Issue Preclusion Following a R.36 Jugdment

by Dennis Crouch

VirnetX Inc. v. Apple Inc., (Fed. Cir. December 10, 2018)

The PTAB sided with Apple in the underlying IPR proceedings, finding that VirnetX patent claims were obvious. U.S. Patent No. 8,504,696 (claims 1–11, 14–25, and 28–30).  On appeal, the Federal Circuit has refused to consider the patentability merits — rather holding that the appeal is barred by issue preclusion (collateral estoppel).

Issue preclusion involves two separate legal actions — and operates to bar a party from relitigating an issue of law or fact already decided in a separate case involving the same party.   Elements:

  1. A prior action presents an identical issue to an issue in the later action;
  2. The prior action actually litigated and adjudged that issue;
  3. The judgment in that prior action necessarily required determination of the identical issue; and
  4. the prior action featured full representation of the estopped party.

The case here started in December 2015 when Apple filed two separate IPR challenges to VirnetX’s ‘696 patent —  both relied upon a 1998 Request for Comments from the Internet Engineering Task Force (IETF) – RFC 2401 – as a key prior art reference. The PTAB followed Apple’s suggestions and determined that RFC 2401 was a prior art printed publication that rendered the claims unpatentable (when combined with other references).

Meanwhile, the RFC 2401 had already been used by the PTAB to cancel several other VirnetX patents.  In March 2018, the Federal Circuit affirmed those decisions in a R.36 No-Opinion Judgment.

Often, a R.36 Judgment (without opinion) cannot be used for issue preclusion purposes because it is impossible to tell whether the issue-at-issue was the reason for the judgment.  However, the court has ruled that “a Rule 36 judgment may serve as a basis for collateral estoppel so long as … the resolution of the issue was essential or
necessary to the Rule 36 judgment.” Citing Phil-Insul Corp. v. Airlite Plastics Co., 854 F.3d 1344 (Fed. Cir. 2017).

Here, collateral estoppel works since – in the prior appeal – each ground of unpatentability relied upon RFC 2401.  Thus, the court’s affirmance required an implicit rejection of VirnetX’s argument that the reference was not prior art. The court explains:

Indeed, in three of the seven final written decisions appealed in VirnetX I, the only issue raised was whether RFC 2401 was a printed publication. Accordingly, by affirming all
seven of the Board’s decisions, this court in VirnetX I necessarily found that RFC 2401 was a printed publication.

I’ll note here that the court particularly focused on this issue at oral arguments in the second case and the litigating attorney was forced to admit that the issue was necessary to the decision.

Other Federal Circuit decisions make clear that a R.36 judgment cannot be used for issue preclusion when there are alternative explanations for the judgment.

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As an interesting inside-issue. Oral arguments in this case were heard in September 2018.  On November 28, 2018, VirnetX filed a motion with the Federal Circuit asking the appeal to be dismissed — expressly admitting that the Rule 36 judgment had collateral estoppel effect. By then, the court had already written its almost-final-draft opinion and so denied the motion.  In this circumstance, is the decision only advisory (and thus not precedential?)

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Standing to Appeal IPR Judgments: When does a Statute Create Injury-in-Fact?

by Dennis Crouch

JTEKT Corporation vs. GKN Automotive LTD. (Supreme Court 2018)

In 2016, JTEKT (Toyota) an inter partes review (IPR) petition challenging GKN’s Patent No. 8,215,440 (2wd/4wd dual drive-train).  During the IPR, GKN disclaimed the broadest claims, and the PTO confirmed validity of the remaining claims.  Here, the key difference from the prior art was a negative limitation – that the system coupling is “without a differential gearing.”  Wanting to also cancel those claims, JTEKT appealed.  Although JTEKT and GKN are competitors, JTEKT has not yet developed a competing product — arguing (without real evidence) that the ‘440 patent was a roadblock to its development project.

On appeal, the Federal Circuit refused to consider the merits. Rather, the court found that the US Constitution prohibited the case — i.e., that JTEKT had no standing to appeal because the petitioner had not alleged any “actual injury.”

In my prior post on the case, I explained:

Standing is an oddball with IPRs.  Anyone can file an IPR request and the USPTO will consider that request.  The Patent Act directly states that a losing petitioner has a right to appeal if it loses the IPR. . . .  Still, the Supreme Court has repeatedly held that the Constitution requires an actual controversy between the parties — and that the Article III courts cannot offer advisory opinions. A particular element in question for appellate IPR standing is injury-in-fact —  “an injury that is both ‘concrete and particularized.’” Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016)(non-IPR case).

After being denied substantive hearing at the Federal Circuit, the patent challenger has now petitioned the Supreme Court on the standing issue — the following question:

Can the Federal Circuit refuse to hear an appeal by a petitioner from an adverse final decision in a Patent Office inter partes review on the basis of lack of a patent-inflicted injury-in-fact when Congress has

(i) statutorily created the right for parties dissatisfied with a final decision of the Patent Office to appeal to the Federal Circuit,

(ii) statutorily created the right to have the Director of the Patent Office cancel patent claims when the petitioner has met its burden to show unpatentability of those claims, and

(iii) statutorily created an estoppel prohibiting the petitioner from again challenging the patent claims?

The question here is substantially the same as the petition found in the pending case of RPX Corp. v. ChanBond LLC (17-1686) (awaiting input from the Solicitor General).  There is a good chance that briefing in JTEKT will be complete before the Solicitor submits the government brief in RPXJTEKT would be a good companion case to RPX because it presents the added element of competitor challenge.

PetitionJTEKT_Petition (Filed by Todd Baker and Lisa Mandrusiak at Oblon)

Standing on Appeal: Being a Competitor with ongoing Product Development Not Sufficient for IPR Appellate Standing

POP! – Precedential Opinion Panel takes on Late-Joinder Attempt

by Dennis Crouch

In September 2018, the USPTO rewrote several Standard Operating Procedures (SOPs) for the Patent Trial and Appeal Board (PTAB). Revised SOP2 creates the Precedential Opinion Panel (POP) to be convened to rehear issues of “exceptional importance” as well as for re-designating prior opinions as precedential, when deemed appropriate.  According to SOP2, the Precedential Opinion Panel will “typically” include the PTO Director, Commissioner for Patents, and the PTAB Chief Judge.

In what I believe is the first such precedential panel, the POP is set to review a prior PTAB decision in Proppant Express Investments, LLC (PropX) v. Oren Technologies, LLC (Oren), IPR2018-00914, with POP constituting the panel of Dir. Iancu, Com. Hirshfeld, and Chief Judge Boalick. The rehearing will focus on the practice of issue and party joinder under 35 U.S.C. § 315(c) — particularly focusing on the three questions:

  1. Under 35 U.S.C. § 315(c) may a petitioner be joined to a proceeding in which it is already a party?
  2. Does 35 U.S.C. § 315(c) permit joinder of new issues into an existing proceeding?
  3. Does the existence of a time bar under 35 U.S.C. § 315(b), or any other relevant facts, have any impact on the first two questions?

Amicus briefs (15 pages) are authorized, and should be submitted to by December 28, 2018.

