Patent – Patently-O https://patentlyo.com America's leading patent law blog Tue, 23 May 2017 14:55:41 +0000 en-US hourly 1 Supreme Court Reins In Patent Venue https://patentlyo.com/patent/2017/05/supreme-court-reins-patent.html https://patentlyo.com/patent/2017/05/supreme-court-reins-patent.html#comments Mon, 22 May 2017 14:52:08 +0000 https://patentlyo.com/?p=19655 by Dennis Crouch

In TC Heartland LLC v. Kraft Foods Group Brands LLC, the Supreme Court has significantly shifted the balance away from the geographically fringe Eastern District of Texas – holding that the residence requirement of 28 U.S.C. § 1400(b) refers only to a defendant’s State of Incorporation for patent infringement venue purposes.

Read the Decision: 16-341_8n59.

The short (10-page) unanimous opinion authored by Justice Thomas reaffirms the court’s prior decision in Fourco Glass Co. v. Transmirra Products Corp., 353 U. S. 222, 226 (1957) — holding again that “for purposes of §1400(b) a domestic corporation ‘resides’ only in its State of incorporation” and rejecting the notion that a much broader definition of venue (found in §1391) applies.

Although the Supreme Court law appears continuous.  The Federal Circuit created a major blip in its 1990 decision of VE Holding Corp. v. Johnson Gas Appliance Co., 917 F. 2d 1574 (1990).  In that case, the appellate court held that patent infringement venue is proper in any court having personal jurisdiction over the defendant.  That expansive change allowed for the rise of patent-focused venues such as the Eastern District of Texas where the majority of infringement lawsuits have been filed over the two decades (heat map below). PatentLawPic984

What next:  Section 1400(b) limits patent cases to the judicial district (1) “where the defendant resides,” or (2) “where the defendant has committed acts of infringement and has a regular and established place of business.”  This means a likely large boost of lawsuits in Delaware.  National retailers will still be amenable to suit essentially everywhere, but many would-be defendants will be able to avoid E.D.Texas at least. There will also be new litigation on the implications for foreign companies with no established place of business in the US.  The decision here expressly refuses to address that question other than noting that it did previously decide that foreign corps can be an exception to 1400(b). Although possible, it is unlikely the court will adapt the “established place of business” to include the internet, although that portion of 1400(b) has not been explored since the e-tailing explosion.  With less concentrated venue, I we can also expect a rise in multi-district litigation.  For more, consider Prof Janicke’s article on the Imminent Outpouring from the Eastern District of Texas.

 

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SAS Institute v. Lee: Partial Institution of Inter Partes Review https://patentlyo.com/patent/2017/05/institute-institution-decision.html https://patentlyo.com/patent/2017/05/institute-institution-decision.html#comments Mon, 22 May 2017 13:39:25 +0000 https://patentlyo.com/?p=19609 by Dennis Crouch

The Supreme Court has agreed to hear a new AIA-trials case: SAS Institute v. Lee

The inter partes review appeal focuses on the procedural question of whether the America Invents Act permits the USPTO to partially institute IPR proceedings – as it has been doing. SAS argues instead that the statute requires a full up/down vote on a petition and, if granted, the Patent Trial and Appeal Board (PTAB) must then pass final judgment on all petitioned claims:

Whether 35 U.S.C. § 318(a) … requires [the] Board to issue a final written decision as to every claim challenged by the petitioner, or whether it allows that Board to issue a final written decision with respect to the patentability of only some of the patent claims challenged by the petitioner, as the U.S. Court of Appeals for the Federal Circuit held.

As I previously wrote,

The basic setup here is that SAS argues that the PTO cannot partially institute IPR proceedings since the statute requires that PTO “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.” 35 U.S.C. § 318(a)

Although a somewhat sideline issue, it will likely have its biggest impact on estoppel resulting from AIA trials and, as a result, may also shift filing strategy.

