Will Justice Gorsuch bite at the new petition in Integrated Tech. Sys. v. First Internet Bank of Ind., Supreme Court Docket No. 17-1590 (2018)?   Petitioner relies heavily on Patently-O writings from Prof. Hricik and myself for its argument that the lack of patent eligibility is not a statutory defense under 35 U.S.C. § 282. [Ed note – I will eventually get his name correct.]

The petition asks the following questions:

1. Does 35 U.S.C. § 282 allow for challenges to a patent’s validity based on patent eligibility under 35 U.S.C. § 101?
2. In addition, and in close alignment with the first question, is it proper to find patents invalid under 35 U.S.C. § 101 after full examination before the U.S. Patent and Trademark Office in response to 12(b)(6) challenges when they are presumed valid under 35 U.S.C. § 282?
3. Is it proper to grant a Rule 12(b)(6) motion to dismiss when the record contains unrebutted factual evidence that the invention is patent-eligible under § 101?

[Case Docket]

The patents here cover systems and methods for person-to-person fund transfers — something like paypal but without any need for a funded account.  United States Patent Nos. 7,912,786 (“the ‘786 patent”), 8,131,643 (“the ‘643 patent”), 8,321,347 (“the ‘643 patent”), and 8,620,809 (“the ‘809 patent”).

Claim 11 of the ‘809 patent reads as follows:

11. A method for automatically transferring funds, comprising:

providing a computer configured to provide a person to person funds transfer system; providing for the computer system to be accessible to a communication medium device that is controlled by a sender, said computer system being accessed by the communication medium device to receive information data related to a debit account of the sender and information data related to a receiving debit accessible escrow account;

receiving account information data and transfer authorization data by the computer system; processing the data in automated modes by the computer system;

transferring funds from the debit account of the sender to the receiving debit-accessible escrow account without requiring a pre-established relationship between the debit account of the sender and the receiving debit-accessible escrow account; and

repeating the above steps by the computer system, thus effecting additional transfers between different sending debit accounts and different receiving debit-accessible escrow accounts to cause fund transfers from the different sending debit accounts to the different receiving debit-accessible escrow accounts.

by Dennis Crouch

An interesting new petition before the Supreme Court focuses on international licensing and copyright issues.  What happens when foreign courts give less weight to contracts and copyrights than would a US court? World Programming Ltd. v. SAS Institute, Supreme Court Docket No. 17-1459 (2018). [petition][docket]

Agreeing not to Reverse Engineer, then Reverse Engineering: WPL, a UK software company purchased a copy of SAS’s popular software and began to study its functionality (all in the UK).  As part of the process, WPL clicked “I agree” on the SAS clickwrap licenses. Those licenses included a prohibition on reverse engineering and also limited the software use to “non-production purposes.”  According to the petition, however, “under U.K. and E.U. law, such observation and study is lawful, and contractual terms restricting such acts are null and void. . . .While  WPL was required to agree to that license before installing the SAS System, it also knew that E.U. and U.K. law permitted use of software for observation, study, and testing regardless of contrary contractual restrictions.” Consider Council Directive 2001/29/EEC, ¶ 50, 2001 O.J. (L 167/10) (EC); Council Directive 91/250/EEC, art. 5(3), 1991 O.J. (L 122/42) (EC); Copyright, Designs and Patents Act 1988, c. 48, §§ 50BA(1), 296A(1)(c) (U.K.).

When SAS later sued, the High Court of Justice sided with WPL — rejecting SAS Institute’s copyright infringement claim (functionality of software not protected) and breach of contract claim (contract cannot bar lawful right of study). Thu U.K. Court of Appeal affirmed — finding the contract provision “invalid to the extent that it prohibits the observation, study or testing of the functioning of the program in order to determine the ideas and principles underlying it” and that the software functionality “does not count as a form of [copyrightable] expression.”

After losing in the UK, SAS brought its lawsuit to the USA and won on the same contract claim that was a loser in the UK (but lost on the copyright claim).  The US lawsuit also included a fraudulent inducement and unfair trade practices under N.C. UDTPA.  A jury found WPL liable — although WPL was barred from presenting any evidence regarding its reliance upon the UK and EU safe harbors.  Damages $80 million.

In this process, the district court refused to give any preclusive effect to the UK judgment.

On appeal, the Fourth Circuit held that the UK judgment was properly denied preclusive effect since it was contrary to North Carolina policy.  “North Carolina courts [are] more protective of the sanctity of contracts” than are UK or EU courts.

On the copyright claim, the 4th Circuit declined to resolve the copyright question — finding it moot.  Here, SAS received all of its sought-for damages from its other claims and the 4th Circuit ruled that it could not prove grounds for injunctive relief.  “Thus, the legal resolution of the copyright question would have no effect on the relief afforded the parties” and therefore the issue is moot. “Absent a practical effect on the outcome of this case, the copyright claim is moot.” SAS Inst., Inc. v. World Programming Ltd., 874 F.3d 370 (4th Cir. 2017).