Section 315(c) indicates that, after institution of an IPR, the Director may, “in his or her discretion”, join “any person who properly files” an IPR petition that the Director “determines warrants … institution.” Section 315(b) bars institution of IPR proceedings for petitions filed more than one year after the petitioner (or privy) was served with an infringement complaint of the patent at issue.

In the case here, PropX filed a first IPR petition against Oren’s patent and then later filed a second petition against the same patent raising an additional issue along with a 315(c) joinder request (to join the second case with the first). One problem with the second petition was that it was filed after the 1-year deadline of 315(b).  PropX argued that the 315(b) deadline does not apply to joinder cases under 315(c).  A second problem is that 315(c) appears to be focused on joinder of parties — not the same party joining additional issues.

In its decision, the PTAB sided with the patentee and refused to allow the late-filed issue joinder petition — denying institution.  It is that decision that the Director Iancu and his team will now review.   Note here that the PropX decision was not one of first impression.  Prior panels came out the other way.  See, Target Corp. v. Destination Maternity Corp., Case IPR2014-00508 (Paper 28) (PTAB Feb. 12, 2015) (concluding that 35 U.S.C. § 315(c) permits a petitioner to be joined to a proceeding in which it is already a party); Nidec Motor Corp. v. Zhongshan Broad Ocean Motor Co., Case IPR 2015-00762 (Paper 16) (PTAB Oct. 5, 2015).

Although the 315(b)/315(c) decision has not been identically addressed by the, in dicta, Judges Dyk and Wallach wrote that it is “unlikely that Congress intended that petitioners could employ the joinder provision to circumvent the time bar by adding time-barred issues to an otherwise timely proceeding.” Nidec Motor Corp. v. Zhongshan Broad Ocean Motor Co. Ltd., 868 F.3d 1013, 1019 (Fed. Cir. 2017) (2-member concurring opinion)

= = =

Patent at issue: 9,511,929, covering a container for storing and transporting “large volumes of proppant.”

Of Brownies and Other Nutty Desserts: Supreme court considers whether the “on sale” bar is limited to public sales

Guest Post by Dmitry Karshtedt, Professor at GW Law.  Prof. Karshtedt attended the Supreme Court oral arguments in Helsinn v. Teva, and provides the following discussion.  A transcript of the arguments is available here: Helsinn Transcript.

The oral argument in Helsinn Healthcare v. Teva Pharmaceuticals had a little bit of everything. First, the Court extensively aired the statutory interpretation question whether the phrase “otherwise available to the public” in the America Invents Act (AIA) expanded or contracted the universe of prior art or perhaps did a bit of both. More to the point of the question presented, the advocates argued extensively over whether the statutory revision modified the meaning of “on sale.” Second, the Justices explored weighty issues of patent policy, such as the role of Section 102 in preventing withdrawal of inventions from the public domain and effective extensions of patent term through pre-patent secret commercial exploitation. Third, undergirding these points were debates on the notion of “congressional ratification” and the role of various facets of legislative history in statutory interpretation—and even what an ordinary consumer would understand “on sale” to mean. As one would expect, there was no shortage of creative hypotheticals, one of which generated an extensive discussion of the meaning of “brownie.” All in all, the Court repeatedly praised the advocates for excellent briefing, and the Chief Justice promised that the Court will issue an excellent opinion—another thing to look forward to in 2019!

Petitioner’s counsel, Kannon Shanmugam, began the argument with the point that the AIA “clarified” the meaning of “on sale” with the phrase “otherwise available to the public.” He explained a that a private offer to his friend on the opposing side, William Jay, should not be a patent-barring event, but an offer to the courtroom audience to sell something to the highest bidder would be. This contention drew immediate, skeptical responses from the Chief Justice and Justice Kavanaugh. Isn’t the phrase “on sale” self-defining, and thus in no need of clarification? And, as relevant to this case, doesn’t a private offer still put something “on sale” under the plain meaning of this term—why should a public availability requirement be read in? Justice Breyer then entered the discussion with the policy argument that, since the time of Pennock v. Dialogue, the purpose of the on sale bar has been to prevent extensions of patent monopolies via initial commercial exploitation of the invention followed by patenting. Petitioner’s response here was that the precedent is better read as focusing on protection the public domain after the public has gained possession of the invention, which implies some level of public availability. In addition, in a point that the government later returned to, the counsel explained that the “extension” policy cannot be all that robust because the on sale bar clearly cannot reach certain pre-patent invention exploitation activities, such as using the invention to draw in venture funding.

Judge Kavanaugh then returned to the statute. If Congress sought to modify the meaning of “on sale,” then weren’t there clearer ways to do this, and didn’t early drafts of the AIA actually have some direct language abrogating the “secret prior art” case law? Further, Justice Ginsburg asked the petitioner to clarify whether or not he thought the AIA was actually a change in the law on the “secret prior art” point. Petitioner’s response here was that Congress wanted to keep the term “on sale” to retain much the underlying jurisprudence around it (such as the “ready for patenting” test) while abrogating certain outlier Federal Circuit cases like In re Caveney and Special Devices, which deemed secret sales to be patent-barring. That, in his view, was not inconsistent with adding an extra “catchall” category of publicly available art that didn’t formally fall into any of the preceding categories. He also maintained that the petitioner’s reading of the AIA was not inconsistent with Supreme Court case law, which has not endorsed the lower-court secret prior art decisions, so there was no clear rule for Congress to ratify in this area. Finally, he explained that the AIA’s first-to-file rule would discourage pre-patent commercial exploitation.

Judge Kavanaugh then referred to the Law Professors’ amicus brief, led by Mark Lemley, which maintained that the Court did indeed endorse the secret prior case law. Petitioner disagreed here, and reiterated that none of the Supreme Court on sale or public use rulings would be disturbed under Helsinn’s reading of the AIA. Justice Breyer countered with a discussion of Bonito Boats, which did address the notion of a “monopoly” going beyond the patent term, though in a different context. He also suggested that perhaps the petitioner’s real argument is that the transaction at issue in this case doesn’t really fit within the definition of the sale. Petitioner offered a variation on this theme, suggesting that a contract with a distributor subject to various contingencies was maybe not the kind of a sale meant to be covered by Section 102.

Malcom Stewart, representing the Solicitor’s office, then argued in support of Helsinn. He emphasized the point that MGI, Helsinn’s “buyer,” was only an intermediary, and there was no assurance of a passage of title to MGI—let alone to the end user of a drug at issue in this case. Indeed, the consumer might not see a transaction at issue in Helsinn as a sale at all. This situation contrasts with Pfaff, which the parties and the government seem to agree remains good law post-AIA, as Pfaff involved a firm offer to an end user. Justice Sotomayor retorted that, surely, commercial entities understand a sale to a distributor to still be a sale, as the product has left the hands of the inventor and begins to wind its way through the stream of commerce. Moreover, she maintained that there seemed to be no precedent, or even textual support, for the government’s definition.

