shore on-line gambling. That campaign has decimated an Antiguan industry and was found to violate the US WTO trade obligations. Antigua has been negotiating with the US for the past decade on some mechanism to resolve the dispute.

In a press release, Hon. Carl Roberts High Commission from Antigua to the UK indicated the following: “For nearly a decade, Antigua has sought to resolve the dispute with the United States Government over the US failure to abide by American treaty obligations with regard to remote gaming.” Colin Murdoch, Trade Ambassador for Antigua goes on: “This decision [to suspend US IP rights] did not come easily. After countless proposals from our government have been more or less ignored by the Office of the USTR – numerous decisions by the WTO declaring the United States Government’s position illegal – and failure of the United States Government to provide meaningful proposals to end the dispute, the WTO provides this remedy not to encourage illicit behavior by nations; but rather to provide them with a way to secure their legal rights as sovereign nations.”

At this point, the Antiguan government has not indicated the exact date when suspension will begin or whether the suspension will apply to both IP procurement and enforcement. About 10 patent applications were filed in Antigua in both 2010 and 2011.

The Land of 365 Beaches may soon become the hot site for unlicensed but legal copyright streaming. Companies may want to proactively register their .AG domain as well.

Get a New Patent Law Job: Recent Patent Law Job Postings

Here are a set of recently-posted patent law jobs posted to our Patently-O Job Board:

More jobs are being posted almost every day. We have two current sponsors on the Job Board site, including Eric Gould and Elysium Digital. Thanks for your support! – Dennis

Design Patent Litigation: Notice Pleading Requirements Remain Low

Totetowelby Dennis Crouch

Hall v. Bed, Bath & Beyond, Inc. and Nachemin, __ F.3d __ (Fed. Cir. 2013)

This design patent decision is interesting and important on several levels and so I have divided the post into two sections. This section focuses on the district court's clear error in dismissing the infringement lawsuit on the pleadings.  The second section will focus on the Federal Circuit's dismissal of the charges filed personally against the employees who caused the allegedly infringement.

The set-up here is interesting.  Mr. R.J. Hall designed a new product known as a “Towel Tote” that is basically an absorbent scarf with pockets on the ends.  [Buy one here.] After filing his design patent application, Hall sat down with Mr. Farley Nachemin at Bed Bath & Beyond (BB&B) to see whether the company would retail his product.  Instead of moving forward with Hall, BB&B mailed Hall's product to Pakistan and had it copied and manufactured for retail distribution back in the US.

When his patent issued, Hall sued BB&B as well as Nachemin and other executives for design patent infringement and a number of state-law business claims such as, false advertising, misappropriation, and unfair competition.  U.S. Design Patent No. D596,439.  The district court then dismissed the case on the pleadings –  finding that the complaint did not particularly identify the “new, original, and ornamental” features of the design patent. On appeal, the Federal Circuit rejects that decision and instead holds that, even under Iqbal and Twombly, a pleading does not require this level of information. Rather, following the law of utility patents, the court holds here that a proper design patent infringement complaint only requires the following five elements:

  1. An allegation of ownership of the patent;
  2. The name of the defendant;
  3. The patent number;
  4. A statement of the means by which the defendant allegedly infringes; and
  5. Relevant sections of the patent laws.

Citing Phonometrics, Inc. v. Hospitality Franchise Systems, Inc., 203 F.3d 790 (Fed. Cir. 2000).  In this case, the district court's ruling was well off-base because the design patentee need not prove the design's points of novelty even at trial since validity is presumed and infringement no longer relies on the points-of-novelty test.

In the litigation, BB&B had filed a counterclaim alleging that that Mr. Hall himself had violated the Lanham Act by telling the company his product was “protected by patent” even before the patent issued.  BB&B also alleged that the Hall committed false marking by continuing to mark his product “patent pending” even several months after the patent had issued.  On appeal, the Federal Circuit holds that these statements “cannot be viewed as even plausibly misleading.”  With regard to the the false marking claim, the court also adds that the defendant had failed to plead competitive harm, which is now a core element of false marking under the Leahy-Smith America Invents Act of 2011.

+ + + + +

Judge Newman wrote the majority opinion that was joined by Judge Linn.