Now, in its petition, WPL asks two questions:

1. Whether federal or state law governs the respect that must be accorded to the judgment of a foreign court in diversity cases.
2. Whether a district court’s decision on the merits of a claim becomes moot, and must be vacated, if the court of appeals determines that the plaintiff has not proven entitlement to the only remaining relief sought in connection with that claim.

In its argument, WPL reaches back to Hilton v. Guyot, 159 U.S. 113 (1895) where the Supreme Court spelled-out its jurisprudence for respecting foreign judgments.  Basically – foreign judgments must be respected by U.S. courts “unless they contravene basic principles of decency and morality.”  The difficulty here, though is how a Federal Court should operate when sitting in diversity and weighing the differences between a foreign judgment and the law of a US state’s law.  Basically – state law is regularly “less respectful of foreign judgments.”

Guest post by Professor Kevin Emerson Collins, Washington University School of Law.

Praxair Distribution, Inc. v. Mallinckrodt Hospital Products IP LTD., 2018 U.S. App. LEXIS 12707 (Fed. Cir. 2018)

In a divided opinion, the Federal Circuit held that all of the claims challenged in an IPR were obvious, upholding the PTAB’s obviousness determination with respect to most of the claims but reversing its nonobviousness determination with respect to a few. Praxair Distribution raises of a number of distinct, yet interrelated, issues concerning the cryptic, yet essential, printed matter doctrine: the opinion addresses the doctrine’s extension to mental steps, its implications for the relationship between sections 101 and 102/103, and the breadth of its functional-relation exception.

U.S. Patent 8,846,112 covers methods of distributing nitric oxide gas cylinders for pharmaceutical applications. Inhaling nitric oxide dilates blood vessels in the lungs and improves blood oxygenation, and it is approved for treating neonates with hypoxic respiratory failure. The prior art taught that inhaled nitric oxide may lead to pulmonary edema, a serious adverse event, in neonates with left ventricular dysfunction. The claims of the ‘112 patent address methods that build on this prior art. Roughly, the claims can be sorted into three groups: the informing claims, the informing-and-evaluating claims, and the informing-and-discontinuing-treatment claims. This commentary addresses each of these three groups of claims in turn.

The Informing Claims: Easy Cases?

In gross, the informing claims recite supplying nitric oxide to a medical provider and providing the medical provider with information relevant to the clinical use of the nitric oxide on neonatal patients. Claim 1, for instance, includes the steps of:

• “supplying the cylinder containing compressed nitric oxide gas to a medical provider responsible for treating neonates” and
• “providing to the medical provider (i) information” about the recommended dose for neonates with hypoxic respiratory failure “and (ii) information” about the risk of that dose for neonates with left ventricular dysfunction, wherein “the information of (ii) [is] sufficient to cause a medical provider … to elect to avoid treating one or more” neonates with left ventricular dysfunction in order “to avoid putting [them] at risk of pulmonary edema.”

The PTAB held, and the Federal Circuit affirmed in a majority opinion authored by Judge Lourie and joined by Chief Judge Prost, that the informing claims were unpatentable as obvious under the printed matter doctrine. Under recent Federal Circuit precedent, the informing claims present an easy case of unpatentability. The printed matter doctrine states that “[c]laim limitations directed to printed matter are not entitled to patentable weight unless the printed matter is functionally related to the substrate on which the printed matter is applied.” Opinion at *9. If a limitation is not given patentable weight, it cannot be relied upon to distinguish the claimed invention from the prior art in the novelty or nonobviousness analyses. In claim 1, the limitations apart from the providing-information limitation are obvious in light of the prior art as an ordered combination, and the providing-information limitation cannot be given patentable weight. Federal Circuit precedent clearly establishes that printing information about how to use a product onto that product as a substrate does not create a functional relationship between the printed matter and the substrate. See, e.g., In re Ngai, 367 F.3d 1336 (Fed. Cir. 2004). But see In re Miller, 418 F.2d 1392 (CCPA 1969) (finding a functional relationship between volumetric indicia and the measuring spoons on which they were printed). Importantly, the printed matter doctrine still applies even though the providing-information limitation does not require the information to be in the form of printed matter per se. In King Pharmaceuticals v. Eon Labs and In re Kao, the Federal Circuit had already extended the printed matter doctrine to encompass the conveyance of information in non-printed forms, such as verbal speech or sign language. See, Kevin Emerson Collins, An Initial Comment on King Pharmaceuticals: The Printed Matter Doctrine as a Structural Doctrine and Its Implications for Prometheus Laboratories, 2010 Patently-O Patent L.J. 111.