Justice Kagan then picked up on a particularly important point in this case. Was there really settled law in this area, and did it include secret sales as prior art? The government responded that there was no such settled law, and what Congress was doing in the AIA is clarifying and modifying some prior decisions, rather than ratifying any secret prior art rule. Assuming such a rule was in fact settled, the government conceded that the “otherwise available to the public” phrase would be an oblique way to overturn it. Justice Kavanaugh amplified this point, again noting that more direct efforts to overturn the secret prior art case law have failed (which, incidentally, also suggests that such case law was at least somewhat settled). Here, the government responded by contending that the early proposals have failed because they were going so far as to take non-informing sales to the public out of the universe of the prior art, an unpalatable proposal. Instead, Congress reached a happy medium by overturning some outlier secret prior art case law, but not non-informing public sale case law.

William Jay argued for respondent. He started with the plain language argument that the phrase “on sale” just means “sold” or “subject to an offer for sale”—no public availability is required. The “otherwise available to the public” art is an entirely different category. Here, justice Alito zeroed in on the meaning of “otherwise available to the public.” That phrase would seem incompatible with the notion that “on sale” means “on sale publicly or on sale privately.” Indeed, the string “on sale publicly, on sale privately, or otherwise available to the public” seems incoherent. The response was that some “on sale” events are surely public, and if the “otherwise available to the public” does refer back to “on sale,” it concerns only those the public sales (of course, a possible response here is that a sale, any sale, is simply deemed in the eyes of the law to make the invention “available to the public”). Petitioner further contended that the new Section 102 is better read as mainly adding an extra category of prior art, such as oral presentations, with the “otherwise available to the public” language—and it would be odd to have a category broadening the definition of prior art that at the same time narrowed it by eliminating secret sales from the definition.

After noting that other countries do not seem to recognize secret art as patent-barring, Justice Sotomayor returned Mr. Jay to Justice Alito’s “otherwise” question. He responded that the role of “otherwise” is, in part, to avoid the potential for interpreting terms like “printed publications” so as to include non-public documents and, more generally, to prevent unsettling the other categories by making clear that “otherwise available to the public” is a residual category of its own. Justice Breyer continued with an inquiry into the phrase by noting that a hypothetical string of “basketball, running, swimming, or otherwise -­ or games that otherwise involve a ball” as being incoherent. Respondent explained that, while awkward, this phrase doesn’t change the meaning of “swimming” into something like water polo. Justice Kagan added a particularly insightful hypothetical: “suppose I say don’t buy peanut butter cookies, pecan pie—this is the key one, ready—brownies, or any dessert that otherwise contains nuts. Do I—do I violate the injunction if I buy nutless brownies?” The implication, of course, is that nutless brownies are ok to buy, and maybe by analogy then non-public sales (like nutless brownies) are not a danger from the inventor’s perspective. The response here was that, while brownies might have nuts or be nutless, a notion of sale encompasses both public and private sales, though Justice Kagan retorted than maybe the meaning sale is not so clear. Justice Kavanaugh returned to point that maybe “otherwise available to the public” is there to summarize the preceding terms, but Mr. Jay’s response that “on sale” has a definitive meaning—”make available to a willing purchaser”—that this phrase could not unsettle.

Justice Gorsuch asked whether, assuming “on sale” is at all ambiguous, the PTO is entitled to some deference to its interpretation, which excludes secret prior art. The respondent countered that, as a plain language matter, that interpretation is just not persuasive. He then maintained that there is no dispute that the transaction at issue in Helsinn was a sale, and that the industry would so understand it. Indeed, he noted that most drugs are sold to distributors, and rule that such a transaction is not a sale will be unduly lenient to the pharmaceutical industry. Justice Kagan then finally brought up the point of third-party secret sales (the fact that Section 102 is party-neutral always seemed important to me), and Mr. Jay responded that they are patent barring. This is correct—the holding in Caveney supports this point. But the implication of this law for the “inventor forfeiture” view was unfortunately not further explored.

In rebuttal, petitioner emphasized the context of the phrase “on sale” and maintained that respondent’s reading would read the word “otherwise” out of the statute. The next “otherwise” string was from a case called United States v. Standard Brewery, which concluded that the phrase “beer, wine, and other intoxicating liquor” excluded alcohol-free beer. After presenting this example, Mr. Shanmugam maintained that there is no legislative history support for respondent’s interpretation. Perhaps more importantly for making the Court comfortable with its position, he reiterated that Pfaff would not be overruled under Helsinn’s interpretation of the AIA. Thus, the parties and the government all agree at least on that. As a patent law Professor, I took this to heart because, whatever happens in Helsinn, my Section 102 notes will not be completely upended by whatever the Supreme Court decides.


Agency Bad Guidance Practices at the Patent and Trademark Office: a Billion Dollar Problem

David Boundy’s writing often focuses on the intersection between administrative procedure and Patent Office operations. In his new Patently-O Law Journal essay, Boundy explains the role of guidance (the MPEP, memoranda to examiners, checkboxes on forms, etc. — anything the PTO uses to govern the public or its employees outside the Code of Federal Regulations). Boundy explains when the PTO may act by guidance vs. when the PTO must use a full statutory rulemaking procedure.

Boundy walks through how bad PTO guidance practices is leading to lost patent protection, companies not formed, companies that fold because of delays and unpredictability of their patent applications, business opportunities not pursued, and similar economic effects, etc.  He estimates the cost as several billion dollars per year.

Boundy’s essay then explains how that law applies to several specific rules that PTO improperly promulgated by guidance that create difficulties for patent applicants.

  • Example 1: The secret 2007 restriction memo
  • Example 2: Unpublished rules for ADS submission of bibliographic data
  • Example 3: MPEP § 2144.03(C) misstatement of the law of intra-agency Official Notice
  • Example 4: MPEP § 1207.04 and an examiner’s power to abort an appeal
  • Example 5: the PTAB’s Trial Practice Guide (The right way)

Boundy’s essay is directly relevant to the pending en banc petition in Hyatt v. USPTO that challenges the agency’s right to “reopen prosecution” following a second rejection rather than allowing issues to be appealed.  Although the Federal Circuit ruled that Hyatt’s petition was time-barred, Boundy explains, inter alia, that PTO procedural failures likely divested the agency from any statute of limitations defense.  See, e.g., National Resources Defense Council v. Nat’l Highway Traffic Safety Admin, 894 F.3d 95, 106 (2d Cir. 2018) (a rule does not go effective until published in the Federal Register, and that’s the event that commences the limitations period). 

Read it here:

  • David A. Boundy, Agency Bad Guidance Practices at the Patent and Trademark Office: a Billion Dollar Problem, 2018 Patently-O Patent Law Journal 20. (Boundy.2018.BadGuidance)
Prior Patently-O Patent L.J. Articles:


Person (Having) Ordinary Skill in the Art

by Dennis Crouch

One ongoing debate among patent attorneys is the proper abbreviation of the statutory phrases “person having ordinary skill in the art,” 35 U.S.C. 103, and “person skilled in the art,” 35 U.S.C. 112(a).

I prefer PHOSITA (Person Having Ordinary Skill In The Art) while many of my colleagues use POSITA (Person having Ordinary Skill In The Art) and in their recent petition to the Supreme Court, Mylan uses POSA (Person having Ordinary Skill in the Art), which was the abbreviation used by District Court Judge Stark in the case. Wikipedia also suggests PSITA (Person Skilled In The Art), which maps the language of section 112(a) instead of section 103.