AIA Trial Docs:

 

 

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Guest Post: Where we Stand with Trade Secret Enforcement in Federal Courts https://patentlyo.com/patent/2017/05/secret-enforcement-federal.html https://patentlyo.com/patent/2017/05/secret-enforcement-federal.html#comments Thu, 18 May 2017 16:09:29 +0000 https://patentlyo.com/?p=16697 Guest Post by Prof. David Opderbeck (Seton Hall), originally published on his blog The CyberSecurity Lawyer.

Introduction

Trade secrets are important to cybersecurity because many data breaches involve trade secret theft.  The Defend Trade Secrets Act of 2016 (DTSA) amended the Espionage Act of 1996 to provide a federal private right of action for trade secret misappropriation.   Some commentators opposed the DTSA in part because it seems redundant in light of state trade secret law and could lead to unnecessary litigation and restrictions on innovation.  Now that the DTSA has been in effect for nearly a year, I conducted an empirical study of cases asserting DTSA claims (with the able help of my research assistant, Zach Hansen).  This post summarizes the results of that study.

Methodology

We ran keyword searches in the Bloomberg Law federal docket database to identify cases asserting DTSA claims in federal courts.  It is not possible to search only on the Civil Cover Sheet because there is no discrete code for DTSA claims.  Our search ran from the effective date of the DTSA (May 26, 2016) through April 21, 2017 (just prior to our symposium on the DTSA at Seton Hall Law School).  After de-duping, we identified 280 unique Complaints, which we coded for a variety of descriptive information.  Our raw data is available online.

Findings

This chart shows the number of filings by district:

We were not surprised to see that the Northern and Central Districts of California, Southern District of New York, or District of Massachusetts were among the top five.  We were surprised, however, to see the Northern District of Illinois tied for first.  This could reflect the influence of the financial services industry in Chicago, but further research is required.

The next chart shows the number of filings by month:

It is interesting to note the decline in filings following the initial uptick after the May 26, 2016 effective date.  Perhaps this reflects a slight lull during the summer months.  Filings then remained relatively steady until March, 2017, when they increased significantly.  This could have something to do with the quarterly business cycle or bonus season, since many of the cases (as discussed below) involve employment issues.  Or, it could reflect a random variation given the relatively small sample size.

We next examined other claims filed along with the DTSA counts in these Complaints:

We excluded from this chart related state law trade secret claims.  Not surprisingly, nearly all the cases included claims for breach of contract.  As noted above, trade secret claims often arise in the employment context in connection with allegations of breach of a confidentiality agreement or covenant not to compete.  Another finding of note was that a fair number of cases assert Computer Fraud and Abuse Act claims, although the number is not as high as expected.  Most trade secret cases today involve exfiltration of electronic information, but perhaps many cases do not involve hacking or other access techniques that could run afoul of the CFAA.

We also noted a smaller but not insignificant number of cases asserting other intellectual property claims, including trademark, copyright and patent infringement.  Since many documents taken in alleged trade secret thefts are subject to other forms of intellectual property — particularly copyright — this may show that some lawyers are catching on to the benefit of asserting such claims along with DTSA claims.

Finally, our review of case status revealed the following:

  • 198 cases in various pre-trial stages
  • 61 cases dismissed
  • 5 preliminary injunctions
  • 4 final judgments, including 2 permanent injunctions
  • 3 default judgments
  • 1 case sent to compulsory arbitration
  • 8 undetermined / miscellaneous

At first blush, the number of cases dismissed seems high, given that none of the cases have been pending for more than a year.  We assume the vast majority of these cases settled, though further investigation is required.  In contrast, the number of preliminary injunctions granted seems very low.  Again, further investigation is required, but so far it does not seem that the DTSA is resulting in the kind of preliminary injunction practice we expected to see under a federal trade secret statute.