Not only is the lack of patentable weight for “informing”-type limitations settled law, but it is good policy, as well. As I have repeatedly argued elsewhere, the core of the printed matter doctrine, as well as its expansion to information conveyed through speech and other non-print media, is necessary to ensure that the knowledge disclosed in patent specifications remains free for all to use qua knowledge during the term of the patent. Kevin Emerson Collins, The Structural Implications of Inventors’ Disclosure Obligations, 69 Vand. L. Rev. 1785 (2016); Kevin Emerson Collins, The Knowledge/Embodiment Dichotomy, 47 U.C. Davis L. Rev. 1279 (2014). Claim limitations that read on communicative acts can restrain the diffusion of the teachings contained in patent disclosures, so a broad interpretation of the printed matter doctrine is necessary to ensure that patentee’s exclusive rights to claimed inventions cannot interfere with the free dissemination of the informational content of patent specifications.

The Informing-and-Evaluating Claims: Mental Steps and Patent Eligibility

The informing-and-evaluating claims depend from the informing claims, adding a number of steps to be performed, presumptively, by medical providers who use nitric oxide. (Bracket the divided infringement issue afoot here.) For example, claim 3 adds inter alia the following limitations to claim 1:

• identifying a neonate with hypoxic respiratory failure,
• determining whether the neonate has left ventricular dysfunction, and
• “evaluating the potential benefit of treating” that neonate with nitric oxide “vs. the potential risk” of doing so.

The PTAB and the Federal Circuit both identify the evaluating limitation as a mental step performed in a medical provider’s mind. They then both extend the printed matter doctrine to preclude giving patentable weight to mental steps and, as a result, hold the informing-and-evaluating claims obvious. The Federal Circuit breaks new ground by extending the printed matter doctrine to mental activity in this manner, and Judge Newman’s concurrence argues that the extension is not proper. Simply put, “[m]ental steps are mental, not printed.” Concurrence at *1. (The concurrence may also be read more broadly to suggest that even the extension of the printed matter doctrine to spoken information in King Pharmaceuticals, discussed in the previous section addressing the informing claims, is legal error.)

Given the policy concerns discussed above for extending the printed matter doctrine to speech, however, I believe that its extension to at least some mental steps is a logical and justifiable move. As Judge Louie correctly notes, the evaluating limitation:

requires a medical provider to think about the information claimed in the providing information limitation of claim 1. But adding an ineligible mental process to ineligible information still leaves the claim limitation directed to printed matter. To hold otherwise would make the printed matter doctrine a dead letter, requiring no more than a “think about it” step to give patentable weight to a claim limitation directed to information content. There is no meaningful distinction between claim limitations directed to written information … verbal information … and mentally-processed information.

Opinion at *13. In brief, the extension of the printed matter doctrine to encompass “mentally-processed information” prevents form from trumping substance.

Although Praxair Distribution does not expressly make this point, it seems to revive some variant of the historical mental steps doctrine. In the mid-twentieth century, the mental steps doctrine did for mental steps what the printed matter does today for printed matter: it invalidated claims that relied on the content of mental processes to establish a distinction from the prior art. See, e.g., In re Abrams, 188 F.2d 165, 165 (C.C.P.A. 1951). The PTAB cited to some of these mid-century mental steps cases to support its extension of the printed matter doctrine to mental steps. 2016 WL 3648375 at *10 (2016). The Federal Circuit, however, did not, most likely because the CCPA abandoned the mental steps doctrine decades ago in the course of grappling with the patent eligibility of software, In re Musgrave, 431 F.2d 882, 889 (C.C.P.A. 1970), and the Federal Circuit has refused to reinstate it, Prometheus Labs. v. Mayo Collaborative Servs., 628 F.3d 1347, 1358–59 (Fed. Cir. 2010). Nonetheless, in practice, if not in name, Praxair Distribution plainly reinvigorates some variant of the mental steps doctrine. Technically, the opinion could be read narrowly so that the printed matter doctrine only extends to mental steps when claims recite both a printed matter limitation with certain informational content and a think-about-it limitation to the same informational content. However, the argument that the informational content of an evaluating, think-about-it limitation should be given patentable weight if the informing limitation is removed from the claim is difficult to fathom.

Another interesting aspect of Praxair Distribution is that it opens a new front in the ongoing debate concerning the intermixing of sections 102 and 103, on the one hand, and section 101, on the other hand. The Supreme Court’s opinions on patent eligibility in Mayo and Alice are highly controversial, in part, because their “inventive concept” analysis—i.e., what is now known as Mayo/Alice “step 2″—requires consideration of the advance over the prior art, a factual issue that is usually addressed in the novelty and nonobviousness analyses. Mixing the patentability requirements in the other direction—that is, using 101 concerns to inform 102/103 doctrine—has to date not received much attention. However, the printed matter doctrine has long mixed in this other direction, and Praxair Distribution brings this other-direction mixing into the spotlight:

Claim limitations directed to the content of information and lacking a requisite functional relationship are not entitled to patentable weight because such information is not patent eligible subject matter under 35 U.S.C. § 101. Cf. Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66, 90 (2012). While the doctrine’s underlying rationale is in subject matter eligibility, its application has been in analyzing other patentability requirements, including novelty … and nonobviousness.