I’m personally drawn to PHOSITA’s exact match to the statutory language of section 103, and I see capital “H” as strong and stable letter.  At the same time, I can understand why a party wanting to bolster the credibility the fictitious artisan might prefer POSITA since POSA suggests a “poser” with a Trans-Atlantic accent and the PHO beginning of PHOSITA also suggests falsity.

For its part, the Supreme Court has not used any of these abbreviations. At the Federal Circuit, most obviousness decisions also don’t use any of the abbreviations.  However, Judge Wallach regularly uses PHOSITA and Judge Reyna tends to use POSITA.  Several judges have also referred to a POSA, but almost always in the context of quoting a district court or expert opinion.   I don’t find any reference to PSITA in court cases.

The chart below shows that the PTAB’s favorite is POSITA with 68% of the cases having abbreviations.  Still, most PTAB cases just spell out the rule without any abbreviation at all.

With the PTAB’s trend so strongly toward POSITA, I’m going to reconsider my PHOSITA habit and try out POSITA for a few months to see if it fits.  Of course, I am still sour about my P-Tab loss (I was calling for P-T-A-B).

Minimum Contacts for Declaratory Judgment Jurisdiction

by Dennis Crouch

Maxchief Investments v. Wok & Pan, Indus. (Fed. Cir. 2018)

This is a fairly simple case case. Maxchief filed a declaratory judgment lawsuit against patentee Wok in E.D.Tennessee.  The case was dismissed though because Wok&Pan lacked sufficient minimum contacts with the state of Tennessee under Int’l Shoe.

For specific jurisdiction in a patent DJ action, the court has particularly held that the focus should be on the defendant-patentee’s contacts with the forum state only as they “relate in some material way to the enforcement or the defense of the patent.”  In this case, Wok did send infringement notice letter’s to Maxchief’s lawyer in Tennessee — however, the appellate court found those letters didn’t constitute sufficient contacts with Tennessee since the letter alleged that Coleman (a KS company) was infringing, not Maxchief.  The court went on to hold – in the alternative – that “sending notice letters of patent infringement” is not enough to create jurisdiction.  This outcome should be distinguished from Xilinx where minimum contacts were found based upon (1) infringement notice letters and (2) a representative traveling to the state to discuss the alleged infringement.  Xilinx, Inc. v. Papst Licensing GmbH & Co. KG, 848 F.3d 1346 (Fed. Cir. 2017).

Under Section 293 of the Patent Act, foreign patent holders – such as Wok – can be sued in the DC Eastern District of Virginia District Court unless they have filed papers with the PTO designating a domestic representative.  D.D.C. is not a hotbed for patent infringement lawsuits, only one has been filed thus far in 2018. [I had forgotten that this provision was amended in the AIA, moving default venue against foreign patent owners from DC to E.D. Va.]

Guest post from Prof. Yelderman: How Much Did the AIA Change Prior Art in the District Court?

Stephen Yelderman is a Professor of Law at the University of Notre Dame Law School.

This week we’ll take a closer look at “activity” prior art—prior uses, sales, and “invention by another.” As I mentioned in my last post, a little more than half the time district courts find a claim anticipated, they rely on art in this category. Activity prior art is less common for obviousness invalidations, but still quite routine: just over a quarter of obviousness invalidations cite activity prior art. (For more background on this project, you can find the full paper here.)

The 2011 America Invents Act (“AIA”) changed the rules for determining when activity qualifies as prior art in several respects. At a minimum, the AIA constricted this category of prior art by removing the “prior invention by another” path previously found in § 102(g). Arguably, the AIA trimmed the category in another way too—by imposing a new “available to the public” requirement on prior uses and sales. (Whether it did or not is the question the Supreme Court will take up next week in Helsinn Healthcare v. Teva Pharmaceuticals.) In the opposite direction, the AIA eliminated the limitation that uses and sales qualify as prior art only if they occurred in United States. Given all this, one might wonder: just how significant are the AIA’s changes when it comes to the prior art district courts actually rely on?

All of the district court invalidations in our study (except for one) involved applications of pre-AIA law, so we can use our data to predict how many cases might come out differently if the stricter aspects of the new prior art rules had applied instead. The answer is not many. For prior invention by another, this exercise was straightforward: under pre-AIA law it was its own legally distinct category, and there is no question that it was eliminated by the AIA. Based on our coding, we found that prior invention by another constituted about 8% of anticipation events relying on activity, and was a basis for roughly 1% of obviousness invalidations citing any activity. From the perspective of anticipation and obviousness overall, just a little more than 2% of district court invalidations relied on this prior art path. (And we can’t rule out the possibility that some of that art might have qualified by a different path anyway.)

The effect of requiring prior uses and sales to be “available to the public” is slightly harder to predict, since we do not yet know what that language will mean (or, until Helsinn is decided, if it applies to prior uses and sales at all). To get a bit of purchase on this question, we coded prior uses and sales that were potentially kept secret from the public: offers / sales made to an identified counterparty (fact patterns like Pfaff v. Wells), internal commercial uses (fact patterns like Metallizing Engineering), and uses by a limited and identified group of outsiders (fact patterns like Egbert v. Lippmann). It’s important to note that this classification scheme is likely overbroad: from the documents before us, we could not always determine whether a use or sale was in fact secret at the time. Instead, we categorized activity based on whether the use or sale could have potentially been secret.

Despite our likely overbroad classification scheme, potentially secret uses or sales appeared to be cited only rarely. When a court found a claim anticipated based on activity, that activity was potentially secret about 14-15% of the time. (These figures are presented as ranges because of a few cases in which we could not determine whether the cited activity was potentially secret under our framework.) When activity was cited in support of obviousness, the cited activity was potentially secret somewhere between 2-7% of the time. To look at the same data from another angle, among all the uses and sales district courts relied upon to invalidate patents, 88-90% lacked any indications of potential secrecy. As a share of anticipation and obviousness invalidity overall, potentially secret uses and sales were cited in about 4-5% of claim invalidations.

So if the past is a guide, it appears that few of the cases litigated to a decision of invalidity under the old law would be flipped under the AIA’s (purported) constriction of the activity prior art category. We must hedge a bit here, however, since we cannot say what the post-Helsinn law will be, or how inventors and litigants might adapt their behavior in light of new rules. What we can say with certainty is that, among the set of all recent court decisions invalidating patents under pre-AIA law, we find only a small number (an average of 3-4 patent invalidations a year) that would be affected by the question in Helsinn.

Unfortunately, the nature of our study does not allow us to predict the effects of the AIA’s amendments in the opposite direction—that is, the changes that made it easier for some activities to qualify as prior art. As mentioned above, the AIA eliminated the longstanding rule that uses and sales may qualify as prior art only if they were conducted in the United States. Because we were observing cases litigated under pre-AIA law, all of the activities we coded had occurred within the United States. We therefore did not observe the non-U.S. activity prior art that may have been waiting in the wings but was excluded by the pre-AIA’s domestic limitation on this category. Likewise, we cannot predict what the effect of adding “otherwise available to the public” as a distinct prior art category might be (not to be confused with the Helsinn question of whether that language modifies other categories).