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SAS Institute Inc. v. Lee: Challenging Partial Institution https://patentlyo.com/patent/2017/05/institute-challenging-institution.html https://patentlyo.com/patent/2017/05/institute-challenging-institution.html#comments Thu, 18 May 2017 15:14:45 +0000 https://patentlyo.com/?p=16694 The Supreme court has relisted SAS Institute Inc. v. Lee, 16-969 – an important step in the progress toward grant of certiorari.  The inter partes review case presents the following question:

Whether 35 U.S.C. § 318(a) … requires [the] Board to issue a final written decision as to every claim challenged by the petitioner, or whether it allows that Board to issue a final written decision with respect to the patentability of only some of the patent claims challenged by the petitioner, as the U.S. Court of Appeals for the Federal Circuit held.

The basic setup here is that SAS argues that the PTO cannot partially institute IPR proceedings since the statute requires that PTO “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.”

Although the Department of Justice has sided with the PTO’s approach here, in a prior filing the DOJ argued that the PTO erred in “picking and choosing some but not all of the challenged claims in its Decision.” See Department of Justice v. Discovery Patents, LLC, Case IPR2016-01041 (Patent Trial & Appeal Bd., Nov. 29, 2016).

The outcome of a rule-change here  is unclear – while the patent challenger (SAS) is petitioner here.  Patentees may prefer the all-or-nothing approach that would hopefully result in final judgments confirming patentability as well as the resulting estoppel.

 

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The Defend Trade Secrets Act and Inevitable Disclosure https://patentlyo.com/patent/2017/05/secrets-inevitable-disclosure.html https://patentlyo.com/patent/2017/05/secrets-inevitable-disclosure.html#comments Wed, 17 May 2017 15:27:04 +0000 https://patentlyo.com/?p=16665 When Can a Company That Hires its Competitor’s Former Employee Be Sued in Federal Court?

Guest post by Maxwell Goss.  Dr. Goss is a business litigator with Rossman Saxe, P.C. in Troy, Michigan. His practice focuses on non-compete, trade secret, intellectual property, and shareholder law and litigation.

The Defend Trade Secrets Act (DTSA) was enacted a year ago, on May 11, 2016. One of the most sweeping changes in intellectual property law in recent years, the statute creates a private cause of action for trade secret misappropriation under federal law.

For trade secret owners, the advantages of the DTSA include access to nationwide discovery and enhanced remedies such as ex parte seizure of property to prevent propagation of stolen trade secrets. For those accused of trade secret theft, the DTSA provides substantial protections including strict limitations on the injunctive relief available and entitlement to a hearing no later than seven days after a property seizure.

An open question has been the status of the controversial “inevitable disclosure” doctrine under the DTSA. Under state law in some jurisdictions, courts will enjoin a company’s former employee from working for a competitor if the company establishes that the employee would “inevitably” use its trade secrets in his or her new position. Trade secret owners like the doctrine of inevitable disclosure because actual misappropriation can be hard to prove. At the same time, the doctrine has been criticized as effectively allowing courts to impose a non-compete on someone who never signed a non-compete agreement.

How does inevitable disclosure fare under the DTSA? The statute provides that an injunction to prevent misappropriation may not “prevent a person from entering into an employment relationship,” and that any conditions placed on a person’s employment in an injunction must be based on “evidence of threatened misappropriation and not merely on the information the person knows.” In light of this language, some have concluded that the inevitable disclosure doctrine is a dead letter under the DTSA.

But a recent court opinion indicates otherwise. Interestingly, the opinion was issued on May 11, 2017, the one-year anniversary of the DTSA, by the United States District Court for the Northern District of Illinois, a federal court in the Seventh Circuit, where inevitable disclosure was first definitively recognized. In Molon Motor and Coil Corp. v. Nidec Motor Corp., the plaintiff, a maker of bespoke motors and gearmotors, sued a competitor after an employee who had allegedly downloaded the plaintiff’s designs and technical data went to work for the competitor.

The defendant moved to dismiss the case, arguing (among other things) that the DTSA did not apply because the alleged acts at issue occurred before the DTSA was enacted in May 2016. The court rejected this argument. Noting that the “key question is whether the inference of inevitable disclosure reasonably extends to continued use beyond the Act’s effective date,” the Court reasoned:

At least on the limited record—the Third Amended Complaint—the alleged trade secrets are not of the nature that would necessarily go stale in the course of a couple of years. A motor design, and the quality control data associated with it, plausibly would retain its trade secret value well into the future. If it is plausible that some of the alleged trade secrets maintain their value today, then it is also plausible that Nidec would be continuing to use them. Of course, further discovery could upend any or all of this, but at this stage, continued use beyond the May 2016 effective date is plausible.