Opinion at *10. (Interestingly, the European Union, too, mixes patent-eligibility concerns into the inventive step analysis with its requirement that that the inventive step reside in a technical effect. European Patent Office, Guidelines for Examination, Part G, Chapter VII.5.2.) The printed matter doctrine reveals that, at least under limited circumstances, what are often conceived of as the rigid statutory silos of patent law must break down. As Judge Newman notes in her concurrence, the printed matter doctrine started out as a prohibition on patenting business forms that was administered as part of the doctrine of patent eligibility. Concurrence at 2–3. However, over time, as patent applicants attempted to claim printed matter in combination with otherwise patent-eligible subject matter, the doctrine developed the two statutory branches that it has today: it is administered via section 101 in cases that involve claims to printed matter per se and via sections 102 and 103 in cases that involve claims to printed matter in combination with statutory processes, machines, manufactures, or compositions of matter. The extension of the printed matter doctrine to mental steps merely further highlights the mixing that is already occurring because mental processes are today, understood, well-understood to be the basis of patent-eligibility rejections. The mental steps doctrine, that the printed matter doctrine now resembles, was administered entirely as a section 101 doctrine, employing the equivalent of a patentable-weight analysis as part of patent eligibility. It never partially migrated from section 101 into sections 102 and 103 like the printed matter doctrine did.

Finally, the dispute underlying the Praxair Distribution opinion also reveals an overlap between sections 102 and 103 and section 101 in yet another way. The parallel district court proceeding invalidated all claims of the ‘112 patent that were at issue for lack of patent eligibility under Mayo, although the representative claim was a more conventional diagnostic claim from a different patent. 2017 WL 387649, *14–*20. The PTAB, of course, could consider this section 101 ground because it is limited in IPRs to 102 and 103 grounds.

The Informing-and-Discontinuing-Treatment Claims: An Expansive Functional-Relation Exception

Like the informing-and-evaluating claims, the final group of claims also depends from an informing claim. Technically, however, these claims depend from a claim that requires slightly different information to be provided to the medical provider with the nitric oxide cylinders, namely information in the form of a “recommendation that, if pulmonary edema occurs in a [neonate] who has pre-existing left ventricular dysfunction … the treatment with … nitric oxide should be discontinued.” Again like the informing-and-evaluating claims, they add further steps presumptively performed by medical providers to the steps performed by nitric oxide distributors. The representative claim here is claim 9. After reciting the limitations of identifying a neonate with hypoxic respiratory failure and determining whether the neonate has left ventricular dysfunction, it adds treatment and treatment-cessation steps:

• “treating the neonatal patient with left ventricular dysfunction with … nitric oxide, whereupon the [neonate] experiences pulmonary edema; and
• in accordance with [the information provided], discontinuing the … nitric oxide due to the neonatal patient’s pulmonary edema.”

The PTAB held claim 9 not unpatentable as obvious. It construed the “in accordance with” language to mean that the discontinuation of the treatment was performed “based on, or as a result of” the information/recommendation provided with the nitric oxide cylinders. It then concluded that the fact that the information was the reason or motivation for the medical provider to discontinue treatment created a functional relationship between the information and the discontinuing-treatment step. Opinion at *6. In turn, the PTAB held that the functional-relation exception to the printed matter doctrine applied, that the information provided could be given patentable weight, and that claim 9 was not obvious.

The Federal Circuit approved of the PTAB’s interpretation of the functional-relation exception to the printed matter doctrine as well as its application to claim 9. Opinion at *17. However, the Federal Circuit reversed the PTAB’s ultimate nonobviousness determination, concluding that, even when the content of the information is given patentable weight, the claim is obvious in light of the prior art. The prior art taught that nitric oxide may be given to patients with left ventricular dysfunction as long as those patients are monitored during treatment. The information provided—namely that nitric oxide should be discontinued for patients with left ventricular dysfunction upon pulmonary edema—was too small of an advance over the prior art to render the claim patentable.

The point of agreement between the PTAB and the Federal Circuit on the expansive interpretation of the functional-relation exception raises an interesting—and possibly troubling—precedent for future cases. The logical reason for a real-world, extra-mental action can now distinguish a claim reciting the action from the prior art. That is, the “invention” of a nonobvious mental motivation for a human actor to perform an already-known, real-world (i.e., non-mental) action, like discontinuing treatment, can give rise to a patentable method claim.