Finally, some might expect the importance of activity prior art in district courts to be increasing over time, for reasons that are related to the AIA but unrelated to the prior art rules themselves. Readers of this blog do not need to be told of the overwhelming popularity of inter partes review (“IPR”) as an alternative forum for adjudicating patent validity. (By my count, in 2016, roughly 380 patents were invalidated in IPR, dwarfing the number of patents invalidated on prior art grounds by district courts.)  But activity prior art is categorically excluded from consideration in IPR, leaving district courts as the primary venue for adjudicating validity when activity prior art is at issue. It would seem logical, therefore, for the share of district court cases involving activity prior art to grow over time, as defendants challenging patents based only on non-activity art select into IPR for its speed, cost, and lower burden of persuasion.

Surprisingly, however, this is not what we found:

This chart illustrates the percentage of district court patent invalidations relying on activity prior art to invalidate any claim. As this chart shows, this number has remained remarkably stable throughout the advent of IPR. Though defendants may be opting in to IPR in large numbers, it is not the case that only activity-based invalidations remain in district court.

To be clear, the availability of IPR could still be having an effect on the kinds of cases that remain for validity decisions in district court. For example, courts may now be deciding only validity challenges in which the defendant made a strategic decision not to petition for IPR, or did petition for IPR without success. Moreover, during the time period illustrated above, the patent system was undergoing a number of changes simultaneously, so it is difficult to isolate the effects of IPR.

All of this is to say that the relationship between IPR and the work of district courts defies a simple explanation. But we can say with confidence that prior art patents and printed publications continue to play an important role in district court invalidations, notwithstanding the availability of IPR.


Edited 11/30: Clarified that 2% reliance on “prior invention by another” and 4-5% reliance on potentially secret uses and sales are stated percentages of claim invalidations for anticipation or obviousness. As a share of invalidations on any grounds, these numbers would be even smaller.

When Eligibility is a Jury Question

by Dennis Crouch

In my recent Berkheimer post, I wrote that “that no court following Berkheimer has … attempted to get a jury verdict on the issue.”  Turns out that I’m potentially wrong.

In the pending case of Finjan, Inc. v. Juniper Network, Inc. (N.D. Cal. 2018), Judge Alsup has ordered a jury trial on the “inventive concept” question.  In its order, denying summary judgment, the court found that the Claim 10 of Finjan’s  U.S. Patent No. 8,677,494 was directed to the abstract idea of “collecting data, analyzing data, and storing results.” (Alice Step 1).  However, the court decided to wait for trial to determine the inventive concept question:

Juniper contends that Claim 10 of the ’494 patent contains no inventive concept sufficient to transform its patent-ineligible subject matter into a patentable invention under Alice step two. At this juncture, this order will postpone on reaching the issue of whether Claim 10 survives under Alice step two. Rather, the Court will wait to have the benefit of the trial record before determining whether Claim 10 contains an inventive concept such that it is patent eligible.

[Finjan District Court Order]

Trial is scheduled to start in December and the parties are now fighting over jury instructions. The patentee suggests the following jury instructions on the inventive concept question:

For purposes of this case, you must determine whether Claim 10 contains an inventive concept. In order to prove that Claim 10 does not contain an inventive concept, Juniper must persuade you by clear and convincing evidence that all of the elements of Claim 10, both individually and as an ordered combination, were well-understood, routine, and conventional at the time of the invention.

Whether a particular technology is well-understood, routine, and conventional goes beyond what was simply known in the field at the time of the invention. The mere fact that something is disclosed in a publication, for example, does not mean it was well-understood, routine, and conventional at the time. If you find that Claim 10 contains an inventive concept, then it is valid. If you find that Claim 10 does not contain an inventive concept, then it is not valid.

The patentee would not ask the jury to whether an inventive concept exists, but only the ultimate question – is the patent valid under Section 101. The proposed form question is below:

The accused infringer (Juniper) doesn’t appear to be objecting to the issue going to the jury (although it may have objected elsewhere).  However, Juniper has major problems with the above proposed instructions.  Probably most importantly, Juniper argues that the jury will need to understand the abstract idea exception, and understand that the innovative concept must go beyond the abstract idea itself.  “i.e., an element or combination of elements that is sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the ineligible concept itself.” Alice.  I don’t believe that Juniper has submitted its competing proposed verdict form yet.

This is a case where the rubber seems to be meeting the road. The Supreme Court seems to have made clear that eligibility itself is a question of law and a threshold question for courts to decide (rather than juries).  This makes me think Judge Alsup may be setting-himself up for reversal.

Despite Misleading Question, Berkheimer Case Has Legs at the Supreme Court

by Dennis Crouch

The Supreme Court has repeatedly held that patent eligibility is a question of law. However, in Berkheimer, the Federal Circuit added some nuance — writing that the issue can include underlying issues of fact. Judge Moore explained:

Berkheimer and Aatrix stand for the unremarkable proposition that whether a claim element or combination of elements would have been well-understood, routine, and conventional to a skilled artisan in the relevant field at a particular point in time is a question of fact.

Berkheimer v. HP Inc., 890 F.3d 1369 (Fed. Cir. 2018) (en banc denial). In the lawsuit between Mr. Berkheimer and HP, the result of the underlying-material-fact revelation meant that the case was improperly dismissed on summary judgment. Rather, on remand, the court will need to be presented evidence and make appropriate factual conclusions before ruling on the eligibility question.

In its petition to the U.S. Supreme Court, HP does not directly confront the Federal Circuit holding regarding underlying facts – but instead directs the the court to a non-decided question about whether Berkheimer makes eligibility a jury question.

HP v. Berkheimer Question: The question presented is whether patent eligibility is a question of law for the court based on the scope of the claims or a question of fact for the jury based on the state of the art at the time of the patent.

In my view, the question presented by HP’s attorneys intentionally creates confusion as the Federal Circuit did not rule (1) that eligibility is a question of fact; or (2) that any aspect of the eligibility question goes to a jury.  Rather, the Federal Circuit has repeatedly ruled, including in Berkheimer, that the question of “eligible subject matter is a question of law.”  I’ll also note that no court following Berkheimer has seen eligibility itself as a question of fact or attempted to get a jury verdict on the issue.  I contacted David Salmons (counsel of record for HP) to see what I’m missing about the misleading question, but he did not respond.

Despite my misgivings about the actual question asked, the petition implicitly raises important questions of (1) whether eligibility may be based upon underlying questions of fact; and (2) the relevance of  the “state of the art” in eligibility analysis (i.e., what is an “inventive concept”).

The petition has some legs — with six amici briefs and a request from the court for a responsive brief from Berkheimer:

  • Brief amici curiae of Electronic Frontier Foundation and R Street Institute
  • Brief amici curiae of T-Mobile USA, Inc., and Sprint Spectrum L.P.
  • Brief amicus curiae of Computer & Communications Industry Association
  • Brief amicus curiae of Engine Advocacy
  • Brief amicus curiae of Askeladden LLC
  • Brief amici curiae of Check Point Software Technologies, Inc. and CableLabs

Of these briefs, Askeladden’s brief from Carter Phillips has an important section walking through jurisprudence on adjudicative facts vs legislative facts.  Engine Advocacy’s brief was filed by Stanford Law Clinic Director Phillip Malone and does a good job of explaining how Post-Alice 101 is good at ending lawsuits early and cheaply, and that Berkheimer is upsetting that system. CCIA’s brief does a good job of walking through the ways that courts have been dealing with eligibility questions on the pleadings and at summary judgment.  I have not fully read the others.