In short, even though the plaintiff company’s former employee had allegedly downloaded the files and gone to work for the competitor before the DTSA went into effect, the court found it plausible that there was a “continuing use” of the information by the competitor after the statute went into effect. Based on this finding, the court allowed the plaintiff to go forward on its DTSA claim.

How does this ruling square with the DTSA, which requires that an injunction be based on “evidence of threatened misappropriation and not merely on the information the person knows”? Though the Molon opinion does not connect the dots, the answer, in part, seems to be that the opinion was addressing a motion to dismiss, not a motion for injunction. A court may not be able to enjoin someone based on inevitable disclosure under the DTSA, but this does not mean a plaintiff may not sue someone based on inevitable disclosure under the DTSA. That is, even where injunctive relief may not be available as an initial matter, a trade secret owner might nevertheless file a claim and move forward with discovery—which could ultimately turn up the evidence necessary to fully substantiate a claim.

Molon represents a significant development in the body of law unfolding under the DTSA. In jurisdictions where inevitable disclosure is recognized, the ruling could help trade secret owners get a case off the ground even where information obtainable in a pre-suit investigation is necessarily limited. On the other hand, defendants will be quick to point out that Molon does not alter the specific allegations needed to plead a trade secret claim premised on an inevitable disclosure theory. Moreover, where an injunction is sought, it should be emphasized that any conditions placed on employment under the statute must be based on evidence of threatened misappropriation and not merely information the person knows.

What the Defend Trade Secrets Act Means for Trade Secret Defendants

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AIPLA On Board with Statutory Reform of 101 https://patentlyo.com/patent/2017/05/aipla-statutory-reform.html https://patentlyo.com/patent/2017/05/aipla-statutory-reform.html#comments Tue, 16 May 2017 18:38:27 +0000 https://patentlyo.com/?p=16653 The AIPLA has now offered its legislative proposal for rewriting 35 U.S.C. § 101 that is quite close to that offered by the IPO:

Inventions Patentable

(a) Eligible Subject Matter.—Whoever invents or discovers any new and useful process, machine, manufacture, composition of matter, or any useful improvement thereof, may obtainshall be entitled to a patent therefor, subject only to the conditions and requirements ofset forth in this title.

(b) Sole Exceptions to Subject Matter Eligibility.—A claimed invention is ineligible under subsection (a) only if the claimed invention as a whole exists in nature independent of and prior to any human activity, or can be performed solely in the human mind.

(c) Sole Eligibility Standard.—The eligibility of a claimed invention under subsections (a) and (b) shall be determined without regard to the requirements or conditions of sections 102, 103, and 112 of this title, the manner in which the claimed invention was made or discovered, or whether the claimed invention includes an inventive concept.

AIPLA statement. The AIPLA proposal is strikingly similar to that of the IPO’s (although not acknowledged by the AIPLA statement).

[DOCX File of Table: Comparing101ProposalsComparing101

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Shore v. Lee https://patentlyo.com/patent/2017/05/shore-v-lee.html https://patentlyo.com/patent/2017/05/shore-v-lee.html#comments Tue, 16 May 2017 17:27:23 +0000 https://patentlyo.com/?p=16642 In Shore v. Lee, the Federal Circuit affirmed a PTAB finding without opinion.  Shore’s petition to the Supreme Court asks whether “the Federal Circuit’s affirmance without opinion of the PTO’s rejection of Petitioner’s patent application violate 35 U.S.C. § 144?”  In its first opportunity to support the Federal Circuit’s R.36 jurisprudence, the Department of Justice has passed – instead waiving its right to offer any argument in support.  The Supreme Court will consider the petition later this month.