Consider a simple hypothetical. Assume that doctors routinely decrease the dosage of a drug when a metabolite of the drug in a patient’s bloodstream exceeds a certain threshold because of a known potential for a serious adverse event, namely liver problems. Now assume that a researcher discovers that, unexpectedly, the same metabolite in a patient’s bloodstream exceeding the same threshold also raises the risk of a different, serious adverse event, namely heart problems. The researcher claims a method of a medical provider: (a) administering a dose of a drug to a patient from a package with a printed indication that a metabolite level exceeding a threshold creates a medically unacceptable risk of heart problems, (b) determining the level of the drug’s metabolite in the patient’s bloodstream, and (c) reducing the dosage of the drug “in accordance with” the printed indication (i.e., due to the risk of heart problems) if the threshold is exceeded. Even though the medical provider infringing the claim performs conduct that, to an external observer, cannot be differentiated from the prior art (except for the printed indication on the drug package), the claim is patentable. The functional-relation exception to the printed matter doctrine allows the content of the printed matter be given patentable weight because the information conveyed motivates the medical provider’s conduct, and the unexpected nature of the connection between high metabolite levels and heart problems strongly supports nonobviousness.

To be clear, even if one finds the patentability of this hypothetical claim to be problematic—and reasonable minds may differ on whether it is problematic—there is no reason to question the Federal Circuit’s actual holding concerning claim 9 in Praxair Distribution. The Federal Circuit held the claim unpatentable for obviousness even when it gave the content of the printed (or spoken or thought) matter patentable weight. By necessity, it therefore would have reached the same holding if it had refused to give that content patentable weight. The expansiveness of the functional-relation exception in Praxair Distribution will only become outcome-determinative in future cases when a claim recites information that provides an unexpected reason or motivation for a real-world, extra-mental action that, standing alone, is known or is merely an obvious departure from the prior art.

Inversely, a narrow interpretation of the functional-relation exception—one that does not label the content of information as functionally related to an action recited as a limitation when the action is performed because of the information—would not widely undermine patentability. In particular, it would not invalidate most claims to actions that are motivated by newly discovered information. For example, consider a researcher who discovers that, unexpectedly, a particular genetic mutation means that a patient should be taking a lower dosage of a drug. The researcher may claim a method of a medical provider: (a) testing a patient for the mutation and (b) administering the lower drug dosage to the patient if the mutation is present. The printed matter doctrine is irrelevant to the nonobviousness of this claim because the claim does not recite the content of printed information (or a mental state of a doctor who thinks about the information) as a limitation. Such an information limitation is not required for validity, and would thus be unnecessary drafting surplusage, because the real-world (non-mental) conduct of testing and administering under the specified conditions is sufficient to distinguish the claim from the prior art. Although it is not recited as a claim limitation, the newly discovered information still provides an explanation for why the claimed invention is useful and why it produces unexpected results. (Further highlighting the interconnection of the printed matter doctrine and patent eligibility, compare the outcome in this hypothetical to the Federal Circuit’s recent holding in Vanda Pharmaceuticals Inc. v. West-Ward Pharms Int’l Ltd., 887 F.3d 1117 (Fed. Cir. 2018), which upheld the patent eligibility of a hybrid diagnostic/treatment claim under Mayo.)

The Federal Circuit’s expansive interpretation of the functional-relation exception to the printed matter doctrine in Praxair Distribution can be traced to a recent shift how the Federal Circuit articulates that exception. Traditionally, the functional-relation exception was applied only when there was a functional relationship between the content of the printed matter “the substrate on which the printed matter is applied.” Opinion at *9 (emphasis added). For example, in one of the few non-software cases in which the Federal Circuit actually held that the functional-relation exception allowed the content of printed matter to receive patentable weight, the content of a series of numbers printed on a loop of paper was held to be functionally related to the substrate/paper because the numbers themselves were a looping series. In re Gulack, 703 F.2d 1381 (Fed. Cir. 1983). In contrast, the PTAB and the Federal Circuit in Praxair Distribution looked for, and found, a functional relationship between the content of the printed matter and a different limitation in the claim other than the printed-matter limitation, namely the discontinuing-treatment limitation. From my quick research, Praxair Distribution appears to be the first case in which the functional-relation exception has been found to apply based on a functional relationship between printed matter and a claim limitation directed to something other than the printed matter’s substrate. Both King Pharms. and Kao use language that suggest the possibility of such a non-substrate relationship satisfying the functional-relation exception, but neither finds that it exists on the facts presented. If the functional-relation exception were limited to claims in which there is a functional relationship between the printed matter and the substrate in particular, then claims to new motivations for already-performed conduct would not be patentable under the printed matter doctrine.

by Dennis Crouch

In February 2018, I wrote an essay titled Patents and Antitrust: Trump DOJ Sees Little Connection.  USDOJ’s chief antitrust lawyer Makan Delrahim has repeatedly stated his position that patent holders rarely create antitrust concerns — even in the standard setting organization and FRAND framework. Mr. Delrahim explained recently:

By denying injunctive relief to standard essential patent holders except in the rarest circumstances, courts in the U.S. run the risk of turning a FRAND commitment into a compulsory license. As a defender of competitive markets, I am concerned that these patent law developments could have an unintended and harmful effect on dynamic competition by undermining important incentives to innovate, and ultimately, have a detrimental effect on U.S. consumers.