Judge Lourie wrote in dissent – basically arguing that more deference should have been given to the district court's role of ensuring that the pleadings are clear enough.  Judge Lourie acknowledged legal mistakes of the district court, but also directed attention to a separate aspect of the district court decision. The district court wrote: “Rather than plead in a coherent fashion, making clear how the facts support a particular theory of infringement as to a given Defendant, Plaintiff has conflated all his facts, pleading without making any distinctions of any kind. This ambiguity in pleading is unacceptable.”   

Notes

  • As with most design patents, this one issued without substantive examination on the merits.  The application was filed in November 2008 and the first correspondence from the USPTO was a notice of allowance mailed in May 2009. The patent issued shortly thereafter.
  • Professor Tushnet has more on her site with more focus on the Lanham Act claims: http://tushnet.blogspot.com/2013/01/do-you-know-where-your-towel-is-and.html

Obvious as a Matter of Law

By Dennis Crouch  [UPDATED]

Soverain Softwarwe v. Newegg (Fed. Cir. 2013)

This Federal Circuit decision is fairly big news as far as its legal results. District Court Judge Davis rejected Newegg's obviousness argument on summary judgment – finding each of the asserted patent claims not invalid. On appeal, the Federal Circuit has completely reversed that holding and instead finds here that all of the asserted claims are invalid as obvious. The case also raises a novel argument for secondary indicia of nonobviousness.

The unanimous opinion is written by Judge Newman and joined by Judges Prost and Reyna.

The Federal Circuit panel's approach here follows the lead of KSR International Co., v. Teleflex, Inc., 550 U.S. 398 (2007). In that case, the Supreme Court was able to make the legal conclusion that the asserted claims were obvious because the factual underpinnings of obviousness were not in material dispute.

Where, as here, the content of the prior art, the scope of the patent claim, and the level of ordinary skill in the art are not in material dispute, and the obviousness of the claim is apparent in light of these factors, summary judgment is appropriate.

In his usual quotable way, Greg Aharonian writes that "A bit of commonsense leaks into the CAFC."

The asserted patents in this case are all eCommerce patents purchased out of bankruptcy. United States Patent Nos. 5,715,314, 5,909,492, and 7,272,639. The court walked through the obviousness of each different claim finding that (1) each element was found in the prior art and (2) the combination of elements would have been well within the skill of an ordinary database designer and GUI developer.

Licensing as Secondary Indicia of Nonobviousness: The court does have an interesting discussion of secondary indicia of nonobviousness. The patentee argued that the extensive licensing of its patent provided evidence of the patent's nonobviousness – asking the rhetorical question "why would someone pay to license an invalid patent?" The court did not entirely foreclose that argument in the future, but appears to have sided with Newegg's contention that the licenses were taken "to avoid the costs of litigation" and not to take advantage of the invention.

Patently-O Bits & Bytes by Lawrence Higgins

Upcoming Events:

  • The New Jersey Intellectual Property Law Association presents: Electronics, Telecom, and Software Patent Practice Update on January 24, 2013. Agenda includes panels on Non-Practicing Entities, America Invents Act, and case law updates. "We are delighted to provide this second annual program to educate intellectual property attorneys about the latest developments in patent law under the America Invents Act and recent rulings in patent litigation that impact legal practice in the electronics, telecom and software sectors," said Robert E. Rudnick, Program Chair. "We are particularly pleased to offer a panel this year addressing issues our clients face in view of patent infringement claims raised by Non-Practicing Entities." To view the program agenda and register, please visit http://www.njipla.org/events.asp#event52.
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  • American Conference Institute is hosting its Medical Device Patents conference March 5-6th, 2013 in Chicago. In response to the daunting challenges facing the medical device industry, ACI's Advanced Summit on Medical Device Patents provides a forum for the key players – preeminent in-house IP counsel, patent prosecutors and litigators, the PTO, and judges – to unite and share their collective intellectual property knowledge to provide you with cutting-edge patent strategies you can immediately incorporate into your practice before the historic switch to first-to-file on March 16th, 2013. [Link] (PatentlyO readers use code PO 200 for a discount)
  • American Conference Institute is hosting its FDA Boot Camp conference March 19-20th, 2013 in New York, NY. Register with code PO 200 for a discount. [Link]
  • Marcus Evans is hosting its IP Law 2013 Summit in Colorado Springs, CO March 21-23. The IP Law Summit will highlight the current challenges and opportunities through visionary conference sessions and keynote presentations delivered by your most esteemed peers and thought leaders from Americas leading corporations and mid-market organizations. Register online at [Link].