Wrongly Affirmed Without Opinion: At the Supreme Court

= = = = =

Similarly in Broadband ITV v. Hawaiian Telecom, respondents have waived their right to respond to Broadband’s challenge to quick-look eligibility denials.

Supreme Court: Challenging Quick-Look Eligibility Denials

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Moot the Dispute? Not with a conditional covenant-not-to-sue https://patentlyo.com/patent/2017/05/moot-the-dispute-not.html https://patentlyo.com/patent/2017/05/moot-the-dispute-not.html#respond Tue, 16 May 2017 17:24:38 +0000 https://patentlyo.com/?p=16651 ArcelorMittal v. AK Steel Corp. (Fed. Cir. 2017)

In a split decision, the Federal Circuit has affirmed a district court judgment invalidating ArcelorMittal’s U.S. Patent No. RE44,153 (claim 24 and 25).  The primary disputed issue was whether the district court possessed subject matter jurisdiction when it granted summary judgment of invalidity and non-infringement.  The majority (Huges + Moore) found a sufficient case-or-controversy, while the dissent (Wallach) would have found appellant’s covenant-not-to-sue sufficient to moot the dispute.

A fundamental Constitutional limitation on the power of American courts is the requirement of a “proper case and controversy.”  US Courts only have jurisdiction over cases that involve “a substantial controversy, between [the] parties having adverse legal interests, of sufficient immediacy and reality.” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007) (focusing on declaratory jurisdiction).

The district originally invalidated all the claims of the ‘153 patent, but that holding was vacated in a prior appeal as to claims 24 and 25. On remand, the patentee moved to dismiss the case for lack-of-jurisdiction since all it wasn’t asserting those claims in the lawsuit and all its asserted claims had been found invalid.  At the same time, however, Defendant moved for summary judgment of non-infringement of claims 24 and 25.   Seeking to avoid such a judgment, the patentee then executed and delivered a covenant not to sue Defendants and their customers under the RE’153 patent.  Although “facially unconditional,” the delivery included a statement that the covenant was tendered on condition that its motion to amend was resolved. (That motion would amend the complaint to totally remove assertion of claims 24 and 25 from the patent).  Importantly, the delivery included a statement that the patentee would be “ready to deliver the covenant unconditionally” upon resolution of the motion and also that the point of the conditional delivery was to ensure that the district court maintained jurisdiction over the case.   Following all that posturing, the district court went ahead an held the claims invalid and denied the motion to amend as moot.

On appeal, the Federal Circuit has agreed with the district court that it still held subject matter jurisdiction over the case since the covenant-not-to-sue wasn’t fully delivered.

Although a patentee’s grant of a covenant not to sue a potential infringer can sometimes deprive a court of subject matter jurisdiction, the patentee “bears the formidable burden of showing” “that it ‘could not reasonably be expected’ to resume its enforcement efforts. . .  In this context, that requires ArcelorMittal to show that it actually granted a covenant not to sue to Defendants, and that the covenant enforceably extinguished any real controversy between the parties related to infringement of the RE’153 patent. . . .

At no time before the court entered summary judgment did ArcelorMittal unconditionally assure Defendants and their customers that it would never assert RE’153 claims 24 and 25 against them. ArcelorMittal certainly had ample opportunity to provide the unconditional assurances required to defeat jurisdiction. It did not. . . . The district court, well within its discretion in managing its docket, resolved the … summary judgment motion without having first resolved the motion to amend.

As the court notes, the outcome here was fully within the patentee’s control and for strategic reasons it chose not to actually issue the covenant-not-to-sue.

Writing in Dissent, Judge Wallach disagrees with the majority’s interpretation of the cover-letter as creating a condition precedent that must be met before the covenant takes effect.  Rather, Wallach focused on the language of the covenant that was appropriately signed and submitted and its terms extinguish “any substantial controversy of sufficient immediacy between the parties concerning the RE153 patent, the only patent at issue in the instant action.”