Mr. Berkheimer’s brief is due December 5, 2018 — We’ll do another post at that point talking through the various positions and the variety of issues raised in this important case. [Full Docket with Briefs].

= = = = = =

The patent at issue here is U.S. Patent No. 7,447,713, which issued back in 2008.  At that time, I hardly even talked about eligibility in my patent law class because the door was so wide open.  The ‘713 patent is broadly directed to “archiving and outputting documents or graphical items.”  The Federal Circuit found claim 1 was properly held ineligible, but ruled that there were some underlying factual disputes about whether claims 4 and 5 crossed into the eligibility threshold.

Claim 1. A method of archiving an item comprising in a computer processing system:

presenting the item to a parser;

parsing the item into a plurality of multi-part object structures wherein portions of the structures have searchable information tags associated therewith;

evaluating the object structures in accordance with object structures previously stored in an archive; [and]

presenting an evaluated object structure for manual reconciliation at least where there is a predetermined variance between the object and at least one of a predetermined standard and a user defined rule.

Claim 4. The method as in claim 1 which includes storing a reconciled object structure in the archive without substantial redundancy.

Claim 5. The method as in claim 4 which includes selectively editing an object structure, linked to other structures to thereby effect a one-to-many change in a plurality of archived items.

Distinguishing between “Res Judicata” and “Law of the Case”

by Dennis Crouch

DBN Holdings v. International Trade Commission (Fed. Cir. 2018)

In 2013, accused-infringer DeLorme signed a stipulated settlement with the ITC agreeing to stop importing products certain products accused of infringing U.S. Patent No. 7,991,380.  Later that year, the ITC re-opened the action — finding that DeLorme violated the Consent Order and assessed a $6.2 million penalty.  Subsequently, a district court found the asserted patent claims invalid.   Those cases were appealed and the Federal Circuit and the court affirmed both: (1) agreeing that the patent was invalid, but that DeLorme was still liable for violating the Consent Order. DeLorme Publ’g Co. v. BriarTek, 622 Fed. App’x. 912 (Fed. Cir. 2015).

Following the Federal Circuit decision, DeLorme petitioned the ITC to rescind the civil penalty in light of the invalidity finding — based upon “changed conditions
in fact or law or in the public interest.” 19 C.F.R. § 210.76.  However, the Commission refused act — finding the whole matter “res judicata” based upon the prior Federal Circuit decision.

Now on appeal, the Federal Circuit has sided with DeLorme — finding that the ITC improperly relied upon estoppel principles to refuse to reconsider its civil penalty.

Res judicata usually refers to the doctrine of claim preclusion, although it sometimes applies to both claim preclusion and issue preclusion (also known as collateral estoppel).  Regardless, both of those doctrines require a prior determination in a separate lawsuit.  Here, the ITC’s res judicata reference was based upon the prior Federal Circuit decision in this same case — that doesn’t work. The Federal Circuit explains here:

For either issue or claim preclusion to apply, a second, separate case must exist. Here, where we have a continuation of the same proceeding, Investigation Number 337-TA-854, neither issue nor claim preclusion apply.

The court went on to discuss the right doctrine to apply – law of the case. “[R]econsideration of matters already resolved ordinarily is referred to [as] law-of-the-case theory” or “direct estoppel.” Wright & Miller.  However, that doctrine doesn’t apply here because neither the ITC nor the appellate court had previously decided the issue of “whether the Commission should rescind or modify the civil penalty in light of the district court’s grant of summary judgment of invalidity.”  Thus, on remand, the ITC can consider this question.

= = = =

I’ll note here that the Commission’s confusion likely arose from the Federal Circuit’s statement in its prior decision that “the [ITC] penalty or sanction cannot be vacated by subsequent events such as invalidation of the claims.”  Here, the court further explained that statement to mean that the parallel invalidation does not automatically cancel a prior-issued sanction.  However, it does open the door to request reconsideration.

Schlafly Wins and Loses at Federal Circuit — You may Register a Distinctive Surname

by Dennis Crouch

Bruce Schlafly v. St. Louis Brewery (Fed. Cir. 2018)

Thomas Schlafly started the St. Louis Brewery and began selling SCHLAFLY beer in 1991.  When the company finally got around to registering the mark in 2011, some of his relatives opposed the registration. Thomas’s aunt, Phyllis Schlafly (now deceased) and her son Bruce Schlafly both filed oppositions.  Andrew Schlafly (another son of Phyllis) was the lawyer for her case.

The opposition here focused on the Phyllis Schlafly brand — arguing that  “the
surname Schlafly is primarily associated in the minds of the public with Phyllis Schlafly and the traditional values that she represented.”  Phyllis Schlafly was a conservative activist who opposed the Equal Rights Amendment, rejected the idea of “marital rape” (“by getting married, the woman has consented to sex”), and co-wrote the ABA’s influential Red-Scare guide to  “Communist Tactics, Strategy, and Objectives.” [PDF of Guide: CSTO]

In the opposition proceedings, the TTAB sided with St. Louis Brewery — finding that the mark had acquired distinctiveness and that there was no evidence of “market proximity” between the beer and Schlafly’s political work.

Of importance to the appeal — Section 2(e)(4) of the Lanham Act prohibts registration of a mark that “is primarily merely a surname.” On appeal, the Federal Circuit affirmed the registration — holding that the distinctiveness test is appropriate even for words that primarily known as surnames:

No law or precedent suggests that surnames cannot be registered as trademarks if they have acquired distinctiveness in trademark use. Because the Board found that the SCHLAFLY mark for beers had acquired secondary meaning, Section 1052(e)(4) did not bar the registration.

Correct outcome here on the law. The prohibition found in 2(e)(4) basically sets up a system where a word that is primarily a surname will never be assumed distinctive. Rather the applicant must prove acquired distinctiveness to overcome the limits of Section 2(e)(4).

The opposition also argued that the trademark registration by the Beer company will impinge their First Amendment free speech rights and also represents a governmental taking in violation of the Fifth Amendment of the U.S. Constitution and a due process violation.  The Federal Circuit rejected these arguments out of hand.

Patently-O Bits and Bytes by Juvan Bonni

Recent Headlines in the IP World:

Commentary and Journal Articles:

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Apple v. Pepper: Can Consumers Sue Apple for an Anticompetitive App Store Market

by Dennis Crouch

Apple Inc v. Pepper (Supreme Court 2018)

On November 26, 2018, the Supreme Court will hear oral arguments in an interesting consumer antitrust class action lawsuit involving Apple’s “App Store.”  The only typical* way to install new apps on an Apple iPhone is via the App Store and the complaint in this case alleges that the single-market setup results in inflated prices.  Apple’s first response in this case is that it is simply providing the market and that App prices are being set by app developers, not Apple.  Of course the reality here is that Apple charges the app developers to sell on the App Store, and the developers raised their prices to account for the fees.