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Patently-O Bits & Bytes by Lawrence Higgins

Upcoming Events:

  • The New Jersey Intellectual Property Law Association presents: Electronics, Telecom, and Software Patent Practice Update on January 24, 2013. Agenda includes panels on Non-Practicing Entities, America Invents Act, and case law updates. "We are delighted to provide this second annual program to educate intellectual property attorneys about the latest developments in patent law under the America Invents Act and recent rulings in patent litigation that impact legal practice in the electronics, telecom and software sectors," said Robert E. Rudnick, Program Chair. "We are particularly pleased to offer a panel this year addressing issues our clients face in view of patent infringement claims raised by Non-Practicing Entities." To view the program agenda and register, please visit
    http://www.njipla.org/events.asp#event52.
  • C5's 5th Annual Forum on Biotech and Pharma Patent Litigation is scheduled for January 29-30 in Amsterdam. [Link] (PatentlyO readers use code PO10 for a 10% discount)
  • IBC Legal will hold its 21st Anniversary Biotech & Pharmaceutical Patenting Conference 2013: Protecting and maximizing medical innovation February 26-27 at the Westin Grand Munich. The conference will help you get up to date with this complex sector's key legal issues and gain commercial insights
    into how to surmount the practical challenges that Biotech & Pharmaceutical Patenting poses. Guest speakers include: Heli Pihlajamaa, Juergen Dressel, Tom Bombelles, and many others. [Link] (PatentlyO readers use code FKW82348PTLL for a 10% discount)
  • American Conference Institute is hosting its Life Sciences Collaborative Agreements and Acquisitions conference February 27-28th, 2013 in New York, NY. Learn more and register with code PO 200 to receive a discount: [Link].
  • Practical Law is hosting the 1st Annual Life Sciences Law Forum on March 5-6 at the Hilton Waldorf Hotel, in London. The forum will provide a unique cross-border analysis of market trends, discuss issues at the heart of your business and prepare you for what lies ahead. Guest speakers include: Ewan Nettleton, Bill Mordan, Elizabeth Choo, Reza Green, and many others. [Link] (PatentlyO readers register online with discount code LSPA01)
  • American Conference Institute is hosting its Medical Device Patents conference March 5-6th, 2013 in Chicago. In response to the daunting challenges facing the medical device industry, ACI's Advanced Summit on Medical Device Patents provides a forum for the key players – preeminent in-house IP counsel, patent prosecutors and litigators, the PTO, and judges – to unite and share their collective intellectual property knowledge to provide you with cutting-edge patent strategies you can immediately incorporate into your practice before the historic switch to first-to-file on March 16th, 2013. [Link] (PatentlyO readers use code PO 200 for a discount)
  • American Conference Institute is hosting its FDA Boot Camp conference March 19-20th, 2013 in New York, NY. Register with code PO 200 for a discount. [Link]
  • Marcus Evans is hosting its IP Law 2013 Summit in Colorado Springs, CO March 21-23. The IP Law Summit will highlight the current challenges and opportunities through visionary conference sessions and keynote presentations delivered by your most esteemed peers and thought leaders from Americas leading corporations and mid-market organizations. Register online at [Link].

Contact Lawrence.Higgins@patentlyo.com with leads for future Bits and Bytes.

Patently-O Bits & Bytes by Lawrence Higgins

Upcoming Events:

  • The New Jersey Intellectual Property Law Association presents: Electronics, Telecom, and Software Patent Practice Update on January 24, 2013. Agenda includes panels on Non-Practicing Entities, America Invents Act, and case law updates. "We are delighted to provide this second annual program to educate intellectual property attorneys about the latest developments in patent law under the America Invents Act and recent rulings in patent litigation that impact legal practice in the electronics, telecom and software sectors," said Robert E. Rudnick, Program Chair. "We are particularly pleased to offer a panel this year addressing issues our clients face in view of patent infringement claims raised by Non-Practicing Entities." To view the program agenda and register, please visit http://www.njipla.org/events.asp#event52.
  • C5's 5th Annual Forum on Biotech and Pharma Patent Litigation is scheduled for January 29-30 in Amsterdam. [Link] (PatentlyO readers use code PO10 for a 10% discount)
  • IBC Legal will hold its 21st Anniversary Biotech & Pharmaceutical Patenting Conference 2013: Protecting and maximizing medical innovation February 26-27 at the Westin Grand Munich. The conference will help you get up to date with this complex sector's key legal issues and gain commercial insights into how to surmount the practical challenges that Biotech & Pharmaceutical Patenting poses. Guest speakers include: Heli Pihlajamaa, Juergen Dressel, Tom Bombelles, and many others. [Link] (PatentlyO readers use code FKW82348PTLL for a 10% discount)
  • American Conference Institute is hosting its Life Sciences Collaborative Agreements and Acquisitions conference February 27-28th, 2013 in New York, NY. Learn more and register with code PO 200 to receive a discount: [Link].
  • Practical Law is hosting the 1st Annual Life Sciences Law Forum on March 5-6 at the Hilton Waldorf Hotel, in London. The forum will provide a unique cross-border analysis of market trends, discuss issues at the heart of your business and prepare you for what lies ahead. Guest speakers include: Ewan Nettleton, Bill Mordan, Elizabeth Choo, Reza Green, and many others. [Link] (PatentlyO readers register online with discount code LSPA01)
  • American Conference Institute is hosting its Medical Device Patents conference March 5-6th, 2013 in Chicago. In response to the daunting challenges facing the medical device industry, ACI's Advanced Summit on Medical Device Patents provides a forum for the key players – preeminent in-house IP counsel, patent prosecutors and litigators, the PTO, and judges – to unite and share their collective intellectual property knowledge to provide you with cutting-edge patent strategies you can immediately incorporate into your practice before the historic switch to first-to-file on March 16th, 2013. [Link] (PatentlyO readers use code PO 200 for a discount)
  • American Conference Institute is hosting its FDA Boot Camp conference March 19-20th, 2013 in New York, NY. Register with code PO 200 for a discount. [Link]
  • Marcus Evans is hosting its IP Law 2013 Summit in Colorado Springs, CO March 21-23. The IP Law Summit will highlight the current challenges and opportunities through visionary conference sessions and keynote presentations delivered by your most esteemed peers and thought leaders from Americas leading corporations and mid-market organizations. Register online at [Link].

Contact Lawrence.Higgins@patentlyo.com with leads for future Bits and Bytes.

US Government Brief: Farmer who Purchases Commodity Soybeans Cannot Replant Those Beans Without Committing Patent Infringement

By Dennis Crouch

Bowman v. Monsanto (SCOTUS 2013)

In its newly filed brief, the US Government has agreed with Bowman that violation of use restrictions on commodity GM soybeans cannot result in patent infringement. However, the Government ultimately sides with Monsanto in arguing that the progeny beans grown by Bowman represent an infringing "mak[ing]" of Monsanto's patented invention.

Briefing continues in the GM seed case between the Indiana farmer Vernon Bowman and the developer of GM glyphosate resistant "RoundUp Ready" soybeans Monsanto. Monsanto holds two patents that clearly and literally cover the seeds in question. U.S. Patent Nos. 5,352,605 and RE39,247E. For several years, Bowman had been looking for a legitimate way to grow RoundUp Ready soybeans without paying the large license fee charged by Monsanto. What he did was find a seeming loophole in the Monsanto license agreement that allowed farmers to sell soybeans to the commodity market without any ongoing restrictions on the use of those beans. Call these "authorized sales" because the unrestricted sale of GM seeds to commodity market was authorized by the patentee, Monsanto. Normally, those commodity beans are purchased by CAFO and public school lunch operators, but Bowman purchased them with the intent of growing more soybeans. The nice thing about soybeans is that they self-pollinate and thus apart from mutation, soybean progeny are genetically identical to their forebears. The US commodity marketplace does not normally distinguish between GM and non-GM soybeans. However, Bowman relied on his reasonable assumption that most of the beans would be RoundUp Ready because of Monsanto's deep market penetration. Bowman planted the beans and fond that the bulk were resistant to the glyphosate herbicide. Bowman saved some of his harvest for replanting and sold the rest back to the commodity market. This continued for several years until Monsanto sued Bowman alleging patent infringement – arguing that Bowman's operation was "making" new infringing seeds in violation of the Patent Act. 35 U.S.C. 271(a) ("whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States … during the term of the patent therefor, infringes the patent").