Another advocacy position we have taken relates to how patent holders are held to their commitments to license on FRAND terms. . . [U]nilateral patent hold-up is not an antitrust problem. Where a patent holder has made commitments to license on particular terms, a contract theory is adequate and more appropriate to address disputes that may arise regarding whether the patent holder has honored those commitments. . . . Using the antitrust laws to impugn a patent holder’s efforts to enforce valid IP rights risks undermining the dynamic competition we are charged with fostering. So when it comes to disputes that arise between intellectual property holders and implementers regarding the scope of FRAND commitments, we advocate for the application of more appropriate theories, other than the blunt instrument of antitrust.

A third topic I have addressed recently is the need for balanced patent policies in standard setting organizations. As I and others at the Division have said on many occasions, by allowing products designed and manufactured by many different firms to function together, interoperability standards create enormous value for consumers. But standard setting only works—and consumers only reap the benefits of innovative and interoperable products—when both patent holders and patent implementers have the incentives to participate in the process. To that end, I have encouraged standard setting organizations to think carefully about the patent policies they adopt, so that incentives are not skewed towards one group or the other.

Delrahim Keynote Text.

A large group of leading law professors and former government antitrust enforcement officials have now continued the debate with an eight-point letter explaining the “broad bipartisan legal and economic consensus” on the antitrust concerns of patent holdups and the market benefit of SSOs.  [Read the Full Letter: DOJ patent holdup letter].

The points:

1. “The anticompetitive harms from patent holdup have been consistently acknowledged by officials in Republican and Democratic administrations,” including in a unanimously adopted 2007 joint agency report.
2. “The holdup problem has been recognized by courts and standard setting organizations themselves.” This is the reason why SSOs (made-up of industry player patent owners) adopt FRAND practices.
3. Holdup concerns (by the patentee) “presents the more serious antitrust concern” as compared with Holdout concerns (by infringers who refuse to license).
4. A patentee who obtains or maintains market power by breaching a FRAND commitment is liable for monopolization.
5. While “injunctive relief often is appropriate” as a remedy in patent cases, the right to exclude granted by patents does not mean that a patentee’s unilateral refusal to license is ‘per se legal.’  Rather there are many doctrines that the right of a property owner to exclude others whether land, personal property, or intellectual property.
6. eBay is the law; patent infringement no longer necessarily results in an injunction. “Because there could be thousands of patents in a product today, it is not appropriate uniformly to apply standards from the 18th century.”
7. Patent rights should be considered for their utilitarian purpose – rather than as primarily a natural property right.
8. Holding patentees to their own FRAND licensing commitments should not be seen as controversial in any way.

The letter here different from an amicus brief or comments to a notice of proposed rule-making since Delrahim need not respond or even consider the ideas presented.  The reality is that nothing in the letter is ‘new’ information and I am confident that Delrahim has already considered all of these points.  Still, it makes sense to speak the truths that you know. But still I wonder whether there is an intended shadow audience for the letter.

by Dennis Crouch

The same panel that recently decided In re ZTE (Fed. Cir. May 14, 2018) (Judges Reyna, Linn, and Hughes) has now also decided another improper venue mandamus action: In re BigCommerce, Inc. (Fed. Cir. May 15, 2018).

BigCommerce focuses on the issue of proper venue in multi-district states. The potential confusion comes from the Supreme Court’s central holding in TC Heartland that “a domestic corporation ‘resides’ only in its State of incorporation for purposes of the patent venue statute.” BigCommerce is a Texas Company, but its HQ is in Austin (W.D.Texas) and argues that the Supreme Court’s statement was incomplete.  Now, on mandamus, the Federal Circuit has sided with BigCommerce — holding that the rule is more nuanced for multi-venue states.

[A] domestic corporation incorporated in a state having multiple judicial districts “resides” for purposes of the patent-specific venue statute, 28 U.S.C. § 1400(b), only in the single judicial district within that state where it maintains a principal place of business, or failing that, the judicial district in which its registered office is located.

Thus, the outcome here is that E.D.Texas is an improper venue for BigCommerce under 28 U.S.C. 1400(b) since the company neither (1) resides nor (2) has a place of business in the venue.

1400(b) Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.

On remand, the District Court should either dismiss the lawsuits or grant a motion to transfer.

The Federal Circuit’s decision here has to be correct, and the only difficulty is the loose Supreme Court wording in TC Heartland.

In its analysis, the Federal Circuit started with the statute, which focuses on “the judicial district where the defendant resides.” The focus here is not on the “state” as a whole but on the district itself.  For its part, the appellate panel though emphasis should be added to the article “the judicial district” — i.e., what is the one single district where the defendant resides? “A plain reading of ‘the judicial district’ speaks to venue in only one particular judicial district in the state.”  The court also cited Stonite Products Co. v. Melvin Lloyd Co., 315 U.S. 561 (1942) for what it identified as the Supreme Court’s “view on the issue” — “that a corporation incorporated in a multi-district state is not a resident of every district in the state.”