In discerning a covenant’s scope and effect, we rely on its terms, not evidence extrinsic to the stipulation such as terms in an accompanying cover letter. See Already v. Nike. . . . When as here a covenant’s terms are unambiguous, we may not interpret those terms using extrinsic evidence, such as a cover letter. See, e.g., Coast Fed. Bank, FSB v. United States, 323 F.3d 1035, 1040 (Fed. Cir. 2003) (en banc) (contract analogy); see also Restatement (Second) of Contracts § 285 (Am. Law Inst. 1981) (describing a covenant not to sue as a “contract”).

My take is that Judge Wallach is substantially on the right path here, but he also misses important issues by focusing on the content of the covenant rather than its mechanism of delivery.  An alternative way to see the facts is that the covenant was wrapped in a separate contract that required resolution of the motion-to-amend prior to the covenant becoming effective.  In the property context, there are differences between the states as to whether conditional-delivery is permissible (outside the escrow context).

 

 

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Remarks By Director Michelle K. Lee at the George Washington University School of Law https://patentlyo.com/patent/2017/05/director-washington-university.html https://patentlyo.com/patent/2017/05/director-washington-university.html#comments Tue, 16 May 2017 15:03:01 +0000 https://patentlyo.com/?p=16647 The following is an excerpt from PTO Director Michelle Lee’s keynote address today, at George Washington University Law School. Read the full remarks here.- DC

How do we continue to incentivize … incredible innovations? First, we must ensure that the USPTO issues the highest quality patents as quickly and efficiently as possible. This means, at a minimum, continuing to bring down our backlog and pendency so that good ideas can be patented quickly. Which is why I am proud to report that we’ve reduced our backlog of unexamined patent applications by almost 30 percent from its peak in January 2009, despite a 32 percent increase in applications over this time period. Our so-called first action pendencies – that measure the time from filing an application to the time of obtaining an initial decision from the examiner— are down by 43 percent—from 28 months in 2011 to 16 months today. Our total pendencies – the time from filing an application to the time of obtaining a final office action, such as an allowance—are down by 26 percent—from 35 months in 2010 to 26 months today. Our backlog of Ex Parte Appeals – that’s not AIA proceedings, but our internal appeal process to the Board after the examiner issues her decision – has also gone down. We have reduced our inventory of ex parte appeals by 45 percent from a high of about 26,000 in 2012 to about 15,000 today. And, we have reduced the average pendency for appeals by 30 percent from 28 months in 2016 to 19 months today. In short, our backlog and pendencies are now lower than they’ve been in more than a decade, and they will continue to go down. Simply stated, this means more inventors are obtaining more patents more quickly. . . .

We constantly welcome—in fact, we solicit—feedback and input. And we have shown that we are willing to refine and improve as many times as needed. For example, we’ve provided applicants with more access to examiner interviews more than doubling the number of interview hours in just eight years. We’ve had more RFC’s, Proposed Rules, and public roundtables than ever before – including on such topics as our Enhanced Patent Quality Initiative, our 101 guidance, and our Patent Trial and Appeal Board proceedings. We’ve also brought a broader range of services to support American innovators where and when needed, including through four regional offices across the country, and through over a dozen IP attaches across the globe. For those of you who may not know, our attaches in China, the EU, India, Brazil, and other locations help U.S. innovators obtain and enforce IP rights outside the US, and also help advocate for improved IP laws outside the U.S. . . .

Examining patents quickly and efficiently is only part of the job. The public relies on us to issue quality patents. Today, we have about a dozen programs underway that we believe will meaningfully improve patent quality. These include programs for making sure we’re getting the most relevant prior art before our examiners as early as possible by making prior art cited in our PTAB proceedings available to examiners handling related applications, and transitioning all our examiners from the decades old, antiquated U.S. Patent Classification System to the updated, increasingly global Cooperative Patent Classification System. Developing best practices such as for enhancing the clarity of the record. And developing new and better ways to measure our progress. For example, with our Master Review Form, we are now processing twice as many reviews, and capturing data not only about the correctness of our actions, but also about the clarity of our actions. This helps us identify trends, and helps us pinpoint very specific areas for training. Finally, and, importantly, for the first time in 40 years, we are doing a comprehensive review of the amount of time our examiners need to do their work in light of the many recent changes within the patent system. We are already seeing measurable and statistically significant results in our patent quality efforts even in the short amount of time since we began the Enhanced Patent Quality Initiative. And you can look forward to more improvements in the future. In sum, the USPTO is operating well, and is issuing more, higher quality patents than ever. …