Thus far, courts are siding with Monsanto, but now the Supreme Court will weigh in on whether those Monsanto-authorized sales should be seen as exhausting the patent rights in the progeny. The judicially created doctrine of exhaustion is designed to better ensure free alienation of goods and a robust secondary market. Exhaustion fits within the centuries long common law history of rejecting covenants and conditions that unduly limit the alienability (resale) and use of property rights. Although much of the property case-law has focused on real estate, the rules against unreasonable limits on alienation and use are at their peak in the context personal property, such as the soybeans at issue in this case. For the most part, restrictions on use and resale of personal property will not be enforceable against a bona fide purchaser. Under the patent exhaustion doctrine, patent rights are said to be exhausted for goods that enter the stream of commerce with the patentee's authorization and without restriction. Thus, when Ricoh sells a patented copier to a customer, the patent rights are exhausted and Ricoh cannot later assert patent infringement when the customer sells the copier to a third party or when that third party uses the copier. Unauthorized sale and use can each constitute patent infringement, but Ricoh would have no case here because its patent would be deemed exhausted. Final point on exhaustion is that it normally applies on an item-by-item basis. The fact that a customer owns an authorized Ricoh copier whose patent is exhausted does not provide the customer with any authority to build another copier that infringes the patent. Making that new copier would constitute patent infringement.

The case at hand is unique because of the self-replicating nature of soybeans (and life in general). In its brief, the US Gov't frames the issue as:

Whether the authorized sale of one generation of a patented plant seed exhausts a patentee's right to control subsequent generations of that seed.

In his framing of the question, Bowman identifies the Federal Circuit's decision as creating a loophole for self-replicating technologies.

Whether the Federal Circuit erred by (1) refusing to find patent exhaustion in patented seeds even after an authorized sale and by (2) creating an exception to the doctrine of patent exhaustion for self-replicating technologies?

Monsanto took its turn by presenting questions in apparently ad absurdum form:

1. Whether the first-sale doctrine grants the purchaser of a patented article the right to make, use, and sell an unlimited number of new copies of the patented invention that have never been sold.

2. Whether patent treats as per se unenforceable all restrictions imposed by license on the use of a patented article following an authorized sale.

There is some amount of cross-talk in these questions presented. Each party accuses the other of seeking an exceptional rule for self-replicated technology. Monsanto here also attempts to bring-in an additional factual question regarding whether the commodity seeds were actually sold without use restrictions.

As suggested above, the key briefs have now been filed (except Bowman's reply brief) and oral arguments are set for February 19, 2013.

I previously discussed Bowman's brief here: http://www.patentlyo.com/patent/2012/12/patent-exhaustion-gmo.html

U.S. Government Brief: The most important brief filed in the case is most likely that of the US Government filed as a joint effort by both Department of Justice and the US Patent Office. That brief fully supports the Federal Circuit's holding that patent exhaustion does not apply to the progeny because the progeny are new articles of manufacture. The brief cites case-after-case where Supreme Court has indicated that exhaustion only applies to the article sold and does not permit the purchaser to make new copies. Unfortunately, the Government brief does not seriously engage the peculiarity of this case – that the patented article is life form that self-replicates by its nature- other than by noting that Bowman "creat[ed]" the progeny "through planting and cultivation." In his brief, Bowman disputes that growing crops constitutes "making" because seeds that fall to earth will naturally sprout and grow without human intervention. The Government also tries to make a distinction based upon elements of the PVPA, but I don't believe those hold water.

On one element, the US Government agreed with Bowman – that the Federal Circuit rule that a patentee's conditional sale of patented goods binds subsequent downstream purchasers. The Government writes that the proper rule, under Supreme Court precedent, is that downstream purchasers will not be liable patent infringement based upon failure to comply with use restrictions placed on the original authorized sale.

Restrictions on downstream use or resale may be enforceable as a matter of state contract law, but a purchaser's failure to comply with such restrictions does not constitute patent infringement.

Although agreeing in principle with Bowman, the Government then reiterated that Bowman is liable for the progeny that are not exhausted.

Read the brief: /media/docs/2013/01/11-796_affirmance_usa.authcheckdam.pdf