The question before the Supreme Court:

 Whether consumers may sue anyone who delivers goods to them for antitrust damages, even when they seek damages based on prices set by third parties who would be the immediate victims of the alleged offense.

Apple argues that the lawsuit should be barred by Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), which limited certain antitrust remedies to direct purchasers and not downstream parties.  Although Apple does interact directly with consumers, it argues that it does so as “an agent on behalf of third party sellers.”

The district court agreed with Apple and dismissed the case. On appeal, however, the 9th Circuit reversed and distinguished this case from Illinois Brick since Apple is dealing directly with consumers — holding that consumers can sue the party who delivers the goods even if seeking pass-through damages. This is a split from a prior 8th Circuit decision.

Apple’s argument here is essentially a technicality.  There are several ways of implementing a legal structure for the App Store market that would effectively identical in terms of market structure and pricing.  Here, Apple intentionally chose a legal structure that attempts to limit its liability to consumers all while (allegedly) abusing its market power over those consumers.  The question for the court seems parallel to what it faces in patent eligibility: Whether or not to ignore the details of the legal documents in favor of an approach that looks at a more generalized impact.

(Note – My understanding is that “sideloading” is technically possible but problematic for many reasons.)

Enplas Display v. Seoul Semiconductor: How to Police Damages Expert Testimony

by Dennis Crouch

Enplas Display Device Corp. v. Seoul Semiconductor Co. (Fed. Cir. 2018)

In this appeal, the Federal Circuit has largely sided with the patentee Seoul Semiconductor — affirming the jury verdict on induced-infringement and validity.  However, the panel split on the issue of damages — with the majority finding that the damages verdict was not supported by the evidence.  In particular, the court ruled that the SSC’s expert had included non-infringing sales in her calculations.  Judge Stoll authored the majority opinion that was joined by Judge Hughes. Judge Newman wrote in dissent and would have let the jury verdict stand.

The patent at issue here claims a method of backlighting LED displays — used in lots of TVs. Back in 2012, Enplas filed for declaratory relief, but the jury sided with the patentee on all counts — finding the patents valid and infringed and awarding $4 million as a reasonable royalty for the life of the patent. (Verdict Form Below).

The infringement theory here rests on induced infringement under 35 U.S.C. 271(b)

(b) Whoever actively induces infringement of a patent shall be liable as an infringer.

Unlike ordinary direct infringement, inducement requires specific intent to cause the infringement.  This requires knowledge of the patent and that the acts being induced “constitute patent infringement. Global-Tech Appliances, Inc. v. SEB S.A., 563 U.S. 754, 766 (2011). At trial, the patentee showed that the defendant knew of the patents and had been informed that its products were infringing once combined into TVs. “In addition, SSC presented evidence that Enplas provided its customers with product specifications that recommended infringing configurations for its accused lenses.”

Note here, that Enplas made lighting products that it supplied to other manufacturers – particularly TV makers.  Enplas products themselves didn’t fully practice the invention until used in a certain way by the TV manufacturers.  In the appeal, Enplas argued that it didn’t “know” that its lenses would be used in the infringing way.

As an issue of law, the Federal Circuit agreed with the accused infringer that “mere knowledge of possible infringement is not enough” for a finding of inducement.  However, in this case, the circumstantial evidence was enough for the jury to find knowledge of infringing use by customers and intent to induce that infringement.

The Federal Circuit called this a “close case.” Truthfully though, but it doesn’t appear close in the way described by the court since the infringer (1) had knowledge of the patents and (2) was directly informed that customers using its instructions would be infringing.

Damages: The damages case here was similar to a convoyed damages situation.  The patentee’s expert testified that the reasonable royalty for the accused lenses would have been $500,000.  However, the expert testified more “pragmatic license” negotiations would be for a broader freedom-to-operate license that would include additional similar (i.e. non-infringing) products as well as future developed infringing products.  That broader license would go for $4,000,000.

On appeal, the Federal Circuit rejected this approach to calculating damages because it goes beyond compensation for the infringement.

Here, SSC’s expert opined that Enplas and SSC would have agreed to a $2 to 4 million royalty based on a royalty base comprising sales of non-accused lenses. This testimony cannot support the jury’s damages award, for § 284 and our precedent proscribe awarding damages for non-infringing activity. Thus, the jury’s $4 million award for infringement of the ’554 patent cannot stand. . .

According to SSC, because its expert  characterized her use of the volume of sales of nonaccused lenses as a “paid-up, lump sum royalty” to ease an “administrative burden,” her application of a royalty to non-accused lenses was acceptable. We disagree. Regardless of the characterization by SSC’s expert, damages calculated by applying a royalty to sales of non-accused lenses cannot support a jury’s verdict on damages. To be sure, we have held that a jury may award a lump-sum, paid-in-full royalty in lieu of a running royalty on future sales. See Lucent. But that lump-sum must be based on an estimate of the extent of future sales of accused products, not on past sales of non-accused products.

The result here is that on remand the damages are likely cut down to $500,000 instead of $4 million.

Writing in dissent, Judge Newman suggests that the statute only sets a floor for damages — not a ceiling.

Neither side argues that the jury’s damages award was not adequate to compensate for the infringement. No argument is presented that the jury awarded less than a reasonable royalty for the use made of the invention. Nonetheless, Enplas argues on appeal that an improper theory was presented by SSC’s damages expert and, thus, the jury verdict is fatally flawed. Enplas is mistaken, in law and in reality, as well as in contravention of standard litigation procedures. . . .  The lump-sum reflects a reasonable royalty that the infringer would have been willing to pay on hypothetical negotiation under the circumstances that existed.

Judge Newman suggests here that if the patentee’s expert testimony was flawed then it should have been either challenged under FRE 702 (Daubert) or exposed on cross-examination or via counter-presentation of evidence.   The infringer did not raise any appeal on those issues.

Is this Heart Monitor Merely an Abstract Idea?

by Dennis Crouch

For the past several years, I have been conducting an annual patent law moot court competition at Mizzou. This year – the eighth annual – the case was was captioned as an appeal of a recent dismissal by District Court Judge Indira Talwani in Cardionet, LLC v. Infobionic, Inc., 2018 U.S. Dist. LEXIS 177305, 2018 WL 5017913 (D. Mass October 16, 2018).  In her decision, Judge Talwani dismissed the case for failure to state a claim — ruling CardioNet’s heart monitor patent is directed to an abstract idea rather than a patent eligible invention. U.S. Patent Number 7,941,207 (“the ‘207 patent”).  The moot court is sponsored by McKool Smith and so the winner receives $1,000.

In the mock appeal, the patentee raises two issues:

  1. Whether the district court’s opinion should be reversed because the asserted claims are patent eligible; and
  2. In the alternative, whether the district court’s opinions should be vacated based upon substantial issues of material fact that make a R. 12(b)(6) judgment for failure to state a claim improper.