What work lies ahead? Our top priority today is to make sure the Patent Trial and Appeal Board’s AIA proceedings are as effective and as fair as possible–within our Congressional mandate. Now is the right time to examine and make any needed reforms to these proceedings, because we have five years of data and experience to guide us. …

Let’s take a look at where we are with the AIA trials today. We have shared regular updates on the number of cases and the results of those cases, but we want to break down the numbers even further so that everyone has the facts, as there have been many numbers cited – some of which are accurate, some of which are not.

Slide 1 Revised

This waterfall slide is our attempt to present even more data in a more accessible and transparent format. According to waterfall slide data, which shows the status of every petition filed since beginning of AIA, of those petitions that have reached some sort of final disposition (i.e., are not pending), about one third of all petitions are denied institution and do not go to trial; about one third of all petitions settle either before or after the decision to institute; and only about one third of all petitions ever reach final written decision. It is only at that point of reaching final written decision is it relevant to talk about the patentability or unpatentability of the claims of a patent. And, at that point, it is true that 66 percent of petitions will find all instituted claims of the patent unpatentable, 17 percent of petitions will find all instituted claims of the patent patentable, and an additional 17 percent will have mixed results (some instituted claims will be found to be patentable and some will be found to be unpatentable). So statements that “all” or 95 percent or even 80 percent of patents are found unpatentable are not supported by the data and do not account for prior disposition by settlement or by denial of institution.

Slide 2 Revised

Drilling down further on the institution rate, here is some helpful data from the years the AIA trials have been in effect. As you can see, the institution rate in our proceedings has been steadily declining from a high of 87 percent in the beginning, to about two thirds today. These are the numbers, and these are the facts. Now, our stakeholders have understandably asked how the rates of unpatentability in AIA proceedings, reflect on the quality of all of the other patents we’ve issued. . . . [T]here are almost 2.8 million patents in force. Incredible. Of those 2.8 million about 4,000 patents have been challenged in AIA trials. This represents less than 0.2 percent of the patents currently in force. …

As I have said many times in the past, the USPTO is constantly looking for ways to make the AIA trials as effective and as fair as possible within our Congressional mandate.  And we welcome your suggestions and ideas, the more specific, the better. To this end, we’ve set up a mailbox where you can submit your ideas at PTABProceduralReformInitiative@uspto.gov. This is an early opportunity to provide input. Your feedback here will help form the basis for our recommendations to the administration on next steps.

In fact, we have already heard from a number of you regarding a number of issues. As discussed:

  1. Multiple petitions, and how best to curb abusive practices.
  2. Whether to provide other opportunities to amend claims later in the proceedings when patent owners may have a better sense of where their claims stand,
  3. Whether to reevaluate our claim construction standards in view of new data and experiences, and
  4. How to best incorporate the findings and legal conclusions of prior proceedings at the USPTO, including examination and other post-grant proceedings, as well as, importantly, proceedings conducted in the federal courts.
  5. What considerations should go into a decision to institute, for example, how can we better take into account considerations such as the interests of justice, economic factors, and hardship.
  6. As to decisions to institute, whether there should be additional review of institution and termination decisions—and by whom.
  7.  When and how to permit parties to join proceedings.
  8. When and under what circumstances might it be appropriate to extend the length of the proceedings beyond 12 months and what impact would extensions have on litigations before, not only the Board, but district courts. . . .

[W]e are [also] streamlining the way the Board identifies and designates opinions as precedential, with the goal of designating more opinions precedential. Why? Because doing so 1). Improves the consistency across panels of the Board, and 2). Provides greater notice to the public to help you make better informed decisions on how to manage your Board proceedings. . . .