From USPTO: Alexandria, VA– The U.S. Department of Commerce’s United States Patent and Trademark Office (USPTO) today announced the recipients of the 2017 Patent Pro Bono Achievement Certificate in recognition of individuals who help make the Patent Pro Bono Program available to financially under-resourced inventors and small businesses.

In 2017 more than 85 volunteer patent practitioners reported 50 or more hours of patent pro bono service to a regional patent pro bono program. To acknowledge their contributions, USPTO provided certificates and listed their names and employers on the Patent Pro Bono Program website.

“I want to congratulate the recipients for their dedication, time, and commitment they’ve demonstrated in an effort to help spur innovation on behalf of under-resourced inventors and small businesses,” said Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office Andrei Iancu. “Their assistance is crucial not only to the success of our Patent Pro Bono Program, but the success of our nation toward inspiring innovation across the country, and ensures that everyone who has the desire is given the opportunity.”

The continued efforts of patent practitioners across the country have strengthened the success of the Patent Pro Bono Program since 2015. To date, more than 1,500 patent professionals have volunteered their availability, time, and resources to help make the Patent Pro Bono Program a success.

In 2018, USPTO will expand its recognition to include law firms and corporations in addition to individual patent practitioners. Those whose registered practitioners cumulatively contribute a minimum number of hours (based on firm size) to one or more participating regional patent pro bono programs may receive the 2018 Law Firm and Corporate Achievement Certificate.

2017 Winners Include: (more…)

by Dennis Crouch

As you’ll read below, the Supreme Court has vacated the Secure Axcess CBM decision on mootness grounds.  This means that the “financial services” limitation of the covered-business-method provisions are again up for interpretation. 

In the America Invents Act (AIA) of 2011, Congress created a trio of AIA-Trials: Inter Partes Reviews; Post Grant Reviews; and Covered Business Method (CBM) Reviews.

The CBM program is particularly targeted at claims for data processing or other operations used in the “practice, administration, or management of a financial product or service” and not covering “technological” inventions.  In PNC Bank v. Secure Axcess, the Federal Circuit narrowly interpreted the eligibility for CBM review – holding that the claims themselves must be directed to a financial service.  A patent does not qualify for CBM simply because it can be used in the financial service industry.

• Fed. Cir. Opinion: Secure Axcess, LLC v. PNC Bank Nat’l Ass’n, 848 F.3d 1370 (Fed. Cir. 2017); See Dennis Crouch, For CBM Review: _Claims_ Must be Directed to Financial Service, Patently-O (2017).
• En Banc Denial (with concurring and dissenting opinions): Secure Axcess, LLC v. PNC Bank Nat’l Ass’n, 859 F.3d 998 (Fed. Cir. 2017). See Dennis Crouch, CBM Review Keeps its Narrow Scope: Narrowly Surviving En Banc Challenge, Patently-O (2017)

PNC then petitioned the Supreme Court for writ of certiorari asking the following question:

1. Whether the U.S. Court of Appeals for the Federal Circuit’s judgment should be vacated and remanded with instructions to dismiss the appeal as moot, in accordance with United States v. Munsingwear, Inc., when the claims of the challenged patent are invalid, and there is no longer a live case or controversy between petitioners and respondent; and
2. Whether, if the case is not moot, the lower court erred in holding that the statutory definition of a patent eligible for covered business method review requires that the claims of the patent expressly include a “financial activity element”—in other words, that the claim have no use outside of financial activity—rather than making covered business method review available for patents that claim “a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service.”

In its list of orders, the Supreme Court has decided the case — agreeing with the first question that the case is moot:

The petition for a writ of certiorari is granted. The judgment is vacated as moot, and the case is remanded to the United States Court of Appeals for the Federal Circuit with instructions to remand the case to the Patent Trial and Appeal Board to vacate the Board’s order. See United States v. Munsingwear, Inc., 340 U. S. 36 (1950). Justice Alito took no part in the consideration or decision of this petition.

The mootness issue here stems from the fact that the challenged Secure Axcess patent claims were also cancelled in a separate IPR proceeding that has been affirmed by the Federal Circuit and the time for petitioning the Supreme Court has passed. Petitioner writes:

The now unreviewable invalidation of those claims, and resulting dismissal of Secure Axcess‘ infringement claims with prejudice moots any live case or controversy between the parties here.

The cited Supreme Court Munsingwear decision comes from mootness-on-appeal. In that case, the court explained its establish practice of vacating judgments on issues that become moot while on appeal or pending decision:

The established practice of the Court in dealing with a civil case from a court in the federal system which has become moot while on its way here or pending our decision on the merits is to reverse or vacate the judgment below and remand with a direction to dismiss.

by Dennis Crouch

On May 11, 2018 the Federal Circuit released two opinions in a bit of tension over the constitutional requirement of a “case or controversy.”