The patent here covers a device for diagnosing and monitoring heart arrhythmia — particularly atrial fibrillation and atrial flutter.  The basic setup uses standard portable-heart-monitor equipment to get ECG signals.  With those signals, the patentee measures variability in beat-to-beat timing of the heart and also ventricular-beat timing.  Those two measures can be used then to diagnose a-fib while ruling out other arrhythmia. Claim 1:

1. A device, comprising:

a beat detector to identify a beat-to-beat timing of cardiac activity;

a ventricular beat detector to identify ventricular beats in the cardiac activity;

variability determination logic to determine a variability in the beat-to-beat timing of a collection of beats;

relevance determination logic to identify a relevance of the variability in the beat-to-beat timing to at least one of atrial fibrillation and atrial flutter; and

an event generator to generate an event when the variability in the beat-to-beat timing is identified as relevant to the at least one of atrial fibrillation and atrial flutter in light of the variability in the beat-to-beat timing caused by ventricular beats identified by the ventricular beat detector.

3. The device of claim 1, wherein the variability determination logic is to compare times between R-waves in three successive QRS complexes to determine the variability in the beat-to-beat timing.

CardioNet sued InfoBionic for infringement in March 2017. Rather than filing an answer, InfoBionic filed a Motion to Dismiss for “failure to meet the pleading standard of Twombly and Iqbal and for patent ineligibility of the ‘207 patent pursuant to § 101.” While the district court was considering the briefed motion, the Federal Circuit decided Aatrix and Berkheimer but did not permit supplemental briefing regarding material facts at issue in the case. The district court then granted the motion to dismiss with prejudice – finding the claims invalid as directed to an abstract idea. The court explained “the innovation of the … patent may be to use  computer equipment and logic to monitor the variability of beats, but nothing in these claims places any limitation on that abstract idea.”

I still struggle with failure-to-state-a-claim motions in this particular situation because it confounds the ordinary approach to procedure in federal civil litigation. Namely, in ordinary litigation, the complaint does not need to anticipate defenses (such as invalidity) and plead facts to get around those defenses.  Rather, the complaint is where the patentee makes its prima facie case of infringement.  That said, the courts are disagreeing, at least de facto.

Question: How would you argue this appeal?

CardioNet has filed its notice of appeal, but briefing is not due in the actual case until January 2019.

Guest Post by Prof. Yelderman: How Do District Courts Cite Prior Art?

Stephen Yelderman is a Professor of Law at the University of Notre Dame Law School.

Not all prior art is created equal. The ease of finding what’s been done before can vary dramatically—from a prior U.S. patent cited by hundreds of applicants, to the dusty doctoral thesis sitting on the shelf of a foreign library. So one might wonder: when district courts invalidate patents on prior art grounds, do they typically rely on prior art that the inventor, or the USPTO, or even a reasonably diligent searcher could plausibly have found? Or do courts regularly invalidate patents on the basis of art that only the most determined litigant could have possibly uncovered?

For the last year or so, I have been working with a team of research assistants to attempt to answer these and other questions. Drawing directly from district court dockets, we collected every decision invalidating a patent claim over a six-and-half-year period. We then coded these on a claim-by-claim, reference-by-reference basis to learn how district courts rely on prior art. Over the next several weeks, I’ll be highlighting some of the more interesting things we’ve uncovered. In this post, I’ll start by sharing some of our top-level findings and briefly explaining our collection methodology. (If you’d like to see our full results right away, a draft of the paper is available for download here.)

First, some may be surprised to learn that district court invalidation appears to be evenly split between anticipation and obviousness. This is true whether one measures by patents or claims:

Over our study period, the number of claims invalidated for anticipation (1,636) almost exactly equaled the number of claims invalidated for obviousness (1,620). As the chart above shows, while there was some up and down from year to year, the ratio held very close to 1 throughout our study period.

However, the similarities end there. In terms of the prior art relied upon to invalidate claims, anticipation and obviousness are two very different animals:

The black columns indicate the percentage of anticipation invalidations citing each category of prior art. As you can see, district court findings of anticipation rely predominantly on activity prior art (defined to include prior uses, sales, and invention by another—old § 102g).  After that, in descending order of frequency, come U.S. patents, printed publications, and foreign patents.

Obviousness invalidations are a bit harder to summarize concisely, since they can be based on multiple references. The hashed columns indicate the percentage of obviousness invalidations citing any art in that category; the gray columns indicate the percentage of obviousness invalidations citing art only in that category. The headline here is that U.S. patents are by far the most commonly cited category of prior art for obviousness: nearly two thirds of obviousness invalidations cite at least one U.S. patent. But less than one third of obviousness invalidations cite only U.S. patents. A similar theme bears out across the rest of the chart. When courts combine multiple references to find a claim obvious, they often do so by combining art across categories—a U.S. patent combined with a prior sale, for example, or a foreign patent combined with a printed publication.

Each of these top-level categories will be explored in more detail in subsequent posts. I’ll close this one with a bit of background about our collection methodology. For purposes of this study, our focus was limited to claim invalidity as found by district courts. Therefore, our data does not capture every distinct argument the defendant made for invalidity, or judicial findings that a claim was “not invalid.” It also does not reflect the ways these decisions may have been modified on appeal. We believe our data does capture every district court determination that a claim was invalid, whether in a published opinion, unpublished document, or jury verdict. In a few cases, these documents did not clearly specify on their face which references supported the conclusion of invalidity. When this occurred, we consulted other documents on the docket (such as post-trial briefing) to identify the prior art supporting the court’s conclusions. When we could not find a conclusive answer, we coded the prior art as “unknown” (the final category in the chart above). Additional details about how we collected and coded these documents can be found in Part II of the paper.

Finally, when interpreting all of this data, one should keep in mind that this is a study of how district courts cite prior art, not a study of patent quality overall. A tiny fraction of issued patents are ever litigated, and only a tiny fraction of those are litigated to a determination of validity. Moreover, the incentives to litigate or settle a patent dispute could very well turn on the nature of the prior art in a case, so the possibility of selection effects is real. Therefore, this data should only be used to answer questions about why patents are invalidated in district court, not why patents might be invalid in general.

Protecting your Flavor

Levola Hengelo BV v. Smilde Foods BV (Court of Appeal, Arnhem-Leeuwarden, Netherlands 2018) involves a spreadable dip known as ‘Heksenkaas’ or Witch’s Cheese.  In particular, the claimant argued that it owned a copyright in the taste of its dip.

We have copyright for protection for works that excite our other senses — works with a certain look, feel, or sound. Why not taste and odor?  We have literary and audiovisual works — why not flavorful works?

As you might imagine, the court said no — taste cannot be protected under European copyright. “The taste of a food product cannot be likened to any ‘works’ protected by that treaty and, to my knowledge, no other provision of international law provides for the copyright protection of the taste of a food product. . . . I consider that the taste of a food product does not constitute a ‘work’ within the meaning of Directive 2001/29.”

Update: The Netherlands Court of Appeals case was decided earlier this year, the EU Court of Justice has now provided its own answer to the question – agreeing with the Court of Appeals and holding that

Directive 2001/29 must be interpreted as precluding (i) the taste of a food product from being protected by copyright under that directive and (ii) national legislation from being interpreted in such a way that it grants copyright protection to such a taste.