Fees: Finally, we are also proposing increases to our AIA trial fees. . . . We believe, as many of you do, that these proceedings should be self-funded. I commend our team for making thoughtful initial cost projections and for recommending revisions to ensure that these proceedings are fully self-funded. There is much to do on AIA proceedings, patent quality, and in many other areas, and I promise you that we are working diligently, with a sense of purpose, every day.

In closing, we all want what’s best for this country’s inventors, innovators and entrepreneurs. Because it is through their efforts that our country remains at the forefront – economically and globally. Simply stated—and I think President Trump and Secretary Ross would agree—we want the United States to out-innovate and out-perform our global competitors, producing new jobs and new technologies and new industries that benefit all Americans, including individual inventors and those in our small businesses and startups. Let’s not forget that the modest businesses and unknown inventors of today may become the largest and most well-known drivers of our economy tomorrow. To make that happen, Congress, the courts, the administration (especially the USPTO), and even all of you here today, must all work together to make sure the system envisioned by our Founding Fathers lives up to its purpose to promote innovation. You have the commitment of the entire USPTO team that we will play our part to ensure that we continue to incentivize the kind of innovations that make our lives better and safer And that put men and women—like Mr. Iver Anderson with his lead-free solder—in the National Inventors Hall of Fame. Our future depends upon it. Thank you.

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IPR Petition Response => Claim Construction Disclaimer https://patentlyo.com/patent/2017/05/petition-construction-disclaimer.html https://patentlyo.com/patent/2017/05/petition-construction-disclaimer.html#comments Tue, 16 May 2017 09:00:58 +0000 https://patentlyo.com/?p=16615 Aylus Networks v. Apple (Fed. Cir. 2017)

The court here holds that claim construction “prosecution disclaimer” applies to statements made by the patentee in a preliminary response to an IPR proceeding.  This holding makes sense and was entirely expected — however it also sets yet another trap for patentees seeking to enforce their patent rights.

The appeal here involves Aylus infringement lawsuit against Apple that alleges AirPlay infringes U.S. Patent No. RE 44,412.  After Aylus sued Apple for infringement, Apple responded with two inter partes review (IPR) petitions challenging all of the patented claims.  However, the Director (via the PTAB) refused to grant the petition as to several claims, including 2, 4, 21, and 23.

Back in the litigation, Aylus amended its complaint to only allege infringement of those non-instituted claims.  In its subsequent motion for summary judgment of non-infringement, Apple argued for a narrow interpretation of the claimed use of “CPP logic . . . negotiate media content delivery between the MS and the MR.”  As evidence for the narrow interpretation, Apple and the district court focused on statements by the patentee (Aylus) in its preliminary response to Apple’s IPR petition.  On appeal here, the Federal Circuit has affirmed:

[S]tatements made by a patent owner during an IPR proceeding, whether before or after an institution decision, can be relied on to support a finding of prosecution disclaimer.

Those of us closely following IPR doctrine will raise some hairs at this statement since the Federal Circuit has previously held that “IPR does not begin until it is instituted.” Shaw Indus. Grp., Inc. v. Automated Creel Sys., Inc., 817 F.3d 1293, 1300 (Fed. Cir. 2016).   Here, the court recognized that general holding, but found that it dies not apply “for the purposes of prosecution disclaimer.” Rather, for this situation, the court found that the proceedings begin with the IPR petition.

If I were writing the opinion, I would have come to the same result – that statements by the applicant to the PTO can form prosecution disclaimer.  However, I would have reached the conclusion without upsetting and further complicating the definition of an IPR proceeding.

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An oddity of all of this is that the Federal Circuit appears quite concerned in this case about the linkages between claim construction during inter partes review and subsequent litigation, but previously ignored that issue during the prior cuozzo debate.   My take has long been that we should be applying the actual claim construction in both situations.

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This case focused on prosecution disclaimer and the finding of a clear and unmistakable disclaimer of claim scope.  However, the same approach should also apply in applying IPR statements as primary intrinsic evidence used in the claim construction analysis even when short of disclaimer.

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