• Altaire Pharma v. Paragon Biotech, App. No. 2017-1487 (Fed. Cir. May 2, 2018) (Opinion kept under seal until May 11, 2018) (finding petitioner has standing to pursue appeal of PTAB PGR decision; dissenting opinion)
• AIDS Healthcare Found., Inc. v. Gilead Scis., Inc., App. No. 2016-2475 (Fed. Cir. May 11, 2018) (finding no standing for declaratory judgment action)

The tension between the cases in this situation is actually fairly small, but the setup raises an interesting question in my mind. When two decisions are released simultaneously, how should we treat the precedential value of the cases relative to one another?  My initial answer is that the cases should be treated as we would a plurality Supreme Court decision.  Although law-of-the-circuit rules prohibit a later panel from upsetting prior precedent, the reality is that principle is treated as an internal rule rather than one opening the later decision to collateral attacks by the parties.

Veering away from the simultaneous release — would it matter if one were uploaded to PACER (the Docket) a few hours before the other? Under Federal Rules of Appellate Procedure R. 36, “a judgment is entered when it is noted on the docket.”  The rules do not, particularly define priority of precedent, and I have not seen any Federal Circuit precedent on-point.  Supreme Court becomes precedent immediately upon release. Federal Circuit decisions should seemingly have the same result by Default.

In this particular case, the opinions were not released simultaneously.  See my comparative timeline below:

• AIDS Healthcare: Decision posted to PACER at 05/11/2018 09:22AM; Posted on the Court Website at approximately 10:00 AM that same date.
• Altaire Pharma: Decision originally issued under-seal on 05/02/2018 10:22 AM; ordered unsealed on 05/04/2018 11:13 AM; Posted on the Court Website at approximately 9:00 AM on 05/11/2018. (It is unclear to me at what point in time the opinion was effectively unsealed).

For Altaire, the initial release of the decision was under-seal.  Although the opinion at that point was already designated as precedential, under-seal opinions are seemingly not binding precedent in the ordinary course.  The docket notes that the Altaire opinion was ordered unsealed on 5/4/2018 and thus should be seen as having precedential priority over AIDS Healthcare, which was not released until 5/11/2018.

Of course, in many ways, Precedential Priority is an illusory marker.  Except when squarely on point, later panels have power to substantially shift precedent by adding nuances or “explaining” the prior decision in terms that better fit to a new narrative.  Later panels are often even better at explaining how prior cases fit together rather stand in tension.   Although the Supreme Court is not bound by its own prior precedent, the high court’s patent eligibility jurisprudence fits this pattern well.

by Dennis Crouch

A new class-action lawsuit has been filed against the U.S. Government alleging damages suffered by “patent holders whose property was taken by the USPTO without compensation in violation of the Fifth Amendment of the Constitution.” Christy, Inc. v. USA, 18-cv-00657 (Ct. Fed. Clms. 2018) (2018-05-09-1-Complaint).

The basic story here begins with the USPTO’s “public (and shocking) admission” that the AIA Trials are targeted toward patents that were “erroneously granted in the first instance” — i.e., the USPTO erred in issuing the patents and that is why the AIA trials are now necessary.  The problem though is that the erroneous issuance lead to a granted property right with the potential for substantial royalty income, substantial payments of maintenance and other USPTO fees, and often substantial costs involved with the AIA-trial. In my mind, only claim with potential here is that of paid fees based upon an erroneous grant. The complaint explains:

The USPTO’s invalidation of the Plaintiff’s and Class member’s patent claims was a taking without just compensation in violation of the Fifth Amendment of the Constitution. The compensation due here includes, but is not limited to, expected royalties and other payments related to use of the patents. This case additionally seeks damages for the Defendant’s breach of contract by failing to maintain in force the subject patent claims for the terms prescribed in the patent grants for the relevant claims, including the recovery of attorney fees expended defending those same patents in post-grant proceedings, any investments made in the inventions underlying those patents, any expected royalties or payments related to the patents, and all fees paid to the Defendant for the issuance of those patents. In the alternative, the case seeks to recover fees that were paid by inventors and patent owners to the USPTO, such fees having been exacted from Plaintiff and Class members through the AIA—according to the Defendant, these patents were issued erroneously by the USPTO in the first instance and thus all fees should be returned to the Plaintiff and Class members.

Id. Note here that, although the Supreme Court in Oil States did not bestow patents with full grandeur private property rights — the Court was clear that patents should continue to be treated as property protected by the Due Process and Takings Clauses of the U.S. Constitution.

[O]ur decision should not be misconstrued as suggesting that patents are not property for purposes of the Due Process Clause or the Takings Clause.

Oil States Energy Servs., LLC v. Greene’s Energy Grp., LLC, 200 L. Ed. 2d 671 (Supreme Court 2018).  Overall, it is in interesting idea for a lawsuit, but it lacks precedential support.  Its best shot is to focus on the retroactive impact of IPR/CBM decisions on pre-AIA patents.  For those cases, the IPR regime was not pre-baked into the implied